Bristol Myers Squibb (BMY)

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Transcript from JPMorgan:
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Bristol-Myers Squibb (BMY) Presents at JPMorgan Healthcare Conference (Transcript)

Jan. 10, 2017 3:17 PM ET| About: Bristol-Myers Squibb Company (BMY)
Bristol-Myers Squibb Company (NYSE:BMY)

JPMorgan Healthcare Conference Call

January 10, 2017, 12:30 P.M. ET

Executives

Giovanni Caforio - Chief Executive Officer

Analysts

Chris Schott - J.P. Morgan

Chris Schott

Good morning everybody. I’m Chris Schott, Pharmaceutical Analyst at J.P. Morgan. I’m very pleased to be introducing Bristol-Myers Squibb this morning. From Bristol, we have Giovanni Caforio, the company’s CEO.

With that, I’ll turn it over to Giovanni.

Giovanni Caforio

Good morning everyone. Thank you, Chris. It’s great to be here again at J.P. Morgan. I like to give you an update of where we are as a company. It’s clearly a very, very important time for us at Bristol-Myers Squibb and I look forward to the opportunity to review that with you. This is our forward-looking information.

And let me start my presentation by showing the slide that I believe may be familiar to many of you. And the objective of this slide is just to remind everyone that the company since 2007 has been very disciplined in executing against our strategy, and many of the principles of our BioPharma strategy are listed and highlighted on this slide.

When we think about who we are today, Bristol-Myers Squibb clearly is a differentiated and diversified BioPharma company. I like to think about our company, thinking about the portfolio, we have a very young portfolio of medicines in areas of very high unmet medical need that have transformative potential and importantly many of those are just the beginning of their life cycle and clearly can contribute in very significant ways to our growth as a company.

The second point I like to make is that our R&D organization clearly has been differentiated and played a very important role in the execution of the transformation of the company because of high productivity, the ability to deliver truly innovative medicines, but also because of our decision to really focus on how you can think about external innovation and internal innovation together as very complimentary for the company.

And so with a very, very productive R&D organization at the same time, we've also focused on business development, and this combined approach we believe is very differentiated and clearly has contributed to the transformation of our portfolio.

The third point relates to the fact that over the last two years as we've had the opportunity to launch multiple products globally, our commercial infrastructure has been scaled up, and today it is actually uniquely leveraged for the growth that is potentially ahead of us. You will remember this slide on BioPharma, we continue to be focused on leveraging the best of both.

And so when we look at our commercial execution, the ability to execute globally, it’s a very key priority for us. Similarly, we have financial strength and flexibility that enables us to execute by investing against our highest priorities, but at the same time we are continuing to challenge ourselves, evolve our operating model, and look for speed and agility in everything we do.

So, 2016 was a very important year for the company - some of you may remember a year ago, I presented a slide with our priorities for 2016, and I like to give an update of how we've executed against those priorities. Beginning with our operating performance, 2016 promises to be an extraordinary year for us, from a financial perspective and execution perspective, commercially.

Obviously, we've not communicated the results of our full-year yet, but when you look at our first nine months top line sales for the company grew 16%, and that was driven by very strong performance across our portfolio, it was true for our Immuno-Oncology portfolio which grew in the U.S. and internationally steadily during the year.

It was also true for a key growth driver for the company Eliquis, but also when you look at products that have growth potential, but have been in the market for longer such as Orencia and Sprycel, overall our business grew very, very well strongly in terms of sales growth, but also in terms of market share performance globally.

That resulted in a guidance, which we provided in October for 2016 that calls for our earnings per share growth in 2016 to be in the range of 40%, which obviously is strong leverage and a result that I am and we are all very pleased with. Obviously, one of our priorities, the core of our strategy and the number one priority is the focus on Immuno-Oncology.

I am sure you are all familiar with the fact that one of the disappointments of 2016 was the negative result of our monotherapy Phase 3 study in first line non-small-cell lung cancer, study 26. We've had a lot of discussions about that study, it clearly is disappointing that we were not able to offer a monotherapy option over 70% of newly diagnosed patients with lung cancer, but I will give you my perspective of how we are progressing our strategy and executing in a couple of slides.

I must say that beyond that event, it was another very strong year for us in Immuno-Oncology and it continued to be marked by clinical progress with study stops and good overall survival data that was the case for example in head and neck cancer. We continued to make progress from a regulatory perspective in our label for Obdivo broaden further in the U.S.; and also we saw significant regulatory approvals in the European Union and Japan to basically bring the full set of data we have to labels globally.

We look at this slide very often. I think that this is an area of science that is evolving at an unprecedented speed and I am very pleased that actually when you look at the number of indications we've added to the label of Obdivo in the last two years is really unprecedented and it was only achieved by some other products in oncology in a much, much longer time frame.

So science continues to move fast and we are leading the evolution of Immuno-Oncology in many different ways. Beyond the R&D space, let me just tell you about our commercial performance, you may also remember, I showed a similar slide last year and this year as well when you look at our commercial performance in the U.S. it was very strong.

Yervoy started growing again because of the adoption of the combination regimen in melanoma. Obdivo continued a very solid uptake across all tumor types and you can see here our competitive performance in 2016. Obviously, when we discuss 2017, we do expect that to be impacted by competitive dynamics that in the short term, particularly this year will impact the lung cancer market, but overall 2016 performance commercially was very, very strong.

Let me now move to Eliquis, and I am very pleased with the performance of Eliquis. We are working extremely well in support of a product that has a very differentiated profile. Some of you may remember that with Eliquis we have a very disciplined and somewhat sequential approach. We focus in every market on cardiology first.

So this is an example of our performance in the U.S. where we now have established the leadership of Eliquis in cardiology in terms of the TRx, so total prescriptions and not only limited to the NOAC market, but also including warfarin where we have actually passed warfarin in TRx’s in cardiology in the U.S.

And this is actually representative of what is happening in large markets like Japan and Germany where we continue to see really strong momentum in cardiology. In fact, in the US for example, we have become the number one [indiscernible] in institutional setting and I think that’s clearly very important in this area.

We are also making very good progress in the total market, which includes primary care physicians, and working very effectively with Pfizer on this segment of the market. And here you see, in the U.S. our new to brand share lead over Xarelto is now over about 10 percentage points, and here as well we are beginning to see very, very strong momentum.

That's actually really important because the next phase of growth for Eliquis comes from gaining TRx, leadership in the total market, we think we are relatively close to achieving that, but then obviously our objective becomes to begin to really broaden the market because there are a number of patients still receiving warfarin and that are clearly a large number of patients still being treated sub optimally overall.

Let me close the review on 2016. I tell you that I'm also pleased with what we accomplished from a business development perspective. I'm actually really happy about some elements of the slide, first of all, its breadth. We were able to sign and close some really interesting and important partnership with academia, with biotech, with larger companies, there is a global scope to our business development activity and clearly it spans between oncology and the other areas that are in focus for us.

So let me now move to 2017 and not surprisingly we will remain very disciplined and focus on very similar priorities for 2017, and this year as well clearly in Immuno-Oncology is at the centre. So, when I think about our Immuno-Oncology business, there are really three components to them, and I see them having very, very different dynamics in 2017.

First of all, it’s our U.S. lung business and we acknowledge that it would be a very competitive environment and we will be impacted this year by the entrance of new agents in lung cancer. We do expect that to be a market that transitions very rapidly and again in the next slide I’ll give you some insights about that.

Outside of lung in the U.S., we are seeing continued strong momentum for Obdivo and Yervoy. Across all of the approved indications we are preparing for a potential launch in bladder and again the performance trends are very, very strong. And I do expect that this year the third leg, the third part of our Immuno-Oncology business, which is really our international business can be a key driver of growth for us.

We have been very successful last year in most markets in securing pricing our reimbursement for Obdivo and Yervoy and we are at the beginning of uptake curves that can look very similar to what we experienced when we launch those agents in the U.S.

Now, just to close there, maybe to remind all of you, we have provided preliminary guidance in October, which speaks through our confidence at Opdivo and Yervoy will grow globally and that we see that there is an opportunity for them to grow in the U.S. as well.

Now, let me go to lung cancer. We spoke about study 26, personally because of the data we have seen in the early stage and the promise of combinations, my perspective is that this market will transition very rapidly through the data readouts of 2017 and 2018 into a combination market.

We saw that happening in melanoma and we expect similar dynamics to drive the transformation of the luck lung cancer market in the U.S. and internationally. That’s where you get the most value in terms of clinical efficacy for patients and in a disease like lung cancer when data is available, we do expect that combinations will be adopted very, very rapidly.

We also believe that we are extremely well positioned in combination. It has been at the core of our strategy since the beginning. We did that in melanoma and we are very well positioned to do that in lung as well. Looking at our phase 3 program in lung, it clearly is very broad. We have ongoing phase 3, programs ongoing where the I-O, I-O combo of Obdivo and Yervoy that’s clearly our priority, we have studies ongoing across all levels of expression of PD-1.

We now have I-O chemo combos phase 3 ongoing, again across all levels of expression of PD-1, and also we are testing innovative strategies to combine our combination regimen with a short term cycle of chemotherapy because we believe it is interesting to understand whether what can address the needs of a small group of patients that progress very, very rapidly and need a very aggressive approach at the beginning.

So, looking at the totality of our ongoing trials, I’m very confident we’re doing the studies we need to do in order to support a rapid transition of the lung cancer market through combinations. Beyond lung cancer, our program continues to expand. Looking at the medium-term, we have 14 potential data readouts in the next 24 months in 10 tumor types that truly have the potential to broaden the label of Obdivo and Yervoy, and low we look forward to the readouts of many of those trials this year and into next year.

And then looking at the long term, our pipeline is clearly as strong or stronger than it’s ever been. Many of those programs are very early, all of them are extremely promising. You see here our approach to Immuno-Oncology where we have 10 compounds in the clinic, 10 medicines in the clinic being studied across 13 tumor types.

When you combine our pipeline of the Immuno-Oncology and oncology, we have close to 15 molecules going into the clinic. And so in the second part of this year into next year, we will begin to see data readouts that can lead to the rapid beginning of registrational progress. In fact, we already have we already have seen some data at the end of 2016 and there will be scientific presentations in the first part of this year as well.

Now let me move from oncology to the rest of the portfolio, obviously the focus for 2017 there is primarily to continue to support strong commercial performance for Eliquis, Orencia, and Sprycel, but we remain also very focused on advancing our early pipeline in the areas you see in this slide, which are the areas we've chosen as a focus for the company. Our pipeline in heart failure immunoscience fibrosis is early, but it is actually progressing very nicely.

Many of our programs are first-in-class programs. They have the potential to be best-in-class in all cases and they do address areas of high unmet medical need. This is an area we’ve not discussed extensively in our pipeline because those programs are relatively early and it is also an area where many data readouts from those that you see listed at phase 2 programs will happen later this year and into next year, and so I do expect that we will have a broader dialogue about some of them when we actually have data that leads to the beginning of registrational programs.

So, overall, when I look at our priorities with respect to marketed products and the pipeline, I think we have a very strong story with respect to short term growth prospects, medium term catalysts, and long-term growth potential for our pipeline.

Now, moving to a different topic, I mentioned at the beginning how we are constantly challenging the way we are organizing and allocating resources in the company. And obviously at the end of a very significant transformation period for us it was important to go back and really look at our infrastructure, and whether we are organized as a company in a way that enables us.

Number one, to maximize the allocation of resources to our highest priorities; and number two, move with speed and agility to remain very competitive. I think that’s very, very important for us to do. A company should never actually think you are done in transforming the way you do business and clearly for us at Bristol-Myers Squibb anticipating market change and evolving as a company has always been a very big priority.

Our objective in the last 12 months with my management team really has been to be very focused on every one of the five areas you see in this slide, and realign our organization in order to make sure that we are able to allocate resources to our highest priorities because we clearly have significant opportunity in every one of our programs.

The second one is that we become increasingly an even more agile and efficient. And that happens by organizing in a way that you can actually accelerate decision-making. I’m actually very pleased with the work we're doing. It is generating really important results already.

One good example, I would like to mention is, the announcement we made recently about the redesign of our research footprint in the U.S. where we were able to evolve from a larger number of research sites to a much more concentrated footprint, at the same time we took that opportunity to bring our research centers closer to a areas of academic expertise and knowledge and talent, and decided to create a research centre in Cambridge, increased significantly the scope and size of our organization here in California.

And I think it’s a really good example of how one can realign an organization, obtain significant efficiencies, but at the same time upgrade the capabilities you need in order to be successful. And so we are doing similar things across the five areas you see below and I’m very excited about what that will do to our company.

Financially, we remain extremely focused on creating value for shareholders. Our balance sheet is strong. We have clearly significant flexibility from a financial perspective to continue to invest and execute our strategy.

We did announce that through the evolution of our operating model, we believe we are able to maintain our OpEx roughly flat between now and 2020, but at the same time we are committed to increasing investment in R&D and continuing to make all of the right decisions in order to support the evolution of the pipeline and the growth of the portfolio. We remain committed to the dividend that’s clearly very important to us, particularly as our company continues to grow.

And finally as you also know, we have announced an expansion of our authorization for share repurchases, which gives us the right flexibility to continue to be opportunistically repurchasing shares. To close here at JPMorgan, let me just reiterate, business development is an absolute priority for the company.

I believe it is an area in which we have demonstrated our ability to execute very effectively, and I remain and we all remain very focused at Bristol-Myers Squibb at looking for the right opportunities that make sense for us strategically, meaning by that a focus on the therapeutic areas we have chosen scientifically because we do only want to invest in transformational medicines that can really make a difference for patients and obviously financially because we can and we must remain disciplined with the investments we make.

So, with that, let me just close and say I am very excited about our prospects for 2017. There is really good momentum in the company, clearly we operate in rapidly evolving markets from a science perspective, from a commercial perspective that requires us to be very, very focused on our key priorities, and I look forward to updating you over the course of 2017 on continued success at Bristol-Myers Squibb in executing our strategy. Thank you.

Question-and-Answer Session

Q -

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