Biotechnology uses living systems and organisms to create or modify products, such as pharmaceuticals, vaccines, biodegradable plastics, food additives and enzymes. It has been around for centuries and has recently experienced a resurgence as scientists have developed new techniques for modifying genes and proteins.
The global market for biotech products was worth just over $1 trillion in 2021, with a CAGR of 13.9% between 2022 and 2030, at which time it is expected to reach almost $4 trillion in value. So the industry is attractive, but what biotech stock is best?
Bird’s Eye View Of Top Biotech Stock
AbbVie is one of the biggest names in the biotech industry, with a market capitalization of almost $300 billion, making it the third largest in the world. The company develops pharmaceuticals, medical devices, diagnostics and consumer health products to treat various diseases, including cancer, arthritis and Crohn’s disease.
AbbVie has been able to stay ahead of the competition by investing heavily in research and development (R&D). In 2021 alone, they spent over $7.1 billion on R&D activities, with more than half of that going toward developing new drugs. This commitment to innovation has allowed it to continually develop new products that have revolutionized the biotech industry.
The company has an experienced leadership team with a proven track record in the biotechnology sector. CEO Richard A. Gonzalez, who has worked in the industry for over 30 years, is widely considered to be one of the most experienced executives in the biotech space. Under his leadership, AbbVie has achieved remarkable growth and innovation, placing it at the forefront of biotechnology stocks.
How To Make Billions From Drugs
AbbVie has a wide range of products designed to treat various diseases. Here is a list of some of their most popular products as well as how they’re performing financially:
- Humira: A prescription medicine used to treat rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, and juvenile idiopathic arthritis. In 2021 the drug was the second-best-selling drug in the world, generating over $20.7 billion in sales.
- Imbruvica: This cancer treatment has been approved for multiple uses, including mantle cell lymphoma and chronic lymphocytic leukemia. The drug was also recently approved to treat Waldenström macroglobulinemia and chronic graft-versus-host disease. In 2021 the drug was able to generate $5.4 billion in sales.
- Skyrizi: Skyrizi is an injectable medicine used to treat plaque psoriasis. Since the FDA approved it in April 2019, it has become a top-selling psoriasis treatment, generating over $2.9 billion in sales in 2021 alone. The success of Skyrizi is predicted to continue, with AbbVie confirming revenue guidance of $15 billion for 2025.
- Botox therapeutic & cosmetic: AbbVie acquired Allergan in 2020, giving it access to one of the most well-known and profitable cosmetic products. With $4.6 billion in sales in 2021, AbbVie’s botox treatments and cosmetics are one of the most profitable products in its portfolio.
Along with its other products, these treatments have helped AbbVie generate $56.1 billion in revenue in 2021.
Dividend Hike Attracts Income Investors
AbbVie’s financials have been solid in recent years, with the company reporting $13.4 billion in net income for the 12 months ending Sept 2022, representing a 77.95% increase year on year.
With a healthy cash flow and strong balance sheet, AbbVie has been able to give back to its shareholders in the form of dividends, which have increased six times over the last five years. The company maintains a dividend yield of around 3.4%.
Notably, management recently announced a 5% increase in dividends for 2023, with the dividend rate slated to be $1.48 quarterly dividend per share, up from $1.41. Over the last twelve months, AbbVie has been able to payout $9.5 billion in dividends based on its $22 billion of free cash flow.
240 Billion Reasons To Like ABBV
AbbVie is in a prime position to continue its success over the coming years as it develops new treatments and expands into new markets. In addition, concerns about AbbVie’s prized asset Humira losing its patent exclusivity have been put to rest as the company signed an agreement with Mylan giving it exclusive rights to manufacture a biosimilar in the United States until 2023.
As such, Humira is set to overtake Lipitor and become the top-selling drug of all time by 2024, with a lifetime value of $240 billion.
AbbVie’s diversity of products also mitigates concerns about Humira’s sales dropping beyond 2024, with botox solutions a key example of a product that gives the company a sustainable long-term outlook.
Before You Buy
AbbVie has proven to be an attractive stock for investors looking for growth and income. However, as a biotech stock, investors need to be aware of the potential risks that come with investing in such a volatile sector.
The company’s success relies heavily on new drugs being successfully developed and can be affected by regulatory changes, competition from other treatments or changes in healthcare laws. However, these factors usually affect the smaller and mid-cap biotech stocks more than prominent established players such as AbbVie.
The bottom line is AbbVie’s strong financials, healthy dividend yield and wide range of products make it one of the most attractive investments in this sector.