Investors have been skeptical about AbbVie lately, particularly after last week’s second-quarter financial report. That doesn’t make all that much sense, given that the company reported net revenues of $8.278 billion for the quarter.
Investors have been skeptical about AbbVie lately, particularly after last week’s second-quarter financial report. That doesn’t make all that much sense, given that the company reported net revenues of $8.278 billion for the quarter compared to $6.944 billion in the same period last year, and $16.212 billion for the six-month period, compared to $13.482 billion for last year’s six-month mark. But short-seller Andrew Left with Citron Research called the company “the next great short” due to possible changes over the biosimilar market and drug rebates.
Keith Speights, writing for The Motley Fool, however, notes five things mentioned at CEO Rick Gonzalez’s earnings conference calls that the skeptics should consider.
#1. Company performance. If this quarter’s numbers don’t convince investors, then they should look at the longer track record. Gonzalez urged investors to look at the last five-and-a-half years, saying the company has “never once disappointed investors.” He added, “there’s not a company that I’m aware of that’s performing better than us, and there’s not a company that has performed better over the past five years.”
#2. Humira worries. Humira, which brought in a whopping $9.894 billion in the first half of this year alone, is facing more and more competition from biosimilars. Yet those figures represent growth figures, not decreases, at least so far. Gonzalez suggests that although some of those worries are normal, “some of it is driven by people who want to elicit fear for their own personal gain.” The company, he indicates, has strategies in place to deal with Humira competition and is ready to execute them.
#3. Deeper portfolio. Although there’s no doubt that Humira is responsible for the bulk of AbbVie’s revenue, it’s not the only arrow in its quiver, with Imbruvica bring in $1.317 billion for the half and the company’s Mavyret for hepatitis C showing promise. AbbVie believes Imbruvica has the potential to bring in peak sales of $7 billion and Mavyret brought in $932 million in the second quarter alone.
#4. Deep pipeline. AbbVie’s not only sitting back raking in Humira sales, but is also developing its pipeline with some drugs it expects can be blockbusters as well. For example, its Venclextra recently was approved by the U.S. Food and Drug Administration (FDA) in combination with Rituxan for second-line treatment for chronic lymphocytic leukemia (CLL), and may get an expansion approval for acute myeloid leukemia (AML) later this year. Its Orilissa (elagolix) was recently approved to treat pain associated with endometriosis. It also has two possible drugs in its pipeline, risankizumab and upadacitinib, that could replace Humira.
#5. Doesn’t need a deal. There are rumors that the company was going to buy something for $20 to $30 billion, which is typically the type of news to get investors’ heart a-fluttering. Gonzalez said his earlier comments on that “took on a life of its own far greater than I would’ve anticipated.” He claims the company doesn’t have any big acquisitions on the table and that smaller deals are more likely.
Maybe. At the call, Jami Rubin, an analyst with Goldman Sachs pressured Gonzalez into talking more about a big acquisition, and he said, in part, “When we find the right kind of opportunity, that we think fits strategically that we believe we can get a good return for our investors, fits into what we’re good at, then we’ve shown, we’re not shy, we’ll act on those….But $20 billion to $30 billion deals these days are rare for a reason. Valuations are sky high and it’s hard to find the right asset at the right price at that level of M&A. And nobody wants a rep for acting recklessly in this market.”
The bottom line for the skeptics? Speights writes, “In my view, Gonzalez made some good points about AbbVie’s track record and its strategy. I don’t think sales for Humira are going to fall off a cliff anytime soon. Actually, I agree with market research firm EvaluatePharma that Humira will remain the world’s top-selling drug for several more years.”
