Better Growth Stock: AbbVie vs. Abbott Laboratories

pharmaceutical company AbbVie (ABBV 0.17%) participle from Abbott Laboratories (ABT 0.66%) The growth-oriented pharmaceutical business has become a monster, generating more than $58 billion in revenue last year. That’s significantly higher than Abbott’s top line, which totals just under $44 billion.

But today, AbbVie is facing some challenges as its top-selling drug, Humira, lost patent protection and sales have plummeted. Meanwhile, Abbott isn’t just a stale businessman. Diabetes products are seeing significant growth and are also making inroads into consumer wearables.

Going forward, which business will be a better choice for growth-oriented investors? Let’s see.

AbbVie case

The beauty of AbbVie’s business is that the diversity of its operations provides many potential paths for the business to grow. Immunology, Oncology, Aesthetics, Neuroscience and Ophthalmology are the company’s main business segments.

In the third quarter, AbbVie reported net income of $13.9 billion, down 6% from the same period last year, largely due to lower sales of its rheumatoid arthritis drug Humira, which faces more competition after losing patent protection.

However, the company’s neuroscience business, which includes Botox Therapeutic, grew 22%. In addition, in the long term, immunotherapies Skyrizi and Rinvoq are expected to make up for the decline in sales caused by Humira. Combining these two drugs can help you reach higher peaks. The top line may seem underwhelming, but when you look at AbbVie at first glance, things aren’t so bad.

Additionally, the company generates sufficient free cash flow to help provide the resources needed to expand its operations. Over the last 12 months, AbbVie reported free cash flow totaling $24.7 billion and has been putting that cash to work.

Earlier this month, AbbVie announced plans to acquire a neuroscience company. Cerevel Remedy It amounts to $8.7 billion. This purchase will help strengthen the company’s neuroscience portfolio. And in November, AbbVie announced the acquisition. Immunogen Another all-cash transaction valued at $10.1 billion. Through that transaction, AbbVie acquired Elahere, an antibody-drug conjugate that is an approved treatment for platinum-resistant ovarian cancer.

Between these acquisitions, strong cash flow, and a pipeline of over 90 different compounds, indications, or devices, AbbVie may still have plenty of growth opportunities going forward.

The Story of Abbott Laboratories

Abbott also has a variety of businesses, but its pharmaceutical operations are relatively small. Medical device sales typically account for the majority of revenues (more than 40%), followed by diagnostics, nutrition, and established pharmaceuticals.

In a sense, Abbott’s business is broader because it doesn’t primarily focus on drug development. And in the third quarter, the company experienced double-digit growth in several segments, including nutrition (18.1%), medical devices (14.7%), and conventional pharmaceuticals (11.1%). Diagnostics was the only sector to decline as demand for COVID-19 tests declined.

One promising growth area for Abbott is diabetes treatment. The company makes continuous blood sugar monitoring devices under the FreeStyle Libre brand. And sales of diabetes management products soared 26% last quarter. Sales of FreeStyle Libre products increased nearly 31%, with total revenue reaching $1.4 billion.

And there may be many more related opportunities. Consumer wearables are an emerging product category that can drive business growth. Abbott has Lingo, a wearable sensor that can track blood sugar levels and provide people (via an app) with personalized health recommendations related to sleep, diet, and exercise. The company hopes to have the product available in the U.S. market by next year.

Which growth stocks are better to buy?

Overall, AbbVie is a better growth stock. Although it is facing some challenges due to declining Humira sales, the company’s vast resources are well-positioned to weather the storm. It may take some time, but AbbVie’s business should return to steady growth. Unfortunately, Humira will be a drag on the top line for some time.

Abbott’s business is strong and it could have an advantage if it were smaller and more focused on diabetes care and wearables. However, extensive diversification allows investors to see more modest growth because it can often be difficult for investors to have so many different business segments all operating well at the same time.