AbbVie (ABBV): A Resilient Dividend Pick Despite Patent Challenges
AbbVie’s Humira Faces Challenges, but New Treatments and Dividends Shine
AbbVie, a seasoned player in the pharmaceutical industry, has recently caught the eye of investors and analysts alike, not just for its challenges but also for its promising opportunities. While Humira, once AbbVie’s top-selling drug, faces generic competition, the company’s strategic foresight into developing new treatments like Rinvoq and Skyrizi has started to pay off, keeping the financial outlook robust.
The Humira Situation and Emerging Opportunities
Humira’s exclusivity in the U.S. market ended in 2023, leading to a noticeable 39.9% decline in sales to an annualized $7.1 billion. Despite this, the decline was not as severe as it could have been, thanks to the structure of pharmacy benefits managers (PBMs) and insurance schemes that keep branded prescriptions like Humira more visible than cheaper alternatives like biosimilars.
However, AbbVie has not just been sitting back. The company has proactively diversified its portfolio. Rinvoq and Skyrizi, both launched in 2019, are already making significant contributions to offset Humira’s losses. With new FDA approvals for treating Crohn’s disease and ulcerative colitis, these drugs are expected to push AbbVie’s revenues with combined annual sales projected to exceed $27 billion by 2027.
Dividend Growth and Financial Stability
A key highlight for investors is AbbVie’s consistent dividend growth, a trend that has continued since its spinoff from Abbott Laboratories in 2013. Over the past decade, dividends have surged by 269%, a testament to AbbVie’s strong cash flow and financial health. Over the last 12 months, the company generated $21.9 billion in free cash flow, well above what is needed to cover its dividend payments, indicating potential for future increases.
Wall Street Optimism
This positive outlook is mirrored by Wall Street analysts, with BMO Capital’s Evan Seigerman recently raising his price target on AbbVie from $180 to $214, suggesting significant upside potential. Despite the challenges with Humira, the comprehensive strength of AbbVie’s portfolio and its financial strategies present a compelling case for investment.
A Solid Buy with Long-term Potential
With its resilient dividend growth, robust pipeline, and strategic management of portfolio risks, AbbVie stands out as a solid buy for long-term investors. The current adjustments in the market and the company’s proactive measures to stay ahead suggest that AbbVie is not just surviving but potentially thriving in a competitive pharmaceutical landscape.
