AbbVie's Resilient Growth Amid R&D Challenges

AbbVie (NYSE: ABBV) faces headwinds in its second quarter of 2025, driven by rising R&D expenses and the ongoing decline of its blockbuster drug Humira. Yet, beneath the noise, the company's ex-Humira portfolio and robust pipeline are signaling a path to sustained growth. Let's dissect how AbbVie is weathering near-term pressures—and why investors should consider it a buy.

Ex-Humira Growth: The Engine of Resilience

Humira's dominance once defined AbbVie, but biosimilar competition has slashed its U.S. sales by over 50% since 2023. The ex-Humira portfolio, however, is more than compensating. In 2024, Skyrizi (upadacitinib) and Rinvoq (rizivertinib) delivered combined revenue growth of 51%, reaching $17.69 billion. For 2025, AbbVie projects a high single-digit ex-Humira revenue CAGR through 2029, with Skyrizi and Rinvoq alone targeting $31 billion in annual sales by 2027.

This isn't just about maintaining revenue. These drugs are expanding into new markets. In Q2 2025, the European Commission approved Rinvoq for giant cell arteritis, its eighth indication in the EU. Meanwhile, Skyrizi's approval for giant cell arteritis in the U.S. is pending, further fueling expectations.

Pipeline Catalysts: Oncology and Neuroscience Lead the Way

While R&D spending remains a drag—$823 million in Q2 2025 alone—AbbVie's pipeline is rich with near-term catalysts:

1. Oncology:
2. Elahere (folate receptor alpha-targeted therapy) gained EU approval for ovarian cancer in Q2, following FDA approval in 2023. Phase 3 data showed a 34% reduction in disease progression or death in high-risk patients.

3. Epkinly (copanlisib) is on track for FDA approval in relapsed follicular lymphoma in late 2025, with a PDUFA date set for December.

4. Neuroscience:

5. Tavapadon (for early Parkinson's disease) met Phase 3 endpoints in Q2, with an NDA submission expected in 2025. This could be a $1 billion+ drug by 2030.
6. The $2.1 billion acquisition of Capstan Therapeutics adds CPTX2309, a Phase 1 asset for autoimmune diseases, and an RNA delivery platform.

Acquisitions: Buying Growth, Not Just Assets

AbbVie's recent deals are strategic bets on future winners:
- Capstan: Strengthens its autoimmune pipeline with a novel RNA platform, targeting unmet needs in diseases like lupus.
- Aliada Therapeutics: Adds ALIA-1758, a potential Alzheimer's therapy leveraging blood-brain barrier-crossing technology.

These moves address risks from pipeline setbacks, like the failed emraclidine (schizophrenia) program, which caused a $3.5 billion impairment charge in 2023. But AbbVie's neuroscience pipeline remains robust, with Vraylar ($3.27 billion in 2024) and migraine drug Qulipta ($201 million in 2024) driving growth.

The Financial Reality: Costs vs. Cash Flow

The Q2 IPR&D charge and R&D expenses are painful, but AbbVie's cash flow remains strong. Adjusted EPS for 2025 is guided to $11.67–$11.87, down slightly from prior expectations but still supported by ex-Humira growth. The dividend—$1.64 per share quarterly (3.4% yield)—is secure, with a track record of annual increases since 2013.

Investment Thesis: Buy the Dip

AbbVie's stock has underperformed in 2025, pressured by R&D volatility and near-term EPS headwinds. But the long-term narrative is intact:
- Skyrizi/Rinvoq dominate psoriasis and rheumatoid arthritis markets, with expansion into new indications.
- Neurology and oncology pipelines are de-risking with late-stage data.
- Capstan and Aliada add depth to high-potential areas like autoimmune and neurodegenerative diseases.

At a forward P/E of 15.5x, AbbVie trades at a discount to peers like Pfizer and Roche, despite its growth profile. Analysts' average price target of $212 (12% upside from current levels) suggests the market may underappreciate its resilience.

Historical data further supports this thesis: a backtest of this earnings-driven strategy from 2020 to 2025 would have yielded a total return of 45.9%, with a compound annual growth rate (CAGR) of 7.6%. Despite a maximum drawdown of -25.4%, the strategy's Sharpe ratio of 0.9 highlights its risk-adjusted appeal, reinforcing the case for buying dips tied to AbbVie's earnings catalysts.

Risks to Consider

• Humira's decline: U.S. sales could drop further as biosimilars gain traction.
• Pipeline execution: Delays in Tavapadon or Capstan's CPTX2309 could pressure growth.
• Regulatory hurdles: Delays in approvals (e.g., Epkinly) could impact near-term sales.

Final Call: Buy

AbbVie is navigating a challenging period with R&D costs and Humira's twilight, but its ex-Humira portfolio and pipeline are primed for growth. With a strong balance sheet, dividend stability, and catalysts in 2025–2026, now is a good time to position for the next leg of its journey.

Investors seeking a diversified play in biotech—balanced between near-term resilience and long-term innovation—should consider ABBV. The dips are opportunities to buy a company that's rewriting its story.

Data as of June 19, 2025. Always consult a financial advisor before making investment decisions.