AbbVie Inc. (ABBV) Buy or Sell Stock Guide
The analysis below may be helpful to you if you have any of the following questions about ABBV stock:
- Is ABBV a buy or a sell?
- Should I sell or hold ABBV stock today?
- Is ABBV a good buy / a good investment?
- What are ABBV analyst opinions, recommendations, ratings?
Here are ABBV stock buy reasons/signals:
1. AbbVie supports a strong dividend yield of close to 4%, which should act as valuation support, as the cash flows to support the dividend look fairly secure over the next few years.
2. AbbVie's increasing entrenchment in blood cancers should bode well for growth as pricing power remains strong in this therapeutic area of the healthcare market.
3. AbbVie's next generation immunology drugs targeting IL23 and JAK pathways should help mitigate the competitive headwinds facing Humira.
4. AbbVie’s flagship product, Humira, continues to drive revenues. Humira, an anti-inflammatory product, is the anti-tumor necrosis factor (TNF) drug of choice. Currently approved for 13 indications, Humira sales have increased consistently - 11.7% in 2015, 16.1% in 2016 and 14.6% in 2017 - backed by robust demand trends.
5. We are positive on AbbVie’s efforts to strengthen its pipeline. The company has been actively pursuing partnership deals and collaborations for candidates across several therapeutic areas including oncology, immunology, neuroscience, and infectious diseases. Some partners include Roche (Venclexta – oncology), J&J (Imbruvica – cancer), Biogen (Zinbryta – multiple sclerosis), Bristol-Myers (Empliciti – multiple myeloma), and Boehringer Ingelheim (risankizumab – psoriasis) among others.
6. AbbVie believes that oncology will be its major growth driver over the next 10 years. The acquisition of Pharmacyclics in May 2015 added Imbruvica to AbbVie’s portfolio and diversified the company’s revenue base. Imbruvica, currently approved for quite a few indications, has multi-billion dollar potential and AbbVie is exploring the potential to expand Imbruvica’s label into solid tumors and autoimmune diseases. Several studies on Imbruvica are ongoing to evaluate the drug alone or in combination in different patient segments.
7. AbbVie has a deep pipeline consisting of several interesting late-stage candidates. Promising candidates include elagolix (endometriosis – under priority review in the U.S.; phase III for uterine fibroids), risankizumab (phase III for psoriasis and Crohn’s disease and phase II psoriatic arthritis and ulcerative colitis), Depatux-M/ABT-414 (phase II trial for glioblastoma multiforme), ABBV-8E12 (phase II for early Alzheimer's disease and progressive supranuclear palsy (PSP)), and upadacitinib/ABT- 494 (six phase III studies for rheumatoid arthritis ongoing; phase III for Crohn’s disease and psoriatic arthritis, phase II for atopic dermatitis, giant cell arteritis and ulcerative colitis). The company expects to move 10 tumor candidates into clinical development in 2018.
8. We are also positive on the company’s progress with the development of interferon-free treatments for HCV. The approval of Viekira, AbbVie’s all-oral, interferon-free therapy with/without ribavirin (RBV), was a major positive for the company. Meanwhile, AbbVie’s 12-week, two-pill, once-daily combination HCV treatment, Viekirax, gained approval in Japan, the second largest HCV market in the world, in September 2015.
9. ABBV quarterly revenue growth was 21.40%, higher than the industry and sector average revenue growth (3.34% and 3.70%, respectively).
10. ABBV forward dividend yield is 3.73%, higher than the industry (0.64%) and sector (0.14%) forward dividend yields.
11. ABBV forward P/E ratio is 10.99, and it’s low compared to its industry peers’ P/E ratios.
12. ABBV PEG ratio (P/E adjusted for growth) is 0.77, and it’s low compared to its industry peers’ PEG ratios.
13. ABBV average analyst rating is Buy.
14. ABBV average analyst price target ($114.20) is above its current price ($98.05).
Here are ABBV stock sell reasons/signals:
1. Several of AbbVie's pipeline products in immunology have mechanisms of action similar to drugs already approved, taking away the first mover advantage.
2. The high profit margins on Humira will cause an amplified impact on earnings as sales are lost to eventual biosimilar competition.
3. The pricing power of hepatitis C drugs has eroded significantly over the past few years, which may put further pressure on AbbVie hepatitis C platform.
4. Viekira’s performance was below the company’s expectations in 2016 and 2017. The company said that it experienced market share loss and price erosion due to competitive dynamics within the HCV market.
5. While we believe that AbbVie has an impressive pipeline, we note that clinical development involves a high degree of risk. Gaining approval for pipeline candidates has become more difficult given the tough regulatory environment. Development and regulatory setbacks for late-stage pipeline candidates would be a major disappointment for the company.
6. ABBV profitability is declining. The YoY profit margin change was -4.40pp.
7. ABBV Price/Book ratio is 30.63, and it’s high compared to its industry peers’ P/B ratios.
What are your thoughts on ABBV?
If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.