Lack Of Major LOE Events And Advancements In Skyrizi And Rinvoq Will Support Future Performance

Key Takeaways

• AbbVie anticipates strong revenue growth driven by Skyrizi and Rinvoq, with a clear runway due to limited Loss of Exclusivity.
  
• Strategic R&D and advancements in oncology and neuroscience are set to enhance long-term growth and improve earnings.
  
• Increasing competition, economic headwinds, and regulatory changes are pressuring AbbVie's revenue, margins, and long-term growth prospects across multiple segments.

Catalysts

A research-based biopharmaceutical company, engages in the research and development, manufacture, commercialization, and sale of medicines and therapies worldwide.

• AbbVie expects robust performance from Skyrizi and Rinvoq, projecting nearly $24 billion in revenue in 2025, driven by strong market access, share capture, and new indications, positively impacting future revenue growth.
  
• The lack of significant Loss of Exclusivity (LOE) events for the rest of the decade provides a clear runway for sustained revenue growth, with projected high single-digit revenue Compound Annual Growth Rate (CAGR) through 2029.
  
• Continued advancements in oncology and neuroscience pipelines, including promising assets like Venclexta, Elahere, Teliso-V, and emerging therapies for Parkinson's disease, should enhance long-term growth prospects and earnings.
  
• Anticipated growth in the aesthetics market, facilitated by low penetration rates and a strong portfolio, is expected to yield high single-digit revenue CAGR through 2029, boosting future revenue.
  
• Focus on strategic R&D investments and external innovation to elevate standards of care in key therapeutic areas could expand AbbVie's pipeline, potentially impacting earnings and revenue positively in the next decade.

AbbVie Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming AbbVie's revenue will grow by 6.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.5% today to 26.2% in 3 years time.
• Analysts expect earnings to reach $18.0 billion (and earnings per share of $10.59) by about March 2028, up from $4.2 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $22.7 billion in earnings, and the most bearish expecting $10.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.1x on those 2028 earnings, down from 89.1x today. This future PE is greater than the current PE for the GB Biotechs industry at 19.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.52%, as per the Simply Wall St company report.

AbbVie Future Earnings Per Share Growth

Risks

• Increasing biosimilar competition for Humira is leading to molecule compression in the U.S. and decreased revenue for AbbVie, as new mechanisms and novel treatments continue to capture market share. This pressure could impact overall revenue growth in the immunology space.
  
• Recent performance in the aesthetics sector has been negatively impacted by challenging market conditions in the U.S. and China, particularly due to economic headwinds and suppressed consumer spending caused by high inflation, affecting revenue and margins in this segment.
  
• There is increased pressure on pricing dynamics in immunology, with expected low single-digit price declines due to formulary negotiations and Medicare Part D redesign impacts. This could adversely affect net margins and overall financial performance.
  
• The neuroscience segment faces pipeline challenges, as seen with issues surrounding emraclidine development, causing potential concerns about long-term growth and revenue diversification beyond 2030.
  
• Changes in Medicare Part D benefit design could negatively impact revenues by approximately 4%, which is a significant headwind in addition to existing pressures on the portfolio.

Valuation

• The analysts have a consensus price target of $211.732 for AbbVie based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $250.0, and the most bearish reporting a price target of just $173.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $68.7 billion, earnings will come to $18.0 billion, and it would be trading on a PE ratio of 25.1x, assuming you use a discount rate of 6.5%.
• Given the current share price of $213.85, the analyst price target of $211.73 is 1.0% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.