How Analysts See AbbVie After the Big Disappointment

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AbbVie Inc. (NASDAQ: ABBV) shares took a big step back last week after the firm reported less than favorable results for its relapsed/refractory small cell lung cancer (SCLC) trial. Specifically, the firm reported Phase 2 data evaluating rovalpituzumab tesirine (Rova-T). Analysts did not take too kindly to this and cut their price targets in response.

Along with the results from the study, the firm has decided that it will not pursue accelerated approval of Rova-T in third-line SCLC, based on magnitude of effect across multiple parameters in this single-arm study. This came after consulting with the U.S. Food and Drug Administration. This seemed to be the real deal-breaker.

Credit Suisse maintained a Neutral rating for the stock but cut its price target to $109 from $135. The firm detailed in its report:

While Rova-T could end up showing a benefit in SCLC or other tumor types as monotherapy or in combination with immunotherapies such as Bristol-Myers Squibb’s Opdivo and/or Yervoy, for now we remove sales for the product from our model. This, along with some other changes explained below, lowers our target price to $109, based on a 75/25 split of DCF valuation ($106) and relative valuation (P/E 16.0x). Our 2018/2019/2020 EPS estimates are now $7.40/$8.69/$9.86 from $7.39/$8.81/$10.09. The main upside risks to our ABBV call are stronger than expected Humira growth and unexpected pipeline successes, while the main downside risks are Humira eroding faster than we expect or additional disappointing clinical data.

Separately, Merrill Lynch maintained a Buy rating for AbbVie but cut its price objective to $134 from $136. The brokerage firm gave this investment rationale:

Our Buy thesis on Abbvie is based on 1) the Street underappreciates the strength of Humira formulation patents which combined with patent litigation timelines give us confidence we will not see a US biosimilar until 2023E, 2) we are optimistic on the commercial potential of Abbvie’s next-generation immunology agents,3) Abbvie has significant negotiating leverage with biosimilar developers, which we think will likely lead to more patent settlements and push out biosimilar launches to 2023+.

A few other analysts weighed in on AbbVie as well:

  • BMO Capital markets maintained an Underperform rating and cut its target to $80 from $95.
  • Deutsche Bank has a Hold rating and cut its target price to $107 from $116.
  • Jefferies lowered its price target to $125.
  • Leerink cut its price target from $128 to $115.

Shares of AbbVie closed out the week at $97.46, with a consensus analyst price target of $123.19 and a 52-week trading range of $63.12 to $125.86.

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