AbbVie: We have more cash than we need
- AbbVie's Humira (adalimumab) continued to barrel forward, bringing in $4.1 billion worldwide, up 15% year-over-year. The bulk of sales came from the U.S. as revenues rose 22.8% — contrasting with the weak results from Amgen's competing Enbel (etanercept), which Amgen blamed on sector weakness.
- Elsewhere, AbbVie's second best-seller, cancer drug Imbruvica (ibrutinib), brought in $551 million, up 44.7% year-over-year. The company is plowing ahead with pursuing other indications for the drug, winning its fifth blood cancer approval earlier in the quarter and awaiting a decision from the Food and Drug Administration on an indication for graft versus host disease.
- AbbVie CEO Rick Gonzalez, speaking on an earnings call Thursday, said the company is excited and encouraged about the proposed tax reform released by the new administration on Tuesday. Should tax reform come to fruition, AbbVie would be encouraged to invest in new jobs in the U.S., he added.
While Humira continues to dominate earnings for AbbVie — routinely bringing in more than 60% of the company's revenues, analysts and investors are starting to see the drug as a "major risk," as opposed to the a monster cash generator that it has been for years.
Goldman Sachs analyst Jami Rubin threw around the idea that AbbVie might spinout Humira into a royalty-generating company in order to better focus resources on the expansive pipeline it has been building and better emphasize "the pipeline story."
AbbVie CEO Gonzalez didn't seem enthused about the notion, highlighting the importance of Humira to provide the company with flexibility from a cash perspective. Gonzalez called the performance of the drug in the U.S. "tremendous," and said AbbVie is "very comfortable" with its position in the U.S. market despite increased competition in the space.
The company had $8.2 billion in cash on hand at the first quarter mark. Most of that is kept offshore due to current tax law, which would impose a high penalty if that cash was repatriated.
"We have a business that generates significant cash flow and is more than we need to reinvest back in the business. We are going to reinvest back in the business. It is in excess of what we need to invest back in the business," Gonzalez emphasized.
The CEO shook off the suggestion that AbbVie should be continuing to conduct bolt-on acquisitions and said the company has enough large platforms at this point. He noted AbbVie is looking to make smaller deals that are specific-product focused and that it intends to add to the pipeline that way. Gonzalez specifically pointed to assets int he non-alcoholic steatohepatitis (NASH) sector. AbbVie has been building its presence in the specialty oncology space, as well as women's health, liver diseases and the anti-inflammatory space.
"We are tremendously undervalued. If we get tax reform and can get better access to our offshore cash, we are going to look at ways to employ that cash. Share buybacks and returning cash to shareholders will be one way of doing that. As we move forward we are going to look at what is the appropriate approach for rewarding shareholders with the excess of cash from Humira," the exec added on the call.
- AbbVie Earnings release
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