Recommendations for AbbVie’s Overdependence on Humira
Patent Cliff and AbbVie
Patent Cliff, referred as drop in sales after the patent expires, is a global revenue threat to major pharmaceutical companies. Around 45% revenue dependence on a single medicine, Humira, by AbbVie is quite high in comparison with the industry, and the company can face major drop in revenue after the year 2016. As this product is currently a hit in the market, there are already many companies who have developed a biosimiliar of this medicine. These biosimiliars will be launched in the market after the patent expiry in 2016. Apart from major drop in revenue, the company is also prone to major threats like drop in stock prices and cash flow issues. Few products in the pipeline is also an alarming situation for AbbVie, as most of the pharmaceutical companies that faces a similar problem keeps attractive products in the pipeline to balance the drop in projected revenue due to patent cliff.
Few years ago, Novartis faced a similar situation as “Diovan” contributed to around $6.1 billion of the revenue but it followed a strategy of market development. When they were few years away from the patent cliff, they started marketing its product to the developing countries. Although, developing countries have low patent protection and there are a number of counterfeit products, but people there are willing to pay more for a quality brand. AbbVie should follow the same strategy and must promote its product to Asia and Latin America.
As AbbVie is faced with the challenge of finding few alternative products to sustain its sales; therefore, the foremost vital strategy for AbbVie is to implement the strategy for licensing. Large pharmaceutical companies forge license deal with small companies and they task them to develop various important medicines. It helps large pharmaceutical companies to get their desired product without the need to buy the entire company. In this deal, the large pharmaceutical companies help the small companies with major investment and increase it as it passes through the clinical trial and gets approval from national regulator authorizes.
Acquisition of companies that have excellent products in their final product development stages of pipeline. On an average a product takes 10 years of research and 1 billion of investment for introducing it into the market, the acquisition strategy is a vital tool to ensure sustainable future sales.