Earnings Call: Q2 2013

Jul 26, 2013

Good morning and thank you for standing by. Welcome to the AbbVie Second Quarter 2013 Earnings Conference Call. All participants will be able to listen only until the question and answer portion of this call. Read 3 and reference the AbbVie call. This call is being recorded by AbbVie. With the exception of any questions asked during the question and answer session, the entire call, including the question and answer session is material copyrighted by AbbVie. It cannot be recorded are rebroadcast without AbbVie's expressed written permission. I would now like to introduce Mr. Larry Pippo, Vice President of in Investor Relations. Good morning and thanks for joining us. Also on the call with me today is Rick Gonzalez, Chairman of the Board and Chief Executive Officer And 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, are Executive Vice President of Business Development, External Affairs and General Counsel and Scott Brunn, Vice President of Clinical Development. Today, Rick will discuss AbbVie's results for the Q2 as well as highlights from our commercial portfolio and pipeline. Following Rick's comments, Bill will give a more detailed review of our Q2 performance and then provide an overview of our outlook for 2013 and the Q3. 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 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 AbbVie's 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.abviinvestor.com. So with that, I'll now turn the call over to Rick. Thank you, Larry. Good morning and thank you for joining us today. We're pleased to report a strong second quarter results with adjusted earnings per share of $0.82 exceeding our guidance range for the quarter. This included strong operational sales growth of more than 5%, ahead of our outlook for the quarter and adjusted gross margin ratios are in line with the results of the call. We delivered this performance with strong and balanced growth across our product portfolio, Despite the impact of generic competition. And today, we raised our full year EPS guidance for are in the range of $13,000,000 reflecting continued momentum from HUMIRA and better than expected results from our other pipeline products including our lipid franchise. We're now 7 months into our 1st year as an independent company and we continue to make good progress executing on our key business With particularly robust growth in dermatology and GI categories. As we've said previously, there are several factors we expect will continue to drive momentum, HUMIRA offers the broadest label in the category. Our expanding list of uses includes 9 approved indications in Europe and 7 in the U. S. And we have several indications currently in late stage trials. All told, we expect new indications, including those approved in 2012 to add will be in the range of $1,500,000,000 in incremental global peak year sales. HUMIRA's utility and label support and use across the broader Spectrum of autoimmune conditions is one of the many attributes that sets it apart from other products in this category. As we track new competitive entrants, performance continues to be in line with our expectations with HUMIRA continuing to gain or hold market share across indications. As I said, HUMIRA is off to a strong start in the first half of the year. And as a result, we now expect global HUMIRA sales growth of 14% to 15% on an operational basis in 2013. This is an increase from our previous outlook of low double digit growth. Beyond HUMIRA, we also saw strong performance from several other products, including double digit growth of Creon, Synthroid, Zemplar and Duodopa. Bill will provide more color on HUMIRA's performance as well as some of the other products in our portfolio. So today, I'll spend some time discussing a few of our pipeline programs. Certainly, pipeline development is critical to our long term success and we're very pleased with the progress we've seen across our mid and late stage pipeline program so far this year. Over the past year, in the past several months, we've also presented important data that support our advancing pipeline and illustrate its potential are ready to address some of the most pressing areas of medical need. I'll start with our late stage HCV program, where we recently completed enrollment in the past several months, we presented additional data from our large Phase 2b AVEAAR study, which enrolled as a reminder are 571 non cirrhotic patients. Data presented at the EASL and DDW meetings showed patients with high SPR Cure rates regardless of baseline characteristics associated with local response interferon therapies including baseline viral load And level of fibrosis. As I said before, our goal is to maximize SVR rates across various patient types from naive patients to the most are difficult to treat with the simplest possible therapy and large body of data that we've collected and presented thus far certainly support our objective. Recently, our direct acting antiviral combination was designated as a breakthrough therapy by the FDA, underscoring its promise in the treatment of HCV. As I've said, we're very pleased with the progress that we're making in our Phase 3 program. We expect registrational studies to begin to readout later this year are in early into 2014, supporting regulatory submission in the Q2 of 2014 and market entry in early 2015. In addition to our late stage efforts, we're also advancing a compelling next generation HCV program, including a potent Protease inhibitor ABT-four ninety three and a new NS5a inhibitor ABT-five thirty. In preclinical studies, these promising assets have shown pan genotypic activity and excellent activity against key resistant mutants. These next generation assets also support once daily dosing as well as the ability to co formulate. Our development program is progressing well and were on track to begin Phase 2 studies this year. Suffice to say, we are very committed to this therapeutic category And we'll continue to work to evolve the treatment paradigm. Now turning to our oncology pipeline, which include several mid and late stage assets in development for more than a dozen different cancers. At the recent ASCO and EHA meetings, presented additional data on ABT199, our 1st in class BCL-two inhibitor in development in partnership with Roche Genentech. These data showed strong single agent activity across a number of hematological malignancies including CLL, NHL and mantle cell lymphoma. We recently started a large Phase 2 single agent single arm study in relapsed Refractory CLL patients with 17p chromosome deletion. We believe this study has the potential to be a registrational trial and plan to engage with the are in the FDA to confirm our view. While these patients represent the most difficult to treat, early data have been promising. In collaboration with our partner, we also expect to begin a Phase 3 comparative trial, a combination study in will plan on starting that in the next 6 to 9 months. We believe that ABT199 represents a potentially transformational approach to the treatment of CLL and other hematological malignancies and are working to quickly advance this asset. Now moving to our next oncology asset ABT-888, our PARP inhibitor. We believe this compound holds promise in enhancing the effectiveness of common chemotherapy and radiation. We have a number of mid stage studies underway including trials evaluating 888 plus chemotherapy in breast cancer, ovarian cancer, non small cell lung cancer as well as a study About the efficacy and utility of this compound as we expect a number of studies to complete over the next 6 to 12 months. It's likely that we will initiate Phase 3 studies with ABG-888 in this same time frame as well. Moving on to ABT-one hundred and twenty six, our alpha-seven NNR in development for Alzheimer's and cognitive impairment associated with schizophrenia or CIAS. Earlier this month results from our initial Phase 2a proof of concept study in patients with mild to moderate Alzheimer's dementia were presented at the at the time of the conference call. These data demonstrated evidence that ABT-one hundred and twenty six treatment effect on measures of cognition were present as well as a safety and tolerability profile that supports continued development. We're exploring a higher dose range in our are ongoing Phase 2b study where we're evaluating ABT-one hundred and twenty six both as monotherapy and in combination with standard of care. The Phase 2b trial results are on track to complete later this year and if successful, we plan to start a Phase 3 development in 2014. We're also actively evaluating APT-one hundred and twenty six in mid stage trials for CIAS. We'll present are in the Phase 2a proof of concept data for this indication in 2014 and the ongoing Phase 2b study will read out next year as well. Now moving on to atrasentan, our internally discovered compound in development for diabetic kidney disease, a common complication of diabetes and the leading cause of chronic kidney disease in the developed world. We presented results from our Phase 2b study at the European Renal Association Congress in May. The mid stage trial showed treatment with atrasentine showed significant and sustained reduction of alginuria, the presence of protein in your urine, A symptom that is predictive of renal function. We recently initiated a large global Phase 3 program, which will evaluate the impact of Atrasenten will be conducting a full global registration trial for the compound. While I won't cover our entire pipeline today, we have a number of other are promising products in development, which I'll mention briefly here. Dicluzumab currently in Phase 3 development in partnership with Biogen for multiple sclerosis. Our are in the range of 2nd quarter 20 13 earnings conference call. All participants are in the range of 20.5 percent for acute kidney injury, which are ongoing. We have 2 select JAK2 inhibitor programs in development for autoimmune diseases including our partnered asset with Galapagos as well as an internal candidate ABT-four ninety four And we have a number of other exciting programs. I'll conclude my remarks this morning with an update on our licensing activity where we continue to be very active. We We recently entered into a global collaboration with Alvine Pharmaceuticals to develop a novel mid stage oral compound for the treatment Celiac disease, a common autoimmune disorder. The compound ALV003 is currently in Phase 2 development and has the potential are to be the 1st therapy to treat celiac disease. Currently, there are no approved therapies for this condition and the only option for patients is to attempt to follow a strict lifelong gluten free diet. Total exclusion of dietary gluten is difficult because gluten is one of the most common food ingredients. Further, despite a gluten free diet up to 60% of celiac patients still have symptoms are underscoring the acute need for non dietary therapies. Alvine will begin a Phase 2b study for this promising compound in the coming months. We also recently extended our clinical development collaboration with Galapagos to include Crohn's disease. Galapagos plans to begin a Phase will be in this indication by early 2014. The Phase 2 program in Crohn's will be performed in parallel with the Phase 2b study are in rheumatoid arthritis, which was recently initiated. So in summary, we're pleased with our performance in the first half of twenty thirteen. In the Q2, we saw another strong performance across our portfolio including double digit growth from HUMIRA, Creon, Duodopa, Zemplar and Synthroid. We delivered higher than expected gross margin ratios and we continued strong levels of investment spending across both our marketed products and our pipeline opportunities. And we made significant progress advancing our pipeline. We presented compelling data on a number of compounds. We've moved a promising asset into Phase 3 And we augmented our mid stage pipeline with 2 opportunities to build upon our expertise and our leadership in the GI field. We expect continued pipeline advancement over the next 12 to 18 months including late stage trial completions, regulatory filings and new product approvals. With that, I'll turn the call over to Bill. Thank you, Rick. Today, I'll spend some time talking about our Q2 performance as well as are out for the remainder of 2013. As Rick said, we feel very good about the strong quarter and year to date performance we've delivered. 2nd quarter reported earnings per share excluding non cash intangible amortization expense and specified items were $0.82 exceeding our previous guidance range. On a GAAP basis, earnings per share were $0.66 Total sales in the quarter increased 5.1% on an operational basis, which excludes an unfavorable 0.7% impact from foreign exchange. Excluding TRICORE and Trilympics, which are experiencing a loss have more than $2,600,000,000 up nearly 13% on an operational basis. In the U. S, HUMIRA sales increased 16% are driven by continued market expansion and share gains in dermatology and gastroenterology. We've been particularly impressed with HUMIRA's performance in the gastro segment following our strong UC launch where we've already gained significant share globally. International HUMIRA sales grew are 10.1% on an operational basis. As expected, we saw a modest negative impact from tender timing in some markets, particularly Brazil. Looking ahead to the Q3, we expect global HUMIRA sales to grow in line with our updated full year outlook of 14% to 15%. Androgel sales were $258,000,000 in the quarter, down 6.5% versus the prior year. Androgel continues to maintain roughly 60% share of the testosterone replacement market. Sales this quarter reflect the year over year impact of rebating actions implemented in mid-twenty 12 and certain account losses. We are now forecasting full year Androgel sales to be roughly flat versus 2012 levels. Moving on to our lipid franchise, we saw stronger than expected performance in the Q2, particularly with Niaspan and Trilipix. U. S. Sales of Niaspan were $232,000,000 up 10% versus the Q2 of 2012. TRICORE Trilympic sales were $107,000,000 down 66% due to the entry of generic Fenofibrate in November of 2012. We continue to forecast 20 13 sales of less than $1,000,000,000 for our combined lipid franchise, reflect a decline of roughly $1,200,000,000 As we've said previously, this decline will be most pronounced are in the Q4 of this year due to the expected entry of generic competition for Niaspan in September and the recently announced entry of generic Trilipix were recorded earlier this month. Global sales of Lupron were nearly $200,000,000 in the 2nd quarter. Lupron continues to hold a leadership position and maintain significant share of the market. For the full year 2013, we expect Lupron sales to be roughly in line with 2012. U. S. Sales of Synthroid were $153,000,000 in the quarter, up strongly. Synthroid maintained strong brand loyalty and market leadership despite the entry of generics into the market many years ago. For the full year, we expect to see have demonstrated the strength of our sales growth in the mid single digits. U. S. Sales of Creon were $106,000,000 in the quarter, up more than 20% compared to the second in the quarter was impacted by the launch of our new 36,000 lipase unit dose. Creon maintains market leadership in the pancreatic enzyme market, where we continue to capture the vast majority of new prescription starts. For the full year 2013, we expect Creon sales to grow at a double digit pace. With Parkinson's disease, which is currently approved in Europe and other international markets performed well in the Q2 with growth of nearly 23% on an operational basis. We are pursuing regulatory approval for this product in the United States and expect a PDUFA date in the first half of twenty fourteen. Moving on to our P and L profile. 2nd quarter adjusted gross margin ratio was 80.7 are in the range of 10% excluding intangible asset amortization and other specified items. This was above our expectations for the quarter Due to the impact of product mix across our portfolio, including better than expected performance of our lipid franchise, which as you know include some of our highest margin products. Adjusted R and D was 14.8% of sales in the 2nd quarter, are in the range of $1,000,000 driven by increased funding of our mid and late stage pipeline assets and the continued pursuit of additional HUMIRA indications. Adjusted SG and A was 27.9 percent of sales in the 2nd quarter, reflecting heightened investment across our growth brands. Net interest expense was $75,000,000 in the quarter and other income was $7,000,000 The adjusted tax rate was 22.3% Turning now to our full year 2013 outlook, we are raising This updated guidance contemplates sales of approximately $18,500,000,000 reflecting strong balanced performance across our portfolio, are citing the decline in lipids from generic competition. Included in our sales guidance is an estimated negative impact from exchange of approximately 1%. Given our performance year to date, including the better than expected sales of our high margin lipid franchise, we are now forecasting a gross margin have a strong balance sheet and cash flow of around 77.5 percent for the full year excluding non cash amortization and specified items. 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 approximately 15% of sales, reflecting funding actions in support of our pipeline. And we now expect SG and A expense to be around 26.5 percent of sales in 2013, reflect increased investment for continued growth of our key brands including HUMIRA, where we've identified opportunities to further increase penetration are interested in the progress we made in the quarter. We continue to forecast net interest expense of approximately 300,000,000 are in the range of $2,000,000 for the full year and we expect an adjusted tax rate of approximately 22% in 20.13. Our adjusted earnings per share guidance range excludes $0.41 per share of non cash intangible amortization expense, acquired in process R and D and certain specified items primarily associated with separation and ongoing restructuring activities. We expect that earnings per share will be $2.66 to $2.72 on a GAAP basis. Regarding our Q3 outlook, we expect adjusted earnings per share of $0.76 to 0 point 78 dollars This excludes roughly $0.13 of specified items and non cash amortization, resulting in a 3rd quarter GAAP EPS of 0.63 were $0.65 Our 3rd quarter outlook reflects sales growth in the low single digits on a reported basis, for the quarter to be somewhat above our revised full year guidance and we expect R and D and SG and A as a percentage of sales to be in line with our revised full year outlook. So in conclusion, we're very pleased with AbbVie's performance in our 1st 6 months as an independent company as well as our outlook for the remainder of the year. And with that, I'll turn it back over to Larry. Thanks, Bill. We'll now open the call up for questions. Ilan, we'll take our first question. Thank you. And our first question today is from Jamie Rubin from Goldman Sachs. Couple of questions for you, Scott. You're on the phone, right? You there, Scott Brown? Okay, great. So a couple of pipeline related questions. Based on your now 2Q 2014 filing timeframe for your all oral hep Can you confirm that you are now neck and neck with Gilead in this horse race of bringing the all oral are in the market. And really most importantly, if you could help us to think about what's the trajectory might look like, because clearly initially I think people think there's a lot of low hanging fruit And how are you and Gilead going to compete in the marketplace? I also think the market assumes that they're going to get the lion's share of the market. And then secondly on ABT199, the potential registrational trial, Can you tell us if the FDA does accept that filing, what is the timeframe for bringing ABT199 to the market? And now since Pharmacyclics J and J have already filed CLL indication, how do you see that marketplace shaking up? It seems that it's getting somewhat are crowded. Thanks a lot. Yes. Sure thing, Jamie. Why don't I go ahead with the timing and such on the HCV and then I'll Rick to talk a little bit about the market potential. So as you said, we're on track for a Q2 2014 filing acknowledging it's a very are in a tight race. We're feeling very, very good about our position. We're very pleased with the progress on the program and certainly it is a top are priority for us to be able to move as quickly as possible on the filing, but things are going extremely well in that regard. Jamie, this is Rick. As far as the market launch, I mean, obviously, we're planning These two products will launch very close to one another. And we do agree there will be a fair amount of pent up demand. So We're certainly building up all of the assets we need to be in a position to be able to have an aggressive launch and feel good about our ability Excuse me, I have a little bit of a cold, our ability to be able to compete effectively in this market. I'll go back to the 199 question. Yes, sure. So with regard to 199, yes, we've just started a large trial looking at ABT199 as a single agent in the treatment of relapsed refractory CLL patients who have the 17p deletion mutation, which is certainly traditionally a very Hard population to treat. Indeed if this trial is acceptable as a registration trial, this could allow us to commercialize ABT199 are in the 2016 timeframe. Now, Jamie, as you said, certainly there's a lot of activity going on with regard to Development in the CLL space, we feel that with the exquisite activity of ABT199 its ability to rapidly reduce tumor burden. It really provides us a number of opportunities to really transform the way this disease is treated, are looking at different paradigms in terms of raising the bar on response with measures such as Minimal residual disease, where you are clearing the body of tumor to a greater extent than we see with traditional response endpoints and also having the potential to perhaps move away from Chronic therapy into more limited duration and bringing the concept of remission into CLL. Thank you. Thank you. Our next question is from Greg Gilbert from Bank of America Merrill Lynch. Thanks. Good morning. Just a couple. Hoping you could quantify that modest Tender timing effect on HUMIRA sales. Secondly, sort of a bigger picture question on long term growth for HUMIRA. As biosimilar versions of products that will compete with HUMIRA become available around the world. Curious on your view as to whether we will see more or less therapeutic substitution Relative to what we've seen in the small molecule world? And then I have one follow-up. So Greg, it's Bill Shaeff. The tender effect internationally was about 4 So if you normalize for that ex U. S. Growth would have been about 14%. Thanks. Greg, this is Rick. On the therapeutic substitution, I mean, certainly as we've said all along, we don't believe that In the area of biologics, we'll see therapeutic substitution that's similar to oral solids, that's for sure. And we still believe that Based on the safety track record of a product like HUMIRA, the broad indications and all the other attributes of that product, We would see certainly more modest kinds of erosions compared to anything that you'd see in solid fields. So safe to say you don't expect biosimilar versions of other products to create a negative growth scenario for HUMIRA, even if the HUMIRA biosimilar is the year is off? Yes. I don't believe it will have a dramatic impact on HUMIRA as an indirect biosimilar competitor. Well, especially if it's A biosimilar to REMICADE for instance, which is an infused product relative to an injectable. So, would think that Anything in that space would not have an impact on injectables like HUMIRA and or Enbrel. And lastly, it's a question on the testosterone market. You're obviously are there and maybe for some time depending on what you do on biz dev and lifecycle management. What's going on in that marketplace Other than jockeying for contracting physician formulary positions, what's up with the growth rate there? And what can get that turned around? Thanks. So the growth rate is it's Bill Chase again. The growth rate has definitely slowed down versus what we saw last year. The growth in the market year to date through May is around 9%. We are seeing some account losses due to competitive pricing. But that said, we're maintaining over 60% share. There's a fair amount of churn in the market. We still think Androgel is a very, very important brand And we're confident that the sales remain flat through the year. The 1.62% version of the product now accounts for about 2 thirds of the overall AndroGel are franchise as well. Thanks, guys. Thank you. Our next question is from David Risinger from Morgan Stanley. Yes. Thanks very much. I have a couple of questions. First, in terms of our model, the international HUMIRA sales were slightly Above the U. S. Were slightly below. I'm just hoping that you could provide a little bit more color are speaking in the year ago quarter or in this quarter and how should we think about second half U. S. Sales Growth for HUMIRA. And then my second question is with respect to DUADOPA, could you just update us on The potential approval timing and whether to expect a panel. Thanks very much. So David, this is Bill Chase, on HUMIRA, I think the clearest thing to look at is the script trends, which in the quarter were about 10% to 11% up on HUMIRA. We obviously did have an impact Price, so when you add it up that 16% was impacted somewhat by some channel changes in the quarter. We're very, very pleased with that growth and we're seeing no slowdown whatsoever in the United States. For the full year, we expect growth to be in the mid single digits, roughly split between price and volume in the U. S. And things are going very, very well. You said mid single digit? Well, the outlook for HUMIRA globally is 14% to 15% This year and as Bill said in his remarks, in the Q3, we also expect global growth to be in the 14% to 15%. But U. S. Specifically David, there really shouldn't be a whole lot of deviation from Scripps plus price. And as Bill mentioned, there's obviously always a little bit Puts and takes with the channel as well. And David, the U. S. Growth is mid double digits not mid single. I'm sorry. Got it. Made you a little nervous there for a sec. Sorry about that. And David, hi. Scott Brunn. I can take the DUOPA question. So as you know with Duolc, we've got a somewhat unique drug device combination system. Consequently, we did have some data are many questions of an administrative nature from FDA. We work through those, address them. The NDA is filed. We're on a 2014 timeline. Right now, We don't have any sense that there is going to be a panel, but certainly as the review progresses, we'll be able to update you on that front. And in terms of the 2014 timeline any more clarity first half, second half? I think we could go ahead and say first half on that. Thank you. Thank you. Our next question is from Steve Scala from Cowen. Thank you. I have two questions on HUMIRA. You mentioned that the company has identified opportunities to further penetrate existing markets. I'm wondering if you would elaborate And quantify the magnitude of those opportunities. And secondly, Evvi has previously said that HUMIRA Has a patent portfolio including over 250 granted or pending patents. Are there any patents In that estate that if investors knew their full nature and content, then investors would have a substantially Different view of the duration and potential of the franchise beyond 2016 2018. So I'm not asking for you to identify the intellectual property or tell us what it is. But since you know what it is, I'm just wondering whether we would have a very different view if we were aware of that data. Thank you. Okay. This is Rick, Steve. So first on the penetration, we've talked more we've talked extensively about These markets still have penetrated at relatively modest levels. So a lot of our activity that is really driving the growth of HUMIRA across Most indications is driven to a great extent by increased penetration and new indication. So I don't know that I can quantify it for you much more than that, but I'd say it's a substantial part of what we do see in growth As well as in certain markets, we're seeing some additional market share. As far as the patents are concerned, obviously, that's a highly sensitive issue for us from a competitive standpoint. So I wouldn't give you any more color other than to say, obviously, we're looking at our patent estate in a very appropriate and aggressive way that we will ensure that no one violates those patents. And I'm probably not willing to give you much more color than that. Thank you. Thank you. Our next question is from Jeff Holford from Jefferies. Good morning. Thanks for taking my questions. So just first of all on HUMIRA following the AXIOT SPA panel, Do you have any different view coming out of that on what the potential bolt on indication revenue potential is for HUMIRA? Just secondly, Do you have in mind based on what you know about Phase 3 readouts when you would actually present your Phase 3 registration The set of data for hep C, would we expect EASL next year to be the most likely venue for that? Thank you. Why don't you cover HCV first? Hi, Jeff Scott Run. Why don't I go ahead and take the HCV first? So, yes, certainly, I mean, it is our plan to have some significant data disclosures of the Phase 3 program at EASL for next year. Certainly, our full data disclosure plan is still in the works. And then Jeff on Axiospa, Axiospy is a relatively modest opportunity from our perspective in the U. S. We'd still like to get a label claim going forward, But it's something less than $100,000,000 Really the big opportunity for Axiospa is in Europe where it's already approved. And so it doesn't have any kind of significant magnitude of impact on the overall growth of HUMIRA. Thanks very much. Thanks, Jeff. Thank you. Our next question is from Chris Schott from JPMC. Great. Thanks very much. Just two questions here. First on ABT-one hundred and twenty six, can you talk a little bit about the doses you're looking at in the Phase 2b Relative to the data that was presented a few weeks ago? And then secondly on that product, it seems like the use here most likely might be in combination with Aricept in Alzheimer's. Can you just talk about your confidence that there'll be an additive benefit on top of Aricept? And I think the data so far have been more in a monotherapy setting. And then the final question, coming back to the biosimilar REMICADE And the recommendation of a full label there. Were you surprised at all with the full label? And what are the implications of that for HUMIRA As we think about potential biosimilar competitors, the amount of clinical work they'll need to get a broad label as we look at the European market? Thanks very much. Why don't I go ahead and scupper on Chris on the ABT-one hundred and twenty six. So as we referenced as you referenced, we recently presented Proof of concept data looking at ABT-one hundred and twenty six as monotherapy in the mild to moderate Alzheimer's disease segment. And certainly what we saw there prompted us to move into our Phase 2b trials. I will say we are studying a higher dose range. I don't want to specifically disclose the doses that we're looking at right now because this as you know is Quite a competitive area. But the Phase 2b program has both monotherapy as well as Add on to Aricept's trials. Certainly with regard to the mechanism of We certainly think that there is potential for add on or synergy With regard to cholinergic mechanism by which Aricept results in its activity. Okay. And Chris, this is Rick on the biosimilar. I'd say we were surprised by the recommendation being broad without at least to our knowledge Any clinical data to be able to support it. I'd say our position is we don't think that's in the best interest of patients. It's clearly unprecedented to have a biologic that you're going to get ultimately an indication for that you've never studied in humans. And I'd say most of the feedback we get from physicians in Europe, particularly GI physicians, I'd say is that they want to see data in here. So We'll have to see how it plays out. There's a lot of time between now and the time. HUMIRA will Potentially face biosimilar competition, so it's a little early to speculate how that might impact HUMIRA one way or another. I think we'll have to see how it plays out. Thank you. Thanks, Chris. Thank you. Our next question is from Mark Goodman from UBS. Yes, good morning. So you talked about extra spending because you're doing better on the top line. So that spending looked like it was in $100,000,000 range in the quarter and it's going to be several $100,000,000 for the year. So is it all HUMIRA or are you going to spend on other things? Are you increasing sales forces there? Or is it just marketing? And can you give us a sense, is this Sales force is there or is it just marketing? And can you give us a sense, is this U. S. Or is it overseas? Second question is on HUMIRA. Can you just give us a sense of the GI part of it, the indication and how much that's helping? If you can quantify it, that And then 3rd on Synagis, can you just help us understand how this product does quarter What kind of timing we need to be thinking about just in modeling it quarter to quarter? And what happened this quarter relative to last quarter? Thanks. Okay, Mark. It's Bill Chase. On the spending, you're correct. In our guidance, we are raising profile for both R and D and SG and A. And what you're seeing there is really 2 different things. First of all, on the R and D front, we've got A lot of programs that are very, very exciting. We're moving to continue to develop those as rapidly as we possibly can and we think that's the right thing to do for the long On the promotional front, on the SG and A front, I think the strong performance of our growth brands has shown that That's been very, very effective use of investment and we are going to continue to invest heavily in those brands to make sure that we reach their full year potential. So that's what you're Seeing the expenses really on a global basis on the marketing side and certainly on the R and D side, it's across the entire pipeline. Synagis, you had asked about the timing of the quarters. What you'll see with this product is typically the sales are more heavily weighted to the 4th and 1st quarters of the year. This year was obviously a much this quarter was obviously much lower based on that gating. But Typically the bulk of those sales fall in the 4th and first quarters. And then with GI, again, the The gastro segment winds up being probably the fastest growing segment of HUMIRA. We've been very, very pleased with both the market growth and our share growth where we're actually capturing share and that's going to be a big part of the HUMIRA story as it develops over the next couple of years. Yes. The blended gastro share for us in the U. S. Is up about 5 points and a lot of that has to do with not only the strength in the UC launch, but just in general the marketplace around Astro, in ex U. S. Markets, in Europe in particular, we've probably gained about a 20% share already in the UC space. So the launch of UC is off to a great start for us. Our next question? Our next question is from Tony Butler from Barclays. Thanks very much. Scott, could I get you to outline for us the HCV program in Japan? Rick, may I ask you a question around the market in HCV in the U. S. For do you know the net number of patients that are actually treated today Under the care of a physician. And then finally, Bill one for you. The $70,000,000 outlying payment was not counted in the non GAAP earnings. I think that obviously was cash. And so I'm just curious is that would that be a consistent practice that AbbVie would do with respect to Royalty payments and upfront payments for collaborations not only in this quarter, but in the future? Thanks very much. Tony, Scott Brunn. I'll start with the HCV Japan question. So as you know, the epidemiology of HCV in Japan is very Specific, very highly weighted to genotype 1b and then genotype 2. As a consequence, our regimen under Phase 2 study right There is a co formulation of the protease inhibitor ABT-four fifty with the NS5A267 and the ritonavir boost are in the 2 pill once a day regimen. We're far advanced in our Phase 2 program and in ongoing discussions with PMDA regarding And on the Alvheim payment, you're correct. IPR and D, we treat as a item which we exclude from our non GAAP estimates and that is our practice. And then Khalid as far as number of and patients being treated. The data obviously moves around a little bit, but the latest data that we've looked at historically, if you look at 2011, Roughly 175,000 patients in the G7 were treated. We expect that to grow with these next generation products to are somewhere in the neighborhood of 2x that based on the capacity that we see in the marketplace from a clinical standpoint. Thank you very much. Thanks, Tony. Thank you. Our next question is from Alex Arfaei from BMO Capital Markets. Good morning. Thank you for taking the questions. First on AAVT-one hundred and ninety nine, based on what we saw at ASCO, you seem to have a pretty compelling argument in the relapsedrefractory CLL are I'm just wondering if there's been any progress on tumor lysis syndrome, the concern there. And then a follow-up on the Galapagos Jack Kwan, the Phase 2a in RA at Eulor was a bit disappointing. I'm just wondering if you could just comment on the potential of that drug in RA from your perspective. Thank you. Sure. Scott Brunson. So let me start with the ABT199. Yes, we agree that actually 199 has promise not only in relapsing refractory CLL, but across a number of hematologic malignancies. With regard to tumor lysis syndrome, which is a direct consequence of the exquisite potency of 199, We have been enrolling CLL patients with a revised dosing schedule where we started a lower dose And ramp up at a more slow rate and so far so good with regard to the patients that we have been treating under that new protocol. So again, we have a number of CLL studies that are actively enrolling right now And we will continue to accrue more data with this new approach. With regard to the Galapagos data, we're certainly not are disappointed in the results. I think you need to be aware that the data that was generated included relatively small cohorts of 15 to 20 patients. And while, yes, You can single out specific response metrics and call bring up some questions with regard to what they mean. If you look in aggregate across all of the measures included in the study, the DAS Across all of the measures included in the study, the DAS28, the various ACRs, we feel that there is a have a very clear dose response relationship that again we're going to characterize much more clearly in the large Phase 2b Study that will include a that includes rather a variety of doses. Thank you. Thanks, Alex. Operator, I think we have time for one more call Our question, sorry. And our final question today is from Damian Conover from Morningstar. Great. Good morning. Thanks for taking the questions. Sure. Just two questions. First Given the recent recommendation by the U. S. Preventative Task Force to provide hepatitis C diagnostic Testing, I was wondering if you thought there would be an increase in the relatively low amount of patients that are currently diagnosed? And also whether or not you think Medicare will start to pay for the sort of diagnostic testing outside Folks that are currently higher risk patients. And then just one other quick question on The Patient Centered Outcome Research Institute, one of their first head to head studies is looking at comparative from antitinanalpha versus steroids for Crohn's and UC. And I just wanted to see how well you feel HUMIRA is positioned against steroids? And then also just generally speaking within this patient group, these patients have refractory to steroid treatment or They generally move right on to HUMIRA. Thank you. Okay. Scott Braun, why don't I go ahead with the HUMIRA question. So Certainly, I can't speak to the details of the comparative effectiveness trial that you're referring to. But Certainly, we feel the data that we have generated to date demonstrates the very compelling activity that HUMIRA provides in these steroid refractory patients. I think you need to be somewhat careful depending on the design of these Periative effectiveness trials. Certainly, we've seen other type trials that Again with real world experience, if you're not carefully randomizing there can be biases with regard to how patients are included on Certain treatments that could limit interpretation. And again, I apologize I can't provide more specifics on this design since I'm not familiar with it. Okay. And Damian, this is Rick Gonzalez. As far as the HCV diagnosis, I mean, it's fairly well known that there are a large number of patients in the G7 that are still undiagnosed in the U. S. As well. And so I think screening more patients to find out those patients that are infected are a good thing for both the patients as well as the market itself. I think as far as the expansion, I mean, clearly, we could see greater numbers of patients Being treated as more and more physician capacity comes online and we'll have to see how that plays out over time. Even without that, This is a very, very large market. So, and your final point was as far as Medicare paying for it, I think that's a little tough for us to call one way or another. I mean with the recommendation, I think there's certainly a higher likelihood of that, but a A little hard to judge at this point. Great. Thank you. Thanks, Damian. 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, go to AbbVie's Investor Relations website at www.abbvieinvestor are in the range of 72,613. The audio replay will be available until midnight on Friday, August 9. And thanks again for joining us today. If you have any follow-up questions, feel free to give the IR team a call. Thanks. Thank you.