Bristol-Myers Squibb Company (BMY) Earnings Call Transcript & Summary

Thank you. So good afternoon, everyone, and thank you very much for joining our session with Bristol-Myers. My name is Dave Risinger. I cover both major and specialty pharmaceuticals at Morgan Stanley. Before we get started, I need to refer you to a disclaimer. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. It's not for members of the press. If you're a member the press, please disconnect and reach out separately. For important disclosures, please see www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. So I wanted to welcome Giovanni Caforio, who is the CEO and Chairman of Bristol-Myers. He became CEO in 2015, originally joined Bristol in 2000 as a VP and General Manager. He took on positions of increasing responsibility, eventually becoming Chief Commercial Officer in 2013 and Chief Operating Officer in 2014. Prior to Bristol, Giovanni spent 12 years with Abbott in a number of leadership positions, and he earned his M.D. degree from the University of Rome. Let me pass it to you, Giovanni, to offer some prepared comments, and then we'll go into the dialogue.

Thank you, Dave, and good morning, and good afternoon, everyone. Dave, thanks for the opportunity to discuss our business. This, as you know, is a very important year for Bristol-Myers Squibb. It's the first year after the acquisition of Celgene as a new company. And I'm very pleased with how the performance of the business is during the first half. First of all, the in-line performance of our business has been very strong in the first 6 months. Additionally, I would say that the positive outcome of 2 important events: first, the Eliquis patent trial; and second, the settlement with Dr. Reddy on Revlimid that we announced this morning, they're important events. They're very much aligned with our assumptions and expectations, and they confirm our perspective with respect to the outlook of our in-line business. We have a number of new launches that are off to a very good start. I'm sure we'll speak about Opdivo and Yervoy in first-line lung cancer, REBLOZYL in MDS and ZEPOSIA in multiple sclerosis. I'm really pleased with the early indicators from the launches. We also have a very rich late-stage pipeline, and I would just like to point to a couple of areas. First one is immuno-oncology, with 3 positive studies for Opdivo: study 9ER in first-line renal; study 577, which is an important trial in the adjuvant setting for esophageal cancer; and 649, first-line gastric. These are 3 important positive outcomes for our immuno-oncology franchise, and all of them will be presented actually this week at ESCO -- at ESMO. We also had an important positive study for ZEPOSIA in ulcerative colitis, which will be presented later this year, and it gives us an additional opportunity to think about ZEPOSIA playing an important role in inflammatory bowel disease. And finally, we have achieved proof-of-concept for psoriatic arthritis for our TYK2 program, confirming really good efficacy and a strong safety profile. And as you know, we look forward to seeing the results of the Phase III program in psoriasis later this year. So a lot happening on the pipeline side and many progresses that we've made during the first half. I'm also really pleased with our integration. It's proceeding, it's going extremely well. And importantly, we're very much on track with synergies. As you will remember, we committed to $2.5 billion in synergies over 3 years, with about 1/3 coming in 2020, and we're tracking very well with respect to our plans. And finally, I would say, the company is in a really strong financial position with a lot of flexibility from a financial perspective. Our capital allocation strategy remains balanced, and we continue to see business development a very important priority for us as we're interested in opportunities that strengthen our pipeline overall, broaden the portfolio and strengthen the outlook of the business in the second half of the decade. So I'll stop there. And I'm sure that we'll cover many of these topics in more detail during the Q&A. I look forward to the Q&A. Thank you, Dave.

Great. Well, that's a great kickoff, Giovanni. I would like to start with immuno-oncology, given some of the recent positive readouts and the improving prospects for your immuno-oncology franchise. So could you please frame your expectations for Opdivo and Yervoy growth prospects and also provide an update on Opdivo + Yervoy market share in first-line lung?

Sure. Thank you, Dave. So first of all, going back to my comments at the beginning, I think we've seen a combination of continued strong competitive performance in all of the indications where we compete in the first half across the globe. And we've seen a number of positive readouts from important clinical trials. And so let me just start by saying that we continue to see Opdivo returning to annual sales growth next year. And we think about our immuno-oncology franchise very much as a growth franchise. Now going into a little more detail. So when you look at our business today, the second-line lung market is -- we see that stabilizing and we've maintained a really competitive position in that market. And so we see that as a foundation for the business. Now with respect to the launches, I am really pleased with what is happening with the launch in first-line lung. As you know, we have approval for 2 indications, Opdivo and Yervoy in first-line lung in PD-L1 positive patients based on study 227 and a broader label based on 9LA with Opdivo, Yervoy and chemotherapy. The initial signs from the launch are very positive. It's going as well or probably better than we had anticipated. Our share right now is in the mid-single digit. And physicians are really valuing the deep responses, the long responses that we've seen in the trial and their experience, including other tumors where they see the long-term durable responses of dual immunotherapy. So, so far, I would say, the launch in first-line lung is going really well. When you think about future drivers of growth, I think the other important study is study 9ER, which reinforces our position in renal. As you know, we have one of the leading agents -- regimens in first-line renal with Opdivo and Yervoy because of study 214. Incidentally, I'll remind you that we are going to be presenting the 4-year data at ESMO, and that data confirms the long-term durable impact of the regimen in survival. So we start from a position of strength in first-line renal, but as we present the results of study 9ER, which was the combination of Opdivo and CABO in first-line renal, we think that the efficacy and safety profile of that regimen position, it is a best-in-class immuno-oncology plus TKI regimen, and we definitely think that it will provide an opportunity for growth. And then, as I said earlier, first-line gastric and adjuvant esophageal are 2 other important opportunities for growth in the short term. So Opdivo is going to return to growth next year. And then when you look at the longer term, we have a very broad program in the adjuvant setting and a number of important studies on the metastatic side, and all of those will begin to read out later this year and into next year. And so I look forward to seeing those results, and I have an expectation that we will continue to strengthen the outlook for Opdivo and Yervoy.

Excellent. And given that you recently launched, I believe, nationwide TV advertising for Opdivo + Yervoy in first-line lung, you're obviously hoping for much more market share than you've just achieved in a few months. Could you talk about the potential for market share gains?

Yes, Dave. You're right. We did start DTC advertising. We think it's really important to educate patients on the opportunity that exists with a new treatment approach in first-line lung cancer, particularly because we hear physician enthusiasm about the opportunity to offer an I-O combination regimen. As I mentioned earlier, the possibility for deep and durable responses is considered to be really important. And second, for some patients, the option of having a chemotherapy-free regimen is really important. We are seeing good uptake across histologies and across PD-L1 expression status. And so that makes us confident that the launch is off to a great start. We are in the mid-single digit in terms of market share right now, with good momentum with the launch. We're executing really well, although in a virtual environment with a number of really meaningful interactions with top prescribers. As a reminder, there is a relatively significant overlap between prescribers in lung cancer and prescribers in melanoma and renal cancer. And those prescribers already have very positive experiences and a lot of experience with Opdivo in combination with Yervoy. So I'm not going to give you sort of a forecast of future share. But what I can tell you is that I'm pleased with what I see. I know we're going to have a meaningful role to play in first-line cancer, and the launch is off to a really good start.

Excellent. So then turning to adjuvant opportunities. You had touched on that. Could you frame Opdivo's opportunities in adjuvant indications and what the most important trial readouts to watch are in the near term?

Sure. Absolutely. I think, Dave, first of all, adjuvant, in our mind, is clearly important as we think about the growth of the segment of immuno-oncology in general. We feel very strongly that the ability to reach patients early has -- provides a real opportunity to make a meaningful impact on the disease. And the reason why we say that is because that's really what we have seen in melanoma when, with the approval of Yervoy first and then Opdivo, we've established a leading regimen in adjuvant melanoma. And we've also seen a significant increase in treatment rates versus the historical figures in melanoma. So that's the experience we have. Now as you know, we just had a second tumor, the adjuvant esophageal cancer setting, where we had another positive and very meaningful result. And so we have a second opportunity there. But then I think when you look at the future, there are 3 areas that I want to be highlighting. The first one is bladder cancer, where we have a study in the adjuvant setting in muscle-invasive bladder cancer, which is going to be reading out later this year or potentially next year. We have an ongoing trial in melanoma, study 915, which also should read out towards the end of this year, beginning of next year. There is an important opportunity in renal with a study that will read out a little bit later. And then, interestingly, we have a very broad approach to lung cancer, where we have a very differentiated program with 4 clinical trials. One of those trials is in the neoadjuvant setting, where we've already seen some promising early data in the recent past. And there, we have an opportunity, depending on the data, to potentially see pathologic complete response data this year, and that obviously would be a really important data set to see. Now going into 2022 and beyond, there are a number of other early-stage trials that will read out later on. So all in all, when you think about it, it's a very broad program which takes a differentiated approach in many diseases, and it builds on the strong foundation that we already have in melanoma and now esophageal.

Very good. So to follow up on what you mentioned on the lung trial with the pathological complete response data later this year, if the data is highly compelling, is it reasonable to assume that you can file and garner approval on that data in both the U.S. and ex-U.S.?

Dave, I think what I would say is that pathologic complete response is an important end point. It is not a traditional regulatory end point. So a lot will depend on the data and the strength of the data. What I can tell you is the unmet medical need in that space is very high. So if the end point is positive and we have an opportunity, we definitely will have a discussion with regulatory authorities.

And I would assume that the bar would be lower in the U.S. than ex-U.S., is that right?

I think it's difficult to speculate on the perspective of regulatory authorities. I think you are right in assessing the level of flexibility we've seen from the FDA in terms of looking at meaningful data sets in areas of high unmet medical need. I think that's happened more often than internationally. So I think that's a fair -- that's -- historically, that would have been a fair assessment, I think.

Okay. Very good. So then we have a limited amount of time. So I wanted to ask one more question on oncology before pivoting. So in light of today's Revlimid settlement with Dr. Reddy's, how would you characterize the expected magnitude of branded sales erosion in 2022 for the company and then the erosion curve beyond 2022?

Yes. Thanks, Dave. What I would say is, I start my answer by saying it's very much aligned with our expectations since we announced the acquisition of Celgene. And then going into more detail, specifically with respect to -- I'll address it from 2 different points of view. So first of all, as I said earlier, the underlying performance of the business is very strong, I would say as strong or stronger, in some cases, that we had anticipated driven by really good execution from our teams and some of the drivers that we've discussed in the last few minutes. Now specifically with respect to the Revlimid developments, I think if you step back and think about the events that have occurred since we announced the acquisition of Celgene, there were 2 positive outcomes from PTO, USPTO reviews that were positive, and those reviews were not instituted. We were able, last year, to settle with Alvogen. Today, we have announcement -- we've announced a settlement with Dr. Reddy, which also is very much consistent with the expectations that we had. And so overall, what I would say is that with respect to generic entries of Revlimid, beginning in -- sometime in 2022, we will see the beginning of the phased entry of some generics. We do expect those volumes to increase again in line with our expectations, between 2022 and 2025, and then see full generic entries in 2026. So that allows us to confirm that our assumptions so far were correct and that the loss of exclusivity for -- the loss of exclusivity for Revlimid will be, as we've said all along, sort of more of a slope than a cliff. Now specifically with Dr. Reddy, the settlement allows us to sell -- allows them to sell certain volume-limited amounts of generic lenalidomide in the U.S. beginning sometime after March '22 and then as I said earlier, the full generic entry beginning at the end of January of 2026. So it's a similar structure to prior agreements we had with Natco and Alvogen. Some of the details are confidential, and we're not going to be disclosing the terms, but just to frame this even in more detail, remember that Natco was the first generic filer and the first party to settle several years ahead of others. So I think it's safe to assume that Natco would have sought to sort of protect that position through the terms of the settlement. And as I -- and I mentioned earlier, the terms of our agreement with Dr. Reddy are confidential, but they're very much aligned with what our expectations had been.