AbbVie Inc.

Good morning, and thank you for standing by. Welcome to the AbbVie First Quarter 2020 Earnings Conference Call. All participants will be able to listen only until the question and answer portion, and you may ask a question by pressing star 1 on your phone. I would now like to introduce Ms. Liz Shea, Vice President of Investor Relations.

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, Michael Severino, Vice Chairman and President, and Rob Michael, Executive Vice President and Chief Financial Officer. Joining us for the Q&A portion of the call is Laura Schumacher, Vice Chairman, External Affairs, Chief Legal Officer, and Corporate Secretary. Before we get started, I remind you that some statements we make today may be considered forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995. ABBYY cautions that these forward-looking statements are subject to risks and uncertainties, including the impact of the COVID-19 pandemic on ABBYY's operations, results, and financial results that may cause actual results to differ materially from those indicated in the forward-looking statements. Additional information about these risks and uncertainties is included in our 2019 annual report and Form 10-K and in our other SEC filings. ABBYY undertakes no obligation to update these forward-looking statements except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand ABBYY's ongoing 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 now turn the call over to Rick.

Thank you, Liz. Good morning, everyone, and thank you for joining us. I'd like to start my remarks by acknowledging the tragic nature of the COVID-19 crisis, which has touched all elements in our lives in ways we never thought possible. The human toll that this pandemic has inflicted is unprecedented and the suffering unimaginable. During this very challenging time, I want to assure you that across AbbVie, we are working carefully to ensure that our business continues to operate properly, our employees remain safe, our patients continue to receive their medicines, and we are providing aid, including product donations and financial assistance. to address some of the critical needs of healthcare systems and underserved communities across the globe. As a matter of priority, we continue to closely manage manufacturing and supply chain resources around the world to ensure that our patients receive an uninterrupted supply of their medicines. Our manufacturing sites remain operational, and we have implemented additional measures at these facilities to ensure the safety of our employees, and to protect our supply of API and finished medicines. We have adequate supplies and inventory to meet the expected demand for all AbbVie key medicines, including Paletra and Nimbex, two therapies that have experienced a significant increase in demand directly related to COVID patient treatment. And we currently do not anticipate any product supply issues. AbbVie is also committed to supporting clinical research efforts for COVID-19. We have provided product donations to many health authorities and institutions globally so that AbbVie products may be further evaluated externally as potential treatments for this difficult disease. In times of crisis, it is our nature as individuals and our culture as a company to give back in any way we can. We recently announced that Abby has donated $35 million to help meet some of the critical needs around the world. We've partnered with several non-for-profit organizations who are on the front lines of the battle against COVID-19, and our donations have helped to support several important initiatives, including the creation and operation of 20 mobile field hospitals in U.S. cities most impacted by the pandemic. the procurement and delivery of oxygen concentrators, ventilators, and personal protective equipment to healthcare systems in Europe, and various other essential programs, including a donation to Feeding America to provide food and household supplies for those most in need, including the elderly. We have donated a significant portion of AbbVie's own personal protective equipment supplies, including N95 and surgical masks to hospitals near our facilities throughout the U.S. and Europe. We have also converted some of our own facilities, including a pilot plant and several research laboratories, to manufacture culture media and provide COVID-19 patient testing to supplement several public health departments. We are honored and committed to do what is in our power to help with this devastating pandemic, and we will continue to look for ways where we are able to help. Now, turning back to our business, I want to further discuss how the crisis is impacting our performance and expectations for the full year 2020. Today, I'm pleased to report strong results. For the first quarter, AbbVie's total revenues were up more than 10.5% on an operational basis, and adjusted earnings per share of $2.42 was up more than 13% versus the prior year. These metrics were significantly above consensus, and our initial expectations. Fortunately, we had very robust demand across our product portfolio heading into the COVID crisis. As the US and other major countries around the world started implementing stay-at-home orders and social distancing strategies in late February, AbbVie, as well as most of our customers, started restricting face-to-face interactions, resulting in reduced physician and patient contacts. These limitations, which are still in effect for most major countries, created two fundamental impacts on our business in the corridor. First, patients and pharmacies built up some additional inventory of our medicines to ensure they had adequate supply. And second, we saw fewer new patients visiting physicians' offices, which had a modest impact on the number of new patient starts. Adjusting for COVID inventory dynamics, AbbVie's first quarter underlying operational sales growth was roughly 8.3%, significantly above expectations, with double-digit underlying performance in both Hemonc and Immunology, demonstrating the strong underlying performance of our business. Within Hemonc and Bruvica, the market leading treatment for CLL grew strong double digits, driven by increased demand in the frontline setting, where we recently received another important label update, which Mike will discuss momentarily. And Clexa also performed very well in a quarter, with global revenues of $300 million, roughly double the first quarter of last year, following share expansion in both CLL and AML. Turning to our immunology business, Humira continues to generate significant revenue, Humira benefits from a substantial installed patient base representing more than 80% of current demand. Globally, Humira revenues were up nearly 6.5% on an operational basis in the quarter, including strong double-digit growth in the U.S. The international biosimilar trends and dynamics remain largely consistent with our expectations. SkyRisi global revenues of $300 million were also significantly above expectations. Since the launch late last April, we have quickly established and expanded our leading in-place psoriasis patient share, which includes both new and switching patients, and now exceeds 30%. This launch trend is truly remarkable and a testament to SkyRisi's strong efficacy compared to other novel agents in the psoriasis category, including Humira and Cosentix. RINVOC is also performing at a very high level in the RA segment, with global revenues of $86 million in the quarter. We estimate more than 17,500 prescriptions were filled, including both paid and bridge, which is more than double the activity we saw in the prior quarter, and now reflects approximately 11% in-play RA patient share. As demonstrated by our first quarter results, the underlying performance of our business remains very strong. We've now also begun to return to ordinary operations in select geographies around the world where health authorities have deemed it safe to do so. And although early, we are seeing those countries ramp towards a normal operation and expected performance. This is obviously a challenging time to forecast, given the unique nature of the COVID pandemic, including its global scope and unknown duration, and it is difficult to predict precisely when major countries around the world will return to normalcy. Despite this uncertainty, we believe it's important to provide a clear set of updated assumptions that reflect the latest view of our four-year performance. We based our forecast on the best estimates we have at this time, and we will make updates, if necessary, on our next quarterly call. As I indicated earlier, our business was performing robustly above expectations and above our guidance prior to the COVID-related impacts. We have spent considerable time carefully evaluating the COVID dynamics from late March and April. Based on this analysis, COVID appears to be having two fundamental impacts on our business. First, there has been a variable impact on new patient starts due to physicians' offices restricting patients' visits and patients adhering to stay-at-home orders. As an example, many dermatology offices are currently closed. AbbVie has a strong frontline position in dermatology with Humira and Skyrizzy. And here we see new patient starts for these two brands were lower by approximately 30 to 40% over this timeframe. Once these offices reopen, patient volume should return back to normalized levels. Second, we've also seen lower new patient utilization of hospital-based treatments such as Venclexa and HCV internationally due to many hospitals limiting access to non-emergency, non-COVID patients. We have carefully modeled these COVID-related dynamics and incorporated the expected impact on our full-year results. Our current forecast now assumes the following. Stay-at-home orders will be gradually lifted starting in May across Europe and the United States. 60 days after geography lifts stay-at-home orders, we expect physician offices and hospitals will reopen. for more routine patient diagnosis and care, and we expect patients will start returning to physicians' offices for routine treatment in that timeframe. We have also factored in a modest increase to our patient assistance programs as well as a shift in our U.S. payer mix due to increased unemployment. Based on these specific assumptions, we are confident we can maintain our current full-year 2020 adjusted earnings per share guidance. We will learn more as the second quarter progresses, and we will continuously evaluate our current assumptions relative to how the environment evolves. Any updates will be provided on our next quarterly call. On a related note, while we have not yet completed the Allergan transaction, we have also been actively working to assess the impact of the COVID crisis on the Allergan business. It's important to highlight that Allergan has both a therapeutic business, which is similar to the AbbVie business, and represents approximately two-thirds of their revenues and profits, and an aesthetics business, which represents roughly one-third of their revenues and profits. Based on the differences in the nature of these two portfolios, we expect them to be impacted differently as a result of the COVID pandemic. We expect Allergan's therapeutic business, except for Botox Therapeutics, to be impacted and recover from the COVID crisis in a manner very similar to the AbbVie business I outlined earlier. We expect Botox Therapeutics, which has a substantial hospital base, to experience a more significant impact, given that patients are being discouraged from going into the hospital for non-emergency procedures during the pandemic, as I mentioned earlier. We also expect to see a more pronounced impact on Allergan's aesthetics business, as many of their customers, including plastic surgeons, med spas, and dermatology offices are closed and therefore not performing procedures. However, after carefully analyzing the aesthetics business performance during the 2008-2009 recession, which experienced a rapid V-shaped recovery, The recent trends we are observing in China, as clinics have reopened locally and procedures have started to ramp significantly, and taking into account the household income and employment status of the aesthetics patient base, we remain confident that the expected near-term impact, while likely substantial, will be transient, with the aesthetics business quickly ramping back to normalized trends following the relaxation of quarantine restrictions in the US and major European markets. As it relates to the closing of the Allergan transaction, we have completed all requirements with the FTC and they are in the final stages of their review process. Following the FTC process, the last step is the Irish High Court approval. Based on everything we know today, we continue to expect the transaction should close in May. we remain confident that the AbbVie Allergan combination will generate significant cash flows, which will support our strong and growing dividend and rapid debt repayment, and we remain highly committed to both of those priorities. So, in summary, we reported a very strong first quarter performance. The COVID crisis is truly unprecedented, and we expect it will have a transient impact on our business, primarily affecting our second quarter performance. However, based on our analysis of the situation, as well as reasonable timing assumptions for the return to a more normalized environment, we are confident in maintaining our full-year adjusted earnings guidance, which speaks volumes about the strength of AbbVie's business momentum entering the COVID crisis. With that, I'll turn the call over to Mike for some additional comments. Mike?