艾伯維 (ABBV) 2017 Q2 法說會逐字稿

Good morning, and thank you for standing by.

Welcome to the AbbVie Second Quarter 2017 Earnings Conference Call.

(Operator Instructions) At the request of the company, today's conference is being recorded.

If you have any objections, you may disconnect at this point.

I would now like to introduce Ms. Liz Shea, Vice President of Investor Relations.

You may begin.

Good morning, and thank you for joining us.

Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer; Michael Severino, Executive Vice President of Research and Development and Chief Scientific Officer; and Bill Chase, Executive Vice President of Finance and Chief Financial Officer.

Before we get started, I want to remind you that some statements made today are or 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 the factors that may affect AbbVie's operations is included in our 2016 annual report on Form 10-K and in our other SEC filings.

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 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.

Thank you, Liz.

Good morning, everyone, and thank you for joining us today.

AbbVie delivered another strong quarter with adjusted earnings per share of $1.42, up 12.7% versus last year and exceeding our guidance range.

Our results included strong top line performance with global operational sales growth of 8.9%.

HUMIRA continues to drive outstanding performance, with nearly 15% operational growth in the quarter despite the introduction of new mechanisms of action and competition from indirect biosimilars.

In the U.S., HUMIRA grew 18%, reflecting robust underlying demand, including low double-digit prescription volume growth.

Internationally, operational sales growth was over 9%, driven by strong market demand.

We continue to be pleased with the robust growth and strong market trends we're seeing across therapeutic categories and geographies.

Another major growth driver for our business is IMBRUVICA, which continues to drive strong momentum and strong growth.

In the second quarter, global IMBRUVICA sales were $626 million, an increase of more than 42% over the prior year.

We continue to make significant progress establishing IMBRUVICA as standard of care in several hematological cancers.

In CLL, our largest single indication, IMBRUVICA is the market share leader in first-line patients, with new patient market share of 24% and total patient market share of 33%.

In second-line CLL, IMBRUVICA is now used in more than 70% of patients under treatment.

We're also making good progress in other areas.

We expect to receive approvals soon of our sixth indication, chronic graft-versus-host-disease, demonstrating IMBRUVICA's broad utility across a wide range of serious conditions.

Based on the significant long-term potential of IMBRUVICA, we recently launched a dedicated sales team focused specifically on NHL indications.

We're also seeing good progress with the launch of VENCLEXTA in our initial indication relapsed/refractory CLL patients with the 17p deletion.

We're tracking against our objective to exceed full year sales guidance of $125 million, which represents more than 1/3 of the 17p deletion market.

We look forward to the MURANO trial readout in the coming months and our subsequent regulatory submissions, which will significantly expand the market opportunity supporting therapy.

So overall, we continue to be pleased with the progress we're making with IMBRUVICA, VENCLEXTA and our broader oncology portfolio and strategy.

We also saw strong performance from several other products in our portfolio, including Creon and Duodopa.

In summary, we continue to demonstrate our strong commercial performance, and we're pleased with our financial results.

Moving on to our pipeline.

We have made significant progress in the first half of the year with regulatory approvals, positive data and pivotal study starts.

And as we've noted, we have a number of important clinical development and regulatory milestones in the second half of this year.

Mike will discuss our clinical programs in more detail here in just a few moments, but I'll briefly highlight a few of the more noteworthy milestones.

In immunology, we continue to make good progress with our 2 late-stage assets.

We recently announced strong top line results from the first of our registrational trials of ABT-494 in RA, and we'll see results from 2 additional pivotal studies in the coming months.

We'll also see data from 3 of our risankizumab registrational trials in psoriasis later in the year.

In oncology, we'll see data from a number of pivotal programs, including results from the VENCLEXTA Phase III MURANO trial, data from the Rova-T TRINITY study in small-cell lung cancer and data from ABT-414 in second-line glioblastoma as well as results from the IMBRUVICA SHINE trial in frontline mantle cell lymphoma.

We also completed our Phase III program for Elagolix in endometriosis, and we're on track to regulatory submission this quarter.

And finally, we are anticipating U.S. and European regulatory approvals for MAVIRET, our next-generation HCV offering.

Our pan-genotypic once-daily ribavirin-free therapy has a highly competitive profile with high efficacy rates across major genotypes and in difficult-to-treat patient populations.

In summary, we're encouraged by our strong commercial execution and our strong financial performance, and we're looking forward to the many pipeline milestones we expect in the back half of the year.

We have a high degree of confidence in our strategy and in our execution, and we'll build upon the strong momentum we have to drive a high level of performance across our operations in the second half of the year.

With that, I'll turn the call over to Mike for additional comments on our R&D programs.

Mike?

Thank you, Rick.

As Rick just noted, 2017 marks a milestone-filled year for AbbVie's pipeline, with a dozen pivotal trial read outs and several planned regulatory submissions or approvals.

We continue to make significant pipeline progress over the past quarter.

This morning, I'll highlight recent pipeline updates and discuss key milestones we anticipate for the remainder of the year.

In the area of immunology, we continue to make good progress advancing our 2 very promising late-stage assets: upadacitinib and risankizumab.

Both of these assets have the potential to significantly advanced standard of care in a number of immune-mediated conditions.

Upadacitinib, also known as ABT-494, has produced encouraging mid- and late-stage data in rheumatology and gastroenterology.

We believe our once-daily oral highly selective JAK1 inhibitor has the potential to provide best-in-class efficacy with a favorable safety profile in RA and provide strong activity and a very competitive profile in psoriatic arthritis, Crohn's disease and ulcerative colitis.

In the quarter, we reported top line results from the first of our registrational trials for upadacitinib, the SELECT-NEXT study.

In this study, which evaluated patients who did not respond adequately to conventional DMARDs, both doses of upadacitinib met all primary and key secondary endpoints.

Furthermore, upadacitinib drove very high responses at the ACR20 level.

But more importantly, it drove strong levels of response on more stringent endpoints such as ACR50, ACR70, low-disease activity and gas remission.

We're also very encouraged by the DAS responses we saw where nearly half of the patients studied achieved a low-disease activity in both dose groups and approximately 30% achieved gas remission with just 12 weeks of treatment.

Upadacitinib's efficacy in this population compares favorably to other selected JAK inhibitors in Phase III development, and we think this drug has the potential to offer meaningful advantages over products on the market today or in development.

Additionally, the safety profile in the SELECT-NEXT study was consistent with what was observed in the Phase II trials and no new safety signals were detected.

We plan to present detailed data from the SELECT-NEXT trial at the American College of Rheumatology meeting in November.

We expect to see results from 2 additional studies later this year: SELECT-BEYOND in biologic inadequate responders and SELECT-MONOTHERAPY, with data from 2 more trials and our regulatory submissions expected in 2018 and commercialization in 2019.

Beyond its lead indication in RA, we're making good progress with upadacitinib in mid-stage studies for several other immune-mediated conditions, including Crohn's disease, ulcerative colitis and atopic dermatitis.

And we also recently began a Phase III study in psoriatic arthritis.

At the recent DDW meeting, we presented promising Phase II upadacitinib data in Crohn's disease.

The results from the Phase II CELEST study demonstrated that significantly more patients treated with upadacitinib achieved clinical remission and endoscopic remission following induction therapy as compared to placebo.

There was also a mandatory steroid taper during the induction phase of this study, and upadacitinib performed very well with significantly more patients at the higher doses in steroid-free and in clinical remission after 16 weeks of treatment.

The patient population in this study was considered to be particularly difficult to treat, given that 96% of patients in the trial had failed or were intolerant to anti-TNFs with more than 2/3 having been previously treated with more than 2 anti-TNFs.

The Phase III program for Crohn's disease will begin later this year.

We also plan to begin Phase III studies in ankylosing spondylitis in the second half of 2017 and in ulcerative colitis in 2018.

Finally, we'll see data from a mid-stage trial evaluating upadacitinib in atopic dermatitis, a prevalent chronic inflammatory skin disease, later this year.

Moving now to our anti-IL-23 monoclonal antibody, risankizumab, where we are nearing completion of 3 registrational studies in psoriasis.

Risankizumab has the potential to provide best-in-class efficacy and increased dosing convenience with quarterly administration, and we look forward to seeing results from the 3 pivotal trials in the fourth quarter.

Additional data from the pivotal program will be available next year, leading to our regulatory submission in 2018 with commercialization anticipated in 2019.

At the DDW meeting, we also presented Phase II risankizumab data in Crohn's disease.

The results from the 52-week maintenance portion of a Phase II study were very promising, demonstrating that the drug was effective in maintaining clinical and endoscopic remission and response in patients who are in clinical remission at week 26.

Risankizumab was well tolerated with no new safety signals detected during maintenance treatment.

Phase III studies in Crohn's disease will be starting later this year.

Later this year, we're also expecting to begin a Phase III study for risankizumab in ulcerative colitis.

Additionally, we'll also see Phase II data in psoriatic arthritis, with Phase III studies expected to begin in the first half of 2018.

Moving now to oncology, where we continue to make good progress with our hem/onc and solid tumor programs.

Between now and the end of the year, we expect several important milestones.

Earlier this week, VENCLEXTA received a breakthrough therapy designation from the FDA for combination treatment with low-dose Ara C in treatment-naïve AML patients who are ineligible for intensive induction chemotherapy.

This is the second breakthrough therapy designation in AML and the fourth overall for VENCLEXTA.

The Phase III study for this indication is already ongoing.

In the coming months, we'll see data from the VENCLEXTA Phase III MURANO trial, which will support our regulatory application for broader use in the relapsed/refractory CLL population.

We are also expecting additional IMBRUVICA data readouts later this year based on interim or final analyses from multiple studies, and we are anticipating regulatory approval soon for the use of IMBRUVICA in chronic graft-versus-host disease after failure of one or more lines of systemic therapy.

If approved, this would be the first treatment specifically approved for chronic GVHD, a serious and potentially life-threatening condition with high unmet medical need.

In the area of solid tumors, we'll see results from the TRINITY study where Rova-T is being evaluated in third line or greater small-cell lung cancer with regulatory submissions following shortly thereafter.

At the recent ASCO meeting, we presented full data from the Phase I study of Depatux-M, also known as ABT-414 in glioblastoma multiforme, including encouraging overall survival and progression-free survival data.

Later this quarter, we'll see data from the Phase II study of Depatux-M in second-line GBM that if positive would support regulatory submission.

And finally, in the area of women's health, we recently completed our Phase III program of Elagolix in endometriosis.

We plan to present additional data from the extension study at the ASRM Congress at the end of October, and we remain on track to submit our regulatory application later in the third quarter.

Our Phase III program in uterine fibroids is also well underway.

We'll begin to see initial top line results from the first pivotal study around the end of the year.

So in summary, we continue to see significant evolution of our mid- and late-stage programs.

The first half of the year has been very productive, and we look forward to the second half of 2017 and the large number of clinical and regulatory milestones.

With that, I'll turn the call over to Bill for additional comments on our second quarter performance.

Bill?

Thanks, Mike.

We are very pleased with our second quarter performance.

Total net revenues were $6.9 billion, up 8.9% operationally, excluding a 90 basis point unfavorable impact from foreign exchange.

We reported adjusted earnings per share of $1.42, up 12.7% compared to the second quarter of 2016 and exceeding our guidance for the quarter.

HUMIRA had another outstanding quarter with global sales of $4.7 billion, up 14.9% operationally.

This performance is reflective of continued strong demand despite increasing competition from new class of drugs as well as anti-TNF biosimilars.

In the U.S., HUMIRA sales increased 18% compared to the prior year, driven by low double-digit prescription growth plus price.

Wholesaler inventory levels were below half a month as is our standard practice.

HUMIRA's growth continues to be fueled by robust demand across all 3 segments, rheum, gastro and derm, and market share remained stable despite competitive dynamics.

Internationally, HUMIRA had an exceptional quarter, with operational sales growth of 9.1%.

This performance was driven by market growth as well as tender timing, which contributed nearly 2 percentage points to operational sales growth in the quarter.

Global IMBRUVICA net revenues in the second quarter were $626 million, up more than 42% over the second quarter of last year.

Robust sales in the U.S., which totaled $528 million in the quarter were driven by our strong market positions in CLL as well as other indications, including mantle cell lymphoma, Waldenstrom’s and relapsed/refractory marginal zone lymphoma, which was approved earlier this year.

Global VIEKIRA sales in the quarter were $225 million, down versus the prior year.

In the coming weeks, we expect U.S. and European regulatory decisions for our next-generation HCV treatment, MAVIRET.

Based on the timing of reimbursement decisions outside the U.S. and managed care contracting cycles in the U.S., we expect to see meaningful sales contribution from MAVIRET starting in 2018.

Global sales of Duodopa, our therapy for advanced Parkinson's disease, grew 16% on an operational basis in the quarter.

And we also saw strong growth from Creon, which was up over 9% in the quarter.

Reviewing the P&L profile for the quarter.

Adjusted gross margin was 82.3% of sales compared to 81.9% in the prior year.

This was inclusive of 80 basis points of dilutive impact related to partnership accounting.

Adjusted R&D was 17.5% of sales, up 200 basis points over the prior year, reflecting increased funding of the pipeline, including incremental spend associated with the Stemcentrx and risankizumab transactions.

Adjusted SG&A was 20.2% of sales in the quarter, down 200 basis points versus the prior year, driven by sales leverage and operational efficiencies.

Operating margin was 44.6% of sales in the second quarter, an improvement of 70 basis points versus prior year.

Net interest expense was $253 million, and the adjusted tax rate was 19.3% in the quarter.

Second quarter adjusted earnings per share excluding intangible amortization expense and other specified items was $1.42, up 12.7% year-over-year.

Turning to full year guidance.

We continue to forecast full year adjusted EPS of $5.44 to $5.54 per share, representing growth of 13.9% at the midpoint.

This guidance comprehends full year top line operational growth approaching 10%.

For U.S. HUMIRA, we continue to expect high to -- mid- to high-teens sales growth for the full year.

Internationally, we expect mid-single-digit operational growth for HUMIRA.

Given recent foreign exchange dynamics, we would expect full year reported sales growth for international HUMIRA to approach mid-single digits.

For IMBRUVICA, we remain on track to achieve our full year expectation for global reported revenues of greater than $2.4 billion, with sales in the U.S. of more than $2 billion.

In the last several weeks, we have seen a weakening of the dollar versus key foreign currencies.

If these rates were to remain constant at today's levels, we would forecast no material impact from foreign exchange to full year sales.

This currency movement would, however, have an adverse impact on gross margin due to hedges in place on key currencies.

If exchange were to hold at current rates, we would forecast full year gross margin as a percentage of sales at 80.5%.

We are forecasting full year R&D expense approaching 17.5% of sales, reflecting pipeline funding and the impacts of the Stemcentrx and risankizumab transactions.

We expect SG&A of over 20.5% of sales, and this would result in an operating margin profile of approximately 42.5% inclusive of the recent impact of currency movements.

We continue to expect the net interest expense of approximately $1 billion, and the adjusted tax rate for the full year should be modeled at above 19%.

For the third quarter, we expect adjusted earnings per share between $1.36 and $1.38.

This adjusted EPS guidance excludes roughly $0.22 of noncash amortization and other specified items and represents year-over-year growth of 13.2% at the midpoint.

We are forecasting operational revenue growth of approximately 9% through the third quarter.

And if current exchange rates hold, no impact from exchange on sales in the quarter.

For U.S. HUMIRA, we expect sales growth in the third quarter in the high teens.

Internationally, we expect mid-single-digit operational growth for HUMIRA.

For IMBRUVICA, we expect U.S. sales growth in the third quarter of approximately 30%.

We expect gross margin in the third quarter to be approximately 80.5% of sales.

This gross margin comprehends the current exchange rates and is inclusive of the dilutive impact of partnered products.

In closing, we delivered outstanding performance in the quarter, driven by our focus on strong commercial and operational execution.

We expect to continue this momentum in the second half of 2017, putting us in a great position to deliver top-tier revenue and EPS growth for the full year.

And with that, I'll turn the call back over to Liz.

Thanks, Bill.

We'll now open the call for questions.

Operator, let's take the first question, please.

Our first question comes from Jami Rubin of Goldman Sachs.

I just had a couple of pipeline-related questions.

Michael, maybe for you.

There seem to be emerging questions about the safety of JAK inhibitors due to DVT and PE issues, which seem to have hobbled the baricitinib application at the FDA.

In addition, we understand there is an upcoming panel meeting on Xeljanz on psoriatic arthritis, and maybe the issue relates to DVTs that were seen in post-marketing studies.

So I'm just wondering what you can tell us in terms of the safety profile of ABT-494 related to DVT and PE issues.

I know in sort of searching through the clinical database and there's not a whole lot of data yet, but we didn't see any information related to platelets.

I'm wondering if that means anything.

And then secondly, we did see a drop in hemoglobin seen in Phase II.

And just wondering if that could be related to anemia or any suggestions of off-target JAK2 inhibitor side effects.

So if you could kind of put that into perspective.

And then just lastly, on risankizumab and positioning of that relative to ABT-494, there are other IL-23 drugs specifically, guselkumab that have just been launched.

And I'm just wondering if you could talk about how you see the relative positioning of both risa as well as ABT-494, particularly in GI where both drugs seem to show very compelling profiles.

And maybe if you could talk about those drugs specifically risankizumab relative to other IL-23s that are also entering the market.

Okay, Jami.

Thanks very much for that question.

I'll try to take these one at a time.

So with respect to the safety profile of our agent upadacitinib and DVTs and PEs.

The short answer is we've looked, and we don't see anything that we'd consider a signal or rates that exceed expected background.

But maybe to fully answer your question, it would be helpful to take a step back from for a moment and think about what we know and what we don't know.

So based on Lilly's recent statements, we know that questions around DVT and PE appear to be the driver behind their CRL, and that, that concern seems to be driven by an imbalance during the placebo-controlled portion of their studies.

We also know that RA patients started increased risk of DVT and PE, and that these events are observed in virtually all Phase III programs in RA regardless of the mechanism of action.

And as you point out, we also know that there had been a number, I think, it's something like 18 post-marketing reports of PE with Xeljanz.

Since RA patients are at increased risk and Xeljanz has been in the market for several years, I don't think that, that is necessarily surprising.

When we think about what we don't know there are a number of things in that column.

For starters, we don't know whether bari does in fact increase risk.

Here, the FDA has just asked for more data.

We also don't know the detailed data that Lilly and the FDA are looking at.

For example, what the total number of cases including not only the placebo-controlled portions but also the open-label periods?

What are rates overall and are they increased?

What's the nature of the cases?

Is there evidence of a dose response or not?

So we still have a lot to learn about bari.

But I can tell you about our program.

We've been monitoring for DVT and PE right from the beginning because we know that RA patients are at increased baseline risk, as I just said.

Because of this background rate, which is generally between about 0.3 and 0.8 events per 100 patient years, you'd expect to see some PEs in any RA clinical program.

In fact, it'd be surprising if you didn't.

So to evaluate them, you have to look at the other factors that I just talked about.

Now again, as I said, we've been monitoring for these events right from the start.

But based on the recent issue from bari, we've gone back, and we've taken another very careful look at all the data we've collected so far.

And as I said, based on that look, we don't see anything that would consider a signal or rates that exceed expected background.

So our view of our program hasn't changed.

Now you asked about platelets.

We've looked at that.

And what we see with [Rh] and our -- a tendency towards modest decreases in platelets with treatment.

Now that's not necessarily surprising because platelets can behave in some patients like an acute phase reactive.

They can go up when there's active inflammation.

And when you treat that inflammation, they can return back towards normal.

And all the changes that we're seeing are very modest, and they are all within the normal range.

So I don't know that I would really make very much of that right now.

You asked about hemoglobin in Phase II.

And what I would say is, in Phase II, we studied a very wide range of doses, including doses that are much higher than the doses we're carrying forward in Phase III.

And we did that because we wanted to make sure we fully explore the dose range and we got that dose selection right because dose selection is critical in any Phase III program.

At the doses that we're studying in Phase III, we're not seeing significant changes in hemoglobin.

And AEs of anemia are very uncommon and seen in all dose groups including placebo.

So we're not seeing issues with hemoglobin in our program.

With respect to the positioning of these agents, maybe I'll let Rick make a few comments and then...

Sure.

I think if you step back and you think about what we're trying to accomplish in this particular area, obviously, we have a leadership position in immunology.

We've been working on this strategy for a number of years now.

Our goal is to bring forward a set of agents that we thought could restate standard of care in all the areas that we have a leadership position in.

From the very beginning, we didn't believe that there was one mechanism of action that was likely to be able to do that.

So we pursued multiple mechanisms of action.

And now we have 2 assets that we believe can give us coverage with a differentiated profile within those areas.

So if you think about the 3 major areas, RA, psoriasis and IBD, certainly, as we look at 494 and the data that we've seen thus far, we believe it fundamentally will have a differentiated profile, in particular in the TNF inadequate responder population.

We're excited and interested in what that data will look like and encouraged that we think that, that will be a profile that will be differentiated in the marketplace.

And so we think 494 is clearly the asset that will be our RA asset.

In psoriasis, certainly, the IL-23 risankizumab is certainly demonstrated in the Phase II studies, a significant differentiation versus other agents that are out there.

I'll let Mike talk specifically about the data here in a moment.

So that's certainly the asset that we're targeting there.

In IBD, these patients tend to rotate through therapies because they do lose effect over time.

In both of these agents, I think in our early data, it would suggest to us, we'll have good activity in IBD.

And I think our strategy, although we have to see how the data plays out, will be that -- we will pursue both agents in this area.

And that will give us more the fullest level of coverage within this disease -- and this is the disease state that still has a significant unmet need.

And then obviously, we're going to look at a number of other areas.

And many of these other areas can be very significant opportunities.

If you think about HFs with HUMIRA, that's tracking to be a $1 billion indication for us.

So many of these other areas will be significant opportunities as well.

But that covers the major areas.

Now from a go-to-market strategy and how we'll be positioning these products, they will vary somewhat based on geography and based on other events like the timing of biosimilar entries within those markets.

But generally speaking, we view this portfolio of assets, HUMIRA and these 2 assets, as the way that we will compete in the marketplace.

Certainly, we have the gold standard product in HUMIRA.

In these areas, it's really the flagship product.

It will play an important role over the long term, as we've said.

Even when we see biosimilars in this market, it will be our goal to maintain our leadership position within this market.

But HUMIRA doesn't work on every single patient.

And I think the best way to think about it is this.

Despite how successful we have been with HUMIRA, we still have roughly 1/3 of the market.

When you add these other 2 agents into the mix of our portfolio, it should give us the opportunity to significantly grow our market share position because we will then have a set of assets that should give us much broader coverage from a clinical standpoint across the patient groups in these areas that have agents that will be efficacious.

Some will be follow-on agents, some will compete head-to-head for new patients.

It will depend a lot of geography and circumstances within that market.

But we think this portfolio of assets in immunology will clearly give us an opportunity to be able to significantly increase our market share position in this area.

And so that's -- we view this as a very exciting opportunity and one that can drive significant growth for the company going forward.

Maybe Mike specifically talk a little bit about some of the data we've seen in the differentiation.

Certainly.

So as Rick mentioned, it's really the data that's going to drive the positioning in, and we're very fortunate to have demonstrated very strong data from both of these programs.

If you look at upadacitinib, we've seen very good responses in Phase II and also in the first Phase III, SELECT-NEXT that we've top lined.

What we're particularly encouraged is the ability to drive responses at higher levels.

And so that's getting patients to DAS -- low-disease activity DAS remission, for example.

We've seen very good performance out of both of our dose levels at those more stringent measures.

We've also designed a very broad and very robust, a very comprehensive Phase III program for upadacitinib in RA that will provide a lot of data and give a lot of time on drug so that we can very well characterize both the benefit and the risk profile of those patients.

So I think the program that we've designed is going to be a real strength.

We've seen good response in upadacitinib in other indications, as Rick mentioned, like inflammatory bowel diseases where there's a real unmet medical need.

And so the breadth of the program I think will be very beneficial.

If we move our attention to IL-23 and risankizumab, there are other agents in this class, and it is a competitive space.

But we were particularly struck with the Phase IIb data that we saw for risankizumab.

We're driving very, very high levels of response and very high levels of response at PASI 100 level, for example, that really are the best that have been seen in this field.

And we did a head-to-head in Phase II and drove PASI 100 levels that were roughly double that of currently available agents.

So I think those data are very strong.

And when you couple that with the fact that we're able to achieve quarterly dosing and very durable responses, which have been a problem with past agents in psoriasis, I think that all shapes up to be a very strong profile.

And of course, risankizumab also provides strong data.

We presented data in IBD at the DDW meeting, which showed very good responses in Phase II.

And we're moving forward with a very broad program for risankizumab as well.

Our next question comes from Jeff Holford of Jefferies.

Firstly, I wonder if you could give us an update on your thoughts as to the extent of excess cash generation over the next few years; I know we've been talking about that recently, and just how you're thinking about now prioritizing that between dividend, share repurchases and M&A.

I wonder if then also you might like to comment on hep C and how you're going to try and approach that from a commercial standpoint in the U.S. You've talked about wanting to look at more open formularies I think going forward, but what's the challenge of you actually achieving this and do you think that price will have to be part of the implicit offering there?

Jeff, this is Rick.

I think on cash generation, obviously, we have a business that generates significant cash flow.

And that cash flow is only going to grow over time.

I think the distribution of that and the priorities are consistent with how we've operated in the past.

Certainly, our first priority is always reinvesting back in the business.

And obviously, we've done some significant acquisitions with Pharmacyclics and Stemcentrx and others.

Risankizumab is a good example of other assets that we then license.

So that's always a priority.

Having said that, I would say that over the course of the last 4 years or so, we have filled out a lot of the major gaps that we had in our therapeutic strategies.

And we're looking more now for individual assets rather than larger platform kinds of plays.

But that's always the first priority.

The second priority is we're committed to the dividend.

We're committed to a growing dividend.

I think we've demonstrated that with our actions going forward across the last 4 years.

And then as far as repurchase, today we obviously look at share repurchase which we've done a significant amount even outside of that related to M&A.

As a more opportunistic strategy, when we have excess U.S. cash, we tend to deploy in that fashion.

Now if there were -- you commented on it, there's been a lot of discussion around it.

I think if there was tax reform and we had greater access to our offshore cash in a cost effective way, then that would open up different opportunities for us to be able to deploy further cash because I think our cash generation would certainly exceed what we would view as our need to be able to redeploy it back on the business.

But we'll have to see how that plays out.

I think it's a little tough to handicap at this point where that will go.

As it relates to HCV, we're certainly excited about MAVIRET.

I think it has a profile that is highly competitive in the marketplace.

The markets are very different within the U.S. and outside the U.S. I'd say if you think about this product outside the U.S., it certainly gives us the ability to compete in the broader set of genotypes, which we haven't had in the past.

And it certainly gives us the ability to be able to compete more effectively in markets that are -- have a significant genotype-1a population because the profile of MAVIRET is much highly -- more highly competitive than VIEKIRA was in those particular marketplaces.

And so we view that opportunity as significant.

We have to get pricing and reimbursement in those countries.

And if you look at markets that we're primarily 1b where the profile of VIEKIRA was more comparable to the competitive offerings, we typically get shares in the 30% range -- the 30% to 40% range.

Now having said that, I will also tell you that we are seeing price come down outside the U.S. and so we're going to have to be able to -- if we can share gains, which we probably will, some of that will obviously be used to offset price impact that we see in those markets.

Within the U.S. market, it's a different type of market, as you know.

On the commercial side of the business, much of that is under contract with the market leader on exclusive contracts.

So we don't see a significant opportunity for that in 2017 and probably certainly even halfway through 2018.

So we don't view that as a short-term opportunity.

So a significant part of our strategy will focus early on in the U.S. and the public channels because those will become available more rapidly.

And so our go-to-market strategy will be one that's focused initially in that particular area where we think there is the greatest opportunity to be able to have an impact.

Now HCV is an unusual market in that if you look at public -- within the U.S., if you look at the public channels versus the commercial channels and you look at currently those patients that are available for treatment that haven't been treated already, it's roughly 70-30.

About 70% of the patients are in this public channel, Medicare, Medicaid, VA, et cetera.

And 30% are in the commercial channels.

And so it's a significant opportunity and it's the part of the market that's still growing where the commercial channel tends to be flat to declining from the patient volume standpoint.

So once we get approval, that will be the area of focus within the U.S. But as Bill said in his comments, we don't view this asset as having much of an impact in 2017.

It will have a more material impact in 2018 and 2019.

And just a last quick add-on if I can.

On the pricing of Rova-T, there is a lot of pushback from investors on the sort of prices you might be able to charge for the 2 doses, especially in third line small cell lung.

Can you just give us any updated thoughts there on what kind of ballpark we should be in for modeling purposes?

Well, I mean, I think for modeling purposes during the acquisition, we used pricing that was typical of a proprietary oncology agent.

I don't believe there's anything in our data that has changed our minds around that.

Certainly, what's going to be the most important thing is the data that we see come out of the trials and that will dictate, I think, the adoption of the agent to a much greater extent than the pricing.

This is a pretty devastating disease where there really aren't many options for these patients.

And if Rova-T shows what we think it will show, I think this will be an excellent opportunity to be able to provide those patients with a therapy that isn't available today that gives them an opportunity to have a significant clinical improvement.

And I think that will drive the adoption more than the price point.

Our next question comes from Chris Schott of JPMorgan.

Just 2, both on HUMIRA.

Maybe first, EU biosimilar landscape, it seems like Remicade is starting to get hit pretty hard.

Can you maybe just compare and contrast how you see HUMIRA dynamics playing out as we look out to 2019 versus what we're seeing from Merck over the last few years and quarters here?

My second question is just interested if you could share any high-level comments on HUMIRA as we kind of think out to 2018 formulary and the pricing outlook.

I believe if I go back to the 3Q 2016 call, you had mentioned you had completed some negotiations for '17 as well as 2018 season.

It was basically business as usual with regards to HUMIRA.

I just wondered, is that view changed all at this point?

Or you're still kind of seeing kind of business as usual as we think about kind of formulary positioning, et cetera, going forward?

So Chris, this is Rick.

On the formulary front, you are correct.

We obviously negotiated a number of contracts that were both '17 and '18.

We never disclosed nor would we disclose what percentage of the contracting falls into that category, but we are now in active negotiations for the remaining contracts in 2018.

And I would tell you nothing has fundamentally changed as it relates to the access that we have assumed or the pricing of the asset or any of the aspects from a standpoint of managed care contracting.

So you shouldn't assume any significant difference in any of our activities as it relates to formulary access or the structure of that access as well.

As far as EU biosimilars, we obviously track it carefully.

I wouldn't say it's my view that there's been a dramatic change in either Remicade or Enbrel.

The pricing has continued in the range that we've talked about in the past.

If you look at their overall market share position, it obviously varies by country.

And there are some countries where they have heavy penetration.

But overall, the Remicade biosimilar, the last date I looked at a few weeks ago would suggest that they have about 6% market share.

In the Enbrel biosimilar something less than 4%, 3.5%, 3.6% something like that was the last data I saw.

If you look at it versus the brand, there's still an area that is relatively modest.

And the price erosion is pretty consistent with what we've expected where you see these tender countries obviously very high discounting and obviously, in some cases, significant conversion to the biosimilar.

The Nordics are good example of that.

But when you look at many of the major European countries, they have relatively modest uptake, and they have pricing in that 35% kind of range from a discounting standpoint.

So I think it's relatively consistent with what we've seen and what we've been modeling for quite some time.

And so it gives us continued confidence that our strategy, when that occurs, is one that should be highly effective.

Our next question comes from Marc Goodman of UBS.

Two questions.

First, can you talk about the gross margin?

It seemed to be pretty strong in the quarter.

I know you mentioned for the full year, but just talk about the quarter specifically?

And then second, can you give us an update on Stemcentrx non-Rova-T activity?

What's going on there?

So Marc, it was a nice quarter for gross margin.

We've gone back and looked.

Historically, Q2 does run a little stronger than the rest of the year.

That's a function of product mix to a certain extent.

But that said, we continue to make pretty nice progress on this line even in the face of the partnership accounting.

If you look at -- if you back out partnership accounting, we are probably at about 120 basis points.

Yes, I think the main driver, about 1/3 of that, was a favorable impact of exchange.

But that still left 80 basis points to the good, and that was really a mix of product mix as well as just cost efficiencies.

And -- this is Mike.

With respect to the Stemcentrx pipeline beyond Rova-T, we continue to make very very good progress.

And one of the things that was really attractive about Stemcentrx was that it not only brought a lead asset, but it had a discovery platform that we thought we could capitalize and accelerate our presence in solid tumors.

And we're seeing that play out.

The scientific team there has been very productive.

They've worked well with a broader scientific team at AbbVie.

Our strengths really complement each other.

We're driving that platform forward rapidly.

We have a number of programs in the clinic and we have a number of programs in late preclinical development poised to enter early clinical development.

And we could introduce as many as 3 to 4 programs a year into the clinic over the next couple of years from that platform as we've said in other settings.

We're still tracking very well against that goal, and we feel good about the progress we're making.

Our next question comes from Umer Raffat of Evercore.

I had a couple if I may.

First, just to follow up on the ABT-494 question.

Can you just remind us exactly the number of cases with thromboembolic events you've seen, either in completed or in ongoing trials on a blinded basis, number one.

And then secondly, just wanted to follow-up on HUMIRA.

The recent news on the judge for the District Court trial, could that have an impact on the actual trial date versus Amgen?

And then also Rick, you mentioned that there's no significant difference in managed care contracting for 2018 for HUMIRA.

But would you continue to expect the same pricing tailwind?

And the reason I ask is I just find the dynamic around your key competitors on [Phase] TNF not getting much price tailwind lately.

Okay.

This is Mike.

With respect to 494, what we've reported so far is from Phase II.

And in Phase II, there were 2 cases of PE that were in patients with a number of risk factors.

One of those was a recurrent case.

Given the background rates that I talked about, it really isn't surprising to see a small number of cases like this, particularly in Phase II where the large majority of patients are on active drug.

With respect to our ongoing trials, what we've said is that we're monitoring our data closely.

We have a good understanding of the background rate, which is between about 0.3 and 0.8 events per 100 patient years.

And we're not seeing anything that's elevated above that rate.

Okay.

This is Rick.

Obviously, we haven't, in the last year or so, talked much about the litigation strategy for obvious reasons.

We're in active litigation right now.

I would tell you nothing has changed in the way of our assumptions around timing, but I probably won't comment much further than that.

But I would tell you, there's not any concern around -- a change in significant timing around the litigation timelines.

As far as contracting is concerned, it's consistent with what I said to you a few moments ago.

We don't see any significant change in the contracting strategy, and that would include what is common in this industry around price protection, which has some impact around your pricing.

Having said that, I would say, as we did this year, we're going to be careful and conservative as we think about price going forward and certainly as we've looked at our longer-range plan, historically, that's how we've operated.

But I'd say even in this last cycle, we have been even a little more conservative than we have been in the past because this has become such a heated topic in the U.S. But it's not a function of anything that is related to the contracting strategy.

It's more a function of how we're trying to operate the business overall.

Our next question comes from of Geoff Porges with Leerink Partners.

Two quick questions.

One, you have the rights to the Galapagos cystic fibrosis program, and you haven't talked about that much on this call, certainly and recently.

I'm wondering how you view the recent announcements from the vertex program and whether that's changed your appetite for investing in the Galapagos program and your expectations and when you expect to start Phase III for that program.

And then a sort of left field question for you, Rick.

Could you talk a little bit about -- you're the only CEO that AbbVie has had.

Could you talk a little bit about your succession planning and timing and what the transition is likely to look like and when that might happen because there's not a lot of history there on how AbbVie has handled that.

This is Mike.

I'll take CF first.

Our CF program is a program that we feel very good about.

It's still in early phase studies.

And so for a company of our size, we don't always spend a lot of time talking about our very early phase work, but that doesn't mean that we're not excited about that.

I think there's a real opportunity there.

I think the target has a lot of the characteristics of things we're really good at doing, engineering very, very specific and high-quality small molecules together with our partner on this Galapagos.

I think there clearly is an unmet medical need.

Obviously, there've been advancements in the field, and that's good for patients, but there's more room to go, and so we think that we can contribute there.

With respect to the vertex data, I mean the vertex data are strong but we expected those data to come out and we expected them to be strong.

We still believe that there is headroom above that can benefit patients, and we can help meet that need.

It's our mid-phase trials that are going to provide that answer.

And we and Galapagos are working diligently to move into that phase of development.

With respect to Phase III, I think it's a bit early to predict timing on Phase III right now.

This is Rick.

I'll answer your second question.

Yes, I've been the only CEO of AbbVie, but AbbVie is only 4.5 years old.

So I guess that's not too unusual.

In fact, I'd say if there were more than one, that probably would be a sign of something different, right?

But on a more serious note, I think as you look at succession planning, it's obviously a critical issue for a company of this size.

We have a very good, high-quality board of seasoned executives at the board level.

We take succession planning very seriously.

I'd say we view it as an active process that we continue to work on.

But certainly once a year at a particular board meeting, we dedicate a significant amount of time to succession planning.

We have a succession plan in place for the company, as most companies of our size would have, that is a plan structure of both -- internal candidates that we have and the development of those internal candidates.

Obviously, there are always opportunities to go outside if the board were to choose that.

We obviously also have an emergency succession plan if something were to happen that would require that and we have identified individuals that we fundamentally believe would be appropriate for that.

So I can tell you, the board takes it seriously.

It is an active process that we use.

And I think -- I won't speak for the board, but as Chairman of the Board, I can tell you it's a process that I feel very comfortable with and I believe it's very appropriate for a company of our size.

Our next question comes from Geoff Meacham of Barclays.

One for Mike.

So Elagolix, how meaningful is the extension study data to the overall profile?

I mean clearly duration of therapy could be a big lever.

I want to get your sense as to persistent compliance trends pretty much throughout the program and what you think that could mean to the real-world use.

And then bigger picture question for Rick.

You guys have made a lot of pipeline progress and have a number of launches for next year.

So I want to get your sense as to how that has changed your strategy, if at all in biz dev?

I think the hiring of Henry a few weeks ago signaled an emphasis on deals, but we haven't seen much activity of late.

This is Mike.

I'll start with the Elagolix question and hand it over to Rick.

We've designed a program for Elagolix that is going to provide a very large and very comprehensive database to guide real-world use.

We have the initial efficacy periods, and those results were very strong.

We've reported them in other settings.

We have extension periods, which, as you point out, could be very important for informing duration of use.

And then we have off-treatment periods so that we can look at a number of factors that we'd want to examine as patients roll off of this therapy.

And the results we've seen in each phase are very, very strong.

What I would say is there's a real unmet medical need here.

There hasn't been any innovation in this space in decades, and women's treatment options are very, very limited.

So oral contraceptives are used upfront.

They provide some women relief, and that's good.

But we know that many, many women don't achieve necessary relief.

Beyond that, there's no disease specific intervention until you get all the way to the other end of the spectrum, either putting a woman in menopause with Lupron or surgical interventions.

And in between, the only thing that doctors can do is give pain medications and basically treat this as a chronic pain condition.

And we know that the pain is severe enough that a large number of women go on opioid pain medicines for this condition.

And so we think that Elagolix is really going to offer a compelling profile to these women.

And what it offers is the ability to titrate suppression of the hormonal axis.

Instead of just an on and off switch, we can achieve different levels of suppression.

And we've seen that translates into improvement in pain, improvement in symptoms on a number of measures and a very favorable safety profile.

So we're looking forward to moving forward with the regulatory submission, which should be later in this quarter.

And we think it's going to be a real advance in this field.

With that, I'll hand it over to Rick.

Well, as you pointed out, we have a number of launches, not just next year but over the next several years.

It's really the evolution of our pipeline playing out.

When we launched the company, we put major emphasis around building a pipeline that could sustain long-term top-tier growth.

And we've been working diligently to get that done.

And I think you're starting to see now the evolution of that reach a point where we'll be launching a number of these products over time.

I'd say as I look at our commercial organization, I think we have an outstanding commercial organization.

They've been even preparing for many of these launches now for several years.

We obviously do it in phases.

You'll start to see us increase investment in certain areas to prepare for those launches.

And I feel good about how we'll enter the marketplace with a number of these new drugs and the impact that we can have.

As far as deals are concerned, what drives our deal decision-making is really built around the strategy for the business.

Within each one of the verticals, we have a strategic set of objectives that we're trying to accomplish.

And we basically apply our deal focus and our BD activity against that strategy.

And so as I said earlier, we've obviously added a number of large platform plays to the business to build out our oncology franchise, which was an important part of our strategy going forward for the business was to build another major growth platform in oncology.

And I think as I look at IMBRUVICA and I look at the Pharmacyclics acquisition and I reflect on what we thought at the time we did it and I look at where we are now, I can tell you I'm very happy with how that has played out.

I mentioned some of the numbers that we talked about a moment ago about the kind of penetration rates that we're getting with IMBRUVICA.

If you look at second line plus, so second, third line and beyond, IMBRUVICA has achieved -- one of the objectives that we had was to get to 65% market share across the vast majority of those indications.

And we are at or above in second line plus.

In first line now, we're focusing a lot of attention on growing our position there.

And you're seeing in CLL, we're ramping very rapidly in that area.

We'll get some additional approvals we believe that will allow us to grow first-line across a number of other tumor types.

And then as you see the NHL line of indications start to play out, we've dedicated a sales force to that because we believe going forward, that will be another significant growth driver for us.

As we track towards what the overall objective was, which is greater than $7 billion of revenue to AbbVie, we're right on that trajectory and $5 billion by 2020.

So I think it played out the way we hoped and expected it should play out.

We constantly look at deals.

You know, Henry's team is doing a great job.

I can't say that there's a lot out there that either fits what our strategic objectives are or has a value proposition at this point that is something that we are comfortable with from a return standpoint.

And that really is what's been driving the lack of activity versus any strategic intent not to go forward on transactions.

But as I said, we're primarily focused now more on individual kinds of assets that can fill out our portfolio.

But they have to be things in that we're comfortable with from a standpoint of the potential for the asset, the probability that the mechanism will work and then obviously, the value proposition that we'd have to pay for.

If it's something that we can't get a return, then it's not something we're going to pursue.

Our next question comes from Greg Gilbert of Deutsche Bank.

Rick, just to follow-up on those last thoughts there.

You've been very clear about the types of things you're looking to do, but how open-minded are you if at all about potential for the big M&A that could address concentration and also create meaningful cost efficiency.

It's not something you've sort of lead with in your discussions around BD, but gaging your open-mindedness.

This industry seems to be ripe for some larger combinations.

Secondly, can you remind us what your commercial infrastructure is for women's health and how you might need to tweak that ahead of Elagolix?

And lastly, with the recent sizable judgment on a Low T case, can you comment on your thoughts on liability in that area for the company?

Obviously, we look at all different kinds of things, but what I would tell you is if you look at our growth, certainly if you look at our growth over the last several years and if you look at our going forward, projections for growth across our long-range plan, this is a company that has performed extremely well, and we expect it to continue to perform well.

Concentration was something that we had looked at as part of our overall pipeline strategy.

We will fundamentally deconcentrate the business as we add more products, more pipeline assets and grow those assets to a sizable level.

And you can start to see some of that with IMBRUVICA.

IMBRUVICA is obviously contributing significant growth and will continue to contribute significant growth.

As some of the additional oncology and other assets move into the phase where they're launched and starting to have a significant impact, you'll see further deconcentration now.

One of the challenges is obviously been -- it's a good challenge to have, we continue to grow HUMIRA at a very robust rate and we're certainly not going to do anything to slow the growth down to deconcentrate.

But that's not a bad problem, that's a good problem.

And I think as we look at our strategy going forward, we'll defend HUMIRA.

In a biosimilar world, we feel very comfortable with what that looks like and our ability to be able to do that.

So I would tell you big M&A is not something that we are considering.

And that's not to say it would never ever happen because you never know in this world, but the reality is that is not fundamental to our strategy.

Our strategy was always built around building out a strong pipeline around the verticals that we operate in and being able to drive to significant market share within those areas.

As it relates to infrastructure on women's health, as you probably know, we currently sell -- as one of the indications for Lupron, it has an endometriosis claim.

Now Lupron certainly is not the ideal agent for this particular disease because obviously it shuts down that axis completely and has all of the side effects of that are associated with doing that like bone loss and hot flash.

So we have, I'd say, a modest sized sales organization because it's really scaled to the opportunity that exists there.

But as I mentioned a moment ago, one of the things that I think we're very good at is planning out launches.

So as we submit Elagolix there's a plan in place today to start to build out the infrastructure that will be necessary to give the appropriate level of coverage.

I can tell you Elagolix is an asset that we're very excited about in endometriosis.

We think it has a very good profile and this is a disease that ultimately has significant consequences for the patients who have this.

Opioid use is an example of significance within this population, which gives you some idea of how severe the pain is and difficult the pain is to manage.

And so I think this will be an important drug for women who have endometriosis.

And we'll obviously scale the organization appropriately to be able to deal with that.

On the AndroGel case, yes, I would say it was a surprising verdict from the standpoint that there was this punitive damages aspect to it without really awarding any damages to the individual.

From a legal standpoint, I think, that's not only unusual, it's probably going to be a difficult situation to sustain over the longer term but we need to work through that.

I think the important part is on the other claims, obviously, the jury found in our favor and I think that bodes well.

We have a number of these cases so we need to see how the other ones play out.

But there's no fundamental change in the way we view the liability of this based on this single case.

Our next question comes from David Risinger of Morgan Stanley.

I have 2 questions, one for Mike and one for Bill.

So obviously, there have been a lot of questions about your JAK inhibitors, PE and DVT rate.

But when do you expect to publish percentages the way that we've seen for baricitinib, that was 0.47% and Galapagos was 0.16%?

And then second with respect to the timing for HUMIRA's gross margin to step up due to the loyalty reductions, Bill, I was just hoping that you can provide a little bit more color on that find.

Okay.

This is Mike.

I'll take the first question on upadacitinib and the rates of DVT and PE.

So I think, as we've said, it's the overall rates that are really important.

We continue to monitor those.

We're well within that expected rate for the population.

And of course, one wouldn't expect to see something lower than the background rate for the population in any large clinical trials program.

So when we have the aggregate data, we'll present the whole picture.

And we'll show what those rates are and we'll also show at an appropriate time the distribution in the control period.

But really right now, we're very early on in unblinding and reporting out our Phase III RA studies.

With respect to those other rates, the rate that you quoted for Gilead, I think we'd have to really understand where that exposure comes from.

Gilead is really just getting started in RA.

Most of their data comes from Crohn's disease and other inflammatory bowel disease conditions like UC where the patient population is very different, they tend to be younger.

The risk profile is different.

So I think at this stage, it's hard to use those benchmarks that you quoted as ranges.

I think you have to look at the literature, you have to look at other sources of information, and we see a very, very consistent background rate of 0.3 to 0.8.

You see that in the literature.

We've done our own work in payer databases, and we see that same rate.

And we've seen that same rate across historical RA programs regardless of mechanism of action.

Some are ours.

Some are other programs.

So we think we have a really good handle on that rate.

And what we're seeing right now is very, very consistent with nothing other than that background rate.

When we have the data from our Phase III program, we'll present that whole picture.

The royalty burden really lifts in 2 different phases.

The first third of it lifts at the very end of '17 so you see a P&L impact in '18.

The other 2/3 lifts at the very end of '18 so you can see the P&L benefit in '19.

And then in terms of quantity to model, we have said that, that burden is about 5% to 6% of global HUMIRA sales.

The next question comes from Vamil Divan of Crédit Suisse.

Two.

One going back to the 494 and the anemia comment you talked about earlier.

It sounds like you're not too concerned based on the dose that you're using, but do you think the anemia could be an issue as you look at more of the GI indications where I think patients are going to have a little bit more underlying anemia?

And then second on HUMIRA and the U.S. biosimilars, my question is regarding the U.S. Remicade biosimilar, but just on a second entrant there, I don't expect that to have any impact on HUMIRA but we were a little bit surprised by the degree of the discount that Merck took presumably to get good traction with payers.

So my question is just were you surprised by that 35% discount off the WACC price versus the #2 biosimilar into the market and do you think that is what we should expect sort of going forward as we think about direct competition to HUMIRA.

Okay.

So this is Mike.

I'll take the first one with respect to 494 and anemia.

As I mentioned, in Phase II, we explored a very broad dose range including doses above what we would expect to study in either RA or other indications like inflammatory bowel diseases.

At the doses we're studying, we're not seeing a problem with hemoglobin our anemia, and we of course have data not only in RA, but we have mid-stage data in inflammatory bowel diseases.

So we don't see anemia as being a problem across the board for that program.

This is Rick on the second question, the biosimilar question.

Obviously, we are monitoring both the international activity here and the U.S. activity, not just in our particular categories but in other categories as we look at biosimilars and how it plays out over time.

I would tell you, frankly, I was a bit surprised with the market reaction about the 35%.

I mean, if you look at all of the metrics in Europe, this is well within the range of what you would expect.

I think it would be odd to think that a biosimilar could get much uptake in the marketplace with discounts that were significantly below this.

Because remember, obviously, there are discounts applied to these products as part of the either rebate structures or other discounts associated with them.

So it's going to require a discount in this range to have any way to be able to compete.

So I wouldn't say that discount is a surprise to me at all.

That concludes today's conference call.

If you'd like to listen to a replay of the call, please visit our website at www.abbvieinvestor.com.

Thanks again for joining us.

That concludes today's conference.

Thank you for your participation and have a nice day.