AbbVie's Q4 Reflects Its Tremendous Growth Potential Going Forward

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Feb 04, 2015

The biopharmaceutical major, AbbVie (ABBV, Financial), reported its fourth quarter earnings on January 30 and left investors and analysts excited, posting better earnings than expected for the fourth consecutive quarter. In fact, the company’s promising product range aided in ending earnings at $0.89 a share for the quarter over the analysts’ consensus of $0.85 a share. Major attention of investors are currently upon the new drug Viekira Pak, sales of which would be a decisive factor on the success level achieved by AbbVie in the developed markets. Let’s quickly dive in and check the highlights of the fourth quarter along with what analysts’ are currently opining on the company outlook for the coming fiscal year.

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The fourth quarter numbers were impressive, yet mixed

Net sales for the quarter rose to $5.45 billion, up from $5.11 billion reported a year ago. This marked a 6.7% improvement over the similar quarter of the past year. Sales in the fiscal year 2014 increased 6.2% from $18.79 billion in the previous year to reach $19.96 billion by the end the year. Though revenue saw a clear boost and surpassed analysts’ estimates of $5.37 billion, the net income was affected by the costs related to calling off the Shire Plc (SHPG, Financial) deal.

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Net earnings was impacted for the full year which decreased by a whopping 57% from $4.13 billion for the full year in 2013 to $1.77 billion for the fiscal year 2014. The Chicago based company report card was bogged down by a $2.2 billion breakup fee and costs related to the abandoned merger with Shire Plc. This, in turn, made the company post a huge loss of about $810 million, or earnings loss standing at $0.51 a share in the final quarter of 2014, compared with a gain of $1.13 billion or earnings gain of $0.70 a share reported a year back.

Barring the impact of such one-time costs, AbbVie’s earnings per share stood at $0.89 a share for the quarter and $3.32 a share for the full year, beating the Street consensus by $0.03 a share for the quarter and $0.02 a share for the entire fiscal year. Revenue and earnings were obviously positively impacted by sales of blockbuster drug Humira which has helped the company step up its revenue in the past few quarters as well.

Strong product range acts as a chief sales boost

The top line of the company did witness a clear boost driven by strong sales of Humira, the flagship rheumatoid arthritis drug released in the market since the end of 2002. Sales of the anti-inflammatory drug Humira increased 10.6% to $3.36 billion during the quarter, partially offsetting the low sales of the testosterone medication Androgel and certain other medicines under AbbVie’s brand name. Speaking with respect to geographies Humira sales in the U.S. increased 15.8% year-over-year to $1.932 billion, while sales in other international locations improved 4.3% year-over-year to $1.431 billion. Other products that did well in the quarter were mainly Creon which posted sales up by 30% to $151 million and Duodopa which saw sales increase 14.7% to $56 million.

The management have clearly stated during the earnings call that while Humira would remain a key driver to its growth curve in the upcoming quarters as well, its newly released Hepatitis C drug Viekira Pak will also determine its success rate in the Hepatitis C virus (HCV) treatment.

As Gilead Sciences (GILD, Financial) remains the immediate rival in the HCV market, all eyes are glued to the sales chart of Viekira Pak in 2015 which could push the total sales graph to much higher levels than predicted initially by the top brass. The sales of the recently approved hepatitis C drug Viekira Pak was also included in the quarter results and in the first month of its release the drug has posted whopping sales of $48 million setting off a price war with other rivals to establish exclusive deals with pharmacy benefit managers and insurers.

Analysts’ take on the results stays solid

Most of the worldwide analysts are optimistic on the future earnings of AbbVie as the fourth quarter results were truly firm enough and did send a wave of enthusiasm amongst analysts speculating on the stock. The company has also confirmed its earnings guidance to be in the range of $4.25-$4.45 a share for the coming fiscal year. But analysts’ expectations on the company’s growth are much higher as reflected through the Zacks earnings projections for the upcoming year which stands close to $4.51 a share, over and above the company’s stated guidance.

Analysts have opined that AbbVie will reduce its dependency on Humira sales and this is well-highlighted in the first month sales of its drug for HCV treatment, Viekira Pak. The recent launch of the latter drug is surely a step forward to gain more traction in the biopharmaceutical space in the U.S. as well as on a global scale. A research study has confirmed that presently about 3.2 million Americans are infected with Hepatitis C and this latest released drug of AbbVie holding a reasonable sticker price comes as a sure relief to such infected patients.

Moreover, AbbVie’s upcoming pipeline represents significant potential as the company promises to expand its Humira-reliant pipeline in the fiscal year 2015. Also, as per company estimates, it has forecasted sales of Viekira Pak in 2015 to nearly cross the $3 billion mark, thereby increasing its market share to almost 40% of the insured market.

Final word

AbbVie after the spin-off from Abbott Laboratories (ABT, Financial) still holds a lot of potential as highlighted in the top line growth pace which saw a clear boost from the vital drug sales and the upcoming days shall witness more of life-saving drugs being released off the product pipeline. As the company brings new drugs into the market and reduces its reliance on its auto-immune drug Humira for majorly driving its sales growth, it will show diversified growth and investors at this juncture are convinced that AbbVie remains a profitable venture for the upcoming fiscal year. So, let’s stay tuned and keep watching for more from the company’s corner.