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AbbVie Beats on Q1 Earnings, Humira Soars

Zacks Equity Research

AbbVie Inc. (ABBV) reported first quarter 2014 earnings of 71 cents per share, surpassing the Zacks Consensus Estimate and year-ago earnings of 68 cents. Revenues increased 5.4% to $4.563 billion in the first quarter of 2014, surpassing the Zacks Consensus Estimate of $4.328 billion. Results were boosted by Humira's strong performance. Currency movement negatively impacted revenues by 1.3%.

Including one-time items, first quarter 2014 earnings came in at 61 cents per share, up 1.7%.

The Quarter in Detail

Key drug, Humira, recorded growth of 17.5% with revenues coming in at $2.637 billion. U.S. sales increased 24.7% ($1.192 billion). Ex-U.S. sales increased 12.2% to $1.445 billion. Other products that performed well included Synthroid (up 31.5% to $157 million), Creon (up 18.4% to $107 million) and Duodopa (up 32.2% to $52 million).

TriCor/TriLipix revenues fell 81.8% to $23 million. Niaspan sales declined 75% to $47 million.

AbbVie said that adjusted SG&A was 27.6% of sales in the first quarter – this reflects the company’s investment in its growth brands as well as preparations for the potential launch of its hepatitis C virus (:HCV) combination therapy.

AbbVie is currently seeking approval for its HCV treatment in the U.S. and expects to file for EU approval early next month. Approval would allow the company to launch the product in the U.S. in 2014 and the EU early next year.

Adjusted R&D was 16.9% of first quarter 2014 sales, reflecting the company’s investment in its mid- and late-stage pipeline as well as its efforts to expand Humira’s label.

AbbVie’s pipeline represents significant potential – the company’s late-stage pipeline includes several compounds or indications in phase III development targeting therapeutic areas like HCV, immunology, and endometriosis. Meanwhile, the company recently initiated a phase III study evaluating Humira for the treatment of fingernail psoriasis in patients with moderate to severe chronic plaque psoriasis.

Guidance Maintained

AbbVie continues to expect 2014 earnings in the range of $3.00 to $3.10 per share on revenues of about $19 billion. The guidance does not include the impact of the potential launch of the HCV therapy in the U.S. The Zacks Consensus Estimate of $3.12 is slightly above the guidance range. The Zacks Consensus Estimate for revenues is also slightly above the company’s guidance at $19.2 billion.

Our Take

AbbVie is going through a transition period with its lipid franchise (TriCor, TriLipix and Niaspan) facing generic competition. We expect 2014 to remain challenging as the company absorbs the impact of the loss of exclusivity on the lipid franchise. However, this year should be catalyst rich for AbbVie as it continues to invest in its pipeline.

The launch of the HCV combination therapy, potentially later this year, would be a major boost for the company. The company has presented impressive data on the candidate - the high rates of response and tolerability coupled with low discontinuation rates are encouraging. But the HCV market currently has strong players like Gilead Sciences (GILD).

AbbVie carries a Zacks Rank #3 (Hold). While we are positive on AbbVie’s strong late-stage pipeline, dividend yield and growth strategy, we remain concerned about its dependence on Humira. We believe AbbVie will continue pursuing in-licensing deals and collaborations to boost its pipeline.

Some better-ranked stocks in the health care sector include Allergan (AGN) and Johnson & Johnson (JNJ). Both are Zacks Rank #2 (Buy) stocks.

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