AbbVie Inc. Q3 Results: Good but Not Good Enough

By Markets Fool.com

AbbVie Inc. (NYSE: ABBV) announced its third-quarter results prior to the market open on Friday. How did the biotech do? Good. However, AbbVie's shares dropped more than 7% in early trading. Good wasn't good enough to satisfy investors. Here's what you need to know about AbbVie's results.

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Image source: Getty Images.

By the numbers

AbbVie reported growth across the board in the third quarter.

Metric 2016 Q3 2015 Q3 Growth
Revenue $6.43 billion $5.94 billion 8.2%
GAAP earnings $1.60 billion $1.24 billion 29%
GAAP earnings per diluted share $0.97 $0.74 31.1%
Non-GAAP earnings $1.99 billion $1.90 billion 4.7%
Non-GAAP earnings per diluted share $1.21 $1.13 7.1%

Data source: AbbVie. Chart created by author.

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Earnings came in slightly above what Wall Street expected. Revenue was a different story. The average analysts' estimate for AbbVie's third quarter revenue was $6.56 billion.

Non-GAAP numbers in the recent quarter looked better than the company's GAAP numbers primarily because of amortization of intangible assets and acquisition-related costs. Per share figure year-over-year comparisons were helped by AbbVie's repurchase of around 24 million shares since the third quarter of 2015.

Behind the numbers

Why did revenue fall short of expectations? One significant factor was that U.S. sales for Viekira plunged 52.5% compared to the prior year period. The hepatitis C drug pulled in $1.21 billion overall in the quarter, thanks to strong international sales. However, weakness in the U.S. hep C market resulted in an overall year-over-year sales decline of almost 20%.

Humira's momentum also appeared to be slowing down. AbbVie reported sales for the autoimmune disease drug of just over $4 billion, up 11.3% from the third quarter of 2015. That's pretty good growth, but it wasn't as impressive as Humira's performance in the first half of this year.

There were at least a couple of bright spots for the biotech. Sales for Imbruvica jumped 64.5% year over year to $501 million. AbbVie splits profits for the cancer drug with Johnson & Johnson.

AbbVie was also able to hold down costs, which helped improve earnings comparisons. Selling, general, and administrative costs in the third quarter decreased more than 6% year over year. Research and development costs fell 22% from the prior year period.

Looking ahead

Although investors were disappointed with AbbVie's third-quarter results, the company remained optimistic. AbbVie raised its full-year 2016 earnings outlook from $3.74 per diluted share to $3.76 per diluted share. The company also now expects full-year non-GAAP earnings per diluted share of $4.82, up from the previous guidance of $4.80.

AbbVie shareholders have several things to look forward to in the not-too-distant future. The company hopes to win regulatory approval for Imbruvica in treatingpatients with marginal zone lymphoma, aslow-growing type of non-Hodgkin's lymphoma.

Great things are also expected from pipeline candidaterisankizumab. AbbVie should announce results from three late-stage studies for the drug in treating plaque psoriasis by late 2017. Another late-stage clinical study targeting Crohn's disease should begin in the first half of next year.

The company plans to submita New Drug Application (NDA) to the U.S. Food and Drug AdministrationforElagolix in treating endomitriosis in 2017 as well. AbbVie licensed the drug fromNeurocrine Biosciences. The two companies reported positive results from a late-stage study ofElagolix on Oct. 19.

And while investors wait for AbbVie's pipeline potential to blossom, they get to enjoy one of the best dividends around. AbbVie increased its dividend by 12% for 2017. Since the company was spun off by parentAbbott Labs, AbbVie's dividend has grown by 60%. That's good -- and probably good enough for most dividend-loving investors.

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Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Johnson and Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.