AbbVie Inc (NYSE: ABBV) took one on the chin this morning when it found itself in the crosshairs of Citron Research. Here’s a look at what Citron had to say:

Those are some pretty harsh projections. A $60 price target on a stock trading over $90 per share at the time of the tweet suggests a substantial over-valuation at current levels. Is this really the case? Will the removal of safe harbor hit ABBV so hard? Let’s dig in:

What Is Citron Research?

Before we get into the details surrounding this morning’s tweet, let’s chat a bit about Citron. Citron Research is a company that is known for releasing short reports and taking out short positions in the stocks these reports target. However, they’ve made one heck of a name for themselves. At the end of the day, while many hate the firm, it’s hard to argue their accuracy in reporting. Just take a look at their track record, or their involvement in uncovering the Valeant Pharmaceuticals (NYSE: BHC) Philidor scandal. At the end of the day, when Citron speaks, investors listen.

Is ABBV Really In Trouble Here?

Let’s take a look at some key statements made in the tweet this morning. First and foremost, Citron pointed to Gottlieb’s comments surrounding the removal of safe harbor. What exactly is safe harbor:

What Is Biosimilar Safe Harbor?

The term biosimilar safe harbor has to do with a law that shields activities done to secure regulatory approval of biosimilar drugs. Essentially, these rules protect the companies that innovated medications from generic competition.

At the end of the day, the cost of medicine in the United States has been a hot topic in the political space for some time now, with politicians on both sides of the fence interested in tapering down the cost of healthcare. So, at the moment, biosimilar safe harbor laws are being called into question.

Is This Really A Threat To ABBV?

AbbVie is a massive company that has made a name for itself. Is this safe haven issue really going to cause issues for the company? Well, before we answer that, I want to point out a statement I made in the beginning of this article, when it comes to Citron “it’s hard to argue their accuracy in reporting.” With that said, I believe that Citron is onto something here.

In the tweet, Citron pointed to the fact that the removal of safe harbor is a “DIRECT hit on Abbvie’s abuse of Humira.” At the end of the day, Humira is a very important product for AbbVie, generating massive amounts of revenue each and every quarter. The drug, designed for the treatment of a variety of arthritis symptoms is overwhelmingly expensive. In fact, depending on the pharmacy you go to and the dosage required, without insurance, Humira will cost $2,477.65 and $11,989.00 per dose! With the safe harbor rules being taken off of the table, these prices simply aren’t going to give the company a competitive advantage.

That’s a massive issue for ABBV too because Humira makes the company a ton of money. In fact, in the year 2017, the company generated $18.427 billion in Humira sales. Should generic competition hit the market, providing a lower cost alternative, that alternative would likely be welcomed by both private payers and insurance agencies alike with open arms! So, there’s no question that Citron is onto something here.

The Bottom Line

The bottom line here is that AbbVie may very well be in trouble here. At the end of the day, if Safe Harbor rules are taken out of the equation, the company has very little protecting it from generic competition regarding a massive revenue generator. So, if you’re considering ABBV, or you own it, you may want to pay close attention to coming reports from Citron.

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