AbbVie Profit Rises on Broad Sales Growth -- Update

By Peter Loftus 

AbbVie Inc. laid out its plans to defend its top-selling drug Humira from potential generic competition in coming years, while higher sales of the anti-inflammatory medicine helped the company report a 4.3% increase in first-quarter profit.

Investors are growing increasingly worried that AbbVie won't be able to sustain strong sales growth for Humira--which accounts for more than 60% of the North Chicago, Ill., company's revenue--after certain patents for the drug begin to expire in late 2016. AbbVie shares were down 1.3% in recent trading at $63.62.

Several rivals are developing copycat versions of Humira, including Amgen Inc., which expects to begin selling it in 2017. The U.S. Food and Drug Administration recently approved the first copy of a biotechnology drug using new abbreviated criteria, kicking off what is expected to be a wave of lower-cost "biosimilars" that could erode sales of expensive brands such as Humira.

But AbbVie's leaders say they expect to defend Humira by wielding "hundreds of patents" globally that cover manufacturing processes and methods of use. Several U.S. patents cover Humira's use to treat specific diseases like rheumatoid arthritis, the earliest of which expires in 2022, AbbVie said. While the company didn't specify when it expects biosimilar competition to begin, it vowed to use those later-expiring patents to put off the competition.

"We have a robust portfolio of intellectual property protecting Humira, which we intend to enforce if infringed by a biosimilar applicant," AbbVie Chief Executive Richard Gonzalez said on a conference call with analysts.

Still, some analysts questioned whether AbbVie was prepared to make big cost cuts in the event of a significant hit to Humira sales from biosimilar competition, or what some analysts call a "disaster scenario."

"Investors are increasingly focused on Abbvie's margin structure," said J.P. Morgan analyst Chris Schott.

Mr. Gonzalez said AbbVie would make appropriate cuts to expenses if a "bear scenario" played out with Humira sales, to protect investors and "preserve profitability."

AbbVie also has taken steps to reduce its dependence on Humira. It recently began selling a new hepatitis C regimen, Viekira Pak, which generated $231 million in sales for the first quarter and which analysts predict will have full-year sales of more than $2 billion. And the company last month agreed t o acquire Pharmacyclics Inc . for about $21 billion, a deal that will bring AbbVie rights to the blood-cancer drug Imbruvica.

For the first quarter, AbbVie reported a profit of $1.02 billion, or 63 cents a share, up from $980 million, or 61 cents a share, a year earlier. Excluding separation-related costs and other items, per-share earnings rose to 94 cents from 71 cents. Analysts had expected first-quarter earnings of 85 cents a share, excluding items.

First-quarter revenue rose 10% to $5.04 billion. Unfavorable currency-exchange fluctuations reduced sales by 7.3%.

Humira sales jumped 18% to $3.11 billion, helped by higher prescription volume and prices. Sales also increased for the cancer drug Lupron and thyroid-disorder treatment Synthroid. Sales of testosterone-replacement therapy Androgel dropped nearly 40% due to generic competition and the contraction of the "Low-T" treatment market.

AbbVie raised its full-year per-share earnings estimate to $4.10 to $4.30, from its previous estimate for $4.05 to $4.25.

Tess Stynes contributed to this article.

Write to Peter Loftus at [e-mail]

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