AbbVie stock fell 10% after emraclidine, its drug for schizophrenia, failed during the final stages of its trials. The setback has spooked investors but I believe it is unlikely to hinder the company’s growth prospects and is therefore a perfect ‘buy the dip’ opportunity.
AbbVie Inc. (ABBV) is a global biopharmaceutical company, founded in 2013 as a spinoff from Abbott Laboratories, focusing on discovering and delivering innovative medicines and solutions for complex health issues. The company is unique because it integrates cutting-edge technologies such as artificial intelligence and machine learning into its R&D processes, with 80% of its pipeline therapies classified as first-in-class.
The company’s leading product is Humira, a treatment for autoimmune diseases that accounts for almost 27% of total revenue. Other relevant products include Imbruvica, used for certain types of blood cancer; Skyrizi, to combat autoimmune diseases, primarily psoriasis; Botox, for cosmetic and therapeutic uses; Vraylar, for Schizophrenia and bipolar disorder; and Rinvoq, against rheumatoid arthritis and atopic dermatitis.
AbbVie’s immunology treatments generate approximately 50% of total revenue, oncology products contribute about 30%, neuroscience adds roughly 10%, and aesthetics around 10%. The U.S. sales represent approximately 60% of total revenue, while international markets generate approximately 40%.
AbbVie serves a diverse range of clients, primarily in the healthcare sector, including healthcare providers, pharmacies, government health programs, insurance companies, pharmaceutical wholesalers, and research institutions.
The recent plunge in stock price was driven by the failure of the company’s schizophrenia drug. The historic plunge seems to be an overreaction. The drug in question belonged to Cerevel, a company that AbbVie acquired last year for $8.7 billion. Since Cereval also has other drugs in the pipeline, investors are spooked about the reliability of their results. But this is an overreaction and the acquisition isn’t necessarily a complete failure as the market is thinking. Shedding over $40 billion in market cap is not justified by the failure of one drug.
The current dividend yield stands at 3.87%, and in a loosening monetary policy environment, investors would like to lock in that yield, providing protection against downward stock price movement.
There is no doubt that emraclidine failure is a big setback, but the company’s robust pipeline, especially the expected growth of its drugs Rinvoq and Skyrizi in the next couple of years, will drive future stock price appreciation.
AbbVie is not on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held ABBV at the end of the second quarter which was 70 in the previous quarter. While we acknowledge the potential of ABBV as a leading healthcare investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as ABBV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
