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Forget Humira -- Here's What You Need to Know About AbbVie

By Keith Speights – Updated Apr 22, 2019 at 11:43PM

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Humira is AbbVie's 800-pound elephant in the room. But the elephant is on its way out, and there are other big things to watch with the drugmaker.

Check out the latest AbbVie earnings call transcript.

Yes, the times they are a-changin' for Humira. The drug now faces stiff biosimilar competition in Europe. And, yes, AbbVie's (ABBV -0.05%) overall performance still hinges largely on Humira. But none of this is news for anyone who has followed the big drugmaker.

This might sound crazy, but I don't think Humira is the main thing that investors should be watching with AbbVie. International sales for the drug are going to plunge over the next few years. U.S. sales for Humira will begin to fall in 2023. Those are givens, though.

The more important things for investors to focus on relate to what AbbVie is going to do beyond Humira. With that in mind, here are four things you need to know about AbbVie. 

Scientist holding a pill with other multi-colored pills in foreground of photo

Image source: Getty Images.

1. AbbVie's strategy is working 

AbbVie's management team has been preparing for the day that Humira faced biosimilar competition for years. They knew additional products would be needed to offset the inevitable sales declines that would come for the world's top-selling drug. So they developed and have been executing on a strategy to keep AbbVie among the top-tier performers in the pharmaceutical industry.

CEO Rick Gonzalez said on the Q4 earnings call that 2019 will be a real test for AbbVie's strategy. The company has several challenges in addition to biosimilar competition for Humira, including pushback on drug price increases, higher research and development investments, and tough year-over-year comparisons after the impressive success in 2018.

But Gonzalez maintains that AbbVie's strategy is working. Is that just spin from a corporate CEO? I don't think so.

Despite its challenges, the company still expects to deliver 10% adjusted earnings per share (EPS) growth in 2019. AbbVie's blood cancer drugs Imbruvica and Venclexta should continue their strong momentum. Orilissa should pick up steam in its initial endometriosis indication. Blockbuster hepatitis C virus (HCV) drug Mavyret will almost certainly still capture around 50% of the global market.

The important thing to remember is that none of these drugs were around when Abbott Labs spun off AbbVie in 2013. They're all key parts of AbbVie's strategy established several years ago, a strategy that does appear to be working pretty well overall.

2. Important launches are on the way

Building a strong pipeline was a key part of AbbVie's strategy. The company should begin to reap more of the fruit of this strong pipeline in 2019.

AbbVie expects an approval decision from the Food and Drug Administration on risankizumab as a treatment for psoriasis in April. It anticipates another FDA approval in the second half of the year for upadacitinib in treating rheumatoid arthritis. 

At the J.P. Morgan Healthcare Conference in early January, AbbVie President Mike Severino said that risankizumab and upadacitinib should be best-in-class therapies. AbbVie is also evaluating both drugs in clinical studies for treating other immunology indications. The company thinks that the two drugs will combine to generate at least $10 billion in annual revenue by 2025.

3. No huge deals are on the horizon

Some analysts and investors seem to have expected that AbbVie would make a huge deal. There was even speculation that AbbVie might buy Bristol-Myers Squibb, potentially scrapping Bristol-Myers' plan to acquire Celgene.

However, Rick Gonzalez stated clearly that AbbVie has no appetite for a huge deal. I think that's good news for the company's shareholders for a couple of reasons. First, major mergers have a spotty track record at best in delivering solid returns. Second, a monster deal would be a distraction for AbbVie in executing its strategy that should work well over the long run.

Having said that, it would be great if AbbVie could pick up some promising pipeline assets without paying too much for them. Gonzalez acknowledged in his comments during AbbVie's Q4 conference call that if the company could find another drug like Imbruvica or risankizumab it would "aggressively pursue" such opportunities.

4. Rick Gonzalez isn't going anywhere 

With AbbVie CFO Bill Chase planning to retire in 2019, some might have wondered if Rick Gonzalez might also retire. Changing horses in mid-stream can end in disaster. Considering the challenges that AbbVie faces, the prospects of a new CEO taking over is the last thing that investors should want. 

The good news is that this shouldn't be a worry. Gonzalez was asked in the Q4 call about succession planning. He responded that he has heard rumors about him potentially retiring and unequivocally stated the rumors aren't true. Gonzalez joked that he had retired once already but found that he's "a heck of a lot better at running AbbVie than he was at retirement."

Forget Humira?

I don't really expect investors to not worry about Humira. It still generates nearly 60% of AbbVie's total revenue. Falling international sales for the blockbuster don't give anyone a warm and fuzzy feeling. Again, though, this has been expected for a long time. 

It's understandable why AbbVie's share price dropped after the company's Q4 update. However, my view is that the sell-off reflects a short-term perspective. AbbVie should be able to deliver great total returns over the long run -- even when the day comes when investors truly do forget Humira.  

Keith Speights owns shares of AbbVie and Celgene. The Motley Fool owns shares of and recommends Celgene. The Motley Fool has a disclosure policy.

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