AbbVie Shares Double In A Year; Leerink Moves To Sidelines

AbbVie Inc ABBV shares ran up about 14 percent last Friday following the release of fiscal fourth-quarter results, where it revealed expectations for higher earnings and a lower tax rate in 2018.

The Analyst

Leerink analyst Geoffrey Porges downgraded shares of AbbVie from Outperform to Market Perform, with the move attributed to the stock's run over the past six months.

The analyst upped the price target for the shares from $105 to $127 on the premise of a dramatically lower tax rate and strong performance of existing products as well as positive views on the company's pipeline.

The Thesis

All the positives are now more or less fully valued into AbbVie's stock, making it hard to justify the incremental upside needed to maintain an Outperform rating, Porges said in a Monday note.

Following the earnings announcement, the analyst increased his revenue forecast for AbbVie by 1-2 percent long-term.

Leerink estimates remain 4-5 percent higher than near-term consensus expectations, and the firm also hiked EPS estimates for the out years.

The new price target assumes predictable erosion of Humira in regions where it faces direct biosimilar competition, Porges said.

"Naturally AbbVie's stock could offer more upside if all of its mid-to-late-stage pipeline succeeds, but we have significant revenue contributions in our model already for upadacitinib, risankizumab, Elagolix, and Rova-T," the analyst said.

Leerink does expect some risk to its revenue forecasts for several of the figutres, given the competitive intensity in the sapce.

Among large-cap pharma stocks, the firm said it now prefers Celgene Corporation CELG to AbbVie. Additionally, Leerink said growth names such as Vertex Pharmaceuticals Incorporated VRTX, Alexion Pharmaceuticals, Inc. ALXN and Regeneron Pharmaceuticals Inc REGN offer more upside than AbbVie.