AbbVie Beats Estimates, Sees Double-Digit Growth to 2020

  • Third-quarter revenue surges 18 percent; net income doubles
  • Arthritis drug Humira generates $3.65 billion in sales

AbbVie Inc., maker of the rheumatoid arthritis injection Humira, reported third-quarter earnings that beat analysts’ estimates and raised its forecast for the year, sending the shares soaring. It also laid out a long-term plan with ambitious financial goals through 2020.

Profit excluding one-time items rose to $1.13 a share, topping the average analyst estimate of $1.08, according to data compiled by Bloomberg. Sales surged 18 percent to $5.94 billion, more than analysts’ estimates of $5.89 billion, the company said Friday in a statement. Net income more than doubled to $1.24 billion, or 74 cents a share.

AbbVie said 2015 earnings before one-time items will reach $4.26 to $4.28 a share. The company had earlier predicted $4.10 to $4.30. AbbVie Chief Executive Officer Rick Gonzalez said he expects double-digit growth in adjusted earnings per share over the next five years and projected sales of about $37 billion in 2020.

Gonzalez acknowledged the sales forecast for 2020 is ahead of Wall Street’s by about $5 billion and said the company used conservative methods to come up with the numbers.

"We have a high level of confidence we can deliver what we’ve put there," he said. "The numbers we have forecasted certainly represent the top tier in this industry and they’re the numbers that we’re willing to stand behind."

Shares Jump

The shares rose 12 percent to $60.61 at 2:34 p.m. in New York, the biggest increase since December 2012.

One of the main questions surrounding AbbVie’s growth is the vulnerability of its best-selling drug, Humira. The company projected Humira sales of $18 billion in 2020, which takes into account competition from copies of rival medicines in the same class.

Analysts have started to build in expectations for biosimilar versions of Humira, as its original composition of matter patent in the U.S. expires in December 2016. The company said it has scores of additional patents that protect the drug until 2022, many obtained within the past two years. It vowed to vigorously fight less expensive copycat medications, including filing for injunctions against similar drugs launched at-risk, before the patent issues are fully resolved.

Humira ‘Erosion’

There are some novel medicines in development that may pose competition to Humira in the U.S. in the next five years, though they will cause only "modest erosion," Gonzalez said. The company is assuming no copycat versions of the drug will reach the U.S. market before 2020. The drug’s international sales will peak in 2018, then decline by about 15 percent to 18 percent as biosimilar rivals reach the market, he said.

Humira’s third-quarter sales totaled $3.65 billion, above analysts’ estimates of $3.61 billion. The introduction of biosimilar, or copycat, versions of rival drug Remicade in Europe hasn’t slowed Humira’s momentum and has generated only modest sales, Gonzalez said on a conference call. Merck & Co. said Friday it’s dropping the price of Remicade in the U.K. by 25 percent because of biosimilar competition.

Forecasts for 2020

The drugmaker acquired biotech Pharmacyclics Inc. this year for $21 billion, gaining Imbruvica, a cancer drug. In the third quarter, Imbruvica sales were $304 million; analysts had expected $272 million. By 2020, AbbVie forecasts Imbruvica sales of about $5 billion.

“We can’t be totally relying on internal R&D to bring innovation," Gonzalez said on a media conference call. He said AbbVie would continue to look for acquisition opportunities but wouldn’t do another on the scale of the Pharmacyclics deal “over the next year or two.”

The company has been developing and acquiring new drugs to diversify sales beyond Humira, which generates more than half of its revenue. Gonzales took AbbVie’s revenue projections further, saying novel medicines from its research and development efforts could generate $30 billion in annual sales by 2024. That excludes new uses of Humira and Imbruvica, and any acquired or licensed drugs. The estimates don’t include sales from some more ambitious efforts, including finding an effective treatment for Alzheimer’s disease, an area that has bedeviled the pharmaceutical industry for decades.

AbbVie’s hepatitis C drugs, which compete with market leader Gilead Sciences Inc., were delivered a blow last week when U.S. regulators updated their labels to reflect possible risks after several patients with advanced liver disease died. Viekira Pak generated $469 million in sales in the quarter, falling short of analysts’ estimates of $510 million.

“The market had a bit of an overreaction to that label change,” Gonzalez said on the call. A “relatively small population” of patients would be affected, he said.

“Our objective was to build a foothold in the marketplace, and we have established it,” he said. “We continue to see the product ramp.”

In its long-term forecast, AbbVie said it aimed to achieve an operating profit margin of more than 50 percent by 2020. It also said it would increase its quarterly dividend by 12 percent to 57 cents a share in the first quarter of next year.

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