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AbbVie faces tough competition in 2019

The outlook for the US’s largest and highest-paying dividend stocks
April 11, 2019
  • Dividend policy: Progressive.
  • Forward yield: 5.85 per cent (next four quarters estimate). 
  • Payment: Quarterly.
  • Last cut: Never cut.

When it comes to the pioneers of medical treatments, UK-based investors might be less familiar with US outfit AbbVie (US:ABBV). But followers of the pharmaceutical sector might recall the name from 2014, when a potential £32bn takeover of the then London-listed Shire was abandoned after the US took legislative action to block what it called “inversion” deals – that is, mergers or takeovers aimed at lowering the corporate tax rate of the acquiring company.

Since then, AbbVie has doubled down on developing new drugs across a range of fields, including immunology (which includes chronic progressive diseases such as rheumatology and dermatology), oncology (cancer), neuroscience (multiple sclerosis, Parkinson’s, Alzheimer’s), virology (AIDS, Hepatitis C) and general medicine (cystic fibrosis, endometriosis, uterine fibroids and diabetic nephropathy).

 

But analysts at JP Morgan have warned that the group faces a tough year in 2019 as its Humira franchise – an injectable product used to treat conditions such as rheumatoid arthritis and Crohn’s disease – battles competition in Europe from so-called ‘biosimilars’, essentially cheaper, almost identical copies of the original drug. AbbVie has said it expects a 30 per cent dip in Humira’s sales outside of the US, which could dent the top line by $2bn compared with 2018. US-based sales should still grow by 7 per cent this year, albeit at a slower pace than the growth rate seen last year.

True, the development and subsequent launch of new products should help to plug the gap, but analysts don’t expect to see a proper recovery in the top line until 2020-22. For now, the market will wait for progress on both risankizumab and upadacitinib – both immunology products – although analysts warn that any future sales are already reflected in current earnings estimates. 

AbbVie    
Ord Price: 8,281¢ Market Value: $122bn  
Touch: 8,231-8,310¢ 12-Month High: 10,725¢ Low: 7,577¢  
Forward Dividend Yield: 5.4% Forward PE Ratio: 9  
Net Asset Value:* Net Debt: $33bn  
*Negative shareholder funds£1 = $1.30   
Year to 31-DecTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201625.69.9482235
201728.211.1559263
201832.713.5732395
2019**32.714.1867472
2020**34.315.1935448
% change578-5
**JP Morgan forecasts, adjusted PTP and EPS figures, with the exception of DPS, which is compiled from Bloomberg consensus estimatesBeta: 1.34