Top Picks 2020: AbbVie Inc. (ABBV)

01/15/2020 5:00 am EST

Focus: FINANCIALS

Ben Reynolds

CEO, Sure Dividend

AbbVie (ABBV) is a top pick from the healthcare sector; the stock has a 5.3% dividend yield, a low valuation, and a compelling future growth outlook thanks to a massive acquisition, suggests Ben Reynolds, editor of Sure Retirement Newsletter.

AbbVie is a pharmaceutical company, spun off from Abbott Laboratories (ABT) in 2013. AbbVie generates annual revenue of approximately $33 billion and it has a market cap above $130 billion.

The firm's largest single product is multi-purpose drug Humira, which represented approximately 58% of the company’s total revenue over the first three quarters of 2019.

There are concerns over Humira — the drug has already lost patent exclusivity in Europe and will lose exclusivity in the U.S. in 2023. This has caused AbbVie’s share price to decline from a multi-year high above $120 to the current level of ~$90.

But we believe this is simply an opportunity to buy a great company at a very attractive price. AbbVie’s $63 billion acquisition of Allergan (AGN) is a major catalyst for 2020 and beyond. Allergan is the maker of the highly popular cosmetic product Botox.

The deal presents a number of strategic benefits for AbbVie, by diversifying its product portfolio into cosmetic products with Botox and also Juvederm.

And, it also provides AbbVie ownership of one of the most successful individual products on the market today, which continues to grow. Botox generated $2.63 billion of revenue for Allergan over the first three quarters of 2019, up 5.3% from the same nine-month period last year.

Allergan has a strong portfolio outside Botox as well. For example, sales of its Juvederm collection increased 8% to $830 million over the first three quarters of 2019. Meanwhile, sales of anti-psychotic Vraylar increased 71% to $337 million in the same period.

These multiple catalysts are expected to fuel continued growth for AbbVie in 2020 and beyond. In the meantime, investors are paid a hefty dividend yield above 5%.

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