For many years, AbbVie (NYSE:ABBV) heavily relied on its top-selling drug, Humira, which accounted for over 60% of its total sales. However, with the recent loss of patent protection and the launch of biosimilars, the company is expecting a significant decline in Humira sales this year.
The Rise and Fall of Humira
Humira has been one of the best-selling drugs of all time, with a wide range of indications in rheumatology, dermatology, and gastroenterology. Despite the loss of exclusivity in Europe and the upcoming loss in the US, Humira sales continued to grow. However, AbbVie recognized the need to diversify its revenue streams and made a strategic acquisition of Allergan. This move allowed AbbVie to reduce its reliance on Humira and enter new therapeutic areas such as aesthetics, neuroscience, and eye care.
The Path to a Balanced Portfolio
To offset the decline in Humira sales, AbbVie has focused on developing new drugs in the immunology segment. Skyrizi and Rinvoq have shown promising results and are indicated for many of the same conditions as Humira. AbbVie expects these drugs to help maintain overall immunology sales at current levels. Additionally, the company is counting on growth in its oncology, neuroscience, and aesthetics segments to drive future revenue. By achieving a better balance across therapeutic areas, AbbVie aims to reduce its dependence on Humira and ensure long-term success.
The Future of Immunology
AbbVie’s immunology segment, led by drugs like Skyrizi and Rinvoq, is expected to play a crucial role in the company’s growth. These drugs work through different mechanisms and have gained approval for various indications. AbbVie is also actively pursuing additional indications for these drugs to expand their market potential. With a robust pipeline and continued investment in research and development, AbbVie aims to maintain stable sales in the immunology segment around $25 billion.
The Growing Potential of Oncology and Neuroscience
While the immunology segment remains a key focus, AbbVie also sees significant growth opportunities in oncology and neuroscience. Imbruvica is currently the top-selling drug in the oncology segment, but sales have peaked and face competition from other BTK inhibitors. However, AbbVie has a pipeline of new drugs, such as Epkinly and Taliso-V, which are expected to receive approval in the coming years. These drugs, along with other early-stage developments, could double oncology segment sales to $12 billion by the end of the decade. In the neuroscience segment, AbbVie’s acquisition of Allergan brought in Vraylar, a depression drug that has already exceeded $2 billion in sales. With additional drugs in the pipeline, AbbVie aims to capitalize on the growing demand for neuroscience treatments.
The Role of Aesthetics in AbbVie’s Growth
Botox and Juvederm, acquired through the Allergan deal, are the main products driving AbbVie’s growth in the aesthetics segment. While the US market has experienced a temporary slowdown due to economic factors, international markets, especially China, have shown robust growth. AbbVie plans to focus on international marketing efforts to further drive demand. With a goal of surpassing $9 billion in sales by 2029, the aesthetics segment is expected to contribute significantly to AbbVie’s overall revenue.
Financial Outlook and Valuation
AbbVie is guiding for $53.4 billion in sales this year, with the expectation that this will be the trough level. Looking ahead, the company aims to stabilize immunology segment sales at around $25 billion and double oncology sales by 2030. With strong growth in neuroscience and aesthetics, AbbVie projects an overall sales figure of $65.8 billion by 2030. While the company’s EPS growth rate is in the mid-single digits, its dividend growth is expected to slow to 3%-5%.
In terms of valuation, AbbVie’s P/E ratio is in line with its peers, indicating fair value. With a focus on long-term growth opportunities, AbbVie offers a potential total return of around 8% per year, similar to the historical return of the S&P 500.
AbbVie’s success in the future hinges on its ability to achieve balance across its revenue sources. By reducing its reliance on Humira and diversifying into new therapeutic areas, AbbVie aims to ensure steady growth and mitigate the impact of declining Humira sales. With a strong pipeline and strategic acquisitions, AbbVie is well-positioned to navigate the evolving pharmaceutical landscape and deliver long-term value to its shareholders.
Disclosure: The author of this article currently holds shares in AbbVie and has no plans to sell. However, investors considering a new position may want to monitor the stock’s price and wait for a potential buying opportunity.