Is Now the Time to Buy AbbVie Ahead of a Pivotal Transition?

Investors often grapple with the question of timing in the pharmaceutical sector, where blockbuster drugs can dominate revenue for years—until they don't. AbbVie (ABBV) is navigating such a transition, as its flagship drug Humira faces relentless competition from biosimilars. Yet, amid this decline, the company is building a new foundation of growth. The question for investors is whether this transition represents a buying opportunity or a cautionary tale of disrupted momentum.

The Humira Dilemma: A Shrinking Pillar

Humira, once the world's best-selling drug, has been a double-edged sword for AbbVie. In 2023, global Humira net revenues plummeted to $14.4 billion, a 32.2% drop compared to the prior year. The U.S. market, where the drug historically thrived, saw a 34.7% decline, while international sales fell by 14.3%. By Q1 2024, the trend accelerated: U.S. Humira revenues dropped 39.9%, and global sales fell 35.9%.

This erosion is not a surprise. Biosimilars, including Amgen's Amjevita and Pfizer's Cyltezo, have aggressively entered the market, eroding Humira's dominance. However, AbbVie's management has long anticipated this shift. The company has consistently emphasized its pivot to newer therapies, particularly in immunology, neuroscience, and oncology. The challenge lies in whether these new pillars can offset Humira's retreat.

The Rise of Skyrizi and Rinvoq: A New Era in Immunology

AbbVie's answer to Humira's decline is a dual-blockbuster strategy centered on Skyrizi and Rinvoq, two IL-23 and JAK inhibitors, respectively. In 2023, Skyrizi and Rinvoq combined to generate $11.7 billion in global net revenues, with Skyrizi alone hitting $7.76 billion and Rinvoq contributing $3.97 billion. By Q1 2024, Skyrizi's growth accelerated to 47.6%, while Rinvoq surged 59.3% year-over-year.

These figures are more than just impressive—they're transformative. Skyrizi and Rinvoq are now AbbVie's fastest-growing products, with management projecting combined peak sales of $27 billion by 2027. This represents a seismic shift: in 2023, the Immunology portfolio generated $26.1 billion in revenue, with Humira accounting for 55% of that total. By 2024, the balance is shifting.

Strategic Acquisitions: Building a Post-Humira Pipeline

AbbVie's recent acquisitions underscore its commitment to this transition. The $10.1 billion purchase of ImmunoGen and the $8.7 billion acquisition of Cerevel Therapeutics are not just about filling gaps—they're about securing long-term leadership in oncology and neuroscience.

ImmunoGen's Elahere, a first-in-class antibody-drug conjugate, generated $64 million in Q1 2024 sales, with full-year potential to bolster the oncology portfolio. Cerevel's focus on neuropsychiatric disorders aligns with AbbVie's neuroscience ambitions, particularly for Vraylar and Ubrelvy. Meanwhile, the company's neuroscience portfolio grew 16% in Q1 2024, driven by $1.96 billion in global net revenues.

Financial Resilience and Guidance: A Cautious Optimism

Despite Humira's struggles, AbbVie's 2023 total revenues of $54.3 billion reflect resilience. While the company's overall revenue fell 6.4% on a reported basis, its Neuroscience portfolio grew 18.2%, and oncology revenue rose 9%.

Looking ahead, AbbVie raised its 2024 adjusted diluted EPS guidance to $11.13–$11.33, factoring in the dilutive impact of its acquisitions. The company also reaffirmed its long-term revenue growth target of high single-digit CAGR through 2029. This confidence is rooted in the accelerating performance of Skyrizi and Rinvoq, as well as the expanding pipeline from ImmunoGen and Cerevel.

Investment Considerations: Balancing Risk and Reward

For investors, the key question is whether AbbVie's transition is already priced in. The stock has traded in a relatively narrow range over the past three years, reflecting both the drag from Humira and the market's skepticism about replacing it. However, the company's strategic moves—bolstering its immunology pipeline, expanding into neuroscience, and acquiring oncology assets—suggest a well-thought-out path forward.

The risks remain. Biosimilar competition could further accelerate Humira's decline, and regulatory or clinical setbacks for Skyrizi or Rinvoq could disrupt growth. Additionally, the high cost of the ImmunoGen and Cerevel acquisitions introduces short-term dilution.

Yet, for long-term investors, the opportunity is compelling. AbbVie's newer therapies are not just replacing Humira—they're outpacing it. With Skyrizi and Rinvoq on track to become the company's largest revenue generators, and with a robust pipeline in oncology and neuroscience, AbbVie is transitioning from a single-asset play to a diversified growth engine.

Conclusion: A Transition Worth Monitoring

Is now the time to buy AbbVie? For patient investors, the answer leans toward yes. The company is in the midst of a pivotal transition, and while the near-term challenges with Humira are undeniable, the long-term trajectory is increasingly clear. Skyrizi and Rinvoq are not just successors to Humira—they're the foundation of a new era.

However, timing is critical. With AbbVie's stock still trading at a discount to its 5-year average P/E and with the company's 2024 guidance reflecting cautious optimism, the current valuation offers a compelling entry point for those willing to ride the transition. As the biosimilar storm subsides and the new blockbusters take hold, AbbVie's long-term potential could justify the patience required today.