With a small army of Wall Street analysts predicting on average that AbbVie's (ABBV 0.54%) revenue will shrink in 2023 as well as in 2024, investors are right to be cautious, and perhaps even a bit skittish. At the same time, the total return of the biopharma's shares is up by 12.4% in the last 12 months, handily beating the market's decline of 4.7%.
Is the market somehow missing the symptoms of a looming collapse, or is it judging that the company will navigate its upcoming troubles with ease? Let's answer those two questions by examining why people might be rightfully bearish about AbbVie's prospects over the next few years.
Why shareholders aren't completely wrong to be sweating
Pretty much everyone agrees that AbbVie's revenue is going to take a hit quite soon. Likewise, the consensus is that there's a very high chance the hits will keep coming over the next year or so. Here's why.
On Jan. 31, Amgen launched its drug Amjevita, a biosimilar copy of AbbVie's hit drug Humira, in the U.S. Like Humira, Amjevita is intended to treat a smattering of immunological conditions that affect millions of people, including rheumatoid arthritis, ankylosing spondylitis, Crohn's disease, and psoriasis. Sales of Humira brought in $21.2 billion in 2022, making the drug a significant contributor to AbbVie's top line, which totaled around $58 billion. And in 2023, Wall Street analysts expect Amjevita to steal a 3% share of the market for such therapies.
There's little reason to expect Humira to regain the lost ground anytime soon, as its exclusivity protections expired at the start of this year. At least seven other biosimilar competitors are anticipated to be in the running before the year ends, each of which is sure to detract from its share. Even AbbVie's management is messaging that revenue growth will be hard to come by through the end of 2024.
So it looks like the near term is going to be difficult for shareholders at best. And if the already gloomy estimates of management and Wall Street end up being rosier than what happens in reality over the next few quarters, it's hard to imagine the stock experiencing anything other than an all-out rout.
This won't be the end of the line
Despite everyone being largely on the same page with regard to AbbVie's upcoming challenges, the picture isn't nearly as bleak as the above might make it seem. In fact, the stock is likely to be a strong investment for the long term, because it'll probably be growing steadily once again during the latter half of the decade.
In 2023 and 2024, it'll commercialize as many as 11 of its pipeline programs, the vast majority of which are expanded indications of its medicines that are already approved for sale for other conditions. It'll also submit six requests for approval to regulators in 2024, which sets it up for potentially six approvals in the following year. And that's why management is anticipating that revenue growth will resume with gusto in 2025, even as Humira's sales continue to crash.
Also, AbbVie knew far in advance that Humira wasn't going to be a cash cow forever, so it invested in research and development efforts to make a pair of replacements. The two replacements, Skyrizi and Rinvoq, are each intended to treat some of the same conditions as Humira such that the company can continue to compete in all the same markets as it currently does. Rinvoq is also being investigated in late-stage clinical trials for its ability to treat diseases that Humira never could, like vitiligo, alopecia, and systemic lupus erythematosus (SLE). And between the indications that are already approved for each medicine, AbbVie is still competing in most of the same segments as it was with Humira.
With approvals for additional indications likely on the way, the company expects to bring in more than $21 billion in annual revenue from the combination of the pair by 2027 when their sales scale up to reach their peak, topping its largest haul from Humira. By then, it'll likely be advancing the next troupe of newer and better candidates for the same swath of conditions. Even if a few of those attempts fail, AbbVie will have plenty of indications to chase, and it's unlikely to repeatedly whiff with so many chances to succeed. And that doesn't sound like much of a nightmare at all, to say the least.
