AbbVie: On the Cutting Edge

11/19/2019 5:00 am EST


Tom Hutchinson

Editor, Cabot Dividend Investor

AbbVie Inc. (ABBV) is a cutting-edge U.S. based biopharmaceutical company specializing in drugs and treatments that incorporate biotechnology as a solution to human diseases, explains growth and income expert Tom Hutchinson, editor of Cabot Dividend Investor.

The company came into existence in 2013 when it was spun off from Abbott Laboratories (ABT). Since then, it’s gotten big. Abbvie is now the 8th largest pharmaceutical company in the world and the fifth largest biopharmaceutical company.

The company got so big so fast because of the success of its blockbuster autoimmune drug Humira, which is by far the world’s best selling drug with nearly $20 billion in annual revenues.

Humira is already facing generic competition (in the form of biosimilars) in Europe and will face competition in the U.S. (which accounts for three quarters of revenue) in 2023.

The market is worried that AbbVie won’t be able to replace the lost revenue. However, the company has long planned for this eventuality. For years, it has made acquisitions and invested heavily in R&D.

The pipeline is already paying off in a big way. Recently launched blood cancer drugs Imbruvica and Venclexta have impressive growth and appear on the way to being multibillion dollar blockbusters. Endometriosis drug Orilissa (launched late last year) will also be a blockbuster drug.

As well, Rinvoq and Skyrozo both received FDA approval this year, and are ranked as two of EvaluatePharma’s top three new drug launches for 2019. By some estimates, those two drugs could combine for annual sales of more than $10 billion.

In addition, AbbVie announced plans to acquire Ireland-based Allergan (AGN) in June for $63 billion. About half the size of AbbVie, the company specializes in aesthetics, ophthalmology, women’s health, gastrointestinal, nervous system products and facial rejuvenation treatment Botoxe.

The acquisition (expected to close in early 2020) will further diversify AbbVie away from Humira. AbbVie will likely be able to quickly pay down the debt it floated to fund the buyout, and it shouldn’t disturb the dividend, which currently yields a whopping 5.46%.

Also consider this. While Humira sales (which currently account for more than 50% of revenues) will decline, they won’t fall off a cliff. Biologic drugs aren’t that easy to duplicate.

Meanwhile, the bigger picture is spectacular. Abbvie is one of the world’s best and most innovative biopharmacuetical companies on the cusp of a pronounced demand explosion from the aging population.

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