Kickback Accusations Put AbbVie on Track for 4th Straight Loss

The pharmaceutical firm is being accused of providing kickbacks to healthcare providers

Managing Editor
Sep 19, 2018 at 10:09 AM
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AbbVie Inc (NYSE:ABBV) is in hot water today, after the California Department of Insurance yesterday sued the pharmaceutical name for allegedly providing kickbacks to health insurance providers. The lawsuit accuses AbbVie of providing cash and other gifts to providers that prescribed its arthritis drug Humira. 

While ABBV stock plunged 2.9% on Tuesday in reaction to the news, the shares are down another 0.6% this morning to trade at $91.99. The drop puts ABBV on track for its fourth straight loss, but this negative price action is nothing new. Year-to-date, the security has shed 5.5%, with recent resistance emerging at its 200-day moving average.

Against this backdrop, sentiment is bearish toward AbbVie. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows ABBV with a 10-day put/call volume ratio of 1.59, which ranks in the 100th annual percentile. This means that AbbVie puts have been purchased at a faster-than-usual rate relative to calls during the past two weeks.

Plus, of the 15 analysts covering ABBV, 10 maintain a "hold" or worse rating. However, the average 12-month price target for the pharma stock is $109.42 -- a healthy 19% premium to current trading levels. Should the equity continue to struggle, a round of price-target cuts could amplify selling pressure.

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