Pharma firm AbbVie Inc. (ABBV), with a market cap of over $300 billion, has lately unveiled its fourth-quarter earnings report. Its income for the quarter amounted to $14.30 billion, down 5.4% year-over-year, whereas its adjusted EPS declined 22.5% from the year-ago quarter to $2.79. However each figures surpassed analysts’ estimates.
Following its 2013 spinoff from Abbott Laboratories, ABBV, below the management of CEO Richard Gonzalez, was confronted with the problem of stopping gross sales dips amid growing competitors to its top-performing drug, Humira – which on the time accounted for roughly $9 billion in annual gross sales, making up over half the corporate’s whole gross sales.
Humira achieved staggering success, hitting its peak with $21.23 billion in annual gross sales in 2022 and accumulating greater than $200 billion in lifetime income – shattering even essentially the most optimistic Wall Road projections. Market analysts praised Humira’s spectacular development trajectory, however the looming patent expirations provoked investor nervousness. Humira’s spectacular outcomes outfitted ABBV with further sources and time to adapt to a post-Humira future.
Gross sales of Humira dropped 40.8% year-over-year to $3.30 billion worldwide within the fiscal fourth quarter that ended December 31, 2023. This decline notably outpaced the full-year gross sales downturn of 32.2% year-over-year, a development the drug maker attributes to the emergence of biosimilar medicine available on the market.
ABBV believes that Humira’s fiscal 2023 income stays robust at $14.40 billion regardless of the introduction of biosimilars. As competitors from these copycat drugs is projected to surge within the upcoming yr, ABBV forecasts that gross sales for Humira will drop to $9.6 billion.
ABBV foresaw the approaching lack of exclusivity and strategically diversified its product line. ABBV’s strategic plan, upon the entry of Humira biosimilars, goals to climate the preliminary monetary affect in 2024 earlier than regaining momentum in 2025.
To cushion in opposition to this looming lack of exclusivity – essentially the most important occasion of its variety throughout the business up to now – ABBV deliberate to leverage gross sales of its quickly rising merchandise, together with Humira’s immunology heirs, Rinvoq and Skyrizi. ABBV’s two progressive anti-inflammatory drugs, Skyrizi and Rinvoq, are used to handle situations like Crohn’s illness and arthritis.
ABBV’s acquisition of Allergan in 2020 and the creation of those new medicine, nevertheless, didn’t solely abate traders’ apprehensions in regards to the long-term viability of ABBV’s merchandise or its capacity to take care of gross sales and earnings development as constantly because it did throughout Humira’s reign. This residual nervousness has seen the inventory oscillating between $134 and $175 over the previous two years. Nonetheless, considerations have been considerably eased following the corporate’s robust fourth-quarter monetary report.
Income from Skyrizi and Rinvoq climbed 51.9% and 62.9% year-over-year, respectively. This propelled their mixed income contribution to $3.65 billion. The corporate initiatives the 2 medicine to generate a formidable $16 billion in gross sales income. In 2027, these medicines might amass $27 billion, thereby outperforming peak earnings from Humira.
Upon detailed examination, Skyrizi might accumulate over $17 billion by 2027, underpinned by elevated market share in psoriasis therapy and its rising use in inflammatory bowel illness (IBD).
Rinvoq can also be slated for fulfillment, with projections suggesting it’ll attain over $10 billion in income in 2027 throughout rheumatology, IBD, and atopic dermatitis functions. Rinvoq’s forecast contains reasonable additions from a number of new therapy areas, onto which ABBV hopes to introduce the drug throughout the latter half of this decade. These new indications have a mixed peak gross sales functionality equal to a number of billion {dollars}.
ABBV maintains a strong aggressive stance with excessive seize charges, as confirmed by Chief Industrial Officer Jeffrey Stewart. Whereas presently on the decrease finish of the prescription share spectrum, Stewart stays optimistic about potential development alternatives. He states there stays important scope for reinforcing affected person uptake of Rinvoq and Skyrizi, significantly inside their current therapy functions.
Furthermore, the corporate has submitted its Skyrizi software to be used in treating ulcerative colitis, with approval anticipated by 2024. Rinvoq is concurrently present process Part 3 trials for added therapy indications, indicating an avenue for development sooner or later. Potential functions for Rinvoq embrace situations similar to vitiligo, hidradenitis suppurative (HS), and lupus.
Past Skyrizi and Rinvoq, there’s additionally ongoing improvement of next-generation drug choices. Lutikizumab, for instance, lately displayed useful outcomes in a Part 2 trial in adults experiencing reasonable to extreme HS and is set to advance to Part 3.
ABBV’s proficiency spans past immunology, regardless of its Oncology division recording a 7.4% year-on-year lower to $1.51 billion, attributed to aggressive pressures on Imbruvica. This development is anticipated to prevail for a number of extra years. Imbruvica’s U.S. market share has dwindled in favor of different BTK inhibitors and is among the many preliminary 10 medicine that can be topic to cost negotiation for Medicare protection.
However, ABBV’s $10 billion ImmunoGen acquisition deal is projected to bolster the corporate’s presence within the strong tumor area – starting with the already-approved Elahere, a second-line remedy for particular ovarian most cancers sorts. The deal is anticipated to lead to R&D synergies throughout a number of remedies on this space.
ABBV’s aesthetics section has demonstrated resilience, marking a 6.4% year-on-year appreciation, primarily pushed by an 11.8% annual improve from Botox cosmetics. Given Botox’s spectacular market penetration, the aesthetics section is envisaged to proceed trending upwards.
As well as, ABBV’s neuroscience division reported a considerable 22.6% year-over-year development, fueled by profitable launches of migraine drugs and an prolonged indication for Vraylar for main despair therapy. Migraine drugs Ubrelvy and Qulipta are projected to achieve mixed peak revenues of $3 billion.
A paramount improvement on this section was the $8.7 billion Cerevel Therapeutics acquisition. ABBV’s prevailing neuroscience portfolio, at the side of its mixed pipeline with Cerevel, epitomizes a substantial development prospect stretching into the following decade.
For the fiscal yr 2024, ABBV anticipates its income to be $54.2 billion and adjusted EPS between $11.05 and $11.25. This steerage features a $0.32 per share dilutive affect tied to the proposed ImmunoGen and Cerevel acquisitions, slated for completion round mid-2024.
Analysts predict ABBV’s income for a similar interval will attain $54.53 billion, whereas EPS is projected to hit $11.25 billion.
Following an optimistic quarterly earnings report, a surge was famous in ABBV shares. Eliciting this rise have been the post-earnings worth goal escalations by analysts monitoring the trajectory of the pharma firm. Wall Road analysts anticipate the inventory to succeed in $176.53 within the subsequent 12 months, indicating a possible upside of three.1%. The value goal ranges from a low of $135 to a excessive of $200.
Wells Fargo maintains an chubby ranking on ABBV shares, elevating the agency’s worth goal to $200. The monetary establishment highlighted an bettering development narrative for ABBV, as its merchandise – Skyrizi and Rinvoq – are positioned to surpass Humira.
Backside Line
World drugs expenditure grew 35% over the previous 5 years, and it’s anticipated to surge round 38% by 2028, underlining the growing demand for medicinal merchandise. Furthermore, the escalation in autoimmune illnesses, now the third most frequent cause for persistent afflictions within the U.S., has instigated an ascending demand for next-generation immunology medicine. The next-generation immunology medicine market is poised to develop at a 6.1% CAGR by 2029.
Pharma agency ABBV is taking appreciable strides to foster investor confidence, exhibiting its capacity to succeed Humira, the first development engine since its inception as an impartial entity. Moreover, strong gross sales of Skyrizi and Rinvoq, together with important oncology and neuroscience acquisitions, have fortified its operational pipeline and enhanced portfolio steadiness.
Contemplating market dynamics and drug trajectory, ABBV’s projected development seems possible. Whereas Humira gross sales are projected to mood attributable to escalating biosimilar competitors from 2024, constant beneficial properties are anticipated for the corporate’s immunology franchise post-2024. The adept transition after Humira’s exclusivity termination performed a pivotal position within the current improve.
Within the pipeline, ABBV would require bolstering part 3 belongings, though an improved part 2 pipeline and up to date acquisitions of ImmunoGen and Cerevel improve the corporate’s long-term outlook. With the ImmunoGen acquisition, optimism surrounds the most cancers drug Elahere. Late 2024 or early 2025 ought to see promising part 2 knowledge for a number of Alzheimer’s medicine, probably paving the best way for main new blockbusters.
Furthermore, the necessity for debt to finance acquisitions might probably affect the corporate’s predicted internet margin. Nevertheless, bettering backside traces could possibly be seen because the debt diminishes.
Buyers relish substantial portfolio returns, particularly earnings traders who prioritize constant money movement from liquid investments. ABBV pays an annual dividend of $6.20 per share, yielding 3.68%, far exceeding the business common of 1.59% and the S&P 500’s yield of 1.34%. ABBV’s dividend has seen an 8.68% CAGR over the previous 5 years.
Future dividend development can be contingent on earnings development and the payout ratio. ABBV’s current payout ratio stands at 53.92%, signifying that over 53% of its trailing 12-month EPS was disbursed as dividends.
Moreover, the corporate has maintained a formidable observe file, with a decade-long streak of accelerating dividends. Over the previous 10 years, its dividend funds grew at a 14.1% CAGR. Its trailing-12-month levered FCF margin of 43.65% notably exceeds the business common. Furthermore, as of September 30, 2023, ABBV had money and equivalents of $13.29 billion. The general state of affairs helps the notion that dividend hikes over the previous decade haven’t impeded money accumulation.
Furthermore, its notable reserve might act as a buffer in opposition to unexpected circumstances. Due to this fact, this inventory presents a strong prospect for passive earnings era, reinforcing traders’ rationale for the inclusion of ABBV of their portfolios.
