The popularity of cosmetic procedures is unquestionably on the rise. Yet two major players in the space have seen their stocks struggle this year.

Major pharmaceutical AbbVie (ABBV -1.03%) is plagued by concerns about the impending patent cliff on its top-selling drug. At the same time, healthcare equipment provider InMode (INMD -0.06%) has been punished by Wall Street's current skepticism about growth stocks. This could be a good time to consider one of these highly profitable companies as a long-term addition to your portfolio.

The case for AbbVie

AbbVie keeps a wary eye on the calendar, with immunology megablockbuster Humira facing fierce biosimilar competition starting next year. Before COVID-19 therapies came along, Humira was the industry's top drug by sales, generating $21 billion in 2021. Despite a thicket of patents extending protection out to early 2034, the company has inked at least eight settlements allowing biosimilars. Sales are likely to fall off quickly once cheaper options enter the market in January.

The question is whether AbbVie can maintain its revenue when Humira loses patent protection. The company has managed to put together a strong portfolio of products across neuroscience, immunology, and oncology, shrinking Humira's share of earnings from 61% in 2018 to 37% in the second quarter of 2022. Management hopes that Skyrizi and Rinvoq will capture over $15 billion of combined sales by 2025, enough to replace Humira's sales.

AbbVie's aesthetics segment makes up a smaller portion of the portfolio, bringing in 9% of the company's $14.6 billion total second-quarter revenue. This segment is a recent addition to AbbVie after its 2020 acquisition of Allergan, which included facial injectables Botox and Juvederm. Despite a lackluster performance in the second quarter, which management attributed to poor international Juvederm sales caused by lockdowns in China and suspended sales to Russia, the global market for Botox is expected to grow by around 13% annually through 2028.

Botox is the leading minimally invasive cosmetic therapy in the U.S., and the number of annual injections has skyrocketed 700% in the past twenty years. While Botox is still primarily used by women over 40, interest among men and younger women is increasing. The "baby Botox" approach, injecting a lower number of units to soften facial expression rather than fully freezing movement, is increasingly being adopted as a preventative measure aimed at slowing down the aging process.

From AbbVie's perspective, Botox is likely to remain a long-term cash cow. Allergan opted to protect the formulation by keeping it a trade secret, rather than patenting its composition. Although AbbVie faces competition from other companies, Botox continues to capture the lion's share of the market with about 70% share. Only Jeuveau, a competing neurotoxin from Evolus (EOLS -1.71%), offers the same gold-standard molecular size, and no competitors so far have been able to undercut Botox on price. With expanding access, more accepting consumer attitudes, and repeat injections needed every three to four months, the treatment is building an ever-growing market of avid users.

The case for InMode

On the other end of the healthcare industry spectrum, InMode is a high-growth company focused exclusively on providing medical equipment for minimally invasive cosmetic procedures. The company's proprietary radiofrequency technology encompasses outpatient procedures for skin rejuvenation, contouring, wrinkle reduction, liposuction and skin tightening, hair removal, and muscle toning.

Energy-based cosmetic treatments are becoming increasingly popular, with the global market expected to grow by 10% annually through 2028. Growth is even higher within InMode's U.S. anchor market, where the number of skin-tightening and fat-reduction procedures using energy-based technology more than doubled from 2020 to 2021.

With a market cap of around $2.7 billion and historical five-year revenue growing 70% per year, InMode is still very much within its early high-growth stage. Analysts expect revenue to grow by 15% to 20% annually in the next two years.

Despite a challenging environment of inflation and supply chain disruptions, InMode maintained an extraordinarily high margin above 80% and increased second-quarter sales by 30% year over year. The company increased its installed base by 20% over the first half of the year to around 14,000 units. InMode is also expanding its footprint internationally, and now about half of its total installed base is located outside of the U.S.

Which is the best choice for you?

With price-to-earnings ratios of 20 for AbbVie and 17 for InMode, both stocks are now trading at valuations near the lower end of the healthcare industry. Both companies are very profitable and should see favorable macro tailwinds from an aging population and booming interest in noninvasive aesthetic procedures.

AbbVie is a Dividend Aristocrat now offering a 4% yield. The company's heavy reliance on a single drug creates shorter-term risk, but AbbVie has been diversifying its pharmaceutical and aesthetic offerings to shore up its long-term outlook. Still, as a mature company, it's unlikely to achieve the same type of growth trajectory as smaller InMode.

InMode is better for investors who can stomach some risk, while AbbVie is better for those seeking a more recession-proof option that generates some income.