AbbVie ABBV reported strong third-quarter results (sales up 11%, earnings up 18%) that were ahead of our expectations, but we don’t expect any major changes to our fair value estimate based on the minor outperformance. We believe the firm should continue to trade at a lower industry valuation multiple based on U.S. biosimilars launching against immunology drug Humira in 2023, a key factor also supporting AbbVie’s narrow (rather than wide) moat rating.
In the quarter, AbbVie posted solid results across its portfolio, with the exception of international Humira (down 17%), where biosimilars have launched. We expect total Humira sales (almost half of total sales) will decline even faster starting in 2023 with staggered biosimilar entries from six or more firms (some with interchangeability designations). We expect annual U.S. Humira declines close to 40% starting in 2023.
Despite the upcoming Humira pressure, AbbVie is making excellent strides with its next-generation immunology drugs. Skyrizi looks well positioned, especially in psoriasis, and new indications in Crohn’s and psoriatic arthritis should drive more growth. While we still expect major sales for Rinvoq ($7 billion peak annual sales) due to strong efficacy in several indications, the recent decision by U.S. regulators to add a boxed warning to its prescribing label positions Rinvoq (and other JAK inhibitors) after older established drugs, which will likely slow the trajectory of the drug in the near term.
AbbVie’s remaining segments are performing well (especially aesthetics and neuroscience), but we believe a stronger late-stage pipeline is needed to improve the firm’s valuation. While the approval of Qulipta (migraine), solid data for ABBV-951 (Parkinson’s), partially favorable data for Vraylar in major depression, and external partnerships with Genmab and Regenxbio are all encouraging, we believe more innovative new drugs are needed to offset biosimilar Humira pressure and drive meaningful growth after 2023.
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