Earnings Call Transcript - ABBV Q3 2021

Operator, Operator

Good morning. Thank you for joining us. Welcome to AbbVie's Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode until the question-and-answer segment. I would now like to introduce Ms. Liz Shea, Vice President of Investor Relations. Please go ahead.

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, Rob Michael, Executive Vice President and Chief Financial Officer, and Jeff Stewart, Executive Vice President Commercial Operations. Before we get started, some statements we make today may be considered forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. 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 the 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. 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 AbbVie's revenue recognition accounting policies and exclude the divestitures of ZENPEP and Bio case. References to operational growth further exclude the impact of exchange. Following our prepared remarks, we'll take your questions. So with that, I will now turn the call over to Rick.

Rick Gonzalez, Chairman and CEO

Thank you, Liz. Good morning, everyone, and thank you for joining us today. I'll discuss our third quarter performance and outlook, and then Jeff, Mike, and Rob will review our business highlights, pipeline progress, and financial results in more detail. AbbVie continues to perform very well. We once again delivered an outstanding quarter with adjusted earnings per share of $3.33, exceeding the midpoint of our guidance by $0.13. Total adjusted net revenues of more than $14.3 billion was up 10.8% on an operational basis, with balanced growth across each of the major growth platforms. We continue to see double-digit revenue growth in immunology, where Skyrizi and Rinvoq have established very strong launch trajectories. These two assets are either approved, under regulatory review, or in late-stage development across all of Humira's major indications. And we remain confident that they will both be significant contributors to AbbVie's long-term growth. Aesthetics is also demonstrating impressive double-digit operational sales growth. Our dedicated global aesthetics structure and increased investment are driving accelerated category growth across both toxins and fillers, where there is substantial room for additional market penetration. Our strategic investments and targeted field force expansions have improved customer retention rates and significantly increased the number of first-time patients to our leading brands. We are once again raising our full-year guidance for aesthetics this quarter. And we view this portfolio as an extremely attractive growth opportunity over the long term, with high single-digit compounded annual growth rates expected through the end of the decade. Our Neuroscience business drove robust double-digit revenue performance again this quarter. And we added a compelling new product to our migraine portfolio with the approval of Qulipta, a once-daily oral medication for the preventative treatment of episodic migraine. Our Hematological Oncology portfolio delivered operational sales growth of approximately 8% this quarter, despite a protracted market recovery in CLL, which remains below pre-COVID levels. Beyond the significant contributions of Imbruvica and Venclexta, we have an exciting oncology pipeline with several promising programs in development for blood cancers and solid tumors, to support sustainable long-term growth. These include Navitoclax for myelofibrosis, Epcoritamab for B-cell malignancies, ABBV383 for multiple myeloma, lemzoparlimab for AML and MDS, as well as Teliso-V for non-squamous, non-small cell lung cancer. Lastly, we continue to make excellent progress with the integration of Allergan. Our financial results show that we have created a stronger and much more diverse company with numerous products across our newly combined portfolio, delivering robust growth. Overall, I'm extremely pleased with our momentum, and we are once again raising our full-year 2021 EPS guidance. We now expect adjusted earnings per share of $12.63 to $12.67, reflecting growth of nearly 20% at the midpoint. Additionally, as noted in our news release today, we are announcing an 8.5% increase in our quarterly cash dividend, from $1.30 per share to $1.41 per share, beginning with the dividend payable in February 2022. Since our inception, we've grown our quarterly dividend by more than 250%. In summary, we're demonstrating strong execution across our portfolio. We've assembled an impressive set of diversified assets with significant growth potential, giving us a high degree of confidence in the long-term outlook for our business. With that, I'll turn the call over to Jeff.

Jeff Stewart, Executive Vice President Commercial Operations

Thank you, Rick. We continue to demonstrate strong and balanced growth across our therapeutic portfolio. I'll start with Immunology, where we remain well-positioned for sustained leadership with a portfolio of best-in-class medicines. Total immunology revenues were approximately $6.7 billion, up 14.9% on an operational basis. Global Humira sales were more than $5.4 billion, up 5.2% on an operational basis, with 10.1% revenue growth in the U.S. offset by biosimilar competition across the international markets, where revenues were down 16.7% on an operational basis. SKYRIZI is performing extremely well. Global sales of nearly $800 million were up 18.1% on a sequential basis, reflecting continued market share gains. In the U.S., SKYRIZI's leading in-play psoriasis patient share, which includes both new and switching patients, is now roughly 36%, more than double the share capture of the next nearest biologic competitor. SKYRIZI total prescription share in the U.S. psoriasis biologic market is now nearly 20%, second only to HUMIRA. Internationally, SKYRIZI continues to ramp nicely, having also achieved in-play patient share leadership in more than a dozen key markets. This compelling share performance will be further supported by two important near-term enhancements. The availability of more simple delivery forms for SKYRIZI, as well as the potential indication expansion in psoriatic arthritis. First, we recently launched the new and convenient SKYRIZI single-dose, 150 milligrams, self-injectable pen and syringe in major territories around the world. The market response has been very favorable, and the approval now makes SKYRIZI the only quarterly dosed brand that is available in a single self-injectable pen for patients. Second, we are preparing for the global launch of SKYRIZI in psoriatic arthritis, as we near approval decisions in both the U.S. and Europe. We received a CHMP positive opinion earlier this month, with anticipated approval in Europe by year-end. And we continue to expect FDA approval early next year. The addition of this indication, once approved, will round out SKYRIZI's dermatology label and give patients with PSA access to a new compelling therapeutic option. We're also making excellent progress with SKYRIZI's development in Crohn's disease, which was recently submitted for U.S. regulatory review, with commercialization expected next year. Rinvoq also continues to demonstrate robust growth. Global sales of more than $450 million were up nearly 20% on a sequential basis. Total in-play RA share remains strong and now reflects approximately 17% patient share in the U.S., as well as leadership in a half a dozen key countries around the world. Internationally, RINVOQ share continues to ramp in RA. And we're making excellent progress with the recent commercial launches of PSA, AS and atopic dermatitis, where we have secured strong labels for each of these indications. As many of you are aware, the FDA issued a safety communication regarding new and updated warnings for JAK inhibitors, including RINVOQ in early September. While we do not yet have an updated label, we are closely monitoring prescription trends and feedback from the field. And we have not observed a significant impact on RINVOQ utilization at this time. That said, should the updated label restrict use to TNF inadequate responders, we would certainly expect a near-term impact on new patient starts in RA. Based on the robust data we have generated across our development program against multiple biologics and later lines of RA therapy, we do expect that RINVOQ will ultimately attain higher share growth in the second line-plus setting, as most patients ultimately fail TNF therapies over time. Overall, we continue to feel very good about the performance and profile of RINVOQ and remain confident this asset will be a major contributor to AbbVie's long-term growth. In Hematologic Oncology, global revenues were nearly $1.9 billion, up 8.1% on an operational basis. Imbruvica and Venclexta have a strong position across multiple heme indications, including CLL, where AbbVie's combined portfolio remains the clear market share leader across all lines of therapy. Global Imbruvica revenues were approximately $1.4 billion, up 0.3%. In the U.S., performance continues to be primarily impacted by a slower-than-expected market recovery in CLL, as well as some modest share erosion from newer therapies, including Venclexta and other BTK inhibitors. New patient starts in CLL remain below pre-COVID levels, and it is difficult to predict when this dynamic may fully recover. Venclexta sales were up 38.7% on an operational basis, with increasing momentum across all indications, including a strong AML launch trajectory in the international markets. In neuroscience, revenues were nearly $1.6 billion, up 25% on an operational basis. I'm particularly pleased with the results and outlook for our emerging migraine portfolio, where we are now the only company to have a portfolio of distinctive therapies to address the spectrum of this common, complex, and debilitating disease, including Botox Therapeutic, a unique foundational treatment for the prevention of chronic migraine, which is performing very well. Total sales of $645 million for all the Therapeutic Botox uses were up 22.5% on an operational basis. Ubrelvy, our leading oral CGRP treatment for acute migraine, is also demonstrating rapid growth. Total sales of $162 million were up nearly 30% on a sequential basis. Based on Ubrelvy's competitive profile, continued strong new patient starts, and a rapidly expanding market, we remain confident that Ubrelvy represents a $1 billion-plus peak sales opportunity. And now we're just launching Qulipta, the only oral CGRP specifically developed for the preventative treatment of migraine, which is already off to an excellent start. Early feedback from our physicians has been very positive, given QULIPTA's strong efficacy, safety, and convenient dosing profile relative to the current standards of care. The QULIPTA launch is being supported by our existing migraine sales force, with commercial access expected to ramp strongly through the first half of 2022. QULIPTA also represents a $1 billion-plus peak sales opportunity. Now we believe having three distinct and competitively positioned therapies across the spectrum of migraine conditions, with Botox Therapeutic, UBRELVY, and QULIPTA, which each have been optimized for a specific migraine indication, enables physicians to tailor treatment for the broadest range of patients. Our portfolio of migraine therapy puts us in a very strong position to capture growth in this dynamic market. Turning to psychiatry, we also see robust performance with Vraylar, which remains the fastest-growing atypical anti-psychotic. Total revenues of $461 million were up 29% on an operational basis, with continued strong demand across schizophrenia, bipolar I disorder, and bipolar depression. Lastly, in our other key therapeutic areas, we saw a significant contribution from eye care, which had revenues of $871 million, up 2.9% on an operational basis. Mavyret sales were $426 million, up 2.9% on an operational basis, as treated patient volumes still remain suppressed compared to pre-COVID levels. And we saw double-digit growth operationally for both Creon and Lupron. So overall, I'm pleased with our continued execution across the therapeutic portfolio, which is demonstrating strong revenue growth. And with that, I'll turn the call over to Mike for additional comments on our R&D programs.

Michael Severino, Vice Chairman and President

Thank you, Jeff. I'll start with immunology, where we had several regulatory updates and data readouts for both Rinvoq and Skyrizi across therapeutic areas. Following successful completion of the registrational programs for Rinvoq in ulcerative colitis and Skyrizi in Crohn's disease, we submitted our regulatory applications for each asset in their respective indications. We saw very strong data for both Rinvoq and Skyrizi as induction and maintenance treatments in UC and Crohn's, respectively. And based on these results, we believe both drugs have the potential to become highly effective, differentiated therapies in these indications. We anticipate approval decisions for both in 2022. Earlier this month, we announced positive top line results from our Phase 3 SELECT-AXIS 2 program for Rinvoq in axial SpA, which included data from two standalone studies: one for ankylosing spondylitis patients who had an inadequate response to biologics, and another for patients with non-radiographic axial SpA. In the ankylosing spondylitis biorefractory study, RINVOQ performed very well, demonstrating significantly greater improvements in signs and symptoms, as well as physical function and imaging endpoints compared to placebo. We saw levels of efficacy in this difficult-to-treat refractory population similar to those more typically observed in bio-naive patients. These results will be added to our submission package for RINVOQ in AS, which is currently under review by the FDA. In a non-radiographic axial SpA study, RINVOQ also performed very well, meeting the primary and key secondary endpoints. We plan to submit our regulatory applications in this indication later this quarter as well. RINVOQ's safety profile in these axial SpA trials was consistent with previous studies, and there was no evidence for increased risk of DVT, PE, MACE events, or malignancies in either study. Based on the data generated in the SELECT-AXIS program, we believe RINVOQ has the potential to improve care for patients suffering from axial spondyloarthritis by providing sustained disease control and rapid and durable pain reduction, as well as improving function. As you're likely aware, in September, the FDA communicated that they will require new warnings for JAK inhibitors, including RINVOQ, and their use will be limited to certain patients who have not responded to or cannot tolerate anti-TNFs. We continue to work with the FDA regarding updated labeling language for the RA indication, while simultaneously engaging with the agency on our files for atopic dermatitis, psoriatic arthritis, and ankylosing spondylitis. We remain confident in our submission packages for these three new indications and continue to expect approvals following completion of the RA label update. In the area of oncology, we continue to make good progress advancing all stages of our pipeline. We're nearing completion of several indication expansion programs for VENCLEXTA. In our study in previously untreated higher-risk MDS patients, which recently received a breakthrough therapy designation, we expect to make a data cut early next year to include six-month follow-up data for duration of response. Based on this data cut, we plan to submit our regulatory applications to the FDA in the first half of 2022 for an accelerated approval. We continue to make good progress with Venclexta in the Canova trial, which is evaluating Venclexta in relapsed refractory multiple myeloma patients with a t(11;14) mutation. VENCLEXTA has shown strong anti-myeloma activity in this biomarker-defined population, and if successful, has an opportunity to play an important role in the treatment paradigm for multiple myeloma. We expect a data readout from this event-driven trial next year. In our early to mid-stage hem/onc pipeline, we continue to expand the cohorts in the aducanumab Phase 1/2 studies in diffuse large B-cell lymphoma and follicular lymphoma, and we're evaluating aducanumab as both a monotherapy and in combinations. We expect to see data from both the monotherapy and combo studies next year, and we will discuss the monotherapy data with regulators regarding a file for accelerated approval. We also recently began the dose escalation stage of the Phase 1b studies for ABBV-181 in AML, MDS, and multiple myeloma, and ABBV -383, our BCMA-CD3 bispecific antibody, is currently in the expansion stage of its Phase 1 study in multiple myeloma patients. We expect to begin registrational phase 3 studies next year. Moving to Neuroscience, where we had several notable pipeline events since our last earnings call. In September, we received FDA approval for Qulipta, the only oral CGRP specifically designed as a preventative treatment for migraine. We're very pleased with the label, which reflects Qulipta's strong benefit risk profile, and is supported by a robust clinical development program. In our registrational program, which evaluated Qulipta in nearly 2,000 patients suffering from episodic migraine, treatment with Qulipta resulted in a significant reduction in mean monthly migraine days compared to placebo, and approximately 60% of patients achieved at least a 50% reduction in migraine days. We think these data compare favorably to other preventative migraine treatments on the market, and believe our new oral treatment option will be competitively positioned in the prevention market. Our migraine portfolio now includes Ubrelvy for acute treatment of migraine, Qulipta for preventative treatment of episodic migraine, and Botox for preventative treatment of chronic migraine. With this distinct portfolio, AbbVie is uniquely positioned to address the full spectrum of this complex and debilitating disease. This morning, we announced top-line results from two Phase 3 studies evaluating Vraylar as an adjunctive treatment in major depressive disorder. In the 301 study, a 1.5 milligram a day Vraylar dose met the primary endpoint demonstrating a clinically meaningful improvement in total MADRS score compared to placebo at Week 6, with a highly statistically significant p-value of 0.005. In this study, the 3 milligram Vraylar dose did not reach statistical significance, but it did show a clear trend toward improvement with a nominal p-value of approximately 0.073 at Week 6. In the second phase 3 trial, the 302 study, neither Vraylar doses met the primary endpoint of change in total MADRS score at Week 6. But both the 1.5 and 3 milligram doses demonstrated clear trends toward a clinically meaningful benefit at weeks 2 and 4, with nominal p-values less than 0.05 for a number of comparisons. Additionally, as a reminder, we had one prior positive registrational Phase 2B study where Vraylar demonstrated efficacy in MDD when added to ongoing antidepressant treatment. Based on precedent in the field and the totality of the data, we believe we have a viable regulatory pathway for Vraylar as an adjunctive treatment in major depressive disorder. We plan to engage with regulatory agencies to discuss these results and expect to submit our regulatory application to the FDA in the first half of next year. We also recently announced positive top-line results from a phase 3 study comparing our novel subcutaneous levodopa/carbidopa delivery system, ABBV -951, to oral levodopa/carbidopa in patients with advanced Parkinson's disease. In this pivotal study, treatment with ABBV-951 resulted in clinically meaningful improvements in on-time without troublesome dyskinesia, as well as similar improvements in normalized off-time compared to oral Levodopa or Carbidopa. We're very pleased with these results, which we believe support our view that ABBV-951 has the potential to become a transformative improvement to current treatment options for patients with advanced Parkinson's disease. We plan to submit our regulatory application next year, with approval decisions anticipated in the U.S. and Europe in early 2023. And in Eye Care, we announced the partnership with REGENXBIO to develop and commercialize RGX-314, a potential gene therapy for the treatment of wet AMD, diabetic retinopathy, and other chronic retinal diseases. RGX-314 is a very attractive addition to our pipeline and complements our Eye Care portfolio with a potential flagship product in retinal disease. REGENXBIO recently presented initial data from two Phase 2 studies evaluating RGX-314 in wet AMD and diabetic retinopathy, using in-office suprachoroidal delivery. While early, these results are encouraging, with RGX-314 demonstrating efficacy at the lowest dose, and the study showing that the drug and delivery method both appear to be well tolerated. Also, in eye care, we continue to expect approval for AGB-190584 for the treatment of symptoms associated with presbyopia. This once-daily eye-drop was developed to help address presbyopia that is often corrected through reading glasses. And once approved, it will be a convenient on-demand solution for patients with mild-to-moderate presbyopia who may not want to wear reading glasses. This has been a very productive year thus far for our R&D organization, and we anticipate several additional milestones in the coming months. We expect this momentum to continue into next year, which is looking to be a milestone-filled year for AbbVie as well. With that, I'll turn the call over to Rob for additional comments on our third quarter performance and financial outlook.

Rob Michael, CFO

Thank you, Mike. As you have heard from Rick, Jeff, and Mike, we once again delivered outstanding performance this quarter while also advancing our strategic priorities. Our results demonstrate the strong momentum of the business and support AbbVie's long-term financial outlook. Turning to third quarter results, we reported adjusted earnings per share of $3.33, up 17.7% compared to the prior year, and $0.13 above our guidance midpoint. This includes $0.05 from accelerated synergies, and $0.03 from mark-to-market equity gains. Total adjusted net revenues were $14.3 billion, up 10.8% on an operational basis, excluding a 0.5% favorable impact from foreign exchange. The adjusted operating margin ratio was 51.1% of sales, an improvement of 230 basis points versus the prior year. This includes adjusted gross margin of 83.2% of sales, adjusted R&D investment of 11.4% of sales, and adjusted SG&A expense of 20.6% of sales. Net interest expense was $585 million, and the adjusted tax rate was 12.6%. As Rick previously mentioned, we are raising our full-year adjusted earnings per share guidance to between $12.63 and $12.67, reflecting growth of 19.8% at the midpoint. Excluded from this guidance is $6.34 of known intangible amortization and specified items. This guidance continues to contemplate full-year revenue growth of 10.7% on a comparable operational basis. At current rates, we now expect foreign exchange at a 0.7% favorable impact on full-year comparable sales growth. This implies a full-year revenue forecast of approximately $56.2 billion. Included in this guidance are the following updated full-year assumptions. We now expect aesthetics global revenue of approximately $5.1 billion. We expect international HUMIRA sales of approximately $3.3 billion. For IMBRUVICA, we now expect global revenue of approximately $5.5 billion, reflecting slower recovery of the CLL market. For Mavyret, we now expect global sales of approximately $1.7 billion. And we now expect Allergan expense synergies of approximately $1.8 billion. As we look ahead to the fourth quarter, we anticipate net revenue approaching $15 billion. At current rates, we expect foreign exchange to have a modest unfavorable impact on sales growth. We expect adjusted earnings per share between $3.24 and $3.28, excluding approximately $1.14 of known intangible amortization and specified items. Finally, AbbVie's strong business performance continues to support our capital allocation priorities. We generated $17 billion of free cash flow in the first nine months of the year, and our cash balance at the end of September was $12 billion. Underscoring our confidence in AbbVie's long-term outlook, today we announce an 8.5% increase in our quarterly cash dividend, beginning with the dividend payable in February 2022. And we remain on track to achieve $17 billion of cumulative debt paydown by the end of this year, with further deleveraging through 2023. This will bring our net leverage ratio to 2.3 times by the end of 2021, and approximately 2 times by the end of 2022. In closing, AbbVie has once again delivered outstanding results and our financial outlook remains very strong. With that, I will turn the call back over to Liz.

Liz Shea, Vice President of Investor Relations

Thanks, Rob. 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, we'll take the first question.

Operator, Operator

Thank you Ms. Shea. Our first question comes from Geoffrey Porges with Leerink. Your line is open, sir.

Geoffrey Porges, Analyst

Thank you very much. Rick, I guess I'll jump in with the big one that I think is still the overhang for the stock, which is the RINVOQ outlook. You have $15 billion out there for 2025 in combined SKYRIZI, RINVOQ forecast guidance. And I'm just wondering if you could give us a sense of the puts and takes. SKYRIZI doing really well but some overhangs for RINVOQ. Is that $15 billion still achievable, do you think you're trending above that, or do you have to make up a shortfall? Thanks.

Rick Gonzalez, Chairman and CEO

Geoffrey, this is Rick. That's a great question. Regarding SKYRIZI, its performance is extremely impressive. Jeff detailed the in-play share and the total TRxs, which are very close to surpassing HUMIRA in a surprisingly short timeframe. I view this as a very positive development. For RINVOQ, the in-place share appears strong, but if the label is modified to restrict it to patients who have failed TNFs, that could impact the front-line patients we are currently capturing. However, I believe RINVOQ's overall performance has been durable, and we will shift more focus towards second-line patients and beyond as originally planned, though that emphasis is happening earlier than expected. We have solid data to support this direction. Additionally, looking at the upcoming indications for these two assets, we have significant opportunities in AD and PSA. Next year, we will have IVD indications launching, and I feel confident about our $15 billion forecast, as we have performed better than initially anticipated during clinical trials. That suggests a significant opportunity for us to exceed expectations. That said, we prefer to wait for the final label from the agency before reaffirming our guidance, which will allow us to communicate clearly with investors. Reflecting on the last five to six years, our goal has been to build a portfolio of assets capable of replacing HUMIRA in the market and outperforming it. Both assets have already reached $5 billion and are growing rapidly. I believe they will meet our expectations, even under less favorable label conditions. Furthermore, we have developed a substantial hematology/oncology portfolio that has the potential for significant growth, especially behind IMBRUVICA and VENCLEXTA. With the Allergan acquisition, I'm very pleased with the performance of the aesthetics and neuroscience franchises. Migraine presents a significant growth opportunity for us, as does eye care. We now have multiple assets and portfolios that can drive growth. Our intention remains to address the anticipated impact of HUMIRA's loss of exclusivity in 2023 and then expect to return to sales growth starting in 2024. Regardless of RINVOQ's label outcome, I am confident we can achieve that. Rob, do you have anything to add?

Rob Michael, CFO

I would just add that obviously with the confidence we have and the dividend increase we announced today, we feel very strong about the long-term outlook. We haven't backed off on the high single-digit growth on 25 and beyond. You look at the portfolio we've assembled, you look at the assets we have today, you look at our pipeline, you look at the BD work we've been doing over the last couple of years, that was some nice licensing deals and we still feel very confident in the outlook for this business.

Liz Shea, Vice President of Investor Relations

Great. Thank you.

Operator, Operator

Thank you. Our next question is from Andrew Baum with Citi. Your line is open sir.

Andrew Baum, Analyst

Yes, thank you. Can you flip back to the other side of RINVOQ, SKYRIZI and just talk HUMIRA? Could you talk to your comfort level with where consensus currently has HUMIRA pegged and the anticipated scale and scope of the erosion? And then second, in relation to your ongoing Alvotech pending court case, could you just confirm whether if they prevail that would effectively invalidate the signed settlements with the other biosimilar players, meaning that you would have a number of players coming that much quicker onto the market with anticipated pricing volume impact? Thank you.

Rick Gonzalez, Chairman and CEO

Okay. Andrew, this is Rick. So I will cover the second one, the Alvotech one. I'm going to have Rob cover the first one. We've seen movement in terms of consensus numbers since we've given just some direction on how to model it. I think right now, consensus in '23 sell-side consensus has about a 41% erosion in the U.S. in '23. And we've said, think about it in terms of 45% based on what we saw in Europe in year 1, plus or minus 10% given the differences in the payer landscape in the U.S. versus other markets. So we have seen the Humira consensus move. Today, it's at 41%, so it's a lot closer than it was a year ago.

Rob Michael, CFO

Okay, Andrew, this is Rick. I'll cover the Alvotech situation. As you know, we're in litigation with Alvotech. I think it's important to understand the nuances behind that litigation. In this first set of litigation, this first wave of litigation, we are basically applying 10 patents in HUMIRA. And as you know, we have a very robust patent portfolio around HUMIRA, but these 10 patents are both formulation patents and indication patents. Many of these patents were challenged through the IPR process and upheld by the patent office. I'll give you some idea of the strength of these patents. The first thing I'd say to you is we have a high level of confidence that we will prevail in this litigation. There will be a second wave of litigation that occurs after that, which will bring into the portfolio the rest of the patents that we think Alvotech infringes. So there could be another phase of litigation that occurs after this one, but I can tell you we're highly confident that we will prevail in this first set of litigation based on the strength of those patents. To specifically answer your question, if they were to prevail, which I don't believe they will, then it would accelerate the other patent settlements. Yes, that is correct.

Liz Shea, Vice President of Investor Relations

Thank you, Andrew. Operator, next question, please.

Operator, Operator

Thank you. It comes from Chris Schott with JPMorgan. Your line is open, sir.

Chris Schott, Analyst

Thank you very much. I have a quick follow-up on RINVOQ and the upcoming indications. Do you foresee a situation where the drug might not receive approval for the pending indications, especially for AD in the near future? Or is your evaluation based on interactions suggesting that this mainly revolves around label and possibly therapy line discussions with the agency? My second question pertains to Botox aesthetics, where we are observing robust growth. As we approach more normalized comparisons, the growth rate remains very strong. Are we still experiencing catch-up usage in this area, or is this indicative of genuine underlying demand at this stage? Additionally, could you provide some insight into your outlook for short-term growth? I am aware you've mentioned high single digits growth over time, but as you look toward 2022-2023, do you think this product could maintain a mid-teens growth rate during that period? Thank you.

Rick Gonzalez, Chairman and CEO

Mike.

Michael Severino, Vice Chairman and President

Okay. Thanks, Chris. This is Mike. I will take the first one, and then Rick will take the second part of your question. With respect to RINVOQ in the three new indications. So psoriatic arthritis, atopic dermatitis, and ankylosing spondylitis. We remain very confident in those files, and we remain confident in approval decisions. The gating factor here is really getting to the specifics of the language around RA, which is a process that is well underway. And we would expect to be in a position to gain approvals after that is completed. And again, we hope that's completed in the near future, certainly this year. The psoriatic arthritis and atopic dermatitis filings, we would expect to follow fairly closely on the heels of that RA decision for ankylosing spondylitis. As I mentioned in my prepared remarks, we rolled in a new study, which is a positive study and a very strong study in ankylosing spondylitis into that submission. And so that one might be on a slightly different timeframe, but we remain very confident in that approval as well.

Rick Gonzalez, Chairman and CEO

This is Rick. On Botox, I think one of the things when we first went through the integration process that was compelling to us was the amount of penetration in these markets and Allergan's ability to be able to reach out and touch consumers and activate those consumers. And that's part of what drove our decision globally to go with this fully integrated, totally dedicated aesthetics organization. Because in many other markets around the world, although the data is not quite as good as it is here in the U.S., but in China as an example, you see very similar kinds of dynamics. And so focusing that team purely on aesthetics was part of the effort here to be able to drive accelerated growth. The second was, when we looked at the ability to be able to use various methods to be able to activate consumers. We believe that the business was being underfunded in a way, both in the way it was being funded and the total amount that was being funded. And so we did some early work to determine whether or not that funding could drive incremental market growth and it showed a positive result. And then when we saw that, we applied significantly greater funding to it. And what you're actually seeing now, I think, is we are driving the market. We're bringing more patients into the category, and obviously because we have the leadership position from a market share standpoint, we get the vast majority of those patients. Is there still some pent-up demand? I would tell you it's hard to believe at this point that there can be a lot of it, but there has to be some of it. Remember those practices reopened in the U.S. in the summer of 2020. That's a long time to have pent-up demand, but it's impossible to tell one way or another. I would say the majority of it is certainly being driven by us activating patients and retaining more patients. One of the other things we saw was the retention rate was relatively low once you activated a patient. And so we spent some time working with the team to figure out how could you retain those patients at a higher rate, meaning they repeat their procedures. They don't just do it once and then disappear, but they come back for a second procedure or plus going to fillers as an example. So the data is very clear. If you look at the U.S. as an example, toxins and fillers are growing high 30% of the market. We're growing at about the same rate, maybe a little bit lower on fillers but about that rate on toxins. When we look at globally, the overall brands are growing at about that rate. And so, I think this is a business that is sustainable over the long term. When we say across the decade high single-digit growth, obviously, if we keep these growth rates, the business is getting bigger and bigger. So therefore, the percentage will come down a bit. But I'd tell you, I'm very optimistic about this market, and our ability to be able to bring new assets into this market. They can change the standard of care going forward and us being able to drive market growth at the same time. It's a very good business.

Liz Shea, Vice President of Investor Relations

Thank you, Chris. Operator, we’ll take the next question, please.

Operator, Operator

Thank you. That comes from Tim Anderson with Wolfe Research. Your line is open, sir.

Tim Anderson, Analyst

Thank you. I wanted to ask a question on HUMIRA in 2023. I'm just really trying to nail down what's in that erosion guidance of 45% plus or minus 10. That's sales erosion, not volume, correct? I'm trying to think through what happens to the U.S. rebate stream in 2023, which is likely in the billions of dollars. Do you think you'll retain favorable formulary positioning even with biosimilars, in which case you keep paying that rebate, but you also would have less volume loss, or do you think it becomes disadvantage on formulary, in which case you pull back those billions of dollars in rebates, and that flows through the bottom-line. To me, I just wonder if your guidance on aversion is frankly too conservative or, I should say too aggressive because those rebate dynamics in the U.S. make us a more durable market than ex-U.S. for those rebate dynamics don't exist.

Rick Gonzalez, Chairman and CEO

Tim, this is Rick, maybe Rob and I will tag team this one. I'll start. I think the guidance we laid out of 45% or 48%, whichever is the latest number plus or minus 10% is still guidance that we feel pretty comfortable with. To your point about, is the bulk of it priced? It is. Even if you look at the international market it's about 1/3, 2/3, or maybe slightly higher than that. I mean, 2/3 of its price, 1/3 of it is volume. And I would expect that we will maintain a significant part of the volume. Obviously, we don't talk publicly about what our managed care strategy is, but what I would tell you is we're close enough now to that 23 timeframe that you would expect us to be starting the work to ensure formulary access on all of our products, and certainly HUMIRA is one of those for 2023. And I think it is logical to assume that we will maintain that formulary position. And we've been pretty effective at doing that historically, so I believe will be pretty effective at doing it again. Rob, anything you want to add?

Rob Michael, CFO

Just as a reminder. I mean, so we gave that and we're using Europe as an analog, but keep in mind that the U.S. system is very, very different. This is why we gave you a range. And so as we get closer to '23, obviously we'll give more specific guidance on the U.S. But we are communicating as more directional information based on the experience we saw with Europe. Keep in mind there were four biosimilars that came in the market at that time, and there will be more biosimilars coming to the U.S. markets. So there's a different level of competitive intensity, but also it's a very different payer landscape. So it's something to keep in mind.

Liz Shea, Vice President of Investor Relations

Okay. Thank you.

Operator, Operator

Thank you. It comes from Gary Nachman with BMO Capital Markets. Your line is open, sir.

Gary Nachman, Analyst

Thanks. Good morning. A couple on neuro that had some recent wins. So first on Vraylar the Phase 2 studies in MDD. In one study, you hit on the 1.5 milligram dose, but not the 3 milligram dose; it was close, but not statistically significant. Will that matter to the FDA? Maybe you could remind us what those who sit in the previous Phase 3. And now that you have the full dataset, how do you think Vraylar will stack up competitively at the MDD space? And then just quickly on migrating, a little bit more how the initial launch has gone to lift, and how has that been rolled into the Botox in UBRELVY offering, and just your confidence about the reimbursement you said going into the first half of next year. Thanks.

Michael Severino, Vice Chairman and President

So this is Mike. I'll take the first part of your question, and then Jeff will take the second part of your question. With respect to Vraylar MDD, in the study that you described, the 1.5 milligram dose met the primary endpoint demonstrating a clinically meaningful improvement in total MADRS score compared to placebo at Week 6, with a highly statistically significant p-value of 0.005. In this study, the 3 milligram Vraylar dose did not reach statistical significance, but it did show a clear trend toward improvement with a nominal p-value of approximately 0.073 at Week 6. The second Phase 3 study that we just read out did not reach statistical significance for either dose group, but there were favorable trends, and across a number of comparisons, there were nominal p-values that were quite small and many of them were lower than 0.05. And I'll just remind the listeners that it's very common in depression studies, even with classes of medicines that have firmly established efficacy, to have some study that read out positive and some studies that are negative. And so we think that overall package that we announced today is very strong. And it's also important to keep in mind that we did have one prior positive registrational Phase 2B study where Vraylar demonstrated efficacy in MDD when added to ongoing antidepressant treatment. Based on precedent in the field and the totality of the data, we believe we have a viable regulatory pathway for Vraylar as an adjunctive treatment in major depressive disorder. We plan to engage with regulatory agencies to discuss these results and expect to submit our regulatory application to the FDA in the first half of next year.

Jeff Stewart, Executive Vice President Commercial Operations

The second question you had was about QULIPTA. It's still early as we have just launched the product with our full commercial promotion. As I mentioned earlier, we now have a dedicated migraine sales force, which highlights how significant we believe this franchise is and its potential. Our sales team is actively promoting QULIPTA while also focusing on UBRELVY. Early feedback has been very positive. Qualitatively, we’ve heard from our field and our research during the initial weeks of launch that the simplicity and effectiveness of QULIPTA for prevention are impressive. Our efficacy data shows that 60% of patients in our trials experienced more than a 50% reduction in migraine days, which is considered significant. Almost 30% achieved complete control with a 100% decrease in migraine days, which is quite compelling for QULIPTA. Physicians appreciate the straightforward, once-daily dosing. Overall, our early qualitative feedback is strong. We expect that most of our prescriptions will start as bridged prescriptions until we establish full market access, which we are confident we can ramp up in the first half of the year, similar to UBRELVY, where we reached about 90% access in the U.S. The feedback on the launch is very encouraging, and we believe that our three products are well-positioned to drive growth in this dynamic market.

Liz Shea, Vice President of Investor Relations

Thank you, Matthew. Operator, next question, please.

Operator, Operator

Thank you. Our next question is from Matthew Harrison with Morgan Stanley. Your line is open, sir.

Matthew Harrison, Analyst

Great, good morning. Thanks for taking the questions. I guess two for me. One, if I could just follow up on CGRP, I'm curious, obviously, you have a different strategy than your competitor when it comes to the prophylactic market. I'm just wondering how you think where your source of the patients are going to come from. Are you expecting more transitions from injectables, or do you think they're going to be more de novo patients, and if you could just talk about that a little bit. And then secondly, on REGENXBIO, could you just talk about your confidence in the data there. Obviously there was some inflammation there, though it did seem self-limiting. I'm just curious how you think about that impacting the profile, because obviously in other gene therapy products in the eye, inflammation has sometimes proven to be pretty significant as a long-term sequela.

Jeff Stewart, Executive Vice President Commercial Operations

Jeff lunge. I’ll take the first question. Regarding the source of business, we believe that QULIPTA will draw from two main areas. Firstly, from major headache specialists and neurologists. Based on our research and feedback, we expect to see an early preference shift from injectable MABs to oral treatments, particularly favoring QULIPTA, which many view as an appealing option. Some have even remarked that it resembles a potent MAB in a single oral form. Secondly, we have insights suggesting we will be reaching out to a significant number of high-prescribing primary care physicians who may not commonly prescribe MABs but do frequently use generic topiramate and older medications. This creates a unique opportunity for us to engage a broader audience of physicians who may hesitate to use MABs due to the injectable nature. We believe this balance between the two sources of business will be quite beneficial for us.

Michael Severino, Vice Chairman and President

This is Mike. I'll take the question regarding REGENX. We're very encouraged by the recent data. If we take a step back and look at the program overall, they have very strong efficacy data already demonstrated with sub-retinal delivery, and that's in a lot of procedures. But it gives us clear proof-of-concept for the approach, and shows that we can get durable control. That component of the program is already in Phase 3. And then the more recent data that were presented just about a month ago, several weeks ago, looked at suprachoroidal delivery. So that is a delivery method that can be done in-office. It's a specialized form of injection, but it is a form of injection. And that is also showing very good promise. We're already seeing signs of efficacy in the first cohort, which is the lowest dose cohort, which quite frankly is sooner than we expected to see them before that study had started to deliver results. And the tolerability is very good. If one looks at the inflammation that has reported in the RGX trials, it's very different in its nature and its management than that, that has been seen with other agents. It's principally anterior, chamber exclusive anterior chamber, there's no vasculitis, no more significant inflammation. It is readily treated with topical steroids, and generally resolves without any difficulty, and in fact, quite rapidly. And it's also important to remember that there's no prophylactic steroids being used here. Other approaches have required that. So these are patients who have no prophylaxis upfront in responding to what's often a brief course of topical steroids. And the reason why there's no prophylactic steroids, given as they're just not felt to be needed, given the very mild nature of the inflammation that's being observed. So we're very confident with it. And again, we feel it's qualitatively very different than what has been seen in other agents. And we've obviously talked to retinal specialists as well who are quite familiar with the program, and the views we've heard from them are supportive of what I just described.

Liz Shea, Vice President of Investor Relations

Thank you, Matthew. Operator, next question, please.

Operator, Operator

Thank you. Our next question is from Steve Scala with Cowen. Your line is open, sir.

Steve Scala, Analyst

Thank you. I have a few questions, a couple of follow-ups. How would you describe the nature and the tone of conversations with FDA regarding RINVOQ's new label in RA? Would you say you're pleased with how things are going? Is the outcome unclear to AbbVie at this juncture, or is the outcome obvious, sending in line with what the FDA had in its statement in September? That's the first question. Second question: To my knowledge, Vraylar has shown superiority to placebo but not generics in MDD. How would AbbVie establish it as a leading MDD agent given the presence of lower-cost alternatives? And then lastly, any thoughts on Soliton acquisition relative to its closing? Thank you.

Michael Severino, Vice Chairman and President

Okay. This is Mike. I'll start, and then Rick will take the question regarding Soliton. With respect to the tone of conversations with the FDA for RINVOQ, I would describe them as productive. With respect to your question specifically about the RA label, those discussions are productive as well. I would assume the base case is what they announced conceptually back in early September, but we are working through the specifics of how that translates into labeling language. And I would characterize the discussions around the other indications as being very productive and very positive as well. And so, as I mentioned earlier in this call, we remain very confident in the files for those new indications for all three of them. With respect to Vraylar, head-to-head superiority studies are not typically done in this space. They are very challenging. It is challenging to show an impact even with established classes period in major depressive disorder, and particularly in this space, because this is the adjunctive treatment of major depressive disorder. So these are patients who aren't responding to the current therapies and require an add-on and atypical antipsychotics with pharmacology similar to Vraylar, are one of the most commonly used agents in this space. So we think the very strong data that we have from the study that we described, and the fact that we have prior supportive evidence as well from the earlier study will position it very well to be competitive in that marketplace.

Rick Gonzalez, Chairman and CEO

So this is Rick, Steve. On Soliton, as you know, we obviously announced our intention to acquire the company and submitted it for approval. We did receive a second request. Maybe just to frame a bit why we're interested in this area. We tend to look at this market where the third major leg of the stool in a stage is body contouring. And this is a good fit with CoolSculpting and CoolTones. Obviously, CoolSculpting is focused more on reduction of fat in targeted areas, and CoolTones more focused on the area of enhancing muscle tone in specific areas. This particular asset is designed to reduce cellulite. We don't have a position in cellulite now, so there's not any kind of competitive overlap in that area. Having said that, we are responding to the FTC's inquiry. We believe that's going reasonably well, so we would expect this to be resolved at some point here in the future. I can't tell you a specific date, but I would expect it to have a positive outcome over a period of time here.

Liz Shea, Vice President of Investor Relations

Thank you, Steve. Operator, next question, please.

Operator, Operator

Thank you. Our next question is from Vamil Divan with Mizuho Securities. Your line is open.

Vamil Divan, Analyst

Great. Thanks so much for taking my question. So just maybe one more just on Vraylar following up on the other comments. I think before you talked about it being as maybe sort of multi-billion-dollar type opportunity in MDD. Is that still the lines you're thinking now that you've seen the data that you've disclosed today? And then the second one, just going back to RINVOQ and obvious sounds like you're still pretty confident on that products outlook. But I'm just curious if that's changed any of your priorities hitting about business development, specifically in immunology? The need for maybe to look at other oral agents that might be in development there, just so how you're thinking about the broader BD landscape there. Thank you.

Rick Gonzalez, Chairman and CEO

Yes, Jeff.

Jeff Stewart, Executive Vice President Commercial Operations

I believe that while the market sizes are roughly the same, the competitive landscape is quite different. We consider this an important additional opportunity, and even with minimal incremental share, we can drive Vraylar to reach the multibillion-dollar target we have in mind. We believe it presents an additional catalyst and is an exciting prospect if it receives approval.

Michael Severino, Vice Chairman and President

So as you pointed out, yes, we are very confident in RINVOQ as a molecule overall. We've talked about the progress on the RA indication and our confidence in the new indications, both those that are under review, and indications where we have data, but have not yet submitted like the IBD indications. And so we feel that it's going to be an important part of our portfolio and the treatment armamentarium going forward. So having said that, immunology is always an area where we are scouring the landscape to look for the best opportunities. So I wouldn't say it's changed our focus in any way or changed our approach, but we will continue to look for novel therapies that can raise the bar on the standard of care across a number of areas, the current indications where we are already playing and new indications that have fewer treatment options, areas like lupus and scleroderma. So the RINVOQ situation has not changed that strategy in any way.

Liz Shea, Vice President of Investor Relations

Thank you, Vamil. Operator, we'll take the next question, please.

Operator, Operator

Thank you. It's from Ronny Gal with Bernstein. Your line is open.

Ronny Gal, Analyst

Good morning and thank you for taking my questions. I've got a clarification and then a couple of questions. First, Rick, you mentioned regarding Alphatec about the acceleration clauses. And I just want to clarify if this is on District Court decision or appeal, given the timing it actually makes quite a bit of difference. Then the two questions I have first are interchangeability for HUMIRA. Do you think this will matter in the marketplace? We are hearing different things from the large payers. What is your take here and what is going to be AbbVie's position about this? And the second question is, the last draft we've seen from this year regarding the infrastructure bill does not include a reduction of out-of-pocket costs in Medicare. We're still hearing from context, this still might be the case if it's still included. If you can comment on this issue, do you expect it to be included, and the impact it might have on AbbVie's business.

Rick Gonzalez, Chairman and CEO

So Ronny, this is Rick. Regarding Alvotech, the agreements we have with other biosimilar companies are confidential, so I won’t go into specifics. What I can emphasize is our strong confidence in our intellectual property. This IP has faced multiple challenges, and we are confident that we will succeed. While it's a hypothetical situation, I don't think it deserves much consideration. Moving on to interchangeable HUMIRA, we previously developed an erosion model over a year and a half ago, which anticipated there would be two interchangeable biosimilars. This does have some impact on pricing, and we have taken this into account in our forecasts and estimates. As for drug pricing in the U.S., the situation is quite fluid, making it hard to determine our exact position. You are correct that the recent framework didn't cover much else. Our focus is on actions that could lower out-of-pocket costs for patients, especially Medicare patients, and allowing costs to be spread over a 12-month period to ease cash flow. We believe the industry has a role to play in this, and we hope to see progress, as lowering out-of-pocket costs for patients is a crucial issue.

Liz Shea, Vice President of Investor Relations

Thank you, Ronny. Operator, next question, please.

Operator, Operator

Thank you. Our next question is from Geoff Meacham with Bank of America. Your line is open, sir.

Geoff Meacham, Analyst

Thank you for the question. I have two quick ones, likely for Mike. First, regarding Rinvoq, I know this has been discussed frequently, but there are several potential labeling scenarios to consider, such as dosage, TNF requirements, black box language, and possible limits on duration. Is there any particular item that stands out as having more impact than the others? I'm curious about what shapes your assumptions. My second question is about cystic fibrosis. As we approach the upcoming proof-of-concept data readout, is there a minimum effect size or profile you're hoping for that would justify advancing to a larger Phase 3 trial? Thank you.

Michael Severino, Vice Chairman and President

I will take the RINVOQ question first and then make some comments on CF. What I would say about RINVOQ is our assumptions around the labeling at a base case are based on what the agency announced in their safety communication in September. That principally updates to the black box warnings that all of these agents have, in fact all agents in immunology, have some degree of this. They treat similar conditions to RINVOQ, for example, the TNFs have some of the same, but not all of the same warnings. Updating that section label is part of our base case, and then the restriction that the agency described for certain patients around TNF inadequate responses forms our base case. And those are the two factors that we're considering. We would not anticipate any limit into ration of therapy, for example. And the question those principally applies to the atopic dermatitis file, because we have just a single dose in the other files, in the files that are in the rheumatology space. And we feel confident about both doses in terms of the benefit-risk that we've demonstrated in that atopic dermatitis program. It's really those two dimensions and how those translate into specific language in RA. And then, of course, how they translate to the other indications, because TNFs are not the standard of care in all indications; they are not used in atopic dermatitis. So then it's how do those concepts get translated into the label in other indications. Those are the principal dimensions that we're looking at when we think about those programs. And again, we feel very confident in the files that we've put forward, and feel very good about how discussions have gone to date. With respect to CF and what we're looking for, we're looking for something that has demonstrated benefit compared to what's already out there, what will be out there at the time our agents come to market. Obviously, the principal competitor, the only group with a marketed product right now in this space is Vertex, so that's what we would be benchmarking ourselves against. I would say at an absolute minimum, you'd have to have efficacy that was just as good with other meaningful advantages. But what we're striving for is something that has an efficacy advantage of a small number of absolute FEV1 points. A small number of absolute FEV1 points might not sound like much, but it can translate into real benefit for patients in this disease.

Liz Shea, Vice President of Investor Relations

Thank you. We've reached the end of our questions. Thanks, everyone, for joining us, and we look forward to seeing you on our next call.

Operator, Operator

This does conclude today's conference call. We thank you all for participating. You may now disconnect and have a great rest of your day.