ABBV - Earnings call transcript Q3 2018

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Operator

Good morning. Welcome to the AbbVie third quarter 2018 earnings conference call. All participants will be able to listen only until the question-and-answer portion of this call. I would now like to introduce Ms. Liz Shea, Vice President of Investor Relations.

Elizabeth Shea

for thanks and morning joining us. Good and the Chairman Chief Officer. of on Severino, President Vice and of call Executive Administration; Bill Executive Senior with Gonzalez, Rick Executive Vice Development Research of Rob are: Finance today President Scientific the Vice Financial Michael Officer; Chase, me Officer; Also Chief and Board Michael, and Chief and and President

indicated forward-looking you AbbVie or Act the get statements. we started, considered for Before uncertainties may cause results statements are in are make today of these that like the remind I of actual and forward-looking statements we to that to Reform be to those Private cautions statements purposes Litigation materially risks differ subject may forward-looking would Securities that XXXX. from

call, the with in measures undertakes our law. performance. affect conference today in from AbbVie's release found XX-K obligation Form developments is Additional earnings AbbVie's our non-GAAP Report XXXX events by and subsequent be AbbVie that business on and measures are help investors as used website. publicly except financial today's the understand our ongoing financial past, These a revisions information forward-looking measures may regulatory as or filings. operations filings financial no Annual required SEC will about comparable statements in included as to On GAAP be reconciled result non-GAAP on to release in of which any to can our other factors

your questions. Following our prepared we'll take remarks

the I'll Rick. that turn now to over with So call

Richard A. Gonzalez

R&D our an expectations joining and in comments third Bill I'll discuss for quarter more for thank XXXX provide our our detail. Mike discuss provide some will pipeline advancements update Good quarter I'll will XXXX. guidance, you, morning, full-year Liz. recent across Thank and today. and you the on everyone, performance, about then our us

industry-leading ahead of by year. growth products sales, once also we on performance more remarks, certainly than sets prior will growth we another top as per at with the expect quarter high more full-year last represents And year. a we of take Adjusted saw we industry next growth outstanding XX% questions. results growth. growth expect while XXXX growth growth VENCLEXTA, XXXX of are performance, strong this for our other a share This and $X.XX, of Based again for time the midpoint. us very and year year. earnings XX% our peer the XXXX at $X.XX We several from strength LUPON. to adjusted CREON, our including business continued strong guidance raising the DUODOPA earnings progress and fourth date, in products our puts performance and to of earnings the We grew than more reflecting and once portfolio of year. exceptional group. very of bar earnings of now was of the our line We've in million global were R&D in driven share commercial, sales and with driven operational and HUMIRA number more per IMBRUVICA XX% including was our versus operational than of with strong versus a quarter our resulting the quarter in bottom again operational, delivered XX.X% than Total sales adjusted top in Following representing earnings $X.XX, expectations. usual, your HCV substantial contributor nearly XX% $XXX execution which

opportunity including year, this factors we despite to to our business XXXX comparison expect provide more significant biosimilar And difficult our year deliver to a of than level targets growth earnings in strong specific a our to double we're XXXX for business; the we HUMIRA ability our launches we to of XXXX. number our competition, VENCLEXTA, making and HCV investment deliver growth once importantly, strong midst are an important XXXX; product process, light as direct particularly clearly the in be ramp us underlying growth early will momentum, digit international too and again of including the ORILISSA, annual support new in drive business in will impacting for to in billion of in of rapid confident ability risankizumab based be on it's planning Although continue our upadacitinib. to Clearly demonstrate earnings AbbVie, for XXXX growth. an $X still

XXX%. generate our also we expect dividend business, that license property, nearly the to which we quarter, the are see have we five quarterly direct Since our U.S. our patent addition cash remain confidence in line share biosimilar bottom in share agreements, payable XX.X% announced we strength the increase competition $X.XX two strong biosimilar we're from to dividend and in Also proposed intellectual over HUMIRA example of In to will of in products. per quarterly there cash significant our Underscoring XXXX. February $X.XX per the flows. confident to the in another now we total, with in dividend grown inception, agreements additional our of today performance, continue continued not the are announcing beginning yet XXXX. until These

our and business look at performing above our our aspect we As our prospects, at just is about expectations. business evaluate every or of

us expectations. one and products remains the making to bring the of to our in support new the allow will market industry long-term pipeline progress to the best Our we're growth

highlight Let a me examples. few

a of past new our including third in have Today build XX% years growth over rate, the the is for driver We than growth significantly a robust at in now AbbVie. quarter. annualizing billion to $X more above oncology invested portfolio growing major hematological several oncology and

program FCR. VENCLEXTA a clinical broad multibillion including well significant will penetration validates cancer data wide and therapies of standard come. assets across franchise that a be to a dollar where patient of by introduction gold our the upadacitinib. to populations As the in to other both sizeable leadership we therapies, by numerous range generate we this risankizumab in in continue growth our front-line driven AML IMBRUVICA immunology, have into also driven grow years utility expect This many peak be we types, evaluating represent growth trials and against further for that CLL position and drive sales and both including new Growth two malignancies with myeloma, the We're first positioned strong opportunity. also expansion multiple indications other will like line of different to combinations our very the

significant represents yet early dollar compelling drive growth. direct category. is improved our recent profiles that launch to HUMIRA, in line This entry firmly The XXXX, to assets was are in we're significant our our on asset built offered and to the identify by over another opportunity. is Risankizumab profiles believe prior broad us ORILISSA therapies assumptions, competition two the coverage gives versus assets biosimilar to of not Elagolix opportunity next endometriosis of launch mechanisms. confident potential track multibillion four performance growth upadacitinib expected have we've these tracking the perform pipeline, that gold three that best generation and We formulary with currently the only standard, As differentiated but focus XXXX. on will U.S. their in and new well two to of of based a immunology ramp in with drive uptake our right years very and expected other the be to in both

and application several indication, our pipeline. the strength year. products, for in The new attractive to We've of submit regulatory portfolio biosimilar combined the We extremely just is and new we momentum exciting for of This our predicted. business next with impact upadacitinib, including entered phase business demonstrate ramp uterine AbbVie. of ORILISSA, we the of phase an our risankizumab continued XXXX had along as the expect the fibroids, strength performance a with where of our follow-on another launch time heme-onc our to grow of and outstanding allow evolution, us through U.S. will clearly the

So demonstrate and expectation continue R&D Mike. outstanding as outstanding results the industry-leading performance in pipeline Mike? by to year-to-date XXXX. and I'll to driven evidenced operational, strong by deliver execution. delivering to significant performance call EPS in financial our turn digit commercial, and again in our confidence in making we our double that, our advancements With growth over We're summary,

Michael E. Severino

and I'll progress advancing noteworthy we Thank start over several XX you, the Rick. for very months. highlight next the programs This of good milestones anticipate I'll VENCLEXTA. discuss key and pipeline making the quarter from our updates we're with morning IMBRUVICA where oncology

IMBRUVICA strong long-term the outcomes disease current and by paradigm As control transform versus setting. already in IMBRUVICA which making hematological the relapsed/refractory line RESONATE progress Rick on better improved mentioned, data in front potential CLL options changed CLL these label in is two CLL therapies the treatment X have study treatment the other and of and older IMBRUVICA deliver significant evaluated The in patients. that the providing has patients. front from chlorambucil for chemotherapy-free line to we're CLL based malignancies

several alone We IMBRUVICA ongoing have used versus studies in combination populations additional patient and comparators. more and widely evaluating in

and includes gold young the evaluating Our treatment. such of standards studies program fit thought versus BR, FCR, CLL patients chlorambucil, and GAZYVA are as IMBRUVICA where in regimens as we often in

increased GC. GAZYVA conducting in and In previously plus X depression. ASH the an in evaluated will In on survival BR. two of arm also with setting. IMBRUVICA by IMBRUVICA's in combination we the this to to a treat watch alone patients survival front demonstrated will IMBRUVICA line superior the combination at are in XX. study combination iLLUMINATE with third meeting. of populations Phase compared Rituxan a Based alone provide study with or Group in CLL line line be GC. line Data risk The study are front presented or important June, X results CLL study, In BR results regulatory in study, first IMBRUVICA our and treatment in We from from evaluated the age IMBRUVICA the GAZYVA accepted compelling compared Alliance Alliance Rituxan in reported that studies RESONATE versus combination for significantly wait will studies those demonstrate benefit studies and At the with more clinical application progression-free CLL. in these the program study of of opportunity which this front ASH, treatment addressed the significantly Cooperative quarter, IMBRUVICA from patients chlorambucil FDA for over population untreated evidence GAZYVA beyond be compared and presenting demonstrated iLLUMINATE our with who we patients and at in upcoming in the longer progression-free the to these the

in of next help that the IMBRUVICA Over be additional data the readouts for CLL front-line we further there course will penetration. believe drive few will years,

This hematologic IMBRUVICA We marks well. the first malignancies received approval with progress macroglobulinemia. chemotherapy-free we make as treatment as approval for IMBRUVICA continue FDA quarter, in with to the IMBRUVICA. the ninth in for good combination for other In combination Waldenström's Rituxan

now for an a in responses minimal label becoming disease trial received malignancies, trial. summer to approval and VENCLEXTA making with important VENCLEXTA XXXX. program. VENCLEXTA's potential inclusion where important MRD in threshold is negativity data progress another at and of from VENCLEXTA, disease the demonstrated are several substantial label an multiple second data myeloma, of of of MRD in in is remission residual VENCLEXTA's these periods for the quarter, This relapsed/refractory deep of to the negativity which for provide The patients treatment we in include undetectable The in the ability expanded CLL cells, milestone Moving goal expansion CLL. these our in the broader hematologic drive AML, and setting our long X CLL, to including we patients. negativity, is XX,XXX is received label this to rates MURANO in the MURANO follows support increasingly

good GAZYVA with chlorambucil. in setting. are We CLLXX GAZYVA very VENCLEXTA top versus from with line CLL announced recently which progress study, combination the evaluated making We results also front-line positive the in VENCLEXTA plus

market. detailed present from further in foundational upcoming establishing as CLLXX basis data an of option the will the of us our in a to the study form towards regulatory this medical study at coming meeting. expect We and chemotherapy-free CLL VENCLEXTA goal submissions move The will months

indications. in we seen mid-stage wXe've where and CLL, completion AML other the myeloma, good malignancies registrational studies hematologic multiple making also first of are and are such Beyond both progress as in nearing data strong

regulatory with which data of with end study, approval X Velcade the multiple in data and review Phase XXXX. our is U.S. with Phase VENCLEXTA expected based in for first program confirmatory who the VENCLEXTA with combination of evaluating we're can't first-line XXXX by FDA, BELLINI approval patients under our Phase expected receive in study, results multiple in chemotherapy In This X relapsed/refractory from accelerated expecting induction dexamethasone from X the will year. the half myeloma. myeloma, in currently Our patients AML compelling is an on be the with application decision high-dose from

We potential XXXX. myeloma, with a are also studies to multiple expected front-line begin in exploring Phase treatment VENCLEXTA as in X

Moving EADV UEGW, portfolio presented the make of has reinforcing rheumatology, now our dermatology, in played a all these to good At immunology and AbbVie defining in leadership immunology, and segments. the innovative meetings, abstracts, strong to and where portfolio, and we we our of showcased a and commitment standard expertise stages researching have across areas. an across recent the immunology, scientific gastroenterology continue XX position deep our of role ACR, care integral we progress built to in total therapies

X for to arthritis, rheumatoid ACR In submit upadacitinib, regulatory three two In have RA, evolving and the to upadacitinib, in late-stage Phase our the cell our for we meeting arthritis, year. of of application to the lead the atopic in sixth we of data begin the upadacitinib we including the a in which with indication including and ulcerative on portfolio in arthritis, by next forthcoming our potential registrational dermatitis, end disease, franchise, selective programs upadacitinib assets, development, commercialization the the from immunology half Our believe Phase remain is abstracts Crohn's for of in therapies first upadacitinib, nine industry, risankizumab, week, arteritis, JAKX presented immune-mediated the of At XXXX. track best five And colitis. late-stage psoriatic giant conditions, studies. studies indication we inhibitor, registrational we ongoing rheumatoid year. for X last plan the five is

we upadacitinib observed. gather we in the confident across data benefit/risk long-term SELECT on products by the data Phase Based will over studies advantages in scopic improvement the look results market today program, clinical generated on Phase treated very from in demonstrating As observed. on clinical presented These meaningful it versus upadacitinib very the more the that significantly remain have At we've the following in placebo. X very for or development. strong a believe the data clinical induction our UEGW promising remain the colitis, patients that we X encouraged profile program, recent we achieved upadacitinib and that signal meeting, with profile ulcerative offer in therapy based remission and we response

showed X Crohn's asset in addition colitis, currently risankizumab, X have where studies to ongoing upadacitinib, to approval psoriasis of while quarterly in dosing. lead improve like upon severe evaluating of first to patients studies Across of expect the durable to X half in responder in believe moderate program, in four we psoriasis these indication, with in and on and Phase studies under several applications the the first treatment X ulcerative half disease, the our in XXXX. expected has Based The providing the now indications, consistently and skin Phase antibody, the we're initiate for risankizumab of we rates each studies the significantly Phase psoriatic Phase potential pivotal arthritis current in TNF-inadequate options are high Moving anti-IL-XX review, clearance. regulatory bio-naïve to with psoriasis, of in very both results, decisions ongoing risankizumab the XXXX. convenience

just in course several anti-TNF over of XXXX. Phase inhibitor/BTK inhibitor in Phase months. We also are X colitis. studies, assets to lastly, look immunology next for are is began XXXX, a year. Phase considerable Phase and programs recently and area approaches to through steroid advancing And several making our name very will RA external begin advancing XX starting We X collaborations ABBV-XXX, X moving an antagonist, of programs neurodegenerative to preclinical in is the updates studies our ulcerative expected begin X as And ABBV-XXX, several targeting ADC the good Neuroscience progress with making clinic. good our across our tremX, the with the to Phase begin continue X expect neuroscience, several disorders on mid-stage AbbVie, CDXX In recently to Phase emerging and investments. providing of these programs. We're focus expected to recently next-generation to our the in we neuroscience few. our forward from mature. and with partners cdXX, early more JAK and next such alpha-synuclein, internal pipeline, area make transition tau, early-stage research clinical data and we of combination, X in we Phase our multi-dose progress as and X program lupus our transitioned innovative with into

So in forward in months With and additional call progress and important third quarter, milestones I'll to more turn Bill? XXXX. many the programs the our the advancing over on our look that, summary, and make continued performance. quarter through pipeline for comments accelerating we over we've to to coming significant Bill

William J. Chase

Mike. Thanks,

share volume Wholesaler plus a digit benefit reflected also new formulation. HUMIRA XX.X% half the month XX% inventory in compared in were with stocking prior EPS strong per We U.S., remained our global XX to third more up year, half The with sales reported billion impact $X.XX, quarter basis net revenues X.X% In quarter with earnings in In led prior operating third profile $X.X and more oncology, in were XX% foreign recent $X.X adjusted market heme compared XX.X% of by plus of are billion were third the sales pleased our an $XXX operationally We and share on dynamics. results. therapy CLL result of very the quarter increased products driven to sales in levels Global our very million a relapsed/refractory Total the XXXX. range continued strong in in International perform exceeded nearly by operationally. In from a segment. the favorable growth global HUMIRA Adjusted well, CLL. modest $X.X mid-single XX% approval quarter, contribution. $X.X midpoint than broad versus were our to up growth Venclexta billion, primarily of price adjusted by operational VENCLEXTA. in driven a exchange. in the uptake guidance XX.X% in as of point roughly the of to launch market guidance. of due the were holding of from unfavorable HUMIRA growth $X.XX driven prior a margin HCV million. our billion sales continues million, sales revenues the MAVYRET $XXX by basis the up by up setting roughly share and were the year, quarter. quarter quarter across quarter, excluding quarter, IMBRUVICA lines second-line underlying the approached nearly all gains the than sales rate increasing the citrate-free quarter prior net revenues the globally. IMBRUVICA the $XX both the in line

fewer saw patients As lower expected, a warehoused internationally of certain sequentially we result in as sales markets.

double-digit CREON. saw operational DUODOPA also and both We growth sales in

quarter, pipeline royalties HUMIRA as basis of The points was was profile prior the impact was the was quarter, adjusted of Turning quarter, interest Adjusted certain prior of related XX.X% our adjusted reflecting leverage in operational XX.X% XXX partnership other and in basis an of the R&D operating as the the the the accounting. efficiencies. offset the prior expense the immunology XXX basis to decrease of improvement dilutive P&L points profile sales quarter, quarter, year. sales, of inclusive adjusted sales the supporting SG&A points margin a exchange was million to to benefit by year, areas. Adjusted sales This compared programs year. versus of rate Net up year-over-year of and XX.X% in the impact X.X%. of tax in for gross XX termination well oncology, favorable and was sales in XX.X% $XXX the the foreign partially was margin of the versus

above with rates, current approximately approach to continue the we an assumes exchange year expect to full full performance $XX.X to benefit net EPS forecast to XX% of operational than also Turning per growth favorable This revenue midpoint. to share, year the our are mentioned, which representing XX.X% guidance expect X%. billion, to At previously we currency less year as of of foreign our key guidance $X.XX following $X.XX our guidance. adjusted guidance, This which today year now assumptions Rick increase communicated comprehends products. at related full a is the adjusted range in we on raising

now expect above billion to be we $X.X revenues billion. global IMBRUVICA, sales with to $X.X For above U.S. AbbVie

expect sales billion. at incorporates markets introduction HUMIRA competition across the current $X.X latest certain we mid-October. following are This to updated of international now in biosimilar For the exchange forecast dynamics rates, approach seeing we

sales remain We XX% HCV margin now year margin HUMIRA global continue continue to $X.X full to forecast All and to sales forecast XXXX sales. adjusted expect of sales year above expect above of unchanged. approximately other we approach We U.S. guidance billion. billion, $XX.X and be of of to adjusted full assumptions XX.X% operating gross

quarter, roughly year-over-year we the $X.XX. fourth be non-cash excludes represents expect and at EPS guidance more the For of and adjusted adjusted and share earnings between other midpoint. XX% items, to specified per than amortization growth $X.XX This $X.XX of

fourth closing, quarter an expect quarter. delivered above impact again, quarter. At in In in would rates, on X% to sales performance growth unfavorable have reported have a once we less the growth current expect than operational of sales We outstanding we X%. exchange foreign of

have been our to that while has We strong driven bottom top growth advance continuing and pipeline. line

I'll as cash Rick to quarterly payable we that, with February And with than dividend range once XX.X% our announced peers increase And XXXX. beginning an today mentioned for more guidance us earlier, our among of forward, growth top XXXX underscoring again range increased XX%. the of confidence the with of the Rick. turn in Our going call representing dividend in puts industry back the the over our midpoint

Richard A. Gonzalez

Bill. you, Thank

launched I to story can or retire guess tell embarrass is him the him to where family the Before this least tell Between tremendous a that are significant XXXX. and can't faze form deliver. this I'm my Bill able able with be seem since worked I to that me a but Bill very has him he Bill I Abbott we Bill retires. in announced Bill. new to next the partner few you when and questions see AbbVie, XX career. say told I fashion as been chapter XX-year about that in I've for known some didn't role his call can you won't the know, personally about I Bill AbbVie, lives. had to that you been played I much. going we all part years. But will Bill intention at and words a summer tell retirement, you wanted to in flunking you Bill open and the I seriousness, because we has Bill, that Europe success miss summer that in tremendous of has have recently his starting to know in very their extremely excited about moving and he so

about do best, and he'll can of and move. well all family I the AbbVie here extremely I him tell excited So you at wish know us his and that this extremely he's all

an Liz. mentioned, Bill congratulate of be over back to personally have will turn With I As you that, prior to departure. until middle year, I'll so next the call of to him his will the with many opportunity us

Elizabeth Shea

now open for the We'll first please. questions. Rick. Thanks, question, Operator, call

Operator

you. Thank

is from Cohen. Steve question first Our from Scala

Steve Scala

your into products. headwinds some will pushes is is but for from thoughts What so what offset that couple seeing headwinds how the by HUMIRA to a XXXX? direct phenomenal you, be Thank performance. year? next have Thank strong appear year a weeks products you. of AbbVie international AbbVie it international the blunt does been expecting and have new feed to And a does a the on contribution you competition. extent. and into promising major And far? in pulls will new group that biosimilar AbbVie congratulations And

Richard A. Gonzalez

Thanks Steve, Rick. this is for the question.

start go lot me a there's I'm with interest, bit so a international it to through of going little biosimilars. of in Let know I detail.

is We're and Sandoz, looks mean exactly think across that, not on stabilized markets idea the Four so end are and internationally we the but out a the low relevant what you It's good as seen where that bit we from I one of like of we higher unusual we and I switching. said the can have high explain planning scenarios We've I what in a most I'd higher in of The healthcare across we somewhat have marketplaces. give impact having simultaneously: winner against. market. it's category, They feel biosimilars ENBREL around as of an explain it's launched can that all tends from we're of of how the they're market and out it's you discounting countries. These like and seen what in higher market drive had how end in. I'd detail use discounting of say heterogeneous, pricing into that biosimilar an the work pretty REMICADE deeper biosimilars weeks two as XX%. probably and But every to the REMICADE that the or perspective, pricing that a been tender for policy market, for system discounting that discounts. to competition had so is you ranges planning as so I'll a looks I the the there of every seeing every Biogen And are scenarios bit dialed as by end planned systems that of and the that analogs know, have you Now now we well. so as that think ENBREL we mean little at higher Amgen, some describe basically here. single will what and Doesn't single includes yet, say on The that level Samsung laid on launch. in have out. as still seen single XX% analogs. entire within laid in like takes the Nordic has all Mylan. TMF non-medical only

in these XX% So markets. discounting to not certainly as is fairly markets I a at not tenders that We've level It's in discount. high us early REMICADE this surprise some as on were tell XX% unprecedented. discounts, you would those of seen

at our So based this of business. the experience we've big that revenue They're of not the or that we've of part seen unexpected the international represent X% markets They all. on wasn't about other And into overall had. or a tend X% business. of any move experience the to any don't of our they

points, in it price going the said, countries. characterize of majority So this for vast business, the the we the now way. I'm revenue have as I in to

the of two-thirds think locked. total I be internationally revenue consider to I would

So at can I do of risk that they'll enter in and in an what example would our is both characterize market, and know mandated both that still has is biosimilar, locked? protected, so the compete be what still we're pricing. a discounting, basically IP in mean that, they and the France we was a the same no a about locked and we in already the marketplace. the and the out the has know pricing country tendered, then what going it says biosimilars that so countries; is the country those to price just price when go of point. that's you be tender, Now cut Or innovator protection, position that there so it country has so as country

of still two-thirds is represents So There's negotiated. that a that about roughly volume. overall the third being

We markets. have in those pricing

an but pretty there's a movement some of opportunity markets. in those still idea have where we We for good stand,

settle month where settle able for have out us another of understanding the play two for volumes to will will or and to and where our we need out to so firm out. a that probably And be discounting

points approximately planned we discounting Now coming what is higher we for, I'd seeing to than XX we versus average anticipated. have in are for characterize you would what on say what the

before to back if XX% assumption So ago, you the we year XX% that as or to communicated that we've planning XX% calculation, to had back you at look go if XX%. that a you put new the would a at two

dramatically, move I locking you think where it think it all in give that I about I'm you a I caution relative obviously in that don't I number but likelihood, it only think and on Now, will move, versus could were. it we will move to will giving some. perspective number. some. move Because

of that So we've pricing seen. all we factored already in this

in that You've quarter estimates. fourth of seen some our

be basically as back And factored that's that look and telling XXXX estimates, more room we're factor double digit. into guidance have and our point. absolutely double confident more to In you So we'll accurate that left, that of the we fourth a give through and we digit at you and – point quarter as that we're that give you it information all that why you in for We a you call, But is we'll deliver third factored range that specific on coming that can floor. at will downside. can well. assume we'll at further can you

fundamentally, But based To we you a stand idea things the I strong. So question, here to important see remain our hopefully, from in of biosimilars. in that of business extremely one some think on where standpoint. that biosimilar we'll is your or international rest business keep international gives headwinds perspective biosimilar HUMIRA the some the continues of is to – obviously

business a to strong HUMIRA. perform very U.S. Our continues rate, at including

remarks to I inflection in VENCLEXTA. Our heme-onc continues hit in And formal extremely strong. franchise my fact, we're perform to to the with described that starting point you

With moved the VENCLEXTA has starts. excitement in out and AML, the data patient up around MURANO dramatically

And contributor. over of will the of launched then XXXX. so and have products launch will or is will well, course XXXX. we a obviously, both we And be ORILISSA either and new risankizumab important have going in upadacitinib launch number that an that

very strong. think look I going So forward our prospects

Steve Scala

you. Thank

Elizabeth Shea

Steve. Thanks,

Operator

from question Bank of Jason next from Gerberry The is America.

Jason M. Gerberry

luck Good retirement. a it's of and and my morning. been taking Europe, Best pleasure. on congrats to Thanks questions in for Bill

up, impacted blended just trying Canada Europe ROW may Brazil XX% – to the markets on or not may in which be I'm commentary I impacted. expect XX% understand growing? may the across Japan, biosimilars XXXX, ex-U.S., to erosion think as Just and to be because is about think even biosimilar on Rick, we I we think I not don't that be and on that follow know impact

pricing Thank provide your like the clarity there? is ability digit seems So the in capture benefit low you single on broader to where industry And you. migrating it U.S.? just some continue then and U.S. to confidence to HUMIRA, mid-single-digit could

Richard A. Gonzalez

Okay.

erosion, book is it's On to of for think business. the it across about best think you way billion I the the of $X.X the biosimilar

exposed, across are it's rate that not so include So it blended does countries a those.

biosimilar the So countries versus described I of what it And do protected publicly – number be that we the know, in exposure. is the number would have ever don't higher have obviously unprotected? the the

Elizabeth Shea

Not with no. any specificity,

Richard A. Gonzalez

I then volume-driven the the in U.S. on will at XXXX, a in negotiated been business guess would contracts expect a price HUMIRA And our primarily I based to on of I look it's Okay, we'll that what won't if fall-through describe all On price in that. you HUMIRA's business, XXXX. very U.S., for we that continue, the had continue with similar that we have confidence

that of lower probably a So reasonable digits on is the mid-single expectation. end

tremendous no had. change a of from we've significant not what but price, So amount

Jason M. Gerberry

Great, thank you.

Elizabeth Shea

Operator, Jason. next please. Thanks, question,

Operator

Thank you.

is Our next Evercore Josh from Schimmer question from ISI.

Joshua Schimmer

question. if in AML, the data, taking despite in approval having Thanks. quantify randomized the VENCLEXTA you Maybe that well can for of discuss Thanks not addressable the you a outlook the of your as for confidence can part market. as

Michael E. Severino

Sure, Mike. this take that. I'll is

that understanding and AML the Breakthrough had our comparators. standard confidence. us the at recovery, complete two is going on evidence something we've approved us in where And FDA's when the It's Therapy strong the gives the what are times gives couple data the take coupled which incomplete that's historical we've in So good which of the higher it's that about Designation data way three U.S. the based field, response Phase get that generated of very into the than of are – the for with order to insight combination response looked that that to for on in approval. called strength with to that in hematologic on thinking with complete X you U.S.,

We also positioned And up X well and to year, underway. they're and in XXXX. running have so Phase our next studies readout

us that that confidence. it's So that full picture gives

cell then that how very, patients can't to that in treatment I data there it's intensive And transplant. treat peak for has and And induction undergo those of addressable go a In in about represents, half very substantial that life, portion. very the on have described. a to market patients of tends really incidence up difficult demonstrated later the those patients, VENCLEXTA AML limited much to terms it's of to are chemotherapy and stem options.

that that will is So very we commercially. be there very and medically think important opportunity both a here real

Richard A. Gonzalez

to at I VENCLEXTA, couple of maybe we some little that a looked we're just what And more it's although AML give addressable, will color on in that, Mike And get seeing obviously activity of the roughly of down. dollars. chemotherapy if seeing, where probably are mean, total, is market pretreating activity to say I a as a because portion AML physicians is to billion said, are prior half patients disease induction you

in it be larger than population that even half AML. of So could

are MURANO a think few in I take the aware ago, As I significant seeing data, we have indicated a growth inflection my data. become remarks released since of physicians moments fairly and in more VENCLEXTA we AML the

compared at you look XX%. patient XXXX they're the of up XXXX, of If actually third to the them at quarter first quarter starts and looking versus

It's rapid $XXX at So and growing fairly obviously million rate the brand right now a a about really pace. at grow starting rapidly. to is running

and going that So VENCLEXTA, be it to an very see will our forward. to growth think contributor oncology can expect strong you'll growth I of out important continue you

Elizabeth Shea

question, Thanks, Josh. next Operator, please.

Operator

Thank you.

from how couple Vamil were think Hi. your one-time sort number, you, commentary Suisse XX% quarter Securities that Divan retirement. prior the thought margins of to questions. XX%, aware taking - for about actually LLC that much One, Rick I Bill, regarding Credit your margins. (USA) sort next margins is And for any Vamil there should or gross there, this of strong. I we the from thanks just comments expectation you. from operating be the guess Suisse. drove biosimilars for Our on Credit so Was question the a Great, impact K. anything then the to of? And on Divan sort anything on especially of and I'm curious Congrats

impact much. margin operating does operating think in higher planning of this sort the margins might discounting, change XXXX XX% so your said about in You you're your by that that end what Does timeframe? of be you scenarios, Thanks XXXX. on how

William J. Chase

Sure.

of the the look that So the that termination at were quarter, this first you impact of only we've if royalty seen place. full previously HUMIRA the is in quarter

So favorability That of big the reduction. to we're about quarter. the related picking mover points in XXX royalty up basis that was

little related the also exchange, other that maybe see We that some call partnership and accounting. then basis under offsetting way was to point, X.X points XXX favorable did going a about

IMBRUVICA partner sold. our profit cost know, a we that on of you As as book the pass we to goods

gross on line. So the that actually dilutive has impact margin a

in that that add the get all you that's how when to saw the we So up, quarter. you number

in XXXX, don't Be plan, I range. the biosimilar of quarter, clear strong at very factoring the progress terms increased our tell now yet. we're what towards XX% XXXX that picture seeing this XXX you operating a we In we're can over We've margin certainly look on growth. although experience you is, look, I into had if points have basis very, by

next about is royalty of to benefit think starting be run-rate. think of which XXX pick XXX inherent our And you've the basis reductions, to in that then, build of points. ought year base the off up I us to to we're got that that going to

we'd We pipeline growth be the XXXX going we're in at rapid into be look moving with said to there But be to remain when products going there XXXX. never in in gear, we XXXX. you not confident. were So the we full really still expecting

Elizabeth Shea

Operator, next question, Thanks, please. Vamil.

Operator

Thank you.

question is Andrew next Baum Our Citigroup. from from

Andrew S. Baum

about Thank suggesting royalties HUMIRA. of whether addressing on Boehringer Second, you, Court some District CALQUENCE, update drug-specific some phenomenon, rather give of Europe, the a the a better as magnitude that's you be seen impact Could with may – that BTK bleeding the order there to have thinking been than recent they're case? of please. couple (XX:XX) of initially questions, meaningful it such in Ingelheim platelet your whether BTK-specific envisaged. and Many on be finally, publications any inhibitors, us IMBRUVICA the may And not relation competitor, the or settlements a in the insignificant? thanks then mousetrap

Richard A. Gonzalez

Andrew, cover one this Rick. three. I'll is and

the qualitative license would settlement with the of royalties typical IP. can't are all speak those important royalties, magnitude of they're even those the so associated the that are I of to confidential way. just So that say I in magnitude agreements, a

BI, a product, and essence can there have We believe large we of also do nor I problem. to you support that settlements itself support evidence would five describing the number believe is court I that if we our there that in case you what case get is, that I'd of now. tell a is BI I is fundamentally On Look, patents don't following. in the is for position. confidence position. have don't the that, believe law on of a that say

companies very a settlement do who have have us. made sophisticated on We our based to agreement with a decision IP

speaks I the confident about remain IP, our magnitude our that and we position. think and power of for in the itself

Michael E. Severino

one same also on a the putative sorts picture, that very a And larger, very that hard number of favorable. it longer-term like emerges. trials, seen with our isn't And in inhibition if you time based have IMBRUVICA, this our right, not take CALQUENCE. BTK a view which question we the with specificity a BTK risk/benefit forward benefit/risk these effects. understanding, say It's inhibitors. But on But see overall risks the The and way arguments a risks. to that very are studies, are specificity to of of that. I those is detect I'll profile similar very to address look are is the moves at come inhibitor BTK are we've around follow-on selectivity, a strongly that way on BTKs from follow-ons, data. are been and very with number which therefore And follow-on that clinical manageable. it's with They early, part preclinical you profile small of say All we based overall associated compounds BTK of target, risks for into respect bleeding including Mike. as quite think that is around some that

effectively, can we that the believe in bleeding they any them benefit/risk inhibitors but believe with respect. of advantage effects part managed positive, that have the we we follow-on BTK again, and see we Obviously, that in of overall the benefit/risk strongly effectively inhibitor, IMBRUVICA. a don't be So managed the is BTK are

Richard A. Gonzalez

now think around indication support – peaked I to is the data at I'd thing market small market And relatively have there now XX% add that. the some would at extent. and they're they in mean, XX%, that they I I only the declining share MCL, think look you if

a be of product the market not on the to does uptake differentiation. has that clearly, representative So appear product

Elizabeth Shea

next question, Operator, Andrew. please. Thanks,

Operator

you. Thank

Our next Chris question is from Schott from JPMorgan.

Chris Schott

Great, thanks much questions. the for very

less higher are the be coming XXXX, step to rate about think beyond you we this you question we spending HUMIRA XX% you. the an to that So that Thank should should do was severe as these Just about longer-term this, about and can do erosion, – as think a year. back the annual XXXX you impact how think as look think predictive higher Does out is then launches, and at put how down, this outsized spending one-time XXXX or biosimilar to erosion XXXX? see significant OUS? support SG&A My XX% we just for or this about drug in viewing upcoming levels annual erosion as spending second think XXXX up we you erosion XXXX. rate company's beyond? more another stepped step-up on for AbbVie

Richard A. Gonzalez

this is Chris, question. I'll Rick. take the Okay, biosimilar

think as would supports the it fact is all only pricing biosimilars then more further. four now seen basically we would which entered I play consistent we've years. market, aggressive, the it's said probably what in we the entered as and what been launch with seen see And the and has follow-on simultaneously, first think along that somewhat I we've that we've the out at that biggest to the them of got impact year, off taper

in think So we get then an much impact bigger And it the will impact. XXXX into XXXX-XXXX. countries expect that can a you slow had I as in

enter countries curve they'll a experience Now there on those later similar will come be in kind a the years, we of that probably and as markets.

best way So I think we it, that's about about and I the investment to the think community it. think the for think way it's

William J. Chase

SG&A our be terms, money more in absolute speaking into dollar support launches. we to certainly Chris, will year next putting

our overall going of we the the the ultimate do at not If and would potential. to the of assets ability their assets look are importance you the to impede anything maximize quality AbbVie story, that to growth

dollar certainly money putting of already both Obviously, a degree the in to will for So and the upa. risa we a is a from spend and in be ORILISSA. standpoint, lot for base VENCLEXTA

And into additional there the However, the seen DTC AML, not ORILISSA, of moving spend campaign. we be startup have year this there. full will

So you I those think should on spending model increased assets.

Elizabeth Shea

Operator, next Thanks, question, please. Chris.

Operator

Thank you.

Our Stanley. is Morgan Risinger from question next from David

David R. Risinger

Yes. much. Thanks very

questions. So I have two

a you stock appears other and hope rather revenue more that company on your allocation with I some the little seem long-term aggressive dividend, talk capital view transactions focused bit could but the pipeline back investors to equity to of and about Bill, allocation. the than quite it are So for been Obviously growth was the respect company's company. buying Rick more on increasing and for more capital hoping has that opportunities enhancement

So XXXX? XX% talking I about was and to a that so are could decline such that XX% a could over separately, the Thanks ex-U.S. you then with sales over teens about in and two-year then thought to comment had HUMIRA XX% XXXX how I sales clarify? the ex-U.S. low again in was XXXX, you to so Or talking in is much. XX% just XX% XXXX, just and two-year period, hoping the you you you're you in on the XXXX? see decline XX% HUMIRA period And balance? respect Rick, to that that i.e. that XX% to that XX% mentioned, between

Richard A. Gonzalez

It's David. Yeah, Rick.

answer me two first. let number So

would expect So in erosion in It level what will XXXX. XXXX. you of moderate, to some that will be I'm there describing impact the but is we

was XX% period You what you described of time. to that XX% we over are two-year to correct that

way. thinking it you're the about So, right

So obviously there's higher levels of erosion.

is ago, Now, I should strategy discounting of as raise that XXXX you will you a very have we go a view with I some but don't that that as I in seen you some it returning I cash time, obviously operated as we to I capital allocation, similar think deeper will think we've see see shareholders that think would to But strategy. forward. assume important quite erosion mentioned our number going some strategy what an out On we for forward. I moderate moment And will and which be say, dramatic, blocks. will that will the overall impact. think think I is more

view we growing we committed it. a use substantial an buybacks dividend to we're the as our was at obviously Our do again have of thought demonstrated stock was thought that call. our in and dividend We primary undervalued. appropriate that saw we vehicle that dividend, a done We that, value although this some to we've as

growth. Our business first drive priority is always We're that for and building therefore have the the strong long-term. fortunate we pipeline, can we a significant

areas, lot a being would in stage, impact focused a are a in could typically of the attention we that But of earlier have example, smaller we've good being range across we of assets active that XXXX, area XXXX, in kinds immunology timeframe oncology on an transactions. example. bring XXXX that been So which that good

everything. we return can shareholders? allocation it fit, don't look fundamental We evaluate And that a opportunities we've of, area almost is now opportunities, and a through the We area. filter so though. opportunities, have of get in standpoint we in at look ultimately shift value done at strategically we have all these some and capital our at that. active from the second, does see fibrosis, goes that pretty larger transactions those. a on how for of operated in point opportunities, a We each we so a versus a medium and evaluate I It good program first, small it

Elizabeth Shea

we for final Operator, time question, David. Thanks, one have please.

Operator

Boris from Our final John question is SunTrust. from today

John T. Boris

the questions. taking for Thanks

So, contraction. Rick, significant just on biotech valuations, we've obviously seen a

a an in investor indicated you you were $XX at range. possibly that billion $XX in somewhere think transaction doing I conference billion to the interested

environment, to at currently, your Just biotech the about thoughts valuations least contracting. relative

away quantitatively or royalties, the some termination of I give dissolution Can a is on XXXX or the Bill, the think, you on of what question XXXX. away XXXX. impact gross third them in went Second margin? the in Thanks. the go commentary Two-thirds just

William J. Chase

start I'll John. that So with one first,

of right in between and exactly XXXX. you're XXXX the gating terms So

between XXX those as on you should about basis next royalties result up think somewhere eliminated. to the XXX a pick being line of year margin gross points expect I to

Richard A. Gonzalez

I'll at early now, valuations, a describe to that data, trying meeting pretty and biotech transaction I in billion valued was billion although you a we larger I value, if data. way. mean you future clarify I that, forward-looking biotech $XX what highly, to having very that of they're in if by rapidly pursuing valuations get But some see guess anticipation what the in you we in bolt-on, down if rise come actively comment. to a is the risk have were some, like And tend look everybody What look positive valuations they've a I not of was On in to just playing data a that that as range. we study, viewed a when at valued larger But still $XX said evaluate industry, out of regardless transaction, you study. in else the not later that look

and is have valuations return. talking those so continue reward a still product, a the to value of balance I'm right look good way. opportunity. all stage one risk the still in generalities ahead for where right tendency us mean the And Doesn't for them every certainly an where to But opportunities the get of And – for exciting are there's single of of that the is of now.

We look some of to brought have those for we'll we've in, and those. seen that continue

John T. Boris

Thanks.

Elizabeth Shea

concludes conference Thanks, today's That call. John.

visit investors.abbvie.com. joining website for call, our a If you'd to please at listen like the replay Thanks again us. to of

Operator

And this Thank conference. does you. today's conclude

You may time. disconnect at his

Elizabeth Shea	AbbVie, Inc.
Richard A. Gonzalez	AbbVie, Inc.
Michael E. Severino	AbbVie, Inc.
William J. Chase	AbbVie, Inc.
Steve Scala	Cowen & Co. LLC
Jason M. Gerberry	Bank of America Merrill Lynch
Joshua Schimmer	Evercore ISI
Vamil K. Divan	Credit Suisse Securities (NYSE:USA) LLC
Andrew S. Baum	Citigroup Global Markets Ltd.
Chris Schott	JPMorgan Securities LLC
David R. Risinger	Morgan Stanley & Co. LLC
John T. Boris	SunTrust Robinson Humphrey, Inc.

AbbVie (ABBV) 2 Nov 182018 Q3 Earnings call transcript