Doomsday Plan for AbbVie Means Preserving Profits at All Costs

AbbVie Inc.’s CEO has a plan in case the drugmaker’s biggest product starts to suffer when cheaper versions come to market: Cut.

Chief Executive Officer Richard Gonzalez promised investors Thursday that he would do what it takes to preserve profits at the drugmaker, even in a “disaster scenario.” Humira, a rheumatoid arthritis injection, made up 62 percent of the company’s first-quarter sales, and new drugs to diversify are selling slowly. Companies including Novartis AG and Amgen Inc. have started developing copycat “biosimilars” of Humira in the U.S., but it’s unclear when regulators will let them come to market.

“If a bear scenario played out and threatened to materially impact the profit contribution of Humira, we would apply our investment philosophy in an appropriate manner,” Gonzalez said on a call with analysts. “We would take prompt and appropriate action to reduce our expense base accordingly with an eye to minimize the impact for investors.” He didn’t elaborate further.

AbbVie, with 25,000 employees around the world and headquarters in North Chicago, Illinois, has already been working to control costs. Its operating profit margin expanded to 33.5 percent in the first quarter from 29.6 percent a year earlier.

The doomsday plan may never be necessary. The company has a strategy in place that Gonzalez said would produce a strong performance for Humira after the introduction of a biosimilar competitor.

‘Unstoppable’ Drug

First-quarter sales of the rheumatoid arthritis injection came in at $3.11 billion, compared with the $3 billion average estimate. Jefferies Group LLC analyst Jeffrey Holford called the Humira result “outstanding” and Bloomberg Intelligence analyst Sam Fazeli said the drug seems “unstoppable.”

First-quarter profit of 94 cents a share, excluding some items, beat the 85-cent average estimate compiled by Bloomberg. Total revenue rose 10 percent from a year earlier to $5.04 billion, exceeding the $4.98 billion average projection.

Still, AbbVie shares fell after the company forecast second-quarter results that may fall short of analysts’ projections. Profit will reach $1.04 to $1.06 a share, AbbVie said. That compared with the average estimate of $1.06. The stock dropped 1.6 percent to $63.47 at 11:13 a.m. in New York.

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