AbbVie Inc.

ABBV Details

AbbVie Inc. (NYSE: ABBV) is a research-based biopharmaceutical company. ABBV offers medicines and therapies in a wide range of therapeutic categories such as Immunology, Oncology, Aesthetics, Neuroscience, Eye Care, Women's Health and Other essential products. ABBV's products are sold globally to wholesalers, distributors, government agencies, health care facilities and independent retailers from AbbVie-owned distribution centers and public warehouses.

Breakthrough Therapy for Treatment of Migraine: On September 28, 2021, the US Food and Drug Administration (FDA) granted QULIPTA (atogepant) approval for the preventive treatment of episodic migraines in adults. As per ABBV, QULIPTA is the first and only calcitonin gene-related peptide (CGRP) receptor antagonist (gepant) designed exclusively for migraine prevention. The evaluation study was conducted on ~2,000 patients having migraines 4 – 14 days in a month, and it was observed that QULIPTA showed quick and ongoing reductions in mean monthly migraine days compared to placebo across a 12-week treatment period, with significant reductions becoming evident in weeks 1-4.

Step Towards Regulatory Approval: On September 20, 2021, ABBV submitted an application to the FDA for approval of risankizumab-rzaa (600 mg IV induction and 360 mg SC maintenance therapy), an interleukin-23 (IL-23) inhibitor, for the treatment of moderate to severe Crohn's disease in patients aged 16 and above. The application is backed by data from three Phase 3 pivotal studies, which showed that risankizumab-rzaa demonstrated significant improvements in clinical remission and endoscopic response as both an induction and maintenance therapy.

Q2FY21 Results: The company reported YoY growth of 33.90% in net revenues to USD 13.96 billion in Q2FY21 (ended June 30, 2021) compared to USD 10.43 billion in Q2FY20. Net income for Q2FY21 was USD 766 million vs. a net loss of USD 738 million reported in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents (including short-term investments) of USD 8.6 billion and total debt of USD 82.14 billion.

Key Risks: ABBV's top Immunology product, Humira, represented 43% of ABBV's net revenues in FY20. Hence, the development of a superior product by any of its competitors or the discontinuation of Humira could hurt the company's financials. Furter, ABBV must conduct its business in the ambit of a strict regulatory environment, where non-observance of norms could lead to recall or even suspension of its products.

Outlook: In FY21, ABBV expects to clock diluted EPS in the range of USD 6.04 – 6.14 and USD 12.52 – 12.62 on GAAP and Adjusted basis, respectively.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ABBV Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ABBV's stock price has declined 3.04% in the past three months and is currently leaning towards the higher end of its 52-week range of USD 79.11 to USD 121.53. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 46.39. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 123.41. Considering the slight correction in the stock price in the past three months, recent regulatory approvals, decent financial performance, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 109.22, up 1.75% as of September 29, 2021, 2:29 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Cigna Corporation

CI Details

Cigna Corporation (NYSE: CI) is a global healthcare service company that provides pharmacy benefit management and health insurance services. Its operating segments are 1) Evernorth, which offers coordinated and point solution health services, including pharmacy solutions, benefits management solutions, care, and intelligence solutions to health plans, employers, government organizations and health care providers; 2) US Medical, which provides US Commercial and Government health care solutions to employers and individuals; and 3) International Markets, which consists of a range of medical and supplemental health, life and accident benefits and health care benefits to multinational employers for their globally mobile personnel.

Geographical Expansion: On September 09, 2021, CI partnered with Oscar Health, Inc., the first health insurance company, to provide affordable and member-first health insurance products to small businesses in Illinois and Missouri. Covered employees will have access to virtual doctor visits without any copays available 24 hours a day, low-cost pharmaceutical coverage, behavioral health support, and CI's network of top doctors, specialists, and hospitals. 

Adding Options for Customers: On September 02, 2021, CI signed a multi-year contract with Tenet Healthcare Corporation (THC) to extend and expand their network access. The partnership enables CI's customers to have in-network access to THC's hospitals, physician clinics, and outpatient centers through 2025, including ambulatory facilities managed by United Surgical Partners International.

Q2FY21 Results: The company reported YoY growth of 9.85% in total revenue to USD 43.13 billion in Q2FY21 (ended June 30, 2021) from USD 39.27 billion in Q2FY20. Pharmacy revenues, which accounted for 69.66% of the total revenue in Q2FY21, reported YoY growth of 13.11%, whereas the Premium segment declined by 0.80% YoY. Net income for Q2FY21 reduced to USD 1.47 billion from USD 1.75 billion reported in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 3.82 billion and total debt of USD 33.14 billion.

Key Risks: CI operates in the health service industry and faces direct competition from more significant players with higher financial and operational resources at their disposal. In addition, recently, this industry has witnessed a lot of merger and acquisition activity. Should this industry consolidate further, it could impair the financial and operational performance of the company.

Outlook: In FY21, CI expects to generate adjusted revenue of at least USD 170.0 billion, along with an adjusted income from operations of at least USD 6.96 billion. It also anticipates to clock EPS of USD 20.20 in FY21. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CI's stock price has declined 13.40% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 160.37 to USD 272.81. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 45.23. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 234.59. Considering the correction in the stock price in the past three months, recent commercial contracts, decent balance sheet, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 205.30, up 0.99% as of September 29, 2021, 11.11 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.

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