Q3 2022 Abbvie Inc Earnings Call

October 28, 2022

Good morning, and thank you for standing by.

To the Abbvie third quarter 2022 earnings conference call, all participants will be able to listen only until the question and answer portion of this call.

You May ask a question by pressing star one on your phone.

I would now like to introduce MS. Liz Shea Vice President head of Investor Relations.

Good morning, and thanks for joining US also on the call with me today are Rick Gonzalez Chairman of the Board and Chief Executive Officer, Rob, Michael Vice Chairman and President, Jeff Stuart Executive Vice President Chief Commercial Officer, and Tom Hudson Senior Vice President R&D, and Chief Scientific Officer George.

Joining us for the Q&A portion of the call are Carrie Strom Senior Vice President and President Global Allergists static Dot rents senior Vice President and Chief Financial Officer, Neil Gallaher, Vice President development, and Chief Medical Officer, and ruble Soccer, Vice President Global regulatory Affairs.

Before we get started I will note that some statements. We make today may be considered forward looking statements for purposes of the private Securities Litigation Reform Act 1995, 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 the forward looking statements additional information.

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 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 following.

Our prepared remarks, we'll take your questions. So with that I'll now turn the call over to Rick. Thank.

Thank you Liz good morning, everyone and thank you for joining US today I'll briefly comment on our overall performance then Jeff Tom and Rob will review, our third quarter business highlights pipeline progress and financial results in more detail.

And it continues to perform very well a testament to the strength of our broad diversified portfolio I'm, especially pleased with the performance of our immunology assets <unk> and Rainbow, we delivered adjusted earnings per share of $3 66.

<unk> our expectations.

Total net revenues of $14 $8 billion were up five 4% on an operational basis in line with our expectations.

Immunology once again demonstrated impressive results from Sky <unk> and Rainbow now on pace to deliver more than $75 billion in combined sales this year.

Well ahead of our initial expectations.

<unk> is especially encouraging recognizing that we're in the early launch phase for both assets in IBD and PSA as well as <unk> and atopic dermatitis.

<unk> and <unk> have established outstanding launch trajectories across existing and new indications, giving us a high degree of confidence in the collective potential of these two assets to ultimately exceed the peak revenues achieved by Humira, achieving the strategic objective, we had we're replacing humira.

We also saw a continued strong double digit operational sales growth from several additional key products, including botox cosmetic.

<unk> and botox therapeutic.

With strong momentum is helping us offset some of the interim economic pressure, we now see in our <unk> portfolio based on these results we remain confident in the outlook of our business and are reaffirming the midpoint of our full year 2022, EPS guidance at $13 86.

Which represents strong double digit growth.

As many of you are aware, we have a leading consumer facing a <unk> portfolio, which is largely cash pay.

We have been monitoring the global economic situation based on all the data we have been observing especially in the U S with both the consumer confidence index and real personal consumption expenditures trending down and continued high inflation. These factors are putting pressure on consumers' discretionary spend.

This metric correlates with the slowdown in treatment procedures that we're seeing across the aesthetics markets impacting the growth rates for toxins fillers and body contouring.

While our U S aesthetics market share remains stable across both toxins and pillars. We now believe it is prudent to adjust our full year of steady is forecast to reflect the moderating market growth over the near to medium term, which is expected to predominantly impact <unk> as well as our body contouring portfolio.

Products, which represent higher price points for consumers.

It's difficult to predict the duration of these economic dynamics, we expect these conditions to persist into 2023 as consumer confidence improves we would once again expect market growth to accelerate our steady portfolio experienced a rapid and sustained recovery following the 2008.

2009 recession, so we anticipate any impact will be transient.

Over the long term. These stakes business continues to be an extremely attractive underpenetrated market with significant growth potential.

Market dynamics do not change our long term guidance for aesthetics, and we remain confident in our ability to achieve total sales of more than $9 billion in 2029.

I also want to provide a brief update on the outlook for 2023.

With regards to the status of contracting for Humira. Our intent has always been to maintain broad formulary access. So that we can compete effectively with forthcoming biosimilars, we're making very good progress consistent with this objective and are currently projecting formulary access or at least <unk>.

80% of all U S covered lives. We expect this percentage to increase further as we conclude additional contract discussions between now and the end of the year.

As a result, we anticipate strong access for U S. Humira throughout 2023 and project Biosimilars will share access as they become available.

We will provide sales guidance for humira on our fourth quarter call.

Issuing 2023 guidance today. It is important to note than when we issue our EPS outlook, we expect the lower end of the range to represent floor earnings.

So while it's possible 2023 could outperform our guidance regardless of the shape of the erosion curve. We don't anticipate 'twenty 'twenty four earnings will be lower than the initial 2023 EPS guidance, given the momentum and growth from another year of our ex Humira portfolio, which is.

<unk> more than offset any incremental humira erosion in 2024.

We know that many investors have an interest in the timing of Abbvie trough earnings whether that'd be 2023 or 2024.

The guidance range should provide and give investors additional clarity regarding our expectations for the companies for EPS.

In summary.

We continue to deliver strong results and see numerous opportunities for our diverse portfolio to drive long term growth to that end as noted in our news release today, we are announcing a 5% increase in our quarterly cash dividend from $1 41 per share to $1 48 per share.

Beginning with the dividend payable in February 2023, since our inception, we have grown our quarterly dividend by 270% with that I will turn the call over to Jeff for additional comments on our commercial highlights Jeff. Thank.

Thank you Rick we once again demonstrated strong and balanced growth across our therapeutic portfolio this quarter.

I'll start with immunology, where we are well positioned for sustained leadership in this extremely attractive market total immunology revenues were more than $7 6 billion up 16, 4% on an operational basis.

We remain very excited about the long term potential for <unk>, and <unk>, which are already having a significant impact on abbey's growth and performance contributing.

Approximately $2 1 billion in combined sales this quarter, representing nearly 15% of total company net revenues.

<unk> continues to exceed our expectations global revenues were $1 4 billion up 12% on a sequential basis.

In psoriasis <unk> is capturing nearly one out of every two new and switching patients in the U S biologic market with.

With our leading total prescription share increasing to approximately 27%.

We have also achieved total market share leadership in a dozen key international markets, including Japan, Canada and France.

Psoriatic arthritis is ramping very nicely with an expected global sales contribution of approximately $500 million. Just this year. Our PSA performance is especially strong in the U S. Dermatology segment, where we have already achieved 10% total market share.

Lastly, our launch of <unk> for Crohn's disease in the U S is progressing very well.

Early prescription trends as well as feedback from Gastroenterologists has been overwhelmingly positive, especially given sky resist convenient dosing and strong clinical profile.

Importantly, commercial access for Sky Ritchie Crohn's is now equal to psoriasis and PSA with sales in this indication expected to ramp significantly over the next several quarters.

Given the momentum we're seeing across the indications we will be raising our full year sales guidance once again for <unk>.

Turning now to <unk>, which delivered global sales of $695 million demonstrating more than 17% sequential growth.

We continue to see positive momentum in <unk> with total market share increasing to more than 6% in both the U S and across key international geographies.

Global prescriptions are also ramping nicely in PSA ankylosing spondylitis, and non radiographic axial Spa, a testament to the strong clinical profile RIN book has demonstrated across the broader rheumatology segment.

<unk> is now the only JAK inhibitor with global approval for all four major room indications.

In atopic dermatitis, we continue to see strong demand for <unk>, particularly in the second line setting.

U S. In play market share is tracking in line with our expectations and we're making excellent progress internationally with in play share ranging now from approximately 20% to 35% across our major markets.

<unk> remains a highly underpenetrated market globally, and an attractive long term growth opportunity for <unk>.

Lastly in ulcerative colitis, we are very excited by the early prescription trends in the U S. In the second line plus setting <unk> has already achieving the second highest in play share which is now approaching 20% in just a few months post launch.

<unk> have been pleased with <unk> high rates of endoscopic healing as well as the speed of onset with over 70% of bio experienced UC patients currently on or having used TNF therapy. The second line plus opportunity for <unk> in UC is substantial.

This strong adoption in UC. Among Gastroenterologists is also encouraging for RIN bulks potential in Crohn's disease as well we are on track for U S and EMA regulatory decisions in the first half of 2023.

Global Humira sales were approximately $5 6 billion up three 9% on an operational basis with seven 4% growth in the U S. Partially offset by international performance, where revenues were down 16, 8% operationally due to Biosimilar competition.

Turning now to hematologic oncology, where total revenues were $1 $65 billion down nine 9% on an operational basis in.

<unk> Global revenues were approximately $1 1 billion down 17, 4%.

The U S performance continues to be impacted by an incrementally challenging CLO market with new patient starts down approximately 20% relative to pre COVID-19 levels.

Given the U S. CLO market has been consistently lower than our expectation in the past several quarters. We are now reducing our view of the total size of the addressable patient population for this indication going forward.

We also anticipate further share erosion. Following the recent unfavorable change to the end CCN guideline preference for <unk>, and <unk> as well as increasing existing and new competition.

These market and share dynamics are expected to have a flow through impact on <unk> 2023 performance.

I think flex the global sales were $550 million up 11, 3% on an operational basis continued share gains across both approved indications are being partially offset by a softer CLO market in the U S and a higher foreign exchange impact on international revenues as a result, we will be adjust.

Our full year sales guidance for <unk>.

Longer term, we anticipate our oncology portfolio, we will return to growth driven by several promising new products and indications such as.

<unk> map for <unk> and Follicular lymphoma.

<unk>, new indications for multiple myeloma and high risk Mds.

<unk> for Myelofibrosis, and police ov for non squamous non small cell lung cancer.

We are beginning launch preparedness activities for several of these important opportunities and look forward to bringing new treatment options to patients.

In neuroscience revenues were nearly $1 7 billion up.

Up eight 3% on an operational basis.

<unk> once again delivered strong growth.

Sales of $554 million were up 22% on an operational basis, reflecting continued market share momentum.

We continue to anticipate the regulatory approval and the commercial launch of <unk> as an adjunctive treatment for major depressive disorder this quarter.

Which would make <unk> the only anti psychotic as a dual partial agonist approved to treat the most common forms of depression, both bipolar one and adjunctive mbd.

Within migraine are market, leading oral <unk> portfolio contributed $222 million and combined sales this quarter.

<unk> prescriptions increased high single digits sequentially, while total revenues were unfavorably impacted by a one time prior period accrual adjustment of $40 million related to patient access program costs. Excluding this onetime adjustment <unk> sales were up more than 20% versus the prior year.

To lift our revenues nearly doubled sequentially as we continue to make very good progress with commercial access.

Potential label expansion in the U S. As a preventative treatment in patients with chronic migraine and new therapy approvals in Europe represent additional opportunities to support <unk> strong momentum.

Botox therapeutic is also performing very well with total sales of $699 million up 10% on an operational basis in.

In chronic migraine, which accounts for roughly 45% of our therapeutic sales botox remains a foundational prevention of preventative treatment in the clear branded leader for existing as well as new patient starts.

Lastly, our launch preparations are underway for ABVD 95, one a potentially transformative next generation therapy for advanced Parkinsons, we anticipate approval in the first half of next year and believe 90 501 has the potential to achieve peak sales in excess of $1 billion.

So overall I'm very pleased with the momentum across the therapeutic portfolio, which is demonstrating strong revenue growth and with that I'll turn the call over to Tom for additional comments on our R&D programs.

Thank you Jeff.

In the area of immunology, we had several important regulatory milestones since our last earnings call receiving FDA approval for <unk> in non radiographic axial spa and positive <unk> opinion for <unk> in Crohn's disease. These developments demonstrate the continued progress we are making.

With a global indication expansion of our next generation immunology assets.

In the quarter. We also saw a longer term data from our phase II study for <unk> systemic lupus, where strong responses and flare reductions continued through 48 weeks of treatment.

Based on these results we plan to advance <unk> development in this indication and we will be discussing our phase III program with regulatory agencies in the coming months.

Now I'd like to provide a few updates on our earlier stage immunology pipeline.

We recently began a phase two study in ulcerative colitis for our Rip K one inhibitor ABV 668.

This small molecule inhibitor is designed to address chronic inflammatory diseases by preventing necrobiosis and reducing Taylor <unk> driven inflammation.

This could be a differentiated approach that has the potential to provide significantly improved efficacy to patients suffering from ulcerative colitis.

We look forward to providing updates as the data mature.

Turning now to <unk> 105 for our anti TNF steroid conjugate, which is being evaluated in multiple indications. We recently completed the primary analysis for the phase two dose ranging study in <unk> patients.

Our hypothesis for this program was led by delivering the steroid directly to the site of inflammation, you could drive higher rates of efficacy with limited or no effects of systemic steroid exposure.

In this study all doses of $105 four met the primary endpoint of ACR 50, as well as the majority of secondary endpoints at week 12.

At the medium and high doses, one 504 delivered ACR scores that are similar to invoke or slightly better.

This validates the platform's ability to drive high levels of efficacy.

The safety profile for <unk> was generally consistent with the safety profile for <unk>.

As part of our safety assessment in this study, we analyzed the metabolic parameters, including cortisol levels.

The data showed minor decreases in cortisol levels at the higher exposures, which are consistent with evidence of systemic steroid effects.

Given the number of effective therapies available in <unk> and a more limited use of steroids and these patients we do not plan to move forward in development for the <unk> indication.

However, we continue to believe <unk> four has the potential to provide a benefit in other diseases, such as <unk> in Crohn's disease, where steroids use is part of the typical treatment paradigm.

Our exploratory phase II studies in these two indications are ongoing and we expect to see data from the TMR study in 2023 and from the Crohn's study in 2024.

Also in the area of Immunology, we recently made the decision to stop the clinical studies and discontinued development for <unk> 157, our Aurora <unk> inverse agonist. This decision was made due to new findings observed in our preclinical.

<unk> chronic toxicology study.

Moving now to our oncology portfolio, where we continue to make excellent progress across all stages of our pipeline.

We recently submitted our regulatory application in Europe , and our partner Genmab submitted an application in the U S for <unk> in relapsed refractory large b cell lymphoma.

We're seeking accelerated approval based on the positive phase II study results for <unk> in this indication, where we saw very deep and durable responses in these highly refractory patients we expect decisions in both the us and Europe in 2023.

We are also nearing completion of the Registrational studies for two additional key programs.

Our heme portfolio than collector and multiple myeloma and <unk> in myelofibrosis, we remain on track to see results from the phase III Canova trial in relapsed refractory multiple myeloma patients with a <unk> 11, 14 mutation near the end of this year.

Flowing the event driven data readout, we anticipate submitting our regulatory applications in the first half of next year.

For <unk>, we remain on track to see data in the first half of next year from both the phase II refined and the phase III transform one trials results from both studies will be included in our regulatory submissions, which we expect in the second half of 2023.

Moving to neuroscience, where we have applications under active review for several key assets.

We anticipate a decision from the FDA in December for <unk> as an adjunctive treatment for major depressive disorder. We believe <unk> has the potential to be an important new therapy in this patient population.

And we look forward to bringing this new treatment option to patients.

We also expect a decision from the FDA in the first half of next year for ABB <unk> 501, our innovative subcutaneous <unk> delivery system for treatment of advanced Parkinson's disease.

And in the area of migraine, we have regulatory applications under review in both the us and Europe for <unk> as a preventive treatment for patients with chronic migraine with decisions expected in the first half of next year.

If approved this would be another differentiating feature.

<unk> future for <unk> as it would be the only oral <unk>.

Proved for prevention in patients with chronic migraine.

This is a common and debilitating disease that significantly impact quality of life.

Look forward to making this new oral treatment option available to patients once approved.

And in Eyecare.

Our partner <unk> recently announced positive interim data from the phase II 88 dose escalation trial for <unk> for using in office Super Choroidal delivery for the treatment of wet AMD.

<unk> hundred four continues to be well tolerated with no drug related serious adverse events and a meaningful reduction in treatment burden was observed at six months across all dose levels.

Two pivotal trials evaluating <unk> four for wet AMD using sub retinal delivery are active and enrolling patients.

So in summary, we've continued to make significant progress advancing our programs. This year and we look forward to many more important pipeline milestones in the remainder of this year and into 2023.

With that I'll turn the call over to Rob for additional comments on our third quarter performance and financial outlook Rob. Thank.

Thank you Tom <unk> third quarter results demonstrate the strength of our broad portfolio. The continued robust performance from Sky <unk> RIN bulk are helping offset the impact from higher inflation and the stronger U S. Dollar.

Reported adjusted earnings per share of $3 66.

Which is 11 and above our guidance midpoint.

These results include a <unk> <unk> unfavorable impact from acquired IP R&D expense.

Total net revenues were $14 8 billion.

In line with our guidance and up five 4% on an operational basis, excluding a two 1% unfavorable impact from foreign exchange.

The adjusted operating margin ratio was 53, 4% of sales. This includes adjusted gross margin of 85, 4% of sales adjusted R&D investment of 10, 8% of sales.

Wired IP R&D expense of 0.3% of sales and adjusted SG&A expense of 29% of sales.

Net interest expense was $497 million and the adjusted tax rate was 12, 9%.

Turning to our financial outlook, we are narrowing our full year adjusted earnings per share guidance to between $13 84.

And $13 88.

This earnings per share guidance does not include an estimate for acquired IP R&D expense that may be incurred beyond the third quarter.

We now expect net revenues of approximately $58 2 billion, reflecting growth of five 5% on an operational basis.

At current rates, we expect foreign exchange to have a one 9% unfavorable impact on full year sales growth.

Included in this guidance are the following updated assumptions.

We now expect Sky <unk> global sales of approximately $5 1 billion, an increase of $300 million due to strong market share performance.

For <unk>, we now expect global revenue of approximately $2 billion based on a lower market outlook in CLO and unfavorable foreign exchange.

For aesthetics, we now expect global revenue of approximately $5 3 billion.

Given the impact of higher inflation on near term market growth and due to unfavorable foreign exchange.

Moving to the P&L, we now expect adjusted gross margin of approximately 85% of sales and forecast and adjusted operating margin ratio of approximately 52% of sales.

Turning to the fourth quarter, we anticipate net revenues of approximately $15 2 billion at current rates, we expect foreign exchange to have a two 5% unfavorable impact on sales growth.

We expect adjusted earnings per share between $3 65.

And $3 69.

This guidance does not include acquired IP R&D expense that may be incurred in the quarter.

Finally, <unk> strong business performance continues to support our capital allocation priorities.

We generated $17 billion up free cash flow in the first nine months of the year and our cash balance at the end of September was $11 8 billion.

Underscoring our confidence in <unk> long term outlook today, we announced a 5% increase in our quarterly cash dividend beginning with the dividend payable in February 2023.

And we remain on track to achieve $30 billion of cumulative debt paydown by the end of this year, bringing our net leverage ratio to one eight times.

In closing Abbvie strong performance allows us to reaffirm earnings expectations in the face of economic pressure and with our diverse portfolio, we continue to be well positioned to deliver long term growth.

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

Thanks, Rob we will now open the call for questions.

Interest of hearing from as many analysts as possible over the remainder of the call. We ask that you. Please limit your questions to one or two operator, we'll take the first question.

Thank you. Our first question is from Chris Schott from Jpmorgan.

Great. Thanks, so much.

My question is really centered around Humira and I know you appreciate some of the access commentary you made the beginning of the call but are there any surprises so far in these discussions as we think about where either rebates or prices settling out for Humira and I'm really just trying to do my hands around I think previously you've commented you expected U S humira erosion to be down roughly.

45%, plus or minus 10% and I just was wondering if that range holds given what you know today about the negotiations and if I could just real quick follow up second question of immunology.

It was a European Jack update out this morning, and I just was wondering if any impact do you expect to the <unk> franchise for that.

Maybe some context about how relevant I guess Europe was as part of the mix and does that label update kind of impact your outlook at all thanks, So much.

Okay. Chris This is Rick.

Cover part of that question and then I'll have Jeff fill in.

Any additional commentary around the contracting I think first if we talk about the 45% plus or minus <unk> 10.

That is the range that we gave we gave we're obviously working on doing the final forecasting for 2023 as we've said in the past there are two major components, which will play into that forecast. One is how will the biosimilars price that will certainly have some impact we won't know that until we actually get into the market.

And start to see some of that activity, but the other big component is obviously.

Our coverage our access coverage for Humira and the physician that Humira has on those formularies I would say that negotiating by Jeff's team is going very well.

As I mentioned in my comments, we're worried about 80% of all covered lives.

Now.

And I would expect that to rise.

To a level that's.

Above 90, as we move towards the end of the year. Once we have a final number there it will allow us to do the final modeling for 2023.

And that's at the point, where we will be able to refine that 45% plus or minus 10%.

Hey, it's going on track I would say Theres no surprises.

And I would say IPO.

I feel good about how the negotiations are going.

With all of the major managed care organizations and Pbms, Jeff anything you'd add there.

No just to just to confirm Rick that no real surprises in terms of where we've been.

And as we've communicated before our principles of of coexisting over over time with one or more biosimilars seems to be the way that the market will play out and certainly like we saw in Europe that we had the principle of for patient continuity to.

To concede pricing to maintain that patient access so so Chris no no major surprises that we've seen so far.

You want to talk about <unk>.

Yes, maybe I'll win ruble and talk about perhaps maybe maybe rupel you could address the procedure and where we are in the procedure and then I'll cover the commercial.

Thanks, Jeff I'll give some context.

So the next step here after <unk> would be moving to the <unk> here in November and then the European Commission.

To finalize this so we expect December or January .

So crack completed their review and what we see in the labeling of the update in warnings and this is related to outcomes of the oral surveillance study.

And in particular in section four four which is the warnings. There is a list of subgroups that were found to be at risk based on analysis from oil surveillance for example patients greater than equal to the age of 65, those that are at risk for cardiac events.

Smokers for example, and in these patients.

Use of JAK inhibitors would be after a consideration of other therapies, if im paraphrasing if no suitable alternatives. So this is consistent with the practice of medicine and provide specific guidance and we would say.

Pragmatic at this stage.

Yeah, and Chris to that point.

This is largely consistent with what we what we see from oral surveillance and the Xeljanz label, which is widely sort of understood by the by the European.

Physicians and so to cut to the quick we don't anticipate a material impact.

As this continues through the process.

Thanks, Chris.

Operator next question. Please. Thank you. Our next question is from Tim Anderson from Wolfe Research.

Thank you.

Hi.

I was under the impression that we'd get more granularity on humira erosion.

This quarter.

Youre, saying thats really going to come in Q4, So I'm wondering did I kind of not here right before.

Or did something change.

And then second question is just on contracting in general.

My understanding is that payer contracts.

They are really not rock solid as they can be reopened when there is a change in the marketplace.

Things like pricing and this case of Biosimilars. So when we do kind of get.

Whatever the next level of guidance, we get from you isn't that going to continue to remain fluid.

Market dynamics won't all play out as of January we will get to mid next year Youll get more entrance youll know pricing better and that sort of thing.

Thank you.

Yes, Tim this is Rick I'll cover that one.

So I think we've talked a number of times.

On these calls about what we would project in the third quarter call and I believe what we said is that we would ultimately provide you an update on where we were in the process.

And so that's what we've attempted to do you can't I can't give you a number for 2023 until I know what the total access is and not all of those contracts are done yet.

They are proceeding well.

We feel good about that but until.

No. The contract is solid and we know what that access looks like we can't give you an accurate projection and I understand the desire.

By the investment community to understand what that number is but I think you can probably also understand that we wanted to give you. The most accurate number that we can give you and we don't want to give you a number that's not accurate.

And so it is going to require us until we get.

For the fourth quarter call to provide that for you.

You are correct in a sense about the way you described how these contracts work.

They can be reopened at some point in time.

I wouldn't say, that's that's all that common usually in particular I'd say around this kind of a situation you're going to anticipate what you think is going to happen in the second half of the year and try to position the contract in a way that it can ultimately deal with those changes going forward, but.

You are correct to say that they could reopen on contract if they chose to do that.

There are various kinds of contracts that we use in some cases.

There are.

Penalties repercussions that wed have to come into the consideration if a contract got reopened at some point in time.

They're not all like that but many of our like that so.

It varies.

And.

I'd say generally speaking your concept is valid, but I would say, it's probably a little less fluid than the way you necessarily described it particularly in this environment, where we know there will be a number of biosimilars coming in.

Anticipated, we built the contracts around that set of assumptions.

No I think Tim Rick described it in the right way, while there are typically.

They are typically out clauses based on timing or other dynamics.

One of the considerations as obviously as we've highlighted before.

The biosimilars are going to be coming in the second half of the year. So.

To some degree.

That actually limits if it was a rare case and they typically are rare where a contract is blown up are renegotiated in the middle of the year.

That length of time, that's left in 2003 for some of those payers to let's take a negative action.

Put some some natural constraint on them in terms of when they with time that out, but Rick highlighted it very very nicely in terms of.

The dynamics.

Thanks, Tim Operator next question please.

And our next question comes from Mohit Bansal from Wells Fargo.

Great. Thanks for taking my question.

Maybe one more question on the contracting side.

Can you help us understand if the pricing part of the contracts.

It's something that you have a good handle on this.

At this point.

And then a follow up question is that how do you think about the cadence of BD activity. Once you hit the model less than two times leverage by the end of the year. Thank you.

Jeff you want to cover that yeah. So look in terms of.

What Rick had highlighted in terms of our confidence in projecting the 80%.

Obviously theres a couple components to that so we have.

While all of the contracts aren't fully complete with the ones that we've done we've done some significant modeling work to understand if we're retaining the ability to stay on the formulary.

He would model or.

Our volume like how much would we retained versus would go to one or more biosimilars, that's something that we can understand and we have made.

Base case, both first half and second half pricing assumptions based on those contracts now what's been highlighted in the last couple of questions is there is still uncertainty on the rest of.

The rest of the contracts that are yet to Ben.

Secured.

And also a bit on that second half price dynamics. So those are the elements that are going to give us more confidence as we go to the fourth quarter call to give.

Everyone have secure number for next year.

This is this is Rick I'll cover your business development question.

I think if I step back and look at where are we today, we have been for the last several years operating with.

On our approach.

Roughly $2 billion to add incremental pieces to the business.

Effectively use that over the last several years to be able to build some additional particularly I'd say early stage pipeline.

Assets of the company.

We're continuing on that same approach right now now having said that.

We obviously have paid down debt very rapidly.

We will.

We will be in a position where if we chose to do something we could do something.

I'd say, if I look at the business today and I look at how it's performing around the expectations that we had for the business going forward.

I'd say theres no need for us to be able to do anything in that area and.

I would go back to the original premise of what we described to the investment community of what we believed would happen when biosimilars enter the U S market for Humira. What we said was that we believe the bulk of the erosion would occur in 2023.

Some additional erosion in 2024, and 25 and beyond we would return to significant growth, we'd be able to deliver high single digit growth from that point forward through the end of the decade, that's what we said.

Everything I know about the business today would suggest to me that we are able to do just that and we're confident that we're able to do that with the portfolio, we have and the late stage pipeline and additional indications that we have coming forward, having said that I can also tell you that over the last 10 years, we've demonstrated to ourselves and hopefully to you that.

We can acquire businesses and assets and we can integrate those and we can successfully drive those and so if we found something that we thought was very important to add to the business. We certainly have the financial wherewithal and this business has tremendous cash flow, we could do that.

I can tell you we don't see that right now so.

We didn't assume that and the other thing I'd point out is as an example, the most important thing and I know everyone is focused on what that erosion curve is going to look like including us to be honest, but I don't know why but.

Probably the single most important thing for us going forward to hit what I described to you a moment ago is that underlying non humira business growing at a rate that it can drive those expectations.

<unk>.

And that's key and I would say Theres two factors that are most important around that the first is that sky Ritchie and rainbow grow fast enough that they can more than offset that they can essentially grow through all of the erosion that occurs on humira and deliver incremental performance above.

Above and beyond that.

And I.

I feel highly confident in that I mean, when you can look at the trajectory of those assets now in the early phase we're in right now in IBD and PSA.

I would say I have.

I have a very high level of confidence that they will perform.

At that level or well above that level and then the second thing is all the other growth assets.

They have to be growing fast enough that they can get us to be able to grow at that rate that I described and if you take this quarter as an example, and you look at the business without Humira.

The underlying growth of about six 5% and remember that six 5% is absorbing the economic impact we see in these studies business and the market and competitive dynamics that we see in Bluebird.

That tells you that underlying growth is pretty strong.

And so I think those are the important things that investors have to focus on and the erosion curve is certainly one of those and I'm sensitive to the fact that you want to know when youre going to hit trough earnings and I recognize that and that's why we wanted to provide you. Some assurance of what that trough earnings is going to look like.

Thanks Mohit.

Operator next question. Please. Thank you. Our next question comes from Terence Flynn from Morgan Stanley .

Hi, Thanks for taking the questions maybe two for me.

Rick I appreciate your comments on 2023, and the aesthetics business I know you don't want to give guidance, but I guess at a high level do you think you can grow that franchise next year versus this year and then on <unk>, Kurt and Matt Congratulations on the filing there just wondering what you're expecting regarding their <unk>.

<unk> for inpatient administration J&J recently got approval of their bio specific in myeloma and it looks like there is a requirement there for inpatient administration of the drug during the stub period. So just wondering how we should think about inpatient versus outpatient dosing of <unk>. Thank you.

Okay excellent thanks, Jeremy I'll cover the first one.

So if I look at the aesthetics business, we're clearly seeing this economic pressure in the U S.

Sure.

And I would expect that we will see that to continue into 2023, certainly its difficult to predict what will happen in the U S will it get worse, where we go into a recession, we'll have to see.

Pay about the same I would say we're looking at this extremely carefully.

Good news right now I would say is that the factors that we're looking at that seem to be driving this consumer confidence and behavior.

The most in the U S appear to have stabilized at the levels that they're at.

And so I would say that that's a positive thing now it's fluid because obviously if the economic situation got worse in the U S. I guess is it would trend down again.

And.

So but at least it appears right now that they've stabilized and maybe even ticked up just a little bit.

They moved in a positive direction, just a little bit.

I think it's very difficult to predict here's what I would assume I would assume that a significant part of 'twenty. Three we will have an impact on it now also recognize that we saw this phenomenon as we said in the last call start in May we werent sure at the time, whether it was the summer season, starting in <unk>.

<unk> early or it was the economic impact as we had been watching the indicators and they trend down several months ahead of that but we didn't see an impact until the month of may.

So the point is when we hit May and beyond we're going to be lapping the impact so the negative impact will be softened on the business. So we will return to better growth rates no matter, what just mathematically right.

So, but I think the best prediction when we can have.

It's going to have an impact and a good part of 'twenty three.

I think it's the best way for us to think about it again.

Again, the rest of the business has an opportunity to be able to offset that as we saw in this quarter.

And this is Rob I would just add that as you think about more long term. If you think about what happened in <unk>.

The business declined high single digits, and then we saw after that very robust growth in the mid teens for the next decade. So given that penetration rates are still very low today theres clearly ample opportunity to grow this market I think once you get on the other side of the economic impact, which we expect to be transient we still expect businesses to deliver long term growth as Rick highlighted earlier.

<unk>, we're still on track for that long term high single digit growth getting to greater than $9 billion by 2029. So we'll have to navigate obviously the short term economic impact, but we still have tremendous confidence in the long term outlook for aesthetics.

Hey, This is Neal got her I'll take the <unk> question.

So the first thing I just want to caution.

But a word of caution before I answer your question directly around inpatient stay which is that the patient population.

That.

Our competitor studied with the Bcm ACD is quite different in terms of overall benefit risk. So the indication that was granted was in fifth line plus multiple myeloma, which is a very.

Heavily pretreated and frail population so to extrapolate any interpretation of benefit risk from that population into the relapsed refractory <unk> population.

We have studied and file for without credit amount would not be valid. So just a word of caution there.

Said the study that we have filed.

<unk> requirement for 24 hour patient staying overnight.

The next day, however, and subsequent.

Studies, we are.

Aiming to removed out requirements that patients would not require be required to remain overnight and we do believe because of the emergence and stable overall benefit risk for up current amount a couple of things that we believe that it has the potential to be best in class. We also believes that our strategy to remove overnight stays.

Is a very valid one.

Unreasonable want to pursue.

Hope that answer your question.

Thanks, Terence operator next question please.

Our next question is from Andrew Baum from Citigroup Global.

Paul.

Couple of questions.

<unk>.

Improved imus.

Assuming that agreement is going to be included in the top 10, CMS Smiths full price negotiation under Medicare next year I'm, assuming that's correct.

Think about the impact on net pricing for Zika.

Do you anticipate pricing net pricing coming under pressure profit.

26, given the contracting.

<unk> take place among your competitors to secure formulary positions given that catastrophic coverage betting on Pbms post the IRA implementation. So is the impact can it get put forward for the costs, including <unk>.

<unk> before you actually got the price cut coming and then second.

With at correct Matt.

There's been some interesting data on the importance of profound b cell depletion and Luc pets using copy assets.

At <unk> by specific.

Could get a similar level I'm wondering whether you have interest in.

Pivoting at career to map and exploring some refractory lupus is one of your competitors were already years, particularly given you have a sub Q administration, which obviously has some advantages.

Yeah, Hi, Andrew It's Jeff I'll take your I'll take your first question.

So when we obviously, we're still studying very carefully the IRR.

And.

We're also discussing directly with CMS not just through pharma, but our own company in terms of how they're going to basically select.

The different drugs that will be negotiated and thats a little bit unclear at this point, it's not unreasonable based on the size of improve OCA to suspect it will be one of the earlier drugs that could potentially be negotiated so just to just to clear that.

In terms of what May take place before that potential negotiation in 2026, I would expect to see some modest.

Some modest changes and Rebating, we see very small levels at this point now, but we do have a third competitor coming.

So that would be something that we would continue to plan to plan for as we as we move into that potential potential event.

Hi, This is Tom maybe I'll answer the Lucas question first I'll say, it's actually.

It was very exciting to see that paper showing that b cell depletion can actually put patients with very severe lupus in remission is a very small study.

Some five patients.

One is looking at this.

Even with the surprise because we used to think we'd have to affect many mechanisms themselves in lupus. So that was one of the reasons. It's so difficult.

I used to be part of the Lucas connection in Montreal, So I know the houses with patients.

We're looking at right now is we're asking yes. The answer to your question is can we use our existing assets and collaborations to.

To see if we can do b cell depletion.

As far as a treatment for lupus the answer is yes.

The type of questions. We're asking ourselves is do we have to have as deeper depletion as we have with in heme malignancies, nobody knows the answer that might be important because if you have to have a very deep depletion.

It might be restricted more to more severe patients and again that would be an advantage, but if we want to go to all lupus patients because not all lupus patients are our flaring all the time. The majority have have a normal life go to a clinic once a year and just see the physicians when they have players so.

<unk> to a very very deep.

Regimen for B cell depletion might be deemed too.

Two two severe so the question is yes, we're looking at it and trying to figure out what's the right regimen and how to approach that and.

<unk> is very exciting questions, which were obviously looking into.

Thanks, Andrew Operator next question please.

Our next question comes from Steve Scala from Cowen.

Thank you what is your level of confidence and a positive outcome for <unk> in Mds at the end of the year I imagine the review is well along so you probably have good visibility. So for instance, our labeling discussions underway as the sales force being trained et cetera.

This is a very large opportunity that does not seem to be a point of external focus as far as I can tell so I'm wondering what you could tell us about how things are going thank you.

Hi, it's rupal. Thanks for the question, maybe I'll go and then Jeff can talk about the opportunity.

You are correct. The review is proceeding per our expectations.

We have two positive studies in this space, we recall we also have.

The same endpoint the depression endpoint, that's read out in three other bipolar depression studies that are already within label.

So theres quite a bit of evidence thats already been generated that's in front of the agency now so I would say is proceeding well and we still anticipate a decision by year end.

I'll pass it to Jeff, Yes, Steve and just in terms of your sales force question. I mean, we are very encouraged and excited about this potential approval I mean, obviously, we continue to gain share week by week sequentially for our base indication in the <unk>.

Bipolar indications.

And we know that based on the profile that we have with <unk>. So very very strong efficacy proven efficacy are very good tolerability profile for an anti psychotic no material weight gain low metabolic effects and I think importantly, and maybe not as appreciated theres no titration you have a very simple starting dose.

<unk> of $1 five milligrams. So as we do our research we see that that profile is very strong as this potential add on therapy in depression.

In the last decade, there has been only one drug that's been approved for this indication and that's <unk> and we think that's a branded drug obviously and we think we can compete very very well. So we have a big existing sales force and infrastructure. We are gearing up in terms of training we have the established relationships across the.

<unk> primary care doctors as well as a psychiatrist.

So we are we agree with your approach that's a meaningful a meaningful commercial opportunity that could evolve very quickly here once we get the approval.

Thanks, Steve Operator next question please.

Thank you. Our next question is from Gary Nachman from BMO capital markets.

Thanks, Good morning.

First could you just provide some more color on how much of a benefit youre seeing for <unk> in IBD as you've been spending more time with the Gis and have your outlooks changed on the potential there.

Major contributors to the long term growth for those franchises. So both of those being used in the treatment paradigms.

For the respective indications in Crohn's and ulcerative colitis. So that's one.

And then secondly, just opex came in much lower than we expected. So you seem to be getting better operating leverage than what you. Originally guided are there areas, where you have scaled back in spending whether in aesthetics or haemonchus. There is pressures there and how will you be thinking about that into the Humira <unk>.

So how much additional flexibility might you have on the spending side.

Yes, I will.

Take the IBD question.

I think we've mentioned before the IBD, it's been a very important part of our long range plan and when we gave that the 2025 guidance it looks relatively small because they're just ramping now.

I would say that as <unk>.

Abbvie. We are we're very very encouraged as I mentioned in my prepared remarks on the launch and maybe I'll start with what we're hearing from the Gastroenterologists I think first as they they look at both assets and the global guidelines the impressions and the clinical approach that we hear from the from the top leader.

And also the.

The community Gastro is this idea over I have to start to think about endoscopic healing higher basically rates of efficacy and more significant clarity on what it's doing in the bowel versus just symptoms and that seems straightforward, but we see the market moving very very fast there in.

Terms of understanding and Thats, what we can deliver whether it's this guy Ritchie data on the endoscopic healing rates with a very very convenient and strong safety profile or similar on the <unk> side in second line in the U S second line for.

For patients that aren't doing well and you see so we see rapid adoption already as I mentioned that in the RIN vote in the United States will be a second line plus based on the label and we see very very fast adoption I will give you some color on it.

Xeljanz had been approved and is approved and you see in the United States.

But basically it had very low adoption, we're seeing now in the community that 70% of the prescriptions are coming from physicians that have never written a Jack before so it shows you that the clinical profile of <unk> in terms of its speed and the depth of the response is being viewed very very well so not only is that encouraged.

<unk> for invoke you see as I mentioned, we're going to have the approval for Crohn's for RIN book in later lines next year as well Scott.

<unk>.

Continues to surprise.

Surprise us to the upside as <unk> heard from the call today.

This is viewed increasingly as the preferred frontline drug coming straight out of the gate for Crohn's in the U S.

And the qualitative.

Qualitative data that we're starting to see and we are seeing some quantitative data that looks very strong too is that this is viewed as a already is a best in class product for Crohn's, which is a very very substantial market. So we are very encouraged that we continue to say that the IBD is probably underappreciated and will continue to give up.

<unk> is these launches progress.

So Gary this is Rob I'll take your question on Opex. If you look at the benefit we're seeing about half of it is actually coming from the stronger U S. Dollar. So it's more of an FX impact. The other half is spend productivity, we always look for opportunities to drive productivity in our spend it's not so much about scaling back in parts of the business, we always look for ways to spend better by better and ultimately that helps us in any case.

Also over the long term redeploy that investment to drive growth as you think about 'twenty three.

Given that 46% to 47% operating margin directional input I've also said, we're not going to cut back investment will obviously be prudent.

Given that you will see a decline in gross margins next year, but we're not going to be cutting back investment because we expect to return to growth quickly so youll see us.

Not necessary, a cutback, but certainly put more behind this business to drive that long term growth and do you expect to be industry, leading over the long term.

Thanks, Gary Operator next question please.

And our next question comes from Colin Bristow from UBS.

Hey, good morning, Thanks for taking the questions. So first on CFS, you recently posted an update to Glen Charles Youre, New to correct based regimen.

Just wondering if you could walk us through what gives you confidence that this has a higher probability of success since your last iteration and then second one for Rick.

I just wanted to touch base on your obsession in an increasingly.

A key topic with investors you've been the architect of <unk>.

Infection, and so just wanted to confirm specifically how long do you expect to stay in the sea and then how should we think about the timelines around the process of identifying a successor.

Thank you.

This is Tom I'll answer the CF question again, this is very challenging to actually make that abnormal CF protein.

Get to the memory and enact.

Alright channel and it takes three different drugs to make it effectively to get it to the cell membrane and opened up in the right way.

And so we felt that we had and takes we call them correctly <unk> corrected to potentiate or these three different compounds. We always see good results with double Ara C. One character, we think is best in class or potentially theres very good what we have had difficulties to get a good situ collector.

And what I presented earlier this year was that it wasn't good enough, but what we've done. Since then we will continue to look at better ones and we came out with differentiated product 576, which is structurally different and.

The data supports higher safety margin higher exposures, good PK, hopefully a single pill.

And then we'd be able to get to this too.

We were able to have this triplet, which is really important to be competitive. So again, our doublet data. We had was very it was.

It was very strong, but we need that third piece in that third piece seems to be coming down really well, that's what we really saw.

On the website at <unk> Dot Gov is moving to evaluate this triple combo with our UC two corrector.

And this is Rick on the.

On the succession question.

Say that we obviously have a very experienced.

Board.

And we've had an active approach on succession.

Going back to about 2016 2017.

And.

And that process has proceeded extremely well and developing.

Internal candidates.

Two ultimately assumed the role when when I do retire.

I can tell you that there are no plans at all for me to retire in 2023.

The most important thing to me and to the board is to make sure that the business is performing exactly as we expect going forward and we're not going to make any transition until.

We've gone through the Biosimilar event, and we're confident in the performance of the overall business.

That would be the appropriate time once we're confident to make a transition at that point also.

Discussions with the board of what that transition would look like.

And assuming it's an internal candidate.

The transition will essentially where we will name a new CEO .

And at that point I will assume the role of executive chair.

For a period of time thereafter.

So I think we have a well thought out succession approach I feel very comfortable with the approach I feel comfortable with.

The work we're doing to develop.

Internal candidates.

<unk>.

I think.

The transition went into curves I think will go smoothly and be successful so hopefully that answers your question.

Thanks, Colin Operator next question please.

Thank you. Our next question comes from Chris <unk> from Goldman Sachs.

Chris are you there we can't hear you.

Please check your mute feature.

Yes, apologies two questions. If I may on Rainbow you had previously commented that you were seeing some use in the first line setting can you update us at all with any color there.

<unk>, obviously, a very attractive market and an opportunity in crohn's disease can you share with us how youre thinking about the potential impact given the low in 2023 of our major branded players to Laura Thank you.

Chris It's Jeff just to clarify in terms of your Rainbow question was there a specific question related to a certain indication on the frontline or I'm not sure I fully appreciate that.

Yes.

<unk>.

Okay right so.

Yes, we do see we do see frontline use across the globe and even in the U S and what we're seeing is now as I mentioned in my remarks, we're seeing in line in play share which is in the high mid teens right now in the U S and it's higher in the international markets. So there seems to be as we look to the research.

And we look to our market end market performance. There is really two segments of dermatologists, there's very cautious dermatologists that are slow to adopt jacks and typically they will start in the in the in the later line of second line plus there is an emerging cohort of of a significant group of dermatologists it well that basically are looking.

At the underlying high efficacy parameters, so basically like the easy 90 skin clearance and almost no discernible ish for the product. They typically are starting to use more and more in the frontline. So the overall balance is leaning towards the second line, but we do see increasing frontline utilization based on the profile of the drug.

<unk> in atopic dermatitis.

In terms of the Sky Rosy.

For Crohn's, we think we're very very well positioned for a couple of a couple of reasons. One is the overall profile of the medicine is is really exceptional as I've highlighted and we're going to see very very rapid adoption. Both in the U S and the external market. In addition, we have anticipated this to lora low.

We see that we have an ongoing head to head trial versus to Laura to make sure that we can continue to differentiate.

With direct direct data that will come over the next year or so so we are anticipating that and we think we have a good setup to maintain the early momentum that we're seeing with sky rosy.

Thanks, Chris.

Next question please.

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

Hey, guys. Thanks, so much for taking the question I just had one quick one youll break lots of questions on Humira for next year.

Want to ask at a high level on the environment beyond that I know there are formal treatment guidelines and ini, but whats the risk that payers mandate cycling through one or more biosimilars.

And what's the risk that the pricing environment doesn't really recover.

<unk> 24, and beyond just obviously, you're thinking about the Scott <unk> Rainbow franchises over the long term. Thank you.

So I'm actually going to have Jeff walk you through that he is probably the closest to that environment.

Yes so.

Thank you for the thank you for the question I mean, one of the things that we see certainly in the near term is that the.

The formularies and ini are actually expanding so many years ago you might have.

Six or seven preferred agents.

<unk>.

The payers are now requesting sometimes up to 11 or 12 preferred agents. So youre seeing an expansive nature in the short term now as you go forward, maybe middle of the decade, or later, where you have more and more biosimilars could the U S environment move towards sort of a step through I mean, it's possible but.

We have again as I'd.

Mentioned in my last statement, we have anticipated that with the right types of data the trials.

We have five head to head studies in <unk> in psoriasis, we have more coming in Crohn's and so we think that basically we have a data driven approach that's going to continue to allow us to cigna.

Significantly differentiate our products.

The other dynamic that we watch very carefully and we talked about this during the immunology Investor day is the lines of therapy, as there's more and more high high efficacy products that get.

Introduced continue to expand so in the middle of the decade or longer the second plus in the third line.

Markets are going to be very very significant at that point. So when we put all of that into the calculus. We feel again, we have a pretty strong set up for for the middle of the decade and longer.

This is Rick.

I agree with everything Jeff said, the one thing I would add that as you think about even under a scenario, where if we did get to some kind of a step edit.

Yes, you have to go back and remember that most of these mechanisms.

Most patients fail and they fail at a relatively high level.

And over a relatively short period of time.

You have to rotate through.

Youre going to get into second line relatively quickly and recycling somebody back through another TNF typically doesn't work very well for those patients and I'd say the demand now which kind of agents that we have on the market now and the level of our mission that they can create the demand among physicians as much high.

To get patients into remission as rapidly as they possibly can and so I think all of those dynamics tell us that this model should continue to work over the long haul.

Thanks, Jeff I believe we have taken all the questions in the queue. So that concludes today's conference call, if you'd like to listen to a replay of the call. Please visit our website at investors Dot Abbvie dot com. Thanks again for joining us.

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

[music].

Good morning, and thanks for joining US also on the call with me today are reconciling chairman of the board and Chief Executive Officer, Rob, Michael Vice Chairman and President, Jeff Stuart Executive Vice President Chief Commercial Officer, and Tom Hudson Senior Vice President R&D and Chief Scientific Officer.

Joining us for the Q&A portion of the call are Carrie Strom Senior Vice President and President Global Allergists that it got rents senior Vice President and Chief Financial Officer, Neil Gallagher, Vice President development, and Chief Medical Officer, and ruble soccer.

President Global regulatory affairs.

Before we get started I'll note that some statements. We make today may be considered forward looking statements for purposes of the private Securities Litigation Reform Act of 1995.

The cautions that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward looking statements.

Information about these risks and uncertainties is included in our SEC filings.

Following our prepared remarks, we'll take your questions.

That I will now turn the call over to Rick.

Thank you Liz and good morning, everyone and thank you for joining US today I'll briefly comment on our overall performance then Jeff Tom and Rob will review, our third quarter business highlights pipeline progress and financial results in more detail.

And it continues to perform very well a testament to the strength of our broad diversified portfolio.

Specially pleased with the performance of our immunology assets <unk> and Rainbow.

We delivered adjusted earnings per share of $3 66.

Exceeding our expectations.

Total net revenues of $14 $8 billion were up five 4% on an operational basis in line with our expectations.

Immunology once again demonstrated impressive results from Skype <unk> and RIN vote now on pace to deliver more than $75 billion in combined sales this year.

Well ahead of our initial expectations.

<unk> is especially encouraging recognizing that we're in the early launch phase for both assets and IBD and PSA as well as Rainbow and atopic dermatitis.

Sky, Regina and window and have established.

<unk> outstanding launch trajectories across existing and new indications.

<unk> is a high degree of confidence in the collective potential for these two assets to ultimately exceed the peak revenues achieved by Humira, achieving the strategic objective, we had for replacing Humira.

We also saw a continued strong double digit operational sales growth from several additional key products, including botox cosmetic.

<unk>.

And botox therapeutic <unk>.

This strong momentum is helping us offset some of the interim economic pressure, we now see in our <unk> portfolio.

Based on these results we remain confident in the outlook of our business and are reaffirming the midpoint of our full year 2022, EPS guidance at $13 86.

Which represents strong double digit growth.

As many of you are aware, we have a leading consumer facing a static portfolio, which is largely cash pay.

This metric correlates with the slowdown in treatment procedures that we're seeing across the aesthetics markets impacting the growth rates for toxins fillers and body contouring.

Products, which represent higher price points for consumers.

While it's difficult to predict the duration of these economic dynamics, we expect these conditions to persist into 2023 and as consumer confidence improves we would once again expect market growth to accelerate our steady portfolio experienced a rapid and sustained recovery following the 2008.

2009 recession, so we anticipate any impact will be transient.

Over the long term. These stakes business continues to be an extremely attractive underpenetrated market with significant growth potential the current market dynamics do not change our long term guidance for aesthetics, and we remain confident in our ability to achieve total sales of more than $9 billion in 2029.

I also want to provide a brief update on the outlook for 2023.

80% of all U S covered lives. We expect this percentage to increase further as we conclude additional contract discussions between now and the end of the year.

As a result, we anticipate strong access for U S. Humira throughout 2023 and project Biosimilars will share access as they become available.

We will provide sales guidance for humira on our fourth quarter call.

While we are not issuing 2023 guidance today. It is important to note than when we issue our EPS outlook, we expect the lower end of the range to represent floor earnings.

So while it's possible 2023 could outperform our guidance regardless of the shape of the erosion curve. We don't anticipate 2024 earnings will be lower than the initial 2023 EPS guidance, given the momentum and growth from another year of our ex Humira portfolio, which is.

<unk> more than offset any incremental humira erosion in 2024.

We know that many investors have an interest in the timing of abbey's trough earnings whether that would be 2023 or 2024.

The guidance range will truly provide and give investors additional clarity regarding our expectations for the companies for EPS.

In summary.

Thank you Rick we once again demonstrated strong and balanced growth across our therapeutic portfolio this quarter.

We remain very excited about the long term potential for <unk>, and <unk>, which are already having a significant impact on abbey's growth and performance contributing.

Approximately $2 $1 billion in combined sales this quarter, representing nearly 15% of total company net revenues.

<unk> continues to exceed our expectations global revenues were $1 4 billion up 12% on a sequential basis.

In psoriasis Sky Ritchie is capturing nearly one out of every two new and switching patients in the U S biologic market with.