AbbVie: Navigating Life After Humira—Can Big Pharma Thrive Post-Blockbuster?
For pharmaceutical giants, blockbuster drugs often represent a pinnacle of success, bringing both significant revenue and investor excitement. However, the flip side to this success story frequently involves the looming threat of patent expirations and market competition. AbbVie, a leading US drug manufacturer, exemplifies this delicate balance as it transitions beyond its once-great revenue driver, the rheumatoid arthritis treatment known as Humira.
The Rise and Fall of Humira
Since its inception as a separate entity from Abbott Laboratories in 2013, AbbVie has witnessed a staggering surge in sales—from $18.8 billion to a projected $58.1 billion in 2022. A significant contributor to this growth has been Humira, which boasted peak annual sales of $21.2 billion in 2022. For two decades, Humira enjoyed the protection of extensive patents, but as of early 2023, lower-cost competitors have begun to infiltrate the market. Projections indicate that sales from Humira will plummet from $9 billion in 2024 to a mere $5.7 billion within the current fiscal year.
Charting a Course for Post-Humira Growth
Despite the impending decline from its flagship product, AbbVie is forging ahead with a robust, multi-faceted growth strategy. The company anticipates achieving high single-digit compound annual sales growth through the end of this decade. Impressively, AbbVie has managed to adjust its sales outlook to $59.3 billion, just two years after Humira saw its patent protections erode.
Central to AbbVie’s optimistic outlook are its follow-on drugs, Skyrizi and Rinvoq, both of which are dramatically exceeding initial market share expectations. Coupled with a rise in investor confidence, AbbVie has adjusted its guidance for combined sales of these drugs from $27 billion to $31 billion by 2027. Notably, the company currently faces minimal threats from patent expirations until well into the 2030s, enhancing its future growth prospects.
The Bumps Along the Road
However, navigating the transition away from Humira has not been without challenges. In November 2023, AbbVie announced a hefty $3.5 billion charge in relation to a failed trial for a schizophrenia drug, Emraclidine. This drug was acquired through the $8.7 billion purchase of Cerevel Therapeutics, completed just the previous August. This setback has sparked concerns regarding AbbVie’s acquisition strategy and highlighted the risks associated with expanding through mergers and acquisitions.
Market Perceptions and Investor Confidence
Despite these challenges, AbbVie shares remain attractively priced at 15 times forecast earnings, particularly given expectations for nearly 17% earnings growth in the upcoming years. The company has garnered the attention of elite fund managers, with 21 top performers holding shares in AbbVie, granting it Citywire’s top AAA rating, a measure of “smart money” interest.
Diverse Revenue Streams and Future Growth
Half of AbbVie’s sales are driven by its immunotherapy drugs, including Skyrizi and Rinvoq, yet the company is not solely reliant on these products. AbbVie maintains a promising pipeline in various sectors, including its aesthetics division, which contributes 9% of total sales through products like Botox, and a neuroscience division, which makes up 16% of sales. The company’s cancer division is also on the rise, bolstered by its recent $9.7 billion acquisition of ImmunoGen.
A Stable Financial Outlook
Although the completion of high-profile acquisitions has temporarily increased AbbVie’s debt levels—rising to $59.9 billion by the end of last year—analysts anticipate this will decrease to $32.6 billion by 2027. This reduction is projected to occur alongside a robust earnings before interest, tax, depreciation, and amortization (Ebitda) forecast of $34.4 billion for that year. With its strong cash generation capabilities, AbbVie also boasts an impressive dividend growth track record, currently offering a yield of 3.4% over the next 12 months.
Conclusion
Although AbbVie faces the daunting challenge of transitioning away from its historic revenue generator, Humira, the company appears poised for continued growth. With a focus on innovative product development, strategic acquisitions, and diverse revenue channels, AbbVie’s future looks increasingly promising, signaling that even after losing its golden goose, it may find a brighter path ahead.