AbbVie Earnings: Solid Drug Sales Help Mitigate Humira Biosimilar, but Increased Pressure Expected

AbbVie Stock at a Glance

• Fair Value Estimate: $120.00
• Morningstar Rating: 2 stars
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow

AbbVie Earnings Update

AbbVie ABBV posted first-quarter results largely as projected, and we don’t expect any major changes to our fair value estimate. With the arrival of the first U.S. biosimilar to Humira, AbbVie’s results took a material hit; we expected this, but it was probably more jarring to the market. With likely six more biosimilars launching later in the year (most around the July time frame), we expect Humira sales to continue to rapidly decline. However, the robustness of the remaining portfolio helps to support AbbVie’s narrow moat.

In the quarter, total sales fell 8% operationally, largely driven by declining Humira sales, partially offset by strong growth of the remaining portfolio. While we expect sales declines to decelerate in 2024 as the initial Humira biosimilar pressures annualize, we expect fairly flat sales for several years after 2024, given the likely continued headwinds from Humira biosimilars over the long term, despite management’s guidance for a return to growth after 2024 with stable Humira sales. With close to seven biosimilar versions likely to be on the market by the end of 2023, we expect long-term declines for Humira, which is likely to limit the stock’s growth potential.

Despite the Humira headwinds, AbbVie’s remaining business is largely holding up. In particular, next-generation immunology drugs Skyrizi (up 46% operationally in the quarter) and Rinvoq (up 51%) are poised to post collective peak annual sales above $21 billion by 2030 (the same sales amount as Humira in 2022). New indications and superior efficacy to existing treatments should continue to propel these drugs. Additionally, the recent approval of Qulipta in chronic migraine gives the drug a very competitive profile versus Pfizer’s Nurtec (another oral CGRP drug). However, beyond strong progress in line extensions with currently marketed drugs, we believe AbbVie’s pipeline needs further development with new molecules to drive robust growth in 2025 and beyond.