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Edited Transcript of ABBV earnings conference call or presentation 27-Apr-17 1:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 AbbVie Inc Earnings Call

North Chicago Apr 29, 2017 (Thomson StreetEvents) -- Edited Transcript of AbbVie Inc earnings conference call or presentation Thursday, April 27, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Elizabeth Shea

* Michael E. Severino

AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development

* Richard A. Gonzalez

AbbVie Inc. - Chairman of the Board and CEO

* William J. Chase

AbbVie Inc. - CFO and EVP

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Conference Call Participants

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* Bradley Patrick Canino

Leerink Partners LLC, Research Division - Associate

* Christopher Thomas Schott

JP Morgan Chase & Co, Research Division - Senior Analyst

* David Reed Risinger

Morgan Stanley, Research Division - MD in Equity Research and United States Pharmaceuticals Analyst

* Gregory B. Gilbert

Deutsche Bank AG, Research Division - MD and Senior Analyst

* Jamilu E. Rubin

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Jeffrey Holford

Jefferies LLC, Research Division - Equity Analyst

* John Thomas Boris

SunTrust Robinson Humphrey, Inc., Research Division - MD

* K. Choi

Barclays PLC, Research Division - Research Analyst

* Marc Harold Goodman

UBS Investment Bank, Research Division - MD and United States Healthcare Analyst

* Vamil Kishore Divan

Crédit Suisse AG, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Good morning, and thank you for standing by. Welcome to the AbbVie First Quarter 2017 Earnings Conference Call. (Operator Instructions)

I would now like to introduce Ms. Liz Shea, Vice President of Investor's Relation.

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Elizabeth Shea, [2]

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

Before we get started, I wanted to remind you that some statements made today are or may be considered forward-looking statements for the 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 statement.

Additional information about the factors that may affect AbbVie's operations is included in our 2016 annual report on Form 10-K and in our other SEC filings. AbbVie undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand AbbVie's ongoing business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website.

Following our prepared remarks, we'll take your questions.

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

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [3]

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Thank you, Liz. Good morning, everyone, and thank you for joining us for our First Quarter 2017 Earnings Call. AbbVie delivered strong performance with double-digit top and bottom line growth, exceeding our guidance for the quarter. Adjusted earnings per share of $1.28 were up more than 11% versus the first quarter of 2016. And global operational sales growth was 10.1%, demonstrating the continued strength of our business.

HUMIRA continues to deliver exceptional performance with 15.8% global operational growth in the quarter. In the U.S., HUMIRA grew 22.8%, driven by robust underlying demand, including prescription volume growth of 12%. HUMIRA holds the #1 market share position across all 3 categories. Internationally, operational sales growth was 4.6%, driven by market growth across, again, all 3 categories. We continue to expect mid-single-digit operational sales growth for the full year internationally despite the impact from new competitive entrants and indirect biosimilar competition which have been in the European markets now for several years.

We continue to see strong momentum and growth from IMBRUVICA with global sales in the first quarter of $551 million, an increase of nearly 45% over the prior year. This performance was driven by continued uptake in first-line CLL where we continue to see strong performance since our approval. In fact, the most recent market share data indicates that we now hold the leading position in new patient starts in the frontline segment, with more than 21% of patients starting IMBRUVICA as frontline CLL therapy. And given IMBRUVICA's duration of therapy, more than 30% of total treated frontline patients now use IMBRUVICA. We're also seeing continued strong market leadership in the second-line plus setting across all indications.

In addition to our commercial progress, we've advanced our efforts to expand the list of IMBRUVICA-approved indications. This includes recent approval in relapsed/refractory marginal zone lymphoma and our recent regulatory submission for chronic graft-versus-host disease.

We also continue to see good progress with the launch of Venclexta in our narrow initial indication of relapsed/refractory CLL patients with the 17p deletion. Our second-line plus market share is now approximately 20% in the U.S.

Internationally, Venclexta is off to a good start, and as we've now launched into 2 of the larger markets, Germany and France. We also saw a continued strong performance from several other products, including Creon and Duodopa. So overall, we're extremely pleased with our commercial performance and financial results for the quarter, and we're off to another strong start in 2017.

Now moving on to our pipeline. As we disclosed last week, the Phase III studies evaluating veliparib in squamous non-small cell lung cancer and early-stage triple-negative breast cancer did not achieve their primary endpoints, and therefore, we won't be moving forward with these indications.

This program carried a higher degree of risk because we were testing a new hypothesis, that hypothesis being whether PARP inhibition enhances chemotherapy-induced DNA damage. While the outcome was not what we hoped for, we have not considered veliparib one of our near-term growth drivers.

We have a number of late-stage derisked assets in our pipeline. As we look forward to the remainder of 2017, we're excited about the forthcoming clinical development and regulatory milestones. Mike will discuss our R&D pipeline in more detail in just a few moments, but I'll briefly give you some highlights of the noteworthy events.

Before the end of the year, you will see data from a dozen pivotal trials, including data readouts for our 2 late-stage immunology programs. Specifically, you'll see data from the first 3 of 6 registrational studies for our selective JAK1 inhibitor, ABT-494, with results from 2 of these studies coming in the next few months.

And we'll see data from our 3 pivotal studies in risankizumab in psoriasis later this year.

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

We'll also see potential registrational data from a study of ABT-414 in second-line glioblastoma multiforme.

We're also expecting several additional IMBRUVICA data readouts based on interim or final analysis across a number of studies.

And we'll see results from the TRINITY study, where Rova-T is being evaluated as third-line treatment in small cell lung cancer.

In the area of women's health, we'll begin to see late-stage data from our Elagolix program in uterine fibroids with results from the first pivotal study expected late in the year. We also expect regulatory action on several programs, including U.S., EU and Japan approvals for our next-generation HCV offering, and we're nearing the completion of our Phase III program for Elagolix in endometriosis and are on track for regulatory submission next quarter.

With so many significant pipeline advancements expected this year, 2017 is shaping up to be an important year for AbbVie and one that will further reinforce the strength of our pipeline.

So as I said a moment ago, we're encouraged with our strong commercial execution and financial performance. We've built a compelling derisked pipeline which continues to progress well and is poised to fuel growth over the long term. And we're off to an exceptional start this year and we're well positioned to continue to deliver top-tier financial performance in 2017 and well beyond.

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

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Michael E. Severino, AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development [4]

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Thank you, Rick. Today, I'll highlight recent pipeline updates and discuss some of the key milestones we anticipate for the remainder of 2017. I'll start with our hem/onc programs, where we continue to make significant progress with both IMBRUVICA and Venclexta.

Starting with IMBRUVICA. As we've outlined, expanding into new indications is an important driver of future growth. Earlier this year, we added relapsed/refractory marginal zone lymphoma to our growing list of approved uses, and we continue to make progress with other indications as well.

During the quarter, we submitted a supplemental new drug application for the use of IMBRUVICA in patients with chronic graft-versus-host disease who failed prior systemic therapy. GVHD is a severe and potentially life-threatening complication that can occur in patients who have undergone an allogeneic stem cell or bone marrow transplant. There are currently limited treatment options for this disease, and if approved, IMBRUVICA would be the first and the only therapy specifically indicated for chronic GVHD.

In Phase II data presented at the end of last year, 67% of patients who failed steroid therapy responded to treatment with IMBRUVICA, with 1/3 of the responders achieving a complete response and almost 2/3 substantially reducing steroid use. Based on these data, we expect a regulatory decision in the second half of the year.

Later this year, we anticipate several key data readouts for IMBRUVICA, including data from an interim analysis in frontline mantle cell lymphoma, as well as additional potential interim analyses in other forms of non-Hodgkin's lymphoma.

Moving now to Venclexta. We're expecting data from the MURANO study evaluating the combination of Venclexta and RITUXAN later this year, which we believe will support a broader label in relapsed/refractory CLL and help establish Venclexta as a foundational therapy in this patient population.

The Phase III program evaluating Venclexta in frontline CLL is also ongoing, with studies being run in younger, more fit patients as well as older patients with comorbidities. These studies, as well as other combination studies with IMBRUVICA, are important parts of the Venclexta strategy to drive toward chemo-free regimens in CLL.

We anticipate key data from the CLL 14 study in older patients with comorbid medical conditions to be available in 2018.

Beyond our core strategy in CLL, we are making great progress with our development programs to expand Venclexta across multiple hematologic malignancies. We have Phase III studies ongoing in multiple myeloma as well as AML, where we have received breakthrough therapy designation. And these studies are progressing well with key data becoming available in the 2019 time frame.

Later this year, we are also expecting additional data readouts from Phase II studies in indolent non-Hodgkin's lymphoma and diffuse large B cell lymphoma, which will inform decisions regarding advancement in these indications.

I'll now turn to our solid tumor programs, where we continue to make good progress with our late-stage programs, Rova-T and ABT-414, as well as with our early-stage oncology pipeline. Starting with Rova-T, our registrational trial in third-line plus small cell lung cancer, the TRINITY study, continues to progress nicely, and we expect data later this year. Our submission will follow soon thereafter, enabling a commercial launch in 2018.

In addition to TRINITY, we have a comprehensive development program in place for Rova-T to evaluate this promising therapy in earlier lines of treatment in small cell lung cancer as well as in other tumor types that express DLL3.

The Rova-T program includes additional studies currently underway in small cell lung cancer, including MARU, a Phase III study evaluating standard chemotherapy followed by Rova-T in the frontline setting; and a mid-stage combination study evaluating Rova-T with Opdivo and with Opdivo and Yervoy in small cell lung cancer. And this quarter, we also start the TAHOE study, a Phase III trial in second-line small cell lung cancer.

Beyond small cell lung cancer, the neuroendocrine tumor basket study is progressing nicely. And we anticipate beginning to see early data from this study toward the end of this year.

As we've discussed, the acquisition of Stemcentrx not only provided AbbVie a late-stage asset in Rova-T but brought a highly attractive discovery and early development platform as well. In addition to Rova-T, we have 4 Stemcentrx assets in the clinic, and we are on track to transition several additional programs into human trials this year, adding to our growing oncology pipeline, which includes more than 35 late preclinical or early clinical stage assets.

Beyond Rova-T and our other Stemcentrx assets, we're continuing to make progress with our solid tumor programs, including our antibody drug conjugate for glioblastoma multiforme, ABT-414, which was granted fast-track designation earlier this month.

At the upcoming ASCO meeting, we plan to present full data from the Phase I study of ABT-414 in glioblastoma, including overall survival and progression-free survival data. And later this year, we'll see data from the Phase II study in second-line GBM that, if positive, would support regulatory submission.

In our early-stage oncology pipeline, we continue to build capabilities and explore new technologies that will extend our reach in the solid tumor market. We're making good progress with our next-generation immuno oncology programs and other novel approaches, such as our biospecific technology, with a number of assets having recently entered the clinic and more study starts expected through the remainder of 2017.

Moving now to our HCV program, where we recently received priority review from the FDA for our pan-genotypic next-generation HCV therapy. In the quarter, we also received EMA-accelerated assessment and priority review in Japan. Last week at the International Liver Congress, we presented new results from our Phase III program, including data from the EXPEDITION-1 and ENDURANCE-3 studies, which together with previously reported data, reinforce our next-generation therapies potential to provide high cure rates and a shorter treatment duration for the majority of patients across all genotypes, including patients with compensated cirrhosis and those with genotype 3 infection.

Results from EXPEDITION-1 demonstrated that 99% of patients with compensated cirrhosis achieved SVR12 through 12 weeks of treatment across genotypes 1, 2, 4, 5 and 6. We also presented data from ENDURANCE-3 in patients with genotype 3, the second most common genotype globally and the most challenging to treat. These results showed that with just 8 weeks of treatment, 95% of genotype 3 patients without cirrhosis and who are new to treatment achieved SVR12 with our next-generation therapy.

We're excited about the high cure rates across all major genotypes and the results in difficult-to-treat patients that we've seen in our Phase III program and remain confident that our pan-genotypic once-daily ribavirin-free HCV therapy will be competitively position within this market. We remain on track for regulatory approval in the U.S., EU and Japan later this year.

Moving now to our immunology programs, where we have 2 very promising late-stage assets, risankizumab and ABT-494, each with the potential to significantly advance standard of care in a number of immune-mediated conditions.

Risankizumab, our anti-IL-23 monoclonal antibody licensed from Boehringer Ingelheim, has the potential to provide best-in-class efficacy and increased dosing convenience with quarterly administration. Results from the Phase II study of risankizumab in psoriasis were recently published in the New England Journal of Medicine. These data show that selective blockade of IL-23 with risankizumab was associated with a superior clinical response compared to Stelara. In this study, approximately 2.5x as many patients achieved PASI 100 with risankizumab compared with those receiving Stelara. The Phase III program in psoriasis is well underway, and we look forward to seeing data from 3 of the pivotal studies later this year, with commercialization expected in 2019.

Earlier this month, we also published results from a proof-of-concept Phase II study of risankizumab in Crohn's disease. Results from this study show that patients receiving risankizumab achieved higher clinical and endoscopic remission rates than placebo, suggesting that blocking IL-23 could be a very promising therapeutic approach in Crohn's disease. 52-week data from the open-label maintenance portion of this trial will be shared in a late-breaking oral presentation at the upcoming DDW meeting in May. Phase III studies in Crohn's disease will be starting soon.

This year, we'll also see Phase II data in psoriatic arthritis with Phase III studies expected to begin in the first half of 2018. Additionally, we are expecting to begin a Phase II study for risankizumab in ulcerative colitis in the second half of the year.

Moving now to our selective JAK1 inhibitor, ABT-494, where we continue to make significant progress with our development programs in RA and inflammatory bowel diseases. At the upcoming DDW meeting, we'll be presenting data from the Phase II CELEST study in Crohn's disease, showing that treatment with ABT-494 demonstrated endoscopic improvement and clinical benefit as induction therapy in patients with moderate to severe refractory Crohn's disease. Based on these strong Phase II results, we'll be initiating a Phase III program later this year.

We have 2 additional mid-stage programs for ABT-494, including an ongoing Phase II study in atopic dermatitis and a soon-to-begin Phase II study in ulcerative colitis.

Turning our attention to rheumatoid arthritis. We expect to begin seeing data from the first of 6 Phase III RA studies in the coming months with top line data from the SELECT-NEXT trial in patients who have failed conventional DMARDs, expected in June and data from the SELECT-BEYOND study in biologic-inadequate responders expected later in the summer. We plan to present full data from both of these studies at a medical meeting later this year.

We believe ABT-494 has the potential to be best-in-class with an optimized benefit-risk profile, and we are particularly excited about this asset's potential in the difficult-to-treat anti-TNF inadequate responder population, a growing segment of the RA market representing roughly 35% of the biologic-treated population.

And finally, in the area of women's health, we are nearing completion of the Phase III program for Elagolix in endometriosis and are on track for regulatory submission next quarter.

In addition to the endometriosis program, we have Phase III studies underway in uterine fibroids. This program is investigating the effect of Elagolix on heavy bleeding related to this highly prevalent condition. We anticipate beginning to see data from this Phase III program late in the year.

Earlier this month, we presented detailed results from the Phase II study in uterine fibroids at the meeting of the Society of Endometriosis and Uterine Disorders. These data demonstrated that treatment with Elagolix provided superior efficacy and rapid control of heavy menstrual bleeding associated with uterine fibroids compared to placebo, as well as improved quality of life. Treatment with Elagolix was well tolerated with a hormonal add-back therapy substantially attenuating the side effects of Elagolix on bone mineral density and hot flashes. Importantly, there were no abnormal endometrial findings, demonstrating that Elagolix has potential as a chronic uninterrupted treatment for this condition.

We remain excited about this potential new medicine for women with both of these highly prevalent conditions where there are few effective treatment options.

So in summary, we've continued to see significant evolution of our mid- and late-stage pipelines, and we look forward to many important data readouts, phase transitions, regulatory submissions and approvals later this year.

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

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William J. Chase, AbbVie Inc. - CFO and EVP [5]

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Thanks, Mike. As Rick said we had another quarter of outstanding performance delivering strong top and bottom line growth. Total net revenues for the first quarter were $6.5 billion, up 10.1% operationally, excluding the impact of foreign exchange. We reported adjusted earnings per share of $1.28, up 11.3% compared to the first quarter of 2016. Adjusted EPS came in $0.02 favorable to our previously communicated guidance range for the quarter, the result of higher-than-forecasted sales and timing of spending.

HUMIRA delivered another quarter of strong sales growth with global sales of $4.1 billion, up 15.8% operationally. In the U.S., HUMIRA sales increased 22.8% compared to the prior year, driven by volume growth in excess of 12% plus price. Wholesaler inventory levels were consistent between the quarters at less than 0.5 months.

HUMIRA's growth has been fueled by robust demand across all 3 segments: Rheum, gastro and derm. In rheumatology, HUMIRA remains the #1 prescribed biologic. In the gastro segment, we continue to see double-digit prescription growth in the quarter despite new competition. HUMIRA holds the market leadership position in treatment-naïve patients for both Crohn's disease and UC, where nearly half of new patients start on HUMIRA. And in dermatology, double-digit volume growth was driven by our market leadership in psoriasis as well as strong adoption rates for HS which was launched in late 2015.

International HUMIRA sales were $1.4 billion in the quarter, up 4.6% on an operational basis and in line with our expectations. We continue to see good growth despite the entry of new competitors and indirect biosimilar competition, which continues to track in line with our expectations.

Global IMBRUVICA net revenues for the first quarter were $551 million, up nearly 45% over the first quarter of last year, driven by penetration into first-line CLL and continued strong performance in other approved indications. We remain on track to receive -- to achieve our full year expectation for global reported revenues of greater than $2.4 billion, with sales in the U.S. of more than $2 billion.

Global VIEKIRA sales in the first quarter were $263 million, down versus the prior year. As we've previously communicated, we have seen market share loss and price erosion due to competitive dynamics within the HCV market.

Global sales of Duodopa, our therapy for advanced Parkinson's disease, grew 19.8% on an operational basis in the quarter. And we also saw strong operational sales growth in the quarter from Creon, which was up 22.8%.

Turning to the P&L profile for the quarter. Adjusted gross margin was 79.9% of sales compared to 81.3% in the prior year. On a year-over-year basis, gross margin as a percentage of sales was negatively impacted by partnership accounting and exchange.

Due to the seasonality of certain products, our gross margin ratio in the first and fourth quarters is typically lower than the second and third quarters. We continue to forecast a full year gross margin ratio of approximately 81%.

Adjusted R&D was 16.9% of sales in support of our ongoing pipeline programs in oncology, immunology, HCV and other areas. On a year-over-year basis, R&D as a percentage of sales increased due to the spend related to the Stemcentrx and risankizumab deals, both of which closed in the second quarter of last year. Adjusted SG&A was 20.7% of sales in the first quarter, down 190 basis points versus the prior year, driven by sales leverage and operational efficiencies.

The operating margin profile was impacted by R&D investment related to Stemcentrx and risankizumab as well as the adverse impact of foreign currency. Adjusting for these items, the adjusted operating margin profile improved by 120 basis points versus the prior year. We continue to forecast a full year operating margin ratio of approximately 43%.

Net interest expense was $247 million and the adjusted tax rate was 18.2% in the quarter. The first quarter tax rate benefited from the adoption of new accounting rules for the treatment of taxes on equity compensation. This impact is most pronounced in the first quarter, given the timing of equity grants and was contemplated in our guidance.

First quarter adjusted earnings per share, excluding intangible amortization expense and other specified items, was $1.28, up 11.3% year-over-year. As we look ahead to the second quarter, we expect adjusted earnings per share between $1.39 and $1.41. Our second quarter adjusted EPS guidance excludes roughly $0.19 of noncash amortization and other specified items.

We are forecasting reported revenue growth in the second quarter of between 7% and 8%. Holding exchange rates constant at the current level, we would expect foreign exchange to have an unfavorable impact on sales growth of approximately 1% in the second quarter.

For U.S. HUMIRA, we expect sales growth in the second quarter in the mid to high teens. Internationally, we expect mid-single-digit operational growth for HUMIRA with approximately 3% unfavorable impact from foreign exchange, resulting in low single-digit reported growth. For IMBRUVICA, we expect U.S. sales growth in the second quarter to approach 35%. And with respect to the tax rate, future quarters should be modeled at above 19%.

We remain on track to achieve our full year guidance, including operational revenue growth of approximately 10% and adjusted earnings per share between $5.44 and $5.54.

So in closing, we are very pleased with AbbVie's strong performance in the quarter. We've driven top-tier revenue and EPS growth while also advancing our strategic priorities and our pipeline. And with that, I'll turn the call back over to Liz.

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Elizabeth Shea, [6]

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Thanks, Bill. We'll now open the call for Q&A. Operator, we'll take the first question.

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Questions and Answers

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Operator [1]

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Our first question is from Jami Rubin from Goldman Sachs.

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Jamilu E. Rubin, Goldman Sachs Group Inc., Research Division - Equity Analyst [2]

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Rick, I have a theoretical question for you. We have written about AbbVie separating into 2 separate businesses for reporting purposes in order to close what we see is a substantial value gap: A HUMIRA company and a growth company. The idea is to set up HUMIRA as an earnout company from which to pay a recurring special dividend to shareholders to alleviate persistent fears from biosimilar competition while drawing attention to your substantial pipeline story. Assuming some form of corporate tax reform is passed, and I know that's far from a sure thing, how realistic is this scenario? And what is your appetite internally to do something like this? Do you have other priorities for cash like M&A, stock buyback or debt paydown? Are those more important than a special dividend? Does that even make sense? Because it seems to me that investors still see HUMIRA as just a huge risk versus a monster cash flow generator. Just curious what your thoughts are.

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [3]

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Yes. Well, first, thanks for the question. Maybe let me come at it from a broader perspective first, and then I'll specifically talk about how we think about it as it relation to HUMIRA and AbbVie. If you listened to the framework of tax reform that came out yesterday, I'd say generally speaking, I find that incredibly encouraging for companies like ours, U.S.-based companies. It certainly would put us in a position where we'd be far more competitive to our foreign competitors, which make up a significant part of our peer competitive company base. And it would certainly give us a lot more encouragement to invest in the U.S. and create U.S. jobs. So I find the discussion encouraging, and I think it would be extremely beneficial for companies, certainly in our industry and across other industries. Specifically as it relates to AbbVie, I'd say first, I've read your report. I thought it was extremely well done, and I'd tell you that I agree wholeheartedly with the thesis that you laid out in the report. And as you point out, we have a business that generates tremendous cash flow, and we anticipate that, that cash flow is sustainable over the long term. That cash flow certainly, as it is generated, far outweighs what we would envision as what is required for us to reinvest back in the business. We're certainly going to reinvest back in the business as we have historically. But I'd say as we project forward, we would be building cash offshore. And so certainly, it is in excess of what we would anticipate we would need for strategic reinvestment back in the business. I'd also say that, as you point out in your report, we're significantly undervalued. We're undervalued from the standpoint of HUMIRA and the benefit that it drives in the business. And certainly, that's driven by the concentration that we have in HUMIRA. And oddly enough, as we continue to drive HUMIRA and show the success with it, I think that increases that pressure. Secondly, I'd say we're tremendously undervalued as you look at the pipeline that we have. As I mentioned in my comments, you're going to see a dozen pivotal trial results that are going to read out over the course of 2017. There aren't many companies in our industry that have those kinds of catalysts going forward. And so as we look at it, if we were to get tax reform where we could get better access or more cost-effective access to our offshore cash, we're certainly going to be looking at ways to be able to appropriately deploy that cash. Dividend has always been important for us, and I can tell you we're committed to a growing dividend. The idea of a special dividend, I think, is a very unique idea and one that I think has strong merit. Certainly, share buyback is another way to do that, but returning cash to shareholders to reward them for the tremendous success that HUMIRA has had and will continue to have going forward, is a high priority for us. So I'm encouraged. I hope we can move tax reform forward in '17 or early '18. And once there is clarity around that, then we'll be looking at what is the appropriate approach to make sure that investors are rewarded for the benefit of the cash flow that HUMIRA is going to generate.

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Jamilu E. Rubin, Goldman Sachs Group Inc., Research Division - Equity Analyst [4]

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Just if I can follow up, Rick, in terms of priorities for cash. I mean, many investors would look at the HUMIRA concentration and say the only way to offset that is through further bolt-on acquisitions. Do you agree with that? Or are you pleased with what you have, and you would -- in terms of uses of cash, just curious how you would prioritize. I mean, is it returning cash to shareholders? Is that a higher priority right now than paying down debt, deploying cash to further acquisitions? How do you think about that?

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [5]

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Well, as far as debt is concerned, I'd say it is not our intent to significantly pay down debt in the current environment. In the event that interest wasn't deductible, then I'd say that priority obviously would change going forward. But I'd say that's not a high priority for us. We believe we'll grow into the appropriate ratios. The credit rating is obviously important to us. And -- but when you look at the growth of our business, we clearly think we can grow into that. As far as bolt-on acquisitions, what really we focus on is we have a strategic roadmap of how we're trying to operate within the franchises. For the most part, I'd say we have the major platforms that we need, so we don't envision the need for large platforms. We did that work with both Pharmacyclics and with Stemcentrx, and think we're well positioned for that. There's certainly additional assets that we'd look for, but I'd say they look more like the BI kind of transaction or individual kinds of products or smaller groups of products, would be a higher priority for us going forward. And so as I said, I think there'll be significant excess cash that will build up over time. And I would say returning that cash to shareholders in some appropriate way will be a high priority for us.

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Operator [6]

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Our next question is from Jeff Holford from Jefferies.

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Jeffrey Holford, Jefferies LLC, Research Division - Equity Analyst [7]

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I just have 2 for you. First of all, on ABT-494. I wonder if you could talk about your confidence in the safety and efficacy of this asset basically in light of the setback that we've seen with baricitinib. And any color you could give us on potentially why your asset might avoid some of the issues that they may have seen that's triggered the CRL. And then secondly, we do have an upcoming catalyst in terms of HUMIRA patents with the IPR decision on the 135 patent. I wonder if you could give us a sense of your level of confidence around the outcome of that decision and then also just the negative and positive implications in either case of the outcome.

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Michael E. Severino, AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development [8]

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Jeff, this is Mike. I'll take the first part of that question. So obviously, we've been following the situation with bari very closely. Of course, we don't have access to the complete response letter or knowledge of Lilly's conversation with regulators, but we do have a very clear understanding of our own program, our own data and our own extensive conversations with regulators here in the U.S. and in major jurisdictions around the world. And based on that, we remain confident in our program and don't see any read-through from the Lilly situation. We've designed a very comprehensive and robust Phase III program that will thoroughly characterize efficacy and safety profile of both of the doses ABT-494 that are being studied in Phase III. And we remain confident in the data that we've seen. Our Phase II data were very strong not only from an efficacy but also from a safety perspective. An important issue here is dose selection, and we designed a very robust Phase IIb program that explored a wide range of doses across different patient populations because dose response is not necessarily the same in an earlier population or a TNF-inadequate responder population, for example. And we ran Phase II studies in both of those patient populations. That allowed us to select doses that we think optimize benefit/risk. And as I said, we've designed a Phase III program that will fully demonstrate that benefit/risk and support regulatory decisions. So our level of confidence or enthusiasm on ABT-494 remains high and hasn't changed a bit this past week.

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [9]

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Jeff, this is Rick on the IPR. As we've said in previous calls, we're in active litigation now, so we're not going to talk a lot about specifics around this. What I would say to you is if you look at our level of confidence in what we've described to the market about our ability to protect HUMIRA, it remains the same, and that confidence was built around a large portfolio of IP. It was never contingent upon any one set of IP or any single set of patents or individual patents. We have a large portfolio of formulation patents that have come under challenge and have been successful and successfully navigated through those challenges. We have now the beginning of these dosing patents. We have a large portfolio of dosing patents. We have dosing patents beyond 135 in RA, so beyond the ones being challenged. And so I'd say our level of confidence in the outcome, the overall outcome that we anticipate, it remains the same, it remains high. Having said that, if I look at the pure statistics around IPR decisions, I would say the statistics are against you, right? More times than not, they're not upheld at an individual level. So -- and I'm not going to speculate on what we think is going to happen in this one, we're going to get that answer fairly soon. I'm sure that if it's a positive reaction, we're going to get a positive result. And if it's not, if it's a negative reaction, we'll get a negative result. I think investors, what they need to focus on is the longer-term perspective. And I think what we have described to the market has played out consistently with what we described both from a litigation time frame standpoint and the broadness of our IP. And whoever -- whatever biosimilars want to enter this market, they're going to have to navigate their way through that IP. And I still feel as confident as I did when we communicated that to you back in 2015.

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Operator [10]

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Next question is from Chris Schott from JPMC.

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Christopher Thomas Schott, JP Morgan Chase & Co, Research Division - Senior Analyst [11]

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I just had 2 regarding the TNF market. So first, can you just elaborate a little bit more on the U.S. kind of immunology market dynamics you're seeing right now? I assume your competitors were highlighting a slowdown in the category in Q1. You obviously had very strong numbers. So just a little bit more about what you're seeing in terms of overall market dynamics or thinking about category growth versus the share that you're able to achieve here. My second question was on the contracting cycle we're entering into. Just any more granularity on what portion of your business is already contracted out through 2018 versus how much is up for renewal as we enter this next contracting season. I think you mentioned in the 3Q call that a good portion of the business was contracted for both '17 and '18, but just trying to get a little bit more granularity as we think about some of the news flow over the next 2 quarters.

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [12]

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Okay. I mean, as far as the TNF market dynamics, they're obviously being affected by 2 major factors. One is what we've just discussed in I guess the last 2 calls now, the impact that is happening as it relates to Enbrel in the marketplace. And then the second is really an IMS reporting issue where IMS, a fairly significant account had blinded their data back in the summer of last year, I believe. It is an account that we have very high share in, so we're overindexed in that particular account. And that -- although we're trying to make adjustments and they're trying to make adjustments to the data, it obviously is depressing both the category and depressing what -- what IMS reports as it relates [tissue mera]. And so that's just an anomaly in the data. It's going to correct itself as we lap it. And I think actually IMS is going to try to correct it. At some point here going forward, they are publishing some correction factors now. And we obviously do the correction internally because we have our own data, that we know what is represented in this particular account so we can add back that data into the overall market. And I'd say generally speaking, HUMIRA continues to perform just like it has historically. In fact, if you look at -- it's interesting. If you look at the last 9 quarters in the U.S, I think on average, those 9 quarters, we've delivered 22.4%. So Q1 is not any kind of an anomaly, it's right in line with what we would have expected. The majority of that growth is volume-driven. You have to remember that in our case, as we look at the market from a quarter standpoint, we know exactly the units that we shipped. We obviously know exactly the revenue that we generated. We have very high specificity around what the inventory levels are in the wholesaler channel, and we obviously know that the calculations are for price. So we can dissect this performance very accurately. And I tell you that HUMIRA continues to perform extremely well. Overall market share in Q1 is stable, I'd say slightly down in psoriasis, just down a tiny bit. And slightly up in RA. So those 2 are netting themselves out with stable market share. One of the things that we look at very carefully is the capture rate of new patients, and that is stable to slightly up. And then obviously, you look at the performance of the brand in the U.S., and it's tremendous. So I think we're still very, very comfortable with how the U.S. is performing, and we expect that performance to continue going forward despite the fact that we are seeing new entrants into the marketplace. Internationally, we continue to perform as we have last year. I'd say first quarter looks a lot like last year. If you look at our overall revenue growth, it's 4.5%, 4.6%. If you adjust for Venezuela, you're talking about high single-digit volume growth. And you have to remember that's despite the fact that there have been biosimilars now in the marketplace, indirect biosimilars in the marketplace, for an extended period of time. REMICADE biosimilars have been in a long time, and now Enbrel biosimilars have been in the market for a substantial period of time as well. So that gives you some idea of how we're competing in that indirect market, but it's a -- we're pleased with what we see in that marketplace going forward. It's tracking as we've dissipated. As far as contracting, I don't believe we have actually ever communicated what the split is between those that are '17 and '18 contracts. But I'd say generally speaking, we feel good about our contract position going forward into '18. So I don't anticipate any change in our position as it relates to our formulary positions in the United States in '18.

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Operator [13]

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Next question is from Marc Goodman from UBS.

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Marc Harold Goodman, UBS Investment Bank, Research Division - MD and United States Healthcare Analyst [14]

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Two questions. First, can you just give us the latest thoughts on what's going on in the HCV market in the 3 different regions and how you think about that's going to play out over the next year or 2? And then second, can you just remind us, for Elagolix, what's the hook for that product? And why we're excited about it?

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [15]

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Okay. So Marc, this is Rick. I guess I'll cover both of those questions. So maybe just repeat what you said about the 3 different regions. What were you referring to?

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Marc Harold Goodman, UBS Investment Bank, Research Division - MD and United States Healthcare Analyst [16]

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Well, I was just saying in hepatitis C, if you could just kind of go in what's happening in the 3 regions. What you're seeing? What are the dynamics? And how you think that will change over the next year or 2?

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [17]

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In regions, you mean the U.S., Europe and Japan? Is that what you mean?

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Marc Harold Goodman, UBS Investment Bank, Research Division - MD and United States Healthcare Analyst [18]

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Yes, yes. Correct.

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [19]

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Okay, I'm sorry. Yes. Well, I'd say the dynamics, there's certainly differences between those markets, but I'd say there's general themes that are also similar. So maybe I'll talk to the themes. We're seeing essentially 2 different dynamics that are playing out in the market. One is we continue to see price pressure in the market. The third entrant in the market has certainly played a stronger price strategy than we would have initially anticipated, but I'd say that is continuing as we see them roll out into many of the international markets. And so there is pressure on price, and I'd say fairly significant pressure on price in those markets. And they're using price in many cases to try to get early access into the marketplace from a pricing and reimbursement standpoint. The second phenomena that we're seeing is we're seeing that patient volumes are still trending down, although at a slower pace. So I think we are reaching some point of stability going forward. I think that's driven by a couple of different dynamics. One is, like in the U.S. as an example, many of the patients who were F3s and F4s have been treated, so now you have earlier-stage patients. Some of those earlier-stage patients are not as motivated to get treated. Some are still obviously undiagnosed in the marketplace, but I think it's primarily their motivation to be treated now earlier on in their disease process. And then some who are still in the later stages are in environments that are far more difficult to be able to access. They might be IV drug abusers, they might be in the prison system, et cetera. And so that's part of what's driving the dynamics in the U.S. market. Outside of the U.S., you have funding cycles within those countries, and many of those countries funded for mostly F3s and F4s didn't fund for earlier-stage patients. And so now we're going through the cycle of them dedicating funding for the number of people that they want to treat, and that clearly is coming down somewhat from what it had been in previous years. Having said all of that, I'd say this is still a very big market. And at the end of the day, it's a market that's sustainable at a substantial level going forward. And I think our GP product, our next-generation product, will compete very nicely in that market. And you have to remember that up to this point, we've only competed basically in genotype-1. And so there's a big opportunity for us to be able to compete in the other genotypes going forward. And we're certainly excited about what we think this next-generation product can do in the marketplace. It will be more of a 2018 impact than a 2017 impact, although we'll be approved in 2017. So I think it's an exciting asset for us. As it relates to Elagolix, I'd say Elagolix has the ideal profile for a new medicine in this particular area. Essentially, let's take the U.S. as an example. You have about 2.5 million women in the United States who suffer from endometriosis. Many people think that, that number is low, that it could be as high as 4 million because many of these patients are not diagnosed and physicians are hesitant to label them as having endometriosis when there's really no real benefit to doing that because there are no significant therapies. Many of these women suffer from significant pain. In fact, I would tell you that the opioid use in this population is relatively high, in the neighborhood of 35% to 40% of these patients who use opioids to try to manage their pain level. And if you look at the profile of Elagolix and the clinical data that supports that, it would tell you that Elagolix has the opportunity to change the profile of the treatment of that disease significantly. These women are typically of an age where they're interested in, at some point, becoming pregnant. And so what they're looking for is an oral agent that's fast on and fast off. Ideally, you want a therapy that could basically treat these women for -- in the neighborhood of a year or longer. We think this profile has the ability to be able to do that for the vast majority of patients. And so we think it has a profile that's very, very consistent with what the market would desire and what patients would desire going forward. It will be a market that you have to build over time because we even saw in the clinical programs that you have to build awareness around this. So there will be an education process that is necessary in order to both educate physicians on the availability of this medicine when it becomes available, but also educate women to become activated and seek treatment when there weren't previous alternatives that could treat this disease. But if you look at the opportunity, this is clearly a multibillion-dollar product from an opportunity standpoint. And so we're excited about it. It will move forward into registration next quarter. And we anticipate being able to get that product approved and on the marketplace and starting to build that market. So I can tell you I'm very excited about what the opportunity looks like. This is a market we know well because of our experience with Lupron in this segment. And certainly, Lupron does not have the ideal profile for these women. So I think it's a market that we will be able to have a significant impact with this product.

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Operator [20]

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The next question is from Geoffrey Porges from Leerink Partners.

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Bradley Patrick Canino, Leerink Partners LLC, Research Division - Associate [21]

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This is Brad Canino on for Geoff. Another question on HCV also -- with the launch of the GT regimen looming, do you expect an additional pan-genotypic labeling, given the latest data? And are the 8-week data for GT3 and GT1 also likely to be in the initial label at launch?

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Michael E. Severino, AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development [22]

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So this is Mike. I'll take that question. We feel very good about the data that we've generated across the program and across genotypes. If you look at our response rates, they're very high across both the common and uncommon genotypes and in particular in some of the most difficult-to-treat patient populations like genotype 3. And so while it's difficult to speculate about a label, we think that the evidence that we've generated strongly supports pan-genotypic use of the product. And with respect to the 8-week data, I would make similar statements. The 8-week data have been very strong across genotypes, including in very difficult-to-treat patients like genotype-3 patients. There, it's been studied in genotype-3 patients at 8 weeks who don't have cirrhosis and are new to therapy, but that's a very, very significant portion of the market not only in the U.S. but around the world. And our results are very strong. And again, while it's difficult to speculate about a label this early in the process, we think the data supports the use of the regimen in that manner.

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Operator [23]

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Our next question is from Gregg Gilbert from Deutsche Bank.

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Gregory B. Gilbert, Deutsche Bank AG, Research Division - MD and Senior Analyst [24]

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First, following up in your comments, Rick, on HCV. Is AbbVie a believer in NASH as a large opportunity? And what are your plans there? Second, for Mike, how would you set the bar for what you hope to see in TRINITY? And can you express your confidence in whether that data is sufficient to file with? You sound very confident there. And then third, Bill, could you comment a bit more on gross margin in the first quarter? I know there are timing issues and lumpiness, but it was the lowest level we've seen in quite some time. So could you provide a little more color on that?

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [25]

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So Gregg, this is Rick. I'll take the first one. Mike will cover TRINITY and Bill can cover the gross margin question. So on NASH, I mean certainly, as you look at the prevalence of NASH, you look at the implications of it, this is a disease that certainly if you could find the right therapy, would be a significant opportunity. Again, it will be a market development kind of opportunity. Many of those patients are the earlier-stage patients, are certainly in GPs and internal medicine right now with elevated LFTs as their only real symptom. So it would require some fairly significant market development work. I think if you found the right drug with the right profile, it's clearly a significant opportunity. It's one of the things that's on our target list. As I said, what we do from a business development or licensing and acquisition standpoint is we have a strategic roadmap within each franchise of what we're looking for. I can tell you NASH is on that road map. We haven't -- we obviously have not found anything yet that has met the criteria that we're looking for that gives us enough confidence for us to pursue an asset. We've looked at a number of different things, and we'll continue to look. We have some internal efforts at an early discovery level, looking at some different mechanisms as well, but those are fairly early on. So yes, it's a nice opportunity for the right kind of drug if we can find that drug with that profile.

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Michael E. Severino, AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development [26]

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Okay. This is Mike. I'll take the question about Rova-T and TRINITY. So what we know about small cell lung cancer is that treatment options are severely limited for these patients. We know that in a frontline setting, we can drive good response rates with traditional chemotherapy, but those responses aren't durable and patients relapse. And when they relapse, they're very, very difficult to treat. Second and subsequent lines of therapy have much lower response rates and very poor durability of those responses. In the third-line setting, where we're conducting the TRINITY study, for example, 1-year survival is at best 12%, and many experts would put that number lower. So what we're looking for in TRINITY is something that really changes that picture, something that shows response rates that are different from the chemotherapy options and clearly differentiated. Chemotherapy drives response rates in the teens here, and responses that have the promise of being durable and increasing that long-term survival to the greatest extent possible. And you asked about our confidence. We remain confident in Rova-T and TRINITY. Rova-T is supported by a very, very strong package of preclinical biology and early clinical data, and this is a situation where the early clinical data are predictive of TRINITY, we're essentially looking at the same endpoints in TRINITY that we did in the early studies. So we feel good about that asset and about the overall Stemcentrx pipeline.

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William J. Chase, AbbVie Inc. - CFO and EVP [27]

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Gregg, it's Bill. As you brought up obviously, our gross margin was a little lighter than last year. Yes, it was down 1.4 points. If you look at the impact of partnership accounting, and just to refresh your memory on that, the profit that we transferred to J&J related to IMBRUVICA, and actually the profit on Venclexta as well, ultimately gets booked up in COGS. So it actually dilutes our gross margin. That had about a 70 basis point impact. And that exchange had about a 30 basis point impact. And obviously, exchange rates are going to move around so it's difficult to call how that is in the future. So if you back those out, we're really 0.4 points below last year. That's primarily product mix. I think you can hang a lot of that on HCV. We do typically see lower gross margins in Q1 and Q4, and that's all tied to the seasonality of Synagis, which is a very, very low-margin product. So that certainly played into that number as well. We feel good about our 81% forecast on the year. I would tell you, you should expect to see a number in Q2 above 81%.

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Operator [28]

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Our next question is from Geoff Meacham from Barclays.

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K. Choi, Barclays PLC, Research Division - Research Analyst [29]

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It's Paul Choi. First, on the pipeline with regard to risankizumab data that's coming out here. Can you maybe comment on what other -- what sort of metrics that you'd be looking for in the psoriasis indication with regard to superiority versus some of these recently launched IL-17 agents that are out there in the market? And secondly, on the Crohn's trials that you're running, with regard to the data that you'll present at DDW, is this something that you think would potentially accelerate the Phase III trials that you're planning to start here in the near term?

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Michael E. Severino, AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development [30]

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Okay, this is Mike. I'll take those questions. With respect to the risankizumab data, if we look at the Phase IIb data for risankizumab, it shows the strongest observed results in the category, which would include the IL-17s and the IL-23s. We had very high PASI 90 response numbers and very high PASI 100, so complete clearance of skin disease in that program. And there were other features about the data that we're very striking. First, we had very good durability of response and there's very good administration with the ability to drive quarterly administration in our Phase III program. So basically, what we're looking for is a result in Phase III that is consistent with those Phase II data. The other thing I'd point out with respect to other agents is we run active comparators on our Phase IIb. Now that's against Stelara, not against the IL-17s, but we saw a very high PASI 100 rates there. And as I pointed out in my prepared remarks, PASI 100 was about 2.5x higher for risankizumab as compared to Stelara in that Phase II. And the results of PASI 90 were similar, that there were substantially higher PASI 90 response rates, about double that of Stelara. So we feel good about the competitive profile and the ability to drive that through Phase III and into the market. With respect to Crohn's disease, the data that we've seen are very encouraging. We're moving very fast already, so I'm not sure if the data at DDW accelerate that, but we're poised to move into Phase III. And we feel that there's a lot of potential for this pathway in inflammatory bowel diseases as well.

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Operator [31]

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Our next question, David Risinger from Morgan Stanley.

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David Reed Risinger, Morgan Stanley, Research Division - MD in Equity Research and United States Pharmaceuticals Analyst [32]

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I have 2 questions, please. First, I was just hoping that you could frame how much total cash AbbVie had at the end of last year. I'm guessing you don't have your 10-Q out yet. And also, what percentage of that was offshore? So we can better understand how much you would plan to repatriate based upon current cash ex U.S. And maybe you can also speak to the opportunity for borrowing ex U.S. in the event that repatriation is allowed to bring back more than the cash on your books. And then second, with respect to IMBRUVICA, would you please talk a little bit about new indication opportunities over the next few years, the market potential and the timing of specific key trial readouts for IMBRUVICA over the next year or 2?

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William J. Chase, AbbVie Inc. - CFO and EVP [33]

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David, it's Bill. So cash on hand at the end of the year was about $8.2 billion. And as you said, we don't have our Q out, but obviously, the number is at least $8.2 billion this quarter. And you'll see that soon. Look, what I would tell you in terms of geographic distribution of cash, obviously, under the current tax paradigm, there is a penalty for bringing back cash back into the United States, so what we try to do is only bring back that cash that is needed to cover our U.S. cash needs. And that's typically things like interest, the dividend obviously and then our U.S. operations. To bring back cash above and beyond that is fundamentally inefficient from a tax perspective, so we tend to try to keep our cash, the majority of it, offshore. In terms of our ability to borrow in the event that there was some type of repatriation that would be a onetime event, look, what I would tell you is, first of all, as Rick said, we're incredibly encouraged that there is talk now about possibly allowing repatriation of cash in a tax-efficient manner. We think that's absolutely the right thing to do, just not only for AbbVie and the industry, but the country. We would certainly hope that, that is on a permanent basis as opposed to a onetime basis. In the event that it was onetime and without specific limits, we would certainly look to take advantage of that to the greatest extent that we possibly could. And I think borrowing would be in the cards, given that following the closure of that window, we would have the ability to continue to generate robust offshore cash and quickly pay down that debt. So in the event that it went that way and we were permitted to do that, that is certainly something we would look at. That said, it's a little early right now to know definitively how this is going to play out, but we remain optimistic.

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [34]

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Okay. On your IMBRUVICA question, David, maybe Mike and I will sort of try to cover the question. Let me just talk about the opportunity first, and then Mike can talk about the timing of the readouts. So I'd say before you jump in to new indications, one of the things that you need to think through is a big part of our strategy with IMBRUVICA and with the Pharmacyclics acquisition when we talked about it was the need to be able to move up into first line. And CLL, all by itself, is a very, very large indication. And the reason that is so important is because, remember, the duration of treatment on IMBRUVICA is much longer than other therapies now. And the fundamental benefit the patients get from a PFS and an OS standpoint is driven by those patients staying on therapy for long periods of time. And so as you move into frontline, you get your greatest benefit for the patient by doing that, and obviously, you get your greatest benefit from a business standpoint by moving up into those first-line patients. So even within the indications we're in today, driving towards first-line, CLL is a very big opportunity, but the other indications moving into first line is a critical priority. Now having said that -- and I'd say the bulk of our LRP is driven off of that. Having said that though, I'd say then if you look at 2 -- 3 other large categories, they have different risks associated with them from a probability of success, but NHL -- I'd say we have a significant amount of data, but NHL as a category is a very significant opportunity for us. And Mike can talk about the different trials that are in that particular area to support our efforts there.

Relapsed/refractory multiple myeloma patients, I think, is another significant opportunity for us just because of the size of the patient population. And those will all play out over the course of this LRP from the standpoint of timing of those trials and readouts of those trials and potential regulatory approvals in those areas. And then I'd say a very high risk but obviously high reward if it were to play out is the pancreatic study. That is one that we've heavily risk-adjusted, and so it's not something that we're counting on, certainly isn't something that investors should be counting on at this point. But if it were to play out in a positive way, obviously, that would be a very big opportunity. So those, as we look forward, I think are the most significant opportunities to describe.

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Michael E. Severino, AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development [35]

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And this is Mike. So with respect to the framework that Rick laid out, we have a number of opportunities to move forward in lines of therapy. And one that we would expect to see data on later this year is mantle cell lymphoma, an aggressive form of non-Hodgkin lymphoma, where we're anticipating interim data from a pivotal study in frontline, which would be an important step towards frontline therapy there. In mantle cell, we also have combination work ongoing with Venclexta, and that combination has shown very strong results. And so those data would continue to mature over the course of the time frame that you described. We're also going to see data in other forms of non-Hodgkin lymphoma over the course of the next 18 or 24 months, including data in diffuse large B-cell lymphoma, where we've seen good results in patients who have the ABC, or activated B cell phenotype, of that disease; and also additional work in follicular lymphoma, which is the largest form of indolent non-Hodgkin lymphoma. Outside of NHL, we're making good progress with GVHD. As I mentioned in my prepared remarks, we have the initial submission in, but we have ongoing data generation in GVHD. So all of those data will mature over the course of the time frame that you described. And then at the back end of that 2-year period, we'll start to see more data on multiple myeloma and other opportunities as well.

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Operator [36]

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Next question is from John Boris from SunTrust.

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John Thomas Boris, SunTrust Robinson Humphrey, Inc., Research Division - MD [37]

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Just on the -- circling back to capital allocation on share repo, can you just give some transparency on what you purchased in the quarter and your thoughts additional repurchases going forward, especially on your -- related to your comments earlier? And then the second question just has to do with the line extension behind HUMIRA. I believe you launched a lower -- low-concentration less-burning formulation in the EU, what's your planning and timing for launch of that in the U.S.? Any thoughts around the appetite for formulary uptake in the U.S., also your ability to do direct-to-consumer advertising. And lastly, just on how Roche's launch in the MS space and Lilly's launch into the diabetes space, that price discount played a role at least in terms of gaining access to formularies there. So appreciate your taking the question.

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William J. Chase, AbbVie Inc. - CFO and EVP [38]

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So John, it's Bill. On share buyback in the quarter, we bought back $500 million of shares. When you see our Q, you're going to see a higher number. We were also buying at the end of the year, about $300 million carried over between the years. So in the Q, it will look like $800 million, but actually this year, we bought back $500 million. It's not our intent at this point to buy back significantly more. That said, as I said earlier, to the extent that we find ourselves with an excess of U.S. cash, we do from time to time deploy that in the market and buy back shares, given that we've already incurred the tax inefficiency of bringing it back home. And we did do some of that last year. So yes, some of this will wind up looking -- we'll have to look to see what our U.S. cash balance looks like as we progress through the year. But right now, I think $500 million is all we have in our current sights.

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [39]

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And then as it relates to the new formulation, we have rolled out a new formulation outside the U.S. in a number of countries. We have a -- we essentially have a country-by-country framework that we've laid out of rolling that out. With the brand of the magnitude of HUMIRA, obviously, we're being careful about how we roll that out to make sure there's no market disruptions. And in fact, because it is a new formulation, we have to change the footprint of our manufacturing to be able to deal with it because it's a different manufacturing process for the API. And so we have to basically -- it's like changing the engine on a 747 while you're still flying at 40,000 feet. We're being careful about how we're doing that as we flex the manufacturing capacity that we have to make the shift over. And so over time, we will anticipate that, that formulation will be in all major markets around the world, but it will take some time in order for that to happen. Your question on DTC, I'm not sure I quite understand. I mean, we obviously have an active DTC campaign now for HUMIRA. We wouldn't anticipate a change in that as it relates to the new formulation, if that's what you were referring to. It's not that kind of a strategy that we've built here, although there is a benefit for patients from the standpoint of pain upon injection, but that's not part of the strategy that we built in place. And then as it relates to the launches of Roche and Lilly, I think every single market has a different set of dynamics. I'm certainly not an expert when it comes to diabetes, so I'm not going to speculate on what the right strategy is there. I would tell you in the markets that HUMIRA competes in, essentially, we've had many competitors come at a low list price strategy, and that hasn't necessarily been as effective because you have to remember that list price in this market is not reflective of what the actual patient or the individual employer pays for the drug. And so at the end of the day, that strategy doesn't seem to work well in this market, especially in a brand like HUMIRA that has the attributes that HUMIRA has and can serve broadly a significant part of the patient population, both within a category and across multiple categories. It's really the strength of this brand and the clinical efficacy and safety of this brand that has driven its performance.

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John Thomas Boris, SunTrust Robinson Humphrey, Inc., Research Division - MD [40]

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So Rick, just on direct-to-consumer, will you be able to make a claim on TV that it's less painful and causes less burning?

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [41]

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I don't believe so. But regardless of whether we could or we couldn't, it's not in our strategy to do that.

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Operator [42]

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Our last question is from Vamil Divan from Crédit Suisse.

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Vamil Kishore Divan, Crédit Suisse AG, Research Division - Senior Analyst [43]

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So just 2, if I could quickly. One, on veliparib, you mentioned obviously the news from -- obviously on the key trials. That is obviously is not a key growth driver in the near term. But just -- can you just talk about what you see as the future role for that asset and why you're still continuing development in the trials that are still ongoing? And then if you can just provide a little more color in terms of the impact you're seeing on biosimilars to HUMIRA outside of the U.S., both in terms of the infused product and the injectables, that would be helpful.

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Richard A. Gonzalez, AbbVie Inc. - Chairman of the Board and CEO [44]

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Okay. So maybe I'll cover the second question first. I guess I'd say, the trend outside the U.S. in biosimilars is very similar to what we've seen, relatively low overall market share, discounting that's within the range of what we predicted historically or slightly lower, slightly less discounting than what we had predicted. And so we've essentially seen the indirect competition pretty much stabilize out in these marketplaces. There has been some impact on price in certain markets outside the U.S., but that has pretty much played through at this point. And so I don't expect any significant changes in the activity in the rest of 2017 from a biosimilar standpoint outside the U.S.

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Michael E. Severino, AbbVie Inc. - Chief Scientific Officer and EVP of Research & Development [45]

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So with respect to veliparib, as we've said on other occasions, we were exploring a different hypothesis with veliparib. We know that veliparib -- or we know that PARP inhibitors play a role in treating patients with inherited mutations in DNA repair, germ line BRCA mutations and other similar mutations, but we didn't view it as a substantial opportunity for a company like AbbVie to come third or fourth to market in that population. Essentially, the medical need was met for those patients. So we were testing a different hypothesis, and that hypothesis specifically was whether PARP inhibition would augment DNA-damaging chemotherapy, that the first hit, if you will, didn't have to be genetic, that it could come from that DNA-damaging chemotherapy. We've now seen across a couple of studies that, that hasn't played out in the way we had initially envisioned. We see that in the triple negative breast cancer neoadjuvant study and in the squamous non-small cell lung cancer study. And so while that's not the result we had hoped for, we know going in that this was a higher-risk, higher-reward sort of approach. And that the evidence, while reasonable from a preclinical and early clinical perspective, isn't entirely predictive in this setting. And so we knew that it was going to take Phase III data to answer the question. We've seen the first 2 readouts, and those studies did not meet the primary endpoint. With respect to ongoing work, we have ongoing studies, some of which will read out very soon. So we can't speculate about what those results might be, but we will complete the ongoing studies and update you on the progress as soon as possible.

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Elizabeth Shea, [46]

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

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Operator [47]

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That concludes today's conference. Thank you for your participation. You may now disconnect.