AbbVie ABBV, which has been in the news thanks to the approval of its hepatitis C virus (HCV) treatment Viekira Pak as well as its intention to acquire Pharmacyclics PCYC, will be reporting first quarter 2015 earnings results on Apr 23, before the market opens.
AbbVie’s performance has been pretty good in 2014 with the company beating earnings expectations consistently. The average earnings surprise over the last four quarters is 8.15%.
Humira and Viekira Will Be in Focus
Key drug Humira should remain the main growth driver in the first quarter; growing awareness, favorable clinical data, additional indications and expansion into new markets should help the product to continue contributing significantly to the top-line. Humira should witness mid-teens growth in 2015.
Synagis, which protects at-risk infants from severe respiratory disease, is a seasonal product with a major part of sales being recorded in the first and fourth quarters of the year. Continued product uptake and strong commercial execution should keep Synagis sales strong in the first quarter. Duopa sales should ramp up gradually as physicians grow familiar with the product.
AndroGel sales should decline given the presence of generic competition for the 1% formulation.
Meanwhile, lipid franchise sales will continue to be impacted by generic competition. Negative market trends will impact HIV sales also.
We expect investor focus to primarily remain on the sales ramp up of Viekira, which is expected to achieve a global annualized sales run rate of more than $3 billion by year end. Another focus area will be the upcoming $21 billion acquisition of Pharmacyclics. The acquisition will add Pharmacyclics’ Imbruvica to AbbVie’s portfolio and diversify the company’s revenue base. Imbruvica, currently approved for four indications, has multi-billion dollar potential and Pharmacyclics is exploring the potential to expand Imbruvica’s label into solid tumors and autoimmune diseases.
AbbVie is positioning Imbruvica as a “pipeline in a molecule” – the treatment is currently in more than 50 studies. The acquisition, slated to close in the second quarter, is expected to be earnings accretive from 2017 with 2019 earnings expected to be boosted by more than 60 cents per share. AbbVie expects Imbruvica peak sales of more than $7 billion and U.S. sales of $1 billion in 2015.
With the deal expected to be earnings dilutive (20 cents) in 2015, AbbVie said that it expects 2015 earnings per share in the range of $4.05 to $4.25 (old guidance: $4.25 to $4.45 per share).
What Our Model Indicates
Our proven model shows that AbbVie is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.19%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of AbbVie’s Zacks Rank #3 and +1.19% ESP makes us very confident in looking for a positive earnings beat on Apr 23.
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
ImmunoGen, Inc. IMGN has an Earnings ESP of +32% and carries a Zacks Rank #3. It is scheduled to report results on Apr 24.
The Earnings ESP for Biogen BIIB is +0.51% and it carries a Zacks Rank #1 (Strong Buy). The company is also scheduled to release results on Apr 24.
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