Abbvie Inc

NYSE:ABBV

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, and thank you for standing by. Welcome to the AbbVie Fourth Quarter 2020 Earnings Conference Call. All participants will be able to listen only until the question-and-answer portion of this call. [Operator Instructions]

I would now like to introduce Ms. Liz Shea, Vice President of Investor Relations.

[Liz Shea, Vice President of Investor Relations]

Good morning, and thanks for joining us. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer; Michael Severino, Vice Chairman and President; and Rob Michael, Executive Vice President and Chief Financial Officer. Joining us for the Q&A portion of the call is Jeff Stewart, Executive Vice President, Commercial Operations.

Before we get started, I remind you that some statements we make today may be considered forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties, including the impact of the COVID-19 pandemic on AbbVie's operations and financial results that may cause actual results to differ materially from those indicated in the forward-looking statements. Additional information about these risks and uncertainties is included in our 2019 Annual Report on Form 10-K and in our other SEC filings. AbbVie undertakes no obligation to update these forward-looking statements except as required by law.

On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand AbbVie's ongoing business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website. Unless otherwise noted, our commentary on sales growth is on a comparable basis, which includes full year -- full current year and historical results for Allergan. For this comparison of underlying performance, all historically reported Allergan revenues have been recast to conform to AbbVie's revenue recognition accounting policies and exclude the divestitures of Zenpep and Viokace. References to operational growth further excludes the impact of exchange. Following our prepared remarks, we'll take your questions.

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

[Richard Gonzalez, Chairman & Chief Executive Officer]

Thank you, Liz. Good morning, everyone, and thank you for joining us today. I'll discuss our fourth quarter and full-year 2020 performance as well as our expectations for 2021. Mike will then provide an update on recent advancements across our pipeline, and Rob will discuss the quarter and our 2021 guidance in more detail. Following our remarks, we'll take your questions.

We delivered another strong quarter with adjusted earnings per share of $2.92, exceeding the midpoint of our guidance by $0.08. Fourth quarter total net revenues were up nearly 7% on a comparable operational basis. This performance was driven by robust double-digit sales growth from our immunology, hem/onc and neuroscience franchises, as well as 9% comparable operational sales growth of Botox Cosmetic, which is demonstrating a rapid recovery.

Our fourth quarter performance topped off another excellent and truly transformational year for AbbVie, which included the successful acquisition and integration of Allergan, creating a stronger and much more diverse AbbVie with leadership across numerous attractive high-growth markets. Significant contributions from our two new best in category immunology medicines, RINVOQ and SKYRIZI , which combined for more than $2.3 billion in 2020 sales, their first full year on the market.

We expect the combined contribution from RINVOQ and SKYRIZI to nearly double in 2021 to approximately $4.6 billion based on their continued strong uptake in RA and psoriasis as well as RINVOQ’s anticipated approvals in PSA, ankylosing spondylitis and atopic dermatitis later this year.

We delivered continued robust growth from our leading hem/onc portfolio, with IMBRUVICA and VENCLEXTA contributing more than $6.6 billion in combined 2020 sales. We expect our hem/onc franchise to grow double digits again in 2021.

We also added two compelling oncology pipeline assets, Epcoritamab, a potential best-in-class CD3xCD20 bispecific antibody in development for B-cell malignancies and lemzoparlimab, an anti-CD47 monoclonal antibody being studied in multiple cancers. These two assets will further support the growth of our hem/onc franchise across our long-range plan.

The acquisition of Allergan brought us a substantial neuroscience portfolio with compelling therapies for migraine and psychiatric conditions augmenting our already existing neuro franchise. The newly combined neuroscience franchise delivered nearly $4.9 billion in comparable 2020 revenue and is expected to grow double digits in 2021.

We also added the leading global Aesthetics franchise, a largely cash pay portfolio with roughly $3.5 billion in comparable 2020 revenues. As I previously noted, this portfolio has demonstrated a rapid V-shape recovery and we view Aesthetics as an extremely attractive long-term growth opportunity.

And importantly, we made excellent progress in 2020 with our pipeline. We expect our R&D pipeline advancements to lead to the approval of more than a dozen new products or indications over the next two years, including a total of six additional indications for RINVOQ and SKYRIZI, which will cover all of Humira's major indications plus new significant disease areas, including atopic dermatitis, expanded indications for VENCLEXTA and Vraylar and several new product approvals, including Atogepant for episodic migraine, Navitoclax for myelofibrosis and ABBV-951, a potentially transformative next-generation therapy for advanced Parkinson's disease.

These new opportunities will collectively add meaningful revenue growth in advance of the U.S. Humira LOE. We've entered 2021 in a strong position, which is reflected in our revenue and earnings per share guidance.

Based on the recent outperformance of our business, we expect full-year 2021 comparable operational sales growth of approximately 9.4% with total AbbVie sales expected to be approximately $1.7 billion above current consensus, and we anticipate 2021 adjusted earnings per share of $12.32 to $12.52, representing growth of 17.6% at the midpoint.

This level of guidance represents impressive performance with nearly all aspects of our business expected to perform at or above current consensus for 2021. The Allergan integration continues to go very well. The transition has been seamless despite the size of the transaction and the timing of the COVID pandemic.

While we're making excellent progress against our expense synergies, which Rob will cover in more detail here momentarily, it remains increasingly clear to us that there are significant opportunities for long-term revenue contributions across numerous Allergan growth platforms.

As we recently disclosed, we believe UBRELVY , the first-to-market in leading oral CGRP for acute migraine, represents a $1 billion-plus peak sales opportunity. Atogepant, a potential once-daily oral treatment for the prevention of episodic and chronic migraine also represents a $1 billion-plus peak sales opportunity.

We expect Vraylar's peak sales to approach $4 billion within its currently approved indications of schizophrenia, bipolar I disorder and bipolar depression with major depressive disorder or MDD, representing a potentially significant incremental growth opportunity. Aesthetics, which is poised to regain its growth trajectory this year is expected to generate high single-digit revenue growth over the next decade.

We continue to closely monitor the COVID dynamics, which will have an impact on our business again in 2021, predominantly in the first half of the year, but significantly moderated from the 2020 impact. And despite the recent COVID resurgence within select geographies, we feel the global healthcare system is much better equipped with COVID treatment protocols in PPE to safely see and treat patients throughout the current year.

That said, some therapeutic areas continue to be more impacted than others, like CLL, HCV, certain hospital-based procedures, among others, which we have contemplated in our 2021 guidance.

Overall, we've been pleased with the rate of recovery across our business, a testament to our differentiated product profiles and our commercial execution. So in summary, we've assembled an impressive set of growth assets and the outlook for AbbVie's business remains strong. With RINVOQ and SKYRIZI expected to contribute more than $15 billion in risk-adjusted sales by 2025 and our expectations for continued robust growth across hem/onc, neuroscience, and aesthetics, we have a high degree of confidence that we will be able to successfully absorb the Humira LOE impact in 2023, support an immediate return to total sales growth in 2024 and produce compelling high single-digit compounded annual total sales growth in 2025 through the remainder of the decade with the diversified portfolio and pipeline that we have today.

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

[Michael Severino, Vice Chairman & President]

Thank you, Rick. We've clearly made significant progress with our pipeline over the past few years, particularly our late-stage programs in hematologic oncology with IMBRUVICA and VENCLEXTA, and in immunology with RINVOQ and SKYRIZI. Since inception, our R&D organization has delivered an impressive set of new products, which collectively contributed approximately $11 billion in revenue in 2020. We also continue to see significant evolution of our early and mid-stage clinical programs with many assets expected to transition to late-stage registrational studies over the next several years. We will continue to replenish our late-stage pipeline with innovative assets that have the potential to drive additional growth for AbbVie in the second half of the decade.

At our recent immunology investor event in December, we provided a detailed overview of our immunology programs, highlighting the robust data generated to-date for RINVOQ and SKYRIZI across approved and pipeline indications. Included in this event, we presented positive topline data from two new Phase 3 studies for RINVOQ . Results from the first induction study in ulcerative colitis and results from the head-to-head study versus dupilumab in atopic dermatitis. We expect to see results from the second Phase 3 UC induction study later this quarter, and from the UC maintenance study in the middle of this year with regulatory submissions anticipated in the second half of 2021. Our regulatory applications for RINVOQ in atopic dermatitis are currently under review and we expect an approval decision in the US in the second quarter based on priority review and in Europe in the second half of the year. We recently received European Commission approval for RINVOQ in psoriatic arthritis and ankylosing spondylitis and expect approval decisions for those indications in the US in the first half of this year.

I want to take a moment to address the topic of safety, specifically MACE and malignancies following the results from tofacitinib's post-marketing safety study. At present, there are no data to suggest the safety outcomes from their study applied to a specific JAK1 inhibitor such as RINVOQ. We are not aware of any signal for an elevated risk of MACE or malignancies with the RINVOQ or any JAK inhibitor other than Xeljanz. We conducted a pooled database analysis across our clinical trials for DVT, MACE and malignancies at the time of RINVOQ’s regulatory submission and have updated it periodically including up to the present.

Rates with RINVOQ have not been elevated relative to competitors or to expected baseline rates. Importantly, there has been no increase or meaningful change in those rates over time. Additionally, we adjudicate events for MACE and DVT, which is considered the highest standard of evidence. If we look across our long-term database in RA, a population that is at increased risk for MACE events, our rates remain low. At the approved dose in RA, we have followed more than 3,700 treated patients totaling more than 9,000 patient-years' experience. Our rate of MACE events is 0.4 per 100 patient-years, which compares favorably to the expected rate of 1.0 to 1.7 events for 100 patient-years. In addition, there is no evidence of a dose-response between the 15 and 30-milligram doses. Similarly, the rate of malignancy, excluding non-melanoma skin cancer with similar follow-up is 0.8 events per100 patient-years. This rate is also consistent with the expected range of rates of 0.86 to 0.94 per 100 patient-years. And again, we see no evidence of a dose-response between 15 and 30-milligrams.

Moving now to SKYRIZI; we also recently reported top-line results from the Phase 3 programs for SKYRIZI in Crohn's disease and psoriatic arthritis. In the two Crohn's induction studies, SKYRIZI demonstrated significant improvements in clinical remission and endoscopic endpoints compared to placebo with symptom improvement seen as early as week four. Based on the data generated to date, we believe SKYRIZI has the potential to become an important new treatment option for patients with moderate to severe Crohn's disease. We expect to see results from the maintenance study in Crohn's disease later this year with regulatory submissions anticipated in the second half of 2021.

We're also very pleased with SKYRIZI’s results in the Phase 3 studies in psoriatic arthritis, where we saw significant improvements in disease activity across both skin and joint endpoints compared to placebo. We believe that the activity we have seen on joint disease and the impressive skin clearance that is a hallmark of the SKYRIZI program make it a compelling offering for patients with mixed joint and skin involvement. We plan to submit our regulatory applications for SKYRIZI in psoriatic arthritis in the first half of this year. We're making good progress with our early and mid-stage immunology programs as well where we expect several data readouts and phase transitions in 2021. We expect to begin three new studies for ABBV-154, our TNF steroid conjugate including a Phase 2b dose-ranging study in RA as well as Phase 2 studies in Crohn's disease and polymyalgia rheumatica. And we'll see proof-of-concept data in the second quarter for ravagalimab, our CD40 antagonist in Phase 2 for ulcerative colitis, and for ABBV-157, our oral ROR-gamma T inhibitor in Phase 1 for psoriasis. Both of these programs experienced slight COVID-related delays with results now expected for both in the second quarter of this year.

In oncology, we continue to make significant progress advancing our pipeline with numerous data readouts and regulatory milestones last year. As well as the addition of several new assets brought in through our in-licensing efforts, including Genmab's CD3xCD20 epcoritamab and I-Mab's anti-CD47 lemzoparlimab. We showcased new data from several programs at the recent ASH meeting where we presented nearly 40 abstracts from eight different assets. Notable presentations included data from the Phase 2 CAPTIVATE trial evaluating IMBRUVICA plus VENCLEXTA in frontline CLL, which showed patients who achieved undetectable MRD following this combination maintain their deep remission at the one-year mark after stopping therapy with a 95% rate of disease free survival.

We also presented new five-year data from VENCLEXTA’s Murano trial demonstrating the benefits of fixed duration VENCLEXTA combinations and helping patients achieve sustained progression-free survival. The latest results from Murano in the relapsed refractory CLL setting showed a median progression-free survival of 54 months in the VENCLEXTA and rituximab group, compared to 17 months in the bendamustine-rituximab group, three or more years after stopping treatment.

Updated dose-escalation data from a Phase 1 study evaluating epcoritamab in B-cell malignancies were also presented at ASH. Epcoritamab is a subcutaneously delivered bispecific CD3xCD20 antibody being developed in collaboration with Genmab. In the Phase 1 study, epcoritamab demonstrated encouraging single agent anti-tumor activity in heavily pretreated patients with a consistent and favorable safety profile showing no Grade 3 or higher CRS events as well as limited neurotoxicity. We believe epcoritamab has the potential to become a best-in-class therapy across a number of B-cell malignancies including diffuse large B-cell lymphoma and follicular lymphoma. The Phase 3 trial in relapsed-refractory DLBCL recently began and we will provide updates on epcoritamab as its development program progresses. Initial results were also presented from a Phase 1 study evaluating TNB-383B in relapsed-refractory multiple myeloma. TNB-383B is a novel bispecific T-cell engaging immunotherapy targeting BCMA and CD3 being developed in collaboration with TeneoBio.

These Phase 1 results demonstrated that the BCMA/CD3 bispecific provided overall response rates of 80% with a large number of patients achieving a very good partial response or better despite having received multiple prior lines of therapy. TNB-383B was well tolerated at all doses tested with a few off-target toxicities and no Grade 3 or higher CRS observed. With its safety profile efficacy and the convenience of once every three-week dosing, this agent has the potential to become a promising treatment option for myeloma patients. And our partner I-Mab published an abstract with initial results from a Phase 1 study evaluating lemzoparlimab in AML and MDS. These results demonstrated encouraging activity in relapsed-refractory AML patients and lemzoparlimab was well tolerated with no serious hematological adverse events reported today. Based on these promising initial results, we plan to begin new studies this year for lemzoparlimab in AML, MDS and in multiple myeloma.

We also recently saw data from an interim analysis of a Phase 2 study evaluating Teliso-V in heavily pretreated non-squamous, non-small cell lung cancer patients. The encouraging results from Stage 1 of this study met the criteria for advancing the program. With Teliso-V demonstrating a 54% objective response rate in patients with wild-type EGFR with highly expressed c-MET. In EGFR wild-type patients with over-expressed c-MET, which includes both high and intermediate expression, the objective response rate was 35%. Based on these results, we believe that there is an important role for Teliso-V in this target population, which represents roughly 25% of the non-squamous, non-small cell lung cancer population. We will be opening the second stage of the study and are planning discussions with regulators regarding the potential of this study to support an accelerated filing. We expect 2021 to be another important year for our oncology pipeline with several regulatory submissions as well as data readouts across all stages of development.

This year, we expect to see data for IMBRUVICA in the Phase 3 SHINE study in frontline MCL with regulatory submissions expected in the second half of the year. Data for IMBRUVICA in combination with VENCLEXTA in second line or greater MCL and frontline CLL with regulatory submission for frontline CLL expected in the second half of the year. We also expect to see data from registration enabling studies for VENCLEXTA in high-risk MDS and navitoclax in relapsed-refractory myelofibrosis. And we expect to see data from numerous programs in our early-stage oncology pipeline. In addition, the programs under collaboration with Calico are also progressing well. Our partnered effort is comprised of a strong pipeline of novel targets, which includes more than 20 active programs in discovery or preclinical development. Importantly, we currently have programs, which have advanced into clinical development in two areas immuno-oncology and neurodegeneration. The lead Calico program in oncology is focused on PTPN2 inhibitors, which act at multiple steps in the cancer immunity cycle and have potential applicability in a broad variety of tumor types.

The discovery of novel orally bio-available PTPN2 inhibitors represents a significant breakthrough and a target class that has historically been considered un-druggable. We currently have two assets in Phase 1 development ABBV-CLS-579 and 484. We've seen evidence of immune activation in the clinic with this pathway and we expect to see proof-of-concept data from this program in 2022. The lead Calico program in neuroscience is an eIF2B activator, which targets a key regulator of the highly conserved integrated stress response pathway. Inhibition of this pathway has the potential to prevent pathology and restore function in a number of neurodegenerative diseases such as ALS and Parkinson's disease as well as in traumatic brain injury. Our lead eIF2B activator ABBV-CLS-7262 is currently progressing through Phase 1 and we plan to begin a study later this year in patients with ALS.

In other neuroscience updates, last year, we completed our registrational program for atogepant in episodic migraine prevention and we recently submitted our regulatory application to the FDA. We expect an approval decision by the end of the third quarter. The data generated in our Phase 3 programs support a strong benefit-risk profile and we believe that atogepant has the potential to offer meaningful benefits to patients as a safe, effective, oral treatment option for the prevention of episodic migraine.

In 2021, we expect to see data from several late-stage neuroscience assets, including results from two Phase 3 studies for Vraylar in major depressive disorder and results from the pivotal program for ABBV-951 in advanced Parkinson's disease with regulatory submissions for 951 expected in the second half of the year. We also expect to see proof-of-concept data for Elezanumab in a Phase 2 study in multiple sclerosis and ABBV-8E12, our lead anti-tau antibody in a Phase 2 study in Alzheimer's disease. In addition to 8E12, we have a number of promising approaches in Alzheimer's, including our neuroinflammation programs aimed at TREM2 and CD33, currently in clinical development, as well as other tau approaches in preclinical development. These include tau antibodies with different epitope specificity as well as approaches to clear intracellular tau.

In Aesthetics, we continue to make excellent progress with our portfolio of facial toxins and dermal fillers with several regulatory submissions, data readouts and pivotal study starts expected this year. Our programs include new indications for Botox as well as innovative toxins such as new liquid formulations and both the long and short-acting toxins. We also have programs to develop new indications for the Juvederm Collection as well as novel dermal fillers such as HArmonyCa, which will be entering registration enabling studies in the U.S. And in eye care, based on the positive results from the Phase 3 studies evaluating our topical eye drop AGN-190584 for the treatment of symptoms associated with presbyopia. We plan to submit our regulatory application later this month and expect an approval decision in the fourth quarter of this year.

So in summary, our R&D productivity remained high last year despite multiple COVID-related challenges and we were able to maintain steady continuity and minimize delays. We're entering 2021 well-positioned for continued success and we expect significant program advancement across all stages of our pipeline, again this year. This includes five new asset or major indication approvals, half a dozen regulatory submissions, more than 10 pivotal study readouts, and more than 15 data readouts from early and mid-stage programs.

With that, I'll turn the call over to Rob for additional comments on our fourth quarter performance and our 2021 guidance. Rob?

[Robert Michael]

Thank you, Mike. Starting with fourth quarter results, we once again delivered strong top and bottom-line performance. We reported adjusted earnings per share of $2.92 above our guidance midpoint by $0.08. Total net revenues were approximately $13.9 billion, up 6.8% on a comparable operational basis and ahead of our expectations. Immunology global sales were approximately $6 billion, up 14.8% on an operational basis. Within immunology, Humira sales were approximately $5.2 billion, up 4.4% on an operational basis with continued high single-digit growth in the US offset by biosimilar competition across international markets.

SKYRIZI sales were $525 million and RINVOQ sales were $281 million with both products demonstrating strong sequential growth above expectations. Hematologic Oncology delivered another strong quarter with revenue of approximately $1.8 billion, up 15.5% on an operational basis with solid growth from IMBRUVICA and VENCLEXTA. Aesthetic sales were more than $1.1 billion with Botox Cosmetic and Juvederm both experiencing a rapid recovery from the COVID pandemic. Neuroscience revenues were nearly $1.4 billion, up 14.9% on a comparable operational basis, led by Vraylar and our migraine portfolio. We also saw a significant contribution from eye care, which had sales of more than $900 million.

Turning now to the P&L profile for the fourth quarter. Adjusted gross margin was 81.8% of sales, adjusted R&D investment was 12.6% of sales, and adjusted SG&A expense was 22.3% of sales. The adjusted operating margin ratio was 46.9% of sales, an improvement of 230 basis points versus the prior year. Net interest expense was $618 million and the adjusted tax rate was 11.6%.

As we look ahead to 2021, our full year adjusted earnings per share guidance is between $12.32 and $12.52, reflecting growth of 17.6% at the midpoint. Excluded from this guidance is $5.63 of known intangible amortization and specified items. We expect adjusted net revenue of approximately $55.7 billion. At current rates, we expect foreign exchange to have a 1% favorable impact on full year comparable sales growth. This forecast comprehends the following assumptions for our key products and therapeutic areas. We expect immunology global sales of approximately $25 billion, including US Humira growth of approximately 8%, internationally Humira revenue of approximately $3 billion at current exchange rates, SKYRIZI global sales of approximately $2.9 billion, and RINVOQ global sales of approximately $1.7 billion.

We expect hematologic oncology to grow double-digits with IMBRUVICA global revenue of approximately $5.7 billion and VENCLEXTA global sales of approximately $1.8 billion. For Aesthetics, we expect global sales of approximately $4.5 billion, including approximately $1.8 billion from Botox Cosmetic and approximately $1.3 billion from Juvederm. For neuroscience, we expect global revenue of approximately $5.7 billion, including Botox Therapeutic sales of approximately $2.3 billion, Vraylar sales of approximately $1.8 billion, and UBRELVY sales of approximately $400 million. For eye care, we expect global sales of approximately $2.9 billion, including approximately $550 million from RESTASIS, which assumes no generic competition in the first half of 2021. For women's health, we expect global revenue of approximately $1.1 billion. For remaining larger products, we expect global sales of approximately $2 billion from Mavyret, $1.2 billion from Creon, $1 billion from Linzess, $800 million from Synthroid, and $750 million from Lupron.

Looking at the P&L for 2021, we are forecasting full year adjusted gross margin of approximately 83% of sales, adjusted R&D investment of approximately $6.6 billion and adjusted SG&A expense of approximately $11.8 billion. This guidance includes approximately $1.7 billion in expense synergies from the Allergan acquisition. We are forecasting an adjusted operating margin ratio of approximately 50% of sales, which represents an improvement of roughly 200 basis points versus 2020. We expect adjusted net interest expense of approximately $2.4 billion. Our non-GAAP tax rate to be approximately 12.5% and our share count to be roughly flat to Q4 2020. As we look ahead to the first quarter, we anticipate net revenue approaching $12.7 billion. At current rates, we expect foreign exchange to have a 1% favorable impact on comparable sales growth. We are forecasting an adjusted operating margin ratio of approximately 50% of sales. And we model a non-GAAP tax rate of 12.3%. We expect adjusted earnings per share between $2.79 and $2.83, excluding approximately $1.32 of known intangible amortization and specified items.

Finally, AbbVie's strong business performance and outlook continues to support our capital allocation priorities. Our cash balance at the end of December was $8.4 billion and we expect to generate free cash flow of approximately $21 billion in 2021. This fully supports a strong and growing dividend, which we have more than tripled since inception, as well as rapid debt repayment where we expect to pay down $17 billion of combined company debt by the end of 2021, including the $8.6 billion that was repaid in 2020. We expect to achieve a net debt to EBITDA ratio just below 2.5 times by the end of 2021 with further deleveraging through 2023. We anticipate that our net leverage ratio will be approximately 2 times by the end of 2022. Our strong cash flow also allows for continued business development with approximately $2 billion allocated annually to augment our pipeline with the most promising external technologies and innovative mid to late-stage assets.

In closing, we are very pleased with AbbVie's strong performance in 2020. We've driven top tier growth while also advancing our strategic priorities and we expect to deliver robust performance in 2021 and over the long term.

With that, I'll turn the call back over to Liz.

[Liz Shea, Vice President of Investor Relations]

Thanks, Rob. We will now open the call for questions. In the interest of hearing from as many analysts as possible over the remainder of the call, we ask that you please limit your questions to one or two. Operator, first question, please.

[Operator]

[Operator Instructions] And our first question today is from Geoffrey Porges from SVB Leerink.

[Geoffrey Porges, SVB Leerink]

Thank you very much. And as usual, appreciate all the detail in the guidance, and congratulations on the results. A quick question on SKYRIZI and one on RINVOQ.

First, one of your competitors had a negative result of a post-marketing study recently. I'm just wondering if you've had any discussions with regulators about conducting any other studies for RINVOQ or updating the label for RINVOQ as a result of that negative signal?

And then, secondly on SKYRIZI, a commercial question. Your current price for the 150-milligram dose is about $85,000 and you're using 4x, the dose for ulcerative colitis. Could you just tell us how you can manage that? And is it feasible to have sort of different prices despite the big difference in dosing? Thanks.

[Michael Severino, Vice Chairman & President]

Okay, this is Mike. I will take your second question first and then we can cover the SKYRIZI question. With respect to RINVOQ, I assume you're talking about the tofacitinib safety study, which top line results fairly recently in the last several days and showed in that program that they were unable to exclude a risk of MACE or malignancy based on the criteria that were used to analyze that data sets.

As I said in my prepared remarks, we've kept a very, very close eye on our data, both at the time of the NDA and in an ongoing manner since that time and we've not seen a signal. Our rates have not been elevated with respect to comparator or baseline rates and the rates overall remain low.

With respect to your specific question about whether we've had discussions with regulators, regulators have not asked us to do long-term safety study in the way that Pfizer was asked. So that has not been discussed with regulators and we have not had any contact with regulators around labeling updates up to the present time.

[Geoffrey Porges, SVB Leerink]

Great.

[Michael Severino, Vice Chairman & President]

And with respect to SKYRIZI?...

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

Yes. Hi, it's Jeff. It's Jeff Stewart on the commercial question. We have anticipated the different markets and how we will approach the pricing. Now, it's important that we're just starting to see the SKYRIZI data. We saw the induction data, we'll see the maintenance data.

I think it's important that as we look at our strategy that we're honing is for SKYRIZI, you're going to -- for Crohn's, you're going to have an induction dose, which is an IV at a different dose and we know that based on the form and some things we can believe we can price that to market. And also, we are coming with a unique approach for the maintenance as well depending on where that dosing falls out. And we would be using at that point, which is known as on-body injector.

So the combination of the forms as well as basically the ways that we will deliver the medication when we get there, we believe that we can price effectively to the market and manage it across the indications.

[Richard Gonzalez, Chairman & Chief Executive Officer]

So this is Rick. So I think the bottom line is, we've contemplated that. It's a good question, Geoff, but I think we have a strategy that will allow us to deal with that and impact the market in an appropriate way.

[Liz Shea, Vice President of Investor Relations]

Thanks, Geoff. Operator, next question, please.

[Operator]

And our next question is from Vamil Divan from Mizuho Securities.

[Vamil Divan, Mizuho Securities]

Hi, great. Thanks so much for taking the questions. And maybe two if I could. So I want to appreciate the long-term guidance you've given recently on the top line. I'm just wondering how we should maybe think about the margin progression as we think about the Humira LOE in a couple of years? And then as we sort of get past that and your sales touch ramp up again, if you could maybe give us some sense of where you think your margins could sort of come back to?

And then, the other one I have is just on Vraylar. Again, appreciate the guidance you've given there. I think one of the big events for you guys this year will be the Phase 3 data in MDD. I’m just curious kind of what gives you confidence that maybe you can just talk about whether it's around the drug or the study design, sort of, what gives you confidence or why should we be confident sort of going into that data readout? Thanks.

[Robert Michael]

Vamil, this is Rob. I'll take your question on margin progression. I think when you consider the greater than $2 billion expense synergies from Allergan by next year and the P&L leverage that will come from the sales growth, we also expect for next year, you should expect that our operating margin will continue to expand through 2022.

Upon the entry of U.S. biosimilars in 2023 and given Humira's profitability, it is reasonable to expect operating margin pull back. We've indicated before the 45% range based on our current LRP, I think it'll be a little bit higher than that.

But then we've returned to growth immediately – in 2024, we'll return to revenue growth, a very strong revenue growth starting in 2025, you can expect then operating margins once again expand. We've had a long history of expanding operating margin by leveraging the P&L. And I would expect that to continue as we start to see very strong revenue growth starting in 2025 and beyond.

[Richard Gonzalez, Chairman & Chief Executive Officer]

Yes, Vamil, this is Rick. Mike and I'll cover the second question on Vraylar. It's important to recognize that what we've communicated in long-term guidance on Vraylar is based on the three currently approved indications. So it doesn't count on the fact that MDD would be successful.

Now having said that, I think we do have -- I'd say, we're cautiously optimistic about the MDD indication and I'll let Mike kind of walk through how we look at it and what gives us that level of confidence. But in the event, it weren't to play out, that doesn't impact the guidance that we gave.

[Michael Severino, Vice Chairman & President]

So, this is Mike. I'll pick up from here. I think that our optimism and I think that's the right way to express it in a disease like MDD, which is a challenging disease to work and is based on a couple of features. One is based on the basic pharmacology of Vraylar, which has a unique mix of D3, D2 specificity and other features that lead clinically to what's been described as a brightening effect, which seems to be beneficial in a number of settings. It's also driven by the results that we have from the MDD study that is positive that we already have in hand.

So with one positive study, we would need only one -- at least one or, of course, both of the next two studies to read out positive, either of those outcomes would support a filing. We've done a deep dive into the study design and the patient population.

We think it's a well-designed study. And we think the patient characteristics with respect to baseline factors and other elements are all very appropriate for this sort of study and we can assess that in a blinded aggregate way in a way that's completely consistent with the study rules for the conduct of the study.

And so all of those things make us feel optimistic that it's a molecule with a good chance to work, well-designed study, well-conducted study, and we look forward to seeing the results. But as I mentioned, MDD is a challenging area. And for that reason, we didn't build into our deal model and we didn't factor it into our guidance, as Rick said, so we view this as upside.

[Liz Shea, Vice President of Investor Relations]

Thanks, Vamil. Operator, next question, please.

[Operator]

Thank you. And our next question is from Randall Stanicky from RBC Capital Markets.

[Randall Stanicky, RBC Capital Markets]

Great. Back to RINVOQ in atopic derm, how quickly do you guys expect that launch to ramp? And maybe just help us with expectations given coinciding JAK competition from abrocitinib , the timing to payer ramp and coverage. And then we sense of a lot of patient warehousing, maybe if you could help quantify your thinking around that opportunity within the $1.7 billion outlook for the year, that would be helpful?

And then a quick follow-up, Rick. You don't get asked about eye care a lot. It's a $3 billion global franchise. You have some pipeline behind it. It could be a good growth business, but it's declining. Any appetite to strategically add to that business or reposition it? Or should we view it more as a mature cash flow generator? Thanks.

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

Yes, hi. It's Jeff Stewart. I'll start off with the atopic derm commercial question. We're very encouraged with the market that we're about to enter and I'll give you some context there. So when we look at the population, we see that just on the moderate to severe atopic derm patients that the market size or the potential is at least 2 times and probably closer to 3 times the size of the psoriasis market. And so this is very, very encouraging in terms of our ability to enter. It's also significantly under-penetrated. I mean if you look at the psoriasis market, you're talking about far greater than 10% or 12% penetration and in the single-digit, the low-single digits, where we are right now with the one biologic dupilumab. So it's very, very attractive. The other thing that I would say is that we see from our go-to-market approach that we know the HCPs very intimately. So about 85% of the market is driven by the derms, we know the derms very well and there is a 90% -- roughly 90% overlap with the big prescribers of dupilumab and drugs like SKYRIZI and our Humira. So we are very, very encouraged at the ability for this segment to rapidly expand, despite the fact there will be multiple new entrants coming in.

To get to your specific question about the access ramp, we have a very strong position, as you know with RINVOQ right now in the existing indication of RA. We had greater than 95% commercial access, that's the dominant channel for atopic derm and our anticipation is we will have very strong access that we'll build to that level over the course of '21. Obviously, it's going to take some time, once we get the approval to go through the final approvals on the big commercial plans and so we see it's starting off slow, but then building into the middle of the year and certainly getting to a significant level at the end of the year. So the combination of the market, the asset itself, which looks very, very strong, as you've seen from the data and the way that we will play in our derm segment as well as the allergy segment give us a lot of confidence for a strong ramp in '21 and beyond.

[Richard Gonzalez, Chairman & Chief Executive Officer]

The only thing I would add to Jeff's comments, I mean if you look at RINVOQ did $731 million last year. Obviously, if you look at the running rate out of the fourth quarter had [ph] strong running rate coming out of the fourth quarter but that's a $1 billion worth of growth from '20 to '21. The majority of that growth is going to come from continued performance in RA. I think where you will see the most significant impact from atopic dermatitis will be as we flow into '22, much like as you saw what happened in the RA market, it takes time for physicians to start to get adapted. Once they do, their momentum picks up. So, I don't remember the specific number. I'm not sure we gave that guidance anyway, but I would be thinking about it more than its continued penetration and growth in RA which drive in the bulk of that growth. Rob, anything you want to add?

[Robert Michael]

Yes, I just -- on your question regarding warehouse patients who have a very modest amount of warehouse patients assumed [ph] in the forecast. So we're not count -- the $1.7 billion doesn't really count on that. And keep in mind that RINVOQ was of the product that was lesser impacted by COVID and so there's not really significant how warehousing in that forecast.

[Richard Gonzalez, Chairman & Chief Executive Officer]

And then, Randall, on your second question; I would say we absolutely agree with your point of view. I think eye care is a very attractive market. The kinds of markets that I think we look for and that we are the very best at is where there are specialized physicians who really drive the use of medications based on the clinical data and being able to restate markets and improve standard-of-care in those markets, and certainly, eye-care, I think it fits that description. And so we would have a strong appetite to look for opportunities and we are looking for opportunities now that we could add to that eye care business to be able to drive growth. Obviously, RESTASIS, as Rob indicated in his formal remarks, we've built in a half a year that's still an unknown of when that product will go generic or if it will go generic. But I think even aside from that regardless of what happens with RESTASIS longer-term, this is an area that we would have interest in and if we could find the right kind of assets to add to it, we would enthusiastically do that.

[Liz Shea, Vice President of Investor Relations]

Thanks, Randall. Operator, next question, please.

[Operator]

And our next question is from Chris Schott from JPMorgan.

[Chris Schott, JPMorgan]

Great. Thanks so much for the questions. Can you just elaborate a little bit more on Aesthetics and maybe some of the learnings you've had in that franchise since you've acquired it? Have there been changes in the way you think about approaching the business commercially in your levels of investment? I'm just trying to get my hands around that high single-digit growth over time does seem healthier than the street have been anticipating. I'm just trying to get a little bit more color of what you're seeing in the market that gives you confidence in that. And then, my second question was just on IMBRUVICA, the growth has slowed here a bit. Can you just elaborate a bit more and how much of this is -- is there any COVID related dynamics playing out here? How much of this is competitive? I'm just trying to [ph] sense of just how you're seeing that the health of that franchise over time? Thanks so much.

[Richard Gonzalez, Chairman & Chief Executive Officer]

Yes, Chris, this is Rick. So I'll cover the Aesthetics question for you. I'd say as we've studied the Aesthetics market and had an opportunity to be able to operate the business now for some time, I think we're even more enthusiastic about the long-term ability to be able to grow this market. I would say some of the areas that were a bit of a surprise to us is the responsiveness of this market to patient activation, and I would say that the strategy that we've put in place is one where we are funding the business on a very -- on a continuous basis at a high level to achieve the level of activation that we're looking for and we think that will, certainly, you can see, the response I guess an example in Botox already, we are seeing a very aggressive response in being able to grow the market, you saw the Botox grew -- Botox Cosmetic grew in the fourth quarter to 9%. I would expect that we can continue to drive that level of growth.

And as part of legacy Allergan, I think it was much more episodic in the way this was funded quarter-to-quarter where we basically built a funding plan that will allow them to continue to drive activation over a longer term [ph]. I'd say the second thing that's it's of interest to us is, I think this is a market where you can drive significant innovation. If you fund that innovation in a way, again on a more continuous basis and advance those programs more aggressively, and have a well thought out strategic roadmap as to where you're trying to drive some of these markets. As Mike mentioned in his comments, our goal is to basically try to advance the level of performance of the toxin market significantly over time. And the same with the filler market. There are certainly things that we can do to expand the areas that you could use fillers, both within the US and globally and that's a significant opportunity. But long term, we think there is an opportunity to take some of the biologic expertise that we have here at AbbVie and create more biologically active fillers, and not only do physical filling but also improve collagen, improve elastin, and other kinds of characteristics that will improve skin quality. And we think that will be -- if we're successful, we think that will be a significant opportunity to drive long-term growth.

And then, the last thing I'd say is the geographic footprint that AbbVie has. We obviously have a very broad geographic footprint and the structure that we've set up is this totally integrated global unit that we're operating the Aesthetics business really gives them the freedom to go out and expand or more aggressively fund areas around the globe that they think there is a significant opportunity. A good case in point is I believe it was in the fourth quarter, we funded a significant expansion in China to be able to increase the sales force there to be able to drive it more deeply into a broader set of the cities in China to the next level down and we are already seeing the benefits of that, China is already back to growing much like it did pre-COVID. So I think there's a lot of attractive attributes about that.

On IMBRUVICA maybe Jeff and I will tag team on that one. What we're clearly seeing is the COVID is having an impact on patient starts in CLL. We're not only seeing it IMBRUVICA, but we're seeing in VENCLEXTA as well. And then somewhat logical when you think about these oncology practices of trying to reduce density and CLL is a disease where you can, in many patients' cases, you can delay therapy for some period of time. I would say that's the vast majority of it. When we look at -- when I look at the overall share. And the reason why I'm talking about the overall share is VENCLEXTA is now gaining a significant level of momentum in this market as well. When I look at our overall shares in first line, second line or third line, we continue to have the dominant share position. And I'd say probably, partially due to your question, if I look at Calico [ph] I'd say it's performing at the expectation we have. I think the first line share is about 12%, slightly higher in second line maybe 14%, and I don't recall the third line share...

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

Very similar, yes.

[Richard Gonzalez, Chairman & Chief Executive Officer]

So I'd say that's within the range or we saw with MCL, it's within the range of what we had modeled. So it's not really a competitive issue that we're dealing with. It's more a function of getting those patients starts back up to the level they were before. Anything, you want to add, Jeff?

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

No, I think Rick, that's exactly right. The only thing I would say in terms of our forecast, we think that in the first part of the year, the early part of the year, we continue to see some suppression in the new patient starts. But as we hit the second and third quarter, we anticipate that the market will recover.

[Liz Shea, Vice President of Investor Relations]

Thanks, Chris. Operator, next question, please.

[Operator]

And our next question is from Tim Anderson from Wolfe Research.

[Nicole Maher, Wolfe Research]

Hi. Can you hear me? This is Nicole Maher on for Tim Anderson. What does your long-term guidance assume for potential austerity measures in the ex-U.S. countries in 2021 and beyond, similar to what we saw in the post-2008 time period except this time around, it would be the fall from the COVID impact?

[Richard Gonzalez, Chairman & Chief Executive Officer]

Hey, Nicole. This is Rick. I think this is something we've got experience with, if you think about the economic crisis, I thought we saw a similar kind of uptick in price erosion outside the United States and in particular, I'd say in the European Union, we have factored in a reasonable assumption into our guidance for 2021, I feel good about that. I think it is reflective of what we're likely to see. So I think we're covered from that perspective. Anything you want to add Rob?

[Robert Michael]

No, that covered it.

[Liz Shea, Vice President of Investor Relations]

Thanks, Nicole. Operator, next question, please.

[Operator]

And our next question is from Steve Scala from Cowen.

[Steve Scala, Cowen]

Thank you. Two questions. AbbVie delivered one of the first completely clean and compelling quarters in pharma this cycle, and I have to believe, has something in reserve for upside as the year unfolds. I'm sure you monitor the competition, so beyond the AbbVie management team itself, what about your business do you think is allowing you to execute in this way? Would you attribute it to -- mainly to the products themselves, the payer strategies, geographic mix, or is there something else? And the second question is the ongoing Vraylar Phase 3 trials utilize doses up to 3-milligrams while the successful prior trials were up to 4.5-milligrams, so why were the doses lowered in the first place? And what placebo response mitigation methods are included in the ongoing trials? Thank you.

[Richard Gonzalez, Chairman & Chief Executive Officer]

Okay. Steve, this is Rick, I'll cover the first one, and Mike can cover the second one. I would say, first and foremost, we are a very disciplined organization in how we approach execution in the marketplace. We tend to probably, in [ph] some extent, obsessively plan and then go out and try to execute against that plan and I think in times of difficulties that kind of discipline tends to demonstrate itself and that's when you see the biggest differences. So that's not say [ph] other people don't do it like that. I'm not that familiar with how others operate, but I know how we operate and I know how we contingency plan and we look at. Okay, if that doesn't work, what are we going to do and we do that ahead of time, if that doesn't work, what are we going to do. And I think that kind of contingency planning and focus on execution is helpful.

I'd say the second thing is, if I look at our business, we put a strategy in place and I feel very good about how the business is performing overall. I mean I would say the business is firing on all cylinders. And you can look at our fourth quarter performance, to your point, and I think it demonstrates that and you can look at our guidance and it demonstrates that almost every single product area is performing at or above, most of them above what consensus was and then I think it's another indicator for you and we have a much more diverse business now. We have four major growth platforms that are helping us drive that level of growth. Our new product launches are doing extremely well. Obviously, SKYRIZI and RINVOQ are, but I'd also say UBRELVY and Vraylar are performing extremely well and the pipeline, I would say one of the things gives me the most confidence is when I look at the pipeline behind that. It's designed to be able to drive our long-term growth because one of the things that we focus on is how we're going to make sure that we continue to drive this business to perform at the level its performing over the long term. And so if I look at the SKYRIZI and RINVOQ R&D execution around the follow-on indications, it's been nothing less than spectacular both from a timing standpoint and the kind of data that we have been able to produce.

When I look at our hem/onc strategy, we've had a very disciplined strategy there ensuring that we have enough assets to continue to grow. What has become a very large franchise for us. Our franchise is $6.6 billion as we said, we're going to grow in double digits. Over the long term, what's going to allow us to do that? Well obviously IMBRUVICA is going to continue to drive share, VENCLEXTA is going to continue to drive share in CLL but VENCLEXTA has indication expansions in the area of potential, in the areas of T1114 and a broader AML population and several other areas. Then I look at Navitoclax. We should get that product approved and give us an opportunity in myelofibrosis and then you look at Genmab and you look at our CD47, those will all allow us to ensure that we can sustain that growth profile over the long term.

In neuroscience, same thing, atogepant will allow us to expand into the broader migraine population. So I feel very good about what we put in place and our ability to execute against that. So I think there is not one silver bullet that I can point to. I think it's all of those things, certainly, our ability in market access has helped a lot in the US. I think we're very good at that, but you have to have the right kinds of assets in order to execute that. You have to have assets that are differentiative like SKYRIZI and RINVOQ. So it's the combination of all of that gives you this performance and gives you the long-term sustainable ability to deliver that kind of performance and I feel awfully good about where we are.

[Michael Severino, Vice Chairman & President]

So, this is Mike. I'll take the Vraylar question. I believe you're talking about the ongoing MDD studies and what I would say there is that the dose selection was based on everything we know about dose-response, not only from the prior MDD studies but across the program and we've done a deep dive into that and we're confident that we're at a dose that ought to have optimal effect in these indications -- in this indication. With respect to your question about placebo response rate, managing or controlling the placebo response is extremely important in all studies, but particularly in depression studies and other studies in psychiatry. And I would say that there are many different approaches that are taken that are complementary to each other. The first and most important is appropriate site selection, one has to select sites with an appropriate patient population with experienced investigators who are also experienced evaluators in a clinical trial setting and that's one of the most important things to getting high-quality data to determine whether a drug works.

The next element has to do with investigator training, investigator manuals, protocol design and also with respect to inclusion and exclusion criteria to make sure that you have a patient population that is representative of the population that you would expect to treat post-registration if the study is successful. And we've taken a look at all of these things, we've taken a look at the blinded aggregate data and we feel good that the measures that we have in place will effectively control the placebo response and give us a quality readout.

[Steve Scala, Cowen]

Thank you.

[Liz Shea, Vice President of Investor Relations]

Thanks, Steve. Operator, next question, please.

[Operator]

Thank you. Our next question is from Gary Nachman from BMO Capital Markets.

[Gary Nachman, BMO Capital Markets]

Hi, good morning. Could you talk about how much more you plan on investing behind the neuroscience franchise to accelerate growth there to get to the long-term targets you talked about like the $4 billion in Vraylar even with that MDD, and how you see the long-term potential in Botox Therapeutic? And then how are you thinking about the launch for atogepant later this year? And how will you leverage the work that you've done so far with Ubrelvy? And how do you think that product will take off in the migraine market? Thank you.

[Richard Gonzalez, Chairman & Chief Executive Officer]

Well, I'd say, on the neuroscience investment, I mean we obviously have a very broad neuroscience investment. I mean we have a significant investment from an R&D standpoint. And in disease-modifying approaches for a number of different neurological diseases that Mike has talked about and mentioned in his comments earlier. So I'd say we have a significant R&D investment. We obviously are investing in Vraylar to continue to expand that asset. Again, our goal will be to invest in these areas where you can get maximum capture -- market share capture.

I think if you look at Vraylar and you look at the projections that we made over time, if you look at the sequential year-over-year dollar growth of that business, that's how you get to that number. And basically, we're going to be able to sustain that, we expect to continue to sustain it as relatively low market share, but that's not unusual. And in this market, because there's a lot of generic products that psychiatrists, cycle patients through and sometimes in combination with patients. So we're going to invest in the business to be able to drive the maximum level of profitable share as we do in any other segment that we're in. Same thing on Botox Therapeutics, obviously, we have R&D programs in there to continue to expand the opportunities in therapeutics. Anything you want to add from an investment standpoint, Rob?

[Robert Michael]

I think if you look at the overall portfolio, we've detailed out what we expect for Vraylar and that's without the additional indication. We think we can get to approaching $4 billion. When you look at the migraine portfolio, peak sales are greater than $1 billion for both the UBRELVY and Atogepant. We have 951 in the pipeline that we think can be a significant contributor, obviously, Botox Therapeutic will continue to grow. So we feel pretty good about the portfolio we have and that double-digit growth outlook is supported by a number of very promising assets.

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

Yes, hi. And it's Jeff, I'll take the second question on atogepant. I think first, the asset itself is very, very attractive. And when you look at the response on the migraine free days at the 10 to 60-milligram, it's really impressive data, very impressive data as this very strong oral. And so we think that we can come at this in a couple of different ways. Obviously, you highlighted the leveraging Ubrelvy. We've got a dedicated sales force that calls on the specialty organization, the neurologists as well as the headache specialists will actually carry both UBRELVY and atogepant in their call plan to really leverage the knowledge of a very established sales force and as well as focus on the big primary care writers that see a lot of migraine sufferers. So this is -- this is an important dynamic that will, we'll be able to leverage when we get into the market towards the end of the year.

Also, we are looking at the ability to see how you look on the back end of the migraine journey so patients are on Botox Therapeutics, for example, which is very substantial. It's the leading in play share for chronic migraine. But many of those patients don't get full efficacy results. So ultimately the combination of Botox plus atogepant as a way to get really migraine freedom in the toughest patients is another area over the long term that we think can leverage these assets across the board, whether it's you UBRELVY on the front end with acute atogepant in the middle, oral for episodic and chronic or Botox on the back end. We think it's a nice portfolio that we can commercially manage over time to hit our ambitions that Rob described.

[Liz Shea, Vice President of Investor Relations]

Thanks, Gary. Operator, next question, please.

[Operator]

Thank you. And our next question is from Naveen Jacob from UBS.

[Naveen Jacob, UBS]

Hi Naveen from UBS. Thanks for taking the question. So first on the ADC steroid you see for inflammatory conditions. Just wanted to get an update there, it's been, I believe you said delayed for COVID-19 do you still believe that this approach can lead to success for refractory RA or other inflammatory conditions. Just wondering about your confidence in this technology understanding, it's still early in development. And then secondly, as it relates to your current state of affairs with RINVOQ and SKYRIZI, could you remind us of what the current in-play market share for our RINVOQ is in RA and SKYRIZI in psoriasis. Thank you so much.

[Michael Severino, Vice Chairman & President]

Okay. This is Mike, I'll take your first question on ABBV 154 our TNF steroid conjugate has not been delayed because of COVID. There were some delays in other early immunology programs. Our CD 40 and our ROR gamma-T program experienced modest delays but 154 did not. As we said at the time of the COVID peak over the course of last summer, there were a small number of studies that we delayed initiation and delayed enrollment, is the programs that I'm talking about TD 40 and ROR gamma T were impacted modestly in that time period but 154 was not so that remains on-track. We remain confident in it. We have selected 154 as the agent to go forward. Remember that we had two 3373 and 154 and we selected 154 because of advantages it had in linker technology, we're planning to initiate a large Phase 2 B study in the first half of this year and then today, we're now saying that we will also be studying Phase 2 Crohn's disease, as well as polymyalgia rheumatica, and that's an important set of indication that covers a wide range of opportunities, RA and Crohn's disease areas where we are very active, PMR polymyalgia rheumatica is a new area where there is not a lot of therapeutics, unfortunately, it is a well-established area in medicine but there is very little in terms of treatment for these patients, they have considerable pain and suffering from their condition and it's -- and it's particularly steroid responsive. So we think it is a very attractive target for our steroid ADC approach. The 154 remains on track and we continue to have confidence.

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

Thanks, Mike. It's Jeff, I'll take the in-play [ph] share. So if we look at the psoriasis market and SKYRIZI we have on our latest data point 33% of in-play share, which is of course is new patients coming in or newly switch patients. If you look at the total AbbVie share, it's approximately 45%, so very remarkable when you add Humira plus SKYRIZI in the dermatology space. If you look at the RA space, our latest data points are between 15% and 16% in terms of in-play share for RINVOQ in RA and that's basically neck and neck with Humira, so for a total AbbVie share of roughly a third of the RA market.

[Richard Gonzalez, Chairman & Chief Executive Officer]

This is, Rick. The only thing I'd add on that is when you look at that SKYRIZI 33% in-play share, it's almost double what the next closest competitor is, I mean it's impressive. The gap between SKYRIZI and the number two player and the other thing is, as these brands get more experience in the market, we'll also start to talk about the total TRx share and I think SKYRIZI is at that point now. I think it's total TRx share now is 14% [indiscernible] or something like that. That's right. And that's pretty impressive for this short period of time and it is close to number two in the market in TRx share. So they are both doing very, very well.

[Liz Shea, Vice President of Investor Relations]

Thanks, Naveen. Operator, next question, please.

[Operator]

And the next question is from Chris Raymond from Piper Sandler.

[Chris Raymond, Piper Sandler]

Hi, thanks. Just a couple of questions. First, on the relationship with BI and SKYRIZI. We had a few inbound questions on the treatment of the royalty and I know you've answered this question a little bit in the past, but also just noticing the big non-cash GAAP charge you took this quarter, you back out a non-GAAP earnings. So I know you have described accounting for this as a business combination. But can you maybe give a little bit more color on the rationale and the accounting behind that non-cash charge and then is there also some threshold number or other event where you'd add this royalty expense back to non-GAAP. And then, on AbbVie 951; we picked up a decent amount of KOL excitement around this asset in Parkinson's. I know Phase 3 is expected later this year, but I wonder if you could maybe talk about the launch -- your launch expectations on this and maybe contrast it to the Duodopa experience just from our feedback, it seems like this could expand the addressable PD population pretty sizably and Rick maybe frame how this sort of factors into your long range $10 billion neuroscience guidance. Thanks.

[Richard Gonzalez, Chairman & Chief Executive Officer]

Yes, Chris, I'll take your question on Contingent considerations and yes, we did account for this as a business combination. So that means each quarter we do a mark-to-market, the fair value of the future milestone royalty payments and you did see us take a fair value write up this quarter. Based on the higher sales outlook as we communicated during the Immunology Day event in December and you see in the guidance provided today, obviously the outlook for SKYRIZI continue to increase. And so we're recognizing that liability going forward. We also take into a consideration because it's a fair value measure what the market is assuming. So it's not just our own forecast. It's also what street expectations are and those have also increased as we've seen a very nice ramp. We are starting to see obviously the confidence from the street increase that's translated into a higher outlook for SKYRIZI which then translates in a higher future potential royalties.

One of the reasons I wanted to stress, also on the free cash flow in my remarks today is because there is some confusion over that's how we account for, but it's important to keep in mind that when I talk about free cash flow of $21 billion this year, that accounts for the royalty payments of - to BI. And so you can look at a few different ways, you can look at it from a – if you can track the consideration accretion that we're recording and the liability on the balance sheet as an indicator of the future outlook, but also as we monitor our cash flow pretty carefully what does that contribute to overall cash flow. So we would not be going back, we made a determination as a business combination. We don't -- should not anticipate that we would reverse that but we'll provide obviously more clarity on what those royalties look like going forward given the size of the asset.

[Michael Severino, Vice Chairman & President]

I also say in that time period when we did BI it was an absolute requirement on the account, right. Well, that was really, it wasn't like a judgment call or something thing to desire to do the accounting, said to be accounted for in that fashion. It's since been changed going forward. But the window in which we that occurred that was the required accounting treatment. So number two, Jeff and I will cover number two, sort of a high level look and then Jeff, maybe can give more specificity around that. If you look at Duodopa I mean this is a -- this is a therapy that has absolutely phenomenal efficacy and you can see these patients who cannot move early and you turn on the pump and you start giving them the drug and within a very short period of time, they will gain their motion.

The challenge is a very difficult treatment to the patient to basically deal with and the caregiver to deal with on a long term sustainable basis; you have to do surgery, insert a G-Tube, you got to maintain that G-Tube opened, so that does somewhat limit the population is able to use it. And so we view this as a way to significantly expand the market. Jeff is obviously far more familiar with it. So I'll let him, give you a little more specific, but that's the general concept. I think this could be a significant -- wanting to be a significant treatment for these patients who need this kind of therapy. And two, I think we could expand the market pretty significantly.

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

Yes, I think just to add on that. Rick, it's we hear the same thing from our KOLs, they're very, very encouraged and with the perspective you look at Duopa or Duodopa, about $0.5 billion product with a really difficult challenge on on-boarding for these patients. Right. You have to do the J-Peg surgery. You have challenges with the size of the pump. Nonetheless, it's still remarkable that we do get that level of sales. So if I give you some perspective on the market. If you look at the advanced Parkinson disease market, 90% of it is really old generic orals where the patients just have to take more and more oral medication before they can have any -- any relief. And then, they are still in big trouble. So, only a minority about 10% ever get to let's say more advanced device-aided therapy, which is Duopa or Duodopa and deep brain stimulation. So, as we studied the market we agree that as we look at the ability to sort of move from a more convenient way a simple way for neurologists to get a more advanced therapy without doing a procedure, whether it's brain surgery or the -- or the GI surgery we think we can start to move upstream into that 90% of really non-workable oral segment. So, we are encouraged at the recent feedback from our KOLs and our study sites and are anticipating and planning for launch in the coming years.

[Liz Shea, Vice President of Investor Relations]

Thanks, Chris. Operator, next question, please.

[Operator]

And our next question is from Gregg Gilbert from Truist.

[Gregg Gilbert, Truist]

Yes, hi, I was curious if your Botox Cosmetic guidance in the US assumes that as you've always on the market or off the market this year and then longer-term curious about Botox Cosmetic versus therapeutic many years ago Allergan started to explore the idea of separating the two from a reimbursement and pricing standpoint, I believe it involved litigation with the government at one point, but I don't know if that's still ongoing or if you're still thinking through that possibility since it has implications longer-term about keeping those that together possibly spending Aesthetics someday if conditions warrant. Thank you.

[Richard Gonzalez, Chairman & Chief Executive Officer]

Yes, so I don't know that we're going to specifically comment on what we've assumed as it relates to [indiscernible]. I just don't think it's probably appropriate. First of all, it's not that large of a product to begin with. So wouldn't have a material impact on Botox Cosmetics. I'd say on the -- on the -- on your second question, I will tell you emphatically we have no interest in spinning off the Aesthetics business. We have a program in place where we manage the differences between the reimbursement associated with Botox Therapeutics and the cash pay portion of the Cosmetics business, it's been in place for quite some time. We're quite comfortable that we can manage it quite effectively. So It's an important thing that you -- that you track carefully, but we have a good system in place to be able to do that, but we have no interest in getting off the Aesthetics business or any aspects of the of the Aesthetics business.

[Liz Shea, Vice President of Investor Relations]

Thanks, Gregg. Operator, next question please.

[Operator]

Our next question is from Geoff Meacham from Bank of America.

[Unidentified Analyst]

Hey guys, it's Austin [ph] on for Geoff. Thanks so much for the questions. A couple of quick ones. So -- and within the context of the Xeljanz's data, do you guys have an early view from the field as to whether docs are differentiating RINVOQ and -- sorry, RINVOQ and Xeljanz's safety profiles? And then quickly on the mid to early stage pipeline there's obviously a lot going on in your Heme-onc space but just going to want to get a sense of how strategically important some more newer disruptive technologies are to AbbVie such as cell or gene therapy. Thanks.

[Jeffrey Stewart, Executive Vice President, Commercial Operations]

Yes, I'll take the early view from the field. I think it's important, at least, we've heard from our teams that some of this data is not really new. It was available in the interim analysis that helped -- led to the label that we have and so really the early reports from our -- from our field particularly from the KOLs and the big prescribers is a little bit of a shoulder shrug like not that, not that new news. I would say, from the standpoint of the comparison between RINVOQ and Xeljanz. I mean if you look at the penetration of the jack-class really across the world, and particularly in the U.S., there has been a significant lift that we just talked about with that in play share. And so really what we're -- what we're hearing from the -- from the field and from the prescribers are they view RINVOQ as a differentiated asset in terms of the overall risk benefit and that's why that share is moving so quickly and so that's really what we -- what we hear in the early days from our -- from our teams that are connected to those big rheumatologists.

[Michael Severino, Vice Chairman & President]

So, this is Mike. I'll take the question on the heme-onc portfolio mid stage and newer technologies, but I would say is there is a lot going on in our heme-onc portfolio. Obviously with our late-stage molecules in the mid-stage. I think you'll see a focus on T-cell redirection, which is of course a newer technology. And I think a very attractive approach to harness the immune system to control these cancers and you see good progress with our CD3 by CD20 and our BCMA T cell redirecting therapies. And so, that is clearly an area of focus for us now and I think we'll continue to be in the future. With respect to gene therapy, gene therapy is not a single thing it can be used in different ways. Gene replacement is not an area that we've been focused on. Gene delivery is an enabling technology for other therapeutic approaches like cell-based therapies and we have early programs and cell-based therapies in heme-onc and in other areas. Solid tumor oncology and potentially other areas in the future. And so that's something that we are keeping a close eye on and making sure that we have access to the enabling technologies we need to prosecute those targets.

I think that for those sorts of approaches we're probably one generation away from things that are broadly applicable. But we are exploring possibilities that we think can fulfill that next generation need. And so we are keeping up a broad eye and are essentially therapeutically agnostic. What I mean by that is we look for the best tool to do the job. We don't find it tool and then figure out how to use it. And so in each of these cases we're going after strong biology. We're going after things that we think will raise the bar on the standard of care. And I think a number of the newer technologies that I mentioned fit that bill.

[Liz Shea, Vice President of Investor Relations]

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

[Operator]

Thank you. Our final question today is from Luisa Hector from Berenberg.

[Luisa Hector, Berenberg]

Hello, thank you for taking my question and thank you for the guidance on the cost lines. And I just wondered given that we have various layers to consider with COVID and then the Allergan inclusion and the synergies could you comment on the implied cost ratio for 2021 and how representative are the combined entity. And is there anything else we should be thinking about for those cost line as we look out to 22 COVID related savings may be sticky ones that may reverse? And could you tell us the level of synergies you achieved already in 2020? Thank you.

[Robert Michael]

Hi, Luis. This is Rob. So I think now that we have first full year with combined company and you're looking at these profiles. I think you could assume they're indicative in the range of what you'd expect going forward. And so that is a cleaner guide then say when you have a partial year like we had in 2020 as it relates to the synergies we achieved in 2020 which is about $600 million of synergies about $400 million that was an R&D and $200 million SG&A and you see we've now increased that to $1.7 billion in 2021 with about a little bit roughly half of that coming from R&D about in the 40% range SG&A and about 10% from cost of goods.

[Liz Shea, Vice President of Investor Relations]

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

[Operator]

Thank you. This does conclude today's conference. You may disconnect at this time.