AbbVie stock tumbled in mid-March after the Food and Drug Administration requested additional information before considering new approvals for its potential blockbuster drug, Rinvoq.
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The request pushes back the potential approval for Rinvoq in psoriatic arthritis treatment by three months until late in the second quarter, AbbVie (ABBV) said in a news release. Rinvoq is already approved as a rheumatoid arthritis treatment.
More bullishly, the pharmaceutical company’s key immunology drugs — Humira, Skyrizi and Rinvoq — topped expectations in the fourth quarter. Though AbbVie’s new aesthetics business, courtesy of the Allergan buyout — saw declines amid the coronavirus pandemic.
Meanwhile, AbbVie recently entered into an agreement that would allow it to buy privately held medical devices company Cypris Medical. And Rinvoq also topped Dupixent, from Regeneron Pharmaceuticals‘ (REGN), in a final-phase study.
So, is AbbVie stock a buy right now?
AbbVie Stock Fundamentals: Earnings, Sales Grow
AbbVie’s year-over-year quarterly sales have risen each of the past six quarters.
In the fourth quarter, adjusted AbbVie earnings soared 32.1% to $2.92 per share. Sales surged 59.2% to $13.86 billion. Both measures easily beat expectations.
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, excluding the Allergan takeover, sales rose a more modest 6.8%.
In the current quarter, analysts polled by FactSet expect AbbVie earnings of $2.81 per share on $12.81 billion in sales. Earnings would rise 16% and sales would increase 49%.
Again, though, the Allergan acquisition boosts results. For a more apples-to-apples comparison, it is key to watch organic sales growth.
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, fourth-quarter Humira sales rose 13.2%.
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 $12.32-$12.52 per share for 2021, which was ahead of Wall Street forecasts for $12.20 per share. Analysts have since revised their estimate to $12.35 per share.
AbbVie Stock Technical Analysis
AbbVie stock is one of the most highly traded pharmaceutical companies. In terms of average daily share volume, AbbVie stock ranks second in its 35-company industry group behind Pfizer (PFE). It ranks fourth in total market value.
Shares are now forming a flat base with a buy point at 113.51.
AbbVie stock has an Investor’s Business Daily Composite Rating of 84 out of a best-possible 99. The CR measures a stock’s key growth metrics. So its shares rank in the top 16% 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 41. 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 were below their 50-day moving average and above their 200-day line in midday trading on March 17.
AbbVie News: New Approvals Are Key
AbbVie stock fell after the FDA said it required additional information regarding the benefits and risks of Rinvoq before making a decision on approvals in psoriatic arthritis and eczema. AbbVie said it had already sent the psoriatic arthritis information and was working to fulfill the eczema request.
The request followed concerns from a study of Pfizer‘s (PFE) Xeljanz. The study pitted Xeljanz against older drugs called tumor necrosis factor inhibitors. Like Rinvoq, Xeljanz is a janus kinase inhibitor. Xeljanz was shown to increase the risk of heart problems and cancer in the study.
More promising, in late February, AbbVie’s Humira gained a new approval. The FDA will now allow Humira as a treatment for children with moderate to severe ulcerative colitis. Also that month, AbbVie declared a $1.30 per share quarterly dividend.
On Jan. 25, the European Commission approved AbbVie’s Rinvoq for two forms of arthritis.
Earlier in the month, AbbVie stock rose after entering an agreement that would allow it to soon buy privately held Cypris Medical. The company is currently studying a device that would treat mid-face descent and perform neck lifts.
In mid-December, AbbVie said Rinvoq outperformed Regeneron’s Dupixent in a head-to-head study of adults with eczema. More adults taking Rinvoq achieved at least 75% eczema clearance at week 16 in the Phase 3 study.
Earlier that month, Rinvoq met all its key goals in a Phase 3 study of patients with severe ulcerative colitis.
AbbVie is also testing coronavirus treatments. The pharmaceutical company has a deal with Harbour, Utrecht and Erasmus to test an antibody approach to Covid-19. 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 add AbbVie stock. It’s best to buy stocks that break out of bases and are still within 5% of the buy price, according to IBD’s MarketSmith. AbbVie stock is still forming its base.
Further, on an operational basis, AbbVie’s sales aren’t hitting a bar of 20%-25% growth that CAN SLIM investors should seek. Analysts call for growing sales and earnings in the first quarter. But the massive growth is tied to its acquisition of Allergan.
The future of AbbVie stock is now largely tied to Allergan. Also, keep an eye out for patent battles that pit Humira against biosimilars from other pharmaceutical companies.
It also is good 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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