AbbVie Inc – Risk Profile
- As per GlobalData’s proprietary risk methodology, AbbVie’s overall risk score is 3.49, signifying medium risk
- Country and operational risk pillars boosted the overall risk profile of the company
- Better inventory management boosted the liquidity ratios; however, a high proportion of debt on its balance sheet could cause concern
AbbVie Inc (AbbVie) has a solid risk profile based on our proprietary risk assessment of the pharmaceutical industry’s diversified drug sector. Country and operational risk pillars strengthened the overall risk score for the company. A large scale of operations, focus on innovation, partnerships, and improved financial performance are its strengths, even as a high proportion of debt on its balance sheet could cause concern to the company.
About the Company
AbbVie is a specialty biopharmaceutical company that discovers, develops, manufactures, and commercializes drugs to treat chronic and complex diseases. The company serves diverse therapeutic areas like metabolic diseases, rheumatological diseases, neurological disorders, viral diseases, skin diseases, complications associated with cystic fibrosis, pain related to endometriosis, gastrointestinal tract diseases, various cancer types, and other severe health conditions. AbbVie is also advancing its pipeline programs to treat cystic fibrosis, women’s health, multiple cancers, neurological disorders, and other autoimmune diseases.
AbbVie is one of the leaders in the diversified drug industry, with reported revenue of $56.19 billion in the financial year 2021 (FY2021), which increased 22.69% over that in FY2020. The company’s net income also increased 150.04% in FY2021 over that in FY2020.
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. The risk scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
AbbVie’s country and operational risk pillars fare better than the other ones. Companies like F. Hoffmann-La Roche Ltd, Johnson & Johnson, and Astellas Pharma Inc are the leaders in the sector.
Country Risk:
AbbVie has a presence in various regions, insulating it from the risk of operating in a single economy. The majority of the revenue of the company is from the US (76.15%), followed by Japan (2.62%), Canada (2.53%), Germany (2.29%), and other countries (8.68%). The company has a country risk score of 4.81.
Industry Risk:
The company generates 100% of its revenue from the diversified drug sector. High-profit margins and lower cyclicity characterizes the diversified drug sector but weak growth projection compared to other sectors hinder the sector score, resulting in an average industry risk score of 3.50.
Operational Risk:
AbbVie has a solid operational score of 3.67. The company capitalizes on its R&D to develop innovative products; R&D expenses account for nearly mid-teens of sales. It has several compounds under clinical development, with over 40 trials in phases 3 and 4. The company also nurtures agreements as a critical element of its business strategy to strengthen its research and development capabilities. Recent improvement in financial performance increases the investors’ confidence and provides a positive outlook for the future. Performance improvement also indicates an optimal pricing strategy and operational efficiency.
Financial Risk:
The company has a financial risk score of 2.48, below the sector average. Low inventory days compared to its peers have positively impacted the liquidity ratios. However, it reported a deficit in its working capital in FY2021, which could cause financial instability and make it difficult for the company to meet its short-term obligations. The company already has a high debt-to-equity ratio compared to its peers, which has affected the leverage ratios and cash flow ratios.
About our Methodology
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData’s proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company’s risk and return potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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