The FINANCIAL — AbbVie announced financial results for the first quarter ended March 31, 2015.
“AbbVie had an exceptional first quarter, delivering on our projection of top-tier EPS growth, as well as robust sales growth and significant margin expansion,” said Richard A. Gonzalez, chairman and chief executive officer, AbbVie. “We also announced the acquisition of Pharmacyclics, which will establish AbbVie as a leader in the hematologic oncology market and provide an important growth platform for the future. And, we continued to gain momentum with the launch of our HCV therapy, Viekira, and further advancement of our late stage pipeline. Certainly, 2015 is a pivotal year for AbbVie and we are off to an impressive start.”
Worldwide sales were $5.040 billion in the first quarter, up 10.5 percent year-over-year. On an operational basis, sales increased 17.8 percent, excluding a 7.3 percent unfavorable impact from foreign exchange rate fluctuations.
First-quarter sales growth was driven by the continued strength of HUMIRA and other promoted products. Global HUMIRA sales increased 18.0 percent, or 26.0 percent on an operational basis, excluding the impact of foreign exchange rate fluctuations. Total company sales growth was also driven by the launch of Viekira, as well as strong operational growth from other key products including Synagis, Synthroid, Creon and Duodopa, according to AbbVie.
The adjusted gross margin ratio in the first quarter was 82.9 percent, excluding intangible asset amortization and other specified items. Gross margin expansion 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 81.3 percent.
Adjusted selling, general and administrative (SG&A) expense was 26.7 percent of sales in the first quarter. On a GAAP basis, SG&A was 29.2 percent of sales.
Adjusted research and development (R&D) was 16.1 percent of sales in the quarter, reflecting funding actions in support of our emerging mid- and late-stage pipeline assets. On a GAAP basis, R&D was also 16.1 percent of sales.
The adjusted operating margin in the first quarter was 40.1 percent, compared to 33.9 percent in first-quarter 2014. On a GAAP basis, the operating margin was 33.5 percent.
Net interest expense was $67 million on an adjusted basis and $126 million on a GAAP basis. The adjusted tax rate was 22.3 percent in the quarter and 26.8 percent on a GAAP basis.
Adjusted diluted earnings per share, excluding intangible asset amortization expense and other specified items, were $0.94 in the first quarter, up 32.4 percent. Diluted earnings per share were $0.63 on a GAAP basis.
Key Events from the First Quarter
On March 4, AbbVie and Pharmacyclics, Inc. announced a definitive agreement under which AbbVie will acquire Pharmacyclics and its flagship asset IMBRUVICA (ibrutinib), a highly effective treatment for hematologic malignancies. The acquisition accelerates AbbVie’s clinical and commercial presence in oncology, strengthens its already robust pipeline, and establishes a leadership position in hematological oncology – an attractive and rapidly growing market approaching $24 billion globally. The acquisition adds to AbbVie’s complementary pipeline and strong growth prospects. Under the terms of the transaction, AbbVie will pay $261.25 per share comprised of a mix of cash and AbbVie equity. The transaction values Pharmacyclics at approximately $21 billion and was approved by the Boards of Directors of both companies.
Biogen and AbbVie announced that the European Medicines Agency (EMA) has validated the companies’ Marketing Authorisation Application (MAA) for ZINBRYTA (daclizumab high-yield process) for the treatment of relapsing forms of multiple sclerosis (MS) in the European Union. Validation confirms that the submission is complete and signifies the initiation of the review process by the EMA’s Committee for Medicinal Products for Human Use. The MAA included results from two clinical trials, DECIDE and SELECT, in which ZINBRYTA 150 mg was administered subcutaneously every four weeks in people with relapsing-remitting MS.
The U.S. Food and Drug Administration (FDA) has accepted AbbVie’s New Drug Application and granted priority review for the company’s two direct-acting antiviral treatment of ombitasvir, paritaprevir, ritonavir (OBV/PTV/r) with ribavirin (RBV) for the treatment of adults with chronic genotype 4 (GT4) hepatitis C virus (HCV) infection. AbbVie’s regimen is the first all-oral, interferon-free therapy being evaluated by the FDA for patients with chronic GT4 HCV infection. The FDA granted priority review for the regimen based in part on data from the PEARL-I study, which demonstrated up to 100 percent sustained virologic response rates at 12 weeks post-treatment with no discontinuations due to adverse events.
AbbVie submitted a New Drug Application to the Japanese Ministry of Health, Labour and Welfare seeking approval for the company’s investigational, all-oral, RBV and interferon-free, 12-week, two direct-acting antiviral treatment of OBV/PTV/r, dosed once daily. The submission, which has been granted priority review, is for the treatment of patients with genotype 1 (GT1) HCV infection, and is based on the Phase 3 GIFT-I study. In Japan, approximately 1.5 to 2 million people are living with HCV. GT1 is the most common HCV genotype in Japan with 60 to 70 percent of patients infected and, of those, about 95 percent are infected with the GT1b sub-type.
AbbVie announced preliminary results from a Phase 2b study of ABT-493 and ABT-530, the company’s ongoing HCV pipeline development program which focuses on investigating a pan-genotypic, RBV-free, once-daily treatment that may also allow for treatment durations of as little as eight weeks. Results from this study in non-cirrhotic GT1 patients (n=79) receiving the RBV-free recommended regimen for 12 weeks demonstrated a sustained virologic response rate at four weeks post treatment (SVR4) of 99 percent (n=78/79).
These results included both GT1a and GT1b, treatment-naïve and pegylated-interferon and RBV prior null responders. To date, the most common (>5 percent) adverse reactions were fatigue, headache, nausea, diarrhea and anxiety. Data from these Phase 2b studies of ABT-493 and ABT-530 will be released at future medical congresses.
AbbVie recently received a Commission Decision in Europe regarding compliance with its Pediatric Investigation Plan for HUMIRA, which ensures that necessary data are obtained through studies in children. As a result of this positive decision, the company will now seek an extension from each Member State where a Supplementary Protection Certificate is held. Once approved, this will extend the HUMIRA composition of matter patent by six months.
The European Commission (EC) has granted marketing authorization for HUMIRA for the treatment of severe chronic plaque psoriasis in children and adolescents from four years of age who have had an inadequate response to or are inappropriate candidates for topical therapy and phototherapies. With the EC decision, HUMIRA now has approval for use in this indication in all member states of the European Union. The marketing authorization is based on the positive results of a Phase 3 study, which will be presented at an upcoming medical meeting.
AbbVie entered into an exclusive worldwide license agreement with C2N Diagnostics, a privately held protein diagnostic and therapeutic discovery company, to develop and commercialize a portfolio of anti-tau antibodies for the treatment of Alzheimer’s Disease and other neurological disorders.
AbbVie announced that the FDA approved DUOPA (carbidopa and levodopa) enteral suspension for the treatment of motor fluctuations for people with advanced Parkinson’s disease. DUOPA is administered using a small, portable infusion pump that delivers carbidopa and levodopa directly into the small intestine for 16 continuous hours via a procedurally-placed tube. In a clinical trial, patients treated with DUOPA experienced significantly greater improvement in “off” time (periods of poor mobility, slowness and stiffness) than patients treated with oral carbidopa-levodopa immediate release tablets.
On February 19, the AbbVie board of directors increased the company’s quarterly cash dividend by 4 percent from $0.49 per share to $0.51 per share. The cash dividend is payable May 15, 2015 to stockholders of record at the close of business on April 15, 2015. Since the company’s inception in 2013, AbbVie has increased its dividend by 28 percent.
Full-Year 2015 Outlook
Today, AbbVie is raising its adjusted diluted earnings-per-share guidance for the full-year 2015 to $4.10 to $4.30 from $4.05 to $4.25. The company’s 2015 adjusted diluted earnings-per-share guidance excludes $0.53 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 $3.57 to $3.77 on a GAAP basis, excluding certain transaction related costs to be quantified following the close of the Pharmacyclics acquisition.