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Presentation

AbbVie Inc. beats earnings expectations. Reported EPS is $3.51, expectations were $2.88.

Operator: Good morning and thanks for joining us. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer; Rob Michael, President and Chief Operating Officer; Jeff Stewart, Executive Vice President and Chief Commercial Officer; Scott Reents, Executive Vice President and Chief Financer; Carrie Strom, Senior Vice President, AbbVie and President, Global Allergan aesthetics; and Tom Hudson, Senior Vice President, R&D and Chief Scientific Officer. Joining us for the Q&A portion of the call is Roopal Thakkar, Senior Vice President, Development and Regulatory Affairs and Chief Medical Officer. Before we get started, I’ll note that some statements we make today may be considered forward-looking statements based on our current expectations.

AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in our forward-looking statements. Additional information about these risks and uncertainties is included in our SEC filings. AbbVie undertakes no obligation to update these forward-looking statements, except as required by law. On today’s conference call, non-GAAP financial measures will be used to help investors understand AbbVie’s business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website. Following our prepared remarks, we’ll take your questions.

So with that, I’ll turn the call over to Rick.

Rick Gonzalez: Thank you, Liz. Good morning, everyone, and thank you for joining us today. 2023 is an important year for AbbVie as we experience Humira biosimilar competition in the U.S. market, and as we execute our long-term diversification growth strategy. Now roughly seven months into the year, I’m extremely pleased with the progress that we’re making against these objectives. The U.S. Humira biosimilar impact is playing out as projected and slightly better than our planning assumptions. We are competing very effectively with the various biosimilar offerings. We have exceeded our guidance in burst in second quarters with the overachievement predominantly driven by our growth platform, the base portfolio, excluding Humira which, as you know, is the critical driver in our rapid return to growth in 2025 and beyond.

To that point, this platform demonstrated operational revenue growth of nearly 8% this quarter with growth expected to further accelerate in the second half of this year. We are also once again raising our full year revenue guidance by $1 billion, which is on top of the $400 million sales increase we delivered in the first quarter for a total overachievement of $1.4 billion. And lastly, we are making good progress with our pipeline, across all stages of development, including recent strong data for Skyrizi in ulcerative colitis as well as the recent U.S. approvals for Rinvoq in Crohn’s disease and Epkinly in relapsed or refractory DLBCL, both important new therapies for patients. So in summary, I’m extremely pleased with the strong momentum and execution across the business.

It reinforces our confidence in our ability to return to robust growth in 2025 with high single-digit compounded growth rate to the end of the decade. With that, I’ll turn the call over to Rob for additional comments on our business performance. Rob?

Rob Michael: Thank you, Rick. AbbVie delivered excellent results once again this quarter. We are demonstrating strong execution across our business with each of our five key therapeutic areas beating expectations. We reported adjusted earnings per share of $2.91, which is $0.11 above our guidance midpoint. Total net revenues were nearly $13.9 billion, more than $350 million ahead of our guidance with the vast majority of the beat coming from our ex Humira growth platform. In immunology, Skyrizi and Rinvoq are demonstrating impressive growth with sales for both therapies up more than 50% versus the prior year. These two agents have achieved differentiated clinical profiles, including head-to-head data versus Humira and other novel therapies.

Skyrizi and Rinvoq are now collectively approved across 10 large indications, and we are forecasting combined revenue growth of more than $3.5 billion this year. With ongoing programs in several additional disease areas, we expect both Skyrizi and Rinvoq to deliver robust growth into the next decade and significantly exceed Humira peak revenue. U.S. Humira is also performing well. The first half erosion coming in better than our expectations due to volume. We have been carefully analyzing the biosimilar marketplace, where the total number of competitors has now expanded to 8. While many of these biosimilars have been added to payer formularies, Humira continues to maintain strong parity access. Based on the volume trends and parity access, we now anticipate U.S. Humira erosion of approximately 35%, an improvement of two points versus our original guidance.

Neuroscience is another area that is outperforming expectations. Based on the current run rate, this portfolio is now on pace to add more than $1 billion of incremental revenue this year. with continued strong growth from Vraylar as well as our leading migraine portfolio. In aesthetics, the outlook continues to improve. We delivered positive growth this quarter, driven by strong international performance and stabilizing trends in the U.S. These positive trends give us the confidence to once again raise our full year guidance for aesthetics. And as a clear market leader, we are focused on expanding the aesthetics category with increased commercial investment and continued innovation to support robust long-term growth. Given the strong and balanced performance across our diverse portfolio, we are raising our full year adjusted earnings per share guidance by $0.23 and now expect adjusted earnings per share between $10.90 and $11.10.

In closing, our operational execution has been outstanding, and we are very well positioned to deliver on our commitments in 2023 and beyond. With that, I’ll turn the call over to Jeff for additional comments on our commercial highlights. Jeff?

Jeff Stewart: Thank you, Rob. I’ll start with immunology, which delivered total revenues of $6.8 billion, exceeding our expectations. Skyrizi continues to perform exceptionally well. Global sales were approximately $1.9 billion, reflecting very strong operational growth of 51%. Our performance in psoriasis continues to be impressive. Total prescription share in the U.S. biologic market is now at 32%, double the share of the next closest biologic therapy. When you consider that Skyrizi is capturing roughly one out of two every in-play patient, which are either new to therapy or switching, there remains substantial opportunity for continued robust sales growth. And based on the available clinical data we are seeing from emerging competitive therapies in psoriasis, including orals, we feel very confident in Skyrizi’s long-term potential with robust sales growth expected through the early part of the next decade.

We are also seeing very nice prescription growth in psoriatic arthritis, especially in the U.S. dermatology segment where Skyrizi is approaching the leading new patient biologic market share. Skyrizi’s momentum across psoriatic disease is very solid globally as well with total in-play share leadership in nearly 30 key countries. Turning now to IBD, where Skyrizi has demonstrated a very compelling clinical profile, including strong endoscopic data paired with convenient dosing. Uptake in Crohn’s disease has been rapid, with total in-play patient share of approximately 25% in the U.S., roughly at parity leadership with Stelara. This uptake is very encouraging for Skyrizi’s potential in ulcerative colitis, where we recently reported positive maintenance data with approval and commercialization anticipated next year.

Given the momentum we are seeing across all of the approved indications, we will be raising our full year sales outlook for Skyrizi. Moving now to Rinvoq which delivered global sales of $918 million, reflecting operational growth of nearly 57%. A key element of Rinvoq’s success is its strong differentiation. It is now approved across seven distinct indications, including four in rheumatology, two in IBD as well as atopic dermatitis. It’s the only potent daily oral medication with compelling head-to-head data against multiple novel therapies, including superiority to Humira in RA and Dupixent in AD. It’s the only JAK inhibitor now approved to treat both Crohn’s disease and ulcerative colitis. And we have established strong and broad commercial access for each of the core diseases with formulary coverage for Crohn’s expected to ramp quickly over the next months.

As it pertains to Rinvoq’s book performance, we are seeing increasing prescriptions across each of the room indications globally, further market share momentum in atopic dermatitis, including now high-teens in-play patient share in the U.S. and robust uptake in IBD, where Rinvoq has demonstrated strong rates of remission and endoscopic improvement. Rinvoq is now capturing roughly one out of every four in-play ulcerative colitis patients in the second line plus setting. And the early data for Crohn’s, which launched just in May, also shows a very strong ramp in new patient starts. We remained well positioned for continued momentum in this new indication as the only jack inhibitor approved to treat Crohn’s disease. This level of performance, along with the development of ongoing projects across several other diseases, such as giant cell arteritis and systemic lupus in rheumatology and multiple additional derm indications, reinforces the long-term potential for Rinvoq with strong sales growth expected through the early part of the next decade.

Global Humira sales were $4 billion, down 24.8% on an operational basis due to biosimilar competition. Erosion in the U.S. remains slightly better than our expectations due to volume with the vast majority of the impact this quarter driven by price. Turning now to hematologic oncology, where total revenues were approaching $1.5 billion. Imbruvica global revenues were $907 million, down 20.8%, consistent with our expectations. Venclexta global sales were $571 million, up 15% on an operational basis with strong demand for both CLL and AML, and we are particularly pleased with the international performance here, following continued reimbursement progress in the EU and inclusion in China’s national reimbursement list. We also recently received the U.S. approval for Epkinly in third line plus DLBCL further expanding our on-market portfolio in hem onc.

Early prescription trends have been encouraging, with a more robust opportunity expected as we progress development in earlier lines of therapy. We also anticipate approval and commercialization in Europe and Japan later this year. In neuroscience, revenues were nearly $1.9 billion, up 14.2% on an operational basis. Vraylar continues to exceed our expectations. Sales of $658 million were up 33.9% on an operational basis with increasing momentum across all indications following the MDD approval late last year. Within migraine, we remain the clear market leader with unique treatment options for both acute and chronic conditions. Our oral CGRP portfolio contributed $292 million in combined sales this quarter reflecting growth of more than 30% as we continue to see strong prescription demand for both Ubrelvy and Qulipta.

Lastly, total Botox Therapeutic sales were $748 million, up 11.3% on an operational basis, reflecting nice momentum in chronic migraine as well as other approved indications. This franchise continues to outperform our expectations, and we will be raising our full year guidance for the collective neuroscience portfolio. So overall, I’m extremely pleased with the performance and execution across the therapeutic portfolio with growth expected to accelerate through the second half of the year. And with that, I’ll turn the call over to Carrie for additional comments on aesthetics. Carrie?

Carrie Strom: Thank you, Jeff. Second quarter global aesthetics sales were approximately $1.4 billion up 2.9% on an operational basis with strong performance from our international portfolio offsetting the economic impact in the U.S. U.S. aesthetic sales were $829 million, down 6.2%. Our U.S. portfolio continues to perform well from a competitive perspective. And as expected, the aesthetics markets continued to be impacted by lower consumer spending related to inflationary pressures, which weighed on year-over-year growth rates. U.S. Botox cosmetic sales were $420 million, a decline of 6.5% versus the prior year. While the U.S. cosmetic toxin market declined low single digits in the second quarter on a year-over-year basis, growth rates improved through the quarter, with June showing a return to positive year-over-year market growth.

Botox Cosmetic continues to be the clear market leader, maintaining strong and stable share despite new competitive entrants. U.S. Juvederm sales were $125 million, down 14.5% on a year-over-year basis as we continue to see a more pronounced impact from inflationary dynamics on higher-priced, more deferrable procedures such as Filler. The U.S. Filler market declined approximately 20% in the quarter on a year-over-year basis due to the persistent inflationary environment. Our Juvederm collection remains market leader and share was stable in the quarter. The economic metrics that we track for the U.S. have largely stabilized. Our consumer market research shows a meaningful recovery from last summer and those intending to get treated with toxins and fillers.

Additionally, we have now lapped the beginning of the market downturn, which occurred in the second quarter of last year. Based on these factors, we expect growth rates for the U.S. facial injectables to improve in the second half of this year. Our international aesthetics portfolio continues to perform exceptionally well with strong results in many key markets. Second quarter sales were $555 million, reflecting operational growth of nearly 20%. The International Botox cosmetic sales of $265 million increased approximately 14% on an operational basis and International Juvederm sales were $243 million, up approximately 28% on an operational basis. Growth in the Asia Pacific region, particularly robust as aesthetic treatment rates in China have fully recovered to pre-COVID levels.

We continue to anticipate strong normalized growth through the remainder of the year in China. We are very pleased with the strong performance of our international aesthetics portfolio over the first half of the year and continue to expect similarly strong results in the second half. In the third quarter, we will be facing a challenging year-over-year comparison due to a shipment timing benefit we saw in the third quarter of 2022. This is expected to result in relatively flat growth for our international portfolio in the third quarter. On a full year basis, we expect our international aesthetics sales to grow high single digits. We continue to invest to drive future growth for our aesthetics portfolio with a focus on enhanced promotional activities, improve digital products and services through our Alle platform, sales force expansion, and injector training.

We continue to invest in our pipeline as well, and we remain committed to a regular cadence of new product introductions and indication expansions for Botox cosmetic and Juvederm. We recently announced the FDA approval of SkinVive, the first hyaluronic acid filler in the U.S. for improved skin smoothness of the cheeks, which, along with the recently launched Volux filler for jawline contouring, will help sustain our leadership position in the U.S. filler market. Our investments will allow us to maintain a strong leadership position in the highly underpenetrated and rapidly growing global aesthetics markets. We remain very confident in the long-term outlook for our aesthetics portfolio and continue to expect to deliver greater than $9 billion in 2029.

In the near term, the improving aesthetics outlook in the U.S. and continued robust international performance gives us confidence to once again raise our full year aesthetics guidance with an expectation for continued operational growth over the back half of the year. With that, I’ll turn the call over to Tom.

Tom Hudson: Thank you, Carrie. We’ve continued to make very good progress with our pipeline over the quarter. We had a substantial amount of activity across our R&D pipeline, resulting in new approvals and advancements of several programs. In immunology, we received FDA approval for Rinvoq in Crohn’s disease, marking its seventh FDA approval across gastroenterology, rheumatology and dermatology. In our Crohn’s development program, Rinvoq demonstrated a very rapid and strong impact on symptoms as well as endoscopic improvement. Given its strong benefit risk profile, we believe Rinvoq will be an important new medicine for patients suffering from moderate to severe Crohn’s disease. While Crohn’s disease approval marks the completion of the core indications, we believe Rinvoq revokes the potential to become a highly effective therapy in several additional important diseases.

We recently began Phase III studies for Rinvoq in systemic lupus, hidradenitis, suprativa, and we remain on track to begin Phase III studies in alopecia areata later this year. We’ll also see later this year from a Phase II study in vitiligo, which could support advancement to Phase III in this indication as well. Moving to Skyrizi, where in the quarter, we announced positive top line results from our Phase III maintenance trial in ulcerative colitis. In this study, Skyrizi met the primary and key secondary end points at week 52 compared to the withdrawal arm, demonstrating that patients continuing treatment with Skyrizi maintain high levels of clinical remission as well as more stringent endpoints such as endoscopic improvement, histologic endoscopic mucosal improvement and steroid-free remission.

It’s important to note that approximately 75% of the patients in this study had failed advanced therapy, including not only anti-TNFs, but also other biologics, JAK inhibitors and S1P modulators. This represents a very difficult-to-treat population in ulcerative colitis. Skyrizi’s strong performance in patients with and without failure to advanced therapies including patients who were naive to advanced therapy demonstrate its utility across the spectrum of moderate to severe UC patients. We remain on track to submit our regulatory applications in the third quarter with approvals anticipated in 2024. We also recently published results from a head-to-head trial comparing Skyrizi to Otezla in patients with moderate psoriasis with Skyrizi demonstrating clear superiority to Otezla on all primary and ranked secondary endpoints at week 16 and 52.

At week 52 of this study, 64% of patients achieved absolute skin clearance as measured by PASI 100 an SPGA clear compared to just 3% for Otezla, underscoring Skyrizi’s ability to drive very high and durable responses in these moderate patients. In addition to higher clinical efficacy outcomes, the patients treat with Skyrizi which is a self-injectable administered quarterly reported improvements in health-related quality of life measures and greater treatment satisfaction compared to those treated with Otezla, which is an oral administered twice daily. Additionally, Skyrizi demonstrated favorable safety and tolerability compared to Otezla. The rates of adverse events, including serious and severe AEs were numerically higher with Otezla than with Skyrizi treatment.

Previous to — similar to previous studies, Otezla treatment was associated with high rates of gastrointestinal distress such as nausea, diarrhea and vomiting, which resulted in a 7% discontinuation rate in the first 16 weeks of treatment compared to no discontinuations for Skyrizi patients. We’re incredibly pleased with these results, which further underscores Skyrizi’s position as the best in category treatment for moderate-to-severe psoriasis, providing very high efficacy, durable responses a safe and tolerable profile and convenient quarterly administration. In oncology, we received accelerated approval in the U.S. for Epkinly as a monotherapy treatment for patients with relapsed or refractory DLBCL who had received two or more systemic therapies.

We also recently received positive CHMP opinion with an approval decision in Europe expected later this year. DLBCL is a very aggressive disease where later-line patients have limited options. We’re extremely excited to bring this new subcutaneous treatment option to patients. In the quarter, we also announced positive top line results from the follicular lymphoma cohort of a Phase II trial evaluating Epkinly in patients who have received at least two prior lines of therapy. In this study, Epkinly performed very well as a monotherapy, demonstrating an overall response rate of 82%. We are pleased with these results and plan to discuss these data with regulatory agencies about the potential to support a submission for accelerated approval. Beyond the mid-stage studies supporting accelerated approvals in later lines of therapy.

We also have Phase III trials ongoing in earlier lines of DLBCL and for follicular lymphoma, and we look forward to providing updates on these programs as the data mature. In our navitoclax program, we recently saw top line results from the Phase III TRANSFORM one trial, evaluating navitoclax in combination with ruxolitinib in for patients with treatment naive myelofibrosis. This study met the primary endpoint at week 24, demonstrating a statistically significant improvement in the percentage of patients who achieved complete volume reduction of at least 35% compared to rux plus placebo. For the primary endpoint, the navitoclax combination showed a doubling of improvement over rux alone with 63% of patients on the navitoclax combination achieving SVR35 compared to 32% in the rux plus placebo combination.

In this study, the navitoclax combination did not achieve the first ranked secondary endpoint, which was improvement in total symptom score at week 24. Additional follow-up data on SVR and TSS as well as other endpoints are expected in the fourth quarter of this year. We plan to wait for these more mature data before engaging with regulatory agencies in order to have a more comprehensive picture of the patient’s clinical response and clinical benefit that navitoclax can provide. Looking to the remainder of this year. We remain on track for several additional data readouts from our late-stage oncology programs, including Phase III data from Venclexta’s CANOVA trial in relapsed/refractory multiple myeloma patients with t(114) mutation. As a reminder, this is an event-driven study, and we’re just waiting — we’re waiting for just a handful of remaining events.

So, we’d expect to have these data in-house in the coming months. And we remain on track to see Phase II data for Teliso-V in second-line plus advanced non-squamous, non-small cell lung cancer in the fourth quarter. We’re also making very good progress with several earlier line, earlier stage solid tumor programs. We recently initiated a Phase II study for ABBV-151, our anti-GARP antibody in hepatocellular carcinoma and plan to begin Phase II in several additional solid tumors over the course of the next 12 months. At the recent ASCO meeting, we presented promising initial results from a Phase I study evaluating our next-generation c-Met ADC, ABBV-400 in several advanced solid tumor types. We’re seeing responses across multiple tumors, indicating broad activity.

Results in late-line colorectal patients were particularly encouraging, where monotherapy treatment with 400 resulted in a confirmed overall response rate of 22% well in excess of standard of care, which is typically less than 2% to 3%. We’re also encouraged by the durability of response seen in these early results. These patients had an average of five prior lines of therapy, so this level of efficacy is very encouraging. Based on these results, we plan to start our Phase II program later this year, beginning with a second line colorectal cancer study. Now moving to neuroscience, where in the quarter, we received a positive CHMP opinion recommending approval of atogepant for migraine prevention. We anticipate a decision in the coming months.

And if approved, atogepant would be the only oral CGRP antagonist approved in Europe for prevention of both episodic and chronic migraine. This is a debilitating condition that impacts tens of millions of people in Europe, and we look forward to making this new oral treatment option available to patients once approved. Also, in the area of neuroscience, ABBV-916, our A-beta antibody for Alzheimer’s disease is rapidly advancing to dose escalation studies. This antibody is demonstrating a long half-life and very low antidrug antibodies, both important attributes to achieve a best-in-class profile for our A-beta antibody. Dose selection in Phase II is expected to begin early next year. And lastly, in our aesthetics pipeline, we recently submitted our regulatory application for Botox in masseter muscle prominence in China, which is the initial focus for our program given the prevalence of masseter muscle prominence in Asian populations and a significant unmet need for minimally invasive treatment options.

In our platisima prominence program for Botox, we remain on track to see data from two additional Phase III studies later this year with our regulatory submission in the U.S. expected near the end of the year. So, in summary, we had a very productive first half of the year across all stages and therapeutic areas of our pipeline, and we look forward to the second half of 2023 with several important clinical and regulatory milestones. With that, I’ll turn the call over to Scott.

Scott Reents: Thank you, Tom. I’m very pleased with the performance and outlook of the business, including the strong momentum from our ex-Humira growth plan. Starting with our second quarter results. We reported adjusted earnings per share of $2.91, which is $0.11 above our guidance midpoint. These results include a $0.15 unfavorable impact from acquired IP R&D expense. Total net revenues were nearly $13.9 billion, more than $350 million ahead of our guidance and down 4.2% on an operational basis, excluding a 0.7% unfavorable impact from foreign exchange. Importantly, these results reflect high single-digit sales growth from our growth platform. The adjusted operating margin ratio was 47% of sales. This includes adjusted gross margin of 84.7% of sales, adjusted R&D investment of 12.5% of sales, acquired IP R&D expense of 2% of sales and adjusted SG&A expense of 23.2% of sales.

Net interest expense was $454 million, the adjusted tax rate was 15.8%. Turning to our financial outlook. We are raising the midpoint of our full year adjusted earnings per share guidance by $0.23 and now expect adjusted earnings per share between $10.90 and $11.10. This guidance does not include an estimate for acquired IP R&D expense that may be incurred beyond the second quarter. We now expect total net revenues of approximately $53.4 billion, an increase of $1 billion. At current rates, we expect foreign exchange to have a modest unfavorable impact on full year sales growth. This guidance includes the following updated assumptions with more than half of the sales improvement attributed to our ex-Humira growth platform. We now expect Skyrizi global sales of approximately $7.6 billion, an increase of $200 million due to continued strong performance across all approved indications.

We now expect neuroscience sales of approximately $7.7 billion, an increase of $300 million, reflecting robust prescription growth for Vraylar following the MDD approval as well as better-than-expected performance of Botox Therapeutics and Qulipta. And for aesthetics, we now expect global revenue of approximately $5.4 billion, an increase of $100 million, primarily reflecting momentum from Botox Cosmetic. Lastly, we now anticipate U.S. Humira erosion of approximately 35%, resulting in a sales guidance increase of $400 million based on volume trends and strong parity access. Moving to the P&L. We continue to anticipate adjusted gross margin of 84% of sales and now expect adjusted R&D expense of $6.9 billion, SG&A expense of $12.7 billion and an adjusted operating margin ratio of approximately 46.5% of sales.

Turning to the third quarter. We anticipate net revenues of approximately $13.7 billion, which includes U.S. Humira erosion of approximately 40%. And rates, we expect foreign exchange to have a modest unfavorable impact on sales growth. We expect adjusted earnings per share between $2.80 and $2.90. This guidance does not include acquired IP R&D expense that may be incurred in the quarter. In closing, AbbVie has once again delivered strong top and bottom line performance, and we are very pleased with the momentum of the business heading into the second half of the year. With that, I’ll turn the call back over to Liz.

Liz Shea: Thanks, Scott. We will now open the call for questions in the interest of hearing from as many analysts as possible over the remainder of the call, we ask that you please limit your questions to one or 2. Operator, we’ll take the first question, please.

Operator: Vamil Divan, Guggenheim Securities. .

Vamil Divan: So one, I’m just curious, given the strong quarter and the guidance raise, in terms of that you talked about your floor EPS, is that — do you still see a floor of $10.70 or is it different? And can you talk anymore at this point or when you see that floor happening? And then my second question is around IRA, and you obviously a lot of focus there. I’m curious if you have any thoughts around what the first list of products around September 1. Are you expecting AbbVie products to be included in that first group of 10. And then infused just Rinvoq specifically and how you see that might be at risk from IRI, given you bring obviously a lot of life cycle development there. And is there a chance that a life cycle may not be quite as long? Or kind of how are you thinking about prioritizing investing in a small molecule like Rinvoq?

Rick Gonzalez : Vamil, this is Rick. I’ll take the first question and then maybe Rob and I can also tag team on the first one and the second one as well. So if you look at the floor, if you step back and look at how the business is performing. Obviously, the business is performing extremely well. And a significant part of the over achievement is not the Humira business. In fact, of the $1.4 billion we’re raising, as Scott said, only $400 million of it is Humira. So $1 billion of it is the growth platform. So all that speaks. We have very strong momentum going into 2024. And we talked before on these calls about, well, when will the trough year occur. And as you think about the floor, I think you have to sort of think about the trough year at the same time.

We said in the past that if we significantly overachieved in 2023, that would increase the probability that the trough year was in 2024. And we said that in the backdrop of primarily thinking about it as Humira overachieving. And obviously, now what we’re seeing that it’s the majority of the other products that are overachieving the growth platform. So as we look at ’24 and as we look at the trough, I think we have to let the year play out a little bit further to see where we’re going. But I would say that we’re feeling pretty — we’re feeling very good about ’24. And the growth of that non-Humira business could more than offset the over performance that we’re seeing this year, especially the over performance that we’re seeing on Humira. So it’s too early to raise the floor.

But what I would tell you is the performance that we’re seeing now gives us a tremendous amount of confidence of what ’24 looks like. Rob, anything you’d add?

Rob Michael : I’d just add that we’ve now collectively raised revenue guidance by $1.4 billion, as Rick mentioned, we raised $400 million in the first quarter, $1 billion this quarter. When you look at it, it’s really across the key therapeutic areas that will drive long-term growth. We’ve raised Skyrizi, aesthetics, neuroscience, and also Humira. So we do feel very good about the performance of the business. We’ve debated when we update the floor that will come at some point may not come until we actually give the Q4 guidance — on the Q4 call of 2024 guidance, but as we look at it, the fundamentals of the business are very, very strong, and we’re seeing performance across all of the therapeutic areas.

Rick Gonzalez : On your second question, IRA. I think it’s very difficult to predict. In our planning assumptions, we have assumed for some products to be impacted here early on. Imbruca is obviously one product that we’re looking at carefully. I would say it’s right from how you would calculate it based on the data that we would have, it would be right on the bubble of where the cutoff would occur in those first 10 products. So it could be 10, it could be 9, it could be 11, depending upon how some other products. And I say it that way because remember, we’re using the data that we have, we’re not 100% sure that, that is the data that CMS is going to use. So there’s not perfect clarity around it. But I would say that’s one that we obviously have on the radar screen and we’re looking at carefully. Anything you’d add, Rob?

Rob Michael : When IRA was passed a year ago, we obviously modeled the impact and we reaffirmed the long-term guidance expectation of high single-digit growth in the second half of this decade. That remains. We looked at what it means in terms of inflation penalties, party benefit redesign, negotiations. So we did make assumptions around that. I think Rick is correct in that there is still enough uncertainty we’re going to know soon, right? September one is when they expect to announce the first list. We have modeled it, but we feel good even with IRA although it does have an impact — has impacted everyone in the industry, we can still deliver on our long-term growth expectations. On your question — and I think keep in mind, too, when you look at the Medicare percent of business for AbbVie.

In the U.S., it’s about 20%. Globally, it’s a little bit lower, obviously. And so you look at us relative to our peers, we have a lower percent of the business as exposed to Medicare. And then when we look at specific at Rinvoq, you have to keep in mind with Rinvoq with indication expansion, the percent of sales you’re talking about by the time it potentially be selected for negotiation, potentially in the later part of the decade, you’re talking about something where like 10% to 12% because if you keep in mind, new indications, in many cases, serve younger patient population. And so that’s the way we’re looking at Rinvoq continuing to develop it. We obviously have a number of indications that could launch later in the decade. We feel very good about that.

Those indications can collectively contribute a couple of billion dollars of revenue. We’ll continue to drive that robust growth we expect from Rinvoq and Skyrizi as well. And so, we’ve modeled the impact of IRA, we don’t expect it to impact the development plans for Rinvoq.

Liz Shea: Thank you, Vamil. Operator, next question, please.

Operator: Chris Schott, JPMorgan.

Chris Schott: Great. Thanks so much. Just two questions for me. I guess first, can you just elaborate in terms of what you’re seeing with biosimilar Humira as we think about kind of the price and volume dynamics. I guess specifically, any surprises from your side in terms of how this is playing out? And then just any qualitative comments you can provide about how you see this kind of translating as we kind of think out to 2024? And then my second question was just on the Skyrizi updated guidance. Just a little bit more color on that $7.6 billion of at this point, how much is coming from psoriasis versus psoriatic arthritis versus this Crohn’s launch that seems to be off to such a strong start. So just directional color of like the mix of the indications would be very helpful. Thank you.

Jeff Stewart: Yeah. Hi, Chris. It’s Jeff. And I’ll answer your first question. So in a nutshell, we haven’t been surprised at any of the dynamics that we’ve seen play out, we’ve called it very, very accurately. So again, nothing that’s really other than some small volume holding on a little bit better that’s really different. So we’re quite pleased with how our contracting and access has played out. And that parity access for Humira has been important. And again, it’s what we believe would happen. We think it’s good for patients, obviously, who can maintain their therapy with very little volatility, and it certainly provided us with a lot of predictability. And so I think we’ve managed sort of the first half with the Amgen launch and then the second half dynamics very, very well.

And if you look to ’24, as I’ve highlighted before, we do have 2-year agreements with some of our accounts. And we negotiated those in good faith, and we expect them to be honored. And remember, these are parity contracts for both ’23 and ’24 with Humira access coexisting with these multiple biosimilars. So I would say based on these dynamics, we’re confident that Humira access will remain quite meaningful in 2024. And we know that as more biosimilars become established, we’re also, as we’ve highlighted, appropriately planning for some volume loss in those certain so-called wax-sensitive accounts over time. So really no surprises in terms of what we’ve seen overall. So we’re quite pleased.

Rob Michael: Chris, this is Rob. Just to give you some color, both in terms of the ’23 guidance and the erosion assumptions around that, and then I’ll talk about ’24 briefly as well. In the first half of the year, obviously, the vast majority of that erosion came from price. We saw very little volume impact. But now with eight biosimilars on the market and some pursuing a low act strategy, we have assumed high single-digit volume erosion in the second half of the year, which would put the full year volume impact at mid-single digits. The rest of the 35% comes from prices we’ve negotiated those higher rebates and maintain strong parity access. Now while we’re not providing ’24 guidance today for U.S. Humira, it is reasonable to assume that there will be additional price erosion.

Some will come from the annualization of the rebates that increased in the second half of this year and some will come from rebate increases negotiated for 2024 parity access. I’d also expect more volume erosion in ’24, given the midyear entry of biosimilars this year, especially those that are pursuing a low act strategy. We’ve taken a close look at consensus estimates, analyst estimates have a very wide range the difference between the lowest estimate and the highest estimate approach is $4 billion. However, I’d say the average of those estimates appears to be a reasonable expectation for next year. Obviously, we’ll give formal guidance likely on the Q4 call, which is our customary practice. But if you look at the average of those estimates, it should give you a good sense.

Liz Shea: Thanks, Chris. Operator? Oh, sorry.

Rob Michael: Yes. And then I’ll take — this is Rob on to your question on Skyrizi. So of the $200 million, it’s split evenly between psoriatic $100 million and IBD a $100 million. So that $7.6 billion psoriatics, about $6.7 million, and IBD is around $900 million. Thanks Chris.

Liz Shea: Operator, next question, please.

Operator: Mohit Bansal, Wells Fargo.

Mohit Bansal: Great. Thank you very much for taking my question. And congrats on the quarter. One clarification question and then one question. So clarification. So Rick, you mentioned that you think, like, again, at this point, you’re not talking about increasing the floor, but you feel comfortable about the floor EPS range of $10.70. Is that fair to be in 2023 or ’24, that’s the first clarification question. And then second one is, when we talk to investors, they do feel comfortable about the ex-Humira portfolio. But one question that cuts up all the time is that, I mean, the lack of shiny object or pipeline beyond Skyrizi and Rinvoq. To the extent you agree with that assessment, how do you plan to mitigate that? Or is there anything in the pipeline that investors are missing at this point? Thank you.

Rick Gonzalez: Okay. This is Rick. So as far as the $10.70, I would tell you that we feel highly confident in the $10.70. So there shouldn’t be any concern there. And as I said, with how the growth platform is performing, we would expect to update at some point the floor. And obviously, by the way I’m saying it, the update would be in an upward direction. So hopefully, that gives some clarity around the floor. And when you think about the pipeline, what I tell you about the way we operate is we design our investment in R&D to be able to deliver the kind of growth that we expect for the business over the long term, both short term and the long term. Our expectations of the business haven’t changed. Our expectations are to build a strategy that allows this business to grow at the top tier and be able to do it over the long term and do it in a consistent way.

And I’d say, as I look at our historical performance, we’ve obviously delivered on that. But as I look at forward-looking performance through the end of this decade and into the early part of the ‘30s, we’re highly confident we can deliver high single-digit growth with the pipeline that we have now, and ultimately, with the assets that we have in the marketplace and how they’re performing in the marketplace and their ability to be able to drive significant growth. And you see that in the performance that we’re delivering now. If you look at the growth platform’s growth in first quarter, and then look at it in the second quarter, it’s accelerating at a very good pace, and it will continue to accelerate as we go through the rest of this year.

And that once we get to a stable tail or relatively stable tail on Humira will be that growth that emerges to be able to drive the company, and that’s what gives us such a high level of confidence. But I think when you look at our pipeline, certainly, we invested significantly in Skyrizi and Rinvoq, and that investment is paying off extremely well. We have a number of assets in our pipeline that will continue to help accelerate that growth as we move forward. So venetoclax for t114 and MDS are in samples of that. 951, we should do any submission and get that product on the marketplace. There’s a huge need for that product in the marketplace. And a number of other assets, I won’t go through every one of them. The rest of our investment in R&D has really been focusing on assets that are designed to be able to sustain our growth from 2030 – ‘40 forward.

And so as I look at our pipeline, and I know you don’t have as much visibility as we do, but when I look at our pipeline for things like the 400 platform and the cement platform that we have, the data we’re seeing in CRC, non-small cell, that’s a significant opportunity for us [indiscernible] is another significant opportunity for us. Our neuroscience portfolio is 916 and other assets is another significant opportunity for us that will emerge in that time frame. We have a next-generation BTK degrader that we’re excited about. We have a second-generation BCL-2 that we’re very interested in pursuing in multiple myeloma. And so there’s a number of assets here that just haven’t emerged to the point that you have clear visibility on all that data, but we do have visibility to where they’re progressing.

And so I think it’s just hard for you to assess that earlier pipeline, but it’s really designed to deliver on that long-term growth. So we’re confident between now and the early ‘30s. And as that pipeline matures and the data comes out, three is another good example of where we have a lot of data now that is demonstrating that is probably best in class for a bispecific in myeloma. And so as that data emerges, you’re going to get more visibility to it. And then obviously, we have the ability to go out and acquire things and we find things that we’re interested in.

Liz Shea: Okay. Thank you, Mohit. Operator, next question, please.

Operator: Terence Flynn, Morgan Stanley.

Terence Flynn: Maybe a couple for me. Maybe Rick, just to follow-up on that last comment, maybe just an update on your M&A BD appetite here, particularly assets that can contribute more near term to growth? And then again, I want to see what you guys are hearing out there regarding the long-acting Botox competitor. It sounds like you’re seeing stable market share, but any feedback on that product?

Rick Gonzalez : Okay. So M&A, I mean, obviously, we have a very active group who’s constantly working in the area of business development. We’re primarily focused in the areas that we operate in franchises. So think of things like immunology, neuroscience, certain areas of neuroscience, oncology, aesthetics, as an example, we constantly look at and then eye care would be, I would say, the key areas of focus. As I said before, we don’t need anything to be able to drive that high single digits. Obviously, if we can grow even faster, that’s a good thing. I think all of us recognize that. If we find assets that are out there that are later-stage assets, and they fit our strategy and they fit the kind of target product profile that we would expect because we only look for assets that can significantly change standard of care.

That’s what we’re good at. And so we evaluate lots of things, but many of them don’t meet that threshold that we’re looking for. But if we find something, we would obviously pursue it. If it was in an area that we thought we could maximize the value of it. And so, we’ll continue to do that. So like I said, I feel good about where we are and what we can drive, and I feel good about how we’re looking at assets that are in the outside. We certainly have the financial wherewithal to be able to acquire assets that are out there. And as we’ve mentioned before, we obviously acquire larger assets. And so we continue to look at those. But they have to meet our criteria and they have to be able to deliver a good return to the business. On DAXI, I feel very good about how the team — Harry and the team are performing against that.

But I’ll let Carrie actually describe to you how it looks.

Carrie Strom : Thanks, Rick. So in terms of DAXI, it’s been more than six months since their launch and the uptake has been quite limited from our perspective in the low single digits. So for context, as we benchmark our competitive launches. And you would benchmark this launch versus the most recent toxin to enter the U.S. market you would see it’s tracking to about 25% of where another product would be at the same point in its launch. And in terms of customer feedback, we continue to hear that expectations are just not being met on duration, that expectations on the customer side and on the consumer side. So we have yet to see impact on Botox share and Botox will continue to be the clear market leader as the other toxins compete for the number 2, 3, 4 position in our customers’ offices.

We are very pleased with the team’s ability to execute on these competitive strategies here. And actually, their clear focus not only on the competitive strategies, but also on the broader focus and vision to grow the entire toxin market in the U.S., which we continue to see as biggest opportunity now and in the future.

Liz Shea: Thank you, Carrie. Operator, next question, please.

Operator: Evan Seigerman, BMO.

Evan Seigerman: I wanted to just talk about kind of how you think about market share across the growth portfolio, specifically Skyrizi and Rinvoq kind of going forward. Is there a potential ceiling for them in one market share you can realize in these markets? Or maybe comment on some of the gating factors for market share growth in each of the patient provider or reimbursement agreements.

Jeff Stewart: Yes. Evan, it’s Jeff. I’ll take that one. One of the aspects that we have that I highlight and we look very carefully at, we look at both sort of in-play capture which I often refer to, for example, right now, the in-play capture for Skyrizi in psoriasis is about 50%. So we’re capturing one out of every two patients. And our market share is about 32%, as I highlighted. So theoretically, as we study these markets that if there’s not major innovation or major disruption that comes in place. And we really don’t see that in psoriasis. You get such a high level of efficacy with Skyrizi, your market share, so the 32% starts to ramp up over time towards your in-play capture because you get the persistency effects and the fall off that take place in the market.

So really, when you look at that, I could say the same thing, for example, with Rinvoq. I mentioned that it’s capturing 25% of second line plus in-play share. It has like a 3% market share. So in terms of the ability to sort of grow that market share over time, we really monitor that capture rate in the early years, and then you just sort of — the in place sort of pulls up your market share over time. So that’s why we’re quite encouraged at the speed of the ramps that we’re seeing there and the ability to move that market share. Now when we study the models, you don’t fully get there because typically, something else launches, time goes by. But we can feel very, very encouraged as we look at our in-play momentum that the market share starts to approach that over our long-range planning cycle.

Rick Gonzalez: The only other thing I would add, this is Rick, is with Otezla head-to-head. I would say currently, Skyrizi is not competing much against Otezla, which is a pretty sizable opportunity. And we’re very pleased with this head-to-head data. So that will open up another pool of patients that today Skyrizi doesn’t necessarily compete against. So that data will obviously allow us to be able to position it quite effectively against Otezla.

Liz Shea: All right. Thank you, Chris. Operator, next question, please.

Operator: Chris Raymond, Piper Sandler.

Chris Raymond: Just maybe a pipeline line of questioning here. Rick, I heard you mention maybe ABBV-951, but it wasn’t in your prepared comments. Maybe — I know you guys were saying you’re working to respond to the CRL later this year with PDUFA in the first half. Is that still the case. And then maybe also on the pipeline. A couple of quarters ago, I think you guys talked about an interesting combo opportunity in IBD with that GLP-2 in-licensed, I think, from Scripps. Any updated thoughts here with this sort of mechanism as a combo agent?

Roopal Thakkar: It’s Roopal. I can take those. So for 951, the team is still on track for a resubmission this year, consistent with what you just stated. And in fact, we’ve launched in Japan, and there’s already commercial patients receiving it. So the team is very excited about that. And what was described earlier. The unmet need is still quite high, and we still believe in a very strong profile in that asset. Along the lines of combinations, as you mentioned, on GLP-2, we feel with something like Skyrizi, the data that we’ve seen in Crohn’s and ulcerative colitis there’s still potentially an opportunity to even increase endoscopic or mucosal healing even higher. We’re seeing high ranges already 50%, 60%. And but we can still potentially go higher and something like a GLP-2 can directly address mucosal healing.

So that could be a potential combo. There’s other assets in our immunology pipeline that we are also considering for a combination. But when you have an asset like Skyrizi and the safety profile that we continue to observe that creates, I would say, multiple opportunities.

Tom Hudson: If I can just add, we didn’t really opt in yet. Our collaboration with Caliber, which we expanded this week to more programs includes them doing a Phase Ia study which is almost finished. We’re going to see the data and make that decision. It does fall into our — part of our immunology program, which is in epithelial repair, which Roopal just mentioned. And so this is one of the assets which we think if you get a healthy gut to prepare that there will be in combination with immunomodulators will get a better response over time. We have another program called RIPK1, which also is involved in epithelial repair. So as multiple strategies, but this is one where we’ll be making a decision and announcing a later time this year.

Liz Shea: Thank you, Chris. Operator, next question, please.

Operator: Steve Scala, TD Cowen.

Steve Scala: A couple of questions. This morning, Takeda noted weakness in the U.S. GI market, and it seemed to be mainly on patient levels as opposed to competition. Wondering if you’re seeing this and to what do you attribute it? So that’s the first question. On the second question, on the Q1 call, the company said it would narrow the EPS range when it had clarity on biosimilar Humira and the landscape for that. So you narrowed that range today despite most biosimilars having been on the market for only three weeks, what do you know now that you didn’t know when you reported in April that gives you the confidence to narrow the range today or is it all about the performance of the rest of the portfolio and really not about Humira?

Jeff Stewart: Yeah, hi Steve, it’s Jeff. No, we don’t see any slowdown in the IBD market. I mean this market has been just one of the highest growth markets we’ve seen from a CAGR perspective over many, many years. There’s such unmet need. And so no, we’re not seeing any patient slowdown. I would say, look, if we look at our particular data, I mean, you’re seeing very fast ramps on this in-place share from Skyrizi and Crohn’s disease. Now you’re seeing an equally fast ramp in the early weeks from Rinvoq and Crohn’s disease. And again, we’re capturing up to 25% of the second line plus patients in ulcerative colitis. So I don’t know what data Takeda is looking at, but we’re seeing that the competitors in that space. And the leading competitors are Stelara and Entyvio and of course, our own Humira, but it’s Stelara and Entyvio, they’re under pressure in terms of incremental patient capture since our launch, and we’ll continue to monitor.

But we don’t see any patient flow issues in the marketplace.

Rob Michael: And Steve, this is Rob. On your second question. I think it’s a combination of both. We’re seeing very strong performance from the ex-Humira growth platform, as you can see by the guidance raise, that’s really a contributor. But now that we’re beyond the middle of the year. We know the biosimilars that have entered the market, we know they’re facing prices. We’ve maintained strong parity access. And so that also increased our confidence which is why we’ve narrowed the range to $0.20. But it’s a combination of both the ex-Humira growth platform performing very strongly as well as where we sit today with biosimilar competition for Humira.

Liz Shea: Thanks, Steve. Operator, next question, please.

Operator: Carter Gould, Barclays.

Carter Gould: Thank you for taking my questions, and congrats on the quarter. I guess, two, acknowledging all your comments on the pipeline and previous comments on BD. Rick, was looking to get your thoughts on how the more assertive FTC here is limiting your target list on BD or your ability to complete deals? And then maybe just on Botox. Just was hoping for a little bit more color on the sustainability of the ex-U.S. trends versus maybe some of that demand getting pushed into the quarter after some of the shutdowns, COVID impacts and whatnot ex-U.S. Thank you.

Rick Gonzalez: Okay. So, I’ll take the first question. Obviously, the FTC appears to be applying a lot more scrutiny to transactions. Having said that, I would say even before this happened, we would always evaluate an acquisition of a product or a company in the backdrop of what we thought the competitive environment would be our position in that market, meaning we didn’t necessarily go out and try to do transactions that we thought would be extremely difficult from an FTC standpoint. So, I think the way we think about the FTC situation now is, look, it may require more time to get acquisitions through it may even require that you’re willing to pursue litigation in order to get those through. But in the end, if your position is that what you’re trying to do is not anticompetitive.

You will be able to ultimately prevail in that process. And I think we’re seeing that as some of these transactions go to court. Some not in our own industry, but in other industries, I think that’s playing out. And so, I think ultimately, it will end up being more of a delay, but not something that staples your ability to do things that are appropriate to do. That’s my perspective on it. Carrie?

Carrie Strom: Sure. In terms of the aesthetics market internationally, like we said, we’ve been very pleased with the performance so far, and we expect to — we continue to expect to see that type of strong performance through the rest of the year. We’re continuing to invest in key growth markets like Japan and in markets like Brazil. And of course, China has become our second biggest market globally. And in China, in the first quarter, we did see significant growth as the market was reopening from COVID and some pent-up demand that came through in Q1 and early Q2. And now China has returned to normalized high growth rates. And so despite some economic pressures there, we really continue to see strong growth as we continue to invest and expand our promotional footprint there through field force, through injector training and our consumer efforts.

And China will continue to be a really attractive market for us. Based on that commercial expansion and also, we’re going to have a steady flow of new product launches throughout the decade in that market. One thing to note, which we did mention in our prepared remarks is that we do expect Q3 to be relatively flat internationally based on shipment timing from last year with that return to growth in Q4 and high single-digit growth for the full year internationally.

Rob Michael: And then, Carter, you were specifically asking about international Botox. I think if you just look at the run rate through the six months of the year, that’s probably a good proxy for where we expect international Botox to land. We’re holding strong share positions. Force is very, very good. So there’s really no dynamic there. As Carrie mentioned, I mean you have to keep in mind that fillers a very large market for us, business for us internationally. We do have the Q3 dynamic. But when you look at the full year for international, that high single-digit growth, is certainly a way to think about the international business for aesthetics.

Liz Shea: Thanks, Carter. Operator, next question, please.

Operator: David Risinger, Leerink Partners.

David Risinger: Yes. Thanks very much. So I have two questions. Rick, you had mentioned that you’re expecting stabilization of Humira sales at some point. Could you provide some perspective on when you might expect that? And then second, with respect to the filler franchise, obviously, it’s performing strongly, could you discuss the prospects including the driver of weight loss drug patients seeking to compensate for facial hallowing? Thank you very much.

Rick Gonzalez: On the Humira tail, as Rob mentioned earlier, obviously, you have the annualization of the impact that we have this year, the second half annualization that’s going to roll into ’24. We’re going to have further price erosion in ’24, both based on the contracts that we have and how we’re expecting the market to play out. And I’d say the pricing in the marketplace has been consistent with what our original assumptions were. So, I think the expectation you’ll start to see stabilization of that tail in ’25. And benefit operates similar to what we see in the international markets, which I think would probably be low at that point. it becomes relatively stable, I’d say, in ’26 going forward. And it should be still a substantial tail that we maintain. But see less erosion pressure on it at that point. Carrie, do you want to talk a little bit about the Otezla impact?

Carrie Strom: Sure. So, in terms of the filler opportunity and outlook, I guess, as that big — I’ll start — I’ll zoom out a little bit and just comment on that the filler market continues to be really attractive, especially internationally, as you’ve already seen here right now. with China driving some strong growth. And really some of the key Juvederm brand have just become available in China in the past few years, and we’ll continue to have, like I said, a cadence of Juvederm launches in China. And then our increased investment all over the world and continues to drive our filler business and gives us a lot of optimism there internationally. Now in the U.S., we have said that the inflationary dynamics have impacted the U.S. market for filler and more than toxin just by the nature of the filler pricing and procedure.

And also in terms of the patient journey patients tend to start on toxin before they add filler. And so, for all those reasons, we believe that the top — the filler market will continue to improve in the second half of the year. although it will lag the toxin market recovery a bit. Now in terms of the question around Ozempic, we have been keeping an eye on that and how these weight loss products could have an impact on the aesthetics market. And what we see is that really anything that gets a consumer engaged in their appearance, including products like Ozempic are a positive tailwind for the aesthetics business. And we are hearing some customers say that these facial hollowing fillers or for — that’s a result of these products is an opportunity for fillers.

We see that on social media. We’re tracking it in other forms of media. And we think that like many other consumer trends around aesthetics, this will just continue to be a tailwind and the positive dynamic of the business.

Liz Shea: Thanks, David Risinger. Operator, next question, please.

Operator: Tim Anderson, Wolfe Research

Tim Anderson: Thank you. A couple of questions. How much uncertainty is there in terms of contracting in the I&I category in 2024 from a pricing standpoint for Skyrizi and Rinvoq. And when will you be able to provide an update on how those pricing discussions are going for those two brands. So not the formal sales guidance for those products, but how the pricing discussions are going. And what is your expectation today for that level of price erosion in 2024 relative to what it’s been in 2023?

Rick Gonzalez: Okay. So, I think Jeff and I will tag team this one. It’s a great question because, look, I think we all know there has been some question out in the marketplace since the first quarter about I&I pricing. And so let me try to frame our perspective on the pricing because I think there’s some misconception that’s developed in the marketplace to some extent around I&I pricing. I guess the first thing I’d say to you, this is a market we know well. We’ve been in this market for a long time. We’re obviously a leader in this market. So, it’s a market we know extremely well. And obviously, we know any trend that’s occurring in this market to a high degree of detail. And what I would tell you is that we see no fundamental change in the way pricing is being dealt with in this marketplace nor do we expect to see any fundamental change that occurs in the foreseeable future.

So that brings me to the rebate question in the first quarter. And I would tell you that we’re operating exactly the same way we have historically operated in this segment as it relates to rebating or discounting. When we get a new indication or a new product, one of the things that we evaluate is — okay, what level of rebating should we do in order to maximize two things for the product. The speed at which we can drive the ramp and the ultimate peak sales that we can drive for that asset. We weigh those two things against how we look at contracting and getting on formulary. And so when you get an indication, you make a trade off. Do I want to be on formulator? I don’t. If I do, I have to provide some level of incremental rebates. Is that a financially positive decision for the asset in the company.

And if it is, we make that decision. And I would say that Skyrizi and Rinvoq are classic examples of that strategy. And I would say, look at how they’re performing. We’re going to grow those two assets despite the increased rebates, $3.5 billion this year. And that’s a pretty good trade-off. I don’t know, Jeff, anything you’d add?

Jeff Stewart: Yes. Maybe just to build on that point, Rick. I mean this fact base of seven indications in one year in one category with one firm, it’s just — it’s really unprecedented. It’s not going to happen again. And I think it’s important to think about how it works. I mean, when you get a new indication and they’re sequencing over time, you’ve got to clear the payer’s P&T clinical committee, and they don’t meet every day. They meet every couple of months. So there’s a process there. And then you’ve got to be added to the formulary structure. So you either have to somehow gain a new spot by indication or replace a competitor. And that’s not easy as well. And so that’s why what we see in the marketplace. Many competitive firms have to offer these free or bridge programs and not just for a quarter or 2, sometimes there are multiple quarters or years until that access ramps.

And I would say, in contrast, Rick, as you noted, on average, we achieved fully paid access for those seven indications in about 60 days, really, really unprecedented. So that means we had to give very little free goods we had almost immediate paid access and profit flow and then, of course, that rapid revenue accumulation that you highlighted. So definitely the right trade-off, and we don’t see that recurring.

Rob Michael: And Tim, on your second question, I mean we’ve said this before, the high single-digit price impact this year is a function, again, as Jeff mentioned, seven new indications. We do not expect that type of price erosion going forward. It should not be what investors are modeling. So I wouldn’t be concerned about high single-digit price erosion in ’24.

Liz Shea: Thanks, Tim. Operator, we have time for one final question.

Operator: And that will be from Geoff Meacham, Bank of America.

Geoff Meacham: Great. Good morning, guys. Thanks for the question. On OUS Humira, you’re obviously well past the initial biosimilar way, but you’re still seeing some sequential decline. So what’s the context here? And is there a dynamic that could impact Skyrizi or Rinvoq even indirectly OUS? And then on navitoclax, I know you guys have more details to come, but is there a threshold you’re looking for and TRANSFORM one to move forward or even to inform development in other indications, just thinking about maybe the tolerability profile and the comps in that?

Rob Michael: So Jeff, this is Rob. I’ll answer your question on International Humira. If you look at the ’23 erosions, about $600 million it’s really split in, I’d say, three buckets. About $300 million of it is new biosimilar markets, markets like Canada, Puerto Rico, Mexico. Those are — remember, we have additional waves coming in. So that’s the next wave coming in so about half of it is that. And then I characterize about $200 million being really the impact of new agents like Skyrizi and Rinvoq, right? So you have agents that deliver higher standard of care, and so you’re going to see share erosion just through that dynamic. And fortunately, we’ve brought forward our own products that do that. And so I’d say of that $600 million, $200 million is roughly that.

And then in the international markets, you typically see some, I’d say, low to mid-single-digit price erosion, just typically year-over-year. So that’s about another $100 million. So it’s important to characterize it the right way. It’s not so much markets that were biosimilar several years ago. It’s more recent biosimilar markets, our own competition from our own agents as well as the typical price erosion you see in the international market.

Roopal Thakkar: It’s Roopal. I’ll take the navitoclax question. So we’ll continue to monitor the spleen volume reduction and see how that looks towards the end of the year. And if it maintains the high level that Tom described, that’s something that definitely a positive. The other things that we’ll get that will reveal themselves over the longer term as the marrow fibrosis and that, along with the spleen volume reduction and actually some of our earlier data may be correlative for survival events. So we’ll get an early look at those. And then in terms of tolerability, what we’ve seen thus far is consistent with what we’ve seen initially, and it is a titratable dosing. So the clinicians can tailor in the study to what the patient needs. So more to come by year-end. Liz Shea Okay. Thanks, Jeff. And that concludes today’s conference call. If you’d like to listen to a replay of the call, please visit our website at investors.abbvie.com. Thanks again for joining us.

Operator: As we are concluded. Again, thank you for your participation. You may please disconnect at this time.