AbbVie Inc. (ABBV) Management Presents at 37th Annual J.P. Morgan Healthcare Brokers Conference (Transcript)

About: AbbVie Inc. (ABBV)
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AbbVie Inc. (NYSE:ABBV) 37th Annual J.P. Morgan Healthcare Conference January 9, 2019 11:30 AM ET

Company Participants

Mike Severino - Vice Chairman and President

Conference Call Participants

Chris Schott - JPMorgan


Chris Schott

Good morning, everybody. I'm Chris Schott from JPMorgan. And it's my pleasure to be introducing AbbVie this morning. From the company, we have recently promoted Vice Chairman and President, Mike Severino. So we welcome Mike to the stage for what I'm sure will be a very interesting presentation. We'll be doing a breakout session afterwards across the hall.

So with that, I turn it over to Mike.

Mike Severino

Great. So thank you, Chris, and good morning, everyone. It's a pleasure to be here today. Before I begin, please take a moment to review our forward-looking statement.

Since becoming a public company in 2013, AbbVie's mission has been to create an innovation-driven, patient-focused biopharmaceutical company capable of achieving sustainable, top-tier performance through outstanding execution and a consistent stream of innovative new medicines.

We have made tremendous progress advancing our strategic priorities in support of this mission. The combination of our innovation and commercial execution has resulted in a portfolio of differentiated medicines that benefit millions of patients across a number of large and growing therapeutic areas.

In addition, our track record of consistent and industry-leading financial performance has allowed us to not only provide an attractive return to shareholders but also reinvest in our business to build what we believe is one of the best pipelines in the industry.

The strategic investments we've made in R&D have resulted in the development of several new therapies, which have demonstrated impressive and differentiated clinical performance. As a result, AbbVie continues to represent a unique investment opportunity. We're now entering an exciting new phase of our evolution, the phase where we expect to demonstrate the strength of both our pipeline and our commercial execution, with the launch of a number of potentially transformational new medicines.

Collectively, we believe these new medicines will significantly drive AbbVie's continued strong performance over the long term and allow us to effectively manage the planned impact of direct biosimilar competition.

We have established a strong foundation for our business. And we have a high degree of confidence in our ability to successfully execute on our long-term strategy and achieve our objective of delivering sustainable, industry-leading performance.

Looking back, AbbVie has consistently delivered top-tier performance, having met or exceeded our key financial goals since becoming a public company. Since 2013, we have increased our revenue by more than 50%, grown our R&D by more than $2 billion and achieved double-digit adjusted earnings growth on average per year. Relative to our peers, AbbVie has performed first or second in both revenue growth and EPS growth in every year since our launch.

While we've demonstrated very strong historical performance, we are also committed to delivering top-tier results in the future. As we outlined on our third quarter earnings call, we expect to deliver double-digit earnings growth in 2019, positioning AbbVie to be among the industry leaders for bottom line growth once again this year.

In 2015, we outlined our company's long-term objectives, including top-tier revenue growth and double-digit EPS growth on average through 2020, and we remain focused on delivering on those commitments.

Our record of strong execution has resulted in exceptional shareholder value. Since becoming an independent company, we've led our peer group in total shareholder returns, delivering total returns of 224%, meaningfully outperforming both the Dow Jones Industrial Average and the S&P 500 Index over this time period.

Since 2013, we have returned a significant amount of cash to shareholders in the form of dividends and through our share repurchase program. Paying a strong dividend remains an important part of our investment identity as we have grown our quarterly dividend nearly 170% since inception. And going forward, we expect to continue to generate significant cash flows.

In addition to funding our pipeline, our strong cash flow generation will continue to support the strong return of capital to shareholders through a growing dividend and share repurchases, including our recently announced $5 billion authorization.

This is an exciting time for AbbVie, and our outlook remains strong. Just about every aspect of our business is performing at or above our expectations. The combination of our on-market products, outstanding commercial execution and promising new medicines make us well positioned for sustained growth, including double-digit earnings growth once again in 2019, as I previously mentioned.

And importantly, we expect to deliver this level of growth despite a number of factors, including direct biosimilar competition impacting our more than $6 billion international HUMIRA business; a difficult comparison year, particularly in light of the rapid ramp of our HCV business in 2018; and the significant investment we will be making in 2019 to support new product launches, which will ultimately support AbbVie's growth into the next decade.

Before discussing our key therapeutic areas of focus and pipeline in more detail, I want to address the key question most investors have about AbbVie, the loss of exclusivity for HUMIRA and our ability to manage its impact and drive growth through this period.

We have long been diligently planning for this event, and we are prepared. We are now facing direct biosimilar competition across the majority of international markets. And as I just outlined, we expect to drive strong growth despite its impact in 2019. Based on the numerous settlement agreements we have in place, we do not anticipate direct biosimilar competition in the U.S. until 2023.

As we enter this important time for our company, you will see the next stage of our strategy play out. We have built a tremendous growth platform in hem/onc with IMBRUVICA and VENCLEXTA, the leading mechanisms in this area. Combined, they will drive significant growth during this biosimilar period.

Additionally, we have two immunology assets in upadacitinib and risankizumab that have the potential to provide improved outcomes for patients across a number of indications and ultimately replace HUMIRA as the leading immunology assets.

As I just mentioned, our hem/onc franchise will continue to be a major growth driver for AbbVie. This portfolio is now annualizing above $4 billion and growing at strong double-digit rates.

As we continue to generate data that validate the utility of both IMBRUVICA and VENCLEXTA across a wide range of patient populations and cancer types, we expect this franchise will contribute more than $9 billion in incremental revenue by 2025.

Additionally, upadacitinib and risankizumab have both been submitted for regulatory review with commercialization in their initial indications coming later this year. Based on the comprehensive data sets that we have generated, we believe these assets will be best-in-category medicines with potential across more than a dozen indications. Collectively, we expect these two therapies will contribute more than $10 billion in incremental risk adjusted sales by 2025.

Elagolix is yet another compelling asset that represents a multibillion dollar growth opportunity. The recent launch of ORILISSA in endometriosis is tracking right in line with our assumptions. And we expect to submit our regulatory application for uterine fibroids, another attractive indication in women's health, later this year.

In addition, we believe our stable base business, which includes a number of leading products, such as MAVYRET, Creon, Lupron and Synthroid, along with our emerging neuroscience pipeline, will continue to provide meaningful revenues through the mid-2020s and beyond.

All told, we expect revenue from our non-HUMIRA growth platform, including our durable base business and innovative new products, will grow to more than $35 billion in 2025.

So now let me discuss each of our key therapeutic areas of focus in a bit more detail. AbbVie holds a strong leadership position in the immunology market, stemming from more than a decade of experience developing 15 indications for HUMIRA and actively treating more than 1 million patients worldwide.

And while HUMIRA has played an integral role in defining the standard of care for multiple disease states, we've continued to push innovation within our immunology pipeline, developing new medicines that raise the efficacy bar and have the potential to further improve patient care.

With the upcoming commercialization of risankizumab and upadacitinib, our immunology franchise will evolve from a single product to a portfolio of therapies that has the potential to restate our current leadership position and move into attractive new areas, such as atopic dermatitis.

Our selective JAK1 inhibitor, upadacitinib, has been submitted for regulatory review in its lead indication, rheumatoid arthritis. We have evaluated upadacitinib across a comprehensive set of studies in patients with moderate to severe RA. This includes a head-to-head study, which demonstrated superiority against HUMIRA, the current gold standard, and additional studies conducted in a wide range of clinical settings, including patients who are naïve to methotrexate therapy at one end of the spectrum and very difficult to treat patients who have failed one or more biologics at the other end. Based on the data generated in our program, we believe upadacitinib will offer meaningful advantages over products on the market today or in development.

In addition to RA, we continue to make great progress with upadacitinib in several other immune-mediated conditions, including psoriatic arthritis, Crohn's disease, ulcerative colitis, atopic dermatitis and giant cell arteritis. We've already generated very promising mid-stage data in a number of these indications.

Phase III studies are underway for the majority of these follow-on indications, and we look forward to providing updates on these programs as the data mature. All told, we believe upadacitinib has the potential to launch in at least 7 indications and will be a significant growth driver for AbbVie.

Like upadacitinib, our anti-IL-23 monoclonal antibody, risankizumab, has the potential to become a transformative therapy in a number of immune-mediated diseases. The regulatory applications in psoriasis are currently under review with approval decisions expected in the first half of this year.

Across each of the four Phase III studies in the pivotal program, including results from a head-to-head study versus HUMIRA and two head-to-head studies against STELARA, risankizumab consistently showed very high and durable rates of skin clearance. Based on these results, we believe risankizumab has the potential to significantly improve upon current treatment options for both bio-naïve and TNF-inadequate responder patients with moderate to severe psoriasis while offering the convenience of quarterly dosing.

In addition to psoriasis, we are evaluating risankizumab in late-stage trials in psoriatic arthritis, Crohn's disease and ulcerative colitis. We remain extremely excited about this asset's potential and believe that it will be a significant driver of growth for AbbVie.

We also have several early stage immunology programs that have the potential to provide transformational efficacy and redefine the standard of care across immune-mediated diseases, including our novel TNF steroid conjugate and JAK-BTK programs in rheumatology, our CD40 program in inflammatory bowel diseases and our RORgamma t and TYK2 programs in dermatology. We've begun proof-of-concept studies with several of these assets and will share clinical data as the programs mature.

Moving now to oncology. We've invested significantly over the past several years to build oncology as a major growth platform for the company. And today, our hematology/oncology portfolio is driving annualized revenue in excess of $4 billion and growing at a robust rate.

With IMBRUVICA and VENCLEXTA, AbbVie has a unique set of assets that are capable of transforming treatment across a wide range of blood cancers. We're targeting CLL, AML, multiple myeloma and non-Hodgkin's lymphoma as well as other conditions. These two therapies, alone and in combination with each other and with other medicines, are demonstrating extremely strong activity in a broad range of cancers, giving us the ability to strengthen our leadership position in the large and growing hematologic/oncology market.

Our goal is to transform the therapeutic approach, driving deeper and more durable long-term responses, ultimately resulting in better outcomes for patients with blood cancer.

A growing body of data has validated the utility of both of these therapies across a wide range of patient populations and cancer types. We anticipate that this evidence will support label expansion and drive increasing market penetration in the coming years.

IMBRUVICA has already changed the treatment paradigm in second line or greater CLL and is gaining momentum in the frontline setting. We recently reported data from three Phase III studies, which demonstrated that IMBRUVICA, alone or in combination, significantly prolonged progression-free survival compared to therapies such as FCR, BR and GAZYVA plus chlorambucil in previously untreated CLL patients.

The evidence from these studies demonstrates IMBRUVICA's compelling clinical benefit in frontline CLL populations beyond those addressed by RESONATE-2 and will provide an opportunity to treat significantly more patients in the frontline setting.

We continue to expect peak risk-adjusted IMBRUVICA sales of greater than $7 billion to AbbVie with the majority of growth driven by further penetration into frontline CLL.

We've also made substantial progress with VENCLEXTA across a wide range of hematologic malignancies. Last year, we achieved two important milestones: approval in the broad relapsed/refractory CLL setting and conditional approval in frontline AML.

This year, we expect additional readouts that will further support VENCLEXTA as a potential new treatment option in areas such as relapsed/refractory multiple myeloma. Each of these indications represents a significant opportunity and will contribute to the growth of VENCLEXTA over our long-range plan.

Given our portfolio, we're well positioned to drive the continued evolution of the treatment landscape for blood cancers, establishing BTK and BCL-2 inhibitors as foundational therapies in a wide range of hematologic malignancies.

Another strategic priority for AbbVie is to establish a strong foundation in solid tumors. We've made significant investments, both internally and externally, to identify and advance promising therapies to address the significant unmet need that continues to exist in this area.

We've prioritized areas of biology that we believe will play an integral role in the anti-tumor immune response, the tumor-immune environment or in tumor growth and survival, areas where we believe we can target with new therapies to have broader applicability and drive greater efficacy than existing agents.

We've made tremendous progress over the past several years. We currently have more than 20 solid tumor programs in late discovery and clinical development. And we look forward to sharing the data from these programs as they mature.

As clearly evidenced by our on-market presence, our late-stage pipeline and our early discovery and development work, we have a major strategic commitment to oncology. Our expectation is that oncology will be a major growth driver for AbbVie over the next 10 years and beyond, further diversifying our business.

In addition to AbbVie's efforts in immunology and oncology, our strategy includes investment and development activities in other attractive high-growth markets, such as neuroscience, virology, women's health and other targeted investments.

In neuroscience, we are investing internally and externally to develop disease-modifying therapies to treat neurodegenerative conditions, such as Alzheimer's disease, Parkinson's disease and multiple sclerosis. We're exploring innovative approaches intended to block the spread and promote the clearance of misfolded proteins, to modify the neuroinflammatory response and to promote neuronal survival and regeneration.

These approaches have the potential to translate into valuable therapeutic options. Our goal is to advance our neuroscience programs to begin contributing to top line growth by the middle of the next decade.

In the area of virology, our emphasis is on addressing the remaining unmet medical need through MAVYRET. Taking into account global patient volumes, we expect the HCV market will be an attractive opportunity well into the 2020s and a source of durable cash flow generation for AbbVie.

And in the area of women's health, elagolix is yet another compelling asset that represents a multibillion-dollar growth opportunity. We recently launched ORILISSA in endometriosis, and we expect to submit our regulatory applications for uterine fibroids, an attractive follow-on indication in women's health, later on this year.

In addition to continuing to invest in internal R&D efforts, we'll also use our strong balance sheet to continue to augment our pipeline through strategic licensing, acquisition and partnering activity. We've always viewed partnering as an important component of our strategy.

While we are committed to driving innovation within AbbVie, we also recognize we must access external innovation as well, and we are doing so through a wide range of partnerships.

So in summary, we are excited about AbbVie's future. As I just outlined, we have a portfolio of hem/onc and immunology assets as well as select derisked assets in other therapeutic areas that have the potential to deliver revenue that is well in excess of the peak revenue for HUMIRA in the time frame when we expect direct biosimilar competition in the U.S. Thus, the strength of our current portfolio, combined with our compelling pipeline of new medicines, represents significant sustainable growth potential.

We've built a strong foundation as an innovative, patient-focused, high-performing biopharma company, and we are confident in our ability to achieve our long-term strategic vision. We also offer an attractive return of capital, balanced between supporting our growth and returning capital to shareholders. And we have a strong track record of execution, both financially and strategically. We are committed to deliver on our vision for AbbVie and are well positioned to continue to drive industry-leading growth, robust cash flows and strong shareholder returns.

And with that, I believe we'll make our way over to the breakout room for Q&A.

Question-and-Answer Session

End of Q&A