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These 17 Words From AbbVie's CEO Explain Why the Stock Is Still a Buy

Motley Fool - Sun Feb 11, 7:25AM CST

There are thousands of drugs on the market, and there are thousands more that are no longer in use. However, none has been more successful in terms of sales than AbbVie's (NYSE: ABBV) Humira. That's why investors were rightly concerned when the immunology medicine ran out of patent exclusivity in the U.S. last year. AbbVie's CEO, Rick Gonzalez, called it the "largest loss of exclusivity event" in the history of the industry.

However, AbbVie saw this headwind coming from a mile away. Though its sales are declining right now, the company's underlying business remains strong. Let's discuss something Gonzalez recently said and why it should assuage investors' fears.

Passing of the torch

AbbVie famously acquired Allergan in a $63 billion blockbuster move to help plan for Humira's loss of patent. However, none of the products it got its hands on through this transaction are as crucial as Skyrizi and Rinvoq, a pair of immunology medicines considered to be the heirs to Humira. Skyrizi and Rinvoq treat many of the same conditions Humira did and target many of the same indications. Individually, they have sometimes been even more effective than AbbVie's former crown jewel.

Still, neither one of them can fill Humira's shoes by itself. But collectively, they can, and according to AbbVie, they will.

Gonzalez has reiterated this point on many occasions and expressed that even he and his team have been surprised at how fast sales of this duo have been growing. During the drugmaker's fourth-quarter earnings conference call, Gonzalez said the following 17 words that should be music to investors' ears: "...we now anticipate Skyrizi and Rinvoq will collectively exceed more than $27 billion in sales by 2027..."

Let's put that number in perspective. Humira generated peak annual sales of $21.2 billion, and that was in 2022 -- the final year of its patent exclusivity. Skyrizi and Rinvoq will collectively rack up some $6 billion more than that by 2027, and neither one will experience a patent cliff the following year. AbbVie expects both to continue growing their sales at a good clip well into the 2030s. In other words, Skyrizi and Rinvoq will, in fact, replace Humira just fine, an impressive accomplishment considering the medicine's status as the best seller in the history of the pharmaceutical industry.

It's also worth noting that AbbVie has many other therapies on which it will rely, from its Botox franchise to newer products like migraine medicine Qulipta. Not to mention, AbbVie should be able to develop new ones. The company's pipeline features more than 90 programs.

Don't forget the dividend

AbbVie should return to top-line growth next year, largely thanks to Skyrizi and Rinvoq. In the meantime, the company continues to reward shareholders with a fantastic dividend program. AbbVie is a Dividend King: It has raised its payouts for 52 consecutive years (when considering the time it spent under the wing of medical device specialist Abbott Laboratories). But even among Dividend Kings, AbbVie has been a standout in the past 10 years.

Consider how much the drugmaker has increased its dividend over the past decade compared to its former parent company.

ABBV Dividend Chart
ABBV Dividend data by YCharts.

Humira's patent exclusivity did nothing to slow down AbbVie's dividend program. The company is still going strong. It currently offers a yield of 3.55%, and its cash payout ratio remains conservative at 42.13%. That leaves ample room for more dividend hikes.

Here's the bottom line: Whether for growth or dividends, AbbVie is still an excellent stock to buy. The concerns surrounding Humira's patent loss seem exaggerated as Skyrizi and Rinvoq seem more than likely to fill that gap and then some.

Moreover, the company's dividend is more than safe -- there is no danger of payout decreases or suspensions anytime soon.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.

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