Is AbbVie Inc (ABBV) Wasting Your Money?

Circling the wagons
Of course, that’s the life of a pharmaceutical — and of the shareholders who invest in it. You’re always fighting a rear guard action while looking ahead to the next blockbuster drug. Analysts note that AbbVie is also targeting more than a dozen new drug approvals over the next few years — specifically in areas like hepatitis C, multiple sclerosis, and Parkinson’s disease — to play against the day when Humira sales dry up.

Not that there aren’t obvious risks here, too. Following the death of two patients, AbbVie and partner Roche just suspended five clinical trials of the leukemia drug ABT-199 they were developing. While they’re putting on a brave face and stating they believe their timetable for initiating phase 3 trials in 2013 is still a go, having to fine tune the dosage so that doesn’t kill patients is a time-consuming obstacle.

A fair value
Despite AbbVie’s numerous rivals, the pharma still seems to be well-positioned — at least for the next few years — to capitalize on its current portfolio of drugs, as well as its deep bench of prospects. The stock is valued at 12 times forward earnings, putting it right in the middle of rivals Merck & Co., Inc. (NYSE:MRK), Pfizer, GlaxoSmithKline plc (ADR) (NYSE:GSK) (LSE:GSK), and Johnson & Johnson (NYSE:JNJ) — all pharmaceuticals confronting a patent cliff of their own to one extent or another.

Even experimental drugs that suffer hiccups, like ABT-199, aren’t necessarily down for the count, but rather have had their timetable extended. Investors who find AbbVie’s stock weakened on news of such developments just might want to avail themselves of the resulting opportunity to acquire shares when offered and benefit as the pharma buys back its stock.

The article Is AbbVie Wasting Your Money? originally appeared on Fool.com and is written by Rich Duprey.

Fool contributor Rich Duprey owns shares of Pfizer. The Motley Fool recommends GlaxoSmithKline and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.