Analysts Cut AbbVie Price Targets After Earnings Miss

AbbVie Inc ABBV dropped Friday after falling short of fourth-quarter earnings estimates. A $1.90 bottom line missed a $1.93 estimate, and sales of $8.305 billion underperformed forecasts of $8.37 billion.

The Analysts

Morgan Stanley analyst David Risinger maintained an Equal-weight rating on the stock and lowered the price target from $88 to $84.

Bank of America Merrill Lynch analyst Jason Gerberry maintained a Neutral rating and cut the price target from $95 to $87.

The Thesis

While generally satisfied with total revenue and earnings per share, Bank of America pointed to lower-than-expected product sales and 2019 guidance in a Friday note. The firm cut its full-year sales estimates.

“The majority of our forecast reduction comes from global Humira, although we also now forecast genericization of Androgel following Q4 launch of a generic,” Gerberry said. 

BofA projects that lower operating expenses will offset 2019 sales reductions, but said the three following years lack such a buffer. Four product launches are expected to depress EPS between 2020 and 2022.

Morgan Stanley highlights a different calculus.

“We believe ABBV could miss '19 U.S. HCV [hepatitis C] guidance and think investors could begin to fear BI [Boehringer Ingelheim] biosimilar newsflow risk in '20,” Risinger said. “But this is balanced by accelerating revenue growth in '20 to 6 percent.”

The analyst forecast a BI patent trial in 2020 and a 12-percent drop in U.S. HCV sales amid pressure from Gilead Sciences, Inc. GILD.

Risinger said he anticipates potential regulatory scrutiny over Humira pricing — although nothing too damaging.

“We would expect Abbvie to emphasize that net price increases have grown at a slower rate than list due to rebates and that the company has decelerated price increases in recent years,” the analyst said. “Importantly, we see potential legislation to bring down list prices of drugs as unlikely to pass in a Republican-led Senate.”

The drug’s international declines are forecasted to moderate in 2020 and help drive revenue growth acceleration, Risinger said. 

Additional catalysts include FDA approval of risankizumab and upadacitinib through 2019, he said. 

Price Action

AbbVie shares were down 3.5 percent at $77.72 at the time of publication Monday. 

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Photo courtesy of AbbVie.