AbbVie Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 27, 2023

There are 18 speakers on the call.

Operator

Good morning and thank you for standing by. Welcome to the AbbVie First Quarter 2023 Earnings Conference Call. I would now like to introduce Ms. Liz Shea, Senior Vice President, Investor Relations.

Speaker 1

Good morning, and thanks for joining us. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer Rob Michael, Vice Chairman and President call. Jeff Stewart, Executive Vice President and Chief Commercial Officer Scott Rentz, Executive Vice President and Chief Financial Officer Carrie Strom, Senior Vice President and President, Allergan Aesthetics and Tom Hudson, Senior Vice President, R and D and Chief Scientific Officer. Joining us for the Q and A portion of the call is Rupal Thakkar, Senior Vice President, Development and Regulatory Affairs and Chief Medical Officer. Before we get started, I'll note that some statements we make today may be considered forward looking statements based on our current expectations.

Speaker 1

Call. AbbVie cautions that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in our forward looking statements. Presentation. Additional information about these risks and uncertainties is included in our SEC filings. AbbVie undertakes no obligation to update these forward looking statements except as required by law.

Speaker 1

Call. On today's conference call, non GAAP financial measures will be used to help investors understand AbbVie's business performance. These non GAAP financial measures are reconciled comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website. Following our prepared remarks, we'll take your questions. Process.

Speaker 1

With that, I'll turn the call over to Rick.

Speaker 2

Thank you, Liz. Good morning, everyone, and thank you for joining us today. I'm extremely pleased with our start to 2023, with 1st quarter total revenues and adjusted earnings per share both exceeding our expectations. This performance was driven by double digit sales growth from several key products, presentation, including SKYRIZI, RINVOK, VENCLEXTA and VALAR, positive momentum from our aesthetics business strong results internationally and stabilizing consumer trends in the U. S.

Speaker 2

And in line performance from U. S. HUMIRA, Our biosimilar erosion is tracking as expected with much of the impact driven by price. Since our inception, We have successfully created a well diversified portfolio with multiple growth platforms in highly attractive markets, including immunology, hematological oncology, neuroscience and aesthetics. Our commercial execution, including the launch of new products Each of these assets are expected to contribute significant revenue growth over the decade.

Speaker 2

The breadth and the depth of our R and D pipeline Also supports our long term growth outlook and we anticipate numerous important pipeline milestones over the next 2 years. In summary, we are 1 quarter into the U. S. Biosimilar event for HUMIRA and are managing the erosion well. Most importantly, our growth platform is demonstrating strong performance, Exceeding our expectations, we are executing well across all aspects of our business and see numerous opportunities for our diverse portfolio call.

Speaker 2

With that, I'll turn the call over to Rob for additional comments on our business performance. Rob? Thank you, Rick.

Speaker 3

We're off to an excellent start in 2023 with each of our 5 key therapeutic areas meeting or exceeding our Q1 expectations, a testament to the strength of our broad portfolio. Call. We delivered adjusted earnings per share of $2.46 which is $0.10 above our guidance midpoint. Total net revenues were $12,200,000,000 approximately $400,000,000 ahead of our expectations. Call.

Speaker 3

1st quarter results include continued robust performance from SKYRIZI and RINVOC, which remain on track to contribute more than $11,000,000,000 in combined sales this year. Growth rates in the Q1 for both products are consistent with our full year expectations. SKYRIZI and RUNVOC are demonstrating momentum across all approved indications, call. And we expect to round out their opportunities in IBD later this year. This includes RINVOX anticipated U.

Speaker 3

S. Approval in Crohn's disease call as well as SKYRIZI's European launch in Crohn's and its global regulatory submission in UC. We are also performing exceptionally well in neuroscience. Total net revenues this quarter were nearly $200,000,000 above our guidance, With VRAYLAR sales accelerating following MDD approval and migraine delivering strong growth. As a result, We will be increasing our full year outlook for neuroscience.

Speaker 3

Aesthetics is also performing better than expected. We are seeing positive recovery trends in China and some stability in the U. S. Market, where we are closely monitoring several economic indicators that correlate with aesthetics procedures, including consumer confidence, personal consumption and Google searches. Call.

Speaker 3

Although it's still early in the year, these positive trends, especially across our international markets, give us the confidence to increase our full year outlook for aesthetics as well. This continues to be an underpenetrated market with significant growth potential. Based on our robust performance this quarter and the continued strong outlook for our business, we are raising our full year adjusted earnings per share guidance by $0.10 and now expect adjusted earnings per share between $10.72 presentation and $11.12 In closing, I'm extremely pleased with the performance of our diverse portfolio. We're off to a strong start to the year, which further reinforces our confidence in the long term outlook of the business. Presentation.

Speaker 3

With that, I'll turn the call over to Jeff for additional comments on our commercial highlights. Jeff?

Speaker 4

Thank you, Rob. I'm very pleased with the strong commercial execution process across our therapeutic portfolio. Immunology delivered total revenues of approximately $5,600,000,000 with continued robust double digit growth from SKYRIZI and RINVOK. SKYRIZI global sales were nearly $1,400,000,000 call, reflecting operational growth of more than 46%, despite retail inventory destocking in the quarter. Call.

Speaker 4

SKYRIZI is the clear market leader in the U. S. Biologic psoriasis market with a total prescription share now at 30%. In psoriasis, SKYRIZI has set a very high bar relative to other therapies on the market or in development with differentiated attributes across the categories that physicians and patients deem most important. This includes The rapid onset of action after the first dose, nearly complete skin clearance with multifold higher rates on PASI90 and PASI100, presentation.

Speaker 4

With a nearly 50% U. S. In place share process. This best in class profile is supporting strong momentum now in psoriatic arthritis with SKYRIZI achieving an in play biologic share of roughly 20% in the U. S.

Speaker 4

Dermatology segment. YYRIZI is also being co positioned with RINVOC in the U. S. Room segment in PSA, where we are seeing increasing utilization among rheumatologists as well. Globally, SKYRIZI has achieved in place psoriatic disease leadership presentation.

Speaker 4

In Crohn's disease, we are seeing very fast adoption of SKYRIZI in the U. S. With a total in play patient share at approximately 20%, second only to STELARA. Feedback from gastroenterologists is very positive, especially as it relates to SKYRIZI's novel dosing and overall clinical profile. We see strong uptake in Japan and Canada as well with the European launch forthcoming.

Speaker 4

We also recently reported strong induction data for SKYRIZI in ulcerative colitis, which Tom will discuss momentarily. Call. Based on the results of that trial, it is increasingly clear that SKYRIZI represents a differentiated asset across inflammatory bowel disease call. Turning now to RINVOC, which delivered global sales of $686,000,000 reflecting operational growth of more than 50%, despite similar retail inventory destocking in the quarter. I'm very pleased with the performance in rheumatology With total prescriptions increasing across each of the 4 approved indications.

Speaker 4

Atopic dermatitis is also tracking in line with our expectations. Call. We continue to see market share momentum globally, including in play patient share increasing to approximately 17% in the U. S. Call.

Speaker 4

We are very excited about the growth potential in gastroenterology. RINVOC has set a high bar for efficacy in both ulcerative colitis and Crohn's disease, demonstrating strong rates of remission and endoscopic improvement. We're seeing very strong momentum in UC where adoption has been robust. RINVOC is now achieving a 23% in play in the U. S.

Speaker 4

Second line plus setting, reflecting an impressive ramp since our launch in UC less than 1 year ago. This accelerated adoption among gastroenterologists is very encouraging for RINVOC's pending outlook in Crohn's. We are currently launching this indication in the EU, a geography where RINVOK is the only JAK approved to treat both IBD conditions, And we remain on track for CD approval and commercialization in the U. S. Later this quarter with broad formulary access anticipated to ramp quickly over the back half of this year.

Speaker 4

So we see inflammatory bowel disease continues to be an area of high unmet need, Having 2 novel therapies in IBD with SKYRIZI and RINVOC that each deliver differentiated levels of efficacy is an important step forward for patients. And with these two complementary assets, we are very well positioned to compete against Other oral or biological agents. Global HUMIRA sales were approximately $3,500,000,000 down 24.3 percent on an operational basis due to biosimilar competition. Erosion in the U. S.

Speaker 4

Remains in line with our expectations with continued pressure on IMBRUVICA, partially offset by robust double digit growth with VENCLEXTA. IMBRUVICA global revenues were $878,000,000 down 25.2% due to increasing competition and the cumulative impact of suppressed market. VENCLEXTA global sales were $538,000,000 up 17.5% on an operational basis with strong momentum across both AML and CLL. In neuroscience, Revenues were approximately $1,700,000,000 up 15% on an operational basis. VRAYLAR is performing exceptionally well.

Speaker 4

Sales of $561,000,000 were up 31.3% on an operational basis, above our expectations. Call. We are very pleased with the AMDD label and the launch, which has resulted in a significant uplift in total new prescriptions for VRAYLAR. With a dedicated sales force that calls on both psychiatrists and primary care as well as ramping DTC promotion, We see an opportunity for accelerated growth across all approved indications, and we will be raising our full year guidance for Vraylar accordingly. Presentation.

Speaker 4

Within migraine, we remain uniquely positioned with a portfolio to support complete migraine freedom. Our leading oral CGRP therapies contributed $218,000,000 in combined sales this quarter, reflecting growth of more than 45% as we continue to see strong prescription demand for both UBRELVI and Q Lipta. We recently expanded the label for Q Lipta, which is now uniquely positioned as the only oral CGRP available as a preventative treatment for patients with both chronic and episodic migraine process further strengthening our competitive profile. Lastly, total BOTOX Therapeutic sales were $719,000,000

Speaker 5

1st quarter Global Aesthetics sales were approximately $1,300,000,000 which came in ahead of our guidance primarily due to process. We are now ready to begin the Q1 of 2019. We are now ready to begin the Q1 of 2019. We are point. Dollars 777,000,000 down 8.1% as we continue to see softness in aesthetic procedures related to inflationary dynamics.

Speaker 5

Call. As a reminder, we saw very robust performance for our U. S. Performance in the Q1 of 2022, which created a difficult comparison for growth in the Q1 of this year. U.

Speaker 5

S. Botox cosmetic sales were $409,000,000 down slightly on a year over year basis. Call. We continue to see a lesser impact from inflationary dynamics on Botox cosmetic compared to other areas of our aesthetic portfolio call due to its relatively lower price point and large install base of loyal repeat consumers. The U.

Speaker 5

S. Cosmetic toxin market portfolio continues to be impacted by inflationary pressure on consumer spending. The U. S. Filler market was down nearly 20% in the quarter on a year over year basis call due to the persistent inflationary environment.

Speaker 5

Our Juvederm collection remains the clear market leader and share was stable in the quarter. Process. Economy, the key external economic metrics that we track have remained relatively consistent with year end 2022 levels. Call. Our international aesthetics portfolio continues to demonstrate robust growth with strong performance in Japan, which is rapidly growing and China, which is recovering faster than expected.

Speaker 5

Sales from our international aesthetics portfolio were $523,000,000 up operationally and international Juvenerm sales were down approximately 1.4% on an operational basis. China, which is our 2nd largest market, was negatively impacted by COVID in January February, but experienced a sharp recovery in March. Call. We expect this level of activity to be sustained throughout the remainder of the year. Recall, our original guidance assumed we would not reach process promotion.

Speaker 5

We continue to make significant investment in injector training, our field force and consumer education. Call. Overall, we are pleased with how our team has been executing through this dynamic environment and remain encouraged by improving trends internationally and stabilization across our U. S. Portfolio.

Speaker 5

These positive trends and continued strong momentum give us the confidence to increase the full year outlook for our Aesthetics business. Longer term, we remain extremely confident in our ability to grow the Aesthetics business and continue to expect to achieve total sales of more than $9,000,000,000 by the end of this point. Aesthetics continues to be an extremely attractive underpenetrated market and our proven ability to drive consumer demand and develop a strong base of loyal customers as well as bring innovative new products to the market will support robust growth over the long term. With that, I'll turn the call over to prompt.

Speaker 6

Thank you, Carrie. We've continued to make very good progress with our pipeline to start this year. Point. In immunology, we recently received European approval for RINVOC in Crohn's disease, making it the 1st JAK inhibitor approved for this indication. We continue to anticipate FDA approval for Winvolk in Crohn's disease next month.

Speaker 6

We also recently announced positive top line results point from our Phase 3 induction study for SKYRIZI in ulcerative colitis, which is a disease with unpredictable symptoms and frequent flares point, making it challenging to manage. In our study, SKYRIZI met the primary and all secondary endpoints, presentation demonstrating a very strong impact on the disease as measured by clinical remission, clinical response and endoscopic improvement. We're particularly pleased with SKYRIZI's impressive performance on the more stringent measures in this trial, With approximately 37% of SKYRIZI treated patients achieving endoscopic improvement call. This level of efficacy has the potential to position SKYRIZI as a highly effective therapy, and we believe it will be a welcome new treatment option for physicians and patients once approved. Presentation.

Speaker 6

Detailed data from this induction study will be presented at a forthcoming medical meeting. We expect to see data from the Phase 3 maintenance study in the second quarter With our regulatory submissions planned for the second half of the year. In oncology, We continue to make good progress across all stages of our hematology and solid tumor pipelines. We remain on track for several important regulatory and clinical milestones this year, including regulatory approval for ekoritumab in relapsedrefractorylargebcell lymphoma. Phase 3 data from VENCLEXTA's Canova trial in realapsedrefractory in multiple myeloma patients with the T1114 mutation and nevitoclax's TRANSFORM-one trial in frontline myelofibrosis and Phase 2 data for TELISOV in second line plus Advanced nonsquamous nonsmallcell lung cancer, which has the potential to support a regulatory submission for accelerated approval.

Speaker 6

We're also beginning to see very encouraging data for our next generation c Met ADC, which uses a more potent topo payload than our TALISO V ADC. Based on the data we've seen to date for ABBV400 in our Phase 1 solid tumor basket study, we plan to expand the program to earlier lines in colorectal cancer Moving to our neuroscience pipeline, where we've recently received FDA approval for Culipta for prevention of both episodic and chronic migraine. In our Phase 3 study, Culipta provided a Significant reduction in migraine days as well as significant improvements in function and quality of life process. As a highly effective oral treatment option, we believe Culipta will be well positioned in the chronic migraine prevention market. Point.

Speaker 6

In Europe, we continue to anticipate an approval decision in the Q3 for etogipan as a preventive treatment for patients with both chronic and episodic migraine. Turning now to ABBV-nine fifty one. We announced that we received a complete response letter for our regulatory application in the U. S. The FDA has not asked For additional efficacy or safety studies related to our drug delivery drug device delivery system, but rather they have requested additional information regarding the pump as well as updates to instructions for use.

Speaker 6

We are working to generate the necessary information and we expect to respond to the CRL later this year with an FDA action anticipated in the first half of twenty twenty four. In international markets, we recently received approval for 951 in Japan, And we continue to expect approval in Europe in the Q4 of this year. Presentation. In our early stage neuroscience pipeline, we recently began Phase 1 studies of our selective D3 dopamine receptor agonist, call. ABBV-nine thirty two.

Speaker 6

Our experience with VRAYOLAR has highlighted the potential clinical benefit of achieving D3 selectivity and we believe that a compound that more selectively engages the D3 dopamine receptor Has the potential to provide enhanced efficacy. Our program will initially focus on general anxiety disorder under our collaboration with Calico are also progressing well. We now have 4 assets in clinical trials, including 2 PTPN2 inhibitors presentation. In Phase 1 in oncology, our EIF2b activator for neurodegenerative diseases and an IGF-one signaling pathway modulator that will be explored in aging related diseases. Our most advanced program is the EIF2b activator 7,262.

Speaker 6

The first patient was recently enrolled in the Healy process ALS platform trial, a Phase twothree study conducted by the Healy Center For ALS at Mass General. Call. This trial is designed to evaluate multiple therapies simultaneously with a goal to accelerate the development of potential breakthrough treatments for ALS. Now I'd like to provide a brief update on 2 earlier stage programs in our therapeutic pipeline. In cystic fibrosis, we recently analyzed data from an ongoing proof of concept study evaluating our triple combination therapy.

Speaker 6

The results from this interim analysis did not meet our criteria for advancing, and we are discontinuing our cystic fibrosis program. We also recently reviewed interim data from our exploratory studies for ABVV-one hundred and fifty four in PMR and Crohn's disease. Similar to results from the RA study, while we observed efficacy with 154, we also observed some changes in biomarkers that are consistent with systemic steroid exposure at the higher doses. The benefit risk profile does not sufficiently differentiate 154 from other available treatments. So based on the totality of the data across RA, PMR and Crohn's disease studies, We will not be pursuing further development of this asset.

Speaker 6

Now moving to our aesthetics pipeline. We recently saw data from our Phase 3 studies for BOTOX in platysma prominence and masseter muscle prominence. In our study for prominent neck muscles, BOTOX met all primary and secondary endpoints, demonstrating a significant reduction in the unwanted appearance of platysma prominence on the neck and jawline. This was the first of 3 Phase 3 studies in platysma provenance with data from the 2 remaining trials expected in the second half of the year, process. Meeting the primary and all secondary endpoints in the trial.

Speaker 6

Our program is initially focused on China and other Asian markets Based on the results from this trial, we expect to submit our regulatory application in China in the second half of the year. Once approved, call. We anticipate high demand for BOTOX in this novel indication, which will help to further build our portfolio in the lower face segment. Call. So in summary, we continue to demonstrate significant progress across all stages of our pipeline and anticipate process.

Speaker 7

With that, I'll turn the call over to Scott. Thank you, Tom. I will discuss our most recent financial results and guidance. Starting with our Q1 results, we delivered strong top and bottom line performance. Call.

Speaker 7

We reported adjusted earnings per share of $2.46 which is $0.10 above our guidance midpoint. Call. These results include an $0.08 unfavorable impact from acquired IP R and D expense. Total net revenues were $12,200,000,000 call. $400,000,000 ahead of our guidance and down 8.3% on an operational basis, excluding a 1.4% unfavorable impact The adjusted operating margin ratio was 45% of sales.

Speaker 7

Call. This includes adjusted gross margin of 84.2 percent of sales, adjusted R and D investment of 13.6 percent of sales, call. Acquired IP R and D expense of 1.2 percent of sales and adjusted SG and A expense of 24.4 percent of sales. Net interest expense was $454,000,000 The adjusted tax rate was 13.7%. Turning to our financial outlook.

Speaker 7

We are raising our full year adjusted earnings per share guidance to between $10.72 call and $11.12 This earnings per share guidance does not include an estimate for acquired IP R and D expense call that may be incurred beyond the Q1. We now expect net revenues of approximately $52,400,000,000 unfavorable impact on full year sales growth. This guidance includes the following updated assumptions. We now expect VRAYLAR sales of approximately $2,700,000,000 an increase of 200,000,000 call, reflecting strong prescription growth following the MDD approval. And for aesthetics, we now expect global revenue of approximately $5,300,000,000 reflecting the better than expected recovery in China and stable economic trends in the U.

Speaker 7

S. Turning to the Q2, we anticipate net revenues of approximately $13,500,000,000 call, which includes U. S. HUMIRA erosion of 27%. At current rates, we expect foreign exchange to have a 0.6% unfavorable impact on sales growth.

Speaker 7

We are forecasting an adjusted operating margin ratio of 48.5 percent of sales, we are modeling a non GAAP tax rate of 15.4%. Include acquired IP R and D expense that may be incurred in the quarter. In closing, we're off to an excellent start to the year strong performance across the portfolio and financial results ahead of our expectations. With that, I'll turn the call back over to Liz.

Speaker 1

Thanks, Scott. We will now open the call for questions. In the interest of hearing from as many analysts as possible over the remainder of the call, we ask that

Operator

Our first question comes from Terence Flynn with Morgan Stanley. Your line is open.

Speaker 8

Great. Thanks so much for taking the question. Maybe 2 for me. Just on immunology, can you quantify the amount of destocking for both SKYRIZI and RINVOC in the quarter? I think Biogen on their call spoke to some tighter working capital requirements at wholesalers due to rising interest rates.

Speaker 8

So just wondering if you're seeing something similar here and just to want to be sure that's not a pricing dynamic. And then can you elaborate at all about your ALS program when we might see some data there? Thank you.

Speaker 3

Hi, Sharon. This is Rob. So on the retail inventory destocking, we do typically see this in the Q1. So it wasn't a complete surprise. In fact, it was factored into our guidance.

Speaker 3

We did beat our guidance in immunology for the quarter. The impact was high single digits both for SKYRIZI and RINVOQ in terms of Absolute value, you're talking about around $70,000,000 for SKYRIZI and $30,000,000 for RINVOC.

Speaker 4

And it's Jeff. Just to clarify on your wholesale comment, I think as Rob highlighted, it's in the retail. So it's in the specialty pharmacy channel. And you recall, as you know, there's about 18 specialty pharmacies that basically distribute the I and I products and there's some big ones So it was not a wholesaler dynamic. It was a retail inventory dynamic, which again as these products get bigger, we do see and contemplate in our projections.

Speaker 3

And then Terrence, this is Rob. Just to more broadly answer the question that I'm sure many investors have. If you look at the growth in the quarter, so overall, U. S. Demand was up just north of 60% And then price was down high single digits and that's really driven by rebate increases, which is typical when you see the type of volume increase.

Speaker 3

And we saw process. SKYRIZI sales up 80% last year, RINVOC in the U. S. Up 40% last year. So when you see that kind of volume growth and couple that with the number of indications we had approved, we had 5 new indications for RINVOQ and 2 for SKYRIZI.

Speaker 3

So it was something we were contemplating. It was factored into our guidance, but I don't know that The Street fully appreciated that In terms of

Speaker 4

the Q1 estimates that were put out there.

Speaker 6

So this is Tom for the ALS question. I'd say about 2 years. We have to recruit the patients and there's about a year of follow-up that is needed. So I'd say late 2024, early 2025, All depends on the enrollment, which I understand is starting off on a good pace.

Speaker 1

Thanks, Terence. Terence, operator, next question please.

Operator

Call. Thank you. Our next question comes from Steve Scala with Cowen. Your line is open.

Speaker 6

Thank you. A couple

Speaker 9

of questions. Some of your peers have called out copay resets early in the year that have led to more modest performances in products such as Dupixent and Cosentyx. Evi has been less vocal on this point. How much was that a factor or are SCOVRZE and Renvoke different in some way? And then secondly, despite the solid performance in Q1, the EPS guidance range continues to be very wide.

Speaker 9

What factors would have To play out for you to hit the high end of that and the low end of that. Thank you.

Speaker 4

Yes. Hi, Steve. It's Jeff, and thanks for the question. I'll take the co pay one. Look, I mean, some of the peers are seeing the effects of the so called maximizer programs or even some of the lingering accumulator programs, Which do sometimes as benefit designs are reset in the Q1 can apply some pressure.

Speaker 4

We don't see that. We've been managing that very tightly and we're not seeing any significant sort of surge or creep in terms of that dynamic. The dynamic is exactly what Rob had highlighted, which is the modest price based on the number of indications and how fast the volume is moving and this destocking event that we talked through. So co pay is very stable for AbbVie.

Speaker 10

And

Speaker 3

Steve, this is Rob. On your EPS range question, We've typically given a $0.20 range. This year, we gave a $0.40 range. And the key driver of that is obviously the U. S.

Speaker 3

HUMIRA dynamics. As we see that play out, particularly in the second half, We would typically tighten that range. Now keep in mind that $0.20 wider range represents about 1% of U. S. HUMIRA growth.

Speaker 3

So it's not as wide as you might think, But we did widen it given the dynamics with U. S. HUMIRA, and I think we'll be able to give you more color as we see those 7, 9 biosimilars coming to market in the middle of the year. We'll have more clarity for you on the Q2

Speaker 9

call. Thank you.

Speaker 1

Thanks, Steve. Operator, next question please.

Operator

Our next question comes from Chris Schott with JPMorgan. Your line is open.

Speaker 11

Great. Thanks so much. Just coming back to SKYRIZI and RINVOC, I think you mentioned high single digit price erosion beyond just those inventory changes. I guess is that a reasonable assumption to think about price as we progress through the rest of this year? And then maybe longer term, should we think about that level of price erosion as more like a one time kind of issue this year given all the new indications And a more stable trend going forward.

Speaker 11

I'm just trying to kind of get my hands around the pricing a little bit more. And my second question was on the aesthetics business. You obviously saw a very strong 1Q. Can you just elaborate a little bit more on your confidence in the sustainability of these trends? I know the market has been a little bit Bumpy, but it seems like the tone is that you're encouraged with the trends you're seeing.

Speaker 11

But just how much, I guess, visibility do you have in terms of sustainability of of those favorable international trends we're seeing right now. Thank you.

Speaker 3

So Chris, this is Rob. So on your question on price, yes, the way to think about 2023 price for the year for SKYRIZI and RINVOC Would be down high single digits. Now we wouldn't expect high single digits to be the rate going forward given a big driver was the number of new indications We launched and so I would expect that to moderate over time.

Speaker 6

Carrie?

Speaker 5

Hi, this is Carrie. In terms of your questions around the aesthetics market, There are 2 key assumptions for the 2023 planning. 1 was around the U. S. Economy and the other was around the recovery in China.

Speaker 5

Process that we track, which Rob mentioned include real personal consumption expenditure and Google. So in January February, We saw favorability there, although in March there are some potential signs of softening. So we continue to have a cautious outlook for our U. S. Business for the rest of the year.

Speaker 5

The way to think about market growth for the full year would be low for toxins, The market would be down low to mid single digits until we lap the 2022 downturn, which happened around May. Process. And then after that, we would expect flat market growth for the rest of the year. So that's how we think about the U. S.

Speaker 5

Our other our second biggest market is China. And recall, we had assumed that the aesthetics market in China would not recall would not fully recover until the second half of the year. Well, in actuality, what we saw was, although January was significantly impacted, in February, we started to see improvement. And in March, there was a really process. We do expect we'll sustain through the rest of the year.

Speaker 5

And in other markets around the world, I guess in Canada and UK, we are seeing Some high inflation impacting consumer demand, but the rest of Europe seems stable right now.

Speaker 1

Thank you, Chris. Operator, next question please.

Operator

Our next question comes from Mohit Bansal with Wells Fargo. Your line is open.

Speaker 12

Great. Thanks for taking my question. I have one clarification and one question. So clarification is regarding the price decline for INI, you said that High single digit, but should we assume like going forward, year over year, we should versus volumes, Should we assume high single digit decline still going forward for at least for us for the quarter and then more stable pricing quarter over quarter term? Just that clarification.

Speaker 12

And the question is regarding your INI pipeline, so you have a leadership position with SkyRezia and InVogue and they are growing, But some of the pipeline products like 154 and 157 did not pan out as you were hoping them to. So What is how should we think about the pipeline strategy beyond these two products? And can you even do M and A given this Please FTC scrutiny nowadays. Thank you.

Speaker 2

So this is Rick. I'll cover number 2 and maybe just touch on number 1. If you think about our pipeline, obviously, as we look at SKYRIZI and LINVOQ, They clearly have restated the immunology market across most of the segments that we operate in. We view those assets As being able to drive strong growth through the early part of the next decade. Having said that, We're continuing to look for assets in areas where we believe there's still a significant opportunity to restate standard of care.

Speaker 2

And we obviously explore as everyone in this industry does many different assets and different mechanisms to try to find those kinds of mechanisms that will deliver that kind of performance. It's interesting when you look at the 154 platform, it did exactly what we thought it would do from the standpoint of efficacy. But It did it in a way only at the highest dose and at that highest dose, we did see it, some effects of steroids on some of the biomarkers and based on the way we think regulators would look at a label for those kinds of products, We didn't believe that would be a competitive profile, but the hypothesis certainly worked around the mechanism. So We continue to look for opportunities. We have lots of runway here to be able to get to those, but we do desire process.

Speaker 2

As the next generation immunology assets for AbbVie. So and I feel good about the progress that we're making there. We're continuing to Explore a number of other areas and we're continuing to look both internally and externally at different assets that we can bring into the company to be able To your question of being able to bring assets into this market, We don't believe that we would be encumbered because immunology is a very crowded space from a competitive standpoint. And that's one of the most important criteria that you look at from an FTC standpoint. So we believe we have freedom to operate across Most of those segments from an FTC standpoint as well.

Speaker 2

And on price, maybe Rob and I will tag team this one to make sure it's It is common that when you go out and you add indications in this industry that When you negotiate those contracts to be able to get access, it does require some level of price concession. I would say we're on the lower end of what you typically would have seen with the speed at which we got access for SKYRIZI and RINVOT process for those indications and the breadth of that access. And so you certainly would expect this year and last year to be the areas where You saw the most significant amount of price because those are the years that we had the majority of the indications. You would expect that to moderate. So then going forward, the way to think about it is that it's only really driven by volume at that point.

Speaker 2

And volume typically requires much more modest kinds of price as you go forward. It's not zero price. You shouldn't have that expectation. But I would not have an expectation of high single digits going forward. Anything you'd add Rob?

Speaker 2

Just to answer the question Mohit on

Speaker 3

the gating. Yes, I think it's safe to assume that you'll see high single digit price in each of the quarters this year.

Speaker 6

Helpful. Thank you.

Speaker 1

Thank you, Mohit. Operator, next question please.

Operator

Our next question comes from Tim Anderson with Wolfe Research. Your line is open.

Speaker 13

Hi, thank you for taking our questions. This is Alice Nettleton on for Tim Anderson. So a question on PBMs, which are under renewed scrutiny. If there were material changes to the rebating structure currently in place, would that put big incumbent products at risk because it might remove the so called rebate wall? And more generally, do you think there is any chance of some of the proposed legislative changes actually becoming law?

Speaker 13

And then secondly, Any collateral impact you're seeing on SKYRIZI or INVOQ since HUMIRA biosimilars have launched, given the overlapping indications, Do you think that you'll start to see some picking off of patients from those 2 brands to biosimilars in the second half of the year? Thank you.

Speaker 4

Yes. Hi, it's Jeff. I'll give some comment on that. I think the way that we think about Our brands is the first place that we look at is how distinctive they are. I mean, we've got 4 head to head trials with SKYRIZI and another one on the way where we can clearly differentiate the product.

Speaker 4

And we have many as well on RINVOX. So We've really thought about it from a development standpoint. And I would say, the perspective is somehow there was a restructuring of the PBMs, which I don't think is imminent, and the rebate sort of approach disappeared. It This appears for everybody. I mean all of these I and I products have a fairly reasonable rebate load and there would be a different basis of presentation, which we would do very, very well.

Speaker 4

So we're not concerned about sort of a fundamental structural change relative to These two products, which are very distinctive. If we look at Your second part of your question, which is it's really the same answer, which is we don't see that, there are going to be significant impacts of HUMIRA biosimilars on the performance of SKYRIZI and RINVOC. And one perspective, let's take RINVOC as sort of a very Simple way of thinking about it, it's already in the United States, a step behind PNF and it's performing at that level because you see such expansion of second and third lines in that space. And SKYRIZI is very, very distinctive. So no, in the second half, we do not anticipate sort of a knock on process of the emergent biosimilars to our 2 core brands.

Speaker 1

Thanks, Alice. Operator, next question please.

Operator

Call. Thank you. Our next question comes from Carter Gould with Barclays. Your line is open.

Speaker 14

Great. Good morning. Thanks for taking the question. Maybe A different spin on sort of the BEE question there. Just given sort of the volatility in the marketplace as you kind of have those conversations or engage with potential targets just if you've seen a shift in sort of that bid ask spread And the willingness of boards and management to consider deals.

Speaker 14

Any updates on that front would be helpful.

Speaker 2

This is Rick. I'd say the environment hasn't changed materially in the last 24 months from my perspective. I still think it's certainly more difficult to raise money for biotech companies. So it probably makes them a bit more willing to engage with players like us or engage in a process, if they're at a point where they've generated data That makes them attractive. But I'd say the interest level in that engagement is similar to what it has been for the last 12 to 24 months.

Speaker 2

And there's a lot of opportunity to be able to find assets They are in the biotech area. The question is you have to find the right kind of asset and you have to find one that's attractive and it meets your needs. And I'd say being able to negotiate a transaction, I think Is a reasonable probability. I'd say prices are still relatively high. And so valuations for good assets tend to go at Pretty high level.

Speaker 2

So again, it's got to be an asset that can demonstrate that it's going to provide significant value to justify that kind of a valuation and a return. But we continue to look for opportunities. And I think As we find those kinds of opportunities, as I've said in the past, we're certainly going to pursue them.

Speaker 1

Thanks, Carter. Operator, next question please.

Operator

Our next question comes from Vamil Divan with Guggenheim Securities. Your line is open.

Speaker 10

Great. Thanks for taking the questions. Maybe a couple from me as well. So one, just a couple of data points you have coming up this year that I think maybe a little bit Less focus on is on nabetoclax and TALISOV. So maybe you can just sort of frame, so what we should be looking for, what your expectations are, what you're hoping to see from those assets, Especially to Lisa V given your comments on the next gen ABBV400.

Speaker 10

And then the other question, I guess, would be for Rick And more on succession planning. I know we've talked you've mentioned before that your plans to stick around through the HUMIRA bent. I'm Just wondering if you have any sort of updated sort of thoughts around timing on that now that we're sort of in the middle of this process. We've been getting some questions there too. Is this something we should expect some sort of announcement this year?

Speaker 15

Hi, it's Rupal. I'll take the ones on navitoclax and TALISSAV. So for navitoclax, That's the combination with the JAK2 and myelofibrosis. And there, we're looking to be better than monotherapy with Jack, too, in that space and improving spleen size and symptoms like abdominal pain, fullness, fever, fatigue. Also, perhaps uniquely what we've observed There's also an improvement in bone marrow fibrosis and a decrease in variant, allelic frequency.

Speaker 15

So that's what we would be looking for and we should get a readout by mid year or so. For TALISSA V In lung cancer, eGFR wild type with high c MET and that's the point. Indication where we have breakthrough therapy designation. Around the end of this year, I would say that's where we would See a readout. What we've seen in earlier data cuts is an ORR above 50%, which is quite a bit higher than what would be expected in standard of care in that second, third line setting.

Speaker 15

And if the data looks strong, there's a potential that we could submit next year for an accelerated approval.

Speaker 2

I'll take the second question. And maybe I'll make a little bit of a comment on TELUSOVI because I think You mentioned 400. I think the early data that we're seeing in 400 is impressive to us. There's no question about it. And I think we're going to have some data presented at this ASCO, right?

Speaker 2

We'll have an opportunity to see that in CRC. Now having said that, TALISOVID, as Rupal said, does get very good responses in C Met highs. But to get a broader set of c Met population, we do believe you need to move to the topo warhead. It seems to get Deeper responses and more durable responses. That data has to play out over time, but it appears to be A very good platform for Seamet.

Speaker 2

And so we need the data to mature and we need to develop more data in that area. But I'd say the early data It's pretty encouraging. You'll have a chance to see a snippet of that at this ASCO. As far as leadership changes, I'd say it's similar to what we said in We have very experienced Board. I've had many, many discussions with the Board about succession.

Speaker 2

The Board knows I'm committed to be here to ensure a successful and smooth transition. The criteria that we're operating against is we need to completely get through the transition for HUMIRA biosimilars here in the U. S. I'd say so far, I'm pretty pleased with how the transition is going. And I'm even more pleased with the way the growth platform is operating right now.

Speaker 2

And in fact, if you look at it this year, the growth platform is going to deliver mid single digits and it's going to do it Despite the headwinds that we see on IMBRUVICA and the headwinds that we're seeing from the economy on aesthetics, Once the aesthetics business returns to its normal growth rates and much of the pressure on IMBRUVICA starts to subside, We should see that growth rate increase significantly as we move into 2024 for the growth platform. And obviously, we're turning to robust growth in 2025 and deliver high single digit from that point forward. So that's the expectation that we're working against. So we want to make sure that the business is operating the way we want it to. We want to make sure that we're through the biosimilar erosion to the point that We believe it is predictable.

Speaker 2

And then obviously, the second part of the criteria is ensuring that the candidate that will succeed me is ready to do that. We can make a successful transition. I've also told the Board that I'm willing to stay In any capacity that they would desire for whatever length of time they would. I think the expectation right now is that, I would assume The Executive Chairman role for a period of time to finish the transition to the new CEO. You should not be expecting that, that transition is going to occur in 2023.

Speaker 1

Thanks, Vamil. Operator, next question please.

Operator

Poll. Our next question comes from Evan Sigerman with BMO Capital Markets. Your line is open.

Speaker 16

Hi, guys. Thank you so much for taking my question. Just On kind of SKYRIZI and some of the dynamics you're seeing there, can you characterize about kind of how you're thinking about further penetration in the psoriasis presentation kind of

Speaker 3

some puts and takes in the dermatology market. And just a

Speaker 16

follow-up on the CF program. Is it safe to assume that you're totally done investing in this area? Or do you have other assets kind of

Speaker 3

an earlier development that could emerge? Thank you.

Speaker 4

Yes. Hi, it's Jeff. I'll take Your comment on psoriasis. I think that, as I mentioned, it's the share is very, very impressive. So we have a 30% total market share now, which is really putting significant headroom against any other drug in that category by a lot.

Speaker 4

And one way to think about it is, I think what you're asking is how much further can it run? And it can run quite a bit further. To some degree, if you think about it, so we're capturing On the dynamic share, roughly 50%, so one out of every 2 patients and our market share is about 30. So theoretically over time, right, unless there's some disruption, which we don't see significant disruption in the market, your total market share is going to move towards that in play share. Now that takes many, many years.

Speaker 4

But as we look at the fundamental momentum that we can achieve, it's still very, very significant. Add on to that, that basically we're still in the rest of the world starting to really see the PSA ramp. And remember, PSA has a very significant impact because it's treated by derms, and it was sort of the last remaining, gap that we had. So you're going to see continued momentum in the international markets, in the U. S.

Speaker 4

Market, and, we have a long way to run. And I'd be remiss if I didn't say how fast again that we're growing in both Crohn's right now and very exciting data in UC and that market is very, very dynamic. So we feel very secure in our ability to continue to create a lot of value with SKYRIZI.

Speaker 6

Hi, this is Tom. Regarding your question on our triplet program, yes, we are C2 corrector that we just tested did not work. This was not our first attempt at producing 1, and we do not have another backup. So we don't have another option than to discontinue the CF program.

Speaker 1

Thanks, Evan. Operator, next question please.

Operator

Thank you. Our next question comes from Trung Huynh with Credit Suisse. Your line is open.

Speaker 17

Hi, good morning. This is Carson on for Trung. Thanks for the question. Just on IMBRUVICA, How confident are you for the 5.7% in HemOnc guide given the significant competitive pressures there? I mean, I understand we have late in the U.

Speaker 17

S. Until late January. What level of pricing pressures can we expect through the year? And is there the potential for further step downs in your guide for later in the year? If you do do that, could the trough be pushed out given the delay with 951 as well?

Speaker 17

Thanks.

Speaker 4

Yes. Hi, it's Jeff. And I think we think that's a very good call. And just as a reminder, We're not seeing significant pricing pressure in the market. This is really, 2 effects, which is one, the cumulative effect as we've highlighted over the to press market over time, which looks to be normalizing.

Speaker 4

Actually for the first time in 3 years, we actually saw a positive growth in the market. So that's encouraging. The big driver is the share, is the new patient share, which has been under pressure, initially under pressure by Calquence, certainly from our own VENCLEXTA and then the recent BRUKINZA launch. And so process. When we put all of that into the calculus, we think we've got it right.

Speaker 4

And it's probably unlikely that we're going to see Any significant step down that would put that in jeopardy.

Speaker 3

Arson, this is Rob. I'll answer your second question. So I wouldn't consider IMBRUVICA 951 That would be variables that would push the trough out. It's really more about how the overall year plays out, particularly the second half with U. S.

Speaker 3

HUMIRA. So if U. S. HUMIRA does better and we outperform in 2023, then we could see the trough in 20 24. I think the important thing to keep in mind is regardless of when the trough occurs, we We wouldn't expect earnings to fall below the 10.74x IPRD.

Speaker 3

That's really what I would focus on. And we don't consider IMBRUVICA and the 951 delay to be

Speaker 1

Thanks, Carson. We are cognizant of a number of peers reporting today. And So, in the interest of time, we have time for one last question.

Operator

Our last question comes from Geoff Meacham with for Bank of America. Your line is open.

Speaker 9

Hi. This is Susan on for Geoff Meacham. We had a follow-up on IMBRUVICA. Do you guys expect any changes to outlook following MCL, MCL withdrawal? And then, do you expect any read through

Operator

comes from the line of Alex Trebek.

Speaker 4

Yes. Hi, it's Jeff. Thank you for the question. First, these are very small indications. So to give you some sense of the relative size for IMBRUVICA, MCL is about 4% of The value MZL is really less than 1% about 1%.

Speaker 4

So we don't anticipate that those Withdrawals due to the fact that we didn't get the confirmatory studies to clear will have a material impact. I think it's also important to note that Many physicians will continue these patients on the medication. They won't be all switched, for example, or taken off and put on another product. That's the market intelligence. There's no requirement that they need to do that for the physicians.

Speaker 4

And so net net, This is not a really material issue given the size of those indications. And I think Rupal will address your point on follicular. Yes.

Speaker 15

I can talk about FL here for a minute. So a Phase 3 readout is expected later this It's not clear if the MCL outcomes would be reflected in what we see there. But what I would say about FL is our focus would be with epgoritimab or dual engager, which we expect DLBCL actions here soon. And then we have programs, and we're seeing very high levels of

Speaker 1

Thanks, Susan. And that concludes today's conference call. If you'd like to listen to a replay of the call, please visit our website at investors. Abbni.com. Thanks again for joining us.

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Earnings Conference Call
AbbVie Q1 2023
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