AbbVie Inc.

Good morning and thank you for standing by. Welcome to the AbbVie Fourth Quarter 2020 Earnings Conference Call. All participants will be able to listen only until the question and answer portion of this call. 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 Jeff Stewart, Executive Vice President, Commercial Operations. Before we get started, I remind you that some statements we make today may be considered forward-looking statements for 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 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 on 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 AbbVie'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. Unless otherwise noted, our commentary on sales growth is on a comparable basis, which includes full current year and historical results for Allergan. For this comparison of underlying performance, all historically reported Allergan revenues have been recast to conform to Abby's revenue recognition accounting policies and exclude the divestitures of ZenPep and BioCase. References to operational growth further excludes the impact of exchange. 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 today. I'll discuss our fourth quarter and full year 2020 performance, as well as our expectations for 2021. Mike will then provide an update on recent advancements across our pipeline, and Rob will discuss the quarter and our 2021 guidance in more detail. Following our remarks, we'll take your questions. We delivered another strong quarter with adjusted earnings per share of $2.92, exceeding the midpoint of our guidance by $0.08. Fourth quarter, total net revenues were up nearly 7% on a comparable operational basis. This performance was driven by robust double-digit sales growth from our Immunology, Hemonc, and Neuroscience franchises, as well as 9% comparable operational sales growth of Botox Cosmetic, which is demonstrating a rapid recovery. Our fourth quarter performance tops off another excellent and truly transformational year for AbbVie, which included the successful acquisition and integration of Allergan, creating a stronger and much more diverse AbbVie, with leadership across numerous attractive high-growth markets. Significant contributions from our two new best-in-category immunology medicines, Renvoke and Skyrizzy, which combined for more than $2.3 billion in 2020 sales, their first full year on the market. We expect the combined contribution from RINVOQ and SkyRisi to nearly double in 2021 to approximately $4.6 billion, based on their continued strong uptake in RA and psoriasis, as well as RINVOQ's anticipated approvals in PSA, ankylosing spondylitis, and atopic dermatitis later this year. We delivered continued robust growth from our leading HEMONC portfolio, with Imbruvica and Van Clexta contributing more than $6.6 billion in combined 2020 sales. We expect our HEMONC franchise to grow double digits again in 2021. We also added two compelling oncology pipeline assets, epicritimab, a potential best-in-class CD3 by CD20 bispecific antibody in development for B-cell malignancies, and Limzoparlamab, an anti-CD47 monoclonal antibody being studied in multiple cancers. These two assets will further support the growth of our Hemon franchise across our long-range plan. The acquisition of Allergan brought us a substantial neuroscience portfolio with compelling therapies for migraine and psychiatric conditions, augmenting our already existing neurofranchise. The newly combined neuroscience franchise delivered nearly $4.9 billion in comparable 2020 revenue and is expected to grow double digits in 2021. We also added the leading global aesthetics franchise, a largely cash-paid portfolio with roughly $3.5 billion in comparable 2020 revenues. As I previously noted, this portfolio has demonstrated a rapid V-shaped recovery and we view aesthetics as an extremely attractive long-term growth opportunity. And importantly, we've made excellent progress in 2020 with our pipeline. We expect our R&D pipeline advancements to lead to the approval of more than a dozen new products or indications over the next two years, including a total of six additional indications for Renvoke and SkyRisi, which will cover all of Humira's major indications plus new significant disease areas, including atopic dermatitis. Expanded indications for Van Clexta and Valar, and several new product approvals, including a Tojapan for episodic migraine, Novitaclax for myelofibrosis, and ABVV951, a potentially transformative next-generation therapy for advanced Parkinson's disease. These new opportunities will collectively add meaningful revenue growth in advance of the U.S. Humira LOE. We've entered 2021 in a strong position, which is reflected in our revenue and earnings per share guidance. Based on the recent outperformance of our business, we expect full year 2021 comparable operational sales growth of approximately 9.4%. with total AbbVie sales expected to be approximately $1.7 billion above current consensus. And we anticipate 2021 adjusted earnings per share of $12.32 to $12.52, representing growth of 17.6% at the midpoint. This level of guidance represents impressive performance with nearly all aspects of our business expected to perform at or above current consensus for 2021. The Allergan integration continues to go very well. The transition has been seamless, despite the size of the transaction and the timing of the COVID pandemic. While we're making excellent progress against our expense synergies, which Rob will cover in more detail here momentarily, It remains increasingly clear to us that there are significant opportunities for long-term revenue contributions across numerous Allergan growth platforms. As we recently disclosed, we believe UBrelvy, the first to market in leading oil CGRP for acute migraine, represents a $1 billion-plus peak sales opportunity. I told you, Pat. A potential once-daily oral treatment for the prevention of episodic and chronic migraine also represents a $1 billion plus peak sales opportunity. We expect Baylor's peak sales to approach $4 billion within its currently approved indications of schizophrenia, bipolar I disorder, and bipolar depression. With major depressive disorder, or MDD, representing a potentially significant incremental growth opportunity. Anesthetics, which is poised to regain its growth trajectory this year, is expected to generate high single-digit revenue growth over the next decade. We continue to closely monitor the COVID dynamics, which will have an impact on our business again in 2021, predominantly in the first half of the year, but significantly moderated from the 2020 impact. And despite the recent COVID resurgence within select geographies, we feel the global healthcare system is much better equipped with COVID treatment protocols and PPE to safely see and treat patients throughout the current year. That said, some therapeutic areas continue to be more impacted than others, like CLL, HCV, certain hospital-based procedures, among others, which we have contemplated in our 2021 guidance. Overall, we've been pleased with the rate of recovery across our business, a testament to our differentiated product profiles and our commercial execution. So, in summary, we've assembled an impressive set of growth assets, and the outlook for Abby's business remains strong. With RINVOC and SkyRisi expected to contribute more than $15 billion in risk-adjusted sales by 2025, and our expectations for continued robust growth across T-Monk, neuroscience, and aesthetics, we have a high degree of confidence that we will be able to successfully absorb the Humira LOE impact in 2023, support an immediate return to total sales growth in 2024, and produce compelling, high single-digit compounded annual total sales growth in 2025 through the remainder of the decade with the diversified portfolio and pipeline that we have today. With that, I'll turn the call over to Mike for additional comments on our R&D programs. Mike? Thank you, Rick.

We've clearly made significant progress with our pipeline over the past few years, particularly our late-stage programs in hematologic oncology with Imbruvica and Benclexta. and in immunology with RINVOC and SCIRISI. Since inception, our R&D organization has delivered an impressive set of new products, which collectively contributed approximately $11 billion in revenue in 2020. We also continue to see significant evolution of our early and mid-stage clinical programs, with many assets expected to transition to late-stage registrational studies over the next several years. We will continue to replenish our late-stage pipeline with innovative assets that have the potential to drive additional growth for AbbVie in the second half of the decade. At our recent Immunology Investor Event in December, we provided a detailed overview of our immunology programs, highlighting the robust data generated to date for RINVOC and SCIRISI across approved and pipeline indications. Included in this event, we presented positive top-line data from two new Phase III studies for RINVOC, results from the first induction study in ulcerative colitis and results from the head-to-head study versus dupilumab in atopic dermatitis. We expect to see results from the second Phase III UC induction study later this quarter and from the UC maintenance study in the middle of this year. with regulatory submissions anticipated in the second half of 2021. Our regulatory applications for RINVOC in atopic dermatitis are currently under review, and we expect an approval decision in the U.S. in the second quarter based on priority review, and in Europe in the second half of the year. We recently received European Commission approval for RINVOC in psoriatic arthritis and ankylosing spondylitis. and expect approval decisions for those indications in the U.S. in the first half of this year. I want to take a moment to address the topic of safety, specifically MACE and malignancies, following the results from Topacitinib's post-marketing safety study. At present, there are no data to suggest the safety outcomes from their study apply to a specific JAK1 inhibitor, such as RINBO. We are not aware of any signal for an elevated risk of MACE or malignancies with RINVOQ or any JAK inhibitor other than ZELJANs. We conducted a pooled database analysis across our clinical trials for DBT, MACE, and malignancies at the time of RINVOQ's regulatory submission and have updated it periodically, including up to the present. Rates with RINVOQ have not been elevated relative to comparators or to expected baseline rates. Importantly, there has been no increase or meaningful change in those rates over time. Additionally, we adjudicate events for MACE and DBT, which is considered the highest standard of evidence. If we look across our long-term database in RA, a population that is at increased risk for MACE events, our rates remain low. At the approved dose in RA, we have followed more than 3,700 treated patients. totaling more than 9,000 patient years experience. Our rate of MACE events is 0.4 per 100 patient years, which compares favorably to the expected rate of 1.0 to 1.7 events per 100 patient years. In addition, there is no evidence of a dose response between the 15 and 30 milligram doses. Similarly, the rate of malignancy, excluding non-melanoma skin cancer, with similar follow-up is 0.8 events per 100 patient years. This rate is also consistent with the expected range of rates of 0.86 to 0.94 per 100 patient years. And again, we see no evidence of a dose response between 15 and 30 milligrams. Moving now to SkyRizzi. We also recently reported top-line results from the Phase III programs for SkyRizzi in Crohn's disease and psoriatic arthritis. In the two Crohn's induction studies, SkyRizzi demonstrated significant improvements in clinical remission and endoscopic endpoints compared to placebo, with symptom improvement seen as early as week four. Based on the data generated today, we believe SkyRIZI has the potential to become an important new treatment option for patients with moderate to severe Crohn's disease. We expect to see results from the maintenance study in Crohn's disease later this year, with regulatory submissions anticipated in the second half of 2021. We're also very pleased with SkyRIZI's results in the Phase III studies in psoriatic arthritis. where we saw significant improvements in disease activity across both skin and joint endpoints compared to placebo. We believe that the activity we have seen on joint disease and the impressive skin clearance that is a hallmark of the SCI-RISI program make it a compelling offering for patients with mixed joint and skin involvement. We plan to submit our regulatory applications for SCI-RISI and psoriatic arthritis in the first half of this year. We're making good progress with our early and mid-stage immunology programs as well, where we expect several data readouts and phase transitions in 2021. We expect to begin three new studies for ABBV154, our TNF steroid conjugate, including a Phase IIb dose-ranging study in RA, as well as Phase II studies in Crohn's disease and polymyalgia rheumatica. And we'll see proof of concept data in the second quarter for Ravagalimab, our CD40 antagonist in phase two for ulcerative colitis, and for ABBV157, our oral ROR gamma T inhibitor in phase one for psoriasis. Both of these programs experienced slight COVID-related delays, with results now expected for both in the second quarter of this year. In oncology, We continue to make significant progress advancing our pipeline with numerous data readouts and regulatory milestones last year, as well as the addition of several new assets brought in through our in-licensing efforts, including GENMAB's CD3 by CD20, epcaritamab, and IMAB's anti-CD47, lemzoparlamab. We showcased new data from several programs at the recent ASH meeting, where we presented nearly 40 abstracts from eight different assets. Notable presentations included data from the phase two Captivate trial, evaluating Imbruvica plus Venclexta in frontline CLL, which showed patients who achieved undetectable MRD following this combination maintained their deeper mission at the one-year mark after stopping therapy with a 95% rate of disease-free survival. We also presented new five-year data from Van Clexta's Murano trial, demonstrating the benefits of fixed-duration Van Clexta combinations in helping patients achieve sustained progression-free survival. The latest results from Murano in the relapsed refractory CLL setting showed a median progression-free survival of 54 months in the Van Clexta and rituximab group compared to 17 months in the bendamustine rituximab group, three or more years after stopping treatment. Updated dose escalation data from a Phase I study evaluating epcaritumab in B-cell malignancies were also presented at ASH. Epcaritumab is a subcutaneously delivered bispecific CD3 by CD20 antibody being developed in collaboration with GenMab. In the Phase I study, epcaritumab demonstrated encouraging single-agent antitumor activity in heavily pretreated patients. with a consistent and favorable safety profile, showing no grade three or higher CRS events, as well as limited neurotoxicity. We believe that pruritamab has the potential to become a best-in-class therapy across a number of B-cell malignancies, including diffuse large B-cell lymphoma and follicular lymphoma. The phase three trial in relapsed refractory, DL-BCL, recently began, and we will provide updates on epcaritamab as its development program progresses. Initial results were also presented from a phase one study evaluating TNB383B in relapsed refractory multiple myeloma. TNB383B is a novel bispecific T-cell engaging immunotherapy targeting BCMA and CD3 being developed in collaboration with TeneoBio. These Phase I results demonstrated that the BCMA CD3 bispecific provided overall response rates of 80%, with a large number of patients achieving a very good partial response or better, despite having received multiple prior lines of therapy. TNB383B was well-tolerated at all doses tested, with few off-target toxicities and no grade 3 or higher CRS observed. With its safety profile, efficacy, and the convenience of once every three-week dosing, this agent has the potential to become a promising treatment option for myeloma patients. And our partner IMAB published an abstract with initial results from a Phase I study evaluating lemzoparlamab in AML and MDS. These results demonstrated encouraging activity in relapsed refractory AML patients. and lemzoparlamab was well tolerated with no serious hematological adverse events reported to date. Based on these promising initial results, we plan to begin new studies this year for lemzoparlamab in AML, MDS, and in multiple myeloma. We also recently saw data from an interim analysis of a Phase II study evaluating Teliso-V in heavily pretreated, non-squamous, non-small-cell lung cancer patients. The encouraging results from Stage I of this study met the criteria for advancing the program, with Teliso-V demonstrating a 54% objective response rate in patients with wild-type EGFR who have highly expressed CMEX. In EGFR wild-type patients with overexpressed TMET, which includes both high and intermediate expression, the objective response rate was 35%. Based on these results, we believe that there is an important role for Teliso B in this target population, which represents roughly 25% of the non-squamous, non-small cell lung cancer population. We will be opening the second stage of the study and are planning discussions with regulators regarding the potential of this study to support an accelerated filing. We expect 2021 to be another important year for our oncology pipeline with several regulatory submissions, as well as data readouts across all stages of development. This year, we expect to see data for Imbruvica in the phase three shine study in frontline MCL. with regulatory submissions expected in the second half of the year. Data for Imbruvica in combination with Venclexta in second-line or greater MCL and front-line CLL with regulatory submission for front-line CLL expected in the second half of the year. We also expect to see data from registration-enabling studies for Venclexta in high-risk MDS and Novitaclax in relapsed refractory myelofibrosis. and we expect to see data from numerous programs in our early stage oncology pipeline. In addition, the programs under collaboration with Calico are also progressing well. Our partnered effort is comprised of a strong pipeline of novel targets, which includes more than 20 active programs in discovery or preclinical development. Importantly, we currently have programs which have advanced into clinical development in two areas, immuno-oncology, and neurodegeneration. The lead CALICO program in oncology is focused on PTPN2 inhibitors, which act at multiple steps in the cancer immunity cycle and have potential applicability in a broad variety of tumor types. The discovery of novel, orally bioavailable PTPN2 inhibitors represents a significant breakthrough in a target class that has historically been considered undruggable. We currently have two assets in phase one development, ABBV CLS579 and 484. We've seen evidence of immune activation in the clinic with this pathway, and we expect to see proof of concept data from this program in 2022. The lead Calico program in neuroscience is an EIF2B activator, which targets a key regulator of the highly conserved integrated stress response pathway. Inhibition of this pathway has the potential to prevent pathology and restore function in a number of neurodegenerative diseases, such as ALS and Parkinson's disease, as well as in traumatic brain injury. Our lead EIF-2B activator, ABBB-CLS-7262, is currently progressing through Phase I, and we plan to begin a study later this year in patients with ALS. In other neuroscience updates, last year we completed our registrational program for etogepant and episodic migraine prevention, and we recently submitted our regulatory application to the FDA. We expect an approval decision by the end of the third quarter. The data generated in our phase three program support a strong benefit-risk profile, and we believe that etogepant has the potential to offer meaningful benefits to patients as a safe, effective oral treatment option for the prevention of episodic migraine. In 2021, we expect to see data from several late-stage neuroscience assets, including results from two Phase III studies for Braylar in major depressive disorder and results from the pivotal program for ABBV951 in advanced Parkinson's disease, with regulatory submissions for 951 expected in the second half of the year. We also expect to see proof-of-concept data for elezanumab in a Phase II study in multiple sclerosis, and ABBV8E12, our lead anti-Tau antibody in a Phase II study in Alzheimer's disease. In addition to 8E12, we have a number of promising approaches in Alzheimer's, including our neuroinflammation programs aimed at TREM2 and CD33, currently in clinical development, as well as other Tau approaches in preclinical development. These include tau antibodies with different epitope specificity as well as approaches to clear intracellular tau. In aesthetics, we continue to make excellent progress with our portfolio of facial toxins and dermal fillers with several regulatory submissions, data readouts, and pivotal study starts expected this year. Our programs include new indications for Botox as well as innovative toxins such as new liquid formulations and both long and short-acting toxins. We also have programs to develop new indications for the Juvederm collection, as well as novel dermal fillers, such as Harmonica, which will be entering registration-enabling studies in the U.S. And in eye care, based on the positive results from the Phase III studies evaluating our topical eye drop, AGN 190584 for the treatment of symptoms associated with presbyopia. We plan to submit our regulatory application later this month and expect an approval decision in the fourth quarter of this year. So, in summary, our R&D productivity remained high last year despite multiple COVID-related challenges, and we were able to maintain steady continuity and minimize delays. We're entering 2021 well positioned for continued success, and we expect significant program advancement across all stages of our pipeline again this year. This includes five new asset or major indication approvals, half a dozen regulatory submissions, more than 10 pivotal study readouts, and more than 15 data readouts from early and mid-stage programs. With that, I'll turn the call over to Rob for additional comments on our fourth quarter performance and our 2021 guidance. Rob? Thank you, Mike.

Starting with fourth quarter results, we once again delivered strong top and bottom line performance. We reported adjusted earnings per share of $2.92, above our guidance midpoint by 8 cents. Total net revenues were approximately $13.9 billion, up 6.8% on a comparable operational basis, and ahead of our expectations. Immunology global sales were approximately $6 billion, up 14.8 percent on an operational basis. Within immunology, Humira sales were approximately $5.2 billion, up 4.4 percent on an operational basis, with continued high single-digit growth in the U.S., offset by biosimilar competition across international markets. Guy Rizzi's sales were $525 million, and RIMVOC sales were $281 million, with both products demonstrating strong sequential growth above expectations. Hematologic Oncology delivered another strong quarter, with revenue of approximately $1.8 billion, up 15.5% on an operational basis, with solid growth from Imbruvica and Van Clexta. Aesthetic sales were more than $1.1 billion, with Botox Cosmetic and Juvederm both experiencing a rapid recovery from the COVID pandemic. Neuroscience revenues were nearly $1.4 billion, up 14.9% on a comparable operational basis, led by Vrelar and our migraine portfolio. We also saw a significant contribution from iCare, which had sales of more than $900 million. Turning now to the P&L profile for the fourth quarter, adjusted gross margin was 81.8% of sales, Adjusted R&D investment was 12.6% of sales, and adjusted SG&A expense was 22.3% of sales. The adjusted operating margin ratio was 46.9% of sales, an improvement of 230 basis points versus the prior year. Net interest expense was $618 million.