AbbVie Inc (NYSE:ABBV) is the maker of the world’s best selling pharmaceutical, Humira. In late 2012, Abbott Laboratories (NYSE:ABT) spun off AbbVie with one drug and a lot of its accumulated debt. At the time, it looked like ABBV stock was being set up to fail so ABT could offload a lot of debt.
But now it looks like ABT might have some spinoff remorse now that the drug AbbVie was left with is doing about $16 billion a year in revenue.
Instead of getting sucked into the black hole of all the debt, ABBV stock has become a shining star in the biotech world.
Now that it has been averaging about 25% growth a year some analysts are throwing up caution signs because Humira’s patent ran out in 2016. They talk about the nearly three dozen cheap generics and biosimlars that are ready to eat its lunch.
Why ABBV Stock Still Has Strength
AbbVie relies heavily on Humira revenue and anything that significantly eats into that revenue is cause for concern. But one of the strength of ABBV stock is the fact that it’s backed by a company that is not only fighting hard to keep the would-be competitors out of its markets using legal tactics, it’s also showing analysts that Humira still has some good years left.
It has raised the price of the drug by 8% and yet, according to its own numbers, saw sales growth in the U.S. of nearly 23% in the past quarter compared to the same quarter a year ago. International sales were up 15%.
Speaking of Q1 numbers, revenue and earnings beat estimates handily. These are strong signals that AbbVie is not going down quickly. The company currently estimates it has about three years until Humira revenue starts dropping off. Part of what’s keeping Humira alive is the fact that ABBV is also expanding its uses for the drug and it expects to bring in $20 billion on Humira in 2020.
But the biggest ace AbbVie has up its sleeve is its late-stage drug pipeline. The company estimates that eight of its drugs that are either in the market now or will be in the next year or two will bring in another $25 to $30 billion annually by 2020.
Spinraza for spinal muscular atrophy was just approved. There are two others in the phase 3 trials for Alzheimer’s and 11 other drugs in phase 2 trials. The point is, ABBV stock is more than a one-trick pony.
The other nice component that AbbVie offers is a solid dividend. Even trading near its 52-week highs, the stock is still delivering an impressive 3.8% dividend. Coupled with the stock’s near-5% rise year-to-date, that’s a solid return for 2017.
The stock looks to be taking a breather right now and the bulls and bears are both tugging at it. This is a good time to get in on ABBV stock while neither side has the advantage and it is trading at a very reasonable price.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.