AbbVie is a global biopharmaceutical company specializing in immunology, oncology, neuroscience, and aesthetics, with a strong track record of innovation and market leadership. From its blockbuster drugs Skyrizi and Rinvoq to its expanding aesthetics and neuroscience portfolios, AbbVie is actively positioning itself for long-term growth beyond Humira. With a focus on high-margin therapies, strategic acquisitions, and pipeline advancements, the company aims to maintain its competitive edge in a rapidly evolving industry. The question remains: Should this pharmaceutical giant have a place in your portfolio?
This is not a financial advice. I am not a financial advisor and I only do these posts to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me.
For full disclosure, I should start by mentioning that at the time of writing this analysis, I do not own any shares in AbbVie. If you would like to see the stocks in my portfolio or copy my portfolio, you can do so on eToro, You can find instructions on how to do this here. I don't own any stocks in competitors of AbbVie either. Thus, I have no personal stake in AbbVie. If you want to purchase shares (or fractional shares) of AbbVie, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started with investing with as little as $50.
The Business
AbbVie is a global pharmaceutical company that was founded in 2013 as a spin-off from Abbott Laboratories. Headquartered in Illinois, USA, it ranks among the five largest pharmaceutical companies worldwide. AbbVie focuses on discovering, developing, manufacturing, and commercializing innovative medicines across immunology, oncology, neuroscience, aesthetics, and eye care. Its diverse product portfolio includes market-leading therapies such as Humira, Skyrizi, Rinvoq, Imbruvica, Botox, Vraylar, and Qulipta, addressing a wide range of chronic and serious diseases. In immunology, Skyrizi and Rinvoq have emerged as next-generation treatments following Humira’s patent expiration. The oncology division includes targeted therapies like Imbruvica and Venclexta, while the aesthetics portfolio, anchored by Botox, benefits from the acquisition of Allergan in 2020. AbbVie’s neuroscience division includes Botox Therapeutic, Vraylar, and migraine treatments such as Ubrelvy and Qulipta, expanding its presence in this space. AbbVie’s moat is rooted in several key factors. The company benefits from strong patent protection for its key drugs, ensuring market exclusivity and generating high-margin revenue. While Humira’s patent exclusivity has ended in key markets, AbbVie has transitioned to next-generation immunology drugs, Skyrizi and Rinvoq, which have patent protection extending through the 2030s. Its research and development capabilities ensure a steady flow of new products, supported by a global infrastructure for clinical trials and regulatory expertise. The company has diversified its portfolio across multiple high-growth therapeutic areas, reducing its dependence on any single drug or market segment. Operating as a single global business segment, AbbVie leverages its scale to optimize supply chains, sales, and commercialization efforts worldwide. Many of AbbVie’s therapies have high switching costs, as patients and physicians often prefer to continue with proven treatments. AbbVie has also expanded through strategic acquisitions, most notably with its purchase of Allergan, which reinforced its leadership in aesthetics and neuroscience.
Management
Robert A. Michael serves as the CEO of AbbVie. He assumed the role on July 1, 2024, succeeding Richard A. Gonzalez, who became Executive Chairman of the Board. In February 2025, Robert A. Michael was appointed Chairman of AbbVie's Board of Directors, further solidifying his leadership within the company. Prior to becoming CEO, Robert A. Michael held several key positions at AbbVie. He served as President and COO, where he was responsible for global commercial operations, finance, corporate human resources, global operations, business development, and corporate strategy. Before that, he was Vice Chairman and President in 2022, Vice Chairman of Finance and Commercial Operations in 2021, and CFO in 2018. Robert A. Michael began his career with Abbott Laboratories as a member of the financial development program and went on to hold leadership roles across multiple businesses, including pharmaceuticals, aesthetics, diagnostics, diabetes care, and nutrition. He played a pivotal role in establishing AbbVie's financial planning organization, developing its diversified business strategy, and successfully navigating the end of exclusivity for Humira in the U.S. Robert A. Michael earned a bachelor's degree in accounting from Indiana University's Kelley School of Business and a Master of Business Administration from the University of California, Los Angeles Anderson School of Management. Under his leadership, AbbVie continues to focus on delivering innovative therapies to patients worldwide, maintaining its commitment to addressing some of the world's most complex and serious diseases. While Robert A. Michael is still new in his role as CEO, his extensive leadership experience at AbbVie provides confidence in his ability to guide the company forward. Given his track record, I am comfortable with Robert A. Michael leading AbbVie into the future.
The Numbers
The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. AbbVie has delivered a return on invested capital above this threshold in most years, with the exception of 2020, which was affected by the pandemic. This partly explains the underwhelming numbers that year. Additionally, the acquisition of Allergan in 2020 also impacted ROIC. In the other nine years, AbbVie has consistently achieved a ROIC of around 20%, which is encouraging. Notably, AbbVie recorded its highest ROIC since 2018 in 2024, signaling a strong recovery and a positive outlook for the future. The company frequently references ROIC in earnings calls and highlights it as a key performance metric when benchmarking against competitors. This emphasis demonstrates that AbbVie views ROIC as an essential measure of financial success, which is something I personally appreciate. Given this focus, I expect AbbVie to continue achieving a high ROIC moving forward.
The following numbers represent the book value + dividend. In my previous format, this was referred to as the equity growth rate. It was the most important of the four growth rates I used in my analyses, which is why I will continue to use it in the future. As you are accustomed to seeing numbers in percentage form, I have decided to provide both the actual numbers and the year-over-year percentage growth. The first thing to notice is that there are some years with negative numbers. In 2018 and 2019, AbbVie reported negative equity mainly due to high debt levels and a reduction in the value of assets acquired in previous deals. Essentially, the company borrowed significant amounts of money, and some of the assets on its balance sheet lost value, which pushed equity into negative territory. However, since 2020, AbbVie has maintained positive equity every year. Equity has decreased over the past two years, partly due to the patent loss of its best-selling drug, Humira. As sales of other drugs continue to grow, we should start to see equity improve. Given that this decline was expected, I am not concerned about AbbVie’s recent equity trend.
Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins offer a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. It is not surprising that AbbVie has generated positive free cash flow every year over the past decade. From 2019 to 2022, AbbVie steadily increased its free cash flow each year. However, in 2023 and 2024, free cash flow declined due to the patent expiration of Humira. The company expects to stabilize free cash flow in 2025 at levels similar to 2024, before returning to growth in 2026 and beyond. AbbVie believes that focusing on high-growth products like Skyrizi and Rinvoq will drive this recovery. Management has stated that AbbVie’s free cash flow will continue to support both dividend growth and debt repayment. Since its inception, AbbVie has increased its quarterly dividend by 310%, reinforcing its commitment to rewarding shareholders. As a result, dividend investors should expect continued annual dividend increases moving forward. The levered free cash flow margin is currently at its lowest level since 2016, primarily due to the Humira patent loss. However, as sales of Skyrizi and Rinvoq expand, the margin should improve. The free cash flow yield is at its lowest level since 2015, indicating that shares may be trading at a premium. We will revisit valuation later in the analysis.
Debt
Another important aspect to investigate is the level of debt, specifically whether a business has manageable debt that can be paid off within a period of three years. This is determined by dividing total long-term debt by earnings. After analyzing AbbVie’s financials, I found that the company has 14,3 years of earnings in debt. This is significantly higher than my preferred level, but it is largely due to AbbVie’s acquisitions, including Allergan in 2020, Cerevel in 2023, and ImmunoGen in 2024. While I generally prefer lower debt levels, these acquisitions provide strategic value, making the higher debt more justifiable. AbbVie has also stated that debt repayment remains a priority, so I expect to see a lower debt-to-earnings ratio in the future.
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Risks
Patent losses represent a major risk for AbbVie, as they directly impact revenue, profitability, and key financial metrics such as return on invested capital (ROIC) and free cash flow. Patents provide market exclusivity, allowing AbbVie to charge premium prices and maintain strong margins. However, once a patent expires, lower-cost generics or biosimilars typically enter the market, often causing a sharp and immediate decline in sales. The most significant patent loss in AbbVie’s history was Humira, marking the largest loss of exclusivity event in the pharmaceutical industry. The introduction of biosimilars in the U.S. in 2023 led to a steep decline in Humira’s revenue, with sales dropping by 48.7% on an operational basis and U.S. revenue falling by $5 billion in 2024. This decline also affected AbbVie’s overall financial performance, leading to its first revenue drop in a decade in 2023. Beyond revenue, the impact extended to ROIC and free cash flow, as Humira had been a key cash generator for the company. The challenge is that Humira is not the only drug facing exclusivity loss. While AbbVie has been shifting its focus toward newer therapies such as Skyrizi and Rinvoq to offset Humira’s decline, additional patent expirations are on the horizon. If the company fails to introduce new blockbuster drugs to replace lost revenue from aging products, it could face further financial pressure. Another risk comes from legislative efforts aimed at accelerating the approval of generics and biosimilars. Any new regulations that shorten exclusivity periods or streamline the entry of competing drugs could further intensify competition. Additionally, AbbVie may face legal challenges to its patents, potentially leading to earlier-than-expected competition.
Competition poses a significant risk to AbbVie due to the highly competitive nature of the pharmaceutical and biotechnology industries. The company faces challenges from both branded and generic competitors, as well as from companies developing biosimilars that directly target AbbVie’s biologic treatments. One of the biggest risks for AbbVie is the constant introduction of new drugs and improved treatments by competitors. AbbVie operates in several key areas, including immunology, oncology, aesthetics, neuroscience, and eye care—fields where many companies are racing to develop better solutions. In immunology, AbbVie’s treatments like Skyrizi and Rinvoq compete against alternative drugs designed to treat the same conditions, including newer therapies that work differently and may be more effective for some patients. In cancer treatment, AbbVie’s drugs face competition from alternative targeted therapies that may offer improved outcomes or fewer side effects. In the aesthetics business, competitors continue to develop new products that challenge Botox, either by offering similar results at a lower price or by introducing alternative methods to reduce wrinkles and improve appearance. If competitors successfully introduce safer, more effective, or more affordable treatments, AbbVie could lose market share, leading to declining sales and profitability. Another major risk comes from biosimilars, which are lower-cost versions of complex biologic drugs. These pose a direct challenge to AbbVie’s best-selling treatments, particularly since biologic drugs are more expensive to develop and manufacture than traditional pills. Humira, once AbbVie’s top-selling drug, has already faced biosimilar competition worldwide, and the U.S. market saw the entry of biosimilars in 2023. As a result, Humira’s sales have dropped significantly, demonstrating how much competition can impact revenue. This trend will likely continue as more of AbbVie’s biologic drugs lose patent protection. Additionally, some of AbbVie’s competitors have merged or formed partnerships, making them stronger and better equipped to develop and market new treatments. If competitors launch products with better safety profiles, improved effectiveness, or lower costs, AbbVie may struggle to maintain its competitive edge.
Laws and regulations present a significant risk for AbbVie because the pharmaceutical industry is one of the most heavily regulated in the world. AbbVie must comply with strict rules at every stage of its business, from drug discovery and clinical trials to manufacturing, marketing, and pricing. Failure to meet these requirements can result in delays in drug approvals, legal penalties, product recalls, or restrictions on sales, all of which could impact revenue and profitability. One of the biggest challenges is the lengthy and costly drug approval process. In the United States, AbbVie must complete extensive preclinical testing and multi-phase clinical trials before submitting a New Drug Application or Biologics License Application to the Food and Drug Administration (FDA). This process takes several years and requires significant financial investment. Even after approval, AbbVie must comply with ongoing regulatory obligations, such as monitoring safety, reporting adverse effects, and maintaining strict manufacturing standards. If AbbVie fails to meet these requirements, the FDA can impose penalties, including rejecting new drug applications, suspending sales, or mandating product recalls. Outside the U.S., AbbVie must also navigate complex regulatory approval processes in international markets, each with its own set of rules. In the European Union, AbbVie must go through the European Medicines Agency, while in Japan and China, additional clinical trials or local studies may be required. Regulatory frameworks in emerging markets are still evolving, and many countries now require a drug to be approved in a major market like the U.S. or Europe before considering it for local approval. These variations in regulatory processes make international expansion time-consuming and unpredictable.
Reasons to invest
Skyrizi and Rinvoq are key reasons to consider investing in AbbVie due to their rapid sales growth, increasing market share, and strong potential to drive long-term revenue. These two immunology drugs play a crucial role in AbbVie’s shift beyond Humira, and the company has positioned them as leading treatments for multiple diseases. AbbVie expects Skyrizi and Rinvoq to generate nearly $24 billion in revenue in 2025, an increase of more than $6 billion from the previous year. Based on their continued success, the company has raised its 2027 sales forecast to $31 billion, $4 billion higher than its earlier projection. This growth is fueled by increasing market share, approval for new uses, and strong demand, particularly in the treatment of inflammatory bowel disease. One of the key drivers of their success is their growing acceptance among doctors and patients. Skyrizi now accounts for 40% of prescriptions in the biologic psoriasis market, making it the clear market leader. Rinvoq is also gaining traction in treating conditions such as eczema (atopic dermatitis), rheumatoid arthritis, and psoriatic arthritis, with doctors prescribing it earlier in the treatment process. These drugs are also making a significant impact in the inflammatory bowel disease market, where they are used to treat Crohn’s disease and ulcerative colitis—two large and growing treatment areas. Currently, Skyrizi and Rinvoq hold half of the market share for Crohn’s disease and one-third of the ulcerative colitis market, with further growth expected as more physicians adopt these treatments. Another factor driving future sales growth is their expansion into additional treatment areas. Skyrizi was recently approved for ulcerative colitis, while Rinvoq is expected to gain approval for five new conditions in the coming years, potentially adding another $2 billion in peak annual sales. These expansions will strengthen AbbVie’s presence in the immunology space, which continues to grow at a steady pace, with certain conditions seeing double-digit market growth.
Aesthetics represents a compelling long-term investment opportunity for AbbVie, despite recent challenges from economic pressures in the U.S. and China. The segment remains highly attractive due to low market penetration, strong consumer interest, and AbbVie’s leading portfolio of facial injectables, including Botox and Juvederm. While short-term conditions have been difficult, AbbVie expects aesthetics to grow at a high single-digit annual rate through 2029, ultimately surpassing $7 billion in revenue. One of the key reasons aesthetics is a major growth driver is the low penetration rate for facial injectables. Many consumers express interest in aesthetic treatments but have yet to try them, often due to concerns about cost or the risk of unnatural results. This suggests there is still significant room for market expansion, particularly as new products help address these barriers and attract first-time users. Internationally, aesthetics sales have been weaker in China due to economic challenges, but AbbVie is actively launching new products to strengthen its competitive position. In other global markets, such as Japan - where aesthetics remains an underdeveloped segment - AbbVie sees strong growth potential and is increasing its investments. AbbVie’s pipeline of new aesthetic products is also expected to drive future growth. One of the most anticipated launches is BoNT/E, a new toxin that works faster and has a shorter duration than Botox. The goal is to attract first-time aesthetic consumers who may later transition to Botox for longer-lasting results. The growing obesity treatment market presents both a short-term challenge and a long-term opportunity for aesthetics. In the near term, consumers prioritizing weight loss treatments may have less disposable income for aesthetic procedures. However, in the long run, as more people lose weight, demand for facial injectables and body contouring treatments is expected to increase. AbbVie is working closely with providers to integrate Botox and Juvederm into treatment plans for patients using weight-loss medications.
Neuroscience is a compelling reason to invest in AbbVie, as it has become the company's second-largest therapeutic area, delivering strong revenue growth across multiple key treatments. With global sales expected to reach $10 billion in 2025, reflecting a $1 billion increase from the prior year, the segment is showing impressive momentum across psychiatry, migraine, and Parkinson’s disease treatments. One of the key drivers of this growth is Vraylar, AbbVie’s leading treatment in psychiatry, which saw double-digit growth in 2024. Vraylar is used for treating bipolar disorder, schizophrenia, and major depressive disorder, and its expanding market penetration has contributed significantly to AbbVie’s neuroscience revenue. In addition to psychiatry, migraine treatments are another major growth driver. Ubrelvy and Qulipta, AbbVie’s oral migraine medications, continue to gain market share. Botox Therapeutic, used for chronic migraines and neurological disorders, also remains a strong performer. The continued double-digit growth across these three products highlights AbbVie’s dominance in the migraine treatment space. Beyond psychiatry and migraine, Parkinson’s disease treatments represent a new area of growth for AbbVie. The company recently launched Vyalev, a new Parkinson’s treatment that provides continuous symptom relief for 24 hours. Unlike traditional treatments that require multiple daily doses or invasive surgery, Vyalev is a non-surgical option that delivers a steady, controlled amount of medication throughout the day and night, helping patients manage symptoms more effectively. This makes it an attractive alternative for those seeking a more consistent and less disruptive treatment. Looking ahead, AbbVie expects neuroscience sales to continue growing at a double-digit rate, reinforcing its long-term potential. The company’s broad and innovative portfolio across psychiatry, migraine, and Parkinson’s disease provides multiple avenues for sustained revenue expansion.
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Valuation
Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.
The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 2,39, which is from the year 2024. I have selected a projected future EPS growth rate of 8%. Finbox expects EPS to grow by 8% in the next five years. Additionally, I have selected a projected future P/E ratio of 16, which is double the growth rate. This decision is based on AbbVie's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $20,41. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy AbbVie at a price of $10,20 (or lower, obviously) if we use the Margin of Safety price.
The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 18.806, and capital expenditures were 974. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 682 in our calculations. The tax provision was -570. We have 1.767 outstanding shares. Hence, the calculation will be as follows: (18.806 – 682 - 570) / 1.767 x 10 = $99,34 in Ten Cap price.
The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With AbbVie's free cash flow per share at $10,09 and a growth rate of 8%, if you want to recoup your investment in 8 years, the Payback Time price is $115,91.
Conclusion
AbbVie is a strong company with solid management. Over the past two years, its financials have been impacted by the patent loss of Humira, which will continue to weigh on the company in 2025. Despite this challenge, AbbVie achieved its highest ROIC since 2018 in 2024. The loss of Humira’s exclusivity has affected both AbbVie’s equity and free cash flow, which are not expected to return to growth until 2026. Patent expirations remain a key risk, as they allow lower-cost biosimilars to enter the market, leading to revenue declines, as seen with Humira in 2023. Without successful new drug launches, future patent losses could further pressure AbbVie’s financial performance. Competition also poses a significant challenge, as AbbVie faces pressure from both branded rivals and biosimilars in key therapeutic areas like immunology, oncology, and aesthetics. To maintain its market position, the company must continuously innovate and develop more effective or affordable treatments. Additionally, strict regulatory requirements present another risk, as navigating complex approval processes across global markets can lead to delays, increased costs, and potential sales restrictions. Despite these challenges, AbbVie has strong growth drivers. Skyrizi and Rinvoq are at the forefront, with rapidly increasing sales, expanding market share, and strong demand across multiple immunology conditions. Expected to generate $24 billion in revenue in 2025 and $31 billion by 2027, their continued success in psoriasis, rheumatoid arthritis, and inflammatory bowel disease positions AbbVie for long-term growth beyond Humira. Aesthetics also represents a compelling long-term opportunity, benefiting from low market penetration, strong consumer interest, and AbbVie’s leadership in facial injectables like Botox and Juvederm. The company expects this segment to grow at a high single-digit rate through 2029, driven by new product launches and international expansion. Neuroscience is another major growth driver, fueled by strong demand for treatments in psychiatry, migraine, and Parkinson’s disease. With key products delivering double-digit growth, AbbVie is well-positioned for continued expansion in this high-potential market. There are many reasons to like AbbVie, and this analysis is based on a particularly challenging period due to the impact of Humira’s patent loss. Given these factors, I believe that buying shares at $139 - offering a 30% discount to the intrinsic value based on the Ten Cap price - would be a strong long-term investment.
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