On Tuesday, BMO Capital Markets adjusted its outlook on AbbVie (NYSE:ABBV) shares by reducing the price target to $208 from the previous $228. The firm has maintained its Outperform rating on the pharmaceutical company despite a recent setback in its clinical trials.
The adjustment comes after AbbVie's experimental schizophrenia treatment, Emraclidine, did not meet expectations in the EMPOWER 1 & 2 Phase 2 trials. According to BMO Capital's analyst, the placebo group outperformed the active arms in both studies, leading to a significant revision of AbbVie's valuation. The analyst emphasized that the failure of Emraclidine, a key asset from the $8.7 billion acquisition of Cerevel, cannot be overlooked.
Despite this, BMO Capital remains optimistic about AbbVie's overall potential, citing the company's robust immunology and inflammation (I&I) franchise. The firm believes that AbbVie's strength in this area continues to support an Outperform rating.
Furthermore, BMO Capital anticipates that another of AbbVie's products, Tavapadon, which is being developed for Parkinson's disease, still holds promise. The analyst noted that results from the TEMPO-2 trial are expected by late-2024, which could provide a positive catalyst for the company.
In light of the recent trial outcomes, BMO Capital has updated its model for AbbVie. The probability of success (PoS) for Emraclidine has been reduced to 0%, prompting the reduction in the target price. Despite the trial results, the firm's confidence in AbbVie's I&I portfolio underpins the decision to maintain the Outperform rating.
In other recent news, AbbVie has been making significant strides in both the financial and development sectors. The biopharmaceutical company reported robust third-quarter earnings, with sales surpassing expectations and significant growth in key product segments.
The company's Q3 revenues hit nearly $14.5 billion, with an operational growth of 4.9%. Adjusted earnings per share for the quarter were $3, exceeding guidance by $0.10. Consequently, AbbVie raised its full-year revenue guidance by $500 million and adjusted EPS guidance to $10.90-$10.94.
In addition to strong financial performance, AbbVie has entered into a strategic partnership with EvolveImmune Therapeutics to develop multispecific biologics targeting cancer.
Under the agreement, EvolveImmune will receive $65 million upfront in fees and equity investment from AbbVie, with potential financial benefits reaching up to $1.4 billion in option fees and milestone payments. This collaboration aims to leverage EvolveImmune's EVOLVE T-cell engager platform to create innovative antibody-based therapies for cancer.
Despite a decline in Humira sales, growth was observed in immunology, oncology, and neuroscience segments. These recent developments underscore AbbVie's resilience and growth in key areas, reflecting a positive outlook for the company's future.
InvestingPro Insights
Despite the recent setback with Emraclidine, AbbVie (NYSE:ABBV) continues to demonstrate financial resilience. According to InvestingPro data, the company boasts a substantial market capitalization of $308.24 billion, reflecting its significant presence in the pharmaceutical industry. An InvestingPro Tip highlights that AbbVie has raised its dividend for 12 consecutive years, showcasing a commitment to shareholder returns that aligns with BMO Capital's maintained Outperform rating.
The company's revenue for the last twelve months stands at $55.53 billion, with a gross profit margin of 70.33%, indicating strong financial performance despite challenges. This robust financial health supports BMO Capital's optimism about AbbVie's immunology and inflammation franchise.
Another InvestingPro Tip notes that 11 analysts have revised their earnings upwards for the upcoming period, suggesting positive expectations despite the recent clinical trial disappointment. This aligns with BMO Capital's view on AbbVie's potential, particularly regarding future catalysts like the Tavapadon trial results.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips that could provide further insights into AbbVie's market position and future prospects.
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