AbbVie Inc. (ABBV) Earnings Call Transcript
February 26, 2021
Earnings Call Speaker Segments
Good morning, everybody. Welcome to our next session at our Global Healthcare Virtual conference. I'm delighted to welcome AbbVie to the GHC this year. AbbVie is represented by Mike Severino, Vice Chairman and President; Rob Michael, EVP and Chief Financial Officer; and Jeff Stewart, EVP of Commercial Operations. Liz Shea will be standing by to keep us all within bounds. So thank you all for joining us this morning.
It's a pleasure to be here. Good to see you, Geoff.
So Mike, perhaps the most pressing question that I hear from investors is about RINVOQ and safety and all that sort of thing. So perhaps you could give us your views of what the implications are for the XELJANZ study that was announced earlier this year and how that may change the landscape for JAKs in general and for, of course, RINVOQ, in particular.
We remain very confident in the safety profile of RINVOQ, not only in its approved indications, but also in the indications where we have recently top line Phase III data. And what I would say is we have had a very comprehensive safety monitoring plan in place through our clinical trials and in the post-marketing setting. We have more than 9,000 patient years experience from clinical trials at the approved dose in RA and additional safety at other doses that are being studied in other indications. And across that data set, we've not seen a signal for the events that were reported in the Pfizer study, in the XELJANZ safety study. Specifically, with respect to cardiovascular events or MACE events, as they're often referred to. Our rates have been low. On the last quarterly call, I gave some numbers. And with that 9,000 patient years of follow-up, our rate for MACE is about 0.4 events, in a patient population that's considered to be at high risk. And so the expected rates would be greater than 1 event per 100-patient years, and we've had 0.4, as I described. And in fact, estimates of that expected rate vary between about 1.0 and 1.7. So we compare very favorably to that expectation. And again, nothing that we would consider a signal. And with respect to malignancy, we have a very similar situation. We've had comprehensive monitoring in place. Our rate is about 0.8 per 100-patient years. And that compares favorably with the expectation, which is about 0.9 or higher, depending on the estimate. So again, we've seen no evidence of an increased risk. We've seen no evidence of a dose response, importantly. And we know that, that's something that investors are often focused on. And we remain confident in the safety profile overall. So the short answer to your question is, we don't view the XELJANZ study result as changing our view of RINVOQ or the potential of RINVOQ, either in the approved indications or the indications that we're currently developing.
Okay. But would you expect that there'd be any regulatory action just to review all of that data? I mean, some people have suggested there might be an AdCom, and would you typically expect that to be just focused on tofacitinib? Or would you participate -- expect to participate in that AdCom?
Well, I think the best thing to look at is how these other events have been evaluated when other molecules have had signals in the JAK class, and those evaluations have generally been conducted on the molecules that generated the signal. For example, there was a lot of speculation as to whether we would have an advisory committee around our RA indication, we did not. We have not been asked to participate in any broad JAK safety update. Certainly, we have, on an ongoing basis, shared our data with the agency. And as I've said, we've generally viewed those data as reassuring. So we don't see a reason why that would change.
Great. So you have the atopic dermatitis PDUFA date coming up shortly, I believe. Could you remind us of that? And also of the dose and the safety observations you have in that indication, which, of course, is quite different to RA.
So we studied 2 doses in atopic dermatitis. We studied the 15-milligram dose and the 30-milligram dose, and both had a favorable benefit risk to RA. There was increased efficacy with the 30-milligram dose. There was very strong efficacy with the 15-milligram dose, but there was a dose response for efficacy. And so we constructed our file around both doses, and we would view both doses as approvable. We think the safety profile is very consistent with the patient population and with the sort of agent that would be used in a moderate-to-severe population there. Again, there were no VTE events in RINVOQ-treated patients across that entire program in all of the studies that we've looked at today. There were some events in the placebo group. There was 1 VTE and 1 arterial thrombus in the placebo group, showing that we could detect these events if they occurred, but none were observed with RINVOQ. Overall, safety was very favorable, and we look forward to an approval decision in the April time frame.
Terrific. So maybe we could pivot a little bit to ulcerative colitis and Crohn's disease, where you have a number of shots on goal. And perhaps, Mike, you could talk a little bit about how sort of scientifically you see those 2 different mechanisms positioned in that indication. And then maybe I'll pivot over and have a conversation with Jeff about what you see is the commercial opportunity there.
I'd be happy to start. We view it as a very attractive opportunity. It's a substantial market. It's a substantial proportion of the Humira revenue footprint, and we're fortunate to have 2 new mechanisms moving into that space with RINVOQ and SKYRIZI. Specific to the UC data, we performed very well with RINVOQ in ulcerative colitis in the 2 Phase III induction studies that we top lined. We top lined the first of those 2 studies at the end of last year. It was in December of last year. And quite frankly, the efficacy results exceeded our expectations with respect to remission rates, with respect to rates of endoscopic improvement and endoscopic healing, which are very important and very important differentiating factors for newer mechanisms coming into this space. And the safety data were also very strong. Again, there were no events that were concerning with respect to VTE or MACE or GI perforations, which are an area of focus for this disease area. And in particular, the rates of SAEs across both studies were actually lower in the RINVOQ group than they were in the placebo group because many of these SAEs are driven by uncontrolled disease. So both on the efficacy and safety profile, it was very strong. And we see a very clear role for JAK inhibition, particularly with a selective agent like RINVOQ in this indication. Now we also have SKYRIZI in inflammatory bowel diseases, and IL-23 plays an important role. And that is, I think, very complementary to what RINVOQ will bring because these patients develop disease very early in life. Lifelong control is very difficult to achieve, and having more mechanisms is very beneficial. And so the ability to bring a high efficacy oral like RINVOQ, hitting the JAK pathway, JAK1 specifically, obviously, is an important advance and also offering an infrequently administered biologic. Hitting IL-23 like SKYRIZI will be a nice complement. And there'll be some natural segmentation based on those characteristics in the marketplace.
Great. Well, Jeff, perhaps you could start-up by giving us a sense of the proportion of your kind of Humira revenue that comes from IBD. And then perhaps we can then think about what the magnitude of the opportunity might be for RINVOQ and SKYRIZI.
Yes. Great, Geoff. It's quite substantial, as Mike mentioned. So if you think about the history of Humira a little bit, the IBD indications were the later major-launched indications. And in some cases, folks didn't fully appreciate, over the ramp of Humira, how important the penetration was in Crohn's and UC over time. It became very, very substantial. So for example, depending on the territory, it's anywhere between 35% and 40-something percent of the overall revenue for Humira. So very, very significant. Also, as Mike said, the unmet need is arguably highest in IBD. So you get, pretty much with the baseline technologies, not that great of sort of pure remission, endoscopic healing, even response rates, and they typically sometimes can wane over time. So the unmet need's substantial. So when we look at the emerging data now on SKYRIZI, which is very, very nice, and the early data that was just released on UC for RINVOQ, which is very impressive in terms of that induction data, we have this opportunity that we're planning for basically a one-two punch, in particular, in '22 with SKYRIZI for Crohn's and then RINVOQ for UC, and that's the first sort of commercial strategic move. And it's important that as a background, right now, we have 2 sleeves in our IBD Humira sleeve. We have people that are focused on CD, Crohn's, and focused on UC. And so as we move with these 2 new assets, we see again that double barrel sort of move into that space with 2 high efficacy products. So it's very, very encouraging. I would think -- say the other thing is that, given the unmet need and the way that the physician sort of segment and even the patient segments, we're quite comfortable having both of those assets work together. I'll give you a little flavor. There's actually a segment of gastroenterologists that are experts in IBD. We call them control and comfort. And typically, they like the idea of infusions. They like the idea of starting off with the infusions, making sure they can have the touch points. And so SKYRIZI will fit very nicely in there because the induction are 3 infusions before you bridge over to more, let's say, outpatient or out-infusion center. Then you got another segment of physicians that have really adopted self-injectables or, in this case, we think they will be very, very nice for the first high efficacy oral JAK is our anticipation. So having both of those working together in a very valuable segment is attractive for us commercially.
Great. And Mike, I know I've asked you this before, but I think it's fourfold dose of SKYRIZI in Crohn's disease compared to the existing psoriasis dose. So could you talk about how are you going to deliver that fourfold higher dose once the product is commercial? And maybe, Jeff, you could talk about what that enables you to do from a point of view of pricing against the competition?
We've studied a range of doses, but typically, in Crohn's disease and in IBD in general, one needs higher doses than the others. And so there are a number of potential delivery solutions that we could use to deliver the doses that are required in a convenient manner for patients, both with respect to formulation and concentration of formulation as well as device solutions to make doses of more than 1 milliliter administrable in a patient-friendly manner. And we're working on both of those aspects of the problem and actually have solutions in place to enable this at launch.
Okay. And Jeff?
Geoff, I think from the standpoint of our ability to price the market or think about how we would think about, given the profile premium, et cetera, those decisions haven't been made. But to Mike's point, given the form, so the IV and also the way that we're planning on delivering the more maintenance dose, we feel quite comfortable that we can get the right value proposition from both the form and pricing as we move into the Crohn's market segment with SKYRIZI.
Okay. I'll pivot over to Rob before he dozes off here. Rob, you've provided a long-term guidance of $15 billion in revenue for these 2 products. Could you just talk about the methodology behind that? And how you've accounted for, for example, atopic dermatitis or HS or some of the other slightly downstream indications in forecasting?
Sure. Yes. So the basis for our long-term guidance is our long-range plan process, which we go through annually. And so when we go through that review with the commercial business, we look at the opportunity, market size and market share uptake for each indication. So in the -- on the immunology day presentation, you saw we broke out what we felt were the appropriate, by 2025, risk-adjusted revenue contributions by indication for RINVOQ and for SKYRIZI. And was really the base -- the basis for that was, again, the long-range plan that we put forward. And obviously, in that long-range plan, we took into account the very strong uptake we've seen with the lead indications as well as a favorable data that's coming out for the new indications. And so that was all factored in. We obviously took our guidance up from -- up $10 billion to $15 billion as a result of that. And we broke it out by indication, try to give investors a flavor for the relative contribution. The thing I'll also highlight is to keep in mind that when we provide that breakout for the gastro indications, given that these are risk-adjusted and we do take into account where they are in the development cycle, it's one thing to keep in mind as well as the timing of that launch and the ramp, you'll see potentially a lower contribution from IBD that you expect by 2025. But as you think about the long term guide, I mean our $15 billion is a 2025 number. We expect strong growth beyond that. And certainly, those indications will contribute as well.
So not to put you on the hot, but you've had great data come out in UC. You have the PDUFA data on atopic dermatitis around the corner. I'm not going to sort of going to make you accountable for upgrading that forecast. But given the probability success adjustment, wouldn't we expect that if AD gets approved with the 2 doses and with the great data you have in UC now, at least on the induction setting, that there's an opportunity even above that, just thinking about probability adjustments?
No, we have a great degree of confidence in our long-term guidance. Certainly, as you see a favorable data, favorable uptake, it's reasonable to assume that over time, you'd see us exceed those forecasts. I think at the position we are today, we feel very good about the guidance we've given for 2025. But as you monitor our performance and with our track record, I don't think it's unreasonable to expect that over the long term, we would exceed the guidance. But as we stand here today, I think that $15 billion is an appropriate number to think about for 2025.
Okay, terrific. And that really does fit in with the expectations for the Humira LoE. Are there any scenarios in which the LoE -- the pace of the erosion of Humira kind of exceeds the incremental contribution from those 2 products?
I think we've tried to give investors a point of view on the best way to model that erosion based on the experience we had in the international markets. That stands today. We've talked about, in year 1, what we saw in those European markets was about 45% erosion. And so we've talked about flexing that plus or minus 10% to give you a range of possibilities. That still holds today. But as we think about the long-term growth of the company, we factored that in. We factored in this -- the growth within immunology, but also the rest of the portfolio. So it gives us a great degree of confidence. While we would expect to see a step down in '23 in terms of revenue, we'll get back to growth in '24, more moderate growth in '24, and then very strong growth in '25 and beyond, high single-digit through the end of the decade.
Great. Maybe we can pivot a little bit. Mike, you talked about neuroscience. Could you talk a little bit about VRAYLAR? How is it performing compared to your expectations? And perhaps give us some -- a look at what you're thinking about the Phase III in depression.
VRAYLAR is performing very strongly, and it is ahead of our expectations based on the deal model. And the uptake that we've seen, since the expansion of the indications in bipolar disease around the summer of 2019, has been very strong. And we've seen good uptake, good acceptance across a broad range of treating physicians. And I think that is largely attributable to the attributes of the product. It has a very favorable profile with respect to the brightening effect that is different than most atypical antipsychotics. It has a very good safety profile, particularly with respect to the metabolic effects that have been seen with others. And that combination makes it a very attractive offering for a wide range of treating physicians, both the psychiatrist population as well as broader population that includes some generalists, and they find it a very attractive profile that is easy for them to use in the patient population for which it's indicated. With respect to depression, we think depression represents a very nice upside for the program. We didn't build it into our modeling at the time of the deal model. And we've not baked in success for that indication in terms of the guidance that we've given around VRAYLAR. And we've done that specifically because we know that depression is a difficult area to work in, and it is a challenging area with respect to study reproducibility. Having said that, we have one pivotal study that's positive in hand. We've looked at both the pharmacology of the molecule and what is likely to drive a benefit in this patient population, and we feel it's a very good fit. We've looked at the design of the studies that are ongoing, the Phase III studies. With respect to some of the core characteristics of patient populations, the measures that we're looking at, the aggregate blinded effect signs that we can look at without penalty and see if they're in line with our expectations, and all of those features point in a favorable direction. So we think there's a very nice possibility here. Again, it would be upside. But we feel good overall about the potential to be able to capture that upside. And those studies will read out in the back half of this year.
Great. And Rob, to the Allergan transaction, as you're well aware, the kind of success or the incremental value from these transactions sometimes comes down to what you found that was better than what you expected and how that offsets against what you found that was worse than what you expected. So now you've had a chance to really bed in the Allergan acquisition, what are the factors that weigh on? What's better then and what's worse than you expected going in?
Yes. So we're very pleased with the Allergan transaction. Now that -- if you think about from the time we closed last May to today, we've seen really, I think, 4 areas of key upside. One, within Aesthetics, we saw a very strong recovery from the pandemic, frankly greater than we expected. And that influenced the guidance we gave this year, which is $4.5 billion of revenue, growing almost 30%; and gave long-term guidance on high single-digit growth, which is higher than -- when we talked about the deal, we were talking about more mid-single-digit growth. And that's also driven by our ability to invest and drive a return in that business. So I'd say Aesthetics, we're very pleased with that recovery and the long-term potential. Then when I look at VRAYLAR, we've talked about VRAYLAR, the share uptake there. We gave that guide of about approaching $4 billion with the current approved indications. There's also the opportunity for adjunctive major depressive disorder. So I'd say that's another opportunity that's been upside to our initial projections. As we look at our migraine portfolio, the uptake in UBRELVY has been excellent. We've given guidance this year of $450 million. We've talked about both for UBRELVY as well as for atogepant in preventative therapy, both being peak sales opportunities of greater than $1 billion. That's also an upside to what we initially projected. And then within eye care, we're very excited about that business as well. We think that fits in very nicely into our business model. But we've also talked about, in RESTASIS, as we've tried to project when there will be a generic that comes in. When we put the deal model together, we were not expecting generics to not be on the market by now. So we've given a guidance that right now, we're assuming that there'll be a generic in the middle of the year. We'll see how that actually plays out. But eye care has also been a source of upside. So all those things have really driven our ability to communicate an expectation that will exceed the accretion targets that we have for the deal. We're doing actually on synergies, tracking very nicely with our expectations there. We've talked about $600 million last year, $1.7 billion this year, well on our way to exceed the greater than $2 billion of synergies. And so I feel the business is firing on all cylinders across, obviously, a number of therapeutic areas.
Okay. Well, if there are all those upside outcomes and no downside. So are you ready to go and do another big deal?
So we've talked about -- look, I mean, the nice thing about our business, we generate so much cash that we can do a number of things. We can grow our dividend, continue to grow our dividend. We just increased it by 10% again in January. And so we're very committed to a strong and growing dividend. We can rapidly pay down debt. We're on track to pay down $17 billion of cumulative debt by the end of this year with further deleveraging. So we're doing a great job of improving the balance sheet, and we're still doing BD deals. We were committing $2 billion per year for deals we've done, things like Genmab and I-Mab last year, which are very attractive opportunities for our hem/onc portfolio. And so we feel with that capital allocation, that gives us a great opportunity to continue to grow the dividend, continue to delever as well as complement our internal pipeline with external innovation. And so the way we're thinking about that, that $2 billion per year will likely stay in place through '23, and then we'll reassess at the time. But I think we're doing a great job of really driving capital deployment consistent with what we've communicated before.
Great. Jeff, just on the Allergan integration. AbbVie has historically been pretty invested in scientific selling, a lot of data, huge clinical trials, that sort of thing. How is your commercial organization adapting to having the Aesthetics business, having the eye care businesses, which are more brand-oriented and less science-driven?
Yes, it's a great question. I think it's going very, very well. I'll give you some examples, and Rob highlighted it, maybe start with the eye business. It's a very, very attractive segment. And so we're looking, to Rob's point, even as RESTASIS, when that goes, as that goes away, it's very highly specialized. We look at the specialization of the Allergan R&D, the ability to deliver novel products to the eye; different types of devices; their expertise; and in some cases, buy-and-bill and a small physician segment. So it's very, very attractive as we look at continuing to build on that. So we've had to learn some of that business, but it's a very, very strong culture, strong customer focus. And I think both ways, there's a lot of very strong sharing across the board in terms of our governance, how we're thinking about investing in those core businesses, let's say, BOTOX, accelerating clinical programs, but letting basically the expertise of the Allergan customer centricity be very, very strong. So that's working quite well. And I would say something that's maybe underappreciated is to the point that Rob just made in terms of surprises is I'm very confident that our international businesses are very strong. So our international affiliates can really, really perform. And that's an area as we start to see those businesses, whether it's Aesthetics or basically eye care, toxins, get integrated into those businesses, I think we're going to start to see some very nice revenue synergies as well as we start to basically come together as 1 team, which has gone well. So that's my perspective on the 2 cultures coming together.
Right. Mike, we only got a few minutes left. Could you ask -- I have had questions about BTK inhibitors. Now with -- through the Pharmacyclics acquisition, you really have the first BTK that was commercial. It's been fabulously successful. But now, of course, you're facing competition as one always does. So my recollection is that Pharmacyclics had a sort of library of BTK inhibitors. And I'm just wondering, have you advanced any of those? Do you envisage both additional BTK inhibitors in oncology, but also exploring autoimmune indications where they seem to be showing promise?
We have explored BTK inhibition in autoimmune conditions. So 559, ABBV-559 is a program that combines JAK inhibition with BTK inhibition. And in the RA study, we had an arm that included the BTK inhibitor alone to understand what the potential effect was in that indication. As we announced some time ago, we didn't see the efficacy results in RA that we would have hoped for that would be required to advance a program around BTK inhibition or the combination in RA, but we do have additional studies in autoimmune indications that are underway. And I think one of the ones that would still have potential scientific promise would be lupus because of the combined B-cell and broader immune impacts of that disease. And so that's something that is underway. So we are studying BTKs in other indications and particularly in those autoimmune indications. When we turn our attention to the earlier pipeline, we also have other approaches at modifying BTK that we're studying, including the ability to knock down BTK and other novel approaches at addressing BTK. So all of those things are still on our radar screen.
Okay. And then perhaps the last question, you have a very strong Th1-mediated or Th1-driven immunology franchise, certainly best in the industry. But you haven't really pivoted that much over to Th2. Certainly, you're in the IL-17 area with SKYRIZI. But as you think about the sort of asthma, to an extent, atopic derm, I know you have the JAK program there, but all the allergic spectrum of diseases, do you have any interest in those diseases? And how do you think you might access them?
When we look at the broad spectrum of immune-mediated diseases, and of course, it is a very broad spectrum, there are diseases that are classically thought of as Th2-driven or allergic in their etiology that could be of interest to us. Atopic derm is obviously one, and we do have a very strong play there with RINVOQ, but there might be other mechanisms long term that could complement that. I think the eosinophilic diseases, particularly eosinophilic esophagitis and gastritis -- gastroenteritis, are interesting. I think the biology is well understood. And so for the right sort of program, those are areas that we could pursue in development. I think asthma is more challenging for us because it's really outside of our footprint, outside of the call points that we know very well. So I think it would be a different hurdle to get into asthma as a company, and it's not one that we're prepared to do today. But I think there are a range of those indications that do fit very well within our scope. And we would pursue those both with internal programs and potentially with external innovation as well. And so that is a space that we're focused on, and it's a space that we monitor quite closely and could pursue in a larger way if the right program came along.
Great. All right. We reached the end of our allotted time. I want to thank you all for sharing your perspective, for answering my questions so patiently and thoroughly. Look forward to chatting with you again in the future. Thanks very much.
Pleasure to be here. Thanks.
Thank you, Geoff.
Thanks.
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