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

Great. Good morning, everybody, and thanks for joining us for the fourth day of our conference. I'm Matthew Harrison, one of the biotech analysts here at Morgan Stanley. And I'm very pleased to have Bristol with us for the next session. Before we get started, I need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures. So I'm going to turn it over to Giovanni to make some opening comments, and then we'll get right into it.

Thank you, Matthew, and good morning, everyone. It's a great opportunity to be able to spend some time with all of you. Let me just say for Bristol-Myers Squibb, we are getting close actually to 2 years after the acquisition of Celgene, and it's a really good time to reflect on where we are as a company. I'd like to start by saying I'm really proud of what our teams have done, particularly in light of the complexities of working in a virtual environment during a global pandemic. And during this period, we've accomplished a lot. In fact, when you look at Bristol-Myers Squibb today, we have a diversified business with 4 units across oncology, hematology, immunology and cardiovascular medicine. And all of those are very dynamic units with a lot happening, significant accomplishments and achievements both from a commercial and clinical perspective. I know that your focus is really on our ability to renew our portfolio through the rest of the decade, and I'm really pleased with where we are. So when you look at our inline business, the return of Opdivo to growth is very important to us. I'm sure we'll talk about that during the session today. Importantly though, we've also launched 6 new medicines, and these medicines are best-in-class, first-in-class compounds. I'm really pleased that physicians are recognizing that they have a differentiated profile. And when you look at our sales for the launch portfolio in Q2, we are annualizing already an approximately $1 billion in sales shortly after the beginning of those launches. We're making great progress with the next set of launches. And in fact, looking at next year, we have the potential to launch 3 really exciting medicines beginning with mavacamten in hypertrophic cardiomyopathy; cabozantinib, of course, in psoriasis; and relatlimab in metastic melanoma. And then our early pipeline has continued to progress. And in fact, we have data in-house which we intend to present at future meetings in the not-too-distant future for both iberdomide, which is our first CELMoD in multiple myeloma; and Milvexian, which is our Factor XI inhibitor, a really important program for our long-term cardiovascular strategy. So a lot happening across the pipeline and also across our 4 disease areas. I would say we've maintained very strong cash flows and balance sheet. And that's allowed us to execute important acquisitions like MyoKardia but also continue to strengthen further our early pipeline through a number of really interesting science deals, and that's clearly part of our strategy to continue to source innovation internally and externally. So the company is in a good position, very strong, coming close to 2 years of its life as a new company. And while I know that there is still a lot of work that we need to do, I'm really pleased with where we are. I'd like to just make one last comment. I said at the beginning that 2 years after the acquisition of Celgene, and mid-November, we plan on hosting an investor event. I think it's a good time for us to step back and share everything that has happened with the investment community and speak about the outlook of the company in the future. So we look forward to that event as well. And with that, Matthew, let me just turn it over back to you.

Great, great. No, perfect. Thank you. Thank you for those comments, Giovanni. And yes, look forward to the discussion.

So I guess maybe let's start with a couple of macro topics, and then we can obviously talk about all the stuff that's going on in Bristol. But I feel like there are 2 sort of macro topics out there that investors are focused on. So the first is what's happening in D.C. over the next couple of weeks related to drug pricing. So maybe just any thoughts you have on that and any expectations you have around what may happen there?

Sure. Well, let me say, first of all, that it's early days, and it's really difficult to forecast what discussions may take place and where they may lead as part of a reconciliation package. I can tell you a couple of things. So first of all and most importantly, the industry and we share the need for reform. And there is a real opportunity to have a dialogue which is more of a policy dialogue and a bipartisan dialogue about how to reform some elements of our system and make medicines more affordable to patients. I think that would be good for everyone. That would be good for patients, first of all. It would be important for the industry as well. I must say that, again, while it's early days, some of the things that we are hearing are concerning because there are some measures that are being discussed that would be punitive for the industry. And clearly, we know that when government price fixing is discussed, innovation suffers. And quite frankly, we have a lot of examples of pretty much every country around the world that demonstrate that when that happens, the access of patients on medicines -- patients to medicines slows down. So we hope that the dialogue continues to be a constructive dialogue about real reforms. And the industry is really willing to be at the table and contribute, in fact, to what is necessary in terms of reform. But it's kind of early days to give you more insights about where this may go in more details.

Okay. No, great. And then I guess the sort of second broader topic is just how you're thinking about capital allocation at Bristol. As you mentioned, 2 years post Celgene, I think people were surprised or maybe slightly surprised by the size and scope of the MyoKardia deal so quickly after Celgene. So maybe just give people your thoughts on how you're thinking about M&A, how you're thinking about size and scope of acquisitions, especially as you think about reimagining the portfolio and then also where M&A fits in with the dividend and with other investments.

Sure. Absolutely. And so let me, first of all, start by saying I feel that the acquisition of MyoKardia was a great deal for us. I really look forward to the opportunity to launch mavacamten. I think it's going to be another really important cardiovascular medicine for the company. Now speaking to capital allocation. Our capital allocation strategy really hasn't changed, and business development continues to be the central pillar of our capital allocation strategy. And I'll make a couple of comments on that later. But at the same time, we do believe in the importance of dividend, and we've grown the dividend every year for several years now. We are committed to continuing to do that. Of course, every time we discuss the dividend, I always say that any increase must be approved by the Board. But our strategy over the last few years really speaks to what we want to do, and our focus is to continue to do the same. At the same time, we've executed more opportunistically share repurchase programs where that was warranted. In fact, we are executing one this year, and I see that potentially continuing to happen in the future as well. So it's a really -- it's a continuation of our strategy. And it's driven, by the way, by very, very strong sort of cash flow generation ability and a lot of flexibility that we have financially. Now with respect to business development and M&A, my belief has always been that the best way to innovate is a combination of internal efforts and external innovation. And when we look at that, we look at really 3 parameters. We look at whether deals that we are considering are strategically aligned. And what I mean by that is areas that we know pretty well where we think we can add value. Again, MyoKardia is a good example of an area where we have deep internal expertise. The second one is science that is potentially transformational. And we look at medicines like mavacamten that we actually have the potential to change the course of the disease, not simply treat its symptoms and establish themselves as the standard of care. And obviously, we want to be very disciplined from a financial perspective. And when those conditions happen, we are ready to make moves like the acquisition. I -- as I've said in the past, when we execute our strategy, there are more small science-based deals that we do that further strengthen our early pipeline and our long-term outlook, but we also follow companies regardless of their size. I mean in many ways, we are agnostic to size. And when the right opportunity comes for a company like MyoKardia, which are technologies that we've typically followed for a while, and we are ready to move when the right opportunity comes.

Okay. Great. Good. Why don't we turn to the business? You talked about return to growth for I-O, so maybe we should start there. I guess first, just give us the outlook on return to growth for I-O, how you're thinking about some of the dynamics there, if you're seeing again an impact from COVID, obviously, as we saw on cancer diagnosis and other factors sort of leading to that. And then there's a couple of follow-ons to that as well.

Well, let me say, first of all, with respect to COVID very briefly, obviously, as you know, oncology in particular was one of the areas that was impacted significantly by the pandemic. Since then, we've seen health care centers, from community-based practices to hospitals, really adapt to operating during the pandemic. And luckily, the flow of patients into clinics have improved dramatically. Now when you look at the numbers, we're still 5% to 10% below pre-COVID numbers, but the situation has improved significantly. It's a little early to give you a definitive perspective about what is happening with Delta because, obviously, the increase in transmission rates is recent and it also happened during the summer period where there is a little bit of inherent volatility in the market. I must say we are seeing some signs that in some parts of the country, in particular, there may be some impact from Delta. At the same time, we are not seeing the same level of impact that we saw at the beginning of the pandemic at this point, but obviously, we're following this very closely. Now most importantly, with respect to the growth of Opdivo, I'm really pleased that Opdivo has returned to growth. We've always said we saw the return of growth in 2021, and we saw that as being sustainable over time. Both of those are happening. And there are multiple sources of growth. So I'll mention 2 or 3 areas that are particularly important. We've had a really good start with the launch in first-line lung cancer, and we believe there is an opportunity to continue to move there. The second opportunity, obviously, is from new indications. And so one that I'd like to highlight is study -9ER in first-line renal cancer. As you know, we have a leadership position there with Opdivo + Yervoy. At the same time, there is a big opportunity to further expand that leadership. There are still patients that are treated with single-agent TKI or they are using combos that are not as effective as of Opdivo + cabo. And we've seen really strong uptake of that regimen. And so when you look at those 2 together, our leadership position in renal has really solidified. The third area is gastrointestinal malignancies. And there, I'm really pleased because through a number of positive Phase III studies, we've really established Opdivo as the leading agent for the broadest set of indications there across first-line gastric; first-line esophageal, which is potentially going to be launching soon, the indication in adjuvant esophageal. And when you look at all of those 3 together, it's a really important commercial opportunity for us. The initial launches in gastric, for example, is going extremely well. And then of course, we are strengthening our presence in the adjuvant setting. I mentioned adjuvant esophageal, but also bladder cancer is an opportunity. So there are multiple levers to sustain the growth of Opdivo. As you know also, launches tend to happen earlier in the U.S. But then later in the process, we begin to get reimbursement internationally, and that creates a second wave of growth opportunities. And then looking at the long term, of course, there is a broad clinical development behind. So I'm actually really pleased with our position with Opdivo right now.

Can you also maybe just follow on and talk about -- because, obviously, as you mentioned, right, sort of mid-decade LOEs or second half decade LOEs are clear focus for The Street. How do you think about the longevity of the I-O franchise? And especially some of the combination work that you're doing, such as the LAG-3 combo, can that extend sort of the Opdivo franchise longer than maybe The Street is thinking about?

Yes. No, thank you. Obviously, given the importance of this franchise working in order to ensure we have a sustained presence in -- sustainable in immuno-oncology, there are multiple levers to that strategy. The first one is an important one, which is our strategy regarding our LAG-3 program, relatlimab. As you know, this is a fixed-dose combination of relatlimab and Opdivo. And obviously, the loss of exclusivity for relatlimab is later into the [ '30s ].And that actually provides us with an opportunity to extend the duration of that franchise. And the data is really exciting because we've been able to demonstrate in metastatic melanoma, which is an area we know well, we are the leaders there, that we can double progression-free survival versus single-agent PD-1 therapy. And remember, there is still about 2/3 of patients that use either single agent PD-1 or use a BRAF inhibitor. And we think there is a real opportunity to offer something more effective to those patients. So that's part of the strategy. And obviously, beyond melanoma, we are investigating -- beyond metastatic melanoma, we're investigating the potential of relatlimab in the adjuvant setting in melanoma. We are conducting early studies in lung cancer and hepatocellular carcinoma, which are all areas where our early-stage research demonstrated the potential signals that are worth exploring. The second part, obviously, is we're exploring and we're studying alternative strategies like, for example, the development of a subcutaneous form of Opdivo, which is well underway. We have 2 really interesting proof-of-concept trials ongoing for next-generation cTLA-4 agents, which will read out over the next year. And those are both the fucosylated form and Probody, which have real potential to be a next-generation Yervoy with improved profile. And finally, I would say we are investing behind a number of new mechanisms in immuno-oncology, be that bempeg, which we are studying as part of our collaboration with Nektar, but also more recent deals. I'm actually really excited about the progress of our collaboration with Dragonfly for their [ IL-12 ] program. So there is a broad strategy in place to ensure the sustainability of our immuno-oncology portfolio. And obviously, oncology goes beyond that. And there are interesting programs in the area of antibody-drug conjugates and also CELMoDs that are beginning to be directed at solid tumors.

Perfect. Maybe we could transition to TYK2. Obviously, as you've been getting questions for a year or more now on the safety profile, I guess, can you maybe just put your views on safety in context with what's happened recently with JAKs and how to think about your confidence in sort of broad utility of that program?

Absolutely. So just as a reminder, first of all, the excitement with deucravacitinib is very clear. The efficacy in psoriasis points to this potential of being a new standard of care from an oral perspective in psoriasis. And as you know, we have a growth development program with data readouts expected in UC and then potentially, psoriatic arthritis and Crohn's disease. And so it's an important program for us. We had a lot of discussions with thought leaders and physicians about the data, including its safety. And we are not getting a concern with respect to safety. Physicians, thought leaders feel very comfortable that the profile that is emerging is one of a very selective IL-12/23 inhibitor. And as you know, the concerns with JAK are very clear. And some of them are actually apparent quite early in treatment like lab abnormalities and signs of VTE, MACE. We have not seen any of those signals. So while I can't speculate on what position the FDA will take, I feel that we've done a lot of work, preclinical work to clinical work, to really articulate why this is a very selective inhibitor of a very specific pathway. The profile that is emerging is remarkably consistent with that, and we'll obviously discuss that with regulatory authorities. At the same time, what remains important really is the perspective of the thought leaders that will prescribe the asset potentially, and their point of view is very clear.

Okay. And maybe just a specific follow-up to that, which is -- one of the questions I get asked all the time is around the label and do you think there's going to be warnings on the label. And so I know you sort of described that broadly, but maybe if you're just willing to comment on what your view is on the label and how to think about how different kinds of labels may impact your thoughts around commercialization and uptake.

Yes. No, I'll tell you -- Matthew, what I can say is, first of all, it's really difficult for me to speculate on what regulators may do or the FDA may do in this case on various scenarios. I think we've got really good data in hand to have solid productive discussions with the regulators. At the same time, I think what's really important also are the discussions with thought leaders and prescribers that will look at the data and recognize the differentiated safety profile. So we'll have more to say as the regulatory process eventually unfolds, but we're very confident in the profile.

Okay. Great. Good. You talked about Factor XI at the beginning. I think there's a lot of focus there. Maybe the best way to talk about it is to put in context the data that we're going to see from knee replacement with how you're thinking about the secondary stroke study. And I guess what I'm really sort of driving at is what should we be looking at for total knee? Should we be looking at safety? Should we be looking at efficacy? What are the key things that read across to maybe some of the larger indications?

Sure. Absolutely. So first of all, let me say we are paying a lot of attention to that program. And as you know, we have a long history of building successful cardiovascular medicines, from Plavix to Eliquis, now mavacamten coming very soon potentially and then Milvexian, Factor XI program. And it's an area we know really well. So when we -- when you think about what is the rationale really for developing the asset, it is to continue to improve on the therapeutic index of medicines in the space. And obviously, efficacy is important and will always be important. But I would say, at the same time, the real priority here, the real opportunity is to be able to achieve high efficacy with a bleeding profile -- risk profile that is different from Factor Xs and other anticoagulants. And we think there is a real rationale why going after Factor XI provides us with an opportunity to do that. So why is that important? I think it's important because there are a number of patients that because of risk of bleeding don't benefit really from currently available agents, including Eliquis. And importantly, there are a number of diseases, particularly on the arterial side, where the combination with antiplatelets could be extremely beneficial. And that's not possible also because of risk of bleeding with the currently available agents. So those are the things to be looking at as we begin to discuss the results from the early part of development. And as you know, we've planned 2 studies. One is shorter term on therapy trial, which looks at total knee replacement. That's a very well-established model in coagulation. And we have the data in hand. What I can tell you is that we've seen what we are expecting to see in terms of the profile of the drug, but obviously, we'll present it soon at a congress. And the second trial is a trial that looks at the combination with antiplatelets, and it's a trial that will give us insights into the combinability and the safety of that strategy. And when you look at those 2 trials together, we will have a clear set of data that enables us to choose the final dose and then initiate rapidly what can be a broader development. And it is likely that we pursue opportunities that are maybe more aligned with the Eliquis indication set, where we would be looking at patients that maybe aren't able to benefit from currently available therapies. But we are also going to consider looking at opportunities, as I said earlier, that are different and that require a combination with antiplatelet agents and extend the potential use of Milvexian into other arterial diseases where the unmet medical need is very high. So I think what you've got here is Bristol-Myers Squibb is an experienced company in cardiovascular, the same for Janssen. We've decided to work together. And the objective, obviously contingent on the data, is to invest and execute aggressively to make this asset into another large cardiovascular medicine, which could be very important for patients.

Okay. And then sorry, one just follow-up there. On the knee replacement study, when we see it, do you think the safety profile of the drug will be clear to investors? Or do we need to see the second combination study to really understand what the safety profile looks like?

Yes. I think these are different trials. One is a monotherapy trial. One is a combination trial. I think these are 2 different settings. The duration of treatment in these trials is different. So I think this will be complementary sets of data. At the same time, as I said, when we looked at the first trial, it was aligned with our expectations.

Okay. Great. Maybe we could flip to myeloma and somewhat in the same way we talked about I-O, I guess. You've mentioned some additional CELMoD data. You've got some additional CELMoDs coming down the line. I guess I ask the question in the context of do you internally feel more positive about the longevity of the myeloma franchise maybe than the Street is because The Street is sort of looking at it and assuming it goes away when Revlimid goes generic?

Yes. No, thank you. First of all, let me say we've discussed our CELMoD platform and strategy in the past. And I'm actually really pleased that we have 5 CELMoDs in the clinic now across myeloma, lymphoma. The program is continuing to advance. And as you mentioned now, for iberdomide, we have data in-house that looks at the efficacy in combination with dex in a highly refractory late-line patient population that really has no other options. And as I've mentioned, we believe that data should be discussed with regulatory authorities to explore a potential registration of that, which is what we intend to do. So there is a lot of progress that we expect. Now when you look at our multiple myeloma strategy, a couple of things that are important. First of all, multiple myeloma remains an area with significant unmet medical need. Many patients continue to progress rapidly through multiple lines of therapy, and they need new options. And when you look at our strategy, we're actually attacking there a need [ from multiple elements ]. The first one is CELMoDs, and obviously, iberdomide plays an important role there. Coming right after iberdomide is a very potent compound, 480. And for both of those CELMoDs, our strategy has been clear. We're looking first at proof of concept in a highly refractory, heavily treated patients like we've done for iberdomide. But then we're going to be moving very rapidly into early stages, early lines of therapy where we will compare them with existing standard of care as part of treatment process. So that's one part of the strategy. The second part of the strategy is really our focus on BCMA. And as you know, we have our BCMA CAR-T, Abecma, in the market already. I can tell you the demand for Abecma has been extremely positive and quite frankly, exceeded our expectations, which really point to a number of things. The first one is the unmet medical need still exists in myeloma. The second is the importance of BCMA. And the third one is the fact that given the right profile, the barriers that have been perceived to be there for CAR therapy actually are no longer there. So that's the first part of our BCMA strategy. And right after Abecma are coming potentially next-generation CAR-T therapies, T-cell engagers, an ADC program and an NK engager. They are all early but very focused. And then finally, we're investigating some new targets. And when you look at all of the strategies, I feel that given the progress that we're making in this -- in multiple myeloma, in the future, we'll continue to be more and more segmented into multiple diseases. And we really have a good opportunity and multiple shots on goals in a way to play a leadership role across multiple diseases. And I'm really pleased with the progress that we're making across the board. And yes, I am confident that we'll maintain an important presence in multiple myeloma.

Perfect. Giovanni, thanks for being here. Thanks for your comments. We very much appreciate it.

Thank you, Matthew. Thanks for the opportunity. Have a good day.