It's been a stomach-churning past few months for investors in pharmaceutical giant AbbVie (ABBV 2.10%). A potential blockbuster drug that AbbVie spent roughly $9 billion to acquire the rights to failed its clinical trials. Investors are also on edge over how the Trump administration and new Secretary of Health and Human Services Robert F. Kennedy Jr. might treat AbbVie and other U.S. pharmaceutical companies.
AbbVie bounced back after strong fourth-quarter results, but tariff fears and market volatility have sent shares tumbling again. Today, AbbVie's stock sits roughly 20% off its highs. It's a good time to take a breather, assess the underlying business, and consider whether the stock's decline offers enough value to make AbbVie a buy despite all this noise.
Here is what you need to know.
AbbVie's transition away from Humira has been masterful
If you've followed AbbVie in the past, it spent years reaping the windfall of Humira, an immunology drug used to treat various conditions, including rheumatoid arthritis and plaque psoriasis. It was a global top-seller for years, with sales peaking at over $21 billion in 2022. Pharmaceutical drugs have lifespans. Once their patents expire, cheaper generics flood the market and typically crater sales for the brand-name product.
Humira's exclusivity in the United States, the world's most lucrative pharmaceutical market, ended in 2023, and sales have already dropped to just $9 billion last year (and will likely continue falling). The dark cloud over AbbVie was how the company would grow once it lost Humira exclusivity. Management prepared AbbVie with acquisitions, headlined by its $63 billion deal to buy Allergan to broaden its portfolio and pipeline.
Additionally, AbbVie developed new immunology drugs in Skyrizi and Rinvoq.These moves are paying off. Skyrizi and Rinvoq were two of AbbVie's top three sellers in 2024. AbbVie's revenue dropped following Humira's patent expiration, but analysts now see record sales this year and again next year:
ABBV Revenue (Annual) data by YCharts
With revenue growth resuming, the market expects 12% annualized earnings growth over the next three to five years. AbbVie has turned the page on its Humira era, and it was a masterclass in business execution.
A Dividend King you can count on
AbbVie is a popular stock with dividend investors for its high starting yield and continuous dividend increases. AbbVie is a Dividend King with over 50 consecutive annual dividend raises. The streak dates back to its years as part of Abbott Laboratories. AbbVie began trading in 2012 following its spinoff from Abbott.
At the current share price, the dividend yields a solid 3.7%. Additionally, management has raised the dividend by an average of 6% annually over the past three years. A high dividend yield, solid growth, and dividend reinvestment have made AbbVie a fantastic investment. It has outperformed the S&P 500 over its lifetime.
AbbVie has $67 billion in debt following its acquisition spree over the past few years. Investors should expect management to raise the dividend modestly while it spends some time paying down debt. The company has an investment-grade (A-) credit rating from S&P Global, so it's not a red flag but something to consider.
Is the stock a buy?
Without factoring in how AbbVie's valuation might change, the company's expected earnings growth and high starting dividend yield could combine for double-digit annualized total investment returns over the next several years. There are always risks to pharmaceutical companies, though. AbbVie's high-profile drug failure in late 2024 is a prime example.
NYSE: ABBV
Key Data Points
Politics is also something to watch. Robert F. Kennedy has floated the idea of banning pharmaceutical companies from placing TV ads in the United States. It sounds scary, but pharmaceutical companies would likely challenge this in court. It's probably not something investors should rush to panic about right now. Depending on how things eventually settle, the real threat might be tariffs if they raise drug prices or complicate supply chains.
The good news is that AbbVie's price-to-earnings (P/E) ratio is only 14.4 times 2025 earnings. The stock price could already reflect these risks, given the dividend and earnings growth estimates. Falling stock prices aren't fun, but AbbVie's recent decline has made the stock a solid buy for long-term investors.
