JAK’d for some Tendies (ABBV)

What is AbbVie? Incase you live under a rock

” AbbVie is a drug company with a strong exposure to immunology and oncology. The company’s top drug, Humira, represents close to half of the company’s current profits. The company was spun off from Abbott in early 2013. The recent acquisition of Allergan adds several new drugs in aesthetics and women’s health.”

Alright, so lets take a look at what happened today. The FDA released a statement today that all Janus Kinase (JAK) inhibitors need to include in the drug label warnings against the following: **risk of serious heart related events, cancer, blood clots, and even death**. Well shit, what a doozie. Except its not.

1. The drug in question **Rinvoq, already has all of these in its** [prescribing information]( except cardiac events, which its competitor Xeljanz (Pfizer’s JAK) had added to it’s warning label this summer, so most medical professionals figured that it is something that can be generalized to the JAK class, not just Xeljanz. Which means it is going to have minimal or no impact on sales whatso ever.
2. **Rinvoq is dominating** the Rheumatoid arthritis (its only indication so far) market space and kicking the shit out of its competitors within the drug class, which will be reflected in their next earnings report, as well as those by its competition, Pfizer (Xeljanz) and Eli Lilly (Olumiant).
3. **Humira**. Abbvie has the biggest kid on the block that covers rheumatoid arthritis. If a patient was on Rinvoq and was going to get switched, Abbvie is going to do everything they can to keep it in house and get them onto Humira, which isn’t going to be hard to do anyways. If you know anyone that has rheumatoid arthritis, 95% of the time they have tried humira at least once before, if not are taking it currently.
4. [Rinvoq was 2.7% of their revenue]( last quarter at $379M out of their $14B in revenue. Humira on the other hand was $6B, making up over 1/3 of their revenue.

I know what you are thinking, and its the same thing Wallstreet is thinking, but Humira is going to go off patent soon and Abbvie needs to replace that revenue stream. Except they can just slightly tweak the formula, put a new patent into the FDA and milk a few more years out of it. They don’t even need to change the active molecule. Recently Abbvie introduced a ‘citrate free’ version of Humira that would help with some pain upon injection, which it does, but it also bought Abbvie more time on label, and its not going to be that hard to do again, especially when it makes up 1/3 of their revenue stream, they will fight tooth and nail to keep it on patent.


So how to play this? Easy, ABBV isn’t a big mover and a shaker, but this is a ridiculous over correction on something that isn’t going to impact the sales or performance of this drug at all. ATM or ITM LEAPS are the way to go. Plain and simple, grab a 100C for June 22 at $15 a pop, tuck it away, and it’s an easy double.

If you want to gamble on it a bit more, which I won’t do, but you are more than welcome to, OCT 15 115c/120c Bull spreads are about $1.5 to enter and max profit is at 300% gain, if you think Wall Street will come to its senses by then.

Was working today and didn’t have time to enter, but will be looking for an entry before the end of the week and will be playing LEAPS.

Edit: LEAPS year cuz Iā€™m retarded

What do you think?

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