With a market capitalization of $123 billion, AbbVie (NYSE:ABBV) stock is one of the most famous names in the pharmaceutical niche. This company has been around for a while and the stock has rewarded long-term owners, though there were a rough patches in 2018 and 2019.
2020 was set to be a terrific year for ABBV stockholders. However, the spread of the novel coronavirus brought with it a serious spike in market volatility.
Shareholders were taken for a wild ride, though at least they could collect the company’s generous dividend payouts. Currently, AbbVie offers an impressive forward annual dividend yield of 5.77%.
Along with the dividend payouts, AbbVie offers its shareholders value through what could be considered one of the most pivotal acquisitions in the pharmaceutical space. With this comes a chance for AbbVie to diversify its pipeline so that it won’t have to rely too heavily on any one particularly well-known drug.
ABBV Stock Is Reducing Single-Product Reliance
The drug in question is known as Humira. It is an immunosuppressant marketed to treat psoriasis, arthritis and Crohn’s disease. AbbVie’s business has been heavily reliant on Humira for a while now. In fact, last year Humira accounted for almost 58% of the company’s sales.
There’s no question about Humira’s popularity and success. In 2019, sales of Humira increased by 8.6% to $14.86 billion. However, it may be uncomfortable for investors to take a position in a drugmaker that relies so heavily on a single product, even if it’s a highly lucrative one.
Therefore, AbbVie’s investors have called for the company to seek diversification outside of that one product. One method of increasing the company’s pipeline is acquiring another drug manufacturer, and that’s exactly what AbbVie is in the process of doing.
Back in June of 2019, AbbVie proposed a bid to buy out Allergan (NYSE:AGN) for $63 billion worth of stock shares and cash. This acquisition would be game-changing for the pharmaceutical industry. Importantly for ABBV stockholders, it would substantially augment the company’s drug pipeline.
AbbVie has Serious Expansion Potential
The value proposition that the Allergan acquisition would provide is tremendous. You’ve probably heard of the aesthetics product Botox, which is owned by Allergan.
Just the addition of Botox to AbbVie’s product offerings would be newsworthy. However, there’s much more to Allergan than Botox. The company has too many products to list here, but some highlights are worth mentioning.
Allergan’s line of products include the Refresh and Ocuflox eye-care brands, Rapaflo capsules for benign prostatic hyperplasia, Norco pain-relief tablets, and Juvederm medical aesthetic products.
And keep in mind that AbbVie’s pre-existing product line includes more than Humira. It’s actually fairly diverse, including the drugs Skyrizi for psoriasis, Rinvoq for rheumatoid arthritis and Orilissa for endometriosis.
Moreover, AbbVie intends to expand some of its recently launched medicines into new areas of disease. For example, AbbVie would like to consider Skyrizi as a treatment for Crohn’s disease and ulcerative colitis. It also seeks to expand Rinvoq’s applications to atopic dermatitis and Crohn’s disease, and would like to use Orilissa to treat uterine fibroids.
In 2019, AbbVie’s revenues generated from products launched since the company’s inception totaled around $9 billion. And now that AbbVie has struck a deal with the U.S. Federal Trade Commission, its acquisition of Allergan is projected to be finalized potentially as soon as May of this year.
With the deal possibly ready to close soon, AbbVie CEO Richard Gonzalez offers shareholders a supreme value proposition in the form of an alphabet soup of potentially lucrative drug names:
“You look at [the drugs] Skyrizi, Rinvoq, Venclexta, Imbruvica. Those all have significant growth opportunities ahead of them on the AbbVie side. And then you look at the Allergan side, you have Vraylar. This is a product that is about an $850 million product. I think the last numbers I saw showed it was growing about 70%.”
The Final Word on ABBV Stock
Sure, you can collect the generous dividends on ABBV stock and be satisfied with that. The best reason to own the shares, however, involves an already robust product pipeline that could soon be expanded in a big way.
Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
