ABBVIE Earningcall Transcript Of Q2 of 2024
vice president, chief financial officer; and Carrie Strom, senior vice president, AbbVie, and president, global Allergan Aesthetics. 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 Rob. Robert A. Michael -- Chief Executive Officer Thank you, Liz. Good morning, everyone, and thank you for joining us. It's a pleasure to speak with you today as AbbVie's new CEO. I look forward to building on our track record of success and delivering on AbbVie's promise to our patients, employees, shareholders, and communities. As we begin this new chapter, nearly every aspect of AbbVie's business is performing at or above our expectations. We are demonstrating a rapid return to revenue growth with operational sales up nearly 4% through the first half of this year, including robust mid-single-digit growth in the second quarter. Our ex-Humira growth platform, which covers more than 80% of AbbVie's total sales, will outperform our initial full-year sales guidance by more than $1 billion, driven by strong performance in immunology and oncology. In addition, U.S. Humira performance continues to meet our expectations, having achieved or exceeded our guidance in all six quarters with biosimilar competition. The strong performance across our diversified portfolio will drive top-tier, high single-digit compound growth through the end of this decade, which will support continued investment to drive growth in the next decade. Turning to our results. I'm especially pleased with immunology, where our leading portfolio is delivering performance well above our expectations. Skyrizi continues to demonstrate strong momentum in psoriasis and Crohn's disease, where we have substantial headroom for additional share gains, and the recent approval in UC will add another source of long-term growth. Rinvoq is also delivering robust growth across all approved indications. We are making excellent progress with late-stage development in five additional indications that we anticipate will launch in the second half of this decade. In oncology, Elahere has accelerated our on-market presence in solid tumors. We also have several exciting pipeline programs, including two novel c-Met ADCs for solid tumors, Teliso-V and 400; as well as 383, our BCMA/CD3 bispecific for multiple myeloma. In neuroscience, our leading therapies for migraine and mood disorders continue to gain share and are competitively well-positioned. The pending acquisition of Cerevel will further augment our neuroscience pipeline, and we're excited about what our two companies can achieve together to make a difference for patients with neuropsych disorders. We have certified substantial compliance to the FTC Second Request and anticipate the Cerevel transaction will close soon. Lastly, we've been very active with business development, investing in exciting opportunities that can drive growth in the next decade. Through the first half of this year, we have executed nearly a dozen early stage deals. These include promising technologies and innovative mechanisms that can elevate the standard of care in immunology, oncology, and neuroscience. In summary, I'm very pleased with the strong momentum of our business. AbbVie's results once again exceed our expectations, and we are raising guidance for the second time this year, underscoring our confidence in the business. The robust performance of our growth platform and the advancement of our pipeline supports AbbVie's top-tier long-term outlook. With that, I'll turn the call over to Jeff for additional comments on our commercial highlights. Jeff? Jeffrey Ryan Stewart -- Executive Vice President, Chief Commercial Officer Thank you, Rob. We continue to demonstrate strong commercial execution across our therapeutic portfolio. I'll start with the quarterly results for immunology, which delivered total revenues of approximately $7 billion. Skyrizi and Rinvoq are performing exceptionally well, contributing more than $4.1 billion in combined sales this quarter, reflecting operational growth of 50% in their fifth full year on the market. These assets are approved across a broad set of indications and are collectively supported by nine compelling head-to-head studies that demonstrate clear differentiation across multiple novel therapies which has resulted in strong share capture. For Skyrizi, we continue to advance our clear leadership position in psoriasis where total prescription share of the U.S. biologic market has increased to approximately 38%. Share is also ramping nicely in PSA, especially in the dermatology segment, where Skyrizi has achieved roughly 15% total prescription share in the U.S. biologic market. And for Rinvoq, we are seeing increasing share across each of the room indications, as well as additional momentum in atopic dermatitis, including total prescription share of 10% in the U.S. We are very excited about the growth potential in gastroenterology, where Skyrizi and Rinvoq are on pace to double their respective sales in IBD this year. The adoption in Crohn's disease has been impressive with Skyrizi and Rinvoq now achieving a combined in-play share in the U.S. of more than 40%. Skyrizi has achieved overall in-place share leadership in Crohn's with in-place share approximately now 13 points ahead of Stelara, following our compelling head-to-head sequence data published last year. This positive trial, which demonstrated Skyrizi's high efficacy versus Stelara, including a more than doubling of effect in endoscopic remission, has driven a significant inflection in performance, and we anticipate continued share momentum. Commercialization for Skyrizi in ulcerative colitis is now underway in the U.S. with broad formulary access anticipated to ramp quickly over the next several months. Early feedback from gastroenterologists has been very encouraging with Skyrizi's UC data viewed as impressive, particularly for naive patients who have not been exposed to biologics. We also expect the European launch in the coming months. We also see very robust adoption of Rinvoq in UC, where the brand is now achieving a leading in-play share in the U.S. Internationally, Rinvoq UC is now approved in 75 countries with reimbursement and share gaining momentum. Having two novel therapies that each deliver differentiated levels of efficacy to treat both of these IBD conditions demonstrates our commitment to transforming the treatment landscape for physicians and patients in this area of high unmet need. Turning now to Humira, which delivered global sales of $2.8 billion, down 28.9% on an operational basis due to biosimilar competition. Erosion in the U.S. was in line with our expectations in the quarter, and our guidance contemplates the impact of additional formulary changes over the course of the year. Importantly, we continue to anticipate that Humira will maintain parity access to biosimilars for a significant majority of patient lives this year. Moving now to oncology, where total revenues were more than $1.6 billion. Imbruvica global revenues were $833 million, down 8.2%, reflecting continued competitive dynamics in CLL. Venclexta global sales were $637 million, up 15.8% on an operational basis with strong momentum across CLL and AML. Elahere is also performing very well with sales of $128 million, and our compelling overall survival data, recent positive updates in the NCCN guidelines, and the expansion of commercial resources will continue to drive rapid uptake. Lastly, we continue to be pleased with the prescription trends for Epkinly in DLBCL. Commercialization is now underway for Epkinly's second indication, follicular lymphoma, in the U.S. with European approval expected later this year. Neuroscience total revenues were nearly $2.2 billion, up 15.2% on an operational basis. This robust performance is driven by continued double-digit growth of Vraylar with global sales of $774 million, Ubrelvy with total revenue of $231 million, and Qulipta with global sales of $150 million. Each of these leading assets continue to gain share and remain competitively well-positioned. Botox Therapeutic is also performing well, especially in chronic migraine. Total global sales were $814 million, up 9.6% on an operational basis. Finally, we are pleased with the early launch trends for 951 in Japan and Europe and look forward to bringing this innovative therapy for advanced Parkinson's to the U.S. soon. Overall, I'm extremely pleased with the momentum across the therapeutic portfolio. And with that, I'll turn the call over to Carrie for additional comments on aesthetics. Carrie? Carrie Strom -- Senior Vice President and President, Global Allergan Aesthetics Thank you, Jeff. Second quarter global aesthetic sales were approximately $1.4 billion, representing growth of 2.8% on an operational basis. In the U.S., aesthetic sales of $863 million increased by 4.4%, driven by Botox Cosmetic and Juvederm growth of 7.1% and 10.4%, respectively. This toxin and filler performance is supported by a consistent recovery in the facial injectable market as the number of procedures in both categories increased by a mid-single-digit percentage versus the prior year. However, this level of market growth was lower than previously anticipated. Sales for Botox Cosmetic and Juvederm also benefited from a partial reversal of the prior quarter's inventory destock, which was related to the timing of certain promotional activities. From a competitive perspective, our U.S. facial injectable portfolio remains the clear market leader with strong and stable market share. Internationally, second quarter aesthetic sales were $527 million, roughly flat versus the prior year on an operational basis as declines in China were balanced by growth in other international markets. In China, our largest international market, sales growth continued to be impacted by sustained economic headwinds and as well as a challenging comparison to the second quarter of last year, which benefited from a strong post-COVID recovery. Consistent with what we experienced in the U.S., economic challenges have impacted Juvederm sales growth more than other areas of our portfolio based upon Juvederm relatively higher price point. Looking to the rest of the year, we expect our market-leading aesthetics portfolio to continue to perform well from a competitive perspective across the globe. As we evaluate market dynamics and leading economic indicators, particularly in the U.S. and China, market growth trends are below our prior expectations. Based upon this, we have moderated our outlook for the remainder of the year. Despite this near-term dynamic, we remain confident in the long-term growth outlook of our aesthetics portfolio. Global market penetration rates are extremely low, and we expect long-term market growth to accelerate from current levels as economic conditions improve. As the market leader, we are also committed to driving growth by activating new patients and launching innovative treatment options. For example, in China, launch activities are underway for the Botox Cosmetic masseter muscle prominence indication. And in the U.S., we will soon launch Juvederm Voluma XC for the treatment of temple hollowing, and we expect an approval for Botox Cosmetic in the platysma prominence indication by the end of the year. Pipeline catalysts like these in the key U.S. and China markets, along with our significant investment in consumer activation, injector training and practice support, will enable us to grow the aesthetics market and maintain our clear leadership position over the long term. With that, I'll turn the call over to Roopal. Roopal Thakkar -- Executive Vice President, Research and Development Thank you, Carrie. We continue to make very good progress advancing our pipeline with several regulatory and clinical milestones since our last earnings call. I will start with immunology. We received FDA approval for Skyrizi in ulcerative colitis, which marks its second inflammatory bowel disease indication. Skyrizi is now the only IL-23-specific inhibitor approved for both ulcerative colitis and Crohn's disease.Skyrizi has proven to be a highly effective, durable, safe, and well-tolerated treatment option for patients with moderate to severe inflammatory bowel disease, and this recent approval further strengthens AbbVie's leadership position in this market. We also received a positive CHMP opinion recommending Skyrizi for the treatment of moderate to severe ulcerative colitis in Europe with an approval decision anticipated soon. Earlier this month, we submitted our regulatory applications in the U.S. and Europe for Rinvoq and giant cell arteritis. Our submissions are based on the previously announced Phase 3 results from our SELECT-GCA trial, where Rinvoq demonstrated superiority compared to placebo on sustained remission from week 12 through week 52 on disease flare and showed a reduction in total steroid exposure at week 52. We expect approval decisions for this indication next year. We also recently began a Phase 3 study for lutikizumab, our anti-IL-1 alpha beta bispecific in hidradenitis suppurativa. HS is a skin disease that can be debilitating, and there are limited treatment options. In our Phase 2 study, lutikizumab demonstrated strong clinical response rates and improvement in skin pain in a very refractory patient population. Based on these results, we believe lutikizumab has the potential to become an important new treatment option for patients with moderate to severe HS. We look forward to providing updates on the Phase 3 program as the data become available. In the second quarter, we announced two additional immunology transactions as we continue to invest in external innovation to expand our pipeline. These include the acquisition of Celsius Therapeutics, which brings a Phase-2-ready anti-TREM1 antibody for IBD and a license agreement with FutureGen to develop a next-generation anti-TL1A antibody for IBD that is designed to have less frequent dosing compared to other TL1As in development and will be evaluated in combination with Skyrizi. This follows the four immunology deals we announced earlier this year, which, as a reminder, included the acquisition of Landos and their oral NLRX1 agonist in Phase 2 for UC, a partnership with OSE to develop a novel ChemR23 agonist for IBD and RA, a collaboration with Parvus to utilize their immune tolerization platform for novel IBD therapies and a collaboration with Tentarix to develop conditionally active multi-specific biologics in immunology and oncology. Moving to oncology, where we continue to make very good progress across all stages of our heme and solid tumor pipeline. In the area of solid tumors, we recently announced positive top-line results from our Phase 2 PICCOLO study evaluating Elahere as a monotherapy in ER alpha-positive third line, plus platinum-sensitive ovarian cancer for those not eligible for retreatment with platinum-based therapies. Elahere met the primary and key secondary endpoints in the study, demonstrating an objective response rate of 52% and median duration of response of 8.25 months. Detailed results will be presented at an upcoming medical congress. Following discussions with the FDA, we will be submitting Teliso-V for accelerated approval as a monotherapy in patients with previously treated c-Met overexpressing, EGFR wild-type, non-squamous, non-small-cell lung cancer. This submission will be reviewed under FDA's real-time oncology review program. Teliso-V has also received breakthrough therapy designation from the FDA. Our submission will be based on the results of our Phase 2 LUMINOSITY study, where Teliso-V demonstrated strong clinical benefits across key endpoints, including overall response rate, duration of response, and overall survival with a tolerable safety profile. Submission is expected in the third quarter with an approval decision anticipated in 2025. The confirmatory Phase 3 study for this potential accelerated approval is currently ongoing. We continue to see encouraging data for ABBV-400, our next-generation c-Met ADC, which uses a topo payload. Recall that we've advanced 400 in late-line colorectal cancer based on the deep responses and prolonged durability observed as a monotherapy in our Phase 1 trial, and we remain on track to begin a Phase 3 study later this year in third-line CRC. We're also seeing encouraging signals of activity for this next-gen ADC in the non-small-cell lung cancer cohort from our Phase 1 study. The preliminary data will be presented at an upcoming medical meeting. And based on the emerging Phase 1 results, we plan to begin a Phase 2 program for 400 in lung cancer. In the area of hematologic oncology, we received accelerated approval in the U.S. for Epkinly as a monotherapy treatment for patients with relapsed/refractory follicular lymphoma after two or more lines of prior therapy. Epkinly is now the only T-cell-engaging bispecific approved in the U.S. to treat both follicular lymphoma and diffuse large B-cell lymphoma. We're extremely excited to bring this new subcutaneous treatment option to patients suffering from follicular lymphoma. We also recently received positive CHMP opinion with an approval decision in Europe expected later this year. In the quarter, we initiated a Phase 3 monotherapy study for ABBV-383 in third-line multiple myeloma. 383 is designed for high-affinity binding to BCMA on malignant cells and low-affinity binding to a unique CD3 epitope on T-cells, which has the potential to mitigate some of the adverse events associated with other T-cell-engaging BCMA-based therapies while preserving high levels of efficacy. We remain excited about this asset's potential to become a best-in-class BCMA/CD3 bispecific by providing deep, durable responses and low incidence and severity of CRS with the potential for outpatient administration, limited or no step-up dosing and monthly administration from the beginning of treatment. In addition to our Phase 3 monotherapy program, we have an ongoing Phase 1 study in later lines of multiple myeloma to evaluate 383 in various combinations, including with Pomalyst, Revlimid, and Darzalex. Based on this work, we will begin Phase 2 combination studies in earlier lines of therapy next year. Moving to neuroscience, where in the quarter we announced that we received a complete response letter for our 951 regulatory application in the U.S. The CRL is based on observations identified during an inspection at a third-party manufacturing site that was unrelated to 951. The CRL did not identify any issues related to the safety, efficacy, or labeling of 951 nor has the FDA requested any additional clinical data or device-related testing. We're working closely with the site and the FDA to get clarity on time lines, and we'll provide updates as soon as information becomes available. Moving to an update on one of our Alzheimer's disease programs. We recently completed an interim analysis of a Phase 2 study evaluating ABBV-916, our A-beta antibody. The emerging efficacy and safety profile in this study is similar to what has been demonstrated by approved agents. However, given the evolving landscape, we do not believe 916 as a monotherapy treatment will be sufficiently differentiated from other emerging therapies. As a result, we are discontinuing further development for 916 as a stand-alone antibody. As Rob mentioned, we remain on track to close the Cerevel transaction soon, and we look forward to welcoming the team into our R&D organization. The emraclidine pivotal studies in schizophrenia remain on track to begin reading out near the end of this year. We'll also see data from two additional Phase 3 studies for davapidon in Parkinson's disease later this year. We look forward to providing updates on these programs once the transaction has closed and data are available. In aesthetics, we recently received approval for Botox in China for masseter muscle prominence, marking the first global approval in this indication for any neurotoxin. Masseter prominence is common in Asian populations, and there is significant unmet need for minimally invasive treatment options. We anticipate high demand for Botox in this novel indication in China, which will help to further build our portfolio in the face-shaping segment. A regulatory application is under review in the U.S. for Botox and platysma prominence, which is another novel indication that will help build our position in the lower face and neck segment. We continue to expect an FDA approval decision later this year. And we remain on track to submit a regulatory application for BoNT/E near the end of this year. A rapid-onset, short-acting toxin has a highly differentiated clinical profile and once approved would offer patients a novel option compared to currently available toxins. So in summary, we've made great progress across all of our therapeutic areas in the first half of the year, and we look forward to additional data readouts, regulatory submissions, and approvals throughout the remainder of 2024. With that, I'll turn the call over to Scott. Scott Reents -- Executive Vice President, Chief Financial Officer Starting with our second quarter results. We reported adjusted earnings per share of $2.65, which is $0.10 above our guidance midpoint. These results include a $0.52 and unfavorable impact from acquired IP R&D expense. Total net revenues were nearly $14.5 billion, $450 million ahead of our guidance and reflecting robust growth of 5.6% and on an operational basis, excluding a 1.3% unfavorable impact from foreign exchange. Importantly, these results reflect more than 18% sales growth from our ex-Humira growth platform. Adjusted gross margin was 85.2% of sales. Adjusted R&D expense was 13.3% of sales, and adjusted SG&A expense was 22.9% of sales. The adjusted operating margin ratio was 42.6% of sales, which includes a 6.5% unfavorable impact from acquired IP R&D expense. Net interest expense was $506 million. The adjusted tax rate was 18.8%. Turning to our financial outlook. We are raising our full-year adjusted earnings per share guidance by $0.10 to between $10 and $0.71 and $10 and $10.91 This EPS guidance continues to contemplate approximately $0.19 of dilution for the pending acquisition of Cerevel which is expected to close soon. Please also note that 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 $55.5 billion, an increase of $500 million. At current rates, we expect foreign exchange to have a 1% unfavorable impact on full-year sales growth. This revenue forecast includes the following updated assumptions with the entire sales increase, once again, driven by our ex-Humira growth platform, which is now on pace to deliver nearly $6 billion of sales growth in 2024. We now expect Skyrizi global sales of approximately $11 billion, an increase of $300 million due to strong performance across all approved indications; Rinvoq total revenue of approximately $5.7 billion, an increase of $100 million, reflecting continued robust uptake in IBD. Venclexta total sales of approximately $2.5 billion, an increase of $100 million, reflecting momentum in both U.S. and international markets. And for aesthetics, we now expect global revenue of approximately $5.5 billion. Given slower-than-expected, near-term market growth, particularly in the U.S. and China, as a result, our total sales guidance for Botox and Juvederm will each be lower by roughly $100 million. Moving to the P&L for 2024, we continue to forecast a full-year adjusted gross margin of approximately 84% of sales, adjusted R&D investment of 14%, and adjusted SG&A expense of 23.5%. We now anticipate an adjusted operating margin ratio of roughly 44.5% of sales, in line with our previous expectations after including the approximately 2% impact of acquired IPR&D expense incurred through the second quarter. And we forecast our non-GAAP tax rate to be approximately 16.3%, also reflecting the impact of IPR&D. Turning to the third quarter, we anticipate net revenues of approximately $14.2 billion. At current rates, we expect foreign exchange to have a 1.3% unfavorable impact on sales growth. We expect adjusted earnings per share between $2.92 and $2.96. This guidance does not include acquired IPR&D expense that may be incurred in the quarter. In closing, AbbVie has once again delivered outstanding performance, and I'm very pleased with the strong momentum across the portfolio heading into the second half of the year. With that, I'll turn the call back over to Liz. Liz Shea -- Senior Vice President, Investor Relations Thanks, Scott. We'll now open the call for questions. [Operator instructions] Operator, first question, please. Operator Questions & Answers: |
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