AbbVie's Potential Is 'Underappreciated,' Says Morgan Stanley Analyst

Despite the pandemic risk, one analyst at Morgan Stanley remains bullish on AbbVie Inc ABBV.

The AbbVie Analyst

David Risinger maintained an Overweight on AbbVie with a $95 price target. 

The AbbVie Thesis

Risks to U.S. sales stemming from unemployment and the Humira patent cliff are likely to be  pushbacks for AbbVie, Risinger said in a Wednesday note. (See his track record here.)

AbbVie's U.S. commercial exposure is at 42% of global sales compared to Eli Lilly And Co's LLY 30%, the analyst said. Notwithstanding the pushback, he said he sees AbbVie stock's valuation and yield as attractive. 

Though Risinger said he is cognizant of the patent cliff faced by AbbVie's rheumatoid arthritis drug Humira, he chooses to focus beyond that issue. Below-consensus sales of Humira in the 2023-24 period will be offset by higher excluding-Humira sales, the analyst said. 

Risinger sees the gentlest cliff for AbbVie. He estimates that 45% of the company's 2023 estimate is at risk to generic or biosimilar competition by 2030, which he said is the smallest percentage of five large-caps that include Merck & Co., Inc. MRK, Pfizer Inc. PFE, Lilly and Bristol-Myers Squibb Co BMY.

Discussing a "wildcard" catalyst for the stock, Risinger said AbbVie is due to release Phase 2 results on ABBV-3373 soon, with the investigational asset being an antibody-drug conjugate consisting of an anti-TNF antibody and a steroid.

Given the low odds of success and that the company hasn't yet demonstrated human efficacy proof-of-concept, the analyst said that if Phase 2 data is surprisingly compelling, AbbVie shares could step higher. If it fails, ABBV shares may only trade off slightly, he said. 

"We view Humira erosion fears as overly discounted and Abbvie's prospects as underappreciated."

ABBV Price Action

At last check, AbbVie shares were trading down 1.4% at $89.19. 

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