The stock reaction was in concert with the 2Q2022 earnings CC, not simply the opioid settlement.
AbbVie's 2Q print was relatively in-line on the top and bottom-line, driven by an outperformance in its I&I franchise
That said, shares are under pressure today, likely over questions on the defensiveness of the story
Indeed, while we fundamentally like the story, we think questions on Humira's LOE and the CEO succession plan limit upside
Shares under pressure over perceived 'safe haven' status
AbbVie's 2Q22 results were relatively in-line on revenue (-$55M) and non-GAAP EPS (+$0.05) and while non-GAAP EPS 2022 guidance was maintained ($13.88 at the midpoint), shares are under pressure today (-6%; DRG: -1%). Indeed, there are many open questions (Humira LOE erosion pace & impact to top and bottom-line in '23/'24 and a lack of clear line of sight into the CEO succession plan) that we think limit upside potential in the near-term as evidenced by todays sell-off. Nevertheless, given the challenging nature of navigating such a large LOE cliff, we think management has communicated expectations well. And in 2Q, AbbVie's I&I franchise outperformed, with Humira (+$131M) and Skyrizi ($175M) offsetting meaningful misses for Imbruvica (-$124M) and Venclexta (-$33M). On AbbVie's aesthetics business, Botox performed well (+$33M) despite inflation and consumer concerns, but the lingering effects of C-19 in China and geopolitical volatility remained an overhang on the Juvederm collection. That said, AbbVie's 2022e aesthetics guidance was maintained (BofA $5.9B; cons $5.9B).
However, we think today's update brings into question AbbVie's perceived 'safe haven' defensive status as 1) Humira was a major driver of it's in-line performance and 2) we no longer consider AbbVie a value growth stock given its 11x our 23E multiple. And while we fundamentally like the business, we think it's unlikely Rinvoq/ Skyrizi will be able to offset Humira's margins/ profitability (BofA $4.0B; $5.7B vs cons $6.0B; $7.6B in 2025 respectively), which underscores our Neutral thesis. Indeed, with a dearth of catalysts to move the needle (see below) and lack of pipeline assets to be excited about, we maintain Neutral and our $156 PO. That said, once we get more clarity on Humira's LOE and the CEO succession plan, we think it's likely we could see a re-rating in the name.
Regulatory catalysts weighted to 2023
We don't see a lot to be excited for in 2H22; that said, we expect a meaningful amount of regulatory decisions for AbbVie in 2023. Indeed, we await 2023 regulatory decisions for 1) epcoritamab in patients with r/r LBCL, 2) Qulipta for the prevention of chronic migraine and, 3) ABBV-951 for advanced PD. But even so, we don't think investor's attention is on the new product cycle given their likely incremental commercial impact.