Pharmaceutical giant AbbVie (NYSE:ABBV) is best known for its mega-blockbuster drug Humira, which raked in more revenue than any other medicine in the world in yet another year of successive growth in 2020. In this segment of Backstage Pass, recorded on Sept. 20, 2021, Fool contributors Brian Withers and Rachel Warren discuss what makes AbbVie such a stalwart choice for the long-term investor’s portfolio.
Brian Withers: The next company is AbbVie, I was just going to jump on to the next company, the next company is AbbVie. I’m not a big healthcare guy, [laughs] but interestingly enough, I worked for Allergan. When I left corporate world in 2019, Allergan was the last company I worked for, and AbbVie recently purchased Allergan. I know a little bit about the inner workings and some of the products, but I didn’t know a ton about AbbVie and I just wanted to share what I found is super-interesting. For those who don’t know, AbbVie started out, it was a split off from Abbott, and Abbott has been just over a century-old company that is focused on healthcare research and producing products that makes people’s lives better.
In 2013, it was formed and spun out as ABBV. What’s interesting is I looked at the initial announcement letter and they talked about how Abbott has been transformative in its 125-year history and enduring success, reinventing our times, reinventing ourselves. The bottom line of the announcement, it talked about a total of 10 programs that are currently in phase 3 clinical development.
The thing that came out most for me as I looked at AbbVie is these guys are an innovation machine. They used to be just focused on this immunology piece, but with the Allergan purchase, both aesthetics here, some neuroscience, Ubrelvy and Botox are both Allergan tools.
But they’ve expanded beyond their immunology routes into a number of other segments. I hadn’t gotten to the R&D pipeline yet. But since 2013, solid growth on the top and the bottom line, shareholder return, and oh, yeah, dividends, big-time dividends, 225% increase in the quarterly dividend since 2013. Look at this pipeline, it is just amazing.
A number of different healthcare areas, as well as stuff throughout the pipeline in phases ready to go or even just early stage is just amazing. Then not only is this pipeline huge and continually growing, they have upcoming key events in the next one and two years that should result in real revenue for the company as they go forward in the next couple of years. Pretty exciting. As you cover healthcare, Rachel, I imagine this name comes up quite often.
Rachel Warren: Oh, yeah. I love writing about the healthcare industry. I think it has a lot of great investment opportunities for long-term buy-and-hold retail investors. I think AbbVie was definitely an easy pick for me in terms of the long list of healthcare stocks that are out there.
You were talking about its dividend. Because of the spin-off with Abbott, it maintained Abbott’s dividend history. It qualifies as a Dividend Aristocrat. To be a Dividend Aristocrat, you have to have 20 years of consecutive dividend increases or more. AbbVie also has an incredibly above-average dividend yield. I believe, based on current share prices, it’s in the ballpark of 4.9% — that may have changed since I logged on — which is quite a bit higher. I believe the average stock trading on the S&P 500 right about now, it’s about 1.3% dividend yield. So, it’s got a super high dividend.
I think the other thing, as with these very large pharmaceutical companies, is you’re buying into a company that has a really stable track record of growth and it’s definitely accomplished that. Then like you were saying, it’s really going outside of these areas like immunology that it’s really known for and expanding. I know one thing that’s been a concern for some investors is that it’s going to be losing U.S. patent exclusivity for Humira, which is the world’s top-selling drug. I think it raked in like $20 billion in revenue for the company last year.
But I would say that AbbVie’s product portfolio, like you were mentioning has grown so much in recent years, and with its acquisition of Allergan has really changed direction and spanning so many different healthcare areas that are really raking in more and more profits for the company. I don’t think the Humira concern is a huge one, and I think that that particular acquisition of Allergan was a really good step in the right direction.
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