AbbVie Inc. ($ABBV)

So good morning, everyone. My name is Dave Risinger. I'm very pleased to host a couple of senior executives from AbbVie. So immediately to my left is the CSO, Roopal Thakkar, and to his left is the CFO, Scott Reents. And very much appreciate you joining the Leerink Global Healthcare Conference.

Maybe, Scott, you can kick us off with some high-level remarks on the company's growth prospects and how we should think about the margin profile in coming years?

Yes, of course, happy to do that. First, thank you very much for having us down and beautiful weather. So it's never hard to come down here from Chicago at this time of the year. So I appreciate you having us. When we think about the business, I think we've been pretty -- we've talked a lot about the prospects. Obviously, we're excited the way 2025 performed, the momentum coming in. We're excited with our guidance of $67 billion in 2026. But really, when we look at the business, we have the portfolio of assets in place today on market derisked, and we've talked about this a lot, driving high single-digit growth through the decade. We're very confident and continue to be very confident in doing that as well as a clear line of sight to robust growth into the next decade as well. So we have what we need to continue to grow. When you think about that growth and what's going to drive that growth, certainly, SKYRIZI and RINVOQ now entering into their eighth year on market, continue to generate strong growth, over 20% combined growth in the year of a large base. And just really have been happy with the performance of those. They're operating in strong products that are differentiated, amongst other assets within their various indications. But they're indications that are growing well. The markets are growing well. And when we look at the market share that we have on an actual basis, we still have a lot of room versus the in play. So we see a lot of headroom for continued share growth in addition to that market growth. And we're happy to see that. Outside of the immunology, we also continue to have a strong growth in neuroscience, our second fastest growing area. When we had our earnings call at the fourth quarter call, and gave the guidance. We talked about a couple of things where we've seen particular momentum. The oral CGRPs for migraine, Ubrelvy and Qulipta, the uptake and the momentum from those 2 has been strong enough that we've indicated that we'll have in excess of $5 billion of growth -- or I'm sorry, total peak sales for those assets. And then when we look into our emerging Parkinson's franchise. Certainly, we've been on the market with Duodopa for a number of years and had good results, but the launch of Vyalev is very promising, and we have an asset that will be coming to market within this growth period, I'm talking about tavapadon and that Parkinson's group of products will be also in excess of $5 billion. So a number of assets across the entire portfolio, and we can talk about those in addition to the pipeline, which I know we'll get into. From an earnings perspective, we've done a nice job. You've seen us expand operating margin this year. In fact, we have a fast growth from EPS in excess of top line. The top line is growing just under 10% on a reported basis. EPS growing over 13%. So we're continuing to drive efficiencies within our SG&A line and leverage the SG&A line. But as we're expanding operating margin, we're making sure that we invest in the future. R&D is something you'll see us continue to be in that 14% to 15% profile. We've continued to increase R&D on an absolute basis, a few billion dollars since 2022. And that's an important piece of our story when we look to what comes after the assets that we have in place today to drive that long, long-term growth. So we're very excited about the positioning of the company. I think we've been very thoughtful. We've been good executors and we'll continue to be -- and the pipeline is something that when we look at across the board, what we're seeing is encouraging and exciting as well.

Excellent. So you touched on SKYRIZI and RINVOQ, and you mentioned market share. And the investment community has been concerned about TREMFYA gaining share in IBD and also concerned about the icotrokinra...

Sure.

Forthcoming launch. So could you just contextualize that and just sort of level set in terms of how you see those competitive threats and the ability of SKYRIZI and RINVOQ to continue to grow in the face of them?

Yes, happy to do that. And I think it's -- I will certainly do that, David. And then I think it would be helpful if Roopal gave some thoughts as well because there's some important profile aspects of the products as well. When we look at these markets, as I said, they're growing, SKYRIZI and RINVOQ have continued to perform well. The competition, in particular, in IBD, it's something that we're mindful we do not ever take competition lightly. We're focused on it. When I talk about the guidance and when I give the guidance, it always contemplates the competitive effects, and we've made some reasonable assumptions. But when we step back and look at IBD, SKYRIZI continues to get its -- more than its fair share, call it 60% of new patients within IBD starts. That continues to go well. TREMFYA being an IL-23, you're not seeing it -- it's not a one-for-one takeaway either where you're seeing some real expansion of the IL-23 class. So if you use an example, what we saw in psoriasis, we've seen the IL-23s be north of 2/3 of that market over time and continuing to grow with that headroom that's run from an in-play. And when you look at IBD, you see the in-play is very high, again, around that call it, 2/3 side. But you also see the actuals are still well below that. And so you've got a lot of room to grow, and that's not going to be a zero-sum game between the 2. Now that being said, as I mentioned, SKYRIZI getting more than its fair share and we're continuing to see that. And even I think more impressive in front line, first line, you're seeing 75% of in-play share for SKYRIZI. So when those naive patients, we're seeing even greater uptake because of the profiles that we have there. And so when we put together guidance, we'll look at the competition, we'll take that into consideration, but we don't see that as a significant impact to our ability to continue to grow market share or achieve these numbers.

Yes. And we're able to bolster that positioning that Scott just referenced in the front line. And we are very enthusiastic about the subcutaneous data that just read out for SKYRIZI and that will be submitted this year and we'll be preparing for approval and launch next year. And why we're enthusiastic is, in particular, in that bio-naive patient population, this is that frontline patient population that Scott referenced, where we already have a strong position. We see that further bolstered by the data where we saw 60% endoscopic response, 70% clinical remission, both of those with 45-point deltas, which is higher than what we've observed with SKYRIZI given intravenously. So that will be new data that will enter into the field and again, help that positioning in the front line. And the other notable change moving into this year is for RINVOQ, where the label has been updated to allow more flexibility for the physician to prescribe RINVOQ, in a second-line setting after the failure of, let's say, a biologic and not being forced to step through an anti-TNF. If the physician feels it's not advisable to use, they can turn right to RINVOQ. So one could imagine a patient getting SKYRIZI in the frontline and for the few patients that don't do well down the road, they can then switch to RINVOQ without having to worry about stepping through. So that label update and this new data for CD induction for SKYRIZI will start entering into the market. And I would say, continue to enhance our position that way the teams can continue to be, I would say, very effective.

Excellent. So what was the timing of that RINVOQ label update?

It was -- what was it, the third quarter of last year.

Got it.

And that will again enter into sales materials and conversations over the course of this year where people understand now where the opportunity has updated with RINVOQ. So that's an exciting place to be where we can have the dual conversation and come to IBD with a portfolio not just a single asset and it really supports -- further support SKYRIZI in the front line and gives an opportunity for a potential expanded use of RINVOQ in the second line. I think we can be competitive across the board in an expanding IBD marketplace.

Excellent. And so remind us about when you'll be able to file for the subcutaneous induction and then that clock?

Yes. We're here in March. We just got the data. Give us a couple of months to submit it. The supplements are reviewed in approximately 10 months. That's usually the time zone and FDA keeps with their time and we stay on time, then the earlier part of next year, we would anticipate an approval and then a fairly rapid launch.

And then obviously, in UC, it's a different volume that's required. Could you speak to that?

Yes. The dose is higher in ulcerative colitis. So we'll take a fulsome look at the data set, including our PK/PD data, which we haven't seen because we've just seen the top line data. And then make a decision if there is a rapid pathway in ulcerative colitis. The Crohn's indication would cover about 2/3 of IBD. So the majority of IBD is covered. And then if you see -- if we see a path forward there after we speak with regulators, and that's something else that we would pursue.

Excellent. Why don't we pivot to the recent amylin press release. Congrats on that. Would love to hear your perspectives and the prospects for that drug candidate.

We're quite encouraged by the data, David. We are seeing almost a 10% efficacy delta only at 12 weeks. And what's really encouraging is that the population studied was not an obese population on average. Meaning the BMI that we studied was more in a healthy population under 30, and majority male, only 12% of that population was female. And majority percentage of weight loss usually occurs in higher BMI settings and when there's more women in the trial and usually beyond 12 weeks. So we had the disadvantage of not having any of those 3 factors in the study and still saw an almost 10% delta in the higher treatment arms. And one of them was actually every other week. So that sets up a potential of a profile that could be every other week, potentially even monthly favorable safety profile and room to move on efficacy as we move into the relevant patient population and treat longer. So we're very enthusiastic about moving into Phase Ib, which will include patients that have, I would say, real obesity. We also have the opportunity to study a dose higher than the 14-milligram studied. And in fact, the 14 milligrams was only given for 1 week before the weight was observed in this study. So longer duration, potentially higher dose and the right patient population for us, I think it was not anticipated to be this good. So we're very excited to move this forward. And then kicking off a Phase II also later this year to further optimize the dose. We want the best tolerability we can get to drive durability. And then to optimize the weight loss, which is already fairly substantial only in week 12.

Excellent. And what was the average BMI of patients that were...

I think it was 29 and change. Just under 30.

Got it.

Typically, you would see 35, 36 above that.

Yes, very impressive. And how have you discussed the balance between amylin and calcitonin for this agent?

Well, you're right. It is a DACRA format, so it binds both. And we don't see any detriment to weight loss, where I think there were some arguments that you could be better off, specifically going after amylin. We haven't observed that. There could be a benefit potentially to bone if you also target calcitonin. So we will learn more about this over time when we're able to do DEXA scans, also MRIs to understand the full metabolic impact whether that's bone. And then the distribution between fat and muscle. So we'll be collecting all of that over time. But so far, encouraged by the DACRA mechanism of this based on the weight loss that we've seen thus far in the wrong patient population in a way.

Excellent. Excellent. So we have a lot of ground to cover another 15 minutes or so. I would like to ask you just to sort of focus this on lot of pipeline readouts to look forward to. But maybe you could focus on some of the bigger CARs that are going to be turning over the next year or so, i.e., that have implications for drugs that can be multibillion in peak sales.

Yes. So we talked about RINVOQ briefly in IBD. We will also see in hidradenitis suppurativa Phase III readout for RINVOQ later this year. It will be the 16-week double-blinded data. And then also for our novel bispecific lutikizumab which targets anti-IL-1 -- sorry, targets IL-1 alpha and beta that will be reading out later this year in HS as well. HS is an underpenetrated market, one of the least penetrated, under 5%, and the prevalence is similar to IBD. So we feel that there is a robust opportunity in HS and something we can replicate potentially if both are approved to the setting that we have in IBD where you have SKYRIZI on one hand and also RINVOQ in IBD something similar could happen with lutikizumab in RINVOQ. So both of those will have Phase III readouts this year. The other important readout in immunology is our IBD combination studies. Currently, SKYRIZI is being partnered with lutikizumab and our own anti alpha-4 beta-7 agent. And that data will read out this year. And if one or both are positive, we'll be moving them forward towards the Phase III program and raising the bar on efficacy is the potential with these orthogonal mechanisms while maintaining a favorable safety profile. And then the other readouts that we'll see, which will be early, but we've entered into patients with their B-cell depletion therapies. One was obtained through the Capstan deal which is an in vivo CD19 mRNA-based CAR-T, and we'll start seeing patients this year, and we have our own anti-CD19 antibody drug conjugate with actually a steroid warhead, and we'll start seeing patient-level data this year. So that's immunology. And then maybe I'll turn to oncology because we probably don't spend as much time talking about oncology and maybe the investor community underappreciates this one. And we'll see Phase III readout for our T cell engaging BCMA antibody etentamig. And that will be in the third-line setting in multiple myeloma. And we don't feel the market has crowded out an agent like this because of the profile being developed. It's a single step-up dose and monthly dosing immediately. So you don't have to wait 6 plus months to get to monthly dosing. And this may drive enhanced safety profile, lower rate of infections and the opportunity to continue to combine this with other therapies to move up in lines of therapy. So that readout will occur later this year as well. We will also see more data from our ADC portfolio. We are already in the market with Elahere as an ADC and Emrelis as an ADC, one is in ovarian cancer, one is in lung cancer. Our next-generation molecule that's similar to Elahere will readout later this year to see if we can go after lower levels of FR alpha. And then Temab-A, which is our next-gen asset that targets c-MET similar to Emrelis, will also have readouts in ovarian cancer and head and neck cancer. And then we've seen strong data in third-line colorectal cancer, which will be initiating a Phase III there but we'll see readouts in second line against FOLFIRI to see if we can replace irinotecan. So that will be important data. And then we have bispecific in prostate cancer 969 that's against PSMA STEAP has our same Topo warhead platform that we have in Temab-A. And that will see data at ASCO in prostate cancer. So the team is very excited about that readout potential this year as well. And then turning to neuroscience, we'll see a second set of data, Phase II data for the Gilgamesh asset called bretisilocin, that's our psychedelic, short-acting agent that showed very strong efficacy in depression. We'll see another set of data there. And if that's positive, we'll have a clear signal to move very quickly into Phase III in depression, and we're also contemplating an indication in PTSD if this continues to show the efficacy that we've seen thus far. And we'll have readouts in the migraine franchise, in menstrual migraine later this year for atogepant and Ubrelvy, and that could allow further expansion of our CGRP portfolio, and that would be a global program. Excellent, I would say a variety of exciting readouts.

Excellent. And I guess, just touching on Temab-A, what are you hoping that, that will demonstrate in ovarian cancer?

Well, I would hope consistent data that we've seen with other assets that are targeting FR alpha and others, including even HER2 where we see c-MET today is nonoverlapping with FR alpha in HER2, and we see high unmet need. And if there's a biomarker population there that's driving efficacy above the 35%, I would say, threshold, then you have a potential co-positioning with an FR alpha agent like Elahere. And then we can have a biomarker approach similarly against c-MET. And we've already seen the behavior with Temab-A in combination with bevacizumab in colorectal cancer, and bev is commonly used in ovarian cancer, so you can anticipate a combination approach in maybe even earlier lines. So that would be exciting because physicians want to optimize that benefit risk. And if we deliver a targeted therapy that is partnered with a biomarker then that will catch people's attention. So we'd be very excited if that data looks strong, and then we'll be moving that in parallel. While we're waiting for 151 is a name of the asset, which is a biparatopic similar to Elahere and similar warhead, so non-topo warhead. And that might have the potential to combine even with chemotherapy, where these maytansinoid warheads don't drive as much cytopenia as maybe the topoisomerase inhibitors do. So we'll be able to have a full spectrum coverage potentially of ovarian cancer over time.

Excellent. Excellent. So Scott, I wanted to hit it back to you just to talk about the financials a little bit more. So AbbVie has a phenomenal track record of delivering very consistent and strong financial performance. But in particular, it's notable that the company can provide the level of detailed guidance that it does, including quarterly guidance, which I think makes the company unique among peers. Could you just talk a little bit about the -- I guess, the culture of execution at AbbVie at a high level and the financial discipline to be able to see things more clearly than your competitors can see for their own businesses.

Well, look, I think that there's been a couple of things that we've taken the approach. One, we are engaged in regular discussions continually not just with the commercial organization and how the top line is looking, but across the company to understand the P&L in total. And so we have some pretty robust meetings. We spend a lot of time walking through and thinking through the various aspects of what we'll be going on. I would say that the granularity that we provide is just coming directly out of our materials. We're talking through it. I think it's important for us to ensure that we're giving that right level of a picture of what the company is. I think maybe it's a little bit of borne out of being still. It feels like a relatively new company when we spun out more than a decade ago. But it's been -- a lot of -- we've had a lot of activity over the years. The Humira LOE is something certainly that probably informed our psyche a bit and making sure that we were providing the level of information not only with respect to that franchise. But also to the remainder of the business because we knew that, that had a finite life, and we need to make sure that the ex-HUMIRA, the growth platform was properly understood and accounted for when we provide that guidance. And there's enough dynamics we felt was important. But we're proud of the fact that we try to give investors a good picture. I think we've been ahead of certain things like the Part D redesign. I think we're one of the first companies to really get out there and just talk conceptually about it at a level of granularity, but also provide even ultimately on a product by product line, where we thought that, that impact would be so people could fully understand it. And it's important. The volume is important, we try to understand that this is a volume-driven business, but pricing is a very dynamic environment. So we try to give the right color where appropriate.

Excellent. Excellent. And then clearly, the company is set for solid growth in coming years. But -- and that I guess, means the company doesn't need to execute M&A. But at the same time, the stock is trading at a relatively low P/E to growth ratio, which implies that there's still some lack of visibility on mega blockbuster pipeline candidates, which is logical, those -- there's a lot of readouts forthcoming. But ultimately, people want to see bright shiny objects that can replace SKYRIZI someday. So how do you think about M&A and external business development from that vantage point? Meaning, you've got a long runway, but at the same time, investors are already looking out, right, to many, many years from now, just like they did for Merck with the turning of the clock in 2020, people started to ask about the KEYTRUDA cliff in 2028.

Yes. So maybe a couple of things. I think you're exactly right. I mean when we look at our earnings profile, if you look at the consensus numbers, we do trade at a discount to where we think we should trade from a P/E multiple perspective. I think especially when you look at our ability to execute over time, I'd say the quality and the durability of our growth over time, it's derisked. We don't have LOEs just one really to speak of in 2030 with Vraylar. But by and large, a very solid profile. And so I think it's a high quality, high durability of earnings. And so we think that should garner more respect from a multiple perspective. And I think you couple that with your question on the BD, 2 things. One, when we look at what our needs are, our needs are farther out. Our needs are more in the back half of the next decade, say, in terms of what are those growth drivers going to be and making sure we get in the market. And at the same time, RINVOQ has an LOE date in 2037 at this point. So we have a long runway, which gives us the flexibility and the time to ensure that what we're bringing in-house fits that time horizon appropriately. So that's why you've seen us do over 30 transactions, roughly $8 billion in the last 2 years to bring things externally into and put in Roopal's R&D engine to make sure we have the tools that we need when we're looking at combination studies or combination therapies, both in immunology with SKYRIZI, but also in the oncology space with the recently acquired PD-1 VEGF that we announced earlier this year. So that's really bringing for those future. We do have the balance sheet that gives us the flexibility. We're right around 2x net debt to EBITDA. We've proven that we can lever up and then deliver upon a deleveraging plan. We've done that. So while it's not our top priority, we certainly will look out in the marketplace. If we see something that is quality, differentiated, something that we have a high conviction on that makes sense within our business, even it is a little more near term to your comment, I guess, that we may or may not necessarily need right now, but if it's the right asset in the right area, we have the ability to execute upon that. And we would, if we saw something that was appropriate for us. So we'll continue to build out our external innovation. We'll continue to feed and invest in the internal R&D pipeline that we have and maintain that, that 14% to 15% profile growing significantly on an absolute basis year-over-year as we invest in R&D. But really, the primary is that future, but we have the ability and I think we've got the discipline if we see something appropriate, we can act on it.

Excellent. All right. Well, maybe we can just wrap up with Roopal, where you started on HS. So with respect to those readouts for RINVOQ and lutikizumab, could you just provide some perspective on what the efficacy bars are from your vantage point? Obviously, they're 2 very different agents. And also with respect to lutikizumab, maybe just provide some context on whether in the wake of its failure last year in ulcerative colitis, whether that might have impacted your expectations for its ability to perform in HS or not?

So ulcerative colitis was a little different than HS, where I wouldn't call it a failure. It just didn't differentiate from HUMIRA as much as we did. So we think there is activity there. We saw strong activity in Phase II for HS. So that's what motivated us to move as quickly as possible in the Phase III. In that setting, it was a 100% TNF failure population with a Hurley score of greater -- of 3, which around was 70% of the patient population. So it was a very resistant refractory patient population, and we saw very strong efficacy, high deltas from placebo. So that's why we moved into Phase III, where we think we could potentially differentiate on efficacy and the safety profile, which was very strong also in Phase II. And in Phase III, we're including those that have failed biologic and those that are naive to a biologic. So you could even see a higher efficacy profile. We have a stringent endpoint there, which is a high score 75. And again, that will be reading out this year and the positioning could be in a naive population or in a post biologic. RINVOQ is being positioned post biologic where we think it will be used in that patient population that was enrolled in Phase III is all bio failure. So you see a portfolio setup that is similar to what we have in IBD. And we think both of them can be highly efficacious in the patient populations that we're studying and both exit out later this year. And again, HS is still underpenetrated and has a prevalence that's similar to IBD.

Excellent. And just one final question. So how are the stats set up for the lutikizumab trial that includes both naive and experienced patients?

Yes. We'll -- it's a single study. So it's highly powered, I would say. So we'll be able to split and look at both groups. And I think it would be very similar to how we've seen splits in IBD where when you look at labeling, you'll see those that are advanced therapy naive and those that are post advanced failure patients, I would say. And then hopefully, we'll be able to communicate something like that in labeling ultimately for lutikizumab.

Excellent. Well, we'll look forward to the results. Thanks so much for being with here with us here. Really appreciate it.

Thank you for having us.