AbbVie Inc. (ABBV) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents a positive outlook, with increased EPS guidance, revenue growth, and dividend hikes. Neuroscience and oncology show promising growth, and strategic investments in R&D and capital allocation support future prospects. Despite some pricing headwinds and market challenges, the overall sentiment remains positive, especially with strong guidance and shareholder returns.

Key Financial Performance

Adjusted Earnings Per Share (EPS) $10 for the full year, which is $0.54 above the initial guidance midpoint, excluding the impact of IPR&D expense.

Total Net Revenues $61.2 billion for the full year, exceeding initial guidance by more than $2 billion, with an 8.6% sales growth year-over-year. This was achieved despite nearly $16 billion of U.S. Humira erosion since the LOE.

Adjusted R&D Expense Increased by nearly $1 billion year-over-year to fully fund 90 clinical programs currently in development.

Skyrizi and Rinvoq Combined Revenue $25.9 billion for the full year, an increase of more than $8 billion year-over-year, reflecting exceptional performance across their respective indications.

Humira Global Sales More than $1.2 billion in the fourth quarter, down 26.1% year-over-year due to biosimilar competition.

Neuroscience Full-Year Revenues More than $10.7 billion, reflecting an increase of nearly $1.8 billion year-over-year, driven by double-digit growth in products like Vraylar, Botox Therapeutic, Ubrelvy, and Qulipta.

Vyalev Sales $183 million in the fourth quarter, up approximately 33% sequentially, with strong uptake in international markets.

Oncology Total Revenues Nearly $1.7 billion in the fourth quarter, down 2.5% year-over-year, with Venclexta global sales up 6.4% but offset by a 20.8% decline in Imbruvica sales due to competitive dynamics.

Aesthetics Global Sales Nearly $1.3 billion in the fourth quarter, down 1.2% year-over-year, with Botox Cosmetic revenues up 3.8% but Juvederm sales down 10.8% due to economic headwinds.

Adjusted Gross Margin 83.6% of sales for the fourth quarter.

Adjusted Operating Margin 38.3% of sales for the fourth quarter, including a 7.6% unfavorable impact from acquired IPR&D expense.

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Operating Highlights

New Product Approvals: Obtained approvals for Rinvoq for GCA, EMRELIS for non-squamous non-small cell lung cancer, and EPKINLY for second-line follicular lymphoma.

Pipeline Investments: Invested over $5 billion in new business development, including technologies like in vivo CAR-T platform, bretisilocin for depression, and a next-generation siRNA platform.

Emerging Products: Vyalev for Parkinson's disease is expected to achieve blockbuster status in 2026.

Immunology Market Leadership: Skyrizi and Rinvoq combined sales exceeded $25.9 billion in 2025, with strong growth in psoriasis, PSA, and IBD markets.

Neuroscience Expansion: Vyalev's strong uptake in Parkinson's disease and double-digit growth in migraine products like Vraylar and Qulipta.

Oncology Portfolio: Strengthened with new products like Elahere, Epkinly, and EMRELIS, despite challenges with Imbruvica.

Revenue Growth: Achieved record net revenues of $61.2 billion in 2025, an 8.6% growth year-over-year.

R&D Investments: Increased R&D spending by nearly $1 billion, funding 90 clinical programs.

Operational Efficiencies: Adjusted operating margin ratio improved to 38.3% in Q4 2025.

Strategic Transactions: Acquired new growth sources, including a PD-1 VEGF bispecific antibody from RemeGen to enhance oncology portfolio.

Government Agreement: Entered a 3-year agreement with the U.S. government to offer low prices in Medicaid and invest $100 billion in R&D and capital over the next decade.

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Risk or Challenges

Humira Erosion: Continued erosion of Humira sales due to biosimilar competition, with further decreases in access expected in 2026 as more plans move to exclusive biosimilar contracts.

Imbruvica IRA Pricing: Imbruvica sales are expected to decline further in 2026 due to competitive dynamics and unfavorable IRA-related pricing.

Economic Headwinds in Aesthetics: Economic challenges are impacting global market conditions for aesthetics, with category growth expected to remain challenged in 2026.

Regulatory and Pricing Pressures: Voluntary agreement with the U.S. government includes commitments to lower prices in Medicaid and expand direct-to-patient cash pay options, which may impact profitability.

Supply Chain and Market Competition: Competitive pressures in oncology and other therapeutic areas, along with potential supply chain challenges, could impact growth.

R&D Investment Risks: Significant investments in R&D and new business development, including $5 billion in 2025, carry inherent risks if expected returns are not realized.

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Guidance & Outlook

2026 Total Sales Growth: AbbVie anticipates total sales growth of 9.5% in 2026, driven by robust sales results despite headwinds from continued Humira erosion and Imbruvica IRA pricing.

Skyrizi and Rinvoq Sales: Combined sales of Skyrizi and Rinvoq are expected to exceed $31 billion in 2026, already surpassing the 2027 long-term guidance by $0.5 billion.

Vyalev Sales: Vyalev is forecasted to achieve blockbuster status in 2026 as a transformational treatment for Parkinson's disease.

Migraine Products Revenue Growth: Continued double-digit revenue growth is expected from leading migraine products, which are trending significantly above long-term expectations.

Revenue Growth Through 2029: AbbVie is well positioned to deliver high single-digit revenue growth through 2029, supported by a diverse portfolio.

R&D Catalysts: Key catalysts are anticipated across core therapeutic areas over the next 24 months, including pivotal data for Rinvoq indications, Crohn's combination platform with Skyrizi, and next-generation assets in neuroscience and oncology.

U.S. Government Agreement: A voluntary 3-year agreement with the U.S. government includes offering low prices in Medicaid, expanding direct-to-patient cash pay options, and committing $100 billion in U.S. R&D and capital investments over the next decade.

Immunology Sales: Global immunology sales are projected to reach $34.5 billion in 2026, including Skyrizi revenue of $21.5 billion and Rinvoq revenue of $10.1 billion.

Neuroscience Sales: Global neuroscience sales are expected to reach $12.5 billion in 2026, driven by strong growth in Vraylar, Botox Therapeutic, oral CGRP products, and Vyalev.

Oncology Sales: Global oncology sales are forecasted at $6.5 billion in 2026, including Venclexta revenue of $3 billion and Elahere revenue of $850 million.

Aesthetics Sales: Global aesthetics sales are projected at $5 billion in 2026, including Botox Cosmetic revenue of $2.7 billion and Juvederm sales of $950 million.

Adjusted Operating Margin: The adjusted operating margin ratio is expected to expand to approximately 48.5% in 2026, reflecting meaningful growth compared to 2025.

Free Cash Flow: AbbVie expects to generate free cash flow of approximately $18.5 billion in 2026, supporting dividends and business development investments.

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Shareholder Return Plan

Dividend Growth: AbbVie has increased its quarterly dividend by more than 330% since inception.

Dividend Support: The company expects to generate free cash flow of approximately $18.5 billion in 2026, which will support a strong and growing quarterly dividend.

Share Count: The company expects its share count to remain roughly in line with 2025.

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Key Q&A

Q:Could you provide more details on the psychedelic in development and its potential to improve upon J&J's bravado?

A:The psychedelic works through the 5-HT2A serotonergic pathway, has a short-acting hallucination period, and shows immediate and sustained efficacy. It has high levels of efficacy leading to remission-like states in most patients. Two more readouts are expected before Phase III begins, with plans to reduce the control arm dose and compare it to a lower dose of the drug itself. Phase III plans will be discussed with regulators by Q3.

Q:Is there any change in new start share for Skyrizi in IBD with the entry of TREMFYA?

A:There are slight distinctions in capture rates between Crohn's and UC, largely due to the timing of competitor launches. Skyrizi has very high and stable new patient starts in both UC and Crohn's, with 75% overall capture rates in IBD frontline settings and 80% in Crohn's. The IL-23 category is expanding, and Skyrizi maintains strong momentum.

Q:What is your view on consensus growth expectations for Skyrizi and Rinvoq?

A:The combined guidance for Skyrizi and Rinvoq is $0.5 billion higher than the 2027 estimate, with robust growth expected into the 2030s. The market growth projections and next wave of Rinvoq indications suggest further upside potential. Neuroscience and oncology are also underappreciated growth areas, with neuroscience expected to deliver mid-teens growth this year and oncology showing promising data in multiple cancers.

Q:What is your BD lens for potential deals, and what is the size and risk profile of deals you might consider?

A:Over $8 billion has been invested in external innovation in the last two years, focusing on early-stage opportunities to drive growth in the next decade. The company is open to both early and late-stage assets in core areas like immunology, neuroscience, oncology, and obesity. Differentiated assets will be pursued, and there is financial capacity to invest in both internal and external innovation.

Q:What are the expectations for the upcoming Rinvoq and LUTI Phase III HS data?

A:Rinvoq is expected to perform well in a treatment failure population, with efficacy potentially lower than in naive populations but still meaningful. Lutikizumab, targeting IL-1 beta, has shown high efficacy in Phase II and will be studied in both naive and experienced populations. The positioning of these two medicines will follow a similar strategy to IBD, with one leading in the naive setting and the other for patients not finding relief with current biologics.

Q:How do you see the oncology portfolio evolving, and are there gaps in the portfolio?

A:The oncology portfolio focuses on rapid efficacy with better tolerability compared to conventional chemotherapy. Temab-A and PD-1 VEGF are key assets, with potential combinations in multiple tumor types. Biomarker approaches are being developed for individualized care. A T cell engager could complement 706 in small cell lung cancer, and KRAS-targeted therapies are being explored. The portfolio is well-positioned, with additional assets like 969 in prostate cancer and trispecifics in multiple myeloma.

Q:What are the expectations for the aesthetics franchise, particularly with the TrenibotE approval?

A:The sales impact of TrenibotE will largely accrue to Botox, with significant patient inflow expected to double at peak. The commercial impact will be seen in higher conversion rates to full-strength Botox, with growth expected to gate heavily into 2027 and beyond. The innovation is expected to increase inflows and Botox share over time.

Q:What is the impact of Botox being selected for Medicare price reductions in 2028?

A:The selection was disappointing but anticipated based on CMS spend. It does not impact long-term growth guidance. There is no significant interaction between therapeutic and cosmetic pricing, and the company is comfortable with the pricing separation.

Q:What are the pricing dynamics for Skyrizi and Rinvoq?

A:Low single-digit pricing headwinds are expected for both products in 2026 and the next few years. In 2025, Skyrizi pricing was roughly flat, while Rinvoq saw a slight year-over-year decline. High single-digit pricing headwinds are expected for Rinvoq in Q1 due to unfavorable comparisons.

Q:What can be done to neutralize competition's impact on Skyrizi in IBD?

A:Strategies include leveraging head-to-head data with ENTYVIO, addressing the subcu induction versus IV induction gap by early 2027, and maintaining leadership through strong capture rates and category expansion.

Q:What is the progress in the migraine primary care expansion?

A:AbbVie has a strong position in the migraine market, with leading brands Ubrelvy and Qulipta. The company has significant primary care presence, covering over 70,000 physicians. Both brands are expected to exceed $5 billion in peak sales, with continued share gains and strong commercial execution.

Q:What is the sizing of the Rinvoq opportunity in vitiligo, and is there a competitive threat from IL-15 therapies?

A:The vitiligo opportunity is sized at over $0.5 billion at peak, with strong data and no systemic treatment currently available. The competitive threat from IL-15 therapies will depend on their efficacy and tolerability, but Rinvoq's high efficacy and tolerability provide a strong competitive position.

Q:What is the potential for 932 as a follow-on to Vraylar, and are there plans to expand into other areas like addiction?

A:932 aims to improve on Vraylar by reducing movement disorders while maintaining efficacy. Data will be analyzed for bipolar I and II. Expansion into areas like addiction is possible, and other assets in psychiatry are being developed, including bretisilocin and emraclidine.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the financial impact of Botox's Medicare price reductions on the cosmetic side, stating only that they are comfortable with the pricing separation. Additionally, they did not provide clear numerical expectations for the TrenibotE approval's impact on aesthetics growth, citing the need for further training and market development.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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AbbVie has raised its revenue and EPS guidance, indicating strong financial performance. Skyrizi and Rinvoq are expected to exceed guidance, and there is optimism in the neuroscience and immunology portfolios. Despite challenges in the aesthetics market and Humira erosion, the company anticipates growth driven by pipeline advancements and strategic acquisitions. The Q&A highlighted strong competitive positioning and market share gains. While some uncertainties remain, the overall sentiment is positive, suggesting a stock price increase in the short term.

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