Invest in AbbVie? I’ve Made My Decision

Kind of like that bunny that keeps on going… pharmaceutical firm AbbVie (ABBV) , long a Sarge fave, and now one of the oldest continuous long positions on my book, keeps on going… higher. Readers will recall how we at first entered the name for the dividend. We were then enthralled with how management, realizing that they were up against a patent expiration cliff with best selling drug Humira, had engineered the acquisition of Allergan to replace potential lost revenue, and potentially lost cash flow. Think Botox, think eye care, think neuroscience.

About six weeks ago, AbbVie posted an earnings beat on a slight revenue miss (+7.4% y/y) for their fourth quarter. Humira, even after having already lost patent protection in Europe, and with that expiration looming in the U.S. in 2023, saw net sales increase 3.5% (+6% in the U.S., -9.1$ elsewhere due to competition from biosimilars.) Sales of Skyrizi as a monoclonal antibody treatment for severe plaque psoriasis increased 70.5%. Beyond that, Imruvica sales fell 2.7%, Therapeutic Botox sales increased 18.3%, Cosmetic Botox sales increased 27%, Venlexta sales popped 33.3%, Vraylar sales increased 21.8%, and Juvedem sales grew 30.6%.

The firm provided FY 2022 guidance for adjusted EPS of $14.00 to $14.20 and guidance for GAAP EPS of $9.26 to $9.46. This guidance was well above consensus at the time. AbbVie will report first quarter results in late April. Currently Wall Street looks for adjusted EPS of $3.15 on revenue of $13.65B. That sales number would be good for 5.5% growth.

News

Just after sharing positive Phase 3 data for the firm’s prospective chronic migraine therapy, comes news that AbbVie will work with Scripps Research in a collaborative effort to develop potential novel, direct-acting antiviral treatments for Covid-19. Dr. Tom Hudson, Chief Scientific Officer at AbbVie said… “We are committed to bringing differentiated, next generation oral antiviral treatments to patients and ensuring broad access to address the diverse treatment needs around the world.”

The Fundies

As of the end of 2021, AbbVie had a net cash position of $9.83B, and current assets of $27.928B. This is the quarter that AbbVie posts its accrued expenses for the year, which drove current liabilities up to $35.194B. AbbVie typically runs with a current ratio above the key “one” level for three quarters and then drops below that level in the fourth quarter. This year’s 0.79 is different only in that it is a little light in comparison. The firm does have $146.529B in total assets and $131.093B in total liabilities less equity. This includes $64.179B in long-term debt that is down from more than $77B a year ago, and really only blew up due to the Allergan acquisition.

Tangible book value remains negative, now at $-52.55 per share, while fee cash flow remains positive… at $2.75 per share. Not as strong on the fundamentals as you expected? I haven’t written on AbbVie for a while.

My Thoughts

AbbVie has acknowledged that sales growth will slow in 2024, and then average single digit growth beyond that. The dividend in this name is key to making any investment decision regarding the stock. ABBV pays shareholders $5.64 annually just to stick around. That’s a yield of 3.62%. Still nice, used to yield a lot more. It’s not that the dividend has been downsized. Quite the contrary. The firm has increased the payout every year. The stock has just been that consistent.

The Chart

Three year chart. I noticed something. ABBV tends to suffer a bit in March, doesn’t it? I am already less in love with the fundamentals than I used to be. I am already up significantly on a fairly large position that does not yield what it used to. So, let’s go back over the past five months of March, back to 2016.

Hmm… it appears that ABBV’s mean performance for March over the past five is -1.88%. In fact, March is, on average, AbbVie’s second worst month of the year, only to October. Let’s dig in a little more. What week of 2022 is this (the eleventh)? This one will knock your socks off. Over these past five month of March, what do you think the worst week of the month has been for ABBV (the twelfth)? That’s right, the twelfth… that week averages a performance of -5.53% for ABBV shares. In fact, the twelfth week of the year is, on average, ABBV’s worst week of the year.

My Decision

I will be selling my shares of ABBV over the balance of the week starting today. Does past performance guarantee anything? Not a thing. If I am wrong, I can always buy them back. Probably buy them back right or wrong. If I am right, I’ll extract some capital from one of my names because I paid attention. Rock and roll.

(AbbVie is a holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells ABBV? Learn more now.)