AbbVie Inc. (ABBV) Q2 2022 Earnings Report, Transcript and Summary

Good morning, and thank you for standing by. Welcome to the AbbVie Second Quarter 2022 Earnings Conference Call. All participants will be able to listen only until the question-and-answer portion of this call. [Operator Instructions] I would now like to introduce Ms. Liz Shea, Vice President, Head of Investor Relations.

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, Vice Chairman and President; Jeff Stewart, Executive Vice President, Chief Commercial Officer; and Tom Hudson, Senior Vice President, R&D, and Chief Scientific Officer. Joining us for the Q&A portion of the call are Laura Schumacher, Vice Chairman, External Affairs, Chief Legal Officer and Corporate Secretary; Carrie Strom, Senior Vice President and President of Global Allergan Aesthetics; Scott Reents, Senior Vice President and Chief Financial Officer; Neil Gallagher, Vice President and Chief Medical Officer; and Roopal Thakkar, Vice President, Global Regulatory Affairs. Before we get started, I’ll note 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. 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. I’ll briefly comment on our overall performance. Then Jeff, Tom, and Rob will review our second quarter business highlights, pipeline progress and financial results in more detail. AbbVie delivered another strong quarter with adjusted earnings per share of $3.37, exceeding our expectations. Total net revenues of approximately $14.6 billion was up 6.1% on an operational basis, in line with our expectations. This performance reflects robust double-digit operational sales growth from immunology, where Skyrizi is exceeding our expectations with impressive market share gains in both psoriasis and PSA. Skyrizi’s recent U.S. approval in Crohn’s disease will add yet another source of long-term growth. As a result of the strong performance we’ve seen in the first half of the year, we are raising our full year guidance for Skyrizi. Rinvoq is also demonstrating strong growth. RA continues to perform in line with our expectations, following the label update, and we’re making very good progress with all of the newly launched indications, including PSA, AS, atopic dermatitis and ulcerative colitis, which collectively represent a significant long-term growth opportunity. Neuroscience is another area with outstanding performance Vraylar, Botox Therapeutic and Ubrelvy and Qulipta each demonstrated double-digit sequential sales growth. Pending regulatory approvals for Vraylar in major depressive disorder, Qulipta in chronic migraine and 951 for the treatment of advanced Parkinson’s disease represent additional near-term growth opportunities for our neuroscience portfolio. Turning now to aesthetics, Botox Cosmetics once again performed very well with sales up more than 20% on an operational basis. Demand for toxins remains strong with high teens growth in the U.S., despite inflation dynamics. As expected, Juvederm performance was negatively impacted by COVID-related lockdowns in China, as well as the suspension of our operations in Russia. Additionally, in the U.S., we had a difficult prior year comparison with a promotional event that we ran last year. We also saw a modest impact in the quarter due to economic pressures. We continue to expect positive full year growth for Juvederm driven by the lessening COVID impact in China and two new filler launches in the U.S. which will benefit growth in the second half of the year. In hematological oncology, Imbruvica continues to be unfavorably impacted by a delayed market recovery for new patients starting therapy in CLL and increasing competition. These ongoing dynamics will have an impact on Imbruvica’s projected 2022 revenues. As a result, we will be adjusting our full-year guidance to reflect these impacts. Venclexta to continues to demonstrate robust share performance in both CLL and AML, with sales up double digits on an operational basis. Venclexta also has registrational studies ongoing in additional attractive indication, such as multiple myeloma in the t(11;14) patient population with Phase 3 data forthcoming, as well as high risk MDS. Additionally, we have an exciting and diverse pipeline of promising new therapies to address critical unmet needs in both, blood cancers and solid tumors, which are expected to support the next wave of AbbVie’s growth in oncology. In summary, the diversity of our portfolio, once again allowed us to deliver another strong performance, despite the challenges we see in the CLL market and increasing Imbruvica competition. Skyrizi and Rinvoq are performing exceptionally well and are on pace to deliver approximately $7.5 billion in combined sales this year. Neuroscience demonstrated balanced double-digit growth driven by migraine and Vraylar and continued robust Botox cosmetic growth offset some of the U.S. inflationary impact to our filler and body contouring portfolios. As a result, we are confirming our full year 2022 adjusted earnings per share guidance of $13.78 to $13.98, representing growth of more than 17% at the midpoint. With that, I’ll turn the call over to Jeff for additional comments on commercial highlights. Jeff?

Thank you, Rick. I’m very pleased with the momentum across our therapeutic portfolio, including the continued progress we’re making with new product and recent indication launches. I’ll start with our immunology portfolio, which delivered total revenues of $7.2 billion, reflecting growth of 19.2% on an operational basis. Global Humira sales were approximately $5.4 billion, up 6.8% on an operational basis with 9.6% growth in the U.S., partially offset by international performance where revenues were down 7.3% operationally due to biosimilar competition. Skyrizi is performing extremely well, well ahead of our expectations. Global revenues were more than $1.2 billion, up 33% on a sequential basis. We continue to advance our leadership position in psoriasis where Skyrizi’s total prescription share of the U.S. biological market has increased to approximately 26%, driven by an in-play share of new and switching patients that is now approaching 50%. We have also achieved in-play market share leadership in 23 key international markets, including Japan, Germany, France, Canada, and Australia. Psoriatic arthritis is also adding significantly to Skyrizi’s momentum, where we are now approved in 54 countries. In the U.S. dermatology segment, where approximately 30% of patients exhibit both skin and joint involvement, Skyrizi is already achieving an in-play patient share of nearly 20%. We have also launched Skyrizi for PSA in rheumatology, where we’re seeing strong utilization, which is driving accelerated share growth. Our recent launch of Skyrizi for Crohn’s disease in the U.S. represents the first new biologic approval in six years for an area where there continues to be considerable unmet need. We believe Skyrizi represents a highly effective and differentiated treatment option for Crohn’s patients, including the potential to provide meaningful levels of endoscopic improvement with novel and infrequent dosing. Managed care access is expected to ramp strongly for this indication in the coming months. Turning now to Rinvoq, where we’re seeing good momentum across each of the approved indications. Global sales of $592 million were up more than 27% on a sequential basis. Prescriptions in RA remained strong with a total market share of 5.8% in the U.S. and approximately 6% across key international markets. Rinvoq is now achieving an in-play RA share of approximately 13% in the U.S. In PSA, Rinvoq continues to see nice uptake, especially in the room segment with commercial access now equal to RA. We also recently received FDA approval for ankylosing spondylitis and European approval for non-radiographic Axial SpA, further expanding Rinvoq’s potential across rheumatology. In atopic dermatitis, new patient starts are tracking in line with our expectations with Rinvoq’s in-play patient share in the mid-teens. Strong commercial access in AD, which is also now equal to RA and PSA, is expected to considerably increase paid prescription volume in this highly underpenetrated market over the remainder of the year. Lastly, our recent launch of Rinvoq for ulcerative colitis in the U.S. is progressing well. And we recently just received European approval for the same indication. Commercial access in the U.S. is ramping strongly, and we are seeing encouraging new patient starts. Physician feedback regarding Rinvoq’s approved profile in UC has been favorable, especially given the very high rates of remission and endoscopic improvement demonstrated across our UC development program. The addressable patient population for Rinvoq in UC is substantial, with nearly 50% of patients currently on or having used TNF therapy. Turning now to hematologic oncology, where total revenues were $1.65 billion, down 7.9% on an operational basis. Imbruvica global revenues were approximately $1.1 billion, down 17.1% and below our expectations. The CLO market continues to remain challenging in the U.S. with new patient starts down double digits relative to pre-pandemic levels. Now, as you may recall, our initial 2022 Imbruvica sales guidance contemplated a partial market recovery, which, unfortunately, we have not yet observed. In fact, the latest data reflects new patient starts in the U.S. were actually down high single digits versus last year. So, based on recent trends, we no longer believe it’s prudent to anticipate a meaningful market recovery in CLL over the second half of this year. Therefore, we will be removing this assumption from our 2022 guidance. In addition, increasing competition from newer therapies, including other BTK inhibitors as well as our own Venclexta also continue to lower Imbruvica’s share of new patient starts, especially in frontline CLL. Despite this increasing competitive pressure, Imbruvica continues to be the total market share leader across all lines of therapy in CLL. Venclexta global sales were $505 million, up 21.2% on an operational basis. In CLL, we continue to see share gains in the U.S. and across all major international markets. We’re also seeing continued strong performance in AML. Venclexta is now approved in 80 countries and in many markets is already considered the new standard of care for frontline AML patients who are ineligible for intensive chemotherapy. As a result, we are seeing ramping market share throughout the countries where we have launched. In neuroscience, revenues were more than $1.6 billion, up 15.2% on an operational basis. Vraylar once again delivered strong growth. Sales of $492 million were up 13.9% on an operational basis, reflecting continued share gains in the U.S. atypical antipsychotic market. Our launch preparations remain well underway in anticipation of our MDD approval in the fourth quarter. This is a potentially large indication that would represent incremental upside to our current projections for Vraylar. Within migraine, Ubrelvy remains the market-leading oral CGRP treatment for acute migraine with revenue of $185 million, up 34% on a sequential basis. Qulipta continues to increase its leading new-to-brand share in the U.S. preventative CGRP class when we consider both, paid and bridge volume. We continue to make good progress with expanded commercial access, which will support strong Qulipta sales growth over the remainder of this year. We are also pursuing the commercial approval for Qulipta as a preventative treatment in patients with chronic migraine in the U.S. as well as a new therapy for Europe, potentially further strengthening our competitive product profile and long-term growth opportunity. Botox Therapeutic is also performing well in chronic migraine as well as its other indications with total sales of $678 million, up 14.5% on an operational basis. So overall, I’m pleased with the commercial execution across the therapeutic business. Our broad portfolio of differentiated therapies and new launches is demonstrating strong revenue growth. And with that, I’ll turn the call over to Tom for additional comments on our R&D programs. Tom?

Thank you, Jeff. I’ll start with immunology where we had several notable pipeline updates in our inflammatory bowel disease programs for both, Skyrizi and Rinvoq. We recently received FDA approval for Skyrizi in Crohn’s disease, and we’re very pleased with the label which reflects a strong benefit risk profile that Skyrizi demonstrated as an induction and maintenance treatment for this condition. Based on its profile, we believe Skyrizi will be a highly effective and differentiated treatment option for patients with Crohn’s disease. Our regulatory application for Skyrizi in Crohn’s disease remains under review in Europe with an approval decision expected near the end of this year. Also in the area of inflammatory bowel disease, we recently received European approval for Rinvoq in ulcerative colitis. And we’re excited to bring this new, highly efficacious oral option to patients suffering from this often debilitating disease. In the quarter, we also completed a registrational program for Rinvoq in Crohn’s disease, reporting positive top line results from our Phase 3 maintenance study. We recently submitted our regulatory applications for Rinvoq in this indication and expect approval decisions next year. Once approved for Crohn’s disease, Rinvoq will have completed development programs for all the major rheum and gastro indications covered by Humira plus atopic dermatitis. The strength of the data generated in our clinical programs should position Rinvoq as a highly differentiated treatment across this broad indication set and enable Rinvoq to deliver significant value to AbbVie over the long term. And just this morning, we announced that we received European approval for Rinvoq in non-radiographic Axial SpA, which rounds out Rinvoq’s label in rheumatology. Moving now to our oncology portfolio, where we continue to make excellent progress across all stages of our pipeline. At the recent EHA meeting, we presented results from the large B-cell lymphoma expansion cohort in the Phase 2 study evaluating epcoritamab in patients who have received at least two prior lines of therapy. In this study, epcoritamab was well tolerated and drove very deep and durable responses in challenging to treat highly refractory patients with large B-cell lymphoma. We recently discussed these results with regulatory agencies and based on the strength of the data, we intend to submit regulatory applications later this year for accelerated approval of epcoritamab in patients with relapsed/refractory large B-cell lymphoma. We expect approval decisions in 2023. We continue to make good progress with the indication expansion programs for Venclexta and remain on track to see results from the Phase 3 CANOVA trial in relapsed/refractory multiple myeloma patients with a t(11;14) mutation in the second half of this year. As a reminder, we’ve seen very promising results in this population in prior clinical studies with Venclexta showing high overall response rates and meaningful trends towards prolonged progression-free survival. The level of efficacy we’ve seen suggests that t(11;14) patients may be particularly responsive to Venclexta and this agent has the potential to become an important biomarker-driven treatment option in the multiple myeloma market. In neuroscience, following successful completion of our Phase 3 chronic migraine prevention study, we submitted our regulatory application to the FDA for Qulipta in chronic migraine. Chronic migraine is defined as 15 or more headache days per month with at least 8 of those days associated with migraines. This is a debilitating disease that affects nearly 10% of people suffering from migraine, significantly impacting their quality of life. If approved, this would be another differentiating feature for Qulipta as it would be the only oral CGRP approved for prevention in patients with chronic migraine. We also submitted data from our Phase 3 prevention studies in both, chronic and episodic migraine to support regulatory applications in markets outside the U.S. We expect approval decisions in the U.S. and in Europe in 2023. In the quarter, we submitted our regulatory application in the U.S. for ABBV-951, our novel subcutaneous levodopa/carbidopa delivery system for treatment of advanced Parkinson’s disease. This innovative delivery system has the potential to become a transformative treatment option for patients with advanced Parkinson’s disease by providing DUOPA-like efficacy with less invasive nonsurgical administration. We also expect to submit our regulatory application in Europe later this year with approval decisions anticipated in both, the U.S. and Europe in 2023. Now, I’d like to provide a few updates on some earlier-stage programs where we have new data and are advancing programs in development. In immunology, we recently obtained encouraging data in a Phase 2 study evaluating Rinvoq in systemic lupus, an autoimmune multisystem disease. In our study, Rinvoq demonstrated greater response rates as well as a reduction in flares compared with placebo. We’ll see longer-term data in the coming months, which will allow us to make a decision on moving Rinvoq into Phase 3 for lupus. In oncology, where we have a pipeline of promising early-stage programs aimed at solid tumors, we are beginning to see very exciting data from several programs. Our anti-GARP antibody, ABBV-151 is designed to block the immunosuppressive activity of regulatory T cells, which leads to increased T cell effector functions in the tumor microenvironment. This reactivates the immune system against tumors, enhancing the antitumor immune response triggered by a PD-1 inhibitor. In our Phase 1 program, we’re combining 151 with a PD-1 checkpoint inhibitor in cancer patients who are refractory to or relapsed after PD-1 as well as evaluating this combination in PD-1 nonresponsive tumors. Based on the preliminary efficacy we’ve seen in the dose expansion cohorts for multiple solid tumors, including a deepening of responses over time and prolonged durability, we recently declared proof-of-concept for 151. We plan to advance to Phase 2 in several solid tumors, starting with urothelial cancer. We’re also expecting additional data readouts later this year in other solid tumor indications, including colorectal cancer, which may enable further expansion studies in this hard-to-treat cancer type. We will also begin new studies to explore a broader set of solid tumors where GARP is implicated as a critical immunosuppressive pathway, based on tumor tissue analyses. We’re also making excellent progress with our next-generation c-Met ABBV-400, where the emerging clinical data is very promising in several solid tumors. This asset is similar to Teliso-V as c-MET ADC that uses a microtubulin inhibitor payload. Teliso-V received breakthrough therapy designation for the treatment of patients with a subtype of lung cancer with high levels of c-Met overexpression. The toxin warhead for 400 uses a more potent topoisomerase inhibitor payload, which is similar to irinotecan, a chemotherapy that is used in the treatment of colorectal cancer. By targeting c-MET positive tumors with ADCs bearing different warheads we believe we can broaden the range of solid tumors where c-MET therapies can be used. In our Phase 1 program, we are seeing good responses in patients with advanced colorectal cancer and remain encouraged by these early efficacy signals. So in summary, we’ve seen tremendous progress across all stages of our pipeline in the first half of the year, and we remain on track for further advancements in the remainder of 2022. So, with that, I’ll turn the call over to Rob for additional comments on our second quarter performance and financial outlook. Rob?

Thank you, Tom. AbbVie’s second quarter results demonstrate the strength of our diversified portfolio. Momentum from new products and recently launched indications allows us to maintain our earnings outlook despite market dynamics for Imbruvica, higher inflation and the stronger U.S. dollar. We reported adjusted earnings per share of $3.37, reflecting growth of 11.2% compared to prior year and $0.11 above our guidance midpoint. These results include a $0.14 unfavorable impact from acquired IPR&D expense. Total net revenues were $14.6 billion, up 6.1% on an operational basis, excluding a 1.6% unfavorable impact from foreign exchange. The adjusted operating margin ratio was 51% of sales, an improvement of 220 basis points versus the prior year. This includes adjusted gross margin of 84.7% of sales, adjusted R&D investment of 11% of sales, acquired IPR&D expense of 1.8% of sales and adjusted SG&A expense of 20.8% of sales. Net interest expense was $532 million, and the adjusted tax rate was 13.4%. Turning to our financial outlook. We are confirming our full year adjusted earnings per share guidance between $13.78 and $13.98. This earnings per share guidance does not include an estimate for acquired IPR&D expense that may be incurred beyond the second quarter. We now expect net revenues of approximately $58.9 billion, reflecting growth of 6.5% on an operational basis. At current rates, we expect foreign exchange to have a 1.7% unfavorable impact on full year sales growth. Included in this guidance are the following updated assumptions. We now expect Skyrizi global sales of approximately $4.8 billion, an increase of $400 million due to strong market share performance. For Imbruvica, we now expect global revenue of approximately $4.7 billion, given the lack of recovery in the CLL market and increasing competition. Moving to the P&L, we now expect adjusted gross margin of 84.7% of sales and continue to forecast an adjusted operating margin ratio of 51.8% of sales. Turning to the third quarter. We anticipate net revenues of approximately $14.8 billion. At current rates, we expect foreign exchange to have a 2.1% unfavorable impact on sales growth. We expect adjusted earnings per share between $3.55 and $3.59. This guidance does not include acquired IPR&D expense that may be incurred in the quarter. In closing, we delivered strong performance again this quarter, including meaningful contributions from new products and recently launched indications. Given the momentum of our business as well as our pipeline advancements, we are well positioned for the long term. With that, I’ll turn the call back over to Liz.

Thanks, Rob. 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, we’ll take the first question.

Thank you. Our first question is Andrew Baum, Citi. Your line is open.

First question is on the guidance range you’ve given for anticipated trajectory of Humira in the U.S., presumably you’re finishing contracting, both with Medicare and commercial. Could you provide any guidance further on ‘23 and even ‘24 [indiscernible] contracts? And then second, a pipeline question in relation to your anti-GARP monoclonal, which you’ve taken a long time to sort of optimize or move forward. I’m just curious whether you’re using any molecular markers in order to minimize risk given the failures of other TGF-beta targeted agents, particularly in colorectal using CMS 4 or a subgroup of the total population, or are you putting it in all comers, the suggestion that what’s an all comers or is this again informed biomarkers? Thank you.

Okay. Andrew, this is Rick. Thank you for the questions. I’ll cover the first one, and then Tom can cover the second one. So, we are in the process now, as we’ve indicated before, of negotiating with the managed care organizations and the PBMs to establish our contract position for Humira in 2023. This is a normal time that you would go through that. It is progressing as we would expect. I would say we’re midway through that process right now. I would expect it to conclude near the end of the third quarter, early the fourth quarter. At that point, that’s an important part of refining our model for 2023 in particular. And what that will tell us is that the positions that we have formulary status for 2023 in for Humira, and that will help us define clearly the volume aspect of it. And so, that’s going well, and that’s going to be an important part of us being able to refine that model. And so, as we get further along in that process, that will give us the ability to be able to potentially refine the model that we have. Now, the one thing that’s important to remember in all of this is price is the other key aspect here. And there, we won’t know real pricing until the actual event starts to occur. So, we will make assumptions around what that price looks like. And I think those will be informed assumptions, but they are just that they’re assumptions. And so, that’s the one piece that will still be somewhat of an unknown until we see the landscape start to play out in 2023, and particularly in midway through 2023 when more biosimilars enter the market. So, as we get more information and we can provide more clarity, we’ll certainly try to do that, but I think that’s where we are right now. Tom?

Thank you. Andrew, I’ll try to break down the question in different parts because you’re right, there are many TGF-beta assets. This one is unique, GARP. Most of the TGF-beta assets work either antibodies against receptors to be active for TGF-beta or TGF-beta itself that’s in circulation on cells. But GARP blocks the inactive form of TGF-beta before it’s released from TGF-beta. And we believe that actually is a differentiated mechanism, also allows that specificity to what’s happening in TGF-beta in the tumor as opposed to other systems in the body. At the beginning of this, we thought -- we had already had people that published that they are very good TGF-beta signatures that exist. And I can tell you that GARP signature follows tracks with TGF-beta signatures. And that’s often seen in all solid tumors as susceptive tumors that express these pathways. It’s a very common immunosuppressive mechanism. That’s why people and us are interested in it. We learned -- initially, from data, we kind of suspected that people who actually had a nice hot tumors but were not responding to PD-1, often had, at least from published work -- actually had a higher TGF-beta signature. So, we thought that was a reason to mechanism why these patients with hot tumors were not responding. And a lot of our initial clinical strategy there was actually to go after hot tumors where PD-1s had relapsed or refractory. And we thought we could augment the PD-1 checkpoint response by doing this combination. We did not see monotherapy activity, but in combination, we did. And that’s why our first data sets and expansions like I’ve just discussed in urothelial cancer, this project started earlier, we’re seeing data that’s suggesting that this is correct that you need to reflect both the pathway of TGF-beta and PD-1, to get a response. And those, again, in multiple tumor types we’re seeing these responses and we’re moving forward. At the same time, to bring it to colon, we could also see the same signatures of TGF-beta and GARP in cold tumors, but we weren’t sure that since they’re not IO responsive, whether we’d get a response, we would get a clinical response. So, we did start some investigations. And yes, we did see some responses in cold tumors. They happen over time, sometimes they appear, the tumors are stable for 3 months, maybe 6 months, and then you see these responses appear. They’re very durable, 1 year, 2 year, very unusual. These are patients with advanced disease that have very poor prognosis in Phase 1 studies. So, we saw some, I would say -- we sometimes say in academic column exceptional responders. And so, we decided to expand. So, those data sets are newer, are happening right now. I probably will have the data at the end of this year. But yes, we’ve seen responses to this combination. And to answer your question, so the signatures we’re looking at are not the CMS or kind of histology-based signatures on the tumor. It’s more signatures of the inflammatory response that we can measure in the tumor, and it has to do with both, inflammatory T cells, which are there for the killing, but also the inhibitory TGF-beta signatures. And of course, we’re going to continue to investigate this. I don’t have all the answers for you today, but it certainly has been exciting to see how this program has evolved.

Thanks, Andrew.

Thank you. Our next question is Terence Flynn with Morgan Stanley.

Maybe two for me. Just wanted to make sure that you are maintaining your 2022 aesthetics guidance of $5.9 billion. Rob, I didn’t hear you call it out, so I’m assuming that was a reiteration, just given what you’re seeing with Juvederm in the U.S. And then the second question I had relates more of a, I guess, strategic one, Rick. I know you’re still going through the conversations with 2023 for Humira. But, as you think about providing an update to guidance, whether that happens with the 3Q results or with the 4Q results, do you think you’ll be able to provide some outlook on 2024 because I think something investors are discussing now is just if the possibility of the impact is more in ‘24, how we should think about revenue margins in ‘24 versus ‘23. So, just wondering strategically how you’re thinking about that at this point, not asking for guidance, more just thought process.

Okay. So, Terence, I’ll take both of those questions, and then Rob can certainly jump in here if he has something he wants to add. We are maintaining the aesthetic guidance as we’ve indicated. Certainly, we have seen good, strong performance on the toxin side of the business, and we would expect it to continue. As we look at the filler side of the business, as you’ve noted, it was lighter this quarter than we’ve seen historically. And I’d say that was driven by a couple of issues. It was certainly driven by the China- Russia issue outside the U.S. In the U.S., we did have a very successful promotional program that we ran last year. So, it was a tough comparison versus last year. But I’d also say, we have seen some glimpses of what could be inflationary pressure on that business or it could be pent-up demand for vacations. And Carrie can certainly go through more detail if there’s a follow-up question. But I think as we look at the business overall, we’re comfortable maintaining the guidance now. We believe that Botox will continue to perform very well. And obviously, we’re doing more things to be able to drive the toxin side of the business. It’s at a price point where it should be less sensitive to inflationary pressures. The price point for toxin is about $500, I think, right, Gary? And where fillers are almost twice that or maybe even a little more than twice that. So clearly, from a disposable income standpoint, fillers are more challenging for people than toxins are. And so that’s the rationale behind it. And certainly, as we look at the overall performance of the AbbVie business, we have plenty of opportunities with the diversity of our portfolio to cover any potential shortfall if we ended up having an issue. So, that’s why we’re comfortable maintaining the guidance. And I think we need to see more time play out here to see exactly where we are from a U.S. inflationary impact. On the second question, as it relates to an update on ‘23 and potentially something on ‘24. I think the way you’ve described it is accurate. When we have more information, we’ll try to provide that. And when we’ve gotten to a point that certainly by the fourth quarter call, we’re going to provide you guidance on what we think will happen in 2023. But if we can provide something on the third quarter call, I wouldn’t be looking for guidance. I think that’s not a good expectation. But certainly, potentially a little more clarification on what our contracting status looks like at that point and how that will translate into what we think. And if we can refine the model to a greater degree, we would certainly provide that. As it relates to 2024, certainly, I’m not going to -- we’re not in a position we’re going to talk about 2024 right now. And I think that would be a little bit unlikely because not all these contracts will be two-year contracts. And so, you really won’t know what your volume position is at that point. And as I said, you won’t know what the pricing is going to be, particularly midway through the year. And so, I think those will be important things to be able to dial in to where the forecast is going. I’d say, overall, we feel good about the contracting position that we’re in. And then, I’d say, the other thing is, I know investors really want to try to model this between ‘23 and ‘24. I understand why you want to do that. Certainly, we obviously would like to do that to the greatest degree possible. But, when you step back and you actually look at the performance of AbbVie and how you will value AbbVie and what AbbVie means going forward, it has relatively little to do with Humira, and that shape of that curve between ‘23 and ‘24. And certainly, by the end of ‘24, we should reach a point where we’ve achieved some level of stability on the tail of Humira. What AbbVie is all about is these other products like Skyrizi and Rinvoq and Vraylar and Ubrelvy, the aesthetics business, Qulipta. Those are going to be the things that drive it. So, if you want to focus on something and it’s what we focus on internally is that underlying growth engine that will emerge on the other side of whatever erosion Humira ends up suffering before it hit some level of stability and tail is those assets and then what comes out of the pipeline. Those are the key things that are going to create that growth between 25% and 30%. And that’s the part that we -- I would say, we’re obviously managing Humira to the greatest extent we can. But that’s the part that we as a team are focusing on. And I think that’s the most important part because that is the AbbVie going forward.

Our next question is Mohit Bansal with Wells Fargo.

Maybe dwelling a little bit more on the Humira question for Rick and Jeff. So, you said that pricing from the competition will be key unknown for next year. As you get into contracts this year, for the next year, how rigid or flexible these contracts are from the pricing point of view when PBMs realize that the biosimilar is giving an X or Y pricing, or would that be more of a 2024 issue rather than 2023? Thank you.

Well, let me take a shot at that, and certainly, Jeff is closer to it. So, Jeff, if you want to add anything in, feel free to jump in and add. Typically, when you contract for an asset like Humira, you’re contracting for a formulary position. And there aren’t volume requirements or other kinds of requirements. I think it’s also -- it would be prudent to assume that biosimilars will be on these contracts, whether it’s one or more than one that will coexist with Humira. So, price plays an important role in that because they will coexist. And so, I’d say -- and as that becomes fluid, you would have to make decisions around how you try to deal with that to maintain the kinds of volumes that you want to maintain. And we’ve said all along, the strategy that we’ll have in the U.S. is similar to the strategy that we had internationally, and that is maintain as much volume as we can at the highest level of profit that we can maintain it at. And that is the logic that we will employ. But that doesn’t mean we won’t have to be somewhat responsive to prices in the marketplace on Humira. Jeff, anything you’d add?

No, I think that’s -- Rick, that’s a very reasonable way to look at it in terms of how these negotiations are going and how we see ‘23 playing out. I mean, the real big ones in terms of how we look at it is the two big scenarios are you are likely coexisting with one or more biosimilars or if the negotiations don’t go the way that we anticipate that were excluded in favor of biosimilars. And that’s basically where price and volume -- in terms of refining our model, for ‘23. That’s the work that we’re doing over the summer and then into the fall.

Next question is Gary Nachman with BMO Capital Markets.

So, Skyrizi was very strong in the second quarter, and you raised guidance nicely. How much of a benefit are you getting from the psoriatic arthritis indication thus far? What are you expecting Crohn’s to contribute this year? How much are those playing into the raised guidance? And are you revisiting the long-term guidance on Skyrizi at this point, given the strong performance? And then just on the hem/onc franchise. Are you keeping the infrastructure intact preparing for new products to contribute? And maybe you could talk about the near-term opportunities you see for products like epcoritamab and navitoclax, how much of those could contribute and potentially offset some of the pressure you’ve been seeing from Imbruvica? Thanks.

Yes. Thank you. It’s Jeff. Thanks for the question. So, your instinct and observation is right. The big dynamic change for Skyrizi here, largely what you’re seeing is from the psoriatic arthritis indication. And obviously saw very, very large sequential moves. And let me give you some sense of what we’re looking at. So, we’re seeing that we’re putting more and more basically headroom into the overall share position, first in psoriatic disease, so that’s psoriasis plus PSA. So, we’re at 26% in terms of total TRx share and moving very, very nicely up. So, that’s being driven by this PSA acceleration. So first, remember that the PSA indication, we were the -- really the last large product that didn’t have that indication. So first, what happens is it starts to interact very positively in the dermatology segment. So, as I mentioned, about 30% of patients both have skin and joint involvement. And so we actually had a lower despite the fact that we had the leading psoriasis share, we had a lower psoriasis share because we weren’t covered with the joints with that indication. So, you see an immediate, very rapid acceleration of our overall derm business that I highlighted. Secondly, strategically important to the performance is that we’re able to launch the PSA indication for Skyrizi in rheumatology. So, it starts to work together with the Rinvoq PSA indication, and the rheum segment is 3 times as large as the derm segment. So, it’s a very, very good dynamic in terms of our momentum in two large segments, even before we get to Crohn’s. Now, I would say that as we’ve talked about before, I mean, Skyrizi is a very special product, very unique dosing, very stable, incredible efficacy. And so, we are encouraged on the early results of Crohn’s. It’s too early to start to see numbers or et cetera. But all of that is playing into the raise that Rob talked about.

And Gary, this is Rob. Just on the guidance. So, if you recall, earlier in the year, we got asked the question, I said PSA for Skyrizi was going to contribute about $200 million this year. It’s probably closer to $400 million now with the guidance range, given the very nice uptick we’ve seen in PSA. But part of that guidance raise is also the strong share performance in psoriasis. So, it includes both. In terms of Crohn’s, that hasn’t changed. We’ve set approximately $100 million this year as we ramp access for Crohn’s. But obviously, the long-term potential for it is tremendous, and we’re very excited about that.

And maybe I can also then chime in on the second question. Certainly, that is a -- the new assets are a very important part of our growth story for hem/onc. Certainly, as I mentioned, we’re still continuing to ramp around the world with CLL. We have more and more impressive data, particularly in the unfit frontline population. We have five years of data in the fit population for frontline for Venclexta. We’re encouraged with the myeloma data, which is very unique in terms of biomarker driven approach for the (11;14). Navitoclax would be really one of the first new entrants for myelofibrosis, where there’s really only been rocks in terms of that market. Epcoritamab, increasingly encouraging data in terms of the simple subcu, very rapid ways to get this medication in later lines and then building into frontline. So we are very, very encouraged while we see some pressure on Imbruvica, the new indications in base for Venclexta helps to offset that. And then we start to build with those near-term hem assets and super encouraged in terms of what we’re seeing in terms of the probability that we can get there.

Our next question is from Chris Schott J.P. Morgan.

First one, I just wanted to come back to dynamics on the U.S. dermal filler market. I guess specifically, can you just quantify how much of the weakness we saw this -- or the decline year-over-year was due to the promotion events last year versus the impact from the economic pressures that you’re seeing? And I guess, in the same context, are you seeing any signs of weakness in the European business? I’m just -- and what I was just trying get your hands around, what type of magnitude of impact you’re talking about here in terms of either of its inflation or economic sensitivity to that business. My second question was just thinking about Rinvoq and Skyrizi formulary and pricing dynamics going forward as biosimilar Humira enters the market. I guess, are you expecting or are you hearing through discussions, any major shifts in the way payers are thinking about those products as we think about pricing coming down and obviously the largest kind of product in the space there.

Hi. This is Carrie. I’ll take your first question around Juvederm. And as Rick said, there was a onetime promotional event that we ran in the U.S. for Juvederm in Q2 of last year, and it was highly successful, and it increased sales in the sales space, which created the challenging prior year comparison. So, that was the key driver. But as you noted, there is also this impact -- economic impact that is suggestive of some early changes in consumer behavior. And that really isn’t surprising in light of the inflationary pressures that we’re seeing on discretionary income. And as Rick said, the filler market is likely more sensitive to that than toxins for a few reasons. We mentioned the price point. So a price point of closer to $1,000 versus $500 for toxin, also the nature of the filler business is different than toxin from a patient dynamic and treatment dynamic and that there are more -- there’s a longer interval between treatments for fillers versus toxin, which is sort of like a more regular treatment paradigm a few times a year. Also, the patient bases are different. When you think about the toxin patient base and Botox Cosmetic, the majority of the patient base is continuing patients versus more of a reliance on new patient acquisition. And so, those are some of the factors we’re thinking about when we think about the deceleration of the filler market in Q2 but while the market has slowed and despite the performance in Q2, we do continue to expect a positive second half growth for U.S. Juvederm, really weighted more in the fourth quarter as we’re going to launch two new fillers in the fourth quarter. And those two new fillers will get us into incremental categories for HA fillers, including jawline and skin quality, which will help to drive some incremental demand at the end of the year. And in terms of your question around economic impact outside of the U.S., we are watching that very closely, and we really have not seen that yet outside of the U.S.

In terms of your second question, again, it’s Jeff. Thanks for that. We’re -- we don’t see some significant pressures on Skyrizi and Rinvoq. Now, we always have discussions with the payers, we look at our contracting strategy. But I think we fall back on our clinical evidence that we have on these two major assets. I mean, we have four head-to-head trials against other major competitors with Skyrizi, where we have just really growth superiority versus whether it’s an IL-17, whether it’s Humira, which one day will be biosimilar, STELARA, et cetera. So just the pure performance there and the momentum, it’s clearly a distinguished asset. We’re going to be first in terms of Crohn’s to start to establish that new area and build the market there. And I think on Rinvoq to some degree, there’s only one other JAK inhibitor that is not going to have the scope of indications and it’s Xeljanz. And Xeljanz has been significantly wounded based on the oral surveillance data. So, in terms of our ability to build and protect and grow Skyrizi and Rinvoq into the next stage of development, we’re quite confident that we have the assets to be able to do that.

Our next question is from Steve Scala, Cowen.

Two questions. First, Rick, in the past, you have laid out four factors that will dictate Humira’s trajectory in 2023. The first two were Humira access and biosimilar price, and it’s clear it’s too early for any news on either of those points. But the second two were competitiveness of biosimilars, which you said in part was interchangeability and also the biosimilar ability to supply the market. So, those two factors, three and four are things that won’t fluctuate and presumably, you have some visibility on that now. So, I’m just wondering if there’s anything unusual occurring there. And in discussions, how important is interchangeability with payers. The second question is, and I apologize if I missed it, but are there any updates on the TNF steroid conjugate and is Phase 2 RA data still expected this year? Thank you.

All right. Thanks, Steve. This is Rick. I’ll cover the first one. And Roopal can cover the second one. So, you are correct. That is what I described a meeting or two ago as the four variables. I would say, when you think about interchangeability, I think you have to think about it in the backdrop of not just interchangeability, but also what is the profile that is the closest to Humira today? And we can look at all the biosimilars and have -- we have pretty good visibility as to what that profile looks like. And what I would say is, to get a profile that is interchangeable and is consistent with the current Humira that’s predominantly in the marketplace today, that’s probably going to occur in the summer of 2023. There should be one or two biosimilars that have a profile that looks like that. And that would make it somewhat easier for an organization to make a switch. So, I think that will play an important variable. Nothing has changed in the last few months in what that profile looks like. And then obviously, supply is an important aspect that certainly anyone that we’re looking at making a significant change in their position with Humira is going to want to make sure that they’re going with a company that has the ability to be able to produce at volume, at significant volumes, Humira, and they can do it sustainably. So, there are certain players that I would say clearly have that ability to be able to do it, similar to us. Certainly, no one does it at the scale of us or anywhere close to the scale of us. But there are also a lot of small players that I think supply is going to be an important aspect and going to somewhat limit the ability to be able to have broad market impact. And so, those are going to be important dynamics as we negotiate with the various managed care organizations. I can tell you that we’re talking through those kinds of things with them. Roopal?

Yes. Thanks. Yes. So, 154 is our anti-TNF conjugated steroid, as you mentioned, and it’s enabled to target delivery of steroid directly to inflammatory cells. So, we do have that Phase 2 running several hundred patients, and we still anticipate getting read later this year and then further data to follow next year.

Our next question is Chris Raymond, Piper Sadler.

Two questions. Maybe one that’s more broad policy and then another one that’s maybe a little bit more detailed. So, maybe first for Rick. I know you guys keep pretty close tabs on healthcare policy. Just on the most recent Senate Democrat drug pricing language in the reconciliation bill. The provisions on the face of it seemed pretty manageable in terms of direct impact from pricing controls, but there’s been some concern around this being just the start of something larger in terms of price controls. Any thoughts from you guys on this would be appreciated. And then, maybe a more detailed question on ABBV-951. I know you guys haven’t provided specific guidance on this or on Duodopa, but there seems to be a lot of recognition of 951 among movement disorder KOLs as a real improvement in terms of overcoming reticence around Duodopa. Just how should we be thinking about 951 vis-à-vis Duodopa, if approved? Thanks.

Okay. So, I’ll take the first question. I mean, I think if you look at the drug pricing proposal that’s out there, it’s certainly an important issue for us, and I think it’s an important issue for patients. I think if I look at that bill, and I’m assuming that if there were something that were to pass, it would be somewhat consistent with what was in the build back better for the Senate Finance text. And so far, it looks like that, but obviously evolving a bit here as we go along. And if I look at it in total, what I’d say is there’s a couple of positive things in there. Certainly, most notably, the $2,000 cap out-of-pocket costs for patients and the ability to be able to smooth, I think that’s an important step in increasing affordability, especially for patients in Medicare Part D. And so, that’s something we’ve been supportive of. We’ve been vocal that we think that’s an important step forward. What I’d say on balance, this is a bill that has far more negatives than it has positives in it. And I think although it may not be short term that challenging from a financial standpoint, I think the long-term implications of this bill are pretty significant. And they really hinge around this so-called negotiation clause that’s in there and how that’s being implemented, particularly for small molecules. And if you’re familiar with it, essentially what it says is that CMS or we’re assuming it will be CMS, has the ability at a certain point in time to be able to negotiate a price on a set of drugs. And by the time you get there, it will be a big set of drugs that they’ll have the ability to be able to negotiate on. And the key issue is this. Essentially, they have full latitude to basically decide whatever price they want the drug to be. And I wouldn’t necessarily call it a negotiation because the only alternative that the manufacturer has is to accept a 95% penalty on their revenues or, in essence, take a 95% discount. So, it’s not a negotiation. We should just call it what it is. It’s price controls is what they’re basically putting in place if the language stays the same. And ultimately, I think the real challenge is how we invest in this as an industry in innovation. If you take small molecules as an example, I’ll walk you through an example that illustrates the point that I’m going to raise here. If you take a small molecule, it says at year nine after the first approval, CMS has the right to be able to negotiate the price on that drug. So, if you take an oncology drug as an example, how do we develop oncology drugs in this industry? And what do the regulatory authorities typically require us to do, to be able to develop an oncology drug. Well, they typically require you to do and what we typically do is we go to patients who have failed on all the existing therapies, fourth-line patients, fifth-line patients. And we take whatever drug we have and we determine, do we have a positive benefit risk in that patient population. If we find that we do, then we seek approval for that drug in that patient population, so that those patients will get the benefit of that drug. And then, we start to work our way up towards front line. Those who refractory patients are typically very small populations of patients, right? And you can never get a return on a drug just on that patient population. And then, you work your way up to front line, or second line, or wherever you end up. That process typically takes 7 to 9 years because of the length of the trials. So essentially, with this, by the time you got to the larger populations, you’d be within a year or two of when CMS could change the price. But one, it’s impossible to figure out what the return is going to be, so how do you invest? Two, it really puts negative pressure on you not to continue to develop new indications. But the most detrimental part of it is to patients who need these drugs or small indications or in later stage. Because you’re faced with the dilemma -- and this is a horrible dilemma, right, as a company and for patients. You’re faced with a dilemma of do I choose not to seek approval in those late-stage patients, so I don’t start the clock and wait until I’m closer to frontline before I start the clock. That is not the right policy. And I would say, on balance, this bill will have a couple of things that are good for patients that I’m fully supportive of. But unless Congress wants to harm patients and harm innovation in this industry, they need to change that part of it. It doesn’t make sense. It’s shortsighted. Now, they can change it in a couple of different ways. They can determine, okay, what is a floor price or a maximum discount by year and then you can calculate the return on investment that you’re going to have on the drug or they can at least make it consistent with biologics that are out 13 years. Otherwise, the investment in small molecule oncology drugs or neuroscience drugs, which Medicare patient populations are highly dependent on new innovative drugs in those areas because they’re elderly patients, are going to suffer. And the CBO report that was published back in April of last year clearly pointed that out. So, this isn’t something I’m just saying or industry is just saying. And in fact, if anything, I’d say, they probably undercall the magnitude of the impact. So, this is an important issue. We all know the affordability and access for Medicare patients is important. But you don’t need to destroy the innovation model in the process in order to provide that. And so, I’m hopeful that we’ll see some movement here and some rationality will play out.

Okay. And to address your 951 -- hi, it’s Jeff. Thanks for the question. So, I think some perspective is globally, DUOPA is about $0.5 billion brand. And certainly, we’ve said that we believe that 951 could certainly double that up or more. I’ll give you the perspective of why we think that way. So, if you look at the advanced Parkinson’s patients, about 85% sort of cycle when they stay on these generic orals that become less and less and less effective. And the only thing they can really do, and that’s about 15% of the market, the advanced Parkinson market, is they can move to either deep brain stimulation or DUOPA. But you got to go through a surgical barrier. So, the families and the patients are forced to think if I need to get improvement in my symptoms and my quality of life, I’m forced to basically think about do I get a hole in my head or a hole in my stomach with a gastric surgery. This is going to be a subcu. And so, we see in our market research that at least 40% to 60% of people never want to move towards DBS or DUOPA. So, we think this is a way where we can start to expand and create a new market segment, in essence, a subcutaneous segment where you don’t have to take that risk on the surgery. And like you mentioned in the movement disorder centers, there’s a significant amount of experts that are excited about this new option, and we believe that it’s going to be a real innovation for patients without having the surgery.

And Chris, this is Rob. As Jeff said, I mean, we expect this to be market expanding. At the JPMorgan conference earlier this year, we did give peak revenue guidance for 951 greater than $1 billion. Obviously, DUOPA is $0.5 billion now. If you’re modeling it, obviously, there’ll be some level of cannibalization, I’d say, minor level of cannibalization on Duodopa. But when you think about the combination between 951 and Duodopa, obviously, it’s going to grow the revenue for the Company and expand the market.

Thanks, Chris. Operator, next question, please?

Thank you. It’s Tim Anderson with Wolfe Research.

Hi. If I could just go back to the whole ‘23 versus ‘24 thing, am I -- I thought that in the past, you guys have said earnings would trough in 2023 and then return to growth in 2024. Is that still the case, or is that off the table? And then, second question goes back to the 154 compound, your antibody drug conjugate. We understand that the timing is still on track, but I just -- it feels like to me there’s a distinct lack of enthusiasm towards this program, you don’t seem to mention that much or at all really, despite its novelty and despite it being in your most critical franchise of immunology. So, has the enthusiasm waned over, let’s say, the last couple of years?

So Tim, this is Rob. On your first question, what we’ve said -- we’ve talked about this 45% with a range around that plus or minus 10% and using, obviously, the Europe analog as an example. And in that case, with the steep erosion year one and ‘23, you would expect then the trough to be in ‘23 and return to growth in ‘24. As this plays out, we’ll see how that shakes out. Ultimately, if more of it happens in ‘24, you obviously have another year of growth for all your growth brands. And so, you have a different floor in that scenario. But most importantly, it’s what happens in ‘25 and beyond. When you look at this company with the growth drivers we have, we’ll be delivering high-single-digit growth in ‘25 and beyond, which is industry-leading. We’ll have the lowest LOE exposure in the industry in the second half of this decade. And so, we’re focused on the long term, we feel very good about the prospects of this business. But as it stands now, the most recent direction we’ve given is expect that first year erosion, so that 45% plus or minus 10%, which then play out to a return to growth in ‘24. We’ll obviously update the market as we see it play out next year.

Maybe I’ll take this one. This is Tom Hudson. I’m a clinical immunologist, and I know how we’ve been using steroids, they can give very profound and deep immunosuppression, decrease inflammation, and that’s often used in severe cases when patient shows up. So, we know that the response is very strong, but there are a lot of side effects. And, when our problem is always weaning, the steroid’s out in the clinic. So here, again, the combination of immunomodulator like TNF and steroid have that potential of giving us that deep, deep response very quickly to remove the immunosuppression. And based on the data we’ve seen preclinically in our Phase 1 studies, we’re not seeing those biomarkers or side effects in the bone or brain, a cortisol or others. So we’ve already demonstrated that, and we have nice data. The other -- so that’s my enthusiasm. We expect to see deep responses, durable responses with much well better tolerated than steroids. Our program -- and we’ve shown this also is that we’ve actually believed in the platform and we’re developing steroid ADCs for other targets to target other immune systems -- other immune cells, more specifically around some T cells or some B cells or some fibroblasts. These programs are coming forward. We think this is a profound platform in immunology to go after different biologies -- in very targeted steroid suppression of different specific immune cell types, and that’s going to play out over the next couple of years. So, based on the data we saw, we expanded the platform to other biomarkers getting into other specific immune cell types. Of course, we’re quiet because we need to see the data, all -- the study has been fully recruited, actually moved faster than we expected. And the day was randomized. We’re just going to see the data in the fall because it’s a blinded study. But the enthusiasm is there. And we’re also, of course, seeing that data, and then we have PMR because we also started studies there in Crohn’s disease. We’ll see that data later, but the more data we have, the more likely we’re going to expand this program to other indications where we believe that deep steroid suppression with TNF might actually bring new solutions for patients.

Our next question is Geoff Meacham, Bank of America. Your line is open.

Great. Thank you so much for the question. Not to belabor the point on Humira, but I wanted to ask you, is the long-term, meaning the four-year kind of trend that we saw this quarter for Humira in Europe, is that still a good proxy for how you guys are thinking about the tail for Humira, just given we’re coming up on four years in Europe and we’re talking about high single-digit erosion still. So, I wanted to kind of ask you about the tail piece of what you expect in the U.S. And the second question, just on Rinvoq, I wanted to ask you also on the -- since the FDA labeling change, you just seen any changes with regard to persistent rates or new starts just on your feedback from the field and how docs view the safety of the JAK class. Thank you.

Jeff, this is Rob. I’ll take your first question. So, the way we’ve talked about Humira erosion, it’s played out in Europe as we saw that steep erosion in year one, more moderate erosion years beyond. In our modeling now, that’s probably the best way to think about it is deep erosion year one, more moderate. You’ll have an annualization impact in year two, but more moderate beyond that. And specifically within the Wave 1 countries, when we look at Europe, and the level of revenue we have this year relative to pre-LOE, we still have about 30% of the revenue footprint. So, it gives you a sense of where Europe is after four years. Obviously, as we model the U.S. out, and it will be more specific in the future, but right now, we’re using Europe as an analog.

And regarding Rinvoq in terms of perceptions from the field or what we’re seeing. It’s largely developing as we predicted. So, we do see segments of physicians that are more wary of the JAKs after the label change. However, we anticipated that. So, we are starting to see a recovery in second line plus in RA as we anticipated. And the new indications because really we’ll be the only JAK inhibitor with the four big indications of RA, PSA, AS and then non-radiographic ultimately in the fall. That just builds upon the confidence level of the physician. So, that’s what we’re feeling from the field. I’ll mention maybe some color on ulcerative colitis. I mentioned that we’re encouraged on the ulcerative colitis start. So, we saw in the quarter because we launched in early April. We saw 600 unique gastroenterologists start to write prescriptions, which is quite interesting and good, a positive. And about half of those customers had never written a JAK inhibitor. So, Xeljanz was approved. And so, we’re seeing, obviously, the ability of these customers to understand the overall risk benefit of Rinvoq relative to, let’s say, another JAK inhibitor. So I feel that our communication is on track, and we’re seeing positive feedback as we build the indications that we’ve highlighted in the call.

Our next question is Colin Bristow with UBS.

Another one on the ‘23 Humira guidance. Could you just walk us through -- at the point at the end of 3Q, what percentage of contracts or volume will you have confirmed at that point? And then, it sounds like that by the -- by the time you have the full year results, you’re still anticipating that there could be a meaningful change. Could you just confirm that’s a fair characterization? And then just on ABBV-154, what are you hoping to see with the Phase 2 data that we’re going to get at year-end? And what’s the threshold here that you need to surpass to move forward? Thanks.

Yes. So, if we look at the discussions that we’ve highlighted and Rick highlighted, I think and they’re progressing as we would expect. So typically, they start in the late spring. And look, these are complex negotiations. They go on for many, many months. In many years, we would have completed the -- at least the large PBM negotiations, which is the vast majority of the volume by that October time frame. In some cases, as you probably know, the payers would publish this information. But very often, not always, the immunology an inflammatory segment, those negotiations can go on longer, and they’re very often published as a TBD in what used to be called the exclusionary formulary. So, we would -- as Rick mentioned, we would have visibility to sort of the status on the volume in that October time frame. That’s a reasonable assumption. Again, I don’t know for sure, given the complexity of biosimilar negotiation, which has never taken place before. But that’s a reasonable way to think about when we’d start to have the visibility to the volume component, as Rick highlighted.

Yes. And it’s Roopal on the 154 question. Dovetailing on what Tom just walked through, things that we want to see are consistent with how we develop in immunology, certainly raising standard of care. So, the way this was designed was to have that anti-TNF and then that direct delivery to avoid systemic side effects of the steroids. So, you’d see sort of that one-two punch as Tom was describing and see that depth of response. So, once we see that type of information along with how it looks from a steroid standpoint, metabolic effects, bone effects taken together will give us a great sense of where it could fit before anti-TNFs, even after we’re studying patients that have failed anti-TNFs in this Phase 2 study. So, taken together, that will give us a really good sense of where to go. And then remember, we’re also going to get data in polymyalgia rheumatic. It’s not an uncommon disease, and these patients are -- many of them are steroid-dependent, 50% or so three years and going and they can’t withdraw from steroids and maybe a third can be 5 plus 6 years. They’re stuck on steroids. So we’ll see that data where we’re able to prevent them from flaring and to be able to reduce their systemic steroid dose. So, there’s multiple facets to this and potentially a number of opportunities and then later on in Crohn’s disease as well.

Thanks, Colin.

Our next question is from Chris Shibutani with Goldman Sachs.

Two questions, if I could. For Skyrizi, if I could just return to this question of how you’re thinking about the long-term guidance. I think on Skyrizi, recalling that you said $7.5 billion, consisting of about 6 from the psoriatic complex. And yet you’re almost already approaching something close to $5 billion. So, can you tell us how you’re thinking about how that could factor in any long-term thinking? And then, for epcoritamab, positioning of that treatment in the overall treatment paradigm. How are you thinking about that in relation to, for instance, CAR-T therapy treatment options before, after? Thank you.

Chris, this is Rob. I’ll take that question. So look, we’re very encouraged by Skyrizi’s continued strong performance. We remain confident in our ability to achieve or exceed that 2025 guidance. Now, keep in mind, I mean, the Street also reflects that too. Street is about $400 million higher than that $7.5 billion. That said, we don’t intend on frequently updating that guidance. Obviously, we’ll provide that guidance update every few years or if there’s an event or there’s a major disconnect. So obviously, if the Street was way off, we want to point that out. But overall, we’re very encouraged about the uptake for Skyrizi. It’s clearly demonstrating its ability to drive long-term growth for AbbVie, and we’ll provide an update for long-term guidance at the appropriate time.

Thanks. And on the epcoritamab question. So I’m not going to go through all of the data points again, we’ve described them several times in the public domain. What I would remind you of is that we’ve observed extremely robust efficacy in a heavily pretreated population. Now it’s true to say that 40% of those patients have sailed CAR-Ts, but 60% of those patients didn’t sail CAR-T. Therefore, our expectation, our intention, rather, and as we’ve mentioned earlier on in Tom’s prepared remarks, we are anticipating filing for accelerated approval during the second half of this year. And I think that what you can expect is that we believe that the total population, the total relapsed/refractory population, whether or not they sail CAR-Ts should have access to epcoritamab because of the strength of the data overall. In terms of future positioning, we’ve also discussed in the past our intention of initiating multiple phase -- additional Phase 3, the confirmatory study for the DLBCL application what would be the confirmatory study, the Phase 3 study is ongoing. That’s in the relapsed/refractory setting. And our anticipation is that we will initiate multiple additional Phase 3s, both in DLBCL and other indications over the coming 12 to 18 months.

Maybe I could just build on that. Chris, it’s Jeff. So, we’ve started to talk to different types of physicians, whether they’re in the CAR-T centers or certainly the community centers. We’re increasingly believing that this lymphoma is treated in the community centers. And so, what we hear, at least at a high level from our research so far is wow, that efficacy is incredibly impressive, even after CAR-T. But where they go is this simple subcu of epcoritamab may be the fastest way to deliver T cells to my patients I’m dealing with. So to build on Neil’s point, that data doesn’t look like it’s niching the drug. In fact, it looks like it’s sort of contributing to the idea of like this is a democratized type of medication for the lymphoma. So, it’s very encouraging from our initial work that we’re doing with physicians.

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

And that question comes from David Risinger with SVB Securities.

Yes. Thanks very much, and thanks for all the details on today’s call. Rick, I was hoping that you could help us to understand the current M&A landscape, how would you characterize it broadly? And then, if you could also comment more specifically on AbbVie with respect to the transaction opportunity set for AbbVie. Thanks very much.

I think, if you look at the M&A environment, I think many players are trying to add to their portfolios. I think there’s less of an appetite for larger transactions right now in general across the industry. Some of that’s probably predicated on the fact that the FTC has been pretty tough in their language around larger kinds of transactions and your ability to be able to get those through. And I think as it relates to us, I mean, we have continued to execute the strategy that we put in place after the Allergan transaction. Allergan, obviously brought us a tremendous amount of diversity. That transaction has been highly successful and has really changed the look and the shape of AbbVie and it has clearly enhanced our performance, and we’ve done quite well. Our focus is continuing to look for opportunities to be able to fill out our portfolio in areas that we believe there are opportunities to bring in strategic assets. We’re probably working more on earlier-stage assets add to our R&D pipeline. Epcoritamab is a good example of the kinds of things that we’re out looking for and finding, to supplement the overall pipeline. I think that strategy has worked well, and it’s a strategy that we’ll continue to do going forward.

Thanks, David. 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.

And thank you. This does conclude the call. You may disconnect your line. And thank you for your participation.