施貴寶 (BMY) 2014 Q3 法說會逐字稿

Good day, and welcome to today's third-quarter 2014 earnings conference call.

This call is being recorded.

At this time, I would like to turn the call over to John Elicker.

Please go ahead, sir.

Thanks, Travis.

Good morning, everybody, and thanks for joining us to review our Q3 results.

With me this morning are Lamberto Andreotti, our Chief Executive Officer; and Charlie Bancroft, our Chief Financial Officer; and they'll both have prepared remarks.

And then also joining are Giovanni Caforio, our Chief Operating Officer; and Francis Cuss, our Chief Scientific Officer; who will be here for Q&A.

So before I turn it over to Lamberto, I'll handle the Safe Harbor language.

During the call we will make statements about the Company's future plans and prospects that constitute forward-looking statements.

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 SEC filings.

These forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates as of any subsequent date.

We specifically disclaim any obligation to update forward-looking statements, even if our estimates change.

We'll also discuss non-GAAP financial measures, adjusted to exclude certain specified items.

Reconciliations of these non-GAAP measures to the most comparable GAAP measures are available on our website.

Lamberto?

Thank you, John.

Good morning, everyone.

Overall, we had a very good first quarter.

We delivered strong sales across our key brands.

Revenues were $3.9 billion, a 7% increase over last year, excluding the [iberis] business that we still had in 2015.

Equally important throughout the quarter, we made significant progress in delivering our pipeline with important clinical and regulatory milestones and several business development agreements.

With respect to Eliquis, the combined efforts of our sales, marketing and medical team contributed to a strong performance around the world this year.

And approval for the [DT] treatment in both the US and Europe this quarter provides another strong platform for success.

The strength of our data and our progress to date supports our continued high expectations for Eliquis.

With respect to hepatitis C, we have a clear opportunity in Japan, where hepatitis C patients have had limited treatment options.

We received approval for our dual Daklinza-Sunvepra regimen in July; it launched in September.

This dual regimen, which was developed to meet the distinct need of a significant proportion of the Japanese patient population, has the potential to play a major role in curing HCV patients in that country.

We're only at the beginning, but initial performance indicators give us reason to be optimistic.

We are also off to a good start in Europe, where the European commission approved Daklinza for use in combination with other products across both [depo] genotypes, and where we have launched in Germany and a few other countries.

In the US, we have withdrawn our new drug application for Asunaprevir while we continue to pursue FDA approval of Daklinza, focusing on distinct patient populations with unmet medical need.

We look forward to presenting important data at the upcoming AASLD meeting in Boston.

And with respect to our immuno-oncology platform, we made important commercial, clinical and regulatory advances in the quarter.

From a commercial perspective, Yervoy had it's best quarter ever, with $350 million in sales, a significant increase over last year, and continues to be a key treatment for patients with metastatic melanoma.

From a clinical and regulatory perspective, we reached a number of key milestones for Opdivo.

We completed regulatory filings for melanoma in both the US and Europe.

In the US, the FDA has granted us priority review and breakthrough therapy status.

And in Europe, our marketing authorization application has been granted an accelerated review.

The European Medicines Agency also recently validated our application for Opdivo in non-small cell lung cancer, based on our O53 study.

At ESMO, we announced the early results from CheckMate-O37, the first Phase III trial of a PD-1 inhibitor.

And we are looking forward to presenting additional data for Opdivo at upcoming medical meetings, including lung cancer data later this month, next week, in Chicago; the first demonstration of our overall survival in melanoma in November at SMR; and the first hematology data in December at ASH.

And finally, as you know, we have always considered business development being an important source of innovation for us.

During the quarter we finalized a number of new agreements, both within immuno-oncology and other therapeutic areas that are important for us.

Charlie will describe them in a minute.

Again, taken together, this was a very good quarter across the board.

We have permanent value and are enforcing the strength of our balanced approach of delivering strong results today, while building a solid foundation for tomorrow.

And now I will turn the floor to Charlie.

Thank you, Lamberto.

Good morning, everyone.

As Lamberto noted, we had a strong quarter.

Our key brands did particularly well, with Eliquis, Yervoy, Orencia and Sprycel each posting double-digit sales growth versus the same period last year.

Let me provide a few highlights.

Eliquis sales were $216 million.

We saw continued strong growth during the quarter, and have recently launched our new indication for VTE treatment in the US and Europe.

Our expectation is that the new indication will be an important catalyst for continued growth.

While our focus will remain on cardiologists, the progress we've made in new brand prescription share for AFib and the VTE indication should help as we expand more into primary care.

In the US, net sales for Eliquis were $113 million, up 20% sequentially from the second quarter.

In AFib, our new-to-brand share among cardiologists is now approaching 45%.

Overall, Eliquis' total prescription volume and new-to-brand volume continues to grow faster than any other NOAC.

Outside the US, net sales were $103 million, up 34% from the second quarter.

Yervoy sales grew 47% to $350 million.

Yervoy had it's best quarter since launch, and the recent weekly sales trends remain strong.

US sales were $191 million, up 47% from the same quarter last year, and up 10% from the previous quarter.

We continue to make significant gains in first-line use among community oncologists as they become more comfortable treating patients with Yervoy.

Sales outside the US totaled $159 million, also up 47% over last year's quarter, as we continue to see strong demand growth in all key markets.

Both Sprycel and Orencia were strong, with sales increasing 22% and 18%, respectively.

Certainly the highlight in our virology business was the launch of our dual regimen in Japan, and Daklinza in Europe, for hepatitis C. We reported $49 million in sales during the quarter, and early results are encouraging.

In Japan, we are focused on the approximately 300,000 patients who are currently diagnosed, half of whom are being actively managed by a physician.

In Europe, we have launched in several markets, and early trends are positive, particularly in Germany.

We continue to face growing competitive pressure across our HIV franchise, including continued erosion for Sustiva, due to generic competition in Europe.

Sales for Baraclude were down 14%, mostly due to the loss of exclusivity in the US and softer demand in China.

Due to the loss of Baraclude exclusivity in the US, we anticipate a negative EPS impact of about $0.06 for this year, and $0.10 for 2015.

A couple of additional points on revenues in 2015.

Included in the mature products category are revenues related to a few agreements entered into over the last several years.

The structure of those transactions provide a revenue stream primarily through this year, and we expect revenues will decline by approximately $400 million in 2015.

On the other hand, we had previously expected loss of exclusivity on Sustiva in the US in March of next year.

While the resolution of patent litigation, we now expect that we will have exclusivity in the US through 2017, which should more than offset the 2015 impact of the mature brand product I just mentioned.

I would like to spend a moment discussing some business development highlights.

During the quarter, we announced several deals to strengthen our immuno-oncology portfolio.

These collaborations with Janssen, Novartis, Celgene and MD Anderson, coupled with earlier deals with INSIGHT and Celldex, among others, demonstrate our commitment to explore our full range of opportunities, including different combinations across multiple tumor types, to help us realize the full potential of our immunotherapy in the treatment of cancer.

Now a few comments from our non-GAAP P&L.

Gross margin was up 240 basis points compared to the same period last year, mostly due to product mix following the divestiture of our global diabetes business.

Marketing, selling and admin expenses decreased 5% to $931 million, as our increased investments in Eliquis, Yervoy, Opdivo and our HCV franchise were more than offset by reduced expenses in diabetes.

Our tax rate was 24.2% during the quarter compared to 17.8% for the same period last year.

The difference is due to earnings mix, plus the expiration of the R&D tax credit, which has not yet been expect extended for 2014.

As previously discussed, our quarterly tax rate will fluctuate due to changes in earnings mix.

Regarding guidance for 2014, we are confirming our non-GAAP EPS guidance range of $1.70 to $1.80.

Based on current trends and assumptions, it is likely that we will come in closer to the higher end of the range.

Our guidance assumes current exchange rates, and that the R&D tax credit will be extended by Congress in 2014.

The only line item change in our guidance is the tax rate, which we now expect to be between 19% to 20%.

The increase from previous guidance is driven by our earnings mix.

Now we'd be happy to address your questions.

Thanks, Charlie.

I'd just like to remind everybody that in addition to Lamberto and Charlie, both Giovanni and Francis are here to handle any questions you might have.

Travis?

Thank you.

(Operator Instructions)

Seamus Fernandez, Leerink.

Just a question as it specifically relates to thinking about metrics in third-line lung cancer.

Just hoping that you could give us a little bit of a rundown of Bristol's thoughts on the information that you have in terms of the one-year survival metrics, two-year survival metrics for the squamous non-small cell lung cancer patient population.

And also as it relates to the CheckMate-017 study, any update on the timing of the readout?

Is it possible that the events are coming in more slowly and that this could slip out, or do we still expect CheckMate-017, the interim look, to occur this quarter?

Thanks a lot.

Good morning, Seamus, thank you.

It's Francis.

First of all, let me take the 063 study, with looking forward to presenting that data next week at the Thoracic Oncology meeting.

As you know, it's very difficult to compare across trials in this area, because 063 is a highly pre-treated, third-plus line of therapy, with no really other approved options or recommendations.

But we've looked at this -- a roughly similar patient population would suggest the historical objective response rate in the low- to mid-single digits.

And you may recall, at ASCO this year we presented an analysis of the SEER registry of Medicare data that showed that perhaps less than 20% -- in fact 18% of the third-line squamous non-small cell lung cancer patients were actually alive at a year.

Then we move on to CheckMate-017.

As you commented, the timing of the analysis on this study is event-driven, and that means that the patient mortality will determine when we do the analysis.

As we've seen in previous I/O studies, the mortality rate continues to slow down.

Our present projection -- of course, this is a projection -- but our present projection is that we will trigger -- or the data management committee will trigger analysis towards the end of the year.

And I think it's just worth commenting that, of course there will be some time, some weeks while they do their analysis.

So we remain on track with the present projections to have a year-end triggering of that analysis.

Thank you.

Thanks, Seamus.

Gregg Gilbert, Deutsche Bank.

First, two quick ones for Charlie.

Sorry if we missed this.

But the other income line, can you break that out between the interest and other stuff?

And then on revenue guidance is the cleanse of the offset to the Baraclude generic hit that I'm pretty sure wasn't in your guidance previously?

And then lastly, I just had a bigger picture question about the anti-PD-1 space.

Are there any observations you can make about Merck's go-to-market-strategy so far that shape how you're thinking about your Opdivo go-to-market strategy?

Giovanni, why don't you take the Merck question first, and Charlie will continue with the rest.

Yes, good morning.

This is Giovanni.

With respect to the question on go-to-market strategy, obviously our go-to-market strategy for Opdivo will be informed primarily by the very large experience we have with Yervoy.

And the fact that we have developed a very normative customer model when we launched the Yervoy metastatic melanoma, and we've developed a very significant experience in terms of the ability to educate physicians in immuno-oncology.

So we are obviously looking at building on the very significant experience that we had with Yervoy, and further developing our go-to-market strategy with Opdivo when we get approval.

I'll just remind you that as a result of clearly the strength of the data, the survival advantage of Yervoy and the strategy we've followed to educate physicians in the academic setting and the community for Yervoy, we continue to see very strong trends in both settings.

It's really too early for us to comment on the launch of Keytruda, but as Charlie said, our recent weekly trends in terms of sales continue to be very strong.

Yes.

Just quickly, Gregg, and you can follow-up with John and his team on the details of the other income.

Our interest income expense US, that specifically is relatively the same as it was in the third quarter of last year.

And as we've commented before, the transaction services agreement that we have with AstraZeneca pretty much starts to wind down significantly by the end of the third quarter, so we really won't see much further income from that [PSA] income on a go-forward basis.

Thanks, Gregg.

Travis, can we go to the next question?

Jami Rubin, Goldman Sachs.

Just a couple of questions.

First, Francis, for you.

Are you still committed to initiating a Phase III combo loan study Yervoy, nivo and lung?

And at some point will you show us the data from that -- I guess it's your 012 trial -- that I would expect you would use to determine which combination or which -- a strategy to go forward with that Phase III trial?

And then secondly, is there a read-across from the third-line squamous to the second-line trial that hopefully results by the end of this year?

And if you could confirm whether or not we will actually see overall survival with the third-line squamous study next week?

Thanks.

Good morning, Jami, thank you.

So first of all, let me talk about the 012 study which, as you recall, is a multi-arm study looking at different combinations in lung cancer.

It's still ongoing.

It's still producing clinical data that's informing our design of our Phase III study and combination.

We have sufficient information to complete the design, and we're heading towards completing that by the end of the year.

I can't actually comment at this point exactly on the design, but you will be able to read about it in ClinicalTrials.gov when it gets posted, probably at the beginning of next year.

As far as the 012 data, we've not yet decided the venue or the timing of the one-plus-one data, for instance.

Although you may see some of the data from the Avastin nivo study at the Thoracic Oncology Studies Symposium next week.

As far as the read-through between the third line and second line, I think I would say that it is difficult to compare across different patient populations.

So repeat, the third-line study 063 actually includes fourth-line and fifth-line patients, patients who were actually progressing as they went into the study.

The second line is a less severe population, although it does really include all comers, both in terms of PD-L1, PDL, positive and negative.

So overall, as we get more data, we remain confident in the Yervoy-Opdivo lung combinations, and we're looking forward to initiating this study.

Thank you.

Thanks, Jami.

Travis, can we go to the next question?

Tim Anderson, Sanford Bernstein.

A few questions, please.

Just hoping to clarify on the interim look.

So on the interim or any interim looks that will be done on 017 and 057, will you have access to what that data shows or will you otherwise be informed in any meaningful way of those findings apart from if there were to be early stoppage?

Or is that something that only the DMC and potentially FDA looks at?

Second question is, I think you and your competitors monitor each other's moves very closely in the PD-1 space.

I'm hoping you can give us your thoughts on whether Roche and Merck might be able to file their own products for approval in lung in early 2015?

Which seems like it could be possible.

And then just a clarification on the nivo-plus-Yervoy combo trial.

Should we assume that, that will be in PD-L1-negative patients, or in all comers?

Tim, good morning.

So let me just talk first about the interim data look.

The trigger for this is a predetermined number of events, as I've already mentioned, that is slowing down.

That's something we've seen before with Yervoy.

It's of course, good for patients.

And it will trigger the Data Monitoring Committee to do the analysis.

Even though this is an open study, it's blind to us; we have no access to the data unless it hits the stopping rules, as you say.

As far as the moves of our competitors, I'm totally focused on our program and clearly can't really comment on what they may do or what they may not do.

And as far as the combination timeline, I'll just reiterate that we are looking to have the study design and preparation completed by the end of the year.

And you will be able to read the fine details of that when it's posted to ClinicalTrials.gov, presumably in that first quarter.

Thank you.

Thanks, Tim.

Travis, can we go to the next question, please?

Chris Schott, JPMorgan.

Just had two here.

First, you've expressed some excitement about the opportunity for PD-1 and hematologic cancers, and we're going to be seeing some initial data at ASH.

So I look at these markets, we're seeing a rapidly evolving standard of care.

Can you talk a little bit about where you see the PD-1's ultimately fitting into treatment paradigms here?

And the second question was on tax.

Your Company has always done a great job, and has one of the lowest tax rates in the group.

In light of the recent tax scrutiny that's been out there, can you talk about how you're thinking about your tax rate over the next several years?

I know some of this double Irish stuff, et cetera, may not apply.

But just generally speaking, how do you think about your tax rate over time?

Thanks.

Charlie, a not unexpected question on taxes.

Thank you, Chris.

As you know, we're not giving any guidance at this point on any particular line item.

We're in the middle of our budget process, and we'll talk about our 2015 tax rate in January in the normal cycle.

I would say, overall -- I've said this before, that our tax rate is primarily influenced by earnings mix, but also there are one-time items.

And also, very importantly, our tax planning opportunities, which allowed us, as you pointed out, to have a fairly good tax rate compared to our peers.

And these tax planning opportunities are something that we will continually assess.

So until we get to January, I don't think there's more perspective I can provide you on the tax rate.

He was asking about the Irish taxes, if it's double.

Yes.

We don't have anything related to the Irish double tax.

Good morning, Chris.

Let me first say that we were very happy to receive Breakthrough Designation for Hodgkin's lymphoma from the FDA, and are looking forward to presenting that data and the non-Hodgkin's data at ASH in December.

This is clearly in a late-stage group of patients.

And you'll have to wait and see what the data is, but I think there is good rationale as well as the data we have, to start out at the late stage.

But I think it will be potentially attractive because of the potential for long-term survival and the underlying biology of hematological tumors.

Thank you.

Thanks, Chris.

Can we go to the next question, please?

Andrew Baum, Citi.

I have three questions, please.

Firstly for Francis.

Regarding the 017 trial, should I assume that the stopping rule for the interim has a similar P value or confidence interval compared to that of the final analysis?

Obviously it depends which stopping rule you're using.

Second, could you remind us when we should expect the first CD137 data?

And then finally, could you update us please on the filing strategy and timing for Yervoy in adjuvant melanoma setting?

Thank you.

Good morning, Andrew.

I'm not going to go get into the detail of the stopping rules, either for the interim or the final analysis.

As far as the 137 [early map] data is concerned, those trials are ongoing.

And we haven't yet decided when and where we might present that data.

Certainly, we are considering, for competitive reasons perhaps, not being as forthcoming as we might have done in the past.

And let me just move to our plans for the adjuvant melanoma filing.

As you know, the data we presented at ASCO in the 029 study was actually quite strong.

And we are having productive discussions with the FDA, and plan to file the adjuvant melanoma data for regulatory approval.

As we traditionally do, we'll provide further information when it's accepted by the FDA.

But we believe that adjuvant melanoma is a significant area of unmet need, and is an important part of our strategy in melanoma.

This is Giovanni.

And obviously from a commercial perspective, adjuvant melanoma is treated in many of the same academic institutions where we have established a really strong presence through Yervoy.

As Francis mentioned, it's an area of very high unmet medical need.

And as we think about preparing for a potential launch, obviously our focus would be on subpopulations of patients at high risk, where we believe that Yervoy can have a very meaningful role to play.

Thanks, Andrew.

Mark Schoenebaum, ISI Group.

Francis, thanks for all the disclosures.

This call's been very clear, just really appreciate that.

If I may ask just one more question on the 017 trial, can you clarify -- I wasn't sure from your remarks, it sounds like you'll have the interim data in-house by the end of the year.

Are you still certain that you'll have be able to disclose something to investors by the end of the year?

And if indeed the trial continues, due to the fact that this is an interim analysis, can you help us out?

When do you believe, roughly, the final analysis would be triggered, please?

And actually one question for Lamberto, if I might.

The M&A environment has heated up and cooled down, et cetera.

Can you update us on Bristol's willingness to think about doing an M&A transaction that might be on the larger side -- so something that's clearly not defined as a tuck-in?

Thanks a lot.

So thank you for that question, and I do want to clarify this.

We will not have the data in-house unless the study stops.

This data analysis is triggered by the event and is performed by the Data Monitoring Committee.

It looks like from our projections -- and of course that's still a projection, because the mortality rate is slowing down -- that we will trigger that analysis about the end of the year.

Then of course there's the time for analysis beyond that.

So there will not be a disclosure when the analysis is triggered.

It will be if and when the studies stop when the analysis is done.

And as far as the final analysis is concerned, it becomes even less certain in a way, because obviously it's still an event-driven study.

So we would imagine towards the end of next year.

But that is a very distant projection.

Thank you.

So about M&A, it is right.

There's a lot going on outside there.

And our point of view has not changed.

We continue to look at opportunities of acquiring products, technologies, pipelines in areas that are significant and key to us.

We do not consider -- we've never considered [investments] as a goal for us.

Because, as I said, we are interested in products and technologies.

In terms of size, we are looking at opportunities of different size.

And we believe that we have the financial capacity to go to a lifecycle operation if we find the opportunity worth investigating.

But we are also continuing to look at smaller opportunities, and we have an ensemble we will announce some more in the near future.

Charlie, do you want to add something here?

I would only add that if you look at our track record, we haven't really done anything of size, but we've always said we are agnostic to the type of deal, structure of deal and size of deal.

I would just conclude with that.

Okay, thanks, Mark.

Travis?

Vamil Divan, Credit Suisse.

This is [Ronec] filling in for Vamil.

Two quick questions.

One is on the patent side.

Can you give us an update on your litigation against Merck related to Opdivo?

And what are the relevant milestones we should be watching and the timeframe for resolution?

And then second, just to get a better sense of your strategy in first-line melanoma, have you seen the results of CheckMate-069 at this point and have had any discussions with regulators on that data?

And if not, how do you plan to leverage that trial moving forward?

Thank you.

Very quickly on the IT, we believe in the strength of our IT position, we will continue to defend it and there is nothing new to announce here.

We make it clear that we are not going to block anything that could be negative for patients.

But obviously we are going to defend our intellectual property rights, and we are going to do it here and in Europe and elsewhere.

Good morning.

We do have the data analysis in-house for the 069 study, and I'm encouraged by the data.

We are working with investigators to determine the venue and timing of the presentation and publication.

But I would say that it's premature to disclose any details of our regulatory strategy at this time.

Thank you.

Thanks, Ronec.

Dave Risinger, Morgan Stanley.

So I have a couple questions.

First, what I have down on the timeline for the 057 non-squamous Phase III trial is that the completion is estimated on ClinicalTrials.gov to occur next summer.

Yet you were, I think, speaking previously about an interim look early next year.

So my first question is, could you update us on those two timeline events?

Second, can you explain why the interim look is so close to the conclusion of the trial?

And then my second question is a little bit longer, or my next question is a little bit longer one, and it's about Yervoy.

So there are two views about the outlook for Yervoy in the near-term.

One view from an expert that we had hosted is that Yervoy use in the community may step up because patients have to fail Yervoy before going on to Keytruda.

And thus, maybe the use of Yervoy could step up in the near-term.

A different view is that the threshold to stop Yervoy may be lower than before for some patients, because there's obviously an alternative.

And so for a patient who is struggling with the side effects of Yervoy, they can drop the therapy at the first signs of toxicity and switch to Keytruda.

So Yervoy sales could decline in the near-term.

Could you please give us your view on which scenario is more likely over the next few quarters?

Thank you.

So let me clarify exactly what's going with 057.

It's very similar to 017 insofar as it's an event-driven study and that the event rate is slowing down.

Perhaps it's slowing down even more than 017.

So there is an anomaly there.

As I said, we are projecting an interim analysis in the first half of next year.

And of course, it would not be rational to expect a final analysis in the middle of the year, according to ClinicalTrials.gov.

So it's like 017; the final analysis will also project out further as well.

Yes, Dave.

This is Giovanni.

With respect to your question on Yervoy melanoma, obviously this is a very dynamic marketplace, with some events happening, and we believe significant developments going forward.

I would start from our current position.

So when you look at Yervoy today, we have very strong trends -- over 60% of our business in the community is in the community, and that is the most rapidly growing segment today.

70% of our use is in the first-line setting.

And so, the first point is that, clearly, the role of Yervoy in metastatic melanoma is very well-established across first- and second-line in both the academic setting and the community setting.

We're also, I must say, seeing not only very high penetration in [veer up wild type], but we've also seen a very good increase in the use of Yervoy in the mutant segment in the last couple of quarters.

We've always said that it is possible that in the short term, there is volatility in the use of Yervoy.

But remember that Keytruda is approved in a very specific patient population, in patients that have failed Yervoy, and that was confirmed recently in the latest update of the CCM guidelines.

And obviously, we are very focused on the medium and the long term.

And there, we continue to be very focused on the fact that combination use in the first-line setting can provide very strong hope for patient survival in the first year after the therapy is started.

So hopefully, that adds a little bit on our perspective there.

Great.

Thank you, Dave.

Alex Arfaei, BMO Capital Markets.

I have three, if I may.

First two for Charlie.

How should we think about royalties for nivo in Japan?

I see it's registering in your financials this quarter.

Could this be a meaningful opportunity for you?

And then looking ahead, how should we think about your margins longer term?

Obviously, Eliquis will be a drag, given the partnership structure.

But your product mix seems to be shifting towards more higher-margin products.

And as immuno-oncology becomes a larger contributor, is it fair to expect significant margin expansion opportunity?

And then, the last one for Francis.

Based on everything you've seen so far, is there anything to suggest that more advanced lung cancer patients are more likely to be PD-L1-positive because of prior treatments?

And just to clarify, will we have two-year OS data from the 063 study?

Thank you very much.

Thank you, Alex.

So on the Ono collaboration, as we've disclosed in the last quarter, we are partnering -- Ono had the rights to nivo in Japan, South Korea and Taiwan.

And we partnered with them with three of our earlier-stage compounds to form an alliance whereby, in combination, we will share equally between the two companies.

And where it gets used as a single agent, the lion's share will go to each partner in which they share the product.

So that's the Ono collaboration.

As it relates to gross margin going forward, as you point out, we have Eliquis, which is below 50% margin, based upon the deal that we have with Pfizer.

And the rest of our products are slightly higher than our overall corporate margin.

So you have to really look at the overall mix of products going forward.

Alex, let me just comment that we don't have the PD-L1 status in this patient population.

There isn't any particular reason to consider they'd be more likely or less to be PD-L1-positive or not.

Certainly we've seen in other studies that we seem to have that representation or proportion of PD-L1-positive patients that are the same, more or less, across them.

As far as the landmark data, in terms of one year or two year, you will see in the abstract when it's presented-published next week, six-month data.

But the presentation will be on the one-month data.

I'm sorry, the quantitive data.

So six months in the abstract, 12 months in the presentation.

Thank you.

Thanks, Alex.

Steve Scala, Cowen and Company.

I have three questions.

There is an expectation that Bristol's long-term multi-year tax rate will be high teens.

In fact, I think Bristol may have actually said that at one point; if not please correct me.

But has that expectation changed?

Second, to hit the top end of Bristol's 2014 guidance range, Q4 EPS needs to be only $0.42, but down 18%, making it by far the worst quarter of 2014.

Other than Baraclude, which also impacted Q3, I'm not sure why this would be the case.

So can you amplify?

And then the third question.

Bristol competitors talk a lot about OX40 and GITR, yet Bristol doesn't have any, at least, later-stage programs in these areas.

Is that because Bristol simply hasn't come upon a good molecule?

Is it due to IP?

Or does Bristol question the value of the target?

And if it's the latter, why is Bristol skeptical?

Thank you.

Thanks, Steve.

This is Charlie.

I'll answer the first two parts of your question.

So in regard to tax, yes, previously I've stated that we expect the tax rate -- not indefinitely -- but over the medium term to be in the high teens.

Clearly that's a function of the factors that I mentioned before, which is earnings mix.

And we did see a little bit of up-skewed towards higher product earnings in the higher tax rate area.

So that's impacted it slightly.

The diabetes business going away actually hurt the rate a little bit as well.

But on average, looking at all the different factors that I mentioned, including our tax planning strategy, I still feel in the medium-term that, that's a good barometer to use.

As it relates to trends, vis-a-vis how we are looking through three quarters and then in the fourth quarter, a few things to recognize.

The bullets of the Baraclude impact is going to happen in the fourth quarter.

We also, as I mentioned earlier -- the diabetes royalties, the way they're structured.

So we get a pretty good royalty on the first $500 million.

We really don't get as much as we get to the balance of this year.

We also have the transaction services agreement with AstraZeneca, whereby that pretty much drops off in the fourth quarter.

And then we do have commercial investments that we are continuing to make in the business around Yervoy as we begin the preparation for the launch of Opdivo, Eliquis DVT.

And also as you look at the R&D spend through three quarters and what we see in the back half of the year, we do see -- particularly in regard to I/O -- expanded patient enrollment, continuation of new study starts, including several clinical collaborations exploring combination regimens.

And then we do have some costs related to comparator arm studies.

So by and large, we do see an increase in our overall expenses from a trend-wise in the fourth quarter.

Steve, good morning.

Let me just re-emphasize that we totally believe that combinations of I/O agents will play a critical role in bringing this potential long-term survival to the broadest number of patients.

And of course, you've seen that in terms of our Phase III starts, and potentially data over the next 12 to 18 months.

We've also got early development -- three early development combinations ongoing.

And a large portfolio in discovery, and actually in pre-clinical development.

And I think notably this year, as broad as that is, we've actually supplemented that with some collaborations, most notably Five Prime and the Dana Farber.

So yes, we are committed to bringing forward a broad portfolio of potential immuno-oncology combinations.

Thank you.

Colin Bristow, Bank of America Merrill Lynch.

Maybe switch gears to hep C. Can you talk about how you see your triple regimen being competitively repositioned, especially in light of a treatment landscape that's moving towards shorter duration regimens?

And then, as your assessing the market opportunity, to what extent do you see price being a competitive lever for those competitors who lack clinical differentiation?

Thanks.

Thanks, Colin.

We're reviewing the recent emerging clinical data from our two global 3DAA studies, which you'll recall is UNITY I and UNITY II.

And those will be presented soon at the upcoming AASLD meeting.

And we'll be evaluating our regulatory strategy in the US, as well as other countries, in the context of this very fast-moving environment.

Yes.

I would -- this is Giovanni, good morning.

To answer your question on our strategy, and particularly with respect to pricing, a couple comments there.

The first one is, from a strategic perspective, our priority remains to identify areas of unmet medical needs -- of high unmet medical needs, and develop regimens that address those.

And as we've discussed before, obviously that is different depending on the region and the market.

With respect to pricing, our belief is that the value continues to be the primary driver in this market, like in other markets.

So we are very focused on delivering regimens that deliver high-value from a clinical perspective.

But obviously, we are working in Europe, in Japan, in other geographies with payers to ensure we work and partner with them to ensure that our products are reimbursed.

Thanks, Colin.

Travis, I think we have time for one more question.

Tony Butler, Guggenheim Partners.

Francis, just one somewhat broad question, again on Opdivo.

Certainly at ESMO, there was a great deal of discussion around the theme of PD-L1 positivity, but more importantly, around enriching populations or trials related to PD-L1 positivity.

And as you think about the combination trial, which you said would be announced at least early next year in clin trials, but also in other data sets, what's your view around enriching for PD-L1 positivity?

Or do you dismiss that theme totally?

Thanks very much.

Tony, good morning.

Our approach to this has been, I think -- let me just zoom out a little bit to our biomarker strategy.

Our entire development program has incorporated biomarker testing, as you know.

We want to understand better not just the objective response rate, but also the linkage of PD-L1 positivity to the overall survival.

So all our patients have tumors tested and PD-L1 positivity measured.

It's clear that in some cases, there is a better response rate with PD-L1 positivity.

But also, both in mono therapy and particularly in combination therapy, we've seen that patients who are PD-L1-negative do get responses.

And we do know that those patients -- PD-L1-negative patients -- do contribute to overall survival.

So our approach to this is to collect the data, to do the study, and we'll look at the data and put together our Reg G submissions based on what that data shows.

Thank you.

Thanks, Tony.

And thanks, everybody, for your questions.

Lamberto, any closing remarks?

Thank you very much, everybody.

We had a very good third quarter -- good in terms of financial results, as well as clinical results, regulatory milestones, and we are working actively at delivering a good program for 2014 and beyond.

Thank you.

That concludes today's presentation.

Thank you for your participation.