And I would say that when you look at that impairment, the magnitude of the impairment is driven by a number of factors, but really, one of the biggest factors that you’re seeing there is it requires you to discount the future cash flow. So as we calculate the future cash flows, looked at what we had assumed was a reasonable assumption on the price, you discount those back. And so that creates part of the magnitude of this adjustment. In terms of the negotiated price that we assumed, I think we’re in the middle of these negotiations, and it really wouldn’t be appropriate for us to talk about what that is. But we looked at a number of factors, and we think that process is going to play out. Certainly, we will see on February 1 in a private conversation with CMS what they anticipate at least an initial thought on price, but it won’t be finalized until September 1 of next year.
And so we will see what that price is as the process plays out.
Operator: Next question comes from Steve Scala with TD Cowen.
Steve Scala : I have two questions and one clarification. First, a clarification. Is the base year for the high single-digit revenue growth to the end of the decade? Is the base year 2023 — or excuse me, 2024 or 2025. I think it’s ’25, but maybe you can clarify that. Second, given AbbVie’s stated interest in building the oncology business, I assume that AbbVie took a hard look at the ADC deal that Merck signed with Daiichi. I’m just curious what about it didn’t you like — was it the profile of the products? Was it the price? Or do you feel you have everything you need already? And then the last question is at least 1 other company has changed its tax rate guidance stemming from a recent IRS document clarifying Section 174 tax legislation. Do you have any perspective on this update and why it doesn’t impact AbbVie?
Rob Michael : Steve, this is Rob. I’ll take your first question. So the base year is ’24. And if you think about it, we signaled that we expect to return a robust growth in ’25. And so that high single-digit CAGR really would pick up that first year of robust growth of 25%. If you start in ’25, you miss that your growth. So our intention has always been ’24 is a base year and that high single-digit CAGR starts from ’24 to the end of the decade.
Rick Gonzalez : Steve, this is Rick. I’ll take the second question. Obviously, I’m not going to comment on whether we looked at that same transaction and that probably wouldn’t be appropriate. But what I can tell you is we knew it was there. So maybe that gives you some idea of our perspective on it. But the reality is, we believe we have what we need with 400. We believe that platform, and we own that platform, we developed it internally. We give us everything that we need in that area. And so it wasn’t something that we were looking at. Scott?
Scott Reents : Yes. It’s Scott. So with respect to the tax legislation, I certainly when can talk about what our facts are. But when we’ve looked at — certainly, this results out of tax reform legislation a few years ago. The tax rules, there’s always a little bit of uncertainty. And what happened this quarter, there was guidance that came out that, I would say, clarified a certain approach in treatment. Prior to that guidance, though, there was a little bit of a diversity of opinion amongst advisors as to — and ourselves as to how we might implement. So I would tell you that we were already implementing consistent with how that guidance ultimately came out, and that’s why you’re not seeing any impact to us on our tax rate.
Operator: The next question comes from Gary Nachman with Raymond James.
Gary Nachman : So first, back to the trough raise in 2024. How are you thinking about spending levels for both SG&A and R&D into the trough year next year to set up for growth in ’21 and beyond? Do you have a better sense of where the operating margin might end up next year? And then secondly, Scares and Rinvoq have been doing very well in the IBD indications talk about how much headroom you see for those products in UC and Crohn’s with that landscape likely getting more competitive in the coming years? And any updated thoughts on 2025 guidance for those products?
Scott Reents: Gary, it’s Scott. I’ll start with your question regarding operating margin. So when we’ve looked at the operating margins we talked about in the past, for ’23 and ’24, we talked about those being very, very similar. So when you think about the operating margin that we’ve talked about for this year and next year, it’s really about 46% to 47% range. This year, our guidance is 46.5% and we would expect operating margin in ’24 to be very similar to what we’re seeing this year. And then I think as a result, roughly the gross margin is going to be in line in ’24 with what we’re seeing this year as well as the expense profile. So very consistent with this year. And of course, we’ll refine that when we come out with guidance.
Jeff Stewart : Yes. This is Jeff. I’ll highlight the — your comment on the head space and IBD. I mean the IBD market is very, very attractive. If we think back historically, we were always, frankly, a little surprised at how fast Humira back in the day grew when we started to achieve the UC and the Chrome’s indications. And again, I would say we’re very, very pleasantly encouraged about the momentum. The momentum is very, very significant. So there is significant headroom. And what we see in the market dynamic is that unlike what you might think that patients would always want to rotate off of their medications because of the severity of the disease, actually physicians haven’t been able to really move the market very much over the years, simply because it’s very dangerous to try to go to another drug that hasn’t provided any increase in benefit for those patients.
It puts those patients at risk. So when you look at what Tom had highlighted, our ability with two complementary assets — for example, in the U.S., Skyrizi position in the early lines, Rinvoq position in later lines, both of which have exceptional performance criteria versus the market. That gives us a lot of confidence. The other thing that gives us a lot of confidence because there will be more competitive entries in the future is we think our profiles are going to hold up exceptionally well. And then there’s the commercial executional component in most of the countries around the world, we have dual sales forces that basically will carry two products with four big indications. So our ability to compete in the market for share even as it gets a little more competitive over time, is still going to be very, very strong.
So lots of headroom in the market, lots of unmet need in the market, and we believe we have the best position in the market for the foreseeable future.
