ABBV AbbVie
Humira cliff survived; Skyrizi/Rinvoq carry it, but the price already assumes the immunology franchise keeps executing.
The story
AbbVie is a scaled immunology and neuroscience franchise that has moved past the Humira cliff: Skyrizi and Rinvoq now more than replace lost Humira sales and are growing double digits, while aesthetics, neuroscience (Vraylar, migraine, Parkinson's) and oncology add breadth. GAAP margins (11-18%) are depressed by acquisition amortization and IPR&D charges; underlying economics are near 45% adjusted, typical of a top-tier pharma franchise. The company is in mature growth, funding the pipeline through debt-financed M&A, and its next patent cliff (Skyrizi/Rinvoq in the early-to-mid 2030s) caps how long excess returns last.
Growth of about 8% reflects Skyrizi/Rinvoq momentum and Humira erosion nearly finished. Target margin is 36%, set between depressed GAAP and the ~45% adjusted figure, because recurring M&A amortization and IPR&D are real reinvestment costs, not one-offs. Sales-to-capital of 1.4 treats acquisitions as capital spending. A 10-year horizon fits a durable immunology franchise with a visible 2030s exclusivity cliff, and terminal growth of 2.5% sits well below the risk-free rate.
Value drivers
| Revenue growth (Y1) | 8.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 10y |
| Target operating margin | 36.0% |
| Years to target margin | 4 |
| Sales-to-capital | 1.40 |
| Beta | 0.90 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 8.9% |
| Terminal WACC | 9.3% |
Valuation bridge
| PV of explicit FCFF | 99.81B |
| PV of terminal value | 125.97B |
| Equity value | 161.84B |
| ÷ shares → per share | $91.58 |
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Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 69.54B | 8.0% | 22.5% | 10.18B | 3.68B | 6.50B | 5.97B |
| 2 | 74.67B | 7.4% | 27.0% | 13.12B | 3.67B | 9.45B | 7.96B |
| 3 | 79.74B | 6.8% | 31.5% | 16.33B | 3.62B | 12.72B | 9.84B |
| 4 | 84.65B | 6.2% | 36.0% | 19.81B | 3.51B | 16.30B | 11.57B |
| 5 | 89.36B | 5.6% | 36.0% | 20.91B | 3.36B | 17.55B | 11.44B |
| 6 | 93.77B | 4.9% | 36.0% | 21.94B | 3.16B | 18.79B | 11.24B |
| 7 | 97.84B | 4.3% | 36.0% | 22.89B | 2.90B | 19.99B | 10.98B |
| 8 | 101.48B | 3.7% | 36.0% | 23.75B | 2.60B | 21.14B | 10.66B |
| 9 | 104.64B | 3.1% | 36.0% | 24.49B | 2.26B | 22.23B | 10.29B |
| 10 | 107.25B | 2.5% | 36.0% | 25.10B | 1.87B | 23.23B | 9.87B |
Key risks
- IRA Medicare price negotiation and MFN pricing pressure on Skyrizi/Rinvoq
- Serial debt-funded acquisitions destroying value or adding further IPR&D charges
- Biosimilar/JAK class safety or competition eroding the immunology franchise ahead of the 2030s LOE
Catalysts
- Rinvoq label expansions (e.g., atopic dermatitis, alopecia, lupus, GCA) driving upside to 2027 guidance
- Neuroscience pipeline readouts (tavapadon, emraclidine follow-ons) and fading IPR&D charges lifting GAAP margins