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AbbVie Outperforms Large-Cap Pharma Industry Year to Date

Zacks Equity Research

The economic impact of the coronavirus pandemic on the large drug sector has been relatively softer when compared to retail, restaurants, gaming, transportation, and travel industries. In fact, all eyes are on this sector to find a cure/vaccine for the deadly COVID-19 disease and bring an end to the global economic catastrophe. A key company in the Zacks Large Cap Pharmaceuticals industry is AbbVie ABBV, which has outperformed the industry this year so far.

AbbVie’s stock has risen 7.8% this year so far against a decrease of 0.6% for the industry.

 

 

Here we discuss some aspects driving AbbVie’s stock this year so far.

Strong Quarterly Results: AbbVie’s results in the first two quarters of 2020 were impressive. It beat estimates for both earnings and sales in both the first and second quarters of the year. Though AbbVie’s sales declined 5.3% on a comparable operational basis in the second quarter, it was because of a substantial decline in sales of legacy Allergan brands. AbbVie acquired Allergan for almost $63 billion in May this year. The impact of COVID-19 related business disruption on legacy AbbVie drugs was less severe than expected in the second quarter. Its legacy AbbVie sales were above expectations due to continued robust performance in both hematology/oncology and immunology franchises.

With regard to the Allergan side of the business, AbbVie said that though second-quarter sales of Botox (both Cosmetic and Therapeutic) and the aesthetics business were significantly hurt by COVID-19, the business had recovered to more than 90% of pre-COVID levels by end of June. In fact, the company said that recovery trends from COVID-19 were faster than expected with further recovery expected in the second half of 2020.

Allergan Deal Adds a Successful Product, Botox: AbbVie’s acquisition of Allergan significantly expanded and diversified its revenue base with new therapeutic areas, enhancing its long-term growth potential. The acquisition strengthened AbbVie’s existing leadership positions in immunology and hematological oncology while providing additional growth franchises in aesthetics and neuroscience.

AbbVie’s rationale behind the Allergan deal was to add a new blockbuster product to its portfolio, Allergan’s Botox, ahead of generic competition for Humira. Humira generics are already denting revenues in Europe and are expected to be launched in the United States in 2023. AbbVie is heavily dependent on Humira and is looking to diversify its portfolio. Approved for therapeutic and aesthetic use, Botox is a key top-line driver for Allergan and looks fit to be the next revenue driver for AbbVie after Humira loses exclusivity.

Strong Pipeline Performance: AbbVie had a rather fruitful year as far as striking collaboration deals and pipeline development is concerned.

Importantly, its two new immunology drugs, Skyrizi and Rinvoq, approved in 2019, were off to strong starts and have witnessed strong sales uptake in 2020. AbbVie expects combined revenues of these two drugs to be approximately $2.0 billion in 2020.  AbbVie gained FDA approval for another new drug — Oriahnn/elagolix —  in 2020 for reducing heavy menstrual bleeding (HMB) in premenopausal women with uterine fibroids. It also gained FDA approval for Imbruvica in combination with Roche’s RHHBY Rituxan for first-line chronic lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL) and EU approval for Venclyxto and Roche’s Gazyva for first-line CLL this year.

It announced successful data from late-stage studies on migraine prevention candidate, atogepant, four studies on Rinvoq in atopic dermatitis, head-to-head plaque psoriasis study on Skyrizi versus Novartis’ NVS Cosentyx, among others.

Important collaboration deals included an oncology collaboration deal with Denmark’s pharma company, Genmab GMAB and a collaboration with Harbour BioMed (HBM), Utrecht University (UU) and Erasmus Medical Center (EMC) to make a monoclonal antibody therapy to prevent and treat COVID-19.

Conclusion

AbbVie has its share of headwinds in the form of sales erosion due to direct biosimilar competition to Humira in international markets and declining sales of HCV medicine, Mavyret. Nonetheless, strong demand trends for Humira in the United States, a strong portfolio of new drugs and continued strong sales performance of Imbruvica and Venclexta keep the stock afloat.

AbbVie has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its earnings estimates have risen by 0.7% for 2020 and almost 2% for 2021 over the past 30 days.

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