In almost every way, AbbVie (NYSE:ABBV) Shares should have risen on Friday. The pharmaceutical giant delivered first-quarter sales and earnings results that beat estimates. The decline in sales of the multi-indication immunosuppressant Humira – a natural consequence of the loss of patent exclusivity – is becoming more gradual than initially feared. The company even raised its full-year profit outlook.
But AbbVie shares still fell, ending Friday’s session down 4.6%, down more than 12% from last month’s peak.
Life after Humira’s patent expiration
Skyrizi and Rinvoq – the drugs AbbVie developed to replace Humira – are proving to be as hoped. The former’s first-quarter sales rose 47.6% year-over-year, while the latter’s sales rose 59.3%, offsetting Humira’s 35.9% sales decline. All told, AbbVie’s revenue was flat year-over-year at $12.3 billion, while earnings of $2.31 per share were below last year’s figure of $2.46 per share. Analysts’ consensus estimates had only expected earnings of $2.23 per share on revenue of $11.9 billion.
The drugmaker now expects its 2024 earnings per share to be in the range of $11.13 to $11.33, up from the previous forecast range of $10.97 to $11.17. Analysts’ consensus forecast for full-year earnings is $11.12 per share.
So what went wrong that sent stocks lower on Friday? AbbVie management has failed to convince investors that Humira sales will not continue to deteriorate at an accelerated rate.
This is an opportunity to buy AbbVie shares
This concern is understandable. Humira isn’t just AbbVie’s best-selling drug. It is one of the best-selling drugs in the world, bringing in $14.4 billion in sales last year alone. According to figures from the industry website Drug Discovery and Development, it was the third-highest seller in 2023. The loss of most – although not all – of this revenue will certainly be felt by AbbVie.
What’s largely forgotten, however, is that this scenario for Humira is already priced into AbbVie’s stock, which is now trading at the same level as two years ago.
What isn’t fully priced in, meanwhile, is the potential of Rinvoq, Skyrizi, cancer-fighter Imbruvica, and the rest of AbbVie’s drug portfolio and pipeline. In February, the company updated its medium-term expectations for several of its drugs, suggesting that Skyrizi’s annual sales could exceed $17 billion by 2027, while Rinvoq might generate more than $10 billion. Those sales figures would be more than double the total sales of the drugs last year. These are just two of the company’s many approved products, and there are several more billion-dollar opportunities among the treatments in the drug company’s pipeline.
The point is that the stock represents a compelling prospect, with AbbVie currently trading 12% below its late March peak. New buyers will enter the stock at a (very) fair valuation, about 14 times this year’s expected earnings.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
“Why AbbVie Stock Stumbled Today Despite Earnings Beat” was originally published by The Motley Fool