Good morning, and thank you for standing by. Welcome to the AbbVie Fourth Quarter 2023 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer portion of this call. Today's call is also being recorded. If you have any objection, you may disconnect at this time. I would now like to introduce Ms. Liz Shea, Senior Vice President, Investor Relations. Thank you. You may begin.

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; Rob Michael, President and Chief Operating Officer; Jeff Stewart, Executive Vice President, Chief Commercial Officer; Scott Reents, Executive Vice President, Chief Financial Officer; Carrie Strom, Senior Vice President, AbbVie and President, Global Allergan Aesthetics; and Roopal Thakkar, Senior Vice President, Chief Medical Officer, Global Therapeutics. Joining us for the Q&A portion of the call is Tom Hudson, Senior Vice President, Chief Scientific Officer, Global Research. Before we get started, I'll note that some statements we make today may be considered forward-looking statements based on our current expectations. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in our forward-looking statements. Additional information about these risks and uncertainties is included in our SEC filings. AbbVie undertakes no obligation to update these forward-looking statements except as required by law. On today's conference call, non-GAAP financial measures will be used to help investors understand AbbVie's 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. In addition to the news release issued this morning, we have also posted slides on our website at investors.abbvie.com that supplement some of the content we'll be covering this morning. Following our prepared remarks, we'll take your questions. So with that, I'll turn the call over to Rick.

Thank you, Liz. Good morning, everyone, and thank you for joining us today. Our performance this quarter tops off another excellent year for AbbVie, with results well above our initial expectations. I'm particularly pleased with the performance of our growth platform, the base business excluding Humira, which delivered full year sales growth of more than 8%, with revenue growth accelerating to more than 15% in the fourth quarter. The strength of our diversified growth platform has not only enabled us to successfully absorb the largest loss of exclusivity event to date across our industry, but it's also supported continued investment in our business for long-term growth. These investments include higher adjusted R&D expense, which was increased by nearly $600 million in 2023 and will be increased substantially again in 2024 to support several promising pipeline programs like ABBV-383 in multiple myeloma, ABBV-400, our next-generation ADC for several solid tumor types and lutikizumab for hidradenitis suppurativa, as well as inflammatory bowel disease. The proposed acquisition of ImmunoGen and their portfolio of ADCs accelerates our entry into the solid tumor space and strengthens our oncology pipeline, as well as the proposed acquisition of Cerevel, a unique opportunity to augment our presence in neuroscience with the pipeline of differentiated assets. We also increased our quarterly dividend which we announced in October. Since our inception, we have grown our dividend by more than 285%. In summary, our operational execution has been outstanding and we have considerable momentum heading into 2024, including an expected return to operational sales growth just one year following the U.S. Humira loss of exclusivity, driven by our growth platform. We remain confident in our long-term outlook, including a return to robust growth in 2025 with a high single-digit CAGR through the end of the decade. With that, I'll turn the call over to Rob for additional comments on our business performance. Rob?

Thank you, Rick. Today we reported another strong quarter and highly productive year for AbbVie. We delivered full year adjusted earnings per share of $11.11, which is $0.63 above our initial guidance midpoint, excluding the impact of IPR&D expense. Total net revenues were $54.3 billion, roughly $2.3 billion ahead of our initial guidance. Most importantly, each of our five key growth areas outperformed our initial expectations. As it pertains to AbbVie's near-term outlook, we are focused on three key priorities. First, driving strong performance of our ex-Humira Growth Platform. This platform is the critical driver of our return to robust growth in 2025 and beyond. In our therapeutic portfolio, we have several key brands including Skyrizi, Rinvoq, Vraylar, Ubrelvy, and Qulipta, which are each expected to contribute double-digit sales growth in 2024. We also expect meaningful growth for aesthetics this year, driven by improving market trends in the U.S. and continued execution across our international business. We are well positioned to drive strong long-term growth in this highly under-penetrated market. Second, we are focused on prioritizing investment in our pipeline, which encompasses numerous opportunities to elevate the standard of care for patients. We anticipate updates this year from several important R&D programs including approvals for Skyrizi in UC, ABBV-951 in the U.S., and potentially accelerated approval for Epkinly in third line plus follicular lymphoma. We also anticipate regulatory submissions for BoNT/E, our novel short-acting toxin, and potentially Teliso-V, an advanced non-squamous non-small cell lung cancer therapy. And third, we are focused on closing and integrating ImmunoGen and Cerevel. These two exciting opportunities represent substantial sources of revenue growth well into the next decade. We remain on track with the anticipated closing of both deals in the middle of the year. Today, we are also reaffirming our long-term sales outlook, which includes a return to robust revenue growth in 2025 with a high single-digit CAGR through the end of the decade. Included in this outlook is an updated forecast for Skyrizi and Rinvoq. Based on the impressive growth of both therapies, which we expect will collectively generate approximately $16 billion of revenue in 2024, we now anticipate Skyrizi and Rinvoq will collectively exceed more than $27 billion in sales by 2027 with robust growth continuing into the next decade. This updated forecast reflects an increase of more than $6 billion in revenue compared to our prior 2027 guidance. We expect global sales for Skyrizi to reach more than $17 billion in 2027, reflecting continued share capture in psoriasis where we are the clear market leader, as well as strong uptake in IBD. And we expect Rinvoq to achieve more than $10 billion of global sales in 2027, reflecting continued market growth and share momentum across each of Rinvoq's approved indications, including four in rheumatology, two in IBD, and atopic dermatitis. This forecast contemplates modest contributions from several new disease areas for Rinvoq, which we anticipate will be launching in the second half of the decade. These new indications have a collective peak sales potential of several billion dollars. Our updated forecast also includes higher estimates for Ubrelvy and Qulipta. We now expect total oral CGRP peak revenue of more than $3 billion, reflecting an increase of more than $1 billion. Our previously issued long-term forecasts for aesthetics, Vraylar, and ABBV-951 remain unchanged. In summary, this is an exciting time for AbbVie. We are demonstrating outstanding execution across our portfolio and our long-term outlook remains very strong. With that, I'll turn the call over to Jeff for additional comments on our commercial highlights. Jeff?

Thank you, Rob. I'll start with the quarterly results for immunology, which delivered total revenues of more than $6.9 billion, exceeding our expectations. Skyrizi total sales were approximately $2.4 billion, reflecting operational growth of 51.6%. Rinvoq total sales were more than $1.2 billion, reflecting operational growth of 62.8%. On a full-year basis, Skyrizi and Rinvoq delivered more than $11.7 billion in total combined revenue, an impressive increase of $4 billion year-over-year. And as Rob just described, we see substantial room for continued growth across each of their currently approved indications. You can get a good sense for this momentum by looking at the relationship between the current in-place share, which includes new and switching patients, and the total prescription share just today. For example, our performance in IBD has been very strong for both Skyrizi and Rinvoq. In Crohn’s disease, these two treatments together are already capturing roughly one out of every three in-play patients across all lines of therapy in the United States, while their combined total prescription share is only in the mid-single digits. You see a similar trend happening in ulcerative colitis for Rinvoq, and we anticipate launching Skyrizi for this indication later this year. So significant opportunity remains for revenue inflection in IBD, especially given their respective efficacy, safety, and dosing profiles. Across some of the other notable indications, Skyrizi is capturing roughly half of the in-place psoriasis patients in the U.S. biologic market relative to a total prescription share, which is in the mid-30s percent. Rinvoq is capturing high teens in-play share in the atopic dermatitis market, while total share is in the high single digits. Similarly, in rheumatoid arthritis, Rinvoq is capturing mid-teens in-play share, while total share is roughly 7%. So, again, we see substantial headroom for share gains in addition to the typical robust market growth across rheum, derm, and gastro. Plus, we are planning to have up to five additional indications for Rinvoq across several sizable markets that will potentially provide another significant revenue inflection in the second half of this decade and into the 2030s. Turning now to Humira, which delivered global sales of $3.3 billion, down 40.8% due to biosimilar competition. The erosion impact in the U.S. played out largely in line with our expectations this quarter, while performance across our international markets continues to trend better than expected. In the U.S., we have once again secured broad formulary access for Humira in 2024. While there will be some step down in coverage year-over-year, we will still have parity access to biosimilars for the vast majority of U.S. patient lives. Turning now to oncology, where total revenues were $1.5 billion. Imbruvica global revenues were $903 million, down 19% reflecting continued pressure in new patient starts. Venclexta global sales were $589 million, up 13.7% on an operational basis, with strong demand for both CLL and AML across our key countries. The early prescription trends for Epkinly in third line plus DLBCL have been encouraging with commercialization now underway in the U.S., Europe and Japan. We also anticipate the potential label expansion for follicular lymphoma later this year. Lastly, we have two new and exciting opportunities in oncology. Pending completion of the transaction, we will add Elahere to our portfolio. Elahere is a first-in-class ADC therapy approved for ovarian cancer, which is already demonstrating impressive uptake in the U.S. market. I look forward to welcoming the ImmunoGen commercial team to AbbVie. And Teliso-V, another novel ADC which has demonstrated very promising data in lung cancer. Teliso-V would further expand our scale and growth potential in solid tumors. In neuroscience, our second largest therapeutic area, total full year revenues were more than $7.7 billion, reflecting impressive absolute sales growth of nearly $1.2 billion. In the quarter, total revenues were approximately $2.1 billion, up 22.4% on an operational basis. Vraylar continues to demonstrate robust growth. Global sales of $789 million were up nearly 40%. We continue to see significant momentum in new prescriptions across all indications following the approval as an adjunctive treatment for major depressive disorder just over a year ago. And our leading oral CGRP portfolio for migraine contributed $348 million in combined sales this quarter, reflecting growth of approximately 40%. We anticipate continued robust demand for both Ubrelvy and Qulipta this year, including the expansion of Qulipta, the only once daily oral CGRP for prevention of both episodic and chronic migraine into the international markets. Based on the strong momentum, we have raised the outlook for our CGRP portfolio and now expect total peak sales from Ubrelvy and Qulipta combined to exceed $3 billion. Total Botox therapeutic global sales were $776 million, up 6.7% on an operational basis, reflecting momentum in chronic migraine, as well as other approved indications. And lastly, we recently launched ABBV-951 in both Japan and Europe, and we are pursuing commercial approval in the U.S. later this year. This treatment represents a potentially transformative next generation therapy for advanced Parkinson's disease and a $1 billion plus peak sales opportunity. So overall, I'm extremely pleased with the commercial execution across our diversified portfolio, especially the growth platform, which is demonstrating very strong momentum as we head into 2024. And with that, I'll turn the call over to Carrie for additional comments on aesthetics. Carrie?

Thank you, Jeff. Fourth quarter global aesthetic sales were approximately $1.4 billion, an operational increase of 6.9%. In the U.S., aesthetic sales of $884 million increased 5.7%, marked by accelerating market growth and strong key product performance. Fourth quarter U.S. Botox Cosmetic sales were $453 million, an increase of 7.3%. We continue to see sustained momentum in the recovery of the U.S. facial toxin market, which was a primary driver of growth in the fourth quarter. Botox Cosmetic remains the clear market leader with strong and stable share, despite new competitive entrants. U.S. Juvederm sales were $156 million in the fourth quarter, an increase of more than 20% versus the prior year. This robust growth was driven by the strong launches of Volux and SkinVive, which continue to drive new consumers and greater penetration in the dermal filler category. Consistent with our expectations, the U.S. filler market recovery trails toxins, but it's continuing to show improvement as year-over-year growth was roughly flat in the fourth quarter. As we look at 2024, we are pleased with the momentum of our U.S. aesthetics portfolio. We expect full year sales growth as our market leadership positions us very well from a competitive perspective, and we anticipate continued recovery in both toxin and filler markets. Internationally, fourth quarter aesthetic sales were $487 million, representing an operational increase of 9%. We experienced strong performance in most regions and growth benefited from the impact of China's COVID lockdowns in late 2022. Within China, the softening economic conditions that emerged in the third quarter continued to impact results. Consistent with what we experienced in the U.S., the economic slowdown has impacted fillers more than toxins, based upon their relatively higher price. We anticipate economic headwinds will continue in China over the near term, balanced against our expectations for continued strong performance in other international regions. Looking to the long-term, Aesthetics remains an area with very low market penetration. And we have demonstrated our ability to drive growth through investments in our customers, consumers, and innovation. As such, we anticipate Aesthetics will be a strong growth portfolio for years to come and remain confident in our ability to deliver more than $9 billion of sales by the end of the decade. With that, I'll turn the call over to Roopal.

Thank you, Carrie. In 2023, we saw significant evolution of our pipeline with multiple data readouts, regulatory submissions and approvals, as well as expansion of our R&D efforts with the announced ImmunoGen and Cerevel transactions. We expect to continue this progress with numerous important clinical and regulatory milestones anticipated this year. In immunology, we recently announced positive topline results for lutikizumab, our anti-IL-1 alpha and IL-1 beta bispecific being evaluated in hidradenitis suppurativa. In the Phase 2 study, lutikizumab demonstrated HiSCR50 and HiSCR75 measures, as well as improvement in skin pain compared to placebo. These are very impressive results considering all patients were inadequate responders to anti-TNF therapy and 70% of the patients were Hurley stage three, which is the most advanced stage of the disease. Based on these results, we plan to begin a Phase 3 program in HS later this year. We also plan to evaluate lutikizumab in ulcerative colitis and Crohn's disease, given the role that IL-1 likely plays in these diseases. Patients with UC who have an IL-1 beta signature have shown resistance to anti-TNF and other biologics, providing strong rationale for a potential biomarker approach. Additionally, we believe lutikizumab has the potential to be used in combinations to provide transformational levels of efficacy in IBD. We plan to evaluate combination approaches with lutikizumab and Skyrizi, as well as with other pipeline assets in Crohn's. Our Phase 2 studies in IBD are expected to begin later this year. Our regulatory applications are under review for Skyrizi in ulcerative colitis, with approval decisions expected in the U.S. and Europe later this year. Once Skyrizi is approved in UC, along with Rinvoq, we will have two assets with different mechanisms of action in IBD, both offering very high levels of efficacy. AbbVie will be very well-positioned with an industry-leading suite of treatment options for patients suffering from moderate to severe ulcerative colitis and Crohn's disease. We continued to make very good progress with the second wave of development programs for Rinvoq, with Phase 3 studies underway in five new indications: giant cell arteritis, lupus, hidradenitis suppurativa, alopecia areata and vitiligo. We anticipate data readouts for these programs over the next three years, beginning with data from our GCA study this year. Moving to oncology, we continue to make very good progress across our heme and solid tumor programs. In hematologic oncology, we'll see data in the second half of this year from the Venclexta Phase 3 VERONA trial in treatment-naive higher-risk MDS patients, with regulatory submissions and approvals anticipated in 2025. For Epkinly, we anticipate regulatory approvals in third-line or greater follicular lymphoma later this year in both the U.S. and Europe. We also expect to begin several new Phase 3 studies in 2024, including studies in second-line DLBCL and frontline follicular lymphoma. At the recent ASH Meeting, we presented new data for our BCMA CD3 bispecific ABBV-383 in multiple myeloma. ABBV-383 is engineered for high-affinity binding to BCMA on malignant cells, and low affinity binding to a unique CD3 epitope on T-cells, which has the potential to mitigate some of the adverse events associated with other T-cell engaging BCMA-based therapies, while preserving high levels of efficacy. We're very encouraged by the data emerging from our Phase 1b study, which show treatment with ABBV-383 is yielding deep and durable responses with a lower incidence and severity of CRS. With this profile, we believe ABBV-383 can be a highly effective and tolerable treatment for multiple myeloma, while potentially allowing for outpatient administration, limited or no step-up dosing and monthly administration from the beginning of treatment. All attributes which would make it very appealing to both patients and physicians. We remain on track to begin a Phase 3 monotherapy study in third-line multiple myeloma this year, and we plan to begin combination trials in earlier lines of therapy in 2025. In solid tumors, we recently announced positive topline results from the Teliso-V Phase 2 LUMINOSITY study in previously treated non-small cell lung cancer. Teliso-V demonstrated strong clinical benefits across key endpoints, including overall response rate, duration of response and overall survival, with a tolerable safety profile. We believe these results have the potential to support accelerated approval, and we plan to discuss the data with regulators in the coming months. Pending alignment with the FDA, our submission is planned for the second half of this year. We're also making good progress with our next-generation c-Met ADC ABBV-400, which utilizes the same c-Met blocking antibody as Teliso-V, but has a proprietary Topo-1 warhead to afford deeper and more durable responses with an improved therapeutic index. We remain on track to see data this year from the non-small cell lung cancer and gastroesophageal cohorts from our Phase 1 study. And based on the progress we're making in our colorectal program, we plan to begin a Phase 3 study later this year in third-line CRC. We also continue to make very good progress with our anti-GARP antibody ABBV-151. Our Phase 2 study in second-line hepatocellular carcinoma is underway, and we plan to begin several additional Phase 2 studies this year, including frontline HCC, frontline lung cancer and metastatic urothelial cancer. We look forward to providing updates on these programs as the data mature. Now moving to Neuroscience where we recently announced the European launch of ABBV-951 for patients with advanced Parkinson's disease. We also recently provided our complete response submission to the FDA for ABBV-951 with an approval decision anticipated in the second quarter. Our novel subcutaneous levodopa/carbidopa delivery system has the potential to offer meaningful benefits over current treatment options and others that are in development. ABBV-951 delivers significant improvements in off-time and on-time with a less invasive non-surgical system. It can deliver high levodopa doses similar to the amount provided by DUOPA, and it doesn't require combination with oral drugs to achieve high efficacy. ABBV-951 also provides a full 24-hour benefit, which should result in less morning akinesia. We're extremely excited to bring this transformative therapeutic option to patients in Europe and the U.S. once approved. In our Aesthetics pipeline, we recently submitted our regulatory application in the U.S. for Botox in platysma prominence. We anticipate an approval decision in the second half of this year. And we remain on track to complete the remaining CMC work this year for BoNT/E, our rapid onset short-acting novel toxin. Following completion of the remaining work, we plan to submit our regulatory application in the second half of the year, with approval anticipated near the end of 2025. So in summary, we continue to demonstrate significant progress across all stages of our pipeline and anticipate numerous regulatory and clinical milestones again in 2024. I also look forward to integrating the ImmunoGen and Cerevel teams and pipeline assets into our R&D organization once those transactions close this year. These two transactions significantly strengthened our oncology and neuroscience pipelines with the addition of several novel assets that have the potential to become innovative new therapies for many patients. With that, I'll turn the call over to Scott.

Thank you, Roopal. I'm very pleased with AbbVie's strong performance in 2023. We have substantial momentum across the portfolio to support our long-term growth outlook. Starting with our fourth quarter results, we reported adjusted earnings per share of $2.79, which is $0.05 above our guidance midpoint. These results include a $0.15 unfavorable impact from acquired IPR&D expense. Total net revenues were $14.3 billion, $300 million ahead of our guidance, and down 5.4%. Most notably, these results reflect 15.3% sales growth from our ex-Humira growth platform. The adjusted operating margin ratio was 43.8% of sales. This includes adjusted gross margin of 83.9% of sales, adjusted R&D expense of 13.4% of sales, acquired IPR&D expense of 2% of sales, and adjusted SG&A expense of 24.7% of sales. Adjusted net interest expense was $363 million, the adjusted tax-rate was 17.2%. Turning to our financial outlook for 2024, our full year adjusted earnings per share guidance is between $11.05 and $11.25. This earnings per share guidance includes dilution related to the ImmunoGen and Cerevel acquisitions of $0.32, which assumes closing in the middle of the year. Please note this guidance does not include an estimate for required IPR&D expense that may be incurred throughout the year. We expect total net revenues of approximately $54.2 billion, reflecting a return to modest operational growth. At current rates, we expect foreign-exchange to have a 0.5% unfavorable impact on full year sales growth. This revenue forecast contemplates the following approximate assumptions for our key products in therapeutic areas. We expect global immunology sales of $25.6 billion, including Humira sales of $9.6 billion, including U.S. erosion of roughly 36%. Skyrizi revenue of $10.5 billion, reflecting growth of more than $2.7 billion due to strong market-share performance in psoriasis, as well as robust uptake in IBD. And Rinvoq sales of $5.5 billion, reflecting growth of nearly 40% with continued market growth and share momentum across all approved indications. On a full-year basis, we anticipate that our strong volume growth for Skyrizi and Rinvoq will be modestly offset by low-single digit negative net price. In oncology, we expect sales of $5.7 billion, including Imbruvica revenue of $2.9 billion and Venclexta sales of $2.4 billion, as well as contributions from Epkinly, and partial year sales from Elahere. For Aesthetics, we expect sales of $5.7 billion, including $2.9 billion from Botox Cosmetic and mid-single-digit revenue growth from Juvederm. For Neuroscience, we expect revenue of $8.9 billion, representing growth of more than 15%, including Vraylar sales of $3.4 billion, Botox Therapeutic sales of $3.2 billion and total oral CGRP revenue of $1.6 billion. For eye care, we expect sales of $2.2 billion. Moving to the P&L for 2024, we are forecasting full-year adjusted gross margin of 84% of sales. Adjusted R&D investment of 14% of sales, adjusted SG&A expense of 23.5% of sales, and adjusted operating margin ratio of roughly 46.5% of sales. We expect adjusted net interest expense of $2.1 billion, which includes the partial year cost in 2024 to finance the ImmunoGen and Cerevel transactions. We forecast our non-GAAP tax rate to be approximately 15.7%. Finally, we expect share count to be roughly flat to 2023. Turning to the first quarter, we anticipate net revenues of approximately $11.9 billion. At current rates, we expect foreign exchange to have a 0.5% unfavorable impact on sales growth. This revenue forecast comprehends the following approximate assumptions for our key therapeutic areas. Immunology sales of $5.1 billion, including Skyrizi sales of $1.9 billion, and Rinvoq revenue of $1 billion. These estimates reflect typical first quarter seasonality as well as low single digit unfavorable net price. We expect Humira global revenue of $2.2 billion, including U.S. sales of $1.7 billion. We also anticipate oncology revenue just above $1.3 billion, Aesthetic sales of $1.3 billion, Neuroscience revenue of $1.9 billion, and eye care sales of $600 million. We are forecasting an adjusted gross margin of approximately 83.5% of sales and an adjusted operating margin ratio of roughly 44.5% of sales. We also model a non-GAAP tax rate of 14.8%. We expect adjusted earnings per share between $2.30 and $2.34. This guidance does not include acquired IPR&D expense that may be incurred in the quarter. Finally, AbbVie's strong business performance and outlook continues to support our capital allocation priorities. Our cash balance at the end of December was $12.8 billion. And we expect to generate free cash flow of approximately $18 billion in 2024, which includes roughly $1.9 billion in Skyrizi royalty payments. The strong free cash flow will fully support a strong growing dividend, which we have increased by more than 285% since inception, continued debt repayment, where we expect to pay down the approximately $7 billion of maturities this year, and also provides capacity for continued business development to further augment our portfolio. In closing, AbbVie has once again delivered outstanding results and our financial outlook remains very strong. We'll turn the call back over to Liz.

Thanks, Scott. We will now open the call for questions. In the interest of hearing from as many analysts as possible over the remainder of the call, we ask that you please limit your questions to one or two. Operator, first question, please.

Yes, the first question comes from Chris Schott with JP Morgan. Your line is open.

Hi, great. Thanks so much for the questions. Just I was looking for a little bit more color on the longer-term immunology outlook. You're targeting $27 billion plus by 2027 and highlighting growth from there. So, I guess my question was just can you elaborate on how mature the existing indications these products are going to be by 2027? And what type of growth can we anticipate longer-term? And maybe as part of that, it seems like from the comments that the growth beyond 2027 is more skewed towards Rinvoq given the new indications, but more like is it balanced between Rinvoq and Skyrizi, or has it become more of a Rinvoq-driven franchise in terms of the growth drivers over time? Thanks so much.

Yes. Hi, Chris. It's Jeff. Maybe I'll walk through a little bit of the process there and answer your questions. So we can see historically actuals and sort of fast forward in terms of the first thing we look at is the biologic penetration of these big indications. And there still remain significant headroom in terms of the ability for moderate to severe patients with these diseases to continue to be exposed to these biologics and these advanced orals, absolutely. And we can see for sure that psoriasis even in the U.S. is about 15% penetration, it's relatively modest; atopic dermatitis, the penetration rate is only about 7%. And then you have higher penetrated markets like IBD and I'll talk about what's interesting about IBD, that's somewhere in the 40% to 50% range across those. And then we can see clearly as these markets develop, you see line of therapy expansion. So first-line becomes less and less important as you move towards second and third-line over time. And right now, IBD is a big story about that; we calculate that into our long-term estimates, because it's still largely despite the severity a frontline-oriented market, because physicians often hang on to their frontline agents. That's going to change quite dramatically in the mid-term and even in the long-term perspective. We have a good peg on the market growth rates. Many of these market growth rates are very significant and stable. And we'll have good growth rates going into the next decade because of these dynamics around biologic penetration and line of therapy expansion. I highlighted in my remarks around share: we have a very good competitive position, very high capture rates. And we're really in the low end of the range in terms of the total prescription share, that will catch up to the in-play capture. Pricing, I think we talked a little bit. We're not going to give detailed pricing. But certainly, you can see based on Scott's comments that the idea of a high CAGR on high single-digit pricing is not something we've contemplated. So, we believe that there is significant room for growth even past 2027, especially as we'll have more Rinvoq indications coming that we've talked through. So we think that we're going to see robust growth based on our share capture and also how dynamic these markets are into the next decade.

And Chris, this is Rob. I'll just add, you think about the markets, the rheum market is growing low-single digits, atopic dermatitis is growing mid-teens and IBD is growing high-single-digits. So they're very strong markets, they will continue to be strong markets for us. And we're also seeing, as Jeff mentioned, there's a lot of headroom in terms of share capture. So we do expect that robust growth to continue beyond 2027 into the early part of the next decade. I think your observation is correct. Given that we would expect up to five new indications for Rinvoq, if you look at the rate of growth, Rinvoq versus Skyrizi, I think it's reasonable to assume that Rinvoq would have a higher rate of growth given the new indications, but both will grow very nicely. So, I would certainly encourage you to look at more robust expectations for both therapies with Rinvoq a little bit higher because of the new indications.

Thanks, Chris. Operator, next question, please.

Yes, the next question comes from Terence Flynn with Morgan Stanley. Your line is open.

Great. Thanks so much for taking the questions. Maybe two for me. Rick, I was just wondering if you could give us an update on succession planning and timing; we've been fielding that question from a number of investors recently, given you're now past the Humira LOE and positioned the company very well here given Skyrizi and Rinvoq commercial success and also some of the recent pipeline build-out. And then the second question I have was on lutikizumab. I know you guys have highlighted this, not a lot of focus from the investor side yet. Maybe if you could just talk about the size of the commercial opportunity in HS. And then why you're confident that that Phase 2 HS data will translate into success in the IBD side. Thank you.

All right, Terence. This is Rick. So I'll cover the first one. I guess what I would say is, I have nothing new to report today, but what I'd indicate is, we've talked about the criteria that we're going to use to make the decision when we're going to make the transition. That criteria is the same: when we believe that we are comfortable, we've navigated the LOE, and the rest of the business is performing at a high level. That's the point at which we want to make the transition, because we think that's the best time to be able to transition the CEO position. So I understand there's a lot of interest from investors here, that's logical and clear. Maybe what I can do is give you a little better perspective on the process that we're going to use in order to make the decision with the Board. I would say, the Board has been actively involved for the last four or five years with a lot of emphasis around ensuring that our internal candidate would get the experiences that we thought were needed prior to making the transition. I can tell you from my perspective, that's gone extremely well. We have regularly scheduled Board meetings several times a year where we specifically talk about succession and the progress that we're making. At the point at which the business has achieved that criteria that I described before, at the next regularly scheduled Board meeting, then I would make a recommendation to the Board that this is the proper time to make the transition. The Board would vote on that recommendation. At the end of that vote, we would send out an announcement to investors. And what you can expect when you get that announcement is that we would make an announcement that we were going to make the transition out at some point in the future, in all likelihood four months to six months in the future. The purpose of that is to make the final transition between myself and that person, and that'll take four to five months in order to be able to do that. I would say it's also very likely at that time, based on the discussions I've been having with the Board, that I will be named the Executive Chair for a period of time, and the purpose of that will be to make the transition of the full position over a period of time. So I think it's a very well thought out, very well managed process. And I think that's what you can expect going forward.

And Terence, this is Jeff. I'll start off and Roopal will address the second part of your question. So we established many years ago now this HS market with the approval of Humira. And we thought it was a relatively small market, and it turned out to be quite a surprise. There is a significant amount of patients around the world that suffer from HS; it's already a multi-billion dollar category. And we think it's going to continue to expand. And I say that because we can see that like IBD, there's just some new approvals coming. So, everyone sort of holds on to Humira as long as they can if they're exposed to a biologic. And so we see the same dynamic as you start to see IL-17s come into this space, and certainly, we're very excited about lutikizumab because of the profile that we're seeing emerge in the clinic. So it's a significant commercial opportunity. And I would say that when we look back over all the Humira indications over the last decade or more, HS was one of the most rapid indications that moved to a $1 billion-plus business. So it's an exciting opportunity, both commercially and certainly for patients. Roopal can address your comment on IBD.

Yes. Hi, Terence. Part of it starts, I would say, almost 15 years ago with our insights in Crohn's disease with Humira, where we started to see efficacy signals in patients that had HS. We saw a good amount of overlap between Crohn's and HS. So that's part of it. Now that doesn't really pan out for IL-17, but what we've observed with IL-1 beta in particular is that our internal data and external data show elevated expression signals with IL-1 beta. So we think we have that opportunity with lutikizumab because it also covers IL-1 beta, and we have two shots at this. One is to go specifically and look at a biomarker-driven targeted profile where we would be able to distinguish which patients actually have that higher expression. And the other approach, which we maybe weren't talking about years ago because we didn't have a product like Skyrizi which has high efficacy and very strong safety profile in Crohn's, is the opportunity to also look at combination. So a biomarker approach and a combination approach. Our insights from Humira and preclinical or biopsy-based insights that we have externally and internally support that. In short, we think the translational rationale is strong and we'll evaluate biomarker strategies and combination approaches in IBD.

Thanks, Terence. Operator, next question, please.

Yes, the next question comes from Andrew Baum with Citi. Your line is open.

Hi, many thanks. Couple of questions. One, given AbbVie's strength in market access in managed markets, I'd be curious on the potential future contagion from IRA-mediated price cuts on the Medicare book spilling over onto the commercial book of business. How much of concern do you think this is, given that has basically the same dynamics? And then second question on lutikizumab: if I remember from the canakinumab trials secondary to neutropenia, there was an increase in fatal infections. If you layer this on top of another immunosuppressive, how are you thinking about the safety concerns in these IBD patients?

Yes. Hi, Andrew. Thanks for your question. It's Jeff. We think that the negotiation aspects of the IRA will be very contained on the Medicare side. And as you can imagine with government programs over the years — when we had discussion with payers, they'll often say things about what the FSS price is for the VA or mandated discounts in the Medicaid channel. But we think those are really government actions and government rules. And so, we see that the market will play out largely like it has with the other government channels; that it's a unique dynamic in terms of essentially a forced negotiation that we think will be contained largely in the Medicare space. So that's how we view the world.

Hi, it's Roopal. I'll talk about lutikizumab and your question around neutrophils. Yes, we do see impact on neutrophils; it's dose-driven. However, I think we should consider the disease context: inflammatory bowel disease and some other indications will likely tolerate different benefit-risk thresholds because today, despite the success we've seen with Skyrizi and Rinvoq, not every patient is getting into remission. We still believe that a combination approach can achieve higher efficacy thresholds. The other opportunity there is that with combination strategies we can optimize doses to assure safety. Thus far in the HS trial, even at the highest dose we saw very few serious infections. So we're conscious of the neutropenia signal, we'll manage dose and combinations carefully, and we believe there are strategies to mitigate infection risk while maximizing efficacy.

Thanks, Andrew. Operator, next question, please.

Yes, the next question comes from Mohit Bansal with Wells Fargo. Your line is open.

Great. Thank you very much for taking my questions. Congrats on all the progress. I just want to go back to the ImmunoGen acquisition and the comments you made before. Can you talk a little bit about the plans to move the drug into earlier lines of ovarian cancer? You talked about maintenance setting, but more we are reading it, in first-line maintenance, the PFS and OS tends to be really long. So could you talk a little bit about the strategy there and how do you overcome the existing OS benefit that these drugs provide? Thank you.

Hi, Mohit. I’ll take that. So, as you've seen with Elahere, there's a substantial overall survival benefit in certain settings. The plan is to move into earlier lines of therapy. Secondly, it's also part of the strategy to move into sensitive populations, which is around 55% of the population; resistant is around 45%. The third aspect is we've seen encouraging data in medium expressers of FR-alpha, which are approximately 30% of patients; high expressers are around 35%. So those are three strategies: move earlier, target sensitive and medium expressers, and identify appropriate combinations. How do we get into earlier lines? A couple of things: we've seen Elahere be combined at full dose with carboplatin, which is encouraging and gives an opportunity to combine upfront. Then maintain on Elahere or Elahere plus bevacizumab. We'll also look at combinations with PARP inhibitors which are relevant for HRD-deficient patients. Taken together, we see opportunity to move earlier; such studies will start as soon as possible but will likely read out in the later part of the decade into 2030.

Thanks, Mohit. Operator, next question, please.

Our next question comes from Vamil Divan with Guggenheim Securities. Your line is open.

Thanks for taking my question. So my question is on Humira. I was curious, given the recent performance the company has had with the erosion since the introduction of biosimilars, can you now provide a better sense around the company's expectations on Humira's longer-term tail revenues in both the U.S. and ex-U.S. markets? Thank you.

Hi, it's Rob. I'll take that question. We do expect the U.S. tail will start to emerge in the 2025 or 2026 timeframe. Keep in mind 2024 is the first full year for U.S. biosimilars. We'll have to see what happens with volume uptake this year and also where interchangeability lands. Ultimately, what contracting looks like next year will matter. So I wouldn't expect us to quantify the tail this year. It's something we would likely do either in 2025 or 2026. As it relates to international, you're seeing, I think this year, a step-down of about $400 million; half of that is really the last wave of markets like Canada and Puerto Rico where we're seeing some incremental erosion this year. The other half would be the typical international price erosion you see across therapeutic areas, not specific to biosimilars. And part of the impact is the strength of Skyrizi and Rinvoq — as these newer agents elevate standard of care, you see some share move to those agents. Probably the best way to think about international is to consider half of the erosion this year as being those final waves, and then consider what the ongoing erosion could be beyond that. But we'll be more specific once we see how the U.S. plays out in this first full year of biosimilars.

Thanks, Dan. Operator, next question, please.

The next question comes from Carter Gould with Barclays. Your line is open.

Great. Good morning, thanks for taking the questions. Two on the neuroscience portfolio. First on ABBV-951: how should we think about that? Is that more about growing the overall pie of device-based therapies versus taking share from apomorphine and gels? And then, looking a little longer-term, AbbVie has several Phase 2 Alzheimer's studies that will read out later this year or by early next year. Fully acknowledging the commercial challenges in the Alzheimer's space today and that some of these targets are being validated, how should investors think about these assets either individually or collectively and your level of excitement? Thank you.

Yes. Hi, it's Jeff. I'll take the first question. At a macro level in Parkinson's disease you have a significant number of patients — 85% of patients are on oral medications. They often end up taking many pills or complex regimens and they face a surgical barrier for more advanced therapies, like deep brain stimulation or DUOPA, which involve invasive procedures. ABBV-951 establishes a transition zone: a less invasive subcutaneous pump that offers significant symptomatic benefit and can be used before moving to more invasive interventions. We're already seeing uptake in Japan where we launched late last year, and in early European launches. ABBV-951 creates a new high-efficacy category with 24-hour benefit, titratable dosing, and a smaller pump that is replaced every few days — it's a compelling option between oral therapy and surgical interventions.

And Carter, I'll talk about the Alzheimer's assets. First, ABBV-916 is our Aβ antibody. What we like about it so far is a long half-life which could allow spaced dosing, potential higher potency if that holds, robust reductions in beta-amyloid that could allow for subcutaneous dosing spaced apart, and potentially lower ARIA. If we see those attributes by the end of this year or early next year, that would be an exciting differentiated profile with convenience and a potentially better benefit-risk profile. ABBV-552 is our SV2A oral candidate for cognition, currently in Phase 2 with a readout expected end of this year or early next year; it is being studied allowing patients to be on standard of care and will use typical cognitive assessments along with measures of neuropsychiatric symptoms. The third asset is emraclidine, which comes from Cerevel and is in early stages for Alzheimer's disease psychosis; about 40% of diagnosed patients present with psychosis symptoms and this could address that important unmet need. Overall, we have a complementary suite of options across Alzheimer's disease that could address multiple aspects of the disease, and we're excited to see data in the coming months.

Thanks, Carter. Operator, next question, please.

The next question comes from Technical Difficulty. Your line is open.

This is (inaudible) on for Vamil. Thanks for taking my question. So my question is on Humira. I was curious, given the recent performance the company has had with the erosion since the introduction of biosimilars, can you now provide a better sense around the company's expectations on Humira's longer-term tail revenues in both the U.S. and ex-U.S. markets? Thank you.

So, this is Rob. Yes, we did include ImmunoGen and Cerevel in our long-term guide. The thing to keep in mind is high-single-digits, when you think about the range that could represent, that's around $10 billion between the low-end of the high-single-digits and the high-end of the high-single-digits. And so, there aren't any pulls; what we've updated as we walked you through is we've increased the oral CGRP peak revenue, we've increased Skyrizi and Rinvoq and we've reaffirmed the others. So there's nothing that we took down. But just keep in mind that you've got a pretty wide range. If you look at Street consensus, we're encouraged that it continues to move up. It has moved up over the course of the last quarter, about $3 billion in 2029. It's nice to see that upward movement. But it's still below what we expect. If you think that that growth rate for the Street is just under 5%, we expect high-single-digits. And so, even with this update, as well as ImmunoGen and Cerevel, we're still high-single-digits. But keep in mind, it's a pretty wide range. Regardless, it's industry-leading growth and we're set up very well to continue delivering a very strong growth, and we're set up very well to grow very nicely in the next decade as well.

Thanks. Operator, next question, please.

The next question comes from Gary Nachman with Raymond James. Your line is open.

Thanks and good morning. First on Aesthetics, could you talk a bit more why you're confident in what seems to be a pretty decent return to growth in 2024? How much of a headwind could China be offsetting the U.S. growth? And what other regions will you be getting some lift this year? And then secondly, as you return to more robust revenue growth in 2025, what are reasonable expectations for operating margins directionally in 2025? Can that expand at all or is it more likely to be depressed from the ImmunoGen and Cerevel deals? Just give us some directional ways to think about that for next year. Thank you.

Hi, Gary, this is Carrie. I'll take your first question on the Aesthetics market recovery. The U.S. toxin market started to recover at the end of 2023 and we expect that recovery to continue through 2024, with toxins showing stronger growth than fillers. In Q4 2023, U.S. filler market growth was roughly flat after multiple quarters of decline, and we expect a modest rebound in fillers in 2024. Our patient-demand metrics and search metrics entering 2024 support our expectations. In China, we expect the economic headwinds that emerged mid-2023 to continue in the near-term and expect the China Aesthetics market to be flat overall in 2024, with a negative first half of the year and recovery in the second half. We expect that China softness will be balanced by strong performance in other international regions, including Japan and Latin America markets like Brazil. For Q1 guidance specifically, growth in the U.S. will be offset by international decline, particularly China, and there is a difficult year-over-year comp in Q1 due to post-pandemic reopening effects in Q1 2023.

And Gary, to build on that, I said previously that to get to our guidance of greater than $9 billion for Aesthetics we need to deliver average annual high-single-digit growth. We haven't seen the full filler recovery yet and China slowed, but despite those headwinds we're delivering high single-digit growth. Aesthetics markets remain under-penetrated and we have multiple innovations — masseter and platysma indications for Botox, our short-acting toxin BoNT/E, and filler innovations — that can drive both market growth and share. We're confident in the greater than $9 billion target by the end of the decade.

Gary, this is Scott. I'll take your question regarding operating margin expansion. For 2024, we've guided to about a 46.5% adjusted operating margin. When we return to robust growth in 2025, we do see the operating margin expanding and continuing to expand as we grow through the decade. If you are modeling this, you might reasonably peak it at around 50% — that's where we see a potential long-term peak for operating margin. We expect steady expansion over several years, and that expansion will include the full-year impact of ImmunoGen and Cerevel by the time we're fully through the integration and the businesses are contributing.

Thanks, Gary. Operator, next question, please.

Yes, our next question comes from Steve Scala with TD Cowen. Your line is open.

Thank you very much. Two questions. Is the current tax rate fully reflecting likely tax changes in the U.S. and outside the U.S.? Previously the company spoke to a 16% tax rate and we're pretty much there. I'm wondering if the increases are kind of behind us? And then Rick, a slightly different question: there are clear reasons such as the success of Skyrizi and Rinvoq, but I'm curious if you would share a few of the externally less visible factors that are leading to AbbVie's success traversing the Humira patent expiration that some peers missed. I assume contracting, formulary management, allocation of overhead are part of it. What else would you be willing to share? Thank you.

Steve, this is Scott. On the tax rate: we were essentially flat between this year and last year at about 15.7%. We do see that tax rate over a three-year period increasing by about 1% on average due to factors like the GILTI rate increasing under global tax changes. That won't be a straight 1% per year step; you'll see a step-up in a couple of years when the U.S. foreign minimum tax increases. The House did pass a bill this week including R&D expensing provisions; if enacted as written, that could modestly reduce our tax rate by roughly 80 basis points. So we see some modest increases from global tax changes but offset potential policy changes depending on legislation.

Steve, this is Rick. If you step back over the last 10 years, our strategic objective was to build a diversified growth platform to offset Humira LOE and return to growth quickly. That required focusing on markets and assets with durable value and ensuring strong commercial execution. AbbVie has historically executed well commercially: understanding markets deeply, competitive environments, and the patient journey so patients can access medicines. We are also adept at 'read and react' — identifying issues early and responding quickly. The label change on Rinvoq and how we've navigated it is an example — despite challenges we found ways to grow. Migraine and neuroscience are other examples of markets where we adapted our approach. Finally, we have been efficient with R&D investment, getting high returns from that investment. Going forward we are increasing R&D to support large Phase 3 programs for assets like ABBV-383 and ABBV-400. It takes all these elements — strategy, execution, R&D discipline, and agility — to deliver sustained performance.

Thanks, Steve. Operator, next question, please.

Yes, the next question comes from Evan Seigerman with BMO Capital Markets. Your line is open.

Hi, guys. It's Nachman for Evan. I wanted to ask — thinking about the upcoming approval for Skyrizi in UC, how is management thinking about how that may or may not impact Rinvoq sales? With both products in the AbbVie suite, what is the expectation for potential cannibalism across these assets, if any? Thanks.

Yes. Hi, it's Jeff. We've learned a lot from watching Skyrizi and Rinvoq in Crohn's. We're careful about positioning these assets with physicians. In many of our major markets, they are complementary. Rinvoq in the U.S. currently has a label that positions it later-line in certain uses, while Skyrizi has strong efficacy and can be considered frontline in some settings. The overlap and cannibalization are manageable and minimal; in many cases we see total AbbVie share build because of complementary positioning. So we are confident we can navigate the two assets in IBD to maximize overall franchise value rather than materially cannibalize one another.

Thanks for the question. Operator, next question, please.

Yes, the next question comes from Tim Anderson with Wolfe Research. Your line is open.

Hi, I have a question on the obesity drug impact on AbbVie's Aesthetics business. Uptake for obesity drugs could be a headwind if patients reallocate out-of-pocket spending away from dermal fillers and toxins, or a tailwind if patients using obesity drugs develop so-called 'Ozempic face' and then use more toxins and fillers. What's been the experience so far and what do you expect going forward over the next few years? Thank you.

Hi, Tim. Short answer: we have not seen an impact on our Aesthetics business positive or negative so far. Our customers and consumers are participating in the weight-loss market and some practices integrate both services. There are instances where a patient trades off share of wallet, but overall we see it as a long-term tailwind: anytime people get more engaged in their appearance it supports Aesthetics. Our consumer and customer insights suggest that many people who use medical weight-loss products are more interested in aesthetic treatments afterwards, so we view it as a potential long-term tailwind.

Thanks, Tim. Operator, next question, please.

Yes, the next question comes from Tim Lugo with William Blair. Your line is open.

Thanks for taking the question. After the two announced acquisitions in December, what are the team's thoughts on M&A in 2024? Some peers have given guidance on expected deal sizes. Is that something you can provide the Street or at least talk about your capacity at this point?

Hi Tim, it's Rob. Our BD efforts continue to focus on identifying assets that can drive growth in the next decade across immunology, oncology, neuroscience, aesthetics and eye care. We have what we need in our current portfolio to deliver on growth expectations this decade. Our external efforts are aimed at early-stage opportunities, which are typically smaller-sized deals. In immunology we look for new mechanisms and combination opportunities. In oncology, ImmunoGen complements our ADC strategy and gives us an entry into solid tumors; we're also focused on bispecifics and CAR-T complementary technologies. In neuroscience, Cerevel adds depth in neuropsychiatry and complements migraine and neurodegeneration efforts. In eye care, we're excited about REGENXBIO collaboration in wet-AMD and diabetic retinopathy and continue to look for innovation in glaucoma and retina. In aesthetics, we look for innovations that drive new consumers. Our BD group is active and we have financial capacity, but most of our near-term focus is on earlier-stage opportunities rather than large transformative deals at this time.

Thanks Tim. Operator, next question, please.

Yes, the next question comes from James Shin with Deutsche Bank. Your line is open.

Hi. Good morning. I had a question on PARP inhibitors and the competitive dynamics in ovarian cancer. How do you feel about PARP inhibitors interacting with Elahere, and how do you feel that market landscape looks going forward?

Unfortunately, your line was not very clear. We're happy to address that question following the call. Apologies for that. Operator, next question please.

Yes, the next question comes from David Risinger with Leerink Partners. Your line is open.

Yes, thanks very much, and congrats on the long-term updates. With respect to the Alzheimer's commentary, one product left out was the TREM2 program AL002 with an estimated primary completion in September. If you could comment on that as well, that would be helpful. And with respect to the GILTI tax change that's coming, can you provide more color on timing and potential impact? Thanks very much.

Hi, this is Tom Hudson. I'll answer the first question. Yes, we do have a partnered program on the TREM2 target. TREM2 was identified in Alzheimer's disease through genetic studies and is linked to modulation of the innate immune response in AD. We have a program with a partner in clinical development; patients are enrolled in the Phase 2 and we expect to have data later this year. It's early development but the target is of high scientific interest and we will report key data later in the year.

Regarding the GILTI tax: this is the U.S. foreign minimum tax on foreign earnings. The current rate is 10.5% and is expected to move up to around 13.1% (a bit more than that). Implementation timing depends on fiscal year-ends of legal entities, but let's call 2026 as the rough time when this will be effective for us. Only part of our income is subject to that rate; we estimate roughly a 1.5% impact to our tax rate from that change. I baked that into my comment of about a 1% average increase over the next three years.

Thanks, David. Operator we have time for one final question.

Okay. And our final question is from Luisa Hector with Berenberg. Your line is open.

Thank you for taking my question. I wanted to touch on the Part D redesign and the IRA. You have a number of drugs that are likely to be impacted by this. You talk about a strong rebound in 2025. I'd love to hear your thoughts on how that redesign will impact results and to what extent that is already baked into your expectations of the rebound. And perhaps to check, have you now received the initial offer from CMS on Imbruvica? Thank you.

Thank you, Luisa. It's Jeff. We have contemplated in our planning and long-term guidance both the Part D redesign and the IRA impacts based on our projections of when some of our drugs might be negotiated. On Part D redesign, many of our brands could be impacted under the catastrophic redesign component. There is also the cap and smoothing policy which could result in volume offsets as patients gain better access due to lower out-of-pocket costs in some parts of the benefit. Volume does not fully offset the pricing impact, but these effects are contemplated in our planning and long-term guidance.

Luisa, this is Rob. We have contemplated the Part D redesign in our high single-digit CAGR target. Keep in mind Part D benefit redesign starts in 2025, so that's an important modeling point. The redesign may present a net headwind of a couple of points of growth because of higher cost share, partially offset by volume and improved low-income subsidy dynamics. We expect growth to accelerate year-over-year starting next year through 2029, delivering the high-single-digit CAGR, but 2025 will have the Part D redesign headwind to consider.

And Luisa, regarding Imbruvica pricing under CMS: yes, we have received the initial offer recently. CMS has a process to set prices and there will likely be back-and-forth between the manufacturer and CMS. CMS has indicated it will publish a final price by September 1st. It's premature for us to comment on the final price now; we don't expect to have a final published price until close to that date.

Thanks, Luisa. And that concludes today's conference call. If you'd like to listen to a replay of the call, please visit our website at investors.abbvie.com. Thanks again for joining us.