AbbVie to Award Shareholders, Increase Employees' Pay on Rosy 2018 Forecast

AbbVie provided an unexpectedly strong 2018 guidance revision, largely built on the new corporate tax rate.

AbbVie manufactures and markets the world’s best-selling drug, Humira, for arthritis, plaque psoriasis, ankylosing spondylitis, Crohn’s disease, and ulcerative colitis, as well as other drugs. The company indicates that its tax rate for 2018 will be 9 percent, significantly lower than the expected 20 percent. The company says it is because of "a one-time net tax benefit related to the timing of the phase in of provisions of the new legislation on certain subsidiaries."

It expects the tax rate would slowly increase over the next five years to about 13 percent.

As part of the unexpected increase in available cash, the company plans to invest about $2.5 billion in U.S. capital projects. It is also considering expanding U.S. facilities. 

The company’s chief executive officer, Richard Gonzalez, in a conference call with analysts and investors, said AbbVie plans to make a one-time charitable donation of about $350 million to specific not-for-profit organizations in the U.S., including rebuilding efforts for Puerto Rico.

It also expects to push $750 million more into pension funding and increase employee compensation. Gonzalez also indicated AbbVie is developing a plan to grow its stock dividend and repurchase more shares.

Reuters noted, "The company, which has been building a promising portfolio of drugs to lessen its dependence on cash cow Humira, forecast full-year adjusted earnings of $7.33 to $7.43 per share for 2018, up from its prior view of $6.37 to $6.57. It projected 2018 revenue of $32 billion, $1 billion higher than the current Wall Street consensus."

"We expected an upward 2018 guidance revision, but not of this magnitude," said Jeffrey Holford, an analyst with Jefferies, in a research note. He also called it "jaw dropping."

Tax reform wasn’t the only reason for the upward reevaluation. Humira continues to grow sales, and its Mavyret for hepatitis C has exceeded expectations. Humira sales rose 14 percent for the quarter, hitting $4.89 billion, also benefiting from price increases. The company projects Humira sales alone of hitting $21 billion by 2020. Which is likely to raise the question among payers, some politicians and the public, if the company is benefiting from tax breaks and strong growth, why isn’t it passing some of that along to patients with more affordable drugs? Humira can cost up to $50,000 per year per patient.

Also, not surprisingly, Gonzalez indicated that the company will be in the market for acquisitions that might help drive growth in the 2023 to 2025 time frame.

The company Imbruvica, for cancer, accounts for about 9 percent of company revenue. It earned $708 million in sales. The company expects to file for approval with the U.S. Food and Drug Administration (FDA) for Venclexta for acute myeloid leukemia later this year. And based on data to date, AbbVie expects Venclexta in combination with Roche’s Rituxan could become a new chemotherapy-free standard treatment for relapsed chronic lymphocytic leukemia.