Bmo abbv Impact & Analysis
When we made AbbVie our top pick following the 2014 EASL conference, we were convinced that the Street was underestimating the potential for the company’s Hep-C franchise. At the time, 2015 Hep-C consensus was roughly $1Bn. However, the Street’s expectations are much higher now, and we believe the stock price (up ~35% since mid-April) reflects that. Now Hep-C consensus for 2015 is $2.7Bn (vs. our $2.1Bn forecast) with some estimates going as high as $3Bn and $3.6Bn. Although this kind of performance is certainly possible, here we argue that it is unlikely because we see AbbVie primarily competing in 15-25% of GT1 patients (Rx experienced with cirrhosis). We also see serious Hep-C competition in the not so distant future that may cast uncertainty over the longer term prospects of this franchise (e.g., MRK C-SWIFT data at AASLD). In short, we believe Hep-C is the most important driver for ABBV in 2015, and we think expectations may now be too high. We also expect increased Humira biosimilar concerns in 2015 as the Remicade biosimilar is expected to enter new European markets, and Humira biosimilar developers get closer to completing their programs. Incrementally positive updates from ABT-199, Elagolix and Elotuzumab are for the most part expected in 2015, and not enough to offset the headwinds above, in our view.
Valuation & Recommendation
Our price target is now $65 based on DCF supported by 15x our 2015 EPS of $4.35. We have low
