In the fourth-quarter ended December 2014, AbbVie Inc. [NYSE:ABBV] reported adjusted revenues of $5.37 billion, up 5.1% year-over-year, including a 3.8% unfavorable impact from foreign exchange rate fluctuations. 

For the quarter, adjusted diluted EPS was $0.89, up 8.54% year-over-year, excluding the $2.2 billion fee and other expenses from the terminated Shire Plc merger in December. On a GAAP basis, AbbVie lost $810 million or ($0.51) per share. Wall Street was expecting earnings of $0.86 per share on revenue of $5.36 billion. 

For the full year of 2014, GAAP revenue was $19.96 billion, up 10.6% compared to $18.79 billion for the previous year. Full year diluted EPS, ex-items was $3.32, up 5.73% compared to diluted EPS of $3.14 for 2013. 

The company reported anti-inflammatory drug Humira sales of $3.36 billion or 59.8% of total revenue, up 10.6% year-over-year. Adalimumab, trade name Humira, is a tumor necrosis factor (TNF) inhibiting anti-inflammatory drug for treatment of rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis and crohn's disease.

Sales of Synagis, AndroGel, Lupron and Kaletra declined for the quarter, compared to the same period last year. AbbVie sold a small volume of hepatitis C drug Viekira Pak in the United States, with sales of about $48 million in Q4. The all-oral, interferon-free Viekira Pak was approved by the FDA on December 19, for the treatment of patients with chronic genotype 1 (GT1) hepatitis C virus infection. 

Looking forward, AbbVie sees a non-GAAP diluted EPS of $4.25 to $4.45 per share, compared with analysts' estimates for $4.37 per share. The company sees the annual sales of Viekira Pak to reach $3 billion by the end of 2015 with further growth in 2016 as the drug expands into other countries outside the U.S. 

Since the beginning of 2014, ABBV has been moving in a rising wedge chart pattern. The stock broke out of the rising wedge in November in anticipation of Viekira Pak’s approval by the FDA. The stock began to pull back after it hit an all-time high at $70.23, as concern was raised about the high prices of hep C drugs and pricing pressures from pharmacy benefits managers and competitors, like Gilead Sciences, Inc. [NASDAQ:GILD].

Another investor concern is that Humira, which accounts for approximately 60% of AbbVie’s revenue, is expected to lose U.S. patent protection in late 2016. We believe that it could take several years after patent expiration for generic drugmakers to develop and win FDA approvals for complex "biosimilar" forms of a biotech drug. 

Last month, Amgen announced its biosimilar version, ABP 501, of the rheumatoid arthritis drug Humira. Amgen’s ABP 501, however, is not expected to be in the market until 2017 or later, pending trial results and FDA approval. 

Meanwhile, AbbVie could move its Humira production to their lower-cost Singapore facility and thereby offer deep discounts to pharmacy benefits managers to compete with its generic drugmaker competitors. 

AbbVie is building a US$ 320 million facility in Singapore with antibody-drug conjugate (ADC) capacity. The manufacturing facility is scheduled to come online in 2019. 

From our technical analysis, the price projection for ABBV is between $70 and $78. BMO Capital Markets reduced their target price for ABBV yesterday from $63.00 to $62.00 while Morgan Stanley’s price target for ABBV was reduced from $72.00 to $65.00.

Disclosure: Long Position ABBV in Portfolio