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AbbVie Q2 Earnings Top on Humira Sales, Shire In Focus

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AbbVie Inc. (ABBV ) reported second quarter 2014 earnings of 82 cents per share, unchanged from the year-ago earnings but surpassing the Zacks Consensus Estimate of 76 cents. Revenues increased 5% to $4.926 billion in the second quarter of 2014, surpassing the Zacks Consensus Estimate of $4.671 billion. Results were boosted by Humira's strong performance.

Including one-time items, second quarter 2014 earnings came in at 68 cents per share, up 3%.


Humira Remains the Growth Driver

Key drug Humira recorded growth of 26.2% with revenues coming in at $3.288 billion. U.S. sales increased 35.6% ($1.661 billion). Ex-U.S. sales increased 17.8% to $1.627 billion. Factors like continued market expansion, share gains, and particularly strong growth in gastroenterology drove Humira’s sales in the U.S. Humira is expected to exhibit high-teens growth in the U.S. in the third quarter.

Ex-U.S. sales of Humira were driven by new indications, share gains and double-digit market growth in most key countries. The timing of international shipments also helped sales. Low double-digit growth is expected in the third quarter in ex-U.S. markets driven by strong underlying trends that will be partially offset by the timing of shipments. Overall, Humira sales are expected to grow in double-digits this year.

Other products that performed well include Synthroid (up 8.7% to $166 million), Creon (up 4.1% to $110 million), Sevoflurane (up 12.6% to $154 million) and Duodopa (up 29.3% to $56 million).

TriCor/TriLipix revenues fell 84.4% to $17 million. Niaspan sales declined 90.9% to $21 million.

AbbVie said that adjusted SG&A was 27.1% of sales in the second quarter -- this reflects the company's investment in its growth brands as well as preparations for the potential launch of its hepatitis C virus (HCV) combination therapy. While SG&A spend is expected to increase modestly on a sequential basis in the third quarter, the sequential increase in fourth quarter SG&A spend will be more meaningful due to the potential HCV product launch.

AbbVie is currently seeking U.S. and EU approval for its HCV treatment. Approval would allow the company to launch the product in the U.S. later this year and the EU early next year.

Adjusted R&D was 16.1% of second quarter 2014 sales, reflecting the company's investment in its mid- and late-stage pipeline as well as its efforts to expand Humira's label.

AbbVie's pipeline represents significant potential -- the company's late-stage pipeline includes several compounds or indications in phase III development targeting therapeutic areas like HCV, immunology and endometriosis.

Meanwhile, AbbVie, which has been looking to acquire Shire (SHPG - Free Report) for a while now, finally convinced Shire to accept its proposal late last week. The deal makes AbbVie the latest to join a string of U.S. health care companies that have been looking towards overseas acquisitions to lower their tax rates.

Guidance Maintained

AbbVie continues to expect 2014 earnings in the range of $3.06 to $3.16 per share. The guidance does not include the impact of the potential launch of the HCV therapy in the U.S. as well as the upcoming Shire acquisition. The Zacks Consensus Estimate of $3.15 is towards the higher end of the guidance range.

Third quarter earnings are expected in the range of 77 cents to 79 cents per share. The Zacks Consensus Estimate is 77 cents.

Our Take

AbbVie’s second quarter results were strong with the company beating on the top-and bottom-line thanks to strong Humira sales. We are positive on AbbVie’s decision to acquire Shire. AbbVie will not just lower its taxes through this acquisition; it will also boost its product portfolio significantly especially for rare diseases. This acquisition is very important for the company, which was mainly dependent on Humira for growth.

While additional details regarding the acquisition will be available this fall, AbbVie expects the deal to boost earnings in the first year following completion – the figure will cross $1.00 per share by 2020.

Meanwhile, the launch of the HCV combination therapy, potentially later this year, would be a major boost for the company. The company has presented impressive data on the candidate - the high rates of response and tolerability coupled with low discontinuation rates are encouraging.

AbbVie carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the health care sector include Allergan (AGN - Free Report) and Biogen (BIIB - Free Report) . Both are Zacks Rank #1 (Strong Buy) stocks.

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