It's been a tremendous year for AbbVie Inc. (NYSE: ABBV) shareholders. Shares of the Abbott spinoff have gained 56.5% this year as investors cheered a handful of important developments. As the year draws to a close, let's look back at a few ways AbbVie crushed it.
What biosimilar competition?
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AbbVie investors can thank the company's legal team for the lion's share of this stock's gain in 2017. Key patents protecting Humira's exclusivity in the U.S. have expired, but it looks like supplemental patents will keep biosimilar competition at bay much longer than previously anticipated. That's a pretty big deal because AbbVie depends on the rheumatoid arthritis drug for about two-thirds of total revenue.
Humira might be aging, but sales are as vibrant as ever, rising 16% on year in the third quarter to a stunning $18.8 billion annualized run rate. AbbVie CEO Richard Gonzalez gave investors a lot to smile about in September when Amgen (NASDAQ: AMGN) agreed to license Humira intellectual property from AbbVie, beginning next year in the EU and not until 2023 in the vital U.S. market.
Amgen's biosimilar version of Humira, Amjevita, earned FDA approval over a year ago and had been expected to begin pinching U.S. Humira sales in 2018. Now that Amgen has agreed to stand down, Gonzalez expects Humira sales to approach $21 billion in 2020. That's a lot better than the contraction we were expecting at the beginning of the year, and it's probably why Gonzalez has the most genuine smile in biopharma.
AbbVie may have added a few chapters to Humira's growth story, but its sales can't grow forever. This year, AbbVie hit another home run with an experimental psoriasis drug that could go a long way to offset the impending losses.
Stelara is a popular psoriasis drug that Johnson & Johnson (NYSE: JNJ) launched around eight years ago and finished the third quarter on pace to achieve $4.5 billion in sales this year. In a pair of head-to-head trials, 21% and 30% of psoriasis patients receiving Stelara achieved completely clear skin after one year of treatment.
Stelara's performance was pretty good, but it couldn't hold a candle to risankizumab. After a year of treatment, AbbVie's candidate completely cleared skin for 56% and 60% of psoriasis patients randomized to receive it. New drug launches can be unpredictable, but it isn't unreasonable to expect risankizumab to outperform Stelara in the commercial setting, as well.
Leukemia better run
Imbruvica has been crushing it for AbbVie since it became the first chemotherapy-free option for newly diagnosed leukemia patients. Third-quarter sales of the drug, which AbbVie markets in partnership with Johnson & Johnson, bounded 37% higher to a $2.8 billion run rate.
While Imbruvica tears up the charts as a first-line treatment for the most common form of leukemia, a more recently launched drug is poised to dominate the space for previously treated patients. AbbVie saved one of the most thrilling clinical trial readouts of 2017 for a scientific conference this December. A combination of Venclexta, which AbbVie markets in partnership with Roche (NASDAQOTH: RHHBY), and Rituxan showed a huge survival benefit over Rituxan plus a standard treatment.
Two years after beginning treatment, 84.9% of patients given the Venclexta combo hadn't shown signs of disease progression, versus just 36.3% among those given standard treatment. With data this good, Gonzalez's assertion that annual Venclexta sales will reach $7 billion isn't as crazy as it sounded over a year ago.
Still a buy?
Even when a company's operations are firing on all cylinders, shares purchased at excessively high prices tend to deliver subpar returns. Although I liked AbbVie much better at the beginning of the year when it was trading at around 11 times 2017 earnings expectations, there's still a chance the stock could outperform over the long run.
Right now the shares trade at about 17.6 times this year's earnings estimates, which is a bit less than the average stock in the S&P 500 (which trades at about 19.8 times forward estimates). AbbVie's accomplishments this year paved a path forward that's far better than average, though. Wall Street consensus growth estimates for AbbVie's bottom line suggest an outstanding 15.2% annual growth rate over the next five years. Put it together, and I'd say there's a good chance AbbVie will continue to outperform over the long run.
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