On October 30, 2015 AbbVie (NYSE:ABBV) reported financial results for the third quarter ended September 30, 2015 (Press release, AbbVie, OCT 30, 2015, View Source;p=RssLanding&cat=news&id=2104614 [SID:1234507847]).
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"We are pleased with our outperformance in the third quarter and our progress year-to-date. We’ve driven strong commercial, operational and R&D execution, resulting in industry-leading top- and bottom-line performance," said Richard A. Gonzalez, chairman and chief executive officer, AbbVie. "We are well-positioned to deliver robust EPS growth in 2015 and beyond, and we continue to make significant progress advancing our pipeline and other strategic actions that will help AbbVie achieve top-tier growth over the long term."
Third-Quarter Results
Worldwide sales were $5.944 billion in the third quarter, up 18.4 percent year-over-year. On an operational basis, sales increased 26.2 percent, excluding a 7.8 percent unfavorable impact from foreign exchange rate fluctuations.
Third-quarter sales growth was driven by the continued strength of HUMIRA and other promoted products. Global HUMIRA sales increased 19.6 percent on an operational basis, or 12.1 percent including the impact of foreign exchange rate fluctuations. Strong U.S. HUMIRA growth of 30.4 percent was driven by continued momentum across all three major market categories, rheumatology, dermatology and gastroenterology. International HUMIRA sales in the third quarter grew 7.1 percent on an operational basis, nearly double the rate of growth reported in the second quarter. Reported international HUMIRA sales growth in the quarter was reduced by 16 percent due to unfavorable foreign exchange.
Third-quarter global IMBRUVICA sales were $304 million with U.S. sales of $267 million and international profit sharing of $37 million for the quarter.
Total company sales growth was also driven by $469 million in global VIEKIRA sales, now approved in 61 countries with additional approvals anticipated throughout the remainder of 2015 and into 2016, as well as strong operational growth from Duodopa, Creon and Lupron.
The adjusted gross margin ratio in the third quarter was 83.3 percent, excluding intangible asset amortization and other specified items. Gross margin expansion of 220 basis points was driven by product mix, operating efficiencies and the impact of foreign exchange rates. The gross margin ratio under U.S. generally accepted accounting principles (GAAP) was 80.4 percent.
Adjusted selling, general and administrative (SG&A) expense was 23.0 percent of sales in the third quarter. On a GAAP basis, SG&A was 24.8 percent of sales.
Adjusted research and development (R&D) was 15.4 percent of sales in the quarter, reflecting funding actions in support of our mid- and late-stage pipeline assets. On a GAAP basis, R&D was 23.8 percent of sales.
The adjusted operating margin in the third quarter was 44.9 percent, compared to 38.5 percent in third-quarter 2014. On a GAAP basis, the operating margin was 31.7 percent.
Net interest expense was $197 million dollars, reflecting the impact of debt issued in connection with the Pharmacyclics acquisition. The adjusted tax rate was 21.9 percent in the quarter and 24.8 percent on a GAAP basis.
Adjusted diluted earnings per share, excluding intangible asset amortization expense and other specified items, were $1.13 in the third quarter, up nearly 27 percent. Diluted earnings per share were $0.74 on a GAAP basis.
Announced company’s long-term strategic and financial objectives, including expectations for growth and other financial metrics such as sales targets, operating margin objectives and earnings-per-share growth over our long-range plan. Provided 2016 earnings per share guidance and confirmed intention to host a comprehensive R&D Pipeline Review in Chicago during the 2016 ASCO (Free ASCO Whitepaper) meeting (see separate release issued this morning).
Key Events from the Third Quarter
AbbVie announced that 34 abstracts from its chronic hepatitis C clinical development program have been accepted for presentation at The Liver Meeting, the Annual Meeting of the American Association for the Study of Liver Diseases (AASLD) in San Francisco from November 13-17, 2015. New clinical studies will be presented on AbbVie’s next-generation HCV medicines, ABT-493 and ABT-530, focused on investigating pan-genotypic, ribavirin (RBV)-free, once-daily treatment options that may allow for shorter treatment durations of as little as eight weeks. Presentations will also highlight new data from Phase 3b studies of AbbVie’s VIEKIRA PAK, taken with or without ribavirin (RBV), for adults with genotype 1 (GT1) chronic HCV infection, including studies of GT1 patients with chronic kidney disease and genotype 1b (GT1b) patients with compensated cirrhosis.
The Japanese Ministry of Health, Labour and Welfare (MHLW) approved Viekirax as a new interferon and RBV-free treatment option for adult patients with chronic GT1 HCV infection, including those with compensated liver cirrhosis. Viekirax consists of a 12-week, two direct-acting antiviral, fixed-dose combination of paritaprevir/ritonavir with ombitasvir, dosed once daily. Japan has one of the highest rates of hepatitis C infection in the industrialized world, with approximately 1.5 to 2 million people living with HCV, making it the second largest HCV market globally.
Results from a Phase 2 clinical trial of ABT-494, AbbVie’s internally developed selective JAK1 inhibitor, in rheumatoid arthritis (RA) met its primary endpoint, achieving ACR20 response at week 12, in patients with inadequate response to either methotrexate or TNF inhibitors (ACR20 responses up to 82 percent and ACR50 responses up to 50 percent; ACR20 up to 73 percent and ACR50 responses up to 44 percent, respectively). With the potential to be a best-in-class therapy with an overall favorable safety profile, AbbVie intends to advance a once-daily formulation of ABT-494 into Phase 3 studies for RA by the end of 2015.
AbbVie reported top-line results from a Phase 2b safety and efficacy study of elagolix in patients with uterine fibroids. Preliminary results from the six-month study demonstrated that all of the elagolix treatment arms met the composite primary endpoint. The company plans to move into Phase 3 development in the first quarter of 2016. Elagolix is also in Phase 3 development for the treatment of endometriosis.
AbbVie announced that it submitted a supplemental New Drug Application (sNDA) to the U.S. Food and Drug Administration (FDA) based on results from the head-to-head Phase 3 RESONATE-2 study, which evaluated efficacy and safety of IMBRUVICA versus traditional chemotherapy, chlorambucil, in treatment-naïve chronic lymphocytic leukemia (CLL) patients aged 65 years or older. The RESONATE study (PCYC-1112) found that treatment with IMBRUVICA improved progression-free survival (primary endpoint) and multiple secondary endpoints, including overall survival and overall response rate when used in treatment-naïve patients with CLL. These data have been submitted for publication in a peer-reviewed medical journal and will be presented at an upcoming medical meeting.
Results from a Phase 2 study of venetoclax (ABT-199) found that AbbVie’s investigational medicine met its primary endpoint of achieving overall response rates in patients with relapsed/refractory or previously untreated CLL with 17p deletion genetic mutation. These data are under regulatory review by the FDA and will be submitted to the European Medicines Agency (EMA) before year-end. Full results from the trial will be presented at an upcoming medical meeting.
AbbVie announced that the FDA and European Commission (EC) approved HUMIRA (adalimumab) for the treatment of moderate-to-severe hidradenitis suppurativa (HS) in adult patients. HUMIRA is the first and only approved therapy for people with this chronic, painful inflammatory skin disease in both the U.S. and European Union (EU). HS affects approximately 1 percent of the adult patient population worldwide, with fewer than 200,000 patients in the United States.
The FDA accepted a Biologics License Application (BLA) for elotuzumab, an investigational treatment in patients with relapsed/refractory multiple myeloma, for priority review. Elotuzumab was previously granted breakthrough therapy designation by the FDA and validated by the EMA for accelerated assessment in the EU. Regulatory submissions were based on results from the ELOQUENT-2 trial which found that treatment with elotuzumab in combination with lenalidomide and dexamethasone demonstrated a 30 percent reduction in disease progression.
During the quarter, the FDA approved AbbVie’s TECHNIVIE in combination with RBV for the treatment of adults with genotype 4 (GT4) HCV in the United States. TECHNIVIE is the first and only all-oral, interferon-free, direct-acting antiviral treatment approved in the U.S. for adult patients with GT4 chronic HCV infection.
AbbVie Raises Full-Year 2015 Outlook
AbbVie is raising its adjusted diluted earnings-per-share guidance for the full-year 2015 to $4.26 to $4.28. The company’s 2015 adjusted diluted earnings-per-share guidance excludes $1.10 per share of intangible asset amortization expense, deal costs, integration, and other specified items, and includes $0.20 of dilution related to the Pharmacyclics acquisition. AbbVie’s diluted earnings-per-share guidance is $3.16 to $3.18 on a GAAP basis.