AbbVie Inc. (ABBV) May 13, 2026 Conference Transcript

All right. Great. We're going to get going here with our next company presenter at the B of A Global Health Care Conference here in Nevada or Las Vegas. So thank you. I've got the AbbVie team and Scott Renz, EVP CFO and Rupel Thacker Research and Development and CSO. My name is Jason Gerber. I cover pharma and biotech at Bank of America. And so I've got a discussion that, you know, I think is a good mix of CFO questions and R&D questions because I know that there's a lot to hit on here. Maybe my first question for you, Scott, is just thinking about the P&L. And you guys are in a great place in terms of having a long LOE runway. And you're still pretty bullish about the growth that your core engines can provide, Skyrisi and Renvoke. And so the consensus estimates, you know, an incremental $15 billion of revenue, I think, by 2031 on Skyrisi and Renvoke. So maybe talk about operating leverage dynamics because you're at such a high watermark from a revenue perspective. And I can't imagine there's a lot of incremental investment to support the brands from here, but maybe I'm wrong. And the reason I ask is I look at street margins kind of topping at 52%, and that was kind of where margins topped the year before Humira went LOE. So I'm just sort of curious, do you think that there is a potential upside to how the street is modeling the operating leverage in the business?

Sure. Thanks, Jason. We're excited to be here, excited to talk about some of the things that we've done, but even more excited to talk about the future. So happy to. And you're right. When we look out and we have mentioned when we look at the consensus numbers and you mentioned 31, there's strong growth. And we feel very confident in our ability to exceed those numbers that are out there. Skyrisi and Renvoke, you know, in particular, you mentioned we're driving a lot of growth through those through market expansion, share share growth and just looking at the dynamic products that we have in the place in those markets. But it's not just an immunology story. That growth is driven by our neuroscience business, a leading neuroscience business, growing at high teens this year, in fact. We have a great pipeline in oncology, which I'm sure we'll get to. And the aesthetics business will continue to grow over that period as well. So with that growth and your question on operating margin, when we look at it, we have an industry-leading operating margin today. We've talked about on the R&D line continuing to invest in R&D. We've increased by over a third since 2022 our R&D spend, over $3 billion. This year we're spending just shy of $10 billion on R&D, a little over 14% of sales from a profile perspective. And we feel very good about the funding and all the activity we have in the pipeline that everything is well-funded and we're doing the right things in terms of investment for the long term. So I think you can think about that number being in that 14% to 15% range over time, continuing to grow absolutely, but that's the profile. We will, of course, adjust that every year as we go through our planning cycles to make sure that we are funding properly for the future. And so the operating margin expansion that you mentioned is going to be coming from the SG&A line. Certainly, we're going to get a lot of sales leverage. We expanded operating margin this year to 48.5% was the initial guidance before we had the IPR&D. We're well on track to accomplish that. And you're going to see us steadily increase our operating margin over time. Now, I'd say over the next couple years, two, three years, you'll see that we'll be up in the 50% range. And we'll continue to do that. I think from a longer-term perspective, that 50% is not the cap, but we haven't really given guidance. And I think we just need to make that decision to invest in the future and make sure we're doing it. Certainly, you mentioned the Humera times. I would say that these markets and the landscape and the competitive landscape is much more dynamic than it was even back then. And so we're making sure that we're not shortchanging anything. We're doing the right investments in our DTC side, also making sure we're generating the right amount of evidence and really driving that business going forward in light of the competitive landscape and the strength of the products that we have and the breadth of indications that we have. SkyBridge and Renvoke certainly offer more indications than Humira did. So we'll continue to drive that. We'll continue to grow operating margins at a steady clip. And then, you know, we'll see where it ends up at a high watermark, but we're going to hit 50% in the next couple of years.

Okay. Let's talk about M&A. And you guys laid out your core focal therapeutic areas, right, on the most recent earnings call. And I imagine that the gating variables in those TAs differs, right? You know, in neuroscience, maybe you want something with more near-term revenues to replace Vralar with obesity. Maybe you need more assets to round out portfolio and then an INI. You can make riskier early stage bets for something that's going to be transformative. But do I have a general sense of kind of how you're approaching the thought process with M&A in these kind of core TAs where you're looking to add to the business?

Yeah, I think it's twofold. One, as you mentioned, we've filled out a lot of things. We've done 30 transactions in the last two years, invested over $8 billion in external innovation to fill out the pipeline. across not just I&I, but also in the neuroscience area, oncology, and we're going to continue to do those types of transactions. I would say it's filling it out from a therapeutic area. We have also looked at adjacencies. We added an obesity asset, which we're excited about last year as well, and we're going to continue to invest. But also the second piece of it is where do we see distinctive assets? Where do we see what we feel are differentiated assets that can raise the standard of care, irrespective of the area that it's in? and finding those assets is going to be important as well. So if we're faced with finding an asset that we're excited about and has a compelling opportunity, whichever area that is, or if it's in an adjacency, we will move on that asset and try to drive that growth because the growth is certainly what we're looking for for a long-term basis. And we have the advantage of having a great runway for growth, high single digits through the decade, limited LOE exposure, really very large. The next is the big one in 2030. And so we've got some nice runway or key products. We have a nice runway on as well. And so we're just going to continue to focus not only in augmenting the areas, the adjacencies, new areas where appropriate, but also making sure we're bringing in the right assets.

And we don't specifically constrain early in one therapeutic area or middle or late. If we see something that's attractive, that's early or middle, mid-stage, the team is free to go look at that. And if there's something late stage or even on market that we think could be a good fit and complement the rest of our portfolio, there's no constraints.

That's exactly right, Ripple. And certainly the balance sheet capacity and our ability to manage that balance sheet well, that's also not a constraint. So we're unconstrained from that perspective as well.

Okay. Obesity is an area that I think you guys have been vocal more to come, I think, in terms of bringing in other assets that could complement your MLIN. So I guess my question is twofold, which is, one, how comfortable are you with the assumption that innovation is going to get rewarded in obesity from a pricing standpoint? Because the million dollar question for most investors on Lilly is pricing around GLP-1, and is that a race to the bottom? And then, you know, secondarily, do you wait for more data for ABV295 before you make decisions on rounding out the portfolio to see what you have as an anchor asset?

A couple of comments, and Scott can weigh in as well. When we started looking at the original deal model and the asset from Gubra, our 295 asset, we did map out what we thought the future would look like. And part of that did include different pricing assumptions that we would anticipate seeing in the future, especially around cash pay. So a lot of that was built in. And the reason that made sense to us was also knowing that we had our aesthetics business, which is all cash pay. And many of these clinics also manage weight loss along with facial aesthetics, let's say, or body contouring. So that was, I would say, built in. So none of this is unexpected, and I would say it was well predicted. That being said, we don't need any particular outcome that we're waiting for to execute other deals if we wanted to in obesity. We think it's a very large market, continues to be underpenetrated, and we think that new assets are going to be needed because people continue to rotate in and rapidly rotate off. So these don't have the durability for something like, let's say, a SkyRizzy, for example. People stay on sometimes only for a few months and they stop. So when we looked at 295, we saw that as an opportunity to enhance tolerability and durability and also assume that many of the patients that we would capture would be those that have already come off of incretin class. So if we see something that, let's say, is an incretin class or a novel class or helps with muscle preservation or bone preservation, oral, extended half-life, all of these parameters is something that our teams would be looking in to bring in. If there's an opportunity to combine with our existing asset, we would look at that very carefully as well, because where we sit today coming out of the early phase one work in a non-obese population, the BMI recall was 29 majority male, was almost a 10 percent delta in a population that really doesn't need to lose weight. So what we're going to look at now is the right population, higher BMIs, greater proportion of women, and also looking at a higher dose than we've already studied. So the goal there being continued enhancement of weight loss and assessing tolerability, looking at every other week dosing and even monthly dosing.

Okay. Maybe shifting to INI. And the first question is just the new competition to SkyRizzi in the way of J&J's IcaTide. I think many investors that we talked to are now kind of coming to the realization that IcaTide is more market expanding than competing with the biologics, particularly in psoriasis. But what I wonder is, you know, SkyRizzi, you know, the incremental patient that might go on SkyRizzi, you know, are you competing for that incremental patient with Icatide, which I imagine is somebody that is with a community derm that might have gotten a topical or another oral therapy? So do you get a lot of naive to biotherapy as new starts for SkyRizzi, and is there a competitive dynamic at some threshold with Icatide?

I think there's a unique profile that we've seen formed with scyrisia and psoriasis, and I think many of our prescribers recognize that, and our sales team and medical team have been very effective of communicating that. And that is, you know, best in class efficacy that there's no oral that can match that quarterly dosing, which is extremely convenient. And when we've done head to head against orals, when we ask the patients, they actually, in our studies, prefer having a quarterly dosing, especially if they have to remember taking a pill every day or worrying about when they're going to eat their meals. It's very simple to take it quarterly and not worry about it. Also, we're able to communicate statistical significance across palmar planter, genital and scalp, difficult to treat areas that people know that they can trust SkyRizzy to really drive high levels of efficacy. We're also able to communicate five years of psoriatic arthritis, radiographic prevention. We have long-term data and PSA, which is very important for many prescribers to know is 30% of patients with in this category of monitor severe will go on to develop PSA. So that's another important consideration. So that profile will continue to be very competitive. And if someone's considering an oral, I think they already know the profile of the patient that they're considering. So they may have now an extra choice in oral. That being said, we agree, and I think the way Scott and the team have modeled it is anticipating some effect on share. But as the market continues to expand and people continue to recognize the profile we have with SkyRizzy, it is very unique. And, again, the orals are not oral SkyRizzys. They are oral.

And when we look at the year, and Ripple is exactly right, we spent a lot of time when we provided the guidance. We increased our guidance after the first quarter results by $100 million for SkyRizzy. So it's still very early days with ICO, but we'll see. We made some very good assumptions, some very prudent assumptions. I think that the guidance contemplates some share uptake by the ICO in general, some market expansion, certainly as the strong share, leading share position that we have in that space. A little bit of that share doesn't come to us, but it's very modest, and we feel well on track and remain very confident in our 2026 numbers.

And now thinking about the Skyrizi-Crohn's subcutaneous induction regimen that you'll roll out in 2027, how much of the new patient funnel is IV site constrained? Just trying to get a sense of how impactful you think the rollout of the subcutaneous induction will be to the business.

You want to start with that? I can start. So maybe I'll make some comments on the data, And then we can talk about the IV sub-q dynamic because many of our sites, maybe half or more, have access to IV. So we don't see that as a major constraint, but we do see an opportunity with subcutaneous. Now, the data that we've observed, particularly in treatment naive or frontline, which is where SkyRiszy has been very effectively positioned, The data that we saw, 45-point deltas versus placebo and key endpoints, was higher than we had originally anticipated. So this further confirms and supports our frontline positioning, I think, which is very important. And we anticipate having that launch this year now, so in around six months. So that's why the team is very excited. And why the frontline makes sense for our portfolio is that Renvoke is approved in Crohn's and UC, and we had a recent label update last year that allows for utilization post-biologic and doesn't necessarily have to fail on anti-TNF. It's up to the clinician to decide. So that means you could have someone frontline SkyRizzy, there's going to be a few patients that maybe need more support or aren't doing well, then they can immediately go to RINVOC. So we have stronger second-line positioning. And when the sub-Q arrives, then they'll have a clear choice of either IV or sub-Q. And if you want convenience after that, you have an oral, which is also best in category for a JAK inhibitor.

Yeah, I mean, we're seeing in the market, you know, the strength continues for SkyRizzy. And in terms of new patient share, we're getting over 50 percent, called 55 percent, plus or minus, depending on the week you're looking at it. Of that, those new patient starts, that's very strong. I think it's a testament to all the strength of SkyRizzy as a whole. And then, you know, once we do have the UC, I'm sorry, the CD sub-Q induction, that's only going to further strengthen our position, especially given the nice data that we've seen.

Yeah, that's right. And behind that, we have a combination with SkyRiszy with our own Alpha 4, Beta 7, very strong data there. So that's coming in even after these two assets.

Yeah, I'm going to jump to that. I may come back to SkyRiszy and Renvoke, but I want to make sure we can get to the combinations. Just given your interim update, J&J's recent Phase 2 update as well in IBD. And so, you know, very interesting data for your IL-23 integrating combination. And so maybe can you just speak to, you know, the additional clinical work that you're going to do, pushing dose? Is there, I mean, obviously there's always going to be safety risk dynamics, like as you assess how much incremental benefit might be worth going after. Is there a certain step up in efficacy threshold in your mind needed to kind of push a dose higher on the, it's on the integrant side that you'd be pushing a dose? That's right.

So we have what we believe are two safe, well-characterized mechanisms that we've studied. The alpha-4-beta-7 on the integrant side is our own unique asset, three to four times more affinity binding than vetalizumab, and we did leave the FC portion of it as active. And that could explain the strength of the data that we've observed in Crohn's disease because typically we see alpha-4, beta-7s shine better in ulcerative colitis than we've seen in Crohn. We've actually seen failed studies in IBD for that class. So you have these two unique acids. You know that we know the strength of Skyrisi already in the space, and we know the safety profiles. So one thing that we did see in the combination was a very robust, favorable safety profile, so no concerns there. And the increasing the dose appears, based on our exposure response data, looking at serum PK, that there is continued room to go on the alpha-4, beta-7. And we don't anticipate any safety concerns there. So the next step is to study the higher dose with SkyRizzy to see if we can drive incremental endoscopic remission or mucosal healing. And if we do see that, then we would pivot to the higher dose moving forward into phase three. We anticipate that by 2028. And recall the data that we showed was a doubling of effect of Skyrizi, which is already very strong. And it was in a very broad treatment population. We didn't have to seek out any particular subgroup for notable efficacy. It was in an all-comers population, which had multiple failures of biologics, including scyrizi failures and vetalizumab failures, and a majority of which would also have already failed anti-TNFs. And we see that in IBD, where a majority of patients have already been through an anti-TNF. So it made sense for us, knowing Humira, to combine something not requiring an anti-TNF. And by combining those two, we saw broad-based efficacy, and we anticipate taking that type of population forward to solve the needs of as many patients as possible in the future.

So to confirm, you weren't seeing any additive effects on the frequency of known AEs or the severity of those AEs? And then how important is it to push efficacy even higher in light of, say, what you've seen with, say, the duet trial that one of your competitors has? And there are a lot of other players out there that are actively seeking to push combination approaches. So obviously, you don't know where the bar is at the moment.

Well, we'd like to, well, that's why we dose optimize and not just arbitrarily select the dose and move forward. And that's why we saw good data. We think we have a phase three ready to go, but we do think it's important for the future, especially if you want to differentiate from SkyRiszy and a RINVOC and provide a safe option, that greater differentiation will be important. And that's essentially how we developed Skyrisi and RINVOC to begin with. And both are very successful, especially if you look at head-to-head. So we want to, again, give it some time to see if we can get several more points of efficacy. And if we can, we'll go. Now, if there is a safety concern for sure, then we would back down. But we think we can answer these questions relatively soon and be ready for Phase 3 in 2028.

And I believe on past calls, you've talked about the desire to have co-formulated subcutaneous, I believe auto-injector would be the preferred form factor here. Maybe some of your competitors will say maybe there's an ease, I don't know if it's from a development perspective or a commercial perspective, to go after a bispecific versus a co-formulation. And so where are you in terms of more holistically thinking about combinations, you know, even beyond IBD, you know, settings where you feel like combinations are most prudent, where efficacy plateaus are an issue? I imagine psoriasis is a setting where clearly there's not, you've got such high efficacy that combinations probably don't make sense, but there are other settings where it does.

So IBD is a good place. I think rheumatoid arthritis is a good place. The reason co-formulation makes sense to us is because these assets are available to us now. And one advantage of the co-formulation combination approach is that you can optimize the ratio of the assets because with a buy specific, it would be locked in. That being said, we don't think there's anything fundamentally wrong with that. Just for our program, we're ahead on these because we have a ready-to-go alpha 4 beta 7. We have a ready-to-combine TL1A, and at the end of this year, hopefully a TREM-1 that's ready to go. That being said, behind that, we do have an IL-23 TL1A bispecific that we could study, and we'll be able to then compare it with the data that we're deriving from a co-formulation and make that call. I don't think we know which approach would be better. it's simpler and potentially faster to have a biospecific because you are not having to demonstrate contribution of components and potentially if it's high concentration maybe there's less volume but then the lingering question would be is that ratio the right ratio and would you have been better off with the co-formulation what i would say for at v is we're doing all of the above. Okay. And then we have combinations of rheumatoid arthritis, multiple combinations in Crohn's and ulcerative colitis where we think it's important. And then on the bispecific side, we are bringing to the clinic this year into phase one, an IL-1331 bispecific with extended half-life and an IL-1318 bispecific with an extended half-life if we're talking about atopic dermatitis, which is still an area which is still very underpenetrated. Yep.

And I think you've talked a little bit on the most recent earnings call about maybe what the desired dose frequency would be with some of these combination approaches, whereas with SkyRizzy, quarterly dosing has been very advantageous. How do you think about the benefit of quarterly versus monthly when you go to the improved efficacy profile that these combinations could offer?

Yeah. I think if you're driving high efficacy, monthly is going to be acceptable, but it has to be high efficacy, and that's what we're going to deliver. Skyrisi and IBD is every eight weeks, and as you stated in psoriasis, is quarterly. We do have an extended half-life version IL-23, hoping to double or maybe two and a half times, we think is a sweet spot of the half-life of Skyrisi. We are not interested in ultra-long half-life. One thing that we've learned talking to all of our clinicians over the last 20 years is if something has a very long half-life and you're in an indication where there could be ongoing flare severe tolerability concerns or loss of response, that's actually a disadvantage if you wanted to alter therapy or stop therapy. An ultra-long half-life won't let you turn it off or add on, you may have concerns. So that's why we would like to develop for all types of prescribers across indications. So with the extended half-life 23, if we can get in and stretch it out, That's great. We combine it with our TL1A if it goes to every eight weeks or quarterly. Going beyond that, we don't think is a good option. And psoriasis, every six months makes sense. Actually, with SkyRizzy, we already have data and label that if you stop it and wait six months, the majority of the patients have the efficacy. So tweaking that half-life a little bit can get you to every six months and probably to every year, but with a constrained half-life because we have a very long pharmacodynamic effect that's independent of PK with skyrizi, and we saw that in IBD, and we see that in psoriasis. So we think that could resonate with a variety of clinicians that may have some nervousness of having a too long of a half-life. Okay.

You guys have been pretty vocal about Capstan and your in vivo CAR-T program and leave data later this year. This is an LNP-based product, so not a leniviral. So maybe just talk about sort of the helping investors think through the importance of the update and clinical data later this year. I imagine the safety hurdle is lower than, say, a leniviral-derived product. And, you know, any sort of early efficacy signals we could see in either the lupus or RA settings.

Yep. This is an in vivo CD19 CAR-T, no lymphodepletion required, no virus, no integration of genomic DNA. It's mRNA-based. So that means it's transient. So we were thinking about safety when we originally were assessing the landscape for these assets. So in healthies, it's delivered, we see rapid B-cell depletion, and then the CAR is only transiently expressed because it's generated by mRNA. So then the CAR goes away, the B-cells are depleted, and the naive B-cells that are non-pathogenic repopulate and hopefully driving remission or cure-like. So we've seen that in healthies, the pattern we would like to see. And now, as you stated, we're going into patients with lupus and rheumatoid arthritis, and we should be able to get a small number. But if we're seeing high levels of efficacy by the end of this year and we have a reasonable idea of dose, then that may allow us to pivot much more rapidly into pivotal studies. And you tend to have to study less patients to get if you're driving high levels of efficacy against a comparator. You could see that relatively quickly. And I think even in single arm studies, if you're seeing very high levels where you traditionally don't see efficacy, that would also give us robust data to allow us to make a very well-informed decision to go into pivotal studies. So we expect some patient readout this year and much more into next year. And that's why we like this construct so much. Okay.

Ludicizumab, the update and then the no-go in IBD, how big of a setback is that for the Ludi story? I know there's a lot of focus on this as one of your INI assets that some look to maybe be a key asset for you. And you still have the HS data coming and any read across the other settings?

That's right. So we saw very strong data in HS in phase two. And that's why we looked at some selected indications and ran phase twos there. Now, in this setting in IBD, we saw much, much stronger data with alpha-4, beta-7, so it made sense to take that horse forward. But I would see this as independent indications because we already had very strong phase 2 data. That's why we made the decision to go to phase 3 for Ludi and HS, and we'll see that later this year, along with RINVOC data, which sets up a similar dynamic that we've established now in IBD, where you have a frontline asset, Skyrizi today, in IBD, hopefully Ludi in HS, and then a second-line asset, Rinvok, where we see that in IBD, potentially also in HS, underpenetrated market, probably in the 20% or so, with advanced therapies and a prevalence that's not inconsistent with IBD prevalence.

Okay.

I have time for one last question. Gilgamesh.

So, you know, just thinking about the landscape, There's a lot of policy updates regarding development of psychedelics. I imagine the goal here is to make for something that's easier to administer and more durable than Spravado, which is the, I guess, the most advanced, the most commercially successful agent in that space. Do these updates from a development standpoint in terms of governmental push to get psychedelics available change the urgency, how quickly you think you can get to market with these approach?

Yeah, it could be certainly a tailwind, especially if they're able to review our briefing packages faster, give us rapid advice. Ultimately, if we have strong data, they can review that quickly. Also, if there's openness to more broader patient populations, that could certainly help the field. And what we see with this asset is a limited duration of the psychedelic hallucination experience. It's limited. So that way, in the office, patients can be turned over pretty rapidly and go home and not have a flashback. And also, in the early data, we saw durable efficacy, which is very important. And the other unique aspect of this molecule is that, yes, it's a 5-HTTA agonist, which is where we see the efficacy for some of these classes, but it is actually a 5-HT2B antagonist. And the concern with many of these, if it agonizes that receptor, that's the same one we observed years ago that was responsible probably for the cardiovascular valvular issues we saw with fenfen. So the other benefit we could have is potential for chronic dosing spaced out and we would like to get away from, you know, once a week or twice a week dosing, you know, greater intervals I think would be helpful for patients in these clinics that have been set up. So that's why we're excited about this asset and we see the government mindset as a tailwind for I think everyone to develop in the psychedelic space.

Great. Well, we're out of time. So, gentlemen, thank you so much for joining us.

Thank you.