AbbVie Posts Solid Q1

AbbVie ABBV reported strong first-quarter results ahead of our expectations, but we don’t expect any major changes to our fair value estimate as we look to model a higher tax rate that partially offsets the strong start to the year. We continue to view AbbVie as fairly valued with a good appreciation of new drugs partially offsetting the likely U.S. generic pressure to Humira in 2023. These strong next-generation drugs combined with a growing pipeline support AbbVie’s narrow moat.

On the tax side, AbbVie faces a high impact from potential tax reform. With a tax rate of close to 11% in 2020, AbbVie holds one of the lowest tax rates in the major biopharma group. While we had already modeled increases in the tax rate going forward, we expect this increase may accelerate with new U.S. tax reforms.

In the quarter, total sales increased 5% (assuming comparable operations from the Allergan acquisition), buoyed by strong growth from Skyrizi and Rinvoq. Supported by leading efficacy and dosing convenience, Skyrizi continues to take share in psoriasis, and we expect new indications (psoriatic arthritis and Crohn’s in 2022) to drive sales close to management’s $7 billion expectation by 2025. Rinvoq also looks well positioned for growth with leading efficacy and safety in rheumatoid arthritis and new indications (ankylosing spondylitis, psoriatic arthritis, and atopic dermatitis in 2021). While the Food and Drug Administration has delayed action on new indications for Rinvoq likely due to safety concerns emerging from other JAK inhibitors, we believe the drug will gain the new approvals based on strong safety data from clinical studies.

On the aesthetics portfolio, AbbVie is increasing marketing support ahead of historical Allergan levels, helping to drive major gains in Botox cosmetics and Juvederm.

COVID-19 disruptions did weigh on oncology and hepatitis C sales, but these areas should rebound later in the year as vaccine utilization increases and quarterly comparisons ease.

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