AbbVie Inc. (NYSE:ABBV) Cowen 41st Annual Health Care Conference March 3, 2021 11:40 AM ET
Richard Gonzalez - Chairman and CEO
Jeffrey Stewart - EVP, Commercial Operations
Michael Severino - VC and President
Robert Michael - EVP and CFO
Conference Call Participants
Steve Scala - Cowen & Company
Good afternoon and welcome to the AbbVie portion of Cowen's 41st Annual Health Care Conference. Representing the company is Mike Severino, who's Vice Chairman and President; Rob Michael, who's Executive Vice President and Chief Financial Officer; and Jeff Stewart, who is Executive Vice President of Commercial Operations.
AbbVie has been a favorite of Cowen for several years, and it's quite simple. We don't think the company's growth prospects, new product portfolio and total return opportunity are reflected in the stock, and we feel this is an opportunity for, you, investors who are participating in this session.
So, with that, there's lots of ground to cover in the next 30 minutes. Let's jump right in. Let's start with Humira. Perhaps you can just tell us what level of detailing is Humira receiving today, and is there any active efforts to switch patients from Humira to RINVOQ or SKYRIZI in the applicable indications?
Well, thanks, Steve. It's a pleasure to be here. I'll start with the answer to that question and Jeff and Rob may want to add in. So Humira means a very important product for us and it's a mainstay of therapy across a wide range of indications.
We've made great progress with our immunology portfolio overall, obviously RINVOQ and SKYRIZI are performing very well in their lead indications. There are on market indications of RA and psoriasis respectively, and are also progressing very rapidly and generating very strong data across the new areas in which we register them both in the rheumatology space, in the dermatology space and in the IBD segments, the gastro segment. So overall, our portfolio is performing very strongly.
If you look at the promotion effort, as I said, Humira remains an important product and is a mainstay across a wide range of disease states. And there is still considerable promotional effort in areas where RINVOQ and SKYRIZI are not yet approved. What you see is as the new indications for RINVOQ and SKYRIZI come online, we shift attention to those molecules, and we feel that that's appropriate. When one looks at the data that we've generated, these molecules are generally superior to Humira and to the other alternatives in the indications that we've studied. And we feel like the shift in promotional focus reflects that overall benefit that will be delivered to the patients.
With respect to switching, we don't try to actively switch well-controlled patients because we don't believe that that would be medically appropriate. But each of these agents has raised the bar on standard of care. They provide superior outcomes, greater depth of response, better long-term control in many agents. And so we think with that new standard being set, it will over time accelerate, move to what we view as a new standard of care.
So we would never actively switch well-controlled patients, but we do think there'll be a natural migration to these agents based on the benefit/risk profile and the value that they deliver to patients.
Jeff, you may want to comment more on the detail.
Yes. I think Mike, just to add to your comments, and maybe I'll use an example. When we looked at the SKYRIZI data relative to the HUMIRA data or even other standards, we knew that our primary representation would be for SKYRIZI. It just was a superior product, and we had the direct head-to-head data. So how we executed that was that in the psoriasis segment, SKYRIZI is the primary detail. And in fact, we did no longer highlighted Humira. So that was the decision we made based on the profile.
Now it's important to know that the dermatologists can still prescribe Humira, and it was one of the standards over time. So now when we look at our in-play share, we can see that we have SKYRIZI at 33% or 34%. Humira is still in the second, third, fourth position, far behind in the teens. But overall, almost 45% or 46% of all in-play patients are getting an AbbVie product. But SKYRIZI is the one that we authentically represent as the choice for the psoriasis patients.
I'll give another comment on how this will play out practically with some color over time. In the dermatology space, again primary detailing is on SKYRIZI for the reasons I highlighted. But we still actually promote Humira for another very important indication, and that's HS, which is a billion-dollar segment right now in dermatology, and we are the only approved indication there.
So there's still effort around that orphan drug. And we will also then build dedicated sales teams, and we are doing that actively now for atopic dermatitis for RINVOQ. And so as we cycle through those big dermatology prescribers, they're getting a SKYRIZI message. They're getting a Humira HS message and they will get a RINVOQ message as well.
So that's how we've gone at the market. I think the principles that Mike Severino highlighted, which is, as we see efficacy that is raising the standard of care, we basically execute that commercially in the field with our customers.
And Steve, you'll see that come through in investment. If you go back to 2019, when we launched both products and their lead indications, we fully funded the launch of both RINVOQ and SKYRIZI for those lead indications, but you didn't see us increase the overall company SG&A. So you saw that play out as we've shifted the investment from Humira to RINVOQ and SKYRIZI, but still obviously fully funding those launches, but doing it in a way where we can maintain the overall level of investment for the company.
Got it. Got it. Let's peer ahead to 2023. And we're well aware that a number of biosimilars for Humira will show up on the market and some may be substitutable, some not. Some might be citrate-free, some not. But what is your intelligence, market intelligence telling you about collectively, what is the total number of units those seven or eight players could satisfy? Is it 100% of the market? Is it 75%? Is it 50%? Do you have any intelligence relative to that point?
Sure. I mean so I think as we look at it, and we've talked about our strategy with Humira, if you look at just the strategy employed in the international markets and also the way we intend to approach the U.S., it's really around price, right? So I would say that to the extent as long as it's profitable, our intent is to maintain the volume.
I can't speak to the capacity of the other biosimilar competitors, but what I can tell you is certainly factor that into our LRP. I mean the other thing to keep in mind for us as a company in terms of biologics capacity, obviously, SKYRIZI plays a role in that as well. So to the extent that there's any impact on manufacturing capacity from Humira, we have SKYRIZI. And then we've had a long history to the extent we have excess capacity in our biologics manufacturing. We have sold that capacity externally through our contract manufacturing organization. So from an AbbVie perspective, we're not concerned about the impact on overall manufacturing capacity.
Okay. One last question on Humira, and then we'll move to other topics, and that is the China opportunity. How big could this be? Is this - would you call a relatively modest opportunity? Or could it be substantially more than that?
I think, Steve, it's relatively modest. I'll give you some color on this. It certainly has improved recently. But in the big scheme of things, it's still relatively modest. So here's how we see it. So in China, there's no longer IP on Humira, and that's - it's gone. So we're starting to see biosimilars come in.
Importantly, earlier in the year, we did receive reimbursement on the big national drug list. And we saw our sales significantly accelerate even through COVID. To give you some flavor, we were operating in the private market for China, which was about a $20 million opportunity. And we've seen the sales accelerate to - we forecast above $100 million. So in that sense, it's a significant acceleration.
We also see at the very same time that Humira achieved the national drug reimbursement. And it was only for about 60% of the indications. We did not receive it for the big gastro indications. Several other local biosimilar players have also jumped in. So it is encouraging that we are going to be able to access the bigger public market in China. But we believe that the competition will be quite fierce as basically it rolls out through the different regions. So in that sense, I would say it's a relatively modest opportunity as we've lost the exclusivity there.
On another note, though, we are encouraged, and Mike can chime in on this as well. We are encouraged that what we're seeing on the innovative pipeline in China. We're seeing them move much faster for approvals, which is very encouraging. For example, we've recently received the approval for Venclexta for acute leukemia. And that's coming even faster than Japan and in line with what we're seeing in some of the big European markets. And that's a substantial leukemia in the Chinese market. And we think that bodes very, very well as we expand our specialty business in China.
I would also say that the affiliate and internally, we're very excited about RINVOQ, particularly around atopic dermatitis, which is over-expressed in China. The price points appear to be quite good. And it's a large population. So again, those will start initially in the private market, but we anticipate some nice dynamics there with the pipeline that we've been discussing.
And I would just add that obviously we have anaesthetics business that's growing very nicely in China. It's the largest international market for aesthetics. And we've put some additional investments to expand into the mid-tier city. So we're very excited about the aesthetics opportunity in China. It's about today between $300 million to $400 million business in aesthetics with significant growth potential.
Okay, great. So let's move to some of the newer products and talk more globally. So let's start with SKYRIZI. When your reps are out in the field today marketing SKYRIZI, what is their principal competitor? And what is that principal competitors detail against SKYRIZI?
Yes. I'll take that one. So SKYRIZI has been a stunning achievement, I think both scientifically and commercially. So again as we've highlighted before, we're collecting over a third of all dynamic patient starts. And we're actually seeing the dynamism shift further and further into frontline. So it's significant. It's more than double any individual competitor in that dynamic space. So SKYRIZI is doing very, very well. And it's the fastest launch across the global territories in terms of uptake in psoriasis, even during some COVID times in our international market. So it's doing quite well.
What we highlight for the physician obviously is the incredible skin clearance, but not only that the durability of the clearance with very, very nice dosing, right? After the loading doses, it's every quarter. So this idea of durable, simple and safe is the - really the global SKYRIZI marketing message and has led to this fantastic performance.
The key competitors differ by territory, but specifically in many territories like the U.S. or Germany, we see that Cosentyx IL17 is a pretty big player, although we have again doubled the in-play share. In some cases, we see in Europe, it's the old IL 1223 Stelara.
I think what's nice is that we're able to handle those competitors quite well because we have three head-to-head trials. We have a head-to-head trial against the old standard Humira. We have a head-to-head trial against Stelara. And we also have a head-to-head trial against Cosentyx, which as I mentioned, some of the bigger territories is one of the leaders that we have the market share battle with. And we have direct superiority versus all three.
What do they say in some cases? Well, they - typically, I would say, the IL-17s often play off the fact that right now SKYRIZI does not have the psoriatic arthritis indication. So they have a skin and joint in actually what's a relatively small segment in dermatology. But that's how the competition plays out. And I would just reiterate, we feel that we're in a very solid competitive position here with SKYRIZI.
And one product - competitive product that Wall Street pays a lot of attention to is the Bristol TYK 2 product that - for which we're getting data apparently at a dermatology conference next month. So what is your market intelligence telling you about the profile of that product?
When we look at the Phase IIb data for TYK2, because those are the data that are available to review in detail, we see an efficacy profile that we would describe as Humira-like. So it comes in the range of traditional biologics, if you will, but falls below that of the high efficacy agents, and certainly below a high-efficacy agent like SKYRIZI.
And so when we look at how orals have performed, I think there is a clear place for orals for patients who are in that earlier phase of the treatment paradigm, may be more in the mild to moderate spectrum, or not yet being considered for a systemic therapy. And they've tended to be market expanding. So they haven't directly competed with SKYRIZI, and in fact they've been market expanding. That was clearly the impact that Otezla had.
Now the challenge with Otezla is that the efficacy is substantially lower than what I just described for the other agents, lower than Humira, the biologics and lower than what's been reported for TYK2. And so many patients came off of that therapy.
And so we would see TYK2 playing in a similar space. We think it will be market expanding and bringing more patients into systemic therapy. We think it will principally compete with Otezla and other agents that have efficacy in that range. We don't see it as a competitor to the high-efficacy agents. And we don't see it impeding our ability to continue to drive SKYRIZI growth, because we're really talking about a very different level of response, a very different depth of response and durability of response with that agent.
Okay. Let's move to a similar group of questions for RINVOQ. So when the reps are out in the field, what is their primary competitor that they are up against?
Yes. Let me give some color on that one as well. So again, depending on the territory, our core claims and promotional approach for RINVOQ in RA is the level of efficacy on the joints and also remission on higher levels of measurement. So for example instead of traditionally over the years an ACR 20 score, the reps highlight the ACR 50, the ACR 70. And it's quite striking. They also are able to highlight the data in multiple failures that show the just incredible strength of the molecule itself. And then we have something very important, which was our select COMPARE study, which was a very, very robust head-to-head trial directly against Humira, which our same representatives have been talking about for years. And so we're able to uniquely - and Humira is the leading competitor in RA, our own product. So we're able to frame how we design the trials, how we're able to basically suggest that, look, there's now been a new standard, and this is the first time there's really been a high-efficacy product in rheumatoid arthritis.
In addition to that, we also see, particularly in the U.S., a significant competitor with Orencia or abatacept. And we've been able to also have a head-to-head trial against that agent. And so it's the first agent that's had two direct comparators with superiority. So this is a very, very strong message that's based on the science. And our teams are very, very stable and strong in front of those rheumatologists.
So we often then besides the Humira, we do are often asked for comparisons versus Xeljanz or other JAK inhibitors. We haven't had direct comparisons there. But when you look at the overall efficacy that we've built up, we can see in our data, our research, our market research that rheumatologists are basically reporting that RINVOQ is a different animal in this case based on the data set. And I think Steve, the performance has backed that up. If we look at the launch trajectory across all of the major markets, we're seeing 2x to 3x the speed of ramp that the other JAK inhibitors have been able to attain. And so I think we've established ourselves very well against the major competitors in rheumatoid arthritis so far.
Let's move to one of the exciting drugs that's in the pipeline, and that is VRAYLAR. I assume that the two trials, MDD trials that we're waiting for, were designed prior to the acquisition of Allergan. Are there any features of those studies that AbbVie would have designed differently had you have the opportunity?
Well, you're correct that both of those studies were underway at the time of the acquisition. So they were designed by the Allergan group. And what I would say is the Allergan Group really dates back through the forest days and has a tremendous amount of experience in this area in particular. And after the acquisition, we did a deep dive on the prior data, prior studies not only for VRAYLAR but for other molecules that have been in this space, to understand features of study design that might impact the ability to reproduce, to have a positive study if one had the right agent.
And we felt that those studies were very robustly designed, and that there was nothing that we would change. We had an opportunity to look in aggregate data in a blinded fashion at the patient characteristics, the performance of the inclusion/exclusion criteria, and also had a very favorable assessment that the study was designed well and was performing as expected.
So we think they give VRAYLAR a very good opportunity to have at least one additional positive study, which is what would be required to gain the indication since we already have one positive pivotal study in hand.
We think this is a very attractive potential upside. It's not something we baked into our deal model or factored into the guidance that we've given around VRAYLAR, because of challenges with reproducibility in this area. But we do think they're well-designed studies. We think VRAYLAR has the right pharmacology to have an impact here as very strong performance in bipolar depression, a different disease. But the brightening effect may be the link between performance there and ultimately the performance in MDD. So we look forward to those readouts, which will come in the back half of this year.
Okay. Great. Maybe we can move to migraine, another important area for AbbVie. So UBRELVY is obviously marketed for treatment, and Atogepant is under review for prevention. Can you talk about how you're commercializing these two agents, particularly given the fact that competitor drugs have both indications? How much of a limitation is that for you, given what the competition can offer?
Well, we don't view it as a limitation. We view it as a strength. If you look at the data that we've generated, both with UBRELVY and with Atogepant, they're very strong. And particularly in the prevention of episodic migraine, the Atogepant data exceeded our expectations based on Phase IIb, was very strong with respect to reduction in migraine days, had a very favorable benefit/risk profile, allows the opportunity for dose selection and ability to navigate drug-drug interactions and other challenges that often appear in this patient population. And we feel like the ability to optimize dose selection, optimize the regimen for each of these two indications is actually a strength, it's not a limitation.
And we feel very good about the profile that we've observed. Obviously, UBRELVY is performing well in the marketplace, and we think there's a very strong need for new mechanisms to treat migraines when they do occur. And we also think that there's a strong preference amongst many patients for an oral in the prevention space. And so we think that will favor Atogepant.
And the last thing that I would add is we're the only company that will have a broad spectrum of potential offerings. With BOTOX for chronic migraine, Atogepant initially for the prevention of episodic migraine, but with a chronic migraine program well underway; and UBRELVY for the acute treatment, and we think that's a real strength in terms of our offering to patients and physicians.
Great. Maybe we can move to Botox Cosmetic, and the company talked on the fourth quarter call about the V-shaped recovery. Can you just talk about why you think there was this V-shaped recovery? It kind of maybe defies logic a bit, but it is obviously reality. So why do you think it happened? And how sustainable is it?
Yes. Thanks, Steve. So look, it exceeded our expectations. We've been very pleased with the strength of recovery and aesthetics. And I'd point to a few things. One, the consumer base here is very motivated. We saw a lot of pent-up demand, and that pent-up demand was consumed very rapidly in the summer of last year, given how motivated consumer base is. At the same time, we have a very motivated set of providers. Many of these are small businesses who obviously count on this to survive. And they quickly adapted to the safety protocols that were necessary to reopen. And so we saw a very, I'd say, very effective reopening at the provider level. And I give our aesthetics team a lot of credit. They have very strong relationships in the field. They support the providers through that process.
And then I'd say the third factor is really our ability to understand how promotionally sensitive this market is. And I'd say as a company, AbbVie, we've been very effective at understanding the ability to drive that type of investment and the necessary ROI. And as we've put more investment behind the business, you've seen us now both for Botox Cosmetic and Juvederm run DTC concurrently. We've seen a very nice return, which is ultimately why we took up our long-term guidance. If you recall at the time of the deal, we talked about mid-single digit long-term growth for aesthetics. Now we're talking about high single-digit growth for that business. And it's really driven by the ability to drive that investment and get a solid return. So I'd say those are all the factors I would point to in terms of the recovery, ultimately our long-term confidence in that business.
Okay. Maybe we can move to another big product for AbbVie, but growth is a little bit more sluggish, and that's Maviret. So what is going on in the hep C market? And is it always going to be kind of flattish? Or do you see inflections one way or the other?
Yes. I mean Maviret, Steve, has been one of the brands that has been hit by the COVID dynamic. And so early on in COVID, we saw a 40% or 50% decrease in new patient starts. And some of this, depending on the territory was because you've had physicians that were pulled into the hospital systems to deal with COVID. Or it just wasn't as urgent over this time period.
Now across the globe, we started to see the new patient start to recover, but it's still below sort of the run rate that we saw prior to COVID. However, over that time period, and it's important that AbbVie has consistently been gaining market share, so this is important as we try to consolidate that share leadership, and we are the global share leader in terms of those new patient starts.
So we're still in a COVID dynamic, but if I look into the crystal ball, we would anticipate that those people have untreated liver disease, and they are going to start to cycle back into the big gastro offices, the hep offices and the ID offices in the second part of the year. So we are anticipating a recovery of that market where we would participate at a higher share level.
So that's how we see things shaping up with Maviret. It remains a very important part of our story, and we're clearly the global leader there.
Okay. We only have a few more minutes. Let's try to fit in a few more questions. So Restasis, what is your competitive intelligence telling you about the status of generics?
Well, that's been a challenging area to predict. I mean I think what we can clearly say is that generics have not come forward in the time frame that they would have been expected. So there is something that is being asked of the generics providers that they've not yet been able to produce. But we can't tell you exactly what it is. There's no public information, and we don't have any competitive intelligence that would tell us specifically what it is. We're monitoring the situation closely.
What we've assumed for our model is that there won't be generic competition for the first half of this year, and that's what we built in. But we're going to have to continue to monitor and see how this situation develops.
Okay. AbbVie has an exciting product in development, ABBV 154 Prior to that, it was the 3373, the difference being the linker technology. What exactly about the linker has been changed in 154?
So those are related programs. There are TNF steroid conjugates in the immune space, and they represent a new class of agents. 3373 was the initial molecule, and that was the molecule that we conducted our proof-of-concept studies with and read those out in the first half of last year; and based on those results, advanced the platform.
We have moved the 154 into the lead based on linker technology, as you described. And what I would say is the difference is relatively minor. The performance of the linker with respect to clinical performance, PK performance, is the same, and there are no expected differences. The real difference is have to do with the ability to formulate at high concentration, which will be important as the product moves forward and ease of manufacturability. So you should think of the clinical data as transferable. And that's the way we view it, with the real advantages being in the areas that I described, high formulation concentrations that are necessary for effective delivery in the marketplace and ease of manufacturing.
Okay, maybe two more questions. AbbVie has always had a pipeline footprint, at least in CF. What - can you give us an update on what is going on now with your CF products in development?
Certainly. If you look at our CF candidates, we have had for a number of years, strong potentiator choices as well as a C1 that we feel is best-in-class. And what has been missing from a triple combination, and I think the field broadly accepts and we certainly have the point of view that a triple combination is what is needed, was a C2 corrector, so mechanistically distinct corrector. That's why we restructured the Galapagos partnership to take direct control over that chemistry effort. And over the last 18 months, two years, we put a very focused, very dedicated chemistry effort, to come up with C2 correctors that we believe can be best in class and can support a best-in-class triple combination. We now have those in hand. We're in the clinic with more advance on the two. And we are now moving forward with the Phase II development that will be necessary to determine whether we do in fact have that best-in-category triple combination.
We'll have Phase II doublet work with the potentiator and the C1. And at the same time, we'll be advancing monotherapy studies for safety and tolerability in PK with the C2 with the ability to merge the three into a triple where we'll have proof-of-concept data right around the end of the year, at least in-house. We'll have those data by the end of the year. That will be with a single high dose of the C2 to tell us whether we have that efficacy profile we are looking for. And if we do, then we'd be able to continue to development. There'll be some additional dose-ranging to make sure that we optimize the dose of the C 2. And then that would be the last step that's required before moving to full late-stage development.
So that proof-of-concept readout that will come in right around the end of the year is what will tell us whether we have that opportunity to go after a best in category triple. I think it's a good disease area for us that fits our talents well. We're good at optimizing small molecules against difficult-to-drug targets. I think there's a need for another triple combination, particularly a very high-efficacy combination. That's something that we factored into our models because they're still Phase I programs. But if we can capture that upside, I think it represents a very attractive opportunity.
We are out of time, but allow me to ask one more question, Mike, and I'll put it to you. What is the one thing that you feel investors don't quite get about the AbbVie story, and you wish they had a deeper understanding and appreciation for it?
I think if there's one thing I would point to, it's the quality of the pipeline. If you look at what we've done with the late-stage pipeline, which is now our newly launched, unmarketed product suite, it's performed very well. It's generating a large amount of revenue, growing robustly not only in the immunology space but also in the hem/onc space, with potential to expand into new indications that are still I think underappreciated in terms of the revenue potential. Entirely new disease areas, like atopic derm, which is outside of the HUMIRA revenue footprint and represents a very nice footprint. Very strong data in inflammatory valve diseases that can be game-changing for that indication, where it's difficult to keep patients in long-term control.
And at the same time, we focused on reloading our pipeline, bringing new molecules that are post proof-of-concept into late-stage development, and in some cases mid-stage development as well. So 951 in Parkinson's disease, navitoclax in myelofibrosis, epcoritamab in diffuse large based cell lymphoma. The CD47 antibody, which is a target that's very attractive and an IO mechanism that can complement many of the things that we've done, just to name a few.
So I think the quality of that pipeline is one thing that I would point to that folks have not completely understood yet.
Great. Mike, Rob, Jeff, I want to thank you for your time. This has been a fascinating overview in a relatively short period of time. And we look forward to watching future developments of AbbVie and the success that will come along with it. So thank you so much, and enjoy the rest of the day.
Thank you, Steve.
Thank you, Steve.