Over the past few years, AbbVie (ABBV +0.98%) has faced significant challenges, including the loss of patent exclusivity for its longtime growth driver, Humira, an immunology medicine. The drugmaker also encountered clinical setbacks, while weakness in the broader healthcare sector hasn't helped either. However, AbbVie continues to post robust financial results.
In the second quarter, the company's revenue increased 10.2% year over year to nearly $17 billion, while its adjusted earnings per share climbed 23% year over year to $3.65. AbbVie's troubles in recent years haven't destroyed its business, not even close. In fact, Wall Street thinks the stock could perform fairly well over the next 12 months. Its average price target of $272.14 (according to Yahoo! Finance) implies an almost 12% jump from current levels. Here's why I think Wall Street is right.
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A dividend you can take straight to the bank
AbbVie replaced Humira with Skyrizi and Rinvoq, a pair of immunology medicines that, together, are performing even better than their predecessor. They have earned approvals across many of Humira's old indications and are seeing significant momentum. Management expects them to combine for $31 billion in sales this year, and neither will lose patent exclusivity until the next decade.
So, AbbVie's medium-term outlook seems bright thanks to Skyrizi and Rinvoq, especially when we factor in the rest of the company's approved portfolio, which includes several other growth drivers, such as Qulipta, a migraine treatment. Just as important, AbbVie is already making plans to replace its current growth pillars. The pharmaceutical giant recently announced the acquisition of Apogee Therapeutics, a biotech that specializes in immunology. That's right up AbbVie's alley.
The key asset from that transaction, zumilokibart, is being developed to treat eczema. It could also target asthma and eosinophilic esophagitis (a chronic disease that causes symptoms such as difficulty swallowing). This could be AbbVie's next blockbuster in immunology, potentially making the $10.9 billion in cash it is paying for Apogee Therapeutics worth it.
NYSE: ABBV
Key Data Points
AbbVie has many other pipeline candidates, and we should expect significant clinical and regulatory progress over the next five years, enabling the company to maintain strong financial results. Lastly, AbbVie has a rock-solid dividend program that hasn't faltered despite the headwinds it has faced in recent years. AbbVie continues to raise its payouts amid major patent cliffs and broader macroeconomic challenges.
When factoring in the time it spent as a division of Abbott Laboratories, AbbVie is a Dividend King, or a corporation with at least 50 consecutive years of payout increases (AbbVie's streak is 54 years). Income-seeking investors will find what they are looking for in AbbVie: A reliable dividend payer with a robust business that can navigate periods of economic instability, attractive growth prospects, and the means to continue innovating and expanding its portfolio to support its income program for a long time.
