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AbbVie (ABBV - Analyst Report) reported second quarter 2013 earnings of 82 cents per share, beating the Zacks Consensus Estimate of 79 cents. Revenues increased 4.4% to $4.692 billion in the second quarter of 2013, above the Zacks Consensus Estimate of $4.492 billion. Currency movement negatively impacted revenues by 0.7%.

Including one-time items, second quarter 2013 earnings came in at 66 cents per share, down 17.5%.

The Quarter in Detail

Key drug, Humira, recorded growth of 12.1% with revenues coming in at $2.606 billion. U.S. sales increased 16% ($1.224 billion) due to strong performance in the dermatology and gastroenterology segments. Revenues also benefited from the global launch of Humira for the ulcerative colitis indication. Ex- U.S. sales increased 8.8% to $1.382 billion. TriCor/Trilipix revenues fell 65.6% to $107 million.

Other products that performed well included Synthroid (up 24.4% to $153 million), Creon (up 20.5% to $106 million), Zemplar (up 12.6% to $107 million) and Duodopa (up 25.7% to $44 million).

AbbVie said that adjusted SG&A was 27.9% of sales in the second quarter – this reflects the company’s investment in its growth brands.

Adjusted R&D was 14.8% of second quarter 2013 sales, reflecting the company’s investment in its mid- and late-stage pipeline as well its efforts to expand Humira’s label.

AbbVie’s pipeline represents significant potential – earlier this year, the company had said that it is targeting 15 regulatory approvals between 2013 and 2017. The company’s late-stage pipeline includes several compounds or indications in phase III development targeting therapeutic areas like hepatitis C, immunology, multiple sclerosis and endometriosis.

Phase III results on the company’s triple direct-acting antivirals (DAAs) plus ribavirin regimen for the treatment of hepatitis C virus (HCV) infection should start coming out later this year.

Outlook Revised

Based on its strong performance in the first half of 2013, AbbVie raised the lower end of its 2013 earnings outlook. The company now expects earnings in the range of $3.07 to $3.13 per share (old guidance: $3.03 to $3.13 per share). The Zacks Consensus Estimate of $3.12 is towards the higher end of the guidance range.

Our Take

We believe AbbVie is poised for strong growth. Humira should continue driving sales thanks to factors like additional indications, increasing penetration, geographic expansion, and share gains. New indications could boost peak sales potential for Humira by another $1.5 billion.

2013 and 2014 represent a transition period for the company which is facing generic competition for its lipid franchise – TriCor, TriLipix and Niaspan.

AbbVie currently carries a Zacks Rank #3 (Hold). While we are positive on AbbVie’s strong late-stage pipeline, dividend yield and growth strategy, we remain concerned about its dependence on Humira. We believe AbbVie will continue pursuing in-licensing deals and collaborations to boost its pipeline.

Companies that currently look attractive include Johnson & Johnson (JNJ - Analyst Report), Actelion (ALIOF) and Jazz Pharmaceuticals (JAZZ - Analyst Report). While Actelion and Jazz are Zacks Rank #1 (Strong Buy) stocks, Johnson & Johnson is a Zacks Rank #2 (Buy) stock.

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