AbbVie Posts Strong Q4 and Issues Robust 2021 Guidance

AbbVie ABBV reported strong fourth-quarter earnings and issued robust 2021 guidance above our expectations. We plan to slightly raise our fair value estimate on the basis of the favorable update. The strong traction of the firm’s next-generation immunology drugs Rinvoq and Skyrizi are helping to propel the outperformance and position the firm to better mitigate pressure from the likely heavy U.S. biosimilar competition to Humira in 2023. While we don’t expect the new immunology drugs to completely offset the loss of U.S. market exclusivity for Humira, the growing entrenchment of new drugs helps support the firm’s narrow moat.

In the quarter, total sales increased 7%, after making the adjustment to include Allergan sales in the previous quarter to reach a normalized growth rate excluding the Allergan acquisition impact. We expect recently launched drugs to drive steady overall company growth until the 2023 Humira biosimilar pressure. New indications for Rinvoq (psoriatic arthritis, atopic dermatitis, ankylosing spondylitis, and ulcerative colitis) hold the potential to drive peak annual sales above $5 billion. Similarly, new indications for Skyrizi (psoriatic arthritis and Crohn’s disease) along with leading efficacy in psoriasis should also drive peak sales above $5 billion annually. While these sales will not completely offset the almost $20 billion in Humira sales, other growth drivers in oncology (Imbruvica and Venclexta) should also help mitigate the pressure.

While AbbVie is making strides to offset the Humira biosimilar pressure, we believe the firm’s ability to drive growth beyond 2023 will be largely driven by its pipeline, which lacks a high number of late-stage assets. However, the early-stage pipeline is focused in the right areas of unmet medical need of oncology, immunology, and neurology, which can advance quickly to the market if favorable data is achieved.

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