Yahoo Finance AbbVie Inc. (NYSE:ABBV) Q1 2024 Earnings Call Transcript
AbbVie Inc. (NYSE:ABBV) Q1 2024 Earnings Call Transcript April 26, 2024
AbbVie Inc. beats earnings expectations. Reported EPS is $2.31, expectations were $2.26. AbbVie Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning and thank you for standing by. Welcome to the AbbVie First Quarter 2024 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer portion of this call. [Operator Instructions] Today's call is also being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Ms. Liz Shea, Senior Vice President of Investor Relations. Ma'am, you may begin.
Liz Shea: 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, Chief Commercial Officer; Scott Reents, Executive Vice President, Chief Financial Officer; Carrie Strom, Senior Vice President, AbbVie and President, Global Allergan Aesthetics; and Roopal Thakkar, Senior Vice President, Chief Medical Officer, Global Therapeutics. Joining us for the Q&A portion of the call is Tom Hudson, Senior Vice President, Chief Scientific Officer, Global Research. 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. I'm extremely pleased with our start to 2024 with first quarter results exceeding our expectations. Before we discuss our performance in more detail, I'd like to share my perspective on the planned CEO transition that was announced earlier this year. After serving more than 11 years as AbbVie's first CEO, I have decided to retire from the role effective July 1, of this year and will continue to serve AbbVie as Executive Chairman of the Board. As you heard me say before, it is important that we choose the right time to make this critical leadership transition. The Board and I have been long planning for my eventual succession and now is the opportune time to move forward with the transition.
As our business is performing very well and is in a strong position for the long-term. We are successfully navigating the Humira U.S. loss of exclusivity. We have built an outstanding company culture, an important priority and competitive advantage. And our productive R&D engine, which has yielded numerous innovative new medicines for patients will continue to fuel our robust pipeline for years to come. After a multi-year process, our board has unanimously selected Rob Michael, our current President and Chief Operating Officer as AbbVie's next CEO. I have known and worked with Rob for many, many years and he is an excellent choice as my successor. He brings the experience, the leadership and the strategic vision to build on AbbVie's past successes, advance our strategy and enhance shareholder value.
Since our inception, Rob has held several important leadership positions that have collectively had a tremendous impact on AbbVie from establishing our financial planning organization to navigating the end of exclusivity for Humira in the U.S., to driving key business development opportunities that have been critical to diversify our business and support long-term growth, including the acquisitions of Allergan and ImmunoGen and the pending Cerevel transaction. Looking back, AbbVie has evolved tremendously as an independent company and our performance has truly been exceptional. Since our inception, we've grown our revenue from $18 billion to $55 billion. Our market capitalization has increased substantially from $54 billion to roughly $300 billion today.
We have achieved a total shareholder return of more than 675%, which is top tier relative to our peers. And importantly, we’ve substantially increased our investments in R&D to discover and develop new medicines that have the potential to improve the lives of patients. As I look ahead, our company has never been stronger and our future has never been brighter. We are executing well across all aspects of our business and our long-term growth prospects remain very strong. In summary, it has been a privilege and immensely gratifying to serve with all of my AbbVie colleagues for the past 11 years, growing AbbVie into what it is today. And I look forward to continuing to work with Rob and the leadership team to create meaningful value for our shareholders and all of our stakeholders.
And I'd also like to take this opportunity to thank all of our shareholders for the trust and confidence you put in me as AbbVie's CEO. With that, I will turn the call over to Rob for comments on our recent business performance. Rob?
Rob Michael: Thank you, Rick. Before I comment on our first quarter performance, I want to congratulate Rick on his exceptional leadership of AbbVie over the past 11 years. During his tenure, Rick made several strategic moves that have positioned AbbVie to have a bright future beyond Humira, consistently drove the organization to deliver very strong performance and demonstrated the genuine care for our employees, patients, shareholders and communities that has defined who we are as a company today. It has been my privilege to work closely with Rick over many years, and I look forward to working with him in his role as Executive Chairman. AbbVie's outlook is very strong and I am excited about the remarkable impact that we the remarkable impact that we will continue to have on patients' lives.
Turning to first quarter performance, we're off to an excellent start to the year with strong top and bottom-line results. We reported adjusted earnings per share of $2.31, which is $0.11 above our guidance midpoint. Total net revenues were $12.3 billion approximately $400 million ahead of our expectations. This overachievement was driven by our ex-Humira growth platform, which delivered revenue growth of more than 15% this quarter and includes continued robust sales from Skyrizi and Rinvoq, with combined growth above 50% in their fifth full year on the market, as well as double-digit revenue growth from several other key products including Venclexta, Vraylar, Ubrelvy and Qulipta. This broad based sales momentum clearly demonstrates the strength of our diversified portfolio with multiple growth drivers to support our long-term outlook.
We are also making excellent progress with several of our near-term priorities. We recently completed the acquisition of ImmunoGen, which accelerates our entry into the solid tumor market and strengthens our oncology pipeline. The integration has been seamless and we are impressed by the caliber of talent we have welcomed into AbbVie. We also remain on track with the pending acquisition of Cerevel, which we anticipate will close in the middle of the year. Cerevel's pipeline of differentiated assets will further augment our neuroscience portfolio. In addition, we continue to advance our R&D pipeline and invest for long-term growth. This progress includes the FDA's full approval of Elahere for FR alpha positive platinum resistant ovarian cancer, a meaningful first in class treatment for patients and a significant long-term growth opportunity for AbbVie in solid tumors.
We also gained U.S. approval of Juvederm Voluma XC for temple hollows, further strengthening our leadership in aesthetic fillers, and we executed several business development opportunities adding novel early stage programs and partnerships in oncology and immunology. Given the strong results this quarter, we are raising our full year adjusted earnings per share guidance by $0.16 and now expect adjusted EPS between $11.13 and $11.33. In summary, this is an exciting time for AbbVie and I am extremely pleased with the momentum of our diverse portfolio. We're off to an excellent start to the year and we are well positioned to deliver a high-single-digit revenue CAGR through the end of the decade. 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 the quarterly results for immunology, which delivered total revenues of approximately $5.4 billion exceeding our expectations. Skyrizi global sales were $2 billion reflecting operational growth of 48%. We continue to see exceptional momentum across all of the approved indications. In psoriasis, Skyrizi is the clear market leader in the U.S. biologic psoriasis market with a total prescription share now above 35%. That's more than double the share of the next closest biologic therapy. Share is also ramping nicely in PsA, especially in the dermatology segment, where we are now capturing one out of every four new or switching in play biologic patients. Globally, Skyrizi has achieved psoriatic in play share leadership in nearly 30 key countries.
In IBD, Skyrizi is on track to add more than $1 billion of incremental sales growth this year. We are seeing tremendous performance in Crohn's disease, where our compelling head-to-head data versus Stelara is driving a meaningful inflection of patient share. As a result, we have now achieved in play share leadership in Crohn's across all lines of therapy in both the U.S. and Japan as well as other key markets around the world. And finally, we are preparing for the launch of Skyrizi in ulcerative colitis, which represents another substantial long-term growth driver. We expect approval decisions in the middle of this year and anticipate rapid access in the U.S. following our launch. Given the robust frontline capture for Skyrizi in Crohn's and the exceptional bio-naive data we have generated in UC, we anticipate a strong launch.
Turning now to Rinvoq with global sales of approximately $1.1 billion, reflecting operational growth of 61.9%. In rheum, we continue to see strong prescription growth across each of the four approved indications, and I'm especially pleased with our performance in rheumatoid arthritis, where Rinvoq has achieved in play share leadership in nearly 20 key international markets. Atopic dermatitis is tracking in line with our expectations with continued market share momentum globally. Importantly, we recently announced positive results from LEVEL UP, our second head-to-head study in AD. LEVEL UP demonstrated Rinvoq superiority for patients starting therapy on the 15 milligram dose versus Dupixent across key efficacy parameters, including the high levels of skin clearance and itch reduction.
We anticipate these strong head-to-head results will support additional share capture, especially given Rinvoq label use in the U.S., which requires that initiation with a 15 milligram dose. And in IBD, Rinvoq's uptake continues to be very strong. Rinvoq is capturing high teens in play patient share in ulcerative colitis as well as mid-teens in play patient share in Crohn's disease. This performance is especially encouraging recognizing that we're still relatively early in the launch phase for both the UC and CD indications, and the lines of therapy are also expanding, with second line plus growing even faster as patients cycle to newer, higher efficacy agents like Rinvoq and IBD. Turning now to Humira, which delivered global sales of approximately $2.3 billion, down 35.2% on an operational basis due to biosimilar competition.
Erosion in the U.S. played out slightly better than our expectations in the quarter with the vast majority of the impact this quarter driven by price. As previously communicated, the recent changes to the CVS template formularies were anticipated in our full year outlook for U.S. Humira and the volume impact is tracking in line with our expectations. Our guidance has also contemplated the impact of additional formulary changes that are expected to go into effect over the course of the year. 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 $1.5 billion exceeding our expectations. Imbruvica global revenues were $838 million, down 4.5%, reflecting continued competitive pressure in CLL.
Venclexta global sales were $614 million, up 16.3% on an operational basis and we are seeing robust momentum internationally with strong performance for both CLL and AML. Elahere generated $64 million of sales to AbbVie, reflecting a partial quarter of revenue following the February close of the ImmunoGen acquisition. The Elahere sales and marketing team is executing very well and I'm pleased with the smooth integration into our commercial organization. We anticipate that the recent positive updates in the NCCN guidelines for both platinum sensitive and platinum resistant ovarian cancer patients as well as the full label approval, which of course, includes the compelling overall survival data that has never been achieved before in these platinum resistant patients will continue to drive strong Elahere uptake.
Lastly, the global launch of Epkinly in third line plus DLBCL is also performing well and we remain on track for the potential label expansion for follicular lymphoma later this year. Neuroscience total revenues were nearly $2 billion, up 16% on an operational basis, again, ahead of our expectations. This robust performance is driven by continued double-digit growth of Vraylar with global sales of $694 million, Ubrelvy with total revenue of $203 million and Qulipta with global sales of $131 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 $748 million, up 4.5% on an operational basis. And finally, we are very excited about 951, which will be commercialized as Vyalev in the U.S. and represents a potentially transformative next generation therapy for advanced Parkinson's disease.
Feedback from the launches in Japan and Europe have been very encouraging and we remain on track for commercial approval in the U.S. later this year. So overall, I'm extremely pleased with the strong and balanced growth across our therapeutic portfolio this quarter, a testament to our differentiated product profiles and commercial execution. And with that, I'll turn the call over to Carrie for additional comments on aesthetics. Carrie?
Carrie Strom: Thank you, Jeff. First quarter global aesthetic sales were over $1.2 billion, reflecting a modest decline on an operational basis. In the U.S., aesthetic sales of $776 million were roughly flat versus the prior year. We continue to see sustained momentum in the facial injectable market recovery that emerged in the back half of last year. Consistent with the past few quarters, the toxin market grew by a mid-single-digit percentage. We saw similar year-over-year increases in the number of facial filler procedures, representing a return to quarterly market growth for the first time since early 2022. From a competitive perspective, our U.S. aesthetics portfolio continues to perform well. Market share for both Botox Cosmetic and Juvederm was stable in the first quarter as these assets remain the clear market leaders.
While we're pleased that the market and share trends across U.S. facial injectables are aligned with our previous expectations, our first quarter results were impacted by customers holding lower than normal inventory levels at quarter end. This dynamic relates to a decision made during the quarter to shift the timing of certain promotional activities into the second quarter. We therefore expect inventory levels to normalize in the second quarter and remain on track to deliver full year aesthetics sales growth in the U.S. Internationally, first quarter aesthetic sales were $473 million reflecting an operational decline of 5.5%. Consistent with our expectations, growth in China was impacted by persistent economic headwinds as well as a challenging comparison versus the first quarter of last year, which benefited from a robust recovery post-COVID.
We are monitoring the economic developments across China and continue to anticipate a recovery in the second half of this year. Our pipeline continues to generate important new assets. Uptake of our recently launched Volux and SkinVive products remain strong, underscoring the importance of innovation within aesthetics. Given this context, we are excited for the upcoming launch of Juvederm Voluma XC for the treatment of temple hollows. As the only dermal filler approved for use in the upper face, we anticipate the Voluma XC introduction will activate more consumers and support the long-term growth of our filler portfolio. And within our toxin pipeline, we continue to expect FDA approval of the platysma prominence indication for Botox near the end of this year, enhancing Botox growth potential as a noninvasive treatment to reduce the appearance of vertical neck bands and improve jawline definition.
We also remain on track to submit a new drug application for our short acting toxin, BoNT/E, before the end of this year. This novel toxin has demonstrated a rapid onset of action as well as a short duration of effect, meaningfully lowering the barrier for toxin adoption across consumers who have been considering but hesitant to try Botox. Given this profile, BoNT/E has significant market expansion potential as satisfied patients would naturally convert to Botox. Overall, the underlying trends across our aesthetics portfolio align well with our previous expectations and we remain on track to deliver high-single-digit global aesthetics growth this year. With that, I'll turn the call over to Roopal.
Roopal Thakkar: Thank you, Carrie. I'll start with immunology. We recently announced positive top-line results from 2 Phase III studies for Rinvoq in dermatology and rheumatology. In the LEVEL UP study, which evaluated Rinvoq against dupilumab in atopic dermatitis, Rinvoq demonstrated superiority on the primary endpoint at week 16, which was a composite endpoint measuring skin clearance and itch reduction. Twice as many Rinvoq patients achieved this very stringent endpoint compared to dupilumab. Rinvoq also demonstrated superiority on all rank secondary endpoints in this trial. LEVEL UP was a study in which patients started on Rinvoq 15 milligrams and could escalate to 30 milligrams if they did not achieve treatment goals, which is how Rinvoq is prescribed for atopic dermatitis in the U.S. We also saw very rapid responses with Rinvoq demonstrating superiority on itch as early as week two and on skin lesions as early as week four.
Rinvoq's safety profile in the LEVEL UP trial was consistent with what has been observed in previous studies. There were no serious infections in patients treated with Rinvoq and one in the dupilumab group. The rate of serious adverse events was similar across treatment arms. There were no malignancies, MACE events or VTEs reported in either treatment group. Based on these data as well as results from previous Phase III studies, we remain very confident in Rinvoq's profile in atopic dermatitis, and we believe it offers meaningful advantages over other products on the market today. We also announced positive top-line results from our Phase III select giant cell arthritis trial, which evaluated Rinvoq in combination with a 26-week steroid taper regimen compared to patients receiving placebo in combination with a 52-week steroid taper.
In the study, Rinvoq 15 milligrams met the primary and key secondary endpoints, demonstrating superiority on sustained remission from week 12 through week 52, as well as on disease flare and reduction in cumulative steroid exposure at week 52. Importantly, Rinvoq's safety profile was consistent with what has been observed in more than 15,000 patients previously studied across controlled trials. The mean age in this population was 71, which is the oldest population studied to date with Rinvoq. And the average prednisone equivalent dose at baseline was almost 35 milligram. Rates of serious adverse events and VTEs were similar across treatment groups. There were no MACE events in the Rinvoq arm, while there were two in the placebo group. Based on the results from the select GCA trial, we believe Rinvoq has the potential to be a safe and tolerable oral treatment option.
We plan to submit our regulatory applications for this indication later this year. We continue to make very good progress with our inflammatory bowel disease programs. We anticipate several advancements this year, including the initiation of a Phase II study for lutikizumab in ulcerative colitis. The start of our Phase II Crohn's disease platform study, which will evaluate combinations of Skyrizi with lutikizumab and other novel biologics. And we remain on track for approval decisions for Skyrizi in ulcerative colitis, with the U.S. expected in the second quarter and Europe in the second half of the year. We also continue to invest in external innovation to expand our immunology pipeline, as evidenced by four deals that we announced in the first quarter.
These include the acquisition of Landos Biopharma, which brings an oral NLRX1 agonist currently in Phase II for ulcerative colitis, a partnership with OSE immunotherapeutics to develop a novel ChemR23 agonist antibody for inflammatory conditions, such as IBD and RA. A collaboration with Parvus Therapeutics to utilize their immune tolerization platform to develop novel therapies for IBD, and a collaboration with Tentarix Biotherapeutics to develop conditionally active, multi-specific biologics in immunology and oncology. We are excited to partner with these companies who are all pursuing very innovative approaches to developing transformative therapies. Moving to oncology, where in the quarter, we closed the ImmunoGen transaction, which brings exciting programs in both solid and blood cancers.
Last month, Elahere received full approval from the FDA for FR alpha positive platinum resistant ovarian cancer in patients treated with up to three prior therapies. This conversion to full approval was based on data from the confirmatory Phase III MIRASOL trial, where Elahere demonstrated an overall survival benefit and significantly reduced the risk of cancer progression. We expect to see results from additional ImmunoGen programs this year, including data from the Phase II PICCOLO study evaluating Elahere as a monotherapy in FR alpha positive third line plus platinum-sensitive ovarian cancer patients who are not eligible for retreatment with platinum-based therapies. And we expect to see data in the second half of the year from a potentially registration-enabling Phase II trial for our CD123 targeting ADC, Pivek in a rare blood cancer called blastic plasmacytoid dendritic cell neoplasm.
Now moving to program updates in hematologic oncology. Based on the totality of the data from our TRANSFORM-1 trial and following recent feedback from regulators, we will not be submitting navitoclax for approval in myelofibrosis, and we will wind down the TRANSFORM-2 study, in the relapsed refractory setting. In other areas of [EMAC], we remain on track for several regulatory and clinical milestones this year, including regulatory approvals in the U.S. and Europe for a Epinkly in relapsed/refractory follicular lymphoma. The Phase III readout from the Venclexta VERONA trial, in treatment-naive, higher-risk MDS and initiation of a Phase III monotherapy study for ABBV-383 in third-line multiple myeloma. We remain very 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 and with the potential for outpatient administration, limited or no step-up dosing and monthly administration from the beginning of treatment.
Moving to other areas of our pipeline. In aesthetics, we remain on track to submit our regulatory application for BoNT/E in the second half of the year. Our rapid onset short-acting toxin as a highly differentiated clinical profile compared to currently available neurotoxins. BoNT/E is designed for patients that are considering using facial toxins for the first time or for a special event and will allow them to experience results over a very short period of time. This novel toxin will complement our existing business as patients would naturally transition to BOTOX following experience with this trial toxin. And in neuroscience, we continue to make good progress with 951, where we have received regulatory approvals in 33 countries thus far and anticipate an approval decision in the U.S. in the second quarter.
As Rob mentioned, we remain on track to close the Cerevel transaction in the middle of this year. Cerevel recently announced positive top line results from their Phase III TEMPO-3 trial evaluating Tavapadon as adjunctive therapy to levodopa in patients with Parkinson's disease. In study, Tavapadon met the primary endpoint, demonstrating a 1.1 hour increase in total on time without troublesome dyskinesia compared to patients treated with levodopa and placebo. Tavapadon also met the key secondary endpoint in the trial, providing a significant reduction in off time compared to levodopa and placebo. Two additional Phase III studies for Tavapadon in Parkinson's disease are expected to read out later this year. The emracladine pivotal studies in schizophrenia remain on track to begin reading out later this year as well.
We look forward to providing updates on these programs once the transaction has closed. With that, I'll turn the call over to Scott.
Scott Reents : Thank you, Roopal. Starting with our first quarter results. We reported adjusted earnings per share of $2.31, which is $0.11 above our guidance midpoint. These results include an $0.08 unfavorable impact from acquired IP R&D expense. Total net revenues were $12.3 billion, $400 million ahead of our guidance and reflecting a return to growth of 1.6% on an operational basis, excluding a 0.9% unfavorable impact from foreign exchange. Importantly, these results reflect more than 15% sales growth from our ex-Humira growth platform. The adjusted operating margin ratio was 42.2% of sales. This includes adjusted gross margin of 82.9%, adjusted R&D expense of 14.7%, acquired IP R&D expense of 1.3% and adjusted SG&A expense of 24.6%.
Adjusted net interest expense was $429 million. The adjusted tax rate was 14.8%. Turning to our financial outlook. We are raising our full year adjusted earnings per share guidance to between $11.13 and $11.33. This increase of $0.16 at the midpoint includes $0.26 of operating overperformance partially offset by $0.10 of higher dilution due to the earlier close of ImmunoGen. As previously communicated, this earnings per share guidance includes $0.42 of dilution related to the recently closed acquisition of ImmunoGen and the pending acquisition of Cerevel. Please also note that this guidance does not include an estimate for acquired IP R&D expense that may be incurred beyond the first quarter. We now expect total net revenues of approximately $55 billion, an increase of $800 million.
At current rates, we expect foreign exchange to have a 0.9% unfavorable impact on full year sales growth. This revenue forecast includes the following updated assumptions with the entire sales increase driven by our ex-Humira growth platform. We now expect Skyrizi global revenue of $10.7 billion, an increase of $200 million due to strong momentum across all approved indications. Rinvoq total sales of $5.6 billion, an increase of $100 million, reflecting robust uptake in IBD. Imbruvica total revenue of $3.1 billion, an increase of $200 million, reflecting lower erosion and Elahere total sales to AbbVie of $450 million, an increase of roughly $200 million, reflecting a partial year of revenue following the February close of the ImmunoGen acquisition.
Moving to the P&L for 2024. We continue to forecast adjusted gross margin of approximately 84% of sales, adjusted R&D investment of 14%, adjusted SG&A expense of 23.5% and an adjusted operating margin ratio of roughly 46.5%. We now expect adjusted net interest expense of $2.2 billion, which includes the partial year cost in 2024 to finance the ImmunoGen and Caravel transactions. Turning to the second quarter, we anticipate net revenues of approximately $14 billion, which includes U.S. Humira erosion of approximately 32%, reflecting a step-up in volume erosion and with the recent CVS formulary change, partially offset by a onetime price benefit also associated with that change. At current rates, we expect foreign exchange to have a 1.3% unfavorable impact on sales growth.
We are forecasting adjusted operating margin ratio of approximately 49.5% of sales, and we are also modeling a non-GAAP tax rate of 16.4%. We expect adjusted earnings per share between $3.05 and $3.09. This guidance does not include acquired IP R&D expense that may be incurred in the quarter. In closing, I'm very pleased with the excellent start to the year. We are demonstrating strong momentum across the portfolio and our financial outlook remains very strong. 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 two. Operator, first question, please.
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