Earnings Call: Q1 2013

Apr 26, 2013

Good morning and thank you for standing by. Welcome to the AbbVie First Quarter 2013 Earnings Conference Call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question 9,186,630 and reference to AbbVie call. This call is being recorded by AbbVie. With the exception of any by AbbVie. It cannot be recorded or rebroadcast without AbbVie's expressed written permission. I would now like to introduce Mr. Larry Pippo, Vice President of Investor Relations. Good morning and thanks for joining us. Also on the call with me today 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 Laura Schumacher, Executive Vice President of Business Development, External Affairs and General Counsel and John Leonard, Senior Vice President and Chief Scientific Sir, today Rick will discuss AbbVie's results from the Q1 as well as highlights from our commercial portfolio and pipeline. Following Rick's comments, Bill will give a more detailed review of the quarter and then provide an overview of our outlook for 2013 and the Q2. Following our comments, we'll take your questions. Before we get started, some statements may be forward looking statements For purposes of the Private Securities Litigation Reform Act of 1995, the words believe, expect, anticipate, Object and similar expressions, among others, generally identify forward looking statements. 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. Such risks and uncertainties include, but are not limited to, challenges to intellectual property, competition from other products, Difficulties inherent in the research and development process, adverse litigation or government action and changes to laws and regulations applicable to our industry. Additional information about the economic, competitive, governmental, technological and other factors that may affect AbbVie's operations It's set forth in Item 1A Risk Factors in our 2012 Annual Report on Form 10 ks, which has been filed with the Securities and Exchange Commission. 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 in our earnings release and regulatory filings from today, which can be found on our website at www.abbvieinvestor.com. So with that, I'll now turn the call over to Rick. Thank you, Larry. Good morning, everyone, and thank you for joining us for AbbVie's Q1 20 13 earnings conference Call. Today, we're pleased to report strong results in our Q1 as an independent company, with adjusted earnings per share of $0.68 Exceeding our guidance range for the quarter, we delivered this strong performance despite the decline in TRICORE sales due to generic competition. During the quarter, we executed on AbbVie's key priorities. We drove continued growth of HUMIRA with More than 17% global operational growth. We advanced our pipeline with continued progress across our mid and late stage R and D programs. This our Phase 3 HCV program, which is well underway and enrolling rapidly and we delivered return to our shareholders through a strong dividend. As we've said before, 2013 is a year of transition as we absorb the impact from the loss of exclusivity of our lipids franchise. The 2013 is also a year of execution across both our commercial portfolio and our pipeline and we're off to a strong start on all fronts. As I mentioned, we continue to see strong momentum from HUMIRA, particularly robust growth in dermatology and GI. Hi. Our global launch of UC, Inc. Is going well with strong uptake in both the U. S. And Europe. Beyond UC, we continue our development efforts For HUMIRA, with several new indications currently in late stage trials, we expect a cadence of data, registrations and regulatory approvals over the next few years. This includes our U. S. Regulatory application for AxialSpot, which is currently under review. And we also expect to submit our U. S. Regulatory application for pediatrics Crohn's disease in the coming months. HUMIRA currently offers the broadest label in the category. Several of the new indications we are pursuing will be unique, unique to our label and will help us further differentiate from competitive products And add to the sustainability and future growth of HUMIRA. All told, we expect new indications, including those approved in 2012 To add roughly $1,500,000,000 in incremental global peak year sales. As we track new product entrants, performance It continues to be in line with our expectations with HUMIRA continuing to gain or hold market share across all indications. Bill will talk more about HUMIRA and our other product performance in the quarter as well as our expectations for the year. But it's fair to say that HUMIRA is off to a strong start this year, well on track to achieve our sales growth outlook for the product in 20 13. Now moving to our pipeline. As a biopharmaceutical company advancing our pipeline is paramount to our long term success. We're focused on delivering innovative therapies to address the most pressing areas of unmet clinical need and we're encouraged with our progress. Over the past year, we've advanced 2 promising programs into Phase 3 development, including our interferon free HCV program, which I'll discuss in more detail Here in a moment. We also expect to advance 7 additional programs into late stage clinical trials over the next 12 to 18 months. For example, atrasentan, our internally discovered compound in development for diabetic kidney disease, Results of our Phase 2b study at the European Renal Association meeting next month and we're on track to initiate the Phase 3 program in the first half of this year. ABT199, our next generation BCL-two inhibitor in development and partnership With Roche Genentech has shown strong activity in hematological malignancies. Earlier this month, we presented Phase 1 data showing patients With chronic lymphocytic leukemia treated with ABT199 experienced rapid tumor reduction. We'll present additional data at the upcoming ASCO and EHA Meetings in June. As discussed on our last quarterly conference call, late last year, we paused dose and recruitment in several ABT199 studies as we work to refine the dosing and monitoring approach for patients at risk for Tumor lysis syndrome. We've recently proposed an amended study protocol for ABT199 in CLL. Upon approval by the FDA, dose escalation and new patient recruitment will resume. It remains our goal Phase 2 and Phase 3 studies in relapsed or refractory CLL patients this year. We continue to have a high level of enthusiasm for this compound, which we believe holds promise in a number of hematological malignancies. ABT-eight eighty eight is another compound within our oncology pipeline poised to advance into Phase 3 in early 2014. ABT-eight eighty eight is a PARP inhibitor. It has shown promise in enhancing the effectiveness of Common cancer therapies such as chemotherapy and radiation. It's currently in Phase IIb for BRCA deficient breast cancer and other ABT-one hundred and twenty six is our Alpha 7 NNR Agonist currently in Phase IIb trials for Alzheimer's disease and cognitive impairment associated with schizophrenia. Data from our Phase 2a proof of concept study in Alzheimer disease will be presented at the Alzheimer's Association International Conference in July and will present results from the schizophrenia study in 2014. Provided our Phase 2b clinical work is successful, we'll initiate Phase 3 trials in both in 2014. ABT-seven nineteen, our novel investigational compound for the prevention of acute kidney injury. Additional confirmatory Phase 2b study is currently ongoing and will enable Phase 3 initiation in early 2014. Helagolix is a compound with a unique profile currently in development for endometriosis and uterine fibroids, Both prevalent conditions with few treatment options. Our Phase 3 program for endometriosis is ongoing And we recently initiated a Phase 2b study in uterine fibroids. Again, pending success in our mid stage trial, The fibroid program is also poised to advance to Phase 3 next year. So as you can see, we have a number of exciting programs on track to advance to Phase development over the next year or so. In addition to these assets, we have several other promising compounds already in late stage development. This includes declusimab, which is in Phase 3 development in partnership with Biogen for relapsing remitting multiple sclerosis. Data from the first of 2 registrational trials, the SELECT study, were recently published in The Lancet and results of the 2nd year extension of that A study called Selection, we recently presented at the American Academy of Neurology meeting. We expect results from the 2nd pivotal study in 2014. And finally, a central program within our late stage pipeline is our interferon free HCV combination. All the Phase 3 studies that will be included in our initial registration are now underway and enrolling very well, in fact, ahead of expectations. As we said before, the primary focus of our program is on delivering interferon free treatments that offer patients the best chance for cure. Our approach is to maximize SBR rates across various patient types from naive patients to the most difficult to With the simplest possible therapy. Earlier this week at the EASL meeting in Amsterdam, we presented data from our large Phase IIb aviator study, showing conditions with reduced response to interferon based therapies such as the level of fibrosis or IL-twenty eight B genotype do not impact response to our interferon free therapy. We expect our Phase 3 study to begin to read out later this year and into 2014, Supporting registration submission in mid-twenty 14, given that our compounds have been granted fast track status by the FDA, We expect market entry in early 2015. So in summary, we've delivered a strong first quarter and we continue to drive strong performance with our flagship product HUMIRA as well as other products in our specialty focused portfolio. And we continue to make notable progress in advancing our pipeline, which we believe includes a number of exciting programs that have the potential to address significant medical need. For a company of our size, the potential sales projections from our late stage pipeline Represent an opportunity for meaningful revenue growth beginning in the 2015 timeframe. With that, I'll turn the call over to Bill. Bill? Thank you, Rick. Today, I'll Strong first quarter we delivered. Total sales increased 5.1% on an operational basis, excluding an unfavorable 1.4% impact from and Exchange. Excluding TRICORE Trilympics due to loss of exclusivity, sales increased 8.6% on an operational basis. The Q1 adjusted gross margin ratio was 76.2 percent excluding intangible amortization and other specified items in line with our expectation This reflects both the loss of exclusivity within our Lipid franchise as well as the effect of unfavorable foreign exchange on the ratio. Adjusted SG and A was 27.9 percent of sales in the Q1, including continued investment in our growth brands and This level of investment was in line with our expectations for the quarter and we remain on track for a full year adjusted SG and A of around 26 percent of sales. Adjusted R and D was 14.6 percent of sales in the first Quarter, reflecting funding actions in support of our emerging mid and late stage pipeline and the continued pursuit of additional HUMIRA indications. Net interest expense was $66,000,000 in the Q1 and other income was $18,000,000 The adjusted tax rate was 22.2 percent in the quarter. 1st quarter adjusted earnings per share excluding non cash intangible amortization expense and specified items were $0.68 which exceeded our previous guidance range. On a GAAP basis, earnings were $0.60 per share. Turning to product sales in the quarter, HUMIRA delivered global sales of more than $2,200,000,000 up more than 17% on an operational basis. In the U. S, HUMIRA sales increased nearly 24%, driven by continued market expansion and share gains in the derm and gastro segments. Internationally, HUMIRA sales grew 13% on an operational basis and nearly 11% on a reported basis as a result of strong market growth and some modest benefit from tender timing. As we look to the Q2 for international HUMIRA sales specifically, we'd expect a modest negative impact from tender timing in some markets, particularly Brazil. On a global basis, however, we expect low double digit sales growth for HUMIRA in the 2nd quarter, in line with our full year outlook. Androgel sales were up low single digits in the quarter following strong 2012 performance. Energeal continues to maintain more than 60% share of the testosterone replacement market. Growth in the quarter was impacted by a moderation in the rate of overall market growth as well as the year over year impact of rebating actions implemented in mid-twenty 12. Based on current trends, we're forecasting Androgel sales growth in the mid single digits for 20 Gene, global sales of Lupron were approximately $180,000,000 in the first Quarter. For the full year 2013, we expect Lupron sales to be roughly in line with 2012. Moving on to our lipid franchise. TRICORE TRILIPIC sales were $128,000,000 in the quarter, down roughly 50% due to the entry of generic pheno Fibrate in November of 2012. U. S. Sales of niaspan were $186,000,000 in the quarter, down 2.6 As a reminder, we're forecasting 20 13 sales of less than $1,000,000,000 for our combined lipid reflecting a decline of roughly $1,200,000,000 which will be exhibited more acutely in the second half of the year. We plan to offset our lipid franchise decline through growth of key marketed products, including HUMIRA. Moving on to Synthroid, where U. S. Sales were $119,000,000 in the quarter. 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 Synthroid sales growth in the mid single digits. U. S. Sales of Creon were $90,000,000 in the Q1, up more than 32% compared to the Q1 of 2012. Preon maintains market leadership in the pancreatic enzyme market, where we continue to capture the vast majority of new prescription starts. This quarter, we received FDA approval for a new dosage strength of Creon. The new 36,000 lipase unit dose is the highest available, which may help to reduce pill burden for some patients. This approval further strengthens our leadership position Because we are able to offer patients the broadest range of dosage strengths in the class. In 2013, we expect U. S. Creon sales to grow at a low with growth of more than 8%. Duodopa is currently approved in Europe and other international markets. We completed registrational studies last year Firming our adjusted earnings per share guidance of $3.03 to $3.13 This guidance continues to contemplate sales somewhat above $18,000,000,000 reflecting growth from key brands offsetting the expected decline in lipids. Included in our sales guidance is an estimated negative impact from exchange of slightly less than 1%. We're forecasting a gross margin ratio of around 76.5% for the full year, excluding non cash amortization. This forecast reflects both the impact of loss of exclusivity events and the effect of unfavorable foreign exchange. We anticipate R and D expense to be approximately 14.5 percent of sales, reflecting funding actions in support of our emerging mid and late stage pipeline and the continued pursuit of additional HUMIRA indications. And we expect SG and A to be around 26% of sales. We're forecasting net interest expense of approximately $300,000,000 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 $0.37 per share of non cash intangible amortization expense and certain specified items primarily associated with separation related costs and ongoing restructuring activities. Earnings per share would be $2.66 to 2 point Finally, we expect approximately $6,000,000,000 of operating cash flow in 2013. Regarding our 2nd quarter outlook, we expect adjusted earnings per share of $0.78 to 0 point The $0.12 of specified items and non cash amortization, resulting in a second quarter GAAP EPS of $0.66 to 0.68 Our 2nd quarter outlook reflects sales growth in the low single digits on a reported basis, Including a modest impact from negative exchange, we expect the gross margin ratio for the quarter to be somewhat above our full year guidance. And we expect R and D and SG and A as a percentage of sales to be in line with our full year outlook. So in conclusion, we're pleased with our Q1 performance as well as our outlook for the remainder of the year. With that, I'll turn it over So Larry. Thanks, Bill. We'll now open the call for questions. Elon, we'll take our first question. Thank you. Our first question today is from Jamie Rubin from Goldman Sachs. Thank you. Just a couple Questions. First, can you hear me okay? We can. Okay, great. So on HUMIRA sales were up 17% on an operational basis. Bill you talked about tendering That could impact international sales, but still your guidance for the full year of low double digit growth does assume A decline in the pace of growth throughout the year. And I'm just wondering if you can talk about why you expect such a slow Down or if it's just too early in the year to make adjustments to your forecast? And secondly, if Don Leonard is on the phone, Wanted to ask a question on ABT199. And it sounds like you're making progress with the FDA in refining the trial so that Amy, it's John Leonard. I'll go first. Thanks for the question. Just for everybody on the phone to remind you, we had At the very end of last year, some instances of tumor lysis syndrome in some of our early studies with ABT199, We voluntarily paused enrollment in some of the studies that we were doing and with the FDA went on partial clinical hold for the CLL studies. In the last couple of months, we've very carefully gone back retrospectively looking at all of those patients to understand what might be Risk Factors for TLS and now I've been working with the FDA. So let me give you a sense of exactly where we are. We've identified risk factors that we think are clearly related to the tumor burden itself. In other words, those Patients that experienced any evidence of TLS all had large tumor burdens associated with it. And with that, we've taken that into consideration going forward. So I'm pleased to report that is a multiple myeloma non Hodgkin's lymphoma. We've resumed enrollment. So it's actively going on. And we're in the very final stages of Working with the FDA to resume enrollment in the CLL studies. Essentially what's going on is some final work to refine the actual prophylactic Thank you, Regimen, for handling some of the well known side effects of TLS. I think to your question, Jamie, we're pretty confident that One can step through dosing in a graded fashion and have tumor die at a controlled rate and with well known, well characterized Prophylactic measurements or measures, we believe that we should be able to readily handle TOS. Okay. Jamie, this is Rick. So let me answer your HUMIRA question. Certainly, we're off to a strong Start. Now one of the things that Bill pointed out in his remarks is we did have some tenders move from Q2 into Q1. So Q1 is Slightly up and we'll see that reverse in the Q2. But all in all, still overall, if you looked at the average, we have very strong growth. We're also only a quarter into 2013, so it's probably a little early to change any projections that we have for the product. But I would suffice to say, We're confident with the performance that we've projected for HUMIRA. We'll just have to see how the rest of the year plays out. Thank you. Thanks, Jamie. Thank you. And our next question is from David Risinger from Morgan Stanley. Thanks very much. Good morning. Good morning. I have Three questions on separate drug candidates. First, and I don't think it's worth going into a lot of detail because there would be too much ground to cover on CV, but if you could hopefully just frame as you see it the timing of launch For your all oral regimen and if you could position that relative To Gilead's timing that would be helpful in terms of the all oral regimen. And then second With respect to ABT199, just curious about whether there's any risk of the lower Dosing constraining the efficacy I. E. Yielding lower efficacy. And then finally with Back to ABT-one hundred and twenty six, I noticed in the press release that you're hoping to start Phase 3 trials Next year, could you just talk about the timing of news flow for ABT-one hundred and twenty six for Alzheimer's and also for Cognition and Schizophrenia. Thank you. Okay. I've been scribbling notes with your questions. Let me take them in reverse. So ABT-one hundred and twenty six, let me give you We're doing Phase 2b work as we speak and that's meant To extend the proof of concept call it 2 way work that was done with modest size studies and limited dosing. So what we want fully flesh out what the efficacy curve might look like and with that characterize even higher doses that we were not in a position to test when we did our first study. 2 different indications, you're correct, Alzheimer's disease as well as cognitive disorders of schizophrenia or CIAS as it's now called. With respect to the news flow, We will share the data from that first 2A study in Alzheimer's disease in July at the Alzheimer's meeting. And our plans right now for the CIS data would be in 2014. We haven't chosen a venue yet, but as we have that obviously we'll share that with you. Let me move on to 199. It's sort of an extension I think of Jamie's Earlier question. And the premise of your question, I think, is a little incorrect, if I understood it. I took it to imply that what we're doing is giving lower doses on a For efficacy, I'd be constrained. That's not what we're doing. Essentially what we're doing is Walking up through lower doses and we're convinced that as tumor dies, The risk of tumor lysis syndrome will recede because there's less material from the tumor to be dealt with. And therefore, you can get to those higher doses that have been associated with the outstanding activity that we've observed today. So It may take a little bit longer to get there, which is what we'll be working out here as we go. But in terms of being able to deliver what want to deliver for these patients. We're very confident we're going to be able to get there. And then finally, HCV was the first question, launch timing. I mean, it's no secret that we're all working as fast as we can. It's a very competitive space. We have an excellent Team on that, they're working flat out. We've communicated along the way that we would expect a very early 2015 launch. We're Confident that we will meet that and we'll see where Gilead is with respect to that timing as well. Thank you. Thanks, David. Thank you. Our next question is from Jeff Holford from Jefferies. Hi, good morning everyone. Thanks My question, just got 2 really. First off on the additional HUMIRA patents that you have submitted to the patent office already. I think they're mainly also just around that as well when you might begin to flush out how new formulation work around HUMIRA when we'll get some more visibility On that too. And then the second question is just some updated thoughts really from you, if you have any on the competitive positioning of your hep C cocktail following recent updates from Gilead and in particular Bristol Myers as well. Thank you. Thanks, Jeff. I'll take the HUMIRA patent And the reformulations and I'll let Doctor. Leonard or Rick go with the latter question. Certainly, we do have a number of patents That we have submitted at this point in time, you're right to characterize those as process, manufacturing, etcetera. Obviously, this is a very competitive space and we're not going to provide a lot of granularity around what Those look like and the timing, but it's safe to say that we do have a fairly significant and robust portfolio of applications in right now, obviously, Trying to do as much as we can to protect HUMIRA in the event that biosimilars Do find a pathway to market. In terms of reformulations, again, a similar story. We've talked About opportunities to enhance the product both from a delivery mechanism as well as the product itself. We're not going to be very specific in terms of what that looks like and the timing, but again we are working On those, we have a window here. Our patents don't expire until later in the decade, and we're putting forth As much effort as we can right now to enhance the product such that if someone is working towards a biosimilar of today's product Jeff, this is Rick. So on the competitiveness of HCV, as I said in my comments, I mean our goal is to basically deliver therapy to the marketplace It gives patients the greatest opportunity to be cured. And we want to do that as broadly as we possibly can across genotype 1 patients. We want to be able to do that for naive patients and we want to do that for even the very difficult to treat Knowles, fibrotic patients, etcetera. And I think as we look at our data and the data we just presented last week at EASL, I think we're demonstrating that. You look at the fibrosis data and the IL-28B data that we presented at that meeting and I think we have outstanding performance, right? It doesn't degrade at all. And so I think we feel very good about the competitiveness of our program based on the objectives that we have for it. And We feel good about the timeline that we're operating against. And so I think we have a high level of confidence in our HCV program. Thanks very much. Thanks, Jeff. Thank you. Our next question is from Gregg Gilbert from Bank of America. Thank you. Good morning. A couple of quick ones. First, is there any color on HUMIRA outside the U. S. You can offer In terms of lumpy ordering patterns or tenders as we progress through the remaining quarters of the year. Secondly, I was curious if you're willing to quantify your royalty Burton on the product and how that changes over time. And third for John, I wanted your take on your strategy for and sort of your Take on overall the breakthrough status versus fast track status that is available to the industry and how that might apply to your novel portfolio? Thanks. Sure. You want me to go first? Yes. Okay. It's John. The regulatory question of breakthrough status. It's an avenue that the Food and Drug Administration has opened up that we think is a valuable one In that, it permits more access and more opportunity to discuss data as it emerges and to have Planning. It doesn't necessarily predict a regulatory outcome, however, or accelerate The review. So we filed for breakthrough status in some of our products and looking forward to hearing from the FDA so that we can as always welcome Additional interaction with them. But I think in terms of planning for review status and all that, I would treat it sure the same way that we always have until now. Greg, it's Bill Chase. On the on your HUMIRA tender question, as you know, Yes, tenders occur fairly choppily throughout the year. If you look at Q1 in international, even if you exclude those tenders, International still had double digit HUMIRA growth. The tenders actually gave it about a 3% lift. We'd see that basically coming out of Q2. And then the second half of the year a little difficult to call at this point in time, but it does have a tendency to move around a little bit on us and we'll certainly give you visibility Okay. So a few percentage points in a given quarter is a decent way to think about it? Yes. I think And Greg, this is Rick on the HUMIRA royalty. We don't provide product Level P and L details. So we're not going to go through the royalties in any level of detail. What I would say is There have been reports put out, Jamie's report in particular that came out recently. I think the premise Behind that report, we would feel is accurate as appropriate. And the range that was characterized in that report of 5% to 10 If you looked at it across on a global basis, I think is a reasonable range to think about it. So I think that should give you some clarity around the royalties And the expiration of those royalties. Thanks. Thanks, Greg. Thank you. Our next question is from Chris Schott from JPMC. Great. Thanks very much. Just a couple of questions here. The first is just with the negative opinion from Xeljanz last night in Europe, Just any thoughts you might have of kind of what that means to the dynamic impact to the HUMIRA business, etcetera? Second question, just coming out of EASL, I think there was some comments the company that they would consider looking for partners in hep C. I just wonder if you could elaborate a little bit on that and talk about any priorities there? And then finally on the oral JAK programs, can you just give us an update of where we are there? And as you maybe as you're considering that, Just maybe longer term, how important do you see having an oral agent in the portfolio? And maybe second, how much differentiation believe you're going to see between the various Jacks that are out there? Thanks so much. Thanks for the question. It's John Leonard. Let me start with the EASL comments. Scott's comments were taken out of context and are not accurate. We're very confident in the work that we have with our 1st generation program, we're also extremely excited and confident about the elements of our 2nd generation program. We've not been Actively looking for partners, and I think the story was essentially a distraction. With respect to Jack, the importance of having an oral Jack, we've shared that our longer term strategy in the Allergy space is to try to enhance the overall benefit risk profile and I think we've seen some evidence of how important that is. Our goal is to take some of the learnings that have come from the JAK space and try to tease that apart and build that into Our own oral program with the intention of getting to higher levels of efficacy than achieved in That's our primary goal. And of course, that's what we're striving for. With respect to where we are, you You undoubtedly know that we have a relationship with Galapagos. They've shared some early information On their compound, which we think is very, very exciting and they're moving into 2b work, the middle of this year That will be dose ranging that will test QD and BID regimens. We're very excited about its profile, particularly with respect to what we think It's a very attractive adverse event profile and the efficacy of OO based on small patient numbers for a short duration we think is definitely Our own internal JAK program goes for great specificity trying to select out the JAK2 Activity which we think has been dose limiting in some of the first generation compounds and that's well into its Phase 1 program and It's progressing well. Chris, this is Rick. I'll cover the Pfizer Amit, I mean, basically, we don't know much more about the Pfizer situation than you do than what's been publicly reported. And so I think as far as the dynamics are concerned, our projections would have been a relatively modest impact In 2013 anyway in Europe based both on the timing and how difficult this market is I think you're seeing that in the U. S. Launch today, the challenges that any competitor coming into this market tends to face. And so I don't think it has any dramatic impact on what we had forecast. And we'll just have to see how it plays out longer term As Pfizer continues to pursue approval of that product in Europe. Thanks, Chris. Thank you. Our next question is from Mark Goodman from UBS. Yes. First on Which we haven't talked about yet. Can you just give us a sense of what are the major countries that it's doing well in, in Europe? And just flesh out How you're doing on the new delivery system that you're working on? And then second on elagolix, the endometriosis Triosis, Phase 3, are we expecting data potentially next year or is this going to drift into 2015? How long is that study? Thanks. So with respect to duodopa, it's launched Primarily in Europe and is used most in the Nordic countries. I think that's where it's getting most of The new delivery system you asked about, we have an active effort To improve the pump and make it easier for patients to carry around and deliver the drug on a continuous basis, That's something that we're very, very actively engaged in. It's early in that work and that's I think we're not in a position right now to I'll characterize it further than that. With respect to elagolix, recall that we're pursuing 2 different indications. The Phase 3 effort is well underway for endometriosis. And these are the largest studies that have ever been done In any endometriosis patient population around the world and that in part dictates the timeline, but also the pursuit of chronic therapy. So they will play out over the next Couple of years, so I wouldn't expect to be in a position to share debt until 2015 or there And then recall that the second indication is the uterine fibroid work and that there we've announced that we've just begun Thank you. Our next question is from Michael Tong from Wells Fargo. Hi, good morning. Actually I want to ask an Androgel question. You made a comment about A slowdown in the growth of that market. Do you think that's temporary or is that permanent? And are you surprised that the market growth has actually decelerated With a couple of new entries or recent entries into the marketplace. And then second question is For Bill, if you can remind me your CapEx expectations for 2013? Thanks. Michael, this is Rick. On Androgel, we have seen the market slow down. You have to remember this is a market that grew very rapidly in 20 So if you look at the average in the Q1, I think it's down around high single to 10% kind of range. I think that's probably a reasonable expectation to think about it going forward from a market growth standpoint. This market will grow roughly in the high single digit kinds of ranges going forward. I don't think that surprises us that much. Every market tends to slow down over time. And I think if you look at the fundamentals of this market, that's what we would expect going forward. And so that our planning assumptions are now built around that kind of market growth going forward for 2013. And Michael, it's Bill. On CapEx, this is a business that runs pretty lean on CapEx. We are over the next couple of years obviously going to have to separate from Abbott, which will increase But this year, we're anticipating about $500,000,000 to $600,000,000 Thank you. Thanks, Michael. Thank you. Our next question is from Alex Herffey from BMO Capital Markets. Good morning. Thank you for taking the questions. Just a follow-up on HUMIRA ex U. S. I was wondering if I could ask a higher level question. We'd love to get your insight about some of the trends you're seeing in different geographies. For example, are things getting better in Europe? If you could elaborate a little bit more on emerging markets. We know there are a few small biosimilars in a couple of emerging market countries. If you could if you see that as a what your outlook is for that in general. Just some overall Victor, on not just tromorphous arthritis, but also across the different indications. Thank you. Alex, this is Rick Gonzalez. So I think if you look at Europe and you've seen this for a number of years now, we continue to see good strong robust growth in Europe In this particular area, I think one of the things that Europe has really adopted and values is the ability to be able to put the disease in remission And be able to hold it in remission for long periods of time. So we continue to see market growth in the double digit range in that market. When you look at the penetration rates Across all three major areas, the penetration rates are still relatively low. And so we would expect that we'll continue to see that growth going forward. And the programs that have in place, I think have been demonstrated to be very effective at both helping market growth as well as driving Improvement in share, growth in share in the indications, particularly derm and GI as I indicated, but also We're continuing to hold our own from an RA share standpoint. And so I think we feel good about the dynamics in There are still problematic countries in Europe for sure. But I think overall, if you look at Europe in general, it's performing Within our expectations and I think it's a market that we think is a good market for products like HUMIRA. As far as the emerging market, I think one of the things that's important to remember is that the majority of our business is still in the developed markets, roughly 85 percent of our revenues come from the developed markets. There are some emerging markets like Brazil that are relatively large markets for us, But there are also a number of markets that are relatively small. And so we have not seen any material impact from any biosimilar competition In the emerging markets or anything that we would perceive to be any kind of an issue for the business going forward in those emerging markets. Great. Thank you very much. Thanks, Alex. Ilan, we have time for one more question today. Thank you. Our final question today is from Damian Conover from Morningstar Investment Services. Hey, good morning. Thanks for taking the question. Just two questions. One on HUMIRA sales in the U. S, very strong growth. But in the press release, rheumatoid arthritis wasn't really called out for the support of that growth. I was just wondering if you Talk through some of the dynamics there. And then secondly, when you're looking at the hepatitis C market in a broad picture, As these next generation of products come to the market with very strong efficacy and lower side effects, I was wondering if you could share your thoughts on The expected treatment rate for this space given that it's very low right now, just so to take a look at the overall market growth. Thank you. Thanks, Damian. This is Larry. On HUMIRA U. S. Sales, on RA, we called out the more rapid growers and that would be gastro and Dermatology, certainly we do still see growth in RA. It's certainly more modest than those other two areas call it mid single digit growth for the market maybe a little Stronger for us and again holding share despite new entrants into the RA space. But certainly a lot of our growth Continues to come from dermatology and gastroderm on the low end of penetration rates. We need to see a lift in penetration rates, which as you know are still only in the single digits at this point in time in dermatology. So We called out the 2 biggest growers, but RA continues to grow and we're holding share in that space. Damian, this is Rick on the HCV question. As we look at this market, we do expect to see some acceleration significant acceleration in market growth, I mean, I think to frame the size of the market and give you some perspective on it, today if we look at With the disease, if you go back to 2011, roughly 175,000 patients were treated. And so there is some clinical capacity constraints that exist today with the current therapies. As we bring these next generations of products to the marketplace in that 2015 timeframe, they're obviously Simpler protocols to be able to administer from a physician standpoint and the side effect profile is dramatically improved from the generation of products that exist today. And so you would expect that you will be able to increase the number of patients who are treated at that point. We're estimating that that number could grow to The $350,000 kind of range per year. As far as the patient types, I think our perspective on it is this is a disease that progresses Very slowly and as these new therapies come to market, we think the health care systems and physicians will prioritize those patients that need the therapy The most and I think particularly if you can bring a therapy to market that has a 90% plus kind of cure rate for those patients, which hasn't been seen before With the current therapies that exist today, there will be motivation to go treat those patients, the null responders, the fibrotic patients, the cirrhotic patients, And so we think in the early parts of the launch, the 1st few years that we should see a significant number of those patients being Treated. And obviously that makes us feel good about our particular therapy. Thank you. Thanks, Damian. And that concludes today's conference call. 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