AbbVie's ex-U.S. Humira sales are on the precipice. But no need to panic, analysts say

By Carly Helfand May 25, 2017 10:05am

AbbVie’s Humira is nearing its international peak, thanks to biosimilar competition overseas, and what goes up must come down. But investors don't need to worry, one analyst argues.

AbbVie expects its world-leading med to reach its zenith outside the U.S. next year before biosimilars take it down, according to a note from UBS analyst Marc Goodman seen by Investor’s Business Daily. After 2018, the Illinois pharma expects to see international sales erode by 15% each year through 2020.

That means cuts to the company's sales and marketing spending in certain countries, execs told Goodman following the UBS Global Healthcare Conference.

Any whisper of Humira’s impending downfall doesn’t play well with shareholders, who are constantly on the lookout for signs the med is slipping. And the way Goldman Sachs’ Jami Rubin sees it, that’s because “investors continue to underappreciate the substantial cash flow generation from Humira over the next five years ... and the company’s diversified pipeline.”

So what would it take to open their eyes to the possibility that the sky may not be falling for AbbVie? A split among AbbVie’s business segments for reporting purposes, Rubin posited in a March note to clients.

On the one hand, AbbVie would have “Humira-co,” a “cash flow generator with potential to distribute cash to shareholders significantly above the current payout objective while the pipeline materializes”; it’d be worth about $39 per share, she figures.

And on the other, it would have “Growth-co,” which, driven by oncology, immunology, women’s health and other therapeutic areas, “should see top-line growth of 16% over the next five years” from $9.8 billion to $20.5 billion. Valuation? $52 per share today.

Rubin’s not the only one who thinks AbbVie is undervalued. CEO Richard Gonzalez, not surprisingly, is a believer; he told Rubin on the company’s Q1 conference call last month that he agrees “wholeheartedly with the thesis you laid out in the report.”

“We have a business that generates tremendous cash flow, and we anticipate that that cash flow is sustainable over the long term,” he said, noting that “we’re undervalued from the standpoint of Humira and the benefit that it drives in the business” and that “we’re tremendously undervalued as you look at the pipeline we have.”

It’s not the first time Rubin has pushed a Big Pharma to separate its business units—for reporting purposes or otherwise. In the past, she’s lobbied for full-scale splits at both Johnson & Johnson and Pfizer, suggesting they follow the trend Abbott started when it spun off Humira to start AbbVie in the first place.

Meanwhile, this year should give AbbVie ample opportunity to prove its pipeline thesis to investors. “You're going to see a dozen pivotal trial results that are going to read out over the course of 2017,” Gonzalez said on the call. “There aren't many companies in our industry that have those kind of catalysts going forward.”