AbbVie (ABBV -4.58%) spent 11 weeks building solid momentum. Its stock climbed more than 14% during the period. But it took only one day to wipe out most of the gain.
The drugmaker's shares plunged last Thursday after AbbVie announced its first-quarter results. Although the pharma stock rebounded slightly on Friday, it's still well below the levels from earlier last week. Should you buy AbbVie stock on the dip?
Why AbbVie stock was hit so hard
There were several factors behind why AbbVie stock crashed last week. The most obvious reason is that sales for the company's longtime best-selling drug, Humira, sank 25% year over year with a 26% drop in the United States. Humira now faces biosimilar competition in the U.S. market.
Humira wasn't the only problem, though. Global sales of blood-cancer drug Imbruvica also plummeted by 25% year over year. AbbVie attributed the dismal performance to "to increasing competition and the cumulative impact of a suppressed market."
The company faced challenges with its aesthetics portfolio, too. Net revenue for the franchise slid 5.4% from the prior-year period. Although Botox Cosmetic sales rose 2.9%, it wasn't enough to offset a 13.4% sales decline for Juvederm.
Wall Street wasn't happy with the results for Humira's successors, Rinvoq and Skyrizi. First-quarter sales for both autoimmune-disease drugs missed analysts' estimates.
More to the story
Before total gloom and despair set in, however, it's important to note that there's more to the story with AbbVie's Q1 update. For one thing, the company actually beat the consensus Wall Street revenue estimate as well as its own internal top- and bottom-line expectations.
Humira's sales decline was fully anticipated. AbbVie CEO Rick Gonzalez maintained in the Q1 conference call that the company is "managing the erosion well."
Despite the lower aesthetics sales in Q1, the numbers were actually ahead of AbbVie's guidance. Senior vice president Carrie Strom, who heads up AbbVie's aesthetics business, said in the quarterly update that the Chinese market reopened faster than anticipated and the U.S. economy was a little stronger than projected.
What about those results for Rinvoq and Skyrizi that displeased Wall Street analysts? Sales for Rinvoq skyrocketed nearly 48% year over year to $686 million. Skyrizi delivered growth of nearly 45% with global sales of $1.36 billion.
AbbVie president Rob Michael stated in the Q1 call, "Growth rates in the first quarter for both products are consistent with our full-year expectations." The company continues to project 2023 combined sales for Rinvoq and Skyrizi of over $11 billion.
Sales for both drugs were negatively impacted by inventory destocking in the first quarter. However, Michael said that this destocking was factored into AbbVie's guidance and is typical for the beginning of the year. This shouldn't be an issue in the remaining quarters of 2023.
Buy on the dip?
My view is that nothing about AbbVie's long-term prospects was materially changed with the company's Q1 update. If you liked the stock before, you should like it even more now that it's available at a lower price.
And I think there are several reasons to like AbbVie. Its valuation is relatively attractive with shares currently trading below 15x forward earnings. The company continues to expect to deliver solid growth over the long term. AbbVie is also a Dividend King with a juicy dividend yield of over 3.9%.
It's easy to get caught up in all of the negative commentary when a stock falls as AbbVie did in recent days. However, the big drugmaker's prospects actually remain pretty good over the rest of the decade and beyond.
I think last week's sell-off was overdone. AbbVie appears to be a solid stock to buy on the dip, in my view.
