1. Ari Lazar, Gabriella Wang, Jessica Kan, Sai Poddutur Presented 4/7/15
Abbvie (ABBV)
Ari Lazar, Gabriella Wang, Jessica Kan, Sai Poddutur
Presented 4/7/15
Sai

2. Agenda Introduction Macroeconomic Review Stock Market Prospects
Company and Business Review
Financial Analysis
Financial Projections
Valuation
Recommendation
Sai

3. Company Description Biopharmaceutical Company Research Based
Not Generics
High focus on disease treatment and prevention
Chronic Autoimmune Diseases
Spun off from Abbott in 2013
Based in Chicago Illinois
26,000 Full time employees
Has market share in approximately 170 countries
Ari
Abbvie k, Yahoo Finance, Google Finance

4. Historic Position Our Position 400 Shares Current Market Price $57.01
Cost Basis of $11,591
Cost Basis of $28.98/share
4/28/ shares at $27.10
11/11/ shares at $27.53
12/10/ shares at $34.22
Current Market Price $57.01
97 % Return
Sai

5. Historical Returns
Current Quarterly Dividend $0.49 Per Share at a 3.44% annualized yield
Sai
Abbvie 10k 2014

6. Macroeconomic Overview
Pharmaceutical Sector grew 2.4% in 2014
Drug spending increased by 13% in 2014
Hot Market for mergers and Acquisitions within healthcare sector
Ari
Avalon Health Economics, MarketWatch.com, Whoeswholegal.com

7. Key Product Descriptions
Humira
Chrohns Disease, Rheumatoid Arthritis, and Other similar problems
Main driver of sales (63% of total sales in 2014)
Viekira Pak
Hepatitis C treatment for patients with genotype 1
Recently approved in December 2014
Imbruvica
Chronic lymphocytic leukemia
Mantle cell lymphoma
Acquired from recent merger
Humira Sales
Jessica
Abbvie k

8. Revenue Breakdown
Gabriella
Abbvie K

9. Revenue Breakdown
Gabriella
Abbvie K

10. Recent Acquisition of Pharmacyclics (PCYC)
Announced on March 4th 2015
Management expects acquisition will be accretive
$0.6 per share by 2017
Over $1.00 per share by 2021
21 Billion dollar purchase price
PCYC purchase price $261.25
20% Premium
Many analysts think Abbvie overpaid
Imbruvica pipeline was driver for sales
58% Cash and 42% stock
Management plans to repurchase shares for acquisition
Ari
Pharmacyclics Acquisition Press Release

11. Management Outlook CEO and Chairman Richard A Gonzalez
Over 70% of salary in stock and stock options
Management Guidelines
Strong growth form Humira
Viekira expected to reach 3 Billion in sales
Partially offset by generic competitors
Strong growth in Earnings
Plans to continue to increase Dividends
Jessica
Abbvie K, Salary.com

12. Pipeline Explanation Phase 1 Phase 2 Phase 3 Registration Safety
30% Average success rate
Phase 2
Safety and Dosing
Larger population samples
14% Average success rate
Phase 3
Efficiency and Side Effects
3 phases usually take 6-11 years to complete
9% Average success Rate
Registration
Government Approval
0.6-2 Year time period
Around 8% of drugs survive process on average
Ari
FDAReview.org

13. Pipeline
Ari
Pharmacyclics Acquisition Press Release

14. Key Competitors Gilead Johnson and Johnson Pfizer AstraZeneca
HIV medication
Competes with Viekera and may need to lower price up to 46%
Johnson and Johnson
50% steak in Imbruvica
Pfizer
Oncology medication
AstraZeneca
Autoimmune Disease mediation
Competes with Humira
Eli Lilly
Ari
Forbes.com

15. Porter 5 Analysis Buyer Bargaining Power Supplier Bargaining Power
Low
Supplier Bargaining Power
Moderate
Threat of Substitutes
Very High
Threat of New Entrants
Rivalry
Moderate
Ari

16. SWOT Analysis Strengths Weaknesses Opportunities Threats
Humira market dominance
Weaknesses
Patent expirations
High reliance on Humira Sales
Opportunities
Drug Pipeline
Revenue Diversification
Less reliance on Humira sales with Viekera and Imbruvica
Threats
Generics
Currency Exchange Rates
Jessica

17. Risks Patent Expirations Competitors and Biosimilars/Generics
Humira USA patent expires at the end of 2016
Humira International patent expires mid 2018
Dyslipidemia Case Study
Competitors and Biosimilars/Generics
Viekera will be competing directly with a biosimilar beginning in 2016
Research and Development shortcomings
Government Regulations
Especially regarding Medicare/Medicaid payments
Currency Exchange Rates
Doubtful Receivables from Europe
Greece
Spain
Jessica

18. Technical Analysis
Bearish Signal
Sai
Bigcharts.com

19. Ratio Analysis / ROE
Sai
Data from Capital IQ

20. Comparable Analysis
Sai
Data from Capital IQ

21. Revenue Projections
Ari
Data From Capital IQ

22. Assumptions
Gabirella
Data From Capital IQ

23. Cost of Capital
Gabriella
Capital IQ, Yahoo Finance

24. DCF
Gabriella

25. Sensitivity Analysis
Ari

26. Price Target Price Target is below market price
Technical Analysis is a sell
Valuation methods lead to sell
Looming expiration of Humira Patents
Overpaid for PCYC Acquisition
Ari

27. Recommendation Sell 200 Shares Limit $55.00 GTC
Will be a 90% gain on investment
Ari