AbbVie stock crumbled in early September after the Food and Drug Administration said it would have to add a warning label to its drug, Rinvoq.
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The order also impacts drugs from Pfizer (PFE) and Eli Lilly (LLY). A recent test of Pfizer’s Xeljanz indicated the drug increases the risk of heart issues, blood clots, cancer and death in patients treated for arthritis and other inflammatory conditions. AbbVie‘s (ABBV) Rinvoq and Lilly’s Olumiant belong to the same drug class.
Recently, AbbVie said it plans to test a next-generation version of Alzheimer’s drug Aduhelm beginning late this year or early next. Aduhelm, a Biogen (BIIB) drug, gained approval in June and helped shift researchers’ focus to the beta amyloid theory of treatment.
Beta amyloid is a type of plaque that builds up in the brains of Alzheimer’s patients. Some believe removing it will help improve patients’ cognition. The theory doesn’t have full support from the scientific community, however. On the company’s second-quarter earnings call, AbbVie President Michael Severino said the company had monitored this area for several years.
“We believe there is a continued opportunity for an A beta-directed monoclonal antibody that clears plaque more rapidly than existing agents with a reduced risk of (a side effect called) amyloid-related imaging abnormalities, or ARIA,” he said.
But AbbVie stock toppled after reporting its earnings.
So, is AbbVie stock a buy right now?
AbbVie Stock Fundamentals: Earnings, Sales Grow
AbbVie’s year-over-year sales and earnings growth has consistently increased.
In the second quarter, adjusted AbbVie earnings popped by a third to $3.11 per share. Sales jumped nearly 34%, hitting $13.96 billion. Both measures beat AbbVie stock analysts’ forecasts.
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 third quarter, analysts polled by FactSet expect AbbVie earnings of $3.23 per share on $14.34 billion in sales. Earnings would rise 14% as sales increase 11%. 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 $12.52 to $12.62 per share for 2021, which trailed the Street’s forecast by three pennies at the midpoint. Analysts now expect adjusted earnings of $12.64 a share and $56.31 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 fourth behind Pfizer (PFE), Novo Nordisk (NVO) and Novartis (NVS).
Shares broke out of a flat base in July, according to MarketSmith.com. But the FDA order regarding Rinvoq and similar drugs on Sept. 1 sent AbbVie stock tumbling out of its buy zone.
AbbVie stock has an IBD Digital Composite Rating of 91 out of a best-possible 99. The CR measures a stock’s key growth metrics. So its shares outrank 91% 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 67. 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.
Shares fell below their 50-day and 200-day moving averages on Sept. 1.
AbbVie News: New Approvals Are Key
Shares fell after the FDA said makers of janus kinase inhibitors, or JAK inhibitors, would have to warn users against a myriad of conditions. The requirement impacts AbbVie’s Rinvoq, Pfizer’s Xeljanz and Lilly’s Olumiant. All three are JAK inhibitors for arthritis and other inflammatory conditions.
Earlier this year, the FDA said it would delay reviewing Rinvoq in two forms of arthritis while it looked into Pfizer’s Xeljanz study. Xeljanz was shown to increase the risk of several conditions and death when pitted against older drugs that block tumor necrosis factor, or TNF.
The FDA is also considering approving Rinvoq in patients with eczema. Last year, Rinvoq topped Regeneron Pharmaceuticals‘ (REGN) 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.
AbbVie launched a single-dose injection of its psoriasis drug, Skyrizi, in early August. Previously, the medicine was administered as two 75-milligram injections. Now, patients can receive a single 150-milligram injection every 12 weeks. But the news didn’t spark ABBV stock.
AbbVie is 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 buy AbbVie stock. Shares are now below their buy point. It’s best to buy stocks that break out of bases and are still within 5% of the buy price.
AbbVie tacked on major growth in the second quarter, easily topping a bar at least 20%-25% growth. 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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