This time it is ABBV
Not too many days ago I welcomed an 11.6% increase in the dividend for ARCC, a financial company. Then I reported a 4.9% increase for our GTY holdings, which is a REIT. Today the good news comes from a pharmaceutical company we own: ABBV. ABBV’s increase is 5.0%.
Three Paths to Income – Path One
We have owned shares of Abbvie Inc since 2016 and have collected dividends. I have bought and sold shares of this stock but tend to hold them. As a result, I have received $12,406.03 in dividends from ABBV. But there is another part to this story. At first those dividends were in my traditional IRA. On April 18, 2019, I did a conversion of the 500 ABBV shares to my ROTH IRA. At that time the share price was in a funk. I saw long-term value, so I moved the shares and paid the federal and state income taxes. Therefore, since April 2019, I have received $8,393.03 in my ROTH. There is no tax on this income. At the new dividend rate, our annual income from the 500 shares will be $2,960. Although the dividend is paid quarterly, this is effectively $246.67 per month. That easily covers my Physicians Mutual Medicare Supplemental insurance premium with money to spare.
Three Paths to Income – Path Two
The second path is from the sale of covered call options. I started selling covered call options on ABBV shares in June 2021. $1,543.98 has been received as income since that date. Although this is not a lot of money, the amount of time and work it took to get that income was minimal.
Three Paths to Income – Path Three
The third path is to buy low and sell high. Although I moved the 500 shares to my ROTH, that did not prevent me from buying 100 ABBV shares in my traditional IRA on September 1, 2021. I paid $107.99 for the shares. I then sold a covered call option on those shares at a price that was attractive to me. As a result, on February 28, 2022, someone bought my 100 shares for $145 per share. That gave me a net profit of $3,700.92 after commissions. Bear in mind that I also received the options income and dividend income during the time I held those shares.
Why did the Price Per Share Drop Yesterday?
Humira patent protection ends in 2023. One blogger noted, “While Humira’s days of exclusivity are numbered, we need to consider that even after the 2023 patent expires sales aren’t suddenly going to zero. Many patients already on the drug will likely remain on it, and some doctors will continue to recommend/prescribe it. Additionally, there will be royalties and licensing agreements from competitors to help offset the losses. AbbVie can also lower prices depending on competitors’ rates in an attempt to retain market share. Ultimately, total sales will still erode over the coming years, although they can continue providing meaningful cash flow to the business.” LINK to BLOG
Third quarter Global net revenues from the Immunology Portfolio were $7.651B, an increase of 14.6% on a reported basis, or 16.4% on an operational basis.
U.S. Humira net revenues were $4.956B, an increase of 7.4%; Internationally, Humira net revenues were $603M, a decrease of 25.9% on a reported basis, or 16.8% on an operational basis, due to biosimilar competition.
Although I no longer make investment decisions using Weiss Ratings, I am a curious investor. From time-to-time I visit Weiss to see what they are saying. Currently, ABBV is rated “B” in their opinion. That is a buy rating. Because the stock market is nervous about Humira’s demise, the share price dropped. However, there is the potential for Humira 2.0. According to one Seeking Alpha author, “There will likely be a data readout this year for the ABBV-154 study in adult patients with moderate to severe rheumatoid arthritis. ABBV-154 has the active ingredient of Humira combined with a targeted steroid delivery to the site of inflammation. If positive as expected, it could signal success for a future Phase 3 program and excitement as AbbVie’s heir apparent to its $20 billion behemoth.” LINK to Clinically Sound Investor
Company Profile – AbbVie Inc.
AbbVie Inc. discovers, develops, manufactures, and sells pharmaceuticals in the worldwide. The company offers HUMIRA, a therapy administered as an injection for autoimmune and intestinal Behçet’s diseases; SKYRIZI to treat moderate to severe plaque psoriasis in adults; RINVOQ, a JAK inhibitor for the treatment of moderate to severe active rheumatoid arthritis in adult patients; IMBRUVICA to treat adult patients with chronic lymphocytic leukemia (CLL), small lymphocytic lymphoma (SLL), and VENCLEXTA, a BCL-2 inhibitor used to treat adults with CLL or SLL; and MAVYRET to treat patients with chronic HCV genotype 1-6 infection. It also provides CREON, a pancreatic enzyme therapy for exocrine pancreatic insufficiency; Synthroid used in the treatment of hypothyroidism; Linzess/Constella to treat irritable bowel syndrome with constipation and chronic idiopathic constipation; Lupron for the palliative treatment of advanced prostate cancer, endometriosis and central precocious puberty, and patients with anemia caused by uterine fibroids; and Botox therapeutic. In addition, the company offers ORILISSA, a nonpeptide small molecule gonadotropin-releasing hormone antagonist for women with moderate to severe endometriosis pain; Duopa and Duodopa, a levodopa-carbidopa intestinal gel to treat Parkinson’s disease; Lumigan/Ganfort, a bimatoprost ophthalmic solution for the reduction of elevated intraocular pressure (IOP) in patients with open angle glaucoma (OAG) or ocular hypertension; Ubrelvy to treat migraine with or without aura in adults; Alphagan/ Combigan, an alpha-adrenergic receptor agonist for the reduction of IOP in patients with OAG; and Restasis, a calcineurin inhibitor immunosuppressant to increase tear production, as well as other eye care products. AbbVie Inc. has a research collaboration with Dragonfly Therapeutics, Inc. The company was incorporated in 2012 and is headquartered in North Chicago, Illinois. Link to ABBV. Link to ABBV Investor Presentations. Link to ABBV Investors.
Cindie and I own 500 shares of ABBV as a long-term investment. I will continue to sell covered call options on the shares. I currently have one option open to sell the shares at $157.50 per share. This option expires November 4th. It is highly unlikely that I will lose those shares.