施貴寶 (BMY) 2006 Q1 法說會逐字稿

Good day and welcome to today's first quarter 2006 earnings release conference call.

Today's conference is being recorded.

At this time, I would like to turn the call over to Mr. John Elicker, Vice President, Investor Relations.

Please go ahead sir.

Thanks.

And good morning, everybody.

Thanks for joining us to review our first quarter results.

With me today are;

Peter Dolan, our Chief Executive Officer and Andrew Bonfield, our Chief Financial Officer.

They will both have prepared remarks.

And then joining us for Q&A is Lamberto Andreotti, who runs our worldwide pharmaceuticals business.

Let me take care of the legal language first, and then we will go to comments and Q&A.

During this call, we may make various remarks about the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Company's most recent annual report of Form 10-Q and in our periodic reports on Form 10-Q.

The documents are available from the SEC, the BMS Website or from Bristol-Myers investor.

In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent day.

While we may elect to update forward-looking at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

With that, let me turn the call over to Peter.

Thanks, John and good morning, everybody.

We had a solid quarter as we continued to execute our strategy and grow our key products and businesses.

In particular, our five pharmaceutical growth drivers, Plavix, Avapro, Avalide, Abilify, Reyataz and Erbitux all delivered strong double digit sales gains in the quarter.

And our health care group delivered approximately 9% underlying sales growth.

We are pleased that Plavix sales growth has reaccelerated.

U.S. prescriptions in the quarter were 15% higher than last year.

Thanks in large part, to the hospital initiative we launched in the second half of 2005 and to DTC advertising.

In each case, emphasizing the value this medicine offers to patients.

You will recall that we and Sanofi-aventis, our alliance partner, announced an agreement with Apotex to settle U.S. patent infringement litigation related to Plavix, subject to government clearance.

And Andrew will say a few words about that in just a minute.

Erbitux sales were also robust, up nearly 60%.

This targeted cancer treatment is increasingly used in its initial indication of refractory colorectal cancer.

And more recently, for head and neck cancer, a new indication that we and our partner Imclone received from the FDA last month.

Our late stage pipeline continues to deliver.

Since the beginning of the year, we launched two important new products, Orencia for rheumatoid arthritis.

And EMSAM, a transdermal patch for depression that we licensed in.

Regarding Orencia, we are pleased with its progress since we were first able to make it available in February.

It's tracking ahead of our base case assumption and has been infused in over 1,800 patients.

With an indication for patients with rheumatoid arthritis, who do not have an adequate response to either anti-TNF therapy or Methotrexate.

Orencia clearly addresses a serious unmet medical need.

We are planning to explore other related potential uses of Orencia, as we continue our robust development program for the product.

And we are looking forward to launching Orencia internationally as well.

It's important to recognize that Orencia is our first internally discovered and developed large molecule protein therapeutic or biologic.

We also have two other biologics in our late stage pipeline.

Belatacept, for prevention of solid organ transplantation rejection.

And ipilimumab, an end-licensed product for metastatic melanoma.

We were making good progress building our biologics capability, which is a key element of our strategy.

We recently announced plans to invest $660 million in the first phase of a new biologics manufacturing plant to be built in the U.S.

We expect to announce the site of that facility later this quarter.

We also recently announced our plans to invest 200 million in expanding our biologics capabilities at our Manati, Puerto Rico, manufacturing site.

Let me say just a few words about EMSAM, our second new product launch in the year.

This product offers a novel mode of delivery, a skin patch, of a well understood mechanism of action.

And offers potential benefits to many patients who suffer from major depression and who cannot or do not want to use other forms of treatment.

We are able to utilize our Abilify salesforce to inform physicians of the benefits of EMSAM, since many of the doctors who treat patients with depression also treat patients with schizophrenia and bipolar disorder.

Shifting to our near-term pipeline, last month the FDA accepted for filing our application for dasatinib, for chronic myelogenous leukemia and granted it priority review.

We expect FDA action on the NDA by the end of this quarter, following an Advisory Committee meeting scheduled for June 2.

Our strong pipeline is the result of our growing investments in R&D in this transitional period for our pharmaceutical portfolio.

And R&D growth remains a centerpiece of our strategy.

Our R&D spend increased 15% in the first quarter and we expect another year of double digit growth.

Building on the previous two years of double digit increases.

We remain committed to R&D growth in 2006, even as we experience the continued impact of exclusivity losses and the effect in our margins of a new product mix.

We recently lost exclusivity in the U.S. on Pravachol and we'll lose exclusivity later in the year in France.

All of those events were part of our planning process.

And for 2006, we are reaffirming our guidance of fully diluted earnings per share from continuing operations of $1.15 to 1.25 on both a GAAP and non-GAAP basis.

Looking ahead, we believe we are well positioned to begin growing revenue and earnings in 2007.

And to build on that growth over the next several years, as our pipeline and new products continue to deliver.

We are also pleased with the strong contributions of the health care businesses, which provided more than 20% of sales in the quarter and as I said earlier, approximately 9% growth.

We expect their collective growth through innovation and market expansion to provide continued strength and stability for the Company.

An important contributor to the Company's future growth will be our ability to control costs.

You will recall that last December, I announced a major Company-wide productivity initiative designed to generate at least $500 million in additional savings above and beyond what we already have achieved by 2007 and an incremental $100 million in 2008.

The process on track.

We are presently evaluating a range of actions focused on procurement and on streamlining business processes.

Across the Company, it's well understood that these measures will help ensure that we have the resources to continuing increasing investments in our R&D priorities and in new product support as we enter a period of expected growth.

Let me now turn the call over to Andrew.

Thank you, Peter.

I would like to briefly discuss our first quarter results and then we will go to your questions.

As you will have seen from our release, fully diluted earnings per share from continuing operations for the quarter were $0.36.

Positively impacted by $0.04 of specified items, primarily the $200 million gain on the sale of Dovonex.

Partially offset by milestone payments, manufacturing restructuring, and a Tequin asset impairment.

Regarding Tequin, we have made a recent decision to stop all our commercialization efforts and return all rights to our partner, Chiron.

Excluding specified items, fully diluted earnings per share on a non-GAAP basis was $0.32.

A full reconciliation of GAAP to non-GAAP earnings per share is posted on our website.

Sales from continuing operations were $4.7 billion, up 3% in the quarter.

Overall, we saw a 5% positive impact from price, no impact from volume, and a negative 2% impact from foreign exchange.

Excluding the impact of the divestiture of Dovonex and the consumer medicines business in the third quarter of last year, volumes would have been up 2%.

Worldwide pharmaceuticals sales were up 3% at $3.7 billion.

With our key growth drivers having another strong quarter, contributing $1.9 billion in sales, up 429 million or 30% compared to the prior year.

Sales in our U.S. pharmaceutical business were up 17% to $2.1 billion.

This was the result of a number of factors.

Firstly, scrip trends to our growth drivers were strong, including accelerating trends for Plavix compared to the fourth quarter of last year.

In total, our key growth drivers grew by $371 million to $1.5 billion.

Secondly, we did see some price benefit from the 4% price increase taken on those products in January.

We also changed our rebate strategy for a number of products in the quarter.

This was partially driven by a strategic decision on Pravachol, as we did not review our managed care contracts for 2006 due to the impending loss of exclusivity.

We also saw changes in a couple of managed care contracts for both Avapro and Coumadin, resulting in lower rebate level's.

These had a positive impact on average selling prices.

We also saw a small net benefit from the MNA, mostly related to Plavix.

We estimate this at less than 2% of U.S. sales in the quarter.

Finally, the change in inventory management agreements caused some favorability in the first quarter, which will reverse over the remainder of the year.

Looking down the profit and loss account.

Excluding specified items in both periods, the gross margin decreased by 0.7% to 69.4%.

This was due to the continued impact from exclusivity losses and the write-off of inventory of Tequin, which more than offset the positive impact from our growth drivers.

We still expect gross margins for the year to be flat and slightly down from 2005 levels.

Marketing, selling and administration expenses were up 4% for the quarter.

Driven in part by stock option expensing as we recorded close to one-third of our annual estimate in the first quarter.

On the salesforce side, as you know, we reduced head count in the U.S. during the first quarter.

And we should see the benefit in the profit and loss account over the next three quarters.

Overall, we still expect only a slight increase in marketing, selling and administration expenses for the year.

Advertising and promotion spend was down 7%, reflecting the disposal of the consumer medicines business.

We will continue to invest in our growth drivers and new product launches throughout the year and expect A&P spend to be down in the low mid-single digits for the year.

Excluding specified items, R&D expense for the quarter increased by 19% to $732 million.

This increase was primarily driven by the spending on the increased resources behind development projects.

Including late stage development spending on Dasatinib, Apixaban, [Alaxased] MDX-010 and [Saxaglibcan].

Our expectation is for R&D to grow in the low double digit range, as this is obviously a priority of area of investment for the Company.

R&D spending, as percentage of pharmaceutical sales, increased to 18.8% in the quarter from 16.2% last year.

The effective tax rate from continuing operations, before minority interests and income taxes and excluding specified items, was 25.9%.

As I mentioned in January, we expect the full year rate to be in the 22% to 24% range, impacted by the resolution of tax orders for the years ending 2002 and 2003.

You will recall that we had a similar situation last year where our Q1 rate was much higher and the resolution of the orders was treated as a discrete item in the quarter which they were resolved.

As Peter mentioned, we are confirming our full year GAAP and non-GAAP guidance of $1.15 to $1.25 per share.

Net debt increased to $3.2 billion from $2.8 billion at the end of last year.

This is mainly driven by the Vanlev litigation settlement and the milestone payment to Imclone, partially offset by the gain on the sale of Dovonex .

Finally, let me briefly touch on a topic I know you all are very focused on.

In March, we announced the proposed settlement with Apotex related to the Plavix patent litigation.

We have since submitted the settlement to the FTC and is it currently under consideration.

Consistent with the terms of our consent decree, we have also submitted the proposal to the Attorney's General for review.

We cannot predict at this point in time, how long they will take to evaluate the agreement.

As we indicated in our release, there is significant risk that the required antitrust clearance will not be obtained.

In the event that the agreement is finalized or terminated, payments will be due to Apotex, payable 50% by us and 50% by Sanofi.

We have established a reserve in the first quarter for $40 million, representing the minimum estimate.

The Bristol-Myers Squibb share of this is some $20 million.

I know that you all have many questions on this matter but I would ask for your understanding as to why we can't elaborate any further at this point in time.

So in summary, our first quarter performance made consensus estimates.

Our growth drivers, newly launched products and other health care businesses are performing well.

And we are confirming our 2006 GAAP and non-GAAP guidance, reflecting continued execution against our strategy.

With that, I will hand it back to John for questions.

Thanks, Andrew.

And before we go to Q&A, I would just like to remind everybody, in addition to Peter and Andrew; we have Lamberto Andreotti with us to answer any of your questions.

I ask you that you keep your questions to one or two so that we can get through as many as possible.

And finally, just to reiterate what Andrew said, given the fact I know everybody has a lot of questions regarding the proposed settlement with Apotex around Plavix litigation, but given that it's currently under FTC review, I'm sure you appreciate that we're not going to be able to take any questions on it.

And I will stick to the commentary that's in the release, the previous release and Andrew's comments.

So with that, I think we are ready to go to Q&A.

Thank you. [OPERATOR INSTRUCTIONS] We will go first to David Risinger with Merrill Lynch.

Yes, thanks very much.

Two questions, please.

First, with respect to Taxol, ex-U.S. it was down about $30 million sequentially.

Was that hit by some wholesaler to stocking ahead of the April price decrease in Japan?

Why was that down so much sequentially?

And should we assume that the vast majority of ex-U.S. sales are in Japan today.

And then my second question is with respect to Gleevec failures, can you give us a framework for thinking about Gleevec failures, in light of the fact that Gleevec worked so well in so many patients?

Also, also what the EU Dasatinib filing status is?

Thank you.

Thanks, David.

First, I will turn it to Lamberto to discuss Taxol ex-U.S.

And then we'll handle your Gleevec question.

It is true that Taxol is an important product for us in Japan.

But we still have sales of Taxol in a number of other markets.

And in fact, out of the total sales for the quarter Taxol, 147 million, Japan represented 57 million.

So, we still have significant sales of Taxol outside of Japan.

In Japan itself, sales grew by 17% as to the previous year.

So, the less positive trend was outside Japan.

And you must remember that in Europe, some of the countries in Europe, have different mechanics of market performance after a loss of exclusivity.

David, on Gleevec, we were estimating that about 5% to 15% of the population fails on Gleevec, which would be the initial opportunity for Dasatinib.

And just, David, the filing has been submitted in the EU.

We can go to the next question.

We'll go next to Jami Ruben with Morgan Stanley.

Actually, we will go to James Kelly with Goldman Sachs.

Thank you.

Good morning.

My question is, taking a look at the press release and the prominence given to the manufacturing facility and the commitment to R&D.

I know you don't have guidance out over the next three years about what's happening to gross margins and R&D.

But I would some love color as we think about our long range models, what are the major pushes and pulls to when gross margins are going to improve materially, a little bit or have to be constrained by the new investment?

And same with R&D, as we take a look at your pipeline.

Thank you.

Jim, it's Andrew.

On the gross margin question, we indicated, that this year as I said again in my comments, that we expect gross margins to stabilize.

The key really for us to expand gross margins is to continue to bring forward our own internally developed compounds in the pipeline.

And that will be the long-term benefit and we will then start to see margin expansion.

You are correct to point out that there will be a drag on gross margins as a result of the launch of Orencia.

As with any new biologic, until you actually continue to improve yields, you will see lower gross margin.

But we expect again over a period of time as we continue to expand the marketplace and to grow, that we would see that grow and therefore improve the overall gross margin.

So, longer-term we expect it to stabilize.

And then actually start to improve as we move later in the decade and have contribution from our own internally developed compounds continues to grow.

On the R&D front I think we've made very clear our priority is to invest in R&D and R&D growth.

We make that decision on an annual basis.

We go through an annual portfolio review, as depending on the opportunities we have in the pipeline.

And we optimize versus what is the right amounts of investments versus what are the tradeoffs we would have to make elsewhere within, not just within our investment tradeoffs, but also within the portfolio.

So at this point in time, we haven't given long-term guidance.

Obviously, as you can see, we continue to grow R&D by double digit rates and we look to do that and continue that into the future.

Can we go to the next question?

We now will go to Jami Rubin with Morgan Stanley.

I can't lift up the phone fast enough.

Two questions.

First on Avapro, I'm wondering if you could elaborate a little bit on the rebating environment?

Because if memory serves me right, last year the rebating environment seemed to have intensified.

So, maybe if you could talk about what you are seeing with managed care in the ARB market and the price per script and how that's changing?

And how we should think about that going forward?

And the second question relates to Abilify.

It does appear to be launching slowly internationally.

And so if you could provide some color around what you are seeing there?

Thanks.

Yes.

Starting with Avapro, Avalide, we, during the quarter was changing our rebate strategy for a number of our products.

And for Avapro, Avalide itself was some changes in a couple of the managed care contracts that resulted in lower rebates.

There was also a price increase for [Orencia] of 4% that contributed to a better gross to net versus last year.

Maybe the market is getting more aggressive?

The change in our Sanofi-aventis IMA agreements with our main wholesalers created some positive performance of [Abilify] in Q1.

And this performance will not -- will reverse in fact, in the next three quarters.

The competitive environment for the -- in the marketplace is there.

And we are focusing on those managed care contracts that allow us to remain in the market at good profitability.

And it's a decision we made with Sanofi-aventis.

As far as Abilify in Europe, we have seen during this quarter some positive signs with -- we have seen positive signs on both the size of the market and our market share.

We have -- in the U.K. where we are concerned about the market slowing down, we have seen an re-acceleration of the market itself.

And the gaining market share is there thanks to focusing in on both the efficacy and the side effect profile of Abilify.

This -- some of the early markets have slowed down, as I said, early launch market slowed down at the end of last year.

We see a reversal, as I said, in those markets.

The U.K., Germany and we see good performance in the late launch market like Italy, Spain and France.

Thanks, Jami, can we go to the next question?

We will go next to Tony Butler with Lehman Brothers.

Thanks very much.

Andrew, can you provide some context around the need to capitalize the new facility and the additional $200 million for Puerto Rico?

How do you think about overall debt-to-total cap targets as you consider working capital, new product launches?

And of course, dividend payments.

Thanks very much.

Thanks, Tony.

As you know, the dividend remains a priority, although it's a quarterly decision made by the Board.

And that is the priority from a cash flow perspective.

On the affordability of the $660 million investment in the new biologics facility and also the extra $200 million in Puerto Rico, we believe that we can fund that very comfortably over the next several years.

We continue to focus on our working capital.

There are still opportunities.

We have some $5.5 billion invested in working capital at the end of last year.

We need to make sure we are as efficient and effective around that as we can.

And we are focused to make sure we maximize overall returns and that includes working capital area.

We have seen some inventory build.

And we continue to see some inventory build obviously for new product launches in particular for Orencia.

But that rate of growth of that should start to slow down.

On the overall total debt-to-cap ratios, we don't actually have any particular target.

Obviously, our focus is to make sure that we maintain adequate rating with the rating agencies.

We were comfortable with their current rating.

I would not want to see us go much further down.

So therefore, the only way we would -- if we did increase debt significantly, that would have a negative impact on those ratings, so we need to always be careful about that.

So, that is one of the rate limiting factors on potentially increasing net debt.

Thanks, Tony.

Can we go to the next question?

We will go next to John Boris with Bear Stearns.

Thanks for taking my questions.

On Orencia, I think Peter, you mentioned that the number of patient starts were about 1,800.

Can you just comment on total numbers of doctors that actually prescribed in the quarter and the rate of discontinuation on the product?

On Pravachol, I think your inventory levels went down from 0.6 to 0.4 months.

Can you just quantify the actual dollar amount that may have come out of the channel from Pravachol?

And then just back to David's question on Dasatinib, can you just give a little bit better clarity when you filed in the EU?

Okay.

I will start with Orencia.

Peter mentioned the number of patients we have on therapy and that number of patients is above what Dave gave.

The number of doctors is too is about our base case projection.

And so we are very happy both the number of patients and the number of prescribers for these products.

This is a good product and our team is executing a very good launch right now.

To give you more information about what is going on in the marketplace, we see doctors particularly focused on the efficacy of the product, but very interested on the safety side of the product itself.

We have market research that indicates that Orencia is now being used two to one versus [Retuxin].

And we see confirmation in the marketplace of various things.

One, is that doctors recognize that we have a broader label in terms of [sides] in types of indications.

We have broader and more comprehensive data in the marketplace.

And our rate of in infusion reaction is 9% versus 6% of placebo.

So, this is a good data and I don't believe that Retuxin has similar data.

The discontinuation, we aren't seeing it.

And in fact, it's so early that it will be very strange to see it.

So on the Pravachol inventory, as you would expect ahead of the loss of exclusivity, we did see continues inventory declines.

That amounted to around about $50 million of inventory taken out of the channel in the quarter.

Just to expand a little bit on Dasatinib, January was the filing date in Europe.

Other key dates coming up, June 2, the Advisory Committee meeting.

And we will be presenting additional data on Dasatinib at ASCO a few days after that.

Thanks, John.

Can we go to the next question?

We will go next to Catherine Arnold with Credit Suisse.

I just wanted to ask you about Plavix and inventory.

It looks like about $60 million of inventory is what came out of the channel, fourth quarter versus first quarter.

And I wondered if you could elaborate?

If that's just the typical ebbs and flows that we're seeing with Plavix inventory or was there any short-term reaction to the CHARISMA results?

And if so was this disruption put to bed as far as the secondary prevention questions that came around with CHARISMA?

Catherine, on the inventory level, it did decline.

That's fairly normal, we seen that historically in the first quarter.

The decline actually was consistent with the prior year and was around about $50 million.

As far as CHARISMA, obviously we were disappointed that study did not meet the primary end point.

But we were pleased with some of the results, especially the results in the symptomatic patient base, that confirmed the benefit of Plavix in that population.

And you may have seen both ACC, AHA and the European Hypertension association issued messages reinforcing their guidelines following the CHARISMA trial data.

We saw some slowdown in the prescription growth immediately after ACC but this moderated very quickly and seems to have come back in the last few weeks.

That last couple weeks.

What is important is that Plavix is back to a better rate of growth of prescriptions.

And the fact is, as Peter was saying before, we see the results of a number of things that we initiated with Sanofi-aventis during the second half of last year.

We continue to focus on the new clinical data.

We are ready, if the FDA approves it, to launch the COMET and CLARITY indications.

And we are continuing our actions on hospitals.

And [these things] seem to have been pretty successful and we have decided in fact to intensify.

So CHARISMA has made some noise immediately after the ACC, but we can say that we are very pleased with the performance in the U.S. their and also in Europe where we co-promote with Sanofi-aventis and book to sales.

Thanks, Catherine.

Can we go to the next question, please?

We will go to Steve Scala with Cohen and Company.

I have a question about what Bristol and Sanofi previously have said about the Apotex settlement.

The Companies previously said that in addition to a guaranteed nonmaterial payment to Apotex, which today was revealed to be $40 million, there was a second material payment that was said to be possible but unlikely when the license became effective.

Now today, Andrew said that additional payments will be required.

I think that's what he said.

So Andrew, was your comment implying above and beyond the $40 million?

So now, this additional payment is no longer possible but unlikely, it is now possible and likely?

And could you give us an example of a circumstance in which the second payment would be triggered?

Steve, it's Andrew.

The first five requirements offer a minimum expected liability.

There are range of options on the payments that could be made.

This the minimum likely payment.

And there may be differences in the event that the agreement is terminated.

And that is the reason why we've said additional payments -- additional charges may be required at some point in time in the future.

As regards the other point you made, no change.

Thanks, Steve.

Can we go to the next question?

We'll go next to Tim Anderson with Prudential.

Thank you.

This is Peter Ho for Tim Anderson.

On the wires are comments from Andrew saying that you have fiduciary duty to consider all offers should someone want to acquire the Company.

Hoping you can tell us whether there is a standstill agreement between Bristol and Sanofi that amy have arisen from the Plavix and Avapro deal?

And also, can you whether Sanofi has rights of first refusal on Plavix and Avapro should another company go after Bristol?

Thank you.

We don't really have any comments on any speculation related to that.

We're obviously, as we've said in the past, we always are looking to act with the best interest of shareholders in mind.

Thank you.

Can we go to the next question?

We will go next to Chris Schott with Bank of America Securities.

I just wanted a quick question on Orencia.

Are you on track for the the Lonza capacity expansion mid year?

And in terms of the timing of this $200 million expansion to the Puerto Rico facility, what can we expect in terms of the timing on that?

And then a second quick question on Saxagliftan, any decision in terms of the out-licensing of the product or should we be waiting for the Phase III results?

As far as the Orencia delay, we submitted the FBLA application in early 2006.

As we said before, pur base case planning assumes four to six review for the FBLA.

We don't have any reasons to believe that we should change our planning and we continue to interact with the Agency to support our FBLA application.

If Lonza gets approved, we believe that we have sufficient capacity to handle our high case forecast over the next few years.

And we have also our older facility available to support that high case for the finishing of the product before the stock-up on our Manati facility, which is in a couple of years from now.

And on Saxagliftan, during third quarter of '05, we transitioned it to Phase III.

We've begun enrolling patients.

We have had some success in the past in terms of developing partnership agreements, but it's too soon to speculate on what our strategy might be regarding the development of that.

Great.

Thanks, Chris.

Can we go to the next question?

We will go next to David Moskowitz with Friedman, Billings, Ramsey.

Thanks and good morning.

I want to go back to the rebate strategy changes that you talked about before.

Can you affirm the direction on the Avapro rebates?

And it might be helpful to talk about the recent price increase and whether or not that's giving you upside on net price versus the rebates that you are offering.

And also, are those rebate -- does that rebate strategy change directionally the same with some of your other products?

That's question one.

Two, Andrew, you mentioned that in the quarter almost 19% of sales went to R&D.

That's likely to get higher as sales go lower due to loss of Pravachol.

Can you talk about a target range in terms of R&D as a percentage of sales as we go out to the horizon?

Because now it looks like you are approaching the high end of the industry.

And then just lastly, on the loading dose trials, the high loading dose for Plavix, can you talk about whether or not they have begun?

And how you plan to get around the difficulty in attracting patients to these anti-thrombotic trials?

Thanks.

On the of Avapro rebating strategy, the key to that actually is the change in the managed care contracts.

Also the impact of the Veterans Administration contract, which was finished at the end of the first quarter last year, that will work its way out of the system.

So, probably the difference between the actual recorded net sales and scrip growth will be greater in this quarter as far as differentials is concerned, than you will see elsewhere within the year.

On R&D as a percentage of sales, it was very high this quarter at 18.8% of sales.

An increase of 19%.

As we indicated for the year, we expect R&D to grow actually in the low double-digit range.

So therefore, this quarter may be a high quarter, a high water mark, versus on the percentage of sales.

As I've said before, we will look at R&D as an investment, as a priority.

We do a portfolio review.

We look at what is right from a shareholder perspective to drive long-term shareholder value.

And we will make a cutoff or determination where we think it's appropriate against individual trials.

And then we have to trade that off against priorities elsewhere within the Company.

And that's a process we look at and we do every year as part of our budgeting process.

So at this point in time, we don't necessarily expect to see this go much higher.

But obviously, we would like to accelerate the top line again as well.

And then that will actually maintain the current percentages around the same level.

As part of the trial on Plavix, Let me first say that Sanofi-aventis and ourselves are discussing whether and when to initiate such trial.

Let me add to that.

That trial if initiated, will be about the high load dose of 600 milligrams as opposed to the 300-milligram that we have in the label.

It's my understanding, it's our understanding that leading institutions in the U.S. and elsewhere are already moving to the 600-milligram.

And so this is something that is already happening as a decision of the users.

So the doctors.

The trial on [clopidogrel] is comparing their product to the 300-milligram loading dose.

And again, as I said, leading institutions are already going towards 600 milligrams.

Thanks, David.

And I think we have time for two more questions.

We will go next to [Bufon Howe] with J.P. Morgan.

Thanks, actually it's Chris Shibutani.

Thank you for the questions.

Three quick ones.

On Plavix, could you comment a little bit what the length of therapy has been, particularly noting that the CHARISMA trial was looking at extended treatment?

Secondly, on Dasatinib, upcoming FDA Advisory Committee meeting in June, data we have seen that you presented elsewhere, efficacy seems very compelling.

What kind of concerns on safety side do you anticipate?

The only thing that we could really identify there was on the pleural effusions might have been higher.

Is that something that's clinically addressable?

Are there any other concerns?

And finally on Berclude, obviously a market that's attractive in China.

Comment about how that launch is going.

Are there any particular payment or reimbursement issues that might be affecting how that's progressing in China?

Thanks.

Okay, let's start with Plavix.

The length of therapy now is approximately 180 days in the populations that are the patient that I indicated in the label.

This is a good improvement.

We were at 140 day, as s you may remember, not long time ago.

And what is interesting is that length therapy of -- or duration of therapy of Plavix is almost in line with the statin now, the statin use.

And I don't expect CHARISMA to have any influence on this.

As far as Baraclude, first of all, we got some interesting news this morning where the CHMP, which is the Technical Committee of the European Agency has given a positive opinion on Baraclude.

So we expect now a formal approval in July, at the very beginning of July, July 3 and to launch there also.

As far as China is concerned, we are are okay.

We were pleased.

As a matter of fact, we have very fast inclusion in the formularies of many hospitals.

We are well above our target for the year for inclusion in the reimbursement formularies for those hospitals.

So, we have all elements to believe that we will meet and beat our forecast there.

In the U.S. which as you know is a smaller market, with the recent data is good.

It's good in terms of new prescriptions, where we are at 20% market share, new prescriptions.

And the latest data I've seen is that we are growing very significantly in the new product prescription.

That means that Baraclude is becoming the product of election for people that are going to therapy for the first time.

And I think the other question was about Dasatinib and safety profile.

Clearly, pleased with the overall clinical package we were presenting.

With regard to safety specifically, it can cause thrombocythemia in patients with hematologic malignancies.

The frequency and the intensity is higher as the stage of the disease advances and the extent of prior treatment increases.

Many patients had it even before they've started getting Dasatinib and severe bleeding episodes were rare.

We've got a randomized trial in chronic CML that will clarify the respective safety profiles to be presented at ASCO in 2006.

And it does not produce significant thrombocythemia in patients with solid tumors, as we talked about in ASCO in 2005.

Thanks a lot, Chris.

And we have time for our last question.

We will take our last question from [Rapesh Patel] with UBS.

I was wondering, I had a couple of questions, first on Orencia, I was wondering if you could just elaborate on development time lines on other uses including for treatment for -- front line treatment?

And then I had one point of clarification on the Plavix settlement more so as it relates to the other genetic challenges.

My understanding is that Apotex been granted an exclusive license to sell Plavix beginning in September of 2011.

So my questions, is does that preclude Bristol from offering, as part of negotiations with either Dr. Reddys, or should it pursue such negotiations, the ability for them to launch before Plavix' patent expires in March of 2012?

Thanks.

Starting with Orencia.

We continue to work at development of this product in various indications.

And we have subjected a formulation on the development and we have a number of other indications that we are pursuing.

The first one is lupus and we are also looking at Crohn's disease, ulcerative colitis and [gastritis] Within the label that we have now, what we believe is important is to remember that we are indicated already or -- indicated already not totally in the adequate responders to anti-TNF but also in -- as a matter of fact inadequate responders.

That means that most likely the first patients that we have are those that are not responding adequately to anti-TNF therapies.

But then we have the possibility within our label to have this product used in much earlier stage of the disease.

And again, this is something that Retuxin, for example, doesn't have because they are only indicated in anti-TNF in adequate responders.

So, within the label we have already certain opportunities that will contributed to the growth of this product.

Once we have established it in the later stage of the disease.

And on Plavix, as we've said, we have contacted Dr. Reddys to discuss a settlement with them.

Really can't comment about it any further.

Thanks Rupesh. and thanks everybody for your questions.

I think that is all the time we have.

I'd remind you to give Blaine Davis or myself a call if you have any follow-ups.

We are here in New York.

Before we end the call, I would like to turn it back to Peter for some closing remarks.

Just very quickly.

This performance of the five growth drivers in the quarter and the health care group is a positive story.

The last of the big exclusivity losses for our Company.

We're dealing with revenue losses from exclusivity products over the last several years.

The last of those big exclusivity losses, Pravachol, we lost in the U.S. just last week.

We lose it in a few months in France.

After that, we begin a period of relatively little exclusivity loss from '07 to '11 at a time when our growth drivers, our new product launches and our pipeline continue to advance.

Thanks for participating in the call.

Appreciate your interest.

Thank you, everyone.

That does conclude today's conference.

You may now disconnect.