Why AbbVie Inc (ABBV) Stock Is Still a Long-Term Winner
December 16, 2016 – by Richard Band
AbbVie Inc (NYSE:ABBV) makes the top-selling drug in the history of pharmaceuticals: Humira. Humira brings in $14 billion a year for ABBV stock and it’s still growing sales.
That is a blockbuster drug. It currently accounts for around 64% of AbbVie’s revenue, which is a double-edged sword.
Being so dependent on one drug could mean that the biotech is setting itself up for a fall once the growth arc on Humira heads south. Also, Humira comes off patent (technically) this month.
However, Humira has proven itself to be a highly effective drug for a number of auto-immune maladies, from Crohn’s Disease, to rheumatoid arthritis to psoriasis and many other chronic issues. And now that the drug is well known and happily prescribed by physicians, its sales will continue to be strong.
Also, because it is so versatile, it is easier for ABBV to ask the Food and Drug Administration for approval for related conditions. That will extend the patent life on Humira and give the drug a very long tail.
Also, as long as AbbVie keeps rolling out new uses, no one can launch biosimilars to compete with Humira. ABBV expects patent protection on Humira to last until 2022, and has planned for that transition.
What Is the Future of ABBV Stock?
But we’ve seen biotech get hammered in 2016 because everyone expected Hillary Clinton to win the White House and go after drug companies like AbbVie for the costs of their meds. Between Sept. 23 and Nov. 3, the Dow Jones Biotech Index was off 15%.
Then Trump won. And biotech took off with the assumption that no Clinton meant no pricing pressure for drug companies.
But then another wave of angst rolled over traders. Perhaps Trump will stick to his populist rhetoric and go after drug pricing to help the ‘little guy’ who’s just trying to feed his family, not spend a month’s wages on his weekly drug prescriptions. In the past month, ABBV stock is off nearly 2%.
That makes now a great opportunity to get into AbbVie stock, while the herd is confused by the conflicting messages. Remember, ABBV stock is one of the top income stocks around, beyond its significant growth potential. Right now it delivers a 4.1% dividend yield, and it’s rock solid.
As far as its pipeline goes, AbbVie has 15 drugs in late stage clinical trials. It also has a couple other drugs on the market that are doing well.
Bottom Line on AbbVie Stock
Viekira is its hepatitis C drug and sales have been growing. Revenue this year is around $1.5 billion. But competition is heating up in the hep C world, so there will be a balancing act between discounting the $85,000 price tag for a 12-week dose and gaining more customers by being price competitive. It’s currently around the same price point Gilead Sciences, Inc. (NASDAQ:GILD) charges for its hep C drug Sovaldi.
Imbruvica is a cancer drug that added more than $1.5 billion into ABBV coffers this year and its potential is still in its infancy. Now that it has established a foothold, it can spread out to capture other specific conditions.
Elagolix is another drug in late-stage development targeting endometriosis and uterine fibroids. This could be another hit to keep AbbVie stock on track for many years to come.
When you add all of these factors up, ABBV stock is a solid long-term choice.
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.