In This Article:
Key Points
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Many experts believe a recession will hit the U.S. in 2025.
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This could upend an already shaky stock market.
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AbbVie is an excellent stock for rocky times. Here's why.
J.P. Morgan stated last month that it believes there is a 60% chance of a recession in 2025 due to trade wars and tariffs. The raging bull market that started at the beginning of 2023 is in jeopardy. No one knows precisely when the bulls will get tired and the bears will come out of hibernation. Sometimes, it's a black swan event that is impossible to predict. Other times, it's a simple matter of exhaustion and valuations that go too far.
The recent market downturn is an excellent example. After the election, the general consensus was that the new administration would be positive for the stock market, and the major indexes rose immediately after Election Day. The continuation of the bull market hasn't come to fruition. Trade wars, tariffs, and uncertainty spooked the major indexes into correction territory. And, despite the recent rebound, many believe there is more pain to come. Time will tell.
Pharmaceutical stocks often outperform during market downturns because they pay dividends and their products are mostly necessities. AbbVie (NYSE: ABBV) is one of the best. It outperformed the Invesco Nasdaq Trust by 57% when tech crashed in 2022, as you can see below.
Here's a closer look at what makes AbbVie a terrific stock.
A transformative vision
Many investors remember when AbbVie was a one-trick pony, selling boatloads of Humira, the best-selling prescription drug ever. Humira accounted for 58% of sales in 2019, and Humira sales peaked at $21 billion in 2022.
But everyone knew that exclusivity wouldn't last. Biosimilars were in the pipeline, and this was very concerning to investors. How would AbbVie cope with losing billions in sales from its signature product? Luckily, management had a vision and wasn't afraid to be bold.
AbbVie executed one of the largest pharmaceutical acquisitions in history when it paid $63 billion for Allergan in a deal that closed in 2020. The deal expanded AbbVie's aesthetics, eyecare, and neuroscience portfolios with Botox, Juvederm, Restasis, Vraylar, and others.
The deal significantly reduced reliance on Humira sales overnight. Although many criticized the deal as too expensive at the time, it has been a smashing success. In 2024 alone, AbbVie earned around $15 billion in revenue from Allergan products. AbbVie didn't stop there.
AbbVie acquired ImmunoGen and Cerevel Therapeutics in 2024 for $10 billion and $9 billion, respectively. The ImmunoGen deal's star is the ovarian cancer drug Elahere, which had sales of $479 million in 2024. AbbVie is in the process of expanding its use cases significantly to boost sales. Unfortunately, the Cerevel acquisition hasn't been successful yet as its primary drug failed to meet endpoints. You can't win them all.