"We believe the market underestimates timing and magnitude of Humira biosimilars beyond 2018 estimates. Even with novel reformulations, HCV franchise and an emergent oncology business, AbbVie's valuation is challenging in absence of material value-enhancing M&A," Citigroup said about the global research-based pharmaceuticals company.
Analysts anticipate Humira revenues declining from $16 billion to $6 billion from 2017 to 2022 due to combined volume and price erosion starting in 2018.
Exclusive Report:Jim Cramer's Best Stocks for 2015
Analysts see 70% erosion likely over seven years, with biosimilars likely at more than 50% discount to brand.
Separately, TheStreet Ratings team rates ABBVIE INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ABBVIE INC (ABBV) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 15.1%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for ABBVIE INC is currently very high, coming in at 79.62%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -14.85% is in-line with the industry average.
- ABBVIE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, ABBVIE INC reported lower earnings of $1.09 versus $2.56 in the prior year. This year, the market expects an improvement in earnings ($4.40 versus $1.09).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 171.8% when compared to the same quarter one year ago, falling from $1,128.00 million to -$810.00 million.
- You can view the full analysis from the report here: ABBV Ratings Report