At first glance, the picture for AbbVie (ABBV -1.01%) looks bad. The company's top-selling drug that generated over half of the company's total revenue in the past has lost patent exclusivity in Europe and will do so in the U.S. within the next three years. Last year, while the overall market skyrocketed AbbVie's shares fell 4%.

But I think that AbbVie is a much better bargain right now than you might think. Here are three reasons why that's the case.

Two men holding giant jigsaw puzzle pieces with drawings of a light bulb, an equal sign, and a dollar symbol.

Image source: Getty Images.

1. Humira protection plan is working

AbbVie has known for years that the day would come when Humira would face biosimilar competition. The company has been planning for that day, which has now arrived (at least in part). 

To be sure, AbbVie didn't foresee everything that has happened with Humira. The company didn't expect its competitors to price their biosimilars so aggressively. As a result, the initial hit to Humira's international sales was bigger than AbbVie initially anticipated. 

However, AbbVie CEO Rick Gonzalez noted in the drugmaker's Q4 conference call last week that the company has held on to around two-thirds of the volume for Humira. In Europe, where the biosimilars are challenging the immunology drug, Humira's sales have eroded by around 45%. This means that AbbVie has been able to retain roughly 55% of the previous sales level for Humira. That's actually pretty good. 

The company has also learned some lessons from its experience in Europe that could help it better handle the entrance of biosimilars in the U.S. market in 2023. For investors who have fretted about the impact that loss of exclusivity for Humira would have on AbbVie, the fact that the company's protection plan for the drug appears to be working well overall is very good news.

2. Post-Humira strategy is paying off

AbbVie didn't just bank on playing defense with Humira, though. The company has invested heavily in its pipeline and made strategic acquisitions along the way with the goal of reducing its dependence on Humira. Several signs seem to point to this strategy paying off.

The company's blood cancer drugs continue to perform really well. In the fourth quarter, sales for Imbruvica jumped nearly 29% year over year to $1.3 billion. It's on track to become one of the top five best-selling drugs in the world by 2024. Venclexta appears destined to become another blockbuster for AbbVie, with the drug racking up sales of $251 million in Q4.

Two successors to Humira are also delivering tremendous sales growth. Skyrizi, which won FDA approval in April 2019 for treating plaque psoriasis, more than doubled its sales in Q4 compared to Q3, pulling in $216 million. Sales for Rinvoq, which received FDA approval for treating rheumatoid arthritis in August 2019, totaled $33 million in Q4. That might seem a little low, but the drug didn't gain fuller market access until January. Even better, Rinvoq doesn't appear to be cannibalizing sales of Humira too much so far.

AbbVie awaits the closing of its acquisition of Allergan (AGN), which should be on track to wrap up later in the first quarter of 2020. Even though some were initially skeptical of the deal, Allergan brings several drugs to AbbVie's lineup that will lower its reliance on Humira. Botox stands at the top of the list, but several other Allergan products -- notably including antipsychotic drug Vraylar and gastrointestinal drug Linzess/Constella -- should also boost AbbVie's growth prospects.

3. AbbVie has an ace in the hole

While AbbVie's shares trade at only nine times expected earnings, some investors won't consider the stock a bargain because of its longer-term prospects are clouded by the future for Humira. However, we've already seen evidence that AbbVie's strategy for defending Humira as much as possible while reducing its dependence on the drug appears to be working.

Perhaps just as important, though, AbbVie's earnings growth doesn't have to be all that high to make the stock an attractive investment because of the company's ace in the hole: its strong dividend. AbbVie ranks as one of the most appealing dividend stocks on the market with a juicy yield of nearly 5%.

The company's track record of dividend hikes is nothing short of spectacular. AbbVie has increased its dividend for 47 consecutive years including the time that it was a part of Abbott Labs. Since being spun off from Abbott in 2013, AbbVie has boosted its dividend by a whopping 195%.

Can AbbVie keep the dividends flowing and growing in the future? I think so, especially with the solid cash flow that the acquisition of Allergan will bring to the table. 

A pretty good picture after all

I'm not dismissing the challenges that AbbVie faces with the inevitable decline of sales for Humira that's on the way. However, my view is that the company is effectively tackling those challenges head on. The combination of a strong lineup of other drugs with fast-growing sales, the likely addition of more drugs on the way with the close of the Allergan deal, and its mouth-watering dividend should provide solid total returns for AbbVie over the long run.