Shares of AbbVie (ABBV) plummeted the other day after the FDA warned that the company’s hepatitis C treatments – Viekira Pak and Technivie – could cause serious injury to the liver mostly in patients with underlying advanced liver disease.
In the warning, the FDA noted 26 cases of liver issues had been reported since the drugs were approved.
Some of the cases led to liver transplants and death.
As a result, the government agency demanded stronger warnings of labels, which lead to the stock decline.
However, many analysts consider the decline to be an overreaction, considering that only three to five percent of the hepatitis population suffers from advanced forms of liver disease. That tells us the long-term impact of the FDA news on the stock could be modest.
Also, when it comes to ABBV, we have to consider that the drugs were never meant for – or approved – for patients with underlying advanced liver disease.
Plus, these 26 cases of liver injury were possibly” related to the two drugs. Possibly resulted in a 15% decline.
There are two ways to trade the stock.
One, consider buying just the stock up to $54. Near-term, I’d like to see a bearish gap refill at $56 before a move higher. And or two, consider buying to open the ABBV January 2016 52.50 calls at market.