AbbVie (ABBV) is a stronger stock bet than Gilead Sciences (GILD) and Amgen (AMGN), Leerink analyst Geoffrey Porges said Thursday after comparing the biopharmas' Q4 earnings, 2017 trajectory and typical R&D turnover.
"This analysis suggests that AbbVie offers more attractive fundamentals based on earnings momentum and dividend yield, and is the only company of the three that is likely to show sustained improvements in operating margin and cash flow over the next four years," Porges wrote in a research report.
Like Gilead, AbbVie's earnings growth is largely based on operating revenue increases. But, Porges notes, those increases are due to volume growth for Humira, Imbruvica and Viekira. Gilead has boosted its operating revenue by increasing prices on franchise hepatitis C drug sales, he said.
Both companies derive the lion's share of their sales from a single segment. In 2014 and 2015, Gilead saw sales spike on its hepatitis C drugs, Sovaldi and Harvoni. Because HCV is a curable disease, sales plunged in 2016. Humira, AbbVie's anti-inflammatory, has been stronger. In Q4, its sales rose 15.5%.
The two are also pitted in a patent battle over AbbVie's claims that an Amgen biosimilar drug infringes on its Humira patents. Though AbbVie is shoring up to defend its IP on Humira, analysts expect biosimilars to come online over the next few years.
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"AbbVie is certainly facing growth and quality issues beyond 2020, when the outlook for Humira becomes increasingly uncertain, but all three companies face generic, biosimilar and branded threats that challenge their current blockbuster product franchises," Porges wrote.
Still, earnings momentum looks good for AbbVie in 2017 and 2018. In January, AbbVie guided to $5.44-$5.54 earnings per share ex items in 2017, which would be up 14% at the midpoint. That outlook didn't chip at consensus views for 2018, which are at $6.44.
Gilead's forecasts have declined significantly over the past 14 months, Porges wrote. "It's possible these estimates could decline more given the recent trend," he noted. Amgen, on the other hand, appears stable.
AbbVie stock closed up 1% at 61.94 on the stock market today, while Gilead and Amgen both rose 0.8%. AbbVie stock is just above its 50-day line but just below its 200-day line. On a year-to-date basis, Amgen stock is outperforming its peers, up 18%, with AbbVie and Gilead stocks down 2% and nearly 4%, respectively.
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