AbbVie's $10.9 Billion Apogee Deal Will Extend Its Immunology Dominance: Is It Time to Load Up on This Dividend King?

AbbVie (NYSE:ABBV) was one of the livelier stocks in Monday’s trading session. It was also one of the better-performing equities, gaining more than 6% that day. Much of this was due to a splashy new acquisition that will strengthen its already considerable presence in a lucrative segment of the pharmaceutical market.

A monster immunology play

Before market open, AbbVie and Apogee Therapeutics (NASDAQ:APGE) announced they had signed a definitive agreement for AbbVie to acquire its peer.

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The deal, valued at roughly $10.9 billion, obligates AbbVie to pay Apogee stockholders $135.11 per share in cash. The two companies did not hesitate to mention that their boards of directors have both unanimously approved the transaction.

It is still subject to the approval of Apogee shareholders. That, however, appears inevitable, as the agreed purchase price is nearly 47% above the stock’s closing price on the previous trading day. The transaction will also have to be cleared by the relevant regulatory authorities.

AbbVie and Apogee said they expect it to close in the third quarter of this year.

Promising pipeline

Apogee is a clinical-stage biotech with several promising investigational programs — hence the premium that AbbVie was willing to pay to acquire it.

The company has developed two monotherapies and combined them with secondary mechanisms to create a pair of combination drugs. All target the proteins that power chronic immune and inflammatory disorders.

Its leading drug program (and the most advanced in the pipeline) is zumilokibart, a monoclonal antibody currently in Phase 2 testing for moderate-to-severe atopic dermatitis (a.k.a. eczema), and in Phase 1b for asthma. It has done extremely well in its trials for eczema.

What’s arguably most promising about zumilokibart is that its effects are relatively long-lasting; patients would only need to take it once every three to six months, compared to once every two weeks for treatments currently on the market. So if it’s ultimately approved, it should be very competitive.

Another plus for the drug is its potential versatility, as it’s also being developed for asthma and eosinophilic esophagitis (allergic inflammation of the esophagus).

The company’s APG279, meanwhile, is a similarly versatile drug currently being developed for the treatment of eczema. If successfully brought to market, it would compete with the highly successful Dupixent marketed by Sanofi and Regeneron Pharmaceuticals.

Finally, there’s the monotherapy APG333, which is combined with zumilokibart in another investigational drug, APG273. Both currently target asthma and COPD.

Ever-ascending AbbVie

In the joint press release, AbbVie and Apogee said their deal is expected to be accretive to the former’s earnings per share (EPS) not in accordance with generally accepted accounting principles (GAAP) starting in 2032.

Given that Apogee hasn’t yet entered Phase 3 trials for zumilokibart, that’s a fairly quick turnaround for a clinical-stage asset.

I feel this acquisition is one of the better and more promising ones for AbbVie, given the obvious strength and potential of Apogee’s pipeline. AbbVie continues to grow in clever ways, both through its proprietary development efforts and through biotech acquisitions.

That said, Apogee isn’t coming cheap; The Wall Street Journal cited a Citigroup analysis stating that in purchasing it, AbbVie will take a $0.14-per-share hit to its non-GAAP (adjusted) EPS this year, and $0.46 per share in 2027.

Still, the consensus analyst estimates for the two years stand at $14.24 and $16.25, respectively, so I don’t think the stock will suffer. I also believe AbbVie’s dividend, currently yielding more than 3%, won’t come under pressure.

All in all, then, I think the Apogee deal boosts the buy case for AbbVie’s already-attractive stock

Citigroup is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Regeneron Pharmaceuticals. The Motley Fool has a disclosure policy.