Our latest featured value-oriented recommendation is a research-based biopharmaceutical company spun off from Abbott Laboratories in 2013, notes Roy Ward, editor of Benjamin Graham Value Investor.

AbbVie (ABBV) focuses on therapies for complex and serious ailments, such as rheumatoid arthritis, cancer, psoriasis, Crohn’s disease, HIV, hepatitis C, Parkinson’s disease and chronic kidney disease.

It flagship product, Humira, continues to drive sales, contributing 61% of total sales. Currently approved for several indications, Humira sales increased 12% to $14 billion in 2015.

The product continues to create strong growth in the dermatology and gastroenterology markets. Additional applications and expansion into new markets, including China and Japan, will spur product growth during the next several years.

Management is working diligently to expand AbbVie’s portfolio of products. The company also has several drugs in various stages of development targeted for a wide range of diseases and conditions.

AbbVie recently inked a deal with a German drug maker to develop and market a biologic antibody for psoriasis which is currently in Phase III trials.

The drug is considered to be “best in class” and could add significant revenue, and thereby help AbbVie diversify its limited drug portfolio.

In May 2015, AbbVie acquired Pharmacyclics, maker of Imbruvica, for $21 billion. Imbruvica, used to treat leukemia, has multi-billion-dollar potential.

Sales climbed 16% and EPS surged 28% in the 12 months ended March 31, 2016. My forecast for the next 12 months includes sales and EPS growth of 11% and 16% respectively.

Humira will continue to boost growth, but new drugs from recent partnering and sales from Imbruvica will begin to contribute significantly. Results could exceed my estimates if new drugs are approved ahead of schedule.

The current P/E of 15.4 and the dividend yield of 3.9% provide excellent value. In addition, AbbVie’s PEG ratio is 0.64, which is very reasonable for a biotech firm.

I expect ABBV’s stock price to rise 47% to my minimum sell price of $86.03 within two years.

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By Roy Ward, Editor of Benjamin Graham Value Investor

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