The US House Oversight Committee intends to issue a subpoena to AbbVie after the drugmaker failed to provide sufficient documents related to an ongoing investigation into drug-pricing practices.
Following the subpoena news, shares dropped 3.7% to $92.24 at the close on Tuesday. As part of the investigation, AbbVie (ABBV) CEO Richard Gonzalez had been asked to provide information on price increases, investments in research and development, and corporate strategies to preserve market share and pricing power on the drugmaker’s two blockbuster treatments: Humira, its immunosuppressive anti-inflammatory drug, and Imbruvica.
In January 2019, the committee launched an investigation into the pricing practices of 12 drug companies that sell 19 of the most expensive medications for patients, consumers, and taxpayers in the US. The goals of the investigation are to determine why drug companies are increasing prices so dramatically, how companies are using the proceeds, and what steps can be taken to reduce prescription drug prices.
“After more than 18 months, AbbVie has demonstrated its unwillingness to comply voluntarily with the Committee’s investigation,” Carolyn Maloney, Chairwoman of the committee wrote in a memo. “Although most of the drug companies we are examining have cooperated with the committee’s investigation, AbbVie’s noncompliance stands out as particularly egregious, which is why I am issuing this subpoena.”
Maloney said that over the course of the investigation, AbbVie repeatedly failed to comply with the committee’s requests and provided inadequate responses regarding Humira and Imbruvica. AbbVie has produced only limited documents about its pricing practices and strategies to preserve market share and pricing power for both products, she added.
AbbVie shares have recovered after hitting a low in March and are now trading 4.2% higher than at the start of the year on the back of its acquisition of Botox maker Allergan and solid revenues of Humira. Looking ahead, the $112.63 average analyst price target indicates another 22% upside potential in the coming 12 months.
Morgan Stanley analyst David Risinger last month raised the stock’s price target to $108 from $95 and reiterated a Buy rating, citing solid financial momentum, uptake of new launches, and prospects for long-term multiple expansion.
Risinger believes that the current valuation overly discounts pessimism about the company’s Humira cliff and lack of new blockbuster pipeline candidates.
Overall, ABBV scores an unanimous 12 Buy ratings from Wall Street analysts adding up to a bullish Strong Buy consensus. (See Abbvie’s stock analysis on TipRanks).
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