Our 2024 piece argued the market was under-pricing the post-Humira ramp. Eighteen months later, the data supports the original view and extends the upside.
The Valuation Desk last wrote on AbbVie in our piece 'AbbVie's Post-Humira Earnings Power Is Being Undervalued' in late 2024. At the time, we argued the market was under-pricing the Skyrizi and Rinvoq franchise ramp and the resulting capital return durability. The stock traded near $185. Since that piece, Skyrizi and Rinvoq combined annualised revenue has grown from approximately $20 billion to $31 billion, exceeding our upside case. The stock has moved to $220. The thesis has played out partially and the updated view is more constructive, with a revised fair value range of $240-265 on a twelve-month view.
This update revisits the specific variables that drove the original thesis, measures them against actual FY2025 results, and re-scales the forward view accordingly. The broader message is that AbbVie has successfully navigated the most dangerous portion of its post-Humira transition, and the valuation now needs to price the post-transition steady state rather than the transition itself.
The 2024 piece made three specific claims. First, that Skyrizi and Rinvoq combined would reach $30 billion annualised revenue by end of FY2025 despite consensus of $26 billion. Second, that the Humira biosimilar erosion would be less severe than the 2024 consensus assumed, with pricing compression topping out at 55% rather than 70% initially projected. Third, that FY2026 consensus EPS of $10.80 was materially below our model of $12.20.
The actual FY2025 data: Skyrizi plus Rinvoq at $31 billion versus consensus $26 billion (beat by $5 billion). Humira revenue declined 48% year over year versus consensus 58% decline (less severe erosion). FY2026 consensus EPS has been revised upward to $12.40 versus our $12.20 estimate. All three original claims have been validated within a reasonable margin of error.
That is an unusual outcome for any sell-side thesis; most predictions miss in at least one dimension. The Valuation Desk takes this validation as evidence that the underlying drivers are observable and the forward update has similar ground to stand on.
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Three things have moved materially since the original piece. First, the Skyrizi and Rinvoq growth has been more durable than forecast. The trajectory through FY2025 has been accelerating rather than decelerating, with both products showing mid-teens quarter-over-quarter growth in the most recent period. That acceleration supports a higher steady-state revenue base than the original model assumed.
Second, the neuroscience and oncology portfolios have begun contributing meaningfully. Elahere, acquired through the ImmunoGen transaction, has reached $1.2 billion annualised. Emrelis launched in late 2024 and is scaling. The broader oncology pipeline depth has improved. These contributions were not central to the original thesis and represent upside that was not credited.
Third, the Allergan Aesthetics business has underperformed. Botox and Juvederm growth has been slower than expected, reflecting softer consumer discretionary spending on aesthetic procedures. That headwind offset some of the Skyrizi/Rinvoq upside but is temporary in nature. Aesthetics cycles tend to recover with consumer confidence; the Valuation Desk models FY2026 as the bottom year for that segment.
At a 14.3x forward earnings multiple, AbbVie is still priced at a material discount to the pharma sector average of 16-17x. The discount reflects the overhang of legacy Humira concerns and the debt load from the Allergan acquisition. Both overhangs are fading. Humira erosion is largely complete. The Allergan debt has been reduced to approximately $64 billion from a $86 billion peak. Each overhang closing supports modest multiple expansion.
The updated Valuation Desk model places FY2026 EPS at $12.60-13.10, FY2027 EPS at $14.00-14.80. At a 16x forward multiple on FY2027 earnings of $14.40 midpoint, fair value is $230 per share. At 18x, fair value is $260. The range of $240-265 on a twelve-month view brackets the 17-18x forward multiple scenario, which the Valuation Desk views as appropriate given the improved portfolio quality.
The dividend yield of 3.2% provides a supportive income characteristic. Buyback pace has been modest given debt reduction priority, but should accelerate as the balance sheet normalises through FY2027. Total shareholder yield reaches 4.5-5.0% at steady state, above the pharma sector average.
Global immunology drug spending reached approximately $135 billion in FY2025 and is projected to grow at 7-8% annually through 2030. That market includes rheumatoid arthritis, psoriasis, psoriatic arthritis, inflammatory bowel disease, and several other autoimmune conditions. AbbVie and Johnson & Johnson collectively hold approximately 58% market share at the branded level; the remaining share is fragmented across smaller specialty pharma players plus growing biosimilar penetration.
Within this market, Skyrizi has become the leading IL-23 inhibitor for psoriasis and is expanding into inflammatory bowel disease where it can capture significant share from older TNF inhibitor therapies. Rinvoq is the leading oral JAK inhibitor across multiple indications. Both products have favourable safety profiles that support first-line or second-line prescribing versus alternatives. Market positioning is strong.
The specific question for AbbVie's long-term earnings power is how the Skyrizi and Rinvoq franchises extend beyond their current primary indications. Both products have expansion paths into additional indications (atopic dermatitis for Rinvoq, hidradenitis suppurativa for Skyrizi, multiple others). Each new indication adds incremental revenue. The Valuation Desk models approximately 3-5% annual revenue growth from new indication expansion beyond the base franchise trajectory.
AbbVie returned approximately $13.5 billion to shareholders in FY2025, split between $11.2 billion in dividends and $2.3 billion in net buybacks. The buyback pace has been deliberately modest during the debt reduction phase; management has prioritised restoring balance sheet flexibility before accelerating repurchases. That discipline is consistent with the original thesis and should reverse as debt approaches target levels in FY2027.
At target net debt of approximately $40 billion by end of FY2027, AbbVie has flexibility to increase buybacks to $6-8 billion annually. Combined with continued dividend growth, total shareholder yield reaches 5-6% by FY2028 on current share count. That is a meaningful income profile even absent multiple expansion.
Historically, pharma companies that transition from debt-reduction mode to capital-return mode have seen 15-25% multiple expansion over twelve to eighteen months. AbbVie's transition timeline places that window in late FY2027 through 2028. That timing supports the Valuation Desk's view that the current re-rating has more room to run into the following fiscal year.
AbbVie's neuroscience portfolio includes Botox Therapeutic, Vraylar, Qulipta, Ubrelvy, and several pipeline assets. The segment generated approximately $9.5 billion in FY2025, growing at 14% year over year. This growth is accelerating rather than decelerating and represents one of the cleanest growth engines in the post-Humira portfolio.
Vraylar specifically has exceeded internal commercial expectations, reaching approximately $3.5 billion annualised run rate with continued double-digit growth. Qulipta and Ubrelvy for migraine have collectively reached $1.8 billion annualised, again ahead of pre-launch expectations. The migraine franchise competition remains intense with multiple GLP-1-adjacent entrants but AbbVie's position is durable.
The neuroscience segment was not central to the original thesis. Its outperformance is incremental upside. The Valuation Desk models the segment reaching $14-16 billion by FY2028 on current trajectory, providing meaningful contribution to consolidated revenue growth.
AbbVie's late-stage pipeline beyond Skyrizi and Rinvoq includes ABBV-383 (multiple myeloma), Tavapadon (Parkinson's disease), and several oncology assets acquired through ImmunoGen. Combined peak revenue potential from these pipeline assets is approximately $8-12 billion annually, with commercial launches starting in FY2027-28 and ramping through FY2030-32.
The specific asset to watch is Tavapadon. Phase 3 data for this D1 selective Parkinson's agent is expected in late 2026. Positive data would enable launch in 2027 and establish a new franchise in a large unmet-need market. Consensus is cautious on the probability of success; the Valuation Desk assigns approximately 55% probability of positive Phase 3 readout based on Phase 2 data.
Pipeline depth matters because it reduces reliance on Skyrizi and Rinvoq as the sole growth vehicles. A diversified growth base is more durable than concentrated growth. AbbVie's pipeline depth has improved meaningfully over the past eighteen months and is an underappreciated component of the forward valuation case.
The 2024 piece modelled Skyrizi and Rinvoq combined peak revenue at $40-45 billion by FY2030. Updated trajectory suggests the peak could reach $48-55 billion, roughly 15% higher than the prior model. The higher peak comes from stronger gains in the immunology market plus earlier-than-expected expansion into additional indications.
The 2024 piece also modelled Humira declining to $3-4 billion sustained by FY2028. Updated trajectory suggests the sustained base could be $5-6 billion as certain patient populations and international markets retain preference for the originator product. That is another 50% upside to the original Humira sustained estimate.
Combined, the two revisions add approximately $8-10 billion to our FY2030 revenue model. Applied at the margin profile we have been using (41% operating margin), that is $3-4 billion of incremental operating profit. Capitalised at 15x, that is $45-60 billion of incremental value creation, or approximately $25-35 per share. The Valuation Desk's revised fair value captures most of this upward revision.
Two specific risks have moderated since the original piece. Humira biosimilar competition pricing has stabilised; further aggressive discounting from biosimilars appears unlikely. The Allergan Aesthetics risk has crystallised and is being quantified; further negative surprises from this segment are less probable than six months ago.
One risk has increased. Regulatory scrutiny of PBM rebate structures, particularly around IBM Medicare negotiations under the Inflation Reduction Act, could affect Skyrizi and Rinvoq pricing in later fiscal years. The extent of impact depends on which products are selected for negotiation and the timing of negotiated price implementation. The Valuation Desk models roughly 4-6% revenue impact across the specialty pharma portfolio from this dynamic beginning in FY2028. That is baked into the current fair value range.
The AbbVie thesis has played out largely as written. The stock has rerated from the $185 level to $220, and our fair value update moves fair value from the original $210-235 range to the revised $240-265 range. We remain constructive and continue to view the stock as undervalued despite the strong recent performance. The post-Humira transition is effectively complete from a market narrative perspective. The next chapter is about Skyrizi, Rinvoq, and portfolio depth delivering sustainable earnings compounding. We are buyers below $210 and holders through $255. Above $265, the upside thins and we would trim into strength. The thesis update increases conviction rather than compressing it.
Relative to Merck, which we are bearish on given the Keytruda concentration, AbbVie's portfolio diversification at this point in its post-LOE transition is materially superior. Relative to Eli Lilly, which is enjoying the GLP-1 momentum, AbbVie offers a less volatile profile with steadier dividend income. Relative to Johnson & Johnson, AbbVie has superior revenue growth but lower geographic and therapeutic diversification.
The composite picture places AbbVie in a specific niche within the large-cap pharma complex: a recovering post-LOE story with demonstrated execution track record and visible multi-year earnings growth. That niche deserves a valuation premium to the sector average, not the current discount. Multiple expansion from 14x to 16-17x forward earnings is the specific valuation lever the Valuation Desk is positioning around.
For investors constructing pharma exposure, AbbVie deserves portfolio weight proportional to its risk-adjusted return profile. We would size it alongside Eli Lilly at the top of the US large-cap pharma complex, with Merck and Pfizer at the bottom given their respective patent cliff concerns.
Three near-term events will determine whether the updated thesis plays out on the Valuation Desk's accelerated timeline or on a more gradual path. First, Skyrizi and Rinvoq Q1 2026 prescription trends. Continued mid-teens growth would confirm the trajectory; any deceleration below 10% would be a negative signal. Second, the IRA Medicare negotiation list for the next selection round. If Skyrizi or Rinvoq are not selected, the thesis strengthens. If one is selected, the near-term earnings model needs adjustment. Third, Allergan Aesthetics sequential performance. A return to positive growth in this segment would remove the last meaningful drag on consolidated growth.
The timing of these events is January through May 2026. The Valuation Desk will update following the incremental data. The base case is that at least two of the three events resolve constructively, supporting continued multiple expansion. If any two resolve negatively, fair value compresses by approximately 10% and we would trim the position accordingly.
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The consensus frames AbbVie as a post-Humira recovery story with a 14x forward P/E and a 3.2% dividend. The debt stack, the net income trajectory, and the biosimilar trajectory tell a more cautious story.
The trailing P/E of 87x masks a forward P/E of 14.3x. Skyrizi and Rinvoq are on pace to exceed peak Humira revenue by 2027, and the market has not fully priced in the replacement math.
AbbVie's dividend yield of 3.1% and aggressive acquisition strategy tell a story the income statement alone can't — management is betting the Humira cliff was already priced in and is deploying capital for the next growth cycle.