You want to sink your money into a no-brainer stock. You want the type of stock that would have been the equivalent of investing your money in Michael Jordan in the nineties, if it would have been possible.
AbbVie Inc. (NYSE: ABBV) is a research-based biopharmaceutical company that developed as an offshoot of Abbott Laboratories in 2013. Its hyper-popular drug, Humira, an injection for autoimmune and intestinal Behçet's diseases, has flowed billions straight toward the bank. But what happens when the generic rivals come knocking at your door? Beginning in 2023, the competition will pound on AbbVie Inc., so it's leaning on Rinvoq and Skyrizi to boost its results.
Let's take a look at what you need to know about AbbVie Inc. and the pros and cons of investing in the company. If you're seeking dividends, AbbVie Inc. may give you some great opportunities.
About AbbVie Inc.
AbbVie Inc. develops and sells pharmaceuticals worldwide, including these household names that treat the following conditions:
- HUMIRA — autoimmune and intestinal Behçet's diseases
- SKYRIZ — psoriasis
- RINVOQ — rheumatoid arthritis
- IMBRUVICA and VENCLEXTA — chronic lymphocytic leukemia and small lymphocytic lymphoma
- MAVYRET — chronic HCV genotype 1-6 infection
- CREON — pancreatic enzyme therapy
- Synthroid — hypothyroidism
- Linzess/Constella — irritable bowel syndrome
- Lupron — advanced prostate cancer, endometriosis and central precocious puberty and anemia caused by uterine fibroids
- ORILISSA — moderate to severe endometriosis pain
- Duopa and Duodopa — Parkinson's disease
- Lumigan/Ganfort — reduction of elevated intraocular pressure (IOP) in patients with open angle glaucoma (OAG) or ocular hypertension
- Ubrelvy — migraine
- Restasis — tear production
The company reported Q2 2022 net revenues of $14.583 billion, an increase of 4.5% on a reported basis and 6.1% operationally. Net revenues from the immunology portfolio were $7.207 billion, an increase of 17.8% on a reported basis or 19.2% on an operational basis.
U.S. Humira net revenues were $4.664 billion, a 9.6% increase. Internationally, Humira net revenues were $699 million, a decrease of 13.8% on a reported basis or 7.3% on an operational basis.
Ultimately revenue fell short and EPS went to $3.37 (up 11%) AbbVie Inc.’s hematologic oncology drug sales fell 9% due to Imbruvica's loss of market share, thanks to competitors. The company holds fast to its full-year outlook, for adjusted diluted earnings per share to hold between $13.78 and $13.98.
Pros and Cons of Investing in AbbVie Inc.
There are a lot of reasons to like AbbVie Inc., but if you've put yourself en garde to any negative stock moves, you may want to consider the downsides of investing in AbbVie Inc.
First, let's take a look at some of the benefits of investing in AbbVie Inc.:
- Dividend yield: If a company pays out more dividends than it earns, it might not be able to support its future dividend payouts to investors. The company has a dividend payout ratio of 79.89% of profit, which indicates that it pays out a majority of its earnings. However, it's important to consider whether AbbVie Inc. can generate enough free cash flow to afford its dividend. It distributed 42% of its free cash flow as dividends, a comfortable payout percentage. Furthermore, AbbVie Inc. has raised its dividend for 50 consecutive years, showcasing a strong track record of dividend growth.
- Exposure to the marijuana industry: The burgeoning marijuana industry deserves second and third glances because of the fact that the industry itself is in its infancy with wide potential. AbbVie Inc. has successfully propagated marijuana-based drugs, including Marinol, which helps relieve nausea during chemo treatments and to restore the appetite during AIDS treatments. The company will likely not be negatively affected by the recreational marijuana debate due to its focus on medical cannabis.
- Big league lineup: Humira isn't the only lion in the AbbVie Inc. lineup. AbbVie Inc. has about 16 drugs in its coffers, including non-household names, such as those for prostate cancer, testosterone boosters and those that help with pancreatic therapy.
What are the downsides? These are equally important to weigh as you consider your investment options. One of the biggest downsides is the competition in the biopharmaceutical arena. Let's take a look:
- Competition: Next January, Humira's first rival will officially launch in the U.S., which signals the close end of about 20 years of success and a nearly $200 billion moneymaker. Cheaper versions have already shown up, including in India and Europe. Not surprisingly, biosimilars should put AbbVie Inc. under intense pressure. However, the company knows what's coming, so the company has done everything it can to reduce its dependence on the drug.
- Struggling stock future: It's not a matter of past history, it's a matter of right now and a few months from now. Shares may struggle to gain traction based on the competition already mentioned. Investors may want to consider being careful about investing right now and toeing the line until the January 2023 headwinds come and go.
Should AbbVie Inc. Be a Dividend Player in Your Portfolio?
It's no question that Humira biosimilars are a huge threat, possibly knocking the company for a loop. However, it's worth acknowledging the fact that AbbVie Inc. has anticipated these changes.
It will be worth watching AbbVie Inc.'s progress on continued sales for Rinvoq (upadacitinib) and Skyrizi (risankizumab). The company has confirmed revenue guidance of greater than $15 billion for both drugs by 2025 — to be exact, the company expects risk-adjusted sales of more than $7.5 billion for Rinvoq and more than $7.5 billion for Skyrizi. However, is the company putting too many eggs in one basket? It's worth consideration before you invest.
Furthermore, before you invest based on the potential occurrences in 2025, it's important to evaluate your goals and investment timeline to determine whether the Chicago-based company deserves a place in your portfolio. It's a good idea to make sure you're investing as part of a diversified portfolio; check your other investments to get a sense of how they fit into your overall strategy.
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