施貴寶 (BMY) 2010 Q3 法說會逐字稿

Good day, and welcome to today's third quarter earnings 2010 earnings release conference call.

This call is being recorded.

At this time I would like to turn the call over to Mr.

John Elicker, Senior Vice President Investor Relations.

Please go ahead, sir.

Thanks, Pat.

Good morning, everybody.

Thanks for joining us to review our third quarter results.

With me today are Lamberto Andreotti, our Chief Executive Officer, Charlie Bancroft, our Chief Financial Officer, they will have prepared remarks, and then joining us for Q&A are Elliott Sigal, Chief Scientific Officer, Beatrice Cazala, Senior Vice President commercial operations with responsibility for global commercialization, Europe and emerging markets, and also Tony Hooper, Senior Vice President commercial operations with responsibility for US, Japan, and other international markets.

Before we get started, I want to take care of the legal matters.

During the call we'll make statements about the Company's future 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 recent report on 10-K and reports on 10-Q and 8-K.

These documents are available from the SEC, the BMS website or Bristol-Myers Squibb Investor Relations.

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 date.

We may elect to update forward-looking statements as some point in the future we specifically disclaim any obligation to do so even if estimates change.

During the call we'll also discuss certain non-GAAP financial measures adjusted to include certain costs, expenses, gains and losses and other specified items.

Reconciliation to these non-GAAP financial measures to the most comparable GAAP measures are available on our website.

Lamberto.

Thank you, John.

Good morning, everyone.

We have completed another quarter in which we continued to successfully deliver against the execution of our strategy.

Let me walk you through the highlights.

Our financial performance in the quarter was solid.

Double-digit growth in earnings per share demonstrates our ability to operate in a very challenging environment as we continue to see the impact of US upscale reform and are beginning to see an impact from incremental pricing pressures in Europe.

Despite these challenges, operationally, we are completely focused on growing our portfolio of innovative products and preparing for the potential launch of new products during the fourth quarter and into 2011.

All while continuing to deliver on productivity initiatives across the entire company.

As we have seen in our release we are reaffirming our guidance for 2010 GAAP and non-GAAP EPS.

Strategic and disciplined capital allocation remains a key part of our biopharma strategy.

We finished the quarter in a very strong financial position with approximately $10.9 billion in cash and marketable securities.

Business development remains a top priority for capital allocation, and we also remain committed to the dividend and are actively engaged in the share repurchase program began in the second quarter.

In October we completed the acquisition of ZymoGenetics, the transaction builds on our longstanding commitment to Virology by giving us full ownership of peg-interferon lambda, currently in development for hepatitis C.

We are looking forward to present twelve-week Phase II lambda and on our small molecule antiviral in development for hepatitis C at AASLD between October 29 and November 2nd.

In addition, we are excited by the seven early clinical and pro clinical programs from ZymoGenetics, that expand our strong biologic capability in oncology and immunoscience and by the FDA approved specialty surgical biologic, RECOTHROM.

On a less positive note we received a warning letter from the FDA about certain processes and practices to be improved or remediated at our manufacturing facility in Manati, Porto Rico.

We have provided a response to the FDA warning letter including the dates of the actions that we have taken and we expect the Manati facility will be inspection rating by the end of the year.

Manufacturing continues uninterrupted at Manati, and I want to assure you that resolving the issues in Manati is one of our top priorities.

This was another good, very good quarter for clinical data.

We presented key data from both our tab vascular and diabetes franchises and important medical meetings.

At the European Society of Cardiology meeting in August we presented a preliminary result of the Phase III Averroes trial for apixaban or Eliquis as we will market it, in patients with atrial fibrillation who are unsuitable for treatment with warfarin.

The preliminary results demonstrated that apixaban significantly reduced the relative risk of a composite of stroke or systemic embolism by 54% compared with [inaudible] without a significant increase in (indiscernible) bleeding.

We believe this is an area of significant unmet medical need as up to 40%, 50% of patients are identified as unsuitable for treatment with warfarin.

Today now I am glad to inform you that based on the strength of this data we along with our partner Pfizer have already initiated a rolling submission with the FDA.

We expect the submission to be complete in the early part of 2011.

For dapagliflozin we have now presented results from five of the total 11 Phase III studies for this novel, first in class diabetes compound.

We are excited by its potential [in order to provide] the balances at three of the benefits -- good HBA1C control, improvements in blood pressure, and increased weight loss with what appears to be a manageable safety and profitability profile.

We and our partner AstraZeneca are on track to submit as previously announced our application for the marketing authorization of dapagliflozin in Europe by the end of 2010, early 2011.

Today now I have also good news for the dapagliflozin in the US.

I am pleased to announce we completed the analysis of cardiovascular data mandated by the new FDA guidelines, and based on that analysis we plan to submit also in the US at the end of 2010 early 2011.

We also submitted a response to the FDA's complete response letter regarding the BLA for neurologics.

We have been advised between our resolving the issue with Manati prior to gaining approval of the pending DLA, and based on our assumptions when Manati will be inspection rated by the end of the year, we hope to hear decision on the DLA in the second quarter of 2011.

On the regulatory front last week we received a positive opinion from the CHMP in Europe for SPRYCEL first line, and we look forward to progressing there.

We are anticipating several other key regulatory decisions in the coming months.

In the US we expect to hear the FDA's decision for both SPRYCEL first line and for the six-dose combination of ONGLYZA Metformin by the end of this month, the month of October.

Additionally, we feel very positive about the prospects for ipilimumab, and we continue to work with the FDA and other regulatory agencies on its approval.

Now, let me turn it over to Charlie.

Thank you, Lamberto and good morning everyone.

We did have another quarter of solid growth.

We delivered non-GAAP EPS of $0.59 or 26% increase over last year supported by sales growth in most of our key products and continued expense management.

Included in our third quarter EPS is a negative $0.02 impact of US healthcare reform.

I want to give you some brief highlights from our third quarter financial results and talk about guidance before we go to your questions.

The Company reported third quarter net sales from continuing operations of 4.8 billion, flat compared to last year or up 1% net of foreign exchange.

US healthcare reform had a 1.6% negative impact on net sales in the quarter, and incremental EU measures had a negative impact of just under 1%.

Volume was up 1%.

The third quarter sales performance was driven in large part by strength in our virology franchise, PLAVIX, ORENCIA and SPRYCEL.

Growth in these brands was primarily offset by declines in our mature brands.

Our virology franchise had solid global sales growth, up 8% from a year ago.

This sales strength demonstrates the continued strong demand for REYATAZ, the SUSTIVA franchise and BARACLUDE across both our US and international markets.

US PLAVIX sales grew 9% in the quarter.

In Europe we saw continued erosion of PLAVIX as generic clopidogrel was available in most of the countries.

As we said, we expect erosion of PLAVIX sales in Europe to begin to slow but it will continue.

The impact is primarily recorded in equity income from affiliates in our P&L.

In the US Abilify prescription demand increased 3% and while lower growth than Q2, Abilify continues to grow faster than the market.

However, Abilify reported sales in the US were down 11% due to the negative impact of US healthcare reform and reduction in our share of net sales under the revised contractual terms with Otsuka.

Lastly, our mature brands declined 19% or 169 million compared to last year.

Divestitures in and rationalization of our nonstrategic mature brands portfolio had a negative impact year-over-year of approximately 65 million.

In aggregate, US healthcare reform, EU pricing measures, the Abilify contract extension and mature brands divestitures had a combined negative 4% impact on our reported total company sales in the quarter.

The impact from US healthcare reform has been slightly less than our original estimate and we now expect a $0.10 impact for 2010.

Our estimated impact for 2011 EPS has not changed given the annualization of managed medication, expected 340 B hospital expansion and the new impacts from the Part D doughnut hole coverage and the pharmacy.

Now let me give you some highlights from the rest of our P&L.

I will focus my comments on our non-GAAP results.

Reconciliations to our GAAP results are available in our press release and in our website.

Gross margin increased 80 basis points to 73.9% compared to the third quarter of 2009.

Improvements in product mix, productivity, and impact from foreign exchange were only partially offset by the impact from the changes in the contractual agreement with Otsuka.

Advertising and promotion expenses were down 10% to 231 million for the quarter.

The decrease is due to less spending on the promotion of those products at the end of their life cycle and to Otsuka's reimbursement of certain Abilify, SPRYCEL and IXEMPRA expenses.

This was partially offset by increased prelaunch spending on new products and indications.

Equity income from affiliates declined 50% driven by continued erosion of PLAVIX sales in Europe, as I mentioned earlier.

The effective overall non-GAAP tax rate on earnings from continuing operations was 20% in the third quarter.

The lower tax rate was primarily due to the favorable resolution of certain tax audits.

You should note that this reserve release was assumed when we gave our full year guidance.

Our guidance remains between 23% and 24% for the year assuming passage of the R&D tax credit.

As a reminder, we only account for the tax credit in the quarter in which it happens.

Let me turn to guidance.

As Lamberto mentioned, we're operating in challenging times.

Macroeconomic issues, US healthcare reform, and incremental pricing pressure in Europe are all having an impact on our business.

As demonstrated by our third quarter results, we have been very efficient in managing our expenses to help offset some of this impact.

However, moving forward these challenges will create a head wind.

We believe we have a very attractive portfolio and while we remain keenly focused on productivity we're also committed to making the appropriate investments required to maximize the long-term value of our assets.

We are confirming our previous 2010 GAAP and non-GAAP EPS guidance with a few adjustments to our non-GAAP line item guidance.

We expect Q4 sales growth to be consistent with Q3 resulting in low to mid-single digit growth for the year.

Advertising and promotions should decrease in the low double-digits as compared to our original guidance of a high single-digit decrease.

R&D will increase in the mid-single digit range.

As I said, we expect our tax rate to remain between 23% to 24% assuming the R&D tax credit is passed in Q4.

In closing, we had a solid third quarter, double-digit EPS growth supported by key brands, good management of expenses, a strong cash position, confirmation of our 2010 EPS guidance, and the continued positive of our innovative pipeline.

I would now like to turn it over to your questions.

Thanks, Charlie, and thanks, Lamberto for the remarks.

Pat, I think we're ready to go to the Q&A.

If I just could, a quick reminder to folks in addition to Lamberto and Charlie we have Elliott, Beatrice and Tony here to answer any questions you may have.

Pat.

Thank you.

Thank you.

(Operator Instructions).

We'll now take our first question from David Risinger of Morgan Stanley.

Thanks very much.

I have three questions.

I guess the first is for Lamberto.

Lamberto, I was hoping that you could characterize the ex US price pressure that you expect in 2011, versus what you've experienced in 2010?

And then for Elliott, I am hoping that you can update us on the IPI first line event rate and the expected timing of study readout.

And then finally if you could just provide any comments on the three-year belatacept data.

Thanks so much.

Okay, David.

I will start about the impact on our prices, but I will ask Beatrice to continue.

For sure was, we said and others have said, what we are seeing in 2010 and we expect in 2011 is a combination of negative actions by the huge number of countries, all at the same time.

Where in the past, to us was a couple of major countries and a few minor countries acting, and the others were staying on their pricing patterns, where what we're seeing now is a combination of everything at the same time.

So, Beatrice, do you want to give a few numbers?

Yes.

We have looked now at all the key markets where we have a better idea of what could be [the relevant picture], and we believe that in addition to the current level of pressure we have had in Europe, we probably will have an additional 1% to 2% incremental historical level pressure, once we have combined all of the various form of government measures and pricing, and some time for them to impact across the region, so --

I would just like to add, because Beatrice is referring to 2010, in which we have historically had 2% to 2.5%, and we budget that and we've managed that, and that's been typical, as Lamberto had mentioned.

What we see now in the third quarter is roughly a 4% impact due to EU pricing pressures, and on an annualized basis we think it is 1% to 2% higher than our historical levels, and when we move forward into 2011, it is probably in the mid-single digit range, incremental to what we have for historical levels.

David, with regard to the R&D questions, this is Elliott.

On ipilimumab, as you know, we are under regulatory review both in Europe and the US on our O20 study, which is in pretreated patients, and those reviews are progressing.

In patients that have not received treatment, in metastatic melanoma, our study O24 continues.

It is event driven.

It is comparing adding to standard of care the carbazine versus the carbazine alone, and we are estimating that we will have results in early 2011.

With regard to belatacept, we have answered the complete response, including the submission of the 36-month data.

I am encouraged by data and believe it supports the benefit risk profile of belatacept, and we expect to present this data at the American Transplant Congress meeting in May of 2011.

Thanks, David, for the questions.

Pat, next up?

We'll now take our next question from Jami Rubin out of Goldman Sachs.

Thank you.

For you, Elliott and Beatrice, lots of noise obviously around the anticoagulant marketplace with the recent approval and launch of pradaxa, and the upcoming data release of ROCKET AF in the next couple of weeks.

Can you frame for us the opportunity that you see in the anticoagulant market and, assuming that apixaban is third to the market, just given the timing of the large base 3Af trials, what will your marketing message be?

Obviously, you are a twice a day drug versus Xarelto which is a once a day drug, so if you could elaborate on that, please.

And then secondly again on ipilimumab, FDA is holding a panel meeting on December 2 related to the O20 study.

What is the strategy around the balancing the front line study with the second line study, given that just around the PDUFA date, December 25, Elliott, you said that the front line study would be reporting out?

Thanks.

Jamie, this is Elliott.

Let me just correct my statement that the first line study is event driven.

We have been continually projecting when we would have it, and I think it would be probably towards the end of the first quarter of 2011.

But the application in front of the agencies have to do with the benefit risk around the second line patients, and I think the data is robust with a survival benefit, and that is the data that we are engaged in discussing with the FDA and with regulatory authorities abroad.

Let me just say that with regard to anticoagulants in general, I think both Beatrice and I, representing the Company, agree that this is a huge new opportunity.

There will be different profiles of drugs out there.

Our belief medically and commercially from the very beginning was that doctors and patients wanted a safer Coumadin, so to speak.

The big unmet medical need is the less bleeding, so that we can administer this drug to patients and achieve some benefit.

We are struck by the large percentage of patients that go untreated, even though efficacy of Coumadin is known, and often offered aspirin, a less efficacious drug, because of the fear of the benefit risk and the narrow therapeutic window of Coumadin.

And hence, AVERROES was performed in patients that could not tolerate, or could not take Coumadin.

Based on that data, that we presented at the European Society of Congress, we've -- we think that that stands on its own.

We are in a fast track procedure with a rolling submission and hope to complete that by the beginning of next year, sometime in 2011, of the first quarter.

Meanwhile, we await the profiles.

We still see major opportunity.

I will let Beatrice comment further, and we are anxiously awaiting the ROCKET data.

Yes, Jamie, all our markets research and also discussion with patient, physician, from generalist to our European leaders clearly emphasize the need for a product at least as efficacious as warfarin, but also -- except only easier to use, in addition to safer to use.

So what we see there is a strong role for more usage, and you see a number of patients that are not treated to date, not just warfarin patients that can be switched.

It is also all the patients that are not treated at all or were treated by aspirin, previously.

You see [last] discontinuations and also trials for aspirin for warfarin, so we know very likely we'll be coming, but you may have a surprise you never know, after November.

But obviously, being third doesn't mean that in an untapped potential, there is not room for you.

We believe we have a large opportunity there, and our profile in, as you probably heard, in DSC was very well received and very encouraging, in terms of having fully demonstrated versus aspirin our benefit risk, with very good bleeding profiles.

So the BID question which was a specific question, product size BID, we don't know what the profile is going to be (inaudible) the safety, so it is also a population with multiple comorbidities, and they are taking drugs, they are taking several other drugs and some others that are also BID, so we don't believe BID would be on the cap.

We believe the risk benefit in the various populations will be what drives our potential success.

Thanks, Jamie, for the questions.

Next question, Pat.

Our next question comes from John Boris out of Citi.

Congratulations on the results.

Just two questions that I have.

First one for Lamberto.

Obviously with the bounty of life cycle management programs and also new product opportunities, there is certainly a certain level of investment that has to go behind those brands in the 2011-2012 time period, relative to the longer term guidance that you have given in 2013 and beyond.

Can you just help us understand or think through how you're thinking about level of investment and how that investment might be different commercially going forward with the business model?

Is it more important to exceed targets in 2013 relative to investment in 2011 and 2012, or vice versa?

And then the second question, just a financial question on share repo.

Did you repurchase shares in the quarter, they were a little bit lighter than we had expected, and can you just tell us how much you repurchased?

Thanks.

Yes.

Let me take your question on 2011-2013, and I will ask Charlie to give you some more details.

But I will start.

The way I see it, John, I see that we are blessed with a very strong pipeline, and we continue to have good clinical data that allows us to look at the future with optimism.

We continue to consider the build of that strong pipeline and successful launch of the new products as a big priority.

At the same time, we are pretty good at managing expenses and deliver in productivity.

We have been doing it, and we will continue to do it, especially when we can go into life cycle management for the older brands.

So when we look at the future, we see a good pipeline, we see some important investments to make behind that pipeline, yes there are headwinds for ESL carry form and European pricing.

We will have to bear the impact of ZymoGenetics and the revised terms, but we will continue to keep 2013 well in mind, but at the same time use our skills and experience in productivity to invest where we need to invest.

That means the products of the future, and take money away from more mature brands and continued productivity.

There is a new customer model that we are incrementally implementing in the market and that tool will help us relieve some of the pressures in 2011.

Charlie, do you want to add something in?

No, I would just add that we have a strong heritage of productivity.

As you know, we had two programs in culmination of $2.5 billion in overall productivity savings.

We're not announcing additional ways, but what we have done probably more importantly, is embed a culture of continuous productivity in the entire business.

And we still see that there are opportunities, but the opportunities are within procurement, selective integration through partnerships and further outsourcing.

We continue to look at streamlining the organization, not just to be -- reduce some level of expenses, but also to become a more focused and efficient organization.

So we are keenly focused and we'll continue to be, on cost management, but as Lamberto said and I said in my comments, we have to appropriately invest against our future assets.

Your question on the share repurchase, we had $189 million in the quarter.

We do a combination of 10b5-1 type purchases as well as open market purchases.

We stopped some of the open market purchases in the quarter because of the ZymoGenetics acquisition.

We felt that it wasn't appropriate to continue those while we were in those negotiations.

Thanks, John.

Appreciate the questions.

Pat, can we go to the next one?

Next question comes from Tony Butler out of Barclays Capital.

Thank you, and good morning.

Lamberto, I respect your comments about the Puerto Rican facility and it being a priority, but can you actually suggest that there is heightened vigilance at every manufacturing facility principally because I suspect the FDA will come in and inspect a number of facilities, given the number of products that you hope will be coming to market?

And then the second question is likely for Tony Hooper.

Have you actually launched ORENCIA in Japan?

Thank you.

Yes.

Your question is how much attention we're giving to all facilities, and to -- besides Manati.

First of all, on Manati.

We are taking very seriously, as I said.

We are taking all the actions that we believe we needed to take.

We have hired one of the best consulting firms to support us in dealing with the changes we must implement there, and we feel very confident.

We're very respectful of the FDA request, and we feel very confident that we are meeting that.

As far as the other manufacturing facilities, we do not anticipate any impact to any of our sites, because the issues that were highlighted in that warning letter were very specific to Manati.

But we take the matter very seriously, and we are reinspecting and reinforcing our activities and quality assurance activities in the -- also in the other plants, GMP compliance is our key goal, and I feel confident about how we are throughout our manufacturing network.

So your question as regards ORENCIA in Japan, the answer is yes.

We actually effectively launched in September of this year.

The team in Japan in fact is a well experienced team who recently, with the launches of ERBITUX, of BARACLUDE and SPRYCEL, have shown they can really execute exceptionally well in the marketplace, and we have great expectations for Japan.

Thanks, Tony.

Next question, Pat.

Next question comes from Tim Anderson out of Sanford Bernstein.

Thank you.

A couple of questions.

If you said it and I missed it, I am sorry.

But, your comments on 2013 guidance, I don't see that in the press release.

It was in the second quarter press release.

Are you reconfirming that, or not?

And then, second question is on apixaban.

Can you frame out in more detail the US regulatory review process from here, now that you've started a rolling submission?

To me, that suggests the final major missing piece to that application would be Aristotle, and then at some point after that is submitted, FDA would make its final decision.

Is that the correct way to think about it, and what is the timing of Aristotle?

Ken, this is Charlie.

On 2013 outlook, we did provide an update, as you said, on our long-term guidance in July.

We would expect to update you again around the same time next year, as we do not plan on doing long-term financial projections on a quarterly basis.

Yes, Tim.

Elliott.

With regard to apixaban.

So, here is the regulatory process, and I would say that they're distinct.

We decided, as we mentioned earlier, to take this very exciting data in an area of unmet medical need, with a very important trial of 5,500 patients, and discuss with the FDA its filability.

And we have agreed, and they have accepted, the beginning of a rolling submission.

That process looks like the following.

The actual filing would occur when the last module takes place on AVERROES, and that we expect to happen within the first quarter of 2011.

We are submitting modules on a rolling basis so that the individual division leaders can be prepared for that submission.

The next decision point by the FDA is to complete that file.

I have no indication that Aristotle will be required, although during a review there is always a possibility that more information is needed, but our understanding is that this will be an AVERROES filing, and there will be a decision to be made upon filing of whether or not this is considered priority review.

That's the process on AVERROES, and for now, I view them separate from Aristotle.

Yes, Tim.

Let me go back on 2013 and beyond then.

Because obviously, as Charlie said, we are not going to update any guidance, but it is clear that our focus here, senior managers of this Company, we are focusing a lot on how we are building the pipeline and the Company in 2013 and beyond.

Every time we have additional good clinical and regulatory news we feel more confident about the future, but we're also aware that we must invest, continue to invest behind building that future.

Hence, the decisions that we will make in 2011, where on one hand we have to deal with the headwinds that I mentioned before, where answering John's question and where we will continue to use our skills and experience in productivity, but we are not going to sacrifice investments behind what we have in 2013.

I feel -- we feel very fortunate in this Company for having a very strong and rich pipeline, and our priority again is to invest properly and adequately behind it.

Thanks, Tim, for the questions.

Can we go to the next one, Pat?

Our next question comes from Steve Scala of Cowen and Company.

Thank you.

I have one financial question and then two pipeline questions.

First, Bristol's 2010 EPS guidance implies Q4 EPS between $0.41 and $0.51 with the lower end down double-digits.

After such a phenomenal nine months, why is the lower end even possible, and even the top end would appear to be a big deceleration, post such a great year?

And the headwinds that you talked about in Q4 really should not be that much different than Q3.

So that's the first question.

And then two for Elliott.

I believe Bristol has the modified release apixaban data in house, but to my knowledge we haven't seen that data yet, so can you summarize that?

And then lastly, also for Elliott, do you have the Phase II Gamma Secretase data in house, and assuming Phase III will initiate in 2011 versus Q4 of 2010, why is there a delay versus what was stated at the March analyst meeting?

Thank you.

This is Charlie.

In regard to guidance, we did update the line item guidance, and you saw in our overall top line, which we're expecting to be roughly the same level of growth that we had in Q3.

On top of that, we have the US healthcare reform and European pricing pressures also mount a little bit further, a little bit more accelerated in the fourth quarter than what we have seen through Q3, and then also a tax rate which was particularly low in the third quarter due to the tax relief.

We don't have that same like event in Q4, in addition to the acquisition of ZymoGenetics, which we mentioned when we did the deal, was roughly $0.03 dilutive to Bristol-Myers Squibb.

Yes.

On apixaban, we have been experimenting with modified release.

I don't have any data.

I have not personally reviewed it.

We will no doubt be describing it next year.

We're pretty satisfied with how apixaban is targeting this particular area, so I don't have any update on the modified release.

With regard to the Gamma Secretase program, I thought I had indicated that the Phase III might start early next year, maybe at the beginning of the year.

I got very optimistic.

I would not signal that as a major concern, other than we want to be very, very careful in this field.

We are pioneers in this field.

There is risk in this field with the new mechanism but the unmet need is unbelievable, and our Company has to be in this area in some of our portfolio.

We are still reviewing our Phase II data and we're going to take another look at our Phase II data, because one of the studies continues are early in the year.

I will say that the compound that has gone before us is nonselective, and I think a lot of the concerns they had was because of a lack of a therapeutic window.

We had a nonselective compound maybe ten years ago in the clinic.

We spent a long time developing a more selective compound.

We have a selective compound and hence a possibility of a therapeutic window.

That's not to say I know whether or not the beta amyloid hypothesis is going to work, but I do believe we will have an ability to test it in Phase III and are making that decision next year.

Great.

Thanks, Steve.

Next question, Pat.

Our next question comes from Seamus Fernandez out of Leerink Swann.

Hello.

Thanks very much.

Actually it is kind of a simplistic question or maybe not that simple, but can we just talk about the volume that you're actually seeing overall?

It looks like the volume growth is kind of slowing over time, both non-US and in the US.

I acknowledge that some of the pressure on the top line very clearly is coming from price pressures, but how could healthcare reform and some of those changes in Europe actually influence volume, and how could we anticipate seeing volume acceleration in some of the different markets?

Thanks.

This is Tony.

Let me talk first a bit about the US.

The data you have seen from organizations like WK and IMS are showing that the markets in the US from a volume perspective has declined to pretty much a flat 1% during the entire 2010.

This compares with a growth in 2009 that went from 1% to about 3%, so clearly a flat market at the moment.

When you decompose that, you see that the branded products are probably declining at about 13%, and the generics are growing at about 5% or so.

So net net, an overall decline in the marketplace.

The healthcare reform itself is not playing that much of a role at the moment.

The economic situation, obviously yes.

One, I think a lot of patients who have come out of COBRA, out of extended benefits, are now having to struggle to find access to healthcare.

Number two, we are seeing an increase in the level of abandonment at the pharmacy level, i.e.

patients who take a prescription to the pharmacy and then decide not to fill it.

When you decompose that data, you see there is quite a dramatic different between new Rx's versus continuing Rx's.

New Rx's in some categories, such as ABILIFY, have gone as high as 22% or 23%, so patients really having a problem to manage that.

Obviously, we have stepped in as quickly as we can to assist patient from a co-pay perspective to drive that forward.

I think the Medicare Part D, healthcare reform for next year, will obviously help us, as more patients will be able to afford the drugs as they move through the doughnut hole.

Beatrice?

Yes.

If you look at Europe, we have several phenomenon.

One is basically, through government measures, pricing pressure and also encouragement of generic prescriptions.

So you see a shift of volume more to generics.

You see also some effect of the crisis in some of the markets, like Spain, obviously where you have high unemployment, so you see some volume pressure.

For BMS per se, what you see is a shift of some large GP brand, like PLAVIX where we lost the patent, to our specialty care innovative compound, where we have less volume but a mix of price volume very differently.

So in that, although the situation having looked at the current situation, we feel that with the launches and the specialty care products we have, we will be able to protect with all the appropriate price volume relation that we have and access our growth potential on the specialty brand.

We feel comfortable that that will help us.

But you certainly see a decline linked to the environment and also to our own portfolio evolution.

Thanks, Seamus.

Pat, we have time for one more question.

Our final question comes from Chris Schott out of JP Morgan.

Great.

Thanks.

Just a quick question on apixaban and then two in the diabetes franchise.

First with apixaban, when we look at that 40% to 50% of the AF market that are patients intolerant or inappropriate for warfarin given aspirin or go untreated, do you believe you can rapidly build this market, or do you think this is going to be a market that takes significant education for physicians to get comfortable taking a different approach with a product like apixaban with these patients?

And then on the diabetes franchise, first on ONGLYZA, should we anticipate a change in message around the franchise as we anticipate your introduction of your metformin combo, given the more modest growth the entire DPP4 market.

Would you consider switching your message to focus more on market share as compared to market growth, with the combination approval?

And then finally, when we consider the peak sales opportunity for [DAPPA], as compared to ONGLYZA, any thoughts as to how you compare the two of those?

Thanks.

I would answer on apixaban.

So when we looked at the market of patients that are not taking warfarin, some of them are patients that were treated by the specialist and end up discontinuing because of side effect, or because they weren't fully monitored and they had to make trade offs.

So we feel that market segment is going to be accessible relatively quickly, because it goes through the normal prescription of the specialist.

The area where the patients are not treated at all, and we certainly need to have a business model that links very closely the specialist and the general practitioner, and we're working on those aspects with all of our teams around the world, to understand how to build a model that captures those populations quickly.

That's why we're very encouraged by all of our raw data, because actually it clearly shows that in comparable to aspirin the product is -- significantly superior in efficacy, and safer in term of the usage.

So we believe with that data, we will have a unique opportunity to accelerate the usage of EFIG.

[EFIG ]is very concerning.

You know the number of stroke, and very severe and debilitating stroke, so the whole message of all the Company is around the disease itself is going to help with that segment.

So, we feel confident that, it may appear that it may be slower to start with, but we have found the ways to generate prescriptions quickly.

We have felt that the only way to tap this really large market is to really have data, and we have the only program that has this study.

Nobody will be able to do a study comparing aspirin if apixaban is approved, and that will not be something that people will ever be able to try.

They'll all have to do non-inferiority studies against apixaban.

And in this day and age, we value that information.

We tested it with payors and we see a great contribution, and that's why I think we're getting fast track status.

And aspirin-like major bleeding, aspirin-like safety, measure by measure bleeding, with Coumadin-like efficacy, should be a powerful message and Beatrice and I are working hard to prepare the market on that.

So if I can move to ONGLYZA quickly, when I looked at the data over the last couple of weeks, it is pretty clear that ONGLYZA has reached about a 25%, 26% share of the new naive Rx's in the US marketplace.

When you look at the mono therapy situation, we take about 1 in 3 patients.

And as we evolve towards the launch of the fixed dose, it has become pretty clear that the growth of the DPP4 market has not met our expectations.

When you assume that more than 40% of diabetic patients are not being properly controlled, there continues to be a huge need for us to educate physicians and patients about the need to add product to the existing regimens.

So I think when we come to market with the fixed dose combination, it will be a combination of looking to drive market growth and then, of course, to compete within that market for market share.

So if we now go to your question on the dapagliflozin and its potential specialty as it relates to GDP sales, the product profile is unique and we have a very differentiated manufacturing.

The product will and is acting independently from insulin, providing a very different pathway to completing the diabetic patient treatment, with additional benefit that we are confirming more and more in our clinical trials on the weight, possible weight loss, as well as possible broad question benefits.

So when we look at the market, we believe that with the unmet need and the growth, and the knowledge they hold in the market and the education on diabetes, and the large number of diabetic program across governments around the world and the heightened awareness of what needs to be done, there will be a large potential for category of -- providing that level of benefit.

So when we compare DPP4 and dapagliflozin sales, we believe this would be a full class on its own and would take a significant share, and that should not be too direct competition when you start segmenting the patient population.

Okay.

Thanks, Chris.

And thanks, everybody, for your questions.

I want to turn it over to Lamberto for some final comments.

Thank you for your questions.

Just a few closing remarks.

First, as our results demonstrate operationally, things are going well here at Bristol-Myers Squibb, and we're glad to confirm 2010 guidance despite the negative impact of US healthcare reform and pricing issues in Europe.

Second, our new positive clinical data provides great momentum for our pipeline and continued confidence in our longer term strategic vision.

I have just written a message to my executives this morning, inviting them to take a minute to absorb all the good clinical news we have.

Enjoy that news, and confirming to them that we will continue to invest in helping ensure the promising future that our pipeline will deliver.

Third, our business development strategy, string of pearls, remains a priority.

We are pleased with our recent acquisition of ZymoGenetics, and we will continue to look for other transactions that complement our internal efforts to help patients today against serious disease.

Well, thank you again for joining us today, and thank you for your attention.

That concludes today's conference.

Thank you for your participation.