1. AbbVie Stock Analysis
Analysts: Marcin Szczepaniak and Dhwani Mehta, presented on April 4th, 2019

2. Agenda Introduction to Company Stock Market Prospects Core Issue
Industry and Economic Overview
Company Overview
Financial Analysis
Final Projections
Recomendations

3. Stock Overview
Business Sector
    Healthcare
Industry
    Biopharmaceuticals
Life Cycle Stage
    Later Stage Growth
Exchange
NYSE
Market Cap (mm)
     B
Shares Outstanding
    1,456 M
Stock Price (as of 04/1/2019)
    $80.78
52 week High/Low
    $107.25/$75.77
Current P/E
     22.65
Recommendation: We recommend to HOLD this stock despite many significant headwinds

4. About AbbVie
AbbVie is a global, research-based biopharma company. AbbVie develops and markets advanced therapies that address some of the world’s most complex and serious diseases
Products are focused on conditions such as chronic arthritis, blood cancers; virology, hepatitis C virus, human immunodeficiency virus (HIV);Parkinson’s disease; thyroid disease and complications associated with cystic fibrosis; pain associated with endometriosis; as well as other serious health conditions
AbbVie also has a pipeline of promising medicines in clinical development across medical specialties such as immunology, oncology and neuroscience, with additional targeted investment in cystic fibrosis and women’s health
3rd point – Address short term expectations.
On January 1, 2013, AbbVie became an independent, publicly-traded company as a result of the distribution by Abbott Laboratories (Abbott) of 100% of the outstanding common stock of AbbVie to Abbott’s shareholders

5. AbbVie’s Strategic Focus
Advance pipeline
Drive strong commercial execution with new product launches
Effectively manage biosimilar erosion
Delivering operating margin expansion while continuing to invest in pipeline
Commitment to return cash to shareholders
Build an innovation driven, patient focused culture
Drive superior performance with off-market brands
Build a robust pipeline
Gain trust and confidence from investors
AbbVie markets to managed care providers including health maintenance organizations (HMOs) and pharmacy benefit managers (PBMs), hospitals, and government agencies (including the US Department of Veterans Affairs and the Department of Defense)
AbbVie has a strong focus on R&D. The company has more than 60 compounds in the pipeline, including treatments in immunology, oncology, neuroscience, hepatitis C, chronic kidney disease, and women's health
AbbVie continues to grow through strategic partnerships with startups and academia like the University of Chicago
Phase 1
Phase 2
The First Five Years: (’13-’17)
The Second Five Years (‘18-’22)
Source:

6. Company Performance
Source:

7. SWOT Analysis Strengths Weaknesses Opportunities Threats
Humira as a blockbuster drug
Acute focus on progressing many multiple drugs through regulatory approval
Growing Free Cash Flow
Reliance on Humira
Average time to get drug from development phase to market takes 12 years and over $1.5 billion
Patent protection is 20 years but in actuality it is much shorter
Opportunities
Threats
Increase in consumer demand
Humira continues to be approved for more conditions
Growing economy and aging population
Regulatory threats due to high costs of medications
Competition through biosimilars
Most recent lawsuits

8. Porter’s Five Forces Power of Buyers Power of Suppliers
Methodology
Power of Buyers
Power of Suppliers
Threat of Substitutes
Threats of New Entry
Threat of Competition
In 2018, three wholesale distributors - McKesson, Cardinal Health, and AmerisourceBergen- accounted for most of the company's sales in the US. This reliance on these firms could leave AbbVie vulnerable to distribution issues should any of them face financial difficulties
AbbVie has not experienced any recent significant availability problems or supply shortages that impacted fulfillment of product demand.
Humira patent protection
The expiration or loss of patent protection for a product typically is followed promptly by substitutes that may significantly reduce sales for that product in a short amount of time.
R&D Costs
Smaller niche focused startups
M&A environment
Many competitors with few instances of communication amongst biggest makers
High competition to get drugs approved and get to market
Generic/biosimilar threats

9. Product Pipeline
20 products with potential for new drug or indication approvals by the end of 2020
15 programs in Phase III under way
8,000+ scientists working globally
Phase III approval ultimately has a 60 percent chance of approval. Drug patents can be enjoyed for 20 years, time the patent as filed to the time it was approved is part of this time. So significant amount of the monopoly will be eaten up in the trial phases. In the mean time competitors are allowed to treat the same conditions but with different compounds. To find out a drug company’s patent protection, take a look in the 10-k under the  section Patents and Intellectual Property rights. Here you will find expiration dates and will likely have to go online to find more details than that. After a drug goes off patent is when generics can come in and cost percent less and this is extended to consumers through a lower price. Companys have been known to lose up to 80% of sales after losing patents. But this is not necessarily death for the original proprietary company, because they could engage in efforts to move current users to a new generation of drugs that may also be patented. A company that doesn’t necessarily pass it trial III drug test isn’t necessarily doomed for death either. They can reapply.
Source: Source: Abbvie Strategic Update 2017

10. Microeconomics/ Industry Trends
Recent Relevant News
Heading 1
Heading 2
Heading 3
In the Netherlands, AbbVie is discounting Humira as much as 89% to underprice biologics
Six lawsuits target AbbVie’s Humira
and its patent thicket with other drug
making giants
AbbVie has had 5 sales and 0 insider
Buys since November 29,2018. This
is a net activity of $21.78 million
Microeconomics/ Industry Trends
Supply
Demand
Industry Trends
Aging, unhealthy habits, and growing
population/unmet needs in emerging
markets all lead to rising medicine
needs
Given the growing economy, drug
sales and drug prices are expected
to rise. There is a potential for
government intervention to both
destroy and enhance value (through
priority vouchers)
Increased supply of biosimilars and
generics provides need for constant
innovation

11. Technical Analysis

12. Weighted Average Cost of Capital

13. Sales Forecast

14. Comparable Company Valuation

15. Discounted Cash Flow Analysis – Base Case.
Value of share – 83.75

16. Discounted Cash Flow Analysis – Upside Case
Value of share – 86.73

17. Discounted Cash Flow Analysis – Downside Case
Value of share – 80.77

18. Sensitivity Analysis

19. Profitability ratios

20. Liquidity Ratio

21. Industry Attractiveness (Growth)
Final Recommendation
GE-McKinsey Matrix
Valuation Ranges
Invest/Grow
Hold
Divest
low
medium
high
Competitive Strength
Industry Attractiveness (Growth)
Comparables:94.89
DCF:
Share Price:83.08
Final Comments:
"Despite significant headwinds to AbbVie with recent patents
expiring and lawsuits coming up, we believe. However, Humira
will still be a profitable drug for at least the next 5 years and in
the past AbbVie has delivered on their commitment of extreme
focus on developing the pipeline of drugs and returning value
to shareholders.”

22. Thank You