If you have $1,500 to invest, AbbVie's stock proposition might strengthen your optimistic outlook.
If you have $1,500 to invest, AbbVie's stock proposition might strengthen your optimistic outlook.
It's always a positive sign when a company manages to navigate through turbulent times with an effectively executed strategy. For AbbVie (ABBV -1.35%), it seems like some celebration is in order, considering it has recently resolved one of its major challenges in the past few years.
Here's how this pharmaceutical company demonstrated the doubters wrong, and why that makes it an investable option, with a $1,500 investment.
The turbulent period is winding down
As we move into 2023, U.S. patent exclusivity on the blockbuster drug Humira, AbbVie's primary income generator, has expired. Over its 20-year market duration, Humira amassed roughly $200 billion in total revenue, prescribed for various ailments such as arthritis, Crohn's disease, and plaque psoriasis.
Now, cheaper biosimilar versions of the drug are available, and its reign is coming to an end. In terms of the original drug's sales, the downward trend has started.
This presents a significant predicament for AbbVie. In Q3 2022, U.S. Humira sales accounted for over $4.9 billion of the company's total revenue of $14.8 billion. Concerns were rampant about its ability to replace nearly a third of its revenue within a couple of years, considering the lengthy drug development process and the slim odds of candidate drugs securing regulatory approval.
The optimistic investment strategy hinged on the expectation that newer immunology medicines, Skyrizi and Rinvoq, would offset the loss.
AbbVie's management's objective was to obtain approval for one or both of these medicines for all the conditions that Humira treats, thereby recapturing a substantial portion of the sales at risk of being lost to the older drug's biosimilars. This required significant investments in research and development, as well as promising clinical trial data and regulatory clearance. Falls along the way would have hindered Skyrizi and Rinvoq's ability to support the top line.
However, the strategy played out successfully.
By Q3 2024, Humira's global sales had plummeted to $2.2 billion, but AbbVie's overall revenue stood at $14.4 billion. Its immunology portfolio (encompassing all three drugs) experienced a 3.9% year-over-year growth, surpassing $7 billion.
Soon, AbbVie's immunology segment may surpass its previous peak as sales of both Rinvoq and Skyrizi continue to surge, with no signs of slowing down. The company will return to steady growth, having smoothly transitioned away from its over-reliance on one of history's most financially successful drugs without harming its stock price.
The optimists were right.
The stock's future looks optimistic
AbbVie's successful shift away from Humira isn't the only reason to consider investing in its shares.
The company anticipates that its oncology segment will regain growth in 2026 due to the addition of new products. Beyond that, the future appears promising. Currently, the company has 14 oncology programs in early-stage trials. In a few years, we can expect at least some of these trials to deliver positive clinical trial results and proceed to approval. By 2027, management expects the two Humira replacements to generate at least $27 billion in annual revenue, with growth persisting through the early 2030s. Additionally, AbbVie estimates that its aesthetics portfolio will be generating at least $9 billion in annual sales by 2029.
In a nutshell, considering AbbVie's projected revenue and earnings growth over the next decade, coupled with the absence of any daunting patent cliffs in this time frame, it's easy to envision various growth catalysts.
Of course, perfection is unlikely to be attained. Most early-stage cancer treatment candidates are unlikely to make it to the market, and some setbacks elsewhere in the pipeline are statistically guaranteed. Consequently, these missteps are bound to impacts the stock, at least temporarily.
Nevertheless, the coming years appear to be less challenging for AbbVie than the past few. With that perspective, a $1,500 investment in its stock seems warranted, if not even larger.
- Given AbbVie's successful transition from relying heavily on Humira, with its immunology portfolio showing significant growth and promising new oncology and aesthetics segments in the pipeline, investing in its finance market could be a strategic move for those seeking growth opportunities in the finance sector.
- As AbbVie continues to navigate the post-Humira era with promising new drug candidates and a strong financial strategy, investing $1,500 or more in its shares could be an appealing option for those looking to capitalize on its potential future growth in the finance market.