AbbVie Inc. (NYSE:ABBV) Q4 2023 Earnings Call Transcript

AbbVie Inc. (NYSE:ABBV) Q4 2023 Earnings Call Transcript February 2, 2024

AbbVie Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and thank you for standing by. Welcome to the AbbVie Fourth Quarter 2023 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer portion of this call. [Operator Instructions] Today’s call is also being recorded. If you have any objection, you may disconnect at this time. I would now like to introduce Ms. Liz Shea, Senior Vice President, Investor Relations. Thank you. You may begin.

Liz Shea: Good morning, and thanks for joining us. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer; Rob Michael, President and Chief Operating Officer; Jeff Stewart, Executive Vice President, Chief Commercial Officer; Scott Reents, Executive Vice President, Chief Financial Officer; Carrie Strom, Senior Vice President, AbbVie and President, Global Allergan Aesthetics; and Roopal Thakkar, Senior Vice President, Chief Medical Officer, Global Therapeutics. Joining us for the Q&A portion of the call is Tom Hudson, Senior Vice President, Chief Scientific Officer, Global Research. Before we get started, I’ll note that some statements we make today may be considered forward-looking statements based on our current expectations.

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 our forward-looking statements. Additional information about these risks and uncertainties is included in our SEC filings. AbbVie undertakes no obligation to update these forward-looking statements except as required by law. On today’s conference call, non-GAAP financial measures will be used to help investors understand AbbVie’s business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website. In addition to the news release issued this morning, we have also posted slides on our website at investors.abbvie.com that supplement some of the content we’ll be covering this morning.

Following our prepared remarks, we’ll take your questions. So with that, I’ll turn the call over to Rick.

Rick Gonzalez: Thank you, Liz. Good morning, everyone, and thank you for joining us today. Our performance this quarter tops off another excellent year for AbbVie, with results well above our initial expectations. I’m particularly pleased with the performance of our growth platform, the base business excluding Humira, which delivered full year sales growth of more than 8%, with revenue growth accelerating to more than 15% in the fourth quarter. The strength of our diversified growth platform has not only enabled us to successfully absorb the largest loss of exclusivity event to date across our industry, but it’s also supported continued investment in our business for long term growth. These investments include: higher adjusted R&D expense, which was increased by nearly $600 million in 2023 and will be ranged substantially again in 2024 to support several promising pipeline programs like 383 in multiple myeloma.

400, our next-generation ADC for several solid tumor types and [Moodi] for HS, as well as inflammatory bowel disease. The proposed acquisition of ImmunoGen and their portfolio of ADCs accelerating our entry into the solid tumor space and strengthening our oncology pipeline, as well as the proposed acquisition of Cerevel, a unique opportunity to augment our presence in neuroscience with the pipeline of differentiated assets. We also increased our quarterly dividend which we announced in October. Since our inception, we have grown our dividend by more than 285%. In summary, our operational execution has been outstanding and we have considerable momentum heading into 2024, including an expected return to operational sales growth just one year following the US Humira loss of exclusivity, driven by our growth platform.

We remain confident in our long-term outlook, including a return to robust growth in 2025 with a high single-digit CAGR through the end of the decade. With that, I’ll turn the call over to Rob for additional comments on our business performance. Rob?

Rob Michael: Thank you, Rick. Today we reported another strong quarter and highly productive year for AbbVie. We delivered full year adjusted earnings per share of $11.11, which is $0.63 above our initial guidance midpoint, excluding the impact of IPR&D expense. Total net revenues were $54.3 billion, roughly $2.3 billion ahead of our initial guidance. Most importantly, each of our five key growth areas outperformed our initial expectations. As it pertains to AbbVie’s near-term outlook, we are focused on three key priorities. First, driving strong performance of our ex- Humira Growth Platform. This platform is the critical driver of our return to robust growth in 2025 and beyond. In our therapeutic portfolio, we have several key brands including Skyrizi, Rinvoq, Vraylar, Ubrelvy, and Qulipta, which are each expected to contribute double-digit sales growth in 2024.

We also expect meaningful growth for aesthetics this year, driven by improving market trends in the US and continued execution across our international business. We are well positioned to drive strong long-term growth in this highly under-penetrated market. Second, we are focused on prioritizing investment in our pipeline, which encompasses numerous opportunities to elevate the standard of care for patients. We anticipate updates this year from several important R&D programs including approvals for Skyrizi in UC, 951 in the U.S., and potentially accelerated approval for Epkinly in third line plus follicular lymphoma. We also anticipate regulatory submissions for BoNT/E, our novel short-acting toxin, and potentially Teliso-V, an advanced non-squamous non-small cell lung cancer.

And third, we are focused on closing and integrating ImmunoGen and Cerevel. These two exciting opportunities represent substantial sources of revenue growth well into the next decade. We remain on track with the anticipated closing of both deals in the middle of the year. Today, we are also reaffirming our long-term sales outlook, which includes a return to robust revenue growth in 2025 with a high single digit CAGR through the end of the decade. Included in this outlook is an updated forecast for Skyrizi and Rinvoq. Based on the impressive growth of both therapies, which we expect will collectively generate approximately $16 billion of revenue in 2024, we now anticipate Skyrizi and Rinvoq will collectively exceed more than $27 billion in sales by 2027 with robust growth continuing into the next decade.

This updated forecast reflects an increase of more than $6 billion in revenue compared to our prior 2027 guidance. We expect global sales for Skyrizi to reach more than $17 billion in 2027, reflecting continued share capture in psoriasis where we are the clear market leader, as well as strong uptake in IBD. And we expect Rinvoq to achieve more than $10 billion of global sales in 2027, reflecting continued market growth and share momentum across each of Rinvoq’s approved indications, including four in rheumatology, two in IBD, and atopic dermatitis. This forecast comprehends modest contributions from several new disease areas for Rinvoq, which we anticipate will be launching in the second half of the decade. These new indications have a collective peak sales potential of several billion dollars.

Our updated forecast also includes higher estimates for Ubrelvy and Qulipta. We now expect total oral CGRP peak revenue of more than $3 billion, reflecting an increase of more than $1 billion. Our previously issued long-term forecasts for aesthetics, Vraylar, and 951 remain unchanged. In summary, this is an exciting time for AbbVie. We are demonstrating outstanding execution across our portfolio and our long-term outlook remains very strong. With that, I’ll turn the call over to Jeff for additional comments on our commercial highlights. Jeff?

Jeff Stewart: Thank you, Rob. I’ll start with the quarterly results for immunology, which delivered total revenues of more than $6.9 billion, exceeding our expectations. Skyrizi total sales were approximately $2.4 billion, reflecting operational growth of 51.6%. Rinvoq total sales were more than $1.2 billion, reflecting operational growth of 62.8%. On a full-year basis, Skyrizi and Rinvoq delivered more than $11.7 billion in total combined revenue, an impressive increase of $4 billion year-over-year. And as Rob just described, we see substantial room for continued growth across each of their currently approved indications. You can get a good sense for this momentum by looking at the relationship between the current in-place share, which includes new and switching patients, and the total prescription share just today.

For example, our performance in IBD has been very strong for both Skyrizi and Rinvoq. In Crohn’s disease, these two treatments together are already capturing roughly one out of every three in-play patients across all lines of therapy in the United States, while their combined total prescription share is only in the mid-single digits. You see a similar trend happening in ulcerative colitis for Rinvoq, and we anticipate launching Skyrizi for this indication later this year. So significant opportunity remains for revenue inflection in IBD, especially given their respective efficacy, safety, and dosing profiles. Across some of the other notable indications, Skyrizi is capturing roughly half of the in-place psoriasis patients in the U.S. biologic market relative to a total prescription share, which is in the mid-30s percent.

Rinvoq is capturing high teens in-play share in the atopic dermatitis market, while total share is in the high single digits. Similarly, in rheumatoid arthritis, Rinvoq is capturing mid-teens in-play share, while total share is roughly 7%. So, again, we see substantial headroom for share gains in addition to the typical robust market growth across rheum, derm, and gastro. Plus, we are planning to have up to five additional indications for Rinvoq across several sizable markets that will potentially provide another significant revenue inflection in the second half of this decade and into the 2030s. Turning now to Humira, which delivered global sales of $3.3 billion, down 40.8% due to biosimilar competition. The erosion impact in the U.S. played out largely in line with our expectations this quarter, while performance across our international markets continues to trend better than expected.

In the U.S., we have once again secured broad formulary access for Humira in 2024. While there will be some step down in coverage year-over-year, we will still have parity access to biosimilars for the vast majority of U.S. patient lives. Turning now to oncology, where total revenues were $1.5 billion. Imbruvica global revenues were $903 million, down 19% reflecting continued pressure in new patient starts. Venclexta global sales were $589 million, up 13.7% on an operational basis, with strong demand for both CLL and AML across our key countries. The early prescription trends for Epkinly in third line plus DLBCL have been encouraging with commercialization now underway in the US, Europe and Japan. We also anticipate the potential label expansion for follicular lymphoma later this year.

Lastly, we have two new and exciting opportunities in oncology. Pending completion of the transaction, we will add Elahere to our portfolio. Elahere is a first-in-class ADC therapy approved for ovarian cancer, which is already demonstrating impressive uptake in the U.S. market. I look forward to welcoming the ImmunoGen commercial team to AbbVie. And Teliso-V, another novel ADC which has demonstrated very promising data in lung cancer. Teliso-V would further expand our scale and growth potential in solid tumors. In neuroscience, our second largest therapeutic area, total full year revenues were more than $7.7 billion, reflecting impressive absolute sales growth of nearly $1.2 billion. In the quarter, total revenues were approximately $2.1 billion, up 22.4% on an operational basis.

Vraylar continues to demonstrate robust growth. Global sales of $789 million were up nearly 40%. We continue to see significant momentum in new prescriptions across all indications following the approval as an adjunctive treatment for major depressive disorder just over a year ago. And our leading oral CGRP portfolio for migraine contributed $348 million in combined sales this quarter, reflecting growth of approximately 40%. We anticipate continued robust demand for both Ubrelvy and Qulipta this year, including the expansion of Qulipta, the only once daily oral CGRP for prevention of both episodic and chronic migraine into the international markets. Based on the strong momentum, we have raised the outlook for our CGRP portfolio and now expect total peak sales from Ubrelvy and Qulipta combined to exceed $3 billion.

Total Botox therapeutic global sales were $776 million, up 6.7% on an operational basis, reflecting momentum in chronic migraine, as well as other approved indications. And lastly, we recently launched 951 in both Japan and Europe, and we are pursuing commercial approval in the U.S. later this year. This treatment represents a potentially transformative next generation therapy for advanced Parkinson’s disease and $1 billion plus peak sales opportunity. So overall, I’m extremely pleased with the commercial execution across our diversified portfolio, especially the growth platform, which is demonstrating very strong momentum as we head into 2024. And with that, I’ll turn the call over to Carrie for additional comments on aesthetics. Carrie?

Carrie Strom: Thank you, Jeff. Fourth quarter global aesthetic sales were approximately $1.4 billion, an operational increase of 6.9%. In the U.S., aesthetic sales of $884 million increased 5.7%, marked by accelerating market growth and strong key product performance. Fourth quarter U.S. Botox Cosmetic sales were $453 million, an increase of 7.3%. We continue to see sustained momentum in the recovery of the U.S. facial toxin market, which was a primary driver of growth in the fourth quarter. Botox Cosmetic remains the clear market leader with strong and stable share, despite new competitive entrants. U.S. Juvederm sales were $156 million in the fourth quarter, an increase of more than 20% versus the prior year. This robust growth was driven by the strong launches of Volux and SkinVive, which continue to drive new consumers and greater penetration in the dermal filler category.

Consistent with our expectations, the U.S. filler market recovery trails out of toxins, but it’s continuing to show improvement as year-over-year growth was roughly flat in the fourth quarter. As we look at 2024, we are pleased with the momentum of our U.S. aesthetics portfolio. We expect full year sales growth as our market leadership positions us very well from a competitive perspective, and we anticipate continued recovery in both toxin and filler markets. Internationally, fourth quarter aesthetic sales were $487 million, representing an operational increase of 9%. We experienced strong performance in most regions and growth benefited from the impact of China’s COVID lockdowns in late 2022. Within China, the softening economic conditions that emerged in the third quarter continued to impact results.

Consistent with what we experienced in the US, the economic slowdown has impacted fillers more than toxins, based upon their relatively higher price. We anticipate economic headwinds will continue in China over the near term, balanced against our expectations for continued strong performance in other international regions. Looking to the long-term, Aesthetics remains an area with very low market penetration. And we have demonstrated our ability to drive growth through investments in our customers, consumers, and innovation. As such, we anticipate Aesthetics will be a strong growth portfolio for years to come and remain confident in our ability to deliver more than $9 billion of sales by the end of the decade. With that, I’ll turn the call over to Roopal.

Roopal Thakkar: Thank you, Carrie. In 2023, we saw significant evolution of our pipeline with multiple data readouts, regulatory submissions and approvals, as well as expansion of our R&D efforts with the announced ImmunoGen and Cerevel transactions. We expect to continue this progress with numerous important clinical and regulatory milestones anticipated this year. In immunology, we recently announced positive topline results for lutikizumab our anti-IL-1 alpha beta bispecific being evaluated in hidradenitis suppurativa. In the Phase 2 study, lutikizumab demonstrated higher, high score of 50 and high score of 75 measures, as well as improvement in skin pain compared to placebo. These are very impressive results considering all patients who were inadequate responders to anti-TNF therapy.

And 70% of the patients were early stage three, which is the most advanced stage of the disease. Based on these results, we plan to begin a Phase 3 program in HF later this year. We also plan to evaluate lutikizumab in ulcerative colitis and Crohn’s, given the role that IL-1 likely plays in these diseases. Patients with UC who have an IL-1 beta signature have shown resistance to anti-TNF and other biologics, providing strong rationale for a potential biomarker approach. Additionally, we believe lutikizumab has the potential to be used in combinations to provide transformational levels of efficacy in IBD. We plan to evaluate combo approaches with lutikizumab and Skyrizi, as well as with other pipeline assets in Crohn’s. Our Phase 2 studies in IBD are expected to begin later this year.

Our regulatory applications are under review for Skyrizi in ulcerative colitis. With approval decisions expected in the US and Europe later this year. Once Skyrizi is approved in UC, along with Rinvoq, we will have two assets with different mechanisms of action in IBD, both offering very high levels of efficacy. AbbVie will be very well-positioned with an industry-leading suite of treatment options for patients suffering from moderate to severe ulcerative colitis and Crohn’s disease. We continued to make very good progress with the second wave of development programs for Rinvoq. With Phase 3 studies underway in five new indications, giant cell arteritis, lupus, HF, alopecia areata and vitiligo. We anticipate data readouts for these programs over the next three years, beginning with data from our GCA study this year.

Moving to oncology, where we continue to make very good progress across our heme and solid tumor programs. In the area of hematologic oncology, we’ll see data in the second half of this year from the Venclexta Phase 3 VERONA trial in treatment-naive higher-risk MDS patients, with regulatory submissions and approvals, anticipated in 2025. For Epkinly, we anticipate regulatory approvals in third-line or greater follicular lymphoma later this year in both the US and Europe. We also expect to begin several new Phase 3 studies in 2024, including studies in second-line DLBCL and frontline follicular lymphoma. At the recent ASH Meeting, we presented new data for our BCMA CD3 bispecific ABBV-383 in multiple myeloma. 383 is engineered for high-affinity binding to BCMA on malignant cells, and low affinity binding to a unique CD3 epitope on T-Cells, which has the potential to mitigate some of the adverse events associated with other T-Cell engaging BCMA-based therapies, while preserving high levels of efficacy.

We’re very encouraged by the data emerging from our Phase 1b study, which show treatment with 383 is yielding deep and durable responses. With a lower incidence and severity of CRS. With this profile, we believe 383 can be a highly effective and tolerable treatment for multiple myeloma. While potentially allowing for outpatient administration, limited or no step-up dosing and monthly administration from the beginning of treatment. All attributes, which would make it very appealing to both patients and physicians. We remain on track to begin a Phase 3 monotherapy study in third-line multiple myeloma this year. And we plan to begin combination trials in earlier lines of therapy in 2025. In the area of solid tumors, we recently announced positive topline results from the Teliso-V Phase 2 LUMINOSITY study in previously treated non-small cell lung cancer.

Teliso-V demonstrated strong clinical benefits across key endpoints, including, overall response rate, duration of response and overall survival, with a tolerable safety profile. We believe these results have the potential to support accelerated approval. And we plan to discuss the data with regulators in the coming months. Pending alignment with the FDA, our submission is planned for the second half of this year. We’re also making good progress with our next-generation c-Met ADC ABBV-400, which utilizes the same c-Met blocking antibody as Teliso-V, but has a proprietary Topo-1 warhead to afford deeper and more durable responses with an improved therapeutic index. We remain on track to see data this year from the non-small cell lung cancer and gastroesophageal cohorts from our Phase 1 study.

And based on the progress we’re making in our colorectal program, we plan to begin a Phase 3 study later this year in third-line CRC. We also continue to make very good progress with our anti-GARP antibody ABBV-151. Our Phase 2 study in second-line hepatocellular carcinoma is underway, and we plan to begin several additional Phase 2 studies this year, including frontline HCC, frontline lung cancer and metastatic urothelial cancer. We look forward to providing updates on these programs as the data mature. Now moving to Neuroscience where we recently announced the European launch of ABBV-951 for patients with advanced Parkinson’s disease. We also recently provided our complete response submission to the FDA for 951 with an approval decision anticipated in the second quarter.

Our novel subcutaneous levodopa, carbidopa delivery system has the potential to offer meaningful benefits over current treatment options and others that are in development. 951 delivers significant improvements in off-time and on-time with a less invasive non-surgical system. It can deliver high levodopa doses similar to the amount provided by DUOPA. And it doesn’t require combination with oral drugs to achieve high efficacy. 951 also provides a full 24-hour benefit, which should result in less morning akinesia. We’re extremely excited to bring this transformative therapeutic option to patients in Europe and the US once approved. In our Aesthetics pipeline, we recently submitted our regulatory application in the US for Botox in platysma prominence.

We anticipate an approval decision in the second half of this year. And we remain on track to complete the remaining CMC work this year for BoNT/E, our rapid onset short-acting novel toxin. Following completion of the remaining work, we plan to submit our regulatory application in the second half of the year, with approval anticipated near the end of 2025. So in summary, we continue to demonstrate significant progress across all stages of our pipeline and anticipate numerous regulatory and clinical milestones again in 2024. I also look forward to integrating the ImmunoGen and Cerevel teams and pipeline assets into our R&D organization once those transactions close this year. These two transactions significantly strengthened our oncology and neuroscience pipelines with the addition of several novel assets that have the potential to become innovative new therapies for many patients.

With that, I’ll turn the call over to Scott.

Scott Reents: Thank you, Roopal. I’m very pleased with AbbVie’s strong performance in 2023. We have substantial momentum across the portfolio to support our long-term growth outlook. Starting with our fourth quarter results, we reported adjusted earnings per share of $2.79, which is $0.05 above our guidance midpoint. These results include a $0.15 unfavorable impact from acquired IPR&D expense. Total net revenues were $14.3 billion, $300 million ahead of our guidance, and down 5.4%. Most notably, these results reflect 15.3% sales growth from our ex-Humira growth platform. The adjusted operating margin ratio was 43.8% of sales. This includes adjusted gross margin of 83.9% of sales, adjusted R&D expense of 13.4% of sales, acquired IPR&D expense of 2% of sales, and adjusted SG&A expense of 24.7% of sales.

Adjusted net interest expense was $363 million, the adjusted tax-rate was 17.2%. Turning to our financial outlook for 2024, our full year adjusted earnings per share guidance is between $11.05 and $11.25. This earnings per share guidance includes dilution related to the ImmunoGen and Cerevel acquisitions of $0.32, which assumes closing in the middle of the year. Please note this guidance does not include an estimate for required IPR&D expense that may be incurred throughout the year. We expect total net revenues of approximately $54.2 billion, reflecting a return to modest operational growth. At current rates, we expect foreign-exchange to have a 0.5% unfavorable impact on full year sales growth. This revenue forecast contemplates the following approximate assumptions for our key products in therapeutic areas.

We expect global immunology sales of $25.6 billion, including Humira sales of $9.6 billion, including US erosion of roughly 36%. Skyrizi revenue of $10.5 billion, reflecting growth of more than $2.7 billion due to strong market-share performance in psoriasis, as well as robust uptake in IBD. And Rinvoq sales of $5.5 billion, reflecting growth of nearly 40% with continued market growth and share momentum across all approved indications. On a full-year basis, we anticipate that our strong volume growth for Skyrizi and Rinvoq will be modestly offset by low-single digit negative net price. In oncology, we expect sales of $5.7 billion, including Imbruvica revenue of $2.9 billion and Venclexta sales of $2.4 billion. As well as contributions from Epkinly, and partial year sales from Elahere.

For Aesthetics, we expect sales of $5.7 billion. Including $2.9 billion from Botox Cosmetic and mid-single-digit revenue growth from Juvederm. For Neuroscience, we expect revenue of $8.9 billion, representing growth of more than 15%, including Vraylar sales of $3.4 billion, Botox Therapeutic sales of $3.2 billion and total oral CGRP revenue of $1.6 billion. For eye care, we expect sales of $2.2 billion. Moving to the P&L for 2024, we are forecasting full-year adjusted gross margin of 84% of sales. Adjusted R&D investment of 14% of sales, adjusted SG&A expense of 23.5% of sales, and adjusted operating margin ratio of roughly 46.5% of sales. We expect adjusted net interest expense of $2.1 billion, which includes the partial year cost in 2024 to finance the ImmunoGen and Cerevel transactions.

We forecast our non-GAAP tax rate to be approximately 15.7%. Finally, we expect share count to be roughly flat to 2023. Turning to the first quarter, we anticipate net revenues of approximately $11.9 billion. At current rates, we expect foreign exchange to have a 0.5% unfavorable impact on sales growth. This revenue forecast comprehends the following approximate assumptions for our key therapeutic areas. Immunology sales of $5.1 billion, including Skyrizi sales of $1.9 billion, and Rinvoq revenue of $1 billion. These estimates reflect typical first quarter seasonality as well as low single digit unfavorable net price. We expect Humira global revenue of $2.2 billion, including US sales of $1.7 billion. We also anticipate oncology revenue just above $1.3 billion, Aesthetic sales of $1.3 billion, Neuroscience revenue of $1.9 billion, and eye care sales of $600 million.

We are forecasting an adjusted gross margin of approximately 83.5% of sales and an adjusted operating margin ratio of roughly 44.5% of sales. We also model a non-GAAP tax rate of 14.8%. We expect adjusted earnings per share between $2.30 and $2.34. This guidance does not include acquired IPR&D expense that may be incurred in the quarter. Finally, AbbVie’s strong business performance and outlook continues to support our capital allocation priorities. Our cash balance at the end of December was $12.8 billion. And we expect to generate free cash flow of approximately $18 billion in 2024, which includes roughly $1.9 billion in Skyrizi royalty payments. The strong free cash flow will fully support a strong growing dividend, which we have increased by more than 285% since inception, continued debt repayment, where we expect to pay down the approximately $7 billion of maturities this year, and also provides capacity for continued business development to further augment our portfolio.

In closing, AbbVie has once again delivered outstanding results and our financial outlook remains very strong. We’ll turn the call back over to Liz.

Liz Shea: Thanks, Scott. We will now open the call for questions. In the interest of hearing from as many analysts as possible over the remainder of the call, we ask that you please limit your questions to one or two. Operator, first question, please.

Operator: Yes, the first question comes from Chris Schott with JP Morgan. Your line is open.

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Q&A Session

Chris Schott: Hi, great. Thanks so much for the questions. Just I was looking for a little bit more color on the longer-term immunology outlook. You’re targeting $27 billion plus by 2027 and highlighting growth from there. So, I guess my question was just can you elaborate on how mature the existing indications, these products are going to be by 2027? And what type of growth can we anticipate longer-term? And maybe as part of that, it seems like from the comments that the growth beyond 2027 is more skewed towards Rinvoq given the new indications, but [indiscernible] like is it balanced Rinvoq and Skyrizi, or has it become more of a Rinvoq driven franchise in terms of the growth drivers over time? Thanks so much.

Jeff Stewart: Yes. Hi, Chris. It’s Jeff. Maybe I’ll walk through a little bit of the process there and answer your questions. So we can see historically actuals and sort of fast forward in terms of the first thing we look at is the bio penetration of these big indications. And there still remain significant headroom in terms of the ability for moderate to severe patients with these diseases to continue to be exposed to these biologics and these advanced orals, absolutely. And we can see for sure that psoriasis still in — even in the US is about 15%, it’s relatively modest, atopic dermatitis, the penetration rate is only about 7%. And then you have higher penetrated markets like IBD and I’ll talk about what’s interesting about IBD, that’s somewhere in the 40% or 50% range across those.

And then we can see clearly as these markets develop and I’ve highlighted this before that you see line of therapy expansion. So first-line becomes less and less important, as you move towards second and third-line over time. And right now, IBD is a big story about that, that we calculate into our long-term estimates, because it’s still largely despite the severity a frontline oriented market, because physicians, just kind of hang on to their frontline agents, that’s going to change quite dramatically believe over this mid-term and even in the long-term perspective. We have a good peg on the market growth rates. Many of these market growth rates are very significant, very stable. And we’ll have good growth rates going into the next decade because of these dynamics around bio penetration and line of therapy expansion.

I highlighted in my remarks around share, share we — we have a very good competitive position, very high capture rates. And we’re really in the sort of low end of the range in terms of the total prescription share, that will feed up and catch up to that. Pricing, I think we talked a little bit. We’re not going to give detailed pricing. But certainly, you can see based on Scott’s comments that, the idea of a high CAGR on high single-digit pricing is not something we’ve contemplated. So, we believe that there is significant room for growth even past 2027. Especially, as we’ll have more Rinvoq indications coming that we’ve talked through. So we think that we’re going to see robust growth based on our share capture and also how dynamic these markets are into the next decade.

Rob Michael: And Chris, this is Rob. I’ll just add, you think about the markets, the rheum market is growing low-single digits, atopic dermatitis is growing mid-teens and IBD is growing high-single-digits. So they’re very strong market, they will continue to be strong markets for us. And we’re also seeing, as Jeff mentioned, there’s a lot of headroom in terms of share capture. So we do expect that robust growth to continue beyond 2027 into early part of the next decade. I think your observation is correct. Given that we would expect up to five new indications for Rinvoq. If you look at the rate of growth, Rinvoq versus Skyrizi, I think it’s reasonable to assume that Rinvoq would have a higher rate of growth given the new indications, but both will grow very nicely. So, I would certainly encourage you to look at more robust expectations for both therapies with Rinvoq a little bit higher because of the new indications.

Liz Shea: Thanks, Chris. Operator, next question, please.

Operator: Yes, the next question comes from Terence Flynn with Morgan Stanley. Your line is open.

Terence Flynn: Great. Thanks so much for taking the questions. Maybe two for me. Rick, I was just wondering if you could give us an update on succession planning and timing, we’ve been fielding that question from a number of investors recently, given you’re now pass the Humira LOE. And positioned the company very well here given Skyrizi and Rinvoq commercial success and also some of the recent pipeline build-out. And then the second question I have was on our pipeline on lutikizumab. I know you guys have highlighted this, not a lot of focus from the investor side yet. Maybe if you could just talk about the size of the commercial opportunity in HS. And then why you’re confident that, that Phase 2 HS data will translate into success in the IBD side. Thank you.

Rick Gonzalez: All right, Terence. This is Rick. So I’ll cover the first one. I guess what I would say is, I have nothing new to report today, but what I’d indicate is, we’ve talked about the criteria that we’re going to use to make the decision when we’re going to make the transition. That criteria is the same, when we believe that we are comfortable, we’ve navigated the LOE, and the rest of the business is performing at high level. That’s the point at which we want to make the transition, because we think that’s the best time to be able to transition the CEO position. So I understand there’s a lot of interest from investors here, that’s logical and clear. Maybe what I can do is, give you a little better perspective on the process that we’re going to use in order to make the decision with the Board.

I would say, the Board has been actively involved for the last four or five years with a lot of emphasis around ensuring that our internal candidate would get the experiences that we thought were needed prior to making the transition. I can tell you from my perspective, that’s gone extremely well. We have regularly scheduled Board meetings several times a year where we specifically talk about succession and the progress that we’re making. At the point at which the business has achieved that criteria that I described before, at the next regularly scheduled Board meeting, then I would make a recommendation to the Board that this is the proper time to be able to make the transition. The Board would vote on that recommendation. At the end of that vote, we would send out an announcement to investors.