AbbVie Inc. (ABBV) Earnings Call Transcript & Summary

Awesome. Thank you very much for joining us today. My name is Mohit Bansal. I'm one of the biotech and pharma analyst here at Wells Fargo, and I'm joined by AbbVie management team with us today. So from my left to right, we have Roopal Thakkar. He's the EVP and Head of Research and Chief Scientific Officer at AbbVie. We have Jeff Stewart. He's the EVP and Chief Commercial Officer at AbbVie; and Scott Reents, he's the CFO of the company. Thank you very much, Team AbbVie, for joining us today.

Thanks for having us.

So exciting times at AbbVie, I don't know, like I mean I have leaders from three different sections of AbbVie. So I'll probably have 10,000 questions in 35 minutes. So maybe I'll start with you, Jeff, right? I mean I'm sure there are a lot of questions around immunology. You have done a tremendous job with SKYRIZI and RINVOQ. We don't even talk about HUMIRA anymore. So you have consistently outperformed the consensus expectations for SKYRIZI and RINVOQ. Where you sit today, how much under appreciation for the franchise still is, some of that pipeline as well. So -- and then what cards will turn over in the next 2 to 5 years that will make you [indiscernible].

Yes. Thank you very much. No, we're very, very pleased with the historical performance and the visibility we have going forward. And I think there's there's multiple factors in there, and I'll run through them. I think the first is, obviously, the markets that we play in are very substantial. And they're marked with very, very nice growth. I mean, we have markets like IBD or atopic dermatitis or PSA. These markets grow anywhere from mid-single digits to high single digits in atopic dermatitis, which is the -- basically the most underdeveloped market is growing well into the double digits. So the markets themselves are very, very nice areas to play in. And what we see that helps drive that market growth, and we've talked about this over time, is as basically innovation comes into these markets, time expands, people live with their conditions, you see line of therapy expansion. So what that does is it sets up basically these categories for multiple assets that can start to play across subsegments, et cetera. So the markets are very, very nice. The other thing that we look at, and SKYRIZI and RINVOQ are in their eighth year of growth. we see that we still have significant market share gains that will accrue to the franchise because we watch the distinction between our in-play share and our total market share. And as long as that in-play share and for most of our categories, it's still well above our TRx share, we see forward market share growth in these categories. And then we have several categories of our catalysts before we get to the pipeline. And some of them are -- we're really, really close on an innovative approach for the subcu induction for Crohn's for SKYRIZI, and we're exceptionally excited about the quality of that data, that affirm data. We'll see that later in the quarter. And we also have the next generation of indications for RINVOQ, which are very, very positive. So we obviously have already launched giant cell arteritis that's helping us drive our business in rheumatology. But in derm, we're going to have Vitiligo, alopecia, we'll have readouts that Roopal can talk about for HS on two assets, RINVOQ and lutikizumab. And so when you look at all of those, we're very, very encouraged. I would take note that you may remember on the last earning calls, we've gotten more incrementally excited about the vitiligo and alopecia data, and we upped our long-term guidance to over $3 billion for just those assets themselves. So we see very, very nice visibility to the momentum. We're in the right markets. And certainly, we know that investors are starting to see a lot more visibility to what comes next. This could be the combination platform. I'm sure we'll talk about SKYRIZI plus the super potent alpha 4 beta 7, the TL1A combinations. And so there's many, many catalysts that will come here for immunology as we move forward.

Got it. So this is very helpful. Before we get there, I think the most talked about aspect of IBD market right now is the competition a little bit here. What are you seeing in the marketplace right now? And like are investors overestimating the competition versus like the growth challenges there, number one. And number two, bringing the subcu Crohn's induction regimen in there, and how does it help?

Sure. And we see that the competition across immunology and was in IBD has played out largely as we predicted. We had predicted that competitive IL-23s would take some share, but the category itself would grow. And that's actually what we've seen play out. We continue to have an exceptional position right now with IV only in the front line, whereas the competitor is mostly accruing sales in the second line, where we also play with RINVOQ. So we have a very stable and strong position. To your point, we are very, very excited that we will be able to basically bring the subcu for Crohn's in the fourth quarter. That's when we anticipate the approval. The one thing that surprised us, which I think is very positive for investors is certainly positive for our commercial and our R&D teams is the quality of our subcu data. It's very exceptional. In fact, I would say we haven't seen anything like this just in terms of induction whether was a subcu or an IV. It's exceptional data. This is the AFFIRM data, and there'll be more data releases pending about that data. But we're very, very excited about it. We've released the top line. So we see tremendous endoscopic healing. We haven't seen anything match it. It's better than our own IV. And so this catalyst that you've talked about, certainly, we believe that we have a very strong position in IBD, but this new data will help us accelerate our position over time.

Got it. Very helpful. I want to touch upon the -- like in immunology, I want to touch upon your platform study here as well. So as the first data set from these studies emerged, like what signals are you looking for, we should be looking for from these combinations that will make us comfortable that SKYRIZI has a long tail or SKYRIZI Plus has a long tail going forward.

Yes, thanks. I'll build on some of the comments that Jeff has already made. So a few things. One is that endoscopic remission and healing. That is an objective marker, and that's one that we like to look at in Phase II to predict outcomes in the future. And what we saw there in the early data in combination with our proprietary alpha 4 beta 7 is a doubling of what SKYRIZI delivered in the same study. So this is not cross trial comparisons. This is within trial comparisons or we had monomonocombo side-by-side. And what we've provided publicly is about 2/3 of the data of the patient flow Later this year, we're hoping to get it to the conferences, the GI conferences, and that will be around 80% of the data, and next year will be 100%. But that doubling is very important while we maintain safety and taking the two together, down the road as we get into Phase III and potential for labeling, you could have a very nice asset that doesn't have a boxed warning. And what we're doing now in parallel as that data flows is generating even a larger platform, which will now enroll SKYRIZI Plus our proprietary alpha 4 beta 7 and and in combination where our extended duration TL1A, and that will be in Crohn's and ulcerative colitis. So we'll monitor that data over time, having interim looks to see if we can ungate moving into Phase III even faster than waiting for the full data set. But we are very encouraged with what we see today. And one thing that we want to look for with the alpha 4 beta 7 is does a little bit higher dose drive even higher efficacy, particularly on the endoscopic side, so that's going to be the most critical things that we'll be looking at.

Got it. So I mean, AbbVie is one company where sales team and R&D team actually work well together, like they all say. But again, you both have input there. So for you, Jeff, what would be the most important aspect for this combinations because you want to move these combinations in first line like get-go, just I you want to treat these patients with the best drug available. What do you want to see as a commercial leader?

Yes. And I think I'll basically build on what Roopal has said. If you think of the transformation that AbbVie's lead in IBD with both SKYRIZI and RINVOQ -- the first was we anticipated with modern clinical design that the market value driver would move from sort of clinical remission or signs and symptoms like how are you feeling with your gut to objective endpoints, this endoscopic remission. This is the deep remission. And that's exactly what we help drive with the gastroenterology community, of course. And so if you think back on the history, which wasn't that long ago, we did a definitive trial, and it was SKYRIZI versus STELARA with the primary endpoint of endoscopic remission. This was the sequence study. It was a doubling of effect. And the community understood that, look, if I can get that bowl that healing under control, I'm going to get differential outcomes. So that market value drivers shifted very, very fast. So as we work, to your point, with Roopal's team to design these pivotal trials for the combination platform, we need to see transformational efficacy. And the great news is we've seen it. So he thinks SKYRIZI doubled the standard of care. And in this combination platform with the super potent alpha 4 beta 7, we've doubled it again. That's a very different dynamic than we've seen in other approaches. We think it's going to be a market-leading approach. So that's critical. So how we design those endpoints, how we can drive that change of standard of care. The second key part is it's got to be convenient, right? We need to be able to not have two different shots or something that's awkward for the community, but something that's simple, a combination asset in a simple delivery, whether that's the on-body device or an injection. We need to make sure it's simple, clean and we can really drive that change. I think the second part, which we've been very successful historically is that you don't ride just one asset. Like we've done remarkable things with -- in many different categories like in PSA with SKYRIZI and RINVOQ. We think with HS, it might be [ luti ] and RINVOQ, where we can take two assets and co-position them effectively within our sales teams. And so we would like, and we work with Roopal on this to say, it's not the alpha 4 beta 7 combo versus the TL1A. Of course, we always let the science drive it. But we actually think we may be able to co-position them in different segments, one may be better in UC than Crohn's. So how do we bring that to the market. So those are things that Roopal and I and Scott we talk about every day in terms of how we want that pipeline to develop.

That's a nice segue into a question for Scott, basically. So I mean, obviously, we all have known every since 2013, that's when it became AbbVie, right? So I think for many years, you had your back against our -- against the wall trying to replace HUMIRA, and that's why there was a lot more pressure to do external deals. At this point, when you think about strategically internal versus external, how do you think about the internal pipeline plus external? And how do you allocate capital on the basis of that?

Sure. I think you're exactly right. I think we've spent a lot of time leading into the HUMIRA loss exclusivity event. Think about what the future looks like immediately after, but also beyond that. So when we look at what we've done over the last couple of years, we've done roughly 30 transactions spent about $20 billion, and half of that was with respect to the [ Apogee ] transaction. That means we've done almost 30 transactions. That's another $10 billion on smaller, earlier-stage things. And so it's that combination of making sure we're bringing external innovation that is well matched. So for instance, the combination studies we're doing with SKYRIZI that's in combination with the TL1A that we brought in. And we looked at that and we were very specific what we were looking for, making sure we had something that was well matched for that combination. So I would say we're looking at the assets. We're making sure we have everything that we need to build us and drive that growth going forward. And at the same time, making sure we're funding it appropriately. From an R&D perspective, since 2022, we've increased our R&D spend by roughly $3.5 billion. And so we're almost at $10 billion this year from the R&D spend. And so making sure we're funding everything that we have internally, and we brought a lot of great things internally, things like lutikizumab, Venclexta, RINVOQ, of course. But also when we're bringing things in, we're also spending a lot of time with them. SKYRIZI is a great example of something that obviously was -- came in, it was a well-formed asset. We knew a lot about it, but the team did a great job of maximizing that not only from the final development and bringing it to market. But also looking at the head-to-head studies and things of those nature. So it's going to continue to be that combination. We have a strong backbone, I think we were something that we're very proud of where we are today with the pipeline. And certainly, that momentum will continue, but we'll continue to augment that with the right areas and just looking at things in our core areas and adjacencies. And we just -- obviously, with [ Apigee, ] it's a little bit later, we got late stage, early stages, focusing on the right assets that we could make a meaningful difference with.

So it's very clear that you are not buying revenues. You're basically -- like it's not the [ Allergan ] deal you are doing like Phase II-ish deals. So is that the strategy here like Phase I, Phase II, looking at 2035 and beyond? Like how are you thinking about?

Well, I would say that we are fortunate to be in the position we're in. We have a strong balance sheet. We've got the financial capacity to do a number of things. We also have a very strong revenue growth profile. We've talked about our high single-digit CAGR through the decade. We've got growth well into the next decade. Really the first LOE that we face as an until 2030 with VRAYLAR. So we have a very strong runway. And so we don't need revenue. But certainly, if it's something that we see and something that we're interested in, we have the ability to go after that revenue if it makes sense with our overall strategy. So that's why I would say it's a little bit, as I said, good fortune. We can look late stage. We can look early stage. Revenue is fine, but it's not something that we are desperate to get.

Got it. Completely makes sense. So Roopal, I want to touch upon HS, two readouts coming this year. Talk a little bit about how comfortable do you feel into those readouts, especially lutikizumab data I mean there have been some placebo responses, which are really high lately. So talk a little bit about that and your comfort level around those Phase III...

Yes, a couple of things to mention. So one, as we've talked about a theme here today, it's good to have multiple assets in a disease area that's under penetrating and growing and HS is such an example. So we have lutikizumab as an alpha-1 beta going forward, so strong data in Phase II. Positioning there would likely be in earlier lines and that's the population that's being enrolled. Those are naive to biologics, but we're also enrolling patients that have already seen and failed biologics like anti-TNFs and 17. And for RINVOQ, it is a patient population that has already failed to biologics. So similar positioning that we see with SKYRIZI and RINVOQ and IBD and in PSA. And that is a very good, I would say, position if both are successful and R&D, our goal is to do our best to make sure these trials are successful. And placebo is a consideration, particularly in HS in immunology because the disease can relapse and remit and placebo can go up and down. So because we have naive patients coming in the luti trial, we set the endpoint as a more stringent HiSCR 75. Traditionally, HiSCR 50 has been used we set that precedent years ago with HUMIRA. So that's one aspect. With a tougher to treat patient population that's in the RINVOQ study, we could anticipate maybe less bouncing up of placebo. So we see a HiSCR 50 there, but that one is because we have 100% treatment failure. So those are two approaches that we're using to do our best to derisk and make sure placebo is tamed. But we agree with you, and that's something that we had to consider early in the days of design. Another important factor is training of the sites and how they identify the lesions and count the lesions over time. So that's been implemented as well, and we'll see data later this year.