Bristol-Myers Squibb Company's (BMY) CEO Lamberto Andreotti Q2 2014 Results - Earnings Call Transcript

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Bristol-Myers Squibb Company (BMY) Q2 2014 Earnings Conference Call July 24, 2014 10:30 PM ET

Executives

John Elicker - SVP, Public Affairs and IR

Lamberto Andreotti - CEO

Charlie Bancroft - EVP and CFO

Giovanni Caforio - EVP and CCO

Francis Cuss - CSO

Analyst

Colin Bristow - Bank of America Merrill Lynch

Tim Anderson - Sanford Bernstein

Jami Rubin - Goldman Sachs

Seamus Fernandez - Leerink

Steve Scala - Cowen

Mark Schoenebaum - ISI Group

Vamil Divan - Credit Suisse

Chris Schott - JPMorgan

Jeff Holford - Jefferies

Marc Goodman - UBS

Alex Arfaei - BMO Capital Markets

Operator

Good day and welcome to today’s Second Quarter 2014 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. John Elicker, Senior Vice President Investor Relations and Public Affairs. Please go ahead, sir.

John Elicker

Thanks, Aaron, and good morning everybody. Thanks for joining the call to review our Q2 results. Before we get started, let me 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 subsequent date. We specifically disclaim any obligation to update forward-looking statements, even if our estimates change.

We will also discuss non-GAAP financial measures adjusted to exclude certain specified items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available on our website.

With me this morning, we have Lamberto Andreotti, our Chief Executive Officer and Charlie Bancroft, our Chief Financial Officer. Both Lamberto and Charlie will have prepared remarks, and then joining for Q&A Francis Cuss, our Chief Scientific Officer and Giovanni Caforio, our Chief Commercial Officer. Lamberto?

Lamberto Andreotti

Thank you, John. Good morning everyone. Well, we just completed another good quarter of Bristol-Myers Squibb, good in terms of financial performance and good in terms of clinical results and regulatory milestone. Overall, revenues were 3.9 billion, a 7% increase over the last period excluding the diabetic business that we still had in the second quarter 2013. We delivered strong growth of our key products in particular of Eliquis and Yervoy. For Eliquis, we continue to execute against our strategy to clearly capitalize on a differentiated and unique profile. And we continue to improve the persistent trend generated by the increased resources, we and Pfizer have been devoting to direct-to-consumer advertising in the U.S. and to sales force expansion and peer-to-peer medical education activities in all countries.

We also make good improvement in access, and the level of Eliquis is expanding beyond atrial fibrillation. We just received a positive recommendation for approval in Europe for the treatment of recurrent DVT and pulmonary embolism and subsequent approval the final registration should be formalized in August. The same indication is under regulatory review in the U.S. Yervoy also had a very strong performance this quarter. Best quarter ever with $321 million in sales, a 38% increase over the last period. We continue to see strong demand worldwide.

As we advance and expand our immune-oncology leadership position, we continue to view Yervoy as an important component of our strategy both in mono-therapy and in combination regimens. With respect to other regulatory developments, the big news this quarter was our recent Japanese approval of our hepatitis C dual regimen, daclatasvir and asunaprevir. Because of significant development for the 1.2 million hepatitis C patients being in Japan, many of whom currently have no treatment options. It was also significant for our company for Bristol-Myers Squibb. This was the first approval of our dual regimen anywhere world and this is the first time the first approval of one of our product and in fact two products at the same time occurred in Japan, something that underscores the global nature of our company.

And while the Japan approval was the first, we also expect important news in other key markets starting with Europe where the CHMP has given daclatasvir a positive opinion for use with our agent. This has also been a very important quarter for Opdivo or nivolumab with key data presentation, new regulatory development and new collaborations that enhance our global development portfolio. We presented important data at ASCO regarding renal cell carcinoma, lung cancer and melanoma as monotherapy and in combination regimens.

A double blind Phase III Opdivo study in melanoma was stopped for a very good reason. The data was too good to keep patients under treatment with the traditional chemotherapy to which it was compared.

In the U.S. we recently announced our plan to seek marketing approval for Opdivo in advanced melanoma with the filing with the FDA in the third quarter. This is an addition to the raw information in lung cancer that we are previously initiating and that should be completed by the end of the year.

For Europe we have just received confirmation this morning that the CHMP Daklinza accelerated assessment formula static melanoma, we expect to complete our European metastatic melanoma submission in Q3. And yesterday we completed a strategic collaboration with Ono pharmaceuticals to help address the unmet medical needs of patients who have cancer in Japan, South Korea and Taiwan.

This follows the approval Ono received for Opdivo in Japan making it the first PD-1 approved anywhere. We will have more important milestone for our immuno-oncology program in the coming months including regulatory submissions and data readouts. We are definitely uniquely positioned and we believe we can realize the potential immuno-oncology without our deep and large portfolio and our experience and committed people.

Taken together this was a good quarter one that reflected our balanced approach for delivering strong results today while building a solid foundation for tomorrow. And now I will turn the floor to Charlie.

Charlie Bancroft

Thank you, Lamberto and good morning everyone. Overall, we had a very good second quarter with strong growth across most of our key brands. Let me provide a few highlights. Eliquis sales were 171 million. As Lamberto noted, our continued investments are building momentum for Eliquis around the world. In the U.S. net sales for Eliquis were 94 million up 54% from the first quarter.

Our new to brand share among cardiologist has grown nearly eight share points since the start of the year. Outside the U.S. net sales were 77 million up 71% from the first quarter. In addition to Germany where Eliquis used to remain strong we are seeing robust growth elsewhere in Europe, especially Italy and France following recent launches there. We are also seeing very good growth in Japan. We continue to make progress in broadening our label, we launched our Ortho indication for deep vein thrombosis in the U.S. in mid-April and expect regulatory decisions for BTE treatment in the U.S. by late August and in Europe by the end of the year.

Yervoy sales grew 38% to 321 million, U.S. sales were 173 million, Yervoy’s best quarter since launch. Sales outside the U.S. totaled 148 million led by market such as Germany, France and just recently the U.K. where we have reimbursement in the first blind study. We also reported strong sales in Australia, Brazil and Canada. Driven by our execution in the markets we are seeing increased awareness about immunotherapy and more community oncologist prescribing Yervoy for the first time.

Orencia sales increased 14% to 402 million. Orencia had a solid quarter due to higher demand in the U.S., Canada and South America. Orencia SubQ has growing 60% worldwide since the same quarter last year and 18% sequentially from the first quarter as we continue to improve our performance in the first blind study. SubQ now accounts for 40% of all Orencia sales even as the IV remains strong.

We did see softness in our Virology business in the quarter. In our HIV franchise, we are seeing increased competitive pressure for Reyataz and the continued impact of last year’s loss of exclusivity for Sustiva in Europe. For Baraclude, sales were down 1%, strong sequential and year-over-year growth for Baraclude in the U.S. and Europe was offset by lower demand in China and inventory work down in Japan.

Abilify sales were 555 million during the quarter including 97 million in Europe. Recall that our rights to Abilify in Europe expired on June 11. As a result we no longer had any commercial interest in or obligations to Abilify in Europe which has accounted for the majority of our Abilify sales outside the U.S.

Before moving to the rest of our P&L, let me remind everyone how we account for the diabetes transaction as this is the first full quarter since we divested our diabetes franchise in February. We record diabetes related royalties in other income. Due to tiered structure of these royalties we recorded the largest royalty income for 2014 in Q2. These royalties are expected to decline as the year progresses.

Our other income line also includes transitional services income from AstraZeneca of over 30 million in the quarter. We expect this income to taper off between now and the end of the year. We also expect to book diabetes product supply revenues of about 30 million per quarter through yearend. For details about our diabetes royalty tier structure and other diabetes related revenues and expenses, please see our SEC filings.

Now, let me highlight a few items from our non-GAAP P&L. Gross margin was 75.5% during the quarter, up 110 basis points compared to the same period last year, mostly due to product mix following the divestiture of our diabetes business.

Marketing, selling and admin expenses increased 9% as our increased investments in Eliquis, Yervoy and our pre-launched assets in immuno-oncology and hepatitis C were offset by reduced expenses in diabetes.

Our non-GAAP tax rate was 21.3% during the quarter compared to 13.8% for the same period last year. The difference is due to earnings mix plus the exploration of the R&D tax credit, which has not yet been extended.

I want to spend a few moments discussing business development. Our approach has not changed. We continue to view business development as a top priority for capital allocation and we will continue to explore opportunities to enhance our commercial and R&D portfolios. These opportunities must meet three criteria. They must be aligned with our diversified specialty biopharma strategy. They must have a strong scientific rationale and they must have the potential of providing the meaningful return to our shareholders.

Since last quarter, we have signed several agreements to strengthen our global IO development portfolio. As Lamberto mentioned, yesterday we announced an agreement with Ono Pharmaceutical to jointly develop and commercialize Opdivo, Yervoy and three of our early-stage IO assets in Japan, South Korea and Taiwan. This agreement significantly enhances our ability to pursue combination regimens with Opdivo as the foundation since Ono previously owned exclusive rights to Opdivo in these markets. Similarly, our recently announced agreements with Incyte and Celldex will expand a number of clinical trials involving Opdivo and other immunotherapy.

I will conclude my remarks on 2014 guidance. Our non-GAAP EPS guidance range of $1.70 to $1.80 is unchanged. Our guidance assumes we retain exclusivity on Baraclude quick sales in the U.S. at least through the end of 2014. It also assumes that the R&D tax credit will be extended this year.

Now, we'll be happy to address your questions.

Earnings Call Part 2:

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