abbvie (abbv) earnings report: q1 2016 conference call ...quarter and our 2016 guidance in more...
TRANSCRIPT
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:97.80BPriceasofEventDate:61.0
©2014TheStreet,Inc.Al l R ightsReserved Page1of23
AbbVie(ABBV)EarningsReport:Q12016ConferenceCallTranscriptThefollowingAbbVieconferencecalltookplaceonApril28,2016,09:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
LarryPeepo;AbbVieInc;InvestorRelationsRickGonzalez;AbbVieInc;ChairmanandCEOMikeSeverino;AbbVieInc;EVPR&DandChiefScientificOfficerBillChase;AbbVieInc;CFOHenryGosebruch;AbbVieInc;EVPandChiefStrategyOfficer
OtherPart icipants
JeffreyHolford;JefferiesLLC;AnalystChrisSchott;JPMorgan;AnalystJamiRubin;GoldmanSachs;AnalystDavidRisinger;MorganStanley;AnalystMarcGoodman;UBS;AnalystAndrewBaum;Citigroup;AnalystJohnScotti;EvercoreISI;AnalystAlexArfaei;BMOCapitalMarkets;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
WelcometotheAbbViefirstquarterof2016earningsconferencecall.
(OperatorInstructions)
Asareminderthiscallisbeingrecorded
IwouldnowliketointroduceMr.LarryPeepo,VicePresidentofInvestorRelations.
LarryPeepo (InvestorRelations):
Goodmorningandthanksforjoiningus.
AlsoonthecallwithmetodayareRickGonzalez,ChairmanoftheBoardandChiefExecutiveOfficer;MichaelSeverino,ExecutiveVicePresidentofResearchandDevelopmentandChiefScientificOfficer;andBillChaseExecutiveVicePresidenttoFinanceandChiefFinancialOfficer.HenryGosebruch,ourChiefStrategyOfficer,willbejoiningusfortheQ&Aportionofthecall.
InadditiontoourearningsreleasethismorningwehavealsoissuedapressreleaseannouncingouracquisitionofStemcentrx.Youcanfindasetofslidesandawebsitethatprovideanoverviewofthetransaction.
BeforewegetstartedIremindyouthatsomestatementswemaketodaymaybeconsideredforward-
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:97.80BPriceasofEventDate:61.0
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lookingstatementsforpurposesofthePrivateSecuritiesLitigationReformActof1995.AbbViecautionsthattheseforward-lookingstatementsaresubjecttorisksanduncertaintiesthatmaycauseactualresultstodiffermateriallyfromthoseindicatedintheforward-lookingstatements.
AdditionalinformationaboutthefactorsthatmayaffectAbbVie'soperationsisincludedinour2015annualreportonForm10-KandinourotherSECfilings.AbbVieundertakesnoobligationtoreleasepubliclyanyrevisionstotheforward-lookingstatementsasaresultofsubsequenteventsordevelopmentsexceptasrequiredbylaw.
Ontoday'sconferencecallasinthepastnon-GAAPfinancialmeasureswillbeusedtohelpinvestorsunderstandAbbVie'songoingbusinessperformance.Thesenon-GAAPfinancialmeasuresarereconciledwithcomparableGAAPfinancialmeasuresinourearningsreleaseandregulatoryfilingsfromtodaywhichcanbefoundonourwebsite.
Followingourpreparedremarkswilltakeyourquestions.
SowiththatI'llnowturnthecallovertoRick.
RickGonzalez (ChairmanandCEO):
Thankyou,Larry.Goodmorning,everyone.Thankyouforjoiningustoday.
ThismorningI'lldiscussourfirstquarterperformanceandprovideanoverviewofthesetStemcentrxacquisitionwhichweannouncedearliertoday.
MikewillprovideupdatesonrecentadvancementsacrossourR&DprogramsandBillwilldiscussthequarterandour2016guidanceinmoredetailincludingthefinancialaspectsofStemcentrxtransactionandasalwaysfollowingourremarkswilltakeyourquestions.
Wedeliveredanotherstrongquarterlyperformanceincludingadjustedearningspershareof$1.15.Representinggrowthofmorethan22%versusthefirstquarter2015.
Ourresultsincludedstrongoperationalsalesgrowthof22.4%.Drivenbyanumberofproductsacrossourportfolio.ItincludesHumiraglobaloperationsgrowthofmorethan19%.StronggrowthfromIMBRUVICAcontinuedglobaluptakeof(inaudible-MicrophoneInaccessible)andstrongperformancefromseveralotherproductsinourportfolio,includingCreonandDuodopa.
Wealsocontinuedtodeliverimprovementsinouroperatingmarginprofile.Inadditiontoourstrongfinancialresults,wealsoadvancedseveralofourkeystrategicpriorities.
LateinthequarterwesecuredFDAapprovalforIMBRUVICAasafirst-linetreatmentforpatientswithCLL.We'reroughlyonemonthintoourfirst-linelaunch,andwe'repleasedwithourprogresstodate.TheNationalComprehensiveCancerNetworkorNCCNrecentlypublishedanupdatedviewoftheseguidelines,grantingIMBRUVICAacategory1recommendationforcertainCLLpatients,thehighestrecommendationassignedbytheorganization.
Wearealsoapproachingtheone-yearmarkforPharmacyclics,andwecontinuetobeverypleasedwiththeprogresswe'vemadetodate.ThePharmacyclicsteamcontinuestorapidlyadvancetrialactivity,exploringIMBRUVICAacrossabroadrangeoftumortypes.IMBRUVICAofferssignificantgrowthpotentialthroughitsexpandinglistofindicationsandlinesoftherapy,andweremainexcitedaboutthevastpotentialforthisuniqueasset.
EarlierthismonthwereceivedFDAapprovalforanothertransformativetherapyforthetreatmentofCLL.Venclexta,ournovelBCL-2inhibitor,wasapprovedforpatientswithrelapsedrefractoryCLL,whoharbor
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:97.80BPriceasofEventDate:61.0
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the17pdeletion,adifficult-to-treatformofthedisease,typicallyassociatedwithpoorprognosis.BasedonthelevelofefficacyinitspatientpopulationtheFDAgrantedtheapprovalunderitsBreakthroughTherapyandpriorityreviewdesignations.
Sincethebeginningoftheyear,we'vealsoreportedcompellingdatafromseveraldevelopmentprogramsincludingpositivetoplineresultsfromoursecondpivotalelagolixtrialinendometriosis,andstrongdatafromournext-generationHCVprogram.Mikewillprovideupdatesonbothprogramsduringhisremarksinjustafewmoments.
WealsoaugmentedourpipelinewithalatestageassetwithaglobalcollaborationwithBoehringerIngelheimtodevelopandcommercializeananti-IL-23,currentlyinPhase3developmentforpsoriasisandmid-stagedevelopmentforseveraladditionalindications.
TheagreementprovidesAbbViewithanotherpotentialbestinclasslatestageasset,addingtoourimmunologypipelinewhichincludesourselectedJAK1inhibitor;ABT-494,currentlyinPhase3developmentforRA;aswellasseveralotherbiologicsthatareinmid-stagetrials.
Basedonitspotentialforbestinclassefficacy,webelievetheBIassetcouldgeneratemultibilliondollarsinpeakyearrevenuesacrossseveralimmunemediateddiseases.
ClearlythemostnotableandexcitingnewstodayisourplannedacquisitionofStemcentrx.Wecouldnotbemorepleasedtohavethistalentedgroupofindividualsjoinourorganization.WehavebeentremendouslyimpressedwiththeiraccomplishmentstodateandtheirinnovationandexpertisewilldrivestrongbenefitsforAbbViegoingforward.TheadditionofStemcentrxisastrategicallyimpellingopportunityforourcompany,ourshareholders,andthepatientswhichweserve.
Overthepastseveralyearswe'vetakenanumberofstepstobuildandstrengthenourpositioninoncologyresearchanddevelopment,withtheobjectiveofbecomingaleadingoncologycompany.
We'veadvancednumerouspromisingpipelineassets,includingourBCL-2inhibitorforbloodcancers,andourPARPinhibitor,ananti-EGFRantibody-drugconjugateindevelopmentforsolidtumors.
We'vestrengthenedourdiscoveryeffortsthroughcollaborationswithleadingacademicsandotherinstitutionsaroundtheworld.We'veaddedtoptalenttoourR&Dorganization.
LastyearthroughtheacquisitionofPharmacyclics,weobtainedIMBRUVICAafirst-in-classPGKinhibitorwhichhasalreadyachievedblockbusterstatusandisonatrajectorytoachievemultibilliondollarpeakyearsales.
AndasImentionedearlier,wejustlaunchedourinternallydevelopedVenclexta,whichaddsanothertransformationaltherapytoourhematologicaloncologyfranchise.
WeviewoncologyasasignificantpillarofgrowthforAbbViegoingforward,andasweevaluateallopportunities,wedosowiththedesiretobalancenear-termperformancebutcontinuingtobuildaportfolioofassetsthatwillgeneratestronggrowthin2020andbeyond,supportingourcommitmenttodrivetop-tierperformanceoverthelongterm.
Sothatbringsmetoourannouncementtoday:theacquisitionofStemcentrx,whichgivesAbbVieahighlyattractiveplatformforsolidtumors,andanextremelyexcitinglatestageassetinRova-T.ThetransactionenablesAbbVietofurtherexpandandaccelerateourpresenceinoncology,buildinguponourgrowingpositioninhematologicaloncology.
Stemcentrx'sproprietarysolidtumorplatformleveragescancerstemcellbiologytoidentifyandvalidatenoveltherapeutictargets.Thecompanyhasdemonstratedatrackrecordofsuccessfullyengineeringand
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:97.80BPriceasofEventDate:61.0
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manufacturingantibodiesandantibodydrugconjugatesforthosetargets.
StemcentrxleadassetisRova-T,aDLL3targetedantibodydrugconjugate.DLL3isanoveltargetexpressedinseveraltumortypes,includingsmallcelllungcancer,anaggressiveanddifficult-to-treatdisease.Smallcelllungcanceraccountsforroughly15%ofalllungcancers,andmorethan60,000patientsarediagnosedannuallyinthemajordevelopedmarkets.
DLL3isthefirstpredictivebiomarkerassociatedwithdrugefficacyinsmallcelllungcancer.Itishighlyexpressedinamajorityofsmallcelllungcancertumors,aswellascancerstemcells,andisnotexpressedinnormaltissue.Predictivebiomarkershelpidentifywhichpatientshavethepotentialtobenefitfromatherapy.
Rova-Tiscurrentlyinregistrationaltrialsforthird-linesmallcelllungcancer.Thereisasignificantunmetneedforthispatientpopulationasthetreatmentlandscapehasnotchangedforseveraldecades.Infact,thereiscurrentlyonlyoneapprovedtreatmentforsecond-linesmallcelllungcancer,andnoapprovedagentsforthird-lineuse.Thefive-yearsurvivalrateforpatientsdiagnosedwiththistypeofcancerisunfortunatelyverylow,atapproximately6%.
LastyearattheEuropeanSocietyofMedicalOncologymeeting,StemcentrxpresentedexcitingPhase2resultsinsmallcelllungcancer,includingdatathatillustratedanoverallresponserateof44%inaDLL3biomarkerdefinedpopulation.
Rova-Talsodemonstratedaclinicalbenefitrateof78%inthisrefractoryanddifficult-to-treatsetofpatients.Responseratesweresimilarinthird-lineandsecond-linepatientswithamanageablesafetyprofile.Theselandmarkdatarepresentthefirsttimeabiomarkertargetedtherapyhasshownsignificantefficacyinsmallcelllungcancer.
Additionaldatafromabroadersetofpatientsandlonger-termfollow-up,includingcompellingoverallsurvivalresults,willbedisclosedduringanoralsessionattheupcomingASCOmeetinginJune,wheretheabstracthasbeenselectedasaBestofASCOpresentation,adistinctiononly1%ofabstractsreceive.
Giventheverypromisingefficacyinthird-linesmallcelllungcancer,StemcentrxrecentlyfiledforFDABreakthroughDesignationforthissetting.Basedonthecompellingdataandthesignificantunmetneedinthispatientpopulation,we'recertainlyhopefulthatwewillbesuccessfulinobtainingthisstatus.
Stemcentrxhasmovedrapidlythroughclinicaldevelopmentinthird-linesmallcelllungcancer,fromtheinitiationofthefirstin-humantrials,totherecentstartoftheregistrationenablingstudy.Basedontheexpectedcompletionoftheongoingregistrationaltrial,commercializationofthisindicationisexpectedin2018.
Stemcentrxisalsomovingtorapidlyadvanceintofront-linesmallcelllungcancer.Mikewillprovidemoredetailontheplannedfirst-lineprograminjustafewmoments.
LikeHumiraandIMBRUVICA,webelieveRova-Thasthepotentialapplicabilityacrossabroadrangeofindicationsandtumors.Inadditiontosmallcelllungcancer,expressionofDLL3indicatesRova-Tmaybeusefulacrossmultiplesolidtumortypes,includingmetastaticmelanoma,glioblastomamultiforma,aswellassomeprostate,pancreatic,andcolorectalcancers,amongothers.
ThereisasignificantsubsetofpatientswhosetumorsarepositiveforDLL3expressionwithinthisbroadersetoftumors,representingmorethan65,000patientstreatedannually.
WeplantoevaluateRova-Tacrossnumerousindications,leveragingourR&Dinfrastructureandglobalclinicaltrialorganization,tomoverapidlyandefficiently.
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
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TheacquisitionofStemcentrxalsobroadensAbbVie'soncologypipelinewithaportfolioofearlierstagecandidatesfocusedonnoveloncologytargets.InadditiontoRova-T,theStemcentrxpipelineincludesfourclinicalcandidatesbeingevaluatedintrialsacrossarangeofsolidtumors,aswellastwoadditionalINDsfornewtargetsplannedfor2016,andabroadportfolioofvalidatedpre-clinicaltargets.
StemcentrxalsoenhancesAbbVie'soncologydiscoverycapabilities.ThetechnologyplatformthatidentifiedRova-TandtheotherassetsintheStemcentrxpipeline,hasstrongpotentialforcontinuedassetgeneration,andwillstrengthenAbbVie'sdiscoveryanddevelopmenteffortsinsolidtumorsgoingforward.
Soaswesummarizethetransaction,theadditionofStemcentrxisstrategicallycompelling.Theacquisitionishighlycomplementarywithourgrowinghematologicaloncologyfranchiseandexistingportfolioofsolidtumorassets.
TheleadassetRova-Trepresentsamultibillion-dollarpeakrevenueopportunity,withrevenuepotentiallyapproaching$5billionasweadvanceinthefirst-linesmallcelllungcancerandotherindications.Rova-Thasthepotentialtohaveadramaticimpactonourgrowthoverthelongterm.
AdditionallyStemcentrx'sexistingpipelineofadditionalassetsandtheirR&Denginewillaugmentourfuturedevelopmenteffortsinsolidtumors.StemcentrxaddstoAbbVie'slongtermgrowthprospects,providinganothercompellinggrowthplatformthatwillfurtherdiversifyourrevenuebasebeginningin2018,andwillenhanceourEPSgrowthstartingin2020andbeyond.Stemcentrxfitswellwithinouroverallstrategy.
Wehavenowassembledasignificantnumberoflatestageassetswhichhavebeensignificantlyderisked,havemultibillion-dollarpotential,andthepotentialtodrivesustainablegrowthin2020andbeyond.AssetsincludingIMBRUVICA,Venclexta,ABT-494,Z INBRYTA,elagolix,thenext-generationHCVcombination,ourrecently[in]-licenseanti-IL-23,andnowRova-T.Alloftheseassetshaveahighprobabilityofregulatoryandcommercialsuccess.
Inclosing,wecontinuetobepleasedwithourstrongexecutionandstrategicadvancement.Wecontinuetodemonstrateanexceptionaltrackrecordofsuccess,withpositiveclinicaldataandregulatoryoutcomes,andwelookforwardtoadditionalimportantpipelinemilestonesintheyearahead.
We'reofftoastrongstartthisyear,andweintendtobuilduponourmomentumtodriveahighlevelofperformanceacrossouroperationsanddeliverstronggrowthin2016.Andweremaincommittedtodeliveringonthelongtermobjectivesthatweoutlinedlastyear.
WiththatI'llturnthecallovertoMikeforadditionalcommentsonourR&Dprograms.Mike?
MikeSeverino (EVPR&DandChiefScientificOfficer):
Thankyou,Rick.
WehadaveryproductivefirstquarterfromanR&Dperspective,withanumberofimportantdatareadouts,phasetransitions,andregulatoryapprovals,aswellaslicensingactivity.ThismorningI'llprovidecoloronsomeofthekeyhighlights.
I'llstartbysayingthatIcertainlyshareRick'senthusiasmforStemcentrx,whichbringsusapromisinglatestageprogramwithRova-T,apipelineofearlierstagecandidates,andaplatformtechnologythatwillenhanceourfuturesolidtumordiscoveryanddevelopmentefforts.
WeverymuchenjoyedourdialoguewiththeStemcentrxteamaswe'vegottentoknowthemoverthepastseveralmonths,andwe'vebeenimpressedwiththeindividualsandtheinnovativeplatformthey've
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:97.80BPriceasofEventDate:61.0
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built.
Stemcentrxhasestablishedanimpressivetrackrecord.Thecompany'sfirstthreeclinicalstagedrugseachrepresentnoveltargets,withsingleagentactivitydemonstratedearlyphasetrialsinsmallcelllungcancer,triplenegativebreastcancer,andovariancancer,alldifficult-to-treatsolidtumorindications.
Stemcentrx'shighlyproductivediscoveryeffortisdrivenbythecompany'scoretechnology,whichutilizesalibraryofmorethan700patient-derivedtumorxenograftmodels,andleveragescancerstembiologytoidentifyandvalidatetherapeutictargetsthatwouldbeoverlookedbyothermethods.
Thisplatformhasyieldedimpressiveresultstoday,andweareexcitedaboutthepotentialforcontinuedassetgenerationwhichwillaidAbbVieinourR&Deffortsgoingforward.
Thecompany'sleadasset,Rova-T,representsasignificantopportunity,notonlythroughitsleadindicationthird-linesmallcelllungcancer,butalsothroughthepotentialforexpansionintothefrontlinesetting,aswellasothertypesofcancerwhereDLL3playsanimportantrole.
StemcentrxhasabroaddevelopmentprogramforRova-Tcurrentlyunderway.We'vebeenimpressedwiththespeedwhichwithStemcentrxhasmovedthroughtheclinic.It'sbeenroughlyfourandhalfyearssincetargetidentification,andlessthanthreeyearsbetweenfilingtheRova-TINDtotheinitiationoftheregistrationstudyinthird-linesmallcelllungcancer.
Theconfirmatorythird-linetrial,whichiscalledTRINITY,beganinJanuaryandisexpectedtocompleteenrollmentbytheendof2016,withcommercializationexpectedin2018.
WeviewtheRova-Tsmallcelllungcancerprogramassignificantlyderisked,withahighprobabilityofsuccess.
InadditiontotheoverallresponsedatapresentedatESMOlastyear,whichshowedanoverallresponserateof44%inDLL3positivepatients,theprofileofRova-Tissupportedbylonger-termdata,someofwhichwillbepresentedattheupcomingASCOmeetings.
Theseupdateddataincludepromisingoverallsurvivalfindingsthatcomparefavorablytohistoricalcontrols.WebelievethefullbodyofdatageneratedtodayarehighlycompellingandstronglysupportthevaluepropositionofRova-T.
StemcentrxisalsomovingrapidlyintofrontlinesmallcelllungcancerwithRova-T.Thecompanyisonthecuspofinitiatingastudydesignedtoselecttheoptimalregimenforthefrontlineregistrationalprogram.ThisforearmtrialwillevaluateseveralpermutationsofRova-Tandstandardofcarechemotherapy,includingbothmonotherapyandcombinationarms.Giventhecompellingdatawe'veseeninsmallcelllungcancertoday,webelievethereisahighlikelihoodofsuccessfullymovingintoearlierlinesoftherapy.
Stemcentrxisalsoevaluatinganeight-arm,400patientbasketstudywhichwilllookatRova-Tasmonotherapyinpatientswitharangeoftumortypesthatsharenarrowendocrinefeatures,includingmalignantmelanoma,medullarythyroidcancer,glioblastoma,largestoneneuroendocrinecarcinoma,andformsofprostatecancer,andothersolidtumors.Thisstudyisontracktostartenrollingpatientsthisquarter.
Additionalfirst-linestudiesareplanned,includingaPhaseIstudytoassessthesafetyofRova-Tincombinationwithantibodytherapy,targetingthePD-1/PD-L1axis,whichisontracktobeinitiatedduringthesecondhalfof2016.
Clearly,priortotheStemcentrxacquisition,AbbViewasalreadyfocusedonestablishingastrongposition
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
EventDescription:Q12016EarningsCallMarketCapasofEventDate:97.80BPriceasofEventDate:61.0
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inoncology.Sincethecompanywasestablishedin2013,we'veadded10newoncologyassetsthroughinternaladvancementorpartnershipefforts.TheStemcentrxacquisitionacceleratesourobjectiveofbecomingofaleadingoncologycompany.WelookforwardtospendingmoretimediscussingStemcentrx,includingtheirpipeline,atourupcomingR&DDayinJune.
InadditiontotheStemcentrxacquisition,lastweekwealsoannouncedtoyouearly-stageoncologycollaborations,includinganagreementwithArgenxfornovelimmuno-oncologytargetGARP,andanagreementwithCytomXtodevelopProBodydrugconjugates,aplatformwhichprovidesanotherdifferentiatedopportunitytocombinewithourstrengthinantibodydrugconjugates.
Beyondoncology,asRicknoted,wealsorecentlyenteredintoaglobalagreementwithBItodevelopandcommercializerisankizumab,anti-IL-23monoclonalantibodyinPhase3developmentforpsoriasis,andmid-stagedevelopmentforseveraladditionalindications.ThecollaborationpositionsthispromisingassetasAbbVie'sleadinvestigationalcompoundinpsoriasis,andcomplementsourrobustimmunologypipeline.
RecentPhase2studyresultsforrisankizumabinpatientswithmoderatetosevereplaquepsoriasisshowedimprovedefficacyoverSTELARA,acommonlyusedtreatmentforthislife-impactingskinconditionthatwasincludedinthestudyasanactivecomparator.Specifically,thestronghead-to-headresultsshowedthat,at12weeks,81%ofpatientstreatedwith180milligramsoftheBIcompoundachievedPASI90,morethandoubletherateachievedbypatientstreatedwithSTELARA.And50%ofthepatientstreatedwiththeBIcompoundachievedcompleteskinclearanceorPASI100,versusjust17.5%oftheSTELARA-treatedpatients.
We'repleasedwiththislevelofefficacy,asourimmunologydevelopmentstrategyiscentereduponidentifyingtreatmentsthatofferdifferentiatedprofiles,relativetocurrentlyavailabletherapies,withagoalofcontinuingtoraisethestandardofcare.
Beyondtheimpressiveefficacy,thisassetalsohasthepotentialtoofferafavorabledosingprofile,withsubcutaneousquarterlyadministration.
TheBIcompoundisalsocurrentlyinPhase2developmentforpsoriaticarthritisandCrohn'sdisease,withplanstoinitiateaPhase2Bstudyinpsoriaticarthritisinmid-2016,andthepotentialtotransitionintoPhase3developmentinCrohn'sdiseasenextyear.Wewillpresentmid-stageCrohn'sdiseaseinductiondataattheupcomingDigestiveDiseaseWeekorDDWmeetingnextmonth.
We'vealsodisclosepositiveresultsforseverallatestageprograms,includingmostrecentlyadditionaldataonanext-generationHCVregimen.
EarlierthismonthattheInternationalLiverCongressinBarcelona,wepresenteddataonourpan-genotypic,once-daily,ribavirin-freecombinationofABT-493andABT-530inpatientswithgenotypes1-6,includingdataontreatmentdurationsasshortaseightweeks.
Thedataillustratethatwitheightweeksoftreatment,97%to98%ofgenotype1-3patientswithoutcirrhosisachievedsustainedvirologicresponseat12weekspost-treatment.Additionally,100%ofgenotype4-6patientswithoutcirrhosisachievedSVR12with12weeksoftreatment.
Wealsopresentedlate-breakingdatainshowingournext-generationcombinationdrove100%SVR12with12weeksoftreatmentwithoutribavirinintreatmentnaivegenotype3patientswithcompensatedcirrhosis.
WhilerecentadvancementsinHCVtreatmenthaveresultedinhighcureratesformanypatients,thereremaindistinctareasofunmetneed,includingpatientswithgenotype3.Thesenewdataillustratethe
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potentialofournext-generationcombinationtoaddressthisneed.
AnotherareaofunmetneedispatientswhohavefailedprevioustherapywithdirectactingantiviralsorDAA's,asre-treatmentoptionsforthesepatientsarelimited.
Wepresenteddatashowingthat95%ofgenotype1patientswhofailedprevioustherapywithDAAs,achievedSVR12with12weeksoftherapywithouttheneedforribavirin.
Themid-stagedatawe'vedisclosedtodayindicatesthatournewHCVcombinationcandelivercureratesapproaching100%,andwebelievethemajorityofpatientswillbewellservedwithaneight-weektreatmentoption.Weexpecttoseeresultsfromthepivotalstudiesinthesecondhalfofthisyear,andweremainontrackforcommercializationnextyear.
WealsoannouncedpositivetoplineresultsfromthesecondoftworeplicatepivotalPhase3clinicaltrialsevaluatingtheefficacyandsafetyofelagolixinpremenopausalwomenwhosufferpainfromendometriosis.Trialresultsshowedthataftersixmonthsofcontinuoustreatment,bothdosesofelagolixmetthestudy'sco-primaryendpoints,withelagolixreducingscoresofmenstrualpainandnon-menstrualpelvicpaininmonththreeandmonthsix.
WeintendtopresentdetailedresultsfrombothPhase3trialsatamedicalconferencelaterthisyear,andwewillcompletetheclinicaldatabaseinanticipationofanewdrugapplicationsubmissionforendometriosisin2017.
Wealsocontinuetoadvancetheelagolixdevelopmentprograminuterinefibroids.DuringthequarterweinitiatedaPhase3programinvestigatingtheeffectofelagolixonheavybleedingrelatedtothishighlyprevalentcondition.
AsRicknoted,wereceivedtwoimportantapprovalswithinourhematologiconcologyportfolioaswell:theexpansionoftheIMBRUVICAlabelintofirst-lineuseforCLL,andtheinitialapprovalofournovelBCL-2inhibitorVenclexta.
WithIMBRUVICAandVenclexta,wenowhavetwotherapiesonthemarketforthetreatmentofCLL,addressingarangeofpatienttypes.WecontinuetoadvanceourdevelopmenteffortsforIMBRUVICA,Venclexta,andseveralotherassetsinouroncologypipeline.
WewillpresentdataacrossawiderangeofstudiesattheupcomingASCOmeeting.
We'vebuiltastrategicportfolioofoncologyassets,includingmultiplemechanismsofactionthathavesignificantpotential,aloneandincombination.
Soinsummary,wecontinuetomakesignificantprogresswithourpipeline,andareontrackforfurtheradvancementsin2016.Wehaveabroadpipelinethatincludesmorethan50activeclinicalassets,includingmorethan20newproductsorindicationsinlatestagedevelopmentorunderregulatoryreview.
WelookforwardtocoveringourfullpipelineinmoredetailatourR&DPipelineReviewtobeheldinChicagoonJune3.Wehopeyouwilljoinus.
Withthat,I'llturnthecallovertoBillforadditionalcommentsonourfirst-quarterperformance.Bill?
BillChase (CFO):
ThanksMike.AsRicksaid,weareverypleasedwiththestrongquarterwedelivered.
Netrevenueswereup22.4%operationally,andweexpandedouradjustedoperatingmarginprofileby
CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs
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300basispointsto43.1%ofsales.
Wereportedadjustedearningspershareresultsof$1.15,up22.3%overthefirstquarterof2015.Strongoperationalrevenuegrowthinthequarterwasinlinewithourguidanceforgrowthofjustabove20%.
Foreignexchangehadanegative4.2%impactonrevenueinthequarter,alsoinlinewithourguidanceofroughly4%negativeexchange.
WecontinuedtoseestrongmomentumfromHumira,whichdeliveredglobalsalesofmorethan$3.5billion,up19.2%operationally,excludingtheimpactofforeignexchange.
IntheUS,Humirasaleswerenearly$2.2billion,reflectingexceptionalgrowthacrossallthreemajorcategories,rheumatology,gastro,andderma.InternationalHumirasaleswerenearly$1.4billioninthequarter,up4.6%onanoperationalbasis,excludinganunfavorableimpactfromexchange.Thisexceededourpreviousforecastof3%operationalgrowth.CurrencyreducedreportedinternationalHumirasalesby9.2%.
Whileearlyinthelaunch,theEnbrelbiosimilaristrackinginlineorfavorabletowhatwehadmodeled.
GlobalIMBRUVICAnetrevenueswere$381millioninthequarter.USsaleswere$325millionandourinternationalprofit-sharingwas$56million.
GlobalVIEKIRAsalesinthequarterwere$414million.ThelaunchofVIEKIRAX,ourtwo-drug,once-daily,ribavirin-freecombinationforpatientswithHCVgenotype1B,isunderwayinJapan,leadingtocontinuedhighermixofinternationalsalesinthequarter.
GlobalsalesofDuodopa,ourtherapyforadvancedParkinson'sdisease,grew36.7%onanoperationalbasisinthequarter.Wesawcontinueddouble-digitgrowthinternationallyforDuodopa,withamodestlevelofUSsalesasexpected.
GlobalCreonsaleswere$151million,up18.2%operationally.Creoncontinuestomaintainitsleadershippositioninthepancreaticenzymemarket,withthemajorityofthemarketshare.
Theadjustedgrossmarginratiowas81.3%ofsalesinthefirstquarter,whichwasimpactedbythePharmacyclicstransactionandyear-over-yearimpactofforeignexchange.Excludingtheseimpacts,theratioisupover200basispoints.
AsImentionedearlier,wecontinuetoshowimprovementinouradjustedoperatingmarginprofile,whichincreasedto43.1%ofsales,up300basispoints.ExcludingtheimpactsofPharmacyclicsandforeignexchange,operatingmarginimprovedover600basispointsversustheprioryearquarter.Themajorityofthisimprovementwasdrivenbyefficienciesandourrapidlygrowingtopline.
AdjustedR&Dwas15.6%ofsales,reflectingfundingactionsinsupportofourpipelineassets.
AdjustedSG&Awas22.6%ofsalesinthefirstquarter,downsignificantlyfromtheprioryearonaprofilebasis,contributingtocontinuedimprovementinoperatingmarginleverage.
Adjustednetinterestexpensewas$200million,andtheadjustedtaxratewas20.7%inthequarter.
First-quarteradjustedearningspershare,excludingnoncashintangibleamortizationexpenseandspecifieditems,were$1.15,up22.3%year-over-year.
Duringthequarter,asaresultoftheeconomicconditionsinVenezuelaandthelackofavailabilityofUSdollarsatthegovernment'sofficialexchangerate,wechangedtheexchangerateweuseinVenezuelatothefloatingDICOMrate.Thisresultedinachargeof$298million,relatedtoadevaluationofournet
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monetaryassetsinVenezuela.ThiswillalsoimpactrevenuebookedforproductssoldinVenezuela.
IwouldliketonowwalkyouthroughthefinancialaspectsoftheStemcentrxtransaction.
WeareacquiringStemcentrxfor$5.8billion,withtheconsiderationbepaidoutas$3.8billioninequityand$2billionincash.TheuseofequityinthistransactionreflectsStemcentrx'smanagementandboardofdirectors'desiretoretainastakeintheasset,aswellasachieveatax-deferredstructure.
Uponclosing,weplantoexecuteanacceleratedsharerepurchaseprogramtoreacquireallofthenewlyissuedequity.Weanticipatethetransactiontocloselateinthesecondquarter.
Weareforecasting$0.28ofdilutionin2016asaresultofthetransaction,whichrepresentsahalf-yearofR&D,operating,andinterestexpense.
WeplantoprovidespecificsonStemcentrx'simpactonourP&LprofileduringthesecondquarterearningscallinJuly.
Weexpectthetransactiontogeneratepositiveoperatingmarginbeginningin2019,andEPSaccretionstartingin2020.
Giventhesefacts,weareupdatingour2016adjustedearningspershareguidancerangeto$4.62to$4.82toreflecttheStemcentrxtransaction.ThisrangereflectsEPSgrowthof10%atthemidpoint,andincludesthepreviouslycommunicated$0.08dilutiveimpactoftheBIcollaborationannouncedlastmonth.Itexcludes$0.75ofintangibleamortizationandspecifiedcosts.
SpecifieditemsrelatedtotheStemcentrxacquisitionwillbequantifiedandincludedonoursecond-quartercall.
Regardingthesecondquarter,weexpectadjustedearningspershareof$1.19to$1.21.Thisexcludesroughly$0.18ofspecifieditemsandnon-cashamortization,andincludestheBIandStemcentrxdilutionimpacts.
Weareexpectingmid-teensoperationalsalesgrowth,excludingaroughly2%negativeforeignexchangeimpactonthequarter.Asaresult,weareexpectinglow-teenssalesgrowthonareportedbasis.
Weareforecasting3%operationalgrowthforinternationalHumirainthesecondquarter.ExcludingVenezuelathisgrowthwould'veexceeded5%.Wecurrentlyexpectthenegative4%currencyimpactoninternationalHumirainthesecondorder,resultinginamodestdeclineyear-over-yearonareportedbasis.However,weremainontrackwithourpreviouslycommunicatedfull-yearguidanceforHumiraoutsidetheUS,includingthemid-single-digitoperationalgrowthexpectedinternationally.
Soinconclusion,weareverypleasedwithourperformanceinthequarter,aswe'vedrivenstrongtopandbottomlinegrowth,anddeliveredoperatingmarginexpansion,whilealsoadvancingonourstrategicpriorities.Thisputsusinastrongpositiontocontinuedeliveringindustry-leadinggrowththisyear.
Andwiththat,I'llturnitbackovertoLarry.
LarryPeepo (InvestorRelations):
Thanks,Bill.Andwe'llopenthecallforquestionsnow.
Operator,we'lltakeourfirstquestionplease.
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QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
JeffHolford,Jefferies.
Jef f reyHolf ord (Analyst-JefferiesLLC):
Goodmorning,everybody.Thanksfortakingmyquestions.
Sojustfirst,Stemcentrx,justbecauseit'sacompanywealldon'tknowsowell,canyoujusthelpusalittlebitmoreonthevaluation?Wasaprimarydrivenbythelastfinancingroundthatyoucite,orotherthingsintermsofpeaksalesexpectations,[thevisibleassets],that'sdrivingthat?
Secondlyalsojustonthattransaction,howmuchdatabeyondwhat'sbeenpubliclydisclosed,i.e.what,someofthedataperhapsiscomingfromASCO,wasmanagementabletoseebeforeagreeingtothisdeal?
AndthenmylastquestionisjustaroundtheupcomingIPR(inaudible-MicrophoneInaccessible),canyoujustconfirmtimingandexpectationsthere,18thofMay,andtheexpected,thesedecisionstobeconsolidated,andthenjustsecondlytothat,thereisapatent[adjustment]outtherethatpotentiallytakesa135patentoutto2028.Ifandwhenthat'sgrantedwhichseemstobeproceduralwillyouextendyourHumiraexclusiveguidanceonthebackofthat?Thankyouverymuch.
RickGonzalez6Okay.Hi,Jeff,it'sRick.SoI'lltakeIguessallofthosequestions.
Soasitrelatestothevaluation,Iwouldsayithadnothingtodowithwhattheirpriorroundvaluationwas,that'snothowwedoacquisitions.
Essentiallyhowwedoacquisitions,andyouprobablyrecallfromthePharmacyclicsdiscussionthatwehad,andIthinkit'stypicalwithinourindustryhowit'sdone,isyoubuildamodelthatultimatelyprojectsoutwhatyouthinkthecompanyandassetscando,andthenoffofthatmodel,youdeterminewhatthereturnwouldlooklikeatvariouspricepoints,whattheNPVwouldlooklike,andultimatelyyouhaveathresholdatwhich,thewaywedoitiswehaveathresholdatwhichwewon'tgoabove.
Andthenwegetintotheprocessandultimatelytrytovalidatethoseassumptions,andmakeadecisionastowhetherornotwewanttogoforward,andifwewanttoforward,thenwe'llobviouslynegotiateashardaswecantotrytogetitatthelowestpossibleprice.
Butmostlytheseareacompetitivekindofsituation,sowhatIwouldtellyouaboutthistransactionisthatIbelieveitisataverygoodvaluationforus,ithasagoodNPVbasedonthebasecase,whichwasessentiallyonsecondandthirdlinesmallcelllungcancer,andacoupleofotherindications,andithassignificantupsideifwemovedtofirst-lineormorebroadlyacrossthosecancersthatareDLL3positive.
Nowthosetrialsareongoing,sowedon'thavethatdata,sowedidn'tnecessarilybuildallofthosein.Ifthatweretooccur,youprobablysawthere'saCVRforfirst-linethattheinvestorswouldreceive,butIwouldtellyoufirst-linewillhaveavery,verystrongNPVaboveandbeyondwhatwefactoredinhere.Butwiththebasecase,thishasaverygoodNPVandaverygoodIRR,soIcanjusttellyou,Ifeelgoodaboutthevaluation.
Asfarasthedataisconcerned,wehaveseenasignificantamountofdataaboveandbeyondwhatispublicnow.Weobviouslyneedtobecarefulaboutwhatwetalkabout,becausesomeofthatdatawillpresentedattheASCOmeeting.Ithinkwe'vegivenyouaprettygoodideaofwhatyou'relikelytoseeat
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theASCOmeeting.ButIcantellyouthatwehaveseenallthedatathatwasavailabletothemanagementteam,andwe'reimpressedwiththatdata.
SoIcantellyouI'mvery,veryexcited.We'velookedforquitesometimenowforasolidtumorplatformplay,andthey'rehardtofindinthismarket,andIthinkifyoulookattheproductivityofthisgroupandthenoveltherapeutictargetsthattheyhavebeenabletocomeupwith,andtheirhitrateonthosetargetsissignificantlyaboveindustryaverage.
Andthewaytheyapproachitisprettyimpressive,andthefactthatthisisfocusingtoagreatextentoncancerstemcells,andIthinkthere'sastrongbeliefthatifyoucanknockout[un]certaincancerstemcells,youcandramaticallyimpactthecourseofthatdiseaseforthosepatients,andIthinkthedatawillspeakforitselfwhenit'savailableandyoucantakealookatit.
Sowe'reimpressedwiththis,wethinkRova-Tisaverygoodassetandgivesusagoodstrongpositioninsolidtumorsgoingforward.
OntheIPRsaswe'vesaidbefore,we'renotgoingtotalkalotabouttheprocessnowthatwe'reinlitigation.Icananswermaybeoneortwoofthesequestions.Wedon'thavetheabilitytopredictthetiming.Youhavethedatecorrectthatyoudescribed.Soitshouldoccursometimenolaterthanthatdate.Wedon'tknowwhetherit'llbeconsolidatedornot.Andwe'renotgoingtocommentontheissuanceofthepatentandwhatwewoulddointhatscenario.Okay?
Jef f reyHolf ord (Analyst-JefferiesLLC):
Thanksforamuchandcongratulationsonthedeal.
Operator :
ChrisSchott,JPMorgan.
ChrisSchott (Analyst-JPMorgan):
Great,thanksverymuch,justacoupleonthedealtoday.MaybefirstcanyoujusttalkaboutthecompetitivelandscapefortheDLL3target,orjustothercompaniesworkingoncancerstemcellsasanADCtarget?
Secondquestionwasonthe$0.20ofdilutionthisyear,I'mjusttryingtogetasenseofwhatit'sgoingtolooklikeoutin2017,shouldwebethinkingaboutsomethinglargerthan$0.40aswegetthefullyearimpactandasyourampR&Dassociatedwiththeseassets?
Andthenthefinalonewasjust,postthisdeal,canyoujustgiveussomesenseofthepositionthecompanyhastopursuelargertransactionsiftherightopportunitywereoutthere?ShouldwethinkaboutStemcentrxasthetypeofsizeandprofileyou'relookingfor,orcouldyoulooktogetmoreaggressiveastheyear,oraswegetto2017,iftherightdeal'soutthere?Thankssomuch.
MikeSeverino (EVPR&DandChiefScientificOfficer):
SothisisMike,I'lltakethefirstquestionwithrespecttothecompetitiveenvironmentforRova-T,andsomeoftheotherprogramsthatStemcentrxhasbeenworkingon.
AndwhatI'llsayisthatoneofthethingsthatreallyimpresseduswithStemcentrxisthenoveltyoftheirplatform.They'veinvestedearlyinthistechnology,theyhavedevelopedgreatexpertise,andtheyareoutintheleadinalloftheareasthatthey'repursuing.SoDLL3isoutinthelead,it'sdemonstratedverycompellingresults,andwethinkit'sanassetthathastremendouspromiseandwillreallychangethestandardofcare.
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AndIthinkifyoulookatalloftheprogramsthatStemcentrxisadvancing,there'sahighdegreeofnoveltyandverystrongsignsofactivityfromtheirfirstthreeclinicalprograms,sowefeelverygoodabouttheirpositioninthecompetitiveenvironment.
BillChase (CFO):
Soonthedilutionhere,aswesaidthe$0.20thisyearrepresentsroughlyahalfyearofthecurrentburnratethatStemcentrxisshowing,aswellastheadditionalfinancingcosts.
Ithink2017weneedtoget,inlookattheclinicalprograms,butobviouslywearegoingtoinvestappropriatelyonRova-Tandtheotherassetsinordertomaximizethevalueoftheasset.
What'sniceaboutthistransaction,though,isin2018we'regoingtobebringingtheproducttomarket,andwethinkgiventheclinicaldatathathasbeenshownsofar,we'regoingtohaveafairlyimpressiveuptakeonRova-T,andthatwilloffsetthatdilutionprettyquickly,andin2020weseethedealbeingaccretive.
RickGonzalez (ChairmanandCEO):
Okay.Chris,thisisRick.TheonlythingI'daddonthe,Iknowwhatyou'retryingtodo,you'reobviouslytryingtomodelorincorporateintoyourmodelwhattheR&Dimpactwillbeon2017.Ithinkthat'swhatyou'retrying,todobasedonyourquestion.
AndI'dsayaswefactoredinthisnumber,andaswelookat2017,itcertainlyincorporatestheassumptionsthatwe'vemadearoundtheexpansionintoothertumorsthatareDLL3positive.ItincorporateswhatMikedescribedasthefirstlinetrialsthatultimatelytheirpursuingwithRova-T.
Theonepartthatitprobablydoesnotincludeatthispoint,andwejustneedtoworkonitsomemore,wouldbewealsobelievethatthiscouldbeasynergisticstrategyinfirst-linewithimmunotherapy.
Andtheyhavewalkedusthroughaplanwherepotentially,asanexample,Rova-TcouldbeahighlyspecificdebulkingagentonthefrontendforDLL3positivepatientsinsmallcell,andknockingoutthestemcellsintheprocesswhichtraditionalchemotherapydoesnotdotoday.Andthenyouwouldgetthediseaseundercontrolanddebulked,andyouwouldfollowitwithimmunotherapyforlongertermmaintenance.Andsothey'velaidoutsomeplansaroundthat,andthathasnotbeenincorporatedtothispoint.Sothatwouldbetheonlything.
Now,weobviouslyhaveasignificantR&Dbudget,andwewouldlookathowwenormallydoR&Disweaddeverythingupandthenwemakeadecisionwherewedrawtheline,andwe'regoingtobeconsciousofthat,soI'mnottellingyouthatwouldbeincremental,butwhatI'mtellingyouisthat'stheonethingthat'soutsidethescopeofwhat'sinthecurrentR&Dplanned(inaudible-MicrophoneInaccessible).Sohopefullythatgivesyousomeclarityaroundthat.
OntheM&Afront,similartothecommentsthatImadeearlier,wehavebeenlookingforasolidtumorplatform.Ithinkwemadethatsomewhatclearthatthatwassomethingwewereinterestedindoing.Iwouldsaythiscameinatavaluationthatwassignificantlybelowthenumbersthatwehadflaggedbefore.
Butwearelookingtobalancenear-termperformanceagainstmakingsurethatwebuildasignificantportfolioofassets,outinthat2020andbeyondperiod,thatcancontributetodeliveringstrongEPSgrowthandstrongrevenuegrowth.
ButI'dsaywherewearerightnowiswehavealotofthingsgoingrightnow,andwe'vefilledalotoftheneedsthatwehave,andsoIwouldnotexpectthatwewillgooutanddoanothersignificanttransaction,
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andobviouslyPharmacyclicswasasignificanttransaction,butI'mtalkingaboutevenatransactionofthissize,soIthinkforthenextcertainly18monthsorso,ifweweretodoanything,itwouldprobablybemoreofaBIkindoftransaction,moreofasingleasset,mightbeanin-licensingkindofatransaction,andIthinkbasedonthefactthatwehavedeliveredsomelevelofdilutionhere,wewouldhavetobeinapositionwherewewouldabsorbthedilutiongoingforward.Sohopefullythatanswersyourquestion.
ChrisSchott (Analyst-JPMorgan):
That'sgreat,thankssomuchforthecolor.
Operator :
JamiRubin,GoldmanSachs.
JamiRubin (Analyst-GoldmanSachs):
Thankyou.IjustwanttofollowuponsomeoftheStemcentrxquestionsandcongratulations.Butclearlythewholesortofstemcellbasedfocushasbeenfraughtwithchallenges,andI'mjustwonderingmaybeifyoucouldreplytothespecificquestions,whatgivesyouconfidencethatsigning[frommouse]modelstranslatestohumancancers,andalsowhatgivesyouconfidencethatsmallcelllungcancerdatawilltranslatetoothertumortypes?
AndwasalsocurioustoknowhowStemcentrx'sADCtechnologydiffersfromotherADCplayers?
Andthenafollow-upquestion,andsorryaboutthis,butjustafollow-uponanearlierquestion,ifyoucankindofplayoutthescenariooftheupcomingIPRwhichinvestorsareobviouslyhighlyfocusedon,whatistherightanalyticalframework,Rick,thatweshouldthinkaboutthis,intheeventthat(a)theIPRisheardoritisdismissed,justinrelationtotheoverallIPpictureanddurationofHumira.Thanksverymuch.
MikeSeverino (EVPR&DandChiefScientificOfficer):
Allright,soIwill--thisisMike--IwilltakethefirstofthoseandthenRickmaywanttoaddsomefollow-up.
Sowithrespecttocancerstemcells,youknowwhatIwouldsayiswe'vehadafairamountoftimetogetverycomfortablewiththeplatformthatStemcentrxhasdeveloped,andwebelievethattheyaredoingsomethingreallynovelhere.
Intermsofunderstandinghowmousemodelsmighttranslateintohumanclinicaltrials,orultimatelyclinicalbenefit,wecertainlyrecognizethatthattranslationalleapisoftenfraughtwithperil,butinthiscasewedon'thavetowonder.We'veseenthefirstthreeassetsmoveintotheclinicshowingstrongactivity.
Andsotheyhavedemonstratedwiththeirfirstthreeclinicalassetsactivityinsmallcelllungcancer,triplenegativebreastcancer,andovariancancer.Sotherearehumandatatobackuptheirhypothesis,notonlyonetimebutthreetimesinarow,andobviouslybeingrightthreetimesinarowinthisbusinessdoesn'thappenbychanceveryoften.
Sowithrespecttoourconfidencethatsmallcellcancerwilltransfertoothercancers,thesetofcancersthatwe'retalkingaboutallshareneuroendocrinefeatures,asdoessmallcell,andStemcentrxhasdonealargeamountofworktounderstandtherolethatDLL3playsbiologicallyinthesetumors.
Andweknowbasedontheworkthattheyhavedone,thatDLL3isplayingthesameroleacrossthesetumors,andsothat'swhywehavemuchgreaterthanaverageconfidencethatwhatwe'reseeinginthosepre-clinicalstudiesandothertumorswilltranslateintothebasketstudythatthey'rerunning.SoasRicksaid,we'veseenalotofdatahere,andwefeelverygoodaboutthisopportunity.
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WithrespecttotheADClandscape,StemcentrxhasshownthattheyareverygoodatgeneratinghighlyselectivemonoclonalantibodiesthatmakegoodreagentsforADCs,andtheyalsohavethelinkertechnologyandthetoxintechnology,allfullyintegratedwithintheircompany,torapidlyproducetheseADC's.AndagainIwouldsaythattheirclinicaltrackrecordspeaksforitself.
Sowiththat,I'llturnitovertoRickfortheotherquestions.
RickGonzalez (ChairmanandCEO):
IguesstheonlythingI'daddonthatfirstsetofquestions,Jami,istherealityishumandatatrumpseverythingelseinourbusiness,right,soIthinkyoucaninterpretfromthat,wehadtogetcomfortablewiththehumandatathatwesaw,andtheimpactthatithad,tomakethedecisionsthatwemade,andasthatcomesoutIthinkyouwilldrawyourownconclusions,obviously,butIthinkthatwillbeinformativeasitcomesoutforyou,okay?
IwanttomakesureIunderstandyourIPRquestion,soI'mgoingtoaskyoutoaskitonemoretime.
JamiRubin (Analyst-GoldmanSachs):
Okay.SoIjustwantyoutokindofframethelandscapeforus,becauseinvestorsarehyperfocusedonthisupcomingCoherusIPR.IftheIPRisthrownout,Ithinkthat'sprettyclear,butifitisheard,helpustounderstandthesignificanceofthat,inthecontextofyouroverallIPsurroundingHumira.
RickGonzalez (ChairmanandCEO):
Yes,okay.Thankyou.Ifyouthinkaboutthisprocess,theprocesswewillgothroughis,ifthepatentofficemakesadecisionwhetherornotthere'senoughevidencetoevenreviewthepatent,that'stheprocessthat'sgoingtooccurhereintheMay/JunetimeframewiththeIPRs.
Andsoallitisis,isthereenoughintheclaimofthecompanychallengingtheIPtoevenmakeadecisiontoreviewit?
Ifthepatentofficedecidesthatisthecase,thentheywillreviewit,andthere'llbeaprocessthatwegothrough,that'swell-documentedofhowwedefendthepatent,andintheprocessthechallengerwouldgothroughaswell.Thattakesabout12months.
Attheendof12months,therewouldbeadecisiononthepatent.Anddependinguponwhichwaythatdecisionwent,ifitwentforusthenobviouslythepatentwouldbeupheldandwouldbeobviouslystrengtheneddramatically.Ifnot,thenwehavetherighttoappeal.
Sothat'stheprocess,andIthinkthatessentiallydefinessortoftheimplicationsoftheprocess.Ifitgetsturneddownonthefrontend,similartowhattheformulationpatentwithAmgendid,thenobviouslythatcreatesaverysignificanthurdleforthecompanythat'schallengingit.Sothosearetheimplicationsofit.
JamiRubin (Analyst-GoldmanSachs):
Thankyou.Iappreciateit.
Operator :
DavidRisinger,MorganStanley.
DavidRisinger (Analyst-MorganStanley):
Thanksveryamuch,andcongratsonthenewsthismorning.Ihavethreequestions.FirstwithrespecttoStemcentrx,couldyoujusttalkabouthowyouplantointegrateandretaintheemployeesnowthat
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they'regoingtobepartofamuchlargerpharmaceuticalcompany.
Second,couldyouexplaintheStemcentrx-Pfizerpartnership,andhowyouexpectthattoevolve?
Andthenasanaside,AbbViedoesn'ttalkmuchaboutyour50-50fundingalongwithGoogleofCalico,butobviouslyyouhavemadeasignificantinvestmentthere,andCalicoisquiteaninterestingcompanygivenitsleadership.CouldyoujustupdateusonthepipelineatCalicoaswell,please?Thankyou.
RickGonzalez (ChairmanandCEO):
Okay.SoDavid,thisisRick,I'lltakeprobablythefirstofthoseandmaybesomepartofthesecond,andImayaskHenrytochimeinonthesecondpart.AndI'lltaketheCalicooneforyou.
SoImeanobviouslyanimportantpartofthesekindsofcompaniesisretainingthepeople,andparticularlywhenyouthinkaboutthiskindofacompanywherealotoftheintellectualpropertyofthecompanyisthat,right,it'stheintellectualhorsepowerofthepeople.
AndIwouldsaywehavebeeninteractingwithStemcentrxnowforanumberofmonths,wellbeforethisprocessstarted.Andsowe'vehadachancetogettoknowtheteam,andgettoknowtheleadershipwithintheteam,andtheyhadadecisiontomake,right,theycould'vegonedowntheIPOroute,theycould'vecollaboratedwithsomebodyandgonedowntheIPOroute,iftheywantedto,andIthinkbasedonthekindofassettheyhaveinRova-T,theycertainlywouldhavehad,eveninatoughIPOmarketasitistoday,Ithinktheywouldhavehadtheabilitytobeabletodothat.
Ortheycoulddoatransactionlikethetransactionweendedupdoingwiththem,andIthinkoneofthedecidingfactorsforthemwaswhatthey'rereallygoodatandwhattheylovedoingisessentiallygoinginanddiscoveringnovelmarkersandcreatingdrugs,sogoingtothediscoveryandearlydevelopmentprocessandtheydemonstratedtheycandothatinahighlyefficientandeffectiveway,andtheycandothatvery,veryrapidly.
IftheywentdowntheIPOroute,theyhadtobasicallybuildalltheotherinfrastructurethatafullyintegratedbusinesswouldneedtohave,includingallthecommercialandmedicalaffairsandglobalclinicaldevelopmentgroups,inordertobeabletoexecuteafullyintegratedstrategy,andIthinkastheylookedatthat,Ithinktheyhadconfidencetheycoulddoit,butitwouldbeatremendousamountofeffortontheirpartandtheirleadershipteamtobeabletodothat.
Whentheylookedatcomingtogetherwithus,theyultimatelysaid,look,wecandothepartthatwethinkwe'regreatat,andwecanplugintowhatyoualreadyhaveforallthoseotherthings.Theglobalclinicaldevelopmentgroupthatwehave,themedicalaffairsgroupthatwehaveallaroundtheworld,thecommercialorganizationthatwehaveallaroundtheworld.
Andsotheyperceivedittobeawin-win.SoIthinkthat'sthefirstthing.Winningtheirheartsandtheirmindsthroughthatprocesswasanimportantaspectofit.
SecondaspectofitwasthatobviouslytheCVRs,alloftheleadershipteamandmanyoftheemployeeshaveeitherownershipinthecompany,andtheyhavestockoptions,right,sotheseCVRsareprettyimportanttothem.TheycanextractatremendousamountofvaluethroughthatprocessiftheydeliveragainstthoseCVRs,andIcantellyouthat'saprettyhealthyfinancialincentiveforthemtostayandexecuteagainstthose,andIcantellyouintheinteractionsthatIhadwiththem,wehadwiththem,Ishouldsay,Icantellyouthat'sanimportantpointtothem.
Thirdthingistheywantedastocktransaction.Nowtheywanteditsomewhatfortaxpurposes,buttheyalsowanteditbecausetheywantedtobelievethattheycouldshareintheupside,andsomeofwhattheyagreedtodowiththeiroptionsonlyreinforcedthat,meaningtheirStemcentrxoptionsandwhat
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theywillbecomeandhowthatvaluewillbederived.
AndsoIthinkthere'saveryhighlikelihoodthatwewillretainthekeypeopleinthis,andIthinktheylikeourcultureandtheyliketheenvironmentthatwereoperatingin,andsoItellyouIhaveafairlyhighlevelofconfidence.
AndIthinkPharmacyclicsdemonstrates,youknow,wehaveretainedallofthekeyclinicaldevelopmentpeople,andI'vespenttime,Mikehasspenttimewiththatteam,Ithinkthey'reveryhappybeingpartofAbbVie.Andtheygettoexecutetheirstrategythattheywantedasanindependentcompanyaswellorbetterthantheycould'veasanindependentcompany.SoIfeelprettygoodaboutthatbutit'sanimportantpoint.
OnthePfizertransaction,it'ssomethingwewanttobecarefulwithbecauseI'mnotsurewhattheirconfidentialityagreementis.Henry,youwanttocommentanythingonit?
HenryGosebruch (EVPandChiefStrategyOfficer):
Yes,justbeclearPfizerdoesnothaveanyrightsRova-Tatall.WedidputoutsomeslidesthismorningandyouseethatthereisfouradditionalassetsinPhaseI,andobviouslythere'sanumberoflatepre-clinicalassetsbehindthere.TwooftheseassetsPfizerhassomerightsto,butwereallycan'tgointofurtherdetailsonhowthosedealsarestructured.Butagaintobeclear,thatistheextentofthePfizerrelationship.
RickGonzalez (ChairmanandCEO):
Theothertwoassetstheycanoptin.
HenryGosebruch (EVPandChiefStrategyOfficer):
Correct,theycanoptin,backinoneofthem.
RickGonzalez (ChairmanandCEO):
Sothereforewecanoptin,backononeofthose,ifwechooseto.SoIthinkthatprobablygivesyouasmuchaswecangiveyouaroundthePfizercompounds.
OnCalico,I'mgoingtohaveMiketalkalittlebitaboutthepipeline,butyes,thatisatransactionthatwedidaboutayearorsoagonow,andwhenyoulookattheindividualsthatCalicofirststartedupwith,ArtandHalandothers,they'veassembledaverytalentedteamandthatwasthebigreasonthatweultimatelydecidedtodosomethingwiththem.
Butessentiallywhatwehaveisweco-fundadiscoveryefforttofindnewinnovativetargetsinanumberofdifferentareas,oncologies,oneofthem,diseasesoftheagingisanother,neurodegenerativediseasesisanotherareathatultimatelywehavealotofinterestin.
Andthewayitworksisessentiallywecanoptinonanythingthat'sdiscoveredthere,andthere'sapointwhichwetakeitover,wehavecommercialrightstoit,andthenthere'sbasicallya50-50profit-sharingarrangementbetweenusandCalico.
SoessentiallywehaverightstoanythingoveracertainperiodoftimethatisdiscoveredwithinCalico.Mikeworkscloselywiththeteam,soI'mgoingtoaskhimtotalkalittlebitmoreabouttheprogressthatthey'remaking.
MikeSeverino (EVPR&DandChiefScientificOfficer):
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Sure.SooneofthethingsthatIthinkisveryimportanttonoteintheCalicocollaborationisthatthere'saverystrongscientificandculturalfitbetweenourteams.Andthatwasoneoftherealdriversbehinddoingthatdeal.TheCalicoteamisobviouslyverytalented.Theyhavealongandverysuccessfultrackrecord.Ourteamsareworkingtogetherverywell,we'readvancinganumberofprograms.
Butofcoursewedoneedtokeepinmindthattheseareearlydiscoveryprogramsthathavebeeninitiatedinthelast12to18months,soweintendtomoveveryquickly,butittakesabitoftimebeforeprogramsarereadyforclinicalintroductionandnewsflowthatyou'dexpecttohearinthissortofsetting.
SowhatIwouldsayistheculturalfitisgreat.We'vemadegreatprogressbuildingupthesetofprogramsintheareasthatRickmentioned,thatIthinkareverygoodfitforouroverallstrategy,andweremainveryoptimisticabouttheCalicopartnership.
DavidRisinger (Analyst-MorganStanley):
Great,thankyouverymuch.
Operator :
MarcGoodman,UBS.
MarcGoodman (Analyst-UBS):
Yes,morning,maybewecantalkalittlebitaboutjustthebusinessforasec,VIEKIRAwasalittlebitweak,maybeyoucantalkabouttheUSversusinternational,howJapanisdoing,USseemstobefallingoffquiteabit,Imean,wejustlosingshare?Giveusasenseofwhat'sgoingonthere.
Second,HumiraintheUS,Iwasjustcurious,obviouslywe'veseenquiteafewpriceincreasesifyoulookoverthepast12months,andIwascuriouswhetheryouarestillbeingabletogetthesameamountofpricedroppingtothebottomlineasyouhavebeeninthepast,iftherewasmorepressureonthat?
Andthenthirdcanyougiveusanupdateonwhatwe'regoingtoseeitASCOforthebroaderportfolio?Thanks.
RickGonzalez (ChairmanandCEO):
SothisisRick.I'lltakeVIEKIRAandBillcantaketheHumiraquestionandwillhaveMikecovertheASCOquestion.
SoVIEKIRA,letmestartwithJapan.Japaniscontinuingtotrackconsistentwithourexpectations.SoIthinkthere'snothingallthatremarkableinJapan,it'sagoodmarket,ourprofilewithinthatmarketisagoodprofile.
TheUShascertainlybeenmorechallenging,Iwouldsaythatit'sacombinationofseveralfactors.Somevolumeloss,aswellassomepriceloss.AsMerckhasenteredthemarket,weknowthattheysetthelistpricelowerthantheotherproductsinthemarketplace.ThatstrategyinitiallyIthinkweinterpretedasastrategythatwouldgoaftermedicalexceptions,becausemedicalexceptionshistoricallyareinatmoreofalistpricepoint,andsotheyhadthelowestpriceessentiallyonamedicalexceptionbasis,andtheyhavebeensomewhatsuccessfulingainingsomeofthosemedicalexceptions.Sothat'spartoftheissue.
Thesecondpartoftheissuethoughis,theyhavebeenmoreaggressivethanweanticipatedfromapricingstandpoint,particularlyinthepublicsegments,theVAinparticular.Andaswelookedatthat,weultimatelymadethedecisionthatwewerenotgoingtocompetewiththelowestoverallpriceintheVA.Wedidadjustourpricedown,butwedidn'tadjustitdowntotheverylowestprice,andthathascausedustoobviouslyloseprice,butalsolosevolume,andwehadafairlysignificantshareofVA.
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SoIthinkitisthosefactorsplayingout,andIwouldsaythatbasedonwheretheUSisgoing,itisunlikelythatwewillachievethe$2billionnumberthatwedescribedearlier.Ithinkanumberthatyoushouldbethinkingaboutnowismoreinthe[onesix]range,globallyI'mtalkingabout.
Andyoucanlookatthisquarterasanexample,eventhoughVIEKIRAwasweakerthanweexpected,weobviouslybeatourEPSnumberandachievedourrevenuenumbers,soittalkstothe[strength]oftherestofthebusiness,that'sthenicethingaboutourbusiness,iswehavegoodbalancedperformanceacrossanumberofdifferentassets,andsowhenonethingdoesn'tgoaswellaswehadhoped,thenotherscanpickuptheslack.
Sowewillnotbechangingourguidancebasedonthis.Wefactoredthatintoourgoing-forwardguidancein2016andwe'recomfortablewiththeguidancethatweprovidedyou.ButthosearethefactsaroundVIEKIRA.
BillChase (CFO):
SoMarc,onaHumirapricingintheUS.Look,obviouslywecontinuetoputupprettyimpressivenumbersintheUS.Ifyoulookatscripttrends,itwasupover16%,sothere'sa,themajorityoftheincreaseinQ1isrelatedtovolumebutpriceisacomponent.Nowthecategoryhastakensomepriceinthelastfourorfivemonths,wedidaswell,andwedon'tseeanymajorshiftrelativetowhatwe'vebeenexperiencingoverthelastfewyears,butobviouslywe'rekeepingoureyeonit.
MikeSeverino (EVPR&DandChiefScientificOfficer):
SowithrespecttoASCO,we'llobviouslybeseeingtheRova-TdatathatwetalkedaboutinsmallcelllungcancerwhichisthatBestofASCOpresentation.
VenclextaalsohasaBestofASCOpresentationwhichcomesfromtheprograminAMLincombinationwithhypomethylatingagents.TherearenineadditionalabstractsforVenclextathatwillbepresented,updatingacrosstherangeofstudiesthatarebeingconductedwiththatmoleculeinnon-Hodgkinlymphomaandothersettingsaswell.
You'llstarttoseeadditionaldatafromADCsthatwe'reintroducingintotheclinic.There'llbeupdateddataonABT-414.You'llstarttoseedataonsomeofournewerADCs,andwecontinuetohaveanumberofprogramsthatwillbemovingintoclinicaldevelopmentinoncology.
Sooverallwe'regoingtobeveryactiveatASCO,andofcoursewe'realsohavingourR&DDaytocoincidewiththetimingofASCO,soyou'llseeabroadupdateonourpipelinethere.
Operator :
AndrewBaum,Citigroup.
AndrewBaum(Analyst-Citigroup):
Hi,threequestions,please.FirstontheStemcentrxtransaction.Couldyouprovidealittlebitmoredetailontheearnoutthepressreleasereferences(inaudible-MicrophoneInaccessible)andyoumentionedinpassingthefirst-lineindication,butifyoucouldprovidesomemoregranularitythatwouldbegreat.
Second,Iwouldimaginethiswasacompetitiveauction,given,wellespeciallyasStemcentrxhasgotafinanceprofessionalasaCEOandseveralhigh-profiletechinvestorsinvolved.Perhapsyoucouldjustgiveusasenseofthecompetitivedynamicsasyouthinkaboutvaluations.
SecondinreferencetoyourcommentonyourIL-23.Youhighlighteditasyourprioritycompoundinpsoriaticarthritis,andwhat'sthefutureforABT-122?Doyouintendtoproceedineitherpsoriaticarthritis,
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orinRAforthatcompound?
Andthenfinallymorebroadly,nowthatyou'vegotalungcandidateinyouroncologypipeline,howyouthinkaboutaugmentingthatcompoundgoingforward?
RickGonzalez (ChairmanandCEO):
SoAndrew--Henry,whydon'tyoucoverthemilestonesandthenwecantalkalittlebitaboutfirst-line.
HenryGosebruch (EVPandChiefStrategyOfficer):
Andrew,sothereareintotal$4billionofmilestones.$2billionrelatetothefirst-lineapprovalthatRicktalkedabout.Sothatapprovalis$2billion,andit'squalifiedbyafavorablepositionintheguidelinesatthetime.AndasRicktalkedaboutwebelievethatwouldcreatesignificantlymorevaluethanthat$2billion.
Inadditionthere'sasecond$2billion,andthatrelatestofourindividual$500millionmilestones,sototaling$4billion,andthoseareforthecommencementofregistrationtrialsforadditionalassetsinindicationsthatwouldbeatleast$1billioninrevenuepotential.Sothatis$500millioneach,foratotalof$2billion,andthenwiththefirst-line,$4billionintotal.
RickGonzalez (ChairmanandCEO):
Soonthosesecondsetofmilestones,justtobeclear,they'reindividuallyearned,right,soiftheytakeoneassetandtheymoveitthrough,andwetakeittoaregistrationstudy,andwedeterminethatthatassetinthatindicationwouldgenerateacommercialassetthathadgreaterthan$1billionworthofrevenue,thenwewouldpaythem$500million.
Andtheniftheydoasecondoneorathirdoneandafourthone,theycangetuptofour$500millionmilestones.Sothat'showthecontingentpaymentsarelaidout.
Onthecompetitivedynamics,itwasacompetitiveprocess.Itwasrelativelyblindtous,sowedon'tknowwhotheothercompetitorswere,butwedoknowthereareotherplayersthatwereinvolved,andI'dsayitendedupbeingusandoneotherplayerattheveryendwhowerecompetingfortheassetthroughthatprocess,andultimatelyasItoldyouonthevaluation,it'sconsistentwithwhatIdescribedtobefore.(inaudible-MicrophoneInaccessible).
Ifyoulookatwhatwewerepayinginthebasecaseforthisasset,andyoulookatthebasecaseforecastwithoutfirst-lineinit,ithasasignificantlypositiveNPVandwellabovethethresholdatwhichwelookatthecutoffforIRRs.
Andsothisisatransactionthatwefeelverycomfortablewithfromafinancialstandpoint,andwe'veobviouslybuiltintheupsideforfirst-line,becausewedon'thavedataonfirst-linerightnow,andwedidn'twanttobeinapositionwherewewerepayingforsomethingthatwedidn'tknowwhatitwasgoingtolooklike.Wewereverycomfortablewithsecondandthirdlinebecausewesawdatathatsupportedthathumandatathatsupportedofthat.
IdobelievebasedoneverythingI'veseen,andIthinkMikeandothersbelievethatthereisahighprobabilitythisassetwillmoveintofirst-line,butwe'regoingtopursueitaggressively,andiftheydotheywillgettheincrementalreward,andwewillobviouslygettheincrementalawardofbeingabletomoveintothat,andwehavespecifiedhowtheguidelineshavetocharacterizetheassetthatitwouldbeabroad-basedfirst-lineagentinorderforthatmilestonetobepaid.(inaudible-MicrophoneInaccessible)OntheBIand122Mikewhatyoucoverthat.
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MikeSeverino (EVPR&DandChiefScientificOfficer):
Certainly.SotheBIcompoundwhichisnowcalledrisankizumabtheantibodytheseareleadassetandpsoriasisandIthinkthedataclearlytherethatoutIthinkbasedonwhatweknowaboutthepathwayandmakessensetomakethatsamestatementaboutpsoriaticarthritis.
Wereverypleasedwiththedatawe'veseentodatewethinkthere'sreallytremendouspotentialforthatasset.WithrespecttoABT122whichisourIL17TNFDVDwearebeengoingtobeseeingthisstagedatainternallyinthemiddleofthisyearsoshortlywillprobablybeinapositiontopresentthatexternallyaroundtheACRtimeframeandsowillmakeadecisionwhenwehavethosedatabutwhatIcansayistomoveforwardwiththosemoleculesitwouldhavetofitourstrategywiththatmoleculewithABT-122itwouldhavetofitourstrategytoraisethebaronthestandardofcare.
Sowewouldbelookingfordifferentiatedefficacycomparedtonotonlywhatwehaveinourownportfoliobutwhat'savailableexternally.Andsowillbemakingthedecisionlateronthisyear.WithrespecttoyourquestionaboutourpresenceinlungcancerwesetforquitesometimethatwewanttobuildourpresenceinsolidtumorsIthinktheStemcentrxacquisitionclearlydoesthatitgivesusabroadplatformaswellasaverypromisingleadassetandotherclinicalassetinmindthat.
Sowe'regoingtocontinuetobuildonthatpresencenotonlywiththedevelopmentandgoingtocomesfromStemcentrxbutwithourinternalpipelineandIthinkyou'llseethatwehaveanumberofprogramsthatcouldbeapplicabletolungcancerandothersolidtumorsthatwillbemovingthroughtheclinicshortly.
AndthenontheM&Ait'sconsistentwithwhatIdescribedearlieryoubelookingforthosekindsofassetswecontinuetoevaluatethingsthatareinthemarketplaceandwebuiltafairlyextensivepipelineinternallyandbutobviouslywecontinuetolookontheoutsideforthoseassetsthatlookinterestingandbutitwillbeofaprofileinvestmentprofileofwhatIdescribedtoyouamomentago.
Operator :
MarkSchoenebaum,EvercoreISI.
JohnScott i(Analyst-EvercoreISI):
Goodmorning.ThisisJohnScottiinforMark.JustafewquestionsifImay.ThefirstoneStemcentrxIrecalllastyearwhenyoupurchasePharmacyclicswithIMBRUVICAyougavealotofhelpfulcoloronhowyoubuildupinyourmodeltothepeakcellsanduserpeaksaleIMBRUVICAyousortofbrokenoutbyindicationlineoftherapyandgavesomecoloronwastojustdoyouthinkyoucoulddothesamethingforRova-Tandthe$5billionnumberyouputoutthereintermsofwhatyeardoyoumodelpeakyoutalkingsmallsolongotherindicationsandsomemoregranularcoloronhowyoubuiltuptothenumber.
thenthesecondquestionnowthatyouhavepurchasedStemcentrxandyoulicenseIL23fromtheIcanyougivealittlebitmorecoloronhowyouseetheR&Dlineevolvingoverthenextyearspecificallywith2020guidanceareyougoingtobeabletokeepholdessentiallythegreaterthan50%non-GAAPoperatingmarginguidancethatyouputgivenpreviouslyorshouldweexpectthattohavetocomedownabitbelowwhatyou'vegiven.Thankssomuch.
AsfarasthemodelobviouslywewentthroughthemodelinsomelevelofdetailaroundPharmacyclicsonebecauseofthemagnitudeoftheinvestmentweweremakingandwedescribedwhatsupportedthatinvestmentinhowwebuiltatthemodel.WhatIcharacterizeforyoualreadybasicallytellsyouhowwebuiltthismodelisbuiltprimarilyaroundsecondandthirdlinewhichwebelievesmallcellwhichwebelievehasaveryhighprobabilityofsuccesstheyoucanimagineweriskadjustedaccordingly.
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AtahighprobabilityofsuccessitdoeshaveacoupleofothersmallerindicationswherewebelieveisaveryhighprobabilityofbeingabletoextenditintosomeoftheseothercancersthatwedescribedIwouldn'tsaythathasasignificantimpactonitandthoseareriskadjustedaccordinglyitdoesn'thavefirst-lineandit.
AndthemilestonesortheCBRisbasicallydrivenoffofwhatwethinkthevaluewouldbeinthereturnwouldbeappropriateforfirst-lineanditdoesn'thaveanyotheroftheseothermilestonedrivenPOCsthatwecomeforward.SoIthinkthat'sroughlythesamekindofguidancewegaveshareandsomeotherkindsofthingsandwe'veobviouslybuiltthemodelaroundthosesamekindsofassumptionsbutIthinkinthiscasewillwaittoprovidethatatalaterdate.
Oncewegetclosertoalaunchoftheassetin2018.OntheR&DlineorIthinkreallywhatyou'reaskingisarewesocommittedtodelivering50%orgreaterin2020andtheshortanswertothatisyes.We'velookedatitwe'vecarefullylookedatthecommitmentswe'vemadearoundthecompoundedgrowthrateandtherevenueprojectionsaswellastheoperatingmarginprofilethatwecommunicatedlastyearandwe'restillabsolutelycommittedtowhatdeliveringagainstthat.
Operator :
AlecourfaithwithBMOCapitalmarkets.
AlexArf aei(Analyst-BMOCapitalMarkets):
GoodmorningandthankyoufortakingthequestionsRickjustfollowinguponsomeoftheearlierquestionsthestreetisobviouslytakenaissignificantlymorecautiousyourelativetoyourlongtermguidanceparticularlyforHumira.
YouseeanythingchangingandthatnearfuturethatwouldmoreconfidenceinyourlongtermguidanceandIguesswhatI'maskingisbasicallyarewegoingtogothroughthislongdrawnoutprocessorwe'regoingforoneHumirahearingtoanotherordoyouseeapointwhereitbecomesclearthatyoucanholdoffHumirabyUSbyyoubelieveyoucan.Thanks.
RickGonzalez (ChairmanandCEO):
Ithinkthere'stwowaystolookatitImeanfirstofallifyoulookattheguidancethatweprovidedbackandIthinkitwasOctober29oflastyear.Andyoulookatwhathappenedtotheconsensusnumberswhatyou'llseeastheyshiftedout.Roughlyayear.
IthinkthemainnounisprobablyifyoulookatwherepeopleareassumingbiosimilarimpactintheUnitedStatesisprobablyinthat2019LarrycorrectmeifI'mwronghere2019timeframealthoughmovedoutfromabout2017to2019.AndI'dsayoneofthethingswetrackistounderstandhowthemarketisproceedingthatguidanceiswetrackwhatourstockperformancehasbeenversusourpeersoverthatperiodoftimeandIsawitjusttheotherdaymadeachangeinthelastcoupledaysalittlebitbutwherethenumberoneperformingstocksincethatpointintime.
SoIthinkitwasaround14%appreciationorsomethinglikethat15%appreciation.IthinkitdidhaveapositiveimpacthavingsaidthatIwouldagreewithyourpointthatthere'sstillthisoverhangandthisoverhangisbuiltarounddifferentcatalystsyouknowaswe'vesaidbeforewegivenalotofclarityinthatreviewofwhatourIPstrategyisandtheconfidencethatwehaveinourIPstrategy.
Howthemarketwillrelatetothatthat'salittleharderformetodescribeorpredictI'dsay.ButcertainlyIthinkasitplaysoutIthinkthemarketwillbasicallystarttobetterunderstandwhatourpositionasandcertainlyasyouhavemoreconfidencearoundthatyouknowIthinkyouwillseethesentimentchange.IthinkthebiggerissueandIthinkRova-TandtheIL23ourtwogoodexamples.Weobviouslyhaveapoint
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ofviewofwhatwethink'sgoingtohappen.
Wecommunicatedwiththatpointofviewlookslike.Ithinkit'sveryclearterms.Thatdoesn'tmeanthateverybodybelievesthatpointofview.ButwhenIsayisifyoulookateventhebearcaseonHumirawhichwecertainlydon'tagreewithanyoulookatthispipelinethatwe'venowassembledofassetsthathaveaveryhighprobabilityofsuccessIthinkeveninthemosttheyarecasepossiblemostpeoplelookatthatpipelineandsaytheyshouldbeabletogrowthroughwhateverhappensnowobviouslywehaveadifferentviewofwhatwethink'sgoingtohappen.
ButevenifyoulookatthemodelsI'velookedatthathavetheworst-casebuiltintothemwhenIlookatourpipelineandtheprobabilityofsuccessofthoseassetsIdescribedinmyformalremarksandusethatAdamupinrisk-adjustedbasedonthedatayou'veseenandthecommercialsuccessyouwouldexpectfromthoseassetsIthinkareasonablepersonwoulddrawtheconclusionthatyoucangrowthroughthat.AndIthinkthatultimatelywillbethecalculusthatinvestorsaregoingtohavetomake.
AlexArf aei(Analyst-BMOCapitalMarkets):
Thankyou.
LarryPeepo (InvestorRelations):
ThanksEllisandthatconcludestoday'sconferencecall.Ifyou'dliketolistentoareplayofthecallpleasevisitourwebsiteatabbvieinvestor.com.Thanksagainforjoiningus.
Operator :
Thatconcludestoday'sconferencethankyouforparticipating.
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