AbbVie stock is trading at a two-year high after its immunology drug, Rinvoq, outperformed Regeneron Pharmaceuticals‘ (REGN) Dupixent in a final-phase study.
Shortly after, the Committee for Medicinal Products for Human Use recommended the full European Medicines Agency approve AbbVie‘s (ABBV) Rinvoq for adults with psoriatic arthritis and ankylosing spondylitis, another form of arthritis. But AbbVie stock slipped 1% on the news.
Earlier in the month, AbbVie had positive news for an ulcerative colitis treatment known as upadacitinib and for a cancer drug called Imbruvica.
But AbbVie stock has faced its fair share of challenges in 2020. Shares slid after touching a 27-month high in July, hurt by the U.S. House committee investigating drug prices saying it intends to subpoena the pharmaceutical giant.
Shares later got a boost when Republicans seemingly held onto the U.S. Senate.
Republicans haven’t pushed as hard as Democrats for drug price cuts, though observers expect some reform ahead. AbbVie stock jumped as much as 10.8% on Nov. 4, even as the presidential and several senatorial races remained too close to call.
Further, AbbVie is working on coronavirus treatments. One is a partnership with Harbour BioMed, Utrecht University and Erasmus Medical Center, announced in June. Their antibody-based approach could either treat or prevent Covid-19.
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 five quarters. Its 52% sales growth last quarter marked its biggest jump ever, but that came courtesy of the Allergan acquisition. Sales rose 4.1% excluding the acquisition.
Still, the company posted record overall sales last quarter, including Allergan, of $12.9 billion.
Earnings jumped 21% to $2.83 per share, on an adjusted basis. That marked the biggest percentage increase since the fourth quarter of 2018.
That earnings growth is solid yet does not meet CAN SLIM rules for investing, which advise looking for stocks with quarterly sales and earnings growth of 20%-25% or more.
Big gains also are expected for the fourth quarter. Analysts polled by FactSet expect AbbVie to earn $2.86 a share, up 29% on $13.71 billion in sales, up 57%. That would be record growth for sales and the biggest earnings growth since third-quarter 2018.
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
Amgen (AMGN), Novartis (NVS), Viatris (VTRS) and Biogen (BIIB) have launched Humira biosimilars in Europe. They are also planning to launch copycats in the U.S. in 2023. Coherus Biosciences (CHRS) will also launch a Humira biosimilar in the U.S. in 2023.
AbbVie relies heavily on Humira, which accounted for nearly 58% of sales in 2019. Last year, Humira sales slid 3.9% on a strict as-reported basis to $19.17 billion. International sales of the blockbuster drug, though, fell 31.1% to $4.31 billion, down 31.1%.
Humira is still growing in the U.S., however. Sales in 2019 rose 8.6% to $14.86 billion.
In the third quarter, Humira sales rose 4.1% overall, to $5.14 billion, despite a 9.3% decline overseas.
In 2019, before Allergan, total revenue grew just 2% in 2019. That followed more stout 16% growth in 2018. That growth rate in 2018 was the highest the pharmaceutical company has seen in years. Among its peers, AbbVie’s sales last year trailed Merck (MRK) whose sales rose 11%.
For 2020, analysts expect AbbVie to earn $10.49 per share on $45.6 billion in sales, up 17% and 37%, respectively. The bullish increase in sales largely stems from the acquisition of Allergan. Last year, Allergan sales were $16.09 billion.
Along with reporting third-quarter earnings, AbbVie guided to adjusted earnings per share this year of $10.47 to $10.49, up slightly from its earlier guidance of $10.35-$10.45. At the midpoint, per-share earnings would rise 17.2%.
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 33-company industry group. It ranks fourth in total market value.
Shares cleared a buy point at 101.38 out of a consolidation on Nov. 20.
AbbVie stock has an Investor’s Business Daily Composite Rating of 70 out of a best-possible 99. The CR measures a stock’s key growth metrics. So, its shares rank in the top 30% of all stocks in terms of technical and fundamental measures.
(Related: Keep tabs on the best-ranking stocks by visiting IBD Digital.)
AbbVie shares, though, have a Relative Strength Rating of just 59. 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 poked above both their 50-day and 200-day moving averages with the big jump on Nov. 4. That’s the first time the stock has traded above both key support lines sine late July. AbbVie stock has managed to stay well above both since then, as of Dec. 11.
AbbVie News: Collaborations, Government Subpoena
On Sept. 1, the chair of the House’s Committee on Oversight and Reform, Rep. Carolyn Maloney, D-N.Y., announced plans to issue AbbVie a subpoena. The committee is investigating drug prices. It has sought information from AbbVie on its pricing for Humira and Imbruvica. ABBV stock fell 3.7% that day.
North Chicago, Ill.-based AbbVie responded by saying it has “been working cooperatively with the House Oversight Committee” and was “surprised and disappointed the Committee chose to take this action.”
In late October, the company posted positive Phase 3 data for its treatment of symptoms associated with presbyopia, or farsightedness. That data will serve as the basis for a submission to the U.S. Food and Drug Administration in the first half of 2021.
Otherwise, AbbVie announced its I-Mab collaboration on Sept. 4 and its Covid R&D Alliance action on Aug. 3. AbbVie, Amgen and Takeda are looking at Covid-19 treatment possibilities from their respective drugs cenicriviroc, Otezla and Firazyr. AbbVie got cenicriviroc with its Allergan acquisition.
In July, AbbVie’s Allergan unit gained Food and Drug Administration approval for Botox as a method of treating spasticity in children ages 2 and older.
AbbVie announced two key collaborations in June. First, the pharmaceutical company unveiled a deal with Harbour, Utrecht and Erasmus to test an antibody approach to coronavirus treatment. The drug could yield a treatment for Covid-19 or a new way of blocking the respiratory disease from taking hold.
Further, AbbVie inked a deal with Genmab to codevelop and co-commercialize three cancer drugs. In addition, the companies also agreed to research up to four additional cancer treatments. AbbVie will pay Genmab up to $3.15 billion in milestones, and will make an upfront payment of $750 million.
So, Is AbbVie Stock A Buy Right Now?
Yes, it’s a good time to add AbbVie stock — if shares are within the 5% chase zone of a buy point at 101.38. In midday trading on Dec. 11, AbbVie stock was 4.8% above that entry.
It’s best to buy stocks that break out of bases and remain within 5% of the buy price, according to IBD’s MarketSmith.
But AbbVie isn’t hitting a bar of 20%-25% revenue and earnings growth that CAN SLIM investors should seek. Analysts call for growing sales and earnings in the fourth quarter. The massive growth is tied to its acquisition of Allergan, however.
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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