AbbVie (ABBV) stock hit a seven-month high Friday on an upgrade from Goldman Sachs, which estimated growth assets could bring in up to $20.5 billion in sales over the next five years.
On the stock market today, AbbVie shares rose 2.1% to 65.88, after earlier rising as much as 3% to touch a high at 66.45. The last time AbbVie shares eclipsed 66 was in August 2016. AbbVie stock outperformed all but Kempharm (KMPH) and Nexvet (NVET) — two smaller firms that now trade under 5 each — among drugmakers on Friday.
Goldman Sachs analyst Jami Rubin urged AbbVie to separate its Humira and growth units. Humira, an immunosuppressant, brings in the lion's share of AbbVie's sales. In 2016, sales of Humira accounted for 63% of AbbVie's total $25.56 billion in revenue.
"We believe AbbVie would benefit from unlocking trapped value by separating business segments for reporting purposes and returning cash to shareholders through a recurring Humira dividend or buyback, as investors wait for (the) growth (products) to mature," she said.
Rubin has a buy rating on AbbVie stock and moved it to her conviction list. She also boosted her price target on AbbVie stock to 80 from 74.
Rubin estimates Humira is worth $39 per share of AbbVie's stock price. Growth assets in oncology, immunology and women's health are worth $52 per share today, minus $19 per share in debt, she wrote in a research report.
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Over the next five years, Rubin expects those assets to grow 16% to $20.5 billion in sales from $9.8 billion. In the meantime, Humira will act as a cash flow-generator and repatriation of cash overseas could make accessing funding easier.
Though AbbVie doesn't appear likely to see mergers, she said.
"Recent comments from management about lack of interest in large deals suggest that alternative uses of cash could be considered," she said, but didn't offer suggestions of what use AbbVie has for extra cash.
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