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Alberto Abaterusso
Alberto Abaterusso
Articles (1701) 

AbbVie Reports 3rd Quarter Results

Company gives update on new treatments

AbbVie Inc. (NYSE:ABBV) closed the third quarter reporting adjusted diluted EPS of $1.21, 4% lower than its second quarter of 2016 EPS of $1.26, and 7.07% higher than the third quarter of 2015.

The biopharmaceutical company, which was founded in 2013 as a spinoff of Abbott Laboratories (NYSE:ABT) and headquartered in Lake Bluff, Illinois, beat analysts’ expectations on third quarter adjusted EPS by one cent and generated a positive surprise of 0.80%.

Source: Yahoo Finance

Concerning revenue for the third quarter of 2016, AbbVie reported revenue of $6.4 billion, a 7.7% increase on a year over year basis, missing analysts’ expectations by $160 million.

AbbVie’s revenue is driven by the sale of Humira, the trade name under which adalimumab is marketed. Humira is the main medication in the company’s portfolio. Approximately 61% of AbbVie's total net revenues in 2015 came from the sale of this medication that is used for the treatment of rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn's disease, ulcerative colitis, juvenile idiopathic arthritis, plaque psoriasis, hidradenitis suppurativa, uveitis and pediatric enthesitis-related arthritis.

The company closed its third quarter reporting Humira sales of $4,060, +11.3% on a year over year basis and -2.2% from the previous quarter of 2016. In the third quarter of 2016, the sale of Humira represented approximately 63.6% of AbbVie’s total adjusted net revenues.

The medication, introduced to the market in January 2003, is approved for use in North America, the European Union and is also approved for more than 60 other markets, including Japan, China, Brazil and Australia.

Since the patent covering adalimumab (brand name Humira), the human monoclonal antibody that recognizes TNF-alpha as antigen, is expected to expire in the U.S. in December 2016 and in the majority of EU countries in October 2018, investors are concerned that competition from biosimilars (Amgen’s Amjevita, recently approved by FDA, and Boehringer Ingelheim's BI 695501) could blow a huge hole in the company’s revenue.

Investors rightly see that AbbVie has a dilemma because the company can generate plenty of cash to sustain the dividend growth (the current dividend yield is 4.59%) from the sale of Humira. However, shareholders should not see  Amgen (NASDAQ:AMGN) and Boehringer Ingelheim’s products as a threat to the company’s revenues because the two medications are ‘biosimilar’ to Humira and not ‘interchangeable products’.

Being a biosimilar product, it will take some time before the competing medications become marketable products that may subtract from AbbVie’s Humira market share. Furthermore, AbbVie CEO Rick Gonzalez has promised that the company can prevent ‘biosimilar’ competition until 2022.

In the meantime, the company is putting a lot of effort in its new drug pipeline, Imbruvica (ibrutinib), a Bruton’s tyrosine kinase (BTK) inhibitor that targets B-cell malignancies, whose sales of $501 million grew 64.8% on year over year basis and were approximately 7.8% of total adjusted net revenues in the third quarter.

Another biopharmaceutical company, BeiGene Ltd. (NASDAQ:BGNE), is currently developing a molecule that shows “higher selectivity against BTK and higher exposure than ibrutinib'' for the treatment of patients with Waldenström’s macroglobulinemia, a type of  rare cancer that affects a type of leucocytes (WBC), the B-cells, causing them to proliferate.

In the U.S., through a business combination with biopharmaceutical company Pharmacyclics (FRA:PY2), Imbruvica is commercialized in a collaboration with Janssen Biotech Inc., one of the Janssen Pharmaceutical companies of Johnson & Johnson (NYSE:JNJ), with AbbVie being the principal in the end customer product sales.

Janssen is responsible for and has exclusive rights to commercialize Imbruvica outside the U.S. The amounts payable by Janssen to AbbVie for the sale of Imbruvica outside the U.S. are included in total net revenues (collaboration revenues) that in the first half of 2016 were $12,410 million (up 18.02% year over year). The revenues from the sale of Imbruvica were $802 million, approximately 6.6% of total net revenues and  up 382.4% on a year over year basis.

A few months ago, the U.S. Food and Drug Admistration updated the Imbruvica (ibrutinib) prescribing information to include new data from two phase three trials supporting its expanded use in patients with chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL).

On Sept. 26,  AbbVie submitted a supplemental New Drug Application to the FDA for treatment of marginal zone lymphoma. If approved, it will be the fifth new treatment indication for the medication.

In the third quarter, AbbVie also reported increases on a year over year basis in the sales of Synagis ($96 million, 2.5%), Creon ($187 million, 16.6%) and Duodopa ($74 million, 21%).

Duodopa, as it is known outside of the U.S., is the carbidopa intestinal gel for the treatment of advanced Parkinson's disease. In the U.S., AbbVie's levodopa-carbidopa intestinal gel is marketed as Duopa, whose regulatory submission in the U.S. was approved by the FDA in January 2015.

For the treatment of Parkinson’s disease, AbbVie entered into a collaboration with BioArctic, a privately held Swedish research-based biopharmaceutical company founded in 2003, to develop and commercialize BioArctic’s portfolio of antibodies directed against alpha-synuclein, a protein whose mutations are believed by researchers to be strongly linked to the development of Parkinson’s disease.

During the third quarter, AbbVie reported decreases on a year over year basis in the sales of the following products: Viekira ($378 million, -19.6%), for which in April 2016 AbbVie received the FDA’s approval as a therapy without ribavirin (RBV) in patients with uncomplicated cirrhosis due to GT1b chronic hepatitis C infection; Lupron ($193 million, -4.1%); Synthroid ($188 million, -0.3%); AndroGel ($174 million, -2.1%); Kaletra ($137 million, -18.4%) and Sevoflurane ($102 million, -16.1%).

In its commitment to advance hepatitis C therapies for people living with chronic hepatitis C,  AbbVie received the FDA designation of ‘Breakthrough Therapy’ for its "pan-genotypic regimen of glecaprevir (ABT-493)/pibrentasvir (ABT-530) (G/P)" in October.

On Oct. 28, AbbVie declared its quarterly dividend of 64 cents per share, a 12.3% increase from the prior dividend of 57 cents. The dividend is payable on Feb. 15, 2017 to stockholders of record at the close of business on Jan. 13, 2017. (AbbVie’s financial release).

The company raised its GAAP diluted EPS guidance range for the year to  between $3.74 and $3.76 and its adjusted EPS guidance range to between $4.80 and $4.82, representing growth of 12.1% at the midpoint.

AbbVie is a member of the S&P 500.

AbbVie is trading around $55.78 per share on the New York Stock Exchange and outperformed  the S&P 500 by 9.84% year to date.

On Oct. 14, a positive opinion was released by the European Union Committee for Medicinal Products for Human Use (CHMP) on Venclexta (Venclyxto in the U.S.), a medication co-developed by AbbVie and Roche used as therapy for patients affected by chronic lymphocytic leukaemia (CLL). The medication is jointly commercialized by AbbVie and Genentech, a member of the Roche Group, in the United States.

Disclosure: I have no positions either in AbbVie Inc. or in any other securities mentioned in this article.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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