The risk of biosimilars to AbbVie Inc.'s (NYSE:ABBV) best-selling drug, Humira, is fading, and new drugs with blockbuster potential are making their way to market. Yet AbbVie's shares are tumbling. Is now a good time to step up and buy AbbVie?

In this clip from The Motley Fool Industry Focus: Healthcare, analyst Kristine Harjes and contributor Todd Campbell discuss AbbVie's financials and key upcoming catalysts, and whether this drop in its shares is a buying opportunity.

A full transcript follows the video.

This video was recorded on Feb. 6, 2018.

Kristine Harjes: Today we're going to talk about two specific stocks, because it doesn't really matter so much what the whole market is doing, it's always a good time for investors to be thinking about individual companies and their business models and their catalysts that are coming up. The two stocks that we want to cover today are AbbVie and Vertex, they're two of the largest biotechs. They both recently reported earnings. Up first, let's do AbbVie. Todd, what's the latest?

Todd Campbell: One of the reasons I want to talk about these two companies is, they're companies that are on my personal watch list for an opportunity like this. They were both very big movers in 2017. AbbVie, for example, was up 60% last year, which is pretty remarkable for a company of its size. If you look at, are there any blue light specials, do I want to go out and buy, now might be a good time to consider a stock like AbbVie, because its shares have fallen about 12% from their peak on Jan. 26. And January was a news-packed month for this company, where they rolled out a lot of long-term plans that really are quite encouraging.

Harjes: I think first and foremost, we should probably discuss Humira, that is their lead drug. It encompasses 65% of the company's sales. They reported sales of $18.427 billion, which was up 14%. That's very encouraging. And that was for the full year, by the way. They expect that the sales will continue to grow to $21 billion by 2020, which is not terribly new news. That's something that we learned during the J.P. Morgan Healthcare Conference. This is important, because there had been a lot of questions regarding the Humira patent, and whether or not this flagship drug will be able to continue to perform. I think the news that came out of this company in January is fairly promising for the stability of this important driver of their business.

Campbell: Absolutely. Sixty-five percent of their sales. And I think up until the fall of last year, when they got a favorable patent decision, people were really wondering what's going to happen when Humira biosimilars start entering the market. As a refresher, last September, they did indeed get a positive verdict on a patent challenge that was brought by a competitor, and that prompted a non-exclusive license with Amgen that will keep biosimilars to Humira off the market until 2023 in the United States. I think that's one of the big reasons that AbbVie has been such a winning stock over the course of the last four or five months, is that people are starting to look at it and say, that gives AbbVie a lot of running room to develop new drugs that can get launched and pick up the slack once Humira does start to face off against those challengers over the course of the next decade.

Kristine, if you look at the numbers that the company put up in 2017 and the potential growth for those non-Humira drugs through 2020 and even 2025, there's a lot for investors to like. [In] 2017, the company's sales were $28.2 billion, and that was up 10%. Growing 10%, for a big company like this, that's pretty remarkable. And even better, they have really good operating leverage. That means they're translating more of those sales into bottom-line profit. Their bottom-line earnings per share were $5.60 in 2017, and that was up 16%. There's nothing to dislike about those figures.

Harjes: Yeah. And you look at their 2018 guidance and it just gets stronger. They're guiding for an operating margin of 44%, which is 150 basis points higher than 2017. Their adjusted EPS guidance is now a range of $7.33 to $7.43, which is up $0.96 from the previous range that they had given for 2018. You might think that's all because of the tax reform, but $0.08 of that is due to stronger operating dynamics. So this is a company that's looking at some pretty strong growth in some of its key drugs aside from just Humira, and also some exciting things coming up in the pipeline.

And I do want to talk about those pipeline drugs, but first, really quick, to hit one some of their key drugs that are already on the market, Imbruvica, which is a drug that the company co-markets with Johnson & Johnson, had sales of $2.6 billion, and that was up 40%. Meanwhile, their hepatitis C market is doing really well. This actually shocked me, their main hepatitis C drug has a market share of 32%. I did not realize it was that high. Of course, that franchise's sale was up 62% year over year.

Campbell: They think those hep C sales can climb to $2.5 billion in 2018, which would be pretty remarkable, considering that in 2017, those hep C sales were $1.3 billion. That's all because of Mavyret. If you look at Mavyret, I think that's probably the stiffest challenge yet that Gilead Sciences has faced in the hepatitis C. It should still be able to provide billions of dollars in revenue for AbbVie over the course of the next few years. And then, with Imbruvica, still being able to grow that quickly on such a high base of sales, that's due to label expansions. As this drug is getting used earlier and earlier in treatment, and also into other indications, such as graft-versus-host disease, which it won approval for last August, those are really driving sales higher. The other thing people should remember with Imbruvica is that they share that drug with Johnson & Johnson. So the fact that they're reporting $2.6 billion in 2017 in sales just goes to show you just how important that drug is overall, considering that Johnson & Johnson shares that with them.

Harjes: Yeah, absolutely. Let's look forward a little bit. What are you watching in the pipeline?

Campbell: There's a few different drugs that I think could move the needle meaningfully over the course of the next few years. Venclexta, which is a drug for CLL [chronic lymphocytic leukemia], they put out some pretty impressive combination-study trial results using it alongside Rituxan in people who were relapsing or refractory, that's the chronic lymphocytic leukemia indication. And that's an indication that Imbruvica is already improved in, but Imbruvica is moving up in earlier lines of treatment. So this could fit in now behind it. And that could turn that drug into a multibillion-dollar seller over time. But even bigger are the opportunities associated with Rova-T, I don't even want to pronounce the names of these so I'm just going to use the old name, ABT-494 and another drug called risankizumab, [laughs] which are autoimmune disease drugs that are in the pipeline and fast approaching the market.

Harjes: Yeah. I'm staring at the name of ABT-494 right now, and I'm going to give it a shot, it's upadacitinib.

Campbell: Sure!

Harjes: So, take note of that one.

Campbell: That works. Those drugs -- upadacitinib and risankizumab -- those are potential Humira successors. Upadacitinib just put up really good data last year in rheumatoid arthritis. They think they can get that into the market sometime in 2019. Risankizumab just put up good data recently in psoriasis. They think that could also land in the market in 2019. And they're projecting that upadacitinib and risankizumab could generate [about] $6 billion and $5 billion, respectively, in peak sales over time. So those are important drugs. They also have another drug for endometriosis that is at the FDA awaiting approval. If that gets approved this year, that could be a billion-dollar seller at some point, too.

Harjes: And let's not forget that this is also a company that's offering a 2.5% dividend yield. So I could see why it's on your watchlist, Todd.

Campbell: And that dividend, Kristine, has increased by about 77% since they got spun out of Abbott. I think when you look at their effective tax rate falling to 9%, their guidance is for operating margins to climb over time to 50% from the mid-30s where they've been historically, I think you have a lot of tailwinds for future dividend increases that make it even more exciting.

Kristine Harjes owns shares of Gilead Sciences and Johnson & Johnson. Todd Campbell owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences and Johnson & Johnson. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.