施貴寶 (BMY) 2015 Q1 法說會逐字稿

Good morning.

My name is Eric and I will be your conference operator today.

At this time, I would like to welcome everyone to the Bristol-Myers 2015 first-quarter results conference call.

(Operator Instructions)

Thank you.

Mr. John Elicker, Senior Vice President of Public Affairs and Investor Relations, you may begin your conference.

Thanks, Eric.

And good morning everybody thanks for joining us.

I know it's a busy morning with several companies reporting.

So, I appreciate your time.

With me this morning are Lamberto Andreotti, our Chief Executive Officer, Giovanni Caforio, our Chief Operating Officer and CEO-designate.

Charlie Bancroft, our Chief Financial Officer and Francis Cuss, our Chief Scientific Officer.

Lamberto, Giovanni and Charlie will have prepared remarks and then we'll go to your questions.

Before I turn it over to Lamberto, let me take care of the safe harbor language.

During this call we'll 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 will also discuss non-GAAP financial measures adjusted to exclude certain specified items.

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

Lamberto?

Thank you, John.

Good morning everyone.

Well it is my last earnings call as CEO of Bristol-Myers Squibb and I'm pleased that my last full quarter was one of our best.

Over the past few years we have evolved and strengthened our Company.

We have delivered on our strategies and we have set a solid foundation for future, building a robust product portfolio, innovative pipeline that position us well for the future.

As a result Bristol-Myers Squibb is now in a very strong position.

And during last quarter, we had solid performance across much of our portfolio, as well as important clinical and regulatory development.

I just want to note how excited we are that Opdivo became the first PD-1 inhibitor approved for lung cancer in the US, and that a positive opinion was adopted last week in Europe for melanoma.

These were not just important milestones for our Company, these are important developments that have potential to improve the lives of thousands of lung cancer patients in the US and melanoma patients in Europe.

Giovanni and Charlie will walk you through the highlights of the quarter in just a moment.

But before they do it I just want to say again that I feel very good about what we have done to transform Bristol-Myers Squibb into a diversified specialty biopharma Company.

And I also feel very good that Giovanni will be my successor as CEO.

He is a trained physician, a global business leader with broad industry experience, and a senior BMS executive.

Who has been instrumental in driving the execution of our strategy over the past several years.

There is no question that Giovanni is the right person, at the right time, and will bring to the position the right mix of experience, passion, vision, and energy.

And lastly I am looking forward to my new role as Chairman of the Board.

Again it's a bittersweet transition in that I will miss working alongside Jim Cornelius, who has played a transformative role at BMS for the past several years.

But I'm glad that I will be able to continue to work with the Board and Giovanni and his leadership team.

And with that I will turn the call over to Giovanni and Charlie.

Thank you.

Thank you, Lamberto and good morning everyone.

Let me begin by thanking Lamberto for his kind words of support and for his years of leadership.

I too am glad that we will continue working together.

So as Lamberto noted we just finished a very good quarter.

Performance across the organization was strong and we had some very important clinical and regulatory advances in our Immuno-Oncology portfolio.

During the first quarter we delivered 6% sales growth.

Excluding the impact from our diabetes divestiture, we delivered a 10% increase over the first quarter last year.

This was due to solid double-digit growth across our new and in line brands.

Here are some highlights.

First regarding Eliquis, we continue to see strong performance.

We had $355 million in global sales in the first three months of the year, with good growth in both cardiology and primary care.

This is more than double the first quarter of last year.

Along with our alliance partner, Pfizer, we continue to focus on our goal of establishing Eliquis as the leading oral anticoagulant within its approved indications.

In the US, Eliquis is now the number one anticoagulant in Muto brand prescriptions among cardiologists and the number one anticoagulant across all physicians for atrial fibrillation.

In addition to progress in atrial fibrillation the label expansion into DVT has helped our performance overall.

Internationally our Business was very strong.

In Europe, Eliquis' strengths across most markets remain very positive.

And we are also doing well in Japan, where Eliquis is the number one anticoagulant in Muto brand prescriptions across all prescribers.

Regarding Hepatitis C, global sales were strong at $264 million, primarily driven by the performance of our Daklinza Sunvepra combination regimen in Japan.

In Europe we have launched in several markets and commercial execution has been good despite increased competition.

In the US we completed our resubmission of a Daklinza to the FDA in February for genotype 3 patients and we have a PDUFA date in Q3.

We also have presented interesting data on the combination of Daklinza with Sovaldi in HIV co-infected patients, as well as more recently in cirrhotic and post transplant patients.

Moving to Immuno-Oncology, we had a very good quarter, commercially as well as in R&D.

Let me first talk about Yervoy.

Yervoy continues to do well with global net sales for the quarter of $325 million.

A 20% increase over the same period last year.

We had strong performance across all geographies.

In the US, we saw growth in the community setting while internationally growth was driven by first-line.

As we continue to advance our Immuno-Oncology portfolio, Yervoy certainly remains an important treatment option for patients.

However, as we have mentioned before, the introduction of new Immuno-Oncology agents such as Opdivo in melanoma will likely create some variability in Yervoy sales.

We are also looking at Yervoy in earlier stages of melanoma, We recently announced the filing of Study 29 in which Yervoy showed a benefit in adjuvant treatment for patients with stage III melanoma who are at high risk of recurrence.

We just presented data from Study 69 at the AACR Conference which showed encouraging data of the combination of Yervoy plus Opdivo.

We believe that this regimen has the potential to further transform the treatment of melanoma, and we're anticipating a submission to the FDA by midyear.

Regarding Opdivo, as Lamberto mentioned the last few months have been very excited for all of us that BMS but most importantly for patients across multiple tumors.

In addition to the early US approval in melanoma late last year and that early approval in second line squamous lung cancer in early March, we recently announced the early stoppage of Study 57, the Phase 3 study of Opdivo in second line non-squamous lung cancer.

Opdivo has once again demonstrated a survival advantage over the standard of care in advanced lung cancer, and we will be providing this data to health authorities as quickly as possible.

With the early approval in lung cancer we are the first PD-1 to market in this area of high unmet need.

Our commercial organization was ready and we were able to start treating patients within 48 hours.

It has been very encouraging to see that we have nearly 100% access for Opdivo in the approved indications, and we are seeing an acceleration of usage in both the academic and community setting.

In addition to the US approvals, just last week the European Medicines Agency adopted a positive opinion recommending that Opdivo be granted approval for use in patients with metastatic melanoma.

This is the first positive opinion from the CHMP for a PD-1 therapy and will now be reviewed by the European Commission, which typically renders a decision within 60 days.

And we are hopeful that we could be approved in lung cancer in the EU by the end of the year.

There's more to come with our Immuno-Oncology portfolio.

ASCO will be an important meeting for us.

We will be presenting to Phase 3 overall survival studies in lung cancer.

Study 17 and we are excited to say we were able to secure a spot for Study 57-2.

In addition to new data of lung cancer we're looking forward to presenting new data in melanoma.

More mature data from ongoing renal studies and data in new tumor types such as hepatocellular carcinoma, small cell lung cancer and glioblastoma.

We will also be presenting the results for the Elotuzumab Phase 3 study in relapsed/refractory multiple myeloma.

And we expect to continue to have important data readouts over the next 12 to 18 months in several tumor types.

So taken together we are very pleased with our first quarter results.

Strong commercial performance, important clinical, regulatory, and business development advances.

This balanced approach driving results today while laying the foundation for tomorrow continues to serve, as well.

And with that, I will turn the floor over to Charlie who can provide more specifics around our Q1 results.

Thank you, Giovanni and good morning everyone.

As a Lamberto and Giovanni mentioned we a very good quarter, which was driven by strong sales growth of 6% or 13%, excluding the impact of foreign exchange.

Overall FX had a slightly negative impact on EPS of about $0.01.

Despite headwinds from FX we had a strong sales performance from our key growth drivers, including Eliquis, Yervoy, and Hep C. In addition, Sprycel and Orencia both had a good quarter each of 10% compared to Q1 last year.

Sales of Opdivo were $40 million for the quarter which included some inventory stocking.

Overall while early, we are seeing encouraging trends.

With Abilify our US sales in Q1 were higher than prior quarters due to the way revenues are shares in our agreement with Otsuka.

The formula is based on a tiered structure and as our rights to Abilify in the US expired in April, all of the US revenues we record this year are at the 50% tier as compared with the blended annual rate of 33% for all of last year.

You may have seen that we recently agreed to transfer North American Erbitux rights to Lily.

We will continue to commercialize Erbitux and book sales until the transition to Lily, which we expect will be completed in the fourth quarter.

After the transition, Lily will pay us royalties on net sales which will be accounted for as other income.

The transaction is not expected to have a significant impact on our non-GAAP earnings.

Gross margin was 80% during the quarter, up 410 basis points compared to the same period last year.

The favorability was mostly due to the FX impact on international inventory sold.

If rates remain constant, we expect the favorability in gross margin to normalize.

Gross margin was also impacted by one-time benefit from a restructured royalty agreement.

A&P and MS&A were both down versus prior year, due in part to FX and lower spending on diabetes and Abilify.

This was partially offset by increased investments in key brands including Eliquis, Yervoy, Opdivo, and our Hep C franchise.

R&D expenses were down about 5% primarily due to timing of R&D spend and FX.

Our non-GAAP tax rate was 21% during the quarter which does not include the R&D tax credit, as it's not been extended yet in 2015.

This was an active quarter for business and development as we continually look for opportunities that can help deliver long-term growth within our core areas of interest.

Within I-O we recently added two new programs that expand our portfolio with the acquisition of the IDO and TDO programs from Flexus and the in license of the TGF beta program from Rigel.

With these programs we had compounds that address the tumor microenvironment, which we think can act synergistically with our I-O assets in multiple tumor types.

We are also expanding our specialty portfolio through business development.

Our recent agreement with uniQure brings us exclusive access to uniQure's gene therapy technology platform for multiple targets in cardiovascular diseases, including a program for congestive heart failure.

The agreement also allows us to collaborate through other therapeutic areas.

Moving to guidance, we're adjusting our non-GAAP EPS guidance range to $1.60 to $1.70.

This range assumes current foreign exchange rates and continuation of the R&D tax credit in 2015.

When studying guidance in January we expect a negative impact of $0.12 to $0.14 on full-year EPS due to FX rates at that time.

Our updated guidance range incorporates an additional $0.02 negative impact based on current FX rates.

While we are not changing line item guidance, in thinking about operating expenses for the remainder of the year, we are very enthusiastic about our position in I-O and are committed to maximizing our opportunity.

And as you might expect, we're continuously evaluating new investment opportunities and we have identified several both commercially and within R&D that are in the process of being reviewed.

Now we will be happy to address your questions.

Okay Eric.

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

And just as a reminder, in addition to Lamberto, Giovanni and Charlie, Francis is here to handle any questions you might have.

So Eric with that if we can go to the questions?

(Operator Instructions)

Seamus Fernandez, Leerink.

Thanks very much.

Just a couple of quick questions.

First off as we look forward to the launch of Opdivo potentially more broadly in lung cancer, can you just talk a little bit about when you would anticipate potentially filing it in non-squamous non-small cell lung cancer?

You certainly have your data available to the agency very quickly from CheckMate-017.

Second question, can you talk a little bit about the -- what you feel the importance of a biomarker is?

And maybe just compare and contrast the PD-L1 biomarker and its relevance to response rate versus overall survival.

And then the last question, Charlie, you had a very interesting comment there about BD and potential additional commercial opportunities.

Is this a time frame within which you think it's time to execute on potentially a more meaningful transaction to really broaden out the product portfolio?

Thanks so much.

Will good morning Seamus.

I must say it's been an incredibly exciting last few months for Opdivo.

As you've heard for our Company for R&D and importantly for patients I must say I'm particularly gratified that the many strategic choices we made to three years ago that shaped our development program are now coming to fruition.

For our initial tumors we focused on lung, as well as the traditional immunological tumors melanoma and renal cell and we initiated broad programs in these tumors and characterize the benefits in terms of overall survival in phase 3 studies going head-to-head with chemotherapy.

When it's standard of care we built optionality into our trials to accelerate some results and we moved quickly to explore the combination therapy.

Now the recent positive data from these studies in lung in melanoma including combination therapy, together with the early US approval in melanoma late last year, the rapid approval in lung cancer and advanced squamous non-small cell lung cancer in early March.

And last week the positive opinion in the EU for Opdivo with a broad label in melanoma really, I believe, puts us in a very strong competitive position.

Moving to your question on -O57 we are very excited about the data which you've heard will be presented at ASCO.

I can't comment specifically on the submission.

There are a number steps we need to take to complete the analysis for the submission, and we're working as quickly as possible to share these data, of course, with the regulators around the world.

But as we've shown recently we're confident that we'll work together and as quickly as possible with the FDA and other health authorities to broaden our label and to bring up Opdivo to non-squamous non-small cell lung cancer patients as soon as it's practical.

Now moving to your PD-L1 biomarker question.

I want to remind you that from the beginning our strategy has been to characterize the PD-L1 expression in as broad a population as possible so also that as many patients as possible can benefit I-O therapy.

Now our scientific goals have been twofold.

To learn about the relationship between PD-L1 expression in clinical outcomes.

Importantly as you said, as you asked, of overall survival as well as objective response.

And also to understand the science underlying PD-L1 expression in tumors and how it's affected by various factors including Yervoy and Opdivo.

I think you'll have to wait until ASCO to hear more specific information about the relationship between objective response and overall survival.

But I will say we are very excited about the fact that we are the only Company that really has been able to show that relationship.

Because as well as the total population, we have done sub analyses looking at PD-L1 positive and negative in both squamous in both studies in second line squamous and non-squamous.

So I just want to -- let me finish by saying we continue to design studies to include all patients regardless of PD-L1 status.

And we will follow the signs and the clinical data that we generate regarding the use of this biomarker.

I think it's important in my final point to say we have developed a high quality validated diagnostic test data with Daiko which will be quickly available should we need it either for approval or labeling.

Thank you.

So, Charlie, you will obviously elaborate on BD, but it is clear that our strategy on business development has not changed over the last years.

We continue to look at opportunities.

We continue to look at opportunities of different size as long as they make financial sense and they give us the possibility of expanding our pipeline and our portfolio.

Size is not the main element of judgment or the main element of selection it's more the fit with our portfolio and our pipeline.

So the moment is always mature for good business development opportunities.

Thanks, Seamus.

As Lamberto said, nothing's really changed regarding our BD strategy.

We've been fairly consistent with that.

In that BD remains a top priority for the Company as we recognize innovation must be sourced not just internally but externally, as well.

And as Lamberto said we're agnostic around size and we're also very good at looking at different structures that suits our partners.

And also and very importantly, we're very disciplined around what we think makes strategic sense for us as well as good science, and of course the financial metrics have to all tie it all in together.

Great.

Eric and go to the next question, please?

Your next question comes from the line Gregg Gilbert, Deutsche Bank.

Firstly, on Opdivo.

I was curious if you're seeing use of Opdivo for squams and non-squams at this point?

And as part of that or as a follow-on to that is there any evidence that payers will differentiate between I-O agents that have OS data versus those that do not?

Obviously, that shouldn't matter to physicians and patients, but wondering if there is a payer angle there.

And second line of questioning is around Eliquis.

Given that some time has passed and the drug is ramping nicely and there's a change in leadership coming here, I just thought I'd re-ask about whether your efforts in Eliquis are leverageable in the future on products beyond Eliquis, and perhaps whether it's profitable at this point or not?

Thank you.

Sure thank you, Gregg.

Good morning, this is Giovanni.

Let me just answer the Opdivo question first and then we'll go to Eliquis.

With respect to Opdivo, as we mentioned earlier, we were approved in lung cancer squamous, second line lung cancer at the beginning of March.

We had, obviously, ensured that despite the very rapid regulatory review, that our teams were fully resourced and ready to launch we were ready to launch right away.

We actually started treating patients within 48 hours.

I think what has happened since launch is very encouraging and reinforces our belief in the potential of Opdivo in lung cancer.

We've seen at this point virtually 100% access with no barriers within approved indications by any payers.

We've seen a lot of interest in our data.

And we are seeing a rapid increase in penetration in both the academic institutions and the community.

One of the things that we look at is a leading indicator of performance is really how our trialists grow.

And we are seeing week over week really good trend in terms of trialists.

With respect to our performance, I would also say we are really looking at what we call the dynamic segment in terms of new patients coming on therapy.

And we are very pleased that we're actually at this point at approximately 50% share in value of the PD-1 market right now.

To your question regarding usage beyond the label, all I can say obviously is we are promoting within our two labeled and approved indications.

And we have seen that approximately 75% of claims are really in label with respect to the totality of our Business at this point.

So what we are seeing really reinforces our belief that the data is very strong.

There's a lot of interest in it.

Obviously we think that survival data and the ability to promote a Phase 3 randomized trial with survival data which is clearly a hard endpoint, resonates extremely well with providers and payers.

And to Eliquis let me just tackle your comments the performance is very strong, we had a really good quarter.

We had a good quarter in the US, where we continue to see a growth in both our TRX share and our new to brand prescriptions share.

We were able to grow both TRX and in BRX volume by approximately 20% in the quarter, compared to other brands which declined during the same period.

And we also saw really good performance internationally with Japan Germany and all key markets in Europe.

Eliquis is a very important asset or us.

It is growing to be a really important product, and, obviously, as you know, cardiovascular is one of our priority areas.

We have a number of early programs in cardiovascular disease.

We actually, as Charlie mentioned, signed an agreement with uniQure which has a potential target in heart failure.

So Eliquis is one product but we are committed to the area.

Thanks for the questions Greg.

Can we go to the next one please, Eric?

Chris Schott, JPMorgan.

Great thanks very much.

Just a couple here.

Just following the data we saw for Yervoy and Opdivo at AACR and what seems to be a really nice bump versus just monotherapy PD-1.

Can you just elaborate a little bit more where you see that combo fitting into the treatment paradigm?

And just as you think about price for that combo, do think there's going to be any kind of rate limiting factor in terms of adoption ultimately when you think about that market?

My second question was on your IDO.

Just can you elaborate a little bit more in terms of what differentiation you see with the product that you acquired here versus others in development?

And just the timelines we should watch in terms of when the product could move forward.

Thanks very much.

Chris good morning.

Let me just start with the combo.

Obviously the data we presented at the AACR was very positive in terms of the high response rate.

And I believe what was really exciting is not only the response rate in the range of 60%, but also that over 20% of patients have a complete response.

We continue to believe that the use of the combination of their Yervoy and Opdivo can really transform melanoma.

Because obviously the difference we're seeing in terms of the response rate translates into the potential for survival for a significant number of patients in a disease that progresses very rapidly.

The other point that I would like to make is that we are reassured by the fact that physicians are able to manage the side effect profile of Yervoy.

In over 80% of cases with the treatment algorithms we've used since the launch of Yervoy and that a significant percentage of even those patients that may stop therapy early almost 70% actually see responses.

So we think there is a lot of value in the regiment.

And obviously as we get ready to present some data from the Phase 3 Study 67 at ASCO, we are very focused on that.

From the perspective of price, I think that our experience is that payers and providers are very interested in data that demonstrates a significant incremental value for patients.

That clearly was our experience with Yervoy from the very beginning and obviously we believe it continues to be what makes a difference there.

It's important to remember that obviously the induction phase with Yervoy is something that physicians are very familiar with.

And obviously the maintenance phase with Opdivo beyond the first 12 weeks is really something that is only happening for patients that have responders.

And as you know there is a very high value in terms of potential survival in the long-term to a response.

The payers traditionally have been very receptive, too.

Chris good morning.

Let me say based on our experience with the Opdivo and Yervoy in combination the science from our internal program and our external collaborations we believe that in addition to checkpoint inhibition of course, which we have a great interest and expertise in, understanding and modulating the tumor microenvironment, which is where IDO plays, is going to play important role in how we continue to expand the benefits of I-O to additional patients.

Specifically around the Flexus asset.

We have now had a chance to look at the data following the successful completion of the HSR process.

We are very happy with what we've seen.

I'm not going to go into the specifics at the moment about what differentiates it, but it's an exciting lead compound, but also represents a program in IDO and behind it programs in IDO/TPO.

All of which together with some other areas in the tumor microenvironment, we think is going to be very important.

As far as timing, we're moving well towards filling the data we need for an IND.

And we are hoping to be in the clinic at the end of the year or in the beginning of next year.

Let me just finish by talking generally about the combination to reinforce what Giovanni said.

We find -- feel the compelling results we saw at the AACR really reinforce our belief in the combinations.

And an opportunity to really expand the benefits beyond the patients who are treated presently with monotherapy and we are planning to be in the position to have a submission for the combination to the FDA by the middle of the year.

Thank you.

Thanks for the questions Chris.

Can we go the next question please, Eric?

Jami Rubin, Goldman Sachs.

Thank you.

Giovanni, I don't know if you answered a question that was asked of you earlier, but maybe you can just talk about what you see as the commercial significance of Opdivo having comparative overall survival in all commerce in second line squamous non-squamous lung?

And the reason I ask is obviously competition is right at your doorstep with Merck and Roche.

Merck's made some comments earlier today on their call suggesting a broader label, albeit no overall survival.

So in the commercial environment, what do you see as a significance or relevance of having that broader label?

And then a question for you Francis.

Roche has started four chemo combination trials of PD-L1 antibody in Phase 3 for lung cancer.

And Bristol has been less committed to a chemo combination trial.

I think that you've decided not to go ahead in Phase 3. Clearly they are making a very large investment in this combination.

What do you think they see that you don't?

Thanks very much.

Jami let me start with the commercial perspective.

We believe that, first of all, it is very important to have Phase 3 data and it is very important to have overall survival data.

Oncologists have traditionally really valued the opportunity to look at a couple of [myo] curves and understand the survival impact of a new treatment for patients.

And what we are very excited about is not only the fact that we have two Phase 3 trials, obviously you'll see those at ASCO and that those are in all commerce, but also our ability to characterize a response in PD-L1 positive and PD-L1 negative patients.

Our data set is very strong and clearly survival is important for both physicians and payers.

From a commercial perspective just to conclude, we are obviously aware that this is a very competitive space.

We are making all of the right investments to be competitive.

We have invested in our commercial infrastructure in the US early in order to be able and ready to launch.

We have share voice in both the melanoma market and lung market at this point.

And we will continue to make the investments that are needed in order to drive very competitive performance with our portfolio.

Good morning Jami.

I'm not going to speculate on Merck or Roche's strategy or indeed what the FDA may or may not do in terms of the data we've heard about.

What I can say from our experience with regulatory authorities is we've got the label based on the data we've put in.

And based on that, I'm confident we're going to have a very competitive label in second line non-small cell lung.

I'm very gratified about the progress of our comprehensive program in lung cancer.

And just to remind you this has generated strong data in overall survival in second line lung, both in a broad population and also it also has sub analyses for both PD-L1 positive and negative patients.

And you'll be seeing that data at ASCO.

I think as far as the combination with chemotherapy, we've set out to go head-to-head with chemotherapy.

And as I've said we've shown very impressive data, which you'll have just a chance to see.

I would remind you, as well as our approval in the US approval, we also have an ongoing registration review in Europe for squamous lung cell cancer.

And we have a number of collaborations in chemotherapy where at least we will be able to get some indication in addition to the I-O combination, which will be starting very soon in chemotherapy.

So overall, I'm very confident in our broad program.

You'll have a chance to see the second line studies at ASCO.

We certainly have first-line therapy again going head-to-head with chemotherapy and the first-line combination study will be starting very soon.

Thank you.

Thanks for the questions Jami.

Can we go to the next one, please?

Mark Schoenebaum, Evercore ISI.

Hello that would be Schoenebaum, but that's okay.

Thank you very much for taking the question and congratulations on the success of lung trials over the last several months.

Maybe I can just ask one question.

There's been I think some questions around this, so I just wanted to hit it on the head.

I don't know if this a question for Giovanni or who, but I know that you're not going to give long-term guidance.

But I think everybody that watches Bristol-Myers understands that your operating margin right now is sort of artificially suppressed, if you will, by some of the nature of your partner products.

And that the earnings power in theory of your I-O franchise over the next several years is substantial.

And in theory the incremental contribution margin of your I-O franchise should be dramatically in excess of the overall Company EBIT margin or operating margin today.

I think that is likely a statement of fact at the product level, but the question is how is management thinking about structuring -- running margins over the long-term?

How much of the I-O sales will you allowed to drop down to the bottom line?

I realize, we all realize you're not going to give specific guidance.

Maybe can just talk philosophically about how in the realm of exploding revenue perhaps of the next three to five years how you will manage expenses.

And then just a clarification on ex-US lung cancer timelines, if I may.

I heard you mentioned that approval will be by the end of the year, I think, Francis, you expected.

Can you just clarify though in which histologies and which line?

And if it's not second line, when would you expect the second line data versus those attacks from both squamous and non-squamous to make it onto the European label?

Thanks.

Okay Mark.

Thank you this is Charlie.

As you suggested we're not going to give long-term guidance.

But let me give you the frame I think that we've talked about before as you think about our Business.

Just in the very near term, as we've talked about on the call we lose Eliquis, or excuse me Abilify.

I almost gave Lamberto a heart attack.

We lose Abilify -- actually we lost as of April 20.

And that is to significantly profitable product for us.

In our agreement with Otsuka, we book revenue on Abilify and virtually have no cost of goods, and we virtually have eliminated all operating expenses against that product.

In addition, Eliquis as you mentioned has -- we share with Pfizer on that and that has an impact on our overall profitability, because that goes through cost of goods sold.

And then we do have a compelling opportunity as you suggest in I-O.

And -- but we also have to make sure we're making the right investments to make sure that we secure our leading position not just now but going out into the future.

Having said all that over time you would expect to see some leverage in our P&L.

Good morning Mark.

As you say we have a validated submission under review in the EU based on squamous non-small lung cancer.

And as you mentioned we're looking to have approval before years end.

I'm not going to comment any further on potential submissions or other approvals, but just obviously to point out that the positive data from -O57 we'll be working very aggressively to have that ready for submission to regulatory authorities around the world, including the EMA.

Thanks for your questions Mark.

Can we go to the next one please, Eric?

Tim Anderson, Bernstein.

Thank you, a few questions.

Can you just update us on your perspective of the combo of Ipi/Nivo in non-small cell lung relative to let's say a year ago.

Are you more confident or less confident in the utility of that combination in lung?

And then can you talk about PD-L1 biomarker and how you think this could play out in Europe in lung cancer?

Do you think that relative to the US, European regulators in payers may take a more pronounced view on the utility of the biomarker as a gating tool for treatment decisions?

And then Elotuzumab, can just repeat what you said when we'd see the data on your level of enthusiasm for that product?

Good morning, Tim.

Let me first of all talk about the 227 study, that's the Phase 3 study in first-line.

It's a comprehensive broad study in non-small cell lung cancer patients.

It includes both PD-L1 positive and negative patients.

It will have a different dosing schedule to other trials in combination.

And I just want to reiterate that we have insured that the trial design has benefited from the insights we gleaned from the recently stopped Phase 3 lung studies.

It's important -- it's an important study.

It's an important part of our broad program and will address a comprehensive lung population.

It's ready to recruit and you'll see it in clintrials.gov soon.

Talking about the PD-L1 biomarker let me be clear.

We've always said that the role of the biomarker may vary based on tumor type, histology, line of therapy and whether it's monotherapy or combination.

And I think I'll add to that, of course, the data that you have that you generate and the response of the regulators to some extent.

But really it all comes down to the data.

And we are very comfortable that we have generated a very comprehensive data setting set in line non-small cell lung cancer based on the -O17 and -O57 studies.

And then finally about Elotuzumab, we have the data from ELOQUENT-2, that's a Phase 3 second-line study.

We look forward to presenting that at ASCO.

But of course it's premature for me to discuss our regulatory plans until after the data is presented.

Thank you.

Thanks Tim.

Can we go the next question please, Eric?

Alex Arfaei, BMO Capital Markets.

Good morning and thank you for taking the questions, and congratulations on -O57.

Charlie your full year guidance it seems is very conservative given the performance in 1Q and gross margin outlook.

Is it a reflection of your Opdivo launch trajectory, or are you expecting other major headwinds somewhere other than of course of Abilify that you had talked about?

And then Francis similar to the earlier question on IDO, could you comment on the TGF beta assets from Rigel and when we can expect data from those?

Thank you

Thanks Alex, this is Charlie.

I did mention to some degree how we think about guidance in my comments, but let me just comment a little bit further.

Abilify was very favorable to us in the first quarter, but that extensively goes all away in the back half or the last three quarters.

I did mention we do have a one-time benefit in our cost of goods sold in related to a royalty restructuring.

And then OpEx is normally lighter for us in the first quarter than it is in any other quarter.

And when you take that timing difference, as well as my comments earlier about considering additional I-O investments, that's really how we get to the guidance range that I talked about earlier.

Let me just -- this is Giovanni, let me just reiterate that we are really excited with the initial feedback from the launch of Opdivo in both melanoma and lung.

As I mentioned earlier, all of the early indicators are very strong from access to physician interest to the growth in number of trialists across community and academic settings.

And finally, as I said, in terms of a total share the PD-1 opportunity and how rapidly that is growing.

Good morning, Alex.

You're right we're excited about the Rigel collaboration on TGF beta.

Just to be clear that's a discovery program.

Therefore I'm not going to comment on when we might have a clinical candidate.

And I think it's important to remind you that we do have in the clinic a collaboration with Eli Lilly on their TGF beta inhibitor with Opdivo.

And I think we would expect to see data from that before we get the Rigel compound into the clinic.

Which of course would be very helpful for us in deciding where we will go.

Thank you.

Thank you.

Can we go the next question please, Eric?

David Risinger, Morgan Stanley

Thanks very much.

I have three questions please.

First is, for your updated 2015 guidance does that reflect an expected US approval and launch in non-squamous non-small lung cancer in 2015?

Second with respect to breaking down study -O17 and -O57 based upon the PD-L1 status could you just help us understand how you plan to potentially cut the data to demonstrate greater effectiveness in high expressors?

And then how you will try to frame the debated ASCO since different companies use different cutoffs and biomarkers?

And then third with respect to ex-US Opdivo in lung, any suggestion for when we should be modeling lung launches, ex-US in 2016?

Should we think about major markets launching in the second half of 2016 after price negotiations?

Is that sort of the right timing to think about in major markets ex-US for lung?

Thank you.

Davis, this is Giovanni let me just answer a couple of your comments.

With respect to launch of study 15 of the non-squamous indication, we are not going to comment on that at that point.

As Francis said, we are conducting all of the analysis on the data, we look forward to sharing that with regulatory authorities, and it's really premature to make any other comment there.

With respect to ex-US Opdivo lung sales, I think that when we are approved we should -- you should be thinking about the same sequence of launches that is typical of ex-US and particularly European markets with more rapid access for patients in those markets like Germany and Northern Europe in general where there is the opportunity to launch right after approval.

And obviously in some other markets we will need to go through negotiations related to reimbursement.

So there the only thing I would say is our experience with Yervoy is going to be very helpful to us.

And with Yervoy, we were able to obtain reimbursement broadly in line with label in every one of the key markets.

Not only in Europe, but around the world.

Great.

Can we go to the next question please, Eric.

Vamil Divan, Credit Suisse.

Thanks so much for taking the questions.

So one, just on Eliquis first and then a couple on the Immuno-Oncology side.

For Eliquis are you seeing, or are you anticipating any greater pressure in that market given the recent approval from another competitor in that space from Daichi?

And then in I-O you mentioned on the progress you're making on Yervoy in the community.

Can you quantify just what percentage of the use of Yervoy is now in the community versus in academic centers?

And then do you think Opdivo is going to have a very different breakdown when we think out a year or two from now, just given the different profiles?

And also for the combination, how do you think about that being used in the community setting?

And is there anything you can do to try and mitigate the heavy drop out rates that we saw with the combination -- anything you've learn from what you've done with the combo in lung or what other tumors that could help there?

Thanks.

Thank you.

Let me take the first part of the question with respect to access for Eliquis.

First of all there's really strong momentum for Eliquis in the market.

We are seeing very significant growth in TRXs and in BRXs.

And obviously we just established a leadership position in new to brand shares across all indications in cardiology and in atrial fibrillation across the total market.

That's important in negotiating with payers.

The second point that I would say is we are in a very strong position from an access perspective.

We have over 90% access in both the commercial and Medicare space.

On the commercial preferred status is approaching 70% and in Medicare it's above 80%.

While the category will continue to managed and obviously we are very focused on it, the fact that we are emerging as the leading agent in terms of the overall momentum positions us strongly with payers.

With respect to the use of Opdivo and how the update is going in the community versus the academic institutions, obviously that's very different in melanoma versus lung.

Because as you know, about 50% of melanoma is treated in the hospital and academic setting and only 50% in the community.

When you look at lung that's very different with over 80% of patients treated in the community.

So while at the beginning it is logical that the uptake is fast in the academic and hospital setting, we are actually seeing with Opdivo already a very significant increase of uptake in community, which is clearly very important.

And it makes us feel optimistic about the overall opportunity for Opdivo in the community setting.

Vamil, good morning let me just say, of course we are collecting safety across many tumors.

It's a lot easier for us of course because we have the same dose in all the tumors, so it's much easier for us to compare.

I think broadly one would say that the safety is very good across most, if not all tumors.

And let me just add a little color to David's question about PD-L1 status also in -O17 and 57.

Building on what Giovanni said.

Obviously I'm not going to talk about the data, but I just want to a reiterate that there are comprehensive analyses both for the broad population in PD-L1 and PD-L positive and negative patients.

That will be presented at ASCO and we hope to publish it also comprehensively.

Thank you.

Great Eric I think we have time for two more questions.

Marc Goodman, UBS

I was hoping you could tell us the one-time impact in the gross margin in the quarter how much did that impact?

And what was your commentary around will it stay for the rest of the year?

What is that new gross margin guidance including this?

And this goes away this year and so there'll be no impact next year?

Just so we're clear on that.

And then secondly on HCV in Japan can you give us a sense of how many patients you have, what market share you have over there?

And Baraclude OUS, just wondering if the weakness was FX, or if there was anything else going on?

Thanks.

Okay, Marc, it's Charlie.

So the 400-basis point improvement we had in gross margin I would characterize two thirds of that was FX and one third was the one-time royalty restructuring.

We expect, assuming current FX rates, that most of the favorability we had in the first quarter due to the FX in our margin will dissipate.

We don't see any further benefit going forward.

From the perspective HCV Japan let me say the performance has been really strong.

Our dual regimen Sunvepra/Daklinza we launched in the middle of last year.

When we describe the opportunity there remember there's about a 1.2 million patients with HCV, with Hepatitis C, in Japan.

Of that 70% are genotype IB.

And we decided to focus initially on the approximately 150,000 patients that are in the healthcare system actively seeking treatment.

We've seen a really strong commercial execution in Japan.

We've seen rapid uptake, and as you've mentioned we had approximately $200 million in sales in Japan in the first quarter.

When we look at our penetration in terms of our share of the more recent oral regimens, we have the vast majority of the patients there.

The largest share we have is in the subset of 150 patients I described before, but we've seen some uptake with new patients coming into the treatment in Japan, as well.

Mark just concluding on your Baraclude question, ex-US, the sales were down 5% versus prior year if you exclude the FX impact.

Eric, the last question please.

Andrew Baum, Citigroup.

Hi, three questions, please.

Firstly just looking at your -O69 trial at AACR, there's obviously some quite considerable toxicity with the combination.

Just thinking about your ongoing lung program with a combination.

What are the learnings in terms of those modification, scheduling, patient selection for monitoring and treatment that can put into place to make a more better-tolerated regimen within the Phase 3 lung indication?

Second I'd wonder would you comment on anticipated patent term extension for Eliquis, how long it will take you until and when you'll have confirmation of that?

And then finally for Francis if there is no difference in response rate between the PD-L1 positive and negative sub groups in -O17 what was that tell you about your diagnostic?

Good morning, Andrew.

First of all, let me just say we to believe the combinations do have an added effect.

We think that's been shown very nicely in melanoma.

And I think they have the potential to meaningfully increase the survival expectations from more patients than monotherapy alone.

I think obviously one can't always extrapolates between tumors, either in terms of efficacy or safety.

We've seen differences there.

But we do think underlying this is an opportunity with combination of Opdivo and Yervoy to treat more patients.

Clearly looking at the lung cancer population we understand that it's a different population and we think in non-small cell lung cancer there may be slightly different tolerability.

That being said, we've learned a lot from the ongoing combination studies together with the second line studies and so we really think the first-line combination study that's about to our really does have a good chance of understanding the potential of combination in lung cancer.

As far as the -O17 study and the assay, let me just say that I think are assay is a good assay.

It's validated.

It's ready to go in terms of the need for approval or labeling.

And you'll have the opportunity to see the data, which is very strong I think across -O17 and -O57 in terms of documenting the different patient populations.

And we're not going to provide any comments on patent term extensions for Eliquis.

And I will close this call by thanking everybody for participating.

We had a strong performance in the first quarter across much of our portfolio and we had important clinical and regulatory development.

Bristol-Myers Squibb is stronger than ever.

Thank you and have a good day.

Okay, everybody, thank you.

As always, Randy, Bill, and I are available for any follow-ups you might have.

Thank you.

Ladies and gentlemen, this concludes today's conference call.

You may now disconnect.