Spotlight On: On the back of Q4 results, AbbVie and Novartis demonstrate contrasting routes towards growth

In delivering their 2012 annual results on Wednesday, Abbott/AbbVie and Novartis presented two contrasting routes towards revenue growth over the next five years.

AbbVie

Early assessments of AbbVie – the pharmaceutical business recently spun out of Abbott – have focused heavily on two questions; how much more revenue growth can the Humira franchise achieve and how quickly can AbbVie progress its mid-to-late stage pipeline in order to reduce long term dependency on this one franchise?

Fourth-quarter results provided a promising suggestion that Humira has the legs to run (and still catch analysts off-guard); global sales of the anti-TNF biologic product increased by 23.1 percent year-on-year to reach $2.7 billion. On an annual basis, Humira revenues reached $9.3 billion in 2012, thereby cementing its position as one of the industry's biggest selling products of all time.

Abbott did not provide a full break-out of AbbVie sales on Wednesday, but based on analyst estimates Humira currently accounts for around 45 percent of the company's revenues. Based on current consensus forecasts, this dependency rate will increase to around 61 percent by 2016.

While progression of AbbVie's pipeline will be keenly observed by analysts and investors alike, continued momentum for Humira will prove equally compelling. Current consensus forecasts indicate peak sales of around $11.2 billion in 2016 and these could be upgraded on the back of impressive Q4 2012 sales. One key competitive threat is Pfizer's Xeljanz, an oral alternative to the anti-TNFs in the rheumatoid arthritis indication.

Analysis by Bloomberg Industries indicates that Xeljanz's initial performance in terms of prescription numbers has bettered that of other more recent launches (such as Bristol-Myers Squibb's Orencia, UCB's Cimzia and Roche's Actemra). Furthermore, they indicate that 10 percent of US patients now taking the drug are paying for it out of pocket, which may be an indicator of strong patient demand. It is early days, but these findings enhance the view that Xeljanz will be key competitor.

Nevertheless, with Humira unlikely to suffer a dramatic loss in revenue anytime soon, it provides AbbVie with a sizeable buffer until new products to emerge from the pipeline.

Novartis

It is a very different story at Novartis, where management strategy is looking to broaden the company’s revenue base across an expanding portfolio of products.

Driving this has been an industry-leading performance in terms of new drug approvals since 2000, and in delivering its Q4 results on Wednesday, management was keen to stress the impact that these launches have had on revenue performance. Products launched since 2007 accounted for 29 percent of total group revenue, generating sales of $16.3 billion in 2012, Novartis said.

Leading the way were the Gilenya (multiple sclerosis +$701 million in annual sales), Afinitor (cancer +$354 million), Lucentis (age-related macular degeneration +$348 million), Tasigna (cancer +$282 million) and Galvus (diabetes +$233 million) franchises. Gilenya – launched in 2010 – has rapidly assumed blockbuster status and the company reiterated in December that it expects to have a larger number of billion-dollar franchises in its portfolio by 2015/16 than current consensus forecasts indicate.

Two very different growth models then, the nuances of which are illustrated by respective revenue outlook. During 2012 the robustness of Humira's performance offset generic losses attributable to older franchises at AbbVie , but despite the sheer size of its leading franchise, current consensus forecasts indicate flattish growth for the company over the next few years as these headwinds continue.

The more dynamic growth seen at Novartis should help offset an anticipated $3.5 billion revenue decline in 2013 which will be heavily attributable to the recent Diovan patent expiry (thus sales for the year are expected to be broadly in line with 2012).

Negotiating this obstacle with minimal top-line impact will be some achievement, noted Novartis management, who are confident that continued revenue expansion across its portfolio of expanding products will allow the company to growth through subsequent high profile patent expiries, such as Glivec in 2015/16.

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