Citi renewed its Buy rating on the Irish-headquartered company Actavis plc (NYSE:ACT). The 12 month price target on the company’s stock was raised by Citi to $325 from $310. The increase in the price target indicates a possible upside of 19.35% on the stock price of $272.31 closing Monday. This increase in the price target is a result of the biosimilars that the company is developing in collaboration with Amgen Inc. (NASDAQ:AMGN).
According to a report that was written by Citi, biosimilar drug makers are a threat to the biologic drug makers and it is just a matter of time before the market will be dominated by biosimilars and the biologic revenues will disrupt immensely. Citi also believes that the companies that are involved in the development of biosimilars are more likely to dominate the market in the coming years.
Currently 4 biosimilars are under progress in the supervision of Actavis (NYSE:ACT);
- Bevacizumab (Avastin)
- Trastuzumab (Herceptin)
- Rituximab (Rituxan)
- Cetuximab (Erbitux)
All these four biosimilars are being developed by Actavis (NYSE:ACT) in partnership with Amgen (NASDAQ:AMGN). According to Citi, the merger of the two companies and their project of biosimilar have a huge potential and has a great opportunity to gather large revenues. Although the two companies have not yet said anything about the financial technicalities of the merger, Citi expects that the companies will share a 50-50 profit amongst each other.
Citi further anticipates that the biosimilar assets are capable of generating $1.1 billion in revenue by the year 2022. Citi bank also stated that the partnership of the two companies will gain advantage from the first biosimilar product of Herceptin in the year 2018 followed by the second biosimilar product of Avastin in the year 2019.
The report also suggested that biosimilars have a lot of relevance to the investors as well as other pharmaceutical companies. Biosimilars are a more affordable alternate to the more expensive biologic drugs. Up till now, biosimilars had not been approved in America due to an inadequate legal framework. However, according to the new regulations, the FDA has now decided to show a green signal to the biosimilars.
The Food and Drug Association in America has examined the safety as well as the efficacy of the products and thus decided to approve the biosimilars in the United States. The FDA is now working hard to launch biosimilars in the market and by next month US market will see the biosimilar of Amgen’s drug Neupogen. The particular biosimilar is made by Novartis.
Furthermore it is anticipated that the biosimilars will be welcomed by not only the insurers but by pharmacy-benefit managers as well. Both insurers as well as the pharmacy-benefit managers were concerned about the high costs of biological drugs and the affordability of biosimilars will grab their attention for sure. The inexpensive biosimilars will give a tough competition to the biologic drugs as there is not much difference between the two as far as the efficacy is concerned.
Citi believes that although there are some hurdles in the way of biosimilars, the market is evolving and it is just a matter of sometime before the maker is dominated by biosimilars.
