Big Profits from Big Pharma? This Company Can Deliver

Michael Robinson

Friday, March 10, 2023

Last month, I reminded you that sometimes big failures can lead to massive profits...

Provided, of course, that the company in question successfully pivots to a breakout new product.

Microsoft (MSFT) did just that by investing as much as $25 billion into artificial intelligence ("AI") powered voice technology...

And now something similar is happening in the world of "big pharma."

You see, you'd be hard pressed to find a more successful drug than Humira, used to treat symptoms of rheumatoid arthritis ("RA"). With sales of more than $102 billion over just the past five years, it's a certified "blockbuster."

Unfortunately for its maker, the patents protecting Humira are set to expire. Now the company is preparing for a crucial pivot – a focus on two new drugs that can replace Humira's sales.

Let me explain why this savvy move will benefit investors and show you why you should certainly be one of them.

Humira Gets Competition

In a nutshell, Humira works by blocking an inflammation-causing compound in the body, resulting in huge relief for people suffering from autoimmune and inflammatory conditions.

When it comes to those battling RA – along with inflammatory bowel disease and other autoimmune conditions – this drug has been nothing short of a game changer.

Given that more than 25 million people have RA, and that Humira has been shown to work only when taken regularly, it's no wonder that it was the best-selling drug in the world in 2019 and 2020.

Humira's total global sales are at about $200 billion. And suffice to say, it's been a huge cash cow for the company that created it.

But as I mentioned, patents for this drug are expiring and the company behind it is starting to face competition. Pharmaceutical giant Amgen (AMGN) recently launched Amjevita, a Humira knockoff, at a price up to 55% lower than the original.

And more competitors are coming this year in both the U.S. and Europe. As a result, analysts estimate this will mean Humira's sales will drop close to 40% this year, and another 40% in 2024.

So why on Earth am I still so bullish about the maker of Humira, pharma company AbbVie (NYSE: ABBV)?

Not Down for the Count

To start, this company has been planning for this day for quite some time. In 2019, it bought fellow pharma company Allergan for $63 billion.

The merger made AbbVie the leader in several beauty and cosmetic drugs, including double-chin removal and Botox treatment for wrinkles.

But as I mentioned earlier, this company isn't ready to close up shop now that its Humira patents are expiring. It's simply pivoting its focus – in this case, to two new drugs.

Pivot No. 1

First, there's Rinvoq, another anti-inflammatory drug already approved to treat RA. It works differently than Humira, has different side effects, and, perhaps most importantly, is taken orally (Humira must be injected by a professional, making it a much more expensive treatment).

Rinvoq also seems to work on patients for whom other drugs haven't helped, making it a potential lifesaver for those who believed they were out of options.

Over the last year, Rinvoq has been approved for use for a number of inflammatory and autoimmune conditions. As approvals and prescriptions ramp up, this easier-to-use alternative could be equally as successful.

Pivot No. 2

The second drug AbbVie is focused on is called Skyrizi. Like Humira, this drug is a monoclonal antibody, meaning an antibody selected to block a specific compound, cloned rather than manufactured to make lots of it available to patients.

While it targets a different compound than Humira, the effect is a somewhat similar reduction in inflammation. Skyrizi is already approved in Europe, Canada, Japan, and the U.S.

And it's important to note that AbbVie is set to keep the exclusive rights to these and other key drugs until 2029. That's a long time to make money and keep working on the next blockbusters that will line up to boost earnings.

These two drugs alone could easily fill the Humira-shaped hole in AbbVie's earnings. And that's just the two drugs that the company recently launched.

Plenty more are in development, including some promising drug candidates to treat brain diseases, as well as drugs to treat blood cancers.

Solid Returns – And Dividends While You Wait

To be candid, I don't see AbbVie's growth accelerating for a while.

However, its current growth rates are still solid. Over the last three years, AbbVie's earnings have grown an average of 15%, which means they're doubling about every five years.

As such, I expect the stock to be stable for the time being. But a juicy 3.9% dividend while you wait serves as a somewhat comforting consolation prize.

A stable company with visions of growth ahead is just what investors like us should be looking for, particularly in a volatile market.

And for my "Pro" subscribers, I'll reveal my strategy for maximizing your profit potential with this company.



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Cheers and Good Investing,

Chief Investment Officer
Trend Trader Daily

Tags: big-pharma ra