AbbVie (ABBV) Earnings Report: Q1 2016 Conference Call ...quarter and our 2016 guidance in more detail including the financial aspects of Stemcentrx transaction and as always following

CompanyName:AbbVieIncCompanyTicker:ABBVSector:HealthCareIndustry:Drugs

EventDescription:Q12016EarningsCallMarketCapasofEventDate:97.80BPriceasofEventDate:61.0

©2014TheStreet,Inc.Al l R ightsReserved Page1of23

AbbVie(ABBV)EarningsReport:Q12016ConferenceCallTranscriptThefollowingAbbVieconferencecalltookplaceonApril28,2016,09:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

LarryPeepo;AbbVieInc;InvestorRelationsRickGonzalez;AbbVieInc;ChairmanandCEOMikeSeverino;AbbVieInc;EVPR&DandChiefScientificOfficerBillChase;AbbVieInc;CFOHenryGosebruch;AbbVieInc;EVPandChiefStrategyOfficer

OtherPart icipants

JeffreyHolford;JefferiesLLC;AnalystChrisSchott;JPMorgan;AnalystJamiRubin;GoldmanSachs;AnalystDavidRisinger;MorganStanley;AnalystMarcGoodman;UBS;AnalystAndrewBaum;Citigroup;AnalystJohnScotti;EvercoreISI;AnalystAlexArfaei;BMOCapitalMarkets;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometotheAbbViefirstquarterof2016earningsconferencecall.

(OperatorInstructions)

Asareminderthiscallisbeingrecorded

IwouldnowliketointroduceMr.LarryPeepo,VicePresidentofInvestorRelations.

LarryPeepo (InvestorRelations):

Goodmorningandthanksforjoiningus.

AlsoonthecallwithmetodayareRickGonzalez,ChairmanoftheBoardandChiefExecutiveOfficer;MichaelSeverino,ExecutiveVicePresidentofResearchandDevelopmentandChiefScientificOfficer;andBillChaseExecutiveVicePresidenttoFinanceandChiefFinancialOfficer.HenryGosebruch,ourChiefStrategyOfficer,willbejoiningusfortheQ&Aportionofthecall.

InadditiontoourearningsreleasethismorningwehavealsoissuedapressreleaseannouncingouracquisitionofStemcentrx.Youcanfindasetofslidesandawebsitethatprovideanoverviewofthetransaction.

BeforewegetstartedIremindyouthatsomestatementswemaketodaymaybeconsideredforward-




lookingstatementsforpurposesofthePrivateSecuritiesLitigationReformActof1995.AbbViecautionsthattheseforward-lookingstatementsaresubjecttorisksanduncertaintiesthatmaycauseactualresultstodiffermateriallyfromthoseindicatedintheforward-lookingstatements.

AdditionalinformationaboutthefactorsthatmayaffectAbbVie'soperationsisincludedinour2015annualreportonForm10-KandinourotherSECfilings.AbbVieundertakesnoobligationtoreleasepubliclyanyrevisionstotheforward-lookingstatementsasaresultofsubsequenteventsordevelopmentsexceptasrequiredbylaw.

Ontoday'sconferencecallasinthepastnon-GAAPfinancialmeasureswillbeusedtohelpinvestorsunderstandAbbVie'songoingbusinessperformance.Thesenon-GAAPfinancialmeasuresarereconciledwithcomparableGAAPfinancialmeasuresinourearningsreleaseandregulatoryfilingsfromtodaywhichcanbefoundonourwebsite.

Followingourpreparedremarkswilltakeyourquestions.

SowiththatI'llnowturnthecallovertoRick.

RickGonzalez (ChairmanandCEO):

Thankyou,Larry.Goodmorning,everyone.Thankyouforjoiningustoday.

ThismorningI'lldiscussourfirstquarterperformanceandprovideanoverviewofthesetStemcentrxacquisitionwhichweannouncedearliertoday.

MikewillprovideupdatesonrecentadvancementsacrossourR&DprogramsandBillwilldiscussthequarterandour2016guidanceinmoredetailincludingthefinancialaspectsofStemcentrxtransactionandasalwaysfollowingourremarkswilltakeyourquestions.

Wedeliveredanotherstrongquarterlyperformanceincludingadjustedearningspershareof$1.15.Representinggrowthofmorethan22%versusthefirstquarter2015.

Ourresultsincludedstrongoperationalsalesgrowthof22.4%.Drivenbyanumberofproductsacrossourportfolio.ItincludesHumiraglobaloperationsgrowthofmorethan19%.StronggrowthfromIMBRUVICAcontinuedglobaluptakeof(inaudible-MicrophoneInaccessible)andstrongperformancefromseveralotherproductsinourportfolio,includingCreonandDuodopa.

Wealsocontinuedtodeliverimprovementsinouroperatingmarginprofile.Inadditiontoourstrongfinancialresults,wealsoadvancedseveralofourkeystrategicpriorities.

LateinthequarterwesecuredFDAapprovalforIMBRUVICAasafirst-linetreatmentforpatientswithCLL.We'reroughlyonemonthintoourfirst-linelaunch,andwe'repleasedwithourprogresstodate.TheNationalComprehensiveCancerNetworkorNCCNrecentlypublishedanupdatedviewoftheseguidelines,grantingIMBRUVICAacategory1recommendationforcertainCLLpatients,thehighestrecommendationassignedbytheorganization.

Wearealsoapproachingtheone-yearmarkforPharmacyclics,andwecontinuetobeverypleasedwiththeprogresswe'vemadetodate.ThePharmacyclicsteamcontinuestorapidlyadvancetrialactivity,exploringIMBRUVICAacrossabroadrangeoftumortypes.IMBRUVICAofferssignificantgrowthpotentialthroughitsexpandinglistofindicationsandlinesoftherapy,andweremainexcitedaboutthevastpotentialforthisuniqueasset.

EarlierthismonthwereceivedFDAapprovalforanothertransformativetherapyforthetreatmentofCLL.Venclexta,ournovelBCL-2inhibitor,wasapprovedforpatientswithrelapsedrefractoryCLL,whoharbor




the17pdeletion,adifficult-to-treatformofthedisease,typicallyassociatedwithpoorprognosis.BasedonthelevelofefficacyinitspatientpopulationtheFDAgrantedtheapprovalunderitsBreakthroughTherapyandpriorityreviewdesignations.

Sincethebeginningoftheyear,we'vealsoreportedcompellingdatafromseveraldevelopmentprogramsincludingpositivetoplineresultsfromoursecondpivotalelagolixtrialinendometriosis,andstrongdatafromournext-generationHCVprogram.Mikewillprovideupdatesonbothprogramsduringhisremarksinjustafewmoments.

WealsoaugmentedourpipelinewithalatestageassetwithaglobalcollaborationwithBoehringerIngelheimtodevelopandcommercializeananti-IL-23,currentlyinPhase3developmentforpsoriasisandmid-stagedevelopmentforseveraladditionalindications.

TheagreementprovidesAbbViewithanotherpotentialbestinclasslatestageasset,addingtoourimmunologypipelinewhichincludesourselectedJAK1inhibitor;ABT-494,currentlyinPhase3developmentforRA;aswellasseveralotherbiologicsthatareinmid-stagetrials.

Basedonitspotentialforbestinclassefficacy,webelievetheBIassetcouldgeneratemultibilliondollarsinpeakyearrevenuesacrossseveralimmunemediateddiseases.

ClearlythemostnotableandexcitingnewstodayisourplannedacquisitionofStemcentrx.Wecouldnotbemorepleasedtohavethistalentedgroupofindividualsjoinourorganization.WehavebeentremendouslyimpressedwiththeiraccomplishmentstodateandtheirinnovationandexpertisewilldrivestrongbenefitsforAbbViegoingforward.TheadditionofStemcentrxisastrategicallyimpellingopportunityforourcompany,ourshareholders,andthepatientswhichweserve.

Overthepastseveralyearswe'vetakenanumberofstepstobuildandstrengthenourpositioninoncologyresearchanddevelopment,withtheobjectiveofbecomingaleadingoncologycompany.

We'veadvancednumerouspromisingpipelineassets,includingourBCL-2inhibitorforbloodcancers,andourPARPinhibitor,ananti-EGFRantibody-drugconjugateindevelopmentforsolidtumors.

We'vestrengthenedourdiscoveryeffortsthroughcollaborationswithleadingacademicsandotherinstitutionsaroundtheworld.We'veaddedtoptalenttoourR&Dorganization.

LastyearthroughtheacquisitionofPharmacyclics,weobtainedIMBRUVICAafirst-in-classPGKinhibitorwhichhasalreadyachievedblockbusterstatusandisonatrajectorytoachievemultibilliondollarpeakyearsales.

AndasImentionedearlier,wejustlaunchedourinternallydevelopedVenclexta,whichaddsanothertransformationaltherapytoourhematologicaloncologyfranchise.

WeviewoncologyasasignificantpillarofgrowthforAbbViegoingforward,andasweevaluateallopportunities,wedosowiththedesiretobalancenear-termperformancebutcontinuingtobuildaportfolioofassetsthatwillgeneratestronggrowthin2020andbeyond,supportingourcommitmenttodrivetop-tierperformanceoverthelongterm.

Sothatbringsmetoourannouncementtoday:theacquisitionofStemcentrx,whichgivesAbbVieahighlyattractiveplatformforsolidtumors,andanextremelyexcitinglatestageassetinRova-T.ThetransactionenablesAbbVietofurtherexpandandaccelerateourpresenceinoncology,buildinguponourgrowingpositioninhematologicaloncology.

Stemcentrx'sproprietarysolidtumorplatformleveragescancerstemcellbiologytoidentifyandvalidatenoveltherapeutictargets.Thecompanyhasdemonstratedatrackrecordofsuccessfullyengineeringand




manufacturingantibodiesandantibodydrugconjugatesforthosetargets.

StemcentrxleadassetisRova-T,aDLL3targetedantibodydrugconjugate.DLL3isanoveltargetexpressedinseveraltumortypes,includingsmallcelllungcancer,anaggressiveanddifficult-to-treatdisease.Smallcelllungcanceraccountsforroughly15%ofalllungcancers,andmorethan60,000patientsarediagnosedannuallyinthemajordevelopedmarkets.

DLL3isthefirstpredictivebiomarkerassociatedwithdrugefficacyinsmallcelllungcancer.Itishighlyexpressedinamajorityofsmallcelllungcancertumors,aswellascancerstemcells,andisnotexpressedinnormaltissue.Predictivebiomarkershelpidentifywhichpatientshavethepotentialtobenefitfromatherapy.

Rova-Tiscurrentlyinregistrationaltrialsforthird-linesmallcelllungcancer.Thereisasignificantunmetneedforthispatientpopulationasthetreatmentlandscapehasnotchangedforseveraldecades.Infact,thereiscurrentlyonlyoneapprovedtreatmentforsecond-linesmallcelllungcancer,andnoapprovedagentsforthird-lineuse.Thefive-yearsurvivalrateforpatientsdiagnosedwiththistypeofcancerisunfortunatelyverylow,atapproximately6%.

LastyearattheEuropeanSocietyofMedicalOncologymeeting,StemcentrxpresentedexcitingPhase2resultsinsmallcelllungcancer,includingdatathatillustratedanoverallresponserateof44%inaDLL3biomarkerdefinedpopulation.

Rova-Talsodemonstratedaclinicalbenefitrateof78%inthisrefractoryanddifficult-to-treatsetofpatients.Responseratesweresimilarinthird-lineandsecond-linepatientswithamanageablesafetyprofile.Theselandmarkdatarepresentthefirsttimeabiomarkertargetedtherapyhasshownsignificantefficacyinsmallcelllungcancer.

Additionaldatafromabroadersetofpatientsandlonger-termfollow-up,includingcompellingoverallsurvivalresults,willbedisclosedduringanoralsessionattheupcomingASCOmeetinginJune,wheretheabstracthasbeenselectedasaBestofASCOpresentation,adistinctiononly1%ofabstractsreceive.

Giventheverypromisingefficacyinthird-linesmallcelllungcancer,StemcentrxrecentlyfiledforFDABreakthroughDesignationforthissetting.Basedonthecompellingdataandthesignificantunmetneedinthispatientpopulation,we'recertainlyhopefulthatwewillbesuccessfulinobtainingthisstatus.

Stemcentrxhasmovedrapidlythroughclinicaldevelopmentinthird-linesmallcelllungcancer,fromtheinitiationofthefirstin-humantrials,totherecentstartoftheregistrationenablingstudy.Basedontheexpectedcompletionoftheongoingregistrationaltrial,commercializationofthisindicationisexpectedin2018.

Stemcentrxisalsomovingtorapidlyadvanceintofront-linesmallcelllungcancer.Mikewillprovidemoredetailontheplannedfirst-lineprograminjustafewmoments.

LikeHumiraandIMBRUVICA,webelieveRova-Thasthepotentialapplicabilityacrossabroadrangeofindicationsandtumors.Inadditiontosmallcelllungcancer,expressionofDLL3indicatesRova-Tmaybeusefulacrossmultiplesolidtumortypes,includingmetastaticmelanoma,glioblastomamultiforma,aswellassomeprostate,pancreatic,andcolorectalcancers,amongothers.

ThereisasignificantsubsetofpatientswhosetumorsarepositiveforDLL3expressionwithinthisbroadersetoftumors,representingmorethan65,000patientstreatedannually.

WeplantoevaluateRova-Tacrossnumerousindications,leveragingourR&Dinfrastructureandglobalclinicaltrialorganization,tomoverapidlyandefficiently.




TheacquisitionofStemcentrxalsobroadensAbbVie'soncologypipelinewithaportfolioofearlierstagecandidatesfocusedonnoveloncologytargets.InadditiontoRova-T,theStemcentrxpipelineincludesfourclinicalcandidatesbeingevaluatedintrialsacrossarangeofsolidtumors,aswellastwoadditionalINDsfornewtargetsplannedfor2016,andabroadportfolioofvalidatedpre-clinicaltargets.

StemcentrxalsoenhancesAbbVie'soncologydiscoverycapabilities.ThetechnologyplatformthatidentifiedRova-TandtheotherassetsintheStemcentrxpipeline,hasstrongpotentialforcontinuedassetgeneration,andwillstrengthenAbbVie'sdiscoveryanddevelopmenteffortsinsolidtumorsgoingforward.

Soaswesummarizethetransaction,theadditionofStemcentrxisstrategicallycompelling.Theacquisitionishighlycomplementarywithourgrowinghematologicaloncologyfranchiseandexistingportfolioofsolidtumorassets.

TheleadassetRova-Trepresentsamultibillion-dollarpeakrevenueopportunity,withrevenuepotentiallyapproaching$5billionasweadvanceinthefirst-linesmallcelllungcancerandotherindications.Rova-Thasthepotentialtohaveadramaticimpactonourgrowthoverthelongterm.

AdditionallyStemcentrx'sexistingpipelineofadditionalassetsandtheirR&Denginewillaugmentourfuturedevelopmenteffortsinsolidtumors.StemcentrxaddstoAbbVie'slongtermgrowthprospects,providinganothercompellinggrowthplatformthatwillfurtherdiversifyourrevenuebasebeginningin2018,andwillenhanceourEPSgrowthstartingin2020andbeyond.Stemcentrxfitswellwithinouroverallstrategy.

Wehavenowassembledasignificantnumberoflatestageassetswhichhavebeensignificantlyderisked,havemultibillion-dollarpotential,andthepotentialtodrivesustainablegrowthin2020andbeyond.AssetsincludingIMBRUVICA,Venclexta,ABT-494,Z INBRYTA,elagolix,thenext-generationHCVcombination,ourrecently[in]-licenseanti-IL-23,andnowRova-T.Alloftheseassetshaveahighprobabilityofregulatoryandcommercialsuccess.

Inclosing,wecontinuetobepleasedwithourstrongexecutionandstrategicadvancement.Wecontinuetodemonstrateanexceptionaltrackrecordofsuccess,withpositiveclinicaldataandregulatoryoutcomes,andwelookforwardtoadditionalimportantpipelinemilestonesintheyearahead.

We'reofftoastrongstartthisyear,andweintendtobuilduponourmomentumtodriveahighlevelofperformanceacrossouroperationsanddeliverstronggrowthin2016.Andweremaincommittedtodeliveringonthelongtermobjectivesthatweoutlinedlastyear.

WiththatI'llturnthecallovertoMikeforadditionalcommentsonourR&Dprograms.Mike?

MikeSeverino (EVPR&DandChiefScientificOfficer):

Thankyou,Rick.

WehadaveryproductivefirstquarterfromanR&Dperspective,withanumberofimportantdatareadouts,phasetransitions,andregulatoryapprovals,aswellaslicensingactivity.ThismorningI'llprovidecoloronsomeofthekeyhighlights.

I'llstartbysayingthatIcertainlyshareRick'senthusiasmforStemcentrx,whichbringsusapromisinglatestageprogramwithRova-T,apipelineofearlierstagecandidates,andaplatformtechnologythatwillenhanceourfuturesolidtumordiscoveryanddevelopmentefforts.

WeverymuchenjoyedourdialoguewiththeStemcentrxteamaswe'vegottentoknowthemoverthepastseveralmonths,andwe'vebeenimpressedwiththeindividualsandtheinnovativeplatformthey've




built.

Stemcentrxhasestablishedanimpressivetrackrecord.Thecompany'sfirstthreeclinicalstagedrugseachrepresentnoveltargets,withsingleagentactivitydemonstratedearlyphasetrialsinsmallcelllungcancer,triplenegativebreastcancer,andovariancancer,alldifficult-to-treatsolidtumorindications.

Stemcentrx'shighlyproductivediscoveryeffortisdrivenbythecompany'scoretechnology,whichutilizesalibraryofmorethan700patient-derivedtumorxenograftmodels,andleveragescancerstembiologytoidentifyandvalidatetherapeutictargetsthatwouldbeoverlookedbyothermethods.

Thisplatformhasyieldedimpressiveresultstoday,andweareexcitedaboutthepotentialforcontinuedassetgenerationwhichwillaidAbbVieinourR&Deffortsgoingforward.

Thecompany'sleadasset,Rova-T,representsasignificantopportunity,notonlythroughitsleadindicationthird-linesmallcelllungcancer,butalsothroughthepotentialforexpansionintothefrontlinesetting,aswellasothertypesofcancerwhereDLL3playsanimportantrole.

StemcentrxhasabroaddevelopmentprogramforRova-Tcurrentlyunderway.We'vebeenimpressedwiththespeedwhichwithStemcentrxhasmovedthroughtheclinic.It'sbeenroughlyfourandhalfyearssincetargetidentification,andlessthanthreeyearsbetweenfilingtheRova-TINDtotheinitiationoftheregistrationstudyinthird-linesmallcelllungcancer.

Theconfirmatorythird-linetrial,whichiscalledTRINITY,beganinJanuaryandisexpectedtocompleteenrollmentbytheendof2016,withcommercializationexpectedin2018.

WeviewtheRova-Tsmallcelllungcancerprogramassignificantlyderisked,withahighprobabilityofsuccess.

InadditiontotheoverallresponsedatapresentedatESMOlastyear,whichshowedanoverallresponserateof44%inDLL3positivepatients,theprofileofRova-Tissupportedbylonger-termdata,someofwhichwillbepresentedattheupcomingASCOmeetings.

Theseupdateddataincludepromisingoverallsurvivalfindingsthatcomparefavorablytohistoricalcontrols.WebelievethefullbodyofdatageneratedtodayarehighlycompellingandstronglysupportthevaluepropositionofRova-T.

StemcentrxisalsomovingrapidlyintofrontlinesmallcelllungcancerwithRova-T.Thecompanyisonthecuspofinitiatingastudydesignedtoselecttheoptimalregimenforthefrontlineregistrationalprogram.ThisforearmtrialwillevaluateseveralpermutationsofRova-Tandstandardofcarechemotherapy,includingbothmonotherapyandcombinationarms.Giventhecompellingdatawe'veseeninsmallcelllungcancertoday,webelievethereisahighlikelihoodofsuccessfullymovingintoearlierlinesoftherapy.

Stemcentrxisalsoevaluatinganeight-arm,400patientbasketstudywhichwilllookatRova-Tasmonotherapyinpatientswitharangeoftumortypesthatsharenarrowendocrinefeatures,includingmalignantmelanoma,medullarythyroidcancer,glioblastoma,largestoneneuroendocrinecarcinoma,andformsofprostatecancer,andothersolidtumors.Thisstudyisontracktostartenrollingpatientsthisquarter.

Additionalfirst-linestudiesareplanned,includingaPhaseIstudytoassessthesafetyofRova-Tincombinationwithantibodytherapy,targetingthePD-1/PD-L1axis,whichisontracktobeinitiatedduringthesecondhalfof2016.

Clearly,priortotheStemcentrxacquisition,AbbViewasalreadyfocusedonestablishingastrongposition




inoncology.Sincethecompanywasestablishedin2013,we'veadded10newoncologyassetsthroughinternaladvancementorpartnershipefforts.TheStemcentrxacquisitionacceleratesourobjectiveofbecomingofaleadingoncologycompany.WelookforwardtospendingmoretimediscussingStemcentrx,includingtheirpipeline,atourupcomingR&DDayinJune.

InadditiontotheStemcentrxacquisition,lastweekwealsoannouncedtoyouearly-stageoncologycollaborations,includinganagreementwithArgenxfornovelimmuno-oncologytargetGARP,andanagreementwithCytomXtodevelopProBodydrugconjugates,aplatformwhichprovidesanotherdifferentiatedopportunitytocombinewithourstrengthinantibodydrugconjugates.

Beyondoncology,asRicknoted,wealsorecentlyenteredintoaglobalagreementwithBItodevelopandcommercializerisankizumab,anti-IL-23monoclonalantibodyinPhase3developmentforpsoriasis,andmid-stagedevelopmentforseveraladditionalindications.ThecollaborationpositionsthispromisingassetasAbbVie'sleadinvestigationalcompoundinpsoriasis,andcomplementsourrobustimmunologypipeline.

RecentPhase2studyresultsforrisankizumabinpatientswithmoderatetosevereplaquepsoriasisshowedimprovedefficacyoverSTELARA,acommonlyusedtreatmentforthislife-impactingskinconditionthatwasincludedinthestudyasanactivecomparator.Specifically,thestronghead-to-headresultsshowedthat,at12weeks,81%ofpatientstreatedwith180milligramsoftheBIcompoundachievedPASI90,morethandoubletherateachievedbypatientstreatedwithSTELARA.And50%ofthepatientstreatedwiththeBIcompoundachievedcompleteskinclearanceorPASI100,versusjust17.5%oftheSTELARA-treatedpatients.

We'repleasedwiththislevelofefficacy,asourimmunologydevelopmentstrategyiscentereduponidentifyingtreatmentsthatofferdifferentiatedprofiles,relativetocurrentlyavailabletherapies,withagoalofcontinuingtoraisethestandardofcare.

Beyondtheimpressiveefficacy,thisassetalsohasthepotentialtoofferafavorabledosingprofile,withsubcutaneousquarterlyadministration.

TheBIcompoundisalsocurrentlyinPhase2developmentforpsoriaticarthritisandCrohn'sdisease,withplanstoinitiateaPhase2Bstudyinpsoriaticarthritisinmid-2016,andthepotentialtotransitionintoPhase3developmentinCrohn'sdiseasenextyear.Wewillpresentmid-stageCrohn'sdiseaseinductiondataattheupcomingDigestiveDiseaseWeekorDDWmeetingnextmonth.

We'vealsodisclosepositiveresultsforseverallatestageprograms,includingmostrecentlyadditionaldataonanext-generationHCVregimen.

EarlierthismonthattheInternationalLiverCongressinBarcelona,wepresenteddataonourpan-genotypic,once-daily,ribavirin-freecombinationofABT-493andABT-530inpatientswithgenotypes1-6,includingdataontreatmentdurationsasshortaseightweeks.

Thedataillustratethatwitheightweeksoftreatment,97%to98%ofgenotype1-3patientswithoutcirrhosisachievedsustainedvirologicresponseat12weekspost-treatment.Additionally,100%ofgenotype4-6patientswithoutcirrhosisachievedSVR12with12weeksoftreatment.

Wealsopresentedlate-breakingdatainshowingournext-generationcombinationdrove100%SVR12with12weeksoftreatmentwithoutribavirinintreatmentnaivegenotype3patientswithcompensatedcirrhosis.

WhilerecentadvancementsinHCVtreatmenthaveresultedinhighcureratesformanypatients,thereremaindistinctareasofunmetneed,includingpatientswithgenotype3.Thesenewdataillustratethe




potentialofournext-generationcombinationtoaddressthisneed.

AnotherareaofunmetneedispatientswhohavefailedprevioustherapywithdirectactingantiviralsorDAA's,asre-treatmentoptionsforthesepatientsarelimited.

Wepresenteddatashowingthat95%ofgenotype1patientswhofailedprevioustherapywithDAAs,achievedSVR12with12weeksoftherapywithouttheneedforribavirin.

Themid-stagedatawe'vedisclosedtodayindicatesthatournewHCVcombinationcandelivercureratesapproaching100%,andwebelievethemajorityofpatientswillbewellservedwithaneight-weektreatmentoption.Weexpecttoseeresultsfromthepivotalstudiesinthesecondhalfofthisyear,andweremainontrackforcommercializationnextyear.

WealsoannouncedpositivetoplineresultsfromthesecondoftworeplicatepivotalPhase3clinicaltrialsevaluatingtheefficacyandsafetyofelagolixinpremenopausalwomenwhosufferpainfromendometriosis.Trialresultsshowedthataftersixmonthsofcontinuoustreatment,bothdosesofelagolixmetthestudy'sco-primaryendpoints,withelagolixreducingscoresofmenstrualpainandnon-menstrualpelvicpaininmonththreeandmonthsix.

WeintendtopresentdetailedresultsfrombothPhase3trialsatamedicalconferencelaterthisyear,andwewillcompletetheclinicaldatabaseinanticipationofanewdrugapplicationsubmissionforendometriosisin2017.

Wealsocontinuetoadvancetheelagolixdevelopmentprograminuterinefibroids.DuringthequarterweinitiatedaPhase3programinvestigatingtheeffectofelagolixonheavybleedingrelatedtothishighlyprevalentcondition.

AsRicknoted,wereceivedtwoimportantapprovalswithinourhematologiconcologyportfolioaswell:theexpansionoftheIMBRUVICAlabelintofirst-lineuseforCLL,andtheinitialapprovalofournovelBCL-2inhibitorVenclexta.

WithIMBRUVICAandVenclexta,wenowhavetwotherapiesonthemarketforthetreatmentofCLL,addressingarangeofpatienttypes.WecontinuetoadvanceourdevelopmenteffortsforIMBRUVICA,Venclexta,andseveralotherassetsinouroncologypipeline.

WewillpresentdataacrossawiderangeofstudiesattheupcomingASCOmeeting.

We'vebuiltastrategicportfolioofoncologyassets,includingmultiplemechanismsofactionthathavesignificantpotential,aloneandincombination.

Soinsummary,wecontinuetomakesignificantprogresswithourpipeline,andareontrackforfurtheradvancementsin2016.Wehaveabroadpipelinethatincludesmorethan50activeclinicalassets,includingmorethan20newproductsorindicationsinlatestagedevelopmentorunderregulatoryreview.

WelookforwardtocoveringourfullpipelineinmoredetailatourR&DPipelineReviewtobeheldinChicagoonJune3.Wehopeyouwilljoinus.

Withthat,I'llturnthecallovertoBillforadditionalcommentsonourfirst-quarterperformance.Bill?

BillChase (CFO):

ThanksMike.AsRicksaid,weareverypleasedwiththestrongquarterwedelivered.

Netrevenueswereup22.4%operationally,andweexpandedouradjustedoperatingmarginprofileby




300basispointsto43.1%ofsales.

Wereportedadjustedearningspershareresultsof$1.15,up22.3%overthefirstquarterof2015.Strongoperationalrevenuegrowthinthequarterwasinlinewithourguidanceforgrowthofjustabove20%.

Foreignexchangehadanegative4.2%impactonrevenueinthequarter,alsoinlinewithourguidanceofroughly4%negativeexchange.

WecontinuedtoseestrongmomentumfromHumira,whichdeliveredglobalsalesofmorethan$3.5billion,up19.2%operationally,excludingtheimpactofforeignexchange.

IntheUS,Humirasaleswerenearly$2.2billion,reflectingexceptionalgrowthacrossallthreemajorcategories,rheumatology,gastro,andderma.InternationalHumirasaleswerenearly$1.4billioninthequarter,up4.6%onanoperationalbasis,excludinganunfavorableimpactfromexchange.Thisexceededourpreviousforecastof3%operationalgrowth.CurrencyreducedreportedinternationalHumirasalesby9.2%.

Whileearlyinthelaunch,theEnbrelbiosimilaristrackinginlineorfavorabletowhatwehadmodeled.

GlobalIMBRUVICAnetrevenueswere$381millioninthequarter.USsaleswere$325millionandourinternationalprofit-sharingwas$56million.

GlobalVIEKIRAsalesinthequarterwere$414million.ThelaunchofVIEKIRAX,ourtwo-drug,once-daily,ribavirin-freecombinationforpatientswithHCVgenotype1B,isunderwayinJapan,leadingtocontinuedhighermixofinternationalsalesinthequarter.

GlobalsalesofDuodopa,ourtherapyforadvancedParkinson'sdisease,grew36.7%onanoperationalbasisinthequarter.Wesawcontinueddouble-digitgrowthinternationallyforDuodopa,withamodestlevelofUSsalesasexpected.

GlobalCreonsaleswere$151million,up18.2%operationally.Creoncontinuestomaintainitsleadershippositioninthepancreaticenzymemarket,withthemajorityofthemarketshare.

Theadjustedgrossmarginratiowas81.3%ofsalesinthefirstquarter,whichwasimpactedbythePharmacyclicstransactionandyear-over-yearimpactofforeignexchange.Excludingtheseimpacts,theratioisupover200basispoints.

AsImentionedearlier,wecontinuetoshowimprovementinouradjustedoperatingmarginprofile,whichincreasedto43.1%ofsales,up300basispoints.ExcludingtheimpactsofPharmacyclicsandforeignexchange,operatingmarginimprovedover600basispointsversustheprioryearquarter.Themajorityofthisimprovementwasdrivenbyefficienciesandourrapidlygrowingtopline.

AdjustedR&Dwas15.6%ofsales,reflectingfundingactionsinsupportofourpipelineassets.

AdjustedSG&Awas22.6%ofsalesinthefirstquarter,downsignificantlyfromtheprioryearonaprofilebasis,contributingtocontinuedimprovementinoperatingmarginleverage.

Adjustednetinterestexpensewas$200million,andtheadjustedtaxratewas20.7%inthequarter.

First-quarteradjustedearningspershare,excludingnoncashintangibleamortizationexpenseandspecifieditems,were$1.15,up22.3%year-over-year.

Duringthequarter,asaresultoftheeconomicconditionsinVenezuelaandthelackofavailabilityofUSdollarsatthegovernment'sofficialexchangerate,wechangedtheexchangerateweuseinVenezuelatothefloatingDICOMrate.Thisresultedinachargeof$298million,relatedtoadevaluationofournet




monetaryassetsinVenezuela.ThiswillalsoimpactrevenuebookedforproductssoldinVenezuela.

IwouldliketonowwalkyouthroughthefinancialaspectsoftheStemcentrxtransaction.

WeareacquiringStemcentrxfor$5.8billion,withtheconsiderationbepaidoutas$3.8billioninequityand$2billionincash.TheuseofequityinthistransactionreflectsStemcentrx'smanagementandboardofdirectors'desiretoretainastakeintheasset,aswellasachieveatax-deferredstructure.

Uponclosing,weplantoexecuteanacceleratedsharerepurchaseprogramtoreacquireallofthenewlyissuedequity.Weanticipatethetransactiontocloselateinthesecondquarter.

Weareforecasting$0.28ofdilutionin2016asaresultofthetransaction,whichrepresentsahalf-yearofR&D,operating,andinterestexpense.

WeplantoprovidespecificsonStemcentrx'simpactonourP&LprofileduringthesecondquarterearningscallinJuly.

Weexpectthetransactiontogeneratepositiveoperatingmarginbeginningin2019,andEPSaccretionstartingin2020.

Giventhesefacts,weareupdatingour2016adjustedearningspershareguidancerangeto$4.62to$4.82toreflecttheStemcentrxtransaction.ThisrangereflectsEPSgrowthof10%atthemidpoint,andincludesthepreviouslycommunicated$0.08dilutiveimpactoftheBIcollaborationannouncedlastmonth.Itexcludes$0.75ofintangibleamortizationandspecifiedcosts.

SpecifieditemsrelatedtotheStemcentrxacquisitionwillbequantifiedandincludedonoursecond-quartercall.

Regardingthesecondquarter,weexpectadjustedearningspershareof$1.19to$1.21.Thisexcludesroughly$0.18ofspecifieditemsandnon-cashamortization,andincludestheBIandStemcentrxdilutionimpacts.

Weareexpectingmid-teensoperationalsalesgrowth,excludingaroughly2%negativeforeignexchangeimpactonthequarter.Asaresult,weareexpectinglow-teenssalesgrowthonareportedbasis.

Weareforecasting3%operationalgrowthforinternationalHumirainthesecondquarter.ExcludingVenezuelathisgrowthwould'veexceeded5%.Wecurrentlyexpectthenegative4%currencyimpactoninternationalHumirainthesecondorder,resultinginamodestdeclineyear-over-yearonareportedbasis.However,weremainontrackwithourpreviouslycommunicatedfull-yearguidanceforHumiraoutsidetheUS,includingthemid-single-digitoperationalgrowthexpectedinternationally.

Soinconclusion,weareverypleasedwithourperformanceinthequarter,aswe'vedrivenstrongtopandbottomlinegrowth,anddeliveredoperatingmarginexpansion,whilealsoadvancingonourstrategicpriorities.Thisputsusinastrongpositiontocontinuedeliveringindustry-leadinggrowththisyear.

Andwiththat,I'llturnitbackovertoLarry.


Thanks,Bill.Andwe'llopenthecallforquestionsnow.

Operator,we'lltakeourfirstquestionplease.




QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)

JeffHolford,Jefferies.

Jef f reyHolf ord (Analyst-JefferiesLLC):

Goodmorning,everybody.Thanksfortakingmyquestions.

Sojustfirst,Stemcentrx,justbecauseit'sacompanywealldon'tknowsowell,canyoujusthelpusalittlebitmoreonthevaluation?Wasaprimarydrivenbythelastfinancingroundthatyoucite,orotherthingsintermsofpeaksalesexpectations,[thevisibleassets],that'sdrivingthat?

Secondlyalsojustonthattransaction,howmuchdatabeyondwhat'sbeenpubliclydisclosed,i.e.what,someofthedataperhapsiscomingfromASCO,wasmanagementabletoseebeforeagreeingtothisdeal?

AndthenmylastquestionisjustaroundtheupcomingIPR(inaudible-MicrophoneInaccessible),canyoujustconfirmtimingandexpectationsthere,18thofMay,andtheexpected,thesedecisionstobeconsolidated,andthenjustsecondlytothat,thereisapatent[adjustment]outtherethatpotentiallytakesa135patentoutto2028.Ifandwhenthat'sgrantedwhichseemstobeproceduralwillyouextendyourHumiraexclusiveguidanceonthebackofthat?Thankyouverymuch.

RickGonzalez6Okay.Hi,Jeff,it'sRick.SoI'lltakeIguessallofthosequestions.

Soasitrelatestothevaluation,Iwouldsayithadnothingtodowithwhattheirpriorroundvaluationwas,that'snothowwedoacquisitions.

Essentiallyhowwedoacquisitions,andyouprobablyrecallfromthePharmacyclicsdiscussionthatwehad,andIthinkit'stypicalwithinourindustryhowit'sdone,isyoubuildamodelthatultimatelyprojectsoutwhatyouthinkthecompanyandassetscando,andthenoffofthatmodel,youdeterminewhatthereturnwouldlooklikeatvariouspricepoints,whattheNPVwouldlooklike,andultimatelyyouhaveathresholdatwhich,thewaywedoitiswehaveathresholdatwhichwewon'tgoabove.

Andthenwegetintotheprocessandultimatelytrytovalidatethoseassumptions,andmakeadecisionastowhetherornotwewanttogoforward,andifwewanttoforward,thenwe'llobviouslynegotiateashardaswecantotrytogetitatthelowestpossibleprice.

Butmostlytheseareacompetitivekindofsituation,sowhatIwouldtellyouaboutthistransactionisthatIbelieveitisataverygoodvaluationforus,ithasagoodNPVbasedonthebasecase,whichwasessentiallyonsecondandthirdlinesmallcelllungcancer,andacoupleofotherindications,andithassignificantupsideifwemovedtofirst-lineormorebroadlyacrossthosecancersthatareDLL3positive.

Nowthosetrialsareongoing,sowedon'thavethatdata,sowedidn'tnecessarilybuildallofthosein.Ifthatweretooccur,youprobablysawthere'saCVRforfirst-linethattheinvestorswouldreceive,butIwouldtellyoufirst-linewillhaveavery,verystrongNPVaboveandbeyondwhatwefactoredinhere.Butwiththebasecase,thishasaverygoodNPVandaverygoodIRR,soIcanjusttellyou,Ifeelgoodaboutthevaluation.

Asfarasthedataisconcerned,wehaveseenasignificantamountofdataaboveandbeyondwhatispublicnow.Weobviouslyneedtobecarefulaboutwhatwetalkabout,becausesomeofthatdatawillpresentedattheASCOmeeting.Ithinkwe'vegivenyouaprettygoodideaofwhatyou'relikelytoseeat




theASCOmeeting.ButIcantellyouthatwehaveseenallthedatathatwasavailabletothemanagementteam,andwe'reimpressedwiththatdata.

SoIcantellyouI'mvery,veryexcited.We'velookedforquitesometimenowforasolidtumorplatformplay,andthey'rehardtofindinthismarket,andIthinkifyoulookattheproductivityofthisgroupandthenoveltherapeutictargetsthattheyhavebeenabletocomeupwith,andtheirhitrateonthosetargetsissignificantlyaboveindustryaverage.

Andthewaytheyapproachitisprettyimpressive,andthefactthatthisisfocusingtoagreatextentoncancerstemcells,andIthinkthere'sastrongbeliefthatifyoucanknockout[un]certaincancerstemcells,youcandramaticallyimpactthecourseofthatdiseaseforthosepatients,andIthinkthedatawillspeakforitselfwhenit'savailableandyoucantakealookatit.

Sowe'reimpressedwiththis,wethinkRova-Tisaverygoodassetandgivesusagoodstrongpositioninsolidtumorsgoingforward.

OntheIPRsaswe'vesaidbefore,we'renotgoingtotalkalotabouttheprocessnowthatwe'reinlitigation.Icananswermaybeoneortwoofthesequestions.Wedon'thavetheabilitytopredictthetiming.Youhavethedatecorrectthatyoudescribed.Soitshouldoccursometimenolaterthanthatdate.Wedon'tknowwhetherit'llbeconsolidatedornot.Andwe'renotgoingtocommentontheissuanceofthepatentandwhatwewoulddointhatscenario.Okay?

Jef f reyHolf ord (Analyst-JefferiesLLC):

Thanksforamuchandcongratulationsonthedeal.

Operator :

ChrisSchott,JPMorgan.

ChrisSchott (Analyst-JPMorgan):

Great,thanksverymuch,justacoupleonthedealtoday.MaybefirstcanyoujusttalkaboutthecompetitivelandscapefortheDLL3target,orjustothercompaniesworkingoncancerstemcellsasanADCtarget?

Secondquestionwasonthe$0.20ofdilutionthisyear,I'mjusttryingtogetasenseofwhatit'sgoingtolooklikeoutin2017,shouldwebethinkingaboutsomethinglargerthan$0.40aswegetthefullyearimpactandasyourampR&Dassociatedwiththeseassets?

Andthenthefinalonewasjust,postthisdeal,canyoujustgiveussomesenseofthepositionthecompanyhastopursuelargertransactionsiftherightopportunitywereoutthere?ShouldwethinkaboutStemcentrxasthetypeofsizeandprofileyou'relookingfor,orcouldyoulooktogetmoreaggressiveastheyear,oraswegetto2017,iftherightdeal'soutthere?Thankssomuch.


SothisisMike,I'lltakethefirstquestionwithrespecttothecompetitiveenvironmentforRova-T,andsomeoftheotherprogramsthatStemcentrxhasbeenworkingon.

AndwhatI'llsayisthatoneofthethingsthatreallyimpresseduswithStemcentrxisthenoveltyoftheirplatform.They'veinvestedearlyinthistechnology,theyhavedevelopedgreatexpertise,andtheyareoutintheleadinalloftheareasthatthey'repursuing.SoDLL3isoutinthelead,it'sdemonstratedverycompellingresults,andwethinkit'sanassetthathastremendouspromiseandwillreallychangethestandardofcare.




AndIthinkifyoulookatalloftheprogramsthatStemcentrxisadvancing,there'sahighdegreeofnoveltyandverystrongsignsofactivityfromtheirfirstthreeclinicalprograms,sowefeelverygoodabouttheirpositioninthecompetitiveenvironment.

BillChase (CFO):

Soonthedilutionhere,aswesaidthe$0.20thisyearrepresentsroughlyahalfyearofthecurrentburnratethatStemcentrxisshowing,aswellastheadditionalfinancingcosts.

Ithink2017weneedtoget,inlookattheclinicalprograms,butobviouslywearegoingtoinvestappropriatelyonRova-Tandtheotherassetsinordertomaximizethevalueoftheasset.

What'sniceaboutthistransaction,though,isin2018we'regoingtobebringingtheproducttomarket,andwethinkgiventheclinicaldatathathasbeenshownsofar,we'regoingtohaveafairlyimpressiveuptakeonRova-T,andthatwilloffsetthatdilutionprettyquickly,andin2020weseethedealbeingaccretive.


Okay.Chris,thisisRick.TheonlythingI'daddonthe,Iknowwhatyou'retryingtodo,you'reobviouslytryingtomodelorincorporateintoyourmodelwhattheR&Dimpactwillbeon2017.Ithinkthat'swhatyou'retrying,todobasedonyourquestion.

AndI'dsayaswefactoredinthisnumber,andaswelookat2017,itcertainlyincorporatestheassumptionsthatwe'vemadearoundtheexpansionintoothertumorsthatareDLL3positive.ItincorporateswhatMikedescribedasthefirstlinetrialsthatultimatelytheirpursuingwithRova-T.

Theonepartthatitprobablydoesnotincludeatthispoint,andwejustneedtoworkonitsomemore,wouldbewealsobelievethatthiscouldbeasynergisticstrategyinfirst-linewithimmunotherapy.

Andtheyhavewalkedusthroughaplanwherepotentially,asanexample,Rova-TcouldbeahighlyspecificdebulkingagentonthefrontendforDLL3positivepatientsinsmallcell,andknockingoutthestemcellsintheprocesswhichtraditionalchemotherapydoesnotdotoday.Andthenyouwouldgetthediseaseundercontrolanddebulked,andyouwouldfollowitwithimmunotherapyforlongertermmaintenance.Andsothey'velaidoutsomeplansaroundthat,andthathasnotbeenincorporatedtothispoint.Sothatwouldbetheonlything.

Now,weobviouslyhaveasignificantR&Dbudget,andwewouldlookathowwenormallydoR&Disweaddeverythingupandthenwemakeadecisionwherewedrawtheline,andwe'regoingtobeconsciousofthat,soI'mnottellingyouthatwouldbeincremental,butwhatI'mtellingyouisthat'stheonethingthat'soutsidethescopeofwhat'sinthecurrentR&Dplanned(inaudible-MicrophoneInaccessible).Sohopefullythatgivesyousomeclarityaroundthat.

OntheM&Afront,similartothecommentsthatImadeearlier,wehavebeenlookingforasolidtumorplatform.Ithinkwemadethatsomewhatclearthatthatwassomethingwewereinterestedindoing.Iwouldsaythiscameinatavaluationthatwassignificantlybelowthenumbersthatwehadflaggedbefore.

Butwearelookingtobalancenear-termperformanceagainstmakingsurethatwebuildasignificantportfolioofassets,outinthat2020andbeyondperiod,thatcancontributetodeliveringstrongEPSgrowthandstrongrevenuegrowth.

ButI'dsaywherewearerightnowiswehavealotofthingsgoingrightnow,andwe'vefilledalotoftheneedsthatwehave,andsoIwouldnotexpectthatwewillgooutanddoanothersignificanttransaction,




andobviouslyPharmacyclicswasasignificanttransaction,butI'mtalkingaboutevenatransactionofthissize,soIthinkforthenextcertainly18monthsorso,ifweweretodoanything,itwouldprobablybemoreofaBIkindoftransaction,moreofasingleasset,mightbeanin-licensingkindofatransaction,andIthinkbasedonthefactthatwehavedeliveredsomelevelofdilutionhere,wewouldhavetobeinapositionwherewewouldabsorbthedilutiongoingforward.Sohopefullythatanswersyourquestion.

ChrisSchott (Analyst-JPMorgan):

That'sgreat,thankssomuchforthecolor.

Operator :

JamiRubin,GoldmanSachs.

JamiRubin (Analyst-GoldmanSachs):

Thankyou.IjustwanttofollowuponsomeoftheStemcentrxquestionsandcongratulations.Butclearlythewholesortofstemcellbasedfocushasbeenfraughtwithchallenges,andI'mjustwonderingmaybeifyoucouldreplytothespecificquestions,whatgivesyouconfidencethatsigning[frommouse]modelstranslatestohumancancers,andalsowhatgivesyouconfidencethatsmallcelllungcancerdatawilltranslatetoothertumortypes?

AndwasalsocurioustoknowhowStemcentrx'sADCtechnologydiffersfromotherADCplayers?

Andthenafollow-upquestion,andsorryaboutthis,butjustafollow-uponanearlierquestion,ifyoucankindofplayoutthescenariooftheupcomingIPRwhichinvestorsareobviouslyhighlyfocusedon,whatistherightanalyticalframework,Rick,thatweshouldthinkaboutthis,intheeventthat(a)theIPRisheardoritisdismissed,justinrelationtotheoverallIPpictureanddurationofHumira.Thanksverymuch.


Allright,soIwill--thisisMike--IwilltakethefirstofthoseandthenRickmaywanttoaddsomefollow-up.

Sowithrespecttocancerstemcells,youknowwhatIwouldsayiswe'vehadafairamountoftimetogetverycomfortablewiththeplatformthatStemcentrxhasdeveloped,andwebelievethattheyaredoingsomethingreallynovelhere.

Intermsofunderstandinghowmousemodelsmighttranslateintohumanclinicaltrials,orultimatelyclinicalbenefit,wecertainlyrecognizethatthattranslationalleapisoftenfraughtwithperil,butinthiscasewedon'thavetowonder.We'veseenthefirstthreeassetsmoveintotheclinicshowingstrongactivity.

Andsotheyhavedemonstratedwiththeirfirstthreeclinicalassetsactivityinsmallcelllungcancer,triplenegativebreastcancer,andovariancancer.Sotherearehumandatatobackuptheirhypothesis,notonlyonetimebutthreetimesinarow,andobviouslybeingrightthreetimesinarowinthisbusinessdoesn'thappenbychanceveryoften.

Sowithrespecttoourconfidencethatsmallcellcancerwilltransfertoothercancers,thesetofcancersthatwe'retalkingaboutallshareneuroendocrinefeatures,asdoessmallcell,andStemcentrxhasdonealargeamountofworktounderstandtherolethatDLL3playsbiologicallyinthesetumors.

Andweknowbasedontheworkthattheyhavedone,thatDLL3isplayingthesameroleacrossthesetumors,andsothat'swhywehavemuchgreaterthanaverageconfidencethatwhatwe'reseeinginthosepre-clinicalstudiesandothertumorswilltranslateintothebasketstudythatthey'rerunning.SoasRicksaid,we'veseenalotofdatahere,andwefeelverygoodaboutthisopportunity.




WithrespecttotheADClandscape,StemcentrxhasshownthattheyareverygoodatgeneratinghighlyselectivemonoclonalantibodiesthatmakegoodreagentsforADCs,andtheyalsohavethelinkertechnologyandthetoxintechnology,allfullyintegratedwithintheircompany,torapidlyproducetheseADC's.AndagainIwouldsaythattheirclinicaltrackrecordspeaksforitself.

Sowiththat,I'llturnitovertoRickfortheotherquestions.


IguesstheonlythingI'daddonthatfirstsetofquestions,Jami,istherealityishumandatatrumpseverythingelseinourbusiness,right,soIthinkyoucaninterpretfromthat,wehadtogetcomfortablewiththehumandatathatwesaw,andtheimpactthatithad,tomakethedecisionsthatwemade,andasthatcomesoutIthinkyouwilldrawyourownconclusions,obviously,butIthinkthatwillbeinformativeasitcomesoutforyou,okay?

IwanttomakesureIunderstandyourIPRquestion,soI'mgoingtoaskyoutoaskitonemoretime.


Okay.SoIjustwantyoutokindofframethelandscapeforus,becauseinvestorsarehyperfocusedonthisupcomingCoherusIPR.IftheIPRisthrownout,Ithinkthat'sprettyclear,butifitisheard,helpustounderstandthesignificanceofthat,inthecontextofyouroverallIPsurroundingHumira.


Yes,okay.Thankyou.Ifyouthinkaboutthisprocess,theprocesswewillgothroughis,ifthepatentofficemakesadecisionwhetherornotthere'senoughevidencetoevenreviewthepatent,that'stheprocessthat'sgoingtooccurhereintheMay/JunetimeframewiththeIPRs.

Andsoallitisis,isthereenoughintheclaimofthecompanychallengingtheIPtoevenmakeadecisiontoreviewit?

Ifthepatentofficedecidesthatisthecase,thentheywillreviewit,andthere'llbeaprocessthatwegothrough,that'swell-documentedofhowwedefendthepatent,andintheprocessthechallengerwouldgothroughaswell.Thattakesabout12months.

Attheendof12months,therewouldbeadecisiononthepatent.Anddependinguponwhichwaythatdecisionwent,ifitwentforusthenobviouslythepatentwouldbeupheldandwouldbeobviouslystrengtheneddramatically.Ifnot,thenwehavetherighttoappeal.

Sothat'stheprocess,andIthinkthatessentiallydefinessortoftheimplicationsoftheprocess.Ifitgetsturneddownonthefrontend,similartowhattheformulationpatentwithAmgendid,thenobviouslythatcreatesaverysignificanthurdleforthecompanythat'schallengingit.Sothosearetheimplicationsofit.


Thankyou.Iappreciateit.

Operator :

DavidRisinger,MorganStanley.

DavidRisinger (Analyst-MorganStanley):

Thanksveryamuch,andcongratsonthenewsthismorning.Ihavethreequestions.FirstwithrespecttoStemcentrx,couldyoujusttalkabouthowyouplantointegrateandretaintheemployeesnowthat




they'regoingtobepartofamuchlargerpharmaceuticalcompany.

Second,couldyouexplaintheStemcentrx-Pfizerpartnership,andhowyouexpectthattoevolve?

Andthenasanaside,AbbViedoesn'ttalkmuchaboutyour50-50fundingalongwithGoogleofCalico,butobviouslyyouhavemadeasignificantinvestmentthere,andCalicoisquiteaninterestingcompanygivenitsleadership.CouldyoujustupdateusonthepipelineatCalicoaswell,please?Thankyou.


Okay.SoDavid,thisisRick,I'lltakeprobablythefirstofthoseandmaybesomepartofthesecond,andImayaskHenrytochimeinonthesecondpart.AndI'lltaketheCalicooneforyou.

SoImeanobviouslyanimportantpartofthesekindsofcompaniesisretainingthepeople,andparticularlywhenyouthinkaboutthiskindofacompanywherealotoftheintellectualpropertyofthecompanyisthat,right,it'stheintellectualhorsepowerofthepeople.

AndIwouldsaywehavebeeninteractingwithStemcentrxnowforanumberofmonths,wellbeforethisprocessstarted.Andsowe'vehadachancetogettoknowtheteam,andgettoknowtheleadershipwithintheteam,andtheyhadadecisiontomake,right,theycould'vegonedowntheIPOroute,theycould'vecollaboratedwithsomebodyandgonedowntheIPOroute,iftheywantedto,andIthinkbasedonthekindofassettheyhaveinRova-T,theycertainlywouldhavehad,eveninatoughIPOmarketasitistoday,Ithinktheywouldhavehadtheabilitytobeabletodothat.

Ortheycoulddoatransactionlikethetransactionweendedupdoingwiththem,andIthinkoneofthedecidingfactorsforthemwaswhatthey'rereallygoodatandwhattheylovedoingisessentiallygoinginanddiscoveringnovelmarkersandcreatingdrugs,sogoingtothediscoveryandearlydevelopmentprocessandtheydemonstratedtheycandothatinahighlyefficientandeffectiveway,andtheycandothatvery,veryrapidly.

IftheywentdowntheIPOroute,theyhadtobasicallybuildalltheotherinfrastructurethatafullyintegratedbusinesswouldneedtohave,includingallthecommercialandmedicalaffairsandglobalclinicaldevelopmentgroups,inordertobeabletoexecuteafullyintegratedstrategy,andIthinkastheylookedatthat,Ithinktheyhadconfidencetheycoulddoit,butitwouldbeatremendousamountofeffortontheirpartandtheirleadershipteamtobeabletodothat.

Whentheylookedatcomingtogetherwithus,theyultimatelysaid,look,wecandothepartthatwethinkwe'regreatat,andwecanplugintowhatyoualreadyhaveforallthoseotherthings.Theglobalclinicaldevelopmentgroupthatwehave,themedicalaffairsgroupthatwehaveallaroundtheworld,thecommercialorganizationthatwehaveallaroundtheworld.

Andsotheyperceivedittobeawin-win.SoIthinkthat'sthefirstthing.Winningtheirheartsandtheirmindsthroughthatprocesswasanimportantaspectofit.

SecondaspectofitwasthatobviouslytheCVRs,alloftheleadershipteamandmanyoftheemployeeshaveeitherownershipinthecompany,andtheyhavestockoptions,right,sotheseCVRsareprettyimportanttothem.TheycanextractatremendousamountofvaluethroughthatprocessiftheydeliveragainstthoseCVRs,andIcantellyouthat'saprettyhealthyfinancialincentiveforthemtostayandexecuteagainstthose,andIcantellyouintheinteractionsthatIhadwiththem,wehadwiththem,Ishouldsay,Icantellyouthat'sanimportantpointtothem.

Thirdthingistheywantedastocktransaction.Nowtheywanteditsomewhatfortaxpurposes,buttheyalsowanteditbecausetheywantedtobelievethattheycouldshareintheupside,andsomeofwhattheyagreedtodowiththeiroptionsonlyreinforcedthat,meaningtheirStemcentrxoptionsandwhat




theywillbecomeandhowthatvaluewillbederived.

AndsoIthinkthere'saveryhighlikelihoodthatwewillretainthekeypeopleinthis,andIthinktheylikeourcultureandtheyliketheenvironmentthatwereoperatingin,andsoItellyouIhaveafairlyhighlevelofconfidence.

AndIthinkPharmacyclicsdemonstrates,youknow,wehaveretainedallofthekeyclinicaldevelopmentpeople,andI'vespenttime,Mikehasspenttimewiththatteam,Ithinkthey'reveryhappybeingpartofAbbVie.Andtheygettoexecutetheirstrategythattheywantedasanindependentcompanyaswellorbetterthantheycould'veasanindependentcompany.SoIfeelprettygoodaboutthatbutit'sanimportantpoint.

OnthePfizertransaction,it'ssomethingwewanttobecarefulwithbecauseI'mnotsurewhattheirconfidentialityagreementis.Henry,youwanttocommentanythingonit?

HenryGosebruch (EVPandChiefStrategyOfficer):

Yes,justbeclearPfizerdoesnothaveanyrightsRova-Tatall.WedidputoutsomeslidesthismorningandyouseethatthereisfouradditionalassetsinPhaseI,andobviouslythere'sanumberoflatepre-clinicalassetsbehindthere.TwooftheseassetsPfizerhassomerightsto,butwereallycan'tgointofurtherdetailsonhowthosedealsarestructured.Butagaintobeclear,thatistheextentofthePfizerrelationship.


Theothertwoassetstheycanoptin.


Correct,theycanoptin,backinoneofthem.


Sothereforewecanoptin,backononeofthose,ifwechooseto.SoIthinkthatprobablygivesyouasmuchaswecangiveyouaroundthePfizercompounds.

OnCalico,I'mgoingtohaveMiketalkalittlebitaboutthepipeline,butyes,thatisatransactionthatwedidaboutayearorsoagonow,andwhenyoulookattheindividualsthatCalicofirststartedupwith,ArtandHalandothers,they'veassembledaverytalentedteamandthatwasthebigreasonthatweultimatelydecidedtodosomethingwiththem.

Butessentiallywhatwehaveisweco-fundadiscoveryefforttofindnewinnovativetargetsinanumberofdifferentareas,oncologies,oneofthem,diseasesoftheagingisanother,neurodegenerativediseasesisanotherareathatultimatelywehavealotofinterestin.

Andthewayitworksisessentiallywecanoptinonanythingthat'sdiscoveredthere,andthere'sapointwhichwetakeitover,wehavecommercialrightstoit,andthenthere'sbasicallya50-50profit-sharingarrangementbetweenusandCalico.

SoessentiallywehaverightstoanythingoveracertainperiodoftimethatisdiscoveredwithinCalico.Mikeworkscloselywiththeteam,soI'mgoingtoaskhimtotalkalittlebitmoreabouttheprogressthatthey'remaking.





Sure.SooneofthethingsthatIthinkisveryimportanttonoteintheCalicocollaborationisthatthere'saverystrongscientificandculturalfitbetweenourteams.Andthatwasoneoftherealdriversbehinddoingthatdeal.TheCalicoteamisobviouslyverytalented.Theyhavealongandverysuccessfultrackrecord.Ourteamsareworkingtogetherverywell,we'readvancinganumberofprograms.

Butofcoursewedoneedtokeepinmindthattheseareearlydiscoveryprogramsthathavebeeninitiatedinthelast12to18months,soweintendtomoveveryquickly,butittakesabitoftimebeforeprogramsarereadyforclinicalintroductionandnewsflowthatyou'dexpecttohearinthissortofsetting.

SowhatIwouldsayistheculturalfitisgreat.We'vemadegreatprogressbuildingupthesetofprogramsintheareasthatRickmentioned,thatIthinkareverygoodfitforouroverallstrategy,andweremainveryoptimisticabouttheCalicopartnership.

DavidRisinger (Analyst-MorganStanley):

Great,thankyouverymuch.

Operator :

MarcGoodman,UBS.

MarcGoodman (Analyst-UBS):

Yes,morning,maybewecantalkalittlebitaboutjustthebusinessforasec,VIEKIRAwasalittlebitweak,maybeyoucantalkabouttheUSversusinternational,howJapanisdoing,USseemstobefallingoffquiteabit,Imean,wejustlosingshare?Giveusasenseofwhat'sgoingonthere.

Second,HumiraintheUS,Iwasjustcurious,obviouslywe'veseenquiteafewpriceincreasesifyoulookoverthepast12months,andIwascuriouswhetheryouarestillbeingabletogetthesameamountofpricedroppingtothebottomlineasyouhavebeeninthepast,iftherewasmorepressureonthat?

Andthenthirdcanyougiveusanupdateonwhatwe'regoingtoseeitASCOforthebroaderportfolio?Thanks.


SothisisRick.I'lltakeVIEKIRAandBillcantaketheHumiraquestionandwillhaveMikecovertheASCOquestion.

SoVIEKIRA,letmestartwithJapan.Japaniscontinuingtotrackconsistentwithourexpectations.SoIthinkthere'snothingallthatremarkableinJapan,it'sagoodmarket,ourprofilewithinthatmarketisagoodprofile.

TheUShascertainlybeenmorechallenging,Iwouldsaythatit'sacombinationofseveralfactors.Somevolumeloss,aswellassomepriceloss.AsMerckhasenteredthemarket,weknowthattheysetthelistpricelowerthantheotherproductsinthemarketplace.ThatstrategyinitiallyIthinkweinterpretedasastrategythatwouldgoaftermedicalexceptions,becausemedicalexceptionshistoricallyareinatmoreofalistpricepoint,andsotheyhadthelowestpriceessentiallyonamedicalexceptionbasis,andtheyhavebeensomewhatsuccessfulingainingsomeofthosemedicalexceptions.Sothat'spartoftheissue.

Thesecondpartoftheissuethoughis,theyhavebeenmoreaggressivethanweanticipatedfromapricingstandpoint,particularlyinthepublicsegments,theVAinparticular.Andaswelookedatthat,weultimatelymadethedecisionthatwewerenotgoingtocompetewiththelowestoverallpriceintheVA.Wedidadjustourpricedown,butwedidn'tadjustitdowntotheverylowestprice,andthathascausedustoobviouslyloseprice,butalsolosevolume,andwehadafairlysignificantshareofVA.




SoIthinkitisthosefactorsplayingout,andIwouldsaythatbasedonwheretheUSisgoing,itisunlikelythatwewillachievethe$2billionnumberthatwedescribedearlier.Ithinkanumberthatyoushouldbethinkingaboutnowismoreinthe[onesix]range,globallyI'mtalkingabout.

Andyoucanlookatthisquarterasanexample,eventhoughVIEKIRAwasweakerthanweexpected,weobviouslybeatourEPSnumberandachievedourrevenuenumbers,soittalkstothe[strength]oftherestofthebusiness,that'sthenicethingaboutourbusiness,iswehavegoodbalancedperformanceacrossanumberofdifferentassets,andsowhenonethingdoesn'tgoaswellaswehadhoped,thenotherscanpickuptheslack.

Sowewillnotbechangingourguidancebasedonthis.Wefactoredthatintoourgoing-forwardguidancein2016andwe'recomfortablewiththeguidancethatweprovidedyou.ButthosearethefactsaroundVIEKIRA.

BillChase (CFO):

SoMarc,onaHumirapricingintheUS.Look,obviouslywecontinuetoputupprettyimpressivenumbersintheUS.Ifyoulookatscripttrends,itwasupover16%,sothere'sa,themajorityoftheincreaseinQ1isrelatedtovolumebutpriceisacomponent.Nowthecategoryhastakensomepriceinthelastfourorfivemonths,wedidaswell,andwedon'tseeanymajorshiftrelativetowhatwe'vebeenexperiencingoverthelastfewyears,butobviouslywe'rekeepingoureyeonit.


SowithrespecttoASCO,we'llobviouslybeseeingtheRova-TdatathatwetalkedaboutinsmallcelllungcancerwhichisthatBestofASCOpresentation.

VenclextaalsohasaBestofASCOpresentationwhichcomesfromtheprograminAMLincombinationwithhypomethylatingagents.TherearenineadditionalabstractsforVenclextathatwillbepresented,updatingacrosstherangeofstudiesthatarebeingconductedwiththatmoleculeinnon-Hodgkinlymphomaandothersettingsaswell.

You'llstarttoseeadditionaldatafromADCsthatwe'reintroducingintotheclinic.There'llbeupdateddataonABT-414.You'llstarttoseedataonsomeofournewerADCs,andwecontinuetohaveanumberofprogramsthatwillbemovingintoclinicaldevelopmentinoncology.

Sooverallwe'regoingtobeveryactiveatASCO,andofcoursewe'realsohavingourR&DDaytocoincidewiththetimingofASCO,soyou'llseeabroadupdateonourpipelinethere.

Operator :

AndrewBaum,Citigroup.

AndrewBaum(Analyst-Citigroup):

Hi,threequestions,please.FirstontheStemcentrxtransaction.Couldyouprovidealittlebitmoredetailontheearnoutthepressreleasereferences(inaudible-MicrophoneInaccessible)andyoumentionedinpassingthefirst-lineindication,butifyoucouldprovidesomemoregranularitythatwouldbegreat.

Second,Iwouldimaginethiswasacompetitiveauction,given,wellespeciallyasStemcentrxhasgotafinanceprofessionalasaCEOandseveralhigh-profiletechinvestorsinvolved.Perhapsyoucouldjustgiveusasenseofthecompetitivedynamicsasyouthinkaboutvaluations.

SecondinreferencetoyourcommentonyourIL-23.Youhighlighteditasyourprioritycompoundinpsoriaticarthritis,andwhat'sthefutureforABT-122?Doyouintendtoproceedineitherpsoriaticarthritis,




orinRAforthatcompound?

Andthenfinallymorebroadly,nowthatyou'vegotalungcandidateinyouroncologypipeline,howyouthinkaboutaugmentingthatcompoundgoingforward?


SoAndrew--Henry,whydon'tyoucoverthemilestonesandthenwecantalkalittlebitaboutfirst-line.


Andrew,sothereareintotal$4billionofmilestones.$2billionrelatetothefirst-lineapprovalthatRicktalkedabout.Sothatapprovalis$2billion,andit'squalifiedbyafavorablepositionintheguidelinesatthetime.AndasRicktalkedaboutwebelievethatwouldcreatesignificantlymorevaluethanthat$2billion.

Inadditionthere'sasecond$2billion,andthatrelatestofourindividual$500millionmilestones,sototaling$4billion,andthoseareforthecommencementofregistrationtrialsforadditionalassetsinindicationsthatwouldbeatleast$1billioninrevenuepotential.Sothatis$500millioneach,foratotalof$2billion,andthenwiththefirst-line,$4billionintotal.


Soonthosesecondsetofmilestones,justtobeclear,they'reindividuallyearned,right,soiftheytakeoneassetandtheymoveitthrough,andwetakeittoaregistrationstudy,andwedeterminethatthatassetinthatindicationwouldgenerateacommercialassetthathadgreaterthan$1billionworthofrevenue,thenwewouldpaythem$500million.

Andtheniftheydoasecondoneorathirdoneandafourthone,theycangetuptofour$500millionmilestones.Sothat'showthecontingentpaymentsarelaidout.

Onthecompetitivedynamics,itwasacompetitiveprocess.Itwasrelativelyblindtous,sowedon'tknowwhotheothercompetitorswere,butwedoknowthereareotherplayersthatwereinvolved,andI'dsayitendedupbeingusandoneotherplayerattheveryendwhowerecompetingfortheassetthroughthatprocess,andultimatelyasItoldyouonthevaluation,it'sconsistentwithwhatIdescribedtobefore.(inaudible-MicrophoneInaccessible).

Ifyoulookatwhatwewerepayinginthebasecaseforthisasset,andyoulookatthebasecaseforecastwithoutfirst-lineinit,ithasasignificantlypositiveNPVandwellabovethethresholdatwhichwelookatthecutoffforIRRs.

Andsothisisatransactionthatwefeelverycomfortablewithfromafinancialstandpoint,andwe'veobviouslybuiltintheupsideforfirst-line,becausewedon'thavedataonfirst-linerightnow,andwedidn'twanttobeinapositionwherewewerepayingforsomethingthatwedidn'tknowwhatitwasgoingtolooklike.Wewereverycomfortablewithsecondandthirdlinebecausewesawdatathatsupportedthathumandatathatsupportedofthat.

IdobelievebasedoneverythingI'veseen,andIthinkMikeandothersbelievethatthereisahighprobabilitythisassetwillmoveintofirst-line,butwe'regoingtopursueitaggressively,andiftheydotheywillgettheincrementalreward,andwewillobviouslygettheincrementalawardofbeingabletomoveintothat,andwehavespecifiedhowtheguidelineshavetocharacterizetheassetthatitwouldbeabroad-basedfirst-lineagentinorderforthatmilestonetobepaid.(inaudible-MicrophoneInaccessible)OntheBIand122Mikewhatyoucoverthat.





Certainly.SotheBIcompoundwhichisnowcalledrisankizumabtheantibodytheseareleadassetandpsoriasisandIthinkthedataclearlytherethatoutIthinkbasedonwhatweknowaboutthepathwayandmakessensetomakethatsamestatementaboutpsoriaticarthritis.

Wereverypleasedwiththedatawe'veseentodatewethinkthere'sreallytremendouspotentialforthatasset.WithrespecttoABT122whichisourIL17TNFDVDwearebeengoingtobeseeingthisstagedatainternallyinthemiddleofthisyearsoshortlywillprobablybeinapositiontopresentthatexternallyaroundtheACRtimeframeandsowillmakeadecisionwhenwehavethosedatabutwhatIcansayistomoveforwardwiththosemoleculesitwouldhavetofitourstrategywiththatmoleculewithABT-122itwouldhavetofitourstrategytoraisethebaronthestandardofcare.

Sowewouldbelookingfordifferentiatedefficacycomparedtonotonlywhatwehaveinourownportfoliobutwhat'savailableexternally.Andsowillbemakingthedecisionlateronthisyear.WithrespecttoyourquestionaboutourpresenceinlungcancerwesetforquitesometimethatwewanttobuildourpresenceinsolidtumorsIthinktheStemcentrxacquisitionclearlydoesthatitgivesusabroadplatformaswellasaverypromisingleadassetandotherclinicalassetinmindthat.

Sowe'regoingtocontinuetobuildonthatpresencenotonlywiththedevelopmentandgoingtocomesfromStemcentrxbutwithourinternalpipelineandIthinkyou'llseethatwehaveanumberofprogramsthatcouldbeapplicabletolungcancerandothersolidtumorsthatwillbemovingthroughtheclinicshortly.

AndthenontheM&Ait'sconsistentwithwhatIdescribedearlieryoubelookingforthosekindsofassetswecontinuetoevaluatethingsthatareinthemarketplaceandwebuiltafairlyextensivepipelineinternallyandbutobviouslywecontinuetolookontheoutsideforthoseassetsthatlookinterestingandbutitwillbeofaprofileinvestmentprofileofwhatIdescribedtoyouamomentago.

Operator :

MarkSchoenebaum,EvercoreISI.

JohnScott i(Analyst-EvercoreISI):

Goodmorning.ThisisJohnScottiinforMark.JustafewquestionsifImay.ThefirstoneStemcentrxIrecalllastyearwhenyoupurchasePharmacyclicswithIMBRUVICAyougavealotofhelpfulcoloronhowyoubuildupinyourmodeltothepeakcellsanduserpeaksaleIMBRUVICAyousortofbrokenoutbyindicationlineoftherapyandgavesomecoloronwastojustdoyouthinkyoucoulddothesamethingforRova-Tandthe$5billionnumberyouputoutthereintermsofwhatyeardoyoumodelpeakyoutalkingsmallsolongotherindicationsandsomemoregranularcoloronhowyoubuiltuptothenumber.

thenthesecondquestionnowthatyouhavepurchasedStemcentrxandyoulicenseIL23fromtheIcanyougivealittlebitmorecoloronhowyouseetheR&Dlineevolvingoverthenextyearspecificallywith2020guidanceareyougoingtobeabletokeepholdessentiallythegreaterthan50%non-GAAPoperatingmarginguidancethatyouputgivenpreviouslyorshouldweexpectthattohavetocomedownabitbelowwhatyou'vegiven.Thankssomuch.

AsfarasthemodelobviouslywewentthroughthemodelinsomelevelofdetailaroundPharmacyclicsonebecauseofthemagnitudeoftheinvestmentweweremakingandwedescribedwhatsupportedthatinvestmentinhowwebuiltatthemodel.WhatIcharacterizeforyoualreadybasicallytellsyouhowwebuiltthismodelisbuiltprimarilyaroundsecondandthirdlinewhichwebelievesmallcellwhichwebelievehasaveryhighprobabilityofsuccesstheyoucanimagineweriskadjustedaccordingly.




AtahighprobabilityofsuccessitdoeshaveacoupleofothersmallerindicationswherewebelieveisaveryhighprobabilityofbeingabletoextenditintosomeoftheseothercancersthatwedescribedIwouldn'tsaythathasasignificantimpactonitandthoseareriskadjustedaccordinglyitdoesn'thavefirst-lineandit.

AndthemilestonesortheCBRisbasicallydrivenoffofwhatwethinkthevaluewouldbeinthereturnwouldbeappropriateforfirst-lineanditdoesn'thaveanyotheroftheseothermilestonedrivenPOCsthatwecomeforward.SoIthinkthat'sroughlythesamekindofguidancewegaveshareandsomeotherkindsofthingsandwe'veobviouslybuiltthemodelaroundthosesamekindsofassumptionsbutIthinkinthiscasewillwaittoprovidethatatalaterdate.

Oncewegetclosertoalaunchoftheassetin2018.OntheR&DlineorIthinkreallywhatyou'reaskingisarewesocommittedtodelivering50%orgreaterin2020andtheshortanswertothatisyes.We'velookedatitwe'vecarefullylookedatthecommitmentswe'vemadearoundthecompoundedgrowthrateandtherevenueprojectionsaswellastheoperatingmarginprofilethatwecommunicatedlastyearandwe'restillabsolutelycommittedtowhatdeliveringagainstthat.

Operator :

AlecourfaithwithBMOCapitalmarkets.

AlexArf aei(Analyst-BMOCapitalMarkets):

GoodmorningandthankyoufortakingthequestionsRickjustfollowinguponsomeoftheearlierquestionsthestreetisobviouslytakenaissignificantlymorecautiousyourelativetoyourlongtermguidanceparticularlyforHumira.

YouseeanythingchangingandthatnearfuturethatwouldmoreconfidenceinyourlongtermguidanceandIguesswhatI'maskingisbasicallyarewegoingtogothroughthislongdrawnoutprocessorwe'regoingforoneHumirahearingtoanotherordoyouseeapointwhereitbecomesclearthatyoucanholdoffHumirabyUSbyyoubelieveyoucan.Thanks.


Ithinkthere'stwowaystolookatitImeanfirstofallifyoulookattheguidancethatweprovidedbackandIthinkitwasOctober29oflastyear.Andyoulookatwhathappenedtotheconsensusnumberswhatyou'llseeastheyshiftedout.Roughlyayear.

IthinkthemainnounisprobablyifyoulookatwherepeopleareassumingbiosimilarimpactintheUnitedStatesisprobablyinthat2019LarrycorrectmeifI'mwronghere2019timeframealthoughmovedoutfromabout2017to2019.AndI'dsayoneofthethingswetrackistounderstandhowthemarketisproceedingthatguidanceiswetrackwhatourstockperformancehasbeenversusourpeersoverthatperiodoftimeandIsawitjusttheotherdaymadeachangeinthelastcoupledaysalittlebitbutwherethenumberoneperformingstocksincethatpointintime.

SoIthinkitwasaround14%appreciationorsomethinglikethat15%appreciation.IthinkitdidhaveapositiveimpacthavingsaidthatIwouldagreewithyourpointthatthere'sstillthisoverhangandthisoverhangisbuiltarounddifferentcatalystsyouknowaswe'vesaidbeforewegivenalotofclarityinthatreviewofwhatourIPstrategyisandtheconfidencethatwehaveinourIPstrategy.

Howthemarketwillrelatetothatthat'salittleharderformetodescribeorpredictI'dsay.ButcertainlyIthinkasitplaysoutIthinkthemarketwillbasicallystarttobetterunderstandwhatourpositionasandcertainlyasyouhavemoreconfidencearoundthatyouknowIthinkyouwillseethesentimentchange.IthinkthebiggerissueandIthinkRova-TandtheIL23ourtwogoodexamples.Weobviouslyhaveapoint




ofviewofwhatwethink'sgoingtohappen.

Wecommunicatedwiththatpointofviewlookslike.Ithinkit'sveryclearterms.Thatdoesn'tmeanthateverybodybelievesthatpointofview.ButwhenIsayisifyoulookateventhebearcaseonHumirawhichwecertainlydon'tagreewithanyoulookatthispipelinethatwe'venowassembledofassetsthathaveaveryhighprobabilityofsuccessIthinkeveninthemosttheyarecasepossiblemostpeoplelookatthatpipelineandsaytheyshouldbeabletogrowthroughwhateverhappensnowobviouslywehaveadifferentviewofwhatwethink'sgoingtohappen.

ButevenifyoulookatthemodelsI'velookedatthathavetheworst-casebuiltintothemwhenIlookatourpipelineandtheprobabilityofsuccessofthoseassetsIdescribedinmyformalremarksandusethatAdamupinrisk-adjustedbasedonthedatayou'veseenandthecommercialsuccessyouwouldexpectfromthoseassetsIthinkareasonablepersonwoulddrawtheconclusionthatyoucangrowthroughthat.AndIthinkthatultimatelywillbethecalculusthatinvestorsaregoingtohavetomake.

AlexArf aei(Analyst-BMOCapitalMarkets):

Thankyou.


ThanksEllisandthatconcludestoday'sconferencecall.Ifyou'dliketolistentoareplayofthecallpleasevisitourwebsiteatabbvieinvestor.com.Thanksagainforjoiningus.

Operator :

Thatconcludestoday'sconferencethankyouforparticipating.

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