AbbVie Inc. (ABBV-N)

Companies that don't have high demand for R&D investment pay out a lot of earnings in dividends or buy back shares. Results in negative net worth on the books. Growth trajectory stale. Don't be fooled by high dividend yield or low PE.

It's been hurt because the whole sector has. Shares went from $182 to $169. At $163-4, start buying again. He owned, sold for a profit and wants to get back in. They make Botox, which is a key product.

In the past 2 months they bought Immurgen (they have an ovarian cancer treatment and oncology portfolio) and Cerevel (a clinical stage biotech to treat, for example, Parkinson's, epilepsy). These are smart moves. Why? Competition. CVS just announced it is adopting biosimilars (generic drugs), including removing Humira (Abbvie's big drug which came off patent).

Sold because Humera was coming off patent. A good move that avoided the opportunity cost of the stock just treading water. Trying to plug holes with acquisitions. Good company, but better opportunities elsewhere.

He sold Abbvie. He likes pharma, but this is a weaker name that's facing more competition.

One of largest pharmacy companies in sector. Recently announced M&A plans for cancer drugs. Very strong brand value with excellent management team. Company very resilient to gyrations in economy. Price target is ~$160. Strong history of good capital allocation. Consistent dividend increases over past 50 years. Current dividend yield very safe. 

They're trying to fill the Humira whole which is going off patent, though is a huge-selling drug. They have to migrate people to use new drugs, and he thinks they can. He'd like to hear managers talk about this.

Great cash flow yield. A great performer in 2022, but has been recently weak with most of healthcare. Beyond healthcare, healthcare has the highest free cash flow, good to hold as we enter an uncertain economy.

Has earnings power, margins and growth. People got too bearish on Humira's biosimilars. Skyrizi did much better than expected. Has strong free cash flow. A good way to diversify away from tech.

EPS of $2.91 beat estimates of $2.87 and revenues of $13.87B beat estimates of $13.51B. Revenues declined by 4.9%, and its adjusted diluted EPS declined 13.6%, which includes an unfavourable impact of $0.15 per share related to acquired IPR&D and milestones expense. Its immunology portfolio saw revenues decline 5.5%, which Humira net revenues declining 25.2%. Hematologic Oncology portfolio revenues decreased 10.4%, and its Neuroscience portfolio increased sales by 13.6%. Management raised 2023 adjusted diluted EPS guidance to $10.90 - $11.10 from $10.57 - $10.97. Its results, while witnessed a year-over-year decline, were above expectations, and driven by its non-Humira business, which delivered high single-digit sales growth. The raising of full-year guidance is encouraging, and it is progressing across all stages of its pipeline and benefiting from diversification amongst its portfolios. We would be comfortable buying ABBV at these levels, given its increased guidance and expectations for growth. 
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Prefers ABBV. Main overhang to PFE is what happens to the vaccine franchise now that we're on the other side of Covid? PFE will need other engines, it's a show-me story. ABBV is a leader in immunology. Humira is coming off patent, which will compress earnings, but that's well-known by the market. Its pipeline will fill the gap, plus Botox business.

Pays a 3.9% dividend, paying 14x forward earnings, but the EPS growth rate is likely under 5% annual forward. Problem is their big drug Humira comprises 43% of overall sales, but this patent expires this year--that's a problem. Abbvie does have a good pipeline though. Prefers Pfizer, Merck, etc.

 ABBV is set to see more competition on Humira, which is a multi-billion dollar product for it. But this is hardly new news. 
The issue has been discussed for years as the drug comes off patent. 
There hasn't been much material news; the company did say it was lifting its $2B cap on acquisitions, potentially worrying some investors who want debt to decline. 
The sector has also seen some weakness generally as investors move into other areas. It reports tomorrow and remains very cheap.  
We would not change a position.  
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It reports Thursday. Recently, it's gotten negative press over the high-handed way ABBV protected the price of Humira, their big drug that has finally lost patent protection. Will it crush gross margins? Does management have enough to offset that loss? If management addresses this issue, shares could go down.