NYSE:ABBV
Chris Zakhem | Mengxi (Vivian) Wang
| Le Huong Hoang | Ziqi (Kay) Mai
November 17, 2015
Team Introduction
Chris Zakhem
Vivian Wang
Investment Manager
B.S. in Finance
Investment Manager
B.S. in Finance and
Accountancy
Le Huong Hoang
Ziqi Mai
Investment Manager
Masters of Finance
Investment Manager
Masters of Finance
Agenda
Company Overview
Stock Market Overview
Macroeconomic Overview
Financial Analysis
Comparable Companies
Financial Projections
Valuation
Recommendation
Client
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Company Overview
Introduction
About the Company
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Spin-off from Abbott Laboratories in 2013
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Global, research-based pharmaceutical company
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Develops and markets advanced therapies that address
some of the world’s complex and serious diseases
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Client
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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
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
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 2014 10K pg. 1-4, 12-14
Company Overview
Client
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Segments
Products
HUMIRA
HCV Products
VIEKIRA PAK
Additional
Virology
products
Metabolics/
Hormones
Products
Endocrinology
Products
Lupron
Other
Products
Duopa and
Duodopa
Kaletra
AndroGel
Norvir
Creon
Sevoflurane
Synagis
Synthroid
Dyslipidemia
products
Zemplar
Imbruvica
AbbVie has several product segments covering the brand name pharmaceutical industry
ABBV 2014 10K pg. 1-4
Company Overview
Key Products
Client
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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 2014 10-K pg. 1-4, 35; 2015 10-Q, ABBV 2015 Q3 Strategy Presentation pg. 11
Company Overview
Other Products
Client
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Product 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 2014 10-K pg. 1-4
Company Overview
Client
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Sales Breakdown
HUMIRA Annual Sales(in $millions)
14000
2014 Product Sales
Breakdown
HUMIRA
3%
3%
2%
AndroGel
1%
0%
Kaletra
8%
3%
4%
4%
4%
5%
12000
11%
10000
11%
8000
6000
5423
4888
25%
20%
4000
2000
6019
6524
5236
4377
0
Synagis
2012
2013
U.S.
63%
Lupron
Creon
International
2014 Geographical Sales
Breakdown
Synthroid
Sevoflurane
2014
Intern
ational
46%
USA
54%
USA
International
Dyslipidemia
products
HUMIRA is a large revenue driver and it has stable annual growth rate; the United States is
the key market for the business
ABBV 2014 10-K pg. 59-61
Company Overview
Pipeline
Development
Phase
Number of
drugs
Phase I
13
Phase II
19
Phase III
15
Client
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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
Company Overview
SWOT Analysis
>Strengths
- HUMIRA is the 2nd largest drug in
the world
- Stable Net Sales
Client
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>Weakness
- Patent expirations
- High reliance on HUMIRA sales
- Improved operating margin
- Patents protected
SWOT
Analysis
>Opportunities
>Threats
- Increasing market demand
- Cost-containment and downward
pricing pressure
- Expanded emerging market
- Currency exchange rate
- 15 Phase III drugs
- Biosimiliar competition & generics
ABBV 2014 10-K pg. 12-14
Technical Analysis
Cumulative Total Returns(assumed $100 invested)
ABBV 2014 10-K; Yahoo! Finance
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Industry Analysis
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Porter’s 5 Forces
Threat of New
Entrants
*Low
Rivalry
*Moderate
Investment Team
Threat of
Substitutes
*High
Buyer Bargaining
Power
Supplier
Bargaining Power
*Low
*High
Macroeconomic Overview
U.S. Health Spending
Client
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The U.S. health spending is expected to increase with a growth rate of 5.8%
http://www.iahc.com; https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/proj2014.pdf
Macroeconomic Overview
Gross Domestic Product
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GPD Growth Rate 2014-2019
3.5
3
2.5
2
1.5
1
0.5
0
2014
2015
2016
U.S. GDP growth rate
2017
2018
2019
World GDP growth
U.S. GDP growth rate is steady in the next 5 years; global GDP will decline in 2019
IBISWorld
Pharmaceutical Industry
Client
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Market share
15.50%
28.70%
15.10%
13.10%
9.80%
6.90%
10.90%
Johnson & Johnson
Pfizer
Abbvie
Merck and Co
Eli Lilly
IBISWorld Brand Name Pharmaceuticals
Pharmaceutical Industry
Client
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There is an increase in sales and demand in pharmaceutical sales worldwide
Arthritis and Hepatitis C Market
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There is an increase in doctor-diagnosed Arthritis and Hepatitis C in US and worldwide
Financial Analysis
Ratios Analysis
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ABBV 2014 10-K; 2015 Q3 10-Q
Client
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Financial Analysis
DuPont Analysis
ABBV 2014 10-K; 2015 Q3 10-Q
Client
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Financial Analysis
Greenblatt Ratios
Bloomberg
Financial Analysis
Greenblatt Ratios
Bloomberg
Comparable Companies
Client
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Descriptions
Competitors
Description
Eli and Lilly
Company
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Two segments: Human Pharmaceutical Products and Animal
Health Products
Merck
and Co
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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
Comparable Analysis
Ratio Analysis
AbbVie has exceptional high ROE and Leverage Ratio
Bloomberg
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Comparable Companies
Analysis
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Median multiples were selected and the price ratios were weighted more heavily
Capital IQ
Discount Rate
Weighted Average Cost of Capital
Client
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A risk premium was added to our WACC to represent the risk involved with AbbVie’s newly
added products
Investment Team
Financial Projections
Client
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The first Humira
Patent is expiring
in 2016. 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 2015 10-K; ABBV 2015 Q3 10-Q
Discounted Cash Flow
Investment Team
Client
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Valuation
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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
Recommendation
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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%)
Dividend.com
Current
Price
# of
Shares
Market
Value
Cost
Gain &
%Gain
$60.01
200
Shares
$12,002
$5,416
$6,586
+121.60%