Expect AbbVie's story to move from 'How much Humira?' to 'Who will it buy?': analyst

AbbVie
AbbVie still has voids in key areas of its business that it may try to fill with M&A, Leerink Partners' Geoffrey Porges predicts. (Image: AbbVie)

AbbVie may not seem to most investors like the kind of company to chase down mammoth deals. But that doesn’t mean it won’t do just that, one analyst figures.

 

With plenty of cash coming in from its operationsHumira alone brought in $4.9 billion last quarteralong with its “borrowing capacity and newly accessible offshore cash," the Illinois drugmaker will likely “pursue additional significant M&A over the next few years,” Leerink Partners’ Geoffrey Porges wrote in a Monday note to clients.

 

“We expect the narrative for this stock in the coming months to develop into a ‘who will it buy’ story, similar to Gilead in 2016 and Celgene more recently,” he added.

 

RELATED: AbbVie hikes 2018 forecast and promises shareholder rewards, thanks to U.S. tax changes

 

The way Porges sees it, the company strategically “still has holes” in important parts of its portfolio, as well as “limited exposure” to the breakthroughs happening around the industry in fields such as immuno-oncology and cell therapy. Alzheimer’s is one arena in which AbbVie could look to bulk up, ahead of its key phase 3 results coming in 2019.

 

And while AbbVie “does not seem inclined towards large or disruptive transactions,” Porges wrote, it’s not as if it has never pulled off a big buyout. “Very few investors saw its 2015 purchase of Pharmacyclics for $21 billion coming either,” he noted.

 

RELATED: AbbVie paid a 'lofty,' 'staggering,' 'astronomical' price for Pharmacyclics. But was it too much?

 

Before that, AbbVie went after an even larger deal, inking a $55 billion pact to buy Shire in the summer of 2014. But new, stricter rules on tax inversions scuttled that deal, and AbbVie pulled the plug.

 

Meanwhile, execs around the industry have said over the past few weeks that they don’t expect new U.S. tax laws to stir up the M&A maelstrom that pharma watchers predicted last year. Last week, Biogen CEO Michel Vounatsos, for one, said he doesn’t “see a frenzy” occurring as companies bring back overseas cash.

Read more on