艾伯維 (ABBV) 2013 Q1 法說會逐字稿

Good morning, and thank you for standing by.

Welcome to the AbbVie first quarter 2013 earnings conference call.

All participants will be able to listen only until the question-and-answer portion of this call.

(Operator Instructions)

This call is being recorded by AbbVie.

With the exception of any participants' questions asked during the question-and-answer session, the entire call including the question-and-answer session is material copyrighted by AbbVie.

It cannot be recorded or rebroadcast without AbbVie's express written permission.

I would now like to introduce Mr. Larry Peepo, Vice President of Investor Relations.

Good morning, and thanks for joining us.

Also on the call with me today is Rick Gonzalez, Chairman of the Board and Chief Executive Officer and Bill Chase, Executive Vice President of Finance and Chief Financial Officer.

Joining us for the question-and-answer portion of the call are Laura Schumacher, Executive Vice President of Business Development, External Affairs, and General Counsel and John Leonard, Senior Vice President and Chief Scientific Officer.

Today, Rick will discuss AbbVie's results from the first quarter, as well as highlights from our commercial portfolio and pipeline.

Following Rick's comments, Bill will give a more detailed review of the quarter and then provide an overview of our outlook for 2013 and the second quarter.

Following our comments, we will take your questions.

Before we get started, some statements may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.

The words believe, expect, anticipate, project, and similar expressions, among others, generally identify forward-looking statements.

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.

Such risks and uncertainties include, but are not limited to, challenges to intellectual property, competition from other products, difficulties inherent in the research and development process, adverse litigation or government action and changes to laws and regulations applicable to our industry.

Additional information about the economic, competitive, governmental, technological, and other factors that may affect AbbVie's operations is set forth in item 1-A, risk factors, in our 2012 annual report on form 10-K, which has been filed with the Securities and Exchange Commission.

AbbVie undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments except as required by law.

On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand AbbVie's ongoing business performance.

These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website at www.AbbVieinvestor.com.

So with that, I will now turn the call over to Rick.

Thank you, Larry.

Good morning, everyone.

And thank you for joining us for AbbVie's first quarter 2013's earnings conference call.

Today we are pleased to report strong results in our first quarter as an independent company, with adjusted earnings per share of $0.68, exceeding our guidance range for the quarter.

We delivered this strong performance despite the decline in TriCor sales due to generic competition.

During the quarter we executed on AbbVie's key priorities.

We drove continued growth of HUMIRA, with more than 17% global operational growth.

We advanced our pipeline with continued progress across our mid- and late-stage R&D programs.

This includes our Phase 3 HCV program, which is well underway and enrolling rapidly.

And we delivered return to our shareholders through a strong dividend.

As we've said before, 2013 is a year of transition as we absorb the impact from the loss of exclusivity of our lipids franchise.

2013 is also a year of execution across both our commercial portfolio, and our pipeline.

And we're off to a strong start on all fronts.

As I mentioned, we continue to see strong momentum from HUMIRA, particularly robust growth in dermatology and GI.

Our global launch of UC is going well, with strong uptake in both the US and Europe.

Beyond UC, we continue our development efforts for HUMIRA, with several new indications currently in late-stage trials.

We expect a cadence of data, registrations and regulatory approvals over the next few years.

This includes our US regulatory application for axial SpA, which is currently under review.

And we also expect to submit our US regulatory application for pediatric Crohn's disease in the coming months.

HUMIRA currently offers the broadest label in the category.

Several of the new indications we are pursuing will be unique.

Unique to our label, and will help us further differentiate from competitive products, and add to the sustainability and future growth of HUMIRA.

All told, we expect new indications, including those approved in 2012, to add roughly $1.5 billion in incremental global peak year sales.

As we track new product entrance, performance continues to be in line with our expectations, with HUMIRA continuing to gain or hold market share across all indications.

Bill will talk more about HUMIRA and our other product performance in the quarter, as well as our expectations for the year.

But it is fair to say that HUMIRA is off to a strong start this year, well on track to achieve our sales growth outlook for the product in 2013.

Now, moving to our pipeline, as a biopharmaceutical company advancing our pipeline is paramount to our long-term success.

We're focused on delivering innovative therapies to address the most pressing areas of unmet clinical need and we're encouraged with our progress.

Over the past year, we have advanced two promising programs into Phase 3 development, including our interferon-free HCV program, which I'll discuss in more detail here in a moment.

We also expect to advance seven additional programs into late-stage clinical trials over the next 12-18 months.

For example, atrasentan, our internally discovered compound in development for diabetic kidney disease.

We'll present results of our Phase 2b study at the European Renal Association meeting next month.

And we are on track to initiate the Phase 3 program in the first half of this year.

ABT-199, our next-generation BcL-2 inhibitor in development in partnership with Roche/Genentech has shown strong activity in hematological malignancies.

Earlier this month we presented Phase 1 data showing patients with chronic lymphocytic leukemia treated with ABT-199 experienced rapid tumor reduction.

We will present additional data at the upcoming ASCO and EHA meetings in June.

As discussed on our last quarterly conference call, late last year we paused dose escalation and recruitment in several ABT-199 studies as we work to refine the dosing and monitoring approach for patients at risk for tumor lysis syndrome.

We've recently proposed an amended study protocol for ABT-199 in CLL.

Upon approval by the FDA, dose escalation and new patient recruitment will resume.

It remains our goal to initiate Phase 2 and Phase 3 studies in relapse or refractory CLL patients this year.

We continue to have a high level of enthusiasm for this compound which we believe holds promise in a number of hematological malignancies.

ABT-888 is another compound within our oncology pipeline poised to advance into Phase 3 in early 2014.

ABT-888 is a PARP inhibitor that has shown promise in enhancing the effectiveness of common cancer therapies such as chemotherapy and radiation.

It's currently in Phase 2b for BRCA-deficient breast cancer and other cancers.

ABT-126 is our alpha-7 NNR agonist currently in Phase 2b trials for Alzheimer's disease and cognitive impairment associated with schizophrenia.

Data from our Phase 2a proof-of-concept study in Alzheimer's disease will be presented at the Alzheimer's Association International Conference in July.

And we will present results from the schizophrenia study in 2014.

Provided our Phase 2b clinical work is successful, we will initiate Phase 3 trials in both indications in 2014.

ABT-719 our novel investigational compound for the prevention of acute kidney injury; additional confirmatory Phase 2b study is currently ongoing and will enable Phase 3 initiation in early 2014.

Elagolix is a compound with a unique profile currently in development for endometriosis and uterine fibroids, both prevalent conditions with few treatment options.

Our Phase 3 program for endometriosis is ongoing and we recently initiated a Phase 2b study in uterine fibroids.

Again, pending success in our mid-stage trial, the fibroid program is also poised to advance to Phase 3 next year.

So as you can see we have a number of exciting programs on track to advance to Phase 3 development over the next year or so.

In addition to these assets, we have several other promising compounds already in late-stage development.

This includes daclizumab, which is in Phase 3 development in partnership with Biogen for relapsing remitting multiple sclerosis.

Data from the first of two registrational trials for select study were recently published in the Lancet.

And results of the second-year extension of that study-called selection were recently presented at the American Academy of Neurology meeting.

We expect results from the second pivotal study in 2014.

And finally, a central program within our late-stage pipeline is our interferon-free HCV combination.

All of the Phase 3 studies that will be included in our initial registration are now underway and enrolling very well.

In fact, ahead of expectations.

As we've said before, the primary focus of our program is on delivering interferon-free treatments that offer patients the best chance for cure.

Our approach is to maximize SVR rates across various patient types, from naive patients to the most difficult to treat with the simplest possible therapy.

Earlier this week at the EASL meeting in Amsterdam, we presented data from our large-based 2b Aviator study showing that conditions which reduced response to interferon-based therapies, such as the level of fibrosis or IL28B genotype, do not impact response to our interferon-free therapy.

We expect our Phase 3 study to begin to read-out later this year and into 2014.

Supporting registration submission in mid-2014, given there are compounds that have been grant fast track status by the FDA, we expect market entry in early 2015.

So in summary, we have delivered a strong first quarter and we continue to drive strong performance with our flag ship product HUMIRA, as well as other products in our specialty-focused portfolio.

And we continue to make notable progress in advancing our pipeline, which we believe includes a number of exciting programs that have the potential to address significant medical need.

For a company of our size, the potential sales projections from our late-stage pipeline represent an opportunity for meaningful revenue growth beginning in the 2015 time frame.

With that, I will turn the call over to Bill.

Bill?

Thank you, Rick.

Today I will spend some time talking about our first quarter performance.

I will then turn to our outlook for the remainder of 2013.

As Rick said, we're very pleased with the strong first quarter we delivered.

Total sales increased 5.1%, on an operational basis, excluding an unfavorable 1.4% impact from foreign exchange.

Excluding TriCor/Trilipix, due to loss of exclusivity, sales increased 8.6% on an operational basis.

The first quarter adjusted gross margin ratio was 76.2%, excluding intangible amortization and other specified items, in line with our expectation for the quarter.

This reflects both the loss of exclusivity within our lipid franchise, as well as the effect of unfavorable foreign exchange on the ratio.

Adjusted SG&A was 27.9% of sales in the first quarter, including continued investment in our growth brands and the incremental costs of becoming an independent company.

This level of investment was in line with our expectations for the quarter, and we remain on track for a full-year adjusted SG&A of around 26% of sales.

Adjusted R&D was 14.6% of sales in the first quarter, reflecting funding actions in support of our emerging mid- and late-stage pipeline, and the continued pursuit of additional HUMIRA indications.

Net interest expense was $66 million in the first quarter, and other income was $18 million.

The adjusted tax rate was 22.2% in the quarter.

First quarter adjusted earnings per share, excluding non-cash intangible amortization expense and specified items, were $0.68, which exceeded our previous guidance range.

On a GAAP basis, earnings were $0.60 per share.

Turning to product sales in the quarter, HUMIRA delivered global sales of more than $2.2 billion, up more than 17% on an operational basis.

In the US, HUMIRA sales increased nearly 24%, driven by continued market expansion and share gains in the Derm and Gastro segments.

Internationally, HUMIRA sales grew 13% on an operational basis and nearly 11% on a reported basis, as a result of strong market growth and some modest benefit from tender timing.

As we look to the second quarter for international HUMIRA sales specifically, we would expect a modest negative impact from tender timing in some markets, particularly Brazil.

On a global basis, however, we expect low double-digit sales growth for HUMIRA in the second quarter, in line with our full-year outlook.

AndroGel sales were up low single digits in the quarter following strong 2012 performance.

AndroGel continues to maintain more than 60% share of the testosterone replacement market.

Growth in the quarter was impacted by a moderation in the rate of overall market growth as well as the year-over-year impact of rebating actions implemented in mid 2012.

Based on current trends, we're forecasting AndroGel sales growth in the mid-single digits for 2013.

Global sales of Lupron were approximately $180 million in the first quarter.

For the full-year 2013, we expect Lupron sales to be roughly in line with 2012.

Moving on to our lipid franchise, TriCor/Trilipix sales were $128 million in the quarter, down roughly 50% due to the entry of generic fenofibrate in November of 2012.

US sales of Niaspan were $186 million in the quarter, down 2.6%.

As a reminder, we're forecasting 2013 sales of less than $1 billion for our combined lipid franchise, reflecting a decline of roughly $1.2 billion, which will be exhibited more acutely in the second half of the year.

We plan to offset our lipid franchise decline through growth of key marketed products, including HUMIRA.

Moving on to Synthroid, where US sales were $119 million in the quarter.

Synthroid maintains strong brand loyalty and market leadership, despite the entry of generics into the market many years ago.

For the full year, we expect to see Synthroid sales growth in the mid-single digits.

US sales of CREON were $90 million in the first quarter, up more than 32% compared to the first quarter of 2012.

CREON maintains market leadership in the pancreatic enzyme market where we continue to capture the vast majority of new prescription starts.

This quarter we received FDA approval for a new dosage strength of CREON.

The new 36,000 lipase unit dose is the highest available, which may help to reduce pill burden for some patients.

This approval further strengthens our leadership position because we are able to offer patients the broadest range of dosage strength in the class.

In 2013, we expect US CREON sales to grow at a low double-digit pace.

Duodopa, our therapy for advanced Parkinson's disease, performed well in the first quarter, with growth of more than 8%.

Duodopa is currently approved in Europe and other international markets.

We completed registrational studies last year and are in the process of pursuing regulatory approval in the US.

Turning now to our full-year 2013 outlook, we are confirming our adjusted earnings per share guidance of $3.03 to $3.13.

This guidance continues to contemplate sales somewhat above $18 billion, reflecting growth from key brands offsetting the expected decline in lipids.

Included in our sales guidance is an estimated negative impact from exchange of slightly less than 1%.

We're forecasting a gross margin ratio of around 76.5% for the full year, excluding non-cash amortization.

This forecast reflects both the impact of lost exclusivity events and the effect of unfavorable foreign exchange.

We anticipate R&D expense to be approximately 14.5% of sales, reflecting funding actions in support of our emerging mid- and late-stage pipeline and the continued pursuit of additional HUMIRA indications.

And we expect SG&A to be around 26% of sales.

We're forecasting net interest expense of approximately $300 million for the full year, and we expect an adjusted tax rate of approximately 22% in 2013.

Our adjusted earnings per share guidance range excludes $0.37 per share of non-cash intangible amortization expense and certain specified items primarily associated with separation-related costs and ongoing restructuring activities.

Earnings per share would be $2.66 to $2.76 on a GAAP basis.

We're still in the process of quantifying certain one-time costs related to the separation, and we will look to further refine our forecast of these specified items as the year progresses.

Finally, we expect approximately $6 billion of operating cash flow in 2013.

Regarding our second quarter outlook, we expect adjusted earnings per share of $0.78 to $0.80.

This excludes roughly $0.12 of specified items and non-cash amortization, resulting in a second quarter GAAP EPS of $0.66 to $0.68.

Our second quarter outlook reflects sales growth in the low single digits on a reported basis, including a modest impact from negative exchange.

We expect the gross margin ratio for the quarter to be somewhat above our full-year guidance.

And we expect R&D and SG&A as a percentage of sales to be in line with our full-year outlook.

So in conclusion, we are pleased with our first quarter performance, as well as our outlook for the remainder of the year.

With that, I will turn it over to Larry.

Thanks, Bill.

We will now open the call for questions.

Elan, we'll take our first question.

(Operator Instructions)

Jami Rubin, Goldman Sachs.

Thank you.

Just a couple of questions.

First, can you hear me okay?

We can.

Okay.

Great.

So on HUMIRA, sales were up 17% on an operational basis.

Bill, you talked about tendering that could impact international sales.

But still your guidance for the full year of low double digit growth does assume a decline in the pace of growth throughout the year.

And I'm just wondering if you could talk about why you expect such a slowdown or if it's just too early in the year to make adjustments to your forecast?

And secondly, if John Leonard is on the phone, just wanted to ask a question on ABT-199.

It sounds like you're making progress with the FDA in refining the trial so that you can remove the pause.

But what gives you confidence that the tumor lysis syndrome is based on a dose response mechanism and not based on the drug mechanism itself?

Thanks very much.

Thanks, Jami.

Jami, it's John Leonard.

I'll go first.

Thanks for the question.

Just for everybody on the phone, to remind you, we had at the very end of last year some instances of tumor lysis syndrome in some of our early studies with ABT-199.

We voluntarily paused enrollment in some of the studies that we were doing and with the FDA went on partial clinical hold for the CLL studies.

In the last couple of months we have very carefully gone back retrospectively looking at all of those patients to understand what might be any risk factors for TLS and now have been working with the FDA.

So let me give you a sense of exactly where we are.

We've identified risk factors that we think are clearly related to the tumor burden itself.

In other words, those patients that experienced any evidence of TLS all had large tumor burdens associated with it.

And with that, we have taken that into consideration going forward.

So I'm pleased to report that in the instances multiple myeloma and non-Hodgkins lymphoma we've resumed enrollment so it's actively going on and we're in the very final stages of working with the FDA to resume enrollment in the CLL studies.

Essentially what is going on is some final work to refine the actual prophylactic regimen for handling some of the well-known side effects of TLS.

I think to your question, Jami, we're pretty confident that one can step through dosing in a graded fashion and have tumor die at a controlled rate and with well-known, well-characterized prophylactic measures, we believe that we should be able to readily handle TLS.

Jami, this is Rick.

So let me answer your HUMIRA question.

Certainly, we're off to a strong start.

And one of the things that Bill pointed out in his remarks is we did have some tenders move from second quarter into first quarter, so first quarter is slightly up, and we will see that reverse in the second quarter.

But all in all, still overall, if you looked at the average we have very strong growth.

We're also only a quarter into 2013 so it's probably a little early to change any projections that we have for the product.

But suffice it to say we are confident with the performance that we've projected for HUMIRA and we will just have to see how the rest of the year plays out.

Thank you.

David Risinger, Morgan Stanley.

Thanks very much.

Good morning.

Good morning.

I have three questions on separate drug candidates.

First, I don't think it is worth going into a lot of detail because there would be too much ground to cover on HCV, but if you could hopefully just frame, as you see it, the timing of launch for your all-oral regimen?

And if you could position that relative to Gilead's timing that would be helpful, in terms of all-oral regimen.

And second, with respect to ABT-199, just curious about whether there is any risk of the lower dosing constraining the efficacy, ie yielding lower efficacy?

And then finally, with respect to ABT-126, I noticed in the press release that you're hoping to start Phase 3 trials next year.

Could you just talk about the timing of news flow for ABT-126 for Alzheimer's, and also for cognition and schizophrenia?

Thank you.

Okay, I've been scribbling notes with your questions.

Let me take them in reverse.

So ABT-126, let me give you a sense of where we are, David.

We are doing Phase 2b work as we speak.

And that's meant to extend the proof of concept, call it two-way work, that was done with modest-sized studies and limited dosing.

So what we want to do is more fully flesh out what the efficacy curve might look like.

And with that, characterize even higher doses that we were not in a position to test when we did our first study.

Two different indications, you're correct.

Alzheimer's disease, as well as cognitive disorders, schizophrenia, or CIAS as it is now called.

With respect to the news flow, we will share the data from that first two-way study in Alzheimer's disease in July at the Alzheimer's meeting, and our plans right now for the CIAS data would be in 2014.

We haven't chosen a venue yet, but as we have that, obviously, we will share that with you.

Let me move on to 199.

It's sort of an extension, I think, of Jami's earlier question.

The premise of your question, I think, is a little incorrect, if I understood it.

I took it to imply that what we're doing is giving lower doses on a continuous basis to patients and therefore the higher doses that we might want to get to may not be reached.

And therefore efficacy might be constrained a bit.

That's not what we're doing.

Essentially what we're doing is walking up through lower doses and we're convinced that as tumor dies, the risk of tumor lysis syndrome will recede because there is less material from the tumor to be dealt with.

And therefore, you can get to those higher doses that have been associated with the outstanding activity that we've observed to date.

So it may take a little bit longer to get there, which is what we will be working out here as we go, but in terms of being able to deliver what we want to deliver for these patients, we are very confident we are going to be able to get there.

And then finally, HCV was the first question, launch timing.

I mean it is no secret that we're all working as fast as we can.

It's a very competitive space.

We have an excellent team on that.

They're working flat out.

We've communicated along the way that we would expect a very early 2015 launch.

We're confident that we will meet that.

And we'll see where Gilead is with respect to that timing as well.

Thank you.

Thanks, David.

Jeff Holford, Jefferies.

Hi, good morning everyone.

Thanks for taking my question.

Just got two, really.

First off, on the additional HUMIRA patents that have you submitted to the patent office already, I think they are mainly manufacturing and formulation patents.

Can you give us any update on any expected timing of when we might hear some more news on those?

And also just around that as well, when you might begin to flesh out how new formulation work around HUMIRA, when we'll get some more visibility on that, too?

And then the second question, is just some updated thoughts, really, from you, if you have any, on the competitive positioning of your Hep C cocktail, following recent updates from Gilead and in particular Bristol-Myers as well.

Thank you.

Thanks Jeff.

I'll take the HUMIRA patent question and the reformulations and I'll let Dr. Leonard or Rick go with the latter question.

You know, certainly we do have a number of patents that we have submitted at this point this time.

You're right to characterize those as process manufacturing, et cetera.

Obviously, this is a very competitive space.

And we're not going to provide a lot of granularity around what those look like and the timing.

But, it is safe to say that we do have a fairly significant and robust portfolio of applications in right now.

Obviously, trying to do as much as we can to protect HUMIRA in the event that biosimilars do find a pathway to market.

In terms of reformulations, again a similar story, you know we've talked about opportunities to enhance the product, both from a delivery mechanism as well as the product itself.

We're not going to be very specific in terms of what that looks like and the timing, but again we are working on those.

We have a window here, you know, our patents don't expire until later in the decade.

And we're putting forth as much effort as we can right now to enhance the product, such that if someone is working towards a biosimilar of today's product that may not be the product that exists down the road.

So I think I will leave it at that, Jeff.

Hopefully that's helpful.

Thank you.

Jeff, this is Rick.

So on the competitiveness of HCV, as I said in my comments, I mean our goal is basically to deliver therapy to the marketplace.

It gives patients the greatest opportunity to be cured.

And we want to do that as broadly as we possibly can across genotype 1 patients.

We want to be able to do that for naive patients and we want to do that for even the very difficult to treat; nulls, fibrotic patients, et cetera.

And I think as we look at our data and the data we just presented last week at EASL, I think we're demonstrating that.

You look at the fibrosis data and the IL28B data that we presented at that meeting and I think we have outstanding performance, right?

It doesn't degrade at all.

And so I think we feel very good about the competitiveness of our program based on the objectives that we have for it and we feel good about the time line that we're operating against.

So I think we have a high level of confidence in our HCV program.

Thanks very much.

Thanks Jeff.

Gregg Gilbert, Bank of America.

Thank you.

Good morning.

A couple quick ones.

First, is there any color on HUMIRA outside the US you can offer in terms of lumpy ordering patterns or tenders as we progress through the remaining quarters of the year?

Secondly, was curious if you were willing to quantify your royalty burden on the product and how that changes over time?

And third, for John, I wanted your take on your strategy for and sort of your take on overall the breakthrough status versus fast-track status that is available to the industry and how that might apply to your novel portfolio?

Thanks.

You want me to go first?

It's John.

Regulatory question of breakthrough status.

It's an avenue that the Food and Drug Administration has opened up that we think is a valuable one in that it permits more access and more opportunity to discuss data as it emerges and to have good planning.

It doesn't necessarily predict a regulatory outcome, however, or accelerate the review.

So we filed for breakthrough status on some of our products and we're looking forward to hearing from the FDA so that we can, as always, welcome additional interaction with them.

But I think in terms of planning for review status and all of that, I would treat it essentially the same way that we always have until now.

Hi Gregg, it's Bill Chase.

On your HUMIRA tender question, as you know, tenders occur fairly choppily throughout the year.

If you look at Q1 in international, even if you exclude those tenders, international still had double-digit HUMIRA growth.

The tenders actually gave it about a 3% lift.

We'd see that basically coming out of Q2.

And then the second half of the year, a little difficult to call at this point in time, but it does have a tendency to move around a little bit on us and we'll certainly give you visibility as that occurs.

Okay.

So a few percentage points in a given quarter is a decent way to think about it?

Yes, I think that's the right way to look at it.

And Gregg, this is Rick on the HUMIRA royalty.

We don't provide product-level P&L details so we are not going to go through the royalties in any level of detail.

What I would say is there have been reports put out, Jami's report in particular that came out recently, I think the premise behind that report we would feel is accurate, is appropriate.

And the range that was characterized in that report of 5% to 10% if you looked at it across -- on a global basis, I think is a reasonable range to think about it.

So I think that should give you some clarity around the royalties and the expiration of those royalties.

Thanks.

Chris Shaw, JPMC.

Great.

Thanks very much.

Just a couple questions here.

The first is I -- just with the negative opinion from Xeljanz last night in Europe, just mention any thoughts you might have of kind of what that means for the dynamic impact to the HUMIRA business, et cetera.

Second question, just coming out of EASL, I think there was some comments from the company that they would consider looking for partners in Hep C. I just wonder if you could elaborate a little bit on that and talk about any priorities there?

And then finally on the oralject programs, can you just give us an update on where we are there?

I'm not sure, maybe as you're considering that just maybe longer term, how important do you see having an oral agent in the portfolio?

And maybe second, how much differentiation do you believe you are going to see between the various [jects] that are out there?

Thanks so much.

Thanks for the question.

It's John Leonard.

Let me start with the EASL comments.

Scott's comments were taken out of context and are not accurate.

We're very confident in the work that we have with our first-generation program.

We're also extremely excited and confident about the elements of our second-generation program.

We have not been actively looking for partners.

I think the story was essentially a distraction.

With respect to ject, the importance of having an oral ject, we've shared that our longer term strategy in the immunology space is to try to enhance the overall benefit/risk profile and I think we've seen some evidence of how important that is.

Our goal is to take some of the learnings that have come from the ject space and try to tease that apart and build that into our own oral program with the intention of getting to higher levels of efficacy than achieved in the space.

That's our primary goal.

And of course that's what we're striving for.

With respect to where we are, you undoubtedly know that we have a relationship with Galapagos.

They've shared some early information on their compound which we think is very, very exciting.

And they're moving into 2b work middle of this year.

That will be dose ranging, that will test QD and BID regimens.

We're very excited about its profile, particularly with respect to what we think is a very attractive adverse event profile and the efficacy, although based on small patient numbers for a short duration, we think is definitely intriguing and worth pursuing.

Our own internal ject program goes for a great specificity, trying to select out the ject 2 activity, which we think has been dose-limiting in some of the first-generation compounds, and that's well into its Phase 1 program and progressing well.

Chris, this is Rick.

I'll cover the Pfizer comment.

Basically we don't know much more about the Pfizer situation than you do, than what's been publicly reported.

I think as far as the dynamics are concerned our projections would have been a relatively modest impact in 2013 anyway in Europe, based both on the timing and how difficult this market is to break into.

I think you're seeing that in the US launch today.

The challenges that any competitor coming into this market tends to face.

And so I don't think it has any dramatic impact on what we had forecast.

And we will just have to see how it plays out longer term as Pfizer continues to pursue approval of that product in Europe.

Thanks, Chris.

Marc Goodman, UBS.

First on Duodopa, which we haven't talked about yet.

Can you just give us a sense of what are the major countries that it's doing well in, in Europe, and just flesh out how you're doing on the new delivery system that you're working on?

And then second, on Elagolix, the endometriosis Phase 3, are we expecting data potentially next year, or is this going to drift into 2015?

How long is that study?

Thanks.

So with respect to Duodopa's launch primarily in Europe, and is used most in the Nordic countries, I think that's where it's getting most of its use.

The new delivery system you asked about, we have an active effort to improve the pump and make it easier for patients to carry around and deliver the drug on a continuous basis.

And that's something that we're very, very actively engaged in.

It's early in that work.

I think we're not in a position right now to characterize it further than that.

With respect to Elagolix, recall that we are pursuing two different indications.

The Phase 3 effort is well underway for endometriosis.

These are the largest studies that have ever been done in any endometriosis patient population around the world.

And that in part dictates the timeline, but also the pursuit of chronic therapy.

So they will play out over the next couple of years.

So I wouldn't expect to be in a position to share data until 2015 or thereabouts.

And then recall that the second indication is the uterine fibroid work, and there we've announced that we've just begun our Phase 2b work so that information lies ahead.

Thanks, Marc.

Michael Tong, Wells Fargo.

Hi, good morning.

Actually I want to ask an AndroGel question.

You made the comment about a slowdown in the growth of that market.

Do you think that's temporary or is that permanent?

And are you surprised that the market growth has actually decelerated with a couple of new entries, recent entries into the marketplace?

And then second question is for Bill, if you can remind me your CapEx expectations for 2013?

Thanks.

Michael, this is Rick.

On AndroGel, we have seen the market slow down.

You have to remember this is a market that grew very rapidly in 2012.

So if you look at the average in the first quarter, I think it's down around high single to 10% kind of range.

You know, I think that's probably a reasonable expectation to think about it going forward, from a market growth standpoint.

That this market will grow roughly in the high single digit kinds of ranges going forward.

I don't think that surprises us that much.

You know, every market tends to slow down over time.

And I think if you look at the fundamentals of this market, that's what we would expect going forward.

And so our planning assumptions are now built around that kind of market growth going forward for 2013.

And Michael, it's Bill.

On CapEx, this is a business that runs pretty lean on CapEx.

We are over the next couple years obviously going to have to separate from Abbott, which will increase CapEx somewhat, but this year we are anticipating about $500 million to $600 million.

Thank you.

Thanks, Michael.

Alex [Erfaif], BMO Capital Markets.

Good morning.

Thank you for taking the question.

Just a follow-up on HUMIRA [ex-US], I was wondering if I could ask a higher-level question.

Would love to get your insight about some of the trends you're seeing in different geographies.

For example, are things getting better in Europe?

If you could elaborate a little bit more on emerging markets.

We know there are a few small biosimilars in a couple of emerging market countries, if you see that as a -- what your outlook is for that in general?

Just an overall picture on, not just from arthritis but also across the different indications.

Thank you.

Alex, this is Rick Gonzalez.

I think if you look at Europe, and you've seen this for a number of years now, we continue to see good, strong, robust growth in Europe in this particular area.

I think one of the things that Europe has really adopted and values is the ability to be able to put the disease in remission and be able to hold it in remission for long periods of time.

So we continue to see market growth in the double-digit range in that market.

When you look at the penetration rates across all three major areas, the penetration rates are still relatively low.

And so we would expect that we will continue to see that growth going forward.

And the programs that we have in place, I think, have been demonstrated to be very effective at both helping market growth as well as driving improvement in share -- growth in share.

And the indications, particularly Derm and GI as I indicated, but also we are continuing to hold our own from an RA share standpoint.

So I think we feel good about the dynamics in Europe.

There are still problematic countries in Europe for sure.

But I think overall, if you look at Europe, in general, it is performing within our expectations.

I think it is a market that we think is a good market for products like HUMIRA.

As far as the emerging market, I think one of the things that is important to remember is that the majority of our business is still in the developed markets, roughly 85% of our revenue has come from the developed markets.

There are some emerging markets like Brazil that are relatively large markets for us, but there are also a number of markets that are relatively small.

And so we have not seen any material impact from any biosimilar competition in the emerging markets or anything that we would perceive to be any kind of an issue for the business going forward in those emerging markets.

Great.

Thank you very much.

Thanks, Alex.

Elan, we have time for one more question today.

Damien Conover, Morningstar Investment Services.

Good morning.

Thanks for taking the question.

Good morning.

Just two questions.

One on HUMIRA sales in the US.

Very strong growth.

But in the press release rheumatoid arthritis wasn't really called out for the support of that growth.

Was just wondering if you could talk through some of the dynamics there?

And then secondly, when you're looking at the hepatitis C market, in a broad picture, as these next generation of products come to market with very strong efficacy and lower side effects, I was wondering if you could share your thoughts on expected treatment rates for this space given that it's very low right now, just so to take a look at the overall market growth?

Thank you.

Thanks, Damien.

This is Larry.

On HUMIRA, US sales -- you know, on RA we called out the more rapid growers and that would be Gastro and dermatology.

Certainly we do still see growth in RA, it's certain more modest than those other two areas, call it mid-single digit growth for the market.

Maybe a little bit stronger for us.

And again holding share despite new entrants into the RA space.

But certainly a lot of our growth continues to come from dermatology and Gastro.

Derma on the low end of penetration rates.

We continue to see a lift in penetration rates, which as you know are still only in the single digits at this point in time in dermatology.

So we called out the two biggest growers.

But RA continues to grow and we're holding share in that space.

Damien, this is Rick on the HCV question.

As we look at this market, we do expect to see some acceleration -- significant acceleration in market growth.

I mean I think to frame the size of the market and to give you some perspective on it, you know, today if we look at genotype 1 in the G7 we would estimate somewhere around 2.5 million people are currently diagnosed as being infected with the disease.

If you go back to 2011, roughly 175,000 patients were treated.

So there is some clinical capacity constraints that exist today with the current therapies.

As we bring these next generations of products to the marketplace in that 2015 timeframe, there are obviously simpler protocols to be able to administer from a physician's standpoint and the side effect profile is dramatically improved from the generation of products that exist today.

And so you would expect that you will be able to increase the number of patients who are treated at that point.

We're estimating that that number could grow to the 350,000 range per year.

As far as the patient types, I think our perspective on it is this is a disease that progresses very slowly and as these new therapies come to market we think the health care systems and physicians will prioritize those patients that need the therapy the most.

And I think particularly if you can bring a therapy to market that has a 90% plus kind of cure rate for those patients, which hasn't been seen before with the current therapies that exist today, there will be motivation to go treat those patients, the null responders, the fibrotic patients, the cirrhotic patients, et cetera.

So we think in the early parts of the launch, the first few years, that we should see a significant number of those patients being treated.

And obviously, that makes us feel good about our particular therapy.

Thank you.

Thanks, Damien.

And that concludes today's conference call.

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