Good morning and thank you for standing by. Welcome to the AbbVie first quarter 2021 earnings conference call. All participants will be able to listen-only until the question and answer portion of this call. You may ask a question by pressing star, one on your phone. I would now like to introduce Ms. Liz Shea, Vice President of Investor Relations. You may begin.

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; Michael Severino, Vice Chairman and President; Rob Michael, Executive Vice President and Chief Financial Officer; and Jeff Stewart, Executive Vice President, Commercial Operations. Joining us for the Q&A portion of the call is Laura Schumacher, Vice Chairman, External Affairs, Chief Legal Officer and Corporate Secretary. Before we get started, I remind you that some statements we make today may be considered forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Additional information about these risks and uncertainties is included in our SEC filings. AbbVie undertakes no obligation to update these forward-looking statements except as required by law. On today’s conference call, non-GAAP financial measures will be used to help investors understand AbbVie’s business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website. Unless otherwise noted, our commentary on sales growth is on a comparable basis, which includes full current year and historical results for Allergan. For this comparison of underlying performance, all historically reported Allergan revenues have been recast to conform to AbbVie’s revenue recognition accounting policies and exclude the divestitures of Zenpep and Viokace. References to operational growth further excludes the impact of exchange. Following our prepared remarks, we’ll take your questions. With that, I’ll now turn the call over to Rick.

Thank you Liz. Good morning everyone and thank you for joining us today. I’ll discuss our first quarter performance and outlook, and then Jeff, Mike and Rob will review our business highlights, pipeline progress and financial results in more detail. We’re off to an excellent start this year, delivering strong top and bottom line first quarter performance. We reported adjusted earnings per share of $2.95, exceeding the midpoint of our guidance by $0.14. Total adjusted net revenue of $12.9 billion was up 5.2% on a comparable operational basis, nearly $250 million ahead of our expectations. These results include strong performance across each of our core therapeutic areas, including double-digit comparable operational revenue growth from immunology, neuroscience, and esthetics, as well as high single digit operational growth from hematological oncology. Additionally, we continue to see robust sales from our key and newly launched products. Skyrizi and Rinvoq contributed nearly $900 million in combined revenues this quarter, more than double the sales versus the prior year as both products continue to ramp in their initial indications. Imbruvica and Venclexta delivered combined sales of approximately $1.7 billion, reflecting continued leadership in CLL and other hematological malignancies. Vraylar, which remains one of the fastest growing medicines in psychiatry, delivered more than 20% comparable operational growth. Ubrelvy, the leading oral CGRP for acute migraine, generated revenue growth of approximately 25% on a sequential basis, and within our leading esthetics portfolio, which is performing well above pre-COVID levels, Botox cosmetics and Juvederm are demonstrating robust performance. Both of these brands grew more than 40% on a comparable operational basis. The integration of Allergan also continues to go very well. As illustrated by our balanced results this quarter, we are clearly demonstrating that we have created a stronger and much more diverse company with the scale and…

Thank you Rick. We demonstrated strong and balanced growth across our therapeutic portfolio this quarter, a testament to our differentiated product profiles and commercial execution. Our immunology portfolio delivered global revenues of more than $5.7 billion, reflecting growth of nearly 12% on an operational basis. Humira sales were approximately $4.9 billion, up 2.6% on an operational basis with continued high single digit growth in the U.S. offset by biosimilar competition across our international markets, where the unfavorable impact was more moderate than expected in the quarter. Our new immunology agents, Skyrizi and Rinvoq, are both demonstrating robust prescription growth well above all comparable launches. Skyrizi sales were $574 million, reflecting 34% in-play patient share, which includes new and switching patients. This is more than double the share capture of the next nearest biologic competitor. Skyrizi total prescription share in the U.S. psoriasis biologic market is now approximately 15%, second only to Humira. Additionally, we recently received approval for a single dose prefilled pen for Skyrizi which will reduce the number of injections per treatment. Skyrizi is now the only quarterly dose psoriasis treatment available in an auto injector, further improving the patient experience. Rinvoq sales were $303 million with strong in-play patient share of approximately 15% in the U.S. RA market. Physician and patient feedback remains very positive on Rinvoq’s level of efficacy, speed of response, and strong benefit-risk profile. Internationally, both of these new assets delivered strong double-digit sequential growth with ramping access in share. Skyrizi has now also achieved in-play patient share leadership in the EU 5 psoriasis market, exceeding Tremfya and Cosentyx and at parity with Taltz. As Mike will discuss momentarily, we are also making considerable progress to expand the uses of Skyrizi and Rinvoq in several immune-mediated diseases with half a dozen additional indication approvals…

Thank you Jeff. I’ll start with immunology, where we continue to make good progress with Rinvoq and Skyrizi in new disease areas, as well as in our early and mid-stage immunology programs. We recently reported positive top line results from the second induction study for Rinvoq in ulcerative colitis. Similar to results from the first induction study, in this Phase III trial Rinvoq demonstrated a very strong impact on disease activity as measured by clinical remission, clinical response, and endoscopic improvement. The 45 milligram induction dose was well tolerated and the safety profile was consistent with previous Rinvoq studies. In these induction trials, we saw no DVT, PE, MACE events, or malignancies in the Rinvoq groups, and the rates of serious adverse events were numerically lower than placebo. We believe these induction data compare very favorably to other UC treatments on the market or in development and based on the data generated to date, Rinvoq has the potential to become one of the most highly effective therapies for patients with moderate to severe ulcerative colitis. We expect to see results from the UC maintenance study this summer with regulatory submissions anticipated in the second half of the year. The Rinvoq program in Crohn’s disease is also progressing very well, and we expect to see induction data from the first of two Phase III trials in the fourth quarter, followed by induction data from a second Phase III trial and maintenance data in the first half of 2022. We’re also nearing completion of our pivotal program for Skyrizi in Crohn’s disease. Earlier this year, we reported positive results from the two Crohn’s induction studies and we expect to see maintenance data this summer. Our regulatory submissions for Skyrizi and Crohn’s disease remain on track for the second half of 2021. Following…

Thank you Mike. Starting with first quarter results, we reported adjusted earnings per share of $2.95, up 21.9% compared to prior year and above our guidance midpoint. Total adjusted net revenues were $12.9 billion, up 5.2% on a comparable operational basis excluding a 1.1% favorable impact from foreign exchange. The adjusted operating margin ratio was 51% of sales, an improvement of 120 basis points versus the prior year. This includes adjusted gross margin of 83.9% of sales, adjusted R&D investment of 11.6% of sales, and adjusted SG&A expense of 21.2% of sales. Net interest expense was $622 million and the adjusted tax rate was 12.3%. As Rick previously mentioned, we are raising our full year adjusted earnings per share guidance to between $12.37 and $12.57, reflecting growth of 18.8% at the midpoint. Excluded from this guidance is $5.10 of known intangible amortization and specified items. This guidance now contemplates full year revenue growth of 9.8% on a comparable operational basis. At current rates, we continue to expect foreign exchange to have a 1% favorable impact on full year comparable sales growth. This implies a full year revenue forecast of approximately $55.9 billion. Included in this guidance are the following updated full year assumptions. We now expect international Humira revenue of approximately $3.1 billion and we now expect Botox cosmetic sales of approximately $1.9 billion. All other full year assumptions remain unchanged. As we look ahead to the second quarter, we anticipate net revenue approaching $13.6 billion. At current rates, we expect foreign exchange to have a 1.6% favorable impact on comparable sales growth. We expect adjusted earnings per share between $3.05 and $3.09, excluding approximately $1.78 of known intangible amortization and specified items. Finally, we continue to make great progress on our Allergan transaction commitments. We realized over $360 million in expense synergies in the first quarter and are on track to deliver synergies of approximately $1.7 billion in 2021 and greater than $2 billion in 2022. We have already paid down $10.4 billion of combined company debt. We continue to expect cumulative debt pay down of $17 billion by the end of 2021 with further deleveraging through 2023. This will bring our net leverage ratio to 2.4 times by the end of 2021 and approximately two times by the end of 2022. In closing, we are off to an excellent start to the year with strong performance across the portfolio and financial results ahead of our expectations. With that, I’ll turn the call back over to Liz.

Thanks Rob. We will now open the call for questions. In the interests 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?

Our first question comes from Chris Schott with JP Morgan. Your line is open.

Great, thanks so much for the questions. The first one from me was on Rinvoq and dose. As we think about FDA balancing lowest effective dose versus incremental efficacy and safety risks, what would the impact of only having a 15 milligram versus a 15 and 30 milligram approval have on your view on the atopic derm opportunity, which I think you talked about is about a $2 billion sales potential previously? Then my second question was just a little bit more color on the esthetic dynamics. Is there anything we’re seeing with the results we’re seeing--very, very strong here, is there any catch-up type event as the world reopens that we’re seeing with these results, or are these sustainable underlying trends that are kind of coming in above expectations for that business? I’m trying to get a sense of just how to think about that progressing as we go through the rest of the year. Thanks so much.

Thanks Chris, this is Mike. I’ll take the first question and then Rick will take the second question that you asked. With respect to Rinvoq, we feel very confident in the benefit-risk profile across indications and across the doses that we study. Having said that, both the 15 and 30 milligram doses have performed very well, both from an efficacy and a safety perspective, and so if you look at the efficacy results that we drove with 15 in atopic dermatitis, we drove high levels of response, very rapid response, and had a very prominent impact on itch, which is one of the most bothersome symptoms, with 15 as well as with 30. With the 15 milligram dose, for example, we saw statistically significant and clinically significant reduction in itch after only two days, which is really quite remarkable in this disease. Again, that’s really one of the most bothersome symptoms to patients. We think we could be successful with either dose, to answer your question specifically, but we also remain confident in the benefit-risk of both doses.

Chris, this is Rick. I’ll cover the esthetics one for you, as Mike said. I think if you look at the underlying performance of the esthetics business, in particular the market growth in the U.S. and in China, it’s driving the fundamental growth that we see through the business. Certainly there is some impacts still from COVID, so we’re seeing some impact there, but I think the majority of it is when we took over Allergan, we made a decision to really invest in promotion at a much higher level than they were investing in it prior, and they had an approach that was more of an episodic investment approach where we have basically made a decision that we’ll fund across the entire year at a relatively significant level to drive demand, because the data clearly supports that you can grow this market. I think the best comparison is to start to look at what it looked like versus 2019, because you obviously had the COVID impact in 2020, but you take for example Botox - Botox versus 2019, cosmetic Botox versus 2019, it’s up about 27%. The market’s growing very robustly. Some of that is probably COVID-driven - these are U.S. numbers I’m describing right now. Some of that is probably COVID-driven, but I wouldn’t say a lot of it at this point is COVID-driven in the U.S. China continues to grow very well - in fact, I’d say China is back to the level of growth, and we have expanded the sales force in China once, about four or five months ago. We’re in the process now of going through a second expansion in China and we expect that China will continue to drive significant growth going forward. The one area that still is being impacted in a fairly significant way from COVID is the European market. We still see it--we see it starting to emerge in areas like the U.K., but there are other areas in Europe that are still in lockdown. I would expect that Europe and Brazil as well will hopefully start to see some recovery as we get into the second half of this year and they can start to contribute, which would add additional growth to the overall business. But I would tell you I’m very pleased with the decisions we’ve made around driving more promotion, and I’m pleased with the execution of this team. This team has done extremely well in executing and driving the kind of share position that we want and the growth that we want, so I think it is sustainable going forward.

Thank you.

Thanks Chris. Operator, next question please.

Our next question comes from Geoffrey Porges with SVB Leerink. Your line is open.

Thank you very much, appreciate the couple questions. First Rick, something we don’t talk about a lot, which is the neuroscience portfolio, and you’ve started reporting it combined. I know there’s four products in there, but adding them up, the long term guidance you provided previously was about $8.3 billion, I think, and you’re already annualizing it close to $6 billion. Could you give us a sense of how much upside that portfolio has, given the trends that you’re seeing? Then on a related question, I hate to harp on the JAK question, but obviously there’s a lot coming to us from what this impact might be, so if you were confined to the 15 milligram dose not because of any signal but because of the regulators’ view of the safety of the class, how much impact would that have on the $8 billion long term guidance, and do you have other levers which you could pull to fill whatever shortfall that would cause? Thanks.

On the neuroscience portfolio, it is an area that we’re very excited about, so maybe Jeff and I will tag team here. But I think when you look at the two major growth franchises there, being the migraine franchise and the anti-psychotic franchise with Vraylar, both of those, we think, have significant opportunity to continue to grow. You’re obviously seeing Ubrelvy now perform extremely well in the marketplace - I think Jeff can probably give you a little more color on that, and Vraylar is continuing to perform very well as well. I think if we are able to achieve one positive study on MDD, I think that will give us significant growth going forward. This is a franchise that we’re excited about. I think it will be a meaningful franchise for us over the long term scenario where we continue to look at assets that we could potentially add to it, and I think it will be a nice growth driver for us. Jeff?

Yes, I think just to reiterate, as I mentioned in my comments, the oral CGRP market is moving very nicely. It’s hit, I mentioned 16% for the quarter, but now on the weeklies it’s 17% or above on just the penetration of that segment, so we see a lot of runway in that segment over our long range planning. Certainly the availability of another oral CGRP, in this case for episodic migraine, allows us to compete in a much larger segment beyond the acute, and to Rick’s point, remember we have the big anchor asset with Botox therapeutic in migraine on the back end for chronic migraine and we have plans in place to expand that upstream also into episodic migraine. This is actually in some ways non-overlapping because we have a big injector base for Botox and then we can have the neurologist and primary care base for Atogepant, and so when you look basically really across the waterfront - you know, leading acute agent, oral, very, very potent and active oral agent in the middle with episodic, and then on the back end with Botox, it’s a very nice portfolio for us that will drive growth. As Rick mentioned, we are encouraged on the potential for adjunctive MDD, and that segment itself when we do the market analysis is about as large, the adjunctive MDD segment, as bipolar depression, and so this basically has the opportunity for us to really double the potential penetration over our long range plans, so we’re very encouraged over this set of assets.

And Geoff, this is Rob. I would just add, if you can take the pieces we’ve given in terms of long term guidance, for Vraylar we’ve talked about approaching $4 billion with the current approved indications. For migraine, both Ubrelvy and Atogepant, we’ve talked about peak potential greater than a billion for each of those assets, and then we have Duopa plus we have 951 in the pipeline, that I think can drive significant growth in addition to our early stage pipeline in neuroscience, so I do see that as a therapeutic area that will drive long term growth for the company going forward.

Great, thanks. Then the JAKs?

On the JAKs, we’ve obviously evaluated carefully the positioning of the product. I think if we look at where we are today, one, we’re confident in the high dose that has a good risk-benefit profile, but I would tell you it wouldn’t change our guidance going forward. The assumptions that we have made in areas like atopic dermatitis, we believe we can get to those assumptions without the high dose. That doesn’t mean that we don’t want the high dose, but at the end of the day I believe we will maintain the guidance that we have based on that.

The other thing that I would point out is that we’ve had additional data on upadacitinib Rinvoq across a number of areas since that guidance, including IBD, so we’ve had the UC data that have come largely since that guidance, and those have exceeded our expectations, and so we remain confident overall in the performance of Rinvoq.

Great, thanks Jeff.

Thanks Geoffrey. Operator, next question please.

Thank you. Our next question comes from Andrew Baum with Citi. Your line is open.

Many thanks. A couple of questions, please. There’s not much bipartisan agreement in the U.S. over drug price reform but there seems to be a lot when it come to antitrust in relation to the pharmaceutical industry. Perhaps Rick could comment, following last night’s House Committee on the Judiciary, where there was lots of pointed talk from both sides focusing firstly on patent thickets, second on having a presumption of anticompetitive behavior in terms of assessment of large scale in particular M&A, meaning that it would impact future business development for the industry, so that’s the first question. Then the second question, rather more positive, in terms of the JAK, when I look at consensus, the forecasts for Rinvoq are about $6 billion. When you look at the size of the opportunity in RA alone, let alone psoriatic arthritis, atopic dermatitis, UC, and the other indications you have, is it conceivable to you, short of this drug effectively or the class being heavily limited or pulled from the market, that that $6 billion looks like an incredibly conservative estimate for what this drug could do?

Andrew, this is Rick. I’ll comment maybe on your point of view around the antitrust discussions. Clearly I’ve accepted the invitation to be able to testify to the Committee on May 18. We certainly feel absolutely comfortable and confident in the way we operate in this market. This is a highly competitive market where Humira competes, and certainly as we look at the patents that were issued for Humira, they went through a rigorous process in order to be issued. They represent true innovation to the product. They were challenged by competitors, just like every competitor has a right to challenge a patent if they don’t believe it’s valid or appropriate, and those patents were challenged and the vast majority of those patents survived that challenge. What I’d say is when we look at our behavior in this market, I think our behavior was absolutely pro competitive. We had patents that went all the way out to 2034 in that portfolio and yet we chose to license every single biosimilar player in 2023, literally 11 years before the last patent would have expired. I feel highly confident in the position that we have taken in this marketplace, that we have operated totally appropriately. Your next question on Rinvoq--I’m sorry, I was thinking about the first one. Can you repeat your question?

I will. Just finishing on the first, so you reference your future testimony. I guess it was more general rather than just AbbVie-centric, how it would impact BD and the ability of the industry to operate if pricing can’t get resolved. But moving onto the second question, my question was whether consensus forecasts for Rinvoq look unrealistically conservative given the scale of the opportunity and given in RA alone, looking at the size of that market, it’s a progressive disease, that you don’t actually need atopic dermatitis to get in excess of where consensus currently pegs forecasts, which when look, about $6 billion.

Andrew, this is Rob. I’ll start and then I’ll hand it over to Jeff. I think we agree with you - we do think consensus is conservative. We’ve given 2025 guidance of $8 billion for Rinvoq, and we would expect it to grow beyond 2025. When I look at the current consensus, obviously as you quoted, it’s a little bit--just a little bit above $6 billion from the numbers that I’m looking at, and I look at the growth beyond ’25, it’s nowhere near what we’re expecting, so we feel very good about the opportunity there. I think what we covered with you in December still holds as we’ve broken out the contribution by indication. We still feel very good about that, but we would agree that consensus is very conservative right now.

Yes, thanks Rob, this is Jeff. Agree - these are spectacular assets with incredibly dynamic market, so we see across the rheumatology markets, the atopic derm market, we see the IBD market which with both assets we think is underappreciated. I mean, even expansion in second and third lines as new assets come in that are really breakthrough assets with higher levels of efficacy, and so we clearly believe that consensus is conservative here. Just a comment on atopic derm - this is an explosive market. I mean, it is significantly underdeveloped in terms of the penetration, so it’s going to grow substantially, and even if you look at conservative assumptions on where we source business - you know, the growth of the second line, that’s not to say that we’re not going to be very competitive in front line. It’s a very, very attractive space. Again, I think the performance that we’ve seen, the clinical performance that we’ve seen right now, primarily on the induction trials for Skyrizi and Rinvoq, Skyrizi in Crohn’s, Rinvoq in UC, is very, very encouraging, so we see that cascading over our long range plans as well. We are very, very bullish and agree that consensus is conservative.

Many thanks.

Thank you Andrew. Operator, next question please.

Our next question comes from Vamil Divan with Mizuho Securities. Your line is open.

Great, thanks so much for taking my questions. Maybe a couple, if I could, on the migraine side. First on Ubrelvy, you mentioned it looks like the class is doing very well and gaining share. It also looks like over the last few weeks or so, you’ve been gaining a little share within the class relative to Nurtec, so I’m just wondering if you can share your perspective on what you think is driving that. Some of us thought it might be due to pricing and access, but based on our calculations, it looks like your gross to net is actually lower than what it is from the Biohaven side, so any perspective would be helpful. Then on Atogepant, maybe just a little more, if you could talk to your go-to-market strategy, assuming approval in September, especially given Nurtec will likely have an indication for both treatment and prevention. How do you see coming in with two separate drugs - you know, could be two co-pays, could be just a different message relative to a single drug, so just any perspective on how competing with that would be helpful as well. Thank you.

It’s Jeff. In terms of the acute market, as I mentioned, the penetration of the overall segment is increasing very, very nicely, as I highlighted. If you look at the mix between Ubrelvy and Nurtec, we have gained a little bit over the last few weeks, but it’s very close. We typically run at 51%, 52%, 53% of the new prescription basis. I think you are quite perceptive over the value creation that’s taking place there, and I clearly don’t have full insight into the Biohaven fall through, but we’ve been quite disciplined. We have over 90% commercial access, so we’re quite comfortable where we are from an overall access perspective, and our team remains quite disciplined in terms of making sure that we both drive the right type of volume with our positioning but also the right type of profitability over time. We’re encouraged with our continued momentum with Ubrelvy. In terms of Atogepant, I think what’s quite impressive about our program there is just the sheer level of efficacy that we have, and I think this is very important in terms of sometimes the narrative over simple or easy versus, look, how do you think about the best drug for episodic prevention, particularly when you choose an oral, so we are at the very, very high end of the migraine freedom or the days of migraine control with this new asset, and we think that frankly you need to take care of the migraine and Atogepant will be very well positioned to do that. We also think that we’ll have nice synergies. Obviously we have a fairly significant sales force that is promoting Ubrelvy to both neurologist and high prescribing general practitioners, and it will fit in very well as we put Atogepant into that sales fleet, so we’re set up well, we think, for our go-to-market.

Okay, thank you very much.

Thanks Vamil. Operator, next question please.

Our next question comes from Tim Anderson with Wolfe Research. Your line is open.

Thank you. A couple of questions please. I haven’t heard really any drug company this reporting season talk about future potential austerity measures in ex-U.S. geographies, meaning broad-based price cuts following the impact of COVID. As a company, as one of the few companies that’s given detailed long term financial guidance, I’m guessing you have been thinking about this, and I’m wondering how you are currently viewing this in terms of its likelihood of occurring, what the magnitude could be and what the timing might be. Then second question just on an early stage pipeline asset, your TNF-steroid antibody drug conjugate, I believe you have in-house probably a fair amount of data that the markets haven’t seen yet. I’m wondering when we might see additional human data and what your current level of enthusiasm is towards that platform.

Tim, this is Rick. I’ll cover the OUS austerity measures. Certainly if we go back to 2008, we saw that kind of an impact, so as we were building out our long range plan, we have made some sets of assumptions around that. I would expect that we will see some pressure outside the U.S. going forward over the next couple of years. It’s certainly manageable within the expectations that we have built for the business going forward, certainly based on that level of experience that we’ve seen historically - it’s manageable. It is something that we have contemplated and I would frankly expect to see some level of pressure going forward.

This is Mike, I’ll take the second question. With respect to the TNF-steroid conjugate program, we’re obviously advancing ABBV-154. We have a large Phase IIb RA study that will start this quarter, and then we’re starting studies in additional immune-mediated conditions as well over the course of the year. With respect to publication of the data from 3373, which is the closely related compound from the same platform that we top line results some time ago, I think you can expect to see more detailed data over the course of the summer.

Thanks Tim. Operator, next question please.

Thank you. Our next question comes from Steve Scala with Cowen. Your line is open.

Many thanks. First on Rinvoq, I’m curious what additional safety data has FDA been provided that it did not have previously, and has all of it been previously presented and if not, what was the conclusion of what now has been submitted, so that’s the first question. Secondly regarding Imbruvica, to what extent can AbbVie tease out COVID impact on new patient starts versus competition from new frontline agents? Thank you.

This is Mike, I’ll take the first question, and then Rick will handle the second. With respect to Rinvoq, the additional safety data that were presented to the FDA or provided to the FDA are essentially a roll forward of the analysis that we did at the time of the NDA submission. Obviously our database continues to grow, we accumulate patient years experience, and so there weren’t fundamentally new analyses but we did an updated assessment with the additional data that have accrued in the time between submission and when we submitted those responses. What I would say is the data that we reviewed have not changed our impression of benefit-risk in any way. I think they’re very consistent with all of the data that have been publicly presented. Obviously since they represent data that were current up to the time that we submitted just a few weeks ago, not all of these data have been presented in the public domain, but I would say that our response is very consistent with what we have described publicly in the past.

On your second question - this is Rick, we get data on new patient starts, so we have relatively, I think, accurate data. It’s offset by a couple of months - I’ll have Jeff maybe talk about it in a little more detail, so we know any CLL patient, when they start, regardless of therapy, we can measure that, and obviously we can measure again what type of therapy they start on, so I think the level of data integrity that we operate with from a market standpoint here is pretty good. It’s offset by a few months, and maybe Jeff can speak to the time offset.

Yes, so Steve, it’s Jeff. We have pretty good visibility to what’s happening from the share perspective versus the market start perspective. I’ll give you some flavor. With regard to Calquence, we can see the impact of the approvals in the front and second line CLL, and it’s largely consistent with what our expectations were, so they’re ramping in a similar fashion to what we saw in the MCL or NHL, so we know that there’s some impact on Imbruvica there. The largest impact has been, unfortunately, into the market, and unfortunately I mean for the patient. I’ll give you a little bit of the numbers. Typically the CLL market, which is the largest driver, it grows sort of at a population level, like 2% every year. If you look at the impact from COVID, we can see almost three different waves - we can see a wave where the new patient starts in the market, we’re down in the high teens in the first part. Then it started to claw back a little bit into the single digits down, and then it got hit again into the teens in the August period and we saw it down again in early January, about 18%. We can see what’s happening, and as I mentioned in my remarks, the biggest impact here has been on continued market suppression due to COVID.

Steve, this is Rob. I would just remind you also on the first quarter that we had the stocking impact from COVID last year, so if you adjust for that, it’s about a four point impact on Imbruvica’s growth year-over-year due to the prior year comp with the stocking impact.

Thank you.

Thanks Steve. Operator, next question please.

Thank you. Our next question comes from David Risinger with Morgan Stanley. Your line is open.

Yes, thanks very much, and congrats on the results and updates. I have two questions. First, just to follow on, on that comment, could you just help us understand a little bit more about why Imbruvica is such an outlier in the cancer market, why the pandemic is hitting Imbruvica very hard whereas the pandemic is not hitting other cancer agents so hard? Then second, with respect to esthetics, it’s obviously booming, and it is validating your acquisition of Allergan. But I think that you updated guidance for the year for Botox cosmetic to $1.9 billion, and that implies flat sequential sales from the $477 million that you booked in the first quarter, so if you could explain that please. Thank you.

This is Mike. I’ll take the first question and then others will comment on your second question. With respect to why Imbruvica is being hit harder than other anti-cancer agents in the pandemic, I think it has to do with the underlying rate of progression CLL. CLL, while it is a very significant limiter of long-term function and survival, in the short term there’s a sense that therapy can be delayed if necessary because the rate of progression is relatively slower than other forms of cancer, for example certainly much slower than AML, another indication that we are very active in, in the hema-on space. I think in the setting of the pandemic, that’s why you are seeing more deferrals for start-up therapy and, in some cases, longer time to switch a therapy, which would explain why Imbruvica dynamics are different than other anti-cancer agents that treat other diseases.

David, this is Rob. On your question regarding Botox cosmetic, we did see in the first quarter, if you just look at toxins market growth, it’s over 30% in the first quarter. There is some impact from pent-up demand as we come out of the pandemic, but we feel very good about the forecast we put forward. We obviously took it up $100 million, so it’s essentially pass through to beat in the quarter. I’d say your math on flat sequentially, I think it’s up a little bit, but really if you consider that we did have some level of pent-up demand come through in the quarter, you’ve got to back that out to truly understand the underlying demand dynamics.

Thank you.

Thanks David. Operator, next question please.

The next question comes from Ronny Gal with Bernstein. Your line is open.

Hi everybody. Congratulations on a very nice quarter, and thank you for fitting me in. Two questions, if I may. First, there was data presented from Richter about negative symptom improvement using Vraylar. I was wondering what was your take on the data in terms of your ability to use it in the United States, is it something that you’re considering doing with [indiscernible], could this potentially be added to the label, and so forth. Second, the growth in Botox neurology is really impressive. It seems relatively odd that there was such a big jump in the middle of a wave of the epidemic in January-February for a physician-administered product. Can you just give us a flavor of what’s the underlying trends there, is there just a lot more success that you’re having in pushing first patients who failed [indiscernible] into Botox? How should we think about this?

This is Mike. I’ll take the first question and then others will comment on your second question. With respect to negative symptoms and the treatment of those negative symptoms in schizophrenia, it’s a very challenging area, it’s a very important area because they’re responsible for much of the long term loss of function in patients who suffer from schizophrenia. It has been a very difficult are to approach in general, and we believe Vraylar has a good profile there and has a good overall impact on the disease, a very strong overall impact on the disease, but it’s also one that’s been very challenging from a labeling perspective in the U.S. It’s been a very difficult claim to get in the U.S. It’s not clear that there is a specific path to negative symptoms in the label, but I do think the overall profile of Vraylar in schizophrenia, both with respect to symptom control and benefit risk, are viewed very positively by treating physicians, and I think the overall benefits are well understood by treating physicians and I think that is reflected in Vraylar’s overall strong performance.

It’s Jeff. In regard to Botox, it’s insightful because we are seeing some robust activity, particularly in migraine. I think there’s a couple reasons for that. One, Rick highlighted the sales force dynamics in China. We’ve definitely focused our sales team on the migraine component. The other thing that’s taken place is a little bit, I think, of an investment approach. We’ve had more consistent consumer investment since we had the integration than previously at the legacy Allergan, so I think the combination of the consumer investment, new waves where if patients access an injector at a neurologist, they can get a sample of Botox right at their first appointment rather than wait for many months. There are various commercial reasons, we think, that give us a lot of encouragement on the therapeutic Botox performance, again specifically and particularly in migraine.

Thank you.

Thanks Ronny. Operator, next question please.

Our next question comes from Terence Flynn with Goldman Sachs. Your line is open.

Great, thanks for taking the question. Maybe two for me. I recognize there are still a lot of unknowns here, but how are you thinking about the potential headwind from any changes to corporate tax rates and guilty? Then given the progress you outlined on debt pay down, you’ll be back to about a two times leverage ratio, you mentioned. How are you thinking about capital allocation into the end of this year and into 2022? What types of assets are you focused on for BD and M&A? Thank you.

This is Rick. I’ll cover the tax. As you said, it’s certainly early in the process and we obviously know what’s being proposed, but we don’t necessarily know where we will end up. I think one of the important things that we need to continue to think through is if we go back to--you know, one of the reasons why back in 2017 tax reform was passed was to make sure that two things happened: one, that U.S.-based companies were competitive with their foreign competitors, and two, it encouraged companies like ours to invest in the United States. I can certainly talk about the AbbVie example. I think it’s pretty compelling when you sit back and look at--you know, we were able to go out and acquire a Irish company, re-domicile it back to the United States. AbbVie today has 24,000 jobs in the United States. We’ve also increased investment significantly in the U.S. since tax reform. Over the last three years, we’ve invested $1.5 billion, we committed that we’d do $2.5 billion over time. We’re going to exceed that commitment. We’ve added about 1,500 jobs over that period of time. Companies like ours clearly took the benefit of tax reform and that has allowed us to be able to be more competitive and certainly in the acquisition of a company like Allergan, I think that was clearly demonstrated, but we also have invested much more aggressively in the U.S. I think going forward, one of the things that important for policymakers to balance is to make sure that we don’t go back to where we were, and that is where U.S. companies aren’t as competitive against their foreign competitors. The current proposal would make the U.S. have the highest rate of all developed countries - I’m not sure that’s the position you’d want to be in, so hopefully as we go forward, there will be a balance that’s looked at in raising taxes but also making companies maintain a competitive position and continue to be incented to invest in the U.S.

Terence, this is Rob. On your question regarding capital allocation, I’ll start and then Mike will add more color in terms of BD. We’ve said all along that we will continue to de-lever through 2023, so think about that net leverage ratio getting to two times in ‘22, the balance sheet would be in very good shape, but we want to continue to pay down the debt through ’23. During that period, we’ve allocated $2 billion of capital for business development. You’ve seen us do some very nice deals, whether you look at Genmab, I-Mab, we’ve done a number of nice transactions in this space with that amount of capital. I’ll let Mike speak to future opportunities as well.

In terms of the areas in which we would expect to be active between now and the end of 2022, we’ll continue to be active in oncology, both in hematological oncology and in solid tumors. That has been an area of focus for us, and I see that continuing as an area of focus. We would certainly like to add to the esthetics franchise - we’ve talked about how we will invest and continue to drive that franchise, and from a business development perspective, I think there are a number of opportunities there that could present themselves in that time frame. There are other areas that opportunistically we would certainly like to add to - I would point to neuroscience, if we could find the right opportunities, and eye care as additional areas where we could be investing.

Thanks Terence. Operator, next question please.

Our next question comes from Daniel Busby with RBC Capital Markets. Your line is open.

Hi, good morning. I’d like to ask a follow-up on esthetics and your high single digit annual growth target for that business over the next decade. Broadly speaking, how much of that growth is dependent on bringing new products to market, such as long and short acting toxins, versus driving continued growth from the esthetics portfolio that you have today? Second, as we near the one-year anniversary of your acquisition of Allergan, can you provide updated thoughts on your appetite for potential divestitures of non-core products or therapeutic areas now that you’ve had about a year to digest that transaction? Thank you.

This is Rick. I’ll cover that, and maybe Rob can tag team along here. I think if you look at our overall estimate of high single digit growth on esthetics, it’s not heavily reliant on a large number of new products. There will be new products that come in - they’re probably closer towards the back end of the long range plan so they don’t have a significant impact on that overall growth rate, so I think we fundamentally believe that the market dynamics are such and the brands are competitive, highly competitive in this market, that we have the ability to grow the market and continue to maintain our share position in that market, and that will allow us to be able to drive that level of growth or higher.

This is Rob. I would just add that if you look at the esthetics business, we’ll see significant growth not just from toxins and fillers, but also in body contouring, so as we think about the potential for that leg of the stool, we think we’ve got really three key drivers of growth within esthetics that will help us get to that high single digit long term expectation. Again, as Rick mentioned, we’re not counting on a significant contribution to the pipeline, although we will continue to drive innovation particularly with toxins and fillers, and of course as you’ve heard before, it’s important within body contouring to continue to drive innovation there as well, so we feel very good about that outlook and we’re not counting on a ton from the pipeline there.

And your second question, I would say even before the Allergan acquisition, we constantly looked at our portfolio and determined whether or not there were areas of our business that we ultimately though we were interested in divesting. I’d say that’s a process that we go through on a fairly consistent basis to ensure that we’re maximizing the value of the assets that we have within our portfolio, and so we will continue to do that. When we find opportunities where we think that’s the right strategy, then we’ll execute against that strategy.

Thanks Daniel. Operator, next question please.

Our next question comes from Gary Nachman with BMO Capital Markets. Your line is open.

Thanks. A couple more from me in Rinvoq. Are you hearing anecdotally any physicians that may be switching patients from Xeljanz to Rinvoq in RA, if there is a perceived safety benefit with Rinvoq as a more selective JAK, are you able to take advantage of that at all? Then secondly, if Rinvoq gets approved for atopic derm, how will you look to build out your presence with dermatologists? Will you leverage your current footprint on the esthetics side, or will you have a completely different medical derm team? Just talk about how you go after that opportunity and how you’re preparing for it, given your clear level of excitement there. Thank you.

Hi, it’s Jeff, and I’ll take both of those. We’re actually not hearing physicians, from our intelligence, from our field teams, actively thinking to switch patients from Xeljanz to Rinvoq. I mean, that’s a big decision for a physician. What we have heard is when we do some of our research and our ear to the ground, we clearly see that oral surveillance is perceived as a Xeljanz issue, so typically what will happen is you may see people take their foot off the gas on some new starts, but we don’t see or hear certainly any widespread news of active switching, so that’s basically our intelligence on your first question. In terms of your second question, we will not be using the esthetics sales force. We will basically leverage our existing infrastructure that we have with some expansion we’ve taken place for Rinvoq in atopic dermatitis. I think as you know, in terms of our reputation amongst the medical derms is extremely strong. We have the number one reputation because of the years of Humira in psoriasis and psoriatic arthritis and HS, and obviously we have a very, very strong impression and launch from Skyrizi, so we’ve basically designed a sales force that through our management, which has been connected to these derms for more than a decade, and existing reps with some new reps in there, we are building--we have built a sales force that will work seamlessly with our Skyrizi teams to give a very nice offering to those dermatologists. An important fact is that basically the overlap of those dermatologists that drive basically the atopic derm market is about 90% between the atopic derm market and the psoriasis market, so we feel we’re well positioned in terms of how we’ve set up our go-to-market approach with the segment.

Thanks Gary. Operator, next question please.

Our next question comes from Gregg Gilbert with Truist Securities. Your line is open.

Thank you. Mike, I was interested in your oral psoriasis commentary. Are you assuming that a new bar has been set by deucravacitinib in terms of efficacy versus Otezla, and is that something you’re very mindful of as you consider your own programs? Secondly for Rick, I realize AbbVie was born out of a company that had devices and pharma under one roof, but clearly you’ve embraced esthetics, for example, that good franchise building could involve drugs and devices or drugs that need to be delivered by device. Does that apply as you think ahead about ophthalmology or other areas when you consider long term BD? Thank you.

This is Mike. I’ll take the first question. With respect to oral psoriasis agents, we would want to come in from an efficacy perspective with something that clearly exceeded the threshold that existed in the past with Otezla, and I think coming in a range that is Humira-like or better would be our goal. I think if you look at BMS’ Tyk2, they sort of come in at that Humira-like efficacy, and so I think that is generally the range that we’re talking about. I think when one talks about a direct comparison in terms of where a bar is set, we have to look not only at efficacy but at safety and at the totality of the data. Obviously it’s extremely early for our RORγT agent, but we think it is a molecule, because it impacts very well understood biology with a good understanding of where to go from an efficacy perspective and a good understanding of safety, that we can get in a range that’s very competitive there, so I think we’d be looking for that Humira-like efficacy or greater as something that we would like to use to enter the space with in oral, obviously coupled with a strong safety profile.

On your second question, this is Rick. I think the way we approach the markets that we operate in is we look for areas where there is significant unmet need and then we ultimately try to come up with solutions for those needs. Sometimes it’s drug only - in fact, I’d say the majority of our historical experience as AbbVie has been drug-only, but as an example, 951 is a good example of where it’s a combination product, right - a device and a drug. Certainly as we look at ophthalmology, we have implantable devices that were part of the Allergan acquisition that are important therapeutic options, that are available for physicians and patients. I’d say we tend to go at it and we’re certainly not opposed to devices being part of it if they can add to the ability to be able to provide for an advancement in the standard of care. In esthetics, as Rob indicated a moment ago, we’re looking at what is that big third leg on the stool, and we believe that is body. I would say in the area of body, devices are going to play a much more critical role, and so that’s an area where I think you’ll see us embrace even device-only kinds of strategies because they provide the right solution for that particular improvement. It’s an area that historically many of us know well because of our experience, as you pointed out, in our previous life, but I’d say also the teams in the organization itself tend to look for broad-based solutions that can meet the unmet need.

Thank you.

Thanks Gregg. Operator, we have time for one final question.

Thank you. Our last question comes from Navin Jacob with UBS. Your line is open.

Hi, thanks so much for squeezing me in here. A couple if I may, if we have time. Just on Vraylar, you have strong long term guidance of $4 billion with just the existing indications, but the script trends at least seem to have slowed down, obviously in part because neuro has been weak as an overall therapeutic area during the pandemic. But just wondering--and just given that the quarter itself was a little bit weaker, I think, versus expectations, can you talk about the broader neuro market? Is that weakness there, because we do see strength with Ubrelvy and with Botox therapeutics, so just wondering if there’s something going on specifically with Vraylar? Has the bipolar depression opportunity been tapped out for some reason, and what can you and need to do to accelerate growth for Vraylar with the existing indication? That’s number one. Number two on Rinvoq, I think understands the rates around DVTP and MACE, but if you could give a little bit more clarity, based on the updated data that you’ve filed with the agency, what the rate of malignancy is across the indications, and whether that’s any different between the strengths and how that compares to the background rate. Thank you so much.

Hi, it’s Jeff. I’ll take the Vraylar comment. The macro prescription market has been down a little bit versus historical trends, but we really think it’s simply a timing issue, and I’ll give you some numbers that support that. Before COVID hit, right in the first quarter of last year, the new to brand, or NBRx for Vraylar was about 3,500 new to brand prescriptions a week, and what we saw is during COVID, that dropped down all the way to about 2,700 - that was the nadir, and then it’s consistently come back up. Towards the end of March, we started to hit or recover that pre-COVID historical rate, so progress is there, and ultimately the way we see these markets function, as you recover your NBRx momentum, the TRx’s will start to come, so we’re encouraged on the latest trends. But your point is right - it has been a little bit soft on the market, and certainly as a brand Vraylar dropped because of COVID, but is now really fully recovered and so we should see continued recovery of the momentum there. Hopefully that helps.

This is Mike. I’ll take your second question. With respect to the rates of malignancies, excluding non-melanoma skin cancer because that’s the way these rates are typically reviewed, I recently described a rate across Rinvoq studies with roughly 10,000 patient years experience of 0.8 events per 100 patient years experience, and that compared to an expected rate that was 0.9 or higher, depending on the estimate, so we’ll call it in the range of about 0.9 events, so not different from that expected rate and without any difference between doses, so no evidence of a dose response, and nothing that we’ve seen in the recent work that we’ve done changes that view in any way.

Thanks Navin. That concludes today’s conference call. If you’d like to listen to a replay of the call, please visit our website at investors.abbvie.com. Thanks again for joining us.

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