Monday, June 15, 2020

Incomplete Financial Highlights - Pharmaceutical Co. AbbVie




Revenue grows year over year since Abbott/ AbbVie split in 2013, mainly due to blockbuster med - Immunology Humira, Oncology Imbruvica and Virology HCV sales.

In 2019 & Q1 2020, OUS Humira sales decreases due to biosimilar competition, mainly in Europe. HCV sales decreases due to price competition and declining market patients. These decreased sales were offset with strong performance in US Humira and Imbruvica sales.

AbbVie paid $4.28/ share dividend in 2019 ($1.07 per quarter) and $1.18/ share in Q1'20. AbbVie has good historical dividend payout record. Dividend payout has increased > 150% since 2013 ($0.40 in Q1'13 to $1.18 in Q1'20).

AbbVie has completed $63billion Botox-maker Allergan acquisition in May 2020. It will be interesting to see what is the consolidated Q2'20 performance, as well as full year revenue forecast and how it impacts AbbVie share price.

AbbVie note in a statement:
Allergan provides new growth opportunities in neuroscience, with Botox therapeutics, Vraylar (cariprazine) and Ubrelvy (ubrogepant) and a global aesthetics business, with leading brands including Botox (botulinum toxin type A) and Juvederm.

This diversified on-market portfolio will drive the existing AbbVie growth platform (ex-Humira) to approximately $30 billion in revenues in full year 2020, with combined revenues of approximately $50 billion

This combined revenues will probably make AbbVie becomes No.4 Pharma Company in term of revenue in 2020.

Current share price $92.46.

If I take Q1'20 EPS x 4 quarters, 2020 PE will be about 11, which is reasonable if we compare with other Big Pharma companies. Note: This PE is excluding Allergan's contribution. 

Is AbbVie a good buy at this price? Few considerations:

Revenue
OUS Humira sales are decreasing. US Humira sales will drop once biosimilars able to enter US market in 2023. Will revenue from new asset launches (e.g. Skyrizi, Rinvoq) and Allergan on-market revenue grows able to cover US Humira declines from 2023 onward? 

Note: Humira is the world best selling drug with nearly $20billion revenue in 2019.

Operating Earning
Will AbbVie able to deliver its expected SG&A savings $2b in 2-3 years from Allergan integration? Any potential integration disruption to commercial execution? Will AbbVie/ Allergan product mix improves new AbbVie operating earning?

Capital allocation
With $63b Allergan acquisition and high debt level, will this impact dividend payout ratio? AbbVie is projecting $24 billion in free cash flow in 2020 and estimated $24 billion in 2021 which allow the company to reduce debts and keep its dividend payout.

Q1'20 Performance
Revenue $8.6b +10.1% 

Immunology:
    Humira sales $4.7b +5.8%.
        - US $3.7b +13.7%
        - OUS $1b -14.9% due to bios competition

    Skyrizi $300m
    Rinvoq $86m

Hematologic oncology $1.5b +32.1%
        - Imbruvica $1.2b +20.6%
        - Venclexta $317m 

Gross margin 77.5% (GAAP), adjusted 82.7%
SG&A19.7% (GAAP), adjusted 18.6%
R&D 16% (GAAP), adjusted 14.3%
Tax rate 2.8% (GAAP), adjusted 9.7%
EPS $2.02 (GAAP), adjusted $2.42




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