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AbbVie, Inc. (NYSE: ABBV) has delivered another quarter of top-line and strong earnings performance but issued cautious guidance for fiscal 2023 citing a decline in sales due to the expiration of the patent for its best-selling drug Humira.
Interestingly, ABBV remained largely unaffected by the market downturn that put Wall Street under pressure in 2022, until the stock hit a record high early last year. This shows investor confidence in the company’s ability to handle a situation where Humira loses exclusivity.
Dividend Power
AbbVie has raised its dividend regularly over the past few years, and currently offers an impressive yield of 3.9% which is above average. Market observers are divided in their recommendations for the stock, which is expected to grow modestly this year. The specialty biopharmaceutical company, headquartered in North Chicago, owes its success primarily to its diverse portfolio and large pipeline. But the business model will be tested soon, as the market will track how the company deals with generic competition to Humira.
AbbVie Q4 2022 Earnings Call Transcript
Humira, which is indicated for the treatment of various diseases including rheumatoid arthritis, psoriatic arthritis, and ankylosing spondylitis, is probably the most popular drug in the segment. Thus, losing market share to Humira biosimilars will have a negative impact on the company. But AbbVie has other high-demand products that contribute significantly to its top line.
Alternative
Since the expiration of the patent is expected, the company began to make preparations in advance to face it. And, developed and launched Skyrizi and make new to cover all of Humira’s main indications, with an additional specific indication for atopic dermatitis. The agent is also being studied for five additional indications.
Combined, they will generate more than $7 billion in sales in 2022. They are expected to gather more momentum this year and surpass the all-time high sales of Humira by 2027. The impressive sales performance so far shows that both drugs have the capacity to take over when Humira lose exclusivity.
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“We have successfully created a diversified portfolio with multiple growth platforms in attractive and sustainable markets. This includes the rapid development and launch of Skyrizi and Rinvoq in all of HUMIRA’s main indications, plus a different new indication, atopic dermatitis. We look forward to these two products will exceed the peak revenues achieved by HUMIRA in 2027 with significant growth by the end of the decade,” said AbbVie CEO Richard Gonzalez in a recent statement.
Strong Q4
AbbVie has done well to deliver stronger-than-expected earnings, with the numbers beating estimates in nearly every quarter of the past year. There was no difference in the December quarter when non-GAAP profit rose 17% to $3.60 per share. This is due to high margins in our core Immunology division which generated 17% more profit than in the year-ago quarter – which represents more than 50% of the total business. Meanwhile, weakness in other operating segments and lower sales in non-US markets limited total revenue growth to just 2%.
On Monday, AbbVie shares traded slightly above their 52-week moving average, helped by last week’s results. Stocks have experienced weakness in the early weeks of the year.
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