Transcript Abbvie (ABBV)

Abbvie (ABBV)
Ari Lazar, Gabriella Wang, Jessica Kan, Sai Poddutur
Presented 4/7/15
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Agenda
 Introduction
 Macroeconomic Review
 Stock Market Prospects
 Company and Business Review
 Financial Analysis
 Financial Projections
 Valuation
 Recommendation
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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
Abbvie 2014 10k, Yahoo Finance, Google Finance
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Historic Position
 Our Position 400 Shares
 Cost Basis of $11,591
 Cost Basis of $28.98/share
 Our Position 400 Shares
 4/28/11 200 shares at $27.10
 11/11/11 100 shares at $27.53
 12/10/12 100 shares at $34.22
 Current Market Price $57.01
 97 % Return
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Historical Returns
Current Quarterly Dividend $0.49 Per Share at a 3.44% annualized yield
Abbvie 10k 2014
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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
Avalon Health Economics, MarketWatch.com, Whoeswholegal.com
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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
Humira Sales
 Imbruvica
 Chronic lymphocytic leukemia
 Mantle cell lymphoma
 Acquired from recent merger
Abbvie 2014 10k
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Revenue Breakdown
Location of 2014 Sales
USA 54%
International 46%
Abbvie 2014 10K
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Revenue Breakdown
2014 Revenue
Humira
AndroGel
Kaletra
Synagis
Lupron
Synthroid
Sevoflurane
Creon
Dyslipidemia
Duodopa
Viekira Pak
Other
Abbvie 2014 10K
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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
Pharmacyclics Acquisition Press Release
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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
Abbvie 2014 10K, Salary.com
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Pipeline Explanation

Phase 1
 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
FDAReview.org
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Pipeline
Pharmacyclics Acquisition Press Release
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Key Competitors
 Gilead
 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
Forbes.com
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Porter 5 Analysis
 Buyer Bargaining Power
 Low
 Supplier Bargaining Power
 Moderate
 Threat of Substitutes
• Rivalry
• Moderate
 Very High
 Threat of New Entrants
 Low
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SWOT Analysis
 Strengths
 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
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Risks

Patent Expirations
 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
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Technical Analysis
Bearish Signal
Bigcharts.com
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Ratio Analysis / ROE
Dupont Analysis
2.00
1.00
Interest
Burden
0.00
ROE
1
Data from Capital IQ
Tax
Burden
2
3
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Comparable Analysis
Data from Capital IQ
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Revenue Projections
Data From Capital IQ
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Assumptions
Data From Capital IQ
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Cost of Capital
Capital IQ, Yahoo Finance
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DCF
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Sensitivity Analysis
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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
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Recommendation
 Sell 200 Shares
 Limit $55.00 GTC
 Will be a 90% gain on investment
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