Dividend Aristocrats Part 47: AbbVie Inc (ABBV)

Can AbbVie Replace Lost Humira Revenue?

AbbVie Inc (NYSE:ABBV) is expecting to have revenues of $37 billion through 2020. The company is expecting $23 billion in sales through fiscal 2015.

The company expects Humira sales will be greater than $18 billion through 2020, or approximately 50% of total revenue. Currently, AbbVie accounts for ~60% of company revenue and should generate around $14 billion in revenue in fiscal 2015.

Using AbbVie’s management’s numbers (which are likely too optimistic), the company will add ~$10 billion in revenue over the next 5 years outside of Humira.

Looking at the numbers above, if Humira sales dropped by about 70% over the next 5 years, the company would have around the same amount of revenue it does now (if it manages to grow $10 billion in new revenue over the next 5 years).

Can AbbVie replace its lost Humira revenue? Yes, it can, thanks to its large pipeline (shown in the image below) which is funded by $3+ billion a year in research and development expenditures. Revenue growth will likely not be able to offset lost Humira sales over the next few years, however.

Source: AbbVie October 2015 Strategy Presentation, slide 22

In Defense of Humira

AbbVie’s management is not just going to let generic Humira competitors steal market share without a fight.

Here’s what AbbVie CEO Richard Gonzalez had to say on the matter inAbbVie’s 3^rd Quarter Conference Call:

“Beyond our composition of matter patent, we have more than 70 additional later expiring U.S. patents related to HUMIRA. The vast majority of these patents which reflect significant innovation and investment were granted by the U.S. patent and trademark office within the past two years. These patents expire between 2022 and 2034. The size of AbbVie’s patent estate is a direct consequence of the ground-breaking work of AbbVie scientists in a new field of biologics…

Any company seeking to market a biosimilar version of HUMIRA will have to contend with this extensive patent estate, which AbbVie intends to enforce vigorously…

While AbbVie’s formulation and manufacturing patents for HUMIRA also have broad coverage, without further information on the biosimilar we cannot know with certainty, the extent to which these patents will be infringed.”

This legal battle will likely not prevent large pharmaceutical companies from entering the United States markets that Humira serves, but it could be enough to scare off smaller would-be-competitors.