Reasons To Buy:

Shares Outperforming Industry: AbbVie shares were up 69.2% in the past one year, comparing favorably with an increase of 15.2% for the industry.

Humira Going Strong: AbbVie’s flagship product, Humira, continues to drive revenues. Humira, an anti-inflammatory product, is the anti-tumor necrosis factor (TNF) drug of choice. Currently approved for 13 indications, Humira sales increased 11.7% in 2015 and 16.1% in 2016 backed by robust demand trends. The product continues to see strong growth in the dermatology and gastroenterology markets. Humira also has the potential to treat other diseases. While the hidradenitis suppurativa (HS) indication is expected to add about $1 billion to peak sales forecasts for Humira, the uveitis indication is worth peak sales of several hundred million dollars. A new formulation of Humira that is designed to reduce injection pain and injection volume was approved in 2015. The company expects Humira sales to approach $21 billion in 2020.

Though Amgen’s Humira biosimilar (Amjevita) was approved by the FDA in November 2016, per the September 2017 Amgen settlement, its biosimilar entry into the United States is set for 2023, thus delaying direct biosimilar competition in the country. Interestingly, at the third quarter 2017 earnings call, AbbVie raised its long-term target for Humira sales based on strong demand trends for the drug, despite new competition.

Collaborations and Agreements to Strengthen Pipeline: We are positive on AbbVie’s efforts to strengthen its pipeline. The company has been actively pursuing partnership deals and collaborations for candidates across several therapeutic areas including oncology, immunology, neuroscience, and infectious diseases. Some partners include Roche (Venclexta – oncology), Biogen (Zinbryta – multiple sclerosis), Bristol-Myers (Empliciti – multiple myeloma), Ablynx (vobarilizumab – inflammatory diseases including rheumatoid arthritis and systemic lupus erythematosus) and Boehringer Ingelheim (risankizumab – psoriasis) among others. We believe the company will continue pursuing such deals to grow its pipeline.

Growing Oncology Portfolio: AbbVie believes that oncology will be its major growth driver over the next ten  years. The acquisition of Pharmacyclics in May 2015 added Imbruvica to AbbVie’s portfolio and diversified the company’s revenue base. Imbruvica, currently approved for quite a few indications, has multi-billion dollar potential and AbbVie is exploring the potential to expand Imbruvica’s label into solid tumors (in phase III for diffuse large B-cell lymphoma and follicular lymphoma) and autoimmune diseases. AbbVie expects Imbruvica peak sales of more than $7 billion and revenues of about $5 billion in 2020. AbbVie is positioning Imbruvica as a “pipeline in a molecule” - the treatment is in several company-sponsored studies. Imbruvica was approved for chronic graft versus host disease (GVHD) - first indication outside of cancer - in August 2017, becoming the first treatment specifically approved for cGVHD, a serious and potentially life-threatening condition with high unmet medical need.

AbbVie continues to work on expanding and accelerating its presence in oncology, building upon its growing position in the $30 billion hematological oncology market. The company acquired cancer drugmaker Stemcentrx and gained a late-stage candidate (rovalpituzumab tesirine or Rova-T), four additional early-stage compounds in solid tumor indications and a significant portfolio of pre-clinical assets. Rova-T is currently in registrational studies for small cell lung cancer (SCLC). A phase I, eight-arm "basket study" on Rova-T in neuroendocrine tumors is also ongoing. Data from a pivotal phase III (TRINITY) study on Rova-T in third-line or later SCLC is expected in first half of 2018. According to AbbVie, the candidate has blockbuster potential and could be launched in 2018. AbbVie intends to study the candidate for additional indications and estimates peak sales close to $5 billion.

AbbVie is also studying Venclyxto/Venclexta to expand the label to address the broader relapsed/refractory CLL patient population, expand into earlier lines of therapy, and broaden into other hematologic malignancies. Positive data from the phase III MURANO study of Venclexta plus Rituxan in relapse/refractory CLL was presented in September. Label expansion for this indication should expand the patient population for Venclexta significantly and boost its commercial potential.

Promising Pipeline: AbbVie has a deep pipeline consisting of several interesting late-stage candidates. Promising candidates include elagolix (endometriosis – under priority review in the U.S.; phase III for uterine fibroids – data from pivotal study expected by end of 2017), atrasentan (phase III for the treatment of chronic kidney disease), risankizumab (phase III for psoriasis (positive top line data from three trials presented in Oct 2017) and phase II for Crohn’s disease and psoriatic arthritis), Depatux-M/ABT-414 (phase II trial for glioblastoma multiforme), ABBV-8E12 (phase II for early Alzheimer's disease and progressive supranuclear palsy (PSP)), and upadacitinib/ABT-494 (six phase III studies for rheumatoid arthritis ongoing; phase II studies for Crohn’s disease, atopic dermatitis and ulcerative colitis). Duopa, for advanced Parkinson’s disease, gained FDA approval in 2014, while Empliciti (multiple myeloma) gained FDA approval in Nov 2015. Zinbryta (relapsing remitting multiple sclerosis) gained FDA approval in late May 2016 and European approval in Jul 2016 and is now available in the U.S and Germany. The company expects to move ten tumor candidates into clinical development in 2018.

HCV a Focus Area: We are also positive on the company’s progress with the development of interferon-free treatments for HCV. The approval of Viekira, AbbVie’s all-oral, interferon-free therapy with/without ribavirin (RBV), was a major positive for the company. Meanwhile, AbbVie’s 12-week, two-pill, once-daily combination HCV treatment, Viekirax, gained approval in Japan, the second largest HCV market in the world, in Sep 2015. Moreover, Technivie, an all-oral, interferon-free, two direct-acting antiviral treatment (ombitasvir, paritaprevir, ritonavir (OBV/PTV/r), with ribavirin (RBV)) gained approval in the U.S. in late Jul 2015 for the treatment of adults with chronic genotype 4 HCV infection – a historically difficult-to-treat patient population. AbbVie’s 8-week, pan-genotypic, ribavirin-free, once-daily HCV treatment, Mavyret, gained approval in the US, EU, Canada and Japan in the third quarter of 2017. Mavyret, AbbVie’s next-generation HCV program, is a combination of glecaprevir, a potent protease inhibitor and pibrentasvir, a NS5A inhibitor. Mavyret has the potential to rejuvenate growth in the HCV franchise. According to AbbVie, Mavyret may be used in up to 95% of HCV patients, depending on the stage of liver disease and prior treatment history.

Returning Value to Shareholders: AbbVie is working on returning value to shareholders in the form of share buybacks and dividends. AbbVie’s share repurchase authorization was increased by $5 billion to $10 billion. AbbVie also hiked its quarterly dividend by 4% in 2015, 12% each in 2016 and 2017 and 11% in 2018. Since inception, AbbVie’s dividend has been increased by more than 77%.