For pharmaceutical giant AbbVie (NYSE:ABBV), the novel coronavirus couldn’t go away fast enough. Though AbbVie stock is obviously related to the suddenly in-demand healthcare space, the underlying company isn’t a play on the Covid-19 pandemic. In fact, the crisis hasn’t exactly helped its fundamental narrative.
That’s because ABBV’s pipeline mostly deals with chronic conditions. Additionally, it has invested heavily in addressing neurological disorders, such as Parkinson’s disease and Alzheimer’s disease. Also, AbbVie features a robust oncology department. In other words, it’s dealing with patients who have severe underlying conditions – exactly the demographic that faces the greatest risk to Covid-19 infections.
Therefore, it wasn’t much of a shock that management admitted that it anticipated a demand hit to their flagship drugs. With every incentive to stay home and avoid potential encounters with the coronavirus, AbbVie stock was all over the map during the first four months of this year.
However, up until late June, new daily infections hit a peak in early April according to the Centers for Disease Control and Prevention. Thus, state began opening certain businesses later that month and throughout May. With the coronavirus seemingly under control, investors began bidding up AbbVie stock.
Of course, this fundamental factor has again shifted directions. Around the middle of June, new cases started inching higher. By July 2, this daily tally breached the 55,000 mark, an all-time record and by a sizable margin.
Even more problematic for AbbVie stock is that hospitalizations are on the rise. According to the Washington Post, some state health officials have implemented protocols to determine which patients get ventilators. Again, hospitals are the last place you want to go, clouding ABBV’s revenue channels.
AbbVie Stock Is Disturbingly Relevant in the New Normal
In early May, AbbVie completed its buyout for Allergan in what management termed a “transformative” deal. When ABBV shelled out the $63 billion to close negotiations, it inarguably did so because of Botox, the blockbuster wrinkle treatment.
Sure, other considerations and synergies exist within the deal. But nothing rings up more growth potential than addressing “affluenza.”
Of course, affluenza is a type of pandemic that you want to nurture if you’re a stakeholder in AbbVie stock. Surprisingly, though, demand for Botox is very high, even in the midst of this unprecedented crisis. According to Allure.com contributor Brennan Kilbane, the rich apparently only care that their beauty products supply chain has been disrupted. This has led to “desperate” measures. Kilbane writes:
Severed from aesthetic maintenance rituals during the COVID-19 pandemic, many are seeing things unfamiliar to them — things like root growth and a loss of skin elasticity. They are looking older. But not if they can help it.
“I’ve been asked by a few patients to come out to the Hamptons and go house to house,” says Amy Wechsler, a dermatologist and psychiatrist, from her practice on Manhattan’s Upper East Side. “That makes no sense to me.” It’s simply dangerous to enter several different homes in the span of a few hours, Wechsler points out. “But people are feeling stressed out about the way they’re going to look, and women are worried that their Botox is going to wear off and their partner is going to see them in a way they haven’t.”
In other words, many rich folks would rather risk death than not look good. Ordinarily, you can look at this dynamic as a sign of class and mental dysfunction. But cynically, it’s incredibly beneficial to ABBV stock.
Welcome to the New Vice
And cynical is admittedly what I’ve become with my own investment philosophy as it relates to Covid-19. For instance, I’m attracted to Altria (NYSE:MO) because cigarettes represent a stress-mitigation platform. Granted, it’s not a healthy one. But at the end of the day, adults must make adult choices – and you can potentially profit from them.
In the same vein, RCI Hospitality (NASDAQ:RICK) is also appealing. During the Great Recession, the “hospitality” industry boomed as presumably discouraged gentlemen sought an outlet to ease their troubles. If we see another prolonged economic downturn, RICK could eventually pop higher.
Perhaps this is the new way to approach AbbVie stock. Before the pandemic, ABBV was a solid play on the pharmaceutical space. To be fair, it still is. But with Botox under its wings, it could benefit from the affluent person’s addiction to superficial beauty.
Is it distasteful? Absolutely. But a distasteful dollar is still a dollar. And there are many of those waiting for AbbVie to collect.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long Altria.