Is AbbVie Inc (NYSE:ABBV) a Good Investment Without the Humira Factor?


Last month, Illinois-based pharmaceutical company AbbVie Inc (NYSE:ABBV) posted fourth quarter results that missed analysts’ expectations on revenue, mainly due to foreign currency headwinds and lower-than-projected revenues from the hepatitis C or HCV franchise. The company earned $1.20 per share in the period, while analysts had projected EPS of $1.19, whereas revenue in the quarter came in at $6.78 billion, versus the consensus estimate of $6.92 billion. AbbVie Inc (NYSE:ABBV) relies heavily on its “Humira” drug which is used to treat inflammatory diseases like Arthritis. But it is trying to slim its dependence on Humira by acquiring other companies and focusing on cancer and HIV treatment.

In 2015, AbbVie Inc (NYSE:ABBV) acquired Pharmacyclics and its half-ownership of the blood cancer drug, Imbruvica, for $21 billion. Even though Imbruvica’s sales fell short of expectations in 2016, the company said it expects $2.4 billion worth of Imbruvica sales in 2017, up from $1.83 billion last year.
AbbVie Inc (NYSE:ABBV) may be a good investment because the company has spectacular growth prospects in the near future. Its margins were affected mainly due to R&D in 2016, which may help the company in making more useful drugs in the coming months. AbbVie Inc (NYSE:ABBV) suffered a hit of about 150 basis points in its full-year 2016 adjusted gross margins due to foreign currency conditions. These factors are temporary and there may be no serious issue with AbbVie Inc (NYSE:ABBV) fundamentals.
AbbVie Inc (NYSE:ABBV) plans to increase its operating margin to over 50% by 2020. The company is expected to gain huge benefits from royalty programs of Humira in 2018 and 2019. It expects its full fiscal 2017 EPS to come in between the range of $5.44 to $5.54. Humira’s revenue in the US jumped 24% in 2016 on year-over-year basis, while the drug saw a 4.3$ revenue growth in the international market.

The Biosimilar Problem

But investors are skeptical about the sustainability of Humira as patent expiration issues and threat of biosimilars loom large. This problem has kept the company undervalued over the past couple of years. However, the company is confident of protecting Humira from generic erosion in the US till 2022. Meanwhile, it will focus on other crucial drugs. Humira is under threat from two main rivals: Remicade and Enbrel. But these biosimilars only have 5% and 3% immunology market share respectively, despite of having a heavy footprint in the international markets. The company has eight other drugs apart from Humira.
AbbVie Inc (NYSE:ABBV) has a 4.18% dividend yield. Since 2013, when it was spun-off from, Abbott Laboratories, its dividend has increased by a 60%.