abbvie (abbv) ari lazar, gabriella wang, jessica kan, sai poddutur presented 4/7/15 1
TRANSCRIPT
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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 DescriptionBiopharmaceutical 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 PositionOur Position 400 Shares
Cost Basis of $11,591Cost Basis of $28.98/share
Our Position 400 Shares4/28/11 200 shares at $27.1011/11/11 100 shares at $27.5312/10/12 100 shares at $34.22
Current Market Price $57.0197 % Return
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Historical Returns
Abbvie 10k 2014
Current Quarterly Dividend $0.49 Per Share at a 3.44% annualized yield
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Macroeconomic OverviewPharmaceutical 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 DescriptionsHumira
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
Abbvie 2014 10k
Humira Sales
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Revenue Breakdown
Location of 2014 Sales
USA 54%
International 46%
Abbvie 2014 10K
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Revenue Breakdown2014 Revenue
HumiraAndroGelKaletraSynagisLupronSynthroidSevofluraneCreonDyslipidemiaDuodopaViekira PakOther
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 OutlookCEO and Chairman Richard A Gonzalez
Over 70% of salary in stock and stock options
Management Guidelines Strong growth form HumiraViekira expected to reach 3 Billion in
salesPartially offset by generic competitors
Strong growth in EarningsPlans 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 AnalysisBuyer Bargaining Power
Low
Supplier Bargaining PowerModerate
Threat of SubstitutesVery High
Threat of New EntrantsLow
• Rivalry• Moderate
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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
Bigcharts.com
Bearish Signal
Data from Capital IQ 19
Ratio Analysis / ROE
1 2 30.00
0.50
1.00
1.50
2.00Dupont Analysis Tax
Burden Interest BurdenROE Asset Turnover Operat-ing Margin
Data from Capital IQ 20
Comparable Analysis
Data From Capital IQ 21
Revenue Projections
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Assumptions
Data From Capital IQ
Capital IQ, Yahoo Finance 23
Cost of Capital
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DCF
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Sensitivity Analysis
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Price TargetPrice Target is below market price
Technical Analysis is a sell
Valuation methods lead to sellLooming 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