Earnings Call Transcript
AbbVie Inc. (ABBV)
Earnings Call Transcript - ABBV Q2 2022
Liz Shea, Vice President, Head 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; Rob Michael, Vice Chairman and President; Jeff Stewart, Executive Vice President, Chief Commercial Officer; and Tom Hudson, Senior Vice President, R&D, and Chief Scientific Officer. Joining us for the Q&A portion of the call are Laura Schumacher, Vice Chairman, External Affairs, Chief Legal Officer and Corporate Secretary; Carrie Strom, Senior Vice President and President of Global Allergan Aesthetics; Scott Reents, Senior Vice President and Chief Financial Officer; Neil Gallagher, Vice President and Chief Medical Officer; and Roopal Thakkar, Vice President, Global Regulatory Affairs. Before we get started, I’ll note that 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. Following our prepared remarks, we’ll take your questions. So with that, I’ll now turn the call over to Rick.
Rick Gonzalez, Chairman of the Board and CEO
Thank you, Liz. Good morning, everyone, and thank you for joining us today. I’ll briefly comment on our overall performance. Then Jeff, Tom, and Rob will review our second quarter business highlights, pipeline progress, and financial results in more detail. AbbVie delivered another strong quarter with adjusted earnings per share of $3.37, exceeding our expectations. Total net revenues of approximately $14.6 billion were up 6.1% on an operational basis, in line with our expectations. This performance reflects robust double-digit operational sales growth from immunology, where Skyrizi is exceeding our expectations with impressive market share gains in both psoriasis and psoriatic arthritis. Skyrizi’s recent U.S. approval in Crohn’s disease will add yet another source of long-term growth. As a result of the strong performance we’ve seen in the first half of the year, we are raising our full year guidance for Skyrizi. Rinvoq is also demonstrating strong growth. Rheumatoid arthritis continues to perform in line with our expectations, following the label update, and we’re making very good progress with all of the newly launched indications, including psoriatic arthritis, ankylosing spondylitis, atopic dermatitis, and ulcerative colitis, which collectively represent a significant long-term growth opportunity. Neuroscience is another area with outstanding performance. Vraylar, Botox Therapeutic, Ubrelvy, and Qulipta each demonstrated double-digit sequential sales growth. Pending regulatory approvals for Vraylar in major depressive disorder, Qulipta in chronic migraine, and ABBV-951 for the treatment of advanced Parkinson’s disease represent additional near-term growth opportunities for our neuroscience portfolio. Turning now to aesthetics, Botox Cosmetics once again performed very well with sales up more than 20% on an operational basis. Demand for toxins remains strong with high teens growth in the U.S., despite inflation dynamics. As expected, Juvederm performance was negatively impacted by COVID-related lockdowns in China, as well as the suspension of our operations in Russia. Additionally, in the U.S., we had a difficult prior year comparison with a promotional event that we ran last year. We also saw a modest impact in the quarter due to economic pressures. We continue to expect positive full year growth for Juvederm driven by the lessening COVID impact in China and two new filler launches in the U.S. which will benefit growth in the second half of the year. In hematological oncology, Imbruvica continues to be unfavorably impacted by a delayed market recovery for new patients starting therapy in chronic lymphocytic leukemia and increasing competition. These ongoing dynamics will have an impact on Imbruvica’s projected 2022 revenues. As a result, we will be adjusting our full-year guidance to reflect these impacts. Venclexta continues to demonstrate robust share performance in both CLL and acute myeloid leukemia, with sales up double digits on an operational basis. Venclexta also has registrational studies ongoing in additional attractive indication, such as multiple myeloma in the t(11;14) patient population with Phase 3 data forthcoming, as well as high-risk myelodysplastic syndromes. Additionally, we have an exciting and diverse pipeline of promising new therapies to address critical unmet needs in both, blood cancers and solid tumors, which are expected to support the next wave of AbbVie’s growth in oncology. In summary, the diversity of our portfolio, once again allowed us to deliver another strong performance, despite the challenges we see in the CLL market and increasing Imbruvica competition. Skyrizi and Rinvoq are performing exceptionally well and are on pace to deliver approximately $7.5 billion in combined sales this year. Neuroscience demonstrated balanced double-digit growth driven by migraine and Vraylar and continued robust Botox cosmetic growth offset some of the U.S. inflationary impact to our filler and body contouring portfolios. As a result, we are confirming our full year 2022 adjusted earnings per share guidance of $13.78 to $13.98, representing growth of more than 17% at the midpoint. With that, I’ll turn the call over to Jeff for additional comments on commercial highlights.
Jeff Stewart, Executive Vice President, Chief Commercial Officer
Thank you, Rick. I’m very pleased with the momentum across our therapeutic portfolio, including the continued progress we’re making with new product and recent indication launches. I’ll start with our immunology portfolio, which delivered total revenues of $7.2 billion, reflecting growth of 19.2% on an operational basis. Global Humira sales were approximately $5.4 billion, up 6.8% on an operational basis with 9.6% growth in the U.S., partially offset by international performance where revenues were down 7.3% operationally due to biosimilar competition. Skyrizi is performing extremely well, ahead of our expectations. Global revenues were more than $1.2 billion, up 33% on a sequential basis. We continue to advance our leadership position in psoriasis where Skyrizi’s total prescription share of the U.S. biological market has increased to approximately 26%, driven by an in-play share of new and switching patients that is now approaching 50%. We have achieved in-play market share leadership in 23 key international markets, including Japan, Germany, France, Canada, and Australia. Psoriatic arthritis is also adding significantly to Skyrizi’s momentum, where we are now approved in 54 countries. In the U.S. dermatology segment, where approximately 30% of patients exhibit both skin and joint involvement, Skyrizi is already achieving an in-play patient share of nearly 20%. We have also launched Skyrizi for PSA in rheumatology, where we’re seeing strong utilization, which is driving accelerated share growth. Our recent launch of Skyrizi for Crohn’s disease in the U.S. represents the first new biologic approval in six years for an area where there continues to be considerable unmet need. We believe Skyrizi represents a highly effective and differentiated treatment option for Crohn’s patients, including the potential to provide meaningful levels of endoscopic improvement with novel and infrequent dosing. Managed care access is expected to ramp strongly for this indication in the coming months. Turning now to Rinvoq, where we’re seeing good momentum across each of the approved indications. Global sales of $592 million were up more than 27% on a sequential basis. Prescriptions in rheumatoid arthritis remained strong with a total market share of 5.8% in the U.S. and approximately 6% across key international markets. Rinvoq is now achieving an in-play RA share of approximately 13% in the U.S. In PSA, Rinvoq continues to see nice uptake, especially in the room segment with commercial access now equal to RA. We also recently received FDA approval for ankylosing spondylitis and European approval for non-radiographic axial spondyloarthritis, further expanding Rinvoq’s potential across rheumatology. In atopic dermatitis, new patient starts are tracking in line with our expectations with Rinvoq’s in-play patient share in the mid-teens. Strong commercial access in atopic dermatitis, which is also now equal to RA and PSA, is expected to considerably increase paid prescription volume in this highly underpenetrated market over the remainder of the year. Lastly, our recent launch of Rinvoq for ulcerative colitis in the U.S. is progressing well. We recently received European approval for the same indication. Commercial access in the U.S. is ramping strongly, and we are seeing encouraging new patient starts. Physician feedback regarding Rinvoq’s approved profile in ulcerative colitis has been favorable, especially given the very high rates of remission and endoscopic improvement demonstrated across our UC development program. The addressable patient population for Rinvoq in ulcerative colitis is substantial, with nearly 50% of patients currently on or having used TNF therapy. Turning now to hematologic oncology, where total revenues were $1.65 billion, down 7.9% on an operational basis. Imbruvica global revenues were approximately $1.1 billion, down 17.1% and below our expectations. The chronic lymphocytic leukemia market continues to remain challenging in the U.S. with new patient starts down double digits relative to pre-pandemic levels. As you may recall, our initial 2022 Imbruvica sales guidance contemplated a partial market recovery, which, unfortunately, we have not yet observed. The latest data reflects new patient starts in the U.S. were actually down high single digits versus last year. Based on recent trends, we no longer believe it’s prudent to anticipate a meaningful market recovery in CLL over the second half of this year. Therefore, we will be removing this assumption from our 2022 guidance. In addition, increasing competition from newer therapies, including other BTK inhibitors as well as our own Venclexta also continue to lower Imbruvica’s share of new patient starts, especially in frontline CLL. Despite this increasing competitive pressure, Imbruvica continues to be the total market share leader across all lines of therapy in CLL. Venclexta global sales were $505 million, up 21.2% on an operational basis. In CLL, we continue to see share gains in the U.S. and across all major international markets. We’re also seeing continued strong performance in AML. Venclexta is now approved in 80 countries and in many markets is already considered the new standard of care for frontline AML patients who are ineligible for intensive chemotherapy. As a result, we are seeing ramping market share throughout the countries where we have launched. In neuroscience, revenues were more than $1.6 billion, up 15.2% on an operational basis. Vraylar once again delivered strong growth. Sales of $492 million were up 13.9% on an operational basis, reflecting continued share gains in the U.S. atypical antipsychotic market. Our launch preparations remain underway in anticipation of our MDD approval in the fourth quarter, which is a potentially large indication that would represent incremental upside to our current projections for Vraylar. Within migraine, Ubrelvy remains the market-leading oral CGRP treatment for acute migraine with revenue of $185 million, up 34% on a sequential basis. Qulipta continues to increase its leading new-to-brand share in the U.S. preventative CGRP class when we consider both, paid and bridge volume. We continue to make good progress with expanded commercial access, which will support strong Qulipta sales growth over the remainder of this year. We are also pursuing the commercial approval for Qulipta as a preventative treatment in patients with chronic migraine in the U.S. as well as a new therapy for Europe, potentially further strengthening our competitive product profile and long-term growth opportunity. Botox Therapeutic is also performing well in chronic migraine as well as its other indications with total sales of $678 million, up 14.5% on an operational basis. So overall, I’m pleased with the commercial execution across the therapeutic business. Our broad portfolio of differentiated therapies and new launches is demonstrating strong revenue growth. And with that, I’ll turn the call over to Tom for additional comments on our R&D programs.
Tom Hudson, Senior Vice President, R&D, and Chief Scientific Officer
Thank you, Jeff. I’ll start with immunology where we had several notable pipeline updates in our inflammatory bowel disease programs for both, Skyrizi and Rinvoq. We recently received FDA approval for Skyrizi in Crohn’s disease, and we’re very pleased with the label which reflects a strong benefit-risk profile that Skyrizi demonstrated as an induction and maintenance treatment for this condition. Based on its profile, we believe Skyrizi will be a highly effective and differentiated treatment option for patients with Crohn’s disease. Our regulatory application for Skyrizi in Crohn’s disease remains under review in Europe with an approval decision expected near the end of this year. Also in the area of inflammatory bowel disease, we recently received European approval for Rinvoq in ulcerative colitis. And we’re excited to bring this new, highly efficacious oral option to patients suffering from this often debilitating disease. In the quarter, we also completed a registrational program for Rinvoq in Crohn’s disease, reporting positive top line results from our Phase 3 maintenance study. We recently submitted our regulatory applications for Rinvoq in this indication and expect approval decisions next year. Once approved for Crohn’s disease, Rinvoq will have completed development programs for all the major rheumatology and gastroenterology indications covered by Humira including atopic dermatitis. The strength of the data generated in our clinical programs should position Rinvoq as a highly differentiated treatment across this broad indication set and enable Rinvoq to deliver significant value to AbbVie over the long term. And just this morning, we announced that we received European approval for Rinvoq in non-radiographic axial spondyloarthritis, which rounds out Rinvoq’s label in rheumatology. Moving now to our oncology portfolio, where we continue to make excellent progress across all stages of our pipeline. At the recent EHA meeting, we presented results from the large B-cell lymphoma expansion cohort in the Phase 2 study evaluating epcoritamab in patients who have received at least two prior lines of therapy. In this study, epcoritamab was well tolerated and drove very deep and durable responses in challenging to treat highly refractory patients with large B-cell lymphoma. We recently discussed these results with regulatory agencies and based on the strength of the data, we intend to submit regulatory applications later this year for accelerated approval of epcoritamab in patients with relapsed/refractory large B-cell lymphoma. We expect approval decisions in 2023. We continue to make good progress with the indication expansion programs for Venclexta and remain on track to see results from the Phase 3 CANOVA trial in relapsed/refractory multiple myeloma patients with a t(11;14) mutation in the second half of this year. As a reminder, we’ve seen very promising results in this population in prior clinical studies with Venclexta showing high overall response rates and meaningful trends towards prolonged progression-free survival. The level of efficacy we’ve seen suggests that t(11;14) patients may be particularly responsive to Venclexta and this agent has the potential to become an important biomarker-driven treatment option in the multiple myeloma market. In neuroscience, following successful completion of our Phase 3 chronic migraine prevention study, we submitted our regulatory application to the FDA for Qulipta in chronic migraine. Chronic migraine is defined as 15 or more headache days per month with at least 8 of those days associated with migraines. This is a debilitating disease that affects nearly 10% of people suffering from migraine, significantly impacting their quality of life. If approved, this would be another differentiating feature for Qulipta as it would be the only oral CGRP approved for prevention in patients with chronic migraine. We also submitted data from our Phase 3 prevention studies in both chronic and episodic migraine to support regulatory applications in markets outside the U.S. We expect approval decisions in the U.S. and in Europe in 2023. In the quarter, we submitted our regulatory application in the U.S. for ABBV-951, our novel subcutaneous levodopa/carbidopa delivery system for treatment of advanced Parkinson’s disease. This innovative delivery system has the potential to become a transformative treatment option for patients with advanced Parkinson’s disease by providing DUOPA-like efficacy with less invasive nonsurgical administration. We also expect to submit our regulatory application in Europe later this year with approval decisions anticipated in both, the U.S. and Europe in 2023. Now, I’d like to provide a few updates on some earlier-stage programs where we have new data and are advancing programs in development. In immunology, we recently obtained encouraging data in a Phase 2 study evaluating Rinvoq in systemic lupus, an autoimmune multisystem disease. In our study, Rinvoq demonstrated greater response rates as well as a reduction in flares compared with placebo. We’ll see longer-term data in the coming months, which will allow us to make a decision on moving Rinvoq into Phase 3 for lupus. In oncology, where we have a pipeline of promising early-stage programs aimed at solid tumors, we are beginning to see very exciting data from several programs. Our anti-GARP antibody, ABBV-151 is designed to block the immunosuppressive activity of regulatory T cells, which leads to increased T cell effector functions in the tumor microenvironment. This reactivates the immune system against tumors, enhancing the antitumor immune response triggered by a PD-1 inhibitor. In our Phase 1 program, we’re combining 151 with a PD-1 checkpoint inhibitor in cancer patients who are refractory to or relapsed after PD-1 as well as evaluating this combination in PD-1 nonresponsive tumors. Based on the preliminary efficacy we’ve seen in the dose expansion cohorts for multiple solid tumors, including a deepening of responses over time and prolonged durability, we recently declared proof-of-concept for 151. We plan to advance to Phase 2 in several solid tumors, starting with urothelial cancer. We’re also expecting additional data readouts later this year in other solid tumor indications, including colorectal cancer, which may enable further expansion studies in this hard-to-treat cancer type. We will also begin new studies to explore a broader set of solid tumors where GARP is implicated as a critical immunosuppressive pathway, based on tumor tissue analyses. We’re also making excellent progress with our next-generation c-Met ABBV-400, where the emerging clinical data is very promising in several solid tumors. This asset is similar to Teliso-V as c-MET ADC that uses a microtubulin inhibitor payload. Teliso-V received breakthrough therapy designation for the treatment of patients with a subtype of lung cancer with high levels of c-Met overexpression. The toxin warhead for 400 uses a more potent topoisomerase inhibitor payload, which is similar to irinotecan, a chemotherapy that is used in the treatment of colorectal cancer. By targeting c-MET positive tumors with ADCs bearing different warheads, we believe we can broaden the range of solid tumors where c-MET therapies can be used. In our Phase 1 program, we are seeing good responses in patients with advanced colorectal cancer and remain encouraged by these early efficacy signals. So in summary, we’ve seen tremendous progress across all stages of our pipeline in the first half of the year, and we remain on track for further advancements in the remainder of 2022. So, with that, I’ll turn the call over to Rob for additional comments on our second quarter performance and financial outlook.
Rob Michael, Vice Chairman and President
Thank you, Tom. AbbVie’s second quarter results demonstrate the strength of our diversified portfolio. Momentum from new products and recently launched indications allows us to maintain our earnings outlook despite market dynamics for Imbruvica, higher inflation, and the stronger U.S. dollar. We reported adjusted earnings per share of $3.37, reflecting growth of 11.2% compared to the prior year and $0.11 above our guidance midpoint. These results include a $0.14 unfavorable impact from acquired IPR&D expense. Total net revenues were $14.6 billion, up 6.1% on an operational basis, excluding a 1.6% unfavorable impact from foreign exchange. The adjusted operating margin ratio was 51% of sales, an improvement of 220 basis points versus the prior year. This includes adjusted gross margin of 84.7% of sales, adjusted R&D investment of 11% of sales, acquired IPR&D expense of 1.8% of sales, and adjusted SG&A expense of 20.8% of sales. Net interest expense was $532 million, and the adjusted tax rate was 13.4%. Turning to our financial outlook, we are confirming our full year adjusted earnings per share guidance between $13.78 and $13.98. This earnings per share guidance does not include an estimate for acquired IPR&D expense that may be incurred beyond the second quarter. We now expect net revenues of approximately $58.9 billion, reflecting growth of 6.5% on an operational basis. At current rates, we expect foreign exchange to have a 1.7% unfavorable impact on full year sales growth. Included in this guidance are the following updated assumptions. We now expect Skyrizi global sales of approximately $4.8 billion, an increase of $400 million due to strong market share performance. For Imbruvica, we now expect global revenue of approximately $4.7 billion, given the lack of recovery in the CLL market and increasing competition. Moving to the P&L, we now expect adjusted gross margin of 84.7% of sales and continue to forecast an adjusted operating margin ratio of 51.8% of sales. Turning to the third quarter, we anticipate net revenues of approximately $14.8 billion. At current rates, we expect foreign exchange to have a 2.1% unfavorable impact on sales growth. We expect adjusted earnings per share between $3.55 and $3.59. This guidance does not include acquired IPR&D expense that may be incurred in the quarter. In closing, we delivered strong performance again this quarter, including meaningful contributions from new products and recently launched indications. Given the momentum of our business as well as our pipeline advancements, we are well positioned for the long term. With that, I’ll turn the call back over to Liz.
Liz Shea, Vice President, Head 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. Our first question is Andrew Baum, Citi. Your line is open.
Andrew Baum, Analyst
First question is on the guidance range you’ve given for anticipated trajectory of Humira in the U.S., presumably you’re finishing contracting, both with Medicare and commercial. Could you provide any guidance further on ‘23 and even ‘24 regarding contracts? And then second, a pipeline question in relation to your anti-GARP monoclonal, which you’ve taken a long time to sort of optimize or move forward. I’m just curious whether you’re using any molecular markers in order to minimize risk given the failures of other TGF-beta targeted agents, particularly in colorectal using CMS 4 or a subgroup of the total population, or are you putting it in all comers, the suggestion that what’s an all comers or is this again informed biomarkers? Thank you.
Rick Gonzalez, Chairman of the Board and CEO
Okay. Andrew, this is Rick. Thank you for the questions. I’ll cover the first one, and then Tom can cover the second one. So, we are in the process now, as we’ve indicated before, of negotiating with the managed care organizations and the PBMs to establish our contract position for Humira in 2023. This is a normal time that you would go through that. It is progressing as we would expect. I would say we’re midway through that process right now. I would expect it to conclude near the end of the third quarter, early in the fourth quarter. At that point, that’s an important part of refining our model for 2023 in particular. What that will tell us is the positions that we have formulary status for 2023 in for Humira, and that will help us define clearly the volume aspect of it. And so, that’s going well, and that’s going to be an important part of us being able to refine that model. The one thing that’s important to remember in all of this is price is the other key aspect here, and there, we won’t know real pricing until the actual event starts to occur. So, we will make assumptions around what that price looks like. I think those will be informed assumptions, but they are just that, they’re assumptions. And so, that’s the one piece that will still be somewhat of an unknown until we see the landscape start to play out in 2023, particularly midway through 2023 when more biosimilars enter the market. As we get more information and we can provide more clarity, we’ll certainly try to do that, but I think that’s where we are right now.
Tom Hudson, Senior Vice President, R&D, and Chief Scientific Officer
Thank you, Andrew. I'll address your question in several parts. You're correct that there are numerous TGF-beta assets. GARP stands out as unique. While many TGF-beta assets focus on either antibodies targeting receptors or TGF-beta itself in circulation, GARP prevents the inactive form of TGF-beta from being released. We believe this mechanism is distinct and provides specificity regarding TGF-beta activity in tumors compared to other body systems. Initially, we noticed published research suggesting that strong TGF-beta signatures are present. I can confirm that GARP signatures align with these TGF-beta signatures, which are typically found in solid tumors that express these pathways. This mechanism is commonly associated with immunosuppression, attracting interest from us and others. Early data indicated that patients with inflamed tumors who did not respond to PD-1 often exhibited higher TGF-beta signatures, suggesting this might explain their lack of response. Consequently, our initial clinical strategy focused on inflamed tumors that were resistant to PD-1 therapy, as we believed we could enhance the PD-1 checkpoint response through our combination approach. While we did not observe activity with monotherapy, we did see encouraging results in combination treatments, especially in urothelial cancer. This project began earlier, and data is confirming our hypothesis that both TGF-beta and PD-1 pathways are needed for a response across multiple tumor types. We are progressing with this understanding. In relation to colon cancer, we also observed TGF-beta and GARP signatures in less responsive tumors, but we were uncertain about their potential for clinical response. We initiated some investigations, and indeed we found responses in these less responsive tumors. These responses emerged over time; tumors remained stable for about 3 to 6 months before showing durable responses, lasting 1 to 2 years, which is quite unusual for patients with advanced disease in Phase 1 studies. We identified what we sometimes refer to as exceptional responders and decided to expand our studies. These new data sets are currently being generated, and I expect to have results by the end of the year. We've noted responses to this combination. The signatures we're examining are not based on tumor histology like CMS but rather on the inflammatory response detectable in the tumor. We're focusing on both inflammatory T cells, which are involved in killing, and the inhibitory TGF-beta signatures. We will continue to explore this further. While I don't have all the answers today, it's been thrilling to witness the progression of this program.
Liz Shea, Vice President, Head of Investor Relations
Thanks, Andrew.
Operator, Operator
Thank you. Our next question is Terence Flynn with Morgan Stanley.
Terence Flynn, Analyst
Maybe two for me. Just wanted to make sure that you are maintaining your 2022 aesthetics guidance of $5.9 billion. Rob, I didn’t hear you call it out, so I’m assuming that was a reiteration, just given what you’re seeing with Juvederm in the U.S. And then the second question I had relates more of a, I guess, strategic one, Rick. I know you’re still going through the conversations with 2023 for Humira. But, as you think about providing an update to guidance, whether that happens with the 3Q results or with the 4Q results, do you think you’ll be able to provide some outlook on 2024 because I think something investors are discussing now is just if the possibility of the impact is more in ‘24, how we should think about revenue margins in ‘24 versus ‘23. So, just wondering strategically how you’re thinking about that at this point, not asking for guidance, more just thought process.
Rick Gonzalez, Chairman of the Board and CEO
Thank you, Terence. I’ll address both of your questions, and Rob can jump in if he has anything to add. We are keeping our aesthetic guidance as previously stated. We have seen strong performance in the toxin segment and expect this to continue. On the filler side, it was weaker this quarter than historically, largely due to external factors like the China-Russia situation. In the U.S., we had a very successful promotional campaign last year, making this year’s comparison tougher. We are also sensing potential inflationary pressures or possibly pent-up vacation demand. Carrie can provide more details if needed. Overall, we feel confident maintaining our guidance. We believe Botox will keep performing well, and we are implementing strategies to enhance the toxin segment. With toxin priced around $500, it is less affected by inflation than fillers, which cost almost twice as much. This economic reality makes fillers more challenging for consumers compared to toxins. Despite any potential shortfall, our diversified portfolio offers plenty of opportunities to mitigate risks. We need more time to assess the U.S. inflation impact. Regarding your second question about updates for 2023 and insights into 2024, your description is on point. We will share more information when available. By our fourth-quarter call, we will offer guidance on 2023, but don’t expect any for the third-quarter call. We might provide clarification on our contracting status, which will help refine our model further. As for 2024, we won't discuss it much now since not all contracts will last two years, affecting volume clarity and pricing midway through the year. These factors will play an essential role in our forecasts. Overall, we are satisfied with our contracting position. I understand investors wish to compare 2023 and 2024, and we would like to do that as well. However, when evaluating AbbVie’s performance and future value, it depends little on Humira and its trajectory between these two years. By the close of 2024, we expect to have stabilized the decline of Humira. The real growth will come from products such as Skyrizi, Rinvoq, Vraylar, Ubrelvy, the aesthetic business, and Qulipta. We are focused on the underlying growth engine that will develop as we navigate the decline of Humira, which is crucial for achieving growth rates of 25% to 30%. This focus on growth is what will define AbbVie moving forward.
Operator, Operator
Our next question is Mohit Bansal with Wells Fargo.
Mohit Bansal, Analyst
Maybe dwelling a little bit more on the Humira question for Rick and Jeff. So, you said that pricing from the competition will be key unknown for next year. As you get into contracts this year for the next year, how rigid or flexible are these contracts from the pricing point of view when PBMs realize that the biosimilar is giving a certain pricing, or would that be more of a 2024 issue rather than 2023? Thank you.
Rick Gonzalez, Chairman of the Board and CEO
Well, let me take a shot at that, and certainly, Jeff is closer to it. Typically, when you contract for an asset like Humira, you’re contracting for a formulary position. There aren’t volume requirements or other kinds of requirements. I think it’s also prudent to assume that biosimilars will be on these contracts, whether it’s one or more than one that will coexist with Humira. Price plays an important role in that because they will coexist. I’d say, as that becomes fluid, you would have to make decisions around how you try to deal with that to maintain the kinds of volumes that you want to maintain. We’ve said all along, our strategy in the U.S. is similar to the strategy that we had internationally, and that is to maintain as much volume as we can at the highest level of profit that we can maintain it at. That is the logic that we will employ. That doesn’t mean we won’t have to be somewhat responsive to prices in the marketplace on Humira. Jeff, anything you’d add?
Jeff Stewart, Executive Vice President, Chief Commercial Officer
No, I think that’s a very reasonable way to look at it in terms of how these negotiations are going and how we see ‘23 playing out. I mean, the real big ones in terms of how we look at it is the two big scenarios are you are likely coexisting with one or more biosimilars or if the negotiations don’t go the way that we anticipate that we’re excluded in favor of biosimilars. That’s basically where price and volume, in terms of refining our model, for ‘23. That’s the work that we’re doing over the summer and then into the fall.
Operator, Operator
Next question is Gary Nachman with BMO Capital Markets.
Gary Nachman, Analyst
So, Skyrizi was very strong in the second quarter, and you raised guidance nicely. How much of a benefit are you getting from the psoriatic arthritis indication thus far? What are you expecting Crohn’s to contribute this year? How much are those playing into the raised guidance? Are you revisiting the long-term guidance on Skyrizi at this point, given the strong performance? And then just on the hem/onc franchise. Are you keeping the infrastructure intact preparing for new products to contribute? Maybe you could talk about the near-term opportunities you see for products like epcoritamab and navitoclax, how much of those could contribute and potentially offset some of the pressure you’ve been seeing from Imbruvica? Thanks.
Jeff Stewart, Executive Vice President, Chief Commercial Officer
Yes. Thank you. It’s Jeff. Thanks for the question. Your instinct and observation are right. The big dynamic change for Skyrizi here, largely what you’re seeing is from the psoriatic arthritis indication. We’re seeing that we’re putting more and more basically headroom into the overall share position, first in psoriatic disease, which is psoriasis plus psoriatic arthritis. So, we’re at 26% in terms of total TRx share and moving very nicely up. That’s being driven by this PSA acceleration. Skyrizi is a very special product, very unique dosing, very stable, incredible efficacy. We are encouraged on the early results of Crohn’s. It’s too early to start to see numbers, etc. But all of that is playing into the raise that Rob talked about.
Rob Michael, Vice Chairman and President
And Gary, this is Rob. Just on the guidance. Earlier in the year, we were asked the question about PSA for Skyrizi contributing about $200 million this year. It’s probably closer to $400 million now with the guidance range, given the very nice uptick we’ve seen in PSA. But part of that guidance raise is also the strong share performance in psoriasis. So, it includes both. In terms of Crohn’s, that hasn’t changed. We’ve set approximately $100 million this year as we ramp access for Crohn’s. The long-term potential for it is tremendous, and we’re very excited about that.
Jeff Stewart, Executive Vice President, Chief Commercial Officer
These new assets are a very important part of our growth story for hem/onc. As I mentioned, we’re still continuing to ramp around the world with CLL. We have more and more impressive data, particularly in the unfit frontline population. We have five years of data in the fit population for frontline for Venclexta. We’re encouraged with the myeloma data, which is very unique in terms of a biomarker-driven approach. Epcoritamab will be one of the first new entrants; Navitoclax is also promising in certain indications. While we see some pressure on Imbruvica, the new indications and base for Venclexta help to offset that.
Operator, Operator
Our next question is from Chris Schott at J.P. Morgan.
Chris Schott, Analyst
First one, I just wanted to come back to dynamics on the U.S. dermal filler market. I guess specifically, can you just quantify how much of the weakness we saw this or the decline year-over-year was due to the promotional events last year versus the impact from the economic pressures that you’re seeing? I guess, in the same context, are you seeing any signs of weakness in the European business? I’m just trying to get your hands around what type of magnitude of impact you’re talking about here in terms of either inflation or economic sensitivity to that business. My second question was just thinking about Rinvoq and Skyrizi formulary and pricing dynamics going forward as biosimilar Humira enters the market. I guess, are you expecting or are you hearing through discussions any major shifts in the way payers are thinking about those products as we think about pricing coming down and obviously the largest kind of product in the space there?
Carrie Strom, Senior Vice President and President of Global Allergan Aesthetics
Hi. This is Carrie. I’ll take your first question around Juvederm. There was a one-time promotional event that we ran in the U.S. for Juvederm in Q2 of last year, and it was highly successful, increasing sales and created the challenging prior year comparison. So, that was the key driver. There is also an economic impact suggestive of some early changes in consumer behavior. That really isn’t surprising in light of the inflationary pressures we’re seeing on discretionary income. The filler market is likely more sensitive to that than toxins. The price point of toxin is about $500, I think, right? And fillers are almost twice that or even more. From a disposable income standpoint, fillers are more challenging for people than toxins are. So that’s the rationale. As we look at the business overall, we believe that Botox has the potential to continue to perform very well. We do continue to expect positive second-half growth for U.S. Juvederm, weighted more in the fourth quarter, as we’re going to launch two new fillers in the fourth quarter.
Jeff Stewart, Executive Vice President, Chief Commercial Officer
In response to your second question, we do not see any significant pressures on Skyrizi and Rinvoq. We are continuously engaging with payers and evaluating our contracting strategy. However, we rely on the robust clinical evidence we possess for these two key assets. With Skyrizi, we have conducted four head-to-head trials against major competitors, demonstrating superior growth compared to options such as IL-17, Humira—which will soon become a biosimilar—and STELARA. The solid performance and momentum of Skyrizi clearly set it apart. We are poised to be the first to establish a foothold in the Crohn’s market and to expand it further. We are confident that we have the resources needed to protect and grow Skyrizi and Rinvoq as we move into the next development phase.
Operator, Operator
Our next question is from Steve Scala, Cowen.
Steve Scala, Analyst
Two questions. First, Rick, in the past, you have laid out four factors that will dictate Humira’s trajectory in 2023. The first two were Humira access and biosimilar price, and it’s clear it’s too early for any news on either of those points. But the second two were competitiveness of biosimilars, which you said in part was interchangeability and also the biosimilar ability to supply the market. So, those two factors are things that won’t fluctuate, and presumably, you have some visibility on that now. I’m just wondering if there’s anything unusual occurring there. And in discussions, how important is interchangeability to payers? The second question is, and I apologize if I missed it, but are there any updates on the TNF steroid conjugate and is Phase 2 RA data still expected this year?
Rick Gonzalez, Chairman of the Board and CEO
You are correct. That is what I described at a meeting or two ago as the four variables. I would say, when you think about interchangeability, you have to think about it in the backdrop of not just interchangeability, but also what is the profile that is the closest to Humira today? We can look at all the biosimilars and have pretty good visibility as to what that profile looks like. What I would say is to get a profile that is interchangeable and is consistent with the current Humira that’s predominantly in the marketplace today, that’s probably going to occur in the summer of 2023. There should be one or two biosimilars that have a profile that looks like that and would make it somewhat easier for an organization to make a switch. Nothing has changed in the last few months in what that profile looks like. Supply is also an important aspect. Anyone that we’re making a significant change in their position with Humira is going to want to ensure they’re going with a company that has the ability to produce at volume sustainably. There are certain players that have that ability to do it, similar to us. There are also many small players, and I think supply is going to be an important aspect that will somewhat limit the ability to have a broad market impact. Those are important dynamics as we negotiate with managed care organizations.
Roopal Thakkar, Vice President, Global Regulatory Affairs
Yes. So 154 is our anti-TNF conjugated steroid that’s aimed at targeted delivery of steroids directly to inflammatory cells. We do have that Phase 2 running several hundred patients, and we still anticipate getting readouts later this year.
Operator, Operator
Our next question is Chris Raymond, Piper Sandler.
Chris Raymond, Analyst
Two questions. Maybe one that’s more broad policy and then another one that’s maybe a little bit more detailed. So, maybe first for Rick. I know you guys keep pretty close tabs on healthcare policy. Just on the most recent Senate Democrat drug pricing language in the reconciliation bill. The provisions on the face of it seemed pretty manageable in terms of direct impact from pricing controls, but there’s been some concern around this being just the start of something larger in terms of price controls. Any thoughts from you guys on this would be appreciated. And then, maybe a more detailed question on ABBV-951. I know you guys haven’t provided specific guidance on this or on Duodopa, but there seems to be a lot of recognition of 951 among movement disorder KOLs as a real improvement in terms of overcoming reticence around Duodopa. Just how should we be thinking about 951 vis-à-vis Duodopa, if approved? Thanks.
Rick Gonzalez, Chairman of the Board and CEO
I think if you look at the drug pricing proposal that’s out there, it’s certainly an important issue for us, and I think it’s an important issue for patients. If I look at that bill and I’m assuming that if there were something that were to pass, it would be somewhat consistent with what was in the Build Back Better Senate Finance text. So far, it looks like that, but obviously evolving a bit here as we go along. If I look at it in total, what I’d say is there are a couple of positive things in there. Most notably, the $2,000 cap on out-of-pocket costs for patients and the ability to be able to smooth, I think that’s an important step in increasing affordability, especially for patients in Medicare Part D. That’s something we’ve been supportive of. We’ve been vocal that we think that’s an important step forward. What I’d say on balance, this is a bill that has far more negatives than it has positives. The long-term implications of this bill are pretty significant, and they hinge around this so-called negotiation clause that’s in there and how that’s being implemented, particularly for small molecules. The key issue is this: essentially, they have full latitude to decide whatever price they want the drug to be. I wouldn’t necessarily call it a negotiation because the only alternative that the manufacturer has is to accept a 95% penalty on their revenues or take a 95% discount. It’s not a negotiation. We should just call it what it is. Ultimately, the real challenge is how we invest in this as an industry in innovation. If you take small molecules as an example, it says at year nine after the first approval, CMS has the right to negotiate the price on that drug. How do we develop oncology drugs in this industry? Well, they typically require you to go to patients who have failed on all existing therapies, taking whatever drug we have and determining, do we have a positive benefit-risk in that patient population? That process typically takes 7 to 9 years because of the length of the trials. So, essentially, by the time you got to larger populations, you’d be within a year or two of when CMS could change the price. How do you invest? It really puts negative pressure on you not to continue to develop new indications. This would also harm patients who need these drugs in later stages. If Congress wants to harm patients and destroy the innovation model in the process in order to provide affordability, I hope they reconsider this proposal.
Jeff Stewart, Executive Vice President, Chief Commercial Officer
So, in terms of ABBV-951, globally, DUOPA is about $0.5 billion brand. Certainly, we’ve said that we believe that 951 could certainly double that or more. If you look at the advanced Parkinson’s patients, about 85% cycle on these generics, and the only thing they can really do is either deep brain stimulation or DUOPA, but you got to go through a surgical barrier. This is going to be a subcutaneous option, which can expand the market segment without a surgical risk. There’s a significant amount of experts that are excited about this new option, and we believe that it’s going to be a real innovation for patients.
Rob Michael, Vice Chairman and President
As Jeff said, we expect this to be market expanding. At the JPMorgan conference earlier this year, we provided peak revenue guidance for 951 greater than $1 billion. DUOPA is $0.5 billion. While there will be some minor cannibalization on DUOPA, when considering 951 and DUOPA together, we expect them to grow AbbVie’s overall revenue.
Liz Shea, Vice President, Head of Investor Relations
Thanks, Chris. Operator, next question, please?
Operator, Operator
Thank you. It’s Tim Anderson with Wolfe Research.
Tim Anderson, Analyst
Hi. I wanted to revisit the discussion about 2023 versus 2024. In the past, it was mentioned that earnings would bottom out in 2023 and then start growing again in 2024. Is that still the outlook, or has that changed? Additionally, regarding the 154 compound, I understand the timeline remains on schedule, but I can't help but feel there's a noticeable lack of enthusiasm for this program. It doesn't seem to be mentioned much, if at all, despite its uniqueness and its significance within the immunology franchise. Has interest in this program diminished over the last couple of years?
Rob Michael, Vice Chairman and President
So, Tim, this is Rob. What we’ve talked about is the 45% with a range around that plus or minus 10% and using the Europe analog as an example. In that case, with the steep erosion year one and ‘23, you would expect then the trough to be in ‘23 and return to growth in ‘24. As this plays out, we’ll see how that shakes out. Ultimately, if more of it happens in ‘24, you have another year of growth for all your growth brands. You have a different floor in that scenario. When you look at this company with the growth drivers we have, we’ll be delivering high-single-digit growth in ‘25 and beyond, which is industry-leading. We’ll have the lowest LOE exposure in the industry in the second half of this decade. We’re focused on the long term, and we feel very good about the prospects of this business. But as it stands now, the most recent direction we’ve given is expect that first year erosion, so that 45% plus or minus 10%, which then plays out to a return to growth in ‘24. We’ll obviously update the market as we see it play out next year.
Tom Hudson, Senior Vice President, R&D, and Chief Scientific Officer
This is Tom Hudson. I’m a clinical immunologist, and we understand how steroids have been utilized. They can lead to significant and deep immunosuppression, reduce inflammation, and are often employed in critical situations with patients. The response is quite robust, but there are associated side effects. Our ongoing challenge is tapering off the steroids in clinical settings. Therefore, combining an immunomodulator like TNF with steroids could provide a rapid and profound response that alleviates immunosuppression. Based on the data from preclinical and Phase 1 studies, we haven't observed those biomarkers or side effects in the bone or brain, such as cortisol. This is why I'm optimistic. We anticipate experiencing deep and durable responses with much better tolerability compared to steroids. Our program has demonstrated this potential, and we have confidence in the platform we're developing, including steroid ADCs aimed at targeting various immune systems and cells. These programs are advancing, and we believe this is a significant platform in immunology that can effectively tackle different biological targets in a precise manner. Given the data we've reviewed, we're expanding the platform to include other biomarkers in the field of immunology. Of course, we will remain discreet until we can analyze the data; the study has been fully recruited and progressed more quickly than we had anticipated. The data is randomized, and we expect to have results in the fall since it’s a blinded study. Nonetheless, the enthusiasm is palpable.
Liz Shea, Vice President, Head of Investor Relations
Thanks, Tim. Operator, next question, please?
Operator, Operator
Thank you. It’s Geoff Meacham from Bank of America. Your line is open.
Geoff Meacham, Analyst
Thank you for the question. I wanted to ask if the long-term trend we observed for Humira in Europe this quarter, which indicates high single-digit erosion, is still a reliable indicator for your expectations regarding Humira's performance moving forward in the U.S. Additionally, I'd like to know if there have been any changes in persistent rates or new starts for Rinvoq since the FDA labeling change, based on feedback from the field and how doctors perceive the safety of the JAK class. Thank you.
Rob Michael, Vice Chairman and President
Yes, Jeff. This is Rob. The way we’ve talked about Humira erosion, it played out in Europe as we saw steep erosion in year one, more moderate erosion years beyond. We’re using Europe as the best way to think about Humira’s trajectory in the U.S. as it relates to the modeling. In trajectory after four years, we still have about 30% of the revenue footprint. So, it gives you a sense of where Europe is after four years.
Jeff Stewart, Executive Vice President, Chief Commercial Officer
Yes, regarding Rinvoq, it’s largely developing as we predicted. We see segments of physicians that are more wary of the JAKs after the label change. However, we anticipated that. We are starting to see a recovery in second-line plus in RA as we anticipated. The new indications are building confidence among physicians.
Liz Shea, Vice President, Head of Investor Relations
Thanks, Geoff. Operator, we have time for one final question.
Operator, Operator
And that question comes from David Risinger with SVB Securities.
David Risinger, Analyst
Yes. Thanks very much, and thanks for all the details on today’s call. Rick, I was hoping that you could help us to understand the current M&A landscape, how you would characterize it broadly. If you could also comment more specifically on AbbVie with respect to the transaction opportunity set for AbbVie. Thanks very much.
Rick Gonzalez, Chairman of the Board and CEO
I think, if you look at the M&A environment, many players are trying to add to their portfolios. There’s less of an appetite for larger transactions right now in general across the industry. Some of that’s probably predicated on the fact that the FTC has been tough in their language regarding larger kinds of transactions and your ability to get those through. As it relates to us, we continue to execute the strategy that we put in place after the Allergan transaction. Allergan has brought us a tremendous amount of diversity, and that transaction has been highly successful. Our focus continues to look for opportunities to fill out our portfolio in areas where we believe there are opportunities to bring in strategic assets. We’re probably working more on earlier-stage assets to add to our R&D pipeline. Epcoritamab is a good example of the kinds of things that we’re out looking for and finding, to supplement the overall pipeline. I think that strategy has worked well, and it’s a strategy that we’ll continue to do going forward.
Liz Shea, Vice President, Head of Investor Relations
Thanks, David. 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.
Operator, Operator
And thank you. This does conclude the call. You may disconnect your line. And thank you for your participation.