UPDATE: Citi Initiates Coverage On AbbVie, Sees Price Erosion Ahead

Citi initiated coverage on AbbVie Inc (NYSE: ABBV) Monday with a Sell rating and $48 price target.

Analyst Andrew Baum felt that the market has underestimated the “timing and magnitude” of Humira biosimilars.

According to Baum, "the critical investment debate for AbbVie is not Viekira or the oncology pipeline but rests on a single issue—the outlook for the estimated $16 billion Humira base business post the US patent expiration in 2016."

The analyst report anticipated “Humira revenues for AbbVie to decline from $16 billion at anticipated peak in 2017 to $6 billion in 2022 due to combined volume and price erosion from biosimilars starting 2018.”

Biosimilar price erosion with discounts of approximately 50 percent was expected and the firm conservatively modeled that “at year 3 biosimilars will achieve 36 percent US market share in Humira patients and 25 percent in established Humira patients.” The firm also anticipated “European price discounts to be steeper due to reference pricing on brand and progressive discounting on biosimilars.”

Baum added that “even with a novel Humira reformulation and an emergent oncology business, AbbVie's valuation still looks challenging in the absence of material value-enhancing M&A.”

The firm’s near-term estimates were inline with consensus with 2015E Q1 EPS at $0.92 and full year EPS at $4.34.

AbbVie recently traded at $55.72, down 2.08 percent.