1. Chris Zakhem | Mengxi (Vivian) Wang | Le Huong Hoang | Ziqi (Kay) Mai
NYSE:ABBV
Chris Zakhem | Mengxi (Vivian) Wang | Le Huong Hoang | Ziqi (Kay) Mai
November 17, 2015

2. Team Introduction Chris Zakhem Vivian Wang Le Huong Hoang Ziqi Mai
Investment Manager
B.S. in Finance
Vivian Wang
Investment Manager
B.S. in Finance and Accountancy
Le Huong Hoang
Investment Manager
Masters of Finance
Ziqi Mai
Investment Manager
Masters of Finance

3. Agenda Company Overview Stock Market Overview Macroeconomic Overview
Financial Analysis
Comparable Companies
Financial Projections
Valuation
Recommendation

4. Company Overview Introduction
About the Company
Spin-off from Abbott Laboratories in 2013
Global, research-based pharmaceutical company
Develops and markets advanced therapies that address some of the world’s complex and serious diseases
On May 26, 2015, AbbVie acquired Pharmacyclics through a tender offer for approximately $20.8 billion
Pharmacyclics is a biopharmaceutical company that develops and commercializes novel therapies for people impacted by cancer
Key Operating Risks:
Expiration or loss of patent protection and licenses
Biologic products subject to competition from biosimilars
Subject to cost-containment efforts and pricing pressures
Any significant effect that affects HUMIRA could have a material affect on the business
AbbVie’s 2015 acquisition of Pharmacyclics diversifies current product lines and 4 key operating risks are important to be noted for evaluation of business
ABBV K pg. 1-4, 12-14

5. Company Overview Segments
Products
HUMIRA
HCV Products
VIEKIRA PAK
Additional Virology products
Kaletra
Norvir
Synagis
Metabolics/
Hormones Products
AndroGel
Creon
Synthroid
Endocrinology Products
Lupron
Other Products
Duopa and Duodopa
Sevoflurane
Dyslipidemia products
Zemplar
Imbruvica
AbbVie has several product segments covering the brand name pharmaceutical industry
ABBV K pg. 1-4

6. Company Overview Key Products
HUMIRA
1.Used to treat autoimmune diseases
2.Accounted for 63 percent of AbbVie's total net sales in 2014.
3.Approved in U.S. , E.U. and other over 60 markets including Japan, China, Brazil and Australia
4.Expiration of the first patent in U.S. in December 2016 and in E.U. in April 2018, no biosimiliar in market till 2022
VIEKIRA PAK
1.Treatment to Hepatitis C (HCV); HCV affects 160MM worldwide
2.Granted marketing authorization in January 2015 by European Commission
3.Key driver of Abbvie’s performance in 2015
Duodopa
1.AbbVie’s levodopa-carbidopa intestinal gel for the treatment of advanced Parkinson’s disease is marketed as Duopa in the U.S. and as Duodopa outside of the United States.
2. US Parkinson’s disease population of ~1MM, of which ~190K may be eligible for therapy
3. One of key focus for the business in the future.
Imbruvica
1. A novel, orally active, selective covalent inhibitor of Bruton’s Tyrosine Kinase (BTK); targeting B-cell malignancies
2. Acquired through the acquisition of Pharmacyclics, Inc. (Pharmacyclics) in May 2015 as further discussed below, will also be a significant contributor to revenue growth in 2015.
3.Hematological oncology market $27BN in 2014, growing to ~$50BN by 2020
Traditional target product HUMIRA and the three new growth-driving products have promising demand in the future
ABBV K pg. 1-4, 35; Q, ABBV 2015 Q3 Strategy Presentation pg. 11

7. Company Overview Other Products
Description
Angrogel
AndroGel is a testosterone replacement therapy for males diagnosed with symptomatic low testosterone that is available in two strengths: 1 percent and 1.62 percent
Synagis
Synagis is a product marketed by AbbVie outside of the United States that protects at-risk infants from severe respiratory disease caused by RSV
Kaletra
Kaletra (also marketed as Aluvia in emerging markets) is a prescription anti-HIV-1 medicine that contains two protease inhibitors
Lupron
Lupron is a product for the palliative treatment of advanced prostate cancer, treatment of endometriosis and central precocious puberty, and for the preoperative treatment of patients with anemia caused by uterine fibroids
Synthroid
Synthroid is used in the treatment of hypothyroidism
Sevoflurane
Sevoflurane (sold under the trademarks Ultane and Sevorane) is an anesthesia product that AbbVie sells worldwide for human use
Creon
Creon is a pancreatic enzyme therapy for exocrine pancreatic insufficiency, a condition that occurs in patients with cystic fibrosis, chronic pancreatitis, and several other conditions
Dyslipidemia
AbbVie's dyslipidemia products (TriCor, Trilipix, Niaspan, Simcor and Advicor) address the range of metabolic conditions characterized by high cholesterol and/or high triglycerides
AbbVie has many other products that influence revenue on a smaller scale
ABBV K pg. 1-4

8. Company Overview Sales Breakdown
HUMIRA is a large revenue driver and it has stable annual growth rate; the United States is the key market for the business
ABBV K pg

9. Company Overview Pipeline
Development Phase
Number of drugs
Phase I 13
Phase II 19
Phase III 15
AbbVie has a robust pipeline of promising new medicines, including more than 30 compounds or indications in Phase 2 or Phase 3 development
Abbvie.com

10. Company Overview SWOT Analysis
>Strengths - HUMIRA is the 2nd largest drug in the world
- Stable Net Sales
- Improved operating margin
- Patents protected
>Weakness - Patent expirations
- High reliance on HUMIRA sales
>Opportunities - Increasing market demand
- Expanded emerging market
- 15 Phase III drugs
>Threats - Cost-containment and downward pricing pressure
- Currency exchange rate
- Biosimiliar competition & generics
ABBV K pg

11. Technical Analysis Cumulative Total Returns(assumed $100 invested)
ABBV K; Yahoo! Finance

12. Industry Analysis Porter’s 5 Forces
Threat of New Entrants
*Low
Threat of Substitutes
*High
Supplier Bargaining Power
Buyer Bargaining Power
Rivalry
*Moderate
Investment Team

13. Macroeconomic Overview U.S. Health Spending
The U.S. health spending is expected to increase with a growth rate of 5.8%

14. Macroeconomic Overview Gross Domestic Product
U.S. GDP growth rate is steady in the next 5 years; global GDP will decline in 2019
IBISWorld

15. Pharmaceutical Industry
IBISWorld Brand Name Pharmaceuticals

16. Pharmaceutical Industry
There is an increase in sales and demand in pharmaceutical sales worldwide

17. Arthritis and Hepatitis C Market
There is an increase in doctor-diagnosed Arthritis and Hepatitis C in US and worldwide

18. Financial Analysis Ratios Analysis
ABBV K; 2015 Q3 10-Q

19. Financial Analysis DuPont Analysis
ABBV K; 2015 Q3 10-Q

20. Financial Analysis Greenblatt Ratios
Bloomberg

21. Financial Analysis Greenblatt Ratios
Bloomberg

22. Comparable Companies Descriptions
Competitors
Description
Eli and Lilly Company
Two segments: Human Pharmaceutical Products and Animal Health Products
Merck
and Co
Offers therapeutic and preventive agents to treat cardiovascular, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection and fertility
Pfizer
Operate through Global Innovative Pharmaceutical, Global Vaccines, Oncology and Consumer Healthcare, and Global Established Pharmaceutical segments
Baxalta Incorporated
Develops, manufactures, and markets a portfolio of products primarily for the treatment of hematology and immunology worldwide.
Bristol-Myer Squibb
Discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide
Celgene Corporation
Focuses for the treatment of illness in the areas of oncology, hematology, inflammation, bone health, nephrology, cardiovascular, and general medicine
Gilead Sciences
Develops, and commercializes medicines in areas of unmet medical need in North America, South America, Europe, and the Asia-Pacific
Products include Stribild, Complera/Eviplera, Atripla, etc.
These comparable companies were narrowed down by business description and industry and are competitors with AbbVie
Capital IQ

23. Comparable Analysis Ratio Analysis
AbbVie has exceptional high ROE and Leverage Ratio
Bloomberg

24. Comparable Companies Analysis
Median multiples were selected and the price ratios were weighted more heavily
Capital IQ

25. Discount Rate Weighted Average Cost of Capital
A risk premium was added to our WACC to represent the risk involved with AbbVie’s newly added products
Investment Team

26. Financial Projections
The first Humira Patent is expiring in However, Humira has several other patents on it, which will prevent biosimilars until 2022.
Duodopa was approved in January 2015 for use in the U.S., boosting growth
Imbruvica was acquired from the transaction involving Pharmacyclics. AbbVie states that this drug will be driving growth in the future.
AbbVie Long Term Strategy Presentation; ABBV K; ABBV 2015 Q3 10-Q

27. Discounted Cash Flow
Investment Team

28. Valuation
Using a 30% weight on comparable companies and a 70% weight on the discounted cash flow analysis, our valuation came out to be $54.90

29. Recommendation
We recommend to sell 100 shares of ABBV at the market price
The acquisition of Pharmacyclics has increased AbbVie’s debt burden and the success of Imbruvica is important to future growth, which provides additional risk
Humira accounts for over 60% of revenues and any material event that impacts its revenues will affect AbbVie significantly
AbbVie pays a high dividend of 3.80% (average healthcare is 2.1%)
Current Price
# of Shares
Market
Value
Cost
Gain &
%Gain
$60.01
200 Shares
$12,002
$5,416
$6, %
Dividend.com