CEO Benjamin Halliburton of Tradition Capital Management says people are concerned about AbbVie Inc (NYSE:ABBV) and biosimilar competition. He says those concerns are unwarranted, and believes the stock is grossly underpriced and can easily trade over $100 in the next year or two.
A company I think that works for a lot of investors right now — extremely out of favor, large-cap name, pays a nice dividend of 4.14% — is AbbVie. They are the producer of HUMIRA. HUMIRA is the primary driver of profits and profit growth over the near term, and represents a huge amount of their business.
People are concerned that biosimilar competition could erode HUMIRA’s market share and profitability. AbbVie, when you talk to management, indicates that they are very confident in their multiple intellectual property protection strategies, lots of patents that will protect them for years, some of which do not expire for multiple years.
The Street is more concerned about this patent expiration of HUMIRA than the actual management team. The management team has been very active in protecting the intellectual property of HUMIRA. So we think that stock is grossly underpriced with a view that the stock can easily trade over $100 over the next year or two, and it’s currently trading in the low $60s.
The other part that is an interesting potential bonus is they do have a strong product pipeline that the management team has detailed that could put kickers on the revenues and earnings growth in the three- to six-year time frame. But I think the big opportunity is how Wall Street is overly concerned that there will be direct HUMIRA competition, and we don’t think that’s the case.
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