Analysis: ABBV

AbbVie (ABBV) reported a top and bottom line beat with its second quarter results. Revenues of $13.96 billion (+33.9% YoY reported, or 19.3% on a comparable operational basis) edged the consensus of $13.63 billion, and adjusted earnings per share of $3.11 (+32.9% YoY) beat consensus by two pennies.

"AbbVie delivered another strong quarter and our business continues to perform extremely well across the portfolio, with AbbVie's new immunology assets contributing more than $1 billion of combined sales in the quarter," Chairman and CEO Richard Gonzalez said in the press release. "The Allergan integration also continues to track exceptionally well, with both the neuroscience and aesthetics portfolios delivering double-digit sequential growth. Based upon the momentum of our business, we are raising our full year 2021 EPS guidance and believe AbbVie is very well positioned for the long term."

In the Immunology portfolio, global net revenues were $6.120 billion (+13.8% on a comparable operation basis), edging estimates of $6.093 billion. By product, Humira net revenues were $5.068 billion (+3.6% YoY on a comparable operation basis) and that was barely below expectations of $5.089 billion. In the U.S., Humira sales increased 7.1% YoY to $4.257 billion, while international sales fell 12.6% YoY to $811 million due to biosimilar competition. We remind members that current erosion in International markets and 2023's U.S. loss of exclusivity has weighed on both the stock's multiple and investor sentiment. On the bright side, the rapid growth of Skyrizi and Rinvoq are expected to pick up the slack. As for the sales of those two products, Skyrizi net revenues were $674 million (+17.4% QoQ) which was inline with estimates of $675 million, and Rinvoq revenues of $378 million (+25% QoQ) exceeded the consensus of $367 million. This was the first quarter the two drugs combined for over $1 billion in sales.

Hitting on Rinvoq a little deeper, recall ABBV has sold off a couple times in the past few months on news that that FDA has extended the review period for a couple indications. Throughout the conference call, management once again expressed its confidence in Rinvoq's safety profile. They cited results from a recent maintenance study that showed that the exposure adjusted event rates for overall adverse events, including serious and severe events, were higher in the placebo group than in either Rinvoq dose group. Also, the exposure adjusted rates for MACE, VTE and malignancies excluding non-melanoma skin cancer were comparable between Rinvoq group and placebo. Furthermore, AbbVie cited the fact of how in June, Rinvoq received a positive CHMP opinion in Europe for both 15mg and 30mg doses in moderate to severe atopic dermatitis. Based on the data, we remain of the belief that the FDA will approve Rinvoq for the indications that are under review, however the exact timing of such PDUFA dates remains unknown but is expected in the next few months

In the hematologic oncology portfolio, global net revenues were $1.816 billion (+13.2% YoY operationally), inline with the $1.806 billion consensus. Global Imbruvica net revenues were $1.381 billion (+7.2% YoY), inline with the $1.378 billion consensus. Global Venclexta net revenues were $435 million vs. $413 million consensus.

Moving on to global aesthetics, net revenues were $1.434 billion. The result was a big beat relative to the $1.117 billion consensus estimate. Notably, global Botox cosmetic net revenues were $584 million and beat estimates of $484 million. Management said they have exceeded their internal revenue expectations for Botox since the closing of the Allergan transaction. Meanwhile, Juvederm sales of $428 million exceeded estimates of $329 million and Other Aesthetics revenue of $422 million topped estimates of $338 million.

In global neuroscience, net sales were $1.459 billion and exceeded the $1.389 billion consensus. By product line, global Botox therapeutic net revenues were $603 million, beating estimates of $561 million, while Vraylar net revenues were $432 million and edged estimates of $425 million. Net revenue for Ubrelvy (the oral CGRP acute migraine drug we closely follow) was $126 million and that's a nice result against estimates of $94 million. Ubrelvy's sales result also exceeded the $93 million sales figure BioHaven preannounced for Nurtec. Management now expects full year Ubrelvy sales of $500 million and this outlook is nicely higher than the $408 million consensus estimate.

Elsewhere in AbbVie's Portfolio, Eye Car revenues of $919 million exceeded estimates of $752 million, Women's Health revenue of $191 million missed estimates of $245 million, and Other Key Products revenue of $1.38 billion missed estimates of $1.409 billion.

In addition to the better-than-expected quarter, AbbVie raised its full year 2021 EPS outlook. Management's new EPS range is $12.52 to $12.62, up from $12.37 to $12.57. Wall Street had already anticipated the move, however, with the consensus full year estimate sitting at $12.60. Full year sales are expected to be $56.3 billion which is a little more than the $55.9 billion consensus.

For the third quarter, management expects net revenue approaching $14.3 billion, which is slightly higher than $14.25 billion estimates. Additionally, adjusted EPS is expected to be between $3.18 to $3.22, which is slightly lower than the $3.24 consensus estimate.

On the debt payment schedule, the company continues to expect a cumulative debt paydown of $17 billion by the end of the year with further deleveraging actions through 2023. From a net leverage standpoint, AbbVie expects a ratio of 2.4x by the end of the year and approximately 2x by the end of 2022. The latter target puts AbbVie's balance sheet in great shape for when Humira goes off-patent in the U.S.

All in, a very solid quarter from AbbVie, and we'll take the raised full-year outlook, even though Wall Street had already anticipated the move. One concern we have had here was that the Allergan portfolio has been underperforming, but today we find ourselves encouraged by the better-than-expected Aesthetic numbers (this was what drove the beat) and the strength of Ubrelvy. Despite the solid quarter from AbbVie, shares are getting little credit in today's volatile trading session and were down about 2% at the time this was written. The decline this morning could be a result of the uncertainty and overhang surrounding Rinvoq's approval timeline. Nevertheless, with a large and safe dividend yield of about 4.47%, we remain holders of ABBV here and continue to view the stock as a great income play.