AbbVie Inc. (ABBV) Presents at 4th Annual Evercore ISI Virtual HealthCONx Conference (Transcript)

AbbVie Inc. (NYSE:ABBV) 4th Annual Evercore ISI Virtual HealthCONx Conference December 2, 2021 12:10 PM ET

Company Participants

Michael Severino - Vice Chairman and President

Robert Michael - Chief Financial Officer

Jeffrey Stewart - Executive Vice President of Commercial Operations

Carrie Strom - President of Global Allergan Aesthetics.

Conference Call Participants

Joshua Schimmer - Evercore ISI

Joshua Schimmer

All right. Welcome, everyone. It's Josh Schimmer from the Evercore ISI Biotech team. We're very pleased to introduce from AbbVie, we have Mike Severino, Vice Chairman and President; we have Rob Michael, Chief Financial Officer; Jeff Stewart, Executive Vice President of Commercial Operations; and also joined by Carrie Strom, President of Global Allergan Aesthetics. So got the whole team and a lot of ground to cover.

Question-and-Answer Session

Q - Joshua Schimmer

I'm going to start with a question really just to get it out of the way, why is everyone asking me about this AbbVie CF? Like it's the only topic that I get questions on. You may feel the same. Why is everyone still fixated on this? And what should we be looking for in the months or -- weeks or months ahead from the [transaction]?

Michael Severino

Well, there's obviously a lot of interest in that program. And quite frankly, I think much of it might come from the Vertex perspective rather than our perspective because if you think about this opportunity for us, it's a preclinical or rather a pre proof-of-concept clinical program. It's very heavily risk-adjusted. It's not anything that contributes meaningfully to our long-range plan at its current stage.

However, if we were to get positive proof-of-concept data, obviously, it does represent very nice upside because it's a very attractive market. And there are a lot of features of this market that play to our strengths. We're good at optimizing small molecules against very difficult drug targets. You can see that with the work we've done in hep C. So that may be some of the reason for the interest.

What I would say is we are looking for a program that will get us to the next stage of innovation. This is an area that is nearing a ceiling for efficacy, but it's not quite there. I think there's one more round of innovation that can bring greater efficacy. We have some very good assets, some of which we have clinical data on already from an efficacy perspective. Others, we don't, like our C2, which is the newest component of that. The preclinical data are very strong.

And the preclinical assets here -- or preclinical assays here are much more predictive than they would be, say, in a rodent model of lupus, but we still need human data to have certainty, and we're driving towards that. We have a proof-of-concept study that's underway for the triple, based on FEV1 as an endpoint. We'll start to have data in-house around the end of the year, and we'll be in a position to share that with the world and say what we think it means, probably sometime around the first quarter, exact timing to be determined.

Now what I would say we're looking for is an agent that does exactly what we talked about just a moment ago, reaches that next level of innovation, the ceiling that we believe exists for efficacy. And we'd also be looking at other potential advantages like [PDI] profile, ease of administration and things of that sort. So we'll know soon whether we have that profile if we do, it's very nice upside. But again, this is an early program from our perspective.

Joshua Schimmer

All right. Perfect. Maybe we can turn to the inflam franchise, starting with Humira. It looks like it's starting to stabilize ex-U.S. But I know that -- I know the cadence tends to be a little bit lumpy depending on which territories biosimilar entry. How are we thinking about 2022, 2023 for more stability or some additional legs there?

Michael Severino

Josh, you make a very good point that really it's driven by the differences in timing of the biosimilar entry in each of the markets. So if you look at this year, we've guided $3.3 billion in international Humira sales, down about 13% operationally, with most of that erosion coming from the Wave 1 market, so the European markets that saw biosimilars enter in late 2018. And so you could expect for those markets to see a similar level of erosion in '22 and '23.

But then in '22, you're also going to see another step down for those markets that saw biosimilar enter in the last year or so. So think of those as a -- we call them the Wave 2 and Wave 3 markets: Brazil, Saudi, Japan, Australia, Canada, those types of markets. So we will see another step down in '22. And think of that, like we saw in Europe in year 1. So a similar step down in those markets in '22. So you'll see a -- I'd say, a greater level of erosion when you look at the overall portfolio in '22 for international Humira, but then '23 and beyond should be more moderate.

So it's the best way to think about it, but you make a great point that you really need to understand the differences between the markets in terms of the timing of biosimilar entry.

Joshua Schimmer

Got it. And then for the U.S., are you starting to get any visibility into or better visibility into 2023 with contracts? Or when you might expect to have a stronger sense of what the 2023 erosion curve might look like?

Jeffrey Stewart

Yes. I think -- it's Jeff here. Thanks for the question. It really will start to play out as we go into the first half and middle of '22, where we'll have more visibility there. Obviously, that we feel confident with the portfolio. Portfolio is important in this category. And certainly, when you have the mix of the established incumbent with Humira, with the scope, with a very unique profile in terms of the high concentration, the citrate free and then you have SKYRIZI and RINVOQ, we think that's going to allow us to compete for formulary position once the once the biosimilars do come in.

So -- but that's not -- it's still a little bit, Josh, of a dance in terms of how that will play out. And especially, as you know, in the U.S., you have all sorts of different segments of customers that will probably behave perhaps differently, and we obviously are in the process of continuing to evaluate how we will enter and play there.

Michael Severino

And given that, that's why we've been using the Europe experience, right, as the proxy for now until we get more specific in terms of guidance. But I think that still holds, right? If you think about that 45% plus or minus 10% based on the European experience, I mean, a high level of competitive intensity with 4 biosimilars entering at the same time, we saw them grow their floor prices. We'll see this with 7 to 9 biosimilars in '23. I think we'll see a similar level of competitive intensity. So I think that's still a good assumption for now.

Joshua Schimmer

And are you thinking you lose more volume share or price power?

Michael Severino

Yes. It's -- what we've experienced, it's really been of the erosion, about 2/3 price, 1/3 volume. So I think that's probably the best way to think about it than the U.S. will compete for the volume through price. But I think that trade-off is probably a reasonable way to model it.

Jeffrey Stewart

I agree, Rob. That's what we've seen internationally. And even when we look, there's not direct comparators to Rob said in the U.S. market. But it is -- when biosimilars enter, it is disruptive. I mean it's hard for the payers. It's hard for patient continuity. And so it's not unreasonable to think that as we do the trade-offs, the price volume trade-off, you'd see more erosion in price than volume, that'd be consistent across the global territories, including the U.S., to some degree.

Joshua Schimmer

Right. That's absolutely what we've heard with some payer checks. Maybe moving on to the JAK class, because we have been on checks on this one, I can't wrap my head around it because the answers are all over the place in terms of what we can expect. I know you talked a bit about waiting for additional information as you're considering your guidance. What is it that you're still looking to learn or know as you think about the long-term targets for RINVOQ?

Michael Severino

Well, the most important thing is getting clarity on the RA label. And I think at this point, what we are waiting to learn is really just the specifics of how the agency will translate the intent that they described in their September safety communication into actual labeling language. And we're working through that with the agency. I don't think we're far away from clarity. We'd expect to have that clarity and something that we can talk about publicly, meaning an approved updated label this year based on everything that we've heard.

And then the indications that are under review will go through a similar process. Getting the RA label updated will be the gating feature, if you will. And after that, we would expect approvals to follow shortly in the important indications, like psoriatic arthritis and atopic dermatitis. So again, what we want to learn is how the concepts that were outlined in the safety communication, which were stated to apply to all JAKs and across inflammatory indications, how they translate into other disease states where the treatment paradigms might be different or are different, certainly for atopic dermatitis.

Joshua Schimmer

Got it. We also have the Euro class of TYK2 agents coming along. How do you kind of see them potentially threatening the JAK class? And do you plan on broadening your oral immunology franchise offerings beyond JAK?

Michael Severino

Well, the TYK2 agent that's most advanced from BMS has shown good data in atopic derm -- rather in psoriasis. And I would say, is consistent with the first generation of biologics. It's not consistent with the sorts of results that we've seen with SKYRIZI, for example. And so we don't see it threatening our franchise in the immunology space, in psoriasis, obviously. I think far more likely it's going to be market expanding, bring more patients into treatment and ultimately provide more opportunities for high efficacy agents like SKYRIZI as that market continues to expand, and there's still room for additional biopenetration or TIM, therapeutic immunomodulator, penetration in that space.

And I think across the other areas where TYK2 inhibition is contemplated, I think you'll see a similar dynamic playing out. Right now, we don't have a TYK2 in our portfolio. And I think based on the dynamics that I described, it's not a high priority for us. It's also a time-bound priority. We're not interested in coming in with a similar agent many years later. So we'll see how the space evolves and what opportunities present ourselves, but it's not a top priority for us right now.

Joshua Schimmer

So it's interesting you made that comment that you are looking for more differentiated assets, because one thing we keep hearing from payers is that it's really all about portfolio and you do have such a strong and differentiated portfolio, that it seems like one where even undifferentiated assets could outperform, thanks to that kind of the negotiating power you're bringing to the table. So is that kind of not the right way to look at it? Why not pursue some maybe a little less differentiated, but good enough because of what AbbVie brings to the table assets?

Michael Severino

Well, I think there certainly is power to the portfolio that we bring to the table in many areas, but particularly in immunology. But we see the optimal use of that to couple that with differentiated agents. And I think when you can bring both together, as we've done with SKYRIZI and with RINVOQ, you can really unlock the full potential. So it's really concentrating that strength that we have in areas where we can bring forward meaningful differentiation to fully unlock the potential.

Jeffrey Stewart

Yes, I would agree, Josh. It's -- even on first principle, there's no question that it is commercially attractive to have a portfolio as you come into the market, the way you can structure your sales teams, the way you can engage with the customers. But to have an undifferentiated asset, particularly as you move forward into some of these very competitive spaces is a very, very tough call. So certainly, as we look at the product profiles with Mike and the R&D pipeline, we think that, that differentiation in many cases, driven by head-to-head very structured programs is essential.

Joshua Schimmer

Maybe we can hop to the migraine franchise. I still keep scratching my head why the guidance is $2 billion, and it's not more like RINVOQ or SKYRIZI, just given the size of the market, the rapid adoption of these therapies. So maybe give us a sense of how the adoption curve is relative to your expectations? And whether it is unreasonable to be thinking SKYRIZI -- well, RINVOQ or SKYRIZI type multibillions for such an important therapeutic category?

Jeffrey Stewart

Yes, I think there's a couple of things. I think first, the SKYRIZI or RINVOQ like valuations, we just can't -- we can't see that math. We said more than $1 billion for each. And I would say that the progression has been quite good so far. So I'll give you some sense over how the markets have developed. Obviously, you have a big base of triptan utilization in the acute segment. And so what we've seen when you add the oral CGRPs together, UBRELVY and the competitor, Nurtec, you've seen about a 20% penetration into that market, except it's a little bit misleading, Josh, because really what's happening, the markets are building on top of each other.

So we haven't seen triptan use actually decline. We've actually seen the CGRPs build on top of it. So about 20% increase in the market. I think what that does show you is that there's still tremendous unmet need out there. So it's not like you're taking away from triptans, you're actually building on top of triptans. I don't want to imply that there's combination use. But what has been surprising, I think, is that while the ability to sort of abort the headaches has been largely similar. When you look at the tolerability of a medicine like UBRELVY or the ability to not have a rebound headache or take it when you need it, we actually see that, one, there's very strong demand for these types of agents, and we're seeing people actually stay more persistent. So they just refill far more scripts than they would on a normal triptan. So that's very attractive.

The other thing that's encouraging is that unlike many categories, we're starting to see an emerging and it's been in the short-term, we see an emerging preference in the preventative market where there are no triptans. It's essentially either injectable monoclonals as you know, or mostly just very, very old generics like topiramate. And so this is also a nice market development because we see that there seems to be an emerging oral preference, okay? So when we look at our early results of QULIPTA, where we see how not just the headache specialist react, but the primary care physicians. We're pretty encouraged right now on the QULIPTA uptake, which is performing at the very high end of our clinical expectations as a simple once-a-day medicine, very well tolerated. The market response has been strong so far.

So all good, but I would reiterate that it does look extremely challenging when we run the numbers that $7 billion potential. We just can't see that at this point now.

Joshua Schimmer

Well, you have not convinced me it can't be a $4 billion franchise. We'll just wait for that -- for those programs to evolve and get a little bit more comfortable with the opportunity.

Carrie, maybe you can focus a little bit on the Aesthetics business here. What do you see as the key growth drivers going forward, whether it's specific products, specific territories and both?

Carrie Strom

Yes. The aesthetics market has really experienced robust growth since the pandemic. The past few quarters in the U.S., around 40% growth. And at this point, we're not seeing that driven by pent-up demand as much as just fundamental demand. It's a market that has been increasingly more accepted, less stigmatized and increased focus on health and wellness. And a patient population that is starting younger and by younger, I mean, closer to 40 versus 50. And so those are great trends for our business in the U.S.

Also, as a part of AbbVie now, we have the benefit of increased and more consistent investment in things like consumer activation, which we're becoming increasingly more sophisticated app and also field force expansion. And in China, which has rapidly become our second biggest market after the U.S., we're also seeing very strong growth. It's a big market. It's also a fast-growing, very aesthetically-oriented, and we're investing in sales force expansion there to go deeper in the markets we're already in, and then go broader and expand into the second-tier markets, which are still large markets. Some of them are as big as Chicago, for example.

And in China specifically, we're seeing very strong growth of our JUVÉDERM filler franchise. And we -- it's partly because of that expansion and partly because we have benefit of launching some of those premium filler lines in the past year or 2. And so I'd say U.S. continues to be a fast-growing market for -- especially for BOTOX Cosmetic, China for injectables. And then as a part of AbbVie, we can invest more in other markets that have potential such as Latin America or Japan.

Joshua Schimmer

How big do you think China can be as an aesthetic market for Allergan?

Carrie Strom

I mean we're seeing China as a potential of being a $1 billion market in the next few years.

Joshua Schimmer

For Allergan, specifically, not...

Carrie Strom

For Allergan Aesthetics.

Joshua Schimmer

Yes, excellent. And on the backdrop of pretty aggressive inflation in the U.S., do you have any pricing power for the cosmetics and aesthetic business?

Carrie Strom

Yes. The Allergan Aesthetics business, all of our brands are, BOTOX Cosmetic, JUVÉDERM, we command a clear leadership position. And along with that comes premium pricing. And that's an important thing for our customers as well, right? So our customers can also command that premium pricing when they are treating their patients.

Robert Michael

But I would look to that business as really being driven by fundamental market growth. And as the market leader works driving that market growth, that's where I would expect to see the growth for Allergan Aesthetics come from is really more market and holding on to share, I wouldn't anticipate a huge contribution from price.

Carrie Strom

Totally agree. It's still a very underpenetrated market despite the growth. And so that's our main goal, is to grow that market.

Joshua Schimmer

All right. So great. And then maybe a quick question on the opthal franchise. You've got a very strong effort there. I'm surprised we haven't seen a little bit more in kind of the bolt-on element of opthal. Are you looking to expand that franchise further? Or if not, would you spin it off?

Michael Severino

We see the eye care franchise as an important component for us and a pillar for growth in the future. It's an area where we have a leadership presence. So we would certainly look to continue to add to that, both internally and externally. Very recently, you've seen us complete the REGENXBIO deal, which brings in an asset that's in Phase III with subretinal delivery, which is done in the OR and in Phase II for a different form of delivery, suprachoroidal, which is done in the office. It's similar to an injection, although it's slightly different technically than a typical intravitreal injection.

This is a program that delivers sustainable VEGF inhibition over the period of multiyears to patients with significant requirement for treatment in their retinal disease with age-related macular degeneration or other conditions with similar pathophysiology. So we are adding to it, and we'll continue to look and as opportunities present themselves, we will continue to add to that portfolio in the future, either internally or external.

Joshua Schimmer

Excellent. Maybe one last quick question on IMBRUVICA. It feels like competitors are claiming they've done a great job claiming market share, but I think AbbVie has kind of been also insisting that you've not lost much market share. So I don't know if you're seeing the same commentary, but maybe you can help reconcile some of the competitive dynamics and what you think the outlook for IMBRUVICA is hopefully, if we can get past COVID in the coming months?

Michael Severino

Well, what I would say is IMBRUVICA continues to very well overall. It's a great asset that delivers outstanding outcomes to patients. We have a survival benefit across multiple studies. We're the only group that has that. It's the only agent that has that. I think there are a couple of things in the near-term dynamic. One is the space is becoming more competitive when you have a molecule that is as successful as IMBRUVICA, there will be follow-on agents, and we've seen those, principally acalabrutinib. We anticipated that Apollo and BTK would take some share. And I would say it's playing out consistent with our expectations.

The CLL market has also sat down a bit since COVID for, I think, 2 principal reasons. The first is that CLL patients can defer therapy for a period of time without the same consequences as one might see in diseases like AML or non-small cell lung cancer. That can't be deferred forever, however, because we do know that mortality is higher for CLL patients across every age stratum and every patient definition that you look at. So ultimately, we would see that coming back.

But as COVID has gone on a little longer than was originally anticipated with additional waves of infection, and as that dynamic continues to play out, we've seen the market stay a bit suppressed in the near term. So we'd see that changing, but it's a little bit hard to predict the exact time frame in which it will return back to more normal levels. And I think those 2 dynamics are playing out. But in the long term, we see strength in IMBRUVICA. We have the outcomes that I described. We have a very large installed patient base, which is an important strength and good long-term control. And it's part of an important franchise. We talked about portfolio strength a little bit ago. It's not just about IMBRUVICA for us. We have VENCLEXTA, which is performing very well. We've built a pipeline behind that. So we feel good about the performance of not only IMBRUVICA, but the hem/onc franchise in the long-term.

Joshua Schimmer

Excellent. Well, a lot more going on at AbbVie, but thanks so much to the team for joining and walking us through some of the key of many, many moving parts that is happening. Thanks, everyone, for tuning in.

Michael Severino

Thanks, Josh.

Robert Michael

Thanks, Josh.

Jeffrey Stewart

Thank you, Josh.