Johnson & Johnson Hopes to Dethrone AbbVie's Biggest Growth Driver. Here's Why Investors Shouldn't Panic

Despite its shares being in the red year to date, AbbVie's (NYSE: ABBV) financial results have been strong. The company's first-quarter update, released on April 29, came in ahead of expectations on both the top and bottom lines. One of the company's most important growth drivers, powering excellent financial results, is Skyrizi, an immunology medicine approved across several indications, including plaque psoriasis, a disease that causes thick, scaly patches of skin.

Skyrizi is one of the leaders in this niche, but could it lose significant market share due to growing competition? Johnson & Johnson (NYSE: JNJ) certainly hopes so, since it recently launched a direct competitor to Skyrizi. But even with this challenge, AbbVie's medium-term outlook remains strong as Skyrizi should continue its march forward. Here's what investors should know.

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Skyrizi's crown is safe

On March 18, Johnson & Johnson announced that the U.S. Food and Drug Administration (FDA) had approved Icotyde, a once-daily oral medicine for plaque psoriasis. This new therapy has an advantage over other drugs in this niche, including Skyrizi and Johnson & Johnson's own Tremfya, since these two are typically administered via subcutaneous injections for maintenance dosing. Many patients will naturally prefer pills if given the choice. However, doctors prescribe medicines not just based on how they are administered. There are other important considerations, including efficacy.

That's where Skyrizi seems to have a clear edge. For context, the PASI (Psoriasis Area and Severity Index) is used to assess the severity of psoriasis. The higher it is -- with a possible maximum score of 72 -- the worse the disease is. In clinical trials testing medicines for plaque psoriasis, achieving, say, a 90% reduction in a patient's PASI score from baseline is an important metric of efficacy and is denoted PASI 90. How did Icotyde compare to Skyrizi? It's always hard to determine that without head-to-head clinical trials.

But it's still worth noting that in clinical trials, around 50% of patients treated with Icotyde achieved PASI 90 by week 16, compared with approximately 70% of patients treated with Skyrizi in phase 3 studies. In other words, Skyrizi seems much more effective and should maintain its lead, even with new competition from Johnson & Johnson's Icotyde. Here's another reason not to be too worried about Skyrizi: It has several other indications, including ulcerative colitis and Crohn's disease.

True, the plaque psoriasis indication was its first and is likely its biggest growth driver, but Skyrizi should be just fine, thanks in part to the multiple label expansions it has earned.

Why AbbVie stock is a buy

Skyrizi is one of the two major growth pillars that are most responsible for AbbVie's financial results. The other is Rinvoq, another immunosuppressant approved across several indications. These two have consistently exceeded expectations. Consider that AbbVie initially predicted that, together, they would reach $27 billion in sales by 2027. The pharmaceutical leader then increased its 2027 guidance to $31 billion. And now, AbbVie expects Skyrizi and Rinvoq to surpass that number this year.

That is an incredible trajectory. Further, neither should lose patent exclusivity until well into the next decade. My view is that they will remain growth drivers until then. AbbVie boasts several others, such as its migraine treatment Qulipta. And beyond its current portfolio, AbbVie has a deep pipeline that will help it overcome the eventual loss of patent exclusivity for Skyrizi and Rinvoq, as it did with its former best-selling medicine and the most lucrative drug in history, Humira. AbbVie is notably looking to break into the weight loss market with an early stage candidate that recently posted encouraging results.

AbbVie's robust financial results, deep pipeline, and innovative abilities all make it an attractive bet. Then there is the company's dividend. AbbVie offers an attractive forward yield of 3.2%, and it has increased its payouts for 54 consecutive years, which makes it a Dividend King, or a corporation with 50 or more straight payout increases. For all those reasons -- and despite increased competition for one of its most important drugs -- AbbVie's stock remains a buy.

Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool has positions in and recommends AbbVie. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.