AbbVie Inc. (NYSE:ABBV) Piper Sandler 34th Annual Healthcare Conference Transcript December 1, 2022 9:30 AM ET
Company Participants
Rob Michael – Vice Chairman and President
Jeff Stewart – Executive Vice President and CCO
Tom Hudson – Chief Scientific Officer
Scott Reents – Chief Financial Officer
Conference Call Participants
Chris Raymond – Piper Sandler
Chris Raymond
Okay. We are going to go ahead and get started. Thanks everybody for being here for day three of the Piper Sandler Healthcare Conference. My name is Chris Raymond. I am one of the Biotech Analysts here at Piper Sandler.
Very pleased to have with us our next company, which needs no introduction is AbbVie. Of course, I have with me the Vice Chairman and President, to my left, Rob Michael; Jeff Stewart, EVP and Chief Commercial Officer; Tom Hudson, who is the Chief Scientific Officer; and Scott Reents, the CFO.
So we have a full complement of management here for our talk. So, normally we ask companies to give a 2-minute or 3-minute overview on the company. I don’t think we need to sort of go into that. So maybe we will just dive into Q&A.
And this is a fireside chat format meant to be very informal. If anybody has any questions, please raise your hand. I will make sure it gets asked and answered effectively. So thanks again for being here.
Rob Michael
Thanks for having us.
Question-and-Answer Session
Q – Chris Raymond
All right. So why don’t we jump in, I am sure you guys have spent a lot of time talking to investors about Humira and I don’t want to spend the entire fireside sort of going over the erosion curve. But I think you guys have been fairly clear that when you give your next update on the Q4 call, you will be sort of talking about guidance, et cetera. Just in broad spoke — strokes, however, help us understand the difference, the dynamics for a biosimilar launch of a pharmacy benefit Part D drug versus past biosimilar launches, maybe help us frame…
Rob Michael
Yeah.
Chris Raymond
… the discussion.
Rob Michael
Yeah. We have studied this a lot, and as we have highlighted before, there’s no perfect model on the Part D or the pharmacy benefit side. So Humira will be sort of the first big one that goes, right? But we are able to look into the medical benefit or the Part B side, because there have been biosimilars there.
It’s not perfect. You can glean some insights. I mean there’s three big differences that I would say that when we look at that. The first is the, how you get the drugs approved, right? So it’s approved through the medical departments through medical benefit. It’s very different from how it works on the pharmacy benefit side, right? So it starts off slow. But there’s just different prior authorization approaches and approval approaches and so that’s one big difference.
The second big difference, which is a significant difference is since the Part B drugs are physician-administered, the reimbursement is very different. So you have basically cost recovery, you have ASP plus, you have buy-and-bill dynamics, some of the innovators are directly shipping to the offices, right? So you have a completely different sort of ecosystem around the physician payments and the reimbursement there that you just don’t see on the pharmacy benefit side.
And I’d say the last difference is the distribution, right? So the distribution are largely on the pharmacy benefit side are largely coming from captured owned pharmacies from the PBMs, like an Accredo, for example, for an Express Scripts, whereas on the D side, you have specialty distributors.
Again, as I mentioned, sometimes they are directly shipped right from the manufacturers. For example, we have a Part B drug, where most of it is shipped right to urologists right from our factories, our distribution centers. So it’s never perfect in terms of what that looks like.
And obviously, what you have to understand is like there’s incentives, there’s disincentives, there’s ways that the reimbursement will flow. You really need to understand as you assess the biosimilar landscape. What are the economics? What are the incentives of the full value chain?
And when we see that, obviously, when we look to what we studied with Humira, which is, okay, how do you negotiate with a PBM? What does that formulary status look like? How will distribution work through their captured specialty pharmacy? So all of that needs to go into the understanding of how basically the market will evolve over time. So, hopefully, that gives you some sense of the differences. Again, it’s a little bit dangerous to look at the Part B modeling when you start to look at what may happen on the D side.
Chris Raymond
Helpful. Okay. And this whole topic actually, if you don’t mind the segue to a more 30,000-foot strategic question, I have to ask. So just from an overall strategy of participating in the biosimilar space, a number of branded innovative manufacturers have taken the tack of developing a biosimilar business from a pure ROI standpoint many have said it makes a lot of sense. And we have seen some of this in our survey work actually having a biosimilar comes from a trusted well-known manufacturer really does matter. It’s not just about price, especially in the biologics space. AbbVie has made a very specific purposeful decision not to do this, you sort of talk about that decision?
Rob Michael
Hey. When we look at our model, we are looking to drive innovation that elevates standards-of-care, right? That’s where we see the value coming from as we negotiate with payers. You look at how we have elevated standard-of-care for Skyrizi and Rinvoq. You have seen the uptake, certainly, the pricing power when you consider that.
When I look at my biologic capacity, I am very happy to utilize for Skyrizi versus a Humira biosimilar. So it’s something we looked at, but what we are pursuing is really an innovation model that elevates the standard-of-care.
So we are not really interested in pursuing a biosimilar strategy. We looked at it. But, again, given what we have been able to produce the Skyrizi and Rinvoq, and those are two assets that will essentially exceed the Humira peak revenue. We think it’s the right strategy.
Jeff Stewart
You do raise a good point on your survey where, as we have highlighted, it’s known, there may be up to 10 biosimilars by the middle of next year. They are not all going to win. I mean, it’s not like they are going to split up the pie by 10. There’s going to be some big winners and I think quite a few losers here.
And we hear the same thing from our customers every day. I mean we are directly involved in the negotiations and it’s very important when they think about what biosimilars do they select to compete in this market. They want to look as close to Humira as you can. So does it have a citrate buffer, a non-citrate buffer, is it a high concentration, do you have the pediatric doses. So they want that.
And they want — they do want, as you highlighted, they want a trusted manufacturer, because they need to have that continuity of supply, because any disruption there or snafu [ph] is a very significant risk for the insurance company.
Chris Raymond
Excellent. So at the risk of changing the subject from Humira, I — so maybe let’s talk about Skyrizi and Rinvoq. I know you guys have maintained this $15 billion bogey. I know the mix has changed a little bit from when you originally provided that guidance. But we have seen a lot of outperformance, especially among Skyrizi. I know there’s a lot of puts and takes here. But I guess you have got other indications coming online here for…
Rob Michael
Yeah.
Chris Raymond
…especially for Rinvoq, maybe just talk about when you will feel comfortable enough to provide maybe a little bit more granularity to the mix.
Rob Michael
Yeah.
Chris Raymond
And maybe it’s sort of the way points along the way to get to that $15 billion number?
Rob Michael
Well, look, we are very pleased with the performance of Skyrizi and Rinvoq. Skyrizi alone this year we have taken the guidance up $700 million. We took it up twice for a cumulative $700 million. What we really saw was with the PSA indication approval, another inflection in terms of the share ramp both for PSA and for psoriasis, early returns on Crohn’s are very, very positive.
We have gotten this question quite a bit on when we are going to update the guidance. If you think about we have done it, I’d say, ever it seems like every few years at the JPMorgan conference. We have had, I will call off-cycle updates when we had the label update for Rinvoq.
We provided in December of last year an updated view different mix, but it’s still like greater than $15 billion for 2025. It’s something we are discussing likely at the JPMorgan conference, we would give a holistic view on a few different areas of the business.
But that’s — there’s really nothing holding us back. We just periodically update that long-term guidance at a logical time, but we are extremely pleased with the performance of Skyrizi and Rinvoq.
You have seen — we look at sell-side consensus clearly, both assets have seen numbers come up in particularly for Skyrizi. I think the sell side is a little bit over $1 billion ahead of our 2025 number. So, clearly, investors believe in the potential for Skyrizi, we will update that long-term guidance at the appropriate time.
Chris Raymond
So let’s talk about Rinvoq. I have spent a lot of time, a lot of work looking at the various surveys that we have done across different therapeutic areas. But I know that atopic derm is not a massive driver now, but it seems like a pretty decent growth driver going forward. And one of the things that’s been, I think, a pretty clear message we have got from doctors. They are not quite sure yet, is this a long-term therapy or something that’s used sort of to manage flare or as a short-term for patients that are new to therapies. Just what are you guys seeing in the field maybe in terms of physician experience and do you see any particular direction, especially in atopic derm, again, I know it’s not a massive driver of use now, but it seems like it could be?
Jeff Stewart
Yeah. I will take that one. It’s – look, it’s a very, very significant market. This is, I would say, as we look at the immunology markets, it’s one of the most, if not the most attractive go-forward markets that there is. So it’s a close cousin to the psoriasis market, but it’s just 10 years, 15 years later in its development and it’s the same physicians, right?
So we heard in our early research because basically the dermatology — global dermatology community had not been exposed to a JAK inhibitor before, because if you remember the history, Xeljanz never made it in psoriasis.
So they had a little bit of a bias there and so you have got this idea over, well, maybe it’s more of a, maybe I’d use it to manage flares, because I am comfortable with the first entrant, Dupixent, of course. But that’s not what we see in the market now.
As we look across the globe, this is clearly not a flare management. In fact, the payers wouldn’t even allow that. This is a long-term chronic disease and the derm segments are using it as a chronic therapy to control curable itch and very severe skin issues.
And so that whole idea from our surveys and our work in the field was just more of the derms trying to process and understand how the new JAK innovation would come to the market, particularly in Rinvoq.
So we see that and I will give some sense over, you have to remember, the overall penetration into the moderate to severe atopic derm segment is about 3% or 4%. So it’s far, far below penetration rates that we see globally in psoriasis, about 12% or 13% or in IBD at 30% to 40%. So there’s huge runway here.
So the key thing that we see, when we look at our performance versus Dupixent, we have about in the U.S. in the mid-teens of an in-play share, okay? About 35% of that in-play share is from the segment of the derms that are using it before Dupixent. That’s quite surprising to some of the onlookers, because I think this will automatically be second line.
In the international markets, we see in-play share that’s in the 25% up to 35% with an even higher index towards frontline in front of Dupixent, because the drug is very powerful and it also works incredibly fast on that skin and itch, and once the patients are on it, they are like, this is really relieving my disease.
So to answer your first question, we are going to see the global derm community really understand the importance of Rinvoq as a chronic therapy to control the condition, and it is as I mentioned, a very attractive market that we are playing in and doing very, very well.
Chris Raymond
Yeah. I think then the one surprise, I guess, we have had from our work is that, common wisdom, I guess, before we really start delving into this is that derms generally are afraid of safety issues. The black box warning would have scared them off and that doesn’t appear to really have happened?
Jeff Stewart
No. There is — in general, no. I mean, again, they have never had a JAK. I mean, I can remember back when we launched psoriasis, right? And if you looked at the — let’s take the U.S., 8,000 or 9,000 derms. For many, many years early a decade ago or more than a decade ago, you had only maybe 500 prescribers.
So now, like, the derms get comfort. They have initially more safety concerns. They need to basically sort of adopt and understand as they drive that adoption and that’s the type of adoption that we are seeing.
If you look at an individual countries, we see in Japan, for example, very, very conservative physicians. Rinvoq has a 35% to 40% in-play share. So as time goes by, they get comfortable with the mechanism. They get comfortable with Rinvoq unique data. We are going to see a very nice momentum here over time for Rinvoq and AbbVie.
Chris Raymond
Excellent. Maybe a development question on Rinvoq, so you guys are taking Rinvoq into Phase 3 for lupus. Just maybe talk about the confidence you have in that indication with Rinvoq and maybe help us understand the next steps following discussions with regulators?
Rob Michael
Very good. Well, we had our — I mean our Phase 2 study, we designed with experts to identify — we want to make sure we are going to get good results and be able to get to a Phase 2 study successfully. And you know some study — many companies have had trouble getting those two studies moving forward.
One of the major things that we have seen as the difficulty in past trials is the use of steroids when people have flares, physicians give steroids, different doses and when that happens, you are actually overwhelming or what the response is.
So what we felt was important to actually develop protocols, which would have to be very careful in the titration of steroids, either going up when there’s a flare or going down at a certain pace. So by having putting those controls on steroids, actually, we had very nice results, which we are going to present next year.
But with SRI1, Big Log [ph], they approved end points in the U.S. and Europe. And again, with a reduction in the use of steroids, but more importantly also is that, just a reduction in flares, patients time to first flare, for example.
So we have pretty — the data is pretty robust and I think we said that we had 24-week data, which is a primary endpoint. We waited to see the 48-week data before we made a decision and we continue to see those robust signals. So I think from the way the study is designed and the endpoints, which will obviously discuss with the regulators, we feel we have actually a pretty robust plan.
Chris Raymond
Got it. Okay. Maybe back to a commercial question on pointed towards Skyrizi and Crohn’s. So I know you guys have been pretty bullish in your commentary around this opportunity. That actually matches some of the survey work we have done and I know you guys haven’t said this, but docs have said this to us that, it may ultimately replace Stelara. Just given this feedback, help us understand, I think, you have a head-to-head study Skyrizi versus Stelara in this indication, how important is that? And then maybe a second question, Stelara it remains to be seen if this will happen since there was recently some litigation action on the loss of exclusivity, but how do you think about that dynamic?
Jeff Stewart
Yeah. So Skyrizi, the early results from Crohn’s we have launched in the U.S. and are getting ready to launch in Japan early in the year, so our big markets are starting to roll. And what I would say is that when we talk to the key opinion leaders and the big gastros, it’s very similar to your surveys. They love the simplicity of Skyrizi, but the thing that hits them the hardest is the endoscopic endpoints that were in our trial.
So we basically designed the trials Tom’s team did to basically look at very, very rigorous endpoints, like, is the colon clearing, is there histology of no active disease. And what’s happening globally in the community is like that is becoming the standard, like, you really have to think about clearing that colon to get the best remission and so all of our studies show that.
And then we thought, as you highlighted, we heard from the market to say, look, I have got this IL-23, which is a big drug, okay. But this drug Skyrizi looks like it’s even better based on these end points.
And so we believe that we have enough confidence to, as you highlighted, do a direct comparative trial against Stelara on the endpoints that the global community cares about, which are those key endoscopic endpoints. And that’s been ongoing, we have completed enrollment, and at some point next year, probably, in the latter part of the year, we will be able to see that full data package.
It’s important to add on to the data set. It’s similar to what we did in Skyrizi with psoriasis, where we did study versus Humira, study versus an IL-17 and that benchmark of Stelara is pretty critical. So it helps us certainly bet in the differentiation of the drug with the gastroenterologists.
And then it does a second thing, to your point, which is as biosimilar threats of Stelara come, we continue to basically elevate that care and have a differentiation versus a potential biosimilar. So it’s an important study. It’s one element of our strategy.
And but, net-net, I think, when we look at the content, like, it’s not just Skyrizi and IBD, it’s what’s happening with Rinvoq and IBD, which also is elevating the standards around endoscopic endpoints. So when our commercial and medical teams bring that to the market, it’s a very, very nice setup for us over the longer term plan.
Chris Raymond
Excellent. Okay. So we got a lot more to talk about, and I am sorry, we chewed up most of the time talking about inflam, as usual I have got more questions and I have time. But maybe let’s just jump to the neurology franchise and just a very quick sort of high level question on migraine. Ubrelvy and Qulipta, the overall C — oral CGR space, CGRP space, really, I mean, I don’t think anybody could have predicted the success two year, three years ago. But just thinking about the competitive set, we have done a decent amount of survey work in this space with both headache specialists and PCPs. And One of the things that really sort of jumped out at us that we didn’t know before was how migraine patients tend to sort of toggle back and forth between acute and prevention. You have got a competitor that’s got one drug label for both, obviously, you have got Qulipta and Ubrelvy that differentiated. Just sort of talk about how you compete with that dynamic, is that a big deal, is it not, how do you deal with it?
Rob Michael
Yeah. The way we look at it, I think, the first we take the macro view, as you highlighted, this is an incredible category. I mean the way we see it over the next five years to seven years, 10 years is the oral CGRPs are going to be the — that’s the story.
The story is no longer going to be the injectable mabs. You are not going to have the old generics, right? And you are going to see this rise of sort of more practical ways to prevent. That’s where Qulipta fits in.
But if you look at that, there’s absolutely huge space for both competitors to come in, right? And you are right, we see that there’s certain headache specialists where they can clearly see that this individual is now in dire need of prevention. And remember, Qulipta will be the only one next year that gets the chronic — for an oral that gets the chronic migraine prevention.
Then you have others. Some of them are certain segments of headache specialists and certainly some of the primary care physicians, where they are like, I don’t know exactly I lead a little bit more towards acute maybe if they need a little bit more, that’s attractive if you think about the competitor.
But net-net, this is going to be, basically, we are splitting the market and the markets are growing quite quickly and so we will be able to go into segments and basically compete very effectively as we have been against the big competitor.
But there’s no question that there’s a segment of particularly primary care physicians that might be easy to have one versus thinking about two, generally those physicians have not fully embraced true preventative agents yet. So we will see, it will be a nice tussle in the marketplace over time.
Chris Raymond
Excellent. And then maybe Vraylar and MDD, you have a forthcoming approval in that indication. Maybe just talk about that opportunity and the go-to-market sort of approach that you guys have come up with?
Rob Michael
Yeah. So, Vraylar is a very attractive opportunity. We have a baseline of the bipolar I where we have three indications, which is very unique and we are the typically the fastest-growing branded atypical antipsychotic in the market with the base business.
So and we basically said that towards the back end of our LRP, we are going to have revenue approaching $4 billion. We are roughly $2 billion now. So it’s a very, very attractive drug. We have a dedicated sales team, dedicated marketing team, it’s one of the moves that we made after the Allergan integration, because we saw the — just the sheer blockbuster potential of the base business.
And then this potential, which is really becoming very, very near-term here, we are going to know in December and we are highly confident that we get that aMDD approval. Very few drugs have ever gotten that approval. The last one was Rexulti about 10 years ago and it’s very, very nice.
When we do our survey work with the physicians, it’s going to be the same representatives, they have known for many years, bringing in a new substantial indication that we know now the drug will work across bipolar depression and adjunctive major depression and we think we are going to see a very, very nice lift and it’s a significant commercial opportunity for us.
Jeff Stewart
And you asked a question earlier on long-term guidance. That would be an example of one we have given that approaching $4 billion peak with the currently approved indications. If we get the aMDD approval, obviously, that would beg an update to the long-term guidance for Rexulti. So we are optimistic. We will have a decision this month.
Chris Raymond
Excellent. Okay. So I have another strategic question maybe and I know you guys get asked around business development all the time. So I am going to ask you, hey, what are you going to buy next, because obviously, maybe you won’t tell. So, but it’s been impressive, though, since the Allergan deal, you guys have paid down or will have paid down by the end of this year some $30 billion and your net leverage ratio now more comfortable 1.8 times I think. But not to sort of ask the usual questions, I know you guys have talked about adding to your pillars of growth, immunology, oncology, aesthetics, neuroscience, et cetera. Are there — when you are thinking about an area where it makes the most sense to bring in external innovation, is there one that stands out?
Rob Michael
You have highlighted the five that we would focus on…
Chris Raymond
Yeah.
Rob Michael
… and we like the one more portfolio that we have and we certainly don’t feel I need to do something. We absolutely have more financial flexibility starting next year, given the balance sheet improvement.
Chris Raymond
Yeah.
Rob Michael
But those are the areas that the BD group does focus on. And so, I’d say, we look across, there’s different needs if you kind of go through each of the areas. I mean, certainly, we are building out the discovery capability in eye care, but that’s been one it’s probably been more of an external innovation source for growth.
In immunology, given that we have got a long runway in Skyrizi and Rinvoq we are doing, say, more earlier-stage deals, but that doesn’t mean we are against doing something that’s more mid- to late-stage. Just as we have set up the immunology franchise, we have a very powerful franchise at Skyrizi and Rinvoq, so we have some optionality there.
Clearly, there’s a lot of activity in oncology and all players are in there. But we have the infrastructure now with neuroscience with the combination with Allergan. So something there makes a lot of sense.
Then aesthetics, clearly, we have demonstrated whether it was Soliton, for the cellulite opportunity Luminera for dermal fillers. Breadth of portfolio there, it is a strategic advantage. So I’d say, aesthetic is another area. So we prioritize those five areas, but each have different needs.
Chris Raymond
Excellent. Okay. Well, I have got a ton more questions, but no more time. So…
Rob Michael
Okay.
Chris Raymond
…thanks for the great talk guys. Thanks.
Rob Michael
Thanks, Chris.
Chris Raymond
Thanks, guys.
Be the first to comment