Earnings Call: Q4 2013

Jan 31, 2014

Good morning and thank you for standing by. Welcome to the AbbVie 4th Quarter 20 13 Earnings Conference Call. All participants will be able to listen only until the question and answer portion of this call. And during the question and answer session, you will be able to ask your question by pressing the star one key on your touch tone phone. Should you become disconnected throughout this conference call, 3 Cell 1-eight seventy seven-nine thirty four-eight thousand five hundred and sixty five and reference the AbbVie call. This call is being recorded by AbbVie 18 with the exception of any participants' questions asked during the question and answer session. The entire call, including the question and Answer Session is materially copyrighted by AbbVie. It cannot be recorded or rebroadcast without AbbVie's written permission. Eighteen. And I would now like to introduce Mr. Larry Pippo, Vice President of Investor Relations. Good morning and thanks for joining us. 18. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer and Bill Chase, Executive Vice President 19th Finance and Chief Financial Officer. Joining us for the question and answer portion of the call are Laura Schumacher, Executive Vice President, Business Development, 18th. External Affairs and General Counsel and Scott Brunn, Vice President of Clinical Development. Rick will begin by eighteen. Discussing AbbVie's results from 2013 as well as highlights from our late stage pipeline. Bill will provide a more detailed review of our 4th quarter performance 18, and then discuss our outlook for 2014. Following our comments, we'll take your questions. 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 19.95. AbbVie cautions that these forward looking statements are subject to risks and uncertainties 18 that may cause actual results to differ materially from those indicated in the forward looking statements. Additional information about the factors that may affect eighteen. Visa operations is included in our 2012 Annual Report on Form 10 ks and in our other SEC filings. 2017. AbbVie undertakes no obligation to release publicly any revisions to forward looking statements as a result of subsequent events 16 or developments except as required by law. On today's conference call, as in the past, non GAAP financial measures will be used nineteen to help investors understand AbbVie's ongoing business performance. These non GAAP financial measures are reconciled with comparable GAAP financial measures 18. And our earnings release and regulatory filings from today, which can be found on our website at www. The investor.com. So with that, I'll now turn the call over to Rick. Thank you, Larry. Good morning, everyone, and thanks for joining us. 13. As our 1st year as an independent company, 2013 certainly was an important year for AbbVie, one in which we eighteen. We set a strong foundation for the future. We're pleased with our performance and as we look back over the year, we believe we exceeded expectations on all the goals eighteen. We completed a seamless transition to operating as an independent company. We drove continued strong growth of HUMIRA and several other key products in our portfolio. We delivered operational efficiencies, including improvements in gross margin. We made notable progress advancing our pipeline, including our late stage HCV program, as well as promising assets in our oncology portfolio. 2017. We expanded our pipeline with the addition of several novel assets and we exceeded our financial commitments to shareholders percent global operational sales growth in 2013, despite losing nearly 1,100,000,000 eighteen. We expect to continue to deliver strong sales from our lipid franchise 2018. Sales in 2013 increased nearly 10% on an operational basis and we exceeded our original EPS guidance range with full year 2013 adjusted earnings per share of $3.14 demonstrating the 16th of our underlying business. Our performance was led by HUMIRA, where we added more than $1,000,000,000 in sales 18. Growth again in 2013 with more than 15% operational growth for the year. And the dynamics are 2019 brand. We also saw a strong performance from several other products in 2013, including Creon, Symthroid, Synagist 16 and DUADOPA. We expect that each of these products, which hold leadership positions in their respective markets, will remain important contributors to our 6 months in the coming year. As we look forward to the future, one of the biggest priorities we have as a company 15 is restoring our legacy of strong growth in 2015 beyond. To position ourselves to achieve this objective, 14. We view 2014 as a year of investment in our pipeline, our leading brands and our upcoming product launches. This includes preparation for the launch of our interferon free HCV combination, which we now expect to occur in the U. S. 2014. From a revenue perspective, as we've said before, 2014 is a year of transition 18. As we absorb the remaining impact from the loss of exclusivity in our lipid franchise, we expect growth 18% from our key brands to roughly offset the decline in lipids. And at this point, we have not included any potential revenue from our U. S. HCV launch 2019 and our 2014 revenue forecast. As a result of all of these dynamics, we expect adjusted 2014 EPS of $3 to $3.10 Bill will provide more specific details regarding our planning assumptions for 2014 18. Our business generates significant cash 12. And we remain committed to returning cash to shareholders. Our primary means to do so will continue to be our strong dividend. 18. We recognize the importance of a growing dividend to our shareholders despite a flat top line and investment trends in 2014. 18. As a result, upon final Board approval, we expect a 5% increase in our quarterly common dividend beginning with the dividend payable in May 2014. We've also utilized our strong cash flow 13. In 2013, we added promising assets to our mid stage pipeline. Eighteen. We view licensing and partnering as an important component of our R and D strategy and we expect to continue to augment our pipeline in 2014 and in the coming years. As a biopharmaceutical company, pipeline advancement is an important component 18. This year, we've achieved a number of important development milestones. Certainly, one of the more significant near term pipeline opportunities 18. This is our interferon free HCV combination. AbbVie's multinational HCV program is the largest all oral interferon 18 months of 2019. This is a very exciting time for the year. This is a very exciting time for the year. This is a very exciting time for the year. And is roughly evenly distributed between genotype 1a and genotype 1b in the G7 markets. Our Phase 3 program includes more than 2,300 Genotype 1 patients and clinical sites in more than 25 countries around the world. The comprehensive program was designed to characterize the performance of AbbVie's therapy across genotype 1 populations. 18. And importantly, because we have conducted independent studies in specific patient populations, we will be able to characterize nineteen. SVR rates across various patient types from naive patients to the most difficult to treat such as non responders to interferon based therapy 18. And demonstrates that we have a very compelling offering for patients and for physicians. 18. We've now disclosed top line results from all 6 of our registrational studies. Late last year, we announced results from our 2 placebo controlled nineteen studies, the Saphyr trials, which showed that in both naive and treatment experienced patients, our therapy plus ribovirine produced very high SVR rates of 96%. Our combination produced consistent and virtually identical 18. Efficacy results across both naive and experienced patients and there were no differences observed between genotype 18.1a and genotype 1b patients. Additionally, the therapy was well tolerated with discontinuations due to adverse events Reported in only 1% of patients receiving the combination. This morning, we reported top line results from the 4 remaining Phase 3 trials. Our 380 patient Turquoise II study is the only dedicated trial of an all oral 18 months of therapy in the difficult to treat cirrhotic patient population. Results from the trial show that 92% of the patients treated with our combination for 18.7 16. Results from the PERL-two study showed that 100% of Genotype 1 experienced patients eighteen. Treated with our combination without ribavirin achieved SBR12. Results from the PERL-three trial nineteen. Showed that 99% of Genentech 1b naive patients treated with our combination with or without ribavirin achieved SBR12. Eighteen. We're particularly pleased with the high level of efficacy demonstrated in the genotype 1b population, which represents roughly half eighteen. The PERL-four study showed that even the more difficult to treat genotype 1 patients, 19 7 percent of patients treated with our therapy and ribovirine achieved SVR12 and 90% of the patients in the ribovirine free arm eighteen achieved SVR12. So these data clearly demonstrate that our interferon free offering eighteen provides a very high level of efficacy across genotype 1 patients with ribovirine providing additional benefit in some patients. 16. As we look at the HCV market and we consider which patients will likely be treated in the 2015 to 2017 timeframe, we believe the most advanced patients, 6. Those with fibrosis, cirrhosis and patients who have previously failed treatment will be treated first. Given that these patients tend to be more difficult to treat, we believe most physicians will likely continue to use ribavirin 18.5% to optimize the likelihood of cure. Based on the high levels of efficacy demonstrated by our therapy in these tougher to treat patients, 18. We believe we're very well positioned for success in this market. And while our initial combination represents a simple therapy, we're working to further 2019. Our initial HCV combination with efforts underway to reduce the number of pills through co formulation of all the components 16. We've begun the necessary pharmacokinetic studies and are working to advance this enhancement. We also continue to make good progress with our HCV program in Japan, where we recently started Phase 3 development. Japan represents the 2nd largest HCV market globally and we believe we're well positioned relative to competitive offerings. 18. Given the prevalence of Genaside 1b in the region, we've advanced our 12 week 2 DAA ribovirine free treatment in Japan. 16. As a result, we expect to have a 2 pill once a day combination for this market. We'll present data from our Phase 22 program later this spring and expect to submit our regulatory application in Japan in 2015. Eighteen. We believe the HCV market will remain very large and attractive for many, many years to come. 6. To that end, we've recently begun a Phase 2 study of our next generation HCV program, which includes a potent protease inhibitor ABT-four ninety three and our new NS5a inhibitor ABT-five thirty. It's our goal with our next generation program to bring to market 18. Alivoviran free once daily pan genotypic combination. In preclinical studies, our next generation assets have shown pan genotypic activity 18. They also support once daily dosing without 18. Ritonavir as well as the ability to co formulate. We'll present data from these promising assets later this year. 16. While HCV represents a significant and important opportunity, our pipeline includes many other promising assets. 18. As we evaluate our pipeline prospects, including the number and potential of the opportunities, we believe our pipeline is the most robust it has ever been. 18. We're particularly enthused about our late stage pipeline where we currently have 10 programs in Phase 3 development or in for registration. Nineteen. And we're on the cusp of transitioning several additional programs into late stage trials. Our late stage oncology pipeline eighteen. It includes several mid and late stage assets in development for more than a dozen different cancer types. 18. Earlier this month, we entered Phase 3 development for 2 internally discovered assets in our oncology pipeline, ABT199 2018 and ABT-eight eighty eight. In collaboration with our partner, we recently began a Phase 3 comparative combination study of ABT199 in relapsed refractory CLL patients. We view ABT199 as an exciting compound within our pipeline and we're working quickly to advance this asset. In addition to our vanguard indication of CLL, we're exploring ABT199 in a number of different hematological malignancies, 16, including non Hodgkin's lymphoma, diffuse large B cell lymphoma and AML. 6. Following encouraging efficacy results from the I SPY II clinical trial, we have recently started a Phase 3 study of our PARP 18. We'll now take a look at the efficacy and utility of ABT888 across a variety of cancer types this year as our ongoing studies complete. 14. We expect to start registrational studies in other indications in 2014 as well. Elotuzumab 18. It's currently in Phase 3 development for multiple myeloma in collaboration with our development partner. Data to date have shown promising efficacy 16.2 Phase 3 studies are ongoing with results expected in early 20 15. Declusimab is our biologic in development for relapsing remitting multiple sclerosis. 18. Results from the 2nd registrational study will read out in mid-twenty 14, supporting regulatory submission for teclizumab later this year. 18. Despite advances in the MS category, there continues to be a significant need for safe, 18.5% of high efficacy agents and we believe dicluzumab has the potential to deliver the right balance of high efficacy, nineteen. A manageable safety profile and a high level of patient compliance. Helagolix is our compound 18.8% and late stage development for the treatment of endometriosis. Evagolus has a unique profile with the potential to provide symptom relief and reduction, eighteen, while avoiding adverse effects that can sometimes be associated with current treatments. We'll see initial data from the first 16 of 2 pivotal studies in endometriosis in the second half of twenty fourteen. The Phase 2b study in uterine fibroids, nineteen. Which we initiated last year also continues to progress well. Atrasentan is our internally discovered 18. In 2013, we initiated a large global Phase 3 registrational study. 18. This trial, which will serve as a single global registrational trial, is expected to complete in 2017. We also have 2 new HUMIRA indications currently in late stage trials and we have DUOPA currently under regulatory review. Eighteen-twenty 18. Therapeutic areas which we focus on, including several in immunology where we have 2 JAK1 programs and several biologics in development. We've been pleased with our pipeline progress over the past year and we look forward to a number of important 18 pipeline milestones in the year ahead. This includes numerous Phase 3 initiations, eighteen. Data readouts from multiple programs across our pipeline, the submission of regulatory applications for 2 major late stage programs 16 and potential product approvals. So in closing, we've had a very successful 1st year. Eighteen. We feel good about the high level of execution on our strategic priorities. We're focused on continuing to drive leading performance with our flagship product, HUMIRA, 16, as well as other products in our specialty focused portfolio. And we continue to make good progress advancing our pipeline, which includes a number 14. Of exciting programs that have the potential to address significant medical need. As we look forward to 2014, We're focusing on maintaining our momentum, while investing appropriately to ensure a successful future. 15. We've set an excellent foundation for the company in order to deliver strong growth in 2015 and beyond. 16. With that, I'll turn the call over to Bill for additional comments on the Q4 and 2014. Bill? Thank you, Rick. 14. This morning, I'll start with an overview of our 4th quarter performance and then I'll provide our outlook for 2014. 2017. We delivered a strong 4th quarter capping off a year of excellent performance. 4th quarter adjusted EPS was $0.82 16.5% excluding non cash intangible amortization expense and specified items. This exceeded our outlook for the quarter. $1,000,000 On a GAAP basis, earnings per share were $0.70 Total sales in the 4th quarter exceeded $5,100,000,000 ahead of our outlook. 18. Sales decreased 1.1% on an operational basis, which excludes an unfavorable 0.7% 16% impact from foreign exchange. Excluding sales from our lipid franchise due to loss of exclusivity, total eighteen. Sales increased 7.9% on an operational basis. 4th quarter growth was led by HUMIRA, which had global sales of more $3,000,000,000 up 13.4%. We continue to see strong growth in the underlying markets eighteen. We've seen a positive impact from the global launch of the UC indication, which continues to progress very well. 20. In the U. S, HUMIRA sales increased 18.1%, reflecting continued market expansion as well as share gains, 16, particularly in the Gastro segment. Internationally, HUMIRA sales grew 8% on an operational basis. 18. As we forecasted in October, international growth was somewhat lower in the quarter due to the impact of tender timing, which benefited growth in the 3rd quarter. International growth is being driven by continued uptake of new indications, share gains and double digit growth 18. Global HUMIRA sales for 20 18% exceeding our original forecast for the year. As Rick mentioned, in 2014, we expect global HUMIRA sales 18.2% to grow at a low double digit pace excluding the impact of foreign exchange. Androgel sales were $289,000,000 18. And the 4th quarter, down versus the prior year, reflecting continued moderation of market growth and other dynamics. 2017. Andrew Jo remains the testosterone replacement market leader with more than 60% market share and achieved share gains during the second half of twenty 13. In 2014, we expect Androgel to be flat to somewhat down nineteen. The conditions stabilized and we lapped the impacts of rebating actions and account losses in early 2013. As expected, all of the products in our lipid franchise are now experiencing generic competition. Sales 12. Niaspan were $31,000,000 and TRICORE TRILIPIC sales were $29,000,000 both down significantly versus the 4th quarter 2012. As forecasted, the decline in the lipid franchise was most pronounced in the 4th quarter 14. And in 2014, we expect these trends to continue. Global Lupron sales were 2 $9,000,000 in the quarter, roughly flat on an operational basis. For the full year 2013, Lupron sales were $785,000,000 Lupron continues to hold a leadership position and maintain 18.2%. In 2014, we expect Lupron sales to be down modestly from 2013. 18. U. S. Sales of Synthroid were $189,000,000 in the quarter, up 12.8% with full year sales 18%. Synthroid maintains strong brand loyalty and market leadership despite the entry of generics into the market many years ago. 2018. In 2014, we expect to see similar growth trends for Synthroid. U. S. Crayon sales were 100 and $18,000,000 in the 4th quarter, up 9.3%. Creon maintains its leadership position 18.5% organic enzyme market where we continue to capture the majority of new prescription starts. We expect high single digit sales growth for Creon 2016. Sales of duodopa, our therapy for advanced Parkinson's disease grew 15.7 18% on an operational basis this quarter. Duodopa is currently approved in Europe and other international markets. In 20 14. We expect continued double digit growth for duodopa and in the U. S. We expect a regulatory decision on our filing in the first half of this year. Moving on to our 4th quarter P and L profile, the adjusted gross margin ratio was 77.1% 16. This was in line with our expectations for the quarter 16 and reflected operational efficiencies and product mix across our portfolio including HUMIRA. Adjusted SG and A was 26.5 percent of sales in the 4th quarter, reflecting heightened investment in our growth brands. 18.6 percent of sales driven by increased funding of our emerging mid 18 late stage pipeline and the continued pursuit of additional HUMIRA indications. Net interest expense was $68,000,000 14 and specifically how we've constructed our plan for the year. As Rick mentioned, we are now expecting a U. S. Approval for our HCV 18.5% CV regimen in 2014. As you know, we've seen these types of products launch quickly, generating significant sales early in the launch. Since we cannot yet forecast the specific date of our approval, our guidance for 20 14 excludes any revenue benefit eighteen associated with the upcoming HCV launch. We have however included the appropriate level of investment to launch the brand reflected in higher 18.5% G and A expense this year. We'll keep you apprised of our program status as the year progresses. In the meantime, eighteen. You should model the year as follows. We expect the total company 2014 sales of approximately $19,000,000,000 16, reflecting growth from our key marketed products offsetting the remaining decline in lipids from generic competition. 10. Included in our sales guidance is an estimated negative impact from exchange of roughly 1% for the full year. We're committed to improving our gross margin ratio in 2014 despite the loss of high margin lipid sales. 18. As a result, we are forecasting an adjusted gross margin ratio approaching 79% for the year, reflecting actions we've taken 16 to further improve our margin profile. As we've noted, we currently have a record number of Phase 3 programs in active development 18 months and our omnicusp of transitioning additional programs in 2014. We have a number of exciting eighteen. In oncology, HCV and Immunology and other areas that warrant investment. As a result, we expect R and D expense 16% to be around 16% of sales reflecting an increase in R and D spending over the prior year. We also expect to see an increase in SG and A as we invest in our key brands, including HUMIRA, where we're pursuing eighteen. We continue to see opportunities to further increase penetration rates across indications and drive both disease and brand awareness. 16. And as I noted with our U. S. HCV launch in 2014, we'll be making the appropriate investments this year to maximize 18.2 percent. Therefore, we expect SG and A expense to approach 28% 18% of sales in 2014, an increase over the 2013 profile. We are forecasting net interest expense of about $275,000,000 for the full year and we continue to expect an adjusted tax rate of approximately 22% in 2014. 2017. Given this profile, we are forecasting an adjusted earnings per share guidance range of $3 to $3.10 2017. Our adjusted earnings per share guidance range for the year excludes $0.37 per share, primarily related to non cash 16. Amortization expense and ongoing separation costs. Regarding our first quarter outlook, nineteen. We expect adjusted earnings per share in the Q1 of $0.67 to $0.69 This excludes roughly $0.08 of specified items and non cash 20 amortization, resulting in a 1st quarter EPS in the range of $0.59 to $0.61 on a GAAP basis. Our first quarter outlook reflects a flat top line including roughly 1% negative exchange. Eighteen. We expect the gross margin ratio somewhat in line with our full year guidance and we expect R and D and SG and A as a percentage of sales 16 to be higher than our full year outlook consistent with historic quarterly trends. 18. So as we look back, we are very pleased with AbbVie's performance in our 1st year as an independent company. We delivered on our commitments and exceeded our original forecast for 18.2% Earnings Per Share. Looking forward, 2014 will be an exciting year with numerous data milestones, key product seventeen. And continued execution across the organization. The investments we're making this year are expected to drive meaningful growth in 2015 18 and beyond. And with that, I'll turn it back over to Larry. Thanks, Bill. We'll now open the call for questions. And today is from Jamie Rubin from Goldman Sachs. Thank you. Can you all hear me? We can. Can you hear me? 18. Okay, great. Rick, congratulations on the end of your 1st year as an independent company. Eighteen. Question is regarding the whole hep C marketplace. I mean now we've seen all of your data. We've seen all of Gilead 18 Phase 3 data. We've also seen the initial launch of ZILVADI, which is clearly very, very 12. And then I'm just wondering if you can sort of opine with us how you see the market shaping up? And just in terms of I don't know if you wanted 16. To provide any of your views in terms of market share differences, but how do you see the market share playing out between these 2 different regimens. And then secondly, also if you could talk about HUMIRA and if you could confirm 18. Thanks. Okay. Well, first, Jamie, thank you for the congratulations. Yes, we feel good about the 1st year. And 16. So now we're off to the 2nd year and it's what have you done for me lately, right? So we have to get off to a good start in 2014, which is eighteen. As far as the launch that we've seen so far in the ramp in the HCV market with the Gilead product, I think it's 18. Going as we would have expected it. This is a market as Bill pointed out that you get very rapid uptake. It will be important to see how much of the 18. Take is in genotype 2 and 3 patients and how much of it is the impact of the existing PIs that are in the market today. And so eighteen. It doesn't surprise me at all, but it doesn't take a lot of patience to get that level of sales with these kinds of products. And it's one of the reasons why, 1, we're excited about the market 22 ultimately. It's one of the reasons why we chose not to build into our forecast the launch because even a couple of months difference can have a substantial 2019. On the performance of the business. As far as how we'll compete in the marketplace, you've seen all of our data, you've seen the competitive data. Nineteen. We feel very good about the data. As we look at this market, as I indicated in my comments, and the dynamics of the patients that are likely to be treated first And the other capabilities that you're going to need to have to be successful in this market from a commercial standpoint, from a market access standpoint around the world, 18. I think we're very well positioned. And as I said, if I look at the profile of our therapy, if I just go through each of the category of patients, you look at our cirrhotic eighteen data. It's the only trial that's ever been done in dedicated cirrhotic patients, clearly unprecedented results compared to standard of care and I think we're very pleased with what we saw out of that trial for cirrhotic patients. If you look at our experience data, 19 6 percent SVR12s. When I look at that in comparison with the published eighteen. It's up very nicely against that at 96.3% or 96.4%. If I look at genotype 1b 20. Naive 99% without ribovir and if I look at Genentech 1b experience without ribovir 100% 18. And 1Bs represent 50% of the total population that we'll be going after, hard to beat 99% and 100%. So we obviously feel very good about that. And we look at genotype 1a's 6. With ribavirin at 97%, highly tolerable therapy, very low adverse event rates, eighteen. We feel good about our ability to stack up against anything that we've seen out there and be able to compete very effectively against that. It's a big market. Eighteen. It's a market I think that very clearly, if you look at payers, if you look at health systems around the world, 16. If you talk to physicians and patients, they want alternatives, especially alternatives that perform at this level. And so I think we'll do very, very well. And what we're focusing on now is getting our submission in, getting the product approved and launching the product aggressively in the marketplace. I'm sorry. So HUMIRA, as far as the patents are concerned, we haven't disclosed 18. Publicly a lot of the patent data. We've obviously aggressively worked to not only take the existing nineteen. We have a fairly large patent portfolio around process patents, formulation patents, some method patents, 18. But we have a very large number of applications in the neighborhood of a couple of 100. 18. Many of those will issue. We believe that those are important patents. And certainly, we will make sure 18. We enforce any patents that we have in this area and it's one of the lines of defense that we have put in place. Eighteen. And I think we feel pretty good about it, but we're not prepared to give you a lot of specifics on any individual patents at this point. 6. Thanks, Jamie. Next question please. Thank you. Thank you. Our next question is from Jeff Holford from Jefferies. Hi. Thanks for taking my questions. I have a couple for you. So just first 14. On the guidance, I mean assuming obviously you're not including any revenues in the guidance, can we just safely assume if you do get revenues that flow through in 2014 That would essentially be upside for the earnings guidance as well. Secondly, I wonder if you can just help us think about your 20. SG and A phasing through the year, when would you anticipate that we start to see the load from the hep C cost eighteen. In the SG and A. Also just in terms of the fixed dose combination on the current 3 gs regimen, 16. Are you assuming you'll have to do a full Phase 3 there? Or would your development plan on that just be more like a bridging study? Thank you. 18. Okay. Maybe I'll take the guidance question and then Bill you can talk about the gating of the SG 18. And we'll talk Scott, you can talk about the fixed dose combination. So maybe let's walk through and give you a little perspective on 18. The timing. As I think you know, we have been given breakthrough therapy status for this product 2. And we expect to get priority review. With priority review, we will have an 8 month PDUFA clock. And so we know the outer limits of when approval could occur based on when we're estimating that we'll submit to the agency. 16. But as we've looked at priority reviews, we've seen priority reviews that are as short as 4.5 months and we've seen some that have gone all the way out to 8 months. 16. And so there's this window that we're operating in that it's just not clear to us at this point where we will be in that window. 18. So our goal is to get the submission in as rapidly as possible and then start to work with the agency on answering any questions that they have. As we get closer through that review process, 6. We will begin to get more clarity as to the timing of that, when we would get that approval and we're obviously prepared to be able to launch 18. As soon as we gain approval of the product. So depending upon where that were to occur, if it was appropriate to adjust 18. Quarterly guidance. We would go ahead and make that adjustment during that quarter. So we'll just have to see when we hit in that window that I just 16. So Bill why don't you cover the key? Yes. Just on SG and A, obviously we're going to be doing everything we can to nineteen. Make sure that this opportunity we live up to the opportunity that we have here. We're investing right now. But that said, the investment will grow Over the course of the year and we'll see on a relative basis more investment in the back half of the year than the first half. Jeff, eighteen. It's Scott Brunt on our fixed dose combination, which takes all three of our direct acting antivirals and co formulates them into a once daily presentation. 2017. We've got a prototype formulation that has been performing very nicely with our pharmacokinetic assessments eighteen. Inhumans and right now we're moving forward very aggressively with the program. We're in discussions with regulatory agencies with regard to exactly eighteen. And that's all I want to say about that right now. Thanks very much. Congratulations. Yes. Thanks, Jeff. Next question please. Thank you. Our next question is from Steve Scala from Cowen. Thank you. I have two questions. Of the 16. Since of the 2014 guidance for HUMIRA of low double digit, can you dissect that by geography, so what we nineteen. Looking for in the U. S. And OUS. And in the U. S, how much of that might be from price and how much might be from volume? And secondly, for many reasons, your P and L in 2014 is quite unusual, but I think we lost you, Steve. Why don't we start Bill, why don't you go ahead and I'll cover the HCV the HUMIRA question. Yes, we are obviously guiding low double digit 16. For the entire year on HUMIRA, it will be a little higher growth in the U. S. Than ex U. S. The pricing on this brand, 16. As you've known, we do see pricing pressures ex U. S. That mutes the overall growth ex U. S. We have had the ability to take some price over the past 18. Couple of years in the U. S. So in that double digit guidance, I would expect slightly higher growth in the U. S. Because of that pricing effect, 16. But both markets will be above double digit growth. Can you hear me now? Yes, we can. Eighteen. Okay. May I ask my second question? Yes. Go ahead, Steve. Okay. So for many reasons, your P and L in 2014 is quite unusual, but it would 15 promises standout top line growth and substantial margin improvement. At this early juncture, would you have any objection to that thinking? I think it's obviously a little early to be giving 2015 guidance. There certainly is a dynamic that's 16. Yes, there certainly is a dynamic that's going to play out in 2015 as we see the full brunt of HCV kick in. So that would certainly expect some gross margin expansion because we'd expect that to be relatively above our overall corporate mix. 18. Likewise on gross margin, we will remain committed to driving additional efficiencies. You've seen some of that play out in 2013 and certainly we're signing up for some of that in 2014. On the investment side, I think a lot is going to depend what we have in our pipeline. 16. We've made it clear today that we're expecting to have 10 programs in Phase 3 or registration this year. We've got a very robust pipeline. We've got things moving Into Phase 3 in the subsequent years. And then likewise on the SG and A side, what we know is 16. HUMIRA is promotionally responsive. We've driven very, very nice growth on that brand. We have our 16. CV launch kicking into full gear in 2015. And then of course, we'll have new products launching 16. In the period right after 2015, we want to make sure that we provide appropriately for those products and opportunities as well. So we'll have to see. 6. Thank you. Thank you. Our next question today is from Alex Arfaei from BMO Capital. 6. Good morning and I'll add my congratulations as well on your 1st successful year. Thanks, Alex. A follow-up to your comment on Turquoise II. To what extent do you think that 16. Do you think that trial having that dedicated Phase 3 trial in those important patients is a market and competitive advantage? 16. And then a couple of follow ups if I may. Are we going to see AVT199 data this year? And could you give us some color on the market opportunity for elagolix? Thank you very much. Alex, hey, it's Scott Braun. I mean with regard to the Turquoise II, when you consider the fact that cirrhotic patients nineteen. The duration in the rates of cirrhosis going up. We thought it was extremely important to well characterize 16. The response in this patient population. And so absolutely, we feel these data are going to be of and 2021. Critical value to clinicians, to patients, to payers in really demonstrating the characterization and nineteen. Certainty of response that you can achieve in this population. And as Rick said, we're extremely pleased. The results certainly surpassed eighteen. My initial expectations, they're unprecedented and provide considerable benefit over Anything that's currently available. With regard to 199 data flow, we're going to be presenting some initial Phase 1 combination data with nineteen and rituxan this year. Remember that that's the combination that's being studied in the Phase III 18 trial that's getting underway that Rick referred to. We'll also be showing some additional data in CLL that will demonstrate the longer term seventeen. The ability of our monotherapy building on the very strong results that we've already showed Where we had a 24% complete response in CLL with 199 as a single agent relapsed refractory patients eighteen. Comparing extremely favorable to the new agents that are currently being studied there. And we're also hoping to be able to get some 18. AML data out later this year. 18. Elagolix, he also asked about in terms of potential and opportunity and our view on the product. Yes. So certainly elagolix currently in Phase 3 on endometriosis and Phase 2b in Urine Fibroids. I mean, when you consider endometriosis, a condition that affects 18. Millions of women worldwide, resulting in considerable symptomatology eighteen. For which there are really no good therapies right now. Existing ones while they may be able to control symptoms create their own set nineteen. We feel there is significant potential for elagolix as a 18. Chronic therapy in endometriosis, certainly allowing patients to avoid more extreme measures nineteen. Such as surgery, which when you consider the population of women here who are of an age where they're considering 18. Certainly, they don't want to have to take that type of option. So with regard to its overall tolerability 18. And efficacy profile, certainly we feel that there is very significant opportunity in endometriosis as well as eighteen. Phiboids, where again there's no chronic therapy available and all the other limitations of existing therapy 2019. Thank you. Thanks, Alex. And then we'll take our next question please. Thank you. Our eighteen. Next question is from Chris Schott from JPMC. Hey, there. It's Jessica Fye on for Chris. I just wanted to follow-up on your Hey. Hey. I eighteen. I want to follow-up on your expectations for the HCV market. Can you talk about how you're thinking about competition based on price? 16. Is that a lever that you consider to gain share? I'll take that. This is Rick. 18. As we've said a number of times, when you look at the attributes of this product, the performance eighteen. This is a highly competitive product against anything that we've seen out in the marketplace. If you look at our capabilities from a commercial standpoint and a market eighteen. I think they speak for themselves as well. You only have to look to HUMIRA, which has a lot more competitors than this market is going to have. So I think eighteen. From that standpoint, we feel good about our ability to be able to go into the market and compete effectively. Having said that, I'd also tell you this is a highly eighteen. Competitive market and it's not prudent for us to lay out what our commercial strategy is going to be and we're not going to lay out what our commercial eighteen. Strategy is going to be and that includes we're not going to lay out what our pricing strategy is as part of that. So 16. That's probably not the answer you were looking for, sorry. But certainly, I think if you were sitting in our chair that would be the prudent way to deal with this. 6. Thanks, Jessica. Next question please, Elan. Thank you. Our next question is from Collin Bristow from Bank of America Merrill Lynch. Hey, this is Colin on behalf of Greg. Thanks for taking the questions. Sure. Pepsi and Turquoise 2, eighteen. Can you comment either quantitatively or qualitatively on the rates of anemia seen? I just want to get a sense of the tolerability as you think about the real world setting. 16. Also on Turquoise 2, could you speak to the relapse and breakthrough rates in the genotype 1a population and or the treatment experienced? And with regards to AndroGel and the testosterone replacement market, script trends have indicated a modest decline over the last few months. And I just wanted to get your sense of what you're hearing from the 18. Yes. Hey, Collyn, it's Scott Brunn. Regarding Turquoise 2. First getting at the tolerability, when you look at the results in both the 12 week and the 24 week ARMs, again, We saw very low rates of discontinuations for adverse events only on the order eighteen. About 2%. Certainly, when you look at rates of anemia, I don't want to quote specific numbers. 2017. Certainly, they were not different from what we've seen in the non cirrhotic populations within our programs. 18. Again, I don't want to parse the turquoise 2 data to any greater extent than we've released. We're going to be eighteen. I'm providing more detail on that at EASL, but what I can say is that we anticipate that the 20. Majority of patients will only require 12 weeks of therapy to achieve these very high SVR rates. And certainly, The 24 week therapy, it will likely only be applicable to a very limited minority subset eighteen. And Kellen on Androgel, certainly the market has swollen particularly versus what we saw in 2012. 13. That said, we are picking up share and we've seen nice progress on that in the back half of twenty thirteen. 16. And frankly, a lot of the pricing pressures are now behind us and pretty stable. So we're pretty pleased with our position. 18. That said, we are taking a realistic view of that market and brand in 2014, which is really the logic behind the guidance that we provided this morning. Great. Thanks a lot. Thanks, Colin. We'll take our next question, please. Thank you. Our next question is from Vamil Divan of Credit Suisse. Yes. Thanks for taking the questions. Eighteen. Sure. 1 on the EBT-eight eighty eight. Just want to get a sense of how you see nineteen. And you're differentiating yourself from other agents in the breast cancer space. Obviously, some interesting data so far, but how you see that playing out? And then when will we actually see the data That one in breast cancer and the other indication that you mentioned. And then the other one just on 199, do you see any change in your expectations around that being competitive eighteen. Given the frontline or relapsed setting just given the strength we're seeing with pharmacichlids and the new data they've commented on with the early stop of their 2020. Yes. Why don't I go ahead and Scott run. So with regard to 888 and its ability to differentiate itself From other agents in breast cancer and certainly I think it's important to mention other malignancies as well. Certainly there's some characteristics of voliparib 888 eighteen. Well, the other PARP inhibitors that suggested it may actually be superior. It's able to cross the blood brain barrier. 16. And perhaps even more importantly, we're able to combine effectively with other chemotherapies where eighteen. Some of the other PARP inhibitors have really had challenges with that. So as a consequence, the other PARP inhibitors are really limiting themselves To cancers with genetic susceptibility to PARP, those with the BRCA mutation and certainly also going 18. We feel that again, particularly with voleparid's ability to combine with other modalities Like platinum chemotherapies and radiations that also damage DNA, that we're able to have a much broader opportunity with our 18. Certainly, the neoadjuvant study allows us again to take advantage of treating eighteen. We've got ongoing studies with combination therapies in ovarian cancer, lung cancer and in use 18. With whole brain radiation in the case of brain metastases from lung cancer. So we feel that we're able to fully leverage the full potential eighteen. Of the PARP platform with voleparin as a consequence of these characteristics. With ABT-one eighteen-nineteen. When you look at the exquisite potency of the agent, its ability to drop 16. B. Lowe:] B. Lowe:] B. Lowe:] CLL malignant cell counts in the blood by 90% within 8 hours. 14 collaboration with our partner. We'll be starting a Phase 3 study in first line CLL in combination with GA-one hundred and 18. And the thought here is that through the potency of 199, we can drive disease state to an eighteen. I referred earlier to the very promising complete response rate that we've seen 24% With 199 as a single agent in patients who have cycled through on average 4 prior therapies, when you look at Ibrutinib in a similar population, 20. Those complete response numbers as a single agent are in the low single digits. And so what we're doing is working on study designs eighteen. Again, really be able to take advantage of the potential to drive to very low levels of disease activity and potentially move away From chronic therapy, which is going to be the case with Ibrutinib and idolalisib and really look at can we 18. B. Lowe:] Thanks, Vamil. Elon? And sir, I am showing no further questions at this time. Okay, terrific. Well, thanks, Elon. We'll eighteen. We'll conclude today's call with some final remarks from Rick before I wrap up the call today. All right. Thank you, Larry, and I'd like to thank everyone for joining us. 18. As we indicated when we launched the company, we had a primary objective for making sure that we set up the organization in a way that we could be successful 2013 and I think we accomplished that and I think we're off to a good start in 2014. We always said those would be transition years 15. Well against that objective. If you think about 2015, as Bill mentioned to you, it's early to talk about guidance. 16. But although we'll get an impact, a positive impact on HCV in 2014 as we launch the product, we will get a very significant impact in 15. And we'll be in a position to be able to drive that product and see significant margin drop 15 timeframe from that product. In addition, we will have worked our way through the loss of exclusivity of our lipid franchise, eighteen, which is obviously creating a significant headwind for us in both 2013 2014. That will be gone and we'll see the emergence 16. Of strong HUMIRA growth again driving the bottom line and we should start to see some efficiencies again in that area as well. At the same token, nineteen. We'll be in a position to be able to start to launch some of the new products that we have in our pipeline. We're particularly excited about our oncology pipeline with 199. 18. And I'll tell you personally, I'm excited about what I've seen about 888 as well. I think it will have a significant opportunity for us going forward. 16. Dacluzumab will also be a product that we're excited about that can launch in that 2015 timeframe and elagolix following that. 18. So I think we have built a robust pipeline that should give us an opportunity to be able to deliver on the expectation that we have for ourselves and the one that we communicated to you. So we're looking forward to doing that. Well, thanks Rick. And that concludes today's conference call. 18. If you'd like to listen to a replay of the call after 11 am Central Time today, go to AbbVie's Investor Relations website at 18,000,000. At www.abbVieinvestor.com or call 1-eight hundred-eight nineteen-five thousand seven hundred and thirty nine passcode 13,114. The audio replay will be available until midnight on Friday, February 14. Thanks again for joining us today. Thank you. And this does conclude 20