施貴寶 (BMY) 2019 Q4 法說會逐字稿

Good day, and welcome to the Bristol-Myers Squibb 2019 Fourth 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.

Good morning, Anna, and thanks, everybody, for joining us today as we talk about our quarter and, importantly, the outlook for 2020 and beyond.

I'll take care of the legal requirements before I turn it over to Giovanni.

Both Giovanni and David Elkins, our CFO, will have prepared remarks.

And then joining us for Q&A as well are Samit Hirawat, our Chief Medical Officer and Head of Development; Chris Boerner, Chief Commercialization Officer; and Nadim Ahmed, our President of the Hematology business.

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

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

And just to remind everybody, in case you haven't seen them, there are slides to go along with today's call.

And with that, I'll turn it over to Giovanni.

Thank you, John, and good morning, everyone.

Welcome to our fourth quarter and full year 2019 earnings call.

I am pleased to be here today to discuss the earning results of our new company for the first time.

On Slide 4, let me start by reminding you who the new Bristol-Myers Squibb is today.

Our mission hasn't changed.

We are focused on discovering, developing and delivering innovative medicines that help patients living with serious diseases.

We aspire to be the leading biopharma company in the industry.

Our strategic foundation remains centered on combining the scale and resources of a pharma company with the agility and speed of a biotech.

I am proud of the strength and talent of our people who are focused on transforming patients' lives through science.

Moving to Slide 5. I am more encouraged about our company's potential today than I was a year ago.

The strength of our performance in '19 has positioned us very well for the future.

As I look at '19, we've delivered strong in-line performance across our businesses and geographies, and we've made important progress on our late-stage pipeline.

I'm pleased with how integration is going so far with good progress across our business units and functions as we remain on track to deliver $2.5 billion in synergies.

Of course, we have more work to do to integrate our processes, systems and platforms, including IT, pricing and accounting.

Based on what I've seen to date, I'm confident about the successful integration of our company.

Turning to our financial outlook.

I feel really good about the financial strength of the company.

Our guidance reflects the earnings power and significant EPS growth outlook that we have as a company.

We continue to see potential for significant cash flows to support debt reduction and continued investment in innovation.

Finally, as I look forward, we have an unprecedented number of new drug launches in the near-term horizon.

These are all either first-in-class and/or best-in-class medicines, and I am very encouraged by how prepared our teams are to maximize these launch opportunities.

Now let's move to the fourth quarter.

Turning to Slide 6, I'll give you my perspective before David provides more color on product performance.

We've delivered strong growth across multiple key brands, many with double-digit growth.

With respect to the I-O franchise, I'm pleased with the excellent work of our teams in this area.

Opdivo grew on a full year basis.

And though we are seeing some pressure in the U.S., as expected, we saw growth internationally and continue to view 2020 as a year of transition for the brand.

Looking forward, we have the potential for new launches, supporting an expected return to growth in 2021.

This includes first-line lung cancer, which studies -227 and 9LA, our first-line renal cancer opportunity, with 9ER and moving into earlier-stage disease with a number of adjuvant opportunities.

Regarding lung cancer, let me talk briefly about Study -227.

While we're disappointed by the position taken by the CHMP, we continue to view the combination of Opdivo and Yervoy as a differentiated regimen with the potential for long-term survival and one that should be available to patients globally.

Going forward, we continue to focus on the review of Study -227 in the U.S., where it was granted priority with a PDUFA date in May, as well as the filing on 9LA in the U.S. and globally.

In summary, I am very encouraged by the strength of commercial execution across the enterprise in oncology, hematology, cardiovascular and immunoscience.

This is a clear demonstration of our leading commercial capabilities, which will be important to deliver on the exciting potential near-term launch opportunities ahead.

Now let's turn to Slide 7. In December, we attended our first medical meeting as a combined company at the American Society of Hematology, just a few weeks after we closed the Celgene transaction.

Importantly, we saw very good data at ASH for our hematology pipeline, including pivotal data for 3 products which are potentially approaching launch and encouraging data from the early pipeline.

I believe that this reinforces the opportunity we have to broaden the hematology portfolio and sustain a leadership position in multiple myeloma.

Let's turn to Slide 8. I feel good about the earnings power and growth outlook for the company moving forward.

I am encouraged by the financial strength of the company this year.

We see significant non-GAAP EPS growth from this year into next year, and we project continued non-GAAP EPS growth into 2022, though this will be moderated by the impact of generics on Revlimid.

David will provide more details on this guidance, but I am pleased with the strength of our in-line business, our launch opportunities, our financial flexibility and the breadth of our pipeline.

And with respect to our launch opportunities, we expect important potential milestones over just the next few months: in March, the U.S. approval of ozanimod in multiple sclerosis; in April, the expansion of Reblozyl in MDS; in May, the U.S. approval of Opdivo plus Yervoy in first-line lung cancer.

Additionally, we continue to advance our regulatory filings for liso-cel, ide-cel and CC-486.

Taken together, the company is in a strong position, and this is reflected in the performance of our business and the outlook we are providing today.

Turning to Slide 9. To realize our potential, we will continue to deliver on the in-line business, drive integration and synergy capture, maximize the value of our launch opportunities and advance our pipeline.

Beyond this, I continue to be encouraged by our financial strength and flexibility and how this enables us to continue to invest in innovation to deliver important medicines for patients.

All of this is what gives me confidence in our near- and long-term opportunities as a company.

I'm looking forward to our Investor Day, which will be held on April 2 in New York City, when my team and I will be able to talk in greater detail about the many opportunities ahead of us.

Speaking of my team, I am very pleased to be joined today by David Elkins and Nadim Ahmed.

Welcome to both.

At this point, I will hand it over to David, our new CFO, to walk you through the financials.

David?

Thank you, Giovanni, and good morning, everyone.

Having benefited from working in this industry for over 20 years, I could not be more excited about the growth potential and earnings power of bringing these 2 companies together.

I've been very impressed by the employees of the combined company, and I'm encouraged by the breadth of opportunities we have ahead and our ability to deliver important new medicines to patients.

Now let's turn our focus to the performance in 2019.

To start, the business continued to deliver strong performance in the fourth quarter with 6% revenue growth on a pro forma basis.

This performance serves as a strong foundation for the future outlook of the company, which we will cover in a moment.

Giovanni gave you some brand insights, but let me provide you with additional color on the underlying performance of the business.

Beginning with Opdivo on Slide 11, we had continued strong commercial excellence in the quarter where our teams continue to operate very well in increasingly competitive markets.

Let me provide you with a perspective on how we see the business at the moment.

From a U.S. demand perspective, we are seeing sequential low single-digit decline driven by the headwinds we've described in the past.

Note that demand trends are more steady than reported sales, which were incrementally impacted by buying patterns both in the government channel and from wholesalers.

Now with respect to some key indications, we expect steady performance in our melanoma business driven by our leadership in both metastatic and adjuvant setting.

In non-small cell lung cancer, the size of the eligible pool of second-line patients is leveling off at roughly 1/3.

In first-line RCC space, we continue to perform well where Opdivo-Yervoy remains the standard of care in intermediate and poor-risk patients, and we've seen stabilization in this indication as well.

Internationally, we've seen very strong commercial execution in all our key markets, resulting in encouraging growth in the brand.

We expect further growth as we continue to secure reimbursement in first-line RCC.

With respect to first-line lung, we look forward to the opportunity to launch 9LA in the same setting and making Opdivo available for patients in these markets.

So stepping back, we continue to see 2020 as a transition year for Opdivo with demand pressures in the U.S. and growth in our international business.

More importantly, as we move into 2021, we believe we have a strong foundation for growth, fueled by potential new indications, including first-line lung.

Now let's turn to Eliquis on Slide 12.

In the fourth quarter, we saw continued strong sales growth of 19% globally due to increased demand in both AFib and VTE.

In the U.S., we saw 18% sales growth in the fourth quarter versus prior year, despite increased discounts for the Medicare coverage gap.

Eliquis continues to increase its share at the expense of warfarin and an expanding NOAC class.

As the class has expanded, we've seen Eliquis taking share at the expense of other NOACs.

Shown on this slide is the difference between new brand share and total brand share in the U.S. for both warfarin and Eliquis.

This highlights the continued growth opportunity for the class and the brand.

We are also very pleased with the growth of Eliquis internationally, where we have a leading share in a growing number of markets, resulting in 21% sales growth in Q4 versus the same quarter last year.

We continue to view this brand, which remains the #1 NOAC globally, as one positioned for significant future growth and continued opportunity for patients.

We also see strong growth in our multiple myeloma franchise.

As you will see on Slide 13, Revlimid continued to grow in the fourth quarter, driven by triplet regimens and increased treatment duration, increasing 10% year-over-year on a pro forma basis.

Pomalyst saw a significant growth of 23% in Q4 versus last year on a pro forma basis, driven by increased demand and duration of therapy.

We expect growth to continue across both brands due to increased adoption of the triplet regimens and increased duration of treatment.

I'll now turn to Slide 14 and review our fourth quarter P&L.

This was an unusual quarter for the company as a result of the close of the Celgene acquisition on November 20.

Included on our reported P&L are the approximately 6 weeks of results from its legacy Celgene business post the transaction close.

As it relates to the non-GAAP P&L, we now include the impact of stock-based compensation in our operating expense, which was previously specified for Celgene when it was a stand-alone company.

With respect to OI&E, since the close of the transaction, we have incorporated both the interest expense on legacy Celgene debt and have begun recognizing interest expense on acquisition financing that had previously been specified since its issuance last May.

Also, our Q4 tax rate was primarily impacted by several onetime favorable items, including the resolution of uncertain tax provision and provision adjustments for filings in the U.S. and other markets.

Looking to 2020 from a financial perspective on Slide 15, we provided guidance reflecting the strength and momentum in the business, plus our new launch products and indications and the realization of synergies.

First, it's important to note that our guidance on non-GAAP earnings per share reflects the expected 40% accretion to the BMS stand-alone P&L and includes significantly higher operating margins than in the past.

Given the unique circumstances as a new company, this year's guidance includes more detail than we typically provide.

So let me provide some color on the key line items.

Revenue represents growth on a pro forma basis, driven by opportunities we see in our prioritized portfolio, more than offsetting declines in our established brands.

We expect a continued decline in established brand portfolio due to strategic course choices and competitive dynamics.

First, we expect BARACLUDE to continue to decline based on the maturity of that drug and generic competition.

We expect Vidaza will be impacted in 2020 by generics in Europe.

And we expect the rest of the established brands portfolio to decrease by about 1/3 compared to the 2019 pro forma results.

This is driven by the full year impact of the Otezla divestiture as well as further generic erosion of the HIV portfolio.

OI&E includes incremental interest expense offset by royalties.

From an interest perspective, in our non-GAAP P&L, interest expense will be driven by approximately $45 billion of debt at a weighted average interest rate of 3.4%.

Note that royalties from the AstraZeneca are stepping up in 2020, and we also expect higher royalties on our PD-1 patents.

Altogether, we expect royalties to roughly offset interest expense in the year.

Our separate line items for R&D and SG&A each include the impact of stock-based compensation as well as deal synergies.

We expect to realize about 1/3 of the total $2.5 billion synergies this year.

With respect to stock-based compensation, BMS includes the impact of Celgene's employee stock-based comp in our operating expense, which negatively impacts our non-GAAP P&L.

The full year amount of the stock-based compensation for Celgene in 2019 was roughly $800 million on a non-GAAP basis, which was incremental to the BMS stand-alone stock-based compensation.

We expect levels of stock-based compensation to remain elevated in 2020 and begin to taper down over time as the Celgene and BMS legacy plans converge.

We also want to remind you, on Slide 16, the evolution of our share count.

Basic share count as of the end of 2019 was impacted by the $715 million of new issuances as a result of the Celgene conversion and by the impact of the ASR.

Going forward, our 2020 basic share count will be impacted by 3 factors: the number of stock options exercised, the finalization of the ASR program and additional share repurchases which provides us flexibility to manage the potential future dilution.

Remember, there will continue to be a dilutive impact for the stock options that remain in the money.

That said, no additional options will be granted under the legacy Celgene plan.

So over time, this impact will lessen as the compensation plans from the both legacy companies converge.

As you can see, we've guided our weighted average share count for the year to be approximately 2.3 billion shares for the year.

Now on Slide 17.

As we look beyond 2020, we see a robust growth in 2021, driven by the current portfolio as well as new expected launch opportunities and the impact of continued synergies, all of which is reflected in the EPS guidance.

We expect continued growth into 2022 while acknowledging this will be at a moderated growth rate due to generic competition for Revlimid.

It's important to mention that we do not anticipate continually updating our long-term guidance throughout the year.

Now let's turn to capital allocation on Slide 18.

As we've said in the past, we continue to expect significant cash flow from the newly combined businesses, and we will continue to employ a balanced approach to capital allocation.

Business development is a key enabler of our strategy and, therefore, remains a top capital priority.

We also remain committed to the dividend, as evidenced by our 10-plus-year track record of annual increases and our recent increase of almost 10% in December.

At the same time, we remain fully committed to deleveraging and achieving our 1.5x gross debt-to-EBITDA ratio by the close of 2023.

As you are aware, we have approximately $10 billion in bonds maturing over the next 3 years, providing an opportunity to reduce total debt.

Finally, related to share repurchases.

We repurchased 105 million shares in 2019, 99 million in Q4 under the $7 billion ASR, mostly due to the 80% retired upfront.

The remaining roughly 20% of the ASR is expected to be completed by the end of Q2 this year.

As we announced today, we've increased our share repurchase authorization by $5 billion to $6 billion.

This provides us with the flexibility to execute disciplined share repurchases to manage the dilution from stock-based compensation and stabilizing the share count into the next year.

Although typically we don't provide quarterly guidance, I'd like to remind you of the seasonality of the legacy Celgene portfolio, specifically, Revlimid revenue is historically a bit lighter in the first quarter than the full year average run rate.

Before we move to the question-and-answer session, I just wanted to reiterate that we feel really good about the growth outlook and financial flexibility of the business and have reflected this in our guidance.

The company is in a strong position to embark on its next chapter in delivering important medicines for patients.

I'll now turn the call back over to John and Giovanni for the question and answer.

Thanks, David.

And Anna, I think we're ready to go to the Q&A session.

(Operator Instructions) We take our first question from Chris Schott from JPMorgan.

Maybe just 2 here on Opdivo.

First, I know, Giovanni, you touched on it a little bit in the prepared remarks, but can you just elaborate on the first-line lung strategy in Europe post the last week's -227 update?

And then when we think about first-line lung in the U.S., is Opdivo-Yervoy and the -227 data the primary focus?

Or do you feel that the 9LA regimen of chemo Opdivo-Yervoy will be the bigger focus?

I'm trying to figure out how you're balancing those, I guess, 2 data sets.

And then my second question was another one, just as we think about 2020 for Opdivo.

When you look at where the Street is shaking out here, which I think is about a 5% erosion for Opdivo this year versus 2019, do you feel like consensus properly captures the balance of the second-line lung erosion relative to the growth you're seeing in some of these other indications?

Yes.

Thank you, Chris.

So first of all, let me just say, as I mentioned in my remarks, our focus in Europe for first-line lung cancer, obviously, has shifted to 9LA, which we believe has -- you know and we've said before, is an important study.

Let me just ask Chris Boerner to give you a perspective on our overall strategy for first-line lung cancer in the U.S. as we think about the 2 trials, and then Chris can provide some perspective on Opdivo performance and the various components of that in 2020 as well.

Yes.

Chris, thanks for the question.

I mean I think we continue to see -227 and 9LA as being thought of in the U.S. very much in conjunction with one another.

If you go back, what we hear consistently from physicians who have seen the -227 data is that, number one, they're impressed with the potential for long-term survival with dual I-O therapy.

They note the depth and durability of complete remissions, all coming with a very manageable safety profile.

And so they see that as an important opportunity for patients who either don't need or don't want chemotherapy.

And incidentally, I would say that the NCCN listing, the 2A listing that we got back in December is a recognition both of the unmet need that continues to exist in first-line lung cancer as well as the potential that exists for dual I-O therapy.

What 9LA then brings to the table is answering the question for those patients who do need chemotherapy, does concomitant chemotherapy, 2 cycles in this case, along with dual I-O therapy, provide a benefit?

And we're very happy to see a second study that demonstrates overall survival.

So as physicians in the U.S. think about these studies, they very much think about them in combination with one another.

And that's an important part of how we are going to think about our long-term strategy in first-line lung cancer.

As it relates to 2020 and how we think about the business, let me say just a couple of things.

First of all, the business for Opdivo in the U.S. continues to perform in line with our expectations.

In second-line lung cancer, eligibility is still on the order of 30% to 35%.

We expect that's going to flatten out around 30% this year.

Our shares are holding stable in the 35% to 40% range.

The business continues to be stable in metastatic melanoma.

We continue to have a leadership position in adjuvant melanoma.

And again, in first-line renal, our business is stable in our approved indications.

As we think about this year, as David mentioned, the business is going to continue to still be under pressure.

As a reminder, that pressure really comes from 3 tumors: it's second-line lung cancer, where we've talked about the dynamics there; and it's small cell; and head and neck.

And in those 2 tumors, it's a very similar dynamic to lung cancer, where you've seen competitive approvals in the first-line impacting eligibility in the second line.

But I would say, importantly, our assumption for this year is that our shares in the second-line setting across those tumors remain stable.

It's just stable within a smaller pool of patients.

And again, as I -- we said earlier in the remarks, Chris, while we're not commenting exactly on guidance for the growth of Opdivo this year, we remain confident with growth growing into 2021.

And that's our focus, particularly as it relates to preparation for launches and commercial execution.

We take our next question from Seamus Fernandez from Guggenheim.

So actually, I'd love to ask you guys about the Celgene portfolio a little bit and rather than focusing on the Bristol portfolio.

One of the products that we learned about at ASH was the oral, the data of opportunity.

I was just hoping you might be able to help put that in context for us to help us understand what may be an underappreciated opportunity in the Bristol story.

And particularly, something that falls outside of the CVR, maybe this is a bit of a surprise upside.

And then also, would you update us on the CELMoD development opportunity, maybe just put in context where you see the CELMoD portfolio delivering the most upside?

As we talk to physicians, some of the feedback that we get is that this is a pretty straightforward opportunity for physicians to treat patients that have progressed on both Revlimid and Pomalyst.

So just love to get your thoughts on both of those opportunities.

Thank you, Seamus.

Let me ask Samit to start and give you a perspective, both on CC-486 and then CELMoDs, and Nadim will make some comments from a commercial perspective.

Thank you, Seamus, for the question.

I think you already teed up the overall portfolio from a -- what comes from the Celgene side of things in terms of hematology, where certainly, beyond the ones that we've already talked about OCREVUS and INREBIC, CC-486 certainly adds on to that.

CC-486 study in patients with acute myeloid leukemia was certainly a very important data set that we presented at ASH, looking at patients with AML who have received induction with or without consolidation chemotherapy and then achieve a complete response with or without complete recovery of the bone marrow.

And what we saw over there is, of course, the overall survival improvement as well as an improvement in the relapse-free survival.

And this is an oral agent, so convenience of delivery for these patients becomes very, very important.

And this is the first and only treatment that has shown a survival benefit in the maintenance setting.

So we remain excited about that, and we're looking forward towards discussions with the health authority and the filings going forward.

Of course, here, we also continue to think about the overall life-cycle management plan with our portfolio and the combinations that could be available in the future.

As it comes to the CELMoDs, and then I will pass it on to Nadim to comment more on, I think CELMoDs are certainly a very, very exciting addition to the overall portfolio and in the armamentarium that we look forward to developing in multiple myeloma.

We see this as absolute necessary opportunity.

And one of the data sets that we presented in ASCO 2019 were for CC-220, where we saw that patients who had received prior treatment with IMiDs, proteasome inhibitors, daratumumab, they still went on to have a response rate of 31%.

And these are durable responses that we saw in this late-line setting.

So we have additional plans for not only CC-220, but CC-480, which is another CELMoD looking at multiple myeloma setting.

And there are a multitude of opportunities with our overall portfolio of cell therapies as well as the T-cell engagers, where we will continue to think about how to do treatments for further improvement in the outcome of these patients where cure still does not exist.

So we'll be sharing those plans in the coming months as we look forward.

But let me pass it on to Nadim to talk a little bit more from the commercial perspective.

Thanks, Samit.

And then thank you for the question, Seamus.

So if you think about frontline or newly diagnosed AML across EU5 and the U.S., about 33,000 patients.

And about 2/3 of those patients are eligible for intensive chemotherapy, and that's the patient group that we studied.

And the unmet need even in newly diagnosed AML is very high.

So with the elderly patients, you have a 5-year survival of only about 15%, and 80% of these patients will relapse within 18 months.

So to have a treatment that adds 10 months of overall survival and doubles the relapse-free survival is going to be really important.

So we're very excited about the opportunity in AML.

And I'll also remind you that this gives us another opportunity to once again establish the maintenance treatment paradigm in another disease after we did the same in multiple myeloma.

So we're very excited about the opportunity.

So that's CC-486.

In terms of 220, and Samit covered it very well, as well as 480, we are hearing the exact same thing from clinicians who have been using the drug on study.

So certainly, we're seeing the CELMoDs work after our IMiDs, our in-line portfolio.

But I think the additional opportunity, as Samit alluded to, is some of our life-cycle management opportunities where we then have the chance to move these treatments up earlier in the treatment sequence to displace the IMiD.

So we're very excited about that opportunity also.

The next question comes from Geoff Meacham from Bank of America.

Just have a couple.

For David or for Giovanni, for 2021 guidance, I know you guys don't want to give details, but generally, should we assume that earnings growth will be mostly from the return to growth for I-O and maybe new launches?

Or is it more from the operational synergy side of things?

And then for Nadim, what is the credit field for BCMA-targeted therapies?

Just curious about the status of moving bb2121 up to second-line myeloma.

And when you guys think about the BCMA modalities in your pipeline, how do you all reconcile bi-specifics with CAR-Ts and others?

Yes.

Thank you, Geoff.

Let me start.

Obviously, when you look at 2121, as we've said, we have an opportunity to return to growth for Opdivo.

We have a number of really exciting launch opportunities, and I've mentioned several of those.

And so there is real momentum in the business, which is driven by the portfolio and how new launches come into play.

That's the reason why I feel really good about the fact that the guidance we provided from -- for '21 is driven by dynamics in the portfolio that are very encouraging for us.

Of course, we will be disciplined with respect to continuing to execute on the synergies.

And as you know, we've updated that we feel comfortable with the $2.5 billion, about 1/3 will come this year, and we expect about 1/3 to come next year.

But I think the growth of next year, we're really excited about the portfolio opportunities playing out.

Let me just ask Samit and Nadim to ask you -- to answer your second question.

Thank you, Giovanni, and thanks, Geoff, for the question on the BCMA portfolio.

So from a BCMA CAR T-cell perspective, from ide-cel perspective, we've already shared some of the data last year at ASH, looking at ide-cel in the fourth-line plus patient population where we saw a CR rate of 31% overall.

And we're certainly excited towards continuing to expand that portfolio and towards filing of that data set itself.

There are 3 additional studies that are currently ongoing, as you can see on ClinicalTrials.gov.

KarMMa 2 is the study, I think, that sort of answers your question that we are beginning to look at the second-line setting.

So we're looking at using ide-cel in the second-line patient population.

KarMMa 3 is a randomized Phase III study looking at ide-cel versus a triplet therapy for patients in the third-line plus setting.

And then KarMMa 4 was just initiated at the end of last year, looking at the first-line patient population in a Phase I/II study.

So we're really excited towards looking into the outcomes of these studies and the data generation.

And when we talk about the overall portfolio from a BCMA perspective, I think all the emerging data tells us that BCMA is absolutely an important target that we need to be able to attack from various modalities, whether it be through the cell therapies that we talked about or the T-cell engager that we have now shared the data from the Phase I Study -269, and certainly looking forward to now looking at how to bring that forward as more data matures and accelerate that development plan.

And then, of course, we'll look into our pipeline how to combine these with, as we previously discussed, with CELMoDs, et cetera.

But let me pass it on to Nadim to give you a little bit more on that.

Sure.

Thanks, Samit.

And so one thing I will remind everyone is that once we had a good idea that BCMA was going to be a very important target for multiple myeloma, we strategically and proactively embarked on a multi-modality approach to treating this disease.

And our thinking there was that you have very different patient segments that can benefit from CAR T versus a T-cell engager and even ADC, which we have early on in the clinic.

So as you think about the various patient segments, patient profiles and patient preferences, you can envisage where a patient has the opportunity to receive CAR T with a one-and-done treatment that allows them to have a very long treatment-free interval.

So there's an opportunity to do that.

Physicians may choose to refer their younger and fitter patients for CAR T, for example.

You may have somebody who prefers to be treated closer to home for whom a T-cell engager will be an ideal treatment.

And then both treatments work differently.

For a T-cell engager, you need to continue the treatment to stay on top of the disease.

And with the CAR T therapy, it's a once-and-done treatment.

So we think there's definitely room for both and even potentially 3 modalities to coexist, 1 within the same line of therapy, but of course, also across multiple lines of therapy in exactly the same way we approach Revlimid and Pomalyst in the multiple myeloma market.

So we feel very confident that we're actually delivering on our strategy, and there's the opportunity for multiple-patient segments to benefit from all these types of modalities.

Next question comes from Tim Anderson from Wolfe Research.

A couple of questions.

Originally, you guys, at the time of the deal, gave 2022 and 2025 guidance on revenues and net income.

That has not been updated since the Otezla divestiture.

And I'm wondering, are you going to update that at some point?

Or can you update that today, I guess, as it will have changed?

And then second question is, at least for us, the black box has been how to model Revlimid erosion.

At the time of the deal, you made it very clear that your internal forecasts were much more conservative and cautious on the rate of erosion of Revlimid from 2022 onwards to the big product.

I'm wondering now a year on, as you see analyst models, do you think the analyst community is appropriately modeling that erosion?

Thank you, Tim.

Let me just start on both questions, and then David can add more comments.

So first of all, with respect to guidance, I think as we said from the beginning, we were not going to go back and update the S-4 from last year.

As you know, there have been a number of things that have happened since last year: the divestiture of Otezla, as you mentioned; the divestiture of our UPSA consumer medicines business; and on the other side, continued really strong performance with our in-line business and significant progress with the pipeline, which obviously is a key driver of our performance in the next few years.

So overall, as I mentioned also in my remarks, I feel better today about where we are than I felt a year ago when we first announced the deal.

And the strength of our in-line business and the progress made with our pipeline make me feel really good about the future and the key drivers that were behind sort of the confidence we had last year and we have today in the business.

Today, we provided guidance on 2020 and '21.

I made some comments about our perspective on '22, and we feel pretty good about where we are.

So now with respect to Revlimid, also there, there have been good developments.

First of all, I would say the in-line performance of the brand continues to be strong, and the teams are doing a great job continuing to support an important franchise.

I think that's important.

We had 2 IPR decisions, which were favorable to Bristol-Myers Squibb.

We did reach a settlement with Alvogen, which was aligned with our expectations.

And I would say that overall, we continue to see the loss of exclusivity for Revlimid as a slope.

That is driven by sort of all the same assumptions that we've discussed in the past.

There has been good development, and so nothing has really changed there.

The next question comes from Terence Flynn from Goldman Sachs.

I was wondering, first, on Opdivo, if you can give us your latest thoughts on the opportunity in adjuvant bladder following the Roche data.

Just wondering if there are any notable trial design differences you could point to for your study versus their trial.

And then on bb2121 and JCAR and their commercial ramp on the forward, anything you guys have learned from the competitive CAR T launches that you can leverage?

And would you expect to have stronger launches as a result?

Thanks, Terence.

Samit, why don't you start and...

Sure.

Thank you for the question, Terence.

And as it relates to the adjuvant setting, first of all, let me start by saying that immuno-oncology products are going to play a major role in the adjuvant setting because the earlier we can utilize these treatments, it will provide an opportunity to not only shift the level of recurrence but provide a potential for cure for these patients.

And overall, as we move earlier and earlier from the metastatic setting to the earlier setting, the overall plan that we have in place, we feel very confident about it in non-small cell lung cancer, melanoma, RCC, gastric and, of course, in bladder cancer as well.

There -- it's no point trying to do cross-trial comparisons.

At this point, I think we are pretty close to where we will be starting to see the data emerging.

I think just to keep in mind that the overall patient population that we've enrolled seems very similar.

And without getting into the specifics, the one major difference is placebo used in our trial versus observation in the other trial, and the treatment duration is different.

But I think we should wait for the data for it to read out rather than getting into the specifics at this time.

But I think Chris can give you more color on the commercial side.

Yes.

So let me just say something on a macro level with respect to the adjuvant programs, and then I'll talk specifically about bladder.

Just a reminder that as you think about the adjuvant setting, you need to think not only about the patients who are treated today but also the potential for patients to be treated.

So what we saw when we launched I-O in the adjuvant melanoma space was that you saw treatment rates increase significantly.

And then a number of the tumors in which we are pursuing our early-stage program, you see treatment rates in the low to single digits, ultimately, up to potentially around 40% for some tumors.

But still, there's plenty of opportunity for us to not only treat patients who are being treated today but with improved therapies, improve the treatment rates overall.

With respect to bladder cancer, specifically, this is a very large patient population.

It's highly fragmented.

And we have, importantly, multiple opportunities in the muscle-invasive space.

About 50% of those patients are getting surgery today.

We have CheckMate -078, which is in the periadjuvant setting.

We're looking at the entire population with CheckMate -274, and we also have a non-muscle invasive bladder program as well.

So it's an important opportunity for us.

We are still very confident in the opportunity for I-O in the adjuvant setting, and we very much look forward to seeing the data.

Great.

Thanks, Chris.

I'll pick up on CAR T. So I think a couple of things I would mention, as you alluded to.

So clearly, there have been some headwinds in the marketplace.

And I think about things like reimbursement access environment, complexity of manufacturing, also, the safety profile of current agents has led to most of the administration being conducted in the inpatient setting.

So we're addressing all of those near-term headwinds.

So a couple of things I would say.

So if I use just liso-cel as an example, the data we showed at ASH of the pivotal data, we're seeing a safety profile where we're seeing significant reduction in the incidence of severity of CRS neurotoxicity, which we think bodes well to be able to give this treatment in the outpatient setting, which will allow us to expand our prescriber base.

So we're excited about that.

The other thing that's important to point out from a differentiation of BMS is that we do have very deep relationships with hematologists, and that includes multiple myeloma, that includes lymphoma.

So our footprint out in the community will really help us to drive those referrals into the treatment sites where CAR Ts will be given as well as expand out into the community with assets like liso-cel.

So from where we're looking, we think we're addressing the near-term headwinds.

In terms of the access environment, ongoing work continues in terms of addressing the DRG issue.

Great news last year that the National Coverage Determination wasn't implemented, so that could have impacted site of care.

So that's not an issue for us now.

From a manufacturing capacity capability between Summit and Seattle, we feel very good about capacity at launch.

And we also have longer-term plans to expand that footprint to make sure we continue to have great capacity.

But the other final thing I would add is we've seen transformational data in very late-stage setting.

But I think the true potential of these therapies is moving them up earlier in the treatment sequence from a long-term potential perspective.

And you heard from Samit that we have a very aggressive life-cycle management plan for both of these assets that will allow us to unlock that long-term potential for these transformational therapies.

Your next question comes from Matt Phipps from William Blair.

I was wondering if you could quantify the impact of buying patterns for Opdivo in the U.S. for the quarter.

Or do we just assume it's the difference between the 6% decline in quarter-over-quarter prices versus -- I know you mentioned the low single-digit decline in demand?

Yes, Matt.

Chris?

Yes.

So let me address that, Matt.

So as David mentioned in his prepared remarks, we saw Opdivo decline on the quarter versus same time last year about 2%.

And let me just characterize that.

That was entirely driven by the U.S., which was down about 10%, but virtually all of that decline year-over-year as a result of the dynamics we've been talking about quite a bit, which are the dynamics in second-line lung cancer.

As you look on a sequential basis, the U.S. was down roughly 6%.

About half of that was a result of the inventory work down with the VA.

The remaining portion of that was mainly the second-line eligibility issue in lung cancer.

We saw a little bit of an impact in eligibility in small-cell lung cancer and head and neck.

But importantly, if you normalize for the VA inventory movements, what you see in both Q3 and Q4 from a demand standpoint was Opdivo was down, as David mentioned, in low single digits around 2% to 3%.

And importantly, as we see both 2020 and 2021, the impacts that you saw in the quarter will have no material impact on what we see for the year as a whole in 2020 and for the growth opportunities for Opdivo as we go into '21.

The next question comes from Steve Scala from Cowen.

I have 2 questions, both for clarification.

First, Giovanni, to clarify on what you said about growth in 2022, did you say you see growth into 2022 or through 2022, although moderating?

And if into, is there any scenario where earnings would be down in 2022?

So that's the first question.

And the second one is on the other income expense guidance for 2020.

It appears way better than one would expect given the financing costs.

Now you mentioned the step-up in royalties on KEYTRUDA and the AstraZeneca diabetes products in 2020.

But I thought that the KEYTRUDA royalty was flat at 6.5% through '24, and the AstraZeneca royalties are either flat at or step down in 2020.

So are you saying that the royalty rates are the same but the products will grow, or something different?

And I don't think there's a lot of optimism about the AstraZeneca diabetes portfolio.

So I'm wondering, again, is it the royalty rates are changing or the products' royalties are changing?

So please clarify.

Thank you, Steve.

Let me ask -- let me answer the first question.

So when I spoke about 2022, I'm speaking about growth in 2022, moderated by, in terms of the growth rate, by the potential beginning of the entrance of generics for Revlimid in 2022.

So I see, at this point, our business growing in 2022 as a year with the moderation of the growth rate versus '21, driven by the dynamic I just discussed.

David?

Yes.

And KEYTRUDA, from a volume perspective, continues to grow; and AstraZeneca, the rate continues to increase.

So that is being offset by the higher interest expense, as I talked about in my prepared remarks, with the $45 billion of debt and average interest rate of 3.4%.

The next question comes from David Risinger from Morgan Stanley.

And congrats on the disclosures.

So -- sorry to go back on this, Giovanni, but just a quick question.

I think that last year, you had said you expected Bristol growth EPS through 2025.

In your prepared remarks, you mentioned continuing growth into 2022.

Could you just provide any comments beyond 2022, please?

And then second, with respect to CAR T, hospitals are obviously losing significant amount of money on patients who are not in clinical trials which are paid for by manufacturers.

Could you just talk about prospects for changes to Medicare reimbursement and potential changes in DRG codes in the future?

Sure.

David, let me start and then Nadim will comment.

So let me just say again, I feel really good about where we are with our business.

We discussed very clearly in Q3, we would not update the S-4 going forward.

And I feel pretty good about having provided visibility into the next 3 years, which clearly demonstrate the earnings power, the growth outlook for the company.

Most importantly, I feel really good about the fundamentals of the business, both in terms of the performance of the in-line portfolio and the speed at which the pipeline that will drive the long-term growth of the company is advancing.

So I'm not going to make comments beyond 2022.

But I believe I provided my perspective on where we are as a company and the real opportunity we have for the long term.

Nadim?

Sure.

Thanks for the question.

So I think part of the issue around the access reimbursement environment has, as I said previously, has been driven a lot by the fact that many of these treatments have been given in the inpatient setting.

So one, I would say, if you have a treatment that has the potential to be utilized in the outpatient setting, then you start entering into the Part B environment, which is very different to the inpatient capitated DRG environment.

So that's one point I would make, especially as it pertains to liso-cel.

I think in the inpatient setting, the challenge has exactly been that decapitated treatment.

Even having said that, though, as things have started to improve, we saw the NTAP improve to 65% last year through CMS.

I think there's been lots of talk, and we've been working on a potential DRG for CAR T specifically.

Currently, sites are having to use the DRG for stem cell transplant, which under-reimburses the cost of CAR T therapy.

So there is work to do, but the 2 things I would leave you with is outpatient represents a discrete different opportunity, which isn't affected by capitated payments.

But at the same time, I think CMS is working on the opportunity to come up with a specific DRG, potentially for CAR T. And I think that will help reimbursement in the inpatient setting also.

We take our next question from Navin Jacob from UBS.

This is Prakhar Agrawal on behalf of Navin.

So my first question is on the CheckMate of oral trial.

There were some interesting data at ASCO GI recently in first-line HCC for Opdivo-cabo and Opdivo-cabo-Yervoy triplet regimen.

So any comment on the data presented and potential for these 2 regimens in HCC?

And second question is on Yervoy.

So Yervoy performed better than expectations this quarter.

So the question is, is the impact from the uptake of KEYTRUDA and lighter regimen is -- in first-line RCC mostly done?

And should we expect more tempered erosion in U.S. in 2020?

Samit, why don't you start?

Yes.

In the HCC arena, our focus is primarily on the Opdivo-Yervoy combination.

So beyond that, we're not really looking to any expanded way of looking at it this time.

So that's all I can share at this time from HCC perspective.

But maybe, Chris, you address the second part?

Yes.

So Yervoy for the quarter was flat relative to the same time last year, and we did show sequential growth of around 9% versus the third quarter of 2019.

And that growth was driven really by both the U.S. as well as in ex U.S. We saw a bit of an uptick in the use of Opdivo plus Yervoy really across multiple tumors, and the remainder of the business where we have Opdivo plus Yervoy in the market today as well as the use of Yervoy as a monotherapy in a selected number of indications was relatively stable for the quarter.

So what we're really starting to see is the increased use of Opdivo plus Yervoy really spread across multiple tumors, and that's happening both in the U.S. and, to a lesser extent, outside of the U.S.

Thank you.

Thank you, Chris, and thanks, everyone.

So before we close, I would like to thank John Elicker for extraordinary leadership of IR over many, many years.

Thank you, John.

Now in closing, we've had a very successful 2019, and I'm proud of the focus that our teams have had throughout a very, very busy year.

We advanced our pipeline.

We delivered strong commercial execution to make a difference in the lives of patients, and we are very well positioned as we embark on our next chapter as a new company.

Thanks, everyone.

Thanks, everybody, for taking the time.

As always, if you have any follow-ups, give us a call.

And ladies and gentlemen, this concludes today's conference call.

Thank you for your participation.

You may now disconnect.