It's been a challenging past three years for AbbVie (ABBV -0.10%). The pharmaceutical leader lost U.S. patent exclusivity for its top-selling medicine, Humira, and encountered a significant clinical setback that sent its stock price plunging, among other challenges. The drugmaker has lagged the market over this period.
Even so, AbbVie might perform very differently through the end of the decade (and beyond), provided it can execute effectively. Here are three key considerations for investors when evaluating an investment in AbbVie.
1. Skyrizi and Rinvoq's continued growth
Although AbbVie lost patent exclusivity for Humira, the immunology business remains its largest in terms of revenue. That's because of a duo of immunosuppressants, Skyrizi and Rinvoq, whose sales have been growing rapidly for years.
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The heirs to Humira have indications that, collectively, overlap with most of their predecessor's most important ones and are performing even better than management expected. The best part is that there is still plenty of room to grow for these medicines, especially as they (hopefully) earn even more label expansions. For instance, Rinvoq could earn five new potential indications over the next five years, including the treatment of alopecia areata and vitiligo.
Ongoing developments related to this duo of drugs matter quite a bit since Skyrizi and Rinvoq should be AbbVie's most significant growth drivers for the foreseeable future. The company expects these medicines to generate $31 billion in sales by 2027 -- $4 billion above their previous 2027 guidance -- compared to the $17.7 billion they achieved last year.
If all goes well, Skyrizi and Rinvoq should remain AbbVie's key performers into the next decade.
2. The pipeline could produce more gems
While Skyrizi and Rinvoq won't lose patent exclusivity anytime soon, pharmaceutical companies must prepare for that eventuality years in advance. Therefore, it's essential to closely monitor AbbVie's pipeline efforts and determine whether and to what extent they yield new products that could ultimately generate significant sales.
One of the company's newer approvals is Emrelis, a medicine for advanced non-squamous non-small cell lung cancer (NSCLC) with a c-Met protein overexpression. Emrelis earned the green light from the U.S. Food and Drug Administration in May. It became the first approved NSCLC therapy that specifically targets c-Met protein overexpression.
Here's why this matters. Lung cancer is the leading cause of cancer death in the world, and roughly 85% of them are of the NSCLC variety. The specific population that Emrelis targets -- advanced non-squamous -- is a smaller niche of that, and approximately 25% of those are c-Met overexpressed. So, there is a decent market here.
AbbVie is also developing other promising candidates. Tavapadon, a potential medicine for Parkinson's disease, has already shown strong data in phase 3 studies, for instance. The company's ongoing clinical progress still matters to its long-term success.
3. AbbVie's efforts to circumvent tariffs
President Donald Trump's trade policies have taken center stage on Wall Street this year. With the administration seeking to impose aggressive tariffs to bring manufacturing jobs back to the U.S., many companies have decided to fold, at least somewhat, by shoring up their local manufacturing capabilities. AbbVie is doing the same thing. The company announced a $10 billion investment over the next decade, partly to construct new production facilities.
Heavy tariffs could cut into the company's profits and margins, but it can mitigate their impact through these efforts. However, it may take some time before these production facilities are operational. In the meantime, it will be important to monitor how AbbVie handles that risk.
Is AbbVie's stock a buy?
AbbVie has moved beyond one of the biggest patent cliffs in the history of the industry (Humira is one of the best-selling drugs ever) thanks to Skyrizi and Rinvoq. Their combined sales should eclipse Humira's peak revenue of $21.2 billion by this year, considering management predicts $24 billion in combined revenue for the duo in 2025. The company also continues to develop newer medicines and has a deep pipeline with dozens of ongoing programs.
And while tariffs could be an issue, AbbVie should find ways to manage that, a project it is already working on. Lastly, AbbVie is a terrific dividend stock, boasting 53 consecutive years of payout increases. For all those reasons, the company's shares look attractive.
