AbbVie (ABBV) reported a mixed third quarter on Friday morning. We decided to lock-in a small return (<5%) and exit the stock that has been one of this year’s winners. Multiple quarters in a row of revenue misses raised our concerns about growth and convinced us that taking profits now would be the wise move in this uncertain market.

• On the top line, net revenue increased 5.4% on an operational basis to $14.81 billion, but that missed the consensus estimate of $14.91 billion. 

• Adjusted earnings per share increased 29.3% to $3.66, beating estimates of $3.57. 

• Adjusted operating margin of 53.4% was higher than estimates of 52.4%.

Q3 segment results 

AbbVie’s Immunology sales of $7.65 billion, up 16.4% year over year, yet were a bit short of the $7.68 billion consensus. Sales within the segment are as follows.

• Humira: $5.56 billion, up 3.9% year over year, versus $5.57 billion expected.

• Skyrizi: $1.4 billion, up 78.3% year over year, versus $1.32 billion expected.

• Rinvoq: $695 million, an increase of 59.3% year over year, versus $710 million expected.

Immunology is a key focus of investors because this is the portfolio in transition, due to the Humira loss of exclusivity in the United States starting the second half of next year. While it is still up for debate how fast Humira sales will decline in 2023 and 2024, what remains clear is that Skyrizi and Rinvoq have a promising future. First approved by the Food and Drug Administration in April 2019, they have since been gaining clearance for other indications, reflecting the huge year-over-year sales gains.

Hematologic oncology sales of $1.65 billion, down 9.9% year over year, missed the $1.73 billion consensus. Sales within the segment are as follows.

• Imbruvica: $1.14 billion versus $1.15 billion expected.

• Venclexta: $515 million versus $550 million expected.

In aesthetics, sales of $1.3 billion, up 8.1% year over year, slightly missed estimates of $1.34 billion. Sales within the segment are as follows.

• Botox Cosmetic: $637 million versus $646 million expected.

• Juvederm: $352 million versus $342 million expected.

• Other: $312 million versus $335 million expected.

In neuroscience, sales of $1.67 billion, up 8.3% year over year, was short of the $1.79 billion consensus. Sales within the segment:

• Botox Therapeutic: $699 million versus $698 million expected.

• Vraylar: $554 million versus $544 million expected.

• Duodopa: $110 million versus $122 million expected.

• Ubrelvy: $160 million versus $231 million expected.

• Qulipta: $62 million versus $60 million.

• Other: $87 million versus $136 million expected.

In the eye care segment, sales of $623 million beat the $582 million consensus. Sales within the segment are as follows.

• Lumigan/Ganfort: $121 million versus $130 million expected.

• Alphagan: $73 million versus $92 million expected.

• Restasis: $142 million versus $47 million expected.

• Other: $287 million versus $289 million expected.

Guidance

Turning to the full year outlook, management now expects total net revenues of approximately $58.2 billion, down from its previous view of $58.9 billion and below estimates of $58.9 billion.

Additionally, AbbVie reaffirmed the midpoint of earnings guidance, however, tightened the range to $13.84 to $13.88 per share from $13.76 to $13.96 per share. That compares to a $13.88 per share consensus estimate.

From a product perspective, AbbVie raised its Skyrizi global sales outlook by $300 million to $5.1 billon, above estimates of $4.8 billion, due to strong market share performance. However, management took down its full year Venclexta expectations to about $2 billion, below estimates of $2.22 billion, due to a lower outlook on the chronic lymphocytic leukemia (CLL) market and unfavorable foreign exchange.

For the fourth (current) quarter, AbbVie expects net revenue of approximately $15.2 billion and adjusted earnings between $3.65 and $3.69 per share. Analysts had expected sales of $15.73 billion and earnings of $3.76 per share.

Bottom line

It wasn’t the cleanest quarter from AbbVie. While Skyrizi appears off to a great start, Rinvoq — the other key drug investors are watching to make up lost sales as Humira loses exclusivity — came up short.

With 2023 and 2024 results set to decline from current levels due to Humira going off patent in the U.S. next year, and the broader market down materially year-to-date, we feel it is time to move on from AbbVie and reallocate funds into names that provide more attractive opportunities over the next six to 12 months.