AbbVie stock toppled in late June after the Food and Drug Administration delayed its review of the company’s drug, Rinvoq, in patients with two forms arthritis.
The agency cited its ongoing review of Pfizer‘s (PFE) rival drug, Xeljanz, in patients with rheumatoid arthritis. Xeljanz and Rinvoq are both janus kinase inhibitors. A post-marketing study recently cast doubt on the safety of Xeljanz when pitted against drugs known as tumor necrosis factor inhibitors.
“Rinvoq has demonstrated strong (effectiveness) data, a safety profile that is well characterized from large long-term studies and a favorable benefit-risk profile,” AbbVie‘s (ABBV) Vice Chairman Michael Severino said in a written statement.
The news sent AbbVie stock down 1.5% on June 25. AbbVie’s Rinvoq is already approved in patients with rheumatoid arthritis, but the company is looking to expand Rinvoq into the psoriatic arthritis and ankylosing spondylitis markets.
More bullishly, the pharmaceutical company’s new aesthetics business — courtesy of the Allergan buyout — smashed first-quarter estimates and immunology drugs came in solidly ahead. But AbbVie Chief Executive Richard Gonzalez was called before a confessional hearing in May to answer questions about price increases and patents for blockbuster inflammation drug Humira.
Meanwhile, AbbVie recently entered into an agreement that would allow it to buy privately held medical devices company Cypris Medical. And Rinvoq also topped Regeneron Pharmaceuticals‘ (REGN) drug Dupixent in a final-phase study.
So, is AbbVie stock a buy right now?
AbbVie Stock Fundamentals: Earnings, Sales Grow
AbbVie’s year-over-year sales and earnings have risen each of the past seven quarters.
In the first quarter, adjusted AbbVie earnings popped 22% to $2.95 per share. Sales surged 51% to $13.01 billion. Both measures easily beat expectations.
At face value, growth in sales and earnings is bullish enough to meet CAN SLIM rules for investing, which advise looking for stocks with quarterly sales and earnings growth of 20%-25% or more. But they were helped by the Allergan takeover which closed last May.
In the current quarter, analysts polled by FactSet expect AbbVie earnings of $3.07 per share on $13.61 billion in sales. Earnings would rise 31% as sales increase 30.5%. In the third and fourth quarters, AbbVie is expected to report slower growth as the Allergan acquisition is fully realized.
Seeking Diversity From Humira
A number of companies have launched Humira biosimilars in Europe and plan to launch those same copycats in the U.S. in 2023. That’s problematic for AbbVie stock. Humira accounted for more than 43% of adjusted sales in 2020.
In the U.S., Humira grew 19.2%. But biosimilars chipped away at international sales, which fell 7.9% on a strict as-reported basis. Overall, first-quarter Humira sales rose 3.5%.
Total sales surged 37.6% in 2020, hitting $45.78 billion. But that includes the takeover of Botox-maker Allergan. On a comparable operational basis, sales inched up 3.3%.
AbbVie recently said it expects adjusted profit of $12.37-$12.57 per share for 2021, which at the midpoint was ahead of Wall Street forecasts for $12.39 per share. Analysts now expect adjusted earnings of $12.55 per share on $55.79 billion in sales.
On May 18, CEO Gonzalez faced questions from the Oversight and Reform Committee regarding the company’s pricing and patent practices for Humira. Gonzalez acknowledged Humira costs more in the U.S. than it does in socialized health care systems abroad.
AbbVie Stock Technical Analysis
AbbVie stock is one of the most well known pharmaceutical companies. In terms of market cap, it ranks third behind Pfizer and Novartis (NVS).
AbbVie stock has an Investor’s Business Daily Composite Rating of 74 out of a best-possible 99. The CR measures a stock’s key growth metrics. So its shares rank just below the top one-quarter of all stocks in terms of technical and fundamental measures.
(Related: Keep tabs on the best-ranking stocks by visiting IBD Digital.)
AbbVie shares have a Relative Strength Rating of 44. The RS Rating is a 1-99 measure of a stock’s 12-month performance. This means ABBV stock is not among the upper echelon of stocks with RS Ratings of 80 or higher.
AbbVie News: New Approvals Are Key
AbbVie stock fell after the FDA said it would delay reviewing Rinvoq in two forms of arthritis while it continues examining Pfizer’s Xeljanz study. Xeljanz was shown to boost the risk of heart problems and cancer in the study against older TNF drugs.
The FDA is also considering approving Rinvoq in patients with eczema. Last year, Rinvoq topped Regeneron and Sanofi‘s (SNY) Dupixent in adults with eczema. More adults taking Rinvoq experienced at least 75% eczema clearance at week 16 in the final-phase study.
On June 25, the European Commission’s Committee for Medicinal Products for Human Use recommended the approval of Rinvoq in eczema. The full EU is expected to make its decision in the third quarter. This would be Rinvoq’s fourth approval in Europe. In January, the EU approved the drug in two types of arthritis.
Also in June, AbbVie declared a quarterly cash dividend of $1.30 per share. The dividend is payable on Aug. 16 to shareholders of record at the July 15 close.
AbbVie is also working to close its takeover of privately held Cypris Medical, an aesthetics company. The company is currently studying a device that would treat mid-face descent and perform neck lifts.
AbbVie is also testing coronavirus treatments. The pharmaceutical company has a deal with Harbour, Utrecht and Erasmus to test an antibody approach to Covid. The drug could yield a treatment for Covid-19 or a new way of blocking the respiratory disease from taking hold.
So, Is AbbVie Stock A Buy Right Now?
No, it’s not a good time to add AbbVie stock. It’s best to buy stocks that break out of bases and are still within 5% of the buy price, according to IBD’s MarketSmith. AbbVie stock is still working on a new flat base.
AbbVie tacked on major growth in the first quarter, hitting a bar of rising at least 20%-25%. But that was partially due to the Allergan takeover. It will be key to watch growth in the second half of 2021 after the acquisition is fully digested.
Also, keep an eye out for patent battles that pit Humira against biosimilars from other pharmaceutical companies.
It will also be important to track AbbVie’s progress in developing a coronavirus treatment with Harbour, Utrecht and Erasmus, and with its Covid R&D Alliance partners.
Keep tabs on IBD content for more analysis on large-cap stocks to buy or sell.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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