The COVID-19 pandemic has led to a wake-up call for governments, as they realize the significant investment required by the healthcare sector. Billions of dollars are now being invested to develop a treatment for coronavirus. Meanwhile, lockdowns impacted the demand for certain drugs due to a decline in doctor visits and prescriptions filled. Also, elective procedures are being delayed.
We will discuss how two leading drugmakers AbbVie and Biogen are faring amid the pandemic and using the TipRanks’ Stock Comparison tool, we will see which stock offers a more compelling investment opportunity.
For a long time biopharmaceutical company AbbVie, which was formed in 2013 as a result of its spin-off from Abbott, banked on its blockbuster immunology drug Humira. But, Humira started losing its grip over international markets due to competition from biosimilars in Europe. The drug still accounted for 58% of AbbVie’s 2019 revenue. Humira continues to grow in the US market, where it will lose patent exclusivity in 2023.
AbbVie completed its $63 billion acquisition of Allergan in May as part of its plans to diversify beyond Humira. The addition of Allergan, especially its Botox franchise, was supposed to boost AbbVie’s second-quarter sales. But COVID-19 ruined AbbVie’s plans.
AbbVie’s second-quarter revenue grew 26.3% Y/Y to $10.4 billion due to the inclusion of Allergan. However, on a comparable operational basis (which assumes for calculation purposes that Allergan acquisition closed on January 1, 2019), the company’s revenue fell 5.3% mainly due to the impact of the pandemic on Allergan.
Notably, Botox Cosmetic revenues declined 43.1% to $226 million, while Botox Therapeutic revenues fell 22.3% to $297 million. And sales for Allergan’s eye-care drug Restasis dropped 19.5% to $138 million. However, its anti-psychotic drug Vraylar delivered sales of $192 million, marking a 70.4% growth.
Meanwhile, Humira’s second-quarter revenues fell 0.7% (reported basis) to $4.84 billion as biosimilar competition led to a 19.9% fall in international sales. Humira’s US sales grew 4.8% to $3.97 billion.
Beyond Humira, AbbVie is seeking growth through its oncology drugs Imbruvica and Venclexta. In the second quarter, Imbruvica’s (Johnson & Johnson has non-US marketing rights) revenues grew 17.2% to $1.29 billion. Venclexta’s revenues of $303 million reflected a 79.2% rise in a reported basis.
AbbVie’s new immunology drugs are also looking promising. Psoriasis drug Skyrizi delivered $330 million and rheumatoid arthritis drug Rinvoq’s revenues were $149 million in the second quarter.
AbbVie’s second-quarter adjusted EPS increased 3.5% Y/Y to $2.34. Including the results from Allergen, AbbVie now expects full-year adjusted EPS in the range of $10.35 to $10.45 compared to its previous guidance in the range of $9.61 to $9.71.
On August 25, AbbVie filed for FDA approval for Rinvoq for the treatment of adults with active ankylosing spondylitis. It also intends to file for regulatory approval for Atogepant in treating migraine after positive phase 3 results.
AbbVie has partnered with Harbour BioMed, Utrecht University and Erasmus Medical Center for developing a treatment for COVID-19. In June, the company inked a deal with Genmab to develop cancer treatments. (See ABBV stock analysis on TipRanks)
On August 20, Morgan Stanley analyst David Risinger increased his price target for AbbVie to $108 from $95 and maintained his Buy rating. Risinger cited strong financial momentum, uptake of new launches and prospects for long-term multiple expansions as the reasons for the price target upgrade.
The Street shows its confidence in AbbVie with its Strong Buy consensus based on 12 Buys and no Holds or Sells. A price target of $112.63 implies an upside potential of about 20%. AbbVie stock has risen 6% so far in 2020.
Biogen received a major setback when it lost a patent dispute with Mylan (MYL) for blockbuster multiple sclerosis drug Tecfidera. This means that Tecfidera might now face competition from generics. Tecfidera accounted for 40% of Biogen’s product revenues in 2019 and 42% in the second quarter of 2020.
On August 19, Mylan announced the launch of its first generic to Biogen’s Tecfidera. However, it is a launch-at-risk since the litigation between Mylan and Biogen is ongoing.
Piper Sandler analyst Christopher Raymond said that he is “incrementally cautious” on Biogen following the launch of Mylan’s generic version to Tecfidera. Raymond has a Hold rating for Biogen with a $270 price target.
There has also been controversy with regard to Biogen’s potential Alzheimer’s drug aducanumab. The company had discontinued the development of this drug in March 2019 as it failed to prove effective in treating Alzheimer’s in phase 3 clinical trial. However, Biogen changed its stance on aducanumab in October 2019 and said that the earlier analysis was incorrect as it was based on a smaller dataset.
On August 7, the company announced that the FDA has accepted Biogen and Eisai’s license application for aducanumab with priority review.
Meanwhile, Biogen delivered better-than-anticipated results for the second quarter. Biogen’s second-quarter revenue rose 2% Y/Y $3.68 billion. The quarter’s adjusted EPS rose 12% to $10.26.
Tecfidera revenue increased 3% Y/Y to $1.18 billion. Sales from spinal muscular atrophy Spinraza rose only 1% to $495 million perhaps due to increased competition as Novartis’s Zolgensma was approved last year. Overall, Biogen’s total product revenues declined 3% to $2.80 billion, including a 7% fall in biosimilar revenues.
But, Biogen’s second-quarter top-line benefited from $208 million in Ocrevus royalties from Roche, which increased 14% Y/Y. Also, other revenues rose 155% to $408 million mainly driven by revenue from the licensing of certain manufacturing-related intellectual property to one of the company’s corporate partners. (See BIIB stock analysis on TipRanks)
Biogen stock has declined 6.0% year-to-date. An average price target of $316.05 indicates an upside potential of 13.3% in Biogen stock. The Street has a Hold consensus that breaks down into 10 buys, 16 Holds, and 3 Sells.
AbbVie’s higher debt levels and lower operating margin compared to Biogen go against it. But, it is notable that AbbVie rewards shareholders through dividends while Biogen makes no dividend payments. AbbVie has an impressive dividend yield of 5.0%.
Overall, dividends, strong sales growth prospects supported by Allergan acquisition, analysts’ bullish stance and higher upside potential makes us choose AbbVie over Biogen.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment