Larry Peepo - Vice President, IR Rick Gonzalez - Chairman of the Board and Chief Executive Officer Bill Chase - Executive Vice President of Finance and Chief Financial Officer Laura Schumacher - Executive Vice President Business Development, External Affairs and General Counsel Mike Severino - Executive Vice President of R&D and Chief Scientific Officer.

Jami Rubin - Goldman Sachs Mark Goodman - UBS Chris Schott - JP Morgan Jeff Holford - Jefferies Vamil Divan - Credit Suisse Mark Schoenebaum - Evercore ISI Robyn Karnauskas - Deutsche Bank David Risinger - Morgan Stanley Colin Bristow - Bank of America Merrill Lynch Alex Arfaei - BMO Capital Markets.

Good morning and thank you for standing by. Welcome to the AbbVie Fourth Quarter 2014 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer portion of this call. [Operator Instructions]. This call is being recorded by AbbVie. I would now like to introduce Mr.

Larry Peepo, Vice President of Investor Relations..

Good morning and thanks for joining us today. Also on the call with me is 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 Mike Severino, Executive Vice President of R&D and Chief Scientific Officer.

Before we get started, I’ll 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.

Following our prepared remarks, we’ll take your questions. So, with that I’ll now turn the call over to Rick..

Thanks, Larry. Good morning everyone and thank you for joining us this morning. Since becoming an independent company, our strategy has centered around delivering strong results and returns for our shareholders while insuring, we have a strong sustainable growth business over the long term.

As we look back over the past year and assess our performance, we’re pleased with the significant progress we've made, not only in delivering outstanding 2014 results, but also in establishing a solid platform for growth well into the future. As we announced this morning, we delivered exceptional results in 2014.

With sales and earnings well above our original projections for the year, we delivered 7% global operational sales growth in 2014 and we increased our ongoing earnings per share by nearly 6%. When we launched AbbVie two years ago, one of our key priorities was to return to strong growth in 2015.

I’m pleased that we were able to achieve that goal a year ahead of schedule. This performance demonstrates the strength and sustainability of our portfolio and underscores our continued focus and execution. Our performance in 2014 was driven by growth from key products including Humira , Synthroid, Synagis, CREON, and Duodopa.

We also delivered year-over-year margin improvement while continuing to invest in R&D and SG&A to drive future growth. In addition to our strong financial results over the past year, we are seeing significant pipeline advancement and have achieved a number of important development and regulatory milestones.

We secured US and European approval for interferon-free HCV treatment [inaudible]. We successfully completed several late stage clinical trials including daclizumab and Humira HS registrational programs.

We initiated a number of promising phase 3 through programs including several phase 3 studies of our PARP inhibitor Veliparib in solid tumors such as breast and lung cancer and our BCL-2 inhibitor ABT 199 in hematological malignancies.

We also made significant advancements with our next-generation HCV program, initiating a broad phase 2 B program which is on track to transition the phase 3 in 2015. We advanced a number of early-stage assets in the mid-stage development including our DB platform and ABT 414R our antibody drug conjugate in development for glioblastoma multiforma.

We augmented our pipeline through strategic licensing and partnering activities. We acquired the rights to [inaudible] now in development for CLL and NHL.

And we entered into a novel collaboration with Calico to accelerate the discovery, development and commercialization of innovative therapies for age-related diseases such as cancer and neurological diseases. And over the first couple of weeks in 2015 we have seen additional pipeline developments.

With the recent US approval of DUOPA, our therapy for advanced Parkinson’s disease and positive topline efficacy results from the first year-to-go ex-pivotal trial in endometriosis. So we have established a strong foundation and have entered 2015 with good momentum which we intend to build upon.

As I outlined earlier this month in 2015 we are forecasting full-year adjusted earnings per share of $4.25 to $4.45. It is important to remember that this range reflects EPS growth of 28 to 34% which is well above our peer group.

And in the coming year we expect to see significant activity across our pipeline including the potential for several regulatory submissions data readouts and phase transitions that I will discuss in more detail in a moment. Humira was certainly an important driver of our strong performance in 2014 with nearly 19% operational growth for the year.

Humira has averaged well over $1 billion of growth per year for the past eight years. For 2015 we expect Humira to once again be an important contributor to our robust performance with the mid-teens global operational growth expected. We also saw strong performance from several other products in 2014 including Creon, Synthroid, Synagis, and Duodopa.

We expected each of these products would hold leadership positions in their respective categories, will continue to represent an important part of our business mix in 2015.

Clearly another important driver of performance in 2015 will be our interferon-free HCV therapy Viteron [ph] which is now been approved in the US, EU and a number of other countries around the world.

We are pleased with Viekira product label and updated AASLD treatment guidelines and we believe both reflect the strength of the product’s clinical profile across genotype-1 patient population. Position reception of Viekira has been positive and in line with our expectations.

While we moved quickly upon approval, I would say that the US launch began in earnest in early January and we’re pleased with our progress today. The first phase of the launch securing payer positions and access for Viekira is well underway.

As we indicated once a highly competitive alternative was available Managed Care began their contracting for this class. Obviously in this category the contracting process is occurring very rapidly unfolding over a period of weeks versus months.

As we embarked on our discussions with payers we applied a standard Managed Care contracting approach with each account, basing our contracting terms upon four key tenants including the volume of Managed Care lives, the level of formulary control, the term of the contract and patient access within the system.

A significant number of payer contracts have been completed in the U.S. with more than half the Managed Care lives in the US now under contract. Based on the outcome of this process today, we estimate that more than 40% of the covered lives will have access to access to Viekira pak including both the exclusive and parity positions we have secured.

More than 20% of the lives will be in an exclusive position and we would expect the Viekira pak to capture some portion of the patients in plans that have elected to pursue exclusive contracts with other suppliers, given certain aspects of the Viekira pak profile and product label for certain patients.

We need to see how the remainders of the contracts are finalized, but up to this point we're pleased with our formulary position and we believe we have the potential to capture meaningful share of the US HCV market.

As we do with most new product launches, we monitor both prescriptions filled data as well as prescriptions written or claimed to assess our sales effectiveness and the efficiency of the payer administrative and prior authorization processes.

To that end we have data from external sources, which show 11,000 Viekira prescriptions have been written through January 16th, with the majority occurring in the first two weeks of January. These prescriptions are working their way through the administrative and prior authorization process in order to be filled.

While some of these claims may not be filled as is the case with all prescription claims, the majority will make their way through the administrative process and should be dispensed in the coming weeks. This level of Viekira prescription generation is well within our expectations for this stage of the U.S. launch.

So based on the full body of data that we have in hand we feel good about the early days of our U.S. launch. Moving forward, our commercial efforts in the U.S.

will focus on driving strong penetration in the AbbVie's exclusive and parity accounts while ensuring access to Viekira and non-AbbVie accounts, where our product offerings more appropriately based on the label or medical preference for certain patients.

Our international launch is also progressing well and discussions with government payers in various countries are under way and they are advancing rapidly.

We are currently selling Viekira in a number of countries around the world including Germany, U.K, Canada, Austria and Sweden and we are on the crux for beginning promotion in several other countries.

The HCV market is significant and rapidly growing and based on patient prevalence, diagnosis, and treatment rates we expect it to remain large and an attractive opportunity for many years to come.

We're excited about the opportunity Viekira offers us in this market and we're committed to this therapeutic category for the long term and we'll continue our efforts to evolve the treatment paradigm with next generation development programs well under way.

Based on our current projections we estimate by the end of 2015 we will achieve a global annualized sales running rate for Viekira of more than $3 billion dollars.

Given that we are early in our launch and there are numerous factors that play we will be providing more specific guidance regarding our 2015 sales expectation for the product as the year unfolds.

Pipeline development is an important component about these long-term success and we continue to place a tremendous amount of organizational focus in this area. We have a rich and broad pipeline with more than 40 clinical development programs under way spanning large and growing especially categories.

Our portfolio is comprised of assets that have the potential to deliver compelling clinical performance, patient benefits and economic value. Many of these products have the opportunity to generate multibillion dollar peak year sales.

For a company of our size the sales projections from our late stage pipeline assets represent an impressive opportunity for meaningful revenue growth in the years to come. Over the past year, we demonstrated a strong track record of successful positive clinical data and regulatory outcomes from a number of clinical programs.

And we look forward to numerous important pipeline milestones in the year ahead. This includes phase 3 trial initiations, data readouts for multiple programs across our pipeline, the submission of regulatory applications for several major late stage assets and potential product approvals.

While I won't cover our entire pipeline in detail today, I thought it would be helpful to review some of the expected milestones in 2015. As I mentioned in 2014 successfully completed our registrational trials evaluating Humira as a treatment for HS.

Our US and EU regulatory applications for this indication are currently under review, and we expect decisions from regulatory authorities later this year. Given our strong data and a high unmet need of patience, we believe this will be a significant indication for Humira sales potentially approaching a billion dollars.

We’re also exploring Humira as a possible treatment for uveitis, a sight threatening inflammatory eye disease. We expect to complete the phase 3 program and some middle regulatory applications for uveitis later this year. We expect to see data from several of our promising oncology programs in 2015.

This data includes data from ABT-199 study in patients with relapsed refractory CLL who had the 17p deletion mutation. We believe this study has the potential to be a registrational trial.

Should we see the level of efficacy observed in the earlier studies, and regulatory agencies agreed ABT-199 addresses an unmet medical need, we plan to submit our regulatory applications for this indication later in 2015. We also plan to start a phase 3 study of ABT-199 in Gazyva in frontline fit CLL patients in 2015.

This year, we expect to see results from the phase 3 study of elotuzumab in relapsed refractory multiple myeloma. Assuming positive results, we expect our partner to submit the regulatory applications for this indication later in 2015. We also expect to present mid stage data from our PARP inhibitor veliparib at medical meetings throughout this year.

In addition to the four phase 3 trials already underway in 2015, we’re planning to begin phase 3 studies, evaluating veliparib as a treatment for ovarian cancer.

We’re also excited about ABT-414, our anti- EGF monoclonal antibody drug conjugate, which is currently being evaluated in glioblastoma multiforme and has demonstrated encouraging responses in early-stage clinical trials.

We will see additional data from the ongoing trial throughout the year and we’re on the cusp of starting a phase 2 study in this aggressive type of malignant primary brain tumor. With respect to our HCV programs, we expect continued progress in 2015.

We’re on track to submit a regulatory application for HCV combination in Japan in the first quarter and anticipate approval in the second half. As a reminder, we expect to commercialize a 12-week, two-pill once-a-day combination for this market.

We also expect to see SVR data from our next generation HCV program and transition to phase 3 development later this year. We have significant R&D efforts in place to advance the standard of care in each of our areas of immunology leadership and we’ll see mid stage results from several programs this year.

We had two selective JAK1 Inhibitors in our portfolio – GLPG0634 and ABT-494. Both oral compounds are currently being evaluated as potential treatments for RA, and we look forward to learning more about each assets’ profile as the phase 2B data study is complete later this year.

We’re working with our partner to complete our regulatory applications for daclizumab or Zinbryta in the first half of 2015. As a reminder we presented strong pivotal trial results last year which demonstrated MS patients treated with Zinbryta at a statistically significant 45% reduction in annualized relapse rates versus Avonex.

Given the product profile and its once monthly subcutaneous administration, we believe this agent has the potential to be an important therapy in this large and growing market. Earlier this month we announced positive topline results from the first of two ongoing phase 3 clinical trials of the elagolix in endometriosis.

Initial results from the study show that after six months of treatment both doses of elagolix evaluated met the studies co-primary endpoints of reducing scores of non-menstrual pelvic pain and menstrual pain associated with endometriosis relative to placebo control. We will see additional efficacy and safety data from this trial later this year.

Results from the mid-stage trial on uterine fibroids are expected later this year as well. Clearly, 2015 promises to be another important year with numerous developments and regulatory milestones. We believe AbbVie has a unique investment identity.

We offer promising pipeline prospects as described along with strong growth and compelling shareholder returns. Our business generates significant cash flow which we expect will grow in 2015 and beyond with new product introductions. We’re committed to returning cash to shareholders and our primary means to do so will continue to be our dividend.

Last year we announced that AbbVie’s quarterly dividend will be increased to $0.49, an increase of nearly 17% beginning with the dividend payable next month. We intend to maintain our strong commitment to growing our dividend going forward.

Additionally last year we also disclosed a $5 billion share buyback program to be executed over the next several years further reflecting our commitment to returning cash to shareholders. We will also utilize our strong cash flow to enhance our pipeline through licensing and partnering activities.

As a mentioned in 2014 we entered into several collaborations to add to our pipeline. We view these activities as an important component of our overall R&D strategy and we expect to continue to augment our pipeline in 2015 and in the years to come.

In closing, since AbbVie became an independent company we’ve been focused on executing our key strategic priorities and delivering market-leading returns for our shareholders. One of our primary stated objectives upon our inception was to return the strong growth in 2015. And we’re pleased that we’ve been able to do that a year ahead of schedule.

We feel good about the high level of execution of our key strategic priorities, we’ve established a strong track record consistently delivering our financial commitments generating strong shareholder returns and driving leading performance of HUMIRA and other products in our portfolio.

We’ve also built a promising late stage pipeline which will fuel our future growth. So we set a very sound foundation for our company. We were entering 2015 with strong momentum. We intend to build upon to drive a high level performance in our operations and strong growth.

With that I will turn the call over to Bill for additional comments in the fourth quarter and our 2015 outlook, Bill?.

Thank you, Rick. This morning I will start with an overview of our fourth quarter performance and then I will walk through our outlook for 2015. We had an outstanding fourth quarter, getting off the year, a better-than-expected performance.

This performance allowed us to raise our people year EPS guidance range of 23 year and ultimately deliver results that exceeded our final guidance. Off note in 2014 we delivered EPS growth despite headwinds from currency in the fourth quarter as well as the loss of exclusivity in our lipid franchise.

For the quarter total adjusted sales were nearly $5.4 billion up 8.9% on operational basis. And as I mentioned exchange dynamics in the fourth quarter were significant reducing sales growth in the quarter by 3.8%.

Fourth quarter revenue growth by Humira which delivered global sales of $3.4 billion, up 14.4% operationally and up 10.6% on a reported basis. In the U.S. Humira sales increased 15.8% reflecting continued strong prescriptions trends double digit market growth across all three major categories rhum, gastro and derm.

Internationally Humira sales grew 12.7% on an operational basis, excluding an 8.4% unfavorable impact from exchange. International Humira performance continues to be driven by double-digit market growth in most countries. Globally Humira sales for the full-year 2014 were more than $12.5 billion, up 18.9% operationally, versus the prior year.

Sales of Synagis were $298 million on quarter, up 4.9% on an operational basis. For the full year, Synagis sales were $835 million an increase of 9.3% operationally versus the prior year. Growth in 2014 was driven by continued product uptake and strong commercial execution.

As a reminder, this is a seasonal product with the majority of sales in the first and fourth quarters of the year. AndroGel sales were $230 million in the fourth quarter, down about 20% versus the prior year, reflecting the continuation of recent market trends. Full year sales were $934 million, down 9.7% year-over-year.

Global Lupron sales were $207 million in the fourth up 0.6% on an operational basis. For the full year Global Lupron sales were $778 million, roughly flat from the prior year and in line with our expectations. Lupron continues to hold a leadership position and maintains significant share of the market. U.S.

sales of Synthroid were $186 million in the quarter, with full-year sales of $709, up nearly 14%. Synthroid maintain strong brand loyalty and market leadership despite the entry of generics into the market many years ago. U.S. Creon sales were $151 million with full-year sales of $516 million up 25.3% versus 2013.

Creon maintain its leadership position in the pancreatic enzyme market with roughly 70% share, and we continue to capture the vast majority of new prescription starts. International sales of Duodopa, our therapy for advanced Parkinson's disease were $56 million in the fourth quarter up 25.4% on an operational basis.

For the full year, Duodopa sales were $220 million, a 24.7% increase versus 2013 on operational basis.

And as you know, we launched our VIEKIRA, in the US in mid-December following FDA approval, sales of VIEKIRA were $48 million in the quarter, reflecting the shipment of stocking quantities into the market over the holiday to support our full commercial launch in January. I'll turn now to the P&L profile for the fourth quarter.

The adjusted gross margin ratio was 81.2% excluding amortization and other specified items. This represents a significant increase over the prior year due to favourable mix impact across the portfolio, margin enhancing initiatives and the impact of exchange dynamics.

Adjust SG&A was 29.1% of sales in the fourth quarter, reflecting investments and support of the recent VIEKIRA launch and in our other growth brands and adjusted R&D was 16.3% of sales in the quarter reflecting funding actions in support of our pipeline assets.

Net interest expense was $63 million and the adjusted tax rate was 22.5% in the fourth quarter. Fourth quarter adjusted EPS was $0.89 excluding non-cash amortization expense and specified items. On a GAAP basis, we posted the loss per share of $0.51.

Specified items were primarily comprised of various cost associated with the termination of the share transaction, our Calico collaboration and ongoing separation costs. I'd like to now discuss the outlook for 2015. We are confirming the full-year guidance we issued earlier this month including adjusted EPS of $4.25 to $4.45.

This guidance excludes $0.34 per share of amortization expense and other specified items. On the topline, we expect high-teens revenue growth on an operational basis. Clearly we have seen significant currency movements in the recent weeks.

If the recent rates would remain in effect for the remainder of the year our sales growth would be roughly 5% lower. Given our global business structure and programs we have in place to mitigate exchange impacts, the fall-through from currency to the bottomline is much more modest for us.

We are comfortable with our 2015 EPS guidance range despite potential currency swings. Included in our topline guidance our assumptions for our key products, for HUMIRA, we expect global sales growth in the mid-teens. For Synagis we expect similar performance to 2014 growth rates.

Regarding AndroGel we're forecasting continued market declines as well as a negative impact from the recent entry of generic competition for the 1% formulation. As a result we expect 2015 AndroGel sales of less than $500 million. We expect 2015 Lupron sales to be roughly in line with 2014 levels.

For Synthroid we expect sales to be roughly flat from 2014 levels in line with market trends. For Creon we expect low double digit sales growth in 2015. We expect continued double-digit growth for Duodopa with a modest level of U.S. sales in 2015.

Given the underserved patient population and the products profile and efficacy we are excited about Duopa's potential in the U.S. and expect it to be a meaningful contributor over time. That said, we anticipate a gradual ramp for the product sales in the U.S. as physicians grow familiar with the product.

And we expect declines in several other products with continued lipid erosion and negative market trends in HIV and other material products.

Turning back to the P&L, we are forecasting in improvement in the adjusted gross margin ratio of around 100 basis points for the year reflecting product mix and actions we've taken to further improve our margin profile.

This level of improvement would be considerably higher if current exchange rates were to hold throughout the year given how exchange flows through our P&L profile in 2015. In 2015, we will continue to invest in our pipeline supporting our exciting opportunities in oncology, HCV, immunology and other areas.

We are forecasting R&D expense of approximately 15.5% of sales, and we expect to continue investing in our growth brands with SG&A levels and approximately 25.5% of sales.

As a result, we are forecasting a significant increase in our operating margin profile, which we expect to reach 40% of sales in 2015 up roughly 400 basis points reflecting the positive impact of leverage across the income statement, given our ability to moderate bottomline Fx impacts in 2015.

Operating margin would be greater than 40% if current exchange rates were to hold throughout the year. We are forecasting net interest expense of about $275 million for the full year and we continue to expect an adjusted tax rate in the 22% range in 2015.

Regarding our first quarter outlook, we expect adjusted earnings per share in the first quarter of $0.82 to $0.84. This excludes roughly $0.18 cents of specified items and non-cash amortizations resulting in a first quarter EPS in the range of $0.64 to &0.66 on a GAAP basis.

So, as we look back we are very pleased with AbbVie’s performance in our first two years as an independent company. In 2014, we delivered sales in our names well above our original outlook and returned to growth a year ahead of expectations. And we expect to build on that momentum in 2015 with industry leading growth.

And with that I'll turn it back over to Larry Peepo..

Thanks Bill. We’ll now open the call for questions. Elon, we’ll take our first question please..

Thank you. [Operator Instructions] and our first question today is from Jami Rubin from Goldman Sachs..

Thank you and good morning everyone. I have a few questions related to Viekira, but first Rick, congratulations on an order. So, first if you can clarify your $3 billion Viekira forecast, is that a runway you expect to achieve by the end of the year or is that a forecast for the full year, I am a little bit unclear, I think the street is too.

And secondly, if you can provide a little bit more color on the percent of cover to Manage lies or you have an exclude deal with Viekira, I think you said 20%. The only exclusive deal with the PBM that we've seen come across the tape is Express Scripts, and I think they cover around 8%.

So, where is the other 12% coming from? Is that on the state side or is that other Managed Care companies that just haven't issued press releases? There is confusion around there.

And then just lastly I'm just curious what your assumptions are for pricing in the market, once Merck enters either late this year or early next?.

Good morning Jami. And thank you for the congratulations. Let me address your questions. So let me start with the run rate question. Yes, what we were describing to you is there are exit rate at the end of 2015. It should be above $3 billion.

So, and the reason why we're characterizing it that way is because we're still assessing the speed at which the ramp will occur, and because there are many different factors that will impact that.

Obviously, a number a different processes about how the administrative and prior authorization process ramps up in the United States, how we get pricing and reimbursement, many countries around the world, the speed of which we decide and a number of other factors.

So what we're basically saying to you is based on our current forecast that we have built in for 2015, as we look at that exit rate it should be above $3 billion. Second question was around PBM access. So, if you look at our preferred position indeed it is above 20%. That includes obviously significant portion of Express Scripts.

It also includes a number of different more regional based PBMs. It includes a number of Blue Cross Blue Shield or Blue Shield plans. And I think as an example Blue Shield of California announced yesterday that position, but there are a number of those they are also in the mix. And so, it's a variety of plans in those areas that make up the 20%.

And then assumptions on price post Merck's entry; I think there is a lot of factors that will play out over time obviously in most markets as you get more competition, there is some additional price pressure.

But I wouldn't anticipate that we will see significant price pressure as we see more players come into the market, but it's very early to tell what that looks like going forward. It will depend a lot on the performance of those products and other aspects of the market and how it plays out. So I think, it's just very hard to predict, Jami..

Our next question is from Mark Goodman from UBS..

Bill, I was wondering if you could just talk a little bit about how much of the spending is now in there for the HCV.

And then on the gross margin you'd mention mix effects, margin enhancing initiatives; can we go into that a little bit more? And then about your commentary about the 2015 guidance you talked about the margins if Fx stays the same, the margins would be even better.

Can you just give us an update on what you mean there? And then you had mentioned the infinity product that you are not licensed? And can you just tell us where that is, when will the studies be getting going and when we will see some data?.

Sure, so it's a lot of different items here, but starting first with the spend for HCV. Yes, as you would imagine in the fourth quarter of 2014, we had fully built out a U.S. sales-force, we had everything basically provided for a strong launch. So those expenses were reflected in the fourth quarter.

In 2015, there will be some annualization of those expenses in the U.S. because obviously we didn't have the full organization on board early 2014. The ex-US, we are currently building out and that timing is gated based on expected reimbursement timelines and launch timeline, but the bulk of that has been encompassed in our 2015 guidance.

I think what's important on SG&A is we've gotten a lot of questions in the past about operating leverage on this P&L and we are beginning to show it. Our SG&A profile is coming down considerably versus where we’ve been in the last couple of years, so we are pleased on the progress there.

Gross margin is another area, frankly Mark we've been focussed on since our inception. We are benefiting from some product mix but we also have programs underway to drive efficiencies on that line and we are very focussed on it. And that's what you're seeing playing through to a great extent.

We were impacted in the fourth quarter by exchange and it was a favorable impact and let me explain like this.

It is a little counterintuitive, but we have within our P&L natural hedges that exist on developed market currencies and we do from time to time, when we think prudent, set up other programs to offset exchange fluctuations, primarily around the Euro. And we are to a great extent in 2014 and 2015 protected from swings in the Euro.

The manifestation on profile of course is you have weakness on the topline and an offset on the gross margin line, which actually has the impact of increasing gross margin profile. And we saw that play out in the fourth quarter. That was about 200 basis points. The rest was operating efficiencies and product mix.

In 2015, we see the same dynamic playing through in the event that currencies were to remain at where they are at, that said what we have forecasted is 100 basis points of gross margin improvement and that's purely related to the operating efficiency programs we have in place as well as product mix.

Is that clear?.

Yeah, so you're saying that there would be more upside to the gross margin on the Fx, that you just haven't baked that in. .

No, what I'm saying on a profile bases it would manifest itself as a higher profile because we'd have the weakness on the topline, but the bottomline would be protected based on our internal high dispositions..

So with respect to Infinity, this is Mike Severino. The Infinity collaboration around duvelisib, this one we're very excited about.

There are a number of studies are up and running and the key studies are dynamo which is a phase 2 study in patients with refractory indolent nonHodgkin's lymphoma and the duo trial which is a phase 3 study in patients with relapsed refractory CLL. Those studies are up and running.

We don't have a specific timing for readouts there, but they're progressing nicely. Over the course of last year, we would this to continue over the course of 2015, earlier studies are continuing to mature on that molecule and there will be a day-to-day readouts over the course of the year. .

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

Just two here.

First, coming back to the greater than $3 billion run rate by year-end 2015, is that a number that you expect you can continue to grow over time? So when we think about the year-end run rate in 2015, could that continue to grow in 2016 or do you really think about sales plateauing at that type of level over time? Second question was just on Viekira and just with all the headlines we're seeing regarding contracting.

I guess just high level is pricing and the amount of access you're securing, is that progressing as expected or are you at all disappointed in terms of the number of formulary wins you're getting at this point?.

Okay, Chris, this is Rick. On the $3 billion run rate we would expect growth between 15 and 16 and if you think about the gating of countries coming online over the course of 2015 as an example, you'd certainly expect you'd see some annualized improvement year-over-year. But again, we have to see how that plays out in the timing of that.

We're pleased with the progress that we're making so far. On the Managed Care contracting I think we are overall pleased with how it has proceeded. I think it's come within the expectations that we had, having overall 40% coverage for Viekira between our parity positions and our preferred positions, I think it is well within the expectations.

But again, as I mentioned in my formal comments we have to see how the rest of it plays out and we're continuing to work on a number of contracts and I think those will conclude over the course of the next 30 days. But so far it's within our expectations. Thanks..

Our next question is from Jeff Holford from Jefferies..

Just a couple of extra questions around Viekira.

Can you give us any kind of sense for the US visit the ex-US mix on the run rate by the end of 2015; just any color on that would be useful? Second you talked about getting potential access, in contrast we don’t have access; how much leakage would you expect of your exclusive contracts to Gilead? And then just lastly we were talking with Roche just the other day, their results about ABT 199, they seem to indicate that the data were almost in-house or were in-house.

Can you give any further commentary around near-term timing on that readout?.

Yes, I will take 199 first. This is Mike Severino. 199 is a program that we continue to be very excited about. We are accruing data in the study that Rick referred to earlier that same patients with refractory or relapse CLL with 17P delta lesion. That's a data set that's accumulating. It's a single arm study, so obviously that data builds over time.

We’d expect to have a data set that would allow us to draw some conclusions sometime early this year and we continue to make good progress. So again if the level of activity that we saw on earlier studies persists, we’d expect that to support a regulatory filing obviously, in discussion with regulatory agencies later on this year.

Okay Jeff, this is Rick. If you are asking the question of what will the US/ex-US mix be in 2015, obviously the US will be a much heavier mix based on how the gating will occur across those countries, and that mix will continue, I think going forward.

As far as leakage or assumptions around what we will be able to achieve within accounts that are Gilead preferred, I think both of these products, if you look at the labels, if you look at the performance there are clearly a certain number of patients and patient types that will benefit from one therapy versus the other.

So as we look at our own, we think that numbers are around 10%, for example, PI failures and decompensated cirrhotics are two examples of patient populations that will be more appropriate for the alternative.

As we look at Gilead are certainly -- as you look at our label and our performance we think there is probably in the neighborhood of about 15% that would be available for therapy, those will be transplant patients, HIV co-infected patients, patient who have significant renal insufficiency, and we also think that there will be some experienced cirrhotic patients.

They could benefit from 12 weeks of therapy with Viekira verses 24 weeks of therapy with Harvoni. And so those are some examples of how we see that sorting out. .

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

Just a couple if I could on the pipeline, with daclizumab, you mentioned some excitement around there.

I guess the questions we’re getting a lot from investors, in terms of your future looking at MS having this one product, this partner obviously with a player that’s much bigger than you and MS, and has other products that they are going to be promoting as well, do you think MS is a space where you need to invest more, obtain more assets in order to have a broader impact? Or is this one where you think where you have daclizumab alone is sufficient? And a second just on Duopa.

If you can just give a little more color there, where we think a lot more activity in terms of new approaches to treating Parkinson’s, how long or how much of an impact do you think that can really have if you think about, it is more of a formulation plan that you guys have here as these other agents maybe come to the market in the coming years?.

Let me start with daclizumab. Certainly as we look at the daclizumab profile, we are very pleased with how it sorted out. This is a high efficacy agent. We think the subcutaneous dosing based on the market research we’ve done is something that is appealing to positions and will be appealing the patients. And so we think it as a clear fit.

As far as the space I would say the MS space is an area that is attractive. It fits the profile of the kinds of markets that we’re interested in and we constantly look for opportunities within all these spaces.

I can tell you, we will look at different opportunities that exist there and evaluate those and if we saw the right opportunity come along we could build us some more critical mass in the MS space, I can tell you we would be interested in that.

On Duopa we've obviously had a fair amount of experience with that product in the international markets, in particular in Western Europe. And this is a product that is unique.

I mean, when you actually look at the clinical benefit that this provides for these patients it's nothing less than astonishing what the benefit that these patients get from this product.

Having said that, it is also a product that has a slow ramp up because it requires a lot of training to get patients on board, to get them titrated to the right level, to get the impact it requires a fair amount of clinical support for those patients that have to be provided. So it's not a product that has a massive ramp.

What we've seen in Europe in particular is that it has good strong steady growth. But we do believe that this is a product that over the long term could become a very significant product, $500 million to $750 million range. Certainly we’re seeing some estimates that were even higher than that. But it's gonna have a gentle ramp and obviously the U.S.

market is an attractive market for us. So we're pleased that we've gotten it approved in the United States and we can bring that product to patients..

Our next question is from Mark Schoenebaum from Evercore ISI..

Hey, guys, thanks a lot for the question. Thanks for all the detailed color; that's super helpful.

Out here on Wall Street where we all sit in chairs and watch flashing lights, there's a lot of speculation that the discounts you guys offered in the hep C market were outsized and that you've ignited a pricing war that will only end badly for everybody in the industry. So I'd just love to hear your comments generally on that.

I recognize you're not going to give us the extent of the discounts, but just qualitatively I'd like to know if those perceptions out on Wall Street you agree with or you don't agree with and why. And then perhaps for Mike, on elagolix; elagolix is a compound I've become quite interested in lately.

Street estimates are around $500 million in the AbbVie consensus model.

Why couldn't this be significantly larger than that? Maybe you can talk about the unmet need, how you guys see this fitting in and specifically can this be a chronic therapy for women?.

Hi Mark, so I'll cover your first question. This is Rick. You know I think the contracting strategy that we put in place was very consistent with the contracting strategy as I said in my remarks that we put in place for all the specialty products.

What we say is this, it became very clear to us prior to approval as we were engaging with payers ahead of the launch that payers made it clear was that they were going to contract this category, and there were many payers that said they were going to contract this category with one preferred agent.

And so, we had to dial that into our launch strategy and essentially we built the launch strategy, was built around those sets of assumptions. We priced and rebated consistent with the value of our product and what we thought was appropriate for the market and we did it around a disciplined approach around those parameters that I described.

And so I don't believe that this is unusual. In fact I believe this is a very typical kind of an approach that we've taken across many specialty categories and the rest of the industry has taken it across many different categories. .

Elagolix?.

Okay, so this is Mike. I'll take the Elagolix question. Just a few weeks ago we announced with our partner, topline results from the first of two phase III studies. Now, that's an ongoing study, so we're limited in terms of the amount of detail that we can go into.

And we will obviously update you as more data come and present full results in a scientific setting at some later day. But, we're very pleased with what we've seen today. We hit our end points, and these are very difficult end points to hit on pelvic pain and menstrual pain in women who had very difficult to control disease.

We did that at both dose levels; we studied with a high level of statistical significance.

We are obviously -- we are going to watch as those data mature and as we get additional data on long-term safety that might inform chronic use, but we feel good about what we've seen today and we clearly feel that there is a very large on that medical need, a large number of women live with endometriosis.

Current treatment options are not sufficient in many women, a little bit debilitating chronic pain and other symptoms. So it's a molecule that we feel good about long-term..

Mark, maybe I will add a couple of comments. This is obvious scenario where we have some experience because we have Lupron that’s available for this indication as well. And fundamentally what we liked about this molecule is that we thought we could get to a chronic use claim for this therapy.

And we also like the fact that this is fast-on and fast-of, one of the challenges with a with a drug like Lupron is once you inject the patient, the impact last for 6 to 12 months and you basically put the woman in the menopause until you have all the normal side effects associated with that; hot flashes and bone loss.

So an ideal profile here would be one that would provide sufficient efficacy but have a safety and side effect profile that was consistent with longer-term use, so minimal bone loss and minimal hot flashes. A product like that, an oral product, that was fast-on and fast-off, we think has a substantial opportunity in the market.

And as Mike said, this is a high prevalence disease where there aren’t great options available for these women. So as we as we release more of the data and we see more of the data, that’s certainly the profile we’re shooting for, it doesn’t mean that a slightly different profile wouldn’t be a very competitive product.

But the ideal profile is what you’re describing..

Our next question is from Robyn Karnauskas from Deutsche Bank..

Just one on hep C and one on the pipeline.

So we're hearing a lot about volume and there's been some volume restrictions by payers this year, and just trying to get a sense when you've been negotiating, what do you think the volume restriction is or how much do you think the volume -- the number of patients the system can handle this year? Are your contracts incorporating any volume restrictions by fibrosis score? And then the second question is on TNF and IL-17, a lot of excitement in the field.

Trying to get a sense of when we will get the next data update? And we've seen very good data on IL-17.

Do you expect to have better response rates or would this just work for a dual population that had dual symptoms for psoriasis and RA?.

Hi Robin, this is Rick. So let me address your first question. As I mentioned in my comments about the four tenants that we operated with our contracting strategy, obviously one of those was access. And we believe strongly that opening up access for all patients regardless of fibrosis score is something that's positive for patients.

So certainly as we approached our contracting strategy we offered the greatest benefit to those plans that were willing to do that. Not every plan is willing to do that. I would give as an example Express Scripts a lot of credit for their willingness to open up access. And so they vary by plan.

Some are completely open, that’s zero to F4, some are F2 to F4, some are just F3 and F$. So there is quite good variability across the plans as to how they are proceeding with that, but certainly that was something that we pursued with each and every one of the of the payers that we tried to contract with..

Okay so this is Mike. With respect to TNF and IL-17, I think you’re referring to our program ABT 122 which uses our dual variable domain technology, so a single biologics that blocks the action of those two important cytokines.

When you look at that the spectrum of activity of agents targeted against the cytokines, one can see very real potential in rheumatoid arthritis, psoriasis, and in particular psoriatic arthritis. The IL17 as we have seen have very pronounced efficacy in skin disease in psoriasis.

But the TNF mechanism remains the most highly active in our opinion in psoriatic arthritis. So we have the agent that I described in substantial phase 2 studies, in rheumatoid arthritis and in psoriatic arthritis and those will be progressing over the course of this year and the next and will provide data updates as appropriate..

Our next question is from David Risinger from Morgan Stanley.

Yes, thanks very much and thank you for all the detailed comments on HCV. That is very helpful. Just a couple questions.

First, could you just provide some more color on the 25 state Medicaid group and how investors should think about the news and specifically what your contract states and what the implications are across those 25 state Medicaid organizations? Second, with respect to ABT-199 data in 17p and filing, could you provide some updates on the timing of both of those? And then, finally, in the past, you provided HUMIRA sales by indication.

If you could provide a breakdown of 2014 sales again by indication, that would be great?.

This is Rick. We’re in the process of continuing to work with that group so I don’t think it is appropriate that we talk and in detail.

There was a public announcement on one of them but the rest of them are still in process and we’re just not in a position to be able to give you a lot more information on that, as they’re finalized my guess is that they will provide some color to their members and through that process you will get some visibility to it but we’re just not in a position where it would be prudent for us to give you that information right now.

With respect 199 were expecting to see data from our study in refractory relapsed CLL in patients with 17p del mutation in the first half of this year.

And when we have this data in hand, we will discuss them with regulatory agencies and assuming we see maintenance of effect size that was observed in early trials, and regulatory agencies agree, we would expect to move to a filing in that indication later on this year.

And in terms of the mix David, right now globally we’d estimate that RA is approaching 40% of the sales mix. Derm is about 15%, gastro is about 25% and then other would be the remainder. That would be akylosing spondylitis and the other psoriatic arthritis etc. Indications..

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

Hey, guys, thanks for squeezing me in. The commentary on hep C over the last 12 months has clearly highlighted the payer sensitivity to high-cost drugs in therapeutic areas.

I'm just curious what gives you confidence that HUMIRA won't face an aggressive headwinds posed by a similar entry given the size of this asset? And then just a quick one; additional one on HUMIRA in the additional indications such as HS, how much off-label use is already occurring in the indication?.

This is Rick. Let me cover the payer comment. Obviously we have had lots of experience in interacting with payers with HUMIRA and this class there’s a lot of competition that already exist in the class and obviously we’ve been tremendously successful in securing strong positions with payers in the United States with HUMIRA.

With the entry of a potential biosimilar at some point in the future, as I said many times before, I don’t see the competitive dynamics changing dramatically from where they are now.

I also don’t necessarily agree that the precedent that occurred in hepatitis C changes the competitive dynamics in any way from the way it was prior to that despite a fair amount of rhetoric that has come out over the last month or so.

The thing that’s important to remember in a chronic used drug, that’s different, is you have large groups of patients that are on drug, well-controlled.

This is a class where when you move patients from one drug to another, not necessarily all patients do well, and has to be switched again, and so there are different dynamics, different competitive dynamics in each class. In oncology I would tell you, it has very different dynamics.

Hepatitis C here you have two products that have tremendous performance and you have basically a product that cures patients is used for a relatively short period of time. Those are different dynamics than you see in many other areas. So, I don't think you can draw a strong correlation from one to the other.

Having said that I'm sure one and if biosimilar competition comes along, it will be another opportunity to be able to work with and negotiate with Managed Care organizations and we'd anticipated that in our planning assumptions as we look at our long range plan.

Off late we'll use on HS, you know I would tell you I just came back from a European meeting where we brought in a number of HS patients. And the first thing I'll tell you is, it's obviously a disease that most people including myself didn't know a lot about.

What struck me is how debilitating this disease really is for these patients and how little therapy there is or knowledge of alternatives that are available out there.

And so I would tell you that I think there is probably very-very little use of HUMIRA in a HS today and I think when we launch, when we get approval one of the things we're focussing a lot of attention on will be education of physicians in order to know that there is an available therapy for these patients.

And so, I would think it was tiny, if anything at all at this point. Thanks, Colin. Alright. Operator, we have time for one more question please. .

Our final question today is from Alex Arfaei from BMO Capital Markets..

On Hep C, what is your estimate for the number of genotype 1 patients treated in 2014 and your expectation for how many are likely to be treated in 2015? Clearly, the size of the pool has a meaningful impact on you.

Could you also comment on the early impact of REMICADE biosimilar in Europe and whether you expect this to be a major factor this year as it enters more markets? And then, finally, I just wanted to clarify and make sure I heard this right. The Fx positive impact on gross margin was 2% this quarter and maybe 1% next year.

Could you just please remind us of that again?.

Alex, let me start with the Fx. In the quarter it was 200 basis points. Our guidance in 2015 is an improvement on 100 basis points and that has no effects on it whatsoever. So, we think we can drive that 100 basis point purely through operational efficiencies that we've been committed to over the last couple of years as well as product mix.

What I did say was if current exchange rates continued, simple math given that our bottom line is greatly protected from those winds, if the current rates continued it'd have the effect of actually increasing the profile above that 100 basis points.

But that basically just math along through as you have a headwind on the topline that we are protecting the bottomline from..

On HCV genotype 1 patients, you know obviously that is one of the parameters that we were carefully watching as it plays out. We are assuming that we'll see a significant increase in patient access going forward and therefore in the U.S. we'll see more patients treated.

I think a reasonable range to think about would be something in the range of may be a 175,000 patients to as much as may be low 200's to 10 to 15 something in that range.

Obviously, based on our planning assumptions we've bracketed between those numbers and that's one of the reasons why we don't want to come out with a 2015 number, because we need to see how that plays out. We build obviously a certain base level number into our guidance they were comfortable with. It may end up being more than that going forward.

But that's at least our view of what it looks like.

On [Rentia] I mean thus far we haven't see a lot of impact, one difference is in European markets self-injectables are treated differently than infusion products, so it doesn't necessarily impact HUMIRA directly in very many markets, I'd say it's tracking for the most part very consistent with what our modelling assumptions were for its level of success and you know we watched that carefully over a period of time and it's proceeding as we would have got.

So, we are not assuming that will have any material impact on us in 2015..

And that concludes today’s conference call. If you’d like to listen to a replay of the call, visit our website or call 866-479-2459 passcode 1305. The audio replay will be available until midnight on Friday February 13. Thanks again, for all of you joining us. Thanks for the questions today. If you have any further questions, please give us a call.

Thanks..

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