Can AbbVie Hold Off Amgen and Pfizer?

AbbVie (ABBV -1.03%) will release its quarterly report on Friday, and investors in the spun-off pharma segment of Abbott Labs have been pleased to see the stock hit its best levels since coming public at the beginning of 2013. Yet given the extent to which AbbVie relies on its rheumatoid arthritis drug Humira for sales, the company needs to figure out how to make the most of its remaining patent protection even with competitors Pfizer (PFE -0.19%) and Amgen (AMGN -0.19%) sporting popular alternative treatments of their own.

AbbVie's Humira is a true blockbuster drug, with sales of more than $9 billion just last year alone. But as many of its peers have already had to deal with major patent-protection expirations in recent years, AbbVie's turn will come in 2016, when Humira goes off-patent and becomes open to generic competition. At that point, it's likely that Amgen's Enbrel or Pfizer's Xeljanz will take over blockbuster status, and so by then, AbbVie needs to have seen some of its other initiatives pay off so that it can avoid an immense revenue drop that could devastate the company. 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 report.

Stats on AbbVie

Source: Yahoo! Finance. *Out of 2 quarters since spinoff.

How will AbbVie earnings fare this quarter?
Analysts have had mixed views about AbbVie earnings in recent months, raising their third-quarter and full-year 2013 estimates by a penny per share but shaving $0.03 per share from their 2014 projections. The stock has done well, though, rising 10% since late July.

AbbVie's second-quarter results made investors perfectly content with the company's prospects, as the report said all the right things. Sales rose by 4.4% from the year-ago quarter, beating expectations and helping to boost earnings above consensus figures as well. AbbVie also guided its expected range for full-year 2013 earnings to the top end of its previous guidance, and Humira managed to stave off an expected challenge from Pfizer's Xeljanz oral rheumatoid arthritis drug.

The obvious question, though, is how AbbVie will survive without Humira. The company has other drugs that sport strong growth, but most analysts are looking to AbbVie's pipeline for better long-term solutions. Unfortunately, AbbVie's promising combination antiviral treatment for hepatitis C is almost certain to end up being late to the game, as Gilead Sciences has already sought FDA approval for its sofosbuvir drug and could get a final decision as early as December. Still, if sofosbuvir runs into problems, then AbbVie stands a good chance of beating out existing treatments for hep-C and gaining a substantial portion of the industry's sales.

AbbVie also has other promising candidates in its pipeline. Parkinson's disease treatment Duodopa has already been approved in Europe and could become a $1 billion drug if the FDA approves it for U.S. use. Further down the chain, AbbVie made a deal with tiny Galapagos to find and develop potential treatments for cystic fibrosis. Competitors have their own drug prospects already in mid-stage trials, but the program nevertheless shows promise for a new source of successful drug candidates in the long run.

One key possibility for AbbVie is to find ways to expand label indications for Humira. By doing so, AbbVie might be able to extend its market exclusivity in those indications beyond Humira's initial patent expiration date, extending the period during which the company can enjoy at least part of the huge sales that Humira brings in.

In the AbbVie earnings report, watch to see how well the company is able to move forward with alternatives beyond Humira. The success or failure of AbbVie's pipeline could make or break the company as it strives to compete against Pfizer, Amgen, and the rest of its rivals.

Click here to add AbbVie to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.