施貴寶 (BMY) 2019 Q2 法說會逐字稿

Good day and welcome to the Bristol-Myers Squibb 2019 Second Quarter Results Conference Call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. John Elicker, Senior Vice President, Public Affairs and Investor Relations.

Please go ahead, sir.

Thanks, Orlando, and good morning, everybody.

We're here to discuss our second quarter earnings as well as the news that was press released last night.

With me this morning, Giovanni and Charlie will have prepared remarks; Chris Boerner, our Chief Commercial Officer, will be here for Q&A; as well as Fouad Namouni, our Head of Oncology Development, is here for Q&A as well.

I'll take care of the safe harbor language.

During the 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 future date.

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

We'll also focus our comments on our non-GAAP financial measures, which are adjusted to exclude certain specified items.

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

Giovanni?

Thank you, John, and good morning, everyone.

I'm pleased to speak with you today about our strong performance in the second quarter and the progress we've made on our planned acquisition of Celgene.

But first, let me start by discussing the results we announced last night and frame what it means for OPDIVO and how I think about our outlook going forward.

With respect to -227 results.

As you know, we announced important results last night.

We had a successful outcome, but also a part of the trial that didn't meet its endpoint.

Starting with the results of Part 1a, this is the third major tumor in which OPDIVO + YERVOY shows an overall survival benefit in the first-line setting, and we believe these results represent a potentially differentiated opportunity in first-line lung cancer.

If approved, the combination will provide an additional and chemo-sparing treatment option for patients.

And I have full confidence in my commercial team's ability to execute in this competitive marketplace.

As we noted in the press release, we also saw in an exploratory analysis an overall survival benefit in PD-L1 negative patients.

We'll be sharing all the data at an upcoming medical meeting so I won't go into the specifics today.

Now turning to the results of Part 2, they were not what we had hoped for.

There are, however, important aspects of the study results to keep in mind.

First, we're looking at 1-year landmark analysis.

OPDIVO plus chemo performed consistently with the experimental arms of other successful trials.

The chemo control arm somewhat overperformed compared to what we regularly see.

The performance of OPDIVO was consistent with our expectations, but the trial was not positive.

The totality of the data we've seen from both Part 1 and Part 2, confirms our belief in the profile of OPDIVO as an important medicine and further strengthens the value of the combination of OPDIVO and YERVOY.

We know lung is a highly competitive market, and we are excited about the potential opportunity to offer a differentiated option for patients.

We plan to discuss these results with health authorities as soon as possible.

We continue to expect growth for OPDIVO in the U.S. and ex U.S. this year compared to last year.

Looking forward, we see the growth trajectory for OPDIVO being driven by data supporting future approvals, and Charlie will discuss the near-term dynamics for OPDIVO.

Now let me turn to the second quarter results.

Our results were driven by excellent commercial execution across the entire portfolio.

Eliquis continues to drive significant growth through strong execution and a best-in-class profile, with a compelling growth outlook ahead.

I've already talked a lot about OPDIVO.

And as you've seen, we've had a really good quarter.

Additionally, our results this quarter reflect strong financial discipline from an OpEx perspective.

Charlie will provide more color on performance in the quarter and the potential opportunities that we see ahead.

Reflecting on a strong performance in the first half of the year and the clinical trial results we announced last night, I want to move to discuss how I am thinking about the future company overall.

When we announced the Celgene acquisition in January, we said it was attractive from a strategic and from a financial perspective.

As I speak with you today, I am even more convinced of the rationale of the deal and the exciting new company we are creating with the acquisition.

When we first announced the deal, we said we viewed Celgene as providing us with a unique value creation opportunity through 5 potential near-term launches and an attractive pipeline.

As the year has progressed, we've seen very positive developments with Celgene's business.

Both IPRs for Revlimid were rejected, and an additional settlement was announced.

We've seen the late-stage pipeline opportunities move closer to launch with 3 of the big 5 filed with the FDA and other health authorities.

As a combined company, we'll have a broader and more diversified portfolio with significant growth prospects.

In the medium term, we will have potential for 4 hematology launches and ozanimod approval in multiple sclerosis and later in IBD and TYK2 approval in psoriasis, among other indications as well as life-cycle management opportunities for our I-O portfolio, including adjuvant therapies.

Longer term, as we face losses of exclusivity in our portfolio in the second half of the next decade, we will be in a much stronger position as a combined company.

We'll have an earlier life cycle portfolio, including the potential 6 near-term launches, the 50 Phase I and II programs will be maturing, and we expect our balance sheet to be reset, allowing us to continue to source external innovation through business development.

As you know, we announced the decision to divest OTEZLA, based on our ongoing discussions with the FTC, and we are currently engaged in a strategic sale process.

Charlie will say more in a few moments.

I feel good about our prepared -- preparedness for the integration and our ability to execute as a combined company.

In June, I announced my future leadership team.

The team includes key talent from across both companies and was selected to ensure key value drivers are protected.

Specifically, it was critical to ring-fence hematology and solid tumor commercial capabilities, while bringing best-in-class enabling functions to bear across the entire portfolio.

With R&D execution a key priority for the combined company, we've named 2 talented leaders, Rupert Vessey and Samit Hirawat, to run the research and late-stage development organizations, respectively.

I'm pleased to note that Samit has been with BMS for a few weeks.

As he transitions into the company, he's not permitted to work on oncology development until the end of October.

However, as John mentioned, Fouad is here today to answer your questions regarding oncology.

To conclude my remarks, I'd like to reiterate, I am pleased with our strong performance this quarter.

I am encouraged by the results we announced in our first-line lung program and the potential opportunity to provide new treatment options to patients with unmet needs.

I'm very excited to create a leading biopharma company and build significant value for our patients and shareholders.

And with that, I'll hand it over to Charlie.

Thanks, Giovanni, and good morning, everyone.

Building on Giovanni's comments about CheckMate -227, I'll start by providing some additional color regarding dynamics in our I-O business during the quarter and how we think about it moving forward.

In the U.S., we continued to see strong share across indications, including both metastatic and adjuvant melanoma, first-line renal cell and second-line lung.

As expected, we also continue to see the size of the eligible pool of second-line lung patients decline, which has impacted demand sequentially.

Yervoy sales were also down sequentially in the U.S., primarily due to unfavorable inventory compared to Q1 and slightly lower demand from non-promoted use of OPDIVO + YERVOY, especially in small cell lung cancer.

Though there were some impact of increased competition within the first-line renal cell market, we maintained strong share at 35% to 40%, almost all being intermediate to poor-risk patients.

Internationally, we continue to see the second-line lung opportunity being more durable than in the U.S., as the size of the patient pool declines much more slowly.

Our teams have driven very good adoption of OPDIVO + YERVOY in first-line renal cell for reimbursed markets, such as Germany, Japan and the U.K. In these markets, we are rapidly seeing first-line renal cell share that is similar to or, in some cases, higher than in the U.S.

Consistent with our experience in the U.S., we've also seen an expansion of the treated population for adjuvant melanoma in markets where it's reimbursed.

This market is, however, more competitive than in the U.S., given KEYTRUDA was launched around the same time.

Looking forward, we continue to expect year-over-year growth for OPDIVO this year.

With respect to 2020, we expect some pressure on OPDIVO compared to 2019, given the competitive dynamics in the business and likely timing for approval of Checkmate -227.

However, looking beyond 2020, we believe a potential launch opportunity in first-line lung cancer next year, along with additional potential future indications across metastatic and adjuvant settings, will position OPDIVO for growth in 2021.

Turning now to Eliquis, which delivered another remarkable quarter.

Eliquis continues to cement its position as the #1 option for anti-coagulation treatment for VTE and AF patients in many key markets around the world, while enjoying substantial room for continued growth moving forward.

In the U.S., Eliquis demand grew over 30% compared to the second quarter last year.

This was driven by continued expansion of the NOAC class, with Eliquis commanding a leading share within the category.

As I've described in the past, the donut hole for Eliquis will be an important factor to bear in mind for the second half of the year.

Recall that we accrued this as patients enter the donut hole, which means that the liability is relatively low in Q1 and Q2, but is substantially higher in Q3 and Q4.

Additionally, the magnitude of the liability, which was roughly $550 million in 2018, will be much larger this year.

The liability has increased from 50% to 70% this year.

We've increased Eliquis volumes significantly, and we have a higher component of Medicare patients in our sales mix.

Looking forward to the longer term for Eliquis.

We continue to see significant headroom for growth.

Within the overall U.S. market, the Eliquis TRx share is currently just under 43% and will converge over time to our new-to-brand share, which stands at almost 55% today.

We also expect to see the NOAC class continue to expand with continued declines in warfarin use.

And with the best-in-class profile, we have seen Eliquis steadily increasing its share within the category.

Finally, we believe there is potential to see the market expand over time as uncontrolled and undiagnosed patients enter treatment.

Now turning to our future with Celgene.

As Giovanni discussed, we are making good progress at preparing to integrate the companies, and we expect to close late this year or early next year.

Let me discuss some of the details starting with OTEZLA.

We announced the planned divestiture late last month and are now preparing the sale process.

We believe OTEZLA is an attractive asset, and we have had significant interest from potential buyers.

As you know, we will need to formalize and agree on the terms of the sale with the FTC once we have a draft definitive sale agreement.

At that point, we expect to enter into a consent decree with the FTC, which will allow the Celgene acquisition to close and subsequently, for OTEZLA to be divested.

With respect to the EU process, the review period ends on July 29, and we are targeting a Phase I clearance.

We will provide an update when we receive the European Commission's decision.

In the quarter, we locked in our permanent financing for the deal by issuing $19 billion of bond financing at attractive rates.

We continue to actively plan for the integration with very good collaboration between BMS and Celgene, and with the later close date, we now have more time to be even better prepared for day 1. We are still expecting to achieve $2.5 billion of run rate synergies by the end of year 3.

Regarding the phasing of synergies, there are a couple of things to bear in mind.

The close date has moved back, which shifts the calendar year impact and synergies from OTEZLA, though modest, would have come later.

And as we've said, we believe we can absorb this impact.

A few comments on the overall financial outlook for the company.

As Giovanni described, we've seen the value rationale for the Celgene acquisition strengthen since we announced the deal with the pipeline opportunity continuing to progress.

Since the financials for the S-4 were prepared at the end of last year, we've seen several important developments in addition to the OTEZLA divestment.

Checkmate -227 has read out, the UPSA sale just closed and 3 of Celgene's late-stage pipeline assets have been filed with the FDA.

Taking all these factors into account, we continue to see the opportunity to grow through 2025.

Until we close, the 2 companies will continue to evolve and the projections in the S-4 will become more stale, so we don't plan to continue to reference or update them.

However, we will provide a perspective on the company's outlook soon after the deal closes.

Switching to capital allocation, where we plan to continue our balanced approach.

We remain committed to the dividend, as evidenced by our 10-year track record of continual dividend increases.

And as we've previously mentioned, we've modeled annual increases in our pro forma financials.

In regard to our capital structure.

We recognize the importance of deleveraging over the next few years.

With this in mind, the OTEZLA proceeds, which we view as an acceleration of future cash flows, are planned to be used to reduce debt upfront and avoid excess initial leverage.

We continue to expect to see our gross debt-to-EBITDA ratio at less than 1.5x in 2023.

Business development continues to be important.

We expect to remain active in early stage and smaller deals over the next few years, while working to reduce debt.

Complementing the dividend, we have a solid history of distributing cash to shareholders, with almost $8 billion of share repurchases over the past 10 years.

And looking forward, we have already announced plans to execute a $5 billion ASR at the close.

Similar to our past practice, we will review our plans to -- for share repurchases, continually taking into account our cash and debt positions and alternatives for allocation of capital.

To close, we've delivered another very strong quarter.

We believe that the opportunity we have with the OPDIVO + YERVOY in first-line lung, along with the life-cycle management opportunities in I-O, our growing Eliquis franchise and the breadth of potential launches from Celgene, TYK2 and the earlier pipeline will position us well for the future.

Now I'll turn it back to John to start the Q&A.

Thanks, Charlie.

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

(Operator Instructions) And we'll take our first question from Tim Anderson with Wolfe Research.

A question -- the first question is results of -227, how do they influence how you now look at the odds of success on CheckMate 9LA?

Does that trial have a CTLA component?

I'm guessing you'd say the odds of success with that one have to be higher.

Also, can I confirm that, that trial stratifies by PD-L1 and not by TMB.

It would seem to make sense in light of the Part 1 findings.

And the second question is on Part 1 itself, just directionally, hoping you can say whether the magnitude of clinical benefit was the same in PD-L1 positive versus negative patients.

It seems that across a few different tumor types now, CTLA-4 combination may offer its greatest value in the PD-L1 negative segment, or we know that PD-1s, at least by themselves, don't really seem to work.

Is that potentially where the best and easiest positioning of the combo would be?

Thank you, Tim.

This is Giovanni.

I'll ask Fouad to answer your 2 questions.

I just want to start and reiterate how excited we are to have an opportunity to play in first-line lung cancer, which was what we now know, with the results of Part 1a of -227, and particularly with OPDIVO + YERVOY, which as you know, we've been successful at establishing in 2 other tumor types, melanoma and renal.

So I think that's important news for us, and I'll ask Fouad to give you his perspective on 9LA and PD-1 expression.

Thank you, Giovanni, and thank you, Tim, for the question.

We are confident in 9LA.

Let me remind us what 9LA is.

9LA is the combination of 2 active checkpoint inhibitor, YERVOY and OPDIVO in first-line lung cancer added to 2 cycles of chemotherapy, where the goal is to really manage the early progressions, but also create a load of new antigens that will continue to stimulate the immune system.

So we continue to be confident in 9LA in the way it is designed.

For your other questions around Part 1, in fact, this is the third time we see YERVOY and OPDIVO perform in terms of overall survival versus standard of care in first-line -- in a cancer, and this time in first-line non-small cell lung cancer.

I think we have seen clinically a significant and meaningful overall survival of the combination in first-line lung cancer in PD-L1 positive.

We have seen an improvement in overall survival in the exploratory analysis of PD-L1 negative.

Overall, I would say, Tim, we are seeing the same pattern for YERVOY and OPDIVO that we have seen in other tumors like melanoma and renal cell carcinoma.

Next, we'll hear from Seamus Fernandez with Guggenheim.

So just a couple of quick questions.

First off, I was just hoping that the team could comment on whatever is possible to comment on relative to the Senate bill at this point and kind of the relative exposure that Bristol has to U.S. spending alone and then, prospectively, in combination with Celgene, and just hoping to get a little bit of your thoughts on the Senate bill itself.

And then separately, just hoping to get a little bit of color on -227.

More than anything, the question really is, when we see the data presented, both from the Part 2 and the Part 1a study, are we going to not only fully understand, but also we'll come away with Bristol proving that the benefits of adding OPDIVO on top of chemotherapy, having clear benefits in -- also in non-squamous patients, perhaps on PFS.

And then in terms of OPDIVO + YERVOY, are we likely to walk away with a clear view that not only is OPDIVO monotherapy showing improvements, but that Yervoy on top of that is additive.

Thank you, Seamus.

This is Giovanni.

Let me start with your question on what's happening from a pricing and policy perspective.

Obviously, as you've seen, the environment is very fluid in Washington.

I think these are early days, and it's difficult to point to specific outcomes of the dialogue that is happening in Congress.

As you know, we've discussed for quite some time the perspective that I have, that we are at the beginning of a period of change from a policy perspective.

And from my point of view, I actually support a discussion about change, because I think it's important to address the affordability issues that patients have.

Now remember, those affordability issues are clearly primarily driven by benefit design and a very high out-of-pocket expense that patients has because of the way -- have because of the way insurance plans are designed and some of the misaligned incentives in the system.

And one of the things that I would like to say is that we are concerned with many of the proposals that we are seeing, including some of the proposals that are included in the Senate bill.

Because while they are very punitive in many ways for the industry and particularly for companies that are focused on innovation, they don't really benefit many patients.

They only benefit about 2% of patients in Medicare, as currently drafted, and they don't address some of the misaligned incentives in the system.

So I think we're all for change, and we have proactively proposed policy solutions that address issues that are making it difficult for patients today.

And I think what we've seen so far doesn't address some of the big issues that we see in the marketplace.

Now as I've said before, I think it's important to remember, from the very beginning, I felt that it was important for us during a period of policy transitions and changes to have a broader and more diversified portfolio that goes across multiple types of reimbursement with more growth opportunities into different diseases and more launch opportunities to accelerate really the life cycle of the portfolio.

And I think that's what the Celgene acquisition does for us.

I think it becomes even more important, given the uncertainty of these days and times to have a broader portfolio, to have a more diversified portfolio and I think it's critical for us, and that's what we do through Celgene.

Now with respect to your question, going to the next level of detail, when we look at the impact of some of the measures that are being proposed, we can see, for example, that yes, there could be a potential impact for Revlimid.

But I would also remind you that some of those measures only would come into effect in 2022, when we would be really, I would say, at the end of the life cycle of that asset.

And also, there are other parts of our portfolio where there would be offsets going in the opposite direction.

So I think it's early to give you a definitive answer on what the impact would be, but I think that given the broad portfolio we have, I think you would see ups and downs.

And many of them, obviously, would be impacted by where every one of the products would be in their life cycle.

And again, OPDIVO -- sorry, Revlimid would be towards the end of that cycle.

Chris, do you have anything to add?

Yes.

I mean, Seamus, let me just pick up where Giovanni left off.

I think you have a number of different proposals embedded within the Senate bill.

There are a number of different additional steps that are going to be required before anything is enacted.

And obviously, as you know, specifics matter here.

What I would say is that, as Giovanni mentioned, having a more diversified portfolio is better.

When you look at it on a product-by-product basis, obviously, the allocation of the business by payment mechanism is going to be important in determining the impact.

What I will say is from a BMS exposure, what we've said previously, I'll just remind you, is that looking across our business, we have about 24% of our business in Part B, about 26% in Part D and relatively little Medicaid exposure.

With respect to Celgene, remember, we're 2 separate companies.

So as for specifics, you would need to ask them.

But multiple myeloma, for example, is primarily a disease of the elderly, so it would skew a bit more towards the Medicare population.

And Seamus, this is Fouad.

For your second question around what we will see, what we will understand when we show the data from both Part 1 and more data from Part 2 will be the following: Let me start with Part 1. When we will show the data from Part 1, clearly, we will understand the performance of nivo and the added benefit of Yervoy on top of nivo, very clearly.

And we will understand also the overall pattern that we are seeing with immunotherapy combinations, like depth of response, rate of complete responder, the durability of response and the long-term survival.

And I think these elements would be very clear when the data will be presented.

For Part 2, in addition to what was reported in the press release today, what we will understand is, one, the performance of nivolumab plus chemotherapy versus other combinations of PD-1 and PD-L1 agents and chemotherapy.

Basically, I think we will see that the performance of nivolumab and chemotherapy is very consistent with what we have seen with other PD-1s and PD-L1 agent, combined with chemotherapy.

I think we will see that the chemotherapy comparator arm in CheckMate-227 Part 2 has outperformed what we will expect in the standard of care.

And let me remind us that what we know from the activity in standard of care in terms of the median overall survival, that chemotherapy is between 13 to 14 months, and this is also supported by real-world evidence.

I think the chemotherapy are outperforming in -227.

It may be underperforming in other studies.

And I think this is probably what people will take when we go in-depth into the data from Part 2.

And next, we'll hear from Chris Schott with JPMorgan.

Just 2 questions on -227.

I guess, first on the Part 1 study, I know you can't go into specific numbers yet.

But do you feel you need to see an overall survivable hazard ratio close to that seen with KEYNOTE-189 for this offering to be competitive?

Or should we -- or are you more focused on those factors, like TR rates and depth of response, as you think about what you need to be to find kind of a role and a niche for that combo?

My second question was then on Part 2 and that stronger kind of control arm survival rate.

Can you give us any color in terms of crossover rates in second line -- to second-line I-O in Part 2?

And was that meaningfully different than what we've seen with prior competitor studies?

So Chris, maybe -- this is Chris.

Maybe let me start, and then I'll turn it over to Fouad.

As we've said previously, as you think about how physicians have conversations with patients, very rarely do they have a discussion around hazard ratios.

And so we believe what is important and what we hear from customers is how are patients performing over time.

So that would imply landmarks are very important.

And one of the key drivers for treatment choice in first-line lung cancer continues to be are products showing durable efficacy.

And so when you step back and you think about first-line lung cancer, despite all of the progress that we've made in that area over the last few years, we need to keep in mind that the majority of patients progress within 1 year.

And in doing so, many of those patients actually burn through 2 options, I-O and chemo.

So there is a need for more options that potentially spare patients from chemotherapy and have proven OS and durability benefit, and that's what we hear consistently with respect to how physicians are going to make choice in first-line lung cancer.

And with regards to the Part 2 crossover to I-O therapy in the chemotherapy reference arm.

We have seen a level of crossover about 1/3 of patients, which is consistent to many other trials, and we do not believe that the crossover is the reason explaining the outperformance of the -- our chemotherapy arm.

Next, we'll hear from Navin Jacob with UBS.

Can you hear me?

Yes, we can, Navin.

Just wanted to understand the rationale behind the non-squamous as the primary end point for Part 2. Is -- the squamous data looked quite good in comparison to KEYNOTE-407.

And if you could, as a corollary to that, could you clarify if 9LA has a similar design as Part 1a, where the primary end point is also specific to non-squamous, please?

Thank you, Navin, for your questions.

So first, in the non-squamous, as the primary end point.

This is the largest population in this study.

The squamous population is pretty -- really a small percentage of the first line.

Data available to us at the time showed there is benefit, and most of the benefit was seen in the non-squamous population.

Therefore, the study was really designed to ask a non-squamous question.

For 9LA, the study is designed to go to all-comers in terms of histology and biomarkers and looking at the first-line population of patients in different way combining both checkpoint inhibitor and diminishing the number of cycles of chemotherapy.

And next, we'll hear from Terence Flynn with Goldman Sachs.

Maybe as you think about the outperformance of the chemo arm in Part 2 of CheckMate-227, can you help us think about your adjuvant program?

And maybe, again, any puts and takes there as you think about design or performance of those control arms and just confidence level in those trials, given that chemo outperformance that you saw in -227 Part 2?

Thank you, Terence.

So in the adjuvant space, I think -- so first, we are very pleased to see our data in the first-line setting with Part 1a, and we believe the performance of immunotherapy in the adjuvant setting, really -- will be good and makes us really confident in the adjuvant setting.

In terms of standard of care, there were so many evolution and changes in the management of patients in terms of supportive care and how we do it in the metastatic setting of lung cancer.

There were not a lot of progress in the adjuvant setting in terms of standard of care in comparers.

And we believe that our adjuvant and early program is pretty strong.

And actually, we have -- as you probably have seen in the start of the study, in the Stage III setting of lung cancer of nivolumab and nivolumab plus Yervoy versus durvalumab looking at overall survival in this population of patients.

And next, we'll hear from Steve Scala with Cowen.

The company seems to be suggesting that the tail of the OPDIVO + YERVOY curve will impress in Part 1a when it's presented.

It has been mentioned 2 or 3 times on this call already.

In KEYNOTE-189, KEYTRUDA plus chemo saw 69% of patients alive at 12 months.

So I'm interpreting Bristol's positive tone as OPDIVO + YERVOY will show more than 69% of patients alive when Part 1a is presented.

And I'm just wondering, would you suggest I consider other interpretations of the company's positive tone?

So that's the first question.

Let me -- go ahead, Steve, why don't you finish?

Yes.

The second question is the company dealing with crossover differently in 9LA than CheckMate-227.

Yes, Steve, let me just start before Fouad answers your 2 questions by saying, I think we've really pointed to the types of benefits that I-O and plus I-O provides, and we've seen consistently in tumors where OPDIVO + YERVOY have provided a benefit.

The physicians really have valued deep responses, complete responses, the durability of responses.

And as the follow-up of those studies that's continued is when we really started to see the value of the trend.

So I think that's an important consideration.

But Fouad?

No.

I think -- I mean, I think Giovanni summarized very well our observation on the lung cancer.

I would just add, this is a pattern that we have seen in 2 other major cancer: in melanoma and in renal cell.

For the question on 9LA crossover.

The crossover is not systematic in 9LA.

It was not systematic in -227.

So patients, when they progress in the study from the chemotherapy arm, they will receive standard-of-care therapy by their physicians.

So -- and this is Chris.

Let me just jump in here and make a couple of comments.

So first, as I mentioned, there's still considerable unmet need in first-line lung cancer.

And we think there's an important role that OPDIVO + YERVOY has to play.

And I think that as you begin to think through what that opportunity can look like, remember the experience that we've had with OPDIVO + YERVOY in melanoma and renal cell, which are the 2 diseases in which we've seen significant benefit there.

And what we see with the regimen is significant responses, including impressive CR rates.

You see durable responses.

You do see a compelling overall survival benefit that has that characteristic plateau in the Kaplan-Meier curve, which appears to be somewhat differentiated from other mechanisms.

And you see a side effect profile that has advantages relative to chemotherapy.

So we think there is an important role to play for dual I-O therapy with OPDIVO + YERVOY in that setting.

The other thing I would say is that when you look at OPDIVO + YERVOY and the clinical trial results, what we see in the market when we hear back from customers is it's very consistent with their real-world experience with the regimen.

Why is that important?

Well, first, that's frequency, not the case with other modalities.

And second, we have a strong base of OPDIVO + YERVOY users across tumors.

In fact, when you look in lung cancer, of the highest prescribers in lung cancer, just over half of those physicians have used OPDIVO + YERVOY in another tumor, notably melanoma and renal.

And if you look at all of the targets in lung cancer, just over 30% have used OPDIVO + YERVOY in other tumors.

And those physicians account for about 45% of the total opportunity in lung cancer.

And those are the very physicians who have made OPDIVO + YERVOY a standard of care in those other tumors.

And next, we'll hear from Matt Phipps from William Blair.

I guess, on Part 1a or Part 1, you've now had OPDIVO + YERVOY show improved survival, at least numerically, in both the biomarker-positive and biomarker-negative population.

So how do you think about the totality of data when you're talking to these physicians and regulators as far as patient populations?

And then secondly, can you talk just generally about the potential for approval in neoadjuvant lung cancer based on pathological complete response rate?

Yes.

Fouad?

Matt, thank you for the question for Part 1a and Part 1. Overall, as we said, we have seen clear benefit, clinically meaningful and statistically significant of YERVOY plus OPDIVO in the primary end point of the study, which is in PD-L1 positive.

We have also seen good survival benefit in the PD-L1 negative.

I think the totality of the data will be seen.

We're not going to comment our interaction with health authorities.

They will be happening in the next days and weeks.

But I think we are seeing benefit across the board in terms of biomarkers in terms of the totality of the data.

Neoadjuvant.

In terms of the neoadjuvant, I think major pathological responses in lung cancer has not been actually used as -- historically as an approval and an end point by the U.S. FDA or by other health authorities.

On the other hand, it's going to depend on how meaningful is the data.

And when we see our data from [study 186], we will be able to interact with health authorities and see what would be the outcome of that.

And the only thing I would add to that is that, while obviously, we'll have to see how the discussions with regulators proceed, what I would say is just consistent with what I had mentioned previously, we think, a, there's opportunity in first-line lung cancer from an unmet need standpoint; and we think that OPDIVO + YERVOY has the opportunity to provide an important treatment option in PD-L1 patients across the full spectrum of PD-L1 patients -- positive patients.

And next, we'll hear from Jason Gerberry with Bank of America.

I just wanted to come back to the comments about OPDIVO in 2020, just to make sure I understand the moving parts correctly.

So it sounds like it's a flat or down year, driven by the drag on sales for lung cancer in 2020, presumably with like maybe flattish sales in renal, with growth coming from melanoma and some of the other tumors.

So just wanted to make sure I sort of had a rough sense of how the moving parts will evolve before you get the lung expansion opportunity in 2021.

And then my second question.

Can you just elaborate a little bit more on FTC trends as it pertains to defining markets.

And really, what I'm getting at here is whether or not your sales process could include companies that have meaningful share in the injectable space of moderate to severe psoriasis.

Thanks, Jason.

Let me ask Chris to give you some perspective on different dynamics impacting the OPDIVO business today and into next year.

And then Charlie can comment on the FTC and where we stand and what's the process there.

Yes.

So let me just start with -- as we think about 2020, obviously, performance in '19 becomes very relevant.

So where we are today, we continue to see strength in our core business.

We continue to lead in virtually every tumor in which we're promoting.

And as you think about our core tumors, the large tumors, first-line metastatic melanoma, second-line renal cell, second-line HCC, we continue to see I-O shares at or greater than 50%.

And then we've talked a lot about the 2 big growth drivers that we have for this year, which are notably first-line renal cell and adjuvant melanoma.

And again, there, very happy with the continued performance of the teams.

In first-line renal cell in the U.S., we are holding share at around 35%.

Obviously, we have seen some impact of I-O plus TKI, mainly in the favorable patients, less so in intermediate and poor, which is where we're indicated.

And then outside of the U.S., we've seen good uptake in key markets, notably, Germany and Japan, where we have access, and we expect additional access approvals later in the year.

Similar story on the adjuvant melanoma side.

U.S. share is still holding around 70% in spite of competitive entries there.

And outside of the U.S., it's still very early in terms of access.

As we think about 2020, while we're very pleased with the results that we presented yesterday for Part 1a, given the competitive dynamics, the timing of data readouts, we do think there will be some pressure on OPDIVO in 2020, but the growth picture becomes much clearer as you get into 2021.

And exactly what that profile looks like is going to be informed, obviously, by the opportunity that we see with -227.

You'll continue to see a stabilizing of the dynamics in second-line lung cancer, which is important.

And just to remind you, we expect second-line lung in the U.S. to stabilize in terms of I-O-eligible patients at the end of this year, a little bit later as you get into ex U.S. markets.

And then, clearly, we'll be looking for some key study readouts that will inform that nearer term growth picture, notably 9LA in lung cancer.

We've got first-line GBM, 9ER in first-line renal cell and then first-line studies in head and neck and esophageal.

And as you get later out, clearly, the adjuvant programs become important.

Yes.

Just, Jason, in regard to your question on the FTC.

We believe that the divestiture of OTEZLA will satisfy the FTC's concerns and allow us to close the transaction on a timely basis.

We won't have full clarity on who is an acceptable bidder until we present a draft sales agreement to the FTC.

But we have had some preliminary perspective from the FTC.

So we feel, at least directionally, we have a good understanding.

As I mentioned in my comments, based upon what we see today, we believe we'll be able to run a robust process that will generate significant bidding interest.

(Operator Instructions) Next, we'll hear from Umer Raffat with Evercore.

First, I want to touch upon a trial I feel like we haven't had much discussion on, which is your LAG-3 Phase III in melanoma, which is due, perhaps in the next 12 months or so as per ClinicalTrials, at least.

And my question is, we know it's fully enrolled.

And where's your expectation?

And how are you thinking about the trial?

I also noticed it has a PFS primary end point, not an OS.

So was curious to get your perspective on that.

And then secondly, it was a helpful commentary on the market shares in various OPDIVO indications.

I was curious if you could give us a bridge on a dollar basis on the progression of sales from 1Q to 2Q for OPDIVO U.S.

Thank you, Umer.

Why don't we start with Fouad on the LAG-3 program?

Yes.

Thank you, Umer, for the question.

And the melanoma development in -- with LAG-3 is a Phase II/III study.

Looking at the addition of LAG-3 to OPDIVO, comparing to OPDIVO.

I think, as you mentioned, we will have in the next months the first readout from the Phase II part, and we will see if we hit the threshold to move to the Phase III part, as we said earlier.

And then, let me just comment on Q2 dynamics.

So Q2 dynamics, OPDIVO was down slightly, about 1% in the U.S., and that's really a function of a few things.

First, we continue to see pressure in second-line lung cancer due to the decline in the overall opportunity.

That's what I referenced previously around the percent of I-O-eligible patients.

What I will say, though, is within the pool of I-O-eligible patients, we continue to hold a market share for OPDIVO of around 40%.

We've also seen some competitive impact in tumors outside of any discussion around lung cancer, notably in first-line renal cell, and I referenced those previously.

Again, they're in that market.

I'm very proud that the team's holding share of roughly 30% to 35%.

And the impact really of I-O TKI has been confined to favorable patients.

And where they have gotten additional uptake outside of those favorable patients, it's mainly come at the expense of monotherapy TKI.

And then beyond that, I think -- I think we've spoken to what the nearer term opportunity looks like for OPDIVO.

All right.

And next, we'll hear from David Risinger with Morgan Stanley.

I just wanted to pivot to ask about the TYK2 development program.

Could you just provide an update on key trial progress?

And when you expect enrollment to complete?

And when you expect to be able to share key results?

Sure.

David.

This is Giovanni.

So as you remember -- as you will remember, we have 2 studies in our Phase III program for TYK2, and both studies are progressing rapidly through the enrollment period.

And the design of those studies requires a 1-year treatment period.

And so we do expect to see data 1 year after the completion of enrollment, which I expect to be sometime towards the end of next year in that time frame.

The only thing I would just add to that is we continue to be very excited about the profile of TYK2 and how it can play an important role in psoriasis.

As you may recall, psoriasis is a debilitating disease, has very serious comorbidities.

There's a considerable psychosocial cost associated with the disease.

And based on what we've seen with TYK2, at least in the early days, we're seeing very good activity approaching biological efficacy with an easier mode of administration.

So we think it has an important role to potentially play in psoriasis.

And from a commercial perspective, we're still very excited about the opportunity here.

Orlando, do we have any more questions?

And there are no further questions.

I'll turn the call back over to Mr. Elicker for additional or closing remarks.

Thank you.

Thanks, everyone.

In closing, this is an important time for us at Bristol-Myers Squibb.

We've had another strong quarter demonstrating our ability to execute on many priorities.

We delivered good financial results, driven by strong commercial execution.

And going forward, we will continue to advance our pipeline and progress the integration planning with Celgene, including the divestiture of OTEZLA.

The data that we announced in first-line lung cancer has really the potential to help us bring a new and an important option to more cancer patients, who continue to have important unmet needs.

Thanks, everyone for participating in the call.

Thanks, everybody.

Tim and I, as always, are available for follow-ups.

Appreciate you joining the call this morning.

And this concludes today's call.

We thank you for your participation.

You may now disconnect.