Resurgent Humira sales make up for hep C decline, powering AbbVie to Q1 beat

AbbVie
AbbVie CEO Richard Gonzalez said during the first-quarter call that he believes his company is undervalued.

AbbVie investors were jittery late last year as the company's mega-blockbuster Humira kept missing sales expectations overseas, especially when the drug came up against competitive pressure from a new biosimilar. So investors were relieved when the company announced first-quarter results that exceeded its own forecasts, driven largely by a 15% increase in global Humira sales.

Most of that growth came in the U.S., where Humira jumped 23% to $2.7 billion. Overseas sales of the drug grew nearly 5% to $1.4 billion. AbbVie’s net revenues rose 10% to $6.5 billion, and its net earnings came in at $1.7 billion ($1.28 per share on an adjusted basis), an 11% jump over the same period a year ago and beating the average analyst estimate of $1.26.

AbbVie’s blood cancer drug Imbruvica also outperformed during the quarter, with sales jumping nearly 45% to $551 million. Imbruvica won its fifth FDA approval in the period, with a nod for patients with marginal zone lymphoma. During an investor conference call after the Q1 report, CEO Richard Gonzalez said more than 21% of patients diagnosed with chronic lymphocytic leukemia (CLL) are now given the drug as first-line treatment, putting AbbVie in the No. 1 position in that market.

The two outperformers helped cushion the blow of rapidly declining sales of Viekira Pak, AbbVie’s hep C combo. Sales missed estimates in the U.S. last quarter and just keep falling as the drug fights for market share against Gilead Sciences' Harvoni. Viekira sales fell 36% to $263 million during the quarter.

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It didn’t help matters when pharmacy benefits manager ExpressScripts added Harvoni to its preferred formulary in January. That decision forced AbbVie—which previously had an exclusive deal with the PBM giant—to compete for access to 25 million patients. What’s more, these hep C remedies amount to cures for most patients, so the overall market is rapidly shrinking.

Meanwhile, investors have high hopes for AbbVie’s blockbuster-in-waiting Venclexta to treat leukemia. The company expects sales of just $125 million this year, but it predicts that number will grow as it completes additional clinical trials designed to expand its market.

Analysts expect Venclexta to bring in more than $1.5 billion by the end of the decade. The product won’t be getting a boost in the U.K., however, at least not in the short term. In February, the country’s drug-price watchdog National Institute for Health and Care Excellence (NICE) turned down the product for routine use.

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But during the earnings call, the discussion was almost entirely focused on Humira, as several analysts expressed concern about AbbVie’s ability to hold onto its market share as biosimilars enter. The company is facing fresh competition overseas from a biosimilar to Enbrel, approved in Europe in January and marketed by Biogen. AbbVie is also facing patent losses and challenges in the U.S.

Gonzalez continues to insist he’s not worried. “If you look at our level of confidence in what we’ve described to the market about our ability to protect Humira, it remains the same. That confidence was built around a large portfolio of [intellectual property],” he said during the call. “We have a large portfolio of formulation patents that have come under challenge and have been successful,” as well as dosing patents, he added.

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AbbVie’s shares nudged up 2% in morning trading to $66.68, as investors applauded the earnings surprise. Still, Gonzalez said during the call that he thinks his company is undervalued—and not just because of Humira’s stronger-than-expected performance. The company is expecting data from a dozen clinical trials by the end of the year, he noted. That includes several trials of Venclexta aimed at new indications for the cancer med.

“We’re significantly undervalued. We’re undervalued from the standpoint of Humira and the benefit that it drives in the business,” Gonzalez said. “Secondly, I’d say we’re tremendously undervalued as you look at the pipeline that we have.”