AbbVie Suffers Market Loss For Humira In Europe, But The U.S. Is A Different Story

|
About: AbbVie Inc. (ABBV), Includes: AMGN, BIIB, NVS
by: Terry Chrisomalis
Summary

AbbVie missed its Q4 earnings expectations, but it does have many other products to help it get back on track in the coming quarters.

The big loss for the quarter was due to international sales of Humira being lost to biosimilar competitors, however, patents for the U.S. are still ongoing until 2023.

The hematologic oncology program is a strong growth story for AbbVie because it generated $3.934 billion in revenue, which was an increase of 45.9%.

Venclexta is a newer hematologic indication for AbbVie, but the recent expansion in AML is likely to result in an increase of growth for this clinical product in the coming quarters.

AbbVie (ABBV) released its 4th quarter earnings report and despite missing on expectations, it still has other products to potentially reignite growth. The biggest issue for the company is the loss in sales of Humira in the European territory. However, I think there will be time for the company to recover because U.S. sales of Humira are not yet affected by biosimilar competition. There is no doubt that AbbVie faces competition for one of its top selling products in the coming years in multiple territories, but I believe its other products will help retain growth.

Humira As Main Product

The fourth-quarter earnings were not as solid as they could have been. The biggest reason for the weaker than expected earnings had to do with a loss of international sales for Humira. AbbVie reported that it had earned $1.90 per share for its fourth-quarter. However, analysts were expecting slightly higher. They believed that EPS would come in at $1.94. The revenue didn't fare any better either. It was pretty much close to beating expectations but slightly lower. Revenue during the quarter came in at $8.3 billion, while analysts were expecting it to reach $8.38 billion. The earnings were pretty close to beating expectations but came up short. What exactly was the biggest culprit for an earnings miss during this quarter? It all boils down to a loss of sales for Humira as I alluded to above. Specifically, international sales were lower due to biosimilar competition. The international competition caused Humira sales to decline by about 14.8%. The whole problem is that Humira patents expired in Europe on October 16, 2018. That was when a host of pharmaceutical companies could start selling a biosimilar version of the treatment. It didn't take long for these companies to get their products out to the European market. There is Amgen (AMGN) with Amjevita, Novartis (NVS) with Hyrimoz, and Biogen (BIIB) with Imraldi.

These companies I named are just a few of the biosimilar competition for Europe as there are tons more. The problem is that all these biosimilars are priced way below the cost of Humira. As you can imagine, this had led to a loss in sales for the drug in the European territory. There is no way to spin this as good news at all when it comes to the European territory. However, there is still light at the end of the tunnel for sales of the drug in the United States. That's because of all the patents AbbVie holds in this territory. Humira is patent protected in the U.S. until 2023. That means no biosimilars can cut into lower prices or steal market share before then. The reason why it is good news is because a majority of the sales for Humira come from the United States. In addition, it is important to understand that this buys AbbVie time to get other growth products out to market before the patents for Humira expire in the United States. It still has about 4 years to get many other products in its pipeline approved that can also drive growth. In that sense, it would no longer have to rely on sales of Humira as being the main growth driver going forward.

Oncology Products As Future Growth Drivers

There is no way around it that AbbVie lost big on international sales for Humira. However, at the same time, there have been two hematologic oncology products that have been achieving substantial sales growth in the current quarter and on a yearly basis. These two oncology products are Imbruvica and Venclexta. For example, global Imbruvica sales came in at $1.006 billion for the quarter, which was a 42% growth increase. Venclexta achieved global sales of $124 million for the quarter. This drug is not as strong in terms of sales like Imbruvica, but it is still starting to achieve growth. To put it succinctly, it is not yet at the level of Imbruvica but still another good growth story for AbbVie. There is something that can help Venclexta sales climb at a faster rate. This would be sales ramping up for the drug being used to treat patients with acute myeloid leukemia (AML). The AML indication is a large market opportunity, and if sales start to ramp up for this indication, then Venclexta will continue to grow at a rapid rate. For instance, the latest FDA approval for Venclexta was for treating newly diagnosed AML patients who are aged 75 or older or for those who can't handle intensive induction chemotherapy because of other coexisting type of medical conditions. As I noted above, the annual global revenue growth of the hematologic oncology program has been solid. This program generated $3.934 billion, which was an increase of 45.9%.

Conclusion

AbbVie is likely to lose additional international market share for Humira in the coming quarters, especially in Europe. The risk moving forward is whether or not it can maintain its growth of Humira in the international markets until it rolls out new products. The good news is that Humira patents won't expire in the United States for quite some time. What that means is that AbbVie can advance other products in its pipeline to take over as the new growth opportunities to advance the company forward. For instance, Imbruvica still continues to shine with sales growing by 42%. Venclexta is off to a good start as well, and as it gains additional indications, that too will start to see massive growth as well. The point being is that even though AbbVie is losing sales in Humira, it will be able to keep itself growing with other promising products.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.