Imagine that someone asks you to invest in a business. This business has been highly successful in the past. However, its top-selling product accounts for nearly 38% of total revenue. And sales for that product are about to tank due to competition. 

Do you invest in the business? I suspect most people would take a pass based on the information provided. 

AbbVie (ABBV 0.22%) currently faces the exact scenario described above. Its megablockbuster drug Humira faces biosimilar competition in the U.S. beginning next year. This loss of exclusivity is viewed as the biggest reason to stay away from AbbVie. But is the big pharma stock actually a smart contrarian pick for 2023?

Examining the conventional wisdom

The conventional wisdom is that AbbVie's revenue will decline significantly next year. Humira will probably rake in somewhere in the ballpark of $20 billion this year. AbbVie has previously modeled for sales erosion of between 35% and 55% in 2023 with biosimilars entering the market in the U.S. If we use the midpoint of that range, the loss of U.S. exclusivity for Humira could negatively impact AbbVie's total revenue next year by around $9 billion. 

It will be challenging, to say the least, for the drugmaker to make up for an anticipated sales decline that large. Can AbbVie do it?

The company's total net revenue in Q3 jumped by 5.4% year over year on a constant-currency basis. But AbbVie CEO Rick Gonzalez noted in the most recent quarterly conference call that the underlying business growth without Humira in Q3 was around 6.5%. And that growth came at a time of headwinds for the company's aesthetics business.

If we assume that AbbVie's non-Humira products continue to deliver that level of sales growth in 2023, they should add somewhere in the ballpark of $2.4 billion in sales next year. That's obviously not enough to fully offset Humira's expected sales decline.

It's likely, though, that the momentum will accelerate for some of AbbVie's products. Skyrizi recently picked up European approval for treating Crohn's disease. Imbruvica added another U.S. approved indication in treating pediatric graft-versus-host disease. In addition, AbbVie expects multiple regulatory approvals in 2023, notably including epcoritamab as a third-line treatment for diffuse large B-cell lymphoma and navitoclax in treating myelofibrosis. 

These approvals (and potential ones) could boost AbbVie's revenue incrementally next year. However, it typically takes a while for commercial launches to move the needle. Ultimately, I think the conventional wisdom is spot on about AbbVie. There's no realistic way for the company to completely make up for Humira's hemorrhaging sales in 2023.

The rest of the story

If AbbVie's story ended in 2023, avoiding the stock like the plague would be a no-brainer decision. But the story for the company doesn't end next year. 

Gonzalez said in the Q3 call that he's "highly confident" that Humira's two successors, Skyrizi and Rinvoq, will more than offset Humira's sales erosion over time. Based on the better-than-expected performance of these two drugs so far, that optimism seems to be warranted. 

It's also important to keep in mind that AbbVie has a boatload of regulatory submissions and late-stage data readouts for other products on the way. The company's pipeline is chock-full of promising earlier-stage programs as well. AbbVie should have plenty of other growth drivers beyond Skyrizi and Rinvoq.

Don't forget the company's attractive dividend, either. AbbVie is a Dividend King with 50 consecutive years of dividend increases. Its dividend yield currently tops 3.7%. Over the last 10 years, dividends have generated nearly 40% of AbbVie's total return.

Not as contrarian as it might seem

I think that AbbVie is a smart contrarian pick for 2023 despite the looming Humira albatross. The company has done a good job of preparing for the loss of U.S. exclusivity for its top-selling drug. 

Actually, though, this view isn't as contrarian as it might seem. Investors clearly still like AbbVie with the stock soaring close to 20% this year. Many Wall Street analysts remain bullish about AbbVie as well. Half of the analysts surveyed by Refinitiv rate the stock as either a buy or a strong buy. None of the analysts recommend selling AbbVie. 

I don't expect AbbVie will deliver the impressive gains in 2023 that it has so far this year. However, the stock will pay investors a solid dividend to wait. My take is that wait will be worth it as Skyrizi, Rinvoq, and the company's other products pick up steam. It doesn't take much imagination to envision AbbVie generating market-beating total returns over the next decade.