Good afternoon, welcome to day two of the Barclays Global Healthcare Conference. My name is Carter Gould, senior biopharma analyst here, and it's my pleasure to welcome AbbVie to the stage. No shortage of debates and controversies and launches going on. Thank you, AbbVie, for joining. Joining us from the company, Robert Michael, Vice Chairman and President, Scott Reents, CFO, Jeffrey R. Stewart, Chief Commercial Officer, as well as Roopal Thakkar, Development and Regulatory Affairs and CML. Thank you, Rob and team.
Thanks for having us.
Great. We're gonna just jump right into Q&A. Aesthetics has been sort of top of mind for many folks, I thought we'd start there. You know, I think the company flagged uncertainty around some of the trends in the space, dating back to last year, and certainly at the fourth Q call. You've also referenced some stabilization in those metrics. I guess the question is sort of what are you seeing in the field now, and has anything sort of evolved that's changed your longer-term view of the attractiveness of the aesthetics business?
We gave guidance. We basically assumed no recovery in the U.S. this year. In China, recovering in the middle of the year. As we monitor certain metrics, I think the economic metrics that tend to be most correlated to consumer confidence as well as real personal consumption. You know, it's interesting, we also look at Google searches, and that tends to be highly correlated with our business. We've seen a very nice uptick there. At this point, I think it's too early to call, but I'd say right now the trends are pretty positive.
Okay. I would also just give it a quick plug. We put out some monthly credit card data for the larger group, and it does seem like there's been some stabilization, but we'll get into some of this. I guess the other follow-on question here is just in terms of longer term trends...
Yeah.
in the space and how you think that, between additional entrants coming in, have a sense of just kind of the longer term growth potential.
Yeah.
in the space.
I mean, we see the current conditions as being transient. We've seen in the past, you think about whether it was the 2008, 2009 financial crisis or COVID. We saw a very robust return to growth once we worked through all that. You look at penetration rates in this business. If I think about in the U.S., I mean, for women, it's about 8%, men, it's 0.5%. There's tremendous opportunity for market expansion. We've been investing in that as we think about, you know, opportunities to expand the market, not just on the demand side, but also on the supply side as we think about injector training, ensuring that, one, the availability of the injectors as well as the quality of injectors is an important consideration. We've been investing in that as well.
We've been putting more behind our Alley technology platform that we think can be a competitive advantage. As we think about the long-term potential for this business, you know, clearly, we haven't backed off on the greater than $9 billion in 2029, despite, I'd say, you know, the current economic conditions. There's tremendous room for growth. I would say internationally, as we look at the likes of China, Japan, Latin America, tremendous growth opportunities there. We're putting a lot in China. If you think about, you know, that's a business today of $500 million-$600 million range. You know, that can grow to greater than $1 billion over the next few years as we think about we've expanded mid-tier cities. We've put, you know, a larger sales force in place.
We've done a lot there with injector training as well. There's tremendous room for growth in the aesthetics.
Maybe one more follow-up on aesthetics, and that being sort of how you see the indirect or just really the impacts from the rise of obesity therapies in America? I know you guys put out your global aesthetics report. Obesity's nowhere in that report. It does seem like something that's relevant and may impact the business, either positive or negative, but I'd love to hear your thoughts.
Yeah, it's very interesting because it's coming quickly.
Right.
That matches with the potential weight loss. I think if it's rapid, people may notice changes. They may lose facial volume, which is very noticeable if it happens quickly. They may realize they had wrinkles on their face that they didn't have before, now pay attention to cellulite or other stubborn areas. In a way, I think anything that alters someone's focus on their own appearance, if they're more interested in that, there's certainly a potential that they're more interested in aesthetics, and maybe going into a clinic. At this stage, it's hard to quantify, but obviously, we would have toxins, fillers, body contouring, soon to have a cellulite strategy with the new device. Interesting...
Okay.
intriguing, hard to quantify.
More net positive than net negative.
Yeah.
we think about discretionary dollars and maybe using them for obesity therapies versus the aesthetics piece.
Yeah. We definitely see it as a net positive.
Okay.
We aren't concerned that it's gonna take spend away from the aesthetics category at this point.
Okay. Great. Perfect. All right. Maybe moving on to the other topic, which we're never far from, and that is sort of HUMIRA dynamics. Clearly, you gave guidance to start the year. What we kinda just hear from you guys, what you're seeing in the field in terms of the impact from that first biosimilar? Maybe we start there?
Yeah. It's been modest so far, and that's what we expected. We highlighted that as we went through the negotiation, basically all of last year that concluded really right at the end of last year. We were able to secure, you know, 90% plus parity access. What that means, again, we are coexisting with one or more biosimilars, and we have the one out there right now. And it's basically a true parity access. It means that patients don't have differential copays. There's no stepping. It's just, will the physician want to continue with HUMIRA, continue to choose HUMIRA for a new patient or choose a biosimilar? In this case, it's AMJEVITA on the formularies. When you, when you have that type of parity access, there's not...
Significant incentive for physicians to start moving things around.
Yeah.
That's what we're seeing. We've seen very modest scripts reported in the last six weeks for AMJEVITA, which is largely what we expected. As Rob has highlighted before in the guidance, the vast majority of the impact, particularly in the first quarter, is gonna be price, and that's the price that we conceded to get to that 90-plus % level of parity access. No surprises in terms of what we've seen, obviously early days and only a matter of weeks since February first, but we seem to be right on track with our expectations.
Okay. I guess with that, any shifts in how you think about second half is gonna set up? obviously, there's gonna be a lot more competitors, but just given sort of the very paced Angivita adoption out of the gates, does that in any way change your expectations?
It doesn't because if you remember, we know that there's gonna be significant more competitive intensity that's gonna come in the second half, and in many cases, we plan for that. We will see a step up in our price concessions that we talked about, again, because we anticipated that competitive intensity. We also see that in the second half, we would expect more volume impact, particularly in the accounts that are more sensitive to the facing price in the marketplace, which we estimate around 20% of accounts. I would say everything is consistent with our expectations, our modeling, and so we're happy that things are progressing as we expected. That syncs up with our guidance, right?
Right.
We gave the 37%. We said 27% in the 1st quarter, thinking about we said more erosion in the second half of the year with 7-9 biosimilars coming in, more volume erosion, plus we've stepped up the rebates. That explains the gating of our guidance for this year.
Okay. When we start to think about that HUMIRA tail, what are gonna be the key drivers that, you know, help us, help you know, forecast how that might look like? To what extent is the EU experience irrelevant proxy here or not?
You know, the EU experience is a really tough analog because, you know, Europe is made up of so many different archetypes. I think we've highlighted before that we saw a very significant range of biosimilar adoption. Almost universal adoption in the Nordics, significant stability in France, and some other European countries. You know, Germany was middling, we think that the U.S. is gonna operate as its own animal, as it were. What we can say is that we really think 23 and 24 will be quite dynamic. Ultimately, there's gonna be a settling of price and a settling of, let's say, retention of U.S. HUMIRA patient volume. We predict that that tail will start to emerge in the 25 and 26 timeframe. We don't know how large it will be.
It's something we're studying very carefully, and a lot will depend on, you know, the next few cycles of what happens here over particularly in 2024.
I'm gonna ask the unfair question is, when you think about that timeframe, 2025, 2026, do you still think all these biosimilar players that are launching HUMIRA biosimilars are still gonna be around, or at least in that, in that market?
You know, it's a great question. Look, the competitive intensity, again, internationally, you have, you know, four major players, four or five. Here you have, right, up to 10. My belief is that you're gonna have winners and a lot of, have several or losers. I think it's gonna be concentrated. What I say is I really don't have the belief that you're gonna see this market split up into 8 or 10 different small slices of the pie.
Yeah.
When we look and when we talk to payers, and we think about this dynamic, we see a couple things. First is that the payers want to try to pick biosimilars that look as close to HUMIRA as they can in terms of the concentration, in terms of the pen offerings, in terms of, you know, the citrate profile. That's for sure. Then the payers also, they're sensitive to the ability for continuity of supply when they pick, let's say, the partners that they want to dance with over the next several years. I do think there'll be winners and losers. It's difficult to predict who they may be. Certainly you have a leading, several leading majors that you know, can supply. They've been able to supply the international market.
No, I don't think that all 10 will be in the market by the time we start to see a tail develop.
You guys have been very clear. I guess when most people model AbbVie, you know, during this period, we're always looking for anchors, right? You guys have been pretty clear on the operating margin side to help people kind of, you know, work through and, you know, what you can lock in. On the gross margin side, though, it's been a little bit less clear. People are looking for those anchors. I guess, as we're going through the period now, what can you say about how you expect gross margins to evolve 2023 and beyond?
Sure. No, it's a fair question, especially in light of, you know, as you said, we've talked about operating margin a lot. We've provided guidance of 47%, which is certainly a reduction.
Yeah.
from prior year. That reduction is really driven by the fact we're continuing to invest in the business. We're not cutting expenses. We actually are spending more year-over-year as we continue to invest in the business because we really believe in that long-term growth. That's the operating margin story. On the gross margin story, it's much more of a product mix question. We've given guidance of 84% for this year, and 84% is really, I think, what you can think about stabilizing at. HUMIRA has a strong gross margin profile.
Yeah.
The products that we've given our, you know, especially the long-term guidance on also have growth.
SKYRIZI, RINVOQ, any of the aesthetics business has a strong gross margin. At 84%, that's kind of stable for me over time when you think about the profiles that are gonna drive the future growth.
You touched on SKYRIZI and RINVOQ there. I wanna come back to those products here, particularly since we're still in the early innings of the IBD launches there. To what you know, kind of what you're seeing in the marketplace there, in terms of early adoption and how you think about their long-term relevance in the context of emerging oral options that may have a different safety profile? We had two companies on stage earlier today, but maybe there's other approaches that are kind of in the wings.
Maybe I'll address the performance. We're very pleased with the performance of both SKYRIZI and RINVOQ around the world. I'll give you some perspective. You know, SKYRIZI been available for, you know, just over 6 months, so let's take the second half of the year. When we look at in-play share, which we look at as a true measure of early performance of a launch, so that's how much naive patients you capture or how many switching patients you capture. We're already at 20% in the Crohn's market, which is second. It's above all the TNFs, and it's just now tracking behind STELARA, which is the leader there as the 12/23. That's exceptionally fast adoption for SKYRIZI Crohn's. We see the same thing in Japan and also in Canada where we've launched it.
Rinvoq very similarly. Remember, for Rinvoq, for ulcerative colitis, we don't have access to front line because it's stepped behind a TNF. If you look again at the December metrics in the second-line-plus market, we're tied for first place again with Stelara. These are very significant ramps. Overall, when we think of, you know, the guidance that Rob highlighted, recently, we're increasingly encouraged about how the roles of both of those agents are gonna play over the plan. A couple other key points I would note for investors is first, we will see the Rinvoq Crohn's approval here, you know, towards the end of the second quarter. In 2024, we'll see SKYRIZI for UC.
We have a couple of punches in both large components there. We're set up very well to compete against really any incursions that come, whether it might be a novel oral or a biologic. Maybe Roopal can highlight, you know, how we see that.
Well, I think part of it is the conversation we have in the oral space, because Derm is around this PASI 75 point. We've essentially stopped talking about that. It's PASI 90 and PASI 100 when you talk about SKYRIZI, and we're multi-fold higher on the PASI 90 and PASI 100 in particular. Once you're in maintenance, you're taking a quarterly dose. Most people feel that that's fairly convenient relative to a daily oral. In the IBD space, it seems like the TYK2s may need to raise their dose. Where we're at, as Jeff was outlining, the SKYRIZI and RINVOQ, it's still... We're at very high levels of efficacy. In IBD, I think that's where many gastros will gravitate towards.
Okay. gonna follow up with another unfair question. Despite still having a lot of wood to chop with SKYRIZI and RINVOQ, there's always a question around what's next in the immunology portfolio. You've got the ADC program, but as you think about exploring some of those novel targets, not necessarily TYK2, but other kind of emerging MOAs.
Sure.
Maybe, you know, shed some light on.
Yeah. Absolutely. One thing I will mention about RINVOQ, where maybe not everyone is aware, is we'll have three phase IIIs starting, a third wave. You saw the four rheum. We're rounding out IBD and then almost a derm-driven startup this year. That would be alopecia areata, hidradenitis suppurativa, and lupus. We'll also get a readout in vitiligo this year from a phase II, and that could be a potential another phase III approach. Moving down into the pipeline, we have a IL-1α/1β lutikizumab that will read out in hidradenitis suppurativa in the next couple of years. We have a biomarker-driven approach that we would look at in ulcerative colitis. We have a RIPK1, which could also be useful in IBD atopic dermatitis that we would be looking at.
GLP-2 is another mechanism we're interested in from a mucosal healing standpoint. lupus, stem cell factor and an IL-2 mutein that would expand specifically Tregs. we also have, we're looking at, CD28 inducible co-stimulator dual blockade. These are all in the phase I, II settings. Quite a few other mechanisms that could potentially stand alone or we could consider combinations of those assets and potentially the on-market assets as well.
Okay, great. Maybe we can transition to the heme portfolio. It does seem like a bit of a year in transition on the heme side. We'll start the easy one first. You guys guided to a pretty meaningful step down in Enbrel because there's sort of emerging competition. If you look at scripts weekly, tough to see. If maybe if you squint, you can see a little bit of a decline. It is early days. Can you just talk through kind of, you know, if there's additional detail you can provide or additional color on, you know, what drove that guidance and to what extent the product's being more resilient in Q1 than you maybe anticipated?
Yeah. There were a couple factors, right? You still have the ongoing, let's say, hangover from the market, right? That's cascading through the patient starts, certainly. When we looked at, you know, the last.
18 months, largely that story has been we had bigger share in KERGEN than we thought from Calquence, and also our own VENCLEXTA, to some degree. When we basically rolled this forward, obviously we understand our market, we understand our share position. Really we are anticipating, based on the data, based on some label changes that we've had and some guidelines changes, really the next step down that is in the guidance is from the Brukinsa launch.
Right.
That's very early days here. Profile's very strong. We certainly think that we're gonna see incremental share pressure that we contemplated on IMBRUVICA. It will also pressure Calquence, there's no question about that. That's probably the big thing that you just don't see in the actuals yet.
Yeah.
We have to think about that flow-through, through 2023. That's that dynamic. I think as we've said before, that's gonna be partially offset by continued growth with Venclexta. Over the next, starting this year with EPKINLY and the pipeline coming in, you know, ultimately that heme business will stabilize, and then the solid tumor business will grow on top of it. We feel confident based on our knowledge of the in our guidance.
We think we've called 2023 right.
Right.
If you think about, we said stability in 2024 and 2025. There will be some level of erosion in IMBRUVICA, the door year what we've seen last year and we expect this year. VENCLEXTA will offset that. And so, and you think about VENCLEXTA-
Right.
EPKINLY, as our pipeline kicks in, you start, you know, you'll see stability the next couple of years and then return to growth in 2026.
I wanna come back to the bispecifics in a second, but just one follow-up. There was no sort of meaningful price erosion factored into that guidance for IMBRUVICA?
It's, the vast majority of it is volume.
Okay. On the bispecifics, I guess, I think you did a wonderful job in terms of really sort of catching up in through M&A. Multiple M&A that allowed you to, you know, be arguably near best in class or I think that's a pretty big in terms of, you know, your products on both sides. At the same time, you're launching for market, which we've got pretty good in both cases. You're not gonna be first to market in either indication within the bispecifics. Just kinda help frame how fast these opportunities can ramp, and how you think about positioning.
I'll start with EPKINLY, which we should start seeing action by mid-years in large B-cell lymphoma. That's pretty early. In that same asset, we would see in follicular lymphoma in later stages, we'll be a data read out later this year, then potentially pursue acceleration. Quickly move into a second and frontline with combinations. As you mentioned, either pre or post-CAR T, we think these assets, at least ours, works very well. Pre-CAR T, if you're comparing a 70% or so ORR and 40% CR rate with the ARV at low single agent subcutaneous offering. There is a nice profile with bi- there that we're gonna ramp into earlier lines.
On the other side, BCMA as a dual engager, you're right, that one's a little bit further behind, but it seems to have the right profile. That one has a low affinity CD3 binding, high affinity to BCMA and bivalent. That one is showing also very high levels of ORR, similar to what we see with EPKINLY. Without step-up dosing, thus far, very low levels of CRS that we think we can tweak further with dose optimization. The other opportunity with that one is a potential prolonged pharmacodynamic effect that may enable once-a-month dosing, and subcutaneous. We're talking about multiple myeloma. Additionally, we have VENCLEXTA, BCL-2, like a BCL-2 agent that's in the pipeline that is in phase I now that's more potent.
You also have opportunities for our own methods to be combined with each other. That can also help later on down the road, even though they're not first.
All right. We've got about two and a half minutes left. I wanted to touch on BD, because I think that was one of the other things that clearly emerged from the 4Q call was taking the brakes off. Clearly, you know, the self-enforced limits have been removed. When you start thinking about, you know, not necessarily companies you're after, but, you know, places to play, potential FTC restrictions here too, given you've got pretty compelling franchises in a number of areas. How does that sort of shape, you know, what you're thinking about from a BD perspective going forward?
Well, I mean, the reason we communicated that was, you know, we potentially paid off by the end of this year all the M&A financing from the Allergan acquisition.
Yep.
We paid down $30 billion in debt last year, $4 billion this year. There really wasn't a need for us to put a $2 billion BD limit like we had during the debt pay down period. That said, we look at this business, you know, five therapeutic areas can drive very strong growth. We have the lowest LOE exposure, if you look at 2024 through 2028 in the industry. We're in a position of strength. We don't feel like we need to go do something. We wanted to communicate to investors that we have more flexibility, you know, in the progress of the balance sheet. We like the business we have today. We like the therapeutic areas we participate in. If there's opportunities in those areas or adjacencies, we have a good track record of bringing in assets.
Certainly, you know, we, if we see a strategic fit where we can generate a strong return, we have a BD group that will look at those opportunities and we have more flexibility. I would think of it as really, you know, the, those five therapeutic areas that could drive long-term growth are areas that we'd be focused on.
Okay. Just to put a button on that, I guess the question is how far do those adjacencies extend, and to what extent you might, you know, move outside those narrow quarters?
I mean, if you look at immunology, you know, you'd start off as a rheum IBD derm, but, you know, we can expand into derm, you can expand, say something like lupus. There could be other disease states. I think that's how we think about all the places that we play, and that the things that are related. Obviously, the R&D folks will be very interested, immunology as an example, but oncology tumor as well, heme, eye care, neuroscience would be looking at all of those ,and potentials for them.
Okay. Well, there was plenty more we wanted to get to. Didn't get to touch on VRAYLAR, and sort of the neuro aspirations. We're out of time. AbbVie, thank you very much for joining us on Stage 6.
Thanks, Carter.
Thank you.