All told, research and development spending was roughly 16% of total revenue in the quarter. Management attributed the increase to the company's mid-stage and late-stage pipeline assets. And this goes back to how confused some analysts appear to be when assessing what or where AbbVie is.
On the one hand, the company is punished for its perceived lack of "fiscal awareness." On the flipside, it gets hammered for what some believe is an eroding pipeline. You can't have it both ways. The fact is, it costs money to put resources towards research and development to grow those pipelines.
In that regard, it's worth noting that Humira sales, although slowing, continue to do well. Revenue was up 13% in the quarter. The fact that year-over-year sales growth remain in double digits is a testament to how dominant this drug has been and will likely continue to be. And when you consider that Humira sales grew 18% in the U.S. despite the threats from cheaper generics, you have to question the logic behind the bearishness.
Richard A. Gonzalez, the company's chairman and CEO said:"We achieved all of the objectives we set forth for 2013, exceeded our original earnings guidance, and established a solid foundation for the future. We intend to build on this momentum in 2014 as we invest in our key products, advance our pipeline, and prepare for significant product launches that will drive growth in 2015 and beyond." I tend to agree. If there is one thing to be concerned about, though, it's that Humira still accounts for roughly two-thirds of AbbVie's annual revenue. The company can benefit from some better diversification. While I'm willing to applaud Humira's strength, AbbVie's other drugs such Trilipix and TriCor continue to post sedated results due to expiring patents. Still, that's not enough to avoid the stock. Not when management continues to raise guidance. AbbVie is in the same situation as Johnson & Johnson (JNJ), whose growth continues to be led by sales of blockbuster cancer drug Zytiga, which continue to expand at close to 65% year over year. But I haven't heard anyone calling JNJ a bad company. I'm not suggesting that AbbVie is a flawless company. But I don't believe it deserves much of the criticism analysts chronically use as talking points. With AbbVie stock trading at around $50 per share, the company is a sure bet to reach the range of $55 to $58 by the second half of the year. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV