- AbbVie raised its 2018 earnings guidance for the third time Friday, delivering second quarter results that beat market expectations and kept the North Chicago, Illinois-based pharma on track to deliver another year of double-digit growth.
- Despite the impressive performance, rumbles of discontent from investors and analysts worried over threats to AbbVie's top-selling drug Humira have grown. Citron Research, an investment firm run by prominent short seller Andrew Left, recently argued that AbbVie could lose a third of its value over the next year.
- Faced with questions on a Friday conference call with analysts, AbbVie CEO Rick Gonzalez emphatically defended the company's track record in delivering on investor expectations as well as its prospects for future growth. "I think the future is even brighter than what the past has been," Gonzalez said.
Bearish investors have sung the same tune about AbbVie since approval of the first biosimilar version of Humira in the U.S. back in late 2016.
AbbVie is reliant on Humira for about 60% of its total sales, making copycat rivals a serious threat that could crimp growth if the pharma's new drugs are unable to fill the TNF inhibitor's place once competition arrives.
Thanks to a wall of protective patents, however, that day looks to be solidly in the future in the U.S. Recent settlement deals with potential challengers Amgen, Samsung Bioepis and Mylan should keep biosimilar versions of Humira off the market until 2023. (Biosimilars should arrive in Europe, where AbbVie's patent portfolio is less strong, later this year.)
In the meantime, Humira sales keep growing. Revenue from the drug grew 9.8% year over year in the second quarter to nearly $5.2 billion — putting $20 billion in annual sales within reach this year.
"Every year since I can remember, there has been fretting about Humira," said AbbVie's Gonzalez. "We have beat every single one of those expectations along the way."
AbbVie has successfully staved off biosimilar threats to Humira in the U.S. until 2023
|Biosimilar Humira approved?
|Entry date per settlement
|Jan. 31, 2023
|June 30, 2023
|July 31, 2023
SOURCE: Company statements
Entry of biosimilars in Europe this year should take some of the shine off Humira's numbers, but AbbVie doesn't appear too concerned about the immediate impact — evidenced by its third and most recent guidance hike.
AbbVie's case for its portfolio outside of Humira also looks a little more convincing. Cancer drug Imbruvica (ibrutinib) brought in $850 million in the second quarter, and the company's hepatitis C portfolio neared $1 billion in sales during the period due to a strong performance from Mavyret (glecaprevir/pibrentasvir)
AbbVie believes both drugs to be capable of $4 billion a year. And CEO Gonzalez ticked off four other drugs that he believes have the potential to be multi-billion dollar, or near multi-billion dollar, products in the near-term: Venclexta (venetoclax), Orilissa (elagolix), and the experimental drugs risankizumab and upadacitinib.
For some investors, though, that doesn't appear enough. Shares in the drugmaker fell by more than 5% to trade below $89 a share early Friday morning before gaining back some of those losses. The stock is down more than 9% since the beginning of 2018 (but up over 20% from last July.)
Short-seller Andrew Left thinks AbbVie can fall all the way to $60 per share.
"What makes AbbVie a short is that there finally seems to be changes coming to the system in two words, Biosimilars and Rebates," his firm, Citron Research, wrote in a recent note. Left was famously one of the few who bet against Valeant Pharmaceuticals (now Bausch Health) before it fell from Wall Street's good graces.
On Friday's call, Gonzalez seemed to reject Left's charges, defending both AbbVie's modeling of the impact of biosimilars and its ability to weather changes to the drug rebate system.
The CEO also made the case its settlement deals for Humira biosimilars represented a fair balance between competition and a patent portfolio that extends into the late 2020s.