AbbVie Posts Strong Q3, Buoyed by New Immunology Drugs
We continue to see the company as undervalued and maintain our narrow moat rating.
AbbVie (ABBV) reported third-quarter results ahead of both our and consensus S&P CapIQ expectations, but we don’t expect any major changes to our fair value estimate based on the minor outperformance. We continue to view the company as undervalued with the market likely not ascribing enough value to the firm’s recently launched products and growing pipeline, which also help fortify our narrow moat rating for the firm.
In the quarter, total sales increased 4% (on a comparable operational basis assuming the Allergan acquisition closed in January 2019) with strong growth from new immunology drugs Skyrizi and Rinvoq along with oncology drugs Imbruvica and Venclexta offsetting weakness in eye care, aesthetics, and hepatitis C. We expect accelerating total growth until U.S. Humira biosimilars emerge in 2023, as COVID-19 pressure should ease on the aesthetics and eyecare businesses. Also, Skyrizi and Rinvoq look poised for significant gains based on low market share penetration in currently approved indications and major label expansion opportunities, including atopic dermatitis, ankylosing spondylitis, and inflammatory bowel disease (IBD) for Rinvoq and psoriatic arthritis and IBD for Skyrizi. An important head-to-head study of Rinvoq versus market leading drug Dupixent in atopic dermatitis should report in late 2020, and we expect Rinvoq to show a benefit on itch based on the drug’s mechanism of action. Overall, we expect these two new immunology drugs to post peak annual sales of over $10 billion, representing just over half of peak annual Humira sales. While the new immunology drugs along with expected continued growth from oncology drugs mitigate some of the biosimilar pressures for Humira, we still expect the company to face heavy pressure starting in 2023. However, we believe the emerging early-stage pipeline focused in oncology and immunology should support steady earnings by 2025, following the worst of the U.S. Humira biosimilar pressure.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Damien Conover does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.