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

And then last question, what does Bristol do with the extra $6 billion if you end up not paying up the CVR? Does that change capital allocation priorities? What do you earmark that amount for?

Well, let me just say, first of all, that we are absolutely committed, as I said at the beginning, to do everything we can to get liso-cel approved. And we think it's important for patients. I know it is really important as part of our commitment to the CVR. I think with respect to the capital allocation strategy of the company, I would just step back and answer your question almost independently from the payment of the CVR. Our capital allocation strategy remains very consistent. We're committed to the dividend and we have -- our Board has approved dividend increases every year for the last 10 years. It's an important part of our capital allocation strategy. Our focus is on continuing to bring external innovation into our R&D engine and into the company. And so business development is a critical part of our capital allocation strategy. We are committed to delevering and going to -- getting to 1.5 ratio by 2024, which we've communicated before. And I think our financial flexibility, our financial strength gives us a lot of flexibility. We've demonstrated that with the acquisition of MyoKardia this year. And I think that will continue to be important going forward.

I want to shift to a different topic. Why do you think -- and I understand you're not a stock analyst. But why do you think Bristol has among the very lowest P/E multiples in the group and among the lowest that any multinational drug company has ever had? It's really rare, over the last 20 years, probably even longer, that big pharma companies hit P/E multiples that are in the single-digit range. And when I looked at Bristol, you've executed very well over the last 18 months and it's been impressive, positive readouts with in-line brands, with the pipeline drugs, indication expansion in the label, various product approvals, you've delivered on quarterly results. And from my conversation with clients over the past few months especially, I can tell having growing interest in the name, yet the stock price in 2020 has been pretty much flat. So based on your conversations with investors, what do you think are the biggest items holding the stock back?

Yes. Thank you, Tim. I can tell you that, from my perspective, when I look at Bristol-Myers Squibb today, first of all, in many ways, we are a 1-year old company because the acquisition of Celgene and the integration of the 2 companies has really transformed Bristol-Myers Squibb. So this is the beginning of a journey for us. And I do agree with you that we are executing really well and that 2020 has been a very, very strong year for us. And in fact, we've never been in a stronger position. The performance of our in-line business with Eliquis, Opdivo, Revlimid and the hematology business is very, very strong. The pipeline is delivering. And we've launched 4 new medicines that have the potential to be important contributors to the growth of the company. We've had 8 positive Phase III clinical readouts this year, very important readouts. We've acquired MyoKardia, which gives us access to another really important medicine. And when I look at the future, our pipeline has 20 assets in first -- in Phase I or Phase II with the potential for proof-of-concept data and the beginning of registrational programs in the next 2 to 3 years. So the company is in a very, very strong position. The way I think about that, and to answer your question, is there's a number of things we're doing that are really important. Because we know that Revlimid exclusivity will be lost between 2022 and 2026. It will be a slope and it's very aligned with our initial assumptions. I actually feel really good that during that period, we have a strong, broad and deep set of pipeline opportunities to ensure that the company continues to be successful during the period. And I think what we have to do is continue to execute well, whether that is the launches of new brands, like REBLOZYL and ZEPOSIA, that are going extremely well and need to continue to strengthen over time to demonstrate the potential of those assets; the registration and launch of new important opportunities, like our TYK2 inhibitor, deucravacitinib, that we think is going to be a really important asset for us and mavacamten in cardiovascular medicine. I think as those medicines become sort of realities in the marketplace, the potential will become even more clear. And then as we think about the long term, when at the end of the decade, we have to be thinking about the losses of exclusivity for Opdivo and Eliquis, I think we have great opportunities in our pipeline and we have the financial flexibility to continue to invest in our future. So I personally am confident, as I think about the future of Bristol-Myers Squibb, I think we're in a very good path to once again successfully renew our portfolio and navigate successfully the losses of exclusivity over the next 10 years. And my focus is to continue to execute really well to articulate sort of the potential of the key assets in our portfolio and demonstrate the ability of the company to continue to perform really strongly during the next few years.

So when I think about it, why the stock is where it is on a multiple basis, I think part of it is that Bristol was in the penalty box really starting in 2016 on execution issues with Opdivo, with the setback in frontline lung. And it was a turning point for the name, as you will remember, because a lot of people felt that Bristol ceded the lead to Merck. But Opdivo, I think, is kind of behind the company at this point. Opdivo is very much on the mend now, which is refreshing. It hasn't yet returned to growth, but I think we can pretty much all agree that, that's coming. I think the biggest single concern now for us that explains why the multiple is where it is that investors have been worried about future patent expiries. And they haven't really been fans of the Celgene acquisition from really one standpoint, more than anything, which is that you're buying off someone else's patent cliff. And that kind of comes on top of your own future scheduled expiries down in the later 2020s. I'm guessing you knew that was going to be possibly an issue and that shareholders might push back against that. So just recap for us what you felt was so compelling with Celgene such that you were willing to kind of take on that pushback about Revlimid that I do think is one of the things holding the stock back still.

Yes. Thank you. Thank you, Tim. Let me just say, first of all, that I feel actually really good about the execution against all value drivers of the acquisition of Celgene. And I'll go back to the discussion that we've had in the last 12 months and say, first of all, it was really our belief and it is our belief that Revlimid is protected by a strong patent. And I know today that our view that the loss of exclusivity of Revlimid will be a slope that begins in 2022 and increases over time through 2026. Well, that view has been confirmed. And so because of the great progress that we've made on the IP front, with the IPR results and the settlements with Alvogen and Dr. Reddy, we feel comfortable about that assumption there. As a result of that, then we looked at the pipeline of Celgene as driving significant value for Bristol-Myers Squibb and enabling the company to renew its portfolio during the time of Revlimid loss of exclusivity and position us really well for growth in the long term. And so at the time in which we acquired Celgene, we pointed to 5 assets in the pipeline that had a potential for peak sales of approximately $15 billion. Well, I actually think that things have improved since then. Now we can point to 7 late-stage assets coming from the Celgene acquisition plus TYK2, where we know that the non-risk-adjusted peak sales potential for us exceeds $20 billion. So when you look at the data that has evolved for REBLOZYL, we think it's a really important product. When you look at ozanimod, we now know we have a best-in-class S1P profile with a strong label for multiple sclerosis and a positive Phase III data in ulcerative colitis. The data for liso-cel and ide-cel in cell therapy, that data has proven to be really strong. And I believe that those 2 treatments will have a really important role to play in their marketplace. And obviously, as you know, our own pipeline has evolved with TYK2 that has had positive studies in psoriatic arthritis Phase II and then the positive Phase III study in psoriasis. So when we look at the late-stage pipeline, 7 assets with peak sales potential of over $20 billion. I think that positions the company to do extremely well through the period of Revlimid exclusivity loss. And as you know, we acquired mavacamten -- MyoKardia and through MyoKardia, mavacamten, which is also an aid medicine with multibillion-dollar sales potential. So the driver for the acquisition of Celgene was really the strength of the pipeline and the differentiation it would provide to Bristol-Myers Squibb. I think that's playing out very well. When you look at the company today, we have 4 therapeutic areas: oncology, hematology, immunology, cardiovascular medicine. All of them have strong in-line businesses, late-stage pipeline that is driving launches in the short term and a really exciting early pipeline that will drive the growth of the company in the future. I think it's a stronger position than we've ever been as a company.

When AbbVie -- AbbVie suffered for a long time, it still suffers today from the Humira expiry that lay ahead in the U.S., but that along the way, they would periodically try to give shareholders comfort by giving extended long-term guidance. And that was very granular in their case. And when they did it in 2017, it was one of the things that really helped the stock take off because management kind of drew a line in the sand. When you guys did the deal with Celgene in early 2019, you did give some elements of guidance to 2025, but you have not updated that since. And that guidance really isn't applicable any longer because you've got rid of things like OTEZLA. So you do have kind of within your control the ability to disclose more. Why not consider giving extended long-term guidance or refreshing that 2025 guidance that would give shareholders some visibility on the numbers beyond this Revlimid LOE event that begins in 2022?

Yes. Thank you, Tim. And yes, you're referring to the S-4 that we published as part of the process for the acquisition of Celgene. I mean, at this point, what I can tell you is we've not made a decision to provide long-term guidance. What I can tell you though is what has happened since then. And I actually feel really, really good about where the company is as I think about the assumptions that we made at that point. And again, I'll point to some really important developments of the last 12 to 18 months. So first of all, the strength of our in-line business, I think, has been in line or above our expectations. We've confirmed the assumptions that we had made for IP. I spoke earlier about the loss of exclusivity of Revlimid, where we feel pretty good about where we are. Similarly, with Eliquis, as you know, we had an important sort of decisions from the -- decision from the courts that validated the strength of our patterns for Eliquis, which gives us visibility into exclusivity potentially beyond 2026. So these are really important developments for us. And then you look at the other driver of those numbers, which is the pipeline, I think that things are going as well or better than we were expecting. ZEPOSIA has confirmed it has a best-in-class label. It has had a positive Phase III study in ulcerative colitis. In the case of REBLOZYL, we have more visibility into the potential that REBLOZYL has in myelofibrosis, which is an important new indication for the drug. We've seen the pivotal data for liso-cel and ide-cel, which are very, very attractive. We've now seen the potential of TYK2 inhibitor across both psoriasis and other indications like psoriatic arthritis. We've added new medicines like the development of cendakimab for eosinophilic esophagitis. We've confirmed actually the opportunity for Opdivo to continue to grow -- to begin to grow again in 2021 and we've acquired mavacamten. So when I think about the view that we had then, the view that we have now, you are right, a lot has changed. We have divested OTEZLA. At the same time, what I can tell you is that the outlook is looking very strong. And as I said earlier, I feel really good about our ability to continue to perform very strongly as a company as we go through the period of progressive decline of Revlimid through 2025 and beyond.

I'm just going to leave it at that. I've got kind of one point on this, which is all those points you've made, I think, almost make my point more salient, which is if you're more confident in that long-term outlook, if you gave guidance, I'm sure it would be higher than where consensus is. And that would give investors reassurance and it would likely have a positive impact. So maybe something just to consider, I'm not asking for a response to that. Let's finish out. We only have a couple of minutes. TYK2, you've top lined it in psoriasis. So it's one of the most kind of closely watched events in anticipated data sets. And we know it was a positive top line release, but there was really no quantification of anything in the press release. Can you at least give investors comfort that when we do see this full data, there won't be any controversies, you're not going to have sell-siders walking away nitpicking and pointing out certain negatives either on the efficacy or safety side? So what's your level of comfort in the robustness of that data set, both safety and efficacy?

Yes. Tim, thank you. Let me just say, I think about deucravacitinib, our TYK2 inhibitor, as a really, really important potential medicine. And what we've seen so far is really exciting. I mean you know all the data, we've seen the Phase II data in psoriasis. The first Phase II data in psoriatic arthritis was released very recently and discussed at a conference. And we have seen the top line data from the first Phase III study in psoriasis. Our perspective with this asset, deucravacitinib, was that we believe we can, because of the specificity of the molecule and the importance of the pathway, that we can have a potential medicine with biologic-like efficacy and a differentiated safety profile. Because this asset is not a JAK inhibitor. It is an inhibitor of the IL-12/23 and interferon I pathway. And what we've seen so far makes us really confident that we have an opportunity to develop an asset that has those characteristics that can become a leading oral molecule in psoriasis and has the potential to be applicable across multiple other diseases. So I feel really good about the data that we have seen. I look forward to presenting them at a conference coming hopefully soon. As you know, we have the second Phase III data reading out at the beginning of 2021 and then we have important Phase II data readouts potentially next year, including SLE and ulcerative colitis, that will give us increased visibility into future indications. But I feel really good about the data I've seen and very excited about deucravacitinib.

Great. Okay. We're going to leave it there. Giovanni, thanks for your time today, and we look forward with what the future holds for Bristol, and a good conversation. Thank you.

Thank you, Tim. Thanks, everyone.

Bye-bye.