Financial Release
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
"This was another very strong quarter for
Second-Quarter Results
- Worldwide sales were
$4.926 billion in the second quarter, up 5.0 percent. On an operational basis, sales increased 4.8 percent, excluding a 0.2 percent favorable impact from foreign exchange rate fluctuations. Excluding sales from our lipid franchise due to the loss of exclusivity, sales increased 12.3 percent on an operational basis in the quarter. - Second-quarter sales growth was driven primarily by the continued strength of HUMIRA. Global HUMIRA sales increased 26.2 percent, or 25.4 percent on an operational basis, excluding the impact of foreign exchange rate fluctuations. Total company sales growth was also driven by strong growth from key products including Synthroid, Sevoflurane and Duodopa.
- The adjusted gross margin ratio in the second quarter was 79.6 percent, excluding intangible asset amortization and other specified items. The gross margin ratio under U.S. generally accepted accounting principles (GAAP) was 77.4 percent.
- Adjusted selling, general and administrative (SG&A) expense was 27.1 percent of sales in the second quarter, reflecting continued investment in our growth brands and the expected HCV launch. On a GAAP basis, SG&A was 29.4 percent of sales.
- Adjusted research and development (R&D) was 16.1 percent of sales in the quarter, reflecting funding actions in support of our mid- and late-stage pipeline and the continued pursuit of additional HUMIRA indications. On a GAAP basis, R&D was 16.9 percent of sales.
- Net interest expense was
$69 million , and the adjusted tax rate was 22.2 percent in the quarter. On a GAAP basis, the second-quarter tax rate was 23.4 percent. - Second-quarter diluted earnings per share were
$0.68 on a GAAP basis. Adjusted diluted earnings per share, excluding intangible asset amortization expense and other specified items, were$0.82 .
Key Events from the Second Quarter
AbbVie announced it reached an agreement with Shire's Board of Directors for a recommended transaction to combine the two companies. The proposed combination is strategically compelling for both companies and will create a larger and more diversified biopharmaceutical company with multiple leading franchises. The new company will also have significant financial capacity for future acquisitions, investment and enhanced shareholder distributions and value creation.AbbVie announced the initiation of a Phase 3 clinical trial evaluating the safety and efficacy of its investigational compound, veliparib (ABT-888), when added to carboplatin and paclitaxel, two chemotherapeutic medicines, in patients with human epidermal growth factor receptor 2-(HER2) negative metastatic or locally-advanced breast cancer, containing BRCA1 and/or BRCA2 gene mutations. The trial will recruit approximately 270 patients. The primary efficacy outcome is progression-free survival. The secondary pre-specified outcome measures include overall survival, clinical benefit rate, objective response rate and duration of response. The start of this trial followed initiation of Phase 3 clinical work in two other settings: non-small cell lung cancer and neoadjuvant treatment of triple negative breast cancer.Biogen Idec andAbbVie announced positive top-line results from the Phase 3 DECIDE trial, designed to evaluate the superiority of once-monthly, subcutaneous daclizumab high-yield process (DAC HYP) when compared to intramuscular interferon beta-1a (IFN β-1a), as a potential treatment for relapsing-remitting multiple sclerosis (RRMS), the most common form of multiple sclerosis. Results showed that DAC HYP was superior on the study's primary endpoint, demonstrating a statistically significant 45 percent reduction in annualized relapse rate (ARR) compared to IFN β-1a (p<0.0001).AbbVie presented interim results from a Phase 1b clinical trial of ABT-199/GDC-0199, an investigational B-cell lymphoma 2 (BCL-2) selective inhibitor, in combination with rituximab. Results showed an overall response rate of 84 percent, in patients with relapsed/refractory chronic lymphocytic leukemia (CLL). These results were presented at the 50th Annual Meeting of theAmerican Society of Clinical Oncology (ASCO). The combination of ABT-199/GDC-0199 and rituximab is being investigated in an ongoing Phase 3 clinical trial for the treatment of relapsed/refractory CLL.AbbVie presented updated data from another Phase 1 study of ABT-199/GDC-0199 as a monotherapy including results from the trial arms investigating the compound as a treatment for patients with relapsed/refractory CLL and a variety of subtypes of non-Hodgkin's lymphoma (NHL ), including diffuse large B-cell lymphoma (DLBCL). ABT-199/GDC-0199 as a monotherapy in patients with relapsed/refractory CLL harboring the 17p deletion is under investigation in an ongoing Phase 2 clinical trial.- Also at
ASCO ,AbbVie released preliminary results from an ongoing Phase 1 study of ABT-414, an anti-epidermal growth factor receptor (EGFR) monoclonal antibody drug conjugate, in combination with temozolomide, which showed four objective responses, including one complete response, in patients with recurrent or unresectable glioblastoma multiforme. The trial was designed to evaluate the toxicities, pharmacokinetics and recommended Phase 2 dose of ABT-414 when administered every other week in combination with temozolomide in patients with recurrent or unresectable glioblastoma. Other important assessments included adverse events, pharmacokinetic parameters, objective response and tumor tissue epidermal growth factor receptor biomarkers. - The New Drug Application for
AbbVie's investigational, all-oral, interferon-free regimen for the treatment of adult patients with chronic genotype 1 hepatitis C virus (HCV) infection was accepted by theU.S. Food and Drug Administration (FDA ) and granted priority review. Additionally, the Marketing Authorization Applications forAbbVie's HCV regimen were validated and are under accelerated assessment by theEuropean Medicines Agency (EMA). AbbVie andBristol-Myers Squibb announced that theFDA has granted elotuzumab, an investigational humanized monoclonal antibody, Breakthrough Therapy Designation for use in combination with lenalidomide and dexamethasone for the treatment of multiple myeloma in patients who have received one or more prior therapies. Phase 3 studies are ongoing and expected to complete in 2015.- On
June 19 , theAbbVie board of directors declared a quarterly cash dividend of$0.42 per share, payableAug. 15, 2014 to stockholders of record at the close of business onJuly 15 , 2014.
Full-Year 2014 Outlook
Excluding the potential impact of the transaction with Shire,
Third-Quarter 2014 Outlook
Excluding the potential impact of the transaction with Shire,
The Full-Year 2014 Outlook and Third-Quarter 2014 Outlook constitute profit forecasts under Rule 28 of the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers (the "Code").
In accordance with Rule 28.4(a) of the Code, the principal assumptions upon which the forecasts are based are included at Schedule 1 to this announcement. In accordance with Rule 28.4(b) of the Code, there is a clear distinction in Schedule 1 between assumptions which the Directors of
The Third-Quarter 2014 Outlook has been reported on by
The Directors of
In accordance with Rule 30.4 of the Code, a copy of this announcement will be available on
About
Conference Call
Non-GAAP Financial Results
Financial results for 2013 and 2014 are presented on both a reported and a non-GAAP basis. Reported results were prepared in accordance with GAAP and include all revenue and expenses recognized during the period. Non-GAAP results adjust for certain non-cash items and for factors that are unusual or unpredictable, and exclude those costs, expenses, and other specified items presented in the reconciliation tables later in this release. AbbVie's management believes non-GAAP financial measures provide useful information to investors regarding
No Offer or Solicitation
This release is provided for informational purposes only and does not constitute an offer to sell, or an invitation to subscribe for, purchase or exchange, any securities or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance, exchange or transfer of the securities referred to in this release in any jurisdiction in contravention of applicable law.
Additional Information and Where to Find it
In furtherance of the combination,
Participants in the Solicitation
Forward-Looking Statements
This release contains certain forward-looking statements with respect to a combination involving
AbbVie Inc. Key Product Sales Quarter Ended June 30, 2014 (Unaudited) |
||||||||
% Change vs. 2Q13 |
||||||||
Sales (in millions) |
International |
Total |
||||||
U.S. |
Int'l. |
Total |
U.S. |
Operational |
Reported |
Operational |
Reported |
|
TOTAL SALES |
$2,646 |
$2,280 |
$4,926 |
0.9% |
9.7% |
10.2% |
4.8% |
5.0% |
Humira |
1,661 |
1,627 |
3,288 |
35.6 |
16.2 |
17.8 |
25.4 |
26.2 |
AndroGel |
218 |
-- |
218 |
(15.6) |
n/a |
n/a |
(15.6) |
(15.6) |
Kaletra |
56 |
160 |
216 |
(15.4) |
(23.5) |
(24.4) |
(21.5) |
(22.2) |
Lupron |
133 |
53 |
186 |
(7.0) |
(0.5) |
(3.1) |
(5.2) |
(5.9) |
Synthroid |
166 |
-- |
166 |
8.7 |
n/a |
n/a |
8.7 |
8.7 |
Sevoflurane |
22 |
132 |
154 |
20.7 |
12.8 |
11.3 |
13.9 |
12.6 |
Creon |
110 |
-- |
110 |
4.1 |
n/a |
n/a |
4.1 |
4.1 |
Synagis |
-- |
74 |
74 |
n/a |
16.3 |
4.3 |
16.3 |
4.3 |
Duodopa |
-- |
56 |
56 |
n/a |
24.2 |
29.3 |
24.2 |
29.3 |
Niaspan |
21 |
-- |
21 |
(90.9) |
n/a |
n/a |
(90.9) |
(90.9) |
TriCor/Trilipix |
17 |
-- |
17 |
(84.4) |
n/a |
n/a |
(84.4) |
(84.4) |
Note: "Operational" growth reflects the percentage change over the prior year excluding the impact of exchange rate fluctuations. |
||||||||
n/a = not applicable |
AbbVie Inc. Key Product Sales Six Months Ended June 30, 2014 (Unaudited) |
||||||||
% Change vs. 6M13 |
||||||||
Sales (in millions) |
International |
Total |
||||||
U.S. |
Int'l. |
Total |
U.S. |
Operational |
Reported |
Operational |
Reported |
|
TOTAL SALES |
$4,872 |
$4,617 |
$9,489 |
2.7% |
9.1% |
8.0% |
5.7% |
5.2% |
Humira |
2,853 |
3,072 |
5,925 |
30.8 |
15.1 |
15.1 |
22.2 |
22.2 |
AndroGel |
472 |
-- |
472 |
(5.2) |
n/a |
n/a |
(5.2) |
(5.2) |
Synagis |
-- |
428 |
428 |
n/a |
10.5 |
3.0 |
10.5 |
3.0 |
Kaletra |
110 |
301 |
411 |
(7.7) |
(18.6) |
(20.4) |
(16.0) |
(17.4) |
Lupron |
273 |
102 |
375 |
1.7 |
(4.4) |
(8.4) |
-- |
(1.2) |
Synthroid |
323 |
-- |
323 |
18.7 |
n/a |
n/a |
18.7 |
18.7 |
Sevoflurane |
41 |
255 |
296 |
18.5 |
9.0 |
6.4 |
10.2 |
7.9 |
Creon |
217 |
-- |
217 |
10.7 |
n/a |
n/a |
10.7 |
10.7 |
Duodopa |
-- |
108 |
108 |
n/a |
26.6 |
30.6 |
26.6 |
30.6 |
Niaspan |
68 |
-- |
68 |
(83.8) |
n/a |
n/a |
(83.8) |
(83.8) |
TriCor/Trilipix |
40 |
-- |
40 |
(83.0) |
n/a |
n/a |
(83.0) |
(83.0) |
Note: "Operational" growth reflects the percentage change over the prior year excluding the impact of exchange rate fluctuations. |
||||||||
n/a = not applicable |
AbbVie Inc. Consolidated Statements of Earnings Quarter and Six Months Ended June 30, 2014 and 2013 (Unaudited) (In millions, except per share data) |
||||||||
Second Quarter Ended June 30 |
Six Months Ended June 30 |
|||||||
2014 |
2013 |
2014 |
2013 |
|||||
Net sales |
$4,926 |
$4,692 |
$9,489 |
$9,021 |
||||
Cost of products sold |
1,113 |
1,054 |
2,213 |
2,207 |
||||
Selling, general and administrative |
1,448 |
1,406 |
2,788 |
2,643 |
||||
Research and development |
834 |
709 |
1,606 |
1,343 |
||||
Acquired in-process research and development |
16 |
70 |
16 |
70 |
||||
Total operating cost and expenses |
3,411 |
3,239 |
6,623 |
6,263 |
||||
Operating earnings |
1,515 |
1,453 |
2,866 |
2,758 |
||||
Interest expense, net |
69 |
75 |
134 |
141 |
||||
Net foreign exchange loss |
5 |
14 |
8 |
29 |
||||
Other (income) expense, net |
8 |
(4) |
5 |
(19) |
||||
Earnings before income tax expense |
1,433 |
1,368 |
2,719 |
2,607 |
||||
Income tax expense |
335 |
300 |
641 |
571 |
||||
Net earnings |
$1,098 |
$1,068 |
$2,078 |
$2,036 |
||||
Diluted earnings per share |
$0.68 |
$0.66 |
$1.29 |
$1.27 |
||||
Diluted earnings per share, excluding specified items |
$0.82 |
$0.82 |
$1.53 |
$1.50 |
a) |
|||
Average diluted shares outstanding |
1,608 |
1,609 |
1,608 |
1,605 |
||||
a) Refer to the Reconciliation of GAAP Reported to Non-GAAP Adjusted Information for further details. |
||||||||
Note: The computation of diluted earnings per share for the quarter and six months ended June 30, 2014 was calculated pursuant to the two-class method which requires the allocation of net earnings between common stockholders and participating security holders. |
AbbVie Inc. Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Quarter Ended June 30, 2014 (Unaudited) (In millions, except per share data) |
|||
1. Specified items impacted results as follows: |
|||
2Q14 |
|||
Earnings |
Diluted |
||
Pre-tax |
After-tax |
EPS |
|
As reported (GAAP) |
$1,433 |
$1,098 |
$0.68 |
Adjusted for specified items: |
|||
Intangible asset amortization |
99 |
69 |
0.04 |
Separation costs |
110 |
96 |
0.06 |
R&D |
40 |
40 |
0.02 |
Acquired IPR&D |
16 |
16 |
0.01 |
Restructuring/Other |
12 |
11 |
0.01 |
As adjusted (non-GAAP) |
$1,710 |
$1,330 |
$0.82 |
Intangible asset amortization reflects costs recognized as a result of licensing and acquisition activities. Separation costs are expenses related to the separation of AbbVie from Abbott. R&D is associated with a milestone payment for a previously-announced collaboration. Acquired IPR&D reflects an upfront payment related to a licensing arrangement with a third party. Restructuring/Other is associated with previously announced restructuring activities. |
2. The impact of the specified items by line item was as follows: |
||||
2Q14 |
||||
Cost of products sold |
SG&A |
R&D |
Acquired IPR&D |
|
As reported (GAAP) |
$1,113 |
$1,448 |
$834 |
$16 |
Adjusted for specified items: |
||||
Intangible asset amortization |
(99) |
-- |
-- |
-- |
Separation costs |
(3) |
(106) |
(1) |
-- |
R&D |
-- |
-- |
(40) |
-- |
Acquired IPR&D |
-- |
-- |
-- |
(16) |
Restructuring/Other |
(6) |
(6) |
-- |
-- |
As adjusted (non-GAAP) |
$1,005 |
$1,336 |
$793 |
-- |
3. The adjusted tax rate for the second quarter of 2014 was 22.2 percent, as detailed below: |
|||
2Q14 |
|||
Pre-tax |
Income |
||
income |
taxes |
Tax rate |
|
As reported (GAAP) |
$1,433 |
$335 |
23.4% |
Specified items |
277 |
45 |
16.2% |
As adjusted (non-GAAP) |
$1,710 |
$380 |
22.2% |
AbbVie Inc. Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Quarter Ended June 30, 2013 (Unaudited) (In millions, except per share data) |
|||
1. Specified items impacted results as follows: |
|||
2Q13 |
|||
Earnings |
Diluted |
||
Pre-tax |
After-tax |
EPS |
|
As reported (GAAP) |
$1,368 |
$1,068 |
$0.66 |
Adjusted for specified items: |
|||
Intangible asset amortization |
136 |
98 |
0.06 |
Separation costs |
67 |
42 |
0.03 |
Acquired IPR&D |
70 |
70 |
0.04 |
Restructuring/Other |
57 |
41 |
0.03 |
As adjusted (non-GAAP) |
$1,698 |
$1,319 |
$0.82 |
Intangible asset amortization reflects costs recognized as a result of licensing and acquisition activities. Separation costs are expenses related to the separation of AbbVie from Abbott. Acquired IPR&D reflects the upfront payment related to the previously announced collaboration with Alvine Pharmaceuticals. Restructuring/Other is primarily associated with previously announced restructuring activities. |
2. The impact of the specified items by line item was as follows: |
|||||
2Q13 |
|||||
Cost of products sold |
SG&A |
R&D |
Acquired IPR&D |
Other (income) expense |
|
As reported (GAAP) |
$1,054 |
$1,406 |
$709 |
$70 |
($4) |
Adjusted for specified items: |
|||||
Intangible asset amortization |
(136) |
-- |
-- |
-- |
-- |
Separation costs |
(4) |
(60) |
(3) |
-- |
-- |
Acquired IPR&D |
-- |
-- |
-- |
(70) |
-- |
Restructuring/Other |
(7) |
(36) |
(11) |
-- |
(3) |
As adjusted (non-GAAP) |
$907 |
$1,310 |
$695 |
-- |
($7) |
3. The adjusted tax rate for the second quarter was 22.3 percent, as detailed below: |
|||
2Q13 |
|||
Pre-tax |
Income |
||
income |
taxes |
Tax rate |
|
As reported (GAAP) |
$1,368 |
$300 |
21.9% |
Specified items |
330 |
79 |
23.9% |
As adjusted (non-GAAP) |
$1,698 |
$379 |
22.3% |
AbbVie Inc. Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Six Months Ended June 30, 2014 (Unaudited) (In millions, except per share data) |
|||
1. Specified items impacted results as follows: |
|||
6M14 |
|||
Earnings |
Diluted |
||
Pre-tax |
After-tax |
EPS |
|
As reported (GAAP) |
$2,719 |
$2,078 |
$1.29 |
Adjusted for specified items: |
|||
Intangible asset amortization |
209 |
148 |
0.09 |
Separation costs |
190 |
184 |
0.11 |
R&D |
40 |
40 |
0.02 |
Acquired IPR&D |
16 |
16 |
0.01 |
Restructuring/Other |
16 |
14 |
0.01 |
As adjusted (non-GAAP) |
$3,190 |
$2,480 |
$1.53 |
Intangible asset amortization reflects costs recognized as a result of licensing and acquisition activities. Separation costs are expenses related to the separation of AbbVie from Abbott. R&D is associated with a milestone payment for a previously-announced collaboration. Acquired IPR&D reflects an upfront payment related to a licensing arrangement with a third party. Restructuring/Other is associated with previously announced restructuring activities. |
2. The impact of the specified items by line item was as follows: |
||||
6M14 |
||||
Cost of products sold |
SG&A |
R&D |
Acquired IPR&D |
|
As reported (GAAP) |
$2,213 |
$2,788 |
$1,606 |
$16 |
Adjusted for specified items: |
||||
Intangible asset amortization |
(209) |
-- |
-- |
-- |
Separation costs |
(6) |
(182) |
(2) |
-- |
R&D |
-- |
-- |
(40) |
-- |
Acquired IPR&D |
-- |
-- |
-- |
(16) |
Restructuring/Other |
(7) |
(9) |
-- |
-- |
As adjusted (non-GAAP) |
$1,991 |
$2,597 |
$1,564 |
-- |
3. The adjusted tax rate for the first half of 2014 was 22.3 percent, as detailed below: |
|||
6M14 |
|||
Pre-tax |
Income |
||
income |
taxes |
Tax rate |
|
As reported (GAAP) |
$2,719 |
$641 |
23.6% |
Specified items |
471 |
69 |
14.6% |
As adjusted (non-GAAP) |
$3,190 |
$710 |
22.3% |
AbbVie Inc. Reconciliation of GAAP Reported to Non-GAAP Adjusted Information Six Months Ended June 30, 2013 (Unaudited) (In millions, except per share data) |
|||
1. Specified items impacted results as follows: |
|||
6M13 |
|||
Earnings |
Diluted |
||
Pre-tax |
After-tax |
EPS |
|
As reported (GAAP) |
$2,607 |
$2,036 |
$1.27 |
Adjusted for specified items: |
|||
Intangible asset amortization |
271 |
196 |
0.12 |
Separation costs |
101 |
64 |
0.04 |
Acquired IPR&D |
70 |
70 |
0.04 |
Restructuring/Other |
56 |
48 |
0.03 |
As adjusted (non-GAAP) |
$3,105 |
$2,414 |
$1.50 |
Intangible asset amortization reflects costs recognized as a result of licensing and acquisition activities. Separation costs are expenses related to the separation of AbbVie from Abbott. Acquired IPR&D reflects the upfront payment related to the previously announced collaboration with Alvine Pharmaceuticals. Restructuring/Other is primarily associated with previously announced restructuring activities and the impact of the Venezuelan currency devaluation. |
2. The impact of the specified items by line item was as follows: |
||||||
6M13 |
||||||
Cost of products sold |
SG&A |
R&D |
Acquired IPR&D |
Net foreign exchange loss |
Other (income) expense |
|
As reported (GAAP) |
$2,207 |
$2,643 |
$1,343 |
$70 |
$29 |
($19) |
Adjusted for specified items: |
||||||
Intangible asset amortization |
(271) |
-- |
-- |
-- |
-- |
-- |
Separation costs |
(7) |
(89) |
(5) |
-- |
-- |
-- |
Acquired IPR&D |
-- |
-- |
-- |
(70) |
-- |
-- |
Restructuring/Other |
10 |
(38) |
(11) |
-- |
(11) |
(6) |
As adjusted (non-GAAP) |
$1,939 |
$2,516 |
$1,327 |
-- |
$18 |
($25) |
3. The adjusted tax rate for the first half of 2013 was 22.3 percent, as detailed below: |
|||
6M13 |
|||
Pre-tax |
Income |
||
income |
taxes |
Tax rate |
|
As reported (GAAP) |
$2,607 |
$571 |
21.9% |
Specified items |
498 |
120 |
24.1% |
As adjusted (non-GAAP) |
$3,105 |
$691 |
22.3% |
Questions & Answers |
|
To provide investors with more insight into AbbVie's business and answer ongoing questions while we operate under the UK Takeover Code, we have expanded our earnings news release to include the following Q&A section. |
|
Financial Questions |
|
Q) |
What is the expected level of sales growth for the remainder of 2014? |
A) |
We are forecasting low- to mid-single-digit operational sales growth in both the third and fourth quarters of 2014. As a reminder, our 2014 outlook excludes any potential revenue from the expected 2014 U.S. launch of our HCV therapy. |
Q) |
What is the expected gross margin profile for the remainder of 2014? |
A) |
We expect the third-quarter gross margin ratio to be approximately 79 percent. For the fourth quarter, the ratio is expected to be somewhat lower than the third quarter driven by product mix, particularly an increase in lower-margin Synagis sales. |
Q) |
How will investment in SG&A impact AbbVie's second-half 2014 results, particularly in light of the anticipated HCV approval and launch? |
A) |
As noted on our fourth-quarter earnings conference call in January, we are forecasting a higher level of SG&A expense in 2014 compared to 2013, driven primarily by investments we are making for the upcoming launch of our HCV regimen in the U.S. and Europe. For the third quarter, we expect a modest sequential increase in absolute SG&A expense from the second quarter. For the fourth quarter, given the proximity to the U.S. HCV launch, we'd expect a more meaningful sequential increase in absolute SG&A expense from the third-quarter level. This has been reflected in our recently-increased adjusted earnings-per-share guidance. |
Q) |
What level of R&D spend do you expect in second-half 2014? |
A) |
We currently have a significant number of Phase 3 programs in active development including exciting opportunities in oncology, HCV, immunology and other areas that warrant investment. As a result, we expect R&D expense to be above 16 percent of sales for the full-year 2014, reflecting a meaningful increase in R&D spending over the prior year. For the third quarter, we expect a sequential increase in absolute R&D investment from the second-quarter level. For the fourth quarter, we are forecasting a more modest sequential increase from the third-quarter level. This has been reflected in our recently-increased adjusted earnings-per-share guidance. |
Marketed Product Performance Questions |
|
Q) |
What factors impacted HUMIRA performance in second-quarter 2014? |
A) |
In the United States, HUMIRA sales increased 35.6 percent, driven by continued market expansion, share gains, and particularly strong growth in gastroenterology. Second quarter wholesaler inventory levels remain at roughly two weeks, consistent with the first quarter. Growth in the second quarter benefitted from retail buying patterns and a favorable comparison to the prior year. We expect third-quarter HUMIRA sales growth in the U.S. to be reflective of underlying product demand and pricing trends, partially offset by a reduction in retail buying patterns. As a result, we are forecasting high-teens growth for HUMIRA in the U.S. in the third quarter. |
Internationally, HUMIRA sales grew 16.2 percent on an operational basis and 17.8 percent on a reported basis. International growth continues to be driven by the uptake of new indications, share gains and double-digit market growth in most key countries. Performance in the quarter also benefitted modestly from the timing of international shipments. We are forecasting low double-digit growth for HUMIRA internationally in the third quarter driven by strong underlying trends, partially offset by the timing of shipments in international markets. |
|
On a global basis, we continue to expect double-digit sales growth for HUMIRA in 2014. |
|
Q) |
What impacted AndroGel sales in the second quarter? |
A) |
AndroGel sales were $218 million, down 15.6 percent from the prior year quarter. We continue to see a notable slowdown in the market, with overall prescriptions down more than 20 percent in recent months. We expect these market trends to continue. |
Q) |
What impacted Kaletra sales in the second quarter? |
A) |
Global Kaletra sales in the quarter were $216 million, down 21.5 percent on an operational basis. This performance has been driven by increasing competition in the HIV marketplace and is in line with our plan expectations for the product. |
Q) |
What impacted Synthroid sales in the second quarter? |
A) |
U.S. sales of Synthroid were $166 million, up 8.7 percent year-over-year. Synthroid maintains strong brand loyalty and market leadership, despite the entry of generics into the market many years ago. The overall market has experienced low-single digit growth, with Synthroid growth outpacing the market, including product pricing trends. |
Q) |
What impacted Lupron sales in the second quarter? |
A) |
Global Lupron sales were $186 million, down 5.2 percent on an operational basis. Lupron continues to hold a leadership position and maintains significant share of the market. Performance this quarter is roughly in line with our full-year expectations for Lupron, and is also consistent with recent market trends. |
Q) |
What impacted Sevoflurane sales in the second quarter? |
A) |
Global Sevoflurane sales were $154 million in the quarter, up 13.9 percent on an operational basis. Performance in the quarter was driven by strong international execution, including key account retention, and underlying volume trends. |
Q) |
What impacted Creon sales in the second quarter? |
A) |
U.S. Creon sales were $110 million in the quarter, up 4.1 percent. Creon maintains its leadership position in the pancreatic enzyme market, where the product continues to capture the vast majority of new prescription starts. |
Q) |
What impacted Synagis sales in the second quarter? |
A) |
Sales of Synagis were $74 million in the second quarter, up 16.3 percent 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 of the year. Growth in the quarter was driven by continued product uptake and strong commercial execution. |
Q) |
What impacted Duodopa sales in the second quarter? |
A) |
Sales of Duodopa, our therapy for advanced Parkinson's disease approved in Europe and other international markets, were $56 million, up 24.2 percent on an operational basis this quarter. Performance in the quarter is in line with recent trends and our full-year outlook for the product. |
Q) |
What impacted Dyslipidemia sales in the second quarter? |
A) |
Sales of Niaspan were $21 million and TriCor/Trilipix sales were $17 million, both down significantly due to generic competition. We expect these trends to continue for the remainder of 2014. |
Pipeline Questions |
|
Q) |
What are the upcoming milestones from the AbbVie pipeline? |
A) |
We expect a number of pipeline milestones over the next 6-9 months including data presentations, clinical trial advancements and regulatory actions. These include: |
|
|
Shire Transaction Questions |
|
Q) |
When do you anticipate providing additional details regarding various aspects of the financial impact of the Shire transaction, including accretion profile and synergies? |
A) |
We will comment further on our plans in the transaction documents in the fall. It is expected that the transaction will be completed in the fourth quarter of 2014. Comments made to date include the following: |
AbbVie expects the transaction to be accretive to AbbVie's adjusted EPS in the first year following the completion, growing to above $1.00 per share by 2020, with material ongoing financial and operating benefits. |
|
Note: Adjusted EPS excludes intangible asset amortization expense and purchase accounting adjustments and other specified items. The statement that the Transaction is earnings accretive should not be construed as a profit forecast and is therefore not subject to the requirements of Rule 28 of the Code. It should not be interpreted to mean that the earnings per share in any future financial period will necessarily match or be greater than those for the relevant preceding financial period. |
|
Q) |
What is the expected tax rate for AbbVie following the Shire transaction? |
A) |
The AbbVie Board expects the transaction to reduce New AbbVie's effective tax rate to approximately 13 percent by 2016 and provide New AbbVie with access to its global cash flows. |
Q) |
What is the expected impact to AbbVie's credit ratings following the Shire transaction? |
A) |
New AbbVie intends to maintain its investment grade rating profile following the transaction. |
Q) |
What are AbbVie's plans for dividend growth and share repurchase following the Shire transaction? |
A) |
It is AbbVie's intent, upon completion of the transaction, to maintain a strong commitment to a growing dividend and to implement a significant share repurchase program. |
Q) |
When do you anticipate providing 2015 financial guidance, inclusive of the Shire impact? |
A) |
We have typically provided guidance for the coming year on our fourth-quarter earnings conference call. We expect to do something similar for our 2015 guidance. |
Q) |
Do you anticipate New AbbVie will be included in the S&P 500? |
A) |
It is intended that the New AbbVie shares will be listed on the New York Stock Exchange. As a result, we expect that New AbbVie will be included in the S&P 500. |
Q) |
Which countries have been identified as requiring approval as a condition of the Shire transaction? |
A) |
Principal countries in which approvals are required or potentially required include: United States, Canada, Ukraine, Israel, Russia and the European Union. |
Q) |
What are the tax implications of the Shire transaction for shareholders of both companies? |
A) |
It is expected that Shire Shareholders who are resident in the UK for tax purposes will generally not be charged to tax in the UK in respect of that element of the consideration provided to them in the form of shares in New AbbVie, but that any cash consideration received by such shareholders for their Shire Shares will crystallise a disposal for such shareholders for the purposes of UK tax on chargeable gains and may, depending on the circumstances of such shareholders, give rise to a charge to UK capital gains tax or UK corporation tax. |
It is expected that, for U.S. federal income tax purposes, the Transaction generally will be taxable to U.S. shareholders of both AbbVie and Shire. The tax consequences of the Transaction may vary based on an individual shareholder's circumstances, and a more complete description of the anticipated tax consequences of the Transaction will be made available in the Scheme Circular and the AbbVie Proxy Statement. |
|
This information is intended to be general guidance only and does not take into account individual investors' specific circumstances or constitute tax advice to any investor. Investors who require further information about the tax consequences of the transaction are urged to seek tax advice from appropriately qualified tax advisors. |
Schedule 1
Profit Forecast for
In accordance with Rule 28.4(a) of the Code, the principal assumptions upon which the profit forecast is based are included in this Schedule 1 to the announcement. In accordance with Rule 28.4(b) of the Code, there is a clear distinction made between assumptions which the Directors of
1. General
Full-Year 2014 Outlook
Excluding the potential impact of the transaction with Shire,
AbbVie is confirming its recently-increased diluted earnings-per-share guidance for the full-year 2014 of$3.06 to $3.16 on an adjusted basis, or$2.69 to $2.79 on a GAAP basis.AbbVie's 2014 outlook excludes any potential revenue from the expected 2014 U.S. launch of its hepatitis C (HCV) therapy. The company's 2014 adjusted diluted earnings-per-share guidance excludes$0.37 per share of intangible asset amortization expense and other specified items primarily associated with certain separation-related costs and ongoing restructuring activities.
Third-Quarter 2014 Outlook
Excluding the potential impact of the transaction with Shire,
AbbVie is issuing diluted earnings-per-share guidance for the third-quarter 2014 of$0.77 to $0.79 on an adjusted basis, or$0.68 to $0.70 on a GAAP basis. The company's third-quarter adjusted diluted earnings-per-share excludes$0.09 per share of intangible asset amortization expense and other specified items primarily associated with certain separation-related costs and ongoing restructuring activities.
The above statements for the financial year ending
In the above statements, adjusted diluted earnings per share is defined as net earnings attributable to
2. Basis of preparation
The AbbVie Profit Forecast has been prepared on a basis consistent with the accounting policies for
3. Assumptions
Factors outside the influence or control of
- There will be no material change to the existing prevailing global macroeconomic and political conditions during the year ended
December 31, 2014 . - The Euro, British pound and Japanese yen and other exchange rates, and inflation and tax rates in
AbbVie's principal markets will remain materially unchanged from the prevailing rates. - There will be no material change in legislation or regulatory requirements impacting on
AbbVie's operations or its accounting policies. - There will be no material change in
AbbVie's labour costs, including medical and pension and other post-retirement benefits driven by external parties or regulations. - There will be no material adverse events that will have a significant impact on
AbbVie's financial performance.
Factors within the influence or control of
- The AbbVie Profit Forecast excludes any material acquisitions or disposals in the year ended
December 31, 2014 . - This AbbVie Profit Forecast excludes any future one-time costs associated with the proposed transaction with
Shire plc , which will be quantified at a later date. - Current separation plans and costs as part of the Transition Service Agreement with Abbott will conclude materially as
AbbVie would reasonably expect based onAbbVie's past experience. - The AbbVie Profit Forecast excludes any potential revenue from the expected 2014 U.S. launch of its HCV therapy.
- There will be no material change in the weighted average number of diluted shares in issue.
- There will be no material change in the present management or control of
AbbVie or its existing operational strategy.
Schedule 2
Report of
The Directors (the "Directors")
1
Canary Wharf
E14 5JP
Dear Sirs
We report on the profit forecast comprising the statement by
This report is required by Rule 28.1(a)(i) of the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers (the "City Code") and is given for the purpose of complying with that rule and for no other purpose.
Responsibilities
It is the responsibility of the Company and the directors of the Company (the "Directors") to prepare the Profit Forecast in accordance with the requirements of the City Code.
It is our responsibility to form an opinion as required by Rule 28.1(a)(i) of the City Code as to the proper compilation of the Profit Forecast and to report that opinion to you.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under Rule 28.1(a)(i) of the City Code to any person as and to the extent therein provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 23.3(b) of the City Code, consenting to its inclusion in the Document.
Basis of Preparation of the Profit Forecast
The Profit Forecast has been prepared on the basis stated in Schedule 1 of the Document and is based on the unaudited interim financial results for the six months ended
Basis of Opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included evaluating the basis on which the historical financial information included in the Profit Forecast has been prepared and considering whether the Profit Forecast has been accurately computed based upon the disclosed assumptions and the accounting policies of the Group. Whilst the assumptions upon which the Profit Forecast are based are solely the responsibility of the Company and the Directors, we considered whether anything came to our attention to indicate that any of the assumptions adopted by the Company and the Directors which, in our opinion, are necessary for a proper understanding of the Profit Forecast have not been disclosed or if any material assumption made by the Company and the Directors appears to us to be unrealistic.
We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Profit Forecast has been properly compiled on the basis stated.
Since the Profit Forecast and the assumptions on which it is based relate to the future and may therefore be affected by unforeseen events, we can express no opinion as to whether the actual results reported will correspond to those shown in the Profit Forecast and differences may be material.
Our work has not been carried out in accordance with auditing standards generally accepted in
Opinion
In our opinion, the Profit Forecast has been properly compiled on the basis stated and the basis of accounting used is consistent with the accounting policies of the Group.
Yours faithfully
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Schedule 3
Report of J.P. Morgan pursuant to Rule 28.1(a)(ii) of the City Code on Takeovers and Mergers
The Directors (the "Directors")
1
Dear Sirs
Report by the financial adviser to
We refer to the profit forecast comprising the statement by the Company and its subsidiaries in relation to the third quarter guidance for the three months ending
We have discussed the Profit Forecast and the bases and assumptions on which it has been prepared with duly authorized executive officers of the Company (acting on behalf of the Company) and with
This letter to you is provided solely in connection with our obligation under Rule 28.1(a) (ii) of the City Code on Takeovers and Mergers and for no other purpose. We accept no responsibility and, to the fullest extent permitted by law, exclude all liability to any other person other than to you, in your capacity as directors of the Company, in respect of this letter or the work undertaken in connection with this letter.
On the basis of the foregoing, we consider that the Profit Forecast referred to above, for which the Company and the Directors are solely responsible, has been prepared with due care and consideration.
Yours faithfully,
/s/
SOURCE
Media, Jennifer Smoter, (847) 935-8865; Adelle Infante, (847) 938-8745; Investors, Larry Peepo, (847) 935-6722; Liz Shea, (847) 935-2211