[Overseas Stocks Spotlight] "AbbVie to Offset Sales Decline with New Immune Disease Treatment Product"

[Asia Economy Reporter Eunmo Koo] Abbvie (Abbvie·ABBV.US) is currently undervalued compared to its peers due to declining sales of Humira, but it is expected to offset the sales decline with the launch of new immune disease treatments such as Skyrizi.

NH Investment & Securities initiated coverage on Abbvie with a 'Buy' rating and a target price of $120, emphasizing the resolution of undervaluation factors and new growth drivers. The target price was calculated by applying a price-to-earnings ratio (PER) of 9.4x (10% discount compared to the average of five peer companies) to the fiscal year 2021 earnings per share (EPS) of $12.56.

In a report on the 1st, analyst Kwanseong Koo of NH Investment & Securities stated, "Concerns over declining sales of Humira (rheumatoid arthritis), which accounts for 60-70% of total sales, are the main reason for Abbvie's undervaluation. However, considering the stabilization trend of sales decline in Europe and the delay in biosimilar launches due to successful patent defense strategies in the U.S., this is seen as a buying opportunity at the bottom."

Although Humira sales have decreased, Botox is showing signs of recovery, and new immune disease treatments are expected to offset the sales decline. First, the acquisition of Allergan was completed, and its results began to be reflected from May. Analyst Koo forecasted, "Due to the COVID-19 pandemic, Botox sales in Q2 this year decreased by 20% compared to the previous quarter, but considering the rebound in cosmetic demand in China and Korea recently, gradual recovery is possible." Allergan recorded sales of $16 billion and operating profit of $1.4 billion last year.

Analyst Koo added, "The combined sales of the follow-up immune disease treatments launched last year, Skyrizi (anti-IL23) and Rinvoq (JAK1), are expected to reach about 10 trillion KRW by 2025," and predicted, "They will offset the decline in Humira's U.S. sales and maintain the title of 'a leading company in autoimmune disease treatments.'"

The new oncology pipeline is also a noteworthy factor. Analyst Koo explained, "Recently, Abbvie signed rights acquisition contracts worth $3.9 billion with Genmab and $1.9 billion with I-MAB for oncology pipelines, securing pipelines at the clinical phase 2 stage, which could generate revenue within the next 3-5 years," and added, "This is seen as a strategy to diversify the portfolio from immune diseases to oncology." Meanwhile, attention should be paid to the U.S. International Trade Commission (ITC) lawsuit result on Botox competitors on November 6 and the phase 3 clinical trial results of Skyrizi competitor pipeline BMS-986165.