Bristol-Myers Squibb Co. Q3 2008 Earnings Conference Call Transcript

 |  About: Bristol-Myers Squibb Company (BMY)
by: SA Transcripts


Good day everyone and welcome to today's Third Quarter 2008 Earnings Release Conference Call. This call is being recoded.

At this time I would like to hand the call over to Mr. John Elicker, Vice President and Investor Relations. Please go ahead Mr. Elicker.

John Elicker - Investor Relations

Thanks Nova, and good morning everybody. Thanks for joining us to review our third quarter results. The release was issued this morning as well as posted on our website as well as the supporting financial data.

With me this morning are Jim Cornelius, our Chairman and Chief Executive Officer; Jean-Marc Huet, our Chief Financial Officer. They both have prepared remarks and then joining us for Q&A are Lamberto Andreotti, our Chief Operating Officer; and Elliott Sigal, Chief Scientific Officer.

Before we get started, let me take care of the legal requirement. During this call, we'll make statements about the company's future plans and prospects including statements about our financial position business strategy research pipeline. Concerning product development product potential that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Actual result 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 most recent annual report on Form 10-K, periodic reports on Form 10-Q and cover report on Form 8-K. These documents are available from the SEC and Bristol-Myers Squibb website or from Bristol-Myers Investor Relations.

In addition, any forward-looking statements represent our estimates only as of today, and should not be relied upon its representing our estimate as of any subsequent day. While we may elect to update forward-looking statements at some point in future, we specifically disclaim any obligation to do so even if our estimates change.

With that, let me turn the call over Jim.

James M. Cornelius - Chairman and Chief Executive Officer

Thank you John and good morning everyone, thank you for joining us.

Let me start by saying that our operational performance in the third quarter was excellent, direct result of our strategy in the hardware by the entire BMS team. We delivered very strong results in the quarter both at top and the bottom lines as we have all year. We had double-digit increases in sales in the quarter and we remain in the period of sustained and improved earnings growth and we forecasted for your last December and now fairly even more confident we can deliver in the future.

On a non-GAAP basis, we grew diluted earnings per share from continuing operations 39% in the quarter or $0.46, which was $0.04 ahead of consensus estimates. Our GAAP diluted EPS tripled in the quarter, up to $1.29, which includes an after tax gain of $0.99 per share from the sale ConvaTec. This sale contributed $4.1 billion in cash proceeds, which will help fund both operations in continuation of the string apparel strategy.

Also on a gap basis, diluted EPS from continuing operations for the third quarter was $0.30 of share, down 21% from last year reflecting the impact of specified items, which Jean-Marc will review in a moment. The breadth and strength of the product portfolio underscores good sales execution worldwide in the quarter. Our pharmaceutical net sales grew 18% in the U.S. and 11% internationally. Globally, Mead Johnson Nutritionals grew 10% in the quarter.

We increased revenue 14% in third quarter by delivering growth on key products worldwide. Our instance on a global basis ABILIFY grew with 34%. PLAVIX grew 15%, and our Virology franchise grew 27% all compared to the third quarter last year. In sales of ORENCIA, one of our more recently launched biologic products nearly doubled since the third quarter of 2007.

As we grow in the top line, we have also managed our costs quite effectively. And the result, our margins continue to improve in the third quarter. Gross profit as percentage of net sales rose 170 basis points on a non-GAAP basis compared to the third quarter of 2007. Our non-GAAP net income margin rose 300 basis points as well. I am glad to say we are well on track to deliver on our productivity initiatives as we projected.

We are raising our GAAP guidance for 2008 assuming received cash this year for the ImClone shares we own. We now expect fully diluted EPS from continuing operations to be between $1.61 and $1.66 per share on a GAAP basis. And between $1.65 and $1.70 earnings per share on a non-GAAP basis, which would be at the upper range of our previous guidance.

We are also re-affirming that we expect non-GAAP earnings per share from continuing operations to grow by at least 15% compounded annual grow rate from the 2007 base, which included ConvaTec for a period through 2010. We are especially pleased about our strong cash position, which is now at $7.2 billion, boosted impart by the cash proceeds of ConvaTec. We expect to add to our cash reserve this year proceeds from the sale of our shares of ImClone as well as from season 2009 of a partial IPO of Mead Johnson.

Our balance sheet puts us in a very strong position to continue executing against our BioPharma strategy. We told you in December, we would be reviewing our non-pharma businesses as result of the BioPharma strategy. Since the, we've sold ConvaTec and Medical Imaging, and we've announced our intentions for Mead Johnson. In addition, continue to rationalize our manufacture and geographical footprint while delivering growth selectively in emerging markets.

For example we are selling a plant and some material brands in Egypt to GlaxoSmithKline for $210 million though we remain in Egypt with our portfolio of innovated products. On the clinical science front, we are steadily advancing our pipeline and expanding our portfolio. Last month we saw encouraging survival data for ERBITUX and ipilimumab coming out of cancer conferences and pharmacy data on adviser the European Association for the Study of Diabetes.

Since we launched our string of pearl strategy a year ago with the purchase of Adanaxis [ph] we've acquired a growing cluster of innovative startups and licensing agreements to compliment our existing pipeline. This quarter for instance we announced in alliance with PDL BioPharma to develop and commercialize an anti-CS1 antibody currently in early development from multiple myeloma.

And while we did not close in our bid for ImClone, I am very proud of the way the team pursued the deal with the degree of vigor and discipline that will go long way toward preparing us for future deals, which will ultimately help us emerge as the leading next generation BioPharma Company over the long-term. And now for more detail about our financial performance, I will turn the call over to our CFO, Jean-Marc Huet.

Jean-Marc Huet - Senior Vice President and Chief Financial Officer

Thank you very much Jim.

What I will do is first review our Q3 results and then guidance before turning over to Q&A. Let me start with revenue first. Total sales from continuing operations were up 14%. You should know that it excludes ConvaTec, which we've reported as a discontinued operation.

Given to our very year-to-date sales performance and our outlook for the remainders of the year, we now expect full year sales to be up lower double-digit range. If we take our sales from continuing operation of 14%, this is an overall sales, which include 3% as a result of FX, 3% due to pricing and 8%, which represent an increase in volumes which just demonstrates the strength of our business portfolio.

Pharmaceutical sales were up 15%, including a 3% impact due to foreign exchange. This is a broad based growth across the portfolio given by PLAVIX, ABILIFY, our Virology business as well as our newer products. So let me turn to the specific therapeutic areas; first starting with our CV Med business.

U.S. PLAVIX sales were up 17 % in Q3. This is true sales growth as there is no impact from APITEX [ph] unlike Q1 and to a lesser extent, Q2. TRX trends encouraging plus 7 % as stent procedures seem to be stabilizing. We then go to neuroscience, ABILIFY, up 34% globally and 32% in the U.S. We had 26 % prescription growth in the U.S., which reflects execution against the opportunities in bipolar and the new major depressive disorder indication supported by a strong DTC campaign, which will continue in Q4. Growth in Europe was supported by the new bipolar indication.

Let me now turn to Virology. REYATAZ was up 25 % globally including 18 % in the U.S. due to TRX growth. Our Sustiva franchise sales were up 24 % globally behind the strong performance of ATRIPLA. BARACLUDE sales were at a $144 million with over $100 million outside the United States.

Turning to immunology, our ORENCIA sales were just under $120 million, up 12% compared to Q2 of this year. Oncology, ERBITUX sales were at a $184 million relatively flat compared to the same quarter last year. This was due a change in the distribution model last year as well as slower sales in colorectal cancer. We expect this market to be a growth driver long term as oncologists are able to identify those patients most likely to benefit based on KOS testing. Global SPRYCEL sales were at $82 million with continued growth in Europe. IXEMPRA, launched in the U.S. during Q4, generated sales of $25 million.

Turning to our nutrition business, Mead Johnson, which represents around 15% of company sales, increased to 10% or 7%, excluding foreign exchange at around $744 million. So in summary, we had quality revenue growth in each business and every geography, the U.S. pharmaceuticals business of particularly strong at plus 18%.

Now turning to expenses, excluding specified items, gross margin increased 170 basis points to just under 70% at 69.9% compared to the third quarter of last year. This was due to favorable mix between the businesses within the pharmaceutical business and manufacturing cost improvements, a reflection that our productivity initiatives are well underway; and this, despite lower margin growth in Mead Johnson.

Full year gross margins for 2008 should be up around 100 basis points. Excluding specified items, gross margins in pharmaceutical business were at 71.9%, up 230 basis points and Mead Johnson was at 61.6% down a 170 basis points from last year, primarily due to geographic mix U.S. versus the international business.

Excluding specified items, marketing, selling, and administration increased 6% with a 3% impact from foreign exchange. Advertising and promotion increased 7%. This includes the 2% FX impact. AMP will likely be up in the lower double-digits for the year. This reflects continued investment as we mentioned in Q2 in our revenue growth drivers such as ABILIFY and ORENCIA.

Excluding specified items, research and development expense increased 7% to $797 million with a 1% impact from foreign exchange. R&D spending for the year 2008 should be up in the mid-single digits, but please remember this includes R&D spend associated with the Kosan acquisition and licensing agreements with Kai [ph] and PDL. Our effective tax rate from continuing operations before minority interest and income taxes and excluding specified items was 25.3% in Q3.

Our full year guidance remains approximately 24% as the R&D tax credit has been approved now and will be accounted for in our Q4 results. Given the volatility in the financial markets, I'd like to make few a comments about our financial strength. Our financial condition, strongly improved in the quarter as our cash and cash equivalents increased to $7.2 billion, as a result of strong operating cash flows as well as $4.1 billion in gross proceeds from the ConvaTec sale.

A significant majority of this cash is invested in treasury and treasury bank securities. And this reflects a conservative investment policy that we initiated earlier this year. Also a reflection of our conservative approach, we refinanced $1.6 billion in debt earlier this year and as such have no significant maturities in terms of our debt profile until 2013.

Our net debt in the quarter was reduced by $4.6 billion. And we are now in a net cash position of $1.2 billion. In summary, we are in excellent liquidity position. In addition to this, if Lilly closes the announced acquisition of ImClone, we will receive approximately $1 billion for our shares in this company. In addition, as you know, we also expect to receive proceeds from the proposed 10% to 20 % IPO of Mead Johnson in 2009.

While we recognized the need to maintain a strong balance sheet, we are also in a strong position to continue pursuing business development opportunities. One specified item to highlight, as noted in the release, we did take an impairment charge of $224 million related to auction rate securities. The original carrying value of $811 million as you know at the end of 2007 has now been reduced to $213 million.

So just some general comments: strong sales, strongly improved gross margins, and effective expense management has driven improvement in pretax and net margins. Our non-GAAP EPS from continuing operations grew 39% to $0.46 from $0.33 in Q3 of last year.

Our GAAP EPS from continuing operations were $0.30 due to specified items. Our totaled specified items total $322 million for the quarter; of this $107 million is related to our productivity initiative, which we are well on a way to delivering as Jim mentioned. The full reconciliation of GAAP to non-GAAP EPS adjusted for ConvaTec is posted on our website.

Let me now turn to guidance. We are revising our full year 2008 GAAP and non-GAAP guidance. Our non-GAAP EPS guidance is now 165 to 170 with the bias towards the top-end of the range based on the overall strength of the business. As Jim mentioned, we are also confirming our three year minimum 2008 to 2010 15% EPS compound annual growth rate on a non-GAAP basis; and again, this is without rebasing 2007 for ConvaTec.

So in summary, our third quarter underlying operating performance was very strong. We saw a double-digit sales and non-GAAP earnings growth along with improved gross on pretax margins. The company has entered into period, where we expect continued growth, improved operating leverage based on product mix and our productivity initiative.

John Elicker - Investor Relations

Great Thanks, Jean-Marc and Jim for the comments. And now, I think we are ready to go to questions. I would just remind everybody then in addition to Jim and Jean-Marc, both Lamberto and Elliott are here to take any questions you might have. Nova?

Question And Answer


Thank you. [Operator Instructions]. Okay guys, first question from Tim Anderson, with Sanford Bernstein.

Tim Anderson - Sanford C. Bernstein

Thank you. Couple of questions on the ImClone 11F8 product; what are the next steps to ascertain whether Bristol's rights to that? And regardless of who has right, can you talk about the likelihood or maybe lack their 11F8 will really are stable really make it and ERBITUX given the long lead time that ERBITUX has and a lot more clinical data supporting it and that sort of thing. And then SPRYCEL, can you update us on some of the timelines of important data flow whether that's in CNO like the head to head studied versus... or in solid tumors and in other areas that you are excited about?

James M. Cornelius - Chairman and Chief Executive Officer

Let me start by addressing the business side. John and I have already talked there is obvious disagreement as to the ownership rights of 11F8. By contract, that should go to arbitration if we are not able to settle that. He and I have agreed if they are successful in closing, there will be a topic we'll discuss as soon as the closing happens.

On the clinical side, Elliott?

Elliott Sigal, M.D., Ph.D. - Executive Vice President, Chief Scientific Officer and President, R&D

Yes, Tim, you asked about... well, let me take SPRYCEL first, and then we'll get back to ERBITUX. With regard to SPRYCEL clinical events, we did present at ASCO Phase II on prostate cancer. We were particularly excited about that and we have initiated our Phase III program. This study is being initiated with the target filing in the 2012-2013 time period.

We have at ASH two presentations that we are planning for. One is two year data for the 100 milligram dose in clinic phase CML, and two year data in advanced CML. We possibly will see first line CML data from the cooperative study being coordinated by MD Anderson in ASH in 2009. We are progressing our first line study in CML against CELEVEC [ph]; that is going well and we hope to see data in 2010. The prostate data will be available in the next six months and will make decision with regard to Phase III in that regard.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Yes, I may take the 11F8 question; it's Lamberto. We are as how to develop 11F8. We have a team that is developing a plan and have been in discussion... interaction with ImClone on that.

There are opportunities to develop 11F8, not necessarily cannibalize totally ERBITUX with 11F8. Having said that, our thought was... our key thought was nowadays is on ERBITUX. We are very confident that ERBITUX has a potential to be delivered. The result of this quarter showed a slight decline, very slight decline versus last year. But we believe that in colorectal cancer the chaos, confusion that is in the marketplace right now, might well develop into an opportunity for this product.

There is additional data that is becoming available and published in these very days. So, we need to clarify the confusion that exists especially in the community oncologists. We also believe that there are additional important improvements of the label that might come if the FDA approves them. And I am speaking about the additional indication in head a neck. And there is a large program, as you know, for starting and continuing to develop ERBITUX in other solid tumor indication.

So, I our focus is on ERBITUX. We are confident that we will continue to develop and successfully this product. And at the same time, we are profiling 11F8in the most adequate way, and we will continue to discuss with ImClone or at a later date we've really on how to do it in the most effective way.

John Elicker - Investor Relations

Thanks Tim. Can we go to next question, Nova, please?


Yes. We'll go next to David Risinger with Merrill Lynch.

David Risinger - Merrill Lynch

Yes, thank you very much. I have a couple of questions. First, following up to that response that you offered, could you please explain why you think community oncologists are confused? And is that to suggest that the sequential trend that we should expect in coming months for ERBITUX maybe worse than expected since I don't think that you were talking about them being confused previously? And second: in terms of the nutritional business, I was hoping that you could comment on the revenue growth and earnings growth outlooks. Thank you.

James M. Cornelius - Chairman and Chief Executive Officer

I cannot what exactly what is going happen. But I believe that the recent publication on K-ras is going to be very useful to community oncology and other decision makers in understanding the importance of K-ras. There is 60% of their patients that are wild type K-ras. And those patients are going to benefit from the use of ERBITUX in colorectal cancer. So obviously we... there is a disalignment between the knowledge that is available and what we have in the labels. So there is a little bit of a disalignment between what we can say and promote and what is known to a broader community. And this is where I believe we must work within the boundaries of the limitation of the label, but where some education will be possible also from other parties. And again, I am confident that this K-ras is an opportunity, and it's not an opportunity years from now is a short term opportunity.

Elliott Sigal, M.D., Ph.D. - Executive Vice President, Chief Scientific Officer and President, R&D

Yes David, this is Elliott. There is a very significant and positive medical opportunity here. I think the commercial impact of the data does depend on the rate and the speed that the K-ras data is fully understood in the marketplace as well as adopted in terms of K-ras testing broadly outside special centers and out into the community. This may happen relatively fast because this is exciting informative data that does identify responders and about 60% have the K-ras characterization that suggests that these are the patients that will respond to ERBITUX. And since ERBITUX has only a mid teen share in second line colorectal cancer and a 30-35% share in later lines of therapy, and a much smaller maybe mid digit level uptake in first line. We do expect even though there might be a short-term flattening of use in certain areas even within label, there should be increased interest in K-ras characterization and considering ERBITUX when other therapies are failing. So I see a big opportunity medically in the second line therapy.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Just a comment on Mead Johnson and just to remind you. Mead Johnson is a nutrition business. It has excellent brands, very strong market shares in very well of the markets. So it's a very defendable business proposition. So when it comes to the outlook, it's a positive one.

Let me just answer in two ways. I think that if you look at our U.S. business and if you look at our performance in Q3, you'll see a decline. And that's very much driven by one off items between the quarter this year and quarter last year. So, we would characterize the growth of our U.S. business to be stable for the first nine months of the year. And it's in area focus on how we can continue the strength of that business.

Importantly a bigger part of our sales contribution comes from outside the United States. Markets, where we are number one, number two in places like China, Thailand, Philippines, and Mexico, where we've demonstrated a very solid strong double digit growth, so a good outlook for the overall baby food total of business.

John Elicker - Investor Relations

Thanks, David. Nova, next question please.


Next we'll go to Chris Schott with JPMorgan.

Chris Schott - JPMorgan

Great, thank you. Just two questions; first, can you update us on the Ballet [ph] asset filing? Have you completed the Phase III at this point or so are you moving forward with the filing and just a reminder of when we could potentially see data on that?

And then second with the regard to sales of PLAVIX in Germany. What type of market share have you been seeing for the alternative platform watched earlier this year, and do you have expectations for generic launches in other European markets in the near future? Thanks.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Okay, let me take the PLAVIX Germany question. Just as a reminder, there was an approval of different sold of clopidogrel in Germany. And despite we stronger believe as we have a legal case demonstrating that that approval should not have happened at that moment. They are in the market and we continue to fight our legal battle and we, I mean Bristol-Myers Squibb in kind of... [ph]. We are also continuing to support PLAVIX and Iscover. Iscover is a brand that we used for clopidogrel. We, Bristol-Myers Squibb use the clopidogrel in Germany, and we are continuing to focus on the strength of our clinical data. And we consider this asset an asset that needs to be supported and can be supported for more time. The generic... two generic or I don't know if you can call them generic; the two companies that are marketing a different sort of clopidogrel in Germany have less than 20% market share as far as I know. And as a reminder, their label does not include all indications that we have for clopidogrel vital state for PLAVIX and Iscover in Germany.

James M. Cornelius - Chairman and Chief Executive Officer

Yes, Chris, with regard to Ballet assets, this is our agent direct preventing a rejection of transplanted organ. It's operating on a similar mechanism to ORENCIO, but has distinct characteristics for which we think are ideal for perusing transplant. We are currently accessing data from our Phase III trials and will meet with the health authorities shortly to discuss our plans for submission.

Data will be presented on our two Phase III trials in May of '09 at the American Transplant Congress and submission is target for the first half at 2009. I would like to remind everybody, we think this is an area of significant unmet medical need although the calciner inhibitors originally advanced the state of the art. There is still a concern about the effect of that class of immune suppression. On renal function long-term, we are doing two studies therefore, one study in renal transplant population of broad criteria donors in which the patients maybe receiving their first or repeated transplant and maybe receiving either a living related donor or a decrease donor kidney.

But the second study is in renal transplant patients of extended criteria donors in which patients are receiving kidneys at higher risks for delayed or declining renal function. We are going head to head with the standard of care with cyclosporine, and the end points are designed to assess efficacy to the end points of death and graft loss as well as acute rejection. And the goal is to demonstrate superior renal protection by measuring directly renal function. And again that data will be presented in May of 2009.

John Elicker - Investor Relations

Thanks, Chris. Next question, Nova, please.


Yes. We'll go next to Roopesh Patel with UBS.

Roopesh Patel - UBS

Thanks for taking my question. My question is for Jim. I was wondering if you could please share with us your current thoughts on the business development and acquisition landscape. In light of the current equity and credit market environment, I am curious about the type and volume of deals that are coming your away. And given these I'm wondering if the company's focus may shift towards more advanced stage opportunities rather than early stage opportunities and also whether its appetite or near term earnings dilution is present or not? Thanks.

James M. Cornelius - Chairman and Chief Executive Officer

Okay.So, I guess question is about size and timing of our string of pearl strategy. After being announced, we made two acquisitions in two significant licensing deals within the last year. As Jean-Marc pointed out and we have a very strong cash position, which puts us in an excellent position to pursue those. Our preliminary studies show that these biotech companies have dropped nearly 40% in terms of their market capitalization and in a sense it's a buyers market.

On the other hand, most of our competitors are also looking at some of these same companies. So I think the key will be that are very active and very skilled business development team, link up those companies in our strategy and based on our result for the last 12 months. Other than ImClone, I am very confident that we can continue that strategy at a reasonable cost.

I want to reemphasize, we are not going to do this at any price. And if there is physical discipline in terms of return on investment as we evaluate each one of those. So we've spent significant time, have a long list of companies, compounds, technologies that we'd like to acquire over the next of couple of years, and I am convinced we'll do it.

Elliott, you want to add anything there?

Elliott Sigal, M.D., Ph.D. - Executive Vice President, Chief Scientific Officer and President, R&D

Yes, Jim. Actually the strategic transaction team under Jeremy Levin is quite energized by the opportunities that are out there. We are applying very specific rigorous criteria to the science as well as to the financials. We do have a focus on late stage pipeline opportunities and accretive transaction where possible. So we have two goals to that team as Jean-Marc has said many times. We look at the objective to raise the floor in '013... '012 and '013 as well as to increase the rebound of earnings that we expect from pipeline deliveries. So team focuses on opportunities that will lead to Phase III assets in the '011, '012 time period and where possible and we are looking at earnings contribution in those critical areas that we are pursuing both types of transactions.

John Elicker - Investor Relations

Thanks Roopesh. Can we get the next question, Nova, please?


We'll go to John Boris with Citi.

John Boris - Citigroup

Thanks for taking questions. First question just has to do with your high dose PLAVIX trial, the current trial. Really just to get an update on I think you indicated on the last call that you were supplementing the trial with some additional patients. So just timing for when that might complete and when we might see results from.

For Jean-Marc on cash flow: any thoughts on additional development on improving working capital? And then on ABILIFY, exceptional growth in the quarter; can you just help us understand the elements of that growth? You believe it's sustainable, Lamberto, and what percentage of it might becoming from the resistant depression versus bipolar and just to get any indication that you have in the label. Thanks.

Jean-Marc Huet - Senior Vice President and Chief Financial Officer

Just on working capital John, I think this is something that we are looking at a much closer than we did at the beginning of the year, and given the fact we have certain individual including myself who have not grown up in the pharmaceutical industry. As you look at working capital and cash flow, we see within the pharmaceutical industry a lot of upside, and I think that's now increased focus.

If I just sort of from a qualitative perspective look at the three drivers behind working capital, inventory, receivables, and payables, I think that in the area of payables and receivables, there is a lot of scope for opportunities. Inventories as well, but I would rank them payables, receivables, as well as inventories. And again without saying the obvious, given the high level of gross margins historically the pharmaceutical companies had that is just been less focused on cash flow and specifically working capital. So you'll be hearing more from us about this topic in the future.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Let me speak about ABILIFY. As you can imagine, we are very pleased of our results with ABILIFY in both the U.S. and EU. The growth of ABILIFY and strong performance in the U.S. is driven by many things. I would say that obviously the availability of strong clinical data across all the indications that we have is very important.

I think that the strong execution of sales force and all related functions is also very important. We have redeployed our sales force in preparation of the major depressive disorder launch. And by redeploying that sales force, which is a good sales force, we managed to increase our target by 15,000 doctors including 8,000 plus primary care physicians, who prescribe products or of that type.

And on top of that, we reached an agreement with our partner Otsuka to use some of their reps to reach an additional target of primary care physicians. So a good work on the sales force and good work by our sales force. We have increased in the U.S. our DTC efforts. We have just launched our first DTC campaign in major depressive disorder. You will see it on television in the very days, and we continue to invest behind the DTC of bipolar disease indications.

So it is a combination of things that make us believe that what is happening with ABILIFY in the U.S. will continue to make us happy. So we have two-third of our sales growth coming now from bipolar and MDD and therefore it's not just the MDD, it's a broader growth of the product. In Europe, we have the bipolar indication that is pretty new. We are very excited by it. And then again we have groups of sales of 43% versus prior year in Europe. And we see markets indicate by doctor increase their intention to prescribe an interest and awareness of interest in and awareness of ABILIFY is growing throughout the European Union.

Elliott Sigal, M.D., Ph.D. - Executive Vice President, Chief Scientific Officer and President, R&D

John, this is Elliott to address your question on the progress of the current trial. As you know, there is a great deal of medical interest in and clinical practice suggesting that the earlier administration of an coagulation maybe beneficial and increasing to those is suggested by some early Phase II trial. So the current trial is comparing the 300 milligram loading dose to the 600 milligram loading dose, and allowing for it to be administered earlier as it's done in clinical practice then on the table. And that trial is progressing.

We have increased the enrolment to insure to steady power and we expect to present those result by the end of the first quarter of 2009. I mean the specific indication that current addresses we have seen stabilization of the number of time procedure in the U.S. So after the decline of previous year, now stent procedures has stabilized even though our growth, the growth of PLAVIX is coming mostly from the other indication, PAD and neuroscience indication. But we still have an important contribution from that 40% indication.

John Elicker - Investor Relations

Thanks for the questions John. Can we go to next one, Nova, please?


Yes, we'll go to Seamus Fernandez with Leerink Swann.

Seamus Fernandez - Leerink Swann, LLC

Thanks very much. Can you hear me?

Unidentified Company Representative


Unidentified Company Representative


Seamus Fernandez - Leerink Swann, LLC

Okay, great. So just a couple of questions; wanted to know if you can give us a little bit of an update on other tumor type with regard to K-ras that you'd see just occurring most frequently and if there is any kind of histological predictor related to that. And then separately in your in late 2007 when you provided guidance, you did say that it assumed approval of Prasugrel in mid-2008. How have those assumption changed relative to the guidance and if so how? If not, can you give us your thoughts on the timing of approval and whether you would expect the panel to be convened to discuss the product? Thank you.

Unidentified Company Representative

Yes, before your K-ras question, no, we have looked four markers specifically in lung cancer, and I think K-ras will have much less of an impact. In lung cancer, there is a lot of experimentation and interest in the fish analysis of EGFR. Our scientists have not only contributed to the early science of K-ras, but have identified two additional markers, amphi-regulant and ephi-regulant [ph] that are ligand to the EGFR receptor, and their over excretion may indicate tumors that are under EGFR control, and therefore most amendable to blockade. This has picked our interest in a variety of tumors. So I don't know that the same... I'm sure the same results with regard to the frequency of K-ras will vary from tumor type to tumor type.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Okay, as far as PLAVIX and clopidogrel are concerned as you can imagine, we are following with interest all the news we read about clopidogrel. And we are readjusting our forecast, depending on the interpretation of that news.

What is very important though is that our focus is on PLAVIX. We have been ready for a launch of Prasugrel for quite some time now. We have planned all the things that needed to be done, to be ready. We have a stronger hospital sales force. We have additional efforts even to make or to remind prescribers of the strong clinical data that we have for PLAVIX.

And again, we are ready if they have a launch, but we are focusing mostly on PLAVIX itself. Its multiple indications, which as you know, I remember are well beyond the possible indications that they are going to have in their lead.

Unidentified Company Representative

Maybe just one point to emphasize is, given unknown Prasugrel in the U.S., PLAVIX Europe, you should remember that when it comes to our 15% guidance in 2007 to 2010, we did not rebase 2007 for ConvaTec.

John Elicker - Investor Relations

Seamus, thanks for the questions. And Nova, I think we have time for two more.


Okay, we'll go next to Steve Scala with Cowen.

Steve Scala - Cowen And Company

Thank you. First for Dr. Sigal on Apixaban, would you clarify the filing strategy for the U.S. and the related timeframe? And is DTE likely to be the first filing or will it be ASC?

And secondly does the change in the arrangement with Otsuka on ABILIFY marketing, which was mentioned a couple of minutes ago, in any way, change the timing of termination of the collaboration in November 2012 in the U.S. and the end of 2014 in the EU, in other words does it extend it? Thank you.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Let me start with ABILIFY. ABILIFY is a very important product for us. And is a very important product for Otsuka and therefore we are working with them very intensively, and we meet them additional levels in the company. We discuss strategic things, we discuss operational things, and that is the agreement we reached about the U.S. sales force is one of the operational thing, we have discussed with them successfully. And as I said we are very pleased all the way we work with Otsuka; and at all levels of the company, we have a very fruitful interactions and discussions.

Elliott Sigal, M.D., Ph.D. - Executive Vice President, Chief Scientific Officer and President, R&D

Steve, this is Elliott. The first filing in the U.S. for Apixaban is likely to be a nature of fibrillation and ACS will be sometime perhaps after that. The result that we previously announced with regard to the Phase III result was in deep vein thrombosis the post surgical effort to prevent clot and implications from that. It had to do with the U.S. regulatory strategy, not the ex-U.S. regulatory strategy. And therefore, as we announced we won't be filling next year for DVT prevention in the U.S., which we thought was a small part of the commercial opportunity, however was going to be our first filing and the disappointment therefore is on the timing. We are investigating with our partner Pfizer on a strategy in surgical prevention of clot however everything... the result to that study do not change our view of the performance of the drug or the safety of the drug and the rest of program is not impacted.

I'll remind you that we have a comprehensive program in multiple indications being developed in Apixaban for prevention and treatment of both arterial and Venus thrombosis in acute and chronic study. There are four Phase III programs in prevention of Venus thrombo and we're living two for the prevention of stroke and patients with arterial fibrillation have started as well.

The BTE prevention program not only include surgical patients, but non surgical patients as well. And we have two important arterial fibrillation programs going. One uses Warfarin as the direct competitor; the other uses aspirin in those patients, who can't tolerate or considered ineligible for Warfarin. And our secondary prevention of ACS Phase II study results were reported recently. They have encouraged to us to start our Phase III program in acute coronary syndrome in the first quarter of '09.

John Elicker - Investor Relations

Okay, thanks Steve. And Nova, I think we are ready for our last question.


Our last question comes from Catherine Arnold with Credit Suisse.

Catherine Arnold - Credit Suisse

Thanks a lot. I wanted to ask Jean-Marc about the nutritional business in Asia Pacific, which is obviously big chunk of the business. Could you clarify what percentage of that business is paid for by the government versus the consumer? And then wanted to follow up with some thing Elliott, you said in the last call, which is about ABILIFY autism. You said at that time you were reviewing some Phase III studies in autism, and you'll be making a filing decision on that. I wondered if you could give us an update and also give us little bit more information about what's population within autism to the extent to which this is used today and your thoughts on that business opportunity.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Yes,this is Lamberto. I will take the question on Mead Johnson financial in Asia [ph]. Most what we sell in Asia is paid by individuals. There is no such thing as government contribution to the purchase of income formula imager [ph].

The reminder, we have two-third of our sales for Mead Johnson outside of the U.S. So it's very important contribution of those sales to be overall business of Mead Johnson. And the results that we are seeing in China, the Philippines and some of the Asian countries are very encouraging, and make us believe that our strategy of focusing in those countries, we have a wide range of premium product is the right strategy.

Capital in the medical need in autism [Ph] is to help children and their parents deal with the behavioral issues associated with that. Two phase III studies have been designed with that in mind and they are now completed. I am encouraged by the data. This data will be presented to American Academy of Child and Adolescent Psychiatry in late October, early November. And over the next several months, we plan to be submitting this with our partner Otsuka as an indication for ABILIFY.

John Elicker - Investor Relations

Thanks Catharine and thank you everybody for your questions and your time on the call. Let me just turn it over for some final thoughts to James Cornelius.

James M. Cornelius - Chairman and Chief Executive Officer

Thank you John. I'll be very brief. A great quarter, the best since I have been here; and more importantly our strong financial performance was lead by double digit sales growth. And as you heard during the Q&A, our clinical science is moving steadily forward to a regular progression of the portfolio. And we are making progress in our string of pearl strategy, which is our business development activity.

We are also improving our margins as we continue executing on productivity initiatives, but at the same time for the long-term, we are making the kind of investments we should. We are also targeting completion of our strategy to monetize our non-core assets as I described earlier and invest in the innovative medicines to help patients prevail against serious disease.

Thanks very much for joining us this morning.


Thank you, ladies and gentlemen. Once again, that does conclude today's conference. We thank you for your participation. .

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