AbbVie CFO: Big Acquisiton Not Prudent

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AbbVie(ABBV) is a behemoth of a company following its spinoff from Abbott Laboratories(ABT), but it is a one-legged giant. The chorus of concern around the companies prospects has centered on its extreme dependence on a single drug, Humira, which accounts for 50% of revenues and 70% of profits. There has been speculation that the firm would use its $7 billion cash hoard.

Speaking at at the J. P. Morgan Healthcare Conference on Tuesday, AbbVie CFO Bill Chase downplayed those speculations

“We are not really in a situation where we need to go and do a big deal,” CFO Bill Chase said at the J. P. Morgan Healthcare Conference. “It doesn’t seem to us to be a prudent way to use our cash.”

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But Chase said the company was confident that its pipeline of 10 drugs in pivotal-stage testing and more than 10 in mid-stage trials will serve to meet future revenue growth.

The current pipeline, including a drug the company views as the leading experimental drug for hepatitis C, could be augmented by bringing in individual products through licensing deals or smaller “tuck-in acquisitions,” he said.

AbbVie also aimed to return cash to shareholders in the form of dividend payments, he added.

“We are comfortable right now with the overall balance sheet,” Chase said, noting that AbbVie has outstanding debt of $15.7 billion. “Cash right now is an important source of liquidity for us.”

Analysts don’t share Chase’s rosy view of AbbVie’s pipeline, and while they may not do a big deal, we would definitely expect the company to spend cash on licensing or buying specific products that can take advantage of its large and effective sales force.

Disclosure: The author has no position in any stock mentioned

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