Alvotech's Q1 2024 earnings call was a symphony of optimism. Revenue guidance soared, EBITDA projections tightened, and a new partnership with Dr. Reddy's Laboratories for their Prolia/Xgeva biosimilar (AVT03) added further fuel to the bullish fire. Most notably, the company boasted binding purchase orders for over 1 million units of its Humira biosimilar (AVT02), a seemingly definitive sign of market acceptance. But amidst the celebratory fanfare, a discordant note emerges - a potential discrepancy that may have slipped past the radar of most analysts.

The company emphasized the success of their private label agreement with Quallent, the private label unit for Cigna. This deal, where Alvotech supplies Humira biosimilars at zero out-of-pocket cost for Cigna's Accredo specialty pharmacy patients, is touted as a game-changer. It's presented as the primary driver for the revised revenue guidance, with the implication being that a significant portion of the 1 million unit purchase order stems from this arrangement.

However, a closer look at the numbers raises a red flag. Evernorth, Cigna's wholly-owned subsidiary, stated that Accredo currently supports over 100,000 Humira patients. Even assuming a generous average of 10 pens per patient annually (Humira is often administered 26 times per year), this translates to a maximum demand of 1 million pens from Cigna alone. This would mean that the entirety of Alvotech's announced purchase orders are solely attributable to Cigna, leaving no room for the "substantial coverage" and "positive momentum" on the non-private label front that the company also highlighted.

This raises a crucial question: **Is Alvotech's reliance on the private label deal overshadowing potential challenges in securing broader market access through traditional formulary placements?**

While the Cigna partnership undoubtedly represents a significant win, the Humira biosimilar market is a fiercely competitive landscape. Multiple players, including giants like Amgen and Boehringer Ingelheim, are vying for market share. Relying heavily on a single private label deal for initial success could mask potential difficulties in penetrating the wider market.

Alvotech's optimism regarding non-private label "substantial coverage" is based on Teva's ongoing formulary negotiations, the final details of which are expected to be announced by the Pharmacy Benefit Managers (PBMs) around July 1st. The success of these negotiations is paramount to Alvotech's long-term Humira strategy, as it will determine the extent of their access to the vast majority of Humira patients outside the Cigna network.

Projected Revenue Breakdown for Alvotech in 2024

Here's where the hypothesis gets interesting. If Alvotech's 1 million unit purchase orders are predominantly tied to Cigna, then the "substantial coverage" anticipated from formulary negotiations must translate into an equally significant order volume to justify the substantial revenue guidance increase.

Let's assume a conservative scenario where Alvotech secures formulary placement with just one additional large payer, covering a comparable number of patients to Cigna. This would necessitate another 1 million unit order, pushing the total to 2 million units. A more optimistic scenario, with multiple large payers adopting Alvotech's biosimilar, could easily see the total order volume surpass 3 million units.

The crucial point here is that the true test of Alvotech's Humira success lies not in the impressive headline figure of 1 million units, but in the yet-to-be-revealed outcomes of Teva's formulary discussions. These discussions will shed light on the company's ability to compete effectively beyond the confines of the Cigna partnership and establish a sustainable market presence for AVT02.

Until then, the million-unit mystery remains. Is it a testament to Alvotech's undeniable early success, or a potential smokescreen obscuring potential challenges in the broader Humira arena? The answer, hidden in the intricate details of formulary negotiations, will be revealed in the coming months.

"Fun Fact: The global biosimilars market size was valued at USD 29.7 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 14.8% from 2023 to 2030."