Company presenter at the B of A Global Healthcare Conference here in Nevada or Las Vegas. Thank you. Got the AbbVie team and Scott Reents, EVP, CFO, and Roopal Thakkar, Research and Development and CSO. My name is Jason Gerberry. I cover pharma and biotech at Bank of America. I've got a discussion that, you know, is a good mix of CFO questions and R&D questions because I know that there's a lot to hit on here. Maybe my first question for you, Scott, is just thinking about the P&L and you guys are in a great place in terms of having a long LOE runway. You're still pretty bullish about the growth that your core engines can provide, SKYRIZI and RINVOQ. I think consensus estimates, you know, an incremental $15 billion of revenue, I think by 2031 on SKYRIZI and RINVOQ. Maybe talk about operating leverage dynamics 'cause you're at such a high watermark from a revenue perspective, and I can't imagine there's a lot of incremental investment to support the brands from here, but maybe I'm wrong. The reason I ask is I look at street op margins kinda topping at 52%, and that was kinda where op margins topped the year before HUMIRA went LOE. I'm just sorta curious, do you think that there is a potential upside to how the street is modeling the operating leverage in the business? Sure. No, thanks, Jason. We're excited to be here, excited to talk about, you know, some of the things that we've done, but even more excited to talk about the future, so happy to. You're right. When we look out, and, you know, we have mentioned when we look at the consensus numbers, and you mentioned 2031, there's strong growth, and we feel very confident in our ability to exceed those numbers that are out there. SKYRIZI and RINVOQ, you know, in particular, you mentioned we're driving a lot of growth through those, through market expansion, share growth, and just looking at the dynamic products that we have and the place in those markets. It's not just an immunology story where that growth is driven by our neuroscience business, a leading neuroscience business, growing at high teens this year. In fact, we have this great pipeline in oncology, which I'm sure we'll get to. The aesthetics business will continue to grow over that period as well. With that growth and your question on operating margin, you know, when we look at it, we have, you know, an industry-leading operating margin today. We've talked about on the R&D line continuing to invest in R&D. We've increased by over 1/3 since 2022 our R&D spend over $3 billion. This year, we're spending just shy of $10 billion on R&D, little over 14% of sales from a profile perspective. We feel very good about the funding and all the activity we have in the pipeline, that everything is well-funded and we're doing the right things in terms of investment for the long term. I think you can think about that number, you know, being in that 14%-15% range over time, continuing to grow, absolutely. That's the profile. We will, of course, adjust that every year as we go through our planning cycles to make sure that we are funding properly for the future. The operating margin expansion that you mentioned is gonna be coming from the SG&A line. Certainly we're gonna get a lot of sales leverage. We expanded operating margin this year to 48.5% was the initial guidance before we had any IPR&D. We're well on track to accomplish that, and you're gonna see us steadily increase our operating margin over time. I'd say over the next couple years, two, three years, you'll see that, you know, we'll be up in the 50% range, and we'll continue to do that. I think from a longer-term perspective, you know, that 50% is not the cap, but we haven't really given guidance, and I think we just need to make that decision to invest in the future, make sure we're doing it. Certainly, you know, you mentioned the HUMIRA times. I would say that these markets and the landscape and the competitive landscape is much more dynamic than it was even back then. We're making sure that we're not short-changing anything. We're doing the right investments in our, you know, DTC side, also making sure we're generating the right amount of evidence, and really driving that business going forward in light of the competitive landscape and the strength of the products that we have and the breadth of indications that we have. SKYRIZI and RINVOQ certainly offer more indications than HUMIRA did. We'll continue to drive that. We'll continue to grow operating margins at a steady clip, you know, we'll see where it ends up at a high watermark, but we're gonna hit 50% in the next couple of years. Okay. Maybe let's talk about M&A. You guys laid out your core focal therapeutic areas, right, on the most recent earnings call. I imagine that the gating variables in those TAs differs, right? You know, in neuroscience, maybe you want something with more near-term revenues to replace VRAYLAR. With obesity, maybe you need more assets to round out portfolio. In I&I, you can make riskier early-stage bets for something that's gonna be transformative. Do I have a general sense of kinda how you're approaching the thought process with M&A in these kinda core TAs where you're looking to add to the business? I think it's twofold. One, as you mentioned, we've filled out a lot of things. You know, we've done 30 transactions in the last two years, invested over $8 billion in external innovation to fill out the pipeline across not just I&I, but also in the neuroscience area, oncology. We're going to continue to do those types of transactions. I would say it's, you know, filling it out from a therapeutic area. We have also looked at adjacencies. We added an obesity asset, which we're excited about last year as well. We're going to continue to invest. Also, the second piece of it is where do we see distinctive assets? Where do we see what we feel are differentiated assets that can raise the standard of care irrespective of the area that it's in? And finding those assets is gonna be important as well. If we're faced with finding an asset that we're excited about and has a compelling opportunity, whichever area that is or if it's in an adjacency, you know, we will move on that asset and try to drive that growth because the, you know, the growth is certainly what we're looking for for long-term basis. We have the advantage of having a great runway for growth, high single digits through the decade, limited LOE exposure, really VRAYLAR is the big one in 2030. We've got some nice runway. Our key products we have a nice runway on as well. We're just gonna continue to focus not only in augmenting the areas, the adjacencies, new areas where appropriate, but also making sure we're bringing in the right assets. Yep. Okay. We don't specifically constrain- That's right. ...early in one therapeutic area or middle or late. If we see something that's attractive that's early or middle, mid-stage, the team is free to go look at that. If there's something late stage or even on market that we think could be a good fit and complement the rest of our portfolio. Yeah There's no constraints. That's exactly right, Roopal Thakkar. Certainly the balance sheet capacity and our ability to manage that balance sheet well, that's also not a constraint. We're unconstrained from that perspective as well. Yeah. Okay. Obesity is an area that I think you guys have been vocal, more to come, I think, in terms of bringing in other assets that could complement your amylin. I guess my question is twofold, which is, you know, one, how comfortable are you with, you know, the assumption that innovation's gonna get rewarded in obesity from a pricing standpoint? 'Cause the million-dollar question for most investors on Lilly is, you know, pricing around GLP-1 and is that a race to the bottom? Then, you know, secondarily, do you wait for more data for ABBV-295 before you make decisions on rounding out the portfolio to see what you have as an anchor asset? Yeah, a couple comments, and Scott can weigh in as well. When we started looking at the original deal model and the asset from Gubra, our ABBV-295 asset, we did map out what we thought the future would look like, and part of that did include different pricing assumptions that we would anticipate seeing in the future, especially around cash pay. A lot of that was built in, and the reason that made sense to us was also knowing that we had our aesthetics business, which is all cash pay, and many of these clinics also manage weight loss along with facial aesthetics, let's say, or body contouring. That was, I would say, built in, so none of this is unexpected, and I would say it was well predicted. That being said, we don't need any particular outcome that we're waiting for to execute other deals if we wanted to in obesity. We think it's a very large market, continues to be under-penetrated, and we think that new assets are gonna be needed because people continue to rotate in and rapidly rotate off. These don't have the durability for something like, let's say, a SKYRIZI, for example. People stay on sometimes only for a few months, and they stop. When we looked at ABBV-295, we saw that as an opportunity to enhance tolerability and durability and also assume that many of the patients that we would capture would be those that have already come off of incretin class. If we see something that, let's say, is an incretin class or a novel class or helps with muscle preservation or bone preservation, oral, extended half-life, all of these parameters is something that our teams would be looking in to bring in. If there's an opportunity to combine with our existing asset, we would look at that very carefully as well. Cause where we sit today coming out of the early Phase I work in a non-obese population, the BMI recall was 29, majority male, was almost a 10% delta in a population that really doesn't need to lose weight. What we're gonna look at now is the right population, higher BMIs, greater proportion of women, and also looking at a higher dose than we've already studied. The goal there being, continued, enhancement of weight loss and, assessing tolerability, looking at every other week dosing and even monthly dosing. Okay. Maybe shifting to I&I. First question is just the new competition to SKYRIZI in the way of J&J's ICOTYDE. I think many investors that we talk to are now kinda coming to the realization that ICOTYDE's more market expanding than competing with the biologics, particularly in psoriasis. What I wonder is, you know, SKYRIZI, the incremental patient that might go on SKYRIZI, are you competing for that incremental patient with ICOTYDE, which I imagine is somebody that is with a community derm that might have gotten a topical or another oral therapy. Do you get a lot of naive to biotherapy as new starts for SKYRIZI, and is there a competitive dynamic at some threshold with ICOTYDE? I think there's a unique profile that we've seen formed with SKYRIZI and psoriasis, and I think many of our prescribers recognize that, and our sales team and medical team have been very effective of communicating that. That is, you know, best-in-class efficacy that there's no oral that can match that. Quarterly dosing, which is extremely convenient, and when we've done head-to-head against orals, when we ask the patients, they actually, in our studies, prefer having a quarterly dosing, especially if they have to remember taking a pill every day or worrying about when they're gonna eat their meals. It's very simple to take it quarterly and not worry about it. Also, we're able to communicate statistical significance across palm or plantar, genital and scalp, difficult-to-treat areas that people know that they can trust SKYRIZI to really drive high levels of efficacy. We're also able to communicate five years of psoriatic arthritis radiographic prevention. We have long-term data in PSA, which is very important for many prescribers to know, as 30% of patients with in this category of moderate to severe will go on to develop PSA. That's another important consideration. That profile will continue to be very competitive. If someone's considering an oral, I think they already know the profile of the patient that they're considering. They may have now an extra choice in oral. That being said, we agree. I think the way Scott and the team have modeled it is anticipating some effect on share. As the market continues to expand and people continue to recognize the profile we have with SKYRIZI, it is very unique. Again, the orals are not oral SKYRIZIs. They are oral. Yeah. When we look at the Roopal's exactly right. We spent a lot of time when we provided the guidance. We increased our guidance after the first quarter results by $100 million for SKYRIZI. It's still very early days with ICOTYDE, but we'll see. You know, we made some very good assumptions, some very prudent assumptions. I think that the guidance contemplates some share uptake by the ICOTYDE in general, some market expansion, certainly as the strong leading share position that we have in that space. A little bit of that share is encompassed, but it's very modest, and we feel well on track and remain very confident in our 2026 numbers. Okay. Now thinking about the SKYRIZI Crohn's subcutaneous induction regimen that you'll roll out in 2027, how much of the new patient funnel is IV site constrained? Just trying to get a sense of how impactful you think the rollout of the subcutaneous induction will be to the business. You want to start? Yeah. Please. I can start. Maybe I'll make some comments on the data, and then we can talk about the IV SubQ dynamic 'cause many of our sites, maybe half or more, have access to IV. We don't see that as a major constraint, but we do see an opportunity with subcutaneous. Now, the data that we've observed, particularly in treatment naive or frontline, which is where SKYRIZI has been very effectively positioned, the data that we saw, 45 -point deltas versus placebo and key endpoints, was higher than we had originally anticipated. This further confirms and supports our frontline positioning, I think, which is very important, and we anticipate having that launch this year now, in around six months. That's why the team is very excited. Why the frontline makes sense for our portfolio is that RINVOQ is approved in Crohn's and UC, and we had a recent label update last year that allows for utilization post biologic and doesn't necessarily have to fail an anti-TNF. It's up to the clinician to decide. That means you could have someone frontline SKYRIZI. There's gonna be a few patients that maybe need more support, aren't doing well, then they can immediately go to RINVOQ. We have stronger second-line positioning, and when the SubQ arrives, then they'll have a clear choice of either IV or SubQ. If you want convenience after that, you have an oral- Yep. ...which is also best in category for a JAK inhibitor. Yeah. I mean, we're seeing in the market, you know, the strength continues for SKYRIZI. In terms of new patient share, we're getting over 50%, call it 55%, ± depending on the week you're looking at it. Of that, those new patient starts, that's very strong. I think it's a testament to all the strength of SKYRIZI as a whole. Then, you know, once we do have the UC, I'm sorry, the CD, SubQ induction, that's only going to further strengthen our position, especially given the nice data that we've seen. Yeah. That's right. Behind that, we have a combination with SKYRIZI with our own alpha-4 beta-7. Very strong data there. That's coming in even after these two assets. Yeah. I'm gonna jump to that. I may come back to. Sure. SKYRIZI and RINVOQ, but I wanna make sure we can get to the combinations, just given your interim update, J&J's recent Phase II update as well in IBD. Yeah, very interesting data for your IL-23 integrin combination. Maybe can you just speak to, you know, the additional clinical work that you're gonna do, pushing dose. Is there, I mean, obviously, there's always gonna be safety risk dynamics- Yeah. ...like as you assess how much incremental benefit might be worth going after. Is there a certain step-up in efficacy threshold in your mind- Sure. ...needed to kind of push a dose higher on the. It's on the integrin side that you'd be pushing dose. That's right. That's That's right. We have what we believe are two safe, well-characterized mechanisms that we've studied. The alpha-4 beta-7, on the integrin side is our own unique asset, three to four times more affinity binding than vedolizumab, and we did leave the Fc portion of it as active. That could explain the strength of the data that we've observed in Crohn's disease 'cause typically, we see alpha-4 beta-7s shine better in ulcerative colitis than we've seen in Crohn's. We've actually seen failed studies in IBD for that class. You have these two unique assets, you know, that we know the strength of SKYRIZI already in the space, and we know the safety profiles. One thing that we did see in the combination was a very robust, favorable safety profile, so no concerns there. The increasing the dose appears based on our exposure response data, looking at serum PK, that there is continued room to go on the alpha-4 beta-7, and we don't anticipate any safety concerns there. The next step is to study the higher dose with SKYRIZI to see if we can drive incremental endoscopic remission or mucosal healing. If we do see that, we would pivot to the higher dose moving forward into Phase III. We anticipate that by 2028. Recall the data that we showed was a doubling of effect of SKYRIZI, which is already very strong, and it was in a very broad treatment population. We didn't have to seek out any particular subgroup for notable efficacy. It was in an all-comers population. Which had multiple failures of biologics, including SKYRIZI failures and vedolizumab failures, and a majority of which would also have already failed anti-TNFs. We see that in IBD, where a majority of patients have already been through an anti-TNF. It made sense for us, knowing HUMIRA, the, to combine something not requiring an anti-TNF. By combining those two, we saw broad-based efficacy, and we anticipate taking that type of population forward to solve the needs of as many patients as possible in the future. To confirm, you weren't seeing any additive effects on the frequency of known AEs? No. Or the- No. ...or the severity of those AEs? No. Then, how important is it to push efficacy even higher in light of, say, what you've seen with, say, the DUET trial that your, one of your competitors has? There are a lot of other players out there that are actively seeking to push combination approaches. Obviously you don't know where the bar - Sure. ...is at the moment? Well, that's why we dose optimize and not just arbitrarily select a dose and move forward. That's why we saw good data. We think we have a Phase III ready to go. We do think it's important for the future, especially if you want to differentiate from SKYRIZI and RINVOQ and provide a safe option, that greater differentiation will be important. That's essentially how we developed SKYRIZI and RINVOQ to begin with. Both are very successful, especially if you look at head-to-head. We want to again, give it some time to see if we can get several more points of efficacy. If we can, we'll go. Now, if there is a safety concern for sure, then we would back down. Yeah. We think we can answer these questions relatively soon and be ready for Phase III in 2028. I believe on past calls you've talked about the desire to have co-formulated subcutaneous, I believe auto-injector- Yeah. ...would be the preferred form factor here. Maybe some of your competitors will say maybe there's an ease, I don't know if it's from a development perspective or a commercial perspective, to go after a bispecific versus- Yeah. ...a co-formulation. Where are you in terms of more holistically thinking about combinations, you know, even beyond IBD, you know, settings where you feel like combinations are most prudent, where efficacy plateaus are an issue? I imagine psoriasis is a setting where clearly You've got such high efficacy that combinations probably don't make sense, but there are other settings where it does. That's right. IBD is a good place. I think rheumatoid arthritis is a good place. The reason a co-formulation makes sense to us, 'cause these assets are available to us now, and one advantage of the co-formulation combination approach is that you can optimize the ratio of the assets 'cause with a bispecific it would be locked in. That being said, we don't think there's anything fundamentally wrong with that. Just for our program, we're ahead on these because we have a ready-to-go alpha-4 beta-7, we have a ready-to-combine TL1A and a t the end of this year, hopefully a TREM-1 that's ready to go. That being said, behind that, we do have an IL-12, IL-23, TL1A bispecific that we could study, and we'll be able to then compare it with the data that we're deriving from a co-formulation and make that call. I don't think we know which approach would be better. It's simpler and potentially faster to have a bispecific because you are not having to demonstrate contribution of components. Potentially, if it's high concentration, maybe there's less volume. The lingering question would be, is that ratio the right ratio, and would you have been better off with a co-formulation? What I would say for AbbVie is we're doing all of the above. Okay. We have combinations in rheumatoid arthritis, multiple combinations in Crohn's and ulcerative colitis where we think it's important. On the bispecific side, we are bringing to the clinic this year, into Phase I, an IL-13/31 bispecific with extended half-life and an IL-13/18 bispecific with an extended half-life if we're talking about atopic dermatitis, which is still an area which is still very under-penetrated. Yep. I think you've talked a little bit on the most recent earnings call about maybe what the desired dose frequency would be with some of these combination approaches, whereas with SKYRIZI, quarterly dosing has been very advantageous. How do you think about the benefit of quarterly versus monthly when you go to the improved efficacy profile that these combinations could offer? I think if you're driving high efficacy, monthly is going to be acceptable. It has to be high efficacy, and that's what we're going to deliver. SKYRIZI in IBD is every eight weeks, as you stated, in psoriasis it's quarterly. We do have an extended half-life version, IL-23, hoping to double or maybe two and a half times. We think it's a sweet spot of the half-life of SKYRIZI. We are not interested in ultra-long half-life. One thing that we've learned, talking to all of our clinicians over the last 20 years is if something has a very long half-life and you're in a indication where there could be ongoing flare tolerability concerns or loss of response, that's actually a disadvantage if you wanted to alter therapy or stop therapy. An ultra-long half-life won't let you turn it off, or add on. You may have concerns. That's why we would like to develop for all types of prescribers across indications. With the extended half-life, IL-23, if we can get in and stretch it out, that's great if we combine it with our TL1A, if it goes to every eight weeks or quarterly. Going beyond that, we don't think is a good option. In psoriasis, every six months makes sense. Actually, with SKYRIZI we already have data and label that if you stop it and wait six months, your majority of the patients have the efficacy. Tweaking that half-life a little bit can get you to every six months and probably to every year, but with a constrained half-life because we have a very long pharmacodynamic effect that's independent of PK with SKYRIZI. We saw that in IBD, and we see that in psoriasis. We think that could be, that could resonate with a variety of clinicians that may have some nervousness of having a too long of a half-life. Okay. You guys have been pretty vocal about Capstan, and your in vivo CAR T program, and with data later this year. This is an LNP-based product, so not a lentiviral. Maybe just talk about sort of helping investors think through the importance of the update in clinical data later this year. I imagine the safety hurdle's lower than, say, a lentiviral derived product and, you know, any sort of early efficacy signals we could see in either the lupus or RA settings. Yep. This is an in vivo CD19 CAR T. No lymphodepletion required, no virus, no integration of genomic DNA. It's mRNA based, that means it's transient. We were thinking about safety when we originally were assessing the landscape for these assets. In healthies it's delivered, we see rapid B-cell depletion, and then the CAR is only transiently expressed because it's generated by mRNA. The CAR goes away, the B-cells are depleted, and the naive B-cells that are non-pathogenic repopulate and hopefully driving remission or cure-like. We've seen that in healthies, the pattern we would like to see, and now as you stated, we're going into patients with lupus and rheumatoid arthritis, and we should be able to get a small number. If we're seeing high levels of efficacy by the end of this year, and we have a reasonable idea of dose, then that may allow us to pivot much more rapidly into pivotal studies. You tend to have to study less patients to get, if you are driving high levels of efficacy against the competitor- Yep. ... you could see that relatively quickly. I think even in single arm studies, if you're seeing very high levels, where you traditionally don't see efficacy, that would also give us robust data to allow us to make a very well-informed decision to go into pivotal studies. We expect some patient readout this year and much more into next year, and that's why we like this construct so much. Okay. Lutikizumab, the update and then the no-go in IBD, how big of a setback is that for the luti story? I know there are a lot of focus on this as a one of your I&I assets. Yeah. Some look to maybe be a key asset for you, and you still have the HS data coming and any read across to other settings. That's right. We saw very strong data in HS in Phase II, that's why we looked at some selected indications and ran Phase IIs there. Now, in this setting in IBD, we saw much, much stronger data with the alpha -4 beta -7, it made sense to take that horse forward. I would see this as independent indications because we already had very strong Phase II data. That's why we made the decision to go to Phase III for luti and HS, we'll see that later this year along with RINVOQ data, which sets up a similar dynamic that we've established now in IBD, where you have a frontline asset, SKYRIZI today in IBD, hopefully ludi in HS, and then a second line asset, RINVOQ, where we see that in IBD, potentially also in HS, under-penetrated market, probably in the 20% or so with advanced therapies and a prevalence that's not inconsistent with IBD prevalence. Okay. Probably have time for one last question. Gilgamesh. Yeah. You know, just thinking about the landscape, there's a lot of policy updates regarding development of psychedelics. I imagine the goal here is to make for something that's easier to administer and more durable than SPRAVATO, which is the, I guess the most advanced, the most commercially successful agent in that space. Do these updates from a development standpoint in terms of governmental push to get psychedelics available, change the, you know, urgency, how quickly you think you can get to market with these approach? Yeah, it could be certainly a tailwind, especially if they're able to review our briefing packages faster, give us rapid advice. Ultimately, if we have strong data, they can review that quickly. Also, if there's openness to more broader patient populations, that could certainly help the field. What we see with this asset is limited duration of the psychedelic hallucination experience. It's limited. That way, in the office, patients can be turned over pretty rapidly and go home and not have a flashback. Also in the early data, we saw durable efficacy, which is very important. The other unique aspect of this molecule is that, yes, it's a 5-HT2A agonist, which is where we see the efficacy for some of these classes. It is actually a 5-HT2B antagonist. The concern with many of these, if it agonizes that receptor, that's the same one we observed years ago that was responsible probably for the cardiovascular valvular issues we saw with Fen-Phen. The other benefit we could have is potential for chronic dosing, spaced out, and we would like to get away from, you know, once a week or twice a week dosing. You know, greater intervals I think would be helpful for patients in these clinics that have been set up. That's why we're excited about this asset, and we see the government mindset as a tailwind for, I think, everyone to develop in the psychedelic space. Great. We're out of time. Gentlemen, thank you so much for joining us. Thank you. Thank you.