AbbVie Inc. (ABBV) Earnings Call Transcript & Summary

Great. Well, thanks, everybody, for joining us for our next session. Very pleased to have with us our next presenter, which is AbbVie. We have with us Mike Severino, who is the Vice Chairman and President; and also Rob Michael. My name is Chris Raymond. I'm one of Piper Sandler's biotech analyst. So a lot to unpack, a lot going on at AbbVie. For folks who are unaware of our format, this is a virtual fireside chat. And what I would urge folks to do is there's an option to ask questions via the Zoom link that I think everybody has dialed into. If you don't want to do that, just tip me up on e-mail. I'll make sure your question gets asked and answered. So before we dive into questions, I think what we'll do is have Mike give a quick overview, maybe 1 or 2 minutes, just to level set the story for investors, and then we'll dive into Q&A. So Mike, please take it away.

Thanks, Chris. It's a pleasure to be here today. As you said, there's a lot going on at AbbVie. It's really an exciting time for our company. We now are operating very, very effectively as an integrated company, following the acquisition of Allergan, and that has really provided a number of benefits for our company. It brings in 2 new growth platforms. So obviously, AbbVie, historically, has had hematologic oncology and immunology as core growth platforms. But now, with the acquisition and integration of Allergan, we have 2 new platforms: Neuroscience. Neuroscience was previously a nascent area, [ drag ], if you will, but it's now a powerhouse across a wide range of areas with a flagship product in Vraylar and a migraine franchise. It's performing very, very well with new entrants coming in terms of the pipeline from the integrated company. And aesthetics, of course, which has been a focus of Allergan, which is a very attractive business and one that continues to perform very well. At the same time, our overall business is performing very well and our pipeline is starting to kick in. We knew when we set out as an independent company about 8 years ago, it was absolutely essential to develop a pipeline that could bring forward a stream of innovative products and allow us to continue leadership in the areas that I described. And if you look at the performance of RINVOQ and SKYRIZI in the marketplace, I think it's clear that we've done that. We've introduced next-generation products that are category-leading that are performing extremely well in their lead indications of rheumatoid arthritis and psoriasis, respectively, and have tremendous potential for growth into new areas, with a large amount of Phase III data coming even through the remainder of this year and into next year. Our hem/onc franchise is performing extremely well. We've added to that pipeline, both with late development molecules like navitoclax; and through our partnership with Genmab, epcoritamab; through our partnership with I-Mab, a CD47 antibody and an organic pipeline that's now coming into focus and is very strong. So we're ending the year with a lot of momentum. And as I said in the beginning, it's an exciting time here at AbbVie.

Excellent. Well, I've got -- I'm looking at my list here, and I think I have about 2 hours worth of questions. So I'm going to have to pack that into roughly 22 or 23 minutes. So let's just jump in. So guys, I wonder if we can start first with just a couple of commercial questions. So I guess, first and foremost, I think everybody is aware of just the incredible launches that we -- you guys have been executing on with RINVOQ and SKYRIZI, well ahead of expectations in spite of COVID. But there's -- you guys have talked about this and others as well that new patient starts, as a result of COVID, has sort of been dampened. Is it your sense that maybe there's a warehousing of rheumatoid arthritis and psoriasis patients that we should be thinking about once we get back to some semblance of normalcy?

Chris, this is Rob. So yes, I think it's fair to assume there is some level of warehousing. And we're seeing it across the immunology market. It's been about down 20%, with derm being more significantly impacted. Derm is about down 25% versus pre-COVID level. So I would expect, as we come out of the pandemic, to see the level of warehousing. Now that said, despite that impact, we've raised our financial guidance twice this year for both RINVOQ and SKYRIZI. We're still seeing nice prescription growth. But certainly, with the reduced office visits, reduced new patient starts, you've seen some impact. And as we come out of the pandemic, I think it's fair to say there will be some level of warehousing that we'll see come through.

Great. So -- and I guess you kind of answered the question, I guess. So we should see then some sort of bolus of new starts arguably then once the vaccination into 2021 becomes more widespread among various geographies. I guess maybe is the big -- is that an effect then, given that you've obviously raised guidance? Or would a bigger growth -- is the bigger growth driver heading into -- if you look at 2021 and beyond label expansion opportunities. Obviously, you've got RINVOQ with psoriatic arthritis, AS and AD and SKYRIZI has its own expansion opportunities.

Well, I mean, they're both going to contribute, right? So if we look at just a new patient capture, in-play share capture right now for SKYRIZI in psoriasis is 33%; for RINVOQ in RA, 16%. And so we're continuing to see very strong share capture. It's a growing market as well. So that certainly fuels growth. Yes, I think the bolus from warehouse patients will have an impact. I would say that's not going to be the main driver of the growth. And then we do have a number of new indications for RINVOQ coming online next year that will also contribute. So they're all going to contribute to the growth, and we feel very good about the outlook for the immunology franchise in '21 and beyond.

So you guys have guided to head-to-head data evaluating RINVOQ versus Dupixent in AD later this year. Sort of, Mike, I don't know if you can maybe frame for us how you would position RINVOQ certainly in these markets that's really been defined by Dupixent. What sort of safety efficacy parameters would be most informative to docs that consider RINVOQ in AD?

Well, as you said, this is a market that has only recently been developed and I think remains underdeveloped. And it's an opportunity and a degree of unmet medical need that previously wasn't appreciated by the industry. I think Dupixent has done well in changing that perception. And we view it as a very attractive market overall. We think that despite the availability of Dupixent, there's still a lot of unmet medical need. If you look at the core registration programs for Dupixent and consider an adequate response, 75% improvement on the EASI scale, which is a composite index that's used there, roughly half the patients don't reach that level. So despite the fact that Dupixent has had a very successful launch in this marketplace and done a good job at developing the market, there's still considerable unmet medical need in those patients who don't achieve an adequate response. And when you look at the data that we've generated across our Phase III program, and we've read out all 3 of the core Phase III studies that will be part of our regulatory submissions, which are now in the U.S. and rolling out around the world, we've demonstrated very, very strong data. We've demonstrated very good response on the EASI composite, as I mentioned, not only at the 75% level but at the 90% level and even 100% level, which was a measure before our Phase III program we weren't even sure could be hit. But we included it because we thought it was important to evaluate in Phase III. And in fact, we were able to hit that level of response. And we also had a prominent impact on itch, which is one of the most troublesome symptoms for patients with this disease. And not only was it prominent, it was quite rapid after the first day of therapy or the second day of therapy in our low dose -- in our high dose and low dose, respectively. So really a very strong efficacy signal. And that is coupled with the benefit risk that we think is very appropriate for a patient population with moderate sphere atopic dermatitis. So if you look at the safety that we've demonstrated across our core Phase IIIs, and we've top lined all of these results, we see rates that are consistent with what one would expect for a systemic agent in this patient population. There was concern about VTEs from some folks based on RA experience. But what we've said consistently is across our program, those rates are no greater than they are baseline and no greater than they are for comparators. That's certainly true of our RA study. We've shown data to support that. And if you look at our atopic dermatitis program, there were no VTEs in upadacitinib-treated patients across those programs. So across all 3 studies, no VTE events in upadacitinib-treated patients. So it was 1 event of a VTE that occurred in the control patient, so not a patient who received upadacitinib, really underscoring what we said that it's important to look at benefit risk in the intended population. So based on all of that, we think there's a real opportunity in 2 areas. One, as I said, there are a number of patients who don't achieve an adequate response to Dupixent. We think that's a natural place to go for a high-efficacy agent like upadacitinib. But based on that benefit risk, we absolutely think it's appropriate to consider upfront use as well. And if you look at this market, traditionally, in an immunology market, new mechanisms start in later patients who have an inadequate response to other therapies, get some upfront use right off -- right from the start. But over time, as longer-term data become available, as physicians gain experience with the real-world use and with the benefit risk profile, we see that frontline use increase. And of course, we also, as you said, have a head-to-head study that's coming this year, which will show in the same study the performance of RINVOQ and dupilumab. So we look forward to those data.

Excellent. So just in the interest of time, I'll try to move on a little bit. And maybe just sort of keeping in pace with the immunology franchise discussion. So ABBV-154, which is your TNF steroid conjugate program, you made the decision earlier this year to focus on that molecule rather than 3373. And I think the improved manufacturability was the big driver. But maybe talk about your level of confidence in showing that the biology, how it will translate between those 2 molecules and sort of smoothly as we see data sort of play out in coming quarters?

So we're quite confident that the biology that we've seen with 3373 will translate to 154 because as you say, the differences are relatively minor differences in linker technology, and they do relate to the point that you made, manufacturability and the ease of producing high-concentration formulations. And those advantages are important when one takes a new therapeutic into the marketplace. But again, the basic biology is the same, so we're quite confident that it would translate. We top lined the positive proof-of-concept data for 3373 earlier this year. And at that point, we wanted to see the Phase I data from 154 to make sure that we are seeing the PK exposures and ability to get the coverage that we wanted to with that molecule in the clinic. A few months ago, we were able to review those data, concluded that we were able to achieve our goals with 154. And that's why we announced that 154 was the agent that will be selected for further development in that -- on that platform with respect to the TNF targeting antibody. There are other components of that platform that can take us into other diseases that we can talk about separately. So we'll be starting a large Phase IIb definitive dose-ranging study in RA with 154. And I think you can expect us to start other Phase II studies in immune [indiscernible] conditions as well.

Excellent. Good. I'm getting some questions from investors. I'll just insert one here on the topic of the immunology franchise. So when the Allergan deal was announced and as you guys started describing the combination and the synergies, I think one point that you guys made was LINZESS would show some decent synergies in the -- with your existing presence in the GI space, but we really haven't heard a lot of discussion around it. It's a decently sized product. But maybe if you could talk a little bit about your plans for that product and sort of the synergy that you talked about before. Is it still there? Any color on the growth outlook or life cycle management strategies for that compound of that business?

Yes. I think where the LINZESS comment is coming from, as we talked about the expense synergies, greater than $2 billion by 2022, 40% of that we said would come from SG&A, with a large majority coming from corporate infrastructure and some level coming from commercial. Now keep in mind, there's not a lot of areas of overlap commercially, so you don't expect to see very many synergies. The 2 areas where there was some overlap was women's health and GI. And so I think potentially -- so we spoke about synergies in that context as it relates to some opportunity. I'd say a fairly minor opportunity to extract synergies from commercial GI being a portion of that. It's an important product in our portfolio. I'd say we continue to promote it and support its future growth. I'd say it's not -- as I think about the key growth drivers of the company, I wouldn't put it at the top of the list, but it's still an important product. It's a sizable product. So -- but we haven't talked about revenue synergies per se related to, frankly, at this point, many -- outside of aesthetics, we've talked something about potential revenue synergies, neuroscience. But as it relates to LINZESS, we really haven't characterized revenue synergies associated with that. We'll certainly try to drive that product going forward.

Fair enough. Okay. Good. Well, maybe let's just jump around a little bit. The hem/onc franchise and your efforts there. So Mike, in your comments, you referenced the I-Mab deal on it. I think it's pretty obvious that the CD47 market's been pretty hot, pretty interesting lately. Maybe talk about your decision to form the collaboration, specifically with I-Mab. And what was it about that molecule that made you feel that, that was a good fit versus some of the other options that are out there?

Certainly. Well, as you say, the CD47 market has been a hot market. I think it's a very interesting target. Obviously, it's an IO target with the primary application in hematologic malignancies and specifically, with good reason to believe there will be strong activity in AML and MDS based on clinical data. And potentially, based on preclinical data and target expression also in multiple myeloma. And these are areas that are very, very -- that are a very, very good fit for our pipeline. If you look at VENCLEXTA, for example, and what we've been able to do with that molecule in AML, we've shown a survival benefit in combination with azacitidine in AML. But there's still more room to go to give longer-term survival to patients who are ineligible for bone marrow transplant. And the addition of an IO molecule, we think an IO mechanism, we think, can really be beneficial in providing that benefit. So it's a very strong fit for our pipeline and an area that we know well. So we went out and we looked at the space, and we found the I-Mab molecule to be a very attractive fit for what we're looking for. It's a molecule with very good characteristics, with high-affinity binding and with relative sparing of red blood cell expressed CD47, which allows them to mitigate the first-dose anemia that's been seen with this pathway. And when you look at that collection of attributes, we thought it was a very good fit for our pipeline. And of course, it was a program that had already been advanced to the clinic. And so we could work with it very quickly to advance into the sort of AML studies and studies in other indications that we think will ultimately show the benefit of this pathway. So again, it's a high-quality program in a very attractive mechanism that we think is a strong fit for our pipeline.

And what kind of -- I'm not going to ask you to get too granular in terms of the data cards that you'll turn over next year. But generally, what should investors be expecting as we go into 2021 in terms of updates on that program?

On the lemzoparlimab program, in particular?

Yes.

Well, You can expect to see it continue to advance through its monotherapy work and some of the initial early studies. And you can expect to see us starting the combo work, including the work necessary for novel combinations like VENCLEXTA combinations as we move forward through 2021.

Excellent. Okay. Well, let's move on to neuroscience, and I apologize we're only a couple of questions deep in every area here, and I apologize. But -- so on the topic of migraine, so UBRELVY is still the share leader among oral CGRPs, at least when we look at the data, the IMS data that's out there. Some KOLs we've talked to, though, indicate that a combined acute prevention label for the lead competitor, Nurtec, next year could really make that a more attractive option for chronic migraine patients. You guys have a pretty broad franchise out there with -- you've got BOTOX, you got UBRELVY, atogepant soon. So maybe just talk about the overall portfolio you've got the competitive positioning. And what -- you mentioned, Mike, I was intrigued in your comments about the neuroscience franchise being a real focus. Just talk about your confidence in the migraine franchise and the continued strength that we've already seen.

Well, the migraine franchise is already strong. And with the addition of atogepant, which we'll be submitting for registration in the very near future, it will become even stronger. So obviously, BOTOX for chronic migraine has been a staple and delivered a benefit to patients that have very significant morbidity associated with that condition for quite some time now. UBRELVY is a newer entrant. UBRELVY has a very strong profile in an area that hasn't had innovation in many years. And if you look at the performance in the Phase III studies and how that has translated through to the label, I think you can see why it's performing so well in the marketplace. It gives good relief from symptoms, rapid relief from symptoms. It's the only oral CGRP that has a second dose on label, because some patients with all agents don't achieve complete control of their headache, and so a second dose can be administered with UBRELVY, which is, again, the only agent that has that on label, which we think is a very strong feature of its product profile. And it will be complemented soon by atogepant in prevention. And we think the flexibility that's afforded with a molecule that can be optimized for treatment and a molecule that can be optimized for prevention is actually a real advantage. There are a number of features of atogepant that are very attractive. It has shown in its recent Phase III study, strong efficacy across all doses tested, efficacy that was really at the upper end of what our expectations were going into Phase III or going into that data readout. The availability of multiple doses can allow for dose flexibility and the ability to manage drug-drug interactions and other challenges that therapeutics in this space have to navigate. And so we actually think that the flexibility between the 2 will be a competitive advantage.

Excellent. Okay. One more question on neuroscience. So a product that I don't think is on the radar screen of a lot of investors is Duodopa. It's a steady product. What we found from some of our KOL work is once they can convince a patient to go through the initial procedure with the [ indwelling ] port, they're quite happy. But 951 actually kind of came up in one of our KOL discussions. Very, very bullish on the therapy because it gets over one of the big barriers to adoption. Just talk about how 951 sort of plays into your prioritization of the opportunities in the overall broader neuroscience franchise, if you would.

Well, 951 is an important program. As you say, Duopa delivers transformational efficacy for patients, but it takes a lot to deliver that efficacy. We have to have a gastric tube placed, which is then threaded into the small bowel that has to be maintained. It's challenging. And only a small proportion of the label population is willing to manage that in order to achieve that efficacy. So the limitation is not really a limitation in the labeled patient population. It's the patient population that's willing to manage that G-tube and device and the long-term maintenance that, that requires. 951 allows us to get away from that. So 951 is a combination of 2 novel prodrugs. So they're NMEs, but they're prodrugs that allow us to deliver levodopa and carbidopa through a subcutaneous route in a way that can mirror the concentrations from Duopa. So it effectively allows you to get Duopa-like efficacy without the need for that complicated drug device combination. And instead, it replaces it with a subcutaneous insulin pump-like device. So we think that, that will broaden the patient population that would be interested in pursuing Duopa, and therefore, able to achieve that transformational efficacy. So it really is, I think, quite an important product. If you think about Duopa, despite the challenges that we talked about, Duopa will still do about $500 million in sales a year. And so something that is much more accessible, much more patient friendly, if you will, I think, has very real potential.

Excellent. Okay. So over to aesthetics and maybe just a quick question on that business. So I think, Rick, on the Q3 call, remarked about the BOTOX Cosmetics and JUVEDERM businesses both experiencing really faster recovery from COVID effects than people had maybe anticipated. Sort of just talk about how you maintain that kind of resilience. And are there parallels maybe -- even though it's been resilient, when you think about the new patient starts, warehousing effect that you've seen among derms and psoriasis and RA among rooms, is there an artifact that's kind of similar to that? Even though it's been resilient, should we expect some kind of sort of warehousing effect as things start to clear?

So Chris, I think we've seen that actually play out already. We've had the pent-up demand. We came back pretty strong in the second and third quarter. We started to see a strong recovery in June shortly after the close and then it carried through in the third quarter. And you're right, it is a very resilient business. I think one thing that we really learned to appreciate with the aesthetics organization is their relationship with the practices is very strong. They know the market very well. They partner very closely with the providers. And we've seen all the providers really implement safety protocols that allows them to operate effectively even with the limitations from the pandemic. It's a very motivated consumer base. Surprisingly, we've seen the demand recover stronger than we've seen many therapeutics. Even with the resurgence as we've been monitoring that very carefully, we really haven't seen an impact yet in the U.S. We've been monitoring Europe. While Europe is smaller. It's about 10% of the aesthetics' global revenue, and they have had lockdowns across a number of countries. For the most part, we've seen patient traffic still in the 60% to 90% range across many markets. The U.K. being one exception where they've had little bit more of a lockdown. But overall, that's a small market for us. So what we've really seen is that resilience of the business demonstrate itself pretty quickly in June and through the third quarter. So we feel very good about that business. And as we think more broadly about aesthetics, our ability to invest more heavily, and Allergan was trying to build out their therapeutic discovery engine, and so investment was somewhat limited. We've been able to really drive the investment, things like BOTOX and JUVEDERM, DTC running concurrently as an example to really try propel the growth of that business going forward. So we've been very pleased, and certainly recovery has been very positive.

Excellent. Well, I have a ton more questions, but unfortunately, I have no more time. So thanks, you guys. This has been very informative and best of luck rest of the year.

Great. Thanks, Chris.

Thanks, Chris.

It's been a pleasure.