Leading healthcare company AbbVie (ABBV -0.16%) appears to be hungry for deals to help it diversify its revenue streams. That's because it will need to become less reliant on Humira, its blockbuster rheumatoid arthritis drug, which is losing patent protection. One example of this came in 2020 when it closed on a massive $63 billion acquisition of Botox maker Allergan. To further diversify its operations, the company recently announced another acquisition.

AbbVie to acquire ImmunoGen

On Nov. 30, AbbVie announced plans to acquire oncology company ImmunoGen (IMGN) for approximately $10.1 billion. It will fund the deal through cash. The acquisition will help strengthen AbbVie's portfolio, giving it a promising asset in Elahere. Elahere is an antibody-drug conjugate (ADC) that regulators have approved for treating platinum-resistant ovarian cancer. Analysts project that at its peak in 2029, the therapy will generate annual revenue of over $1.4 billion.

Unlike other cancer treatments and therapies which can damage other healthy cells in the process, ADCs target cancer cells and can lead to better results for patients. ImmunoGen has other ADCs in its pipeline, though nothing that's beyond phase 2 trials. But with years of experience working on them, the company would instantly improve AbbVie's growth opportunities within oncology.

AbbVie can benefit from more diversification

For AbbVie, the acquisition makes a lot of sense: Its lack of diversification is one reason investors aren't overly bullish on the healthcare stock these days. Its top-selling drug Humira saw a loss in sales this year due to rising competition related to patent expiration. And while the company has a plan to make up for that void with other immunology drugs, Skyrizi and Rinvoq, it hasn't been winning over investors; year to date, share prices of AbbVie are down 11%.

In its third-quarter results, immunology drugs generated $6.8 billion in sales, accounting for nearly half of the company's total revenue of $13.9 billion. This is despite AbbVie having products in many other segments, including eye care, neuroscience, aesthetics, and oncology. Its oncology business is its second-largest, but at $1.5 billion, the revenue the company's cancer drugs brought in was about one-fifth of immunology drug sales.

Acquiring ImmunoGen will help pad AbbVie's oncology revenue while also bolstering its pipeline in the process.

AbbVie is in a great position to spend on acquisitions

Despite the stock's struggles this year, I'm not concerned about AbbVie. This is a solid business that generates ample cash flow to support both its dividend (it now yields 4.3%) and its growth opportunities. Over the past 12 months, the company generated $24.7 billion in free cash flow, with $10.4 billion of that going to cover its dividend payments.

AbbVie's strong cash-generating operations enable it to take on ImmunoGen in a cash deal, without having to rely on stock offerings or taking on mammoth amounts of debt. If the company can continue to pump out such impressive amounts of free cash, don't be surprised to see more deals in the future as it continues to expand its business.

Is AbbVie stock a buy?

AbbVie was a solid stock to buy even before this deal. Acquiring ImmunoGen is a good move for the company. And it should remind investors that AbbVie, equipped with strong financials, will find opportunities to get bigger and more diverse.

The stock trades at a forward price-to-earnings multiple of only 13. At such a modest valuation, AbbVie is practically a no-brainer buy for the long haul.