Richard Gonzalez – Chairman, Chief Executive Officer William Chase – Executive Vice President, Chief Financial Officer Scott Brun – Vice President, Clinical Development Larry Peepo – Vice President, Investor Relations.

Steve Scala – Cowen & Co. Jami Rubin – Goldman Sachs Jeff Holford – Jefferies David Risinger – Morgan Stanley Chris Schott – JP Morgan Vamil Divan – Credit Suisse Alex Arfaei – BMO Capital Colin Bristow – Bank of America Merrill Lynch Mark Goodman – UBS.

Good morning and thank you for standing by. Welcome to the AbbVie First Quarter 2014 Earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question by pressing the star, one key on your touchtone phone.

Should you become disconnected throughout this conference call, please dial 1-877-934-8565 and reference the AbbVie call. This call is being recorded by AbbVie. With the exception of any participants’ questions asked during the question and answer session, the entire call including the question and answer session is material copyrighted by AbbVie.

It cannot be recorded or rebroadcast with AbbVie’s express written permission. I would now like to introduce Mr. Larry Peepo, Vice President of Investor Relations. .

Good morning and thanks for joining us. Also on the call with me today are Rick Gonzalez, Chairman of the Board and Chief Executive Officer, and Bill Chase, Executive Vice President of Finance and Chief Financial Officer.

Joining us for the Q&A portion of the call are Laura Schumacher, Executive Vice President, Business Development, External Affairs and General Counsel; and Scott Brun, Vice President of Clinical Development.

Rick will begin by discussing AbbVie’s results from the first quarter and then provide an update on our pipeline and some of the key milestones we expect this year. Bill will give a more detailed review of our quarterly performance and then provide an overview of our 2014 outlook. Following our comments, we’ll take your questions.

Before we get started, I remind you that some statements we make today may be considered forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.

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

Additional information about the factors that may affect AbbVie’s operations is included in our 2013 annual report on Form 10-K and in our other SEC filings. AbbVie undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

On today’s conference call as in the past, non-GAAP financial measures will be used to help investors understand AbbVie’s ongoing business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings release and regulatory filings from today, which can be found on our website.

With that, I’ll now turn the call over to Rick..

Thank you, Larry. Good morning everyone, and thank you for joining us for our first quarter 2014 earnings conference call. Today, we’re pleased to report strong results with adjusted earnings per share of $0.71, exceeding our guidance range for the quarter. This included strong operational sales growth also ahead of our outlook for the quarter.

We delivered this performance with strong growth across a number of products in our portfolio, including Humira, Synagis, Synthroid, and Creon. Our performance this quarter illustrates our ability to grow our business despite the impact of generic competition.

It also provides confidence in our ability to deliver meaningful sales and EPS growth starting next year as we launch our HCV therapy. In 2014, our focus remains on continued strong commercial and operational execution as well as pipeline advancement.

Today, I’ll briefly discuss our first quarter performance and provide an update on our pipeline and some of the key milestones we expect to occur throughout the year. Then I’ll turn the call over to Bill, who will provide you additional detail on our performance and our second quarter outlook.

Our first quarter performance was led by Humira, which delivered more than 18% global operational growth. We continue to see increasing penetration across therapeutic categories and geographies which is driving strong market growth. Additionally, Humira continues to gain market share across segments.

Humira is off to a strong start and we’re well on our way to achieving our sales growth outlook. Beyond Humira, we also saw a strong performance from other products in our portfolio, including Creon, Synthroid, Synagis, and Sevoflurane. We continue to be pleased with the performance of these durable and growing brands.

In addition to our strong commercial performance in the quarter, we also made significant progress advancing our pipeline. So far in 2014, we have achieved a number of key regulatory and clinical objectives. This includes an important milestone for our interferon-free HCV combination.

As you may have seen, earlier this week we announced the submission of our U.S. regulatory application for HCV therapy for genotype 1 patients. Our European regulatory application will occur in early May based on specific dates allowed for submitting applications to the CHMP. In anticipation of U.S.

commercialization in late 2014 and European approval in early 2015, we’ve continued to make good progress in building the appropriate infrastructure. Detailed results from several of our Phase III registrational studies were recently presented at EASL and published in the New England Journal of Medicine.

The comprehensive body of data demonstrates that our combination provides high rates of cure across genotype 1 populations, including difficult-to-treat patients.

As we evaluate the HCV market and consider which patients which likely be treated in 2015 to 2017 time frame, we believe the most advanced patients – those with cirrhosis, fibrosis, and patients who have previously failed treatment – will be treated sooner.

This view is consistent with feedback we’ve received from payor organizations and physicians around the world, and based on the high level of efficacy demonstrated by our therapy in these difficult-to-treat patients, we believe we’re well positioned for success in this market.

Further, because we’ve conducted independent studies across specific genotype 1 patient populations, we’re able to characterize the performance in each patient type with a very high degree of confidence and we believe this will be an important point of differentiation.

During the quarter, we also presented results from our mid-stage HCV trials in Japan as well as initial data on our next-generation HCV assets. Given patient characteristics and the prevalence of genotype 1b in Japan, we are evaluating a 12-week 2daa once daily ribavirin-free treatment for these patients.

Data from our Phase II study with this combination in Japan demonstrated SVR12 rates in the mid-90% range. Our Phase III program is ongoing and enrolling rapidly, and we expect to submit our regulatory application in the first half of 2015.

Japan represents the second-largest HCV market globally, and given our commercial presence and the potential product profile, we believe we’re well positioned relative to the competitive offerings.

At the recent CROI meeting, we presented initial data from our next-generation HCV assets, including ABT493, a potent protease inhibitor, and our new NS5A inhibitor, ABT530. As we’ve said before, it is our goal with our next-generation program to bring to market a ribavirin-free, once daily pan-genotypic combination.

As I mentioned last quarter, we have ongoing efforts to further simplify our initial offering with a once-daily formulation, and we’ve continued to make progress in this regard. Certainly there has been significant attention regarding the competitive landscape for this market.

While we can’t make direct comparisons between studies, we do believe there are important differences between the clinical trial designs across various programs. This includes significant differences in cohort size for specific subgroups and patient populations, and the confidence intervals around trial results.

We believe these factors will be important considerations for physicians, payors, and patients. Based on the large body of data supporting our therapeutic profile across genotype 1 patients, our global footprint and our ability to execute commercially, we continue to believe we’re in a strong position.

AbbVie will be an early entrant into this market where there is clearly a strong desire from both physicians and payors for multiple therapeutic options.

Well-tolerated treatments like ours that demonstrate high levels of efficacy, particularly in difficult-to-treat patients, will fare well; and considering the number of patients afflicted and both the physician and payor capacity, we believe there will be a steady cadence of patients treated annually, making this a very attractive market for many years to come.

While HCV certainly garners significant attention, today I’d also like to highlight some of the other important pipeline programs and milestones that we expect throughout the remainder of 2014.

We continue to have a high level of enthusiasm on our late-stage oncology assets, including our BCL-2 inhibitor, ABT-199, in development for a number of hematological malignancies, including our late-stage trials for our vanguard indication, CLL; our PARP inhibitor, ABT-888, in development for more than a dozen different cancer types; elotuzumab in Phase III development for multiple myeloma.

The ABT-199 clinical program, which is partnered with Roche Genentech, continues to progress very well. As a reminder, last spring we refined the dosing and monitoring approach with ABT-199 in CLL to minimize the risk for tumor lysis syndrome. Since initiating the new protocol, we’ve collected and analyzed data on a significant number of patients.

There have been no clinically significant events of TLS reported. We recently shared these findings with the U.S. regulatory authorities and reached agreement to remove the hospitalization requirement for a significant portion of patients going forward. We plan to present these safety data at an upcoming European Hematology Association meeting.

As you know, last year we initiated a large Phase II single agent study in relapsed refractory CLL patients with 17p deletion. The initial date readout from this trial is expected in the first part of 2015.

If the data warrants and regulatory agencies agree that ABT-199 addresses an unmet medical need, these data have the potential to serve as a path to early registration. We have a number of ABT-199 data presentations and other activities that are also expected this year.

We plan to present initial Phase I combination data with Rituxan in relapsed refractory CLL patients at the upcoming AASCO and EHA meetings.

Later this year, we expect to present initial single agent AML data and multiple myeloma data, and also later this year in collaboration with our partner, we plan to start a Phase III combination study of ABT-199 plus GA101 in first-line CLL patients. We’ve also seen good progress with ABT-888, our PARP inhibitor.

We recently announced the initiation of a global Phase III trial evaluating ABT-888 in patients with previously untreated squamous non-small cell lung cancer. The data supporting the decision to advance the Phase III development will be presented at a medical meeting in the second half of this year.

Earlier this year, we started a Phase III study of ABT-888 for neo-adjuvant treatment of triple-negative breast cancer. Several other mid-stage trials will complete in 2014 with the potential for additional Phase III transitions yet this year.

Also in late stage development in our oncology pipeline is elotuzumab for multiple myeloma, the second most common blood cancer, in partnership with Bristol-Myers Squibb. Two Phase III studies are ongoing in relapsed refractory and first-line patients. Results from the event-driven trial are expected in early 2015.

Now turning to our other late-stage pipeline assets. This summer, we’ll see data from the second of two registrational studies on daclizumab. As a reminder, the DECIDE trial is designed to show a reduction in annualized relapse rates and disability progression in patients with relapsing remitting multiple sclerosis versus an active comparator.

Despite advances in this category, there continues to be a significant need for high efficacy agents and we believe daclizumab has the potential to deliver the right balance of clinical activity and an acceptable safety profile. In our neuroscience pipeline is Duopa. Regarding our U.S.

regulatory application, we recently received questions on the submission. FDA did not identify safety issues in the clinical data and no new clinical trials were requested. The questions were primarily related to the use of the delivery system. We’re in the process of addressing the questions and plan to submit a response when that process is complete.

Moving on to Elagolix, our compound in Phase III development for endometriosis and Phase IIb for uterine fibroids, we’ll see initial data from the first of two pivotal studies in endometriosis in the second half of 2014. Finally, we look forward to seeing Phase IIb data in RA in our partner-selected JAK1 inhibitor.

Beyond our partnership with Galapagos, we have a robust pipeline in mid-stage immunology assets, including an internal selected JAK1 inhibitor, an IL6 nanobody, and DVD bispecific biologics, among others. In closing, we’re off to a strong start in 2014.

We delivered strong performance in the quarter and we continue to make good progress executing on our key strategic priorities, including pipeline advancement. As we evaluate our pipeline prospects, including a number of potential opportunities, we believe our pipeline is the strongest it has ever been.

We’re on the cusp of a number of important data milestones, phase transitions, and product launches. Given the progress we’ve made, we continue to expect strong sales and earnings growth beginning in 2015. With that, I’ll turn the call over to Bill for a more detailed view of our results..

Thank you, Rick. This morning, I’ll review our first quarter performance and provide an update on our outlook for the remainder of 2014. As Rick said, we’re very pleased with the strong quarter we delivered. Total sales increased 6.7% on an operational basis, excluding a 1.3% unfavorable impact from foreign exchange.

Excluding sales from our lipid franchise due to loss of exclusivity, total sales increased 13.5% on an operational basis. Humira delivered global sales of more than $2.6 billion, up 18.4% on an operational basis.

In the U.S., Humira sales increased 24.7% driven by continued market expansion, share gains, and particularly strong growth in the gastro segment. Internationally, Humira sales grew nearly 14% on an operational basis and more than 12% on a reported basis.

International growth is being driven by continued uptake of new indications, share gains, and double-digit market growth in most key countries. On a global basis, we continue to expect double-digit sales growth for Humira in 2014. International sales of Synagis were strong in the first quarter at $354 million, up 9.3% on an operational basis.

Synagis, which protects at-risk infants from severe respiratory disease, is a seasonal product with the majority of sales in the first and fourth quarters. Androgel sales were up 6%, benefiting from a favorable comparison versus the market dynamics of the prior year quarter.

While Androgel continues to gain share, we have seen a notable slowdown in the market this year with overall prescriptions down roughly 10%. We expect Androgel performance for the year to be in line with these market trends. Global Lupron sales were $189 million in the quarter, up 5.6% on an operational basis.

For the full-year 2014, we expect sales to be down modestly from 2013. U.S. sales of Synthroid were up $157 million with the year-over-year growth rate aided by a favorable comparison to the first quarter of 2013, which was unfavorably impacted by customer ordering patterns.

Synthroid maintains strong brand loyalty and market leadership despite the entry of generics into the market many years ago. For the full-year 2014, we expect low double-digit sales growth for the brand. U.S. Creon sales were $107 million in the quarter, up 18.4%.

Creon maintains its leadership position in the pancreatic enzyme market where we continue to capture the vast majority of new prescription starts. We expect low double-digit sales growth for Creon in 2014. Sales of Duodopa, our therapy for advanced Parkinson’s disease, grew nearly 30% on an operational basis this quarter.

For the remainder of 2014, we expect continued double-digit growth in Europe and other international markets where Duodopa is currently approved. All of the products in our lipid franchise are now experiencing generic competition.

Sales of Niaspan were $47 million and TriCor Trilipix sales were $23 million, both down significantly versus the first quarter of 2013. We expect these trends to continue for the remainder of 2014. I’ll now turn to the P&L profile for the first quarter.

The adjusted gross margin ratio was 78.4%, in line with our expectations and up 220 basis points from the prior year quarter. This reflects loss of exclusivity in our lipid franchise offset by favorable mix impacts across the portfolio and margin-enhancing initiatives we’ve implemented.

Adjusted R&D was 16.9% of sales, up 22% from the prior year driven by increased funding of our mid- and late-stage pipeline assets and the continued pursuit of additional Humira indications. The level of R&D investment in the quarter was above our guidance.

Adjusted SG&A was 27.6% of sales in the first quarter, reflecting continued investment in our growth brands and preparations for our upcoming HCV launch. Adjusted SG&A investment increased 4.6% from the prior quarter. We remain on track for a full-year adjusted SG&A profile approaching 28%.

Net interest expense was $65 million and the adjusted tax rate was 22.3% in the quarter. First quarter adjusted earnings per share, excluding non-cash amortization expense and specified items, were $0.71, up 4.4% year-over-year and exceeding our previous guidance range. On a GAAP basis, earnings per share were $0.61.

Moving on to our full-year 2014 outlook, we are confirming our adjusted earnings per share guidance of $3 to $3.10. This guidance range excludes $0.37 per share related to amortization expense and ongoing separation and restructuring costs.

We continue to expect sales of approximately $19 billion this year with growth from our key marketed products offsetting the decline in lipids from generic competition. Included in our sales guidance is an estimated negative impact from exchange of roughly 1% for the year.

We’re committed to improving our gross margin ratio in 2014 despite the loss of high-margin lipid sales. As a result, we continue to forecast an adjusted gross margin ratio approaching 79% for the year, reflecting actions we’ve taken to further improve our margin profile.

As you know, we have a record number of Phase III programs in development, including a number of exciting opportunities in oncology, HCV, immunology and other areas that warrant investment. We now expect R&D expense to be somewhat above 16% of sales as we continue to advance our late-stage pipeline.

As I noted during our call in January, we expect to see an increase in SG&A this year as we invest in our key brands and our upcoming HCV launch. As a result, we continue to expect SG&A expense to approach 28% of sales in 2014.

We are forecasting net interest expense of about $270 million for the full year and we continue to expect an adjusted tax rate of approximately 22%. Regarding our second quarter outlook, we expect adjusted earnings per share of $0.75 to $0.77.

This excludes roughly $0.10 of specified items and non-cash amortization resulting in a second quarter EPS in the range of $0.65 to $0.67 on a GAAP basis. Our second quarter outlook reflects a flat to slightly increasing top line, including a modest negative impact from foreign exchange.

We expect gross margin as a percentage of sales to be in line with our full-year guidance. The amount of investment in R&D and SG&A in the second quarter is expected to increase sequentially from the first quarter as we accelerate spending, particularly for our upcoming HCV launch.

This has been captured in our EPS guidance range for the second quarter. In conclusion, we’re pleased with our first quarter performance as well as our outlook for the remainder of 2014. With that, I’ll turn it back over to Larry..

Thanks Bill, and we’ll now open the call for questions. Elan (ph), we’ll take our first question, please..

Thank you. [Operator instructions] Our first question today is from Steve Scala from Cowen..

Thank you so much. I have three questions. First regarding the hep-C opportunity, has your strategy on how to approach the market changed at all in the past six months, and if so, in what ways? Secondly on Duopa, I assume the PDUFA date will be pushed out from the early May time frame.

Do you have visibility on for how long? And then thirdly, maybe a bit of a bigger picture question. Some companies are philosophically opposed to changing full-year EPS guidance at the end of Q1 because it’s simply too early in the year to do so.

Does AbbVie share this view, or would the company have increased its full-year EPS guidance already if it thought that was prudent? Thank you..

Okay Steve, this is Rick Gonzalez. I’ll take the first one and the last one – let me start with the last one. Yeah, I think we are in a position where it just doesn’t make sense based on first quarter to change guidance.

I wouldn’t say we have a philosophy where we won’t change it if ultimately we believe it should be changed going forward, but it’s just too early in the year to ultimately make that decision today.

As far as hep-C is concerned, I think it is a very interesting market as it’s evolved over time, but the one thing I’d roll out is we said early on in the process that we thought we had a very competitive profile on our product and we thought we could position this product well in the marketplace.

If you recall, one of the things that we talked about is that we had done a significant amount of market research in this area and there were really three key drivers of success. One was clearly cure rates – SBR12 rates in both naïve patients but more importantly in difficult-to-treat patients; and second was therapies that were highly tolerable.

Those two factors alone drove the vast majority of physician prescribing patterns. Convenience was a distant third – a very, very distant third is what we said.

At the same time, we also said that this was a large market and would stay a large market for a long period of time because of the clinical capacity and the triaging of patients over time, and that physicians and payors would want multiple options in the marketplace.

We also said that we believe that the patients that would get treated first were cirrhotics, fibrotic patients, and experienced patients, that they’d be a significant amount of the treatment in the first several years.

When you look at the way the market is playing out today, it’s playing out pretty close to what I just described to you, and that’s what we articulated more than a year ago. If you look at our product profile against that, we have very strong SBR12 rates in cirrhotic patients and experienced patients.

We have strong individual patient data around sub-populations with very tight confidence intervals. We have extremely high tolerability with or without ribavirin. We have very low relapse rates in these patients, and we’re going to be an early entry into the marketplace and provide an alternative to the other competitive offerings.

So when I look at it, it’s playing out very similar to what we expected, and I think we’ll be in a very good position to compete very effectively in this market. .

This is Scott Brun and I’ll take the second question on Duopa regarding the PDUFA date.

So certainly through our interactions with FDA, they acknowledge the importance of Duopa in providing an option for patients with severe Parkinson’s disease who other than deep-brain stimulation really have no other options, so we’ve been working very closely with them to address some questions predominantly related to the use of the delivery system.

Really, we’ve gotten no concerns with regard the safety efficacy profile of the product.

I think this is more a factor that this is a very unique drug-device combination and we’re working with multiple constituent parts of the FDA beyond just the drug review division, so certainly there are some additional questions related to patient use, instructions for use.

We’re working through those with the various FDA divisions, our partner who manufactures the pump, and our own internal AbbVie experts. I don’t want to give you guidance on the PDUFA date right now. Certainly it will extend beyond May, but we’re working very expeditiously in partnership with the FDA to address those questions..

Thank you. Our next question is from Jami Rubin from Goldman Sachs..

Thank you. Just a couple questions – Rick, I’m not even really sure where the question is here, but maybe you can comment on this. As you know, Sovaldi sales this quarter were $2.2 billion.

J&J’s Olysio sales this quarter, one single agent protease inhibitor generated $350 million in sales annualizing at $1.4 billion, and I look at consensus numbers for AbbVie’s hep-C regimen next year and they’re under $800 million.

What do you think the world is missing here, because we’ve seen really good data, et cetera, but I don’t know – maybe you can just comment on what you think the gaps and misunderstanding are.

Secondly, Scott to you on your second-generation hep-C regimen, clearly I think one of the key messages at EASL is just how aggressively your competitors are moving in this space, and I’m wondering if you can give us an update on your development timelines for your second-generation hep-C regimen and if we will see data at AASLD.

Then just lastly on the news, Rick, on ABT-199, so are you saying that we are now out of the woods on TLS with respect to ABT-199? Thanks..

Thanks Jami. Okay, so I’ll cover the question on hep-C. I’m not sure what the gaps are. I mean, I just went through how I think our product fits against the market criteria, and I think that’s consistent with our view of how we’ll compete in the marketplace. I will say, look – the data is evolving here very rapidly.

We just saw a lot of the competitive subset data at EASL, and the market probably needs a little time to digest that over a period of time and make some determinations as to how they want to value each of the competitive alternatives in the marketplace.

But I can tell you from our perspective, we feel pretty good about our position and we feel it’s playing out very consistently with what we thought would play out in the marketplace.

Having said all that, it’s certainly better to delight than disappoint, and so the number that’s out there I think is a number that certainly is one that we have confidence we can beat..

Jami, it’s Scott. Maybe I’ll go on with the HCV second-generation. So as Rick said, we presented data at CROI showing the characteristics of our new protease inhibitor, ABT-493 and our new NS5A, ABT-530.

Both are pan-genotypic with very balanced activity against genotypes 1 through 6, activity against the first generation compound typical mutations that we see arise, and frankly very interesting characteristics with regard to their barriers to resistance.

So certainly if you compare these against other next-generation compounds, these compounds are ranking near the top – extremely favorably. We are in Phase II right now. We have established to our confidence that these are indeed once daily compounds without the need of ritonavir.

We are very pleased with regard to what we’re seeing in patients, and we are moving forward with our Phase II program that’s going to incorporate elements of, let me say, much of what we’ve been learning about where the competition is moving with the next wave of therapy.

We certainly feel we are on track for these therapies to be available in the 2017 time frame. Moving on to ABT-199, as Rick said, after we changed our dosing protocol to start at a somewhat lower dose and ramp up more slowly, we had been hospitalizing all of our CLL patients with the initiation of 199.

We had monitored them very carefully, collected a very significant body of data, and certainly have seen no TLS – clinically significant TLS – with that approach. As a consequence of our analyses of these data, moving forward with the FDA we’ve been able to remove the hospitalization requirement for, I will say the majority of patients.

We’re continuing hospitalization for those patients at highest risk with the most bulky disease, who frankly are also the ones who have the fewest options and the greatest ability to benefit from ABT-199 therapy. So the program is expanding rapidly with Phase III studies having initiated, so we’re going to be getting a lot more patient experience.

You’re going to see what we’ve seen at the upcoming AASCO meeting. Always want to be careful about saying out of the woods, but I will say strongly off to the races based on what we’ve been seeing..

Okay, thanks..

Thank you. Our next question is from Jeff Holford from Jefferies..

Hi, thanks very much for taking my questions. Just on the once daily formulation of the current offering, wondering if you can just give us a bit more color around timing of that and what you’re required to do for that in terms of any clinical studies or work with the FDA.

Secondly, can you just let us know if you’ve had any indication around guideline advantage potentially in patient groups like cirrhotics or any other hep-C population where you think you have a higher level of evidence than he competitors so far in terms of specific trials? And then just a last question, what do you guys think the percentage of the global hep-C opportunity that’s driven by tender or preferential access based pricing, just to give us a sense of how important pricing might be in this market? Thank you..

It’s Scott Brun again. So with regard to our once daily formulation of our first generation regimen that will take our twice daily non-nuke polymerase ABT-333 and coformulate with the once daily 450 267, we are finishing up some of our pharmacokinetic work to make sure that we’re selecting the optimal candidate formulation.

Certainly based on what those data look like and how similar the PK profiles are to the regimen with (indiscernible) will drive exactly what our next steps are going to be.

Certainly if there is additional clinical work required, we fully anticipate that we’re going to be beginning that work before the end of the year, and this regimen will slot in between the entry of the first generation regimen and, as I referred to, the second generation.

With regard to guidelines, certainly we work very closely with the various groups that drive the prevailing global guidelines, certainly to make sure that they understand the breadth and depth of our program. I think typically guidelines are driven by weight of evidence.

Certainly you can see ADC gradings with regard to how strong evidence is, and having dedicated data in some of the most important patient groups – those that are the hardest the treat – in very significant numbers that shrink your confidence intervals and provide you greater certainty, I think is going to resonate with these guideline groups.

Again, those guidelines haven’t been written yet, but if you look at how these are conventionally put together, it’s a weight of evidence approach and I think we feel very, very confident in our body of data, particularly in the groups that you referenced, such as the cirrhotics..

Jeff, this is Rick on the tender question. Well, as you know, the U.S. is a big part of this market, which isn’t a tender-driven kind of market, and then obviously a lot of the major European countries would be the other significant part, and Japan.

So if you look at pure tenders across the G7, it will be a relatively small percentage of the overall revenue in this market as it exists today. .

Thanks very much..

Thank you. Our next question is from David Risinger from Morgan Stanley..

Yes, thanks very much. Good morning. I have a number of questions but I’ll try to just ask three, if that is okay. The first is relatively straightforward, just a simple numbers question. IMS has been reporting mid to high single digit TRX growth for Humira in the U.S. in the first quarter. Could you just break down the reported 25% U.S.

Humira sales growth to give us some better perspective on underlying demand as you see it, in case the IMS TRX growth is misleading, and then also on price and any inventory stocking. Second, with respect to HCV on pricing, maybe Rick, you could just give us your thoughts at a high level about how competitive one needs to be on price in a duopoly.

I would think that in the initial duopoly, it would make little sense to price aggressively when you have just one competitor, but just wanted to get your perspective on that.

Then third, with respect to HCV diagnosis, I think the HCV bulls are talking about significant diagnosis increases in the U.S., but I don’t have a good perspective on what the real numbers are.

So maybe you could talk about the number diagnosed in terms of whatever number you have recently, and how that number is really going to grow annually in the next three years. We think about the number diagnosed in the United States growing in the low single digit percentage annually or mid-single digit percentage. Any color on that would be helpful..

So David, it’s Bill Chase. I’ll start with your Humira question. As you pointed out, the IMS scripts on Humira are high single digit. The numbers we see are actually a little higher than that typically on an annual basis.

This thing is doing high single to low double digits, and then obviously you’ve seen it when we’ve taken price increases, so price does remain a component of the U.S. growth. Inventories – we try to minimize fluctuations from quarter to quarter on inventories as much as we possibly can.

In both the fourth quarter and the first quarter, Humira inventories were about half a year. There were some impacts—half a month, rather, I’m sorry. There were some impacts in the first quarter of 2013 but that was maybe four to five points on the growth altogether. This is a brand that continues to perform very, very strongly in the U.S.

You saw the numbers last year and certainly we expect continued performance this year..

I’m sorry – I don’t know if you can hear me.

Sorry to interrupt, but with respect to four to five points in the first quarter of ’13, did you say there was a negative impact resulting in a somewhat easy comp for the first quarter of ’14, given what happened in the first quarter of ’13?.

There was a favorable comp versus the first quarter of 2013 related to ordering patterns..

Thank you..

Okay David, this is Rick. I’ll cover the HCV one. As it relates to pricing, as we’ve said before, if I look at the product profile that we have and I look at the mix of patients that are going to be treated first, we have a product profile that stands up quite nicely in the marketplace, so that’s not our strategy going forward.

So we’re not going to talk specifically about how we’re going to deal with pricing, as I mentioned on the last call as well, but I’ll just tell you the product attributes of the AbbVie therapy, I think stand up quite nicely to what the market wants, and certainly that will be the driver of how we try to educate the market and market the product.

As far as diagnosis rates are concerned, I don’t have the numbers directly in front of me but last time I recall we thought they were about 3.5 million patients in total in the United States. About half of those were currently diagnosed, and I’d say in our LRP modeling we’re not modeling out dramatic increases in newly diagnosed patients.

I mean, there are obviously patients that are being diagnosed and coming into the system, but it’s probably in that high single or low double digit kind of rate.

You have to remember, there’s a certain level of clinical capacity here to begin with just to get through the people that are already diagnosed that need treatment, so I think everybody will have campaigns to go forward and try to diagnose more patients, but the governing factor may be the level of clinical capacity that exists in the marketplace anyway.

.

David, it’s Scott. I completely agree with Rick. You see some varying numbers with regard to, say the U.S., how many patients are actively in care with HCV. I’ve seen numbers on the order of 400,000 –again to Rick’s point, maybe 1.5 to 1.7 diagnosed on the total of 3 million.

But I think the more relevant question, as Rick laid out, if you’re trying to see how this market is going to evolve is all the various factors in the patient, their journey not only diagnosis, clinical capacity, but then some of the things certainly both in the U.S.

and globally with regard to how payors are going to be looking at the cadence of treatment with certainly all the signaling that we’ve been seeing, those with the most advanced fibrosis and/or prior treatment experience coming in first. So I agree with Rick.

We have not modeled and don’t need to model very aggressive diagnostic uptake in our forecast..

Great, thank you..

Thank you. Our next question is from Chris Schott from JP Morgan..

Great, thanks very much. Following up on the pricing topic here on the HCV side, I guess your competitors price and launch have obviously attracted a lot of attention from payors and some politicians.

Can we have a little bit more on your view on how this all plays out? If price doesn’t come down in this market, do you think we’re going to see more efforts to restrict usage of these products that it medically makes sense at all to do, and I guess finally, does that attention at some point give AbbVie better negotiating position with payors? I guess it’s a couple questions there, but just any thoughts would be appreciated.

My second question was on ABT-199. I guess two clarifying questions there – first, how many patients have been dosed on the new regimen at this point? And the second question is, it looks like you could have a best-in-class product here but one that’s going to be coming to market a few years later than some other highly effective, novel agents.

How do you see that playing out commercially, the time to market issue here? Thanks very much..

Chris, it’s Scott Brun, so maybe I can talk about--. Obviously I don’t want to be giving away exact numbers with regard to where we’re at on our Phase II program, again just because of the competitive fervency here.

But to your point, when I look at the characteristics of these drugs – and again, we’re comparing in your minds the preclinical information that’s out there and then certainly what I know about from what we’ve seen in patients so far. No, I absolutely think that this particular regimen has the potential for best-in-class.

We will know more over the ensuing years as we—ensuing year as we continue our Phase II program. But when I say for a regimen that’s going to be out in 2017, referring back to the prior question, this epidemic is going to be far from over, okay, and I’m talking in the developed markets.

You just look at our throughput, even if you assume in the G7, say, on the order of 250,000 patients coming through, they are going to be a number of patients still in need and certainly this number, as you made the point, is going to be affected by healthcare system decisions on how are patients going to be prioritized.

Now certainly this is a disease where the consequences occur decades after initial infection, so you do have some time before you have to act. You don’t have to treat everybody with no or little evidence of liver scarring right off the bat.

Certainly I think those patients who have more advanced fibrosis or scarring or other factors that are medical indications for treatment, I cannot imagine any healthcare system is going to be making the decisions to deny that care..

Chris, this is Rick. The only thing I would add to that is what will really drive access and who is treated is capacity, guidelines, and then ultimately whatever criteria the governments or managed care organizations put in place.

I think those will be responsible and appropriate clinical guidelines that are put in place because they tend to come together, and the governing factor may be more one of capacity than it is other kinds of things..

Thank you. Our next question is from Vamil Divan from Credit Suisse. .

Yes, thanks for taking the question. So just following up a little bit on the pricing question there with hep-C, I just actually wanted to ask you a question as it relates to Humira.

Obviously hep-C, there’s some unique components here, but are you seeing or do you expect to see any greater pressure across other specialty care markets, I guess specifically with Humira in a class of anti-TNS where we do have a number of different competitors.

I think we’re starting to see some of these concerns maybe extend to areas that have been immune to this issue before, so just curious to hear your thoughts. And then separated and unrelated question, just on Androgel – appreciate what you said about 2014.

Just what do you think about the longer term potential for this class and your drug specifically, just given some of the safety concerns that have been raised? Do you see any potential to re-establish growth for this category, or not? Thanks..

This is Rick. So if you look at Humira and the class of anti-TNS, I think you have to reflect back on there have been many, many competitors in this market for a long period of time, and you still see Humira have a leadership position in this category.

Obviously a component of that is working with governments and working with managed care organizations to ensure that you’re demonstrating the right value proposition for the product and it is priced appropriately against that value proposition, and that’s something we deal with every single day, every single year.

I wouldn’t say that we’ve seen dramatic changes in the approach that we’ve had to take with those organizations. Even recently, I wouldn’t say we’ve seen dramatic changes.

As it relates to Androgel, certainly we’re not projecting going forward that the market will accelerate dramatically, and so I think we’re assuming in our modeling per our long-range plan that ultimately the market will be relatively slow growing to flat going forward. .

Thank you. Our next question is from Alex Arfaei from BMO Capital..

Good morning and congratulations on the quarter, folks. Three questions, if I may. Regarding your hep-C regimen, are you having discussions with payors already, and specifically I’m wondering if your (indiscernible) Phase III in cirrhotics is resonating with payors given the importance of this group.

Second, could you comment on the enhanced gross margin initiatives that you were talking about earlier? What are those initiatives, and what is your longer term outlook on gross margin given your plans to establish manufacturing in Singapore? Then third, when can we expect data from your own JAK1 inhibitor? Thank you..

So maybe, Alex, going on with regard to our data particularly in cirrhotics and the payor community, look – we’ve been sharing the specifics on these data with a variety of different stakeholders that are involved in the care of these patients, ranging from again clinicians to various payor groups around the world.

As I’ve said before, yeah, when you have been the only company that has done a dedicated study in a population that traditionally has had lower rates of response with any other HCV therapy that’s been seen, there’s great interest in how therapies are going to perform in this population, and I will say great appreciation to the fact that we did a very comprehensive 400-patient study in these patients to be able to provide them some granularity in terms of how sub-populations of cirrhotics will perform.

Their view is we’re not—we understand there’s a population, but the individual clinician is going to be treating the 1a cirrhotic relapsed patient – they're not going to be looking at a blended population when they make their choice, and that’s exactly what payors want to be seeing. So I’d say there’s been a very robust interest in those data.

Maybe I could go ahead with regard to the JAK question. Certainly we have two selective JAK1 programs ongoing, our partnered program with Galapagos and then our own internal ABT-494 selective JAK inhibitor. Certainly we’re looking at both of these in rheumatoid arthritis. We’ve also been studying Galapagos in Crohn’s disease.

We will be seeing data on our JAK inhibitor on the first part of 2015..

On gross margin, I would say that our gross margin profile has been a focus of emphasis on this business going back actually many, many years, even pre-spin. The way we drive those savings is a combination of everything from manufacturing efficiencies to purchasing efficiencies to even lean manufacturing techniques – that sort of thing.

Certainly we’re keeping our eye on all of those balls as we move forward through the LRP. We expect over the next few years that you’ll see some gross margin profile expansion.

A lot of that is going to be driven by the launch of HCV, which as you can imagine, will be a higher margin product relative to our base, so I think you’ll be very happy watching that line develop over the next couple years..

Great, thank you..

Thank you. Our next question is from Colin Bristow from Bank of America Merrill Lynch..

Thanks for taking the questions.

Another one on hep-C – just with regards to what you are seeing in terms of the Solvadi Olysio numbers, how has this changed your internal expectations regarding the number of patients treated and launch ramp? And you talked a little bit about capacity – where do you think we are now with regards to the sort of percentage of capacity, and what do you assume the limit is here? On Humira, previously you’ve given some good color on the share and trends in each of the indications.

If you could give us an update on this, that would be great. And just one on ABT-199 – what are your expectations now for potential post-approval monitoring requirements? Do you envisage a scenario where patients are stratified based on tumor bulk regarding whether they need monitoring? Thanks. .

Thanks Colin – this is Larry. I’ll start with some Humira overview, as you mentioned. Certainly we’re seeing very good growth by indication. In general, I would say we’re seeing the rheum growth in kind of the mid to high single digit range.

The derm area is growing probably close to mid single digits, and in gastro we’re seeing more strong double-digit growth there. Ex-U.S., it’s a little bit harder to cut it by indication, but as we mentioned in the prepared remarks, we continue to see nice double-digit growth across the major markets ex-U.S.

In terms of share at this point in time, we would say that we’re seeing gains in rheum – we’ve got about a 25% share there. We see steady derm share at about a 40% share, and gastro we’re seeing share gains there and we’re probably about a 45% shareholder there, toggled between number one and number two there, number one in derm.

So very pleased with the progress that we’re seeing, strong commercial execution across the board. The mix of sales right now, we see RA in the U.S. is actually just a little bit below 40% of our overall sales. Ex-U.S., it’s probably around 35%. The gastro space is probably around 25% or so of the overall sales mix, both here in the U.S. and ex-U.S.

The derm space is probably in the range of 15% or so of sales in both geographies, and then the remainder is a little heavier ankylosing spondylitis, psoriatic arthritis component ex-U.S. – call it 25% or so, and in the U.S.

that component is around 20% of our sales mix, so it’s becoming a nicely diversified book of business for us overall in both geographies. .

Colin, it’s Scott. I’ll go ahead and take the 199 question.

So with regard to speculating on post-approval monitoring, obviously a little bit early but as we’ve said today, we’ve been able to successfully remove the requirement for hospitalization for both the low and medium risk patients, which accounts for the majority of the patients, be it either first line or later line.

We’re going to continue with hospitalization for the time being on the high risk patients, which as you said are those with the bulkier tumors, but as we include more data on those patients, we’re going to continue to see how we can refine any requirements for that type of monitoring.

So I just think we need some more patients under our belts for us to be able to really say what it’s going to look like at the time of launch..

Colin, this is Rick. I’ll cover the hep-C one. We’re obviously pretty early into this launch, so it’s a little difficult, I think, to project off of one quarter. I’d say it is relatively consistent with how we modeled it.

If you go back to the initial PI launches, what you saw was some de-warehousing occurring and then in the first quarter or two it was high, and then it started to flatten out a bit and come down a little bit.

So if you think through that and you say that was a model that you wanted to follow, that ultimately you might see it peak, come down, flatten out a bit and then you see another peak occur with the launch of all orals where you see more de-warehousing occur.

But at this point, you’re looking at one quarter, you’re looking at one data point, so it’s a little hard to model against that; but I wouldn’t say it was out of the realm of what we anticipated. As far as capacity is concerned, I think we’ve talked before about the capacity.

We do anticipate that there will be some expansion of capacity with all oral coming into the marketplace, so I think we will see, particularly in the United States, some expansion of capacity going forward, so we will see more patients being able to be treated by the time those products get to the marketplace..

Thanks Colin; and Elan, we have time for one final question..

Our final question today is from Mark Goodman, UBS..

Yes.

Can you talk about the PARP and the market, and how you view your product in comparison to the other products?.

Yeah, definitely. Mark – Scott Brun. So Veliparib, our PARP, one of the things we’ve tried to do differently from the competition is to not just limit the use of the PARP mechanism as monotherapy in genetically deficient tumors, such as breast cancer with the BRCA mutation.

So I think you can see from the Phase III trials that we’ve started so far, as a neo-adjuvant therapy in triple-negative breast cancer, these are for women who have been initially diagnosed with breast cancer where we treat with the Veliparib-based regimen prior to therapy to de-bulk the tumor.

And then certainly in non-small cell lung cancer which is an area that no other PARP inhibitor has explored, we’re able to go there because we found a way to successfully combine with carboplatin-based chemotherapy.

So we’re really looking to more broadly leverage the potential of PARP by using it in combination with chemotherapies reflected in our initial Phase III trials. We have an ongoing Phase II trial where we’re using it in combination with whole brain radiation in patients who have brain metastases from lung cancer.

That study is going to be reading out later this year. Looking at a variety of other solid tumors in combination with other chemotherapies as well.

So I’d say through a lot of the work that we’ve been doing, we’ve been able to set the stage to be able to do things with our PARP that, frankly, the competition is not currently pursuing, so I think it really broadens our opportunity for Veliparib as a consequence. .

Thanks Mark. That concludes today’s conference call. If you’d like to listen to a replay of the call after 11:00 am Central time today, visit our website or you can call 866-491-2909, pass code 42514. The audio replay will be available until midnight on Friday, May 9. Thanks again for joining us..

Thank you, and this does conclude today’s conference. You may disconnect at this time..