Zacks_Analysts' Blog : FDA Approves Abbott's AndroGel - Analyst Blog

Abbott Laboratories (ABT) recently gained US Food and Drug Administration (FDA) approval for AndroGel (testosterone gel) 1.62%. The gel formulation is approved for the treatment of hypogonadism (low or zero testosterone levels) in adult men. Abbott Labs already has a product in its portfolio for this indication – AndroGel 1%.

However, Abbott Labs said that AndroGel 1.62% has the ability to restore testosterone levels in hypogonadal men with half the volume of gel at the starting dose compared to AndroGel 1%.

Results from a study showed that 82% of patients taking AndroGel 1.62% achieved a normal average testosterone level on day 112. AndroGel 1.62% will be available from the second quarter of 2011. AndroGel 1.62% became a part of Abbott Labs’ portfolio with its Feb 2010 acquisition of Solvay Pharmaceuticals.

Abbott Labs estimates that almost 14 million men in the US may have low testosterone levels. Primary competitors in the market include Auxilium Pharmaceutical’s (AUXL) Testim. However, Abbott Labs has the advantage of having launched AndroGel 1% three years prior to Testim. According to IMS, as of December 31, 2010, AndroGel accounted for 77.9% of gel prescriptions.

Recent entrants in the testosterone therapy market include Endo Pharmaceutical’s (ENDP) Fortesta and Eli Lilly/Acrux’ (LLY) Axiron. Additional competition could come in the form of BioSantePharmaceuticals/Teva Pharmaceutical Industries Ltd.’s (BPAX/TEVA) Bio-T-Gel (FDA action date: Nov 14, 2011), and Repros Therapeutics’ (RPRX) Androxal.

Neutral on Abbott Labs

We currently have a Neutral recommendation on Abbott Labs, supported by a Zacks #3 Rank (short-term Hold rating). We believe Abbott Labs is weathering the storm relatively well despite facing challenges like the impact of US healthcare reform, product recalls, foreign exchange headwinds and EU pricing austerity.

Abbott Labs’ strong business segments and contributions from recent acquisitions should help fortify long-term earnings growth. While lead product, Humira, will continue to be a huge growth driver in the next couple of years, we remain concerned about Abbott Labs’ dependence on the product.

Moreover, the company’s pharma pipeline needs to deliver in order to drive long-term growth.