Image source: AbbVie Inc.
What happened
After competitors reported news that could negatively impact its future sales, and ahead of third-quarter results that did little to spark enthusiasm, shares in AbbVie Inc. (ABBV -0.05%) fell 11.6% last month, according to S&P Global Market Intelligence.
So what
In early October, trial results for Johnson & Johnson's (JNJ 0.08%) clinical stage psoriasis drug, guselkumab, showed that it outperformed AbbVie's top-selling Humira. Among patients receiving three doses of guselkumab, 73.3% achieved PASI 90 (90% skin improvement), while 49.7% of patients receiving 10 injections of Humira achieved PASI 90.
Later in the month, Boehringer Ingelheim announced that its Humira biosimilar was equivalent to Humira in rheumatoid arthritis patients participating in a phase 3 trial. Boehringer's news comes roughly one month after the FDA approved Amgen's Humira biosimilar, Amjevita.
On Oct. 28, AbbVie reported third-quarter sales of $6.4 billion, up 7.4% from last year, and non-GAAP EPS of $1.21, up 7.1% year over year. The top-line results were shy of estimates by $160 million, but the bottom-line earnings beat estimates by one penny. Humira was AbbVie's best-selling drug in the quarter, generating $4.06 billion in revenue, up 11% from a year ago. Humira sales accounted for roughly 64% of AbbVie's total third-quarter revenue.
Now what
AbbVie's management believes Humira's remaining method of use patents can keep Humira biosimilars at bay for a few more years. In the meantime, they're attempting to diversify the company's revenue away from Humira by expanding into new indications, such as cancer treatment.
Last year, AbbVie spent $21 billion buying the maker of the fast-growing blockbuster leukemia and lymphoma drug Imbruvica, and earlier this year, the company acquired Rova-T, a promising anti-tumor medicine that's in early-stage trials. AbbVie also secured FDA approval for its chronic lyphocytic leukemia drug Venclexta earlier this year.
Overall, AbbVie has a flurry of research and development activity going on, but Humira will eventually face competition, and it's not 100% clear to me that the company's pipeline will produce enough blockbusters to offset that risk. Because of that revenue uncertainty, AbbVie is a riskier big-cap biotech stock. However, investors are being nicely rewarded for accepting that risk in the form of the company's dividend: AbbVie's dividend payout has grown 60% since 2013, and its shares yield a healthy 4.5% right now.
