AbbVie Inc. — Q1 2021 Form 10-Q Summary
Reporting period: Three months ended March 31, 2021. Unless noted, financial amounts are in U.S. dollars. AbbVie is a global biopharmaceutical company operating as one business segment. Results include Allergan from its May 8, 2020 acquisition date, so Q1 2021 includes Allergan products for the full quarter while Q1 2020 does not.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Net revenues | $13.010 billion | $8.619 billion; up 51.0% reported and 49.4% at constant currency |
| Operating earnings | $4.103 billion | $3.603 billion |
| Net earnings attributable to AbbVie | $3.553 billion | $3.010 billion |
| Diluted EPS | $1.99 | $2.02 |
| Gross margin | $8.797 billion; 68% of revenue | $6.677 billion; 77% of revenue |
| Operating cash flow | $4.877 billion | $3.815 billion |
| Cash and equivalents | $9.755 billion | $8.449 billion at December 31, 2020 |
| Debt and finance lease obligations | $85.521 billion carrying value, including $11.338 billion current and $74.183 billion long-term | $86.022 billion at December 31, 2020 |
| Current assets / current liabilities | $26.569 billion / $31.951 billion | $24.173 billion / $28.661 billion at December 31, 2020 |
Investing cash flow was an outflow of $342 million and financing cash flow was an outflow of $3.174 billion. Financing included $2.322 billion of dividends paid and $787 million of treasury-stock purchases. The company reported no borrowings under its $4 billion revolving credit facility and was in compliance with its covenants.
Material changes and business drivers
- Revenue growth primarily reflects the full-quarter contribution from Allergan, which management identified as $4.0 billion, together with growth in Skyrizi, Rinvoq, U.S. Humira, Imbruvica and Venclexta.
- Allergan product revenue included $477 million from Botox Cosmetic, $321 million from Juvederm, $532 million from Botox Therapeutic and $346 million from Vraylar. These products were not included in the prior-year quarter.
- Humira revenue was $4.867 billion, up 3.5% reported: U.S. sales rose 6.9%, while international sales fell 8.3%, principally due to biosimilar competition. Humira represented approximately 37% of current-quarter revenue, versus 55% in Q1 2020.
- Skyrizi revenue increased 91.1% to $574 million; Rinvoq rose to $303 million from $86 million; and Venclexta increased 27.9% to $405 million. Imbruvica revenue increased 2.9% to $1.268 billion.
- Mavyret revenue declined 25.7% to $415 million, which AbbVie attributed primarily to COVID-related disruption in global hepatitis C markets. Lupron revenue fell 8.3% amid a near-term supply issue affecting certain formulations.
- Gross margin declined to 68% from 77%, mainly due to higher amortization of acquired Allergan intangible assets. SG&A rose 68% to $2.842 billion, including Allergan expenses and integration costs. R&D expense rose 29% to $1.782 billion, but declined as a share of revenue to 14% from 16%.
- Reported diluted EPS was $1.99. Management cited after-tax costs including $1.7 billion of intangible-asset amortization, $180 million of milestones and other R&D expenses, $155 million of Allergan acquisition and integration expenses, and $62 million of acquired IPR&D. These were partly offset by a $343 million after-tax benefit from the fair-value change in contingent consideration liabilities.
Outlook, risks and unusual items
- Management’s stated priorities include integrating Allergan, growing new and existing products, investing in the pipeline, expanding margins, returning cash to shareholders and reducing debt. The filing does not provide a clear numerical revenue or EPS forecast.
- AbbVie expects more than $2 billion of annual cost synergies over a three-year period, with approximately 50% from R&D, 40% from SG&A and 10% from cost of products sold. It expects approximately $2 billion of total integration charges through 2022.
- COVID-19 had not materially affected operations to date, but management reported lower new-patient starts for certain products and markets and said the pandemic could continue to negatively affect results. The extent of future effects remains uncertain.
- Pipeline developments included positive Phase 3 results for Skyrizi in psoriatic arthritis and Crohn’s disease and Rinvoq in ulcerative colitis. The filing also reports regulatory submissions, approvals and review extensions; timing and outcomes remain uncertain.
- Legal matters include antitrust, product liability, securities and intellectual-property proceedings. Approximately 3,100 opioid-related matters were pending against Allergan. AbbVie stated that it could not predict all outcomes but believed ultimate disposition of the proceedings should not materially adversely affect its consolidated financial position, results or cash flows.
- Contingent consideration liabilities were $12.522 billion, measured using significant unobservable assumptions; changes in estimates could materially affect results or financial position. Q1 included a $343 million earnings benefit from their fair-value remeasurement.
- Three U.S. wholesalers accounted for 72% of net accounts receivable. The company also disclosed repayment after quarter-end of $1.8 billion of senior notes and €750 million of senior euro notes due in Q2 2021.
Important facts for investors to verify
- How much of reported growth reflects Allergan’s inclusion versus underlying, comparable product growth.
- Whether Skyrizi and Rinvoq growth can offset international Humira biosimilar pressure and sustain portfolio growth.
- Progress on Allergan integration, realization of projected synergies, and the resulting charges and margins.
- Debt reduction, near-term maturities, cash generation and the sustainability of dividends and repurchases.
- Developments in COVID-19 impacts, product supply constraints, regulatory reviews, litigation and contingent-consideration estimates.