AbbVie Earnings: Firm Sees Strong Next-Generation Immunology Drugs Sales

Key Morningstar Metrics for AbbVie

• Fair Value Estimate: $176.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of AbbVie’s Earnings

We are increasing our fair value estimate of AbbVie ABBV to $176 per share from $168 following solid second-quarter earnings that exceeded our expectations. Importantly, the firm’s next-generation immunology drugs Skyrizi and Rinvoq are generating enough growth to offset biosimilar pressure on the firm’s older immunology drug, Humira. This trend increases our conviction in AbbVie’s wide moat. With limited other patent losses, the company is poised to continue to post mid-single-digit sales growth over the next three years, after which Humira’s sales contribution will likely be less than 10%. We believe the firm has effectively navigated this major patent loss.

New indications and strong efficacy data are propping up Skyrizi and Rinvoq growth more than we expected. Skyrizi’s new indication in ulcerative colitis, combined with superior efficacy versus Johnson & Johnson’s JNJ Stelara in Crohn’s disease, is helping drive the robust operational growth of 46%. Similarly, Rinvoq’s recent superior efficacy data versus Sanofi’s SNY Dupixent in atopic dermatitis is likely helping drive its 59% operational growth. With new indications emerging for both drugs, we expect the firm to exceed its 2027 guidance for the drugs to deliver over $27 billion in combined sales.

Outside of immunology, AbbVie posted mixed results, with strong oncology and neurology gains offsetting weakness in eyecare sales. We expect this trend to continue, with likely continued robust gains from more recently launched migraine drugs Ubrelvy and Qulipta. We believe AbbVie needs to increase its late-stage product pipeline. However, with Skyrizi and Rinvoq not facing patent losses until 2033, the firm has time to develop earlier-stage drugs. Also, recent acquisition activity is helping augment internal development.