AbbVie is a pharmaceutical company with a strong exposure to immunology and virology diseases. The company's top drug, Humira, represents over half of the firm's profits. The company was spun off from Abbott in early 2013.
We believe AbbVie moat is based on patent-protected drugs, intellectual intangibles and a powerful salesforce. Humira represents the majority of AbbVie's sales (50%) and profits (greater than 70%). AbbVie's R&D has created a database of intellectual insights that should help increase the odds of successful drug development. AbbVie's entrenched sales force in one of the most sought-after therapeutic areas of immunology should help the firm launch its next generation of drugs be a leading candidate for smaller drug firms needing help to develop and commercialize innovative new drugs.
On March 4th, the drugmaker announced that it had entered into definitive agreement to acquire Pharmacyclics in a deal valued at $21 billion. The purchase should greatly enhance AbbVie's clinical and commercial presence in oncology, strengthen its pipeline, and establish a strong position in hematological oncology, an attractive and rapidly growing market that is now approaching $24 billion globally. Management expects it to close around mid-2015 The company is working to develop some diversity to its portfolio. The company is poised for strong gains in 2015. Management is guiding for adjusted earnings reflecting annual growth of 28%-34% versus last year's tally.
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Healthcare reform in the US could negatively impact the company's profitability
Similar to other drug companies, AbbVie faces the risks of new product failures, reimbursement challenges for new drugs, and drug pricing cuts by large payer groups that are growing increasingly price-sensitive.
Several of AbbVie's pipeline products are partnered with other drug companies, which reduces the profit potential of the new drugs.
Besides the hepatitis C drugs, AbbVie's pipeline prospects are not as strong as the company needs to help ensure long-term growth following the Humira patent loss.
Split enabled Abbott and AbbVie to actively optimize their portfolios
AbbVie supports a strong dividend yield of more than 3%, which should act as valuation support, as the cash flows to support the dividend are very secure over the next few years.
We believe Humira represents one of the best immunology drugs for RA, Crohn's disease, and psoriasis, and we expect it will continue to penetrate these markets.
he new competitive RA threat from Pfizer's Xeljanz will not likely take much share from Humira initially as Xeljanz's safety and efficacy profile is still uncertain and the drug requires heavy monitoring during usage.
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