AbbVie Stock Boosts Portfolios With Entry Into Weight Loss Market
AbbVie Inc. (NYSE: ABBV) is trading near an all-time high after the company announced a licensing agreement with Gubra, a Danish company. The agreement pertains to Gubra’s experimental weight loss drug, which is in a Phase 1 trial.
AbbVie paid Gubra a $350 million upfront payment for the right to its experimental weight loss drug, GUB014295, which is in a Phase 1 trial. AbbVie has committed to paying Gubra up to $1.9 billion based on certain development and sales milestones that are met.
But the move higher after this announcement just continues the bullish pattern in place with ABBV stock, which has been up more than 19% since the start of the year. Analyst sentiment suggests the stock still has room to run higher.
How Gubra Is Different From Existing Competition
Entering the weight loss market makes sense for AbbVie when you consider that analysts believe the weight loss drug market could be worth $130 billion by 2030. Currently Novo Nordisk A/S (NYSE: NVO) with Ozempic and Eli Lilly and Co. (NYSE: LLY) with Zepbound are the major players. And like those two drugs, GUB014295 (also known as GUBamy) is an injectable drug.
But it’s important to note that GUBamy offers a distinct difference that Gubra believes will be an advantage. Both Ozempic and Zepbound target the GLP-1 hormone. By contrast, GUBamy acts as an analog of the body’s amylin hormone.
Amylin has been identified as a potential therapeutic target for obesity treatment. The hormone gives patients’ brains a feeling of fullness that helps suppress appetite, reduce food intake, and delays gastric emptying. The optimism is that GUBamy may provide a more long-lasting solution to weight management. In results from Gubra’s six-week Phase 1 study in 2024, patients achieved 3% weight loss after a single dose.
It’s Not Who’s Selling, It’s Who’s Buying
In February, the AbbVie Insider Trades on MarketBeat show three different AbbVie executives sold the company’s stock in February. Retail investors frequently assign too much importance when company insiders sell stock. In this case, each trade was executed pursuant to a Rule 10b5-1 plan.
A Rule 10b5-1 plan is a written agreement between a corporate insider and a broker, establishing predetermined trading instructions with a predetermined share price, amount, and transaction date. In each case, these plans were made in November 2024.
It’s a good reminder that investors, even corporate insiders, sell stock for a variety of reasons. But there’s usually only one reason they’re buying. And in the last 12 months, six different members of Congress have bought ABBV stock. And as investors know, Congressional trading doesn’t have the same oversight as a Rule 10b5-1 plan when it comes to potential insider trading.
Analysts Are Raising Their Price Targets
Since the announcement in early March, AbbVie stock reached an all-time high at over $216 per share. The stock has fallen back to around $212 as of this writing, and some investors are concerned about the stock’s trailing twelve-month price-to-earnings (P/E) ratio, which is 88x.
However, AbbVie’s forward P/E is only around 17x, which is slightly below the company’s ten-year average of around 20x. That suggests that rather than being expensive, ABBV stock may be trading at a discount to its historical average and the average of other stocks in the biopharmaceutical and medical sector.
That seems to be the consensus of the analyst community. Since the announcement of the deal with Gubra, two analyst firms, Bank of America and Wells Fargo, have raised their price targets on ABBV stock to $223 and $240, respectively. Erste Group Bank upgraded the stock to a Strong Buy.
Investors looking to get involved will want to see if other analysts raise their outlook before AbbVie reports earnings in April. Even if you feel the stock is too expensive, you may want to consider starting a position simply to collect the company’s dividend, which currently pays $6.56 per share annually.
Learn more about ABBV
