AbbVie Inc. (ABBV) Earnings Call Transcript & Summary

Welcome to the BofA Healthcare Conference. My name is Geoff Meacham, I'm a senior biopharma analyst here at BofA. And we're happy to kick it off with AbbVie today. So with me on stage, we have Rob Michael, Vice Chairman and President; Scott Reents, EVP, CFO; Jeff Stewart, EVP, CCO; and then Roopal Thakkar, who is SVP, Development, Regulatory Affairs and CMO. So guys, thanks for coming.

Thanks for having us.

Always a big crew, right? Rob, I'll kick it off to you. So when we talk about the cadence of this year, you guys have given pretty good specifics on the flow of earnings trough just with respect to the HUMIRA erosion. As you have moved through the year so far, what would you say is kind of better or worse than you thought initially? What are the higher-level dynamics?

Yes. Look, we feel good about the first quarter we printed. We beat our top line and our bottom line. Passed that through, so we raised the full year outlook. When you look across the board, I mean, clearly, we beaten every therapeutic area versus our guidance. I know though there are some issues with Street modeling for the quarter, but versus our guidance, we certainly exceeded expectations. When you look at aesthetics, as an example, we saw a faster recovery in China. We assumed midyear recovery, that happened sooner. We're seeing stability in the U.S. market. So we beat on aesthetics and we raised the guidance there. We feel very good about the performance of immunology. We beat immunology by $100 million, even though the Street had different expectations. We beat our guidance by $100 million. $30 million of that was U.S. HUMIRA. We came in a little bit lower. We had 27% erosion in our guidance. We came in at 26.1%. The other $70 million is SKYRIZI and RINVOQ. So we saw some nice performance there. We'll talk about the disconnect versus Street models. I'd say IMBRUVICA, VENCLEXTA slightly ahead of our expectations. I'd say, fairly in line. But the one that really stood out for us was VRAYLAR. VRAYLAR, we've seen very rapid uptake with the new indication aMDD. So we saw -- we took up our guidance by $200 million for the full year. We substantially beat -- we're seeing nice strong growth in migraine. So as we look across the portfolio, we feel very good about the performance. I'd say we have assumptions around HUMIRA. We've given now second quarter guidance for U.S. HUMIRA of 27% erosion. So that essentially gives you a sense of what we expect for the second half of the year, right? We said 37% for the full year, the first half is 26% to 27%. So you just do the math, and you're at basically the mid-40s. So we've assumed some additional price erosion because we know the rebates we've negotiated with the payers to give us that level of access, which is greater than 90% of covered lives. And we've assumed with 7 to 9 biosimilars coming in the middle of the year that we would see some volume erosion. That's really mainly coming from the WACC sensitive accounts. And so we've assumed in the second half of the year, that mid 40s of erosion. If we do better, that can certainly drive over performance this year. We could talk about what that means for trough. And then I'd say the other area that we're very closely monitoring is in aesthetics. We've assumed the U.S. market will not recover really until next year. So right now, we're seeing stability. But if we see that recovery happen sooner, that potentially would drive over performance this year, which would have implications on which year is the trough, '23 or '24. I've always said that regardless of what year the trough is, you shouldn't expect earnings to fall below the $10.70 EPS ex IP, R&D. It's the best way to think about it. But as we sit here today, we feel very good about the performance of the business.

So to start the year, it sounds like it's not just about the INI portfolio. When you look at trough, there are other businesses that I think you could outperform on and maybe even beat the trough number for next year.

Yes. I think -- really, I think the 2 major variables are going to be U.S. HUMIRA and aesthetics. We're seeing nice momentum. I mean we -- if you look at SKYRIZI and RINVOQ, they grew $3 billion combined last year. We're expecting to grow $3.5 billion this year, really tremendous growth. So they're on the path that we assume and we gave that '23 guidance and as we thought about what it means for '24. So those are performing exceptionally well. VRAYLAR is definitely performing slightly ahead. So that could be an area of upside. Migraine looks good. But I'd say overall that the 2 things I would monitor most closely would be U.S. HUMIRA and aesthetic as it relates to trying to figure out which year is the trough.

Got you. How do you think about the -- in the INI space when you have STELARA coming off patent? How much does that inform the view of the pace of HUMIRA potential erosion? And also the effect maybe on SKYRIZI and RINVOQ?

Yes. I think we don't -- we see it as independent of HUMIRA. So HUMIRA is going to happen with those 9 biosimilars. It's going to be a paced out curve on the price and volume. And as we sort of highlighted that by the time we get to probably '25, maybe '26, we'll start to see that tail emerge. We don't know how large that tail will be. We continue to study it. It's going to really depend on the dynamics in the back half of '24, probably. But when we think about STELARA overall, I mean, STELARA competes in 2 areas, in really the psoriasis market, where SKYRIZI is a real juggernaut, frankly. It has 50% in-play share and 30% overall share. So STELARA is actually a smaller and smaller player there based on the other IL-23s and the IL-17s, for example. And I think it's important to note that we have head-to-head superiority versus STELARA in psoriasis. If you look at Crohn's, STELARA is a leader in Crohn's, in both UC and Crohn's in terms of that space. But we also have planned for that. And I think importantly, we're going to see another head-to-head trial in Crohn's that's going to come out towards the end of the year. And so we think on the very challenging endpoint at the right doses of STELARA, we're going to see growth superiority on that endoscopic improvement, which really drives the market in that space. So we plan for that event, and we've got a pretty solid clinical position to be able to manage it.

Perfect. Well, one of the underlying drivers, if you look at SKYRIZI and RINVOQ was duration of therapy. And that has a pretty big compounding effect. I wanted to ask you guys, how has that kind of improved over time? And does that give you confidence and more upside in what you guys have provided in terms of peak guiding?

I can speak to what we see from duration. It's really too early to comment on what we're seeing in the IBD space. But in general, I would say, when you look at the psoriatic space, which is right now, driving a huge amount of the momentum, we can see market leading, let's say, adherence and persistency with SKYRIZI. But that's sort of embedded within our guidance. So we can see the actuals. We can see those patient persistency curves that are developing over time. And I think because you have such convenient dosing with SKYRIZI and you have such high clearance rates with the total skin clearance of 60%, that actually seems to grow a little bit over time, you actually see very strong adherence. So that's built into our guidance. We're going to have to see how the more difficult disease plays out with, let's say, Crohn's or also ulcerative colitis, but we certainly feel like we're going to be at the top or market-leading based on the profile of the medicine.

I mean one benefit we see clinically that might be leading towards the commercial aspects when you look at a drug like SKYRIZI and compare them to maybe other medicines or previous anti-TNFs, there's a low amount of immunogenicity. So you have high efficacy that leads to adherence in our clinical trials and open-label extensions and very low immunogenicity, so lack of a loss of response. And with something like RINVOQ, it's an oral, so you have high efficacy, no immunogenicity. So in clinical trials, we do see very strong adherence.

And -- well, let's go down that path a little bit. So across the -- your INI portfolio with SKYRIZI and RINVOQ, are there any indications within INI that you're particularly excited about sort of intermediate to longer term? And when you look at some of these markets, we've gotten into more niche-er indications like eosinophilic diseases and the like that -- how much of those more rare, but high-impact factors into kind of your thinking on these products?

So we have -- if you think about our -- the guidance we've given for '25 and for '27, that's really driven by -- largely by the core HUMIRA indications plus atopic dermatitis. So that's -- now we do have the next wave, I said -- like we call it the next wave of derm indications for RINVOQ, which we can certainly talk about that, that over time, those will start to kick in sort of towards the '27 time frame and deliver -- think of it as peak -- combined peak revenue potential of a couple of billion dollars. So that should be another driver of growth for RINVOQ sort of in the second half, late in the decade, early in the next decade. I would say, overall, one thing that may not be fully appreciated as I look at consensus estimates is the growth for SKYRIZI and RINVOQ, we expect to be very robust heading into early part of the next decade. And one of the contributors will be these 4 indications we've talked about. Roopal, certainly, you can go into more detail if you'd like.

Yes. If you think about it in the rheumatologic space, we have giant cell arteritis underway for Phase III, and we're going to initiate lupus this year. So that fits nicely with those prescribers. And then as Rob mentioned, in dermatology, we're also going to be starting hidradenitis suppurativa, alopecia areata Phase IIIs, and we'll get a Phase II readout this year for vitiligo and potentially move into Phase III there in the derm space, where we already have atopic dermatitis, so it fits nicely with those prescriber bases.

Got you. Perfect. Well, let's switch gears to the neuroscience portfolio. So migraine has been a pretty rapidly growing category. Just give us a sense for how you think that could play out over the course of the year and into next. And talk a little bit about your -- the pipeline with respect to newer assets in neuro. You guys have talked about ALS. And in the past, you guys have developed TAL. So there's a lot going on in that category.

Migraine is a very attractive space for us. And we think of it as basically the intersections of our big 3 assets. And we cover the full spectrum of migraine from acute migraine all the way to through the most serious forms such as chronic migraine. So on the back end, we historically had, obviously, Botox Therapeutics, which right now is the leading drug in terms of in-play capture for the most severe form of migraine where you have 15 more migraine days a month. That's the chronic migraine. Then for episodic migraine, we've had QULIPTA sort of in the middle. And we've also had UBRELVY, which is the leading oral CGRP on the front end. And what we're going to see over time is all those markets are going to continue to develop. It's pretty exciting. QULIPTA recently has achieved the chronic migraine approval. So we'll have 2 assets with that approval, and it will be the only oral CGRP in that space to have that approval. So that's a big catalyst that's happening right now in the marketplace. So our representatives and our medical experts are launching that indication there as well. Ultimately, we see that Botox and QULIPTA will positively interact because there's still a lot of burden even with one of those assets. So we have ongoing trials that Roopal can talk about where you're using them in combination to get to this concept of total migraine freedom. So it's very exciting. And as I mentioned, on the front end, UBRELVY is a very significant drug in terms of patients who can't tolerate or just want better care than the older triptan generic marketplace. So we're in a good spot there overall in terms of our full spectrum of migraine support. And Roopal can talk about what's further back in the pipeline.

Well, one interesting thing is we're also looking at Botox in episodic. For those who find success in injections that way, you can get it if you have less than the 15 that Jeff mentioned for chronic. So that's going to read out in the next couple of years. And as Jeff mentioned, we are looking at combinations with Botox, with the anti-CGRPs to see if you can get to migraine freedom, and then even looking at combinations with both orals to see if UBRELVY can play on top of QULIPTA in case there's breakthrough. So there's a variety of ways to continue to cover the full spectrum.

And from a commercial perspective, are you starting to see some leverage from the success of migraine and looking to the VRAYLAR MDD? And that portfolio was -- and there's a lot of clear synergy, but I wasn't sure if you guys are starting to see some momentum spillover into VRAYLAR.

Well, it's important that we actually have done the opposite. We think it's strategically important. After the integration with Allergan, there was one sort of mono approach with both migraine, which was just launching in VRAYLAR. When we looked at the pure potential of this migraine space and the pure potential for the bipolar plus the adjunctive MDD space, we separated those. So we have dedicated sales teams on both migraine and VRAYLAR. So it's a nice investment, and we see the immediate return in terms of our leadership potential. So as Rob noted, we are very impressed and pleased with the initial results of this big new indication. And we think a big piece of that is dedicated representatives, dedicated medical experts in the field that talk to both psychiatrists and big primary care writers that can own that VRAYLAR message in largely a generic space. So it's working very well in terms of how we've gone to the market.

We just launched DTC recently for VRAYLAR as well, additional DTC. So we're seeing a nice response. I would say across the Allergan portfolio, we saw, after we combined the companies was, there was opportunity to invest and drive strong returns. We saw in aesthetics, in migraine and antipsychotics. So those investments are certainly paying off.

Right. That makes sense. In the neuroscience portfolio, so in neurodegeneration, talk a little bit about the -- historically, you guys have gone after a number of indications such as Alzheimer's. And a lot of, obviously, a buzz from the Lilly data last week. So give us your -- kind of your priorities right now in that part of the portfolio.

Yes. So we have an A beta program as well with the monoclonal antibody, and we've seen that play out a couple of interesting assets. So our focus here is on the monoclonal itself. I think the 2 that are being most discussed have half-lives around 6 to 10 days, I would say. Ours were looking at maybe 30 days. So longer half-life, potentially higher potency and the ability to bind a beta outside of the vasculature that potentially may reduce rates of ARIA, potentially a lower immunogenicity rate, that may also play. So we may have an opportunity to do exactly what's needed, that's drive down A beta to low levels and do it fast and potentially do it in a very patient-friendly way if we can get to every month dosing and even subcutaneous. So that's the focus that's in the clinic now inpatient. And we should see the proof-of-concept readout about 1.5 years to 2 years.