How Will AbbVie's Earnings Fare?

On Friday, AbbVie (ABBV 1.12%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

AbbVie has just completed its first quarter as an independent publicly traded company, having left Abbott Labs (ABT 1.46%) with the company's generic drugs, diagnostics, nutrition, and medical-device segments. Now that AbbVie can focus solely on pharma, will it find ways to face its huge coming patent cliff? Let's take an early look at what's been happening with AbbVie over the past quarter and what we're likely to see in its quarterly report.

Stats on AbbVie

Source: S&P Capital IQ. *Based on pro forma figures provided by Abbott.

How will AbbVie do on its own this quarter?
In recent months, analysts have had mixed views on AbbVie's earnings prospects, having reduced their estimates for the just-ended quarter by $0.03 per share but raising their full-year 2013 earnings-per-share. The stock has chosen the more optimistic course, soaring more than 25% since mid-January.

After its spinoff, the reliance that AbbVie has on its best-selling Humira has become more obvious than ever. The arthritis drug made up more than half of AbbVie's total revenue last year, and although Humira won't lose patent protection until 2016, investors are still nervous about how the company will replace the $9.27 billion in annual sales that Humira brought in 2012.

Yet AbbVie does face competitive threats in its core markets. Pfizer (PFE +1.24%) won approval for its Xeljanz JAK inhibitor late last year, and although doctors are more familiar and comfortable with Humira, the fact that Xeljanz is taken orally could be a big draw over self-injection. Meanwhile, AbbVie's No. 2 drug, AndroGel, is under siege from Perrigo (PRGO +1.11%), which got approval from the Food and Drug Administration for a bioequivalent of the lesser-concentrated form of the drug back in February.

To address those concerns, AbbVie does have a promising pipeline of drug candidates in development. A couple of arthritis treatments have shown great promise, including one that could become one of the safest drugs on the market. Yet it will take a big success story to replace Humira's place atop AbbVie's sales results, and until the company's pipeline gets closer to the FDA approval stage, it'll be tough to assess the potential impact new drugs will have on revenue.

In AbbVie's earnings report, watch closely for more color on its recently released results in trials testing a potential new hepatitis C treatment. Although there's heavy competition in that lucrative market, success there could give AbbVie the opening it needs to improve its long-term sales prospects.

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