Pandemic Headwinds Pressure AbbVie’s Second Quarter

We don’t expect any major changes to our AbbVie ABBV fair value estimate after the firm reported second-quarter results that were slightly below our expectations but ahead of S&P CapIQ consensus projections. The results included Allergan for the first time, and the integration appears to be tracking smoothly despite the heavy COVID-19 pressures on several of Allergan’s more elective treatments. We expect the Allergan business will help AbbVie diversify away from heavy U.S. biosimilar Humira competition in 2023, but the upcoming loss of sales from a very high-margin drug is still a key concern, leading to our narrow moat rating for AbbVie rather than the wide moat rating carried by most Big Pharma companies.

In the quarter, the Allergan acquisition helped boost total sales by 26%, but sales would have fallen by 5% excluding Allergan due to COVID-19 pressures. We expect pandemic pressures to ease through the rest of the year as the healthcare systems adapts. However, given the more elective nature of several of the Allergan-acquired products, such as cosmetic treatment Botox, we expect sales traction will return more gradually for AbbVie versus the drug industry. Nevertheless, AbbVie’s legacy platform, including immunology drugs Humira, Skyrizi, and Rinvoq along with cancer drug Imbruvica, are posting steady gains. The underlying critical nature of the diseases these drugs target, along with drug administration outside of the doctors’ office, likely support the resilience of these drugs despite the COVID-19 pandemic.

On the pipeline front, AbbVie continues to make strides. Recent atopic dermatitis data for Rinvoq suggests a highly competitive drug in a major new indication. Additionally, recent Skyrizi data showed better head-to-head efficacy in psoriasis versus Novartis’ Cosentyx, which should help AbbVie gain more share in new patient starts. Also, the approval for Oriahnn in uterine fibroids opens up a significant new indication for the drug.

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