The operator introduces the AbbVie Third Quarter 2023 Earnings Conference Call and announces that participants will be in a listen-only mode until the question-and-answer portion. Liz Shea, Senior Vice President of Investor Relations, introduces the AbbVie team members on the call. She also mentions that some statements may be considered forward-looking statements and that non-GAAP financial measures will be used. Rick Gonzalez, Chairman and CEO, thanks Liz and begins the call.

The speaker begins by thanking everyone for joining and announces that AbbVie has once again delivered an excellent quarter with results exceeding expectations. They mention the impact of the U.S. biosimilar event for Humira and how they have managed erosion. The company's growth platform, which includes a diverse portfolio and strong products, has shown robust performance and is expected to continue driving significant revenue growth. The speaker also highlights promising R&D programs in various areas and expresses confidence in the company's long-term outlook, as evidenced by an increase in their quarterly dividend.

Rob Michael, CEO of AbbVie, discussed the company's strong performance in the third quarter, with adjusted earnings per share of $2.95 and total net revenues of $13.9 billion. The ex-Humira growth platform, including Skyrizi and Rinvoq, saw revenue growth of over 12%, and is expected to exceed Humira peak revenues by 2027. Neuroscience and aesthetics also had strong performance, leading to an increase in the company's full year revenue guidance by $600 million and adjusted EPS guidance by $0.25. The company has also raised its floor guidance for 2024 adjusted EPS to $11, excluding any impact from IPR&D expense.

In the fourth quarter call, the company announced a 4.7% increase in their quarterly cash dividend and provided their formal EPS guidance range for 2024. They also reported strong execution across their portfolio and expressed confidence in their long-term outlook. The commercial highlights included strong results in their immunology portfolio, with Skyrizi and Rinvoq showing impressive growth and on track to deliver a combined $11.6 billion in sales this year. Skyrizi saw operational growth of over 50% and continued to gain market share in psoriasis, psoriatic arthritis, and Crohn's disease.

The company has recently announced positive results from a head-to-head study of Skyrizi and Stelara in Crohn's disease, which showed Skyrizi's superiority in both clinical and endoscopic remission. This data will support Skyrizi as the best therapy for Crohn's and the company plans to raise its sales outlook for the drug. Rinvoq also had strong sales growth, particularly in gastroenterology, and the company plans to raise its sales outlook for that drug as well. Humira sales were down due to biosimilar competition, but this was expected.

In the third quarter, the company's oncology division generated $1.5 billion in revenues, with Imbruvica sales down 20% and Venclexta sales up 14%. The company's neuroscience division saw revenues of over $2 billion, with strong growth in Vraylar, the oral CGRP portfolio for migraine, and Botox Therapeutic. The aesthetics division had global sales of $1.2 billion, a 4% decline. Overall, the company's growth platform is performing well and demonstrating strong revenue growth.

In the U.S., aesthetic sales remained flat due to economic pressures, but Botox Cosmetic saw a 5% increase in sales. The facial filler market is still struggling, but there are signs of improvement. Internationally, there was a decline in sales due to a timing benefit in the previous year. Overall, the company expects a stable to improving outlook in the U.S. and internationally.

In the third quarter, economic conditions in major international aesthetic markets, particularly China, had a negative impact on results. However, the company remains confident in the long-term growth outlook for its aesthetics portfolio and plans to launch new products and indications. In the immunology sector, the company achieved two important milestones with the submission of regulatory applications for Skyrizi in ulcerative colitis and positive results from a head-to-head trial for Crohn's disease. Skyrizi demonstrated clear superiority to Stelara on all endpoints and a high rate of remission without the use of steroids.

In addition to the approval of Skyrizi for ulcerative colitis, the positive results from head-to-head Crohn's disease trials further establish it as a safe and effective treatment option. Progress is also being made in the development of Rinvoq for other conditions such as GCA, lupus, and HS, with positive results seen in a Phase 2 study for vitiligo. In oncology, approval has been received for epcoritamab in Europe and Japan for DLBCL, and progress is being made in earlier lines of DLBCL and follicular lymphoma. Top-line results from a Phase 3 trial for Venclexta in multiple myeloma have also been announced.

The study compared the efficacy of VenDex and PomDex in multiple myeloma and found that while VenDex did not meet statistical significance in terms of primary endpoint, it did result in higher response rates and longer overall survival. The company plans to discuss these results with regulatory agencies and provide updates on the program. They also have promising multiple myeloma programs in their pipeline, including a BCMA CD3 bispecific and a next-generation BCL2 inhibitor. In the neuroscience division, they received approval for Aquipta in Europe for prevention of migraine. In aesthetics, they have announced positive results for Botox in platysma prominence and plan to submit for regulatory approval in the U.S. They are also working on expanding the indications for Botox and advancing their novel toxin pipeline.

AbbVie recently announced positive results from two Phase 3 trials for their novel toxin, BoNT/E, in treating glabellar lines. The toxin showed a rapid onset of action and short duration of effect, providing a differentiated profile compared to other available neurotoxins. AbbVie plans to complete the remaining development work and submit regulatory applications in the second half of next year. They also have several important milestones coming up, including Phase 2 data for Teliso-V in lung cancer and regulatory approvals for other products. The company's strong performance in their ex Humira growth platform is supporting their long-term growth outlook.

The company reported adjusted earnings per share of $2.95, which exceeded their guidance midpoint by $0.14. Total net revenues were $13.9 billion, slightly above their guidance and down 5.8% excluding foreign exchange. The adjusted operating margin ratio was 46.7% and the company is raising their full year adjusted earnings per share guidance by $0.25. They now expect adjusted earnings per share between $11.19 and $11.23. The company also expects total net revenues of approximately $54 billion and an adjusted operating margin ratio of 46.5%. They anticipate net revenues of $14 billion in the fourth quarter.

In paragraph 13, the company discusses their expectations for foreign exchange impact on sales growth and adjusted earnings per share for the year. They also mention their strong business performance and capital allocation priorities, including a dividend increase and debt paydown. The company is confident in their long-term outlook and expects to achieve $11 in earnings per share by 2024. They attribute this confidence to various factors and are awaiting further details on top line and margin structures.

The company has raised its growth platform sales by $1.4 billion and has seen strong performance in its IBD indications for Skyrizi and Rinvoq, as well as its other indications. Their migraine portfolio and Botox have also outperformed expectations, leading to the company raising its guidance for aesthetics twice this year. They have raised their EPS floor to $11 ex IPR&D and expect to deliver a high single-digit CAGR from '24 to the end of the decade. Despite a 10% quarter-over-quarter decline in all products, the company is keeping its guidance and expects a bump in the fourth quarter. This is partly due to difficult comparisons in the international market and seasonality in the U.S. business.

The company is encouraged by the return to growth in the U.S. toxin market and is maintaining its share position despite competition. The recovery for fillers is taking longer due to their higher price point. However, the company is still seeing positive trends and is excited about their new filler products. The situation in China is being closely monitored, but overall, the international business is growing nicely. The company is confident in the long-term outlook for the business, as the U.S. toxin market has historically grown in the mid-teens and is still underpenetrated. Market growth is crucial for the company's long-term goals.

The market for Botox is expected to rebound strongly after a period of economic pressure, and the company has several innovations that can accelerate growth. These include new indications for Botox, a short-acting toxin that can attract new patients, and regenerative fillers. The company is confident in its ability to deliver robust growth and reach a revenue goal of $9 billion by 2029. In the fourth quarter, Botox revenue is typically higher, which may explain a larger increase in that quarter. In terms of immunology, the company is seeing positive volume trends for Skyrizi and Rinvoq, with discussions about the 2024 formula complete.

The speaker is confident that there will be more normalized price erosion for two products in the coming year, and that there will not be a repeat of the significant concessions seen this year. They also believe that HUMIRA will see erosion mainly due to price rather than volume in 2024.

The speaker mentions that they are not giving guidance for next year, but they expect U.S. Humira sales to be around $7 billion. Some analysts have predicted higher sales, but the speaker believes this is not a reasonable expectation. The next question from an investor asks about potential mergers and acquisitions to bolster the company's pipeline. The speaker responds that they are comfortable with their current growth and are primarily focused on adding assets for future growth towards the end of the decade and into the 2030s. They also mention that BD has been an important factor in the company's growth over the past 11 years.

The company has had success with acquiring assets and making them perform well, such as with Skyrizi and Allergan. They value business development as a tool for growth and are focused on adding additional mechanisms in immunology for combination therapy. They are also interested in next-generation CAR-T technology and T cell engagers in oncology, as well as assets in psychiatry for anxiety and mood.

The speaker discusses the company's financial ability to make transactions and the importance of finding value-enhancing assets. They also address concerns about obesity and its impact on the healthcare industry, specifically in relation to step edits for drugs like Skyrizi. The speaker emphasizes the distinctiveness of their product, which has shown gross superiority in head-to-head trials against other medications for psoriasis, potentially mitigating the need for payers to implement formulary structures like step edits.

The speaker reflects on previous comments and highlights the distinctiveness of Skyrizi and Rinvoq. They remain confident in their strategy of raising the standard of care. The speaker then responds to a question about underappreciated assets in the pipeline and explains the timing and amount of a charge taken for Imbruvica regarding the Medicare drug pricing program.

The speaker discusses the company's pipeline and how it has been underappreciated. They mention the success of their investments in Rinvoq and Skyrizi, which are growing rapidly. They also mention other programs, such as their topo warhead platform and BCMA bispecific, which they believe will be significant opportunities for the company in the future.

The speaker discusses their company's potential for entering the multiple myeloma market, which is a large and lucrative market. They also mention other promising programs in their pipeline, such as their REGENXBIO program for eye diseases. The company recently had an impairment charge related to their drug Imbruvica, which was expected due to the negotiation process under the Inflation Reduction Act. The magnitude of the impairment was influenced by various factors, including the discounting of future cash flow.

The speaker discusses how they calculate future cash flows and the magnitude of adjustments based on negotiated prices. They mention ongoing negotiations and a private conversation with CMS on February 1. The speaker clarifies that the base year for high single-digit revenue growth is 2024. They also address AbbVie's interest in building their oncology business and mention a recent IRS document that does not impact AbbVie's tax rate guidance.

The company's intention is to have a high single-digit CAGR starting in 2024. They are confident in their platform and did not consider a recent transaction. The company has already implemented tax legislation changes and there will be no impact on their tax rate. The company is not yet certain about spending levels for SG&A and R&D in the trough year of 2024, but they are seeing success with Scares and Rinvoq in IBD indications and believe there is room for growth in the competitive landscape.

Scott Reents and Jeff Stewart discussed the company's operating margin for 2023 and 2024, which is expected to be similar to this year's margin. They also highlighted the potential for growth in the IBD market, with two complementary assets, Skyrizi and Rinvoq, positioned to address different stages of the disease. The company is encouraged by the momentum and sees significant headroom for growth in this market.

The speaker expresses confidence in the future of the company, citing the potential for more competitive entries and the strength of their profiles. They also mention the commercial executional component and their ability to compete in the market for share. The company periodically updates their long-term guidance for their portfolio and is pleased with the momentum of Skyrizi and RNA. They will provide a holistic update to their long-term guidance at the appropriate time. The speaker also mentions the potential for combinations with Skyrizi in the future.

The speaker, Roopal Thakkar, discusses the recent launch of a competitor's psoriasis treatment with a warning for anti-TNF safety. She mentions their own IL-1 alpha beta bispecific antibody, Lutikizumab, which has shown resistance to anti-TNF and other biologics. They are also looking at potential biomarker approaches and combination therapies with other agents such as Skyrizi, RIPK1, and an IL-2 mutein. Thakkar then addresses a question about depression and suicidal ideation associated with an IL-17 class agent, stating that Skyrizi, an anti-IL-23, has not shown any similar signals and continues to perform well.

The speaker discusses the advantages of their label, Skyrizi, compared to the new 1 in the '17 class. They mention that it does not have a high rate of fungal infections or lead to IBD, unlike the IL-17 class. They are confident in Skyrizi's position in psoriasis, especially with its dosing regimen of 0 and week 4, followed by quarterly doses. They also mention their vision for their oncology portfolio, stating that they are targeting different types of cancer, such as colon, gastric, and pancreas, and are seeing positive results with their c-Met targeted drug, ABBV-400. They highlight its low rate of diarrhea, which is a common side effect of other treatments for GI tumors.

The company has seen promising results in third-line treatment and is now exploring earlier lines and combination therapies for better efficacy. There is a large unmet need in GI tumors, and the company's GARP program has shown the best results in liver cancer. The company plans to target areas with high unmet need and less competition. They also have other targets in the ADC space, such as 706, which will be going to two other indications next year. The company's strategy is to bring their treatments to a larger number of cancer patients. The ESMO data showed that using a biomarker to select patients may be a more effective approach than broad treatment. The company has also observed higher efficacy in EGFR mutant lung cancer, but this comes with a more severe adverse event profile.

The company has seen slight increases in efficacy with their platform, but patients do not want side effects such as nausea, vomiting, stomatitis, alopecia, and fatigue. They have a potential combo with osimertinib for mutant patients, and are seeing 50% ORR in that segment. They are also moving into Phase 3 with their best-in-class heme drug, which has a high level of efficacy and potential to avoid hospitalization and REMS. The company also has other assets in clinic, including a next-gen BCL2 blocker and a BTK degrader. They have a comprehensive approach across oncology. In terms of immunology, the company has evaluated the impact of Humira biosimilars and believes that tail revenues may be better than initially modeled. The delay in Stelara biosimilars may also have an impact.

The speaker discusses the company's capital deployment and potential for M&A activity. They believe that the Humira tail will emerge in 2025 or 2026 and will not significantly impact their strategy. They also mention the potential for Stelara to become interchangeable in the US in 2025, but highlight the strength of their Skyrizi product. The company has lifted their cap for BD activity and is rapidly paying off debt, with a current net leverage ratio of 1.8x.

The company's dividend growth has slowed down, but they are still committed to increasing it in the future. They expect earnings to grow faster than dividend increases, and their current payout ratio is in the mid-50s. Despite a decline in earnings, the company has managed to maintain a strong dividend growth in the past few years.

The company is committed to growing its dividend, but not at the same rate as earnings. They have a long-term view and are balancing earnings growth and dividend growth. The trough in 2024 will have a similar operating margin as in 2023. There is potential impact on sales from GLP-1s in aesthetics, but the company has not seen it yet. The company expects a 46%-47% operating margin profile in 2023 and 2024, with a $11 EPS ex IPR&D as a floor for next year.

The speaker believes that weight loss products can have a positive impact on the aesthetics business in the long term by increasing patient engagement. However, in the short term, there may be a trade-off with higher-priced products due to economic factors. Overall, weight loss products are seen as an opportunity for cross-selling and increasing patient engagement in the aesthetics market. A replay of the conference call can be found on the company's website.

This summary was generated with AI and may contain some inaccuracies.