Earnings Call: Q3 2013

Oct 25, 2013

Good morning and thank you for standing by. Welcome to the AbbVie Third Quarter 20 13 Earnings provided by AbbVie. It cannot be recorded or rebroadcast without AbbVie's expressed written permission. I would now like to introduce Mr. Larry Pippel, and 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 Officer Bill Chase, Executive Vice President of Finance and Chief Financial Officer. Joining us for the question and answer portion of the call are Laura Schumacher, Executive Vice President of Business Development, External Affairs and General Counsel and Scott Brunn, Vice President of Clinical Development. Rick will begin by discussing AbbVie's results from the Q3 as well as highlights from our commercial portfolio and upcoming pipeline milestones. Following Rick's comments, Bill will provide a more detailed review of our Q3 performance and then give an update to our outlook for the remainder of 2013. Following our comments, we'll take your questions. Reform Act of 1995. AbbVie cautions that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward looking statements. Additional information about the factors that may affect These operations is included in our 2012 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. On today's conference call, as in the past, non GAAP financial measures will be used to help investors understand AbbVie's ongoing business performance. These non GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website at www Today, we reported strong Q3 results with adjusted earnings per share of $0.82 exceeding our guidance range for the quarter. Our performance demonstrates the strength and durability of our portfolio as we delivered these results despite the continued impact of generic competition on our Lipid franchise. Today, we also raised our full year EPS guidance for 2013, call, reflecting the high level of execution we've demonstrated this year. As we embarked on this year, we set forth several Key priorities for our business, including a seamless transition to operating as an independent entity, maximizing the performance of our current product portfolio, Advancing our pipeline, including our late stage HCV program and other key assets and delivering operational efficiencies. As we assess our progress, I believe we have met or exceeded expectations on our strategic objectives. I'm I'm pleased with the performance of our product portfolio including HUMIRA, which delivered more than 19% global operational growth in the quarter. This strong growth was driven by several factors including continued robust market growth resulting from increasing penetration across Therapeutic categories and geographies. Market share gains, particularly in the GI segment where our UC launch is progressing ahead of our expectations and we delivered this performance despite the entry of new competitors into the category. As we've indicated in the past, HUMIRA's broad label and new indications are a competitive advantage and UC is the latest example of that. We've launched UC indication in a number of key countries and it quickly gained meaningful market share and we're working to secure market access and reimbursement in a number of additional markets in the coming months. To date, in Western Europe, we're currently capturing roughly 25 Percent of the UC market. And in the U. S, the UC indication has contributed significantly to our strong performance in the IBD market as HUMIRA is now the market leading biologic in the GI category. We continue to pursue HUMIRA in several other indications, which are currently in late stage development. Earlier this month, we presented Phase 2 data in patients with HS, authorization of this indication in the 2015 timeframe. Given the lack of effective treatment options, we believe HS could represent a several $100,000,000 peak year opportunity for us. HUMIRA continues to gain or hold market share across all indications. As I mentioned earlier, Our strong UC launch has helped us attain the number one position in the GI category. We also hold the number one market share position in dermatology and we continue to hold steady share in rheumatology despite the entry of new competitors. We've been very pleased with HUMIRA's exceptional performance this year and we're well on track to achieve our 2013 guidance for the product. Beyond Jumira, we also saw strong performance from several other products, including Creon, Synthroid, Zemplar, of Synagist and Duodopa. Though certainly not as high profile as HUMIRA, we've been pleased with the performance of these durable and growing brands. In the quarter, we also made good progress on other key strategic objectives. We continue to drive operational efficiencies, including gross margin which Bill will discuss in more detail in his remarks. And we've begun the process of creating our own efficient back office infrastructure that is more appropriate for an independent biopharmaceutical company. In addition to our strong commercial and operational performance, we've also made significant number and potential of the opportunities, we believe our pipeline is the healthiest it has ever been. In addition to assets currently in late stage such as HCV, dicluzumab, helagolix, atrasentan and elituzumab, we're on the cusp of transitioning several additional programs into Phase 3 development, including but not limited to ABT199 for CLL and ABT888 for select solid tumors. Regulatory filings and new product approvals. Let me now provide you with an overview of some of the key highlights in our pipeline. We expect numerous HCV data milestones to be achieved, including the results from our 6 Phase 3 interferon free combination studies starting later this year and into early 2014. We will also present data from these studies at EASL in April and other medical meetings throughout the course of 2014. We remain on track with our U. S. And EMA regulatory submissions in the Q2 of 2014. In anticipation of an early 2015 commercialization, we are actively building the appropriate infrastructure, including medical affairs personnel and our sales organizations. We'll present data from our Phase 2 HCV program in Asia and plan to start our Phase 3 program in Japan in the first half of twenty fourteen. Japan represents the 2nd largest HCV market globally and we believe we're well positioned relative to competitive offerings. Given the prevalence of Genotype 1b in the region, we plan to advance our 12 week 2 DAA A treatment in this area. We also have strong commercial presence in Japan, which has been in place for a number of years. We remain on track to start our Phase 2 studies of our next generation HCV compounds by the end of this year. As a reminder, our next generation assets include a potent protease inhibitor ABT493 and our new NS5a These assets also support once daily dosing as well as the ability to co formulate. Commercialization of our next generation compounds could occur in the 2017 timeframe. Now moving to our oncology pipeline. We'll See continued data flow from our BCL-two inhibitor ABT199. The Phase 2 single agent study in previously treated CLL patients with 17p deletion will likely read out at the end of 2014. Additionally, the Phase 3 comparative study of ABT199 plus rituxan versus rituxan plus chemotherapy in patients with relapsed refractory CLL will begin in Early 2014. The ongoing studies of ABT199 will continue to collect data and in 2014 will present data demonstrating the durability of the treatment effect. We also expect to present combination treatment data as well as results from some of our ongoing studies in other for Cancer Types. A number of our mid stage studies of our PARP inhibitor, ABT-eight eighty eight will also read out in the coming months and throughout 2014, beginning with data that will be presented at the San Antonio Breast Cancer Symposium this December. Call. From our neuroscience pipeline, in 2014, we'll present data from our Alpha-seven NNR agonist ABT-one hundred and twenty six, which is currently being studied in Alzheimer's disease and cognitive impairment associated with schizophrenia. We'll also see data from the second of our 2 registrational studies for to show reduction of annualized relapse rates and disability progression in patients with relapsing remitting multiple sclerosis ocluzumab in the second half of twenty fourteen. We'll also see initial data from the first of 2 pivotal studies of elagolix in endometriosis in the second half of twenty fourteen. And finally, we look forward to seeing Phase 2b data in RA from our and Incurred focused effort on strategic licensing, acquisitions and partnering activity. We've targeted large and growing specialty focused therapeutic areas that enhance with our current franchises and our emerging pipelines. In the recent years, we've added more than a dozen promising assets to our portfolio. Last month, we announced 2 new collaborations. First, we entered into a global licensing agreement with Ablynx to develop and commercialize an anti IL-six antibody for autoimmune diseases including rheumatoid arthritis and lupus. Early Work in RA has shown promise and given the molecule's unique characteristics, we believe there's room for therapeutic differentiation here. In addition, we entered into a global alliance with Galapagos to discover and develop novel therapies for cystic fibrosis where there's still a significant unmet need. In closing, as we approach the end of our 1st year as an independent company, We feel very good about the progress we've made executing our key strategic priorities. We're pleased with our performance this quarter where we saw steps to build a more efficient organization as we move to a fully independent operating environment beginning in 2015 And we've made significant progress advancing our pipeline and look forward to a number of key milestones in the months ahead. With that, I'll turn the call over to Bill for a more detailed view of our results. Bill? Thank you, Rick. This morning, I'll start with an overview of our Q3 performance and then I'll provide an update to our 2013 outlook. In addition to delivering strong top line growth in the 3rd quarter, We again exceeded our earnings per share guidance. 3rd quarter adjusted EPS was $0.82 excluding non cash intangible amortization The 3rd quarter increased 3.6% on an operational basis, which excludes an unfavorable 0.3% impact from foreign exchange. From the launch of the UC indication, which has helped us gain significant share in the global gastro market. In the U. S, HUMIRA sales increased 22.3%, reflecting continued robust market expansion as well as share gains in dermatology and gastroenterology. Internationally, HUMIRA sales grew 16% on an operational basis with many Markets continuing to grow strong double digits. Share gains and continued uptake of new indications are contributing to the growth. And we are forecasting slower international HUMIRA growth in the 4th quarter. Androgel sales were $248,000,000 in the 3rd quarter, down 11.1% versus the prior year, reflecting continued moderation of market growth, rebating actions from the second half of last year and certain account losses in early 2013. Androgel remains the testosterone replacement market leader with more than 60% share and achieved share gains in the last quarter. As expected, all the products in our lipid franchise are now experiencing generic competition. U. S. Sales of niascan were $201,000,000 down 13.4 and the launch of a generic niasan in mid September. TRICORE TRILIPIC sales were $39,000,000 down 88.3% versus of the Q3 of 2012. Though sales across the lipid franchise declined in the 3rd quarter, they did perform better than we had forecast. We continue to expect full year 2013 sales of less than $1,000,000,000 for our combined lipid portfolio, reflecting a decline of roughly $1,200,000,000 As we've said previously, this decline will be most pronounced in the 4th quarter when the full impact of Niaspan's loss of exclusivity will be felt. Global Lupron sales were nearly 196 1,000,000 in the quarter, up 4.2% on an operational basis. BluePrime continues to hold a leadership position and maintain significant share of the market. U. S. Sales of Synthroid were $161,000,000 in the quarter, up 22.9%. To see Synthroid sales growth in the mid single digits. U. S. Creon sales were $101,000,000 in the 3rd quarter, up 9.8%. The launch of our 36,000 lipase unit dose earlier this year continues to positively impact sales performance. We expect double digit sales growth for Creon in 2013. Sales of duodopa, our therapy for Advanced Parkinson's disease grew 18.9% on an operational basis this quarter. Duodopa is currently approved in Europe and other international markets. Moving on to our P and L profile. 3rd quarter adjusted gross margin ratio was 79 0.7%, excluding intangible asset amortization and other specified items. This was above our expectations for the quarter, driven by operational efficiencies and product mix across our portfolio including HUMIRA and better than expected performance of our high margin lipid franchise. Adjusted SG and A was 26.1 percent of sales in the 3rd quarter, in line with our expectations and reflecting mid and late stage pipeline assets and the continued pursuit of additional HUMIRA indications. Net interest expense was $79,000,000 in the quarter and the adjusted tax rate was 22.3%. Turning now to our full year 2013 outlook, we are raising our adjusted earnings per share guidance range to negative impact from exchange of somewhat less than 1% for the full year. We are now forecasting a gross margin ratio of around 78% for the year, excluding non cash amortization and specified items. 1st 3 quarters. In addition to raising our EPS guidance, our performance this year has also allowed us to increase the level of investment behind both our pipeline opportunities and marketed products. As a result, we now expect R and D expense to be somewhat SG and A expense to be approximately 27% of sales in 2013, reflecting increased investment in our key brands including HUMIRA where we're and Pursuing Opportunities TO Further Increase Penetration Rates Across Indications. We are forecasting net interest expense of about of $280,000,000 for the full year and we continue to expect an adjusted tax rate of approximately 22% in 2013. Our adjusted earnings per share guidance range for the year excludes $0.57 per share related to amortization expense, acquired IPR and D and ongoing separation and restructuring costs. We expect that earnings per share will be 2.54 to $2.56 on a GAAP basis. Regarding the 4th quarter, We expect sales approaching $5,000,000,000 reflecting a mid single digit decline on a reported basis, which includes a negative impact from exchange of approximately 0.5%. Our sales guidance for the 4th quarter includes continued impact of the loss of clusivity for Tricore Trilympics as well as the full impact of Niaspan going generic since this occurred late in the Q3. So in conclusion, we're very pleased with AbbVie's performance again this quarter as well as our outlook for the remainder of the first year as an independent company. And with that, I'll turn it back over to Larry. Thanks, Bill. We'll now open the call The first question today is from David Risinger with Morgan Stanley. Yes. Hi. Can you hear me? Can hear you, David. How are you? Great. Good morning. So I have a couple of questions. First of all, on hepatitis C, could you just update us on the top line press release strategy And potential timing. So what studies were likely to see top line releases That's my first question. 2nd, could you talk about the hep C pill burden from payer and physician perspectives? It's not clear to me that payers and physicians will care about the number of pills for 12 week treatments. And I'm guessing that's your viewpoint as well, but just wanted to hear your perspective on what you're hearing about And then 3rd, with respect to ABT-one hundred and twenty six as an add on for both Alzheimer's and Schizophrenia. Could you just remind us when we should expect top line press releases With regard to the Phase 3 Hepatitis C program, all six studies as you know are fully enrolled. We're very pleased with that we're making there. We will be releasing data as top line press releases later this year and moving into early 2014. I don't want to get into the specifics with regard to which studies are going to be released. But Certainly, when you look at all 6, each of them is quite large involving several 100 patients. Again, looking at a variety of different context from treatment naive treatment experience cirrhotic patients. So I think certainly each study or set of As you noted David, with regard to the payers as well as the clinicians that we've spoken to, cure or sustained virologic response is really And when you consider a short term regimen, whether or not you're talking 1 pill, 4 pills, Really what's going to trump everything is how well is it going to perform with regard to eliminating the virus. And certainly with regard to the performance that we've seen so far of our regimen in aviator in both treatment naive and treatment experienced patients, 1st events less than 2%. We really don't feel that the pill burden is going to be material to clinicians, to payers or for that matter to patients. We're really looking to eliminate this virus. Finally, with regard to ABT-one hundred and twenty six, the Alpha 7 NNR, We are looking in Alzheimer's disease both as a monotherapy treatment as well as an add on to donepezil. And then in cognitive Periments associated with schizophrenia, we are looking we are evaluating the drug as a monotherapy. We will begin to see data in Alzheimer's very late this year and certainly releases would probably be expected sometime within the 1st part of 2014. The schizophrenia's data likely coming A bit later within 2014. Thank you. Sure. Thanks, Thank you. The next question is from Jeff Holford with Jefferies. Hi. Thanks for taking my question. Just Firstly, I wonder if you can just give us a bit more color on the HUMIRA sales potentially splitting them by the main indications if you can for the quarter. Secondly, on ABT199, I was interested as to where you put it in the press release that it's a large Single agent study you described it as with ABT199 in the 17p deletion patients. Now that's Conference. And then just lastly, I noticed that share count was down more than expected during the quarter. Can you just talk a little bit about capital allocation and just how you're thinking about share repurchases going Call. Okay. Thanks, Jeff. Let me start with the HUMIRA sales breakdown. Scott will cover the 199 Nine question and Bill can talk about capital allocation at the end with Rick if necessary. In terms of our mix right now, It's interesting that in the U. S. RA is now in the high 30% range. It's a little below 40% of our total U. S. And the remainder is kind of in the spondo area, the psoriatic arthritis, ankylosing spondylitis, those types of indications. It's similar ex U. S. I'd say RA is probably in the mid-thirty percent of the ex U. S. Franchise. Psoriasis again is down in that 14%, 15% range. SPA ex U. S. Is approaching 30% And again, gastro is probably about a quarter of our sales. So hopefully that gives you a pretty good feel of how the sales mix up today. So I would characterize it as a pretty diverse basket of sales across those 4 different categories. Jeff, why don't I go ahead and take your question on ABT199, our first in class BCL2 inhibitor. So you're right, we're currently enrolling A large study in relapsed refractory CLL patients with the 17p deletion mutation, certainly a very hard to treat population. And if the results from this study look similar to results in this population that we presented before with an overall response rate above 80% complete response rate of 18 met medical need. Certainly as Rick noted though, we're also beginning a in collaboration with our partner, a large Phase 3 traditional study that will compare 199 with rupuxan, a chemotherapy free regimen to a more standard chemo containing regimen. Jeff, it's Bill Chase. We've been pretty consistent on our capital allocation story this year. 1st and foremost, This is a business that generates very, very healthy cash flow. The first thing we're going to do with that cash flow is make sure that we reinvest in the business. You've seen some good progress on the deal front this year with a number of compounds announced. And certainly, we continue to build Our infrastructure with capital expense that sort of thing. So that's 1st and foremost. 2nd, the dividend is a The payout ratio went relative to our peers. We've been pretty clear that we intend to grow that dividend over time, probably more in 2014 given some of the challenges with the lipid business, but growing it nevertheless. And I think you can Expect to see that payout ratio creep up as a result. After that, we like to try to pay down a little bit of debt. We think that would be the right thing to do given our balance sheet. And then above and beyond that capital cash will build and that will be a valuable source of liquidity and flexibility for the Thank you. We do have a buyback program, Jeff, but that is primarily geared to offset dilution of Compensation Programs. Thanks very much. Thank you. Thank you. The next question is from Steve Scala with Cowen. Thank you. I have two questions. I appreciate that you're not giving guidance for 2014. But when we think about the spending levels in 2014, Given the need to develop and roll out the pipeline, how would you compare spending in 2014 to 2013 on a percent of sales basis? And secondly, you've done a good job of downplaying the 250 filed in pending patents around HUMIRA. Is that how you want us to view the patent state as of limited ability to blunt potential biosimilars as patents expire in 2017 or 2018. I must admit I'm surprised that the estate has So this is Rick, Steve. So let me start with your investment question. We're obviously going through our planning process right now. So we haven't finalized any investment Decisions yet as to how we're going to proceed forward in 2014. But what I would say is you should think about it from this Effective. 1, we're as I indicated in my remarks, we're going to prepare to have a very effective launch of HCV and we need to build that infrastructure in 2014 to be prepared to launch in the early part of 2015. That's going to require incremental investment. The second thing is we could have as many as 7 or 8 assets in Phase 3 development during 2014 and we're obviously going to fund those Phase 3 assets to be able to get them to the market as quickly as possible. So I think there will be some increased investment, but we're just not in a position yet to be able to tell you that looks like. And so I think that's how you got to be thinking about it and we'll give more guidance in the Q4 as to what that looks like. The second thing is, maybe I'd answer your question a little bit differently. As you look at how we think about biosimilars, Maybe let me walk you through our thought process around them because I think it helps answer your question. We certainly feel good about Patent portfolio that we have and I would not interpret it as we don't believe that it provides a level of protection. Quite the contrary, I believe it does and will provide a significant level of I believe it does and will provide a significant level of protection and we certainly intend to enforce our patents and make sure no one violates those patents. And so but we're not going to talk a lot about specific patents. But more importantly, I think you have to look at the whole biosimilar situation in a broader perspective. And I tell you that we fundamentally don't view the biosimilar market as a very attractive market. And Frankly, we could get into the biosimilar market easily. We looked at it actually a couple of times as to whether or not we wanted to get into it. We certainly have the capabilities from an R and D standpoint as well as a manufacturing standpoint. And we decided not to get into it for 3 fundamental reasons. If you look at biosimilars and you really analyze the ability of biosimilars to perform in this market. I think it raises a lot of questions. Patents are only one of those. There are 3 basic areas that we've looked at versus other pipeline opportunities that we have. And number 3 is the risk around patents and other Thanks as well as the fact that you don't control your own destiny. So let me walk you through each one to at least give you our view of it. If you think about the predictability of commercial success in biosimilars, and you take the anti TNF market as an example, it's a difficult market even for differentiated innovative products to carve out much share. I mean, literally 6% or Innovative products to carve out much share. I mean literally 6 or 7 products have been introduced into that market in the last 6 or 7 years and they've all gotten 2% or 3% market share. So it's a tough market to break your way into. And these are differentiated products. Bio Diversimilars have no differentiation at all from an efficacy or safety standpoint. In fact, I could argue with you that biosimilars Because they don't have a long safety database, they're at some disadvantage from a safety standpoint. And if they ran non inferiority trials, they can basically Today, they're no worse than X versus the innovator product. And so they really have no differentiation. The only way they can compete for market share is on price. And if the innovator chooses to respond to that in some form or fashion, it's very difficult to build models that suggest that you're going to get any significant Share in this market. So that really brings you to the second part of the analysis and that is the return on investment. So if you think about modest Share gains and what kind of pricing you'd have to go at it with a biosimilar strategy. In our analysis, it says you have to make 6 or 8 different biosimilars to have a meaningful impact on the business. When you develop 6 or 8 biosimilars, the investment to be able to do that in your pipeline was this, you might invest in it. But frankly, when we stack it up against the things that we have, we wouldn't trade off 6 or 8 biosimilars for a couple of our innovative products. And so we just don't see a good return on investment there. And then frankly, then there's the last part that you pointed out, That's risk and controlling your own destiny. If you're going to do 6 or 8 biosimilar products, you're going to be walking your way through an absolute minefield of IP, Thousands of patents around all of these products. And you have to make sure that you don't step on any one of them along the way because that's going to create a The beginning is you're at the mercy of the innovator that if they change the formulation or they change the device or they somehow innovate the product Along the way, then you're at a disadvantage. And so as we look at all these things, we ultimately don't believe that it is a good place to And frankly, it probably gives you some picture into how we view some of our defense strategies as well as how we view how So hopefully that gives you some perspective on it. That's great. Thank you. Thanks, Steve. Thank you. The next question is from Vamil Divan with Credit Suisse. Yes. Thanks for taking the questions. Just 1 on HUMIRA. Again, I appreciate the color you gave on the quarter. Can you talk a little bit about the payer dynamics There, if there's anything specific over the quarter, we saw some stuff from prominent PBMs around formulary decisions, anything that impacted the quarter and also maybe more Looking out near to medium term, how you see that changing? And then second one just on 199, if I could. Appreciate the comments around the studies that are ongoing. Just wondering when you might we might start thinking about you looking at other non CLL indications. We've seen some excitement from all leaders about potentially moving this product into those areas. Thanks. Why don't I go ahead and I'll start with the 199 question, Scott Brunn again. So we already have some studies ongoing in non CLL indications such as non Hodgkin's lymphoma, diffuse large B cell lymphoma. And certainly you'll We're seeing some more of those data next year and we continue to look at other opportunities within hematologic malignancies, including things like The potential for the BCL-two mechanism do have applicability in solid tumors. So all of that work, some of it already ongoing and much to be initiated in the not too distant future. Okay. And this is Rick. I'll take the HUMIRA payer I think if you look at one of the strengths of HUMIRA, it has been that payers and governments around the world Recognize the value of this product. And so I'd say we've been in the fortunate position that we have a very strong position from the standpoint of payers. In fact, in the U. S. Managed care environment, the number is around 70% preferred status, Meaning you have to go through HUMIRA first as your first anti TNF. That dynamic hasn't been changing at all. In fact, if anything, I'd say it's probably improving a little bit over time. But we don't see any negative dynamics occurring in that area, if that's what you were looking at. Thanks. Thanks, Vamil. Thank you. The next question is from Ariel Hermann with Goldman Sachs. Hi. This is Arielle. I'm in for Jamie Rubin. I just have two pipeline questions. The first on ABBY-one hundred and ninety nine, how should we think about the potential to do Can you just help us understand the market dynamics and the potential size for this product? Thank you. Great. Why don't I Go ahead and I'll start with 199. So with regard to additional combos, we're working with We're certainly interested in those types of combinations and we're Talking about how best to pursue that with regard to the timing of availability of ibrutinib. Certainly with combinations like 199 And other agents or even as single agents, there's the potential to really change the way CLL is treated, moving it from Something that requires chronic therapy to a situation where you could have a well tolerated combination that perhaps result So certainly we're in Phase 3 in assessing patients with of endometriosis, a very common condition affecting millions of women in the developed Certainly, the current treatment options available have limitations with regard to tolerability. Because of the very dense estrogen suppression they result in, you get menopausal type symptoms like hot flash and bone loss. And with Elagolix's Oleks' mechanism, you get a more guided or partial suppression of estrogen, which through Phase 2 studies, we've We've seen reduced impact on symptoms such as hot flashes or certainly bone loss. So We think that combination of the efficacy and the tolerability profile will provide a very nice option for women when you consider The types of surgical alternatives such as hysterectomy which are quite extreme. We're also in Phase 2 for uterine symptomatology. And again with regard to the type of estrogen suppression we're seeing, we feel very confident in the ability to markedly impact that rate of bleeding and provide women an alternative to hysterectomy, which again represents The majority of Surgical Solutions for this condition. Certainly from a commercial perspective, We've talked about the endometriosis indication being a potential greater than $1,000,000,000 opportunity and certainly fibroids Could be a significant opportunity as well for us if you're looking from a modeling perspective. Yes. This is Rick. I think The key here and what we're working towards is, if you can get sufficient pain suppression in endometriosis And a strong safety profile where this can be used as a long term more chronic kind of therapy, it's a very big opportunity. And that is why we designed the trial the way we designed it where we have 2 doses that we're running through Phase 2 to determine which one of those doses Thanks Ariel. Thank you. The next question is from Chris Schott with JPMorgan. Great. Thanks very much. Just had a few here. First, coming back on the question about longer term spend. As I think about growth in SG over the next few years and this is probably more qualitative question. But can you just help me understand how significant the spend associated with the rollout of HCV is going to be? I guess my question is how much of this can you leverage existing infrastructure as compared to incremental spend? The second question was on HUMIRA. You mentioned Higher spending due to some of accelerating some promotion programs there. Can you elaborate a little bit more specifically what those I'm going to focus on, is there any particular indication that's more promotion sensitive or you see an opportunity to accelerate share gains? And then the final question is in HCV-one. I know it's early, but can you just elaborate a little bit on the confidence you have you'll be able to maintain the initial Show share you're going to take in this market. I think example as an example, we look at it looks like some interesting Merck early stage data in the AASLD abstracts. And if we end up with several players with all oral highly efficacious combos, does that translate to a relatively fragmented market in your opinion? Or is the 1st mover Vantage here just so significant that it's hard to displace that initial share you take. Thanks very much. Okay. This is Rick. I'll cover the question. So if you look at the building structure associated with HCB. I'd say for the most part it's incremental. There is there are certainly areas around the world where we'll Have an opportunity to be able to have some synergies with our existing structures. But I'd say for the bulk of it, you're going to you should be thinking about it as incremental build. And as I said, we're going through our planning process right now. We literally have not finalized it yet and probably won't finalize it for another month or so. But We're going to make sure that we're in a position to be highly effective in that area. If you talk about HUMIRA spend, one of the things I'd say to you is As we approached the beginning of this year, one of the things that we knew is that we were going to face some new competitive challenges. And in anticipation of that, we did some things from an investment standpoint that we thought would put us in a position to be able Happy with the investment that we made there because it's given us back a pretty healthy return and it's really been it has allowed us from a competitive standpoint to really deal with new This is really built around the performance of the product. We've done a lot of market research. And when you look at prescribing preference of physicians, the First five, six attributes are all related to performance of the product, cure rates in different populations. And so as the competitive environment rolls out and as we get to our 2nd generation product, I think we will then take another incremental step in this particular disease treatment paradigm that will be difficult to beat. I think it's incredibly difficult to get performance that's better than this or at least what we anticipate. And then it will be all about how you've built your infrastructure, Well established it is that will make it difficult. You look again at the anti TNF market. Think how Difficult it is for a new competitor to break into that market. And it's because of both the performance of the product and the value that it provides and the And so I think HEB will play out the same way and I don't think there's enough headroom left that Anybody can truly have a very differentiated product after 2nd generation. So that's how we view it. Thanks, Chris. Thank you. The next question is from Mark Goodman with UBS. Yes. Good morning. First, can you talk about the Cystic fibrosis product and what excites you about that? What's the hook there? Obviously, that's an interesting market. Second, HUMIRA in the emerging markets. Just Give us a little color there. You had mentioned something about tenders. Maybe you can go into that a little more. And then 3rd, I know you're working on some Can you update us on where you are there? Thanks. Sure. So why don't I go ahead Scott Brown with the cystic fibrosis Galapagos collaboration. So, I mean, certainly with regard to the genetic understanding of cystic fibrosis and the mutations that lead to dysfunction in the channel, the cystic fibrosis transmembrane receptor that leads to the symptomatology. We've seen introduction of a therapy like What we're excited about is can we go ahead and take this even further by addressing patients with the Much more common F508 mutation, really looking at combinations of 2 drugs, to work properly as well as a corrector that helps to affect the folding and the transport of the receptor to the Yes. And even though there's a timing element here, we won't be entering clinical trials until late next year. We'll use the analogy of Titus C, we're certainly we did not begin in the lead, but by leveraging certain scientific insights and taking full advantage of the ability to combine different mechanisms, we're able to get where we are now. So Again, I think that's really what excites us, the ability to make a remarkable impact on a very devastating disease and to follow on the science that is already out there for the minority of patients. With regard to, We'll say HUMIRA Next Generation. Certainly, we've built a very, very strong foundation with HUMIRA in rheumatology, dermatology and Gastroenterology. And the question is, what can you do as a leader in these areas to improve upon what the anti TNS, HUMIRA specifically have been able to achieve. And so we're looking at the potential to improve efficacy, tolerability, conference. Convenience across the whole patient journey within those various diseases. And we're approaching it strategically with a combination of both internal and External Innovation, Small Molecules and Biologics. So for example, we have a selective JAK1 platform. You're certainly familiar with tofacitinib, which a non selective JAK As a consequence has limitations in its ability to dose to really get Significant efficacy before you start running into side effects. With our Galapagos collaboration, we've got a selective JAK1 inhibitor in currently dosing in Phase 2b in rheumatoid arthritis as well as Crohn's disease. And we feel that the ability to be able to dose these molecules higher without running into JAK2, 3 related side effects provides the potential for significant improvement in efficacy in these diseases. We also have our own internal JAK ABT-four ninety four that's recently entered Phase 2 studies. And we think that With these 2 JAK mechanisms, we have the ability to have a portfolio of compounds that can and address multiple disease states in again patients who have various stages treatment experience. Moving on, we've got other external collaborations, other mechanisms like our BioTest work in Phase with an anti CD4 mechanism. We're very excited about the AbbVieux steel that's an anti IL-six nanobody. These nanobodies because of their size have the potential for improved tissue penetration. Also the Ablynx NanoBody binds to serum albumin, which is present during inflammation, which will help it Graphic to the tissues where you want it to go. So again, we think there's potential for differentiation via the currently available IL-six based therapies. And then certainly we're extremely excited about our Dual Variable Domain Technology, DVDs, which allows us really to buy specifically target 2 biologic mediators in disease. We've got ABT-one hundred and twenty two, which targets both TNF as well as IL-seventeen, which has been shown That's currently in early development in rheumatoid arthritis patients. So really a wide portfolio of various approaches to build upon our current strengths in autoimmune disease. Mark, it's Bill Chase. As you acknowledge, we did have some tender activity in the Q3 and that did lift our international Mirror results a bit. The way you got to look at that, this does occur from time to time in certain markets. When it occurs, it's Generally about a 2% to 3% lift. That's certainly what we saw in Q3. And what we'll try to do and we have been doing is To be transparent to let you know when that's occurring to allow you to better understand both the quarter that's occurring as well as the next. Thanks, Mark. Operator, we have time for one more question, please. Thank you. Our final question today is from Tony Butler with Barclays Capital. Thanks very much. Rick, you outlined very nicely Call. HUMIRA and the various indications, you guys have done a phenomenal job in growing the ex RA indications in particular. But I wanted to Focus on AHRI only. Is that a market that continues to grow in volume? Or has have we really reached a nadir? Two very small questions And then lastly is ABT-four ninety three is that boosted or non boosted? Thanks very much. Okay. Maybe quickly on the RA market. RA market has penetration rates that are still under 30 So there's still clearly an opportunity to grow and we continue to see in most markets around the world that the RA market is continuing to grow. So It's not growing as fast as some of the other markets like the GI market as an example, but it is continuing to grow. Tony, it's Scott. With regard to our Strategy on other genotypes. We are currently doing work with ABT-four fifty and 2/67, which do have activity beyond genotype 1 in genotypes 2, 3 as well as 4. So we're currently in Phase II with those Genotypes and we'll continue to move forward. But it's really our pan genotypic ABT-four ninety 3, 530 combination that we think has the most balanced tangentipic activity. To your question, neither 493 nor 5 Thanks, Tony. And that concludes today's conference call. If you'd like to listen to a replay of the call after 11 am Central Time today, Friday, November 8. Thanks again for joining us today. Thank you. That concludes today's conference. Thank you very much for joining. You may