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AbbVie: Best Is yet to Come
06/23/2015 7:00 am EST
This global biopharmaceutical company is a rock-solid, low-risk blue chip stock that we own in our dividend aristocrat portfolio, says Jimmy Mengel, editor of The Crow's Nest.
Chicago-based AbbVie (ABBV) discovers, develops, and commercializes advanced therapies that have an impact on people’s lives. AbbVie is an Abbott Labs (ABT) spin-off that was launched on January 1, 2013.
The company is poised for continued growth, despite the fact that its bestseller, Humira, is going generic next year. Humira is the single-biggest drug in the world. It is now bringing in a record $14 billion a year.
But once it does go generic not all is lost. Most analysts agree that it will be difficult for competitors to make a generic version of Humira. One reason is AbbVie was wise enough to secure hundreds of patents that cover the formulation and manufacturing of Humira.
It could use these patents—which don’t expire until 2022—to hold up any competitors in court, which will buy them several more years of $14 billion-plus paydays.
Once the generic competitors do make it through the legal gauntlet, analysts still only expect that they’ll steal around 15% of Humira sales, still a huge amount of money. But AbbVie is making sure it has a solid pipeline of stocks to make up the difference.
This year it released Viekira Pak, a treatment for hepatitis C. It has already banked more than $230 million during the first quarter and is projected to hit $3 billion in global sales by the end of the year.
AbbVie also acquired Pharmacyclics (PCYC) this year for $21 billion, which gives it the rights to the blood cancer drug Imbruvica. Blood cancer is a $24 billion global market and Imbruvica is expected to be one of the world’s top-selling cancer drugs.
AbbVie has five oncology drugs poised to launch over the next few years. It also has 20 compounds—or indications—in Phase II or Phase III development across diverse medical specialties like immunology, virology/liver disease, oncology, renal disease, neurological diseases, and women’s health.
The company has seen double-digit growth from key products including Synthroid, Creon, and Duodopa.
First-quarter sales of $5.04 billion were up more than 10%. First-quarter earnings rose 32% with a three-year EPS growth rate of 11%. This allowed the company to raise its EPS projections from $4.05-$4.25 to $4.10-$4.30.
Influential analysis firm Jefferies has just showered AbbVie in praise. It has added the company to the Jefferies Franchise Pick List, which represents the firm’s highest buy-rated US stocks. Jeffries put a $90 price target on AbbVie.
With a 3% dividend yield, we continue to buying AbbVie as part of a long-term dividend reinvestment program. It seems like the best is yet to come.
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