Good day. Thank you for standing by. Welcome to the AbbVie Investor and Analyst Conference Call. All participants will be able to listen only until the question and answer portion of this call. If you would like to ask a question, dial star one on your phone. This call is being recorded by AbbVie. I would now like to introduce Ms. Elizabeth Shea, Vice President of Investor Relations.
Good morning. Thanks for joining us for this special conference call to discuss AbbVie's acquisition of Allergan, which we announced this morning. Joining me on the call today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer, and Rob Michael, Senior Vice President and Chief Financial Officer. Joining us for the Q&A portion of the call are Michael Severino, Vice Chairman and President, Laura Schumacher, Vice Chairman, External Affairs, Chief Legal Officer, and Corporate Secretary, Phil Chase, Executive Vice President of Finance and Administration, and Henry Gosebruch, Executive Vice President, Chief Strategy Officer. Rick will provide an overview of the strategic rationale for this acquisition, and Rob will discuss the key financial aspects of the transaction. Following the prepared remarks, we will take your questions.
Please be aware that while we will do our best to address all of your questions, because this transaction falls under Irish Takeover Rules, there are certain limitations to the information we can provide. Please note that we have also posted a slide presentation, which includes additional background on the transaction for your reference. 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 these risks and uncertainties is included in our 2018 annual report on Form 10-K and our other SEC filings and the related set of slides posted on our website.
AbbVie undertakes no obligation to update these forward-looking statements except as required by law. With that, I will now turn the call over to Rick.
Thank you, Liz. Good morning, everyone, and thank you for joining us today. Let me begin by saying how pleased I am to announce our acquisition of Allergan. This is a transformative transaction that provides important strategic benefits for both AbbVie and Allergan, while further advancing AbbVie's mission to be an innovation-driven, patient-focused biopharmaceutical company delivering a consistent stream of innovative new medicines. The transaction significantly advances the strategy AbbVie embarked upon when we first became an independent company to reduce dependence on HUMIRA through the rapid expansion of our non-HUMIRA business, the AbbVie Growth Platform. The Growth Platform represents the future of AbbVie, and it is delivering on its strategic mandate with critical launches and indication expansions across IMBRUVICA, VENCLEXTA, SKYRIZI, ORILISSA, and later this year, upadacitinib.
The acquisition of Allergan represents a rare and unique opportunity for AbbVie to accelerate the progress of the Growth Platform by adding highly valuable on-market assets with leadership positions across attractive growth segments. With today's announcement, AbbVie's Growth Platform will be put on a course to achieve immediate standalone scale with sales of more than $30 billion in 2020 and best-in-industry growth prospects. This will have a profound impact on AbbVie's overall growth story while addressing concerns about the company's reliance on HUMIRA. In the process, we will create the fourth largest global biopharmaceutical company with leadership positions in immunology, hematological oncology, medical aesthetics, neuroscience, women's health, eye care, and virology. Before I discuss the combined business, I'd like to address the question of why now. AbbVie has clearly delivered outstanding performance, and we are confident our strategy is working.
We recognize our job is to continuously identify opportunities to maximize our growth, fortify our position, and put the company on the strongest possible footing. Assets of the quality of Allergan are not always available, and certainly not at this value. The opportunity to access these attractive, durable franchises and immediately reach scale on our Growth Platform, and at the same time have ample HUMIRA cash flow to deleverage before the U.S. LOE is an incredibly compelling opportunity, and one that we did not want to pass up. Now let's take a look at how the pieces of the combined company fit together. We remain well-positioned to grow our strong leadership position in immunology with the recent launch of SKYRIZI, which is tracking significantly ahead of our expectations, and the forthcoming approval of upadacitinib pro RA.
In their respective initial indications, both of these therapies have demonstrated across multiple clinical trials superiority versus HUMIRA and other competitive offerings. With the collective potential of these two therapies across more than a dozen indications, they each represent multi-billion-dollar peak sales potential. Allergan's GI business adds to our already strong position in immunology and includes two leading medicines for the treatment of irritable bowel syndrome. We'll leverage our expertise and commercial scale in this area to drive strong performance in immunology, where collective sales will exceed $20 billion. We have a leading hematological oncology portfolio that is expected to contribute more than $5 billion in revenue this year and growing at a robust rate.
As we continue to generate data that validates the utility of both IMBRUVICA and VENCLEXTA across a wide range of patient populations and cancer types, we expect this franchise to drive significant growth for many years to come. Additionally, our innovative pipeline includes more than 20 active development programs for blood cancers and solid tumors, which we expect will strengthen our growing position in oncology. The acquisition of Allergan brings to AbbVie the world's leading medical aesthetics business. With revenue of nearly $4.5 billion, this primarily cash-pay business is growing high single digits and is anchored by very well-known brands, including BOTOX Cosmetic, the market-leading neurotoxin, JUVÉDERM, a portfolio of injectable dermal fillers, and CoolSculpting, an emerging body contour treatment.
With significant presence globally, supported by the largest sales and marketing effort in medical aesthetics, expected cadence of new indications and product launches over the next several years, we feel highly confident in the competitive position of this business. In addition, the medical aesthetics market remains highly under-penetrated. With increasing interest and acceptability of aesthetic procedures and products globally, increasing utilization within younger demographics, the medical aesthetics market has the potential to double by 2025, making this franchise extremely attractive and durable for AbbVie. The acquisition of Allergan also brings with it significant neuroscience assets. Neuroscience is a core area of focus for AbbVie today, an area where we have been investing significantly in promising disease-modifying pipeline programs to become a leader in the treatment of neurodegenerative conditions.
With greater than $3 billion in combined revenues, Allergan brings us immediate scale and a large commercial presence in both neurology and psychiatry. Allergan's neuroscience franchise contains a number of flagship products, including a comprehensive portfolio of treatments for migraine. This includes BOTOX therapeutics for chronic occurrence and two late-stage oral CGRPs that will offer further growth potential. We will also be adding VRAYLAR to our portfolio, one of the fastest-growing therapies for schizophrenia and bipolar disorder, a therapy we believe represents a clear blockbuster opportunity. With this collection of products, along with DUODOPA and our next-generation ABBV-951 for advanced Parkinson's disease, our pipeline of early-stage development programs, we see neuroscience as an important area for long-term growth potential. Our new portfolio will also include several additional attractive franchises. The combined business includes a complementary portfolio of therapies in the area of women's health.
Allergan's product includes the market-leading oral contraceptive, their total women's health portfolio generates more than $800 million in revenue, with mid-single-digit growth. AbbVie's elagolix represents a multi-billion-dollar growth opportunity with the recent launch of ORILISSA in endometriosis and the expected submission of our regulatory application in uterine fibroids very soon. Together, we'll leverage our commercial scale to drive strong, profitable growth for this franchise. We'll also have a durable eye care franchise with approximately $2 billion in revenue and leadership in glaucoma and dry eye, as well as multiple mid- and late-stage pipeline prospects. Our HCV franchise, with expected sales of $3.3 billion this year, remains an important business for AbbVie. MAVYRET holds a leadership position in the large global HCV market. Our HCV business represents a durable and strong source of cash flows for many years to come.
We have an attractive, stable base portfolio, which includes a number of products that hold leadership positions in their respective areas. As I mentioned, the addition of Allergan's attractive franchises to AbbVie's existing growth platform immediately creates a very large and compelling growth engine with standalone scale. With revenue of more than $30 billion in 2020, we expect our growth platform to drive high single-digit annual growth over the next decade. Given the scale and growth prospects, we will have increased capacity to pursue the most promising and innovative science, which remains the core focus for AbbVie and what makes the difference for the many patients we serve. The combination of AbbVie and Allergan will also unlock significant value for our shareholders. The transaction strengthens both companies by diversifying the sources of revenue and payer mix and adding new leadership positions in attractive markets.
Allergan's product lines will greatly benefit from access to AbbVie's geographic footprint. This combination also provides significant additional earnings in the period following the loss of HUMIRA exclusivity. The transaction also provides enhanced cash flow to support a strong and growing dividend. Cash flow from HUMIRA provides the ability to rapidly pay down debt, which we have committed to reduce by $15 billion-$18 billion by the end of 2021, with further de-leveraging through 2023. The revenue scale that Allergan brings to AbbVie will enable enhanced funding of our innovative R&D platform and provides ample resources for additional pipeline expansion. We'll also link Allergan's business with AbbVie's innovative discovery engine and early development capabilities to maximize R&D output.
The transaction also offers more than $2 billion in annual pre-tax synergies and cost savings in the third year post-closing through the elimination of redundant infrastructure and spending while leaving key franchise funding levels untouched. Of course, the transaction delivers immediate, robust financial benefit with EPS accretion of 10% in the first full year of the combination, increasing to above 20% at peak, and an ROIC that exceeds our cost of capital in year one and increasing in subsequent years. Upon completion of the transaction, the company will continue to be incorporated in Delaware and have principal executive offices in North Chicago, Illinois. I will serve as chairman and chief executive officer and plan to continue in this capacity through the U.S. HUMIRA loss of exclusivity event in 2023. Our board of directors will include two Allergan board members, including Brent Saunders.
In summary, this transformational transaction is strategically compelling for both companies. For AbbVie, it allows us to address the reliance on HUMIRA and sustain our focus on innovative science and the advancement of our industry-leading pipeline while driving strong growth. For Allergan, this transaction provides immediate R&D capabilities and global commercial scale to maximize the value of their attractive portfolio of on-market products. This is an extremely exciting day for AbbVie, for Allergan, and for our combined shareholders. The transaction represents an opportunity to create significant value while putting us in an even stronger position to deliver sustainable long-term growth. With that, I'll turn the call over to Rob. Rob?
Thanks, Rick. Let me begin by reiterating how pleased we are to announce this transaction. The acquisition of Allergan adds several attractive new growth platforms to AbbVie's already strong portfolio and accelerates the point at which our growth platform reaches the scale necessary to stand on its own to fund the business. The combination significantly enhances the profile of AbbVie's business on both the top and bottom lines by diversifying our sources of revenue, creating the opportunity to deliver meaningful synergies through the elimination of redundant infrastructure and spending, and providing additional R&D funding capacity to support AbbVie's innovative R&D engine. Under the terms of the proposed transaction, AbbVie will acquire Allergan in a cash and stock transaction valued at $188.24 per share based on AbbVie's closing price on June 24th.
Each Allergan share will be exchanged for cash of $120.30 and a fixed ratio of 0.866 shares of the combined company. With respect to financing, AbbVie will assume Allergan's existing debt of approximately $23 billion and will fund the cash portion of the transaction with a mix of existing cash and new debt. We remain committed to a Baa2/BBB credit rating or better for the combined company and plan to reduce debt by $15 billion-$18 billion within two years of closing, with further de-leveraging through 2023. We anticipate the transaction to close in the first quarter of 2020, subject to regulatory approvals, Allergan shareholder approval, and other customary closing conditions. The transaction is extremely compelling from a financial perspective.
We expect to deliver more than $2 billion in annual pre-tax synergies and other cost reductions within three years of completing the transaction through the reduction of duplicative infrastructure while leaving funding levels to support our key growth franchises, oncology, immunology, and medical aesthetics untouched. It is immediately accretive upon closing, delivering 10% accretion above our first full year adjusted EPS and peaking at above 20%. It has a robust ROIC, which exceeds the corporation's cost of capital in the first year of combination. As you know, AbbVie generates very robust cash flow, which will be significantly enhanced by this acquisition. On a combined basis, the company generated approximately $19 billion of operating cash flow in 2018.
This cash flow will be used to reduce debt, support a growing dividend, and pursue additional innovative mid to late-stage pipeline assets. Following the closing, we will commence the integration process, which we view to be highly executable. Both companies have considerable experience with the integration of large, complex transactions. As noted earlier, we expect the major growth franchises, immunology, oncology, and medical aesthetics, to be untouched by integration activities, allowing them to focus on maximizing new product launches and growth prospects. In summary, we are very excited about today's announcement. We believe this transaction is financially compelling for shareholders of both companies, as it offers profound strategic benefits, as well as significant and immediate accretion and an attractive return on invested capital. We believe the companies are stronger combined than apart. We are excited to join with Allergan to create a diversified biopharmaceutical company well-positioned for sustainable growth.
With that, I'll turn the call back over to Liz.
Thanks, Rob. We'll now open the call for questions. In an effort to hear from as many analysts as possible over the remainder of the call, we ask that you please limit your questions to one or two. Operator, we'll take the first question.
Thank you. We'll now begin the question and answer session. If you would like to ask a question, just press star one. If you withdraw your question, you may press star two. Our first question comes from Jason Gerberry with Bank of America. You may ask your question.
Good morning, thanks for taking my questions. I guess this first question for Rick, can you just talk about how you got comfortable with some of the perceived competitive risks to BOTOX, be it either migraine or aesthetics? Secondly, I know you'll get a couple of questions today just around Allergan's, to the extent they have any opioid-related liability, your level of concern there, and just your comfort level that the courts will enforce Pfizer's indemnity obligation there. Thank you.
Thanks, Jason. This is Rick. I'll cover the first question. I'm going to ask Laura to cover the opioid question. We spent a considerable amount of time analyzing Allergan's business. We have worked on this strategy with our board for about a year, looking at a variety of strategic options, one of which was a larger transaction like this. When we made the decision that that was the best path to go forward, we spent a large amount of time analyzing, product by product, the Allergan portfolio to ensure that it fit the objectives that we had. Certainly, one of the things that we looked at carefully is BOTOX.
We looked at it from the perspective of both what was the risk of a biosimilar coming to the market and what was the risk of other branded competitive alternatives entering the market. As you know, there have been some that have already entered the market. If you look carefully at how Allergan has performed, I'd say they've done a very good job of protecting BOTOX. They've lost some share, but it's relatively modest, and they've done an excellent job of protecting the brand, both through the brand presence as well as their bundling strategy, and a variety of other techniques that have worked quite well. As far as it relates to a biosimilar, obviously, that's an area we know well. When you look at BOTOX, it's a very unique molecule, is not very well-characterized, and it's in very low concentrations.
For a variety of technical reasons, I would tell you that it's highly unlikely that we would see a biosimilar against BOTOX for a long time, if ever. We became very comfortable with what the forecast was that we had built. Now, having said that, we have built a conservative forecast across the board for probably all of the assets, or at least most of the assets. When you look at medical aesthetics in total, and BOTOX is obviously a significant piece of that, our forecast for the business is at or slightly below what we see even in the most current analyst models that have talked about their medical aesthetics business. I feel very comfortable with the forecast that we've built. I think it's a great business.
We plan on investing heavily in the business to continue to drive growth. When you look at demographics and all the other aspects of this and their competitive position and the skill at which they have operated in this market, this is an exciting growth platform for AbbVie. I feel good about it. Laura?
Sure. With respect to the opioid litigation, we're very familiar with this litigation, and it's important to note that Allergan had a very small and declining market share in branded opioids for the past 20 years. Our view is that this litigation is in early stages, and the legal theories have not been challenged through the legal process yet. In the one case that has proceeded to trial, all but one of the plaintiffs' legal theories were dropped before trial, and there are two state courts already that have rejected plaintiffs' theories. It will be important to see how the trial plays out and also how the appellate process plays out. We're confident in our ability to handle complex litigation. We have a long track record of achieving both favorable trial verdicts as well as settlements.
We expect that any eventual resolution of these matters will likely reflect Allergan's small branded share. With respect to their generic liability, Teva acquired those liabilities and has reaffirmed its responsibility for those matters on two occasions. We don't anticipate any exposure for those matters. With respect to Pfizer, similarly, we anticipate that Pfizer will stand behind the liabilities that it acquired also in its purchase of the preceding company. Thank you.
We feel comfortable with the risk. We looked at it carefully.
Thanks, Rick.
Thanks, Jason. Operator, next question, please.
Next question comes from Navin Jacob with UBS. You may ask your question.
Hi. Thanks for taking my questions. A couple things. Rick, AbbVie's been very focused on innovation over the last few years, PCYC, Stemcentrx, were clearly innovative deals. While we've highlighted the value of Allergan as well, we're just a little bit surprised by the change in direction here, as well as the size of the deal. Would love some comments on that. Then also, what would you characterize as the primary driver? I realize these things are multifactorial, but if you were to choose one driver of the deal, would that be to de-risk the 2023 HUMIRA LOE and provide stability in cash flows and earnings? Is there something else that you'd like to highlight? Thank you very much.
All right. Thank you. The first thing I'd say is we haven't altered the kind of company that we are and what our strategy is. We are still an innovation-focused company. You do different transactions for different purposes, right? They serve different strategic needs. I would say it's all about sequencing of what you do first and then what you do after. We have invested heavily for the last five or six years in driving and building the growth platform, because from day one, we knew HUMIRA was going to go biosimilar. It was just a question of when. We knew that we had to build a platform that would allow us to be able to grow through that event. That platform is tracking exactly the way we had hoped it would. So we feel good about that.
That was built through a process of internal R&D, as well as going out and doing various transactions, some larger, a lot of smaller ones. In fact, I'd say the vast majority of what we have done were smaller transactions to be able to build out that pipeline. We have a very large early to mid-stage pipeline that is working its way through, and we will get a number of readouts in 2020, 2021, 2022 that will start to emerge and give us visibility as to how many of those assets will become important drugs for us. What was the purpose of this transaction? I think when you look at a transaction like this, you have to think about it in the backdrop of why are you doing it and what's the financial benefit for doing it?
I think that's the easiest way to think about it. When you looked at this transaction, what it ultimately allowed us to do is to significantly accelerate the size of that growth platform to get the growth platform to critical mass. Critical mass, we believed, meant that you had to have revenues around $25 billion-$30 billion, and more importantly, you had to have profitability that ultimately allowed that part of the business to be standalone, self-sufficient, and to support the innovation engine that we have put in place, that we value highly. In order to do that, you can't take risks on a lot of binary events because you don't know whether or not those are going to play out or not.
You need to try to find a set of assets that are highly profitable, are large enough, say, $10 billion-$15 billion in revenue, and you have a fundamental belief that they're durable and they can grow. They don't have to grow rapidly, but they have to be able to grow because you don't want to put a lot of downward pressure on your own growth prospects. We're fortunate that our pipeline of late-stage assets can drive a tremendous amount of growth. We don't need to find something for this purpose, this strategic purpose, to drive dramatic growth.
We want something that wasn't declining, didn't have a lot of LOE risk, as I said, was profitable, so it wasn't dilutive to our overall profit, and ultimately had durability and added to the other franchises that we had, either franchises that we're currently in or franchises that we believe would be important new franchises for us. Ultimately, when we looked at all of the options that were available out there, Allergan fit that profile the best. I'm going to talk about value here in a second. The purpose of the transaction was that. You'd say, "Why did you want to do that?" We obviously wanted to do that because there are a whole range of outcomes that can occur in 2023.
We have a responsibility as the management of this organization, of this company, to make sure that we have covered that full range of outcomes, meaning even in the worst case, in the bear case, we have to be in a position where the company is not reliant on that asset. The interesting thing when you look at it is, and the reason why I'd say, as I indicated earlier, why now, is because we're in the unique situation now where HUMIRA can essentially pay for these replacement products. It can take this $15 billion set of assets. They're durable and growing, and highly profitable, and the cash flows from HUMIRA prior to or shortly into the LOE in 2023 will have paid down the incremental debt that was necessary to be able to buy these assets.
Essentially, HUMIRA is buying the assets that replace it over the long term. What does that do for us? Well, it obviously creates a stable business that's rapidly growing, that's large, that has scale from a profitability standpoint, and we will continue to run the strategy that we have run since day one of this company of going out and looking for innovative new products that ultimately will allow us to continue to expand our position in immunology, in oncology, in neuroscience. It really serves a purpose to eliminate any reliance we have on HUMIRA. Hopefully, the market will view that in a way that's helpful. At the end of the day, it's all about running this business to maximize its performance over the long term and ensure that we have mitigated any possible risk going forward.
I can tell you, it took a long time to come to this strategy, and I'm extremely excited about what it will do. It will allow us to continue to drive this business in a way that is consistent with the performance that we've delivered. We've delivered top-tier performance for the last six years, and this will give us the ability to be able to do that going forward. I don't know that that was one factor because it really is many different factors. Then you have to look at value. I can tell you that whether you look at this transaction from an ROIC standpoint, it's above our cost of capital in the first year, which is unusual for a transaction of this size. If you do a sum of the parts, this is a very good deal for us.
It's immediately accretive in year one, the first full year, 10%, and that grows to more than 20%. It has $2 billion of synergies or more, and we were able to get it at a 45% premium, which is significantly below the last two precedent transactions for a transaction of this size. I feel very good about the strategic move here, and I think it'll be a great asset, and a great addition to AbbVie.
Thanks, Navin. Operator, next question, please.
Thank you. Our next question comes from Josh Schimmer with Evercore ISI. You may ask your question.
Hey, thanks for taking some very quick questions. Seems like the FTC is defining competition much more broadly these days. Are there any assets in the portfolios you expect will require closer scrutiny or may need to be divested? Just a quick second question, whether this impacts in any way your expected dividend growth strategy or outlook. Thanks.
Okay. I'm going to have Laura answer the first one, and I'll answer the dividend one.
With respect to the FTC, we don't anticipate any significant issues with the FTC approval process. There are a few small product overlaps that we've agreed to divest promptly, but other than those, we really don't foresee any significant issues.
Okay. On the dividend, look, again, this just assures that we can continue to drive a strong and growing dividend. We're absolutely committed to a growing dividend, and nothing has changed, and this gives us a higher level of surety to be able to continue to do that at a robust rate.
Okay. Thanks, Josh. Operator, next question, please.
Thank you. Our next question comes from Terence Flynn with Goldman Sachs. You may ask your question.
Hi. Thanks for taking the questions. I was just wondering, I noticed you didn't reiterate your 2025 targets, at least from what I saw in the slide deck, Rick. I was just wondering if you could talk about that and how you thought about those targets, if anything changed on that front. Would love your thoughts in terms of, you talked a lot about kind of the strategic rationale behind the deal and how there are different deals for different periods of time. Did any of the recent policy proposals out there play a role in terms of how you were thinking about this deal versus other deals? Just would love your perspective on that front as well. Thank you.
Sure. On the 2025 targets, nothing has changed. I'd say the growth platform, which is really characterized by those targets, is on track, and I would tell you, if anything, SKYRIZI, as I mentioned in my formal comments, is tracking significantly ahead of our expectations. I would say we're pleased with what we're seeing there. It's delivering exactly the kind of value that we hoped it would. On the policy proposals, I wouldn't say it played a prominent role. Certainly, if you look at the medical aesthetics business, it's about $4.5 billion in revenue and growing nicely. It's nice to have a business that's a cash pay business that's not subject to those things. In the grand scheme of things, it's still, I don't know, 10%, 12% of the overall enterprise.
We're committed to being an innovative biopharmaceutical company, and we fundamentally believe that regardless of what happens in the environment, if you bring medicines that truly make a difference for patients, the systems ultimately will pay for those. We see that in all the socialized medicine systems around the world, where we do extremely well with our products. For me, it's more about making sure that you're bringing products to the market that make a real difference.
Thanks, Terence. Operator, next question, please.
Thank you. Our next question comes from David Risinger with Morgan Stanley. You may ask your question. David, your line is open. Go ahead with your question. He's not on the line.
Sounds like David's not on, if you want to go to the next question.
Certainly. That comes from Geoffrey Porges with SVB Leerink. Your line is open, sir. You may ask your question.
Thank you very much, congratulations on reshaping the industry yet again, Rick. First, could you just talk about breakup fees and your confidence that there won't be a counteroffer for Allergan? Secondly, could you talk a little bit about what you see as the long-term operating margin outlook for a combined business? Then lastly, Mike, could you talk a little bit about the pipeline opportunities you see in the current Allergan portfolio? Which of the programs that you think offer particular opportunity and/or synergy with the existing AbbVie portfolio? Thank you.
Jeff. This is Rick. I'll cover the first two. On the breakup fee, the breakup fee are public. It's a 1% on their side, a 2% on our side. It's pretty standard for transactions of this nature. There's nothing unique about it. This has been a very cooperative process between us and Allergan. I would credit their executive leadership team for the effort that they put into it, how open they were. We spent quite a bit of time in diligence with them, and they were extremely open and helpful in helping us verify the assumptions that we made. I'm not overly concerned about that. We're obviously not in a position where we're going to publish guidance yet around this, around operating margins.
As I said, one of the things that we were looking for as we were looking for an opportunity here that might fit this part of the strategy is we wanted a company that had operating margins and gross margins that were reflective of our own, so they weren't dilutive. Allergan does have very nice gross margins and operating margins in the business. I think we will end up with a very strong operating margin profile for the combined company. Mike?
Jeff, this is Mike. I think it's important to keep in mind that the large majority of the value of this transaction comes from Allergan's strong portfolio of on-market products. Having said that, there are areas in the pipeline that look interesting, such as their CNS programs. VRAYLAR is a very attractive asset. It's in its growth phase, and their migraine portfolio is very attractive when you look at the combination of BOTOX and their oral CGRP assets. To be conservative, we haven't built in a large contribution from the pipeline, and all the programs are appropriately risk-adjusted. You should think of the Allergan pipeline as providing optionality for us.
Great. Thank you very much.
Thanks. Operator, next question, please.
Thank you. The next question comes from David Risinger with Morgan Stanley. You may ask your question.
Hi there. This is Zushin on behalf of David Risinger. Could you please discuss the pro forma debt and net debt to EBITDA, and separately comment on potential revenue synergy opportunities which are not factored into your financial assumptions? Thank you.
This is Rob. In terms of the net debt to EBITDA, we're expecting in the near term to be trending towards three times with improvement later in the LRP, as we've made a commitment to reduce debt.
This is Rick. Can you repeat the second question? I want to make sure I answer it properly for you.
Sure. We were hoping you could comment on potential revenue synergy opportunities, which are not factored into your current financial assumptions.
Oh, you're asking about upsides to our forecast, right?
Yep.
Okay. Well, as I said, we build a forecast that we're comfortable with, that will be the one that we base our projections upon. Obviously, there are significant opportunities here for the combined company to be able to enhance the performance. If you look as an example at the women's health area, if you take their portfolio of products in women's health, they've done an excellent job with their proprietary oral contraceptive. That total franchise is a little over $800 million, growing at mid-single digits as an example. We obviously have created a sizable sales organization to drive ORILISSA on endometriosis. It's in the early phases of that launch. Those two are absolutely synergistic, we would believe that we should be able to create a significant opportunity to be able to drive more rapid growth in that area for both ORILISSA and potentially for their products as well.
We will ultimately put those organizations together, which will give us broader coverage of that particular physician group. Ultimately, that's one area that you could see some potential upside over the long term. Internationally, we have a very large geographic global footprint. We operate in 170 countries around the world. It's obviously significantly larger than what Allergan has. These products will ultimately get dropped into that infrastructure, and I think we'll be able to provide significant value for the Allergan product portfolio based on that global footprint. I think those are the two most significant ones.
Thank you. Operator, next question please.
Okay. Next question comes from Vamil Divan with Credit Suisse. You may ask your question.
Great. Thanks so much for taking my questions. Maybe just, I think you touched on this a little bit before, Rick, but just the sort of pursuit of a single large deal as opposed to more of a series of smaller, more maybe innovation pipeline-driven deals. Can you maybe just talk through the thinking? I think especially with large deals, we sort of worry about disruption or integration risk, and maybe it's less so when you're doing smaller bolt-ons. How do you get comfortable with the concept of a large deal and dealing with the integration risk? And then maybe just a couple of questions we've received on some of the pipeline assets. Mike, I appreciate the comments you made around the CNS franchise, just specifically, there's been some controversy around some of their assets in eye care, like Abicipar, and also their NASH program.
I'm wondering if you have any comments specifically to those assets and how you thought about that in terms of valuation for the deal. Thanks.
Okay. Vamil, let me cover the first one, maybe I'll take it in a couple of different pieces. Let's start with integration risk. We don't view this transaction as having a high level of integration risk. We've obviously done larger transactions both here, as well as when we were a part of Abbott. Most of this team came from Abbott, where we did, Solvay as an integration and a number of other larger integrations. I'd say, obviously, Allergan has had a lot of experience with that as well. Our goal will be to fence off the growth franchises. Like medical aesthetics or our immunology franchise, or our hematological oncology franchise, would be to essentially firewall those off so that they are not disrupted at all in this process. We want them to continue to drive as they have been.
That'll be an important aspect of it. When you look at the synergies, about 50% of the synergies come from R&D. There'll be a fair amount of activity that comes in that area. Around 10% of them come from operations, plant rationalization activities, cost improvement activities there, then a smaller percentage comes from SG&A. I don't view this as a transaction that has a high level of integration risk. We've looked at the synergies carefully, I'd say we're very confident in that number. I don't view it as being disruptive to the business. If you look at the range of possibilities, I mentioned earlier that we have been going through a process with our board for one year or maybe a little bit more than one year.
We looked at 3 different types of transactions to evaluate what is the best way to be able to operate the business through the 2023 LOE event with HUMIRA. One was obviously just an enhanced string of pearls. One was one or two big bolt-ons, then one was a larger transaction like this. If you look at a large number or a larger number of string-of-pearls, fundamentally when you look at that, one, you have to have the availability of those assets. Number two, in order for you to do that, you obviously have to increase R&D in the period leading up to the event, which would be dilutive to our earnings growth leading up. That in and of itself is not that big of a challenge. You're reliant on a series of binary events that can play out positively or negatively.
If they play out negatively, you get there and ultimately you haven't accomplished what your objective was. If you look at a large bolt-on, you have a similar kind of risk, except it's even more binary in its outcome. It's hard to find a bolt-on that can give you $10 billion-$15 billion of revenue to be able to advance that growth platform rapidly. The ideal strategy is the strategy that we ended up on. It's low risk. You're adding assets that you know you can continue to drive. They ultimately provide the support that you want to be able to bring critical mass to the growth platform. The pipeline that we have ultimately can drive the long-term growth of the business quite well, industry-leading.
We're in the fortunate position that we have a strong pipeline, but this gave us the critical mass, and it did it in a way that wasn't risky. By doing it now, HUMIRA can pay for those assets leading up to it. It doesn't mean that you abandon the others. There's still plenty of capacity to be able to go out and do the string-of-pearls strategy that we have employed leading up to this, that has been so successful in being able to drive the performance. It's a question of sequencing. We did this one first, then we return back to the strategy we had before to continue to enhance the pipeline. I think it is very elegant in how it works. It's relatively simplistic when you think about it. This transaction is not a transaction that's highly dependent on pipeline.
There are some pipeline assets there. Certainly the CGRPs are ones that we did build in some revenue for in our model. We looked at those carefully to make sure that we were comfortable with those. Mike can talk about some of these other programs. Mike?
Okay, this is Mike. With respect to NASH, we recognize that drug development in NASH has been very challenging, and we have not included NASH in our model. Obviously, there are some clinical studies or a clinical study that's ongoing with the NASH compound, so we'll have to see how that plays out, but that's not an area that we're counting on. With respect to Abicipar, the investment's already behind us there, so we view this as optionality, as I discussed in one of the earlier questions. We'll have to see what the label looks like to have a better sense for the opportunity. The trade-off we're looking at is the benefit of the longer-acting nature of this agent compared to the patients who experience ocular inflammation, which is on the order of about 8%-10% of patients.
We'll have to see what that looks like in the label, and we'll have to see how that's viewed by a treating physician. More has to play out here before we can be certain. We've included appropriate risk adjustment for this in our model. Again, it's not something that we're dependent on.
Thanks, Vamil. Operator, next question, please.
Thank you. Our next question comes from Tim Anderson with Wolfe Research. You may ask your question.
Thank you. You talked about robust growth through 2023. I think investor concerns have usually been around growth beyond 2023, I'm hoping you can address that. Specifically, on operating margins, at least our model shows big operating margin contraction with AbbVie as a standalone, with 2023 being the peak and declining from there. For the combined company, can you talk about operating margins from 2023 onwards, just directionally? Not asking you to give absolute numbers. Will those operating margins stay flat? Will they grow? Might they decline? Again, with 2023 being the reference point.
Okay.
On Allergan as well, you talked about all the good things with Allergan. Naturally, the other side of that discussion, there are risks to this sort of thing. With this $63 billion collection of assets, what are the potential greatest risks that you see?
Okay. Well, first of all, Tim, thanks for the question. Obviously, we're not going to give guidance on this call about 2023, but I'll talk directionally about your point. If you look at this transaction, and you look at the range of possibilities in 2023, because there are a range of outcomes that are potentially available in 2023 as it relates to biosimilars. Obviously, the deeper the discounting, the more pressure it puts on operating margin. There's obviously costs that can be offset against that. You have to recognize, this business has an operating margin that's pretty close to our operating margin. It will obviously raise the floor of whatever the floor ultimately is in 2023. It won't be dilutive to our operating margin.
The combined company, based on the range of outcomes that we've looked at, the erosion outcomes that we have looked at, has a very respectable operating margin profile. In fact, I'd say it's up there as one of the best in the industry, even when you look at the outer range of erosion for HUMIRA in 2023. Hopefully, that's helpful, at least directionally. As we get closer, we'll obviously put out guidance, but this isn't a time that we're going to do that. If you look at the risks around this business, I would say there's not a lot of risk. We're not betting on pipeline. If some of their pipeline assets were to work out, they would be an upside to our model. We built in very modest assumptions in this. I've described our view of BOTOX, which people talk about the risk.
As I said, we have built a model that is at or slightly below what the most recent analyst reports have been. I'd say, if anything, it is a conservative model. I think we're pretty comfortable with what that looks like. I don't view that we'll be very disruptive to their major growth engines, because we will basically try to make sure that they are protected from any disruption. The medical aesthetics business is an area that we will aggressively fund. There'll be other aspects of that business that we will aggressively fund as well. Their neuroscience business, particularly VRAYLAR, I think has a significant upside opportunity to it, and ultimately, there are a couple of other products in that neuroscience pipeline that although we didn't build them in, they ultimately could potentially have some upside to it.
I don't view that this transaction has a lot of significant risks, and that was part of the reason why it was appealing to us. When we want to have the availability of this $15 billion portfolio of durable growing assets, we didn't want a lot of risk. We wanted something that we could be comfortable was going to cover the 2023 event and stabilize that aspect of it in a way that we would continue to be able to drive growth. I think one of the important things that investors and analysts need to look at now is you really need to look at AbbVie as two very separate pieces of business. You're going to have this $30 billion growth platform that's going to grow at high single digits for the next decade.
That's the size of some of our competitors when you look at it in the way of revenue, and you look at it in the way of profitability as a standalone. You're going to have Humira, that essentially its only role is to produce cash flow to pay down the debt. In 2023, we will obviously defend Humira aggressively. Whatever happens in 2023, the company's not dependent on. If it turns out better than we have assumed, then ultimately it'll be upside. If it doesn't, if it turns out the same or worse. We're covered. This event basically does that, and that's how investors ought to look at it. Go value this $30 billion platform for what it is versus our competitors. Put a terminal value on Humira, and when you add them together, that's what AbbVie is.
As we go through that event, ultimately Humira will stabilize at whatever level it stabilizes at, and that will be the new company, and the new company will grow dramatically from that point forward. That's how we do it.
Thank you.
Thanks, Tim. Operator, next question, please.
Thank you. Our next question comes from Andrew Baum with Citigroup. You may ask your question.
Thank you. A couple of questions, please. Firstly, in the event that Sandoz prevail in their court case against Amgen and launch biosimilar ENBREL, what's the impact for your credit rating? Could you comment on how you think that may impact HUMIRA usage in 2020? Have all the plans been already finalized? Second, in relation to the $2 billion cost savings, perhaps you could identify how much is sourced from Allergan and how much actually is from AbbVie itself. Many thanks.
Okay. Obviously we can't speculate on the ENBREL court case. We've looked at various outcomes. We don't think it will have a significant impact on HUMIRA. Remember that ENBREL really is a significant player in the RA market. It's not a significant player in the psoriasis market to any great extent now. The plans, for the most part, are in a strong position for 2020, so I don't view that as a major risk. As far as credit ratings are concerned, Rob, do you want to comment on that?
We've had very good discussions with the ratings agencies. They, of course, run a whole host of scenarios as they consider the rating. If you look at what Moody's published today, they maintained a rating with a stable outlook. We're still one notch above with S&P based on what they published today. They obviously look at a whole host of scenarios and I'm sure considered this amongst others, and we're very comfortable with the way our rating is sitting now.
On the synergies, this is an area that we need to be careful from an Irish Takeover Code. What I would tell you, as I mentioned earlier, that about half of the synergies come from R&D. Obviously, that would be primarily or exclusively on the Allergan side. Beyond that, I don't necessarily feel comfortable talking about those.
Thank you, Andrew. Operator, we have time for one final question.
Thank you. We do have time for one final question that comes from Gregg Gilbert with SunTrust. You may ask your question.
Thank you. Good morning, Rick. Good to hear not much focus on taxes here, but interesting that you're bringing a former U.S. company back to the U.S., so maybe you can get some brownie points for that or at least a tweet from the president. Make sure to play that up. My two-part question is as follows. How can you ensure that the aesthetics business, which many view as the crown jewel, remains focused and special in the context of a much larger company? You talked a lot about what Allergan's done in the past in terms of its programs, et cetera, and we agree, looking for more sort of forward-looking stuff to maintain the specialness of that key franchise. Then as sort of a part of that, you mentioned cash pay being more relevant now for AbbVie, but not enormously so.
Once you digest this deal and move ahead, pre-HUMIRA LOE is becoming more cash pay oriented part of the plan. Thanks.
Okay. First of all, I would say certainly the medical aesthetics is a very good business. I wouldn't want to shortchange other aspects of Allergan. I think that neuroscience business is a very attractive business, and the women's health business, although it hasn't gotten a lot of attention from a performance standpoint, is another part of their business that I think has been very well run. There are many, many aspects. I would say overall, as I interacted with and our team interacted with their team, they have a very talented team there. Specific to your question, I would use Pharmacyclics as the example. If you remember when we bought Pharmacyclics, there were similar kinds of questions about what makes you think you can run an oncology business, a small entrepreneurial company? Are you going to kill it?
Well, that's probably a little harsh, but it was pretty close to that. Are you going to kill it? Ultimately it's going to lose all of its ability to continue to perform. I think we have demonstrated over and over again that we understand how to run these businesses. We will be setting up the aesthetics business in a fashion that it will maintain the Allergan name. It will essentially run as a standalone platform. Think of it like a sub of AbbVie, and our goal will be to retain, across all of Allergan, as much of the talent as we can, and we think we'll be very successful at that. Our goal will be able to retain the talent in medical aesthetics to make sure that that business is not disrupted as we move forward. I'm confident we'll be able to do that.
On your second question, I can't say we have a strategy that we're going to focus more and more on cash pay. Obviously, we will try to grow the medical aesthetics business as rapidly as we can, and we will fund it accordingly to try to be able to drive that level of performance. As it grows, obviously, it will become a larger portion, but I wouldn't expect us to go out and do other transactions that would add to the cash pay part of the business. We obviously will feed the medical aesthetics business with additional activity. They have been good at being able to do that, to add products through acquisitions. We'll clearly do that for that part of the business.
Outside the scope of medical aesthetics, there won't be a focus on looking for other cash pay businesses, which I think is where your question was going.
Thanks a lot.
Thanks, Gregg. That concludes today's conference call. If you'd like to listen to a replay of the call, please visit our website at investor.abbvie.com. Thanks again for joining us.
Okay, Tim, that does conclude today's conference. At this time, you may disconnect your lines. Thank you.