It's been more than a year since AbbVie (ABBV 0.71%) lost patent exclusivity for its most important product, Humira, an immunology medicine. Though this was a long time coming, the market reacted as though it was unexpected: AbbVie's shares dropped once the magnitude of Humira's sales decline became clear, during the drugmaker's first-quarter 2023 earnings release. AbbVie hasn't done much better since.
However, the drugmaker is showing great signs of being able to handle this headwind and deliver excellent results for a while afterward. Let's consider three such signs.
1. The top-line drop hasn't been that steep
Let's put things in context. Humira wasn't just AbbVie's top product, generating peak sales of $21.2 billion. It was the best-selling medicine in the biopharma industry's history, one in which many drugs never cross the "$1 billion in annual sales" mark. Furthermore, Humira accounted for a hefty percentage of AbbVie's sales. In 2022, the last year before it lost patent exclusivity in the U.S., Humira made up just under 37% of AbbVie's total revenue.
Given these factors, we might expect AbbVie's sales to drop much more dramatically than they have since the patent cliff. Revenue was down 6.4% to $54.3 billion in 2023, not a catastrophic plunge by any means. In fact, the company returned to top-line growth in the first quarter. AbbVie's revenue was $12.3 billion, 0.7% higher than the year-ago period.
Drugmakers often experience several years of declining sales after major patent cliffs, but AbbVie is already recovering. That's impressive, considering the size of the patent cliff in question.
NYSE: ABT
Key Data Points
2. The heirs to Humira are taking off
Humira has a deep portfolio of products, from its migraine treatment Qulipta to its Botox franchise and many more. Many of these medicines are helping smooth out Humira-related losses. The ones doing the bulk of that job, though, are Skyrizi and Rinvoq, a pair of immunology medicines. These two products have been growing their sales rapidly over the past few years, as they have earned indications that substantially overlap with those of Humira.
Take Skyrizi, the higher-selling one of the duo. In the first quarter, it delivered revenue of $2 billion, 48% higher than the year-ago period. Management sang its praises during the company's first-quarter earnings conference call, and with good reason. Jeff Stewart, executive vice president of the company, pointed out that Skyrizi has a market share in the U.S. of 35% in psoriasis, more than twice that of any competing biologic. AbbVie is awaiting approval for the drug in ulcerative colitis, an indication the company thinks could be a significant growth driver.
Rinvoq is similarly impressive, racking up sales of $1.1 billion in the first quarter, a 59% year-over-year increase. AbbVie said it expects combined sales of these products to hit $27 billion by 2027, and to continue increasing well into the 2030s as they keep earning new indications.
The company may not have found a single product that can replace Humira, but Skyrizi and Rinvoq together seem more than capable of doing that, and then some.
3. The dividend remains attractive
AbbVie's excellent dividend program remains one of the best reasons to buy the stock. Humira's patent cliff did nothing to slow things down for the drugmaker. Taking into account the time it spent as a division of Abbott Laboratories, AbbVie is a Dividend King that has now raised its payouts for 52 consecutive years, even since 2023, when Humira lost patent protection in the U.S. Given that the company is performing reasonably well even with Humira still weighing down growth, investors shouldn't worry about payout cuts.
AbbVie currently offers a yield of 3.8% and a cash payout ratio of just under 48%. There is plenty of room for more dividend increases. The payouts have nearly quadrupled since AbbVie became a stand-alone company in 2012. So, despite its lagging the market over the past year, AbbVie is a top pick for income-seeking investors.
