By virtually any measure, AbVie (NYSE: ABBV) Stocks should have risen on Friday. The pharmaceutical giant achieved sales and profit results that exceeded expectations in the first quarter. The decline in sales of the multi-indicative immunosuppressive drug Humira – a natural consequence of the loss of patent exclusivity – is taking shape more slowly than initially feared. The company even raised its full-year profit forecast.
But AbbVie shares fell anyway, ending Friday's session down 4.6%, capping a decline of more than 12% from last month's high.
Life after Humira's patent expires
Skyrizi and Rinvoq – the drugs that AbbVie developed to replace Humira – are performing as hoped. The former's sales improved 47.6% year-over-year in the first quarter, while the latter's sales rose 59.3%, offsetting Humira's 35.9% sales decline. All told, AbbVie's revenue was flat year over year at $12.3 billion, while earnings fell to $2.31 per share from $2.46 per share a year earlier. Analyst consensus estimates had only predicted earnings of $2.23 per share gain of $11.9 billion.
The drugmaker now expects 2024 earnings per share to be between $11.13 and $11.33, compared to a previously expected range of $10.97 to $11.17. Analysts' consensus outlook for full-year earnings is lower, at $11.12 per share.
So what went wrong to cause shares to fall on Friday? AbbVie's management has not convinced investors that Humira sales won't continue to deteriorate at an accelerated pace.
This is an opportunity to buy AbbVie stock
That concern is understandable. Humira isn't just AbbVie's best-selling drug. It is one of the best-selling drugs in the world, generating $14.4 billion in sales last year alone. That made it the third bestseller of 2023, according to figures collected by industry website Drug Discovery and Development. The loss of most – though not all – of these revenues will certainly be felt by AbbVie.
What is largely forgotten, however, is that this scenario for Humira is already priced into AbbVie's stock, which is now trading where it was two years ago.
What has not been fully priced in in the meantime are the potential of Rinvoq, Skyrizi, cancer fighter Imbruvica, and the rest of AbbVie's drug portfolio and pipeline. In February, the company revised down its medium-term guidance for some of its drugs, suggesting Skyrizi's annual sales could top $17 billion by 2027, while Rinvoq could potentially generate more than $10 billion. Those sales figures would be more than double last year's total figures. These are just two of the company's many approved products, and there are several other treatments worth billions of dollars in the pharmaceutical company's pipeline.
The point is that AbbVie is now down 12% from its late March peak, making the stock an attractive prospect. New buyers will enter shares at a (very) fair valuation of around 14 times this year's expected earnings.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has one disclosure policy.
Why AbbVie shares stumbled today despite earnings beat was originally published by The Motley Fool
