AbbVie Inc. (ABBV) Earnings Call Transcript & Summary

All right. Good morning, everybody. Welcome to our next session of the Leerink Global Healthcare Conference. I wanted to thank members of AbbVie's leadership team for joining us this morning. Thanks so much for coming to Miami. And so just wanted to introduce that on stage, we have Jeff, Scott and Roopal from the executive leadership team. And I thought it would be great to have you, Jeff, start out on discussing the company's exceptional commercial execution. So it's really stood out, obviously, and reflected in the stock price. So congrats on that execution. And could you just comment on your key priorities looking out over the next couple of years? It seems like you have an opportunity to even lean in a little bit more because the magnitude of the Humira dollar sales declines annually are diminishing, as it's declining from a smaller base?

Sure. No, great question. So we're really pleased with our setup. And obviously, we have really 5 big growth platforms. That's been the story and the way that we think about our therapeutic areas. And across those therapeutic areas, commercially, we're very much focused on the big brands or the engines that are going to drive our performance over the next couple of years. And they're highly differentiated assets, and we spend a lot of time thinking about the positioning, our investment strategies, how we're going to gain share, how do we think about leading the markets where we can. And obviously, on the immunology side, it's all about Skyrizi and Rinvoq and the energy that we put towards those brands. We're also super excited to think about the size of our neuroscience franchise that's developing really well. And we're heavily focused on certainly our big 3 migraine assets. We're very well structured across migraine with Ubrelvy, Qulipta and certainly Botox as well, again, for chronic migraine. We have strong positions, good share gains there. We're also thinking about how we drive more near-term assets that we think are going to be very, very nice assets, VYALEV for Parkinson's. And also, we're in the prelaunch phase for tavapadon, which is an oral Parkinson agent that will be filed later in the year. So that's a very, very exciting franchise that we're building. I'd also say, certainly, Vraylar, in our psychiatry area is also a big engine that we anticipate over our long-range plan will approach $5 billion so very, very strong position that we have with these brands in neuroscience. In oncology, we also have growth engines. Now we certainly still have some headwinds from the Imbruvica decline. But if we look at Venclexta, big global brand, still going to grow very, very nicely. We're in the early days of ELAHERE. And certainly, with Epkinly for the hematological malignancies, we also have a nice growth driver there. In aesthetics, we have big engines, right? We have Botox for the aesthetic procedures and also the Juvederm line. So net-net, we have a very, very strong set of really brands that we focus on to sort of deliver that high single-digit growth that we're anticipating over our -- through the end of the decade. So those are the dynamics that we focus on as sort of gain share, lead the markets, win in the marketplace with our investment strategy.

Excellent. And regarding Skyrizi, it's pretty amazing to see that the brand is driving roughly 50% year-over-year growth in TRx, which is -- and that's in recent weeks, which is about the same as the 52-week performance despite the law of large numbers. So can you discuss those drivers and what to watch going forward?

It's -- we're very often asked like which of the indications is bigger than the others. And we look at it's going all of the indications. Because remember, what we did with Skyrizi and Rinvoq is we covered all of the major indications of Humira in about half the development time plus one, which was Rinvoq for atopic dermatitis. And we have more Rinvoq coming. If you just look at Skyrizi, we continue to see basically the lines of therapy expanding across certainly the psoriatic conditions as well as IBD. And we're able to have very, very strong capture rates that keep going up. So the way that we think about it from a mechanical standpoint, the more new-to-brand that we capture, which is basically naive patients or switching patients, the more that it's going to continue to pull up almost in a linear fashion, basically the demand or the TRx demand that you highlight. And so we continue to see in the -- in our in-market performance, strong share capture in psoriatic disease, which is psoriasis and psoriatic arthritis for Skyrizi. And we also see very, very strong momentum in IBD, both in Crohn's, which started in the U.S. and is now expanding around the world as well as ulcerative colitis, which is our latest indication for Skyrizi. So good markets and very, very strong capture rates leads to this very strong performance in the observations that you've made with the data.

Excellent. Excellent. And obviously, J&J had data over the weekend for its oral IL-23. Could you just comment on that, provide some high-level perspective?

Yes. I mean we've watched the oral market develop largely in the United States. The oral market is very concentrated in both the U.S. and a little bit in Japan. We've seen that with Otezla. We've seen that with the TYK2, with deucra. And typically, what we see is that the orals carve out a market space in the U.S. Typically, in some cases, it's almost like a prebiologic. It doesn't necessarily cannibalize or take from the penetration rate of the biologics. So that's the first perspective that we have. And it appears, although we haven't really studied the data too much, it just came out, that the oral drug will probably do very, very well in the oral space. It appears to be stronger than Otezla. They've announced, I think, a comparative trial versus the TYK2, which has not really performed very well. So I think it will be a reasonable competitor in that space. The other perspective that I would give is how fast the IL-23 class has moved over time. So to give you some metrics on that, if you look back 5 or 6 years ago in psoriatic disease, the IL-23s, of which there's Skyrizi, TREMFYA, maybe this oral in the future, was about 5% of the TRx market in the early days. Now it's above 55%. So the expansion of that class, where Skyrizi is the clear leader, is a big dynamic. So that class starts to eat up some of the other mechanisms. And we're seeing a little bit of that, David, as well in IBD. So if you think of where we are right now in IBD, the IL-23 class is about 5% to 6% of the TRxs. So you can imagine where is that going to go as you start to see the expansion in ulcerative colitis, Crohn's disease, et cetera. So I don't know if it will get to 55% or 60%, but it very well could based on how these markets develop. So I think there's plenty of space for new entrants, and we're also very -- we feel very secure in the power of Skyrizi and its clinical results.

Excellent. So then turning to Rinvoq. So its U.S. TRx are not quite matching Skyrizi, growing 45% year-over-year, obviously, phenomenal, but also consistent with the 52-week performance. So -- and once again, that's also despite the law of large numbers. Could you talk about the Rinvoq drivers going forward?

Yes. We see Rinvoq -- it's a very unique asset. One of the things that's not fully understood is that in the U.S., where we have the label changes, it's basically reserved after the use of a TNF inhibitor. And that came from the XELJANZ oral surveillance trial many years ago. In the international markets, you don't have that label consideration, and it's actually larger than Skyrizi in the international markets. So this is a very, very nice balanced brand. We often see that in many of the big indications, for example, like psoriatic arthritis or IBD again, Rinvoq and Skyrizi are positioned very, very well. So in many cases, physicians are using Skyrizi first. And then per the label, particularly in the U.S., they use Rinvoq later. So basically, both grow at the same time. There's very little interaction or cannibalization. So we can see, for example, that the combined IBD capture rate in Crohn's, for example, which is the biggest indication, is over 50% now when you add Skyrizi and Rinvoq. So that's a very strong AbbVie position. We also feel that Rinvoq is -- in the later lines is a very, very secure place. So if physicians feel that they're ever getting in trouble with a TNF or another mechanism, they really think of Rinvoq as just a super powerful backstop. So as you look at line of therapy expansion in these other areas, that's very, very strong. We continue to see very strong capture rate around the world in IBD. We continue to be one of the leading -- if not now, the leading drug in second line plus for rheumatoid arthritis and psoriatic arthritis, and we have increasingly strong capture rates in atopic dermatitis. Certainly, Dupixent is the leader in that market, and Rinvoq is a real solid #2 with continued share growth. So it's a fantastic asset. And again, it works in concert with the positioning with Skyrizi in many of the indications.

Excellent. And you had touched on how, in the U.S., Rinvoq is reserved for use after TNFs. Is there any way to get that label changed?

It's probably unlikely, and maybe Roopal can address that in a little bit. We do and are working with the agency around thinking about how we might adapt the label a bit in IBD. But in general, without having a large-scale outcome study, which probably couldn't be completed in time to have a meaningful commercial return, our label is largely going to be set for the future.

Got it. Okay. Excellent. So actually, why don't we pivot to you, Roopal. So actually, I'd like to start at a little bit higher level. So if you could discuss your vision for R&D at AbbVie. I think it's -- R&D at AbbVie is potentially underappreciated by the investment community. It would be great for you to just start at a high level, and then we can go into a little more detail.

Sure. I'll build a little bit off of how Jeff started in describing our core areas of focus and investment. So that are immunology, neuroscience, oncology, aesthetics and eye care. And as Jeff was describing some of those brands, our goal is to generate that data that would allow for that market differentiation. And we look at that as unmet need. Where do we feel we can maximally address unmet need for patients, caregivers and payers. And how do we differentiate and then restate standard of care. And that is what we're hoping would then get into Jeff and his team's hands and they're allowed to -- or they're able to then compete quite effectively, I would say. So many of the assets that Jeff mentioned that are near-term drivers of growth. There's still some development work we're doing there to optimize those. Rinvoq is a good example. There's still 5 more indications that we're working on. Giant cell arteritis is currently under review, has had CHMP positive opinion in Europe, but we have several more coming, alopecia areata, vitiligo, HS, lupus. So we're still driving those brands forward. Then if we look at what do we think about next and how we look at the pipeline, we focus on those core areas that we just -- we went through. However, the way we think about it is in those same indications where we are on market, what do we do next in that space to further elevate and meaningfully restate standard of care. So many of our assets that are, I would say, in earlier stages are in follow-on channels into these indications. Now there's some new ones that we can get into, particularly in oncology and also a new opportunity, I would state, that's not the core, but a potential new source of growth, and that's in obesity, and that's a recent deal that we've done. So as we discuss more, I can happy to go into details in these indications.

Great. Well, why don't we just touch on that since that's recent new news, your move into obesity. Could you talk about that?

Sure. We've always been interested. We've observed the space for several years. And we saw a good opportunity as an entry point, and this is the one with Gubra. And for a variety of reasons, we like the deal terms, the capital outlay along with our able -- our ability now to influence fully the R&D development program and on the commercial side and execution. So the deal terms, we thought, were good for us, a good fit. And then we like the amylin space as a potential opportunity to differentiate with the current GLP backbones. We saw the tolerability profile that we liked, low rates or no rates of nausea and vomiting after a single dose of the lower 3 doses. And then we actually saw weight loss at 6 weeks after a single dose. And that looked quite meaningful to us. And why I think we're seeing that is a half-life of 270 hours, which could enable twice a month or even monthly dosing. And the serum concentrations peak very slowly. That's the Tmax when you have the maximum concentration. It takes 40 to 80 hours to get there. So you could have a convenient dosing paradigm along with the potential for very strong tolerability. And that's important in this space because some of our observations have been approximately 20% to 30% of patients will stop just after a month now, and 60% to 70% will stop at a year with the existing assets. Some of that might be due to cost, but much of our findings is due to tolerability. So that, I think, sets up a nice opportunity where we would address this as monotherapy and consider other opportunities in obesity that could also be combination. The other important point that we liked about this asset was a neutral pH in the formulation. So that opens the door with potentially more ease of co-formulation with other types of mechanisms.

Excellent. That's a very helpful framework. So could you also talk about how you think about the balance of amylin and calcitonin and just obviously, the jury is still out, but it would be great to get your perspective.

So this one has a -- is balanced, influences the big 3 amylin receptors and calcitonin. So it's both. I know some are developing specific to amylin. We like the calcitonin and amylin for a couple of different reasons. One is in animal models, you do see less muscle loss, potentially muscle preservation. So that could be another differentiator of an asset like this. The other opportunity is around bone preservation, and that's the calcitonin pathway. That's another, I would say, desirable effect, especially for older populations. As they lose weight, typically, what we've observed is 30% to 40% of that is lean muscle mass and they're also losing some bone. If there's a way that this amylin class can prevent some of that loss, that can be very, very desirable. And also unique to this mechanism, and we're not exactly sure what's driving that, is we don't see increases in heart rate, which also if you're in a cardiovascular or metabolically sensitive population, that's one thing that if you had the choice, you would have -- you would like to see a neutral or decreasing heart rate, and there's some evidence there that this amylin class would lend itself to that versus these doublets and potential triplets that are driving heart rate, which may come down, but never really comes back down to baseline. And it's not clear what's happening to outlier populations, especially if they have cardiovascular risk. So that's another reason we like this molecule.

Excellent. And since we're talking about a drug that will be bigger than Skyrizi, I'll ask another question or 2. So with respect to the efficacy, could you just talk about that and thinking about this as a monotherapy because there's obviously just a huge amount of GLP-1s coming, but patients are seeking alternatives, and you mentioned the better tolerability. If the efficacy were meaningful for a stand-alone, that would be sufficient -- maybe not to be as big as Skyrizi, but would be sufficient to be quite a substantial drug.

Yes, I think it will. This market is still young. It's still very large. I think over time, it will start to segment out, as people get treated with GLPs and other therapies come off of them, return back, what else do they want? We think this amylin could be a nice area that people can come to even as a monotherapy. When I mentioned the efficacy, it was in a male population, BMI of 26, so not overweight, healthy group. And they just received a single dose. And if you look at the top 3 doses, that's where we saw the 3% weight loss at 6 weeks, weight loss began within a week and corrected for placebo was 4%. So that was a single dose after 6 weeks in a patient population that doesn't need to lose weight. So I think there is opportunity to get into the zone where people are looking for 10% to 15% weight loss, I think, the majority. There's another population that would like to see higher levels of weight loss. And if you look at BMI, I think, greater than 40, maybe that's 10% to 15% of the population. So I would say -- the most are in, I would say, a lower zone that would be very comfortable where we think we can go. It's hard to give an exact number until we get more data because what's interesting is if you do see fat loss and less lean loss, your absolute weight may not be the best metric to measure. It may be more about fat loss and the quality of weight loss. So that's something that we're going to study more carefully using MRI scans, using DEXA for bone to fully characterize where the weight is coming from. Ideally, most of it would lean towards fat. So I think there'll be a large segment of patients that will want to be into that class, either de novo or many of them that came off of GLPs by the time something like this would launch that they're looking for another solution that's potentially better tolerated than what they had before.

Excellent. Excellent. And when should we expect to see Phase II data?

We will start multiple ascending dose -- or it's already begun. We'll take that over from our partner. And then from that, because you'll see multiple dose, I would say in about a year, we'll have that data to talk about. And then after that, probably a IIb type setting, the dose range a little bit longer than quickly move into Phase III.

But that -- so that data is in obese patients?

Yes. Now -- yes, the multiple ascending dose portion will be in obese, and we'll have a chance to do a little bit of titration, potentially study monthly dosing. We will be a cohort at 6 weeks and there'll be a cohort at 12 weeks. As this enrolls, like I said, I anticipate having data about a year from now.

Got it. Okay. Excellent. Well, I have too many questions, but why don't I pivot to Scott? So the company is in an enviable position. So you have no major patent cliffs over the next 5 years. Could you talk about the company's reinvestment plans, how you think about that? Because clearly, the company has been extremely successful with its SG&A spending. But I'm assuming you continue to reinvest in SG&A, but more importantly, in R&D. So if you could share your thoughts, that would be great.

Yes. No, certainly. I mean we do feel that the setup that we have right now, obviously, we've just navigated a very large LOE event with Humira. But going forward, we have the assets in place today that will allow us to grow over the -- at least the next 8 years. And that kind of coincides with the long-term guidance we've given for high single-digit revenue growth through the decade. And that's with the existing assets that we have in place. And so you're right we don't face any patent cliffs, any LOEs coming up over those periods, and we feel very good about the setup that we have. Now that means that -- I guess I kind of look at it in 2 ways. One, certainly to execute, those are, I think, numbers that we are very confident in, but numbers that we need to achieve. So that's going to require continued investment in SG&A. And as you mentioned, our commercial organization is top tier, and we feel very good about that, and that's something we're going to continue to invest in and ensure that we're continuing to drive that strength. From an R&D perspective, I think it's actually helpful to look back to the Humira loss of exclusivity. So if you look at from '22 to '25, we've actually increased our R&D investment by $2 billion -- approximately $2 billion over that period of time. And that's really a signal that we believe in the long-term health, but we're also looking to make sure we have the growth drivers for the next decade -- for the 2030. So you can expect us to continue to increase our absolute investment in R&D. We've guided to a profile that's just above 14% of sales this year, $8.5 billion. I think that profile is something to think about from a modeling perspective. That profile will probably continue to grow R&D in line with earnings, roughly speaking, but we'll continue to increase that investment. And that's something that's important, as we drive the growth drivers to the next decade. And also, it's -- I'd be remiss if I didn't mention that's what we have in the pipeline in-house today that we're developing. But certainly, we continue to look for external innovation. And so in 2024, we did approximately 20 deals to acquire a variety of interesting assets to fill out our pipeline. And so that's something that we'll continue to do as well.

Excellent. So at a high level, you're -- I think you said grow R&D in line with revenue roughly, including both internal and future external.

That's right.

That's right. And then with respect to BD, could you just remind us about AbbVie's current leverage? Obviously, you paid down a lot of debt or delevered effectively post the Allergan transaction and just your M&A firepower looking forward?

Yes, certainly. I think I'll talk about the firepower in a second, but it's important to think about what is our BD strategy, and that strategy is to access growth drivers for the next decade primarily. And that's going to mean earlier-stage deals. So as I said last year, we did 20 deals. That was about $3 billion. Half of that was an acquisition of Aliada, which allows -- which should allow some of our agents to penetrate the brain blood barrier. So those are typically earlier-stage deals at lesser value. That's our strategy. Our firepower isn't driving our strategy. Our strategy is what do we need in our portfolio to drive that long-term growth. So that's really kind of our -- what guides us as we go forward. Now in terms of our balance sheet, we feel very comfortable with where our balance sheet is. We're slightly above 2x net debt to EBITDA. We've talked over the years about -- that is a level that we're very comfortable, 2x net debt to EBITDA, operating at that level. You've seen the agencies upgrade us over the last couple of years, as we have delevered. We recently went to the bond market to refinance some maturing debt and achieved the tightest spreads of all time on a couple of the towers. So certainly, I would say the markets are respecting our creditworthiness at that 2x level. We did go above 2x. We're slightly above now, as I said, and that was for the funding of the ImmunoGen and Cerevel transactions. But we'll do that where we have a clear path back to 2x or below. And this year, we should be right at 2x, and we committed to being at or below 2x by the end of next year, and we're well on track to achieve that.

Excellent. Excellent. So pivoting back to Roopal. Could you just comment on some of the exciting pipeline cards that are going to be turning over for the company over the next year or 2, like what you're most excited to see and what can move the needle the most potentially in the 2030s?

Yes. I'll go quickly. With immunology, we mentioned Rinvoq and this next wave of indications that are coming that will add $2 billion in peak. We have another antibody, a bispecific lutikizumab, alpha-1 beta strong data in hidradenitis suppurativa. That's in Phase III and also will be in ulcerative colitis and as part of our Crohn's platform, which is where we bring other biologics and combine sort of mix and match with Skyrizi to further elevate standard of care. We want to break that efficacy ceiling that we see in Crohn's and UC. Rinvoq and Skyrizi are very strong, but we can still drive remission rates, especially endoscopic higher. So lutikizumab will be one of those agents. Another one will be our TL1A that we've brought in. We also have an alpha 4 beta 7. We've also accessed the TREM1. So there's a variety of shots on goal. And that combination approach will be one that we'll follow also for other indications in immunology. I should mention oncology quickly. We have Teliso-V under review for c-MET overexpressed lung cancer, and that we anticipate an approval during the first half of this year, but we have a follow-on asset, 400 or Temab-A, which is also c-MET targeting antibody, but with a very stable linker and topo warhead, that one is showing almost double the efficacy that we saw with Teliso-V in lung cancer in the patients that have -- that are -- that don't have oncogenes that are actionable. We will also have -- and that data we took and we'll move into Phase III in combination with PD-1. We have EGFR mutant data that will come out later this year, and the 2 together can be quite substantial, as this goes forward. Temab-A is already in Phase III for colorectal cancer, which is a pretty large indication not dissimilar to ovarian cancer in the sense that there hasn't been much innovation, and it's all driven by chemo. We saw an ovarian strong overall survival data with ELAHERE. And if you look at CRC, it's like ovarian, except much, much larger. So that is currently in Phase III, and we're looking to do additional combos to round out earlier lines in CRC, including frontline combinations with chemo. We have another agent, 706, which is another topo warhead but SEZ6, this is an embryonic antigen that's expressed in small cell lung cancer. And that data we'll see this year in ESMO, but early data has been very, very encouraging. And then as I mentioned, ELAHERE, we have a follow-on ADC to ELAHERE that's already in the clinic that might have better penetration, a slightly better half-life, better killing. And that is following in parallel with ELAHERE and may access lower FR alpha expressing patients. And a next-gen ADC looking at ELAHERE and this 151 asset, both with topo warheads. So we're doing quite a bit of work in the ADC space, which I think you asked earlier but could be underappreciated, I think that oncology pipeline. And on the heme side in multiple myeloma, we have a potential best-in-class BCMA CD3 dual engager that's also in Phase III, which could enable monthly dosing, only one step up, potential outpatient dosing, high efficacy, strong safety and potential to combine with other assets to also access earlier lines in myeloma because most patients really don't have access to CAR-T, and we see that paradigm existing for quite some time. So those are a few I would mention that are underappreciated that could be quite large.

Great. Well, more than a few, I was typing away. Thank you so much. Really appreciate you being here.

Thank you, David.

Thank you.

Thank you.