Given the volatility of AbbVie's (ABBV 1.77%) stock over the past year, it's pretty clear that traders are worried about next year's impending Humira patent cliff. But it's not as if the company didn't see this coming and didn't prepare for it.

As a result, the pharmaceutical stock is up more than 36% so far this year but still appears to be attractively priced, with a forward price-to-earnings ratio of slightly less than 12.

It appears the market has already priced in the potential for reduced earnings for the company. Although the way AbbVie is going, an earnings slump is likely to be short-lived.

A tale of three drugs

Humira was seen as a blockbuster from the beginning; the rheumatoid arthritis medication brought in $800 million in its first full year of sales in 2003, back when AbbVie was still part of Abbott Laboratories. AbbVie kept Humira when it split off from Abbott Labs in 2013. In 2006, three years after Humira got its first approval from the Food and Drug Administration (FDA), it did $2 billion in sales.

Compare that ramp up to the company's new duo of immunology drugs, Skyrizi and Rinvoq. Skyrizi got its first approval in April of 2019, so its first full year of sales was 2020, when it did $1.59 billion in sales. Rinvoq got its first FDA approval in August of 2019, so its first full year of sales was also 2020, when it brought in $731 million. Together the two did $2.32 billion in sales in their first year -- already more than Humira did in its third year:

Bar chart showing early revenue growth for Humira vs. Skyrizi and Rinvoq.

Data sources: Abbott Laboratories and AbbVie. Chart by author. Yearly revenue figures are in millions of dollars.

AbbVie CEO Rick Gonzalez, in the company's third-quarter earnings call, said he expected Skyrizi and Rinvoq to together bring in $7.5 billion in sales this year, ahead of earlier company estimates.

"Skyrizi and Rinvoq have established outstanding launch trajectories across existing and new indications, giving us a high degree of confidence in the collective potential of these two assets to ultimately exceed the peak revenues achieved by Humira, achieving the strategic objective we had for replacing Humira," Gonzalez said.

Taking a look past immunology

Outside of immunology, AbbVie has several other therapies that have already had more than $1 billion in sales this year. Imbruvica, used to treat several blood cancers, made $2.6 billion in revenue in the first nine months of 2022. Botox Therapeutic brought in $1.6 billion in revenue in that period, and Botox Cosmetic pulled in $1.2 billion through the nine months. Antipsychotic drug Vraylar brought in just under $1.5 billion. Creon, a therapy used to aid people who can't digest food normally because they lack enough enzymes in their pancreas, falls just outside the $1 billion threshold with $941 million in sales over the first three quarters of the year.

AbbVie's pipeline is huge. At the American Society of Hematology annual meeting in New Orleans next week, the company is on schedule to present 65 abstracts across eight different types of cancer that have potential to eventually reach FDA-approved status.

Besides Imbruvica, which continues to add indications, one of the most promising of the company's oncology therapies is epcoritamab, which is being codeveloped by AbbVie and Genmab. The drug is being looked at to treat various blood cancers, and its Biologics License Application (BLA) was just given priority review status by the FDA last month to treat relapsed/refractory large B-cell lymphoma, a fast-growing type of non-Hodgkin lymphoma that affects 150,000 people worldwide every year.

A solid dividend

AbbVie qualifies as a Dividend King because, counting its time as part of Abbott Labs, it has raised its dividend for at least 50 consecutive years. It's on track for 51 years as it has announced a dividend starting in February of $1.48 a share, a rise of 5%. That works out to a yield of around 3.6%, which is roughly twice the S&P 500's average dividend yield of 1.82.

Since it was split off from Abbott, the company has increased its dividend by 270%. That makes a big difference in the long term. Since 2013, AbbVie's total return price has increased 670%, superior to the S&P 500's average total return over the same period. It's also well-covered, as AbbVie has plenty of free cash flow and the cash dividend payout ratio is only 44.94%, leaving room for continued increases.

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Abbvie stock is waiting for the bounce

AbbVie's Gonzalez has said he expects the company, after the Humira patent cliff hits, to see erosion of as much as 45% of Humira's revenue (the drug brought in more than $20 billion last year and is on track to do so again this year). Even if the percentage of decline is higher, expect a slower slump for Humira sales than many think.

Several Humira-type biosimilars are expected to launch next year, but only Amgen's Amjevita is expected to be ready in January. Overseas, Humira has been facing pressure from biosimilars since the fourth quarter of 2018, and yet the therapy still brought in $3 billion in international sales through the first nine months of this year.

It may take a while for physicians to change their habits and switch to new biosimilars, and AbbVie will likely offer discounts to maintain sales of Humira. Yes, the drug's revenue will slide, but the company is in a strong position to bounce back. That makes the stock a good buy for long-term investors.