AbbVie Inc. (ABBV) Earnings Call Transcript & Summary

Well, I think it depends on how you look at catalysts. I mean first of all, I wouldn't agree that there aren't catalysts. I mean we're going to have a number of readouts here across our early to mid-stage pipeline. We certainly are excited about the opportunities in things like navitoclax, 951 and other assets have the potential to be able to demonstrate performance in a number of different areas. But it also depends on how you want to look at performance. I mean, what I would tell you is I have a very high level of confidence that as we fill out the indications on Skyrizi and Rinvoq, that we'll be able to drive those assets to be significantly larger than what we originally projected in our 2025 guidance. I would say as an investor, does that give me a higher level of confidence? It would to me because essentially, there's much less risk in me being able to deliver against that. Same thing with an asset like Venclexta and t(11;14) for multiple myeloma. I think we have a high level of confidence that we'll be able to get an indication in that area and continue to expand that asset. So you have to have a combination of both, right? You have to have high-probability events that you can drive, that give you confidence that you can drive the revenue that you're looking for. And those are all catalysts. And then you have to have an emerging pipeline that allows you to continue to be able growth. I'd also point to things like neuroscience. Here's a franchise for us, where we'll be the only player that has a full complement of migraine assets. Today, that business is roughly about $6 billion, and it gives us the ability to be able to grow that business over time. Maybe it's $5 billion, it's somewhere in that range. I think that's an area where I can clearly see us being able to drive strong growth over the long-range plan, and that could be a franchise approaching $10 billion by the end of our long-range plan. And I don't think investors are taking into account that kind of growth opportunity between Vraylar and the migraine franchise. If I look at aesthetics, I have a high level of confidence we can drive aesthetics at the high single to low double-digit rate over our long-range plan. I look at hem/onc, that's a $6.5 billion franchise for us, growing double digits. With the addition of the new indications and continued penetration in CLL and AML and getting into t(11;14) and then adding to that franchise the Genmab and the I-Mab assets, that gives us a lot of confidence we can continue to drive that. And then as I said, Skyrizi and Rinvoq certainly give me confidence that we can drive through and continue to drive significant growth in immunology. And then we have a number of assets in our pipeline in immunology and oncology that will drive further growth as we get to the latter part of the LRP. So I feel pretty good about what we have to be able to drive the performance of the business going forward.

So beyond quarterly performance, there are other levers that you could pull if you wanted to. So one of those would be on the capital allocation front. You've already raised the dividend. You did a healthy raise. You had a nice high yield, among the highest of the big pharma companies, I think Glaxo might be slightly higher. So you've already kind of pulled that lever. Another potential lever would be to do even more M&A, and we did recently see Bristol, who closed their transaction not too far before you did, through a $13 billion transaction. So if a low multiple says that the market's too concerned about this future gap from Humira, what about possibly engaging in additional M&A that is like a myocardial, like Bristol? So I think in that case, it was a $13 billion transaction. Are we likely to see any more deals? Or are you happy with what you have inside the company over the next few years?

Well, as I said before, I mean, obviously, I'm familiar with our long-range plan, our 10-year long-range plan. And I can tell you I have a high level of confidence that we can drive strong top and bottom line growth up to the LoE and then on the other side of the LoE, again drive strong top line growth and strong bottom line growth and an operating margin profile that's industry leading. So I feel good about -- and that's with what we have today and what we have in our current pipeline of assets. Now that doesn't mean that you don't continue to look for other opportunities. But the way we look at BD is we operate within each of our franchises a long-range strategy where we look for how do we fill out gaps in what we're trying to accomplish. So Genmab, as an example, that filled the gap in hematological oncology that we had. And we wanted an important asset that could cover more areas of hem/onc to continue to drive our leadership position. So we strategically went out and looked for a CD3xCD20. Same thing with I-Mab. We wanted a CD47 because it allowed us to further penetrate in areas that we were in and extend our footprint beyond that. And that's how we operate in every single franchise. So we won't just go out and look for what's available and can we basically make it fit. We try to go out and look for how do we continue to build our franchises in a way that we can increase our position in that market and drive long-term growth. And we've allocated $2 billion a year for transactions. That's more than sufficient. That's 4x what we've spent historically in executing that strategy. I would expect that we'll continue to do transactions that will add to the portfolio. If something opportunistically came along that was a little bit bigger than that, we would certainly -- and it fits, that's the most important thing. It fits into the strategy. What you're not going to see us do is run off into an area that we don't have a position in today like cardiovascular. We're not a cardiovascular player. We're in immunology, we're in neuroscience, we're in hem/onc. If the right kinds of assets come along -- and we'd like more assets in solid tumor. We have a number of plays in our early to mid-stage pipeline. We're going to get data on those. Mike can talk about that. We're certainly excited about some of those, and we continue to look for more solid tumor assets. That's certainly something we're interested in. And building on our aesthetics franchise is important to us as well.

Okay. So one lever that you could pull would be capital allocation. We covered that. The other lever, it actually goes to a question I asked at Q3 results but I'll ask it again here for listeners. You could give long-term guidance like you've done in the past. You did that in 2017. It resonated with the market. The stock took off. You've been talking today on this call about your confidence in your LRP, but investors sometimes want a line drawn in the sand and some tangible numbers to wrap their heads around. So what about the possibility of giving guidance for more than just 1 year at a time but maybe give it out to '23 or even beyond 2023?

Yes. Tim, I think it's a good point and certainly, it's something that we have considered, and we are continuing to consider. What I'd say is one of the purposes of this Immunology Day is to start to lay the foundation for investors to truly understand what is our ability to more than offset Humira erosion in 2023 with the current pipeline of assets that we have, specifically in Skyrizi and Rinvoq. And I think we will accomplish that when we have this meeting in December. And if you put that foundation in place and you put to rest the fear that, okay, they can grow -- in immunology alone, they can continue to grow that franchise with the assets that they have today, then I think you put a big question mark behind you. And then the rest of the franchises add incremental growth above and beyond that. And so I wouldn't rule out that at some point, we will give longer-term guidance. But I think we want to do this step first because this is the most important element. I mean no one would have ever believed that we could stand here and tell you today that we fundamentally believe that Skyrizi and Rinvoq can more than offset any biosimilar impact that we could have in the United States for Humira. Humira, let's call it in 2023, will be an $18 billion drug in the U.S. And what I'm telling you today is that I have confidence that Rinvoq and Skyrizi can offset any level of erosion that Humira will experience in the U.S.

Okay. That's a really helpful answer. So let's talk about Rinvoq a little bit here, kind of it comes up following from what you said. So I can't hardly think of an area within immunology and inflammation that you guys haven't delivered on. You've been very successful over the years with different products. And you mentioned Skyrizi and Rinvoq and how well they're launching. And I agree, like we didn't think when they were launching that they would be as successful as they were -- as they are. We have a launch coming up here not so far away in atopic derm with Rinvoq. Investors remain skeptical that JAK inhibitors, any one in the class will play much of a role in this indication because of the risk benefit profile with one big competitor being Dupixent, which has very clean safety. So can you talk about atopic derm, how much -- if you think that's a wrong point of view? And why it might be different and why there might be a much bigger opportunity here for the JAKs than what the market's assuming?

So this is Mike. I'll take that. I think it's important to look at benefit risk in the intended population. And that's the reason that we designed and executed, now have reported at least at the top line level the data from our core Phase III programs. These are large studies that characterize the benefit risk very, very well, very effectively. And they've shown very strong results across all 3 of the studies that we have reported out. They've shown prominent efficacy, certainly, not only on measures like EASI, the composite measure that's used in atopic dermatitis. At the 75% improvement level, we have strong results. But even more importantly, we have strong results at the 90% and 100% improvement, which hasn't typically been seen in the field. And we also show a very prominent impact on itch, which is the most troublesome symptom. And we see that very rapidly within 1 or 2 days in the 2 different doses that we studied across the Phase III program. And so we think that the efficacy package is very strong. And when you look at the safety that we have reported out there, I think the benefit risk profile is very appropriate for the intended patient population. There were concerns about events that had occurred in other populations but those weren't seen in the Phase III studies in atopic dermatitis. So for example, there were no VTE events, venous thromboembolic events, in upa-treated patients in those studies. There was one in the control group, and if you include arterial thrombus, there was a second one in the control group, but none of those events in the upa group. And so I think it's important to look at safety in the intended population, and we think we're going to bring forward a very competitive offering here. And if you think about the space, I would say a couple of things. One is Dupi's been very successful, and they have really highlighted a need here that had been underappreciated by the industry for quite some time. But if you look at Dupi, only about 50% of the patients in their core registrational studies achieved an adequate response if you consider an adequate response to be 75% improvement. So we think there's plenty of room for patients who have not achieved response to get to those higher levels of efficacy with a high efficacy agent like upadacitinib. Now we don't think that, that is the only use for upadacitinib. We think given the benefit risk we've demonstrated, there's also a role for therapy upfront for patients who desire those higher levels of efficacy. I mean generally, in the immunology space, you see that use increase over time as practicing physicians in the marketplace gain experience and comfort with the mechanism. So we would expect that growth over time. The last thing that I would add is in a space that's as underdeveloped as atopic dermatitis, more competitors can often grow the market because I think this market has been underappreciated and underdeveloped. And in some ways, it resembles the psoriasis market of a decade or more ago. And there, we saw as there was a greater awareness of the burden of illness and as effective therapies came in, the market really expanded considerably. So we think that there's room for a number of agents. And as I said, I think we're bringing forward a very competitive product profile.

Do you think it's going to be a fast ramp for Rinvoq in atopic derm? Or is it going to take market education and persistence and heavy advertising? And there's going to be a more moderate uptake.

Well -- so this is Rick. I mean first of all, to the point Mike made, I think you will see promotion activity that drives growth in the category. That's important. It is clearly an underserved market. So that -- you can assume that, that will be part of what we deploy as we enter this market. I would also say that, look, if you look at the profile of Rinvoq or what we know about it today, you would say this is an agent that has a number of attributes. But 3 important attributes would be. Its ability to suppress itch, which is probably the single-most troublesome aspect of this disease for patients. Its ability to drive high levels of efficacy. And it's a convenient dosing in that it's an oral versus an injectable for this patient population. And so I think those will be the first 3 things that you see. But as with any category, what typically happens is physicians are going to want to get some level of experience. There's a significant number of patients who have either failed Dupi or they're getting suboptimal performance on Dupi. You would expect that those would be the first places where physicians will start to try it. Once they get some experience with it in that part of the population -- very similar to what we saw with Rinvoq in RA. Once they get some experience in that part of the population and get some comfort with it, then they will move to it being one of the choices that they use as a first-line agent. Certainly, the positioning of the drug will be, here, you have a very high efficacy agent. It's highly effective at treating itch, and it's an oral. And there's no reason why that wouldn't be a choice that you would use in first line. And so I think the ramp will be -- will mirror what I've described there. We will try to drive growth in the market. We will move in, trying to get physicians experienced using the drug. That will probably be in patients who have been suboptimally treated with Dupi or failed Dupi. That will be the first phase of it, and then it will move into the broader population.

We're out of time. I want to slip in one final question. So related to this December meeting coming up in the immunology space, how much profiling are you going to do of ABBV-154 or the predecessor compound ABBV-3373 or share the TNF steroid antibody drug conjugates? Are we going to see any new data there? And how much focus will there be on that approach?

So 154 is the candidate within the TNF steroid platform that we've selected to move forward. We announced positive proof-of-concept data earlier this year with 3373. The difference between 3373 and 154 relates to minor but still important changes in linker technology that relate to ease of manufacturability, the ability to concentrate, to formulate at high concentrations. And these are things that can be important to -- for a successful molecule going forward. So it's for those reasons that we selected 154. We wanted to see PK data from 154 to make sure that we're getting the exposure we wanted, having the PK profiles that we wanted to see and we've now confirmed that. So we have selected 154 to go forward. With respect to the role of 154 in the Immunology Day, I think you can expect us to show how we see it fitting into our overall immunology portfolio, where we see some of the opportunities, use it as an example of the immunology ADC platform that we have, which can be broader than TNF steroids. And so I think you can expect that, to hear information along those lines. We don't have new data for 154 to present at that meeting because as we've said, the next step is to move into a large-scale Phase IIb definitive dose-ranging study with 154. And that's going to start in the first half of the coming year.

Great, okay. We're out of time. So I want to thank Rick, Mike and Rob. Thanks for your time today. It's been a great discussion. I wish we had more time because there's certainly more to talk about.

Our pleasure. Thank you.

Okay. Bye-bye.