After releasing a relatively strong 1st quarter financials, AbbVie (NYSE:ABBV) adjusted its EPS guidance to $3.03 - $3.13. Its original GAAP EPS guidance was within a range of $2.66 - $2.76. The increase came after the company saw 16% growth in global sales from its flagship product Humira. The U.S. sales of Humira increased by 23.7% in the last quarter. Global sales of AbbVie also saw an increase by 3.7% to $4.329 billion for the first quarter.
At present, AbbVie has 11 products on the market. Humira, its sole blockbuster product, comprised about 51.8% of the company's total sales in the 1st quarter. Humira garnered $2.244 billion in sales, up 16% versus the prior year 1st quarter sales of $1.934 billion. About $956 million came from the U.S. market, while the remaining $1.288 billion came from the international market.
Other products of AbbVie with 6-figure sales are Synagis ($345 million), AndroGel ($240 million), and Kaletra ($219 million). The list also includes Niaspan ($186 million), Lupron ($181 million), Tricor ($128 million) and Synthroid ($119 million). The remaining 3 products have 5-figure sales. They are as follows: Creon ($90 million), Zemplar ($81 million) and Duodopa ($39 million).
Of the eleven products, six have positive growth over the same period of the prior year. These products are Humira, Synagis, AdroGel, Kaletra, Creon and Duodopa. The rest saw negative growth. In spite of that, the company still ended the quarter with overall positive growth over last year. This was fueled by a significant increase in Humira sales in both the U.S. and abroad.
Major Financial Highlights for the 1st Quarter
Aside from having a remarkable growth in revenue, AbbVie also reported about a 10% increase in earnings. Its net income jumped from $883 million in 2012 to $968 million in 2013. Consequently, the diluted earnings also grew from $0.56 to $0.60. Thanks to this performance, the company has already achieved it projected GAAP EPS of $0.60. It is for this reason that the management adjusted and raised its estimates for GAAP EPS to $0.68.
Another notable highlight of the report is the relative increase in operating income from $978 million to $1305 million in 2012 and 2013, respectively. The company's total operating cost and expenses were reduced from $3.195 billion to $3.024 billion.
In addition, AbbVie also has an outstanding gross margin ratio of 76.2%. The company's selling, general, and administrative expense was 28% of sales. Its research and development, on the other hand, was 14.6% of sales. This data reflects the company's continued investment on its growth brands, and its commitment in funding products in the pipeline.
By the end of the year, AbbVie expects to have a handful of drug candidates advancing to the later stages of Phase 3 trials. Within 12 to 18 months, it expects to commence the phase III trials of ABT-126, ABT0719, ABT-199, Atrasentan, and Elagolix.
On May 6, 2013, AbbVie cheerfully announced that its investigational HCV regimen got a 'breakthrough' designation from the U.S. FDA. A 'breakthrough' designation is given after a drug candidate passes the FDA criteria. This includes substantial improvement of the preliminary clinical evidence on at least one clinical end-point compared to the available therapy. The breakthrough designation entitles AbbVie's investigational 3-DAA combination with and without ribavirin to the benefits of fast-track program. On top of that, it will also get more intensive guidance from the FDA.
AbbVie's Versus Peers
One of Humira's peers is Xeljanz of Pfizer (NYSE:PFE). It would not be fair to compare AbbVie versus Pfizer as a company. AbbVie is a new firm which was separated from its parent company, Abbott Laboratories (NYSE:ABT) on January 2013. Pfizer, on the other hand, has been around for more than a century. Today, it still plays a major role in the entire global pharmaceutical industry handling several blockbuster products.
On November 6, Pfizer got an approval for Xeljanz for the treatment of rheumatoid arthritis. Xeljanz was expected to bring in additional $2.5 billion to $3 billion in annual sales to the company. This was based on the presumption that about 40% of rheumatoid arthritis sufferers did not respond to the available treatment.
On March 25, Pfizer announced the approval of Xeljanz in Japan. However, the drug faces a tough challenge in a much bigger market, Europe. Just barely 5 months after the FDA approval, Xeljanz got a negative opinion from the Committee for Medicinal Products for Human Use [CHMP]. On April 25, 2013, CHMP advised against the approval of Xeljanz. It counseled the European Medicines Agency that Xeljanz has unfavorable risk/benefit profile for moderate-to-active rheumatoid arthritis. Pfizer is expected to appeal this view by asking for a re-examination of the opinion made by CHMP.
Nonetheless, the recent issues with Xeljanz will unlikely prevent the drug from being approved in Europe. But it can significantly delay its availability to the European market, giving Humira a remarkable edge over its peers.
Another Pfizer-marketed product, Enbrel, also competes with Humira. This is, however, a co-marketing venture between Pfizer and Amgen (NASDAQ:AMGN). Enbrel is currently the market leader in the psoriatic arthritis indication. However, many analysts projected that Humira will soon replace Enbrel as the market leader in this segment. According to Amgen's 1st quarter earnings report, Enbrel grew 11%. This is lower than Humira's commanding growth of 16% for the quarter.
The solid Humira sales during the first quarter could be just the start of what lies ahead. AbbVie expects to earn an additional $1.5 billion in annual sales from Humira, once newer indications are approved. This was reported by the company's Chief Financial Officer Richard Gonzalez during a conference call. However, Humira faces patent expiration issues ahead starting from 2016. Despite that, the company remains optimistic and projected Humira sales to hit $14 billion by 2017.
While AbbVie is 50% dependent on Humira, it has started to diversify its portfolio. Presently, there are 10 programs in phase III underway. It has 9 new molecules in the pipeline from various external sources. From 2013 to 2017, AbbVie is poised for 15 major regulatory submissions. By 2015, it is expected to launch an experimental hepatitis C therapy. The solid pipeline portfolio of AbbVie is sufficient enough to remain long ABBV.
Meanwhile, Humira sales will continue to give AbbVie impressive revenue performance. The increased GAAP guidance estimate of $0.68 is achievable, if Humira will maintain its revenue growth.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Efsinvestment is a team of analysts. This article was written by one of our equity analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.