3 things you need to know if you’re buying AbbVie stock today

One of the most important biopharmaceutical companies in the world, AbbVie (ABBV 1.28%) it is quite a complicated stock to approach as an independent investor. In addition to the scientific due diligence required to assess the quality of its pipeline and the competitive landscape in which it operates, you need to understand a suite of governance and business issues before buying shares.

Let’s take a moment and identify three main areas of interest so you’ll be better equipped to determine if the company is a smart buy for you.

1. There’s a new CEO in town

First, pay attention to changes in executive leadership, especially when a highly effective leader leaves.

Longtime AbbVie CEO Richard Gonzalez, who has held the position since the business spun off Abbott Laboratories in 2013, he resigned in early July; he is now the chairman of the board. Former President and Chief Operating Officer (COO) Robert Michael will now lead the company.

Michael was once the Chief Financial Officer (CFO) of AbbVie, among other leadership roles, and is also another alumnus of the former Abbott Labs management team. All in all, he is a well-rounded insider and is certainly already deeply familiar with the company’s strategy, pipeline and senior staff, among others. Additionally, since Gonzalez will remain on the board, it’s not necessarily a complete loss of execution know-how with the CEO transition, although there may be new leadership direction.

These are all good signs for shareholders, as well as anyone considering a stock investment.

2. Expect solid growth from two blockbuster drugs

It’s important to know how a pharmaceutical stock is expected to grow, including what segments it plans to compete in.

AbbVie’s trailing 12 month (TTM) revenue is $55 billion. By the end of this year, management expects two drugs, Skyrizi and Rinvoq, to ​​bring in a total of $16 billion, making them a significant proportion of the top line. By 2027, the pair is expected to bring in more than $27 billion annually; this may represent an even greater proportion of total annual sales than it does today, with sales growth continuing well into the 2030s.

Between the two drugs, Skyrizi and Rinvoq treat an impressive array of immunological conditions, including Crohn’s disease, ulcerative colitis, plaque psoriasis, psoriatic arthritis, eczema and ankylosing spondylitis. There is ongoing research and development (R&D) in late-stage clinical trials to further expand this set of conditions for Rinvoq, subject to regulatory approval. If all goes well, the pair will continue to be cash cows for a long time.

3. Alzheimer’s disease could be a key growth segment in just a few years

Finally, while AbbVie doesn’t currently have any drugs to treat Alzheimer’s disease, that could change very soon. It has three separate programs for the condition in phase 2 clinical trials.

Importantly, two of these programs use mechanisms of action that make them different from marketed therapies produced by biogenic and Eli Lilly. That means it could, in theory, avoid some of the drawbacks associated with current options or help patients cope with their symptoms more effectively. Of course, there’s no guarantee that any of the three will make it to market, as they still have to go through Phase 3 trials and seek regulatory approval.

But the odds are fair that at least one of the programs will eventually win FDA approval and thus be commercialized, growing AbbVie’s neurology segment. And while it’s too early to predict, if these candidates win approval, the company will likely study them for several related indications, further increasing the pace of growth substantially.