Abbvie Inc

NYSE:ABBV

Earnings Call Analysis

Rising Revenue and Solid Guidance Amid Challenges

AbbVie's Q4 reflected resilience with key products like Rinvoq and Skyrizi poised for future growth, despite the 40.8% decline in Humira sales due to biosimilar competition. Rinvoq garnered 7% market share with plans for expansion, while Imbruvica faced a 19% revenue dip. Aesthetics showed strength with a 6.9% increase, and neuroscience pipeline advances like ABBV-951 offer potential. Guidance for 2024 predicts $54.2 billion in net revenues, foreseeing continued strong performance in Immunology with a modest negative price impact and significant growth in Neuroscience. Adjusted EPS guidance for the year is set at $11.05 to $11.25, while Q1 expects $11.9 billion in net revenues and adjusted EPS between $2.30 and $2.34.

Financial Performance and Free Cash Flow

The company envisions a robust financial future, anticipating a striking increase in free cash flow to approximately $18 billion in 2024, bolstered by around $1.9 billion in Skyrizi royalty payments. This surge in free cash flow is expected to undergird a substantially growing dividend, which has flourished by more than 285% since the company's inception. Additionally, the company is on track to reduce its debt by tackling roughly $7 billion worth of maturities within this year. Moreover, this financial muscle will support ongoing business development to enhance the company's portfolio further.

Expectations for Biosimilar Competition and International Market

There is an anticipation of biosimilar competition intensifying in the U.S., starting around 2025 or 2026. 2024 marks the first full year of U.S. biosimilars, which denotes a period of observation to determine the uptake of volume, interchangeability, and contracting dynamics. Internationally, a forecasted step down of $400 million is largely attributed to the last influx of markets like Canada and Puerto Rico, alongside standard international price erosion, which is not specifically related to biosimilars. Additionally, competition from newer agents such as Skyrizi and Rinvoq is expected to lead to market share shifts.

Operating Margin Outlook

For 2024, the company has provided guidance for an operating margin of 46.5%. Post-2024, as the company resumes vigorous growth, an expansion of the operating margin is predicted. This expansion is expected to continue steadily over several years, with an envisaged peak operating margin of around 50%. Expansion is specifically anticipated in 2025, benefiting from the full-year impact of recent transactions, and is projected to contribute to the company's growth throughout the decade.

Impact of the GILTI Tax Increase

The company is preparing for an increase in the U.S. tax known as the GILTI tax, which is the foreign minimum tax on foreign earnings. This tax rate is projected to rise from the current 10.5% to 13.1% by approximately 2026. This uptick in tax rate will result in roughly a 1.5% impact on the company's tax rate, which is factored into the average 1% anticipated increase over the next three years.

Considerations for Future Growth Amid Policy Changes

The company has meticulously factored in the expected impact of the high single-digit CAGR and the Inflation Reduction Act (IRA) into its long-term planning. Notably, the Medicare Part D benefit redesign, which is set to commence in 2025, has also been accounted for. Although this redesign introduces some growth headwind, the executives remain optimistic about achieving robust growth thereafter. The growth rate is projected to escalate from 2025 through 2029, even with the anticipated headwinds. The company intends to maintain a high single-digit CAGR over this period while acknowledging that the rate of growth will not be uniform each year but will instead gain momentum as the decade progresses.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning, and thank you for standing by. Welcome to the AbbVie Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] today's call is also being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Ms. Liz Shea, Senior Vice President, Investor Relations. Thank you. You may begin.

[Elizabeth Shea, executive]

Good morning, and thanks for joining us. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer; Rob Michael, President and Chief Operating Officer; Jeff Stewart, Executive Vice President, Chief Commercial Officer; Scott Reents, Executive Vice President, Chief Financial Officer; Carrie Strom, Senior Vice President, AbbVie and President, Global Allergan aesthetics; and Roopal Thakkar, Senior Vice President, Chief Medical Officer, Global Therapeutics. Joining us for the Q&A portion of the call is Tom Hudson, Senior Vice President, Chief Scientific Officer of Global Research.

Before we get started, I'll note that some statements we make today may be considered forward-looking statements based on our current expectations. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in our forward-looking statements. Additional information about these risks and uncertainties is included in our SEC filings. AbbVie undertakes no obligation to update these forward-looking statements, except as required by law. On today's conference call, non-GAAP financial measures will be used to help investors understand AbbVie's business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website. In addition to the news release issued this morning, we have also posted slides on our website at investors.abbvie.com that supplement some of the content we'll be covering this morning. Following our prepared remarks, we'll take your questions. So with that, I'll turn the call over to Rick.

[Richard Gonzalez, executive]

Thank you, Liz. Good morning, everyone, and thank you for joining us today. Our performance this quarter tops off another excellent year for AbbVie, with results well above our initial expectations. I'm particularly pleased with the performance of our growth platform, the base business, excluding Humira, which delivered full year sales growth of more than 8%. And with revenue growth accelerating to more than 15% in the fourth quarter.

The strength of our diversified growth platform has not only enabled us to successfully absorb the largest loss of exclusivity event to date across our industry, but has also supported continued investment in our business for long-term growth. These investments include higher adjusted R&D expense, which was increased by nearly $600 million in 2023 and will be ranged substantially again in 2024 to support several promising pipeline programs, like 383 in multiple myeloma, 400, our next-generation ADC for several solid tumor types and [ Moody ] for HS as well as inflammatory bowel disease. The proposed acquisition of [ ImmunoGen ] and their portfolio of ADCs, accelerating our entry into the solid tumor space and strengthening our oncology pipeline. As well as the proposed acquisition of [ Cerevel ], a unique opportunity to augment our presence in neuroscience with a pipeline of differentiated assets.

We also increased our quarterly dividend, which we announced in October. Since our inception, we have grown our dividend by more than 285%.

In summary, our operational execution has been outstanding, and we have considerable momentum heading into 2024, including an expected return to operational sales growth just 1 year following the U.S. [ Genera ] loss of exclusivity driven by our growth platform. We remain confident in our long-term outlook, including a return to robust growth in 2025 and with a high single-digit CAGR through the end of the decade. With that, I'll turn the call over to Rob for additional comments on our business performance. Rob?

[Robert Michael, executive]

Thank you, Rick. Today, we reported another strong quarter and highly productive year for AbbVie. We delivered full year adjusted earnings per share of $11.11, which is $0.63 above our initial guidance midpoint, excluding the impact of IPR&D expense. Total net revenues were $54.3 billion, roughly $2.3 billion ahead of our initial guidance. Most importantly, each of our five key growth areas outperformed our initial expectations.

As it pertains to AbbVie's near-term outlook, we are focused on three key priorities: first, driving strong performance of our [ Ex-Humira ] growth platform. This platform is the critical driver of our return to robust growth in 2025 and beyond. In our therapeutic portfolio, we have several key brands, including Skyrizi, Rinvoq, Vraylar, Ubrelvy and Qulipta, which are each expected to contribute double-digit sales growth in 2024.

We also expect meaningful growth for aesthetics this year, driven by improving market trends in the U.S. and continued execution across our international business. We are well positioned to drive strong long-term growth in this highly underpenetrated market.

Second, we are focused on prioritizing investment in our pipeline, which encompasses numerous opportunities to elevate the standard of care for patients. We anticipate updates this year from several important R&D programs, including approvals for Skyrizi in [ U.C. ], 951 in the U.S. and potentially accelerated approval for [ Epkinley ] in third line plus follicular lymphoma. We also anticipate regulatory submissions for [ Bonty ], our novel short-acting toxin and potentially [ Talisovy ] in advanced non-squamous non-small cell lung cancer.

And third, we are focused on closing and integrating [ ImmunoGen ] and [ Cerevel ]. These two exciting opportunities represent substantial sources of revenue growth well into the next decade. We remain on track with the anticipated closing of both deals in the middle of the year.

Today, we are also reaffirming our long-term sales outlook. Which includes a return to robust revenue growth in 2025 with a high single-digit CAGR through the end of the decade. Included in this outlook is an updated forecast for Skyrizi and Rinvoq. Based on the impressive growth of both therapies, which we expect will collectively generate approximately $16 billion of revenue in 2024, we now anticipate Skyrizi and Rinvoq will collectively exceed more than $27 billion in sales by 2027, with robust growth continuing into the next decade. This updated forecast reflects an increase of more than $6 billion in revenue compared to our prior 2027 guidance.

We expect global sales for Skyrizi to reach more than $17 billion in 2027, reflecting continued share capture in psoriasis, where we are the clear market leader as well as strong uptake in [ IBD ]. And we expect Rinvoq to achieve more than $10 billion of global sales in 2027, reflecting continued market growth and share momentum across each of Rinvoq's approved indications, including four in rheumatology to an [ IBD ] and atopic dermatitis. This forecast comprehends modest contributions from several new disease areas for Rinvoq, which we anticipate will be launching in the second half of the decade. These new indications have a collective peak sales potential of several billion dollars.

Our updated forecast also includes higher estimates for Ubrelvy and Qulipta. We now expect total oral CGRP peak revenue of more than $3 billion, reflecting an increase of more than $1 billion. Our previously issued long-term forecast for aesthetics, Vraylar and 951 remain unchanged.

In summary, this is an exciting time for AbbVie. We are demonstrating outstanding execution across our portfolio, and our long-term outlook remains very strong. With that, I'll turn the call over to Jeff for additional comments on our commercial highlights. Jeff?

[Jeffrey Stewart, executive]

Thank you, Rob. I'll start with the quarterly results for immunology, which delivered total revenues of more than $6.9 billion, exceeding our expectations. Skyrizi total sales were approximately $2.4 billion, reflecting operational growth of 51.6%. The Rinvoq total sales were more than $1.2 billion, reflecting operational growth of 62.8%. On a full year basis, Skyrizi and Rinvoq delivered more than $11.7 billion in total combined revenue, an impressive increase of $4 billion year-over-year. .

And as Rob just described, we see substantial room for continued growth across each of their currently approved indications. You can get a good sense for this momentum by looking at the relationship between the current in-play share which includes new and switching patients and the total prescription share just today. For example, our performance in IBD has been very strong for both Skyrizi and Rinvoq. In Crohn's disease, these two treatments together are already capturing roughly 1 out of every 3 in-play patients across all lines of therapy in the United States. While their combined total prescription share is only in the mid-single digits.

You see a similar trend happening in ulcerative colitis for Rinvoq, and we anticipate launching Skyrizi for this indication later this year. So significant opportunity remains for revenue inflection in IBD, especially given their respective efficacy, safety and dosing profiles.

Across some of the other notable indications, Skyrizi is capturing roughly half of the in-place psoriasis patients in the U.S. biologic market relative to a total prescription share, which is in the mid-30s percent. Rinvoq is capturing high-teens in-play share in the atopic dermatitis market, while total share is in the high single digits. Similarly, in rheumatoid arthritis, Rinvoq is capturing mid-teens in place share while total share is roughly 7%.

So again, we see substantial headroom for share gains in addition to the typical robust market growth across room, derm and gastro. Plus, we are planning to have up to five additional indications for Rinvoq across several sizable markets that will potentially provide another significant revenue inflection in the second half of this decade and into the 2030s.

Turning now to Humira, which delivered global sales of $3.3 billion, down 40.8% due to biosimilar competition. The erosion impact in the U.S. played out largely in line with our expectations this quarter, while performance across our international markets continues to trend better than expected. In the U.S. we have once again secured broad formulary access for Humira in 2024. While there will be some step down in coverage year-over-year, we will still have parity access to biosimilars for the vast majority of U.S. patient lives.

Turning now to oncology, where total revenues were $1.5 billion, Imbruvica global revenues were $903 million, down 19%, reflecting continued pressure in new patient starts. Venclexta global sales were $589 million, up 13.7% on an operational basis with strong demand for both CLL and AML across our key countries. The early prescription trends for Epkinley in third line plus DLBCL have been encouraging, with commercialization now underway in the U.S., Europe and Japan. We also anticipate the potential label expansion for follicular lymphoma later this year.

Lastly, we have two new and exciting opportunities in oncology. Pending completion of the transaction, we will add [ Elaheer ] to our portfolio. [ Elaheer ] is a first-in-class ADC therapy approved for ovarian cancer, which is already demonstrating impressive uptake in the U.S. market. I look forward to welcoming the ImmunoGen commercial team to AbbVie.

And [ Talisovy ], another novel ADC, which has demonstrated very promising data in lung cancer. [ Talisovy ] would further expand our scale and growth potential in solid tumors.

In neuroscience, our second largest therapeutic area, total full year revenues were more than $7.7 billion. reflecting impressive absolute sales growth of nearly $1.2 billion. In the quarter, total revenues were approximately $2.1 billion, up 22.4% on an operational basis. Vraylar continues to demonstrate robust growth. Global sales of $789 million were up nearly 40%. We continue to see significant momentum in new prescriptions across all indications, following the approval as an adjunctive treatment for major depressive disorder just over a year ago. And our leading oral CGRP portfolio for migraine contributed $348 million in combined sales this quarter, reflecting growth of approximately 40%. We anticipate continued robust demand for both [ Ubrelvy ] and [ Qulipta ] year, including the expansion of [ Equipta ], the only once-daily oral CGRP for prevention of both episodic and chronic migraine into the international markets.

Based on the strong momentum, we have raised the outlook for our CGRP portfolio and now expect total peak sales from [ Ubrelvy ] and [ Qulipta ] combined to exceed $3 billion.

Total Botox Therapeutic global sales were $776 million, up 6.7% on an operational basis. reflecting momentum in chronic migraine as well as other approved indications.

And lastly, we recently launched 951 in both Japan and Europe, and we are pursuing commercial approval in the U.S. later this year. This treatment represents a potentially transformative next-generation therapy for advanced Parkinson's disease and a $1 billion-plus peak sales opportunity.

So overall, I'm extremely pleased with the commercial execution across our diversified portfolio, especially the growth platform, which is demonstrating very strong momentum as we head into 2024. And with that, I'll turn the call over to Carrie for additional comments on aesthetics. Carrie?

[Carrie Strom, executive]

Thank you, Jeff. Fourth quarter global aesthetic sales were approximately $1.4 billion, an operational increase of 6.9%. In the U.S., aesthetic sales of $884 million increased 5.7%, marked by accelerating market growth and strong key product performance. Fourth quarter U.S. Botox cosmetic sales were $453 million, an increase of 7.3%. We continue to see sustained momentum in the recovery of the U.S. facial toxin market. which was a primary driver of growth in the fourth quarter. Botox Cosmetic remains the clear market leader with strong and stable share despite new competitive entrants. U.S. [indiscernible] sales were $156 million in the fourth quarter, an increase of more than 20% versus the prior year. This robust growth was driven by the strong launches of [ Velox ] and [ Skinvive ], which continue to drive new consumers and greater penetration in the dermal filler category.

Consistent with our expectations, the U.S. filler market recovery trails out of toxins, but is continuing to show improvement. As year-over-year growth was roughly flat in the fourth quarter. As we look to 2024, we are pleased with the momentum of our U.S. aesthetics portfolio. We expect full year sales growth as our market leadership positions us very well from a competitive perspective, and we anticipate continued recovery in both toxin and filler markets. Internationally, fourth quarter aesthetic sales were $487 million, representing an operational increase of 9%. We experienced strong performance in most regions and growth benefited from the impact of China's COVID lockdowns in late 2022.

Within China, the softening economic conditions that emerged in the third quarter continued to impact results. Consistent with what we experienced in the U.S., the economic slowdown has impacted fillers more than toxins based upon their relatively higher price. We anticipate economic headwinds will continue in China over the near term, balanced against our expectations for continued strong performance in other international regions.

Looking to the long term, Esthetics remains an area with very low market penetration, and we have demonstrated our ability to drive growth through investments in our customers, consumers and innovation. As such, we anticipate aesthetics will be a strong growth portfolio for years to come and remain confident in our ability to deliver more than $9 billion of sales by the end of the decade. With that, I'll turn the call over to Roopal.

[Roopal Thakkar, executive]

Thank you, Carrie. In 2023, we saw significant evolution of our pipeline with multiple data readouts, regulatory submissions and approvals. As well as expansion of our R&D efforts with the announced [ ImmunoGen ] and [ Cerevel ] transactions. We expect to continue this progress with numerous important clinical and regulatory milestones anticipated this year. In immunology, we recently announced positive top line results for [ lutakizumab ] and our [ anti-IL-1 alpha beta bispecific ] being evaluated in [ hidradenitis supertiva ]. In the Phase II study, [ lutakizumab ] demonstrated higher high-score 50 and high score 75 measures as well as improvement in skin pain compared to placebo. These are very impressive results considering all patients for inadequate responders to anti-TNF therapy and 70% of the patients were [ Hurley Stage III ], which is the most advanced stage of the disease. Based on these results, we plan to begin a Phase III program in [ HF ] later this year.

We also plan to evaluate [ lutakizumab ] in ulcerative colitis and Crohn's, given the role that IL-1 likely plays in these diseases. Patients with [ UC ] who have an IL-1 beta signature have shown resistance to anti-TNFs and other biologics, providing strong rationale for a potential biomarker approach. Additionally, we believe [lutakizumab ] has the potential to be used in combinations to provide transformational levels of efficacy in IBD. We plan to evaluate combo approaches with [ lutakizumab ] and Skyrizi as well as with other pipeline assets in Crohn's. Our Phase II studies in IBD are expected to begin later this year.

Our regulatory applications are under review for Skyrizi in ulcerative colitis with approval decisions expected in the U.S. and Europe later this year. Once Skyrizi is approved in [ UC ] along with Rinvoq, we will have two assets with different mechanisms of action in IBD, both offering very high levels of efficacy. AbbVie will be very well positioned with an industry-leading suite of treatment options for patients suffering from moderate to severe ulcerative colitis and Crohn's disease.

We continue to make very good progress with the second wave of development programs for Rinvoq with Phase III studies underway in five new indications. Giant cell [ arteritis ], [ lupus ], HS, [ alopecia areata ] and vitiligo. We anticipate data readouts for these programs over the next 3 years, beginning with data from our GCA study this year.

Moving to oncology, where we continue to make very good progress across our heme and solid tumor programs. In the area of hematologic oncology, we'll see data in the second half of this year from the Venclexta Phase III [ Verona ] trial in treatment naive higher-risk MDS patients with regulatory submissions and approvals anticipated in 2025. For [ Epkinley ], we anticipate regulatory approvals in third line or greater follicular lymphoma later this year in both the U.S. and Europe. We also expect to begin several new Phase III studies in 2024, including studies in second-line DLBCL and frontline follicular lymphoma.

At the recent ASH meeting, we presented new data for our BCMA CD3 bispecific, ABBV 383 in multiple myeloma. 383 is engineered for high affinity binding to BCMA on malignant cells and low affinity binding to a unique CD3 epitope on T cells. Which has the potential to mitigate some of the adverse events associated with other T cell engaging BCMA-based therapies while preserving high levels of efficacy. We're very encouraged by the data emerging from our Phase Ib study, which show treatment with 383 is yielding deep and durable responses with a lower incidence and severity of CRS. With this profile, we believe 383 can be a highly effective and tolerable treatment for multiple myeloma, while potentially allowing for outpatient administration, limited or no step-up dosing and monthly administration from the beginning of treatment. All attributes, which would make it very appealing to both patients and physicians.

We remain on track to begin a Phase III monotherapy study in third-line multiple myeloma this year, and we plan to begin combination trials in earlier lines of therapy in 2025. In the area of solid tumors, we recently announced positive top line results from the [ Teliso-V ] Phase II luminophaty study in previously treated non-small cell lung cancer. [ Teliso-V ] demonstrated strong clinical benefits across key endpoints, including overall response rate, duration of response and overall survival with a tolerable safety profile. We believe these results have the potential to support accelerated approval, and we plan to discuss the data with regulators in the coming months. Pending alignment with the FDA, our submission is planned for the second half of this year.

We're also making good progress with our next-generation [ C-MET ADC ABBV 400 ] which utilizes the same cMET blocking antibody of [ Teliso-V ], but has a proprietary [ topo1 ] warhead to afford deeper and more durable responses with an improved therapeutic index. We remain on track to see data this year from the non-small cell lung cancer and gastroesophageal cohorts from our Phase I study. And based on the progress we're making in our colorectal program, we plan to begin a Phase III study later this year in third-line CRC.

We also continue to make very good progress with our anti-GARP antibody, [ ABBV-151 ]. Our Phase II study in second-line hepatocellular carcinoma is underway, and we plan to begin several additional Phase II studies this year, including frontline HCC, front-line lung cancer and metastatic urothelial cancer. We look forward to providing updates on these programs as the data mature.

Now moving to neuroscience, where we recently announced the European launch of [ ABBV-951 ] for patients with advanced Parkinson's disease. We also recently provided our complete response submission to the FDA for 951 with an approval decision anticipated in the second quarter. Our novel subcutaneous [ Levodopa/Carbidopa ] delivery system has the potential to offer meaningful benefits over current treatment options and others that are in development.

951 delivers significant improvements in off time and on time with a less invasive, nonsurgical system. It can deliver high levodopa doses similar to the amount provided by [ Duopa ], and it doesn't require combination with oral drugs to achieve high efficacy. 951 also provides a full 24-hour benefit, which should result in less morning akinesia. We're extremely excited to bring this transformative therapeutic option to patients in Europe and the U.S. once approved.

In our aesthetics pipeline, we recently submitted a regulatory application in the U.S. for Botox and [ platysma ] prominence. We anticipate an approval decision in the second half of this year. And we remain on track to complete the remaining CMC work this year for [ Bonti ], a rapid onset, short-acting novel toxin. Following completion of the remaining work we plan to submit a regulatory application in the second half of the year with approval anticipated near the end of 2025.

So in summary, we continue to demonstrate significant progress across all stages of our pipeline and anticipate numerous regulatory and clinical milestones again in 2024. And I also look forward to integrating the [ ImmunoGen ] and [ Ceravel ] teams and pipeline assets into our R&D organizations once those transactions closed this year. These two transactions significantly strengthened our oncology and neuroscience pipeline with the addition of several novel assets that have the potential to become innovative new therapies for many patients. With that, I'll turn the call over to Scott.

[Scott Reents, executive]

Thank you, Roopal. I'm very pleased with AbbVie's strong performance in 2023. We have substantial momentum across the portfolio to support our long-term growth outlook. Starting with our fourth quarter results. We reported adjusted earnings per share of $2.79, which is $0.05 above our guidance midpoint. These results include a $0.15 unfavorable impact from acquired IP R&D expense. Total net revenues were $14.3 billion, $300 million ahead of our guidance and down 5.4%. Most notably, these results reflect 15.3% sales growth from our [ X-Humira ] growth platform.

The adjusted operating margin ratio was 43.8% of sales. This includes adjusted gross margin of 83.9% of sales adjusted R&D expense of 13.4% of sales, acquired IP R&D expense of 2% of sales and adjusted SG&A expense of 24.7% of sales. Adjusted net interest expense was $363 million. The adjusted tax rate was 17.2%.

Turning to our financial outlook for 2024. Our full year adjusted earnings per share guidance is between $11.05 and $11.25. This earnings per share guidance includes dilution related to the [ ImmunoGen ] and [ Cerevel ] acquisitions of $0.32, which assumes closing in the middle of the year. Please note that this guidance does not include an estimate for acquired IP R&D expense that may be incurred throughout the year.

We expect total net revenues of approximately $54.2 billion. reflecting a return to modest operational growth. At current rates, we expect foreign exchange to have a 0.5% unfavorable impact on full year sales growth. This revenue forecast contemplates the following approximate assumptions for our key products and therapeutic areas. We expect Global Immunology sales of $25.6 billion, including Humira sales of $9.6 billion, including U.S. erosion of roughly 36%. Skyrizi revenue of $10.5 billion, reflecting growth of more than $2.7 billion due to strong market share performance in psoriasis as well as robust uptake in IBD. And Rinvoq sales of $5.5 billion, reflecting growth of nearly 40% with continued market growth and share momentum across all approved indications.

On a full year basis, we anticipate that our strong volume growth for Skyrizi and Rinvoq will be modestly offset by low single-digit negative net price. In oncology, we expect sales of $5.7 billion, including Imbruvica revenue of $2.9 billion and Venclexta sales of $2.4 billion. as well as contributions from [ Epkinley ] and partial year sales from [ Ellahere ].

For aesthetics, we expect sales of $5.7 billion. including $2.9 billion from Botox Cosmetic and mid-single-digit revenue growth from [ Juveder ]. For neuroscience, we expect revenue of $8.9 billion, representing growth of more than 15%, including Vraylar sales of $3.4 billion, Botox Therapeutic sales of $3.2 billion and total oral CGRP revenue of $1.6 billion. For Eye Care, we expect sales of $2.2 billion.

Moving to the P&L for 2024. We are forecasting full year adjusted gross margin of 84% of sales, adjusted R&D investment of 14% of sales, adjusted SG&A expense of 23.5% of sales and adjusted operating margin ratio of roughly 46.5% of sales. We expect adjusted net interest expense of $2.1 billion, which includes the partial year cost in 2024 to finance the [ ImmunoGen ] and [ Caravel ] transactions. We forecast our non-GAAP tax rate to be approximately 15.7%. Finally, we expect share count to be roughly flat to 2023.

Turning to the first quarter. We anticipate net revenues of approximately $11.9 billion. At current rates, we expect foreign exchange to have a 0.5% unfavorable impact on sales growth. This revenue forecast comprehends the following approximate assumptions for our key therapeutic areas. Immunology sales of $5.1 billion. Including Skyrizi sales of $1.9 billion and Rinvoq revenue of $1 billion. These estimates reflect typical first quarter seasonality and as well as low single-digit unfavorable net price. We expect Humira global revenue of $2.2 billion, including U.S. sales of $1.7 billion. We also anticipate oncology revenue just above $1.3 billion; aesthetic sales of $1.3 billion, neuroscience revenue of $1.9 billion and eye care sales of $600 million. We are forecasting an adjusted gross margin of approximately 83.5% of sales and an adjusted operating margin ratio of roughly 44.5% of sales. We also modeled a non-GAAP tax rate of 14.8%. We expect adjusted earnings per share between $2.30 and and $2.34. This guidance does not include acquired IP R&D expense that may be incurred in the quarter.

Finally, AbbVie's strong business performance and outlook continues to support our capital allocation priorities. Our cash balance at the end of December was $12.8 billion, and we expect to generate free cash flow of approximately $18 billion in 2024, which includes roughly $1.9 billion in Skyrizi royalty payments. The strong free cash flow will fully support a strong growing dividend, which we have increased by more than 285% since inception, continued debt repayment where we expect to pay down the approximately $7 billion of maturities this year and also provides capacity for continued business development to further augment our portfolio. In closing, AbbVie has once again delivered outstanding results and our financial outlook remains very strong. We'll turn the call back over to Liz.

[Elizabeth Shea, executive]

Thanks, Scott. We will now open the call for questions. [Operator Instructions] Operator, first question please. .

[Operator]

Yes. The first question comes from Chris Schott with JPMorgan.

[Christopher Schott, analyst]

Just I was looking for a little bit more color on the longer-term immunology outlook. You're targeting $27 billion plus by 2027 and highlighting growth from there. I guess my question was just can you elaborate on how mature the existing indications for these products are going to be by 2027? And what type of growth can we anticipate longer term? And maybe as part of that, it seems like the comments that the growth beyond '27 is more skewed towards Rinvoq given the new indications, but I'm just in a sense of like, is it balanced Rinvoq and Skyrizi has it become more of a Rinvoq-driven franchise in terms of the growth drivers over time?

[Jeffrey Stewart, executive]

Yes. Chris, it's Jeff. Maybe I'll walk through a little bit of the process there and answer your question. So we can see historically actuals and sort of fast forward in terms of the first thing we look at is the bio penetration of these big indications. And there still remains significant headroom in terms of the ability for moderate to severe patients with these diseases to continue to be exposed to these biologics and these advanced orals, absolutely. And we can see for sure that psoriasis still even in the U.S. is about 15%. It's relatively modest. Atopic dermatitis, the penetration rate is only about 7%.

And then you have higher penetrated markets like IBD, and I'll talk about what's interesting about IBD. That's somewhere in the 40% or 50% range across those. And then we can see clearly, as these markets develop, and I've highlighted this before, that you see line of therapy expansion. So first line becomes less and less important as you move towards second and third line over time. And right now, IBD is a big story about that, that we calculate into our long-term estimates because it's still largely despite the severity a frontline oriented market because physicians just kind of hang on to the frontline agents. That's going to change quite dramatically believe, over this midterm and even in the long-term perspective.

We have a good peg on the market growth rates. Many of these market growth rates are very significant, very stable and we'll have good growth rates going into the next decade because of these dynamics around bio penetration and line of therapy expansion. I highlighted in my remarks around share , we have a very good competitive position, very high capture rates, and we're really in the sort of the low end of the range in terms of the total prescription share that will feed up and catch up to that.

Pricing, I think we talked a little about -- we're not going to give detailed pricing. But certainly, you can see based on Scott's comments that the idea of a high CAGR on high single-digit pricing is not something we've contemplated. So we believe that there's significant room for growth even past '27, especially as we'll have more Rinvoq indications coming that we've talked through. So we think that we're going to see robust growth based on our share capture and also how dynamic these markets are into the next decade.

[Robert Michael, executive]

And Chris, this is Rob. I'll just add. If you think about the markets, the room market is growing low single digits. [ Atop dermatitis ] is growing mid-teens and IBD is growing high single digits. So they're very strong markets. They will continue to be strong markets for us. And we're also seeing, as Jeff mentioned, there's a lot of headroom in terms of share capture. So we do expect that robust growth to continue beyond '27 into the early part of the next decade.

I think your observation is correct, given that we would expect up to five new indications for Rinvoq. If you look at the rate of growth, Rinvoq versus Skyrizi, I think it's reasonable to assume that Rinvoq would have a higher rate of growth given the new indications, but both will grow very nicely. So I would certainly encourage you to look at more robust expectations for both therapies, which we book a little bit higher because of the new indications.

[Operator]

Your next question comes from Terence Flynn with Morgan Stanley.

[Terence Flynn, analyst]

Great. Maybe two for me. Rick, I was just wondering if you could give us an update on succession planning and timing. We've been that question from a number of investors recently, given you're now past the Humira LOE and position the company very well here. Given Skyrizi and Rinvoq commercial success and also some of the recent pipeline build-out? And then the second question I had on a pipeline on [ litakizumab ]. I know you guys have highlighted this, not a lot of focus from the investor side yet. Maybe you could just talk about the size of the commercial opportunity in HS. And then why you're confident that, that Phase II HS data will translate into success in the IBD side?

[Richard Gonzalez, executive]

All right, Terence, this is Rick. So I'll cover the first one. I guess what I would say is I have nothing new to report today. But what I indicated is we've talked about the criteria that we're going to use to make the decision when we're going to make the transition. That criteria is the same. When we believe that we are comfortable, we've navigated the LOE and the rest of the business is performing at a high level. That's the point which we want to make the transition because we think that's the best time to be able to transition the CEO position.

So I understand there's a lot of interest from investors here that's logical and clear. Maybe what I can do is give you a little better perspective on the process that we're going to use in order to make the decision with the Board. I would say the Board has been actively involved for the last 4 or 5 years with a lot of inputs around ensuring that our internal candidate would get the experiences that we thought were needed prior to making the transition. I can tell you from my perspective, that's gone extremely well. We have regularly scheduled Board meetings several times a year where we specifically talked about succession and the progress that we're making at the point in which the business has achieved that criteria that I described before, at the next regularly scheduled board meeting, then I would make a recommendation to the Board that this is the proper time to be able to make the transition. The Board would vote on that recommendation.

At the end of that vote, we would send out an announcement to investors. And what you can expect when you get that announcement is that we would make an announcement that we were going to make the transition out at some point in the future. In all likelihood, 4 to 6 months in the future. And the purpose of that is to make the final transition between myself and that person and that will take 4 or 5 months in order to be able to do that. I would say it's also very likely at that time based on the discussions I've been having with the Board. is that I will be named the Executive Chair for a period of time, and the purpose of that will be to make the transition of the full position over a period of time. So I think it's very well thought out, I think, very well-managed process. And I think that's what you can expect going forward.

[Jeffrey Stewart, executive]

And Terence, this is Jeff. I'll start off and have Roopal address the second part of your second question. So we established many years ago now, this HS market with the approval of Humira. And we thought it was a relatively small market, and it turned out to be quite a surprise. There's a significant amount of patients around the world that suffer from HS. It's already a multibillion-dollar category and we think it's going to continue to expand. And I say that because we can see that like IBD, there's just some new approvals just coming. So everyone sort of holds on Humira as long as they can if they're exposed to a biologic.

And so we see the same dynamic as you start to see IL-17 come into the space. And certainly, we're very excited about [ lutakizumab ] because of the profile that we're seeing emerge in the clinic. So it's a significant commercial opportunity. And I would say that when we look back over all the Humira indications over the last decade or more, HS was one of the most rapid indications that move to $1 billion-plus business. So it's an exciting opportunity, both commercially and certainly for patients. And Roopal can address your comment on IBD.

[Roopal Thakkar, executive]

Yes. Terence, part of it starts, I would say, almost 15 years ago with our Insight in Crohn's disease with Humira, as Jeff was discussing, where we started to see efficacy in patients that had HS, we saw a good amount of overlap between Crohn's and HS. So that's part of it.

Now that doesn't really pan out for IL-17A but what we've observed with IL-1 beta in particular is that our internal data and external data do show elevated expression signals with 1 beta. So we think we have that opportunity with [ Lodi ] because it also covers on beta. And we have two shots at this, right? One is to go specifically and look at a biomarker-driven targeted profile where we would be able to distinguish which patients actually have that higher expression. And the other approach, which we maybe weren't talking about years ago because we didn't have a product like Skyrizi, which has high efficacy and very strong safety profile in Crohn's. What we have now is the opportunity to also look at in combination. So a biomarker approach and a combo approach our insights from Humira and preclinical or biopsy-based insights that we have externally and internally.

[Operator]

Next question comes from Andrew Baum with Citi.

[Andrew Baum, analyst]

A couple of questions. One, given AbbVie's strength in market access and managed markets, I'd be curious the extent of future contagion from RNA IRA mediated price cuts on the Medicare book spilling over on to the commercial book of business. How much of a concern do you think this is given the payers are basically the same?

And then second question on [ lutakizumab ]. If I remember from the [ calicilumab ] trials, secondary to neutropenia, there was an increase in fatal infections. If you're layering this on top of another immuno suppressive, how are you thinking about the safety concerns in the IBD patients?

[Jeffrey Stewart, executive]

Andrew, thanks for your question. It's Jeff. And we think that the -- particularly the negotiation aspects of the IRA will be very contained on the Medicare side. And as you can imagine, with government programs over the years, when we have discussions with payers, they'll often say things over -- well, we know what the FSS price is for the VA or the mandated discounts and supplemental discounts in the Medicaid channel.

But we think those are really government actions and government rules. And so we see that the market, we believe, will play out largely like it has with the other government channels. that it's a unique dynamic in terms of essentially a force negotiation that we think will be contained largely in the Medicare space. So that's how we view the world.

[Roopal Thakkar, executive]

It's Roopal. I'll talk about [ Lodi ], in your question around neutrophils. Yes, we do see an impact on neutrophils. It's dose driven. However, I think we think about inflammatory bowel disease, probably lupus, others to have a different tolerance for benefit risk. Because today, in those disease states, despite the success that we've seen with Skyrizi and Rinvoq, there's still substantial headroom to lead to more transformational efficacy. Not every patient is getting into remission, though high levels, not every patient. So we still believe that a combo can get to that and break that efficacy threshold. The other opportunity there is what we'll do with the combination is obviously optimize the dose to assure safety. And thus far, in the HS trial, even at the highest dose, we saw very little infections.

[Operator]

The next question comes from Mohit Bansal with Wells Fargo.

[Mohit Bansal, analyst]

Congrats on all the progress. I just want to go back to the [ ImmunoGen ] acquisition and the comments you made before. Can you talk a little bit about the plans to move the drug into earlier lines of ovarian cancer. You talked about maintenance setting, but more we are reading it, I mean, in first-line maintenance, the PFS and OS tends to be really long. So could you talk a little bit about the strategy there? And how do you overcome the existing U.S. benefit that these tracks provide?

[Roopal Thakkar, executive]

It's Roopal. I'll take that. So I think as you've seen in resistance, we've seen the overall survival benefit, a very substantial one unprecedented thus far. And to your point, the plan is to move into earlier lines of therapy. Secondly, it's also a part of the strategy to move into sensitive populations, which is around 55% of the population resistance is around 45%. And then the third aspect is we've seen encouraging data in medium expressers of FR alpha. And those are approximately 30% of the patients, high is around 35%.

So those are the three strategies to go forward. Now how do we get into earlier lines of therapy? Well, a couple of things, insights that we've seen. One is we've seen [ Ellahere ] been able to combine at full dose with carboplatinum. So that's encouraging that gives you an opportunity to upfront combined. And then, as you stated, maintain on [ Ellahere ] or with [ Ellahere ] plus BEV. So the other approaches that we would do getting the earlier line of maintenance is have that upfront therapy, and then we see patients that go on to BEV, we can combine with BEV at that time point. And we'll be looking at combinations with PARP inhibitors, which is about the other half of the patient populations, which are HRD deficient. So taken all together, we see there's an opportunity. Now the PFS is going to be a little bit longer along with OS. So that is something that we're planning for. We'll start these studies as soon as possible, but they will read out in the later part of the decade and into 2030.

[Operator]

Next question comes from Vamil Divan Devon with Guggenheim Security.

[Unknown Analyst]

This is Jan [indiscernible] for Vamil. So my question is on Humira. I was curious, given the recent performance of the company has had with the erosion in the interruption of biosimilars. I was wondering if you can now provide maybe a better sense around the company's expectations on Humira's longer-term CAL revenues in both the U.S. and ex U.S. markets.

[Robert Michael, executive]

It's Rob. I'll take that question. So we do expect that in the U.S., the tail starts to emerge in the '25 or '26 time frame. Keep in mind, '24 is the first full year for U.S. biosimilars. We'll have to see what happens with volume uptake this year and also where interchangeability lands. And ultimately, what does contracting look like next year. So I wouldn't expect us to quantify the tail this year, but it's certainly possible something we would do either in '25 or '26. As it relates to international, you're seeing, I think, this year, it's a step down of about $400 million half of that is really the last wave of markets like Canada, Puerto Rico, we're seeing, I'd say, some incremental erosion we would expect this year. And then the other half would be your typical international price erosion you see across therapeutic areas. So not really specific to biosimilars. And then the other 1/4 of it would be -- what we're seeing is just the strength of Skyrizi and Rinvoq as these newer agents elevate standard of care, you see some share go to those newer agents.

And so probably the best way to think about international would be if you want to adjust for half of the erosion this year as being more of the final waves and then you get a sense of what could potentially be the ongoing beyond that. But we'll be more specific. I think we need to see really how the U.S. plays out with this being the first full year for biosimilars before we can really give you more color. But we're very, very pleased with the progress we've made so far.

[Operator]

The next question comes from Carter Gould with Barclays.

[Carter L. Gould, analyst]

Two, on the neuroscience portfolio, I guess, first on 951, how should we think about that? Is that more sort of on growing the overall pie of device sated therapies versus taking share from [ apomorphine and the gels ]. And then maybe looking a little bit longer term, AbbVie has sort of three Phase II Alzheimer's studies that are going to read out later this year or by early next year. fully acknowledging the commercial challenges by the players in the market today and that some of these targets are now validated. How should investors think about these assets, either individually or collectively and your level of excitement.

[Jeffrey Stewart, executive]

It's Jeff. I'll take the first question. So what we look at when we see this market at a macro level, you have a significant number of patients -85% of patients are just on these oral medications, so oral cinema, okay? And they essentially need to consume more and more and more orals. And sometimes at the end of it, they're taking 12 pills a day. It's very, very difficult to manage. But then they're faced with a very difficult decision. Which we kind of call like a surgical barrier. And that surgical barrier is to get any sort of more advanced relief, you either have to think about deep brain stimulation, which is a brain surgery or our own Duopa, which is a GI surgery.

So the way we see this market developing is we see that 951 starts to establish a very nice transition zone because you don't have -- it's a [ subcu ]. So a new market segment that starts to emerge before bigger interventions like DBS or Duopa, and obviously, the ability to basically move quicker to more relief from these chronic oral basically overtreatment. So that's how we see it. And as Roopal highlighted, we're seeing some very nice uptake in Japan, where we launched late last year and also in Germany and some of the first European launches. So that's how the market is exactly playing out. We're establishing essentially a new high-efficacy category here with 24 hours of ongoing relief, you can do super specific dosing titration and the pump is much smaller. And again, it's a [ subcu ] injection that you move around every 3 days. So it's a nice opportunity for the company.

[Roopal Thakkar, executive]

And maybe I'll talk about the other assets that you mentioned in Alzheimer's. First, 916, that's our A-beta antibody. What we like about that one thus far that the profile we've seen is a long half-life, which would be good to space out dosing potentially higher potency, if that holds, and we see robust reductions in beta amyloid that could allow for subcutaneous dosing that's based apart. And the other thing we're looking at is potentially lower REA. So if we see those three things over the course, I would say, end of this year, early next year, I think that, that would be quite exciting because it would be a differentiated profile, again, a better convenience and potentially better benefit risk profile. So that's 916.

552 is our SV2A that's our oral medication in cognition that's currently in Phase II. And we anticipate readout at the end of this year, early next year. Now that one is being studied in a setting where a patient can be on a therapy already like in [ Aricept ] or nothing. And we would use the typical ADAS COG assessments along with a variety of others including other neuropsychiatric symptoms like depression. So that's another nice one that could combine with a variety of different assets in Alzheimer's.

The third one I'll mention is around [ emaracladine ], which comes from [ Cerevel ]. They are at early stages right now in elderly patients and the goal there would be in Alzheimer's disease psychosis. Of the 6 million or so diagnosis, I would say around 40% of these patients present with symptoms of psychosis. So with all the therapies that are in the clinic, we think we have a very nice complementary suite of options that could address numerous symptoms of Alzheimer's because it won't be just one therapy that's going to solve this. But more to come end of this year and into next year.

[Operator]

Next question comes from Tran [indiscernible]. .

[Unknown Analyst]

Just on the reaffirmed long-term guide, can I clarify if the [indiscernible] mention deals are in this '29 guide, given you included them in the '24 guide? And you up Skyrizi and Rinvoq by $6 billion, migraine by $1 billion. If these are the pushes, what are the pulls in reaffirming that long-term guidance?

[Robert Michael, executive]

This is Rob. I'll take that question. I guess we did include [ ImmunoGen ] and [ Cerevel ] in our long-term guide. The thing to keep in mind is high single digits when you think about the range that could represent that's around $10 billion between the low end of the high single digits and the high end of the high single digits. And so there aren't any pulls. What we've updated as we walked you through it, is we've increased the oral CGRP peak revenue. We've increased Skyrizi and Rinvoq and we've reaffirmed the other. So there's nothing that we took down. But just keep in mind that you've got a pretty wide range.

If you look at Street consensus, we're encouraged that it continues to move up. It has moved up over the course of last quarter, about $3 billion in 2029. It's nice to see that upward movement, but it's still below what we expect. If you think that growth rate for the Street is just under 5%. We expect high single digits. And so even with this update as well as [ ImmunoGen ] and [ Cereval ], we're still high single digits, but keep in mind, it's a pretty wide range. and it would be regardless industry-leading growth, and we're set up very well to continue delivering very strong growth, and we're setting ourselves very well to grow very nicely in the next decade as well.

[Operator]

Our next question comes from Gary Nachman with Raymond James. .

[Gary Nachman, analyst]

First on aesthetics, could you talk a bit more why you're confident in what seems to be a pretty decent return to growth in 2024. So how much of a headwind could China be offsetting the U.S. growth? And what are other regions will you be getting somewhat of a lift this year? Just talk about the dynamics on that front. And then secondly, just as you return to more robust revenue growth in 2025, what are reasonable expectations for operating margins directionally in 2025. Can that expand at all? Or is it more likely to be depressed from the [ ImmunoGen ] and [ Cerevel ] deals? Just give us some directional way to think about that for next year.

[Carrie Strom, executive]

This is Carrie. I'll take your first question on aesthetics and the aesthetics market recovery. So I'll start with the U.S., and we have started to see the U.S. toxin market recover at the end of 2023. We expect that recovery to continue and for the market growth for toxins to continue to improve in 2024. For fillers in the U.S. in Q4 after multiple quarters of decline, the filler market in the U.S. was somewhat flat. And so that dynamic of the filler market recovery lagging the toxin market recovery, is playing out, and we do expect that recovery on fillers to also continue to a lesser degree, even toxin, it's more of a modest growth -- positive growth for 2024. And as we look at the beginning of the year here in 2024, we are seeing our patient demand metrics and Google metrics really supporting our expectations here.

In terms of China, we do expect the economic headwind that we saw beginning midyear 2023 to continue in the near term with China. And we expect the China aesthetics market to be flat overall in 2024. That would look like negative market in the first half of the year until the China market starts to recover in the second half of 2024. And we expect that China performance to be balanced against expectations for strong performance in other international regions, including Japan, which has become an important market for aesthetics, and areas of Latin America, like Brazil, which is a highly aesthetically oriented market.

It's also important to note in terms of Q1 of 2024, in terms of our guidance there, that the growth in the U.S. will be offset by that international decline specifically in China. So not only the China economic headwind, but also a difficult year-over-year comp in Q1 because recall, in Q1 of 2023, there was the post-pandemic reopening in China. So that's really how we see the market growth factors in U.S., China, in other parts of the world playing out in 2024.

[Robert Michael, executive]

And Gary, this is Rob. To build on the aesthetics story. I said in the past to get to our guidance of greater than $9 billion, we need to deliver annual growth of high single digits on average. And as Carrie just walked you through, we haven't quite seen the recovery for the fillers market yet this year. And we will, but it's not going to be a normal year, we'll see a ramping. And we also had a slowdown in China. But despite that, we're still delivering high single-digit growth. and given how underpenetrated these markets are, we can drive that market growth that's required to achieve the long-term guidance.

And then on top of that, we have several innovations that will further support that growth. I've said this before, but the [ masseter ] and [ platysma ] indications for Botox will add a few hundred million dollars each. Our novel short-acting toxin bond has the potential to activate new patients who have not started toxin due to fear of an unnatural look. So that could drive an inflection in market growth and market share. And then our regional fillers pipeline is really aimed at providing both short- and long-term treatment benefits for consumers. So we have several avenues to get to our greater than $9 billion guide. I have seen consensus estimates at 8 for 2029, but we're very confident in our guidance of greater than 9 by that period.

[David Risinger, analyst]

This is Scott. I'll take your question regarding operating margin expansion. So for '24, as I mentioned in my remarks, we've guided to 46.5%. When we do return to robust growth in 2025, we do see that operating margin will expand and will continue to expand as we grow through the decade. I think that when we think about the pace of that expansion. It will be relatively steady over several years. I would, though, if you're modeling that, I would kind of peak it out at around 50%. I think that's what will hit a peak at the operating margin. But we do see expansion both in '25 on that return to robust growth, including the impact of the two transactions, [ ImmunoGen ], [Cerevel ], which should presumably be a full year at that point in time. But at a full year impact, we see that expansion I do think it's worth noting even at our current levels, we have industry-leading operating margin and certainly with the future expansion, we'll continue to have that and only grow that position.

[Operator]

Next question comes from Steve Scala with TD Cowen.

[Steve Scala, analyst]

Two questions. Is the current tax rate fully reflecting likely tax changes in the U.S. and outside the U.S. So it represents the high watermark for the foreseeable future. Previously, the company spoke to a 16% tax rate, and we're pretty much there. So I'm wondering if the increases are kind of behind us. And then, Rick, a slightly different kind of question, but there are clear obvious reasons such as the success of Skyrizi and Rinvoq. But I'm curious if you would share with us a few of the externally less visible factors that are leading to AbbVie's success traversing the Humira patent expiration that your pharma peers missed when dealing with their own pressures, I would assume contracting formulary management allocation of overhead or all part of it. But what would you be willing to share with us?

[Jeffrey Stewart, executive]

Steve, this is Scott. I'll start with your tax rate question. So with respect to the tax rate, we were essentially flat between this year and last year at 15.7%. We do see that tax rate over the 3-year period, including this year, increasing about 1% on average. Now that's not going to be a 1% per year. What you'll see is a step up in a couple of years when the U.S. tax rates do increase, the GILTI rate, in particular, will increase. So we see that over a 3-year period, about 1% per year on average. That does include all the impacts of a number of things going on globally with the OECD and some of these OECD minimum taxes and other things. I would say the one thing that does not include , you saw just this week, the House passed a tax bill that includes a provision regarding the R&D expensing. So if that bill were to pass as it's written, we would see a slight step down in our tax rate about 80 basis points from the impact of that on an ongoing basis.

[Richard Gonzalez, executive]

Steve, this is Rick. I think if you step back and you look over the last, I'd say, 10 years, we were trying to develop a strategy that we fundamentally believe would allow us to be able to offset the Humira LOE and continue to deliver top-tier financial performance as we have for the past 10 years. That was the whole objective. And we knew we had to build a very diversified growth platform in order to be able to do that, to be able to absorb that impact and return to growth as rapidly as possible. And so we, as an executive team focused a lot of energy around how do we do that, how do we build it? How do we do it in the right markets? I think AbbVie -- I'm obviously biased, I guess, but I would say our commercial execution has always been exceptional, in my opinion. We understand the markets we're in extremely well. We understand the competitive environment that we compete in those markets extremely well. We understand the patient journey and how that patient journey is affected by access to medicines to ensure that patients can get their medicines routinely and be able to get the benefit of those medicines. It takes all of those things, I think, to end up with the kind of success that we see with assets like Skyrizi and Rinvoq.

But it also takes, I think, a company that is very good at what I described as read and react. There are always challenges in businesses as big and as complex as this. And I think the difference between companies that can continue to perform at the top tier year in and year out is they're good at seeing issues and then quickly reacting how they're going to either offset those or deal with those. We had many of those examples. I'd say the label change on Rinvoq was a great example. But look at where Rinvoq is growing now. And despite that label change, many would not have predicted that. Migraine was a very challenging market for a period of time. We look at how we've operated with [ Ubrelvy ] and [ Qulipta ] and the kind of success we've seen against the competitors in those markets. Neuroscience, very different kind of market with Vraylar. That's all about trying to grow market share and expand your position there with a very good asset. And so we're good at that. And I think that is the real differentiator.

The other thing I'd say is, I think we have been very efficient at our R&D investment. We obviously don't have the largest R&D investment in the industry. But we produced a tremendous amount of return against that R&D investment. Now having said that, as we go forward, we know we need to increase R&D, as I said in my comments, we did a fairly significant increase last year despite dealing with the Humira LOE and we're going to do another fairly significant increase this year because we have some assets that had very, very significant opportunities, like 383 and like 400 and several others that are going to require a large Phase III, multiple large Phase III studies to be able to get the kind of label that we need. And that's another thing I'd say we're good at, understanding how you have a competitive label and building your clinical programs to get that. So I think it requires all of those things. I don't think there's one magic formula. I think those are the kinds of things that we have honed here at AbbVie as an executive team, and we execute very well against those.

[Operator]

The next question comes from Evan Seigerman with BMO Capital Markets.

[Unknown Analyst]

Macon for Evan. I wanted to ask, thinking about the upcoming approval for Skyrizi in UC, how is management thinking about how that may or may not impact our invoke sales? Obviously, combined be offers an impressive suite of inflammatory assets. But what is the expectation of Campbell is across these assets potentially?

[Jeffrey Stewart, executive]

It's Jeff. I'll take that one. We've learned a lot from watching Skyrizi and Rinvoq in Crohn's. And to Rick's point, look, we're very careful about how we position these assets, how we basically represent them with our medical teams and our commercial teams. And so what we see, certainly, in our biggest markets, we see that they're actually complementary positioning. So Rick highlighted the label change, right? So Rinvoq in the U.S. is is basically indicated for use after a TNF. So it's basically a later line therapy. Skyrizi, if you look at the Skyrizi UC results, it's very, very impressive. We studied some very, very tough patients there. the bio-naive patients, the efficacy is just outstanding. I would say it's best-in-class.

So we can see that based on the profile of the agents for many of our representatives, we're able to talk to physicians about the consideration for Skyrizi frontline and then in later lines, Rinvoq. So the cannibalization of the overlap is very manageable and minimal. And what happens is you start to see this very significant build for total AbbVie share because of that complementary positioning. So we're quite confident that we'll be able to navigate this very well just as we see in the larger Crohn's market.

[Operator]

Our next question comes from Tim Anderson with Wolfe Research.

[Timothy Anderson, analyst]

I have a question on obesity drug impact on AbbVie's aesthetics business. So the uptake of the two drugs could be a headwind or a tailwind. It's a potential headwind of patients only have so many dollars to spend on aesthetics and they reallocate their out-of-pocket spending away from dermal fillers and toxins towards these three drugs, or it's a tailwind of patients using obesity drugs get things like the so-called Ozempic case and they end up using more toxins and fillers. So what's been the experience thus far? And what do you expect going forward over the next handful of years? .

[Carrie Strom, executive]

This is Carrie. So the short answer is we have not seen an impact on our aesthetics business positive or negative so far. That said, absolutely. Our customers and our consumers are participating in this market. We are seeing it integrated into some of these aesthetic practices. And to your point, there are instances where a patient will make a trade-off in terms of her share of wallet.

But that said, we do see it as a long-term tailwind any time people are getting more engaged in their appearance. That's a positive thing for aesthetics. And as we ask our consumers and our customers about it, really, what we've learned is that it does reinforce the long-term tailwind because the majority of people who engage in these medical weight loss products, are more interested in aesthetics afterwards than they were before. So that's really how we see it in terms of that dynamic impacting aesthetics.

[Operator]

Our next question comes from Tim Lugo with William Blair.

[Tim Lugo, analyst]

After the two announced acquisitions in December, what are the seen thoughts on M&A in 2024. Some of your peers have given guidance on expected deal sizes? Is that something you can provide -- the Street or at least talk about your capacity at this point?

[Robert Michael, executive]

Tim, it's Rob. I'll take that question. So our BD efforts continue to be focused on identifying assets really that can drive growth in the next decade across immunology, oncology, neuroscience, aesthetics and eye care. We have what we need in our current portfolio to deliver on growth expectations in this decade. So our external efforts are really aimed at early stage opportunities, which are typically smaller-sized deals. As we look across the growth areas, if you think about immunology, Skyrizi and Rinvoq will drive robust growth into the next decade. So our focus in immunology in terms of BD is really looking for new mechanisms of action that can elevate standard of care, whether monotherapy or in combination. I'd say there's a lot of interest in combination.

In oncology, [ ImmunoGen ] really nicely complements our efforts with ADC. It gives us a head start by an entry in the solid tumor space that we're not in today. But in addition to ADCs, we're focused on bispecifics, multispecifics, [ immuno-onc ] agents. We also recently announced a collaboration with [indiscernible] studying [ InSight CAR-T therapy ]. So a lot of focus in oncology, but this, again, would be earlier stage smaller-sized deals. In neuroscience, several adds depth to our neuropsych pipeline, but we also have a focus on migraine and neurodegeneration. In Eye Care, we're extremely excited about the [ Regenxbio ] program in wet AMD and diabetic retinopathy, but we continue to look for innovation in glaucoma and retinal disease. So you certainly have an interest there.

And then in aesthetics, it's always about looking for innovation that can drive new consumers into our providers' practices. So our BD group is still very active. We certainly have the financial wherewithal to pursue those opportunities to further bolster our pipeline, but those are the areas that we're most interested in.

[Operator]

The next question comes from James Shin with Deutsche Bank .

[James Shin, analyst]

I had a question on [indiscernible]. Is going to be more competitive with at. How do you feel about kind of into ADCs contracting? And how do you feel that market landscape works going forward?

[Elizabeth Shea, executive]

Unfortunately, your line is not very clear. Can you maybe try to repeat the question one time?

[James Shin, analyst]

Sorry about that. Hearing better now?

[Elizabeth Shea, executive]

It's still a little a little bit better, but go ahead.

[James Shin, analyst]

Okay. I was asking about Category 6 and the competitive dynamic on ovarian cancer?

[Elizabeth Shea, executive]

Yes. Unfortunately, it's just not coming clear coming through clearly, happy to address the questions following the call. Apologies for that. Operator, next question please.

[Operator]

The next question comes from David Rinseger with Leerink Partners.

[David Risinger, analyst]

Yes. And congrats on the long-term updates. So with respect to the Alzheimer's commentary, a product was left out of the [ TREM2 AL002 ], which has an estimated primary completion in September. If you could comment on that as well. that would be helpful. And then with respect to the GILTI tax change that's coming, could you please provide some more color on that, including the timing and the potential impact.

[Thomas J. Hudson, executive]

This is Tom Hudson. I'll answer the question. The first question. Yes, we do have a partner program with [ Alector ] on the [ TREM2 ] target. [ TREM2 ] was identified in Alzheimer's disease through genetic studies several years ago, very strong link. We have a program with [ TREM2 ] modulates a neuro inflammatory response and AD. All patients are enrolled in the Phase II, we won't have data later this year. So again, it's an early clinical development, but we will expect to see key data later.

[Scott Reents, executive]

Sure. This is Scott. Regarding the GILTI tax. So this is the U.S. tax, the foreign minimum tax on foreign earnings at the U.S. supplies. That tax rate today is at 10.5%, it's going to move up to 13.1% a little bit more than that. That will occur. The implementation date is a little bit mixed because it depends on fiscal year-end of legal entities. But let's call it, 2026 is when we can look at that. And only part of our income is subject to that rate. So I would say that's approximately a 1.5% impact to our tax rate. that you would see. And that's baked into my 1% on average over the next 3 years.

[Elizabeth Shea, executive]

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

[Operator]

Okay. And final question is Luisa Hector with Berenberg.

[Luisa Hector, analyst]

I wanted to touch on the Part D restructure and IRA. So you have a number of drugs that are likely to be impacted by this. And obviously, you talk about your strong rebound in 2025. So I'd just love to hear your thoughts on how that restructurable impact and to what extent that is already baked into your expectations of the rebound? And maybe just to check, have you now received the initial offer from CMS on Imbruvica?

[Jeffrey Stewart, executive]

Yes. Thank you, Luisa. It's Jeff. And we have contemplated in our planning and long-term guidance, both the Part D redesign, and of course, the IRA impacts based on our projections over when some of our drugs might be negotiated. To give you some color on the Part D redesign, we have clearly a very good visibility over the pricing dynamics that will take place as you say, many of our brands basically will be under the catastrophic redesign component. Now we've also understood based on one of the policy items, which is the cap and smooth. We've also countered some of that price with volume offsets based on patients having the ability to acquire these. Now volume does not fully offset the pricing impact. But suffice it to say that that's been very much contemplated into that. I'll let Rob comment over how that sort of feeds into the growth rates.

[Robert Michael, executive]

You asked a very good question. This is Rob. Clearly, and we have contemplated that in the high single-digit CAGR. The impacts of IRA. But as you think about the annual progression, it is important to note that Part D benefit redesign starts in '25. So that is certainly something you should consider for modeling of annual sales. I mean, that impact by itself on a net basis could be worth a few points of growth. As Jeff mentioned, the higher cost share with an offset in volume, we have studied the improvement in abandonment rates as we look at the low-income subsidy part of Part D, which doesn't have the out-of-pocket burden that the standard benefit does. And when we compare the abandonment rates and as you address this issue of out-of-pocket burden, we would expect the abandonment rates to improve across Medicare Part D, but not enough to fully offset the higher cost share. That was something we certainly contemplated.

But as you think about the progression of growth, the rate of growth will accelerate starting next year through '29. So we'll deliver a high single-digit CAGR, but it's important to note that in '25, you do have that beginning of park benefit redesign, which adds, I'd say, a couple of points of growth headwind that will still allow us to deliver robust growth, but it won't -- you shouldn't think about the same amount of growth every year. It's going to accelerate over the long-range plan.

[Richard Gonzalez, executive]

And then this is Rick, on the Imbruvica price. Yes, we have received the initial offer on Imbruvica recently. As you know, there is a process that CMS is going through here to set pricing. And because none of us have any experience with this, we don't know exactly how that process will proceed. There will be some back and forth between the manufacturer and CMS. CMS has indicated that they'll have the final price by September 1. It's certainly premature for us to talk about the price now because it's not the final price.

I don't know that we'll know the final price until very close to the point at which they're prepared to publish that price, having not had any experience here. So I wouldn't anticipate you get any updates until either that date or very close to that date.

[Elizabeth Shea, executive]

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.