Biogen (BIIB) and AbbVie (ABBV) Get Wolfe Upgrades—Which Pharma Stock Has More Upside?

Wolfe Research upgraded two prominent pharmaceutical companies to Outperform on August 13. The firm upgraded both Biogen Inc. (NASDAQ: BIIB ) and AbbVie Inc. (NYSE: ABBV )'s ratings from Peer Perform, with Wolfe assigning them similar $300 price targets. The firm's logic in each case was based on a comparable set of factors: pipelines that the market appears to undervalue, and valuations that Wolfe believes are too low given each company's growth track.

Wolfe's thesis for Biogen Inc. (NASDAQ:BIIB) is mainly based on late-stage clinical programs, which it believes the stock has yet to reflect. The firm focused on two experimental therapies in particular, both of which have key late-stage clinical readouts expected over the coming year: litifilimab, which Wolfe believes could be the first biologic approved for cutaneous lupus erythematosus, and felzartamab, which the firm claims represents a bigger commercial opportunity in antibody-mediated transplant rejection than Wall Street currently thinks.

Wolfe also cited Biogen's acquisition of Apellis Pharmaceuticals as strengthening its near-term revenue base through the FDA-approved drugs Empaveli and Syfovre. That move is part of an overall pattern of Biogen Inc. (NASDAQ:BIIB) diversifying beyond its core neurology brand, with the company completing its acquisition of RayThera on August 6, adding another early-stage immunology platform to its pipeline.

Wolfe's Biogen Inc. (NASDAQ:BIIB) thesis is incomplete without valuation. The firm believes the stock is trading at a discount to the broader market, despite the company's development on Leqembi, its Alzheimer's medication, and what Wolfe described as solid commercial execution overall.

AbbVie: Patent Strength and Cash Generation

AbbVie's upgrade is based on a slightly different premise: patent strength and cash generation rather than simple clinical events. Wolfe stated that AbbVie's 2027 earnings multiple of 14.6x seemed too low for a company that forecasts high-single-digit revenue growth for the rest of the decade. AbbVie's patent position, according to Wolfe, sets the company apart from its competitors in a way that the market has yet to completely price in.

Wolfe pointed out that the expected generic entry date for Rinvoq, one of AbbVie's key immunology drugs, has been pushed back to 2037, while the company continues to defend the patent securing Skyrizi, its other major immunology brand, and the drug most responsible for making up for the long decline in Humira sales since that medication lost patent exclusivity.