Liz Shea: Thanks, [indiscernible]. Operator, next question, please.
Operator: Thank you. And our next question comes from Gary Nachman with Raymond James. Your line is open.
Gary Nachman: Thanks and good morning. First on Aesthetics, could you talk a bit more why you’re confident in what seems to be a pretty decent return to growth in 2024. So how much of a headwind could China be offsetting the US growth. And what are other regions will you be getting some somewhat of a lift this year. Just talk about the dynamics on that front. And then secondly, just — as you return to more robust revenue growth in 2025, what are reasonable expectations for operating margins directionally in 2025. Can that expand at all or is it more likely to be depressed from the ImmunoGen and Cerevel deals? Just give us some directional way to think about that for next year. Thank you.
Carrie Strom: Hi, this is Carrie, I’ll take your first question on Aesthetics and the Aesthetics market recovery. So I’ll start with the US and we have started to see the US toxin market recover the end of 2023. We expect that recovery to continue. And for the market growth for toxins to continue to improve in 2024. For fillers, in the US, in Q4, after multiple quarters of decline, the filler market in the US was somewhat flat. And so, that dynamic of the filler market recovery lagging the toxin market recovery is playing out. And we do expect that recovery on fillers to also continue — to a lesser degree than toxins, more of a modest growth, positive growth for 2024. And as we look at the beginning of the year here in 2024, we are seeing our patient demand metrics and Google metrics really supporting our expectations here.
In terms of China, we do expect the economic headwinds that we saw beginning mid-year 2023 to continue in the near-term with China. And we expect the China Aesthetics market to be flat overall in 2024. That would look like negative market in the first half of the year until the China market starts to recover in the second half of 2024. And we expect that China performance to be balanced against expectations for strong performance in other international regions, including Japan, which has become an important market for Aesthetics and areas of Latin America, like Brazil, which is a highly aesthetically oriented market. It’s also important to know in terms of Q1 of 2024, in terms of our guidance there that the growth in the US will be offset by that international decline, specifically in China.
So not only the China economic headwinds, but also a difficult year-over-year comp in Q1, because recall, in Q1 of 2023, there was the post-pandemic reopening in China. So that’s really how we see the market growth factors in US, China and other parts of the world playing out in 2024.
Rob Michael: And Gary, this is Rob. To build on the Aesthetics story, I said in the past to get to our guidance of greater than $9 billion, we need to deliver annual growth of high-single-digits on average. And as Carrie just walked you through, we haven’t quite seen the recovery for the fillers market yet this year. And we will, but it’s not going to be a normal year, we’ll see a ramping. And we also had a slowdown in China. But despite that we’re still delivering high single digit growth. And given how under penetrated these markets are, we can drive that market growth that’s required to achieve the long-term guidance. And then on top of that, we have several innovations that will further support that growth. I’ve said this before, but the masseter and platysma indications for Botox will add a few $100 million each.
Our novel short-acting toxin BoNT/E has the potential to activate new patients who have not started toxin due to fear of an unnatural look. So that could drive an inflection in market growth and market share. And then our region, our fillers pipeline is really aimed at providing both short and long-term treatment benefits for consumers. So we have several avenues to get to our greater than $9 billion guide. I have seen consensus estimates at $8 billion for 2029, but we’re very confident in our guidance of greater than $9 billion by that period.
Scott Reents: Gary, this is Scott. I’ll take your question regarding operating margin expansion. So for 2024, as I mentioned in my remarks, we’ve guided to 46.5%. When we do return to robust growth in 2025, we do see that operating margin will expand, and will continue to expand as we grow through the decade. I think that when we think about the pace of that expansion, it will be a relatively steady over several years. I would though, if you’re modeling that, I would kind of peak it out at around 50%. I think that’s where we’ll hit a peak at the operating margin. But we do see expansion both in 2025 on that return to robust growth, including the impact of the two transactions ImmunoGen and Cerevel, which should presumably be a full-year at that point in time.
But at the full year impact, we see that expansion. And I do think it’s worth noting, even at our current levels, we have industry-leading operating margin. And certainly with the future expansion we will continue to have that and only grow that position.
Liz Shea: Thanks, Gary. Operator, next question, please.
Operator: Yes, our next question comes from Steve Scala with TD Cowen. Your line is open.
Steve Scala: Thank you very much. Two questions. Is the current tax rate fully reflecting likely tax changes in the US and outside the US? So, it represents a high watermark for the foreseeable future. Previously the company spoke to a 16% tax rate. And we’re pretty much there. So I am wondering if the increases are kind of behind us? And then Rick, a slightly different kind of question, but there are clear, obvious reasons such as the success of Skyrizi and Rinvoq, but I’m curious if you would share with us a few of the externally less visible factors that are leading to AbbVie’s success traversing the Humira patent expiration that your pharma peers missed when dealing with their own pressures. I would assume contracting formulary management, allocation of overhead are all part of it. But what would you be willing to share with us? Thank you.
Scott Reents: Steve, this is Scott. I’ll start with your tax rate question. So with respect to the tax rate, we were essentially flat between this year and last year at 15.7%. We do see that tax rate over the three year period including this year increasing about 1% on average. Now that’s not going to be a 1% per year. What you’ll see is a step up in a couple of years when the US tax rates do increase the GILTI rate in particular, will increase. So we see that over a three year period about 1% per year on average. That does include all the impacts of a number of things going on globally with the OECD and some of these — OECD minimum taxes and other things. I would say the one thing it does not include, you saw just this week, the House passed a tax bill that includes the provision regarding the R&D expensing.
So if that bill were to pass, as it’s written, we would see a slight step down in our tax rate, about 80 basis points from the impact of that on an ongoing basis.
Rick Gonzalez: Steve, this is Rick. I think if you step back and you look over the last, I’d say, 10 years, we were trying to develop a strategy that we fundamentally believed will allow us to be able to offset the Humira LOE and continue to deliver top-tier financial performance as we have for the past 10 years. That was the whole objective. And we knew we had to build a very diversified growth platform in order to be able to do that, to be able to absorb that impact and return to growth as rapidly as possible. And so, we as an executive team focused a lot of energy around how do we do that, how do we build it, how do we do it in the right markets. I think AbbVie, I’m obviously biased, I guess, but I would say our commercial execution has always been exceptional in my opinion.
