Earnings Call: Q1 2014

Apr 25, 2014

Good morning and thank you for standing by. Welcome to the AbbVie First Quarter 2014 Earnings Conference Call. All participants will be able to listen only on your touch tone phone. Should you become disconnected throughout this conference call, please dial 1-eight at 7,934-8565 and reference the AbbVie call. This call is being recorded by AbbVie. With the exception of any participants' questions asked during the question and answer session. The entire call, including the question and answer session is material you write it by AbbVie. It cannot be recorded or rebroadcast without AbbVie's expressed written permission. I would now like to introduce Mr. Larry Pippo, Vice President of Investor Relations. Good morning and thanks for joining us. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive and Bill Chase, Executive Vice President of Finance and Chief Financial Officer. Joining us for the Q and A portion of the call are Laura Schumacher, in Executive Vice President, Business Development, External Affairs and General Counsel and Scott Brunn, Vice President of Clinical Development. As well. Rick will begin by discussing AbbVie's results from the Q1 and then provide an update on our pipeline and some of the key milestones we expect this year. As Bill will give a more detailed review of our quarterly performance and then provide an overview of our 2014 outlook. Following our comments, we'll take your questions. In Before we get started, I remind you that some statements we make today may be considered forward looking statements for purposes of the Private Securities Litigation Reform Act in the forward looking statements. Additional information about the factors that may affect AbbVie's operations is included in our 2013 annual report on Form 10 ks and in our other SEC filings. AbbVie undertakes no obligation to release publicly any revisions to forward looking statements as a result of subsequent events or developments except as required by law. At this performance. These non GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings at the end of the call today, which can be found on our website. So with that, I'll now turn the call over to Rick. Thank you, Larry, good morning everyone and thank you for joining us for our Q1 20 fourteen's earnings conference call. Today, we're pleased to report strong results at the end of the quarter with adjusted earnings per share of $0.71 exceeding our guidance range for the quarter. This included strong operational sales growth also ahead of our outlook after the quarter. We delivered this performance with strong growth across a number of products in our portfolio, including HUMIRA, at Synagis, Synthroid and Creon. Our performance this quarter illustrates our ability to grow our business despite the impact of generic in competition. It also provides confidence in our ability to deliver meaningful sales and EPS growth starting next year as we launch our HCV therapy. In In 2014, our focus remains on continued strong commercial and operational execution as well as pipeline advancement. Today, I'll briefly discuss our Q1 performance and provide an update on our pipeline and some of the key milestones we expect to occur throughout the year. Then I'll turn the call over to Bill, who will provide you additional detail on our performance and our second quarter outlook. Our Q1 performance was led by HUMIRA, which delivered more than 18% global operational growth. We continue to see increasing penetration across therapeutic categories and geographies, which is driving strong market growth. Additionally, HUMIRA continues to gain market share across segments. HUMIRA is off to a strong start and we're well on our way to achieving our sales growth outlook. Beyond HUMIRA, we also saw strong performance from other products in our portfolio, including Creon, Synthroid, Synagist and sevoflorin. We continue to be pleased with the performance of these durable and growing brands. In addition to our strong commercial performance in the quarter, at We also made significant progress advancing our pipeline. So far in 2014, we have achieved a number of key regulatory in clinical objectives. This includes an important milestone for our interferon free HCV combination. At as you may have seen earlier this week, we announced the submission of our U. S. Regulatory application for HCV therapy for genotype 1 at the end of the quarter. Our European regulatory application will occur in early May based on specific dates allowed for submitting applications to the CHMP. In anticipation of U. S. Commercialization in late 2014 and European approval in the early 2015, at we've continued to make good progress in building the appropriate infrastructure. Detailed results from several at of our Phase 3 registrational studies were recently presented at EASL and published in the New England Journal of Medicine. In patients, including difficult to treat patients. As we evaluate the HCV market and consider which patients and patients who have previously failed treatment will be treated sooner. This view is consistent with feedback we've received from payer in the organization and physicians around the world. And based on the high level of efficacy demonstrated by our therapy in these difficult to treat at patients we believe are well positioned for success in this market. Further, because we've conducted independent at studies across specific genotype 1 patient populations. We're able to characterize the performance in each patient type with a very high degree of in confidence and we believe this will be an important point of differentiation. During the quarter, we also presented results from our mid stage HCV trials in Japan as well as initial data on our next generation HCV assets. Given patient characteristics and the prevalence of Genotype 1b in Japan, at we are evaluating a 12 week 2 DAA once daily ribovirine free treatment for these patients. At data from our Phase 2 study with this combination in Japan demonstrated SVR12 rates in the mid-ninety percent range. In our Phase 3 program is ongoing and enrolling rapidly and we expect to submit our regulatory application in the first half in 2015. Japan represents the 2nd largest HCV market globally and given our commercial presence and the potential product profile, we at the end of the call, including ABT-four ninety three, a potent protease inhibitor and our new NS5a inhibitor ABT-five thirty. As we've said before, It is our goal with our next generation program to bring to market ariboviran free once daily pan genotypic combination. At As I mentioned last quarter, we have ongoing efforts to further simplify our initial offering with a once daily formulation and we've continued to make in this regard. Certainly, there has been significant attention regarding the competitive landscape for this market. While we can't make direct comparisons between studies, we do believe there are important differences between the clinical trial designs across various programs. At this time. This includes significant differences in cohort size for specific subgroups and patient populations and the confidence intervals around trial results. At We believe these factors will be important considerations for physicians, payers and patients. Based on the large body of data supporting our therapeutic in the next few months. Our global footprint and our ability to execute commercially, we continue to believe we're in a strong position. At AbbVie will be an early entrant into this market where there is clearly a strong desire from both physicians and payers for multiple therapeutic options. At well tolerated treatments like ours that demonstrate high levels of efficacy, particularly in difficult to treat patients will fare well. And considering the number of patients afflicted in both the physician and payer capacity, we believe there will be a steady cadence at patients treated annually, making this a very attractive market for many years to come. While HCV certainly garner significant attention, at today. I'd also like to highlight some of the other important pipeline programs and milestones that we expect throughout the remainder of 2014. We continue to have a high level of enthusiasm on our late stage oncology assets, including our BCL-two inhibitor, in the Q1 of 2019 in development for a number of hematological malignancies, including our late stage trials for our Vanguard indication CLL at our PARP inhibitor, ABT-eight eighty eight, in development for more than a dozen different cancer types and elotuzumab in Phase 3 development for multiple myeloma. At the beginning of the year. The ABT199 clinical program, which is partnered with Roche Genentech continues to progress very well. As a reminder, last spring, We refined the dosing and monitoring approach with ABT199 in CLL to minimize the risk for tumor lysis syndrome. At Since initiating the new protocol, we've collected and analyzed data on a significant number of patients. There have been no at the clinical significant events of TLS reported. We recently shared these findings with U. S. Regulatory authorities and reached agreement to remove the at hospitalization requirement for a significant portion of patients going forward. We plan to present these safety data at an upcoming European Hematology Association meeting. At As you know, last year we initiated a large Phase 2 single agent study in relapsed refractory CLL patients at 17p deletion. The initial data readout from this trial is expected in the 1st part of 2015. If the data warrants as and regulatory agencies agreed that ABT199 addresses an unmet medical need. These data have the potential to serve as a path to early registration. At we have a number of ABT199 data presentations and other activities that are also expected this year. We plan to present initial Phase 1 in combination data with Rituxan in relapsed refractory CLL patients at the upcoming ASCO and EHA meetings. Later this year, we expect to present initial single agent AML data and multiple myeloma data. And also Later this year, in collaboration with our partner, we plan to start a Phase 3 combination study of ABT199 plus at GA-one hundred and one in first line CLL patients. We've also seen good progress with ABT-eight eighty eight, our at PARP inhibitor. We recently announced the initiation of a global Phase 3 trial evaluating ABG-eight eighty eight in patients with previously untreated squamous non small cell lung cancer. The data supporting the decision to advance to Phase 3 development will be as we've presented at a medical meeting in the second half of this year. Earlier this year, we started a Phase 3 study of ABT-eight eighty eight at for neoadjuvant treatment of triple negative breast cancer. Several other mid stage trials will complete in 2014 with the potential for additional at Phase 3 transitions yet this year. Also in late stage development in our oncology pipeline is elituzumab for multiple myeloma, the 2nd most common blood cancer in partnership with Bristol Myers Squibb. 2 Phase 3 studies are ongoing in relapsed at refractory and first line patients. Results from the event driven trial are expected in early 2015. At the end of the year. Now turning to our other late stage pipeline assets. This summer, we'll see data from the second of 2 registrational studies on dekluzumab. As a reminder, the DECIDE trial is designed to show reduction in annualized relapse rates and disability progression in patients with relapsing remitting multiple sclerosis versus an active comparator. Despite advances in this category, there continues to be a significant need for high efficacy agents and we believe dicluzumab has the potential to deliver the right balance of clinical activity and an acceptable safety profile. At in our neuroscience pipeline is DUOPA. Regarding our U. S. Regulatory application, we recently received questions on the submission. At FDA did not identify safety issues with the clinical data and no new clinical trials were requested. The and questions were primarily related to the use of the delivery system. We're in the process of addressing the questions and plan to submit a response when that process is complete. At Moving on to elagolix, our compound in Phase 3 development for endometriosis and Phase 2b for uterine fibroids. At we'll see initial data from the first of 2 pivotal studies in endometriosis in the second half of twenty fourteen. And finally, we look forward to seeing Phase 2b data in RA in our partnered selective JAK1 inhibitor. At Beyond our partnership with Galapagos, we have a robust pipeline of mid stage immunology assets, including an internal selective in JAK1 inhibitor, an IL-six antibody and DVD bispecific biologics among others. At In closing, we're off to a strong start in 2014. We delivered strong performance in the quarter and we continue to make good progress executing on our key strategic priorities, including pipeline advancement. As we evaluate our pipeline prospects, including number and potential of the opportunities, we believe our pipeline is the strongest it has ever been. We're on the cusp at a number of important data milestones, phase transitions and product launches. Given the progress we've made, we continue to expect strong sales in earnings growth beginning in 2015. With that, I'll turn the call over to Bill for a more detailed view of our results. Thank you, Rick. At this time. This morning, I'll review our Q1 performance and provide an update on our outlook for the remainder of 2014. As as Rick said, we're very pleased with the strong quarter we delivered. Total sales increased 6.7% on an operational basis, excluding a 1.3% unfavorable impact from foreign exchange. Excluding sales from our Lipid franchise due to loss of exclusivity, total sales at least 13.5% on an operational basis. HUMIRA delivered global sales of more than $2,600,000,000 up 18.4% on an operational basis. In the U. S, HUMIRA sales increased 24.7% driven by continued market expansion, share gains and particularly strong growth in the Gastro segment. Internationally, HUMIRA sales grew nearly 14% on an operational basis and more than 12% on a reported basis. International growth is being driven by continued uptake of new indications, share gains and double digit market growth in most key at Therese. On a global basis, we continue to expect double digit sales growth for HUMIRA in 2014. At International sales of Synagis were strong in the Q1 at $354,000,000 up 9.3% on an operational basis. At Synagis, which protects at risk infants from severe respiratory disease is a seasonal product with the majority of sales in the 1st and 4th quarters. AnderGel sales were up 6%, benefiting from a favorable comparison versus the market dynamics as of the prior year quarter. While Androgel continues to gain shares, we have seen a notable slowdown in the market this year with overall prescriptions down at roughly 10%. We expect Androgel performance for the year to be in line with these market trends. At Global Lupron sales were $189,000,000 in the quarter, up 5.6% on an operational basis. For the full year 2014, we expect sales to be down modestly from 2013. U. S. Sales of Synthroid were up $157,000,000 with the year over year growth rate aided by a favorable comparison to the Q1 of 2013, which despite the entry of generics into the market many years ago. For the full year 2014, we expect low double digit sales growth for the brand. U. S. Creon sales were $107,000,000 in the quarter, up 18.4 in advance. Creon maintains its leadership position in the pancreatic enzyme market, where we continue to capture the vast majority of new prescription starts. We expect low double digit sales growth for Creon in 2014. In for the remainder of 2014, we expect continued double digit growth in Europe and other international markets where Duodopa is currently approved. All of the products in our lipid franchise are now experiencing generic competition. Sales of niaspan were $47,000,000 and at TRICORE TRILIPIC sales were $23,000,000 both down significantly versus the Q1 of 2013. We expect these trends to continue for the remainder of 2014. I'll now turn to the P and L profile for the Q1. In adjusted R and D was 16.9% of sales, up 22% from the prior year, driven by increased funding of our mid and late stage pipeline assets and the continued pursuit of additional HUMIRA indications. At the level of R and D investment in the quarter was above our guidance. Adjusted SG and A was 27.6% of sales in the Q1, reflecting continued investment in our growth brands and preparations for our upcoming HCV launch. Adjusted SG and A investment increased at 4.6% from the prior quarter. We remain on track for a full year adjusted SG and A profile approaching 28%. As net interest expense was $65,000,000 and the adjusted tax rate was 22.3% in the quarter. 1st quarter adjusted earnings per share including non cash amortization expense and specified items were $0.71 up 4.4% year over year and exceeding our previous guidance range. In adjusted earnings per share guidance of $3 to $3.10 This guidance range excludes $0.37 per share related to amortization expense at ongoing separation and restructuring costs. We continue to expect sales of approximately $19,000,000,000 this year with growth from our key marketed products offsetting the decline in lipids from generic competition. Included in our sales guidance is an estimated negative impact from exchange of roughly 1% for the year. We're committed to improving our gross margin ratio in 2014 despite the loss of high margin lipid sales. Reflecting actions we've taken to further improve our margin profile. As you know, we have a record number of Phase 3 programs in development, at including a number of exciting opportunities in oncology, HCV, immunology and other areas that warrant investment. At 1. As I noted during our call in January, we expect to see an increase in SG and A this year as we invest in our key brands and our upcoming HCV at TV launch. As a result, we continue to expect SG and A expense to approach 28% of sales in 2014. We are forecasting net interest expense of about $270,000,000 for the full year and we continue to expect an adjusted tax rate of approximately 22%. Regarding our 2nd quarter outlook, we expect adjusted earnings per share of 0 point 7 5 at 0 $0.77 This excludes roughly $0.10 of specified items and non cash amortization at resulting in a second quarter EPS in the range of $0.65 to $0.67 on a GAAP basis. If Our second quarter outlook reflects a flat to slightly increasing top line including a modest negative impact from foreign exchange. As we expect gross margin as a percentage of sales to be in line with our full year guidance. The amount in the Q2 is expected to increase sequentially from the Q1 as we accelerate spending, particularly for our upcoming HCV launch. This has been captured in our EPS guidance range for the Q2. So in conclusion, we're pleased with our Q1 performance as well as our outlook for the remainder of 2014. And with that, I'll turn it back over to Larry. Thanks, Bill. And we'll now open the call for questions. Elon, we'll take our first question, please. Thank you. Our first question today is from Steve Scala from Cowen. At Thank you so much. I have three questions. First, regarding the hep C opportunity, has your strategy on how to approach the market changed at all in the past 6 months and if so in what ways? Secondly on DUOPA, I assume the PDUFA date will be pushed out from the early May at the time frame. Do you have visibility on for how long? And then thirdly, maybe a bit of a bigger picture question. Some companies are philosophically opposed to Changing full year EPS guidance at the end of Q1 because it's simply too early in the year to do so. Does that be share this view? Or would the if the company has increased its full year EPS guidance already, it thought that was prudent. Thank you. Thanks, as Steve. Okay. Steve, this is Rick Gonzalez. I'll take the first one and the last one. Let me start with the last one. Yes, I think we are in a position where it just Doesn't make sense based on Q1 to change guidance. I wouldn't say we have a philosophy where we won't change it if ultimately we believe it should be changed Going forward, but it's just too early in the year to ultimately make that decision today. As far as hep C is concerned, I think it is a very interesting market as it's evolved over time. But the one thing I'd roll out is we said early on in the process that we thought we had a very competitive profile on our product and we We could position this product well in the marketplace. And if you recall, one of the things that we talked about is that we had done a significant amount of market research in this area and that there were really 3 key drivers of success. 1 was clearly cure rates, SBR12 in both naive patients, but more importantly in difficult to treat patients. And second was therapies that were highly tolerable. Those two factors alone drove the vast majority of physician prescribing patterns. Convenience was a distant third, a very, very distant as a third is what we said. At the same time, we also said that this was a large market and would stay a large market for a long period of time because of the clinical capacity and the triaging of at patients over time and that physicians and payers would want multiple options in the marketplace. And we also said that we believe that the patients that will get treated first were cirrhotics, fibrotic patients and experienced patients at That they'd be a significant amount of the treatment in the 1st several years. When you look at the way the market is playing out today, It's playing out pretty close to what I just described to you and that's what we articulated more than a year ago. If you look at our product profile against that, We have very strong SBR12 rates in psoriatic patients and experienced patients. We have strong individual at patient data around subpopulations with very tight confidence intervals. We have extremely high tolerability with or without ribavirin. At we have very low relapse rates in these patients and we're going to be an early entry into the marketplace and provide an alternative to the other competitive offerings. And And so when I look at it, it's playing out very similar to what we expected. And I think we'll be in a very good position to compete very effectively in this market. This is Scott Brunn. I'll take the second question on DUOPA regarding the PDUFA date. So certainly through our With them, to address some questions predominantly related to the use of the delivery system. Really, we've gotten no concerns with regard to the safety, efficacy profile of the product. I think this is more a factor that this is a very unique drug device at combination and we're working with multiple constituent parts of the FDA beyond just the drug review division. And so certainly there are some additional questions related to patient use instructions for use and we're working through those with the various at FDA divisions, our partner who manufactures the pump and our own internal AbbVie I don't want to give you guidance on the PDUFA date right now. Certainly, it will extend beyond May, but we're working very Vadisciently in the good partnership with the FDA to address those questions. Thanks, Steve. Thank you. Our next question is from Jamie Rubin from Goldman Sachs. Thank you. Just a couple of questions. Rick, I'm not even really sure where the question is here, but maybe you can comment on this. And as you know, Solvadis sales this quarter were $2,200,000,000 J and J's ALICIO sales this quarter, one single in protease inhibitor generated $350,000,000 in sales, annualizing at $1,400,000,000 And I look at consensus numbers for AbbVie's hep C regimen next year and they're under $800,000,000 What do you think the world is missing here? Because we've seen really good data, etcetera, etcetera. But I don't know, maybe you can just comment on what you think the gaps and misunderstanding are? And then secondly, Scott, to you on your 2nd generation hep C regimen, clearly, I think one of the key messages at EASL on just how aggressively your competitors are moving in this space. And I'm wondering if you can give us an update on your at the development time lines for your 2nd generation hep C regimen and if we will see data at AASLD. And then just lastly on the news, Rick, on ABT199. So are you saying that we are now out of the woods on TLS with respect to ABT199? Thanks. At Thanks, Jamie. Okay. Jamie, so I'll cover the question on Hep C. In Yes. I'm not sure what the gaps are. I mean, I just went through how I think our product fits against the market criteria and I think that's consistent with Our view of how we'll compete in the marketplace. I will say, look, the data is evolving here very rapidly. We just saw a lot of the competitive subset data at EASL and the market probably needs a little time to digest that over a period of time and make some determinations as to how they want to value each of the competitive in the marketplace. But I can tell you from our perspective, we feel pretty good about our position and we feel it's playing out very consistently with what we thought Play out in the marketplace. Having said all that, it's certainly better to delight than disappoint. And so The number that's out there I think is a number that certainly is one that we have confidence we can be. Jamie, it's Scott. Maybe I'll go on with the HCV 2nd generation. So as Rick said, we presented data at CROI showing the characteristics of our new protease inhibitor ABT493 and our new NS5A, ABT530. Both are pan genotypic with very balanced activity against genotypes 1 through 6, Activity against the 1st generation compound typical mutations that we see arise and frankly very interesting characteristics with regard to their barriers to resistance. So certainly, if you compare these against other next generation compounds, these at the top extremely favorably. We are in Phase 2 right Now we have established our confidence that these are indeed once daily compounds without the need of ritonavir. We are very pleased with regard to what we're seeing in patients. And we are moving forward with our Phase 2 program that's It's going to incorporate elements of let me say much of what we've been learning about where the competition is moving with the next at the next wave of therapy. And we certainly feel we are on track for these therapies to be available in the 2017 time frame. Certainly moving on to ABT-one hundred and ninety nine. As Rick said, after we changed our dosing protocol to at somewhat lower dose and ramp up more slowly. We had been hospitalizing all of our CLL patients with the initiation of 199. As we have monitored them very carefully, collected a very significant body of data and certainly have seen no TLS, clinically significant us with that approach. As a consequence of our analyses of these data moving forward with the FDA, we've been able to remove the hospitalization requirement for I will say the majority of patients. We're at continuing hospitalization for those patients at highest risk with the most bulky disease who frankly are also the ones who have the fewest options and the greatest ability to benefit from ABT199 therapy. So the program is expanding rapidly with at Phase 3 studies having initiated. So we're going to be getting a lot more patient experience. You're going to see what we've at the upcoming ASCO meeting. Always want to be careful about saying out of the woods, but I will say strongly off to the races based on what we've been seeing. Okay. Thank you. Thanks, Jamie. Thank you. Our next question is from Jeff Holford from Jefferies. At Hi. Thanks very much for taking my question. Just on the once daily formulation of the current offering, whether you can just give us a bit more at the time of the year. And what you're required to do for that in terms of any clinical studies or work with the FDA? Secondly, can you just let us know if you've had any indication around guidelines in Advantage potentially in patient groups like cirrhotic Or any other hep C population where you think you have a higher level of evidence than the competitors so far in terms of specific trials? And then just the last question. What do you guys think the percentage of the global hep C opportunity that's driven by tender at or preferential access based pricing, just to give us a sense of how important pricing might be in this market. Thank you. It's Scott Brunt again. So with regard to our once daily formulation of our first generation regimen that will take our twice daily non new polymerase ABT-three thirty and co formulate with the once daily 450,267. We are finishing up some of our pharmacokinetic work to make sure that we're selecting the optimal candidate formulation. Certainly based on what those data look like and how similar at the end of the year. Certainly, if there's additional clinical work required, we fully anticipate that we're going to be beginning that before the end of the year and this regimen will slot in between the entry of the 1st generation regimen and as I referred to at the 2nd generation. With regard to guidelines, certainly, we work very closely with the at various groups that drive the prevailing global guidelines, certainly to make sure that they understand at the breadth and depth of our program. I think typically guidelines are driven by weight of evidence. Certainly, you can see ABC gradings with regard to how strong evidence is and having at dedicated data in some of the most important patient groups. Those are who are the hardest to treat in very significant numbers that shrink your confidence intervals and provide you greater certainty, I think is going to resonate with these guideline groups. Again, those guidelines haven't been written yet. But if you look at how how these are conventionally put together. It's a weight of evidence approach. And I think we feel Very, very confident in our body of data, particularly in the groups that you referenced such as the cirrhotic. Hey, Jeff. This is Rick on the tender question. Well, as you know, the U. S. Is a big part of this market, which isn't a tender driven kind of market. And then obviously a lot of the major European countries would be the other significant part in Japan. And so if you look at Sure tenders across the G7. It will be a relatively small percentage of the overall revenue in this market as it exists today. Thank you very much. Thank you. Our next question is from David Risinger from Morgan Stanley. At Yes. Thanks very much. Good morning. I have a number of questions, but I'll try to Just ask 3, if that is okay. The first is just great. At The first is relatively straightforward, just a simple numbers question. IMS has been reporting mid to high single digit TRx growth for HUMIRA in the U. S. In the Q1. Could you just break down the reported 25% at IMS TRX growth is misleading and then also on price and any inventory stocking. At with respect to HCV on pricing, maybe Rick you could just Give us your thoughts at a high level about how competitive one needs to be on price in a duopoly. I would think that in the initial duopoly, it would make little sense to price aggressively when you have just one competitor, but Just wanted to get your perspective on that. And then 3rd, with respect to HCV diagnosis, I think the HCV bulls are talking about significant diagnosis increases in the U. S, but I don't have a good perspective on what the real numbers are. So maybe you could talk about the number diagnosed in terms of whatever number you have recently and how much that number is We're going to grow annually in the next 3 years. We think about the per diapause Should the United States growing in the low single digit percentage annually or mid single digit percentage? Any color on that would and helpful. Thank you. Thanks, Dave. So David, it's Bill Chase. I'll start with your HUMIRA question. As you pointed out, the IMS scripts on HUMIRA are high single digit. The numbers we see are actually a little higher And then obviously you've seen it when we've taken price increases. So price does remain a component of the U. S. Growth. In Inventories, we try to minimize fluctuations from quarter to quarter on inventories as much as we possibly can. In both the Q4 and the Q1, HUMIRA inventories were about half a year. There were some impacts half a month rather, I'm sorry. There were some impacts in the Q1 of Q3 of 2013, But that was maybe 4 to 5 points on the growth altogether. This is a brand that continues to perform very, very strongly in the U. S. You saw the numbers last year and Certainly, we expect continued performance this year. And I'm sorry, I don't know if you can hear me, sorry to interrupt. But with respect to at 4 points to 5 points in the Q1 of 'fourteen. Are you saying there was a negative impact resulting in somewhat easy comp for the Q1 of 2014 given what happened in the Q1 of 2013? There was a favorable comp versus the Q1 of 2013 related to ordering patterns. At Thank you. Thank you, Ernesto. Okay, David, this is Rick. I'll cover the HCV one. As it relates to pricing, as we've said before, if I look at the product profile that we have and I look at the mix of patients that are going to be treated first, We have a product profile that stands up quite nicely in the marketplace. And so that's not at our strategy going forward. And so we're not going to talk specifically about how we're going to deal with pricing as I've mentioned on the last call as well. But I'll just tell you, the product attributes of the AbbVie therapy, I think, stand up quite nicely to what the market wants. And certainly that will be the driver of how we try to educate the market and market the product. As far as diagnosis rates I don't have the numbers directly in front of me, but last time I recall, we thought there were about 3,500,000 patients in total in the United States about half of those were currently diagnosed. And I'd say in our LRP modeling, we're not modeling out dramatic increases in Diagnose in newly diagnosed patients. I mean, they're obviously patients that are being diagnosed and coming into the system, but it's probably in that high single or low double digit at kind of rate, because you have to remember there's a certain level of clinical capacity here to begin with just to get through the people that are already diagnosed if need treatment. And so, I think everybody will have campaigns to go forward and try to diagnose more patients, But the governing factor may be the level of clinical capacity that exists in the marketplace anyway. Yes. No, David, hey, it's Scott. I completely agree with Rick. You see some varying numbers with regard to say the U. S. How many patients are actively in care, To say the U. S, how many patients are actively in care with HCV, I've seen numbers on the order of 400,000. Again, to Rick's point, maybe 1.5 to 1.7 diagnosed on a total of 3,000,000. But I think the more relevant question is, as Rick laid out, if you're trying to see how this market is going to evolve is all the various factors in the patient, their journey not only diagnosis clinical capacity, but then some of the things certainly both in the U. S. And globally with regard Certainly, all the signaling that we've been seeing, those are the most advanced fibrosis and or prior treatment experience coming in first. So I agree with Rick, probably. We have not modeled and don't need to model very aggressive uptick in our forecast. Great. Thank you. Thank you. Our next question is from Chris Schott from JPMorgan. Great. Thanks very much. Just following up on the pricing topic here on the HCV side. If I guess your competitors price and launch have obviously attracted a lot of attention from payers and some politicians. I guess you know a little bit more on your view on How this all plays out, I guess if price doesn't come down in this market, do you think we're going to see more efforts to restrict usage of these products? Does that if medically makes sense at all to do. And I guess finally, does that attention at some point give AbbVie better negotiating position with payers? So just a couple of questions, and Any thoughts would be appreciated. My second question was on ABT199. I guess as Two clarifying questions there. First, how many patients have been dosed on the new regimen at this point? And the second question is, it looks like you could have a best in class How do you just see that playing out commercially, the time to market issue here? Thanks very much. Thanks, Chris. Chris, it's Scott Brunt. So maybe I can talk about obviously, I don't want to be giving away exact numbers with regard to where we're at on our Phase in clinical information that's out there and then certainly what I know about from what we've seen in patients so far. No, I absolutely think that This particular regimen has the potential for best in class. We will know more over the Ensuing years as we ensuing year as we continue our Phase II program. But when I say for a regimen that's going to be out 2017 referring back to the prior question, this epidemic is going to be far Okay. And I'm talking in the developed markets. You just look at our throughput, even if you assume in the G7, say on the order of 250 at 1,000 patients coming through. There are going to be a number of patients still in need. And Certainly, this number as you made the point is going to be affected by healthcare system decisions on how our patients are going to be prioritized. Certainly, this is a disease where the consequences and decades after initial infection. So you do have some time before you have Certainly, I think those patients who have more advanced fibrosis or scarring or other factors that at our medical indications for treatment. I cannot imagine any healthcare system is going to be making the decisions to deny that care. At And Chris, I mean the only thing this is Rick. The only thing I would add to that is, what will really drive in the next few quarters. I think those will be responsible and appropriate clinical guidelines that are put in place because they tend to come together. And the governing factor may be more one of capacity than it is other kinds of things. Thanks, Chris. Thank Thank you. Our next question is from Vamil Divan from Credit Suisse. Yes. Thanks for taking the question. So just following up a little bit on the pricing Hep C. I just think you wanted to ask a question as it relates to HUMIRA. And just obviously, hep C, there's some unique components here. But are you seeing or do you expect to see any greater And just on Androgyel, appreciate what you said about 2014. Just what do you think was the longer term potential for this class and your drug specifically, Just given some of the safety concerns that have been raised, do you see any potential to reestablish growth for this category or not? At thanks. Thank you. This is Rick. So if you look at HUMIRA and The class of anti TNFs. I think you have to reflect back on there have been many, many competitors in this market for a long period at time and you still see HUMIRA have a leadership position in this category. Obviously, a component of that is working with governments and working with managed care at the end of the call to ensure that you're demonstrating the right value proposition for the product And it is priced appropriately against that value proposition. And that's something to deal with every single day, every single year. I wouldn't in the quarter. Even recently, I wouldn't say we've seen dramatic changes. As it relates to AndroGel, Certainly, we're not projecting going forward that the market will accelerate dramatically. And And so I think we're assuming in our modeling for our long range plan that ultimately the market will be relatively slow growing to flat Going forward. Thanks, Hamil. Thank you. Our next question is from Alex Arfaei from BMO Capital. At Good morning and congratulations on the quarter folks. Good morning. Three questions if I may. Regarding your hep C regimen, are you having discussions with at And specifically, I'm wondering if your dedicated Phase 3 in cirrhotics is resonating with this with payers given the importance of this group? At 2nd, could you comment on the gross margin enhancing margin initiatives that you were talking about earlier? What are those Listen, what's your longer term outlook on gross margin given your plans to establish manufacturing in Singapore? And then 3rd, when can we expect data from your own JAK1 inhibitor? Thank you. Yes. So maybe Alex going on with regard to Our data, particularly in cirrhotics and the payer community. So look, we've been sharing the specifics on these data with a variety of different stakeholders that are involved in the care of these patients ranging from again clinicians Due to various payer groups around the world. And as I've said before, yes, when you are I've been the only company that has done a dedicated study in a population that traditionally Has had lower rates of response with any other HCV therapy that's been seen. There's great interest in how at therapies are going to perform in this population. And I will say great appreciation to the fact that we did a very comprehensive 400 patient study in these patients to be able to provide them some granularity in terms of how subpopulations of cirrhotics will perform. Their view is we're not we understand there's a population, but the individual clinician is going to be treating the 1a at cirrhotic relapsed patients. They're not going to be looking at a blended population when they make a choice. And that's exactly what payers want to be seeing. So I'd say there's been a very robust interest in those data. Maybe I can go ahead with regard to the JAK question. Certainly, we have 2 selective JAK1 at programs ongoing, our partnered program with Galapagos and then our own internal ABT-four ninety four selective in the JAK inhibitor. Certainly, we're looking at both of these in rheumatoid arthritis. We've also been Studying Galapagos in Crohn's disease, we will be seeing data on in our JAK inhibitor on the 1st part of 2015. On gross margin, yes, I would say that our gross margin profile has been a focus of on this business going back actually many, many years even pre spin. The way we drive those savings is a combination of everything from manufacturing efficiencies to purchasing efficiencies to even lean manufacturing techniques that sort of thing. And certainly we're keeping our eye on all of those balls as we move forward through the LRP. We expect over the next few years that you'll see some gross margin profile expansion. A lot of that's going to be driven by the launch of HCV, which as you can imagine will be a higher margin product relative to our base. And so I think you'll be very happy watching that line develop over the next couple of years. Great. Thank you. Thanks, Alex. Thank you. Our next question is from Collin in Presto from Bank of America Merrill Lynch. Thanks for taking the questions. Sure. Another one on hep C. Just With regards to what you're seeing in terms of the CIVALDI, ALICIO numbers, how has this changed your internal expectations regarding The number of patients treated and launch ramp. And you talked a little bit about capacity. And where do you think we are now with regards to the Sort of percentage of capacity and what do you assume this is the limit is here? On Humira, you previously you've given some good color on the share and trends in each of the indications. If you give us an update on this that would be great. And just one on ABT199. What are your expectations now for potential post approval monitoring requirements? Do you envisage a scenario where patients are stratified based on tumor bulk regarding whether they need monitoring? Thanks. Thanks, Colin. This is Larry. I'll start with some HUMIRA overview, as you mentioned. Certainly, we're seeing very good growth by indication. In general, I would We're seeing the room growth in kind of the mid to high single digit range. The derm area is growing probably close to mid single digits. And then gastro, we're seeing more strong double digit growth there. Ex U. S, it's a little bit harder to cut it by indication, but as we mentioned in the prepared remarks, we continue to see nice double digit growth across the major markets ex in terms of share at this point in time, we would say that we're seeing gains in room. We've got about a 25% Share there. We see steady derm share at about a 40% share. And gastro, we're seeing share gains there and We're probably about a 45% share holder there, toggle between in Derm. So very pleased with the progress that we're seeing, strong commercial execution across the board. The mix of sales right now, we see RA in the U. S. Is actually just a little bit below 40% of our overall sales. Ex U. S. It's probably around 35%. The gastro space is probably around 25% or so Of the overall sales mix both here in the U. S. And ex U. S, the derm space is probably in the range of 15% or so at of sales both in both geographies and then the remainder is a little heavier ankylosing spondylitis psoriatic arthritis component ex in the U. S. Call it 25% or so. And in the U. S. That component is around 20% of our sales mix. So it's becoming A nicely diversified book of business for us overall in both geographies. Colin, hey, it's Scott, I'll go ahead and take the 199 question. So with regard to speculating on post approval monitoring, obviously, a little bit early. But as we as said today, we've been able to successfully remove the requirement for hospitalization For both the low and medium risk patients, which accounts for the majority of the patients, be it either first line or later line. As We're going to continue with hospitalization for the time being on the higher risk patients, which as you said are those with the bulkier But as we improve more data on those patients, we're going to continue to see how we can refine any requirements for that type of monitoring. So I just think we need some more patients under our belts and For us to be able to really say what it's going to look like at the time of launch. Yes. And Colin, this is Rick. I'll cover the hep C one. We're obviously at Pretty early into this launch, so it's a little difficult I think to project off of 1 quarter. I'd say it is relatively consistent with how we modeled it. If you go back to the initial PI launches, what you saw was some de warehousing occurring and then In the Q1 or 2, it was high and then it started to flatten out a bit and come down a little bit. And so if you think through that and you say that That was a model that you wanted to follow that ultimately you might see it peak, come down, flatten out a bit and then re you see another peak with the launch of all orals where you see more de warehousing occur. So but at this point, you're looking at 1 quarter, you're One data point, so it's a little hard to model against that, but I wouldn't say it was out of the realm of what we anticipated. As far as capacity is concerned, I I think we've talked before about the capacity. We do anticipate that there will be some expansion in capacity with all oral Coming into the marketplace, so I think we will see particularly in the United States some expansion of capacity going forward. And so we will see more patients Being able to be treated by the time those products get to the marketplace. Thank you. Thanks, Colin. And Ilan, we have time for one final question. Our final question today is from Marc Goodman, UBS. At us. Yes. Can you talk about the PARP and the market and how you view your product and compares to the other products? Sure. Yes, definitely. Mark, Scott Run. So, voliparib, our PARP, one of the things we try to do differently from at the competition is to not just limit the use of the PARP mechanism as monotherapy in genetically deficient tumors, such It has breast cancer with the BRCA mutation. And so I think you can see from the Phase 3 trials We've started so far as a neoadjuvant therapy in triple negative breast cancer. These are for women's who have been initially diagnosed with breast cancer where we treat with a voleprobib based regimen prior to therapy to debulk the tumor. And then certainly in non small cell lung cancer, which is an area that no other CARP inhibitor has So we're really looking to more broadly leverage the potential of PARP by using it in combinations with chemotherapies reflected in our initial Phase III trials. We have an ongoing Phase II trial where we're using it in in combination with whole brain radiation in patients who have brain metastases from lung cancer. That study is going to be reading later this year. Looking at a variety of other solid tumors in combination with other chemotherapies as well. So I'd say Through a lot of the work that we've been doing, we've been able to set the stage to be able to do things with our PARP at that. Frankly, the competition is not currently pursuing. So I think it really broadens at our opportunity for proliferative as a consequence. Thanks, Mark. And that concludes today's conference call. If at if you'd like to listen to a replay of the call after 11 am Central Time today, visit our website or you can call 866-491 at 2,909 passcode 42514. The audio replay will be available until midnight on Friday, May 9. And thanks again for joining us. Thank you. And this does conclude today's conference. You may disconnect