AbbVie (ABBV -1.03%) and Pfizer (PFE -0.19%) are two of the world's biggest pharmaceutical companies, and the similarities don't end there. Both players are going to face some headwinds over the next couple of years as the income from their cash cow medicines sharply erodes. Beyond that, however, both have big plans to keep growing. But which will grow at a faster pace? Let's look at the arguments for each.
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AbbVie's pivot is proceeding as planned
The case for AbbVie as a growth stock can't avoid two issues: the decline of Humira, and the stagnation of its oncology portfolio.
For 2022, Humira, its arthritis drug and one of the best-selling medicines of all time, brought in $21.2 billion out of AbbVie's top line of roughly $58 billion. But now that generic versions are on the cusp of devouring its market share, the business will have a hard time expanding its top line anytime before 2025.
To make matters worse, management is also expecting oncology revenue to fall this year and remain at a lower level until roughly 2026, when new launches should return the segment to growth. So the next few years will be difficult for AbbVie.
But after 2025, the two new medicines that the company developed to compete in the same markets as Humira, Skyrizi and Rinvoq, should start to see their sales pick up -- and by 2027, they are anticipated to surpass the total revenue of Humira. Furthermore, AbbVie's aesthetics segment, which holds the rights to popular treatments like Botox and Juvederm, is slated to grow from 2022's total of $5.3 billion to reach more than $9 billion in annual revenue in 2029.
If management's projections are correct, and so far with the ramp-up of Skyrizi and Rinvoq they have been, the business will be increasing its sales between 7% and 9% annually by the end of the decade. While that might not seem like rapid growth, it's important to note that AbbVie also pays a dividend that currently has a forward yield of around 3.8%, and it plans to continue doing share repurchases, so investors will get rewarded in more ways than just top-line expansion.
Will Pfizer's oncology gambit with Seagen pay off?
Like AbbVie, Pfizer is going to see its sales crater in the near term thanks to declining demand for its coronavirus medicines -- vaccine Comirnaty, and antiviral pill Paxlovid.
Excluding any residual sales from coronavirus products, management is expecting to bring in $52 billion in 2025, a brutal drop from its 2022 revenue of $100.3 billion. But after that, it'll also lose another $17 billion from its top line as a result of expiring exclusivity protections for some of its medicines between 2025 and 2030.
To partially mitigate that drop, the company is spending $43 billion in cash to acquire Seagen, a biopharma that focuses on oncology drugs. The Seagen purchase could contribute around $10 billion to the additional $25 billion in sales that Pfizer is hoping to generate in 2030 via acquisitions. So under management's best set of guesses, it could have a top line worth $84 billion by the end of the decade.
But that's still less than it made last year, even if Pfizer is going to continue paying out its dividend, which currently yields 4%, and performing share buybacks too.
It's a close call
Both AbbVie and Pfizer are good investments that most people should feel relatively comfortable buying and holding as long as you don't expect to beat the market every single year. But AbbVie's growth trajectory through 2030 makes it a better growth stock today.
Even losing its biggest moneymaker isn't going to cause its top line to sag by as much as Pfizer's loss of most of its coronavirus revenue will, because AbbVie had the luxury of planning for Humira's decline many years in advance of it actually happening, unlike Pfizer. And while the Seagen acquisition will probably be a positive for Pfizer shareholders, it still won't be enough to power actual growth from the standpoint of 2022.
Still, it's important to note that neither AbbVie nor Pfizer is likely to expand by as much as a far smaller company at the start of its growth journey. So if you're able to take on more risk, you might see your money grow faster elsewhere.
