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Executives

John Elicker – Senior Vice President, Public Affairs and Investor Relations

Lamberto Andreotti – Chief Executive Officer

Charles Bancroft – Executive Vice President and Chief Financial Officer

Giovanni Caforio – President-U.S. Pharmaceuticals

Béatrice Cazala – Executive Vice President-Commercial Operations

Elliott Sigal – Executive Vice President, Chief Scientific Officer and President-R&D

Analysts

Gregory B. Gilbert – Bank of America/Merrill Lynch

Jami Rubin – Goldman Sachs Group Inc.

Mark Schoenebaum – ISI Group

Tim Anderson – Sanford C. Bernstein & Co., LLC.

Alison Yang – Barclays Capital

Catherine Arnold – Credit Suisse

David R. Risinger – Morgan Stanley & Co. LLC

Seamus Fernandez – Leerink Swann

Christopher Schott – JPMorgan

Andrew S. Baum – Citigroup Global Markets Ltd.

Alex Arfaei – BMO Capital Markets

Bristol-Myers Squibb Co. (BMY) Q4 2012 Earnings Call January 24, 2013 10:30 AM ET

Operator

Good day, and welcome to the Fourth Quarter 2012 Earnings Release Conference Call. This call is being recorded. At this time, I would like to turn the call over to Mr. John Elicker, Senior Vice President, Investor Relations and Public Affairs. Please go ahead, sir.

John E. Elicker

Thank you, Alicia, and good morning everybody. Thanks for joining the call this morning to discuss our Q4 results and 2013 guidance. With me this morning are Lamberto Andreotti, our Chief Executive Officer; and Charlie Bancroft, our Chief Financial Officer. Both Lamberto and Charlie will have prepared remarks. And then joining us for Q&A are Elliott Sigal, our Chief Scientific Officer; Beatrice Cazala, Executive Vice President of Commercial Operations; and Giovanni Caforio, President of U.S. Pharmaceuticals. Again Lamberto and Charlie will have prepared remarks and then Elliot, Beatrice, and Giovanni will be here for Q&A.

Before we get started, I will take care of the legal requirements. During this call, we'll make statements about the company's future plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act. Actual results 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 SEC filings. These forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates as of any subsequent date.

We specifically disclaim any obligation to update forward-looking statements even if our estimates change. We will also discuss non-GAAP financial measures adjusted to exclude certain specified items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available on our website.

Lamberto?

Lamberto Andreotti

Thank you, John. Good morning everyone. Well, we had a strong close to a very important year. In just the last quarter, we grew our in line and new brands by 16% with especially strong performance by ORENCIA, YERVOY, SPRYCEL, ONGLYZA, KOMBIGLYZE, and BARACLUDE.

We made some important clinical advances; most notably with respect to our immuno-oncology and Hepatitis C abscess. And we had several key regulatory successes with the European approval of FORXIGA, and especially important for the company, multiple approval of ELIQUIS, including in the U.S. In fact, these regulatory accomplishments underscored the importance of 2012 as a year of significant transition for Bristol-Myers Squibb, one that brought our portfolio of the future into sharper perspective, and laid the ground work for this year’s focus on our commercial opportunities.

ELIQUIS was the big story of the quarter by gaining back-to-back approvals in Europe, Canada, Japan, the U.S. and South Korea. This differentiated asset has set us up for a strong start to the New Year. Next week along with our partner Pfizer, we will be launching ELIQUIS in the U.S. Our teams have been working together, planning for this day, preparing for our launch. We're ready to move forward and while we have already launched in few markets such as the UK, Germany, and Denmark, we are making similar preparations in the other markets too.

This is an important development for patients and physicians. For the past 60 years Warfarin has been the gold standard for this patient population, but now that has changed. ELIQUIS is the only anticoagulant that demonstrated superior risk reduction versus Warfarin in the three critical outcomes of stroke prevention, major bleeding, and all-cause death in patients with nonvalvular atrial fibrillation.

With respect to diabetes, FORXIGA’s European approval during the fourth quarter has significantly strengthened our franchise and kept an important year for Bristol-Myers Squibb in this space. Central to our expansion in diabetes was our acquisition of Amylin, announced last June, and the announcement of our five-year old partnership with AstraZeneca. Both of these developments have reinforced our leadership with respect to type 2 diabetes and have better positioned us to address the significant unmet medical need that still exists for these patients.

Regarding Amylin, our integration continues to go well. Our cross-trained sales force is already hard at work in the U.S. market, and by the beginning of the second quarter, we should largely assume full commercialization of the two Amylin assets outside the U.S.

As I said before, we also made significant pipeline progress last year including during last quarter. With respect to immuno-oncology PD-1 nivolumab  is already in multiple Phase III trials for lung, renal, and melanoma. We presented important data at ASCO last year and we are looking forward to their read out of the very broad Phase III programs we had initiated. Similarly, elotuzumab for multiple myeloma is also in Phase III trials. We presented some interesting data at ASH in December. We suggested that elotuzumab may be promising for patients with relapsed/refractory multiple myeloma.

With respect to hepatitis C, we continue to advance our portfolio. Japan in particular provides significant opportunity with its 1.5 million patients. We expect to file an all oral regimen in Japan by the end of this year and expect to be in the market next year in 2014. And having presented interesting Phase II data at the AASLD conference in November, we are also expecting to move our triple regimen into Phase III trial in 2014.

So taken together, 2012 was a very important year for Bristol-Myers Squibb, one that embodied our transition to the portfolio of the future, one that reflected the continued leadership of our Company in a range of therapeutic areas, one that sets the stage for sustained, long-term growth.

Going forward, I’m optimistic. 2013 will be a year of clinical advances, launches, commercial execution, investments, all of which will allow us to deliver our full long-term potential.

And with that let me now turn it over to Charlie. Charlie?

Charles A. Bancroft

Thank you, Lamberto. Overall, we had a good fourth-quarter while building a solid foundation for sustained long-term growth. In addition to the important regulatory approvals for ELIQUIS and FORXIGA that Lamberto mentioned, we also saw strong sales growth among our key products as we continue to move toward our portfolio of the future and a more diversified global footprint.

During the fourth quarter, we delivered non-GAAP EPS of $0.47. For the full year, we delivered non-GAAP EPS of $1.99. This includes the dilution due to the acquisition of Amylin in August.

Net sales for the fourth-quarter were $4.2 billion, down 23% compared to the fourth-quarter last year, primarily due to the loss of exclusivity of PLAVIX and AVAPRO/AVALIDE. Price was favorable by 1%, and foreign exchange had a negative 1% impact on sales in the quarter. Excluding PLAVIX and AVAPRO, , global sales grew 13% lead by gains in key brands that are important to our future, YERVOY, ONGLYZA, ORENCIA, and SPRYCEL.

I will review some of the product highlights. YERVOY had a very strong quarter; global sales were $211 million, up 18% sequentially from the third quarter. In less than two full years on the market, YERVOY’sglobal sales topped $700 million for 2012, making YERVOY one of the best oncology launches of the last decade.

In the U.S. we are focused on the efficacy message of YERVOY, shifting the focus of treatment in metastatic melanoma to the potential for long-term survival, and expanding the prescribing base beyond large institutions. Both of these initiatives seem to be gaining traction. U.S. sales rose $141 million in the quarter, up nearly 15% from the third quarter. We are also in the process of fully launching YERVOY in Europe and continue to work with health authorities in other regions to ensure patients have access. We believe there is still ample opportunity for YERVOY to grow.

In diabetes, worldwide sales for the ONGLYZA franchise rose 29% to $198 million during the quarter. The DPP-4 class is becoming more crowded, but we expect ONGLYZA to be competitive in this class, and we expect the class to continue to grow.

In the U.S., we now have the combined strength of the Bristol-Myers Squibb, Amylin, and AstraZeneca diabetes sales forces promoting both ONGLYZA and the exenatide franchises and the launch of KOMBIGLYZE  XR in Europe during the quarter strengthens our competitive position there as well.

We reported $152 million in revenues for BYDUREON and BYETTA. This includes just $5 million in royalties from international markets. We will begin reporting direct sales for exenatide outside the U.S. after completing the transition of commercial responsibilities from Lilly. We expect that to occur by April 1.

The ORENCIA franchise was up 26% in the quarter to $325 million. Full year sales were nearly $1.2 billion. ORENCIA SubQ now accounts for 25% of full year ORENCIA sales in the U.S. and we recently launched SubQ in Europe.

SPRYCEL sales grew 24% to $281 million in the fourth quarter compared to last year and surpassed $1 billion in annual sales for the first time. We continue to see strong growth for SPRYCEL in the U.S. and international markets, with sustained first line adoption in CML and our continued market leadership in second line CML treatment.

ABILIFY sales were up 11% to $819 million; ABILIFY sales during the quarter benefitted from a reduction in the estimated amount of certain managed Medicaid rebates attributed to prior periods. As you think about ABILIFY for 2013, I want to remind you that our share of ABILIFY revenues in the U.S. will be lower in 2013 as we shift from a flat 51.5% to the new tiered revenue structure, which we approximate to be 35% in 2013. Finally, HIV franchise sales were down to 6%. While global sales were $777 million for the fourth quarter and $3 billion for the year, we continue to see increased competition in many markets.

Now, let me highlight a few items from the rest of our P&L. I will focus my remarks on our non-GAAP results. As John mentioned, reconciliations to our GAAP results are available in our press release and on our website. Gross margins were 76.4% during the quarter, up 120 basis points compared to the same period last year. This improvement is mostly attributable to favorable foreign exchange and a one-time benefit from the renegotiation of a supply agreement.

Marketing, selling and administrative expenses were $1.1 billion, down 5% from the same quarter last year. This was driven by no PLAVIX or AVAPRO spend in the quarter and certain one-time expenses incurred in the fourth quarter of 2011. This was somewhat offset by increased investment due to the Amylin acquisition and the launches of new products, including ELIQUIS and FORXIGA.

Our non-GAAP tax rate of 15% during the quarter was driven by two factors; the evolution of our earnings mix and our tax planning initiatives. Regarding mix, PLAVIX has a relatively higher tax rate as compared to the rest of our portfolio. Secondly, in Q4, we restructured some legal entities, which improved our earnings mix. We saw the impact of these changes in Q4 and we expect this impact to be sustained going forward. The Q4 rate does not include the R&D tax credit on risk in January.

Before I turn to our 2013 guidance, I will briefly comment on our capital allocation strategy. We have the balanced approach to capital allocation with business development remaining a top priority. We are also committed to the dividend. In December, we increased the company’s dividend by 3%, demonstrating our confidence in our near and long-term business and our focus on creating value for shareholders. This is the fourth consecutive year that we have increased our dividend.

Turning to guidance; you will see that we have set our 2013 non-GAAP EPS guidance range from $1.78 to $1.88. I will now provide some color on select line items; we expect our gross margin as a percent of sales to be between 72% to 73%, a decrease of approximately 300 basis points compared to last year. This is driven by expected growth for ELIQUIS and diabetes portfolio where we booked our respective partner share and cost of goods sold, causing downward pressure on gross margin.

We project MS&A to be flat and AMP to increase in the high single-digit as we will continue to invest in our growth brands and our portfolio of the future. Remember that, in 2012, we had virtually no spending related to PLAVIX and AVAPRO as we had pulled back on commercial investments in those products in 2011.

Moving into 2013, we are committed to making the right commercial investments in the important new product launches such as ELIQUIS and FORXIGA and we have a full year of investment behind the exenatide franchise. We also need to ensure continued growth of our key brands and we will appropriately invest to optimize our portfolio. While we continue to drive efficiencies throughout our P&L as part of our everyday business, we believe there is a balance between short-term results and building a solid foundation for sustained long-term growth.

Finally, we expect our effective tax rate to be approximately 16%. There are three main reasons for the decrease in the 2013 tax rate. First, 2013 reflects the impact of the R&D tax credit for both 2012 and 2013. This has an impact of about 2.5 percentage points compared with 2012. Second, as I said previously, we have seen an evolution in our earnings mix with PLAVIX having relatively higher tax rate. Lastly, in 2012, we did a structuring of some legal entities, which has a positive impact on earnings mix. We saw the impact of this in Q4, and we expect the impact to be sustained going forward.

In summary and as Lamberto mentioned, 2012 was an important year for the company as we begin to transition to a more diversified portfolio and the potential for longer term growth. and we believe our guidance for 2013 reflects the appropriate investments to help position the company for that longer term growth.

I would now like to turn it over to your questions.

Lamberto Andreotti

Thanks, Charlie. And Alicia, if you could go to questions and if I can just remind everybody that try to keep them focused as we will try to get through as many questions as possible. Alicia?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) We’ll take our first question from Greg Gilbert from Merrill Lynch.

Gregory B. Gilbert – Bank of America/Merrill Lynch

Thanks, I have two, I’ll ask them upfront. Charlie, can you talk a little bit more about the massive tax changes is massive relative to what we – I think the market we are expecting going forward. And make sure we're all on the right place in terms of the ongoing sustainable rates, and perhaps a commercial question on ELIQUIS, J&J talked about strong Tier 2 access (inaudible) also, and even though you have the best profile, is it you or Pfizer’s plan to pay up to ensure that acts as a similar to the competition, or do you have another strategy in that regard? Thanks.

Charles Bancroft

Thanks, Greg, it's Charlie. As I mentioned in my comments, there were three main reasons for the drop in our overall tax rate, let me go through each one and take you through, which ones are sustainable as we think about our rate going forward.

So with regard to the R&D tax credit which we have a double dip in 2013 as we have in 2012 benefit as well, obviously the piece that relates to 2012 is not sustainable going forward. As we talked about PLAVIX, PLAVIX is now out of our business, so that benefit we also see going forward. But remember, earnings mix will always play a role as we think about our tax rate. And then lastly, the restructuring we did, that had a positive impact on our earnings mix, we expect that this impact will be sustainable going forward.

Lamberto Andreotti

As to your question on ELIQUIS, while Giovanni will address specific question, so let me repeat a couple of things about ELIQUIS, and add a few things.

First of all, as I said before, the approval of ELIQUIS last year was a significant accomplishment for us. We had the approvals in all those geographies, U.S., Europe, Japan, Canada, South Korea, all in just over one month’s time. This is an achievement there.

And as I said before, we continue to believe that based on the data from our clinical trials, ELIQUIS has a real differentiated profile, and we were very encouraged to see the approvals in different parts of the world, reflects the risk rate action versus Warfarin in all three important outcomes of strong reduction, nasal bleeding and all because of that. So good clinical data and labels reflecting that clinical data.

This unique and differentiated profile of ELIQUIS will resonate with (inaudible) and will position us well against Warfarin and against all other anticoagulant including the one you mentioned.

We are working to secure pricing in access, and as I said the launch will happen in – is happening in these very weeks, in these very days. So one last point, the quality of the product as I said, there is strength for the label as I said, but there is also the fact that we both Bristol Myers Squibb and Pfizer have a strong experience, and we are leader in the cardiovascular field. All these made me very confident that we’d be very successful. Giovanni, why don’t you continue from here.

Giovanni Caforio

Yes, good morning, this is Giovanni. Just following up on what Lamberto said, we are getting ready for launch in early February. But in fact, access is our number one priority. So our access teams are actually already working there in the field. We’ve scheduled many meetings with all of the key brands both commercial and Medicare and some of those meetings have taken place already. To add what Lamberto said, we believe that the strong profile and the quality of the label will be extremely important to access and we don’t expect significant barriers.

We also have put in place specifically for commercial patients a very good set of programs in place to manage the out-of-pocket cost for patients. And that will be important in the commercial space at the beginning as we improve our access situation and then it will of course, continue to be important going forward. But we are very focused on this and the profile and the label would be very important.

Unidentified Company Representative

Thanks, Greg. Do you have the next question at least here.

Operator

We’ll go next to Jami Rubin from Goldman Sachs.

Jami Rubin – Goldman Sachs Group Inc.

Thank you. And Jonathan or Elliot on the call, but I wanted to ask sort of a big picture question on PD-1, obviously this is going to be an important year for their disclosure of PD-1 read out, so I am wondering if you could just update us on where you are with your Phase III program, what other additional trials do you have planned, how you see the competitive dynamics playing out, you are not alone in this field, there are other companies also pursing PD-1 and PD-L1. And specifically what can we expect to see at ASCO this year? Thanks.

Elliott Sigal

Thank you, Jami. This is Elliott, yes, we continue to advance our leadership position in immuno-oncology in PD-1 as you state clearly as an important part of our platform. We were quite encouraged last year by the day that we presented at the Clinical Oncology Meeting and appeared at The New England Journal of Medicine showing that monotherapy with this patient is clinically active and non-small cell lung cancer metastatic melanoma and renal cell carcinoma with durable responses in most patients and an acceptable and manageable safety profile. We've got – had experienced now in multiple dose levels, and we believe the activity is encouraging because it is significant in heavily pretreated patients. We show some updated results at the end of the year.

So we basically have moved on this data from a Phase 1, Phase II compound into five significant Phase III studies that are all ongoing now. There are two lung studies in second-line squamous and second-line non-squamous our strategy to stratify based on that histology is based on data that we've seen. We are also doing extensive analysis looking for biomarkers, which could be a distinguishing aspect of the program. We have a renal cell carcinoma study in Phase III, and we now have two melanoma studies in Phase III, one in advanced patients post at the ipilimumab and one in untreated patients versus chemotherapy.

Also we have a Phase I combination of study with YERVOY and I think one of the exciting aspects of our program is getting early experience with combinations particularly with different mechanisms to boost the immune system. That will be I think very interesting data that we’ll be able to present hopefully at ASCO this year. At ASCO, we’ll be giving updates of the Phase 1, Phase II in terms of survival data, in terms of biomarkers and all these five Phase III studies will be ongoing.

And we clearly acknowledge that there is competition in this field. We are gratified to be in the position we are in. We are not going to be complacent, and I think it's important to move fast in this area with high-quality molecules that are well characterized with biomarker studies and I would say with combinations that we are in a very good position to administer and to explore.

We do have a PDL-1 mechanism and that's respectable competition from Genentech in Phase I in their program I believe. Our view is, there may be a theoretical advantage to targeting anti-PD-1 because you can cover both the PDL-1 and the PDL-2 ligands. We will have to see whether that that matters. Essentially we had enough information and extensive information on PD-1 to move as we have.

John E. Elicker

Great. Thanks, Elliott, and thanks, Jamie. Can we go to the next question Alicia please?

Operator

Yes sir. We will go next to Mark Schoenebaum from ISI Group.

Mark Schoenebaum – ISI Group

Hi guys. Thanks a lot for taking the questions. Maybe this question is for Charlie on the taxes to push a little bit. So if we just add back the 1.25%, which will be half of the 2013 total R&D tax credit, would it be roughly that 17% to 18% that you advised us to use is sustainable or will be something or might have be something slightly more than that. And then I was wondering if you could maybe give us general thoughts on how we should be thinking about share repurchases in 2013? Thank you.

Charles Bancroft

Okay, thanks, Mark. This is Charlie. Regarding the rate, I think your basic math that you use there is reasonable. To think about it going forward always in the business our size and diversified the global footprint, earnings mix will always play a role in the rate but overall I think that your math certainly makes sense to me. And regarding to the share repurchase program, as you know, we had two authorizations totaling $6 billion. Year-to-date were through $4.2 billion, so we have $1.8 billion remaining on that authorization. As you know, we have to build a – to suspend or utilize our share repurchase program on the discretionary basis.

Lamberto Andreotti

Thanks, Charlie, thanks, Mark. Can go to the next question, Alicia, please.

Operator

We’ll go next to Tim Anderson from Sanford Bernstein.

Tim Anderson – Sanford C. Bernstein & Co., LLC.

Thank you. If I can just go back to tax rates again, presumably all drug companies try to optimize their legal entities to take their tax rate as low as they can, yet your rate is markedly lower than any other companies that I cover at least. And so I’m wondering, why your tax rate might be unique in that regard, and can you explain a little more on the legal entity restructuring and how much Amylin plays into that? If I’m not mistaken, Amylin had a bunch of NOLs and I‘m wondering if that helps to take the rate lower.

And then on ELIQUIS, can you just give us your thoughts about the potential competitor Edoxaban in your long reign planning assumptions for ELIQUIS, or you assuming that Edoxaban will be a viable competitor?

Lamberto Andreotti

Yeah. Let me first talk about the tax rate. In regard to the NOLs for Amylin, we did mention when we purchased Amylin by the NOLs, almost fully when we then basically sold the portion of the business to AstraZeneca, so that worked as a capital gain for us offset by the NOL. So there is no benefit of the Amylin NOLs going forward.

As far as our tax rate vis-à-vis our competitors, I really don’t have the visibility into their earnings mix, their own tax planning strategies, and that’s something that I don’t feel perfect that we talk about in real detail.

Elliott Sigal

Yes, Tim, this is Elliott, and perhaps Giovanni would collaborate some of our joint feeling about this. First of all we’re very happy to be in the position we are globally with the label that we have, and it’s impossible for us to know what profile any compound will have, short of knowing the Phase III data, so (inaudible) is considered a very important compound for us to watch it will clearly depend on their data as to what the opportunities are for that compound. We have been under the belief scientifically, that because the half-life of this drug is similar to both (inaudible) and ELIQUIS, that adhering to what we think we have shown pretty well of a rather stable blood level, and low peak to trough ratio by going VIV with be part of the reason that you’re seeing the differentiated profile with ELIQUIS and very significant reduction risk in stroke.

A very significant decrease of bleeding, which is very important to the practicing community, and for the superiority we’ve seen in All-Cause Death. So I think we need to wait and see and of course, we are prepared for the competition for that once-a-day dose, which I think is going to, now have to meet the bar of superiority in all those three outcomes.

That’s it from my perspective from a commercial prospective, we will have to see data on label, but we are very focused on executing our launch of the data, we have versus warfarin in terms of superiority with throat bleeding and mortality is very, very compelling, and we are focused on our launch and the significant opportunities we have.

Tim Anderson – Sanford C. Bernstein & Co., LLC.

And you may also mention some scenarios about the YERVOY data, which is an interesting element of differentiation of ELIQUIS, right?

Lamberto Andreotti

Yes. Our company did something that was not all that conventional at the time, and I’m very pleased with how it turned out, and that is to look at the unmet medical need of the patients that are not judged to be not suitable for warfarin, which is a size of the AF population, perhaps 40% to 50%, and these patients are often given aspirin. So the (inaudible) study that went head-to-head to aspirin does two things for us, and I don’t think a study like this could now ever be done again, and that is to show the power of efficacy of the agents in its full form. But most importantly, to have a competitor leading, and there is no statistical difference in major bleeding rates between ELIQUIS and an aspirin, and I think that was part of our development plan, it was part of our evaluation with payers and their opinion while we were designing the Phase III, and I think it’s a strong part of our label and competitive position.

John Elicker

Thanks, Tim. And Alicia, can we go to the next question, please?

Operator

We’ll go to Tony Butler from Barclays.

Alison Yang – Barclays Capital

Good morning. this is Alison Yang, asking the question on behalf of Tony. Heading back to the oncology franchise, a couple of questions for YERVOY, can you just ask your current share in the market, and personally secondly relative to sort of some of the small molecules, and also it looks like there may be some additional indications in Phase III wrapping up prostate cancer, chemorefractory prostate cancer. Can you kind of discuss your vision for the other indications from YERVOY? Second question on oncology and elotuzumab, can you discuss sort of the strategy envisioned for multi-myeloma, and also can we expect to see any of the ELIQUIS to refractory data this year? Thank you so much. Giovanni, why don’t you start?

Giovanni Caforio

Yeah, this is Giovanni. With respect to our performance with YERVOY and our share, we were very pleased with our performance in Q4 in the U.S. with significant growth versus Q3, and previous year. And as Charlie mentioned before, our share in first-line is we estimate at this point to be above 30% when you look at the total market in the 10% range in BRAF-mutated patients, and clearly significantly higher in the BRAF wild-type population. That the utilization in first-line continues to grow, and it’s really one of the drivers of growth that you see in the fourth quarter versus previous periods.

Béatrice Cazala

Béatrice speaking, we also very pleased with the growth in Europe, this product is now commercially heading for the (inaudible). The adoption has been very good. Our sales trajectory in countries like Germany and UK have been better than all of the oncology launch, I’ll present you, so very satisfactory growth plan.

Obviously the second time to get National Formulary across Europe, we have been very pleased with the progress we have made, and during recent months we have added to all key market, country like Spain. We also got approval from NICE in the UK, and now we have ongoing discussion with the remaining markets, which will conclude in the coming months.

So we’re looking forward on the products we have made and continue building that products and we are aligning with obviously the global strategy working hard on the long-term survival data, and that data is going to be cheap for us to continue growing our market share across the world for that product.

Charles Bancroft

And before I really speak about the new indications, let me add something in. I mean obviously YERVOY is supported by great days, okay, but what is very important to me I’m very proud of the fact that, our analysis shows that YERVOY has been the best oncology launch in the U.S. and Europe over the past 10 years, which show a combination of good product, well developed and good commercial execution.

Unidentified Company Representative

Yes, so to the question of the lifecycle management, which we’re working on very hard for YERVOY, we do have Phase III trials and multiple indications including adjuvant melanoma, two trials in prostate cancer and you mentioned, yes, one of them should have data internally at BMS in the first half of the year and hopefully we will find a way to present that this year at a conference, and the one that will be coming due first is the Phase III trial in castrate resistant post-docetaxel prostate cancer and these are patients who have progressed on that taxane.

It was initiated in 2009, we project to have the number of events to analyze and present this year. The other trial will take longer. We have two trials also in lung cancer, one in non-small cell lung cancer, one in small cell lung cancer. We are doing combination therapy with other chemotherapy agents and we are actively exploring studies in other tumor types with the National Cancer Institute.

With regard to your question on elotuzumab, this too is a form of immunotherapy using a different non-T-cell based mechanism and we've been very excited about the updates we get from the Phase II study. One such update was presented last December at the ASH meeting and these are patients that have relapsed or refractory multiple myeloma and are being treated with the combination of lenalidomide and low-dose dexamethasone with and without the additional elotuzumab. That eloquent study we won't have data for this year, it’s a Phase III study now, and we are also looking at earlier lines of therapy and that will take a little longer.

Lamberto Andreotti

Thanks, Alicia. Can we go to the next question please?

Operator

We’ll go to Catherine Arnold from Credit Suisse.

Catherine Arnold – Credit Suisse

Hello, good morning.

Lamberto Andreotti

We lost you Catherine there for a minute.

Catherine Arnold – Credit Suisse

Okay. I wanted to ask you about the Amylin integration and how we should be interpreting the sales trajectory of that franchise. For instance 2014 you'll be launching the dual chamber pen, and I'm wondering as we look at your results for U.S. this year, should we be thinking about the sales trajectory having another very important inflection point such that the sales curve is really probably not completely visible and projectable and so we see the trend because of the convenience. And then also with this transitions happening in Europe, I think you guys takes full control in the second quarter, but I'm wondering how we should be thinking about interpreting the ex-U.S. sales once you start booking them additionally. So Alan could you elaborate that would be great?

Unidentified Corporate Participant

Okay, Catherine, good morning. Let me start here with a couple of comments about our diabetes franchise and let me reviewing a little bit why we bought Amylin and why we expanded our AstraZeneca partnership. And then Giovanni and Béatrice will give specific comments on the Amylin products and what we are planning to do with that.

In the morning I feel good, I feel good, I feel good, in fact, I feel good about also our diabetes franchise. We have now – we have strong diversified comprehensive franchise with – since we are the only company with three novel classes of medications. On ONGLYZA component, we have FORXIGA that has moved into Europe, and I was very pleased to see that Europeans recognized the need of additional agents when they approved FORXIGA, and I was pleased to see that they included this additional agent product like FORXIGA with an insulin-dependent mechanism. And then we bought Amylin, which gives us the third leg as GLP-1 leg in our franchise. So, we have a good portfolio, diversified portfolio and with the portfolio and not only focusing on glycemic control within diabetes but we are also looking at CT protection. So I’m sure that we are all following the fact that we have [CD] outcome programs in place for (inaudible) product.

So the Amylin acquisition made a lot of sense to us to make this program more complete and we start seeing first indicators of how we are doing with the product in the market. Long plan is to what Giovanni is going to elaborate on as far as the Amylin products are concerned.

Giovanni Caforio

Yes, Catherine. This is Giovanni. So from a U.S. perspective, as we mentioned before in Q4, we have virtually completed the integration of the teams in the U.S. with the Amylin AstraZeneca. We now have full integrated sales, marketing and medical teams that are promoting the entire portfolio. When we started working on the integration we clearly articulated three objectives for 2013 for the GLP-1 franchise. The first one was to increase and improve access. The second one was to have a competitive share of voice and the third one important in order to enable growth was to broaden the prescriber base.

And we made good progress in these areas, I will give you an example about access when beginning January 1 at Aetna, we now with BYDUREON  have a preferred position in both the commercial and Medicare spaces which we think is very, very important.

As we think about GLP-1s, there clearly is opportunity for significant growth in the market given the availability of a weekly product, the efficacy profile, the reduced nausea of BYDUREON , the product can and will be adopted more broadly in earlier lines of therapy, and we are very focused on that. And obviously the availability of the pen will be later important to continue to fuel the growth of BYDUREON . But overall, we have really good organization in place, we are very focused on executing against the three objectives and optimistic about the performance of that franchise going forward.

Béatrice Cazala

So you were asking also the transfer in international market, Catherine, , so it’s clear that it may take some time in terms of the transfer of marketing authorization and also non-commercial responsibilities, and that is likely to go on for few quarters. However, with our partner AstraZeneca, we are expecting a full control of the commercial operation at the end of the quarter, and we should book sales starting Q2 of 2013. You heard Giovanni mentioning the potential, I think we all agree behind the growth potential of that product. Actually, our teams across the world are very impatient outside of the U.S., to get control of the product, with the mindset of launching those products, BYETTA and BYDUREON . If we need to do that, it is clear that transition period was optimizing the sales of the product. So, the teams are currently being fully trained, and we will be fully operational as of Q2 to take over and grow that franchise in the international market.

Unidentified Company Representative

Thanks Catherine. Alicia can we go to the next question please.

Operator

We’ll go to David Risinger from Morgan Stanley.

David R. Risinger – Morgan Stanley & Co. LLC

Thanks very much. I guess I have two questions, one for Charlie and one for Elliott. Charlie, I was hoping that you could just talk about any 2015 inflections in the tax rate, when ABILIFY and SUSTIVA go generic?. So, I don't know if they are in 2013 being taxed above that corporate average of 16% or below that corporate average of 16% to understand if there is an inflection to anticipate for 2015. And then Elliot, could you just discuss the transition of the PD-L1 development strategy away from cancer and to virology, and then how you expect to develop that product in virology? Thanks very much.

Unidentified Company Representative

Charlie it seems that your good work during 2013 on taxes make if you work a lot of this morning on answering questions.

Charles Bancroft

Thanks David. Without commenting specifically on ABILIFY and SUSTIVA, I do want to point out the differences of those products and the rest of our portfolio actually vis-à-vis PLAVIX, which did have the ability to decrease our rate, given it was higher relative to the rest of our portfolio. PLAVIX we had unique structure with Sanofi, where it was a JV, and we had the minority interest component. So I don’t see that there is going to be a major difference in ABILIFY and SUSTIVA to the rest of our portfolio excluding the PLAVIX component.

David R. Risinger – Morgan Stanley & Co. LLC

Thanks.

Elliott Sigal

David, this is Elliot. What I can say at this time is that, as I mentioned before we had a lot of good reason to move forward in oncology with our anti-PD-1. We have a very valuable asset with our anti-PD-L1. There is a scientific basis for hypothesizing that the PD-1, PD-L1 mechanisms are relevant not only to oncology but to virology, help clear viruses for example, and they perhaps do affect cures in viruses that are sustained chronically.

Now we have studied our PD-1 compound on a small number of patients with HCV. At this time, our plans are to develop PD-1 in oncology, and we’re conducting early works on the utility of PD-L1 in a variety of virologic infections and hopefully we’ll have more to say as time progresses.

John E. Elicker

Thank Dave. Can we go to the next question please Alicia.

Operator

We’ll go to Seamus Fernandez from Leerink Swann.

Seamus Fernandez – Leerink Swann

Hello, thanks very much. So a couple of quick questions; one for Lamberto; Lamberto historically when we kind of talked about the pace and direction of earnings, you had established 2013 as a trough year, are you comfortable reiterating that now with the expectation that 2015 would actually be a higher earning year? And then separately for Charlie; Charlie can you just walk us through a little bit on the gross margin mix going forward given the high volume of partnerships and then the loss of high margin ABILIFY? How should we be thinking about margins post 2015? Thanks a lot.

Lamberto Andreotti

I don’t think we are going to give guidance today about years beyond 2014 and 2015 which you shouldn’t take –you should just take this as we’re giving guidance for 2013. But at the same time, you should have heard and I let me repeat it my comment before that we are seriously investing behind many growth drivers we have in our portfolio and pipeline, and therefore our focus on the entire company is long-term growth while delivering short-term results.

Again, we’re giving that guidance today for 2013 and we are committed to deliver according to that guidance.

Charles Bancroft

Thanks. Let me quickly talk about your question on gross margin. Let me start by saying PLAVIX overall, which is the major product for us in the U.S. had roughly the same gross margin as the total company had. So when we have lost now PLAVIX, which acted as a big stabilizer on our gross margin, we will see more quarter-to-quarter variability and we will also see variability related to as I mentioned in my comments, our partner products, so ELIQUIS in our diabetes franchise where we book the partner share up in cost of goods. Those products have clearly a lower gross margin than the rest of our portfolio, which generally had a slightly higher margin than for example, PLAVIX. So net-net, it will be a combination of our product mix. But I do see in the medium term, more downward pressure on our gross margin related to how we see the growth of our partner products.

John Elicker

Thanks Seamus. Can we go to the next question please, Alicia?

Operator

Let’s go to Chris Schott from JP Morgan.

Christopher Schott – JPMorgan

Great, thanks very much. Just had two questions here, both on diabetes. First on the GLP-1 space, Lilly recently announced a positive top line data for their GLP-1. Can you talk about how you think about the competitive dynamics with another potential once-weekly product coming to market as you are looking to build out this franchise over time?

Second on ONGLYZA, just latest timing on the outcome study and just – can you just remind us, as you are speaking about ONGLYZA, how important is that outcome study in terms of both the ultimate ramp of the product as well as your market share within the DPP-4 class? Thank you.

Giovanni Caforio

This is Giovanni. So let me start by giving a perspective on the potential for BYDUREON, and the growth of the GLP-1 class. So, I would say a couple of things. First of all, it’s important to remember that less than 10% of patients with diabetes in the U.S. today receive a GLP-1 agent at some point during their treatment journey. And given the profile of this product, as I’ve said before, now that we have a weekly agent available, very good efficacy, good tolerability profile, will reduce nausea, there is opportunity for broader penetration into the primary care setting, there is an opportunity for earlier use during the treatment continuum and as a result of that significant opportunity for growth in the class.

So we are very well positioned as an exenatide franchise, because physicians are experienced with the franchise, because we have the only available weekly agent. Today, the efficacy is non-understood, the tolerability as I said before is very good. and as a result of that, we are very well positioned. we believe we will have a pen available – the Dual-Chamber pen available well before other weekly agents are available in the market. And so, we will be able to consolidate our market position ahead of other competitors?

Elliott Sigal

So, Chris, hi. This is Elliott, and I’ll start and in Béatrice will complement to answer your question about the significance of that outcome trial for ONGLYZA, it’s called Savor. It’s the cardiovascular outcome trial. And recall that, in this staying age, we expect most diabetes agents to undergo a cardiovascular outcome trial. And it’s important to do so to show that there is no cardiovascular harm. So one scenario and Béatrice will address this commercially is the significance of showing no cardiovascular harm. This is a 16,500 patient trial. It enrolls very well. We increased the enrollment and we’re able to buy to predict that we’ll have some read out this year, based on the number of events and the way the events are being gathered.

We also took the opportunity however to add the question of could we see a cardiovascular benefit. So this is ONGLYZA on top of standard of care not including GLP-1 or GPP-4s versus standard of care, and it’s powered to show superiority. It can also test for non-inferiority on a composite cardiovascular outcomes and we have enrolled patients so that we can make statements with regard to primary prevention and secondary preventions. This one is the unique aspects of this trial.

And the best case would be to show some advantage of using the GPP-4 beyond incurring no cardiovascular harm, which is suspect in many older compounds. There is two hypotheses; one pre-clinical and one clinical, that makes one want to ask these questions, but this is an experiment.

Pre-clinically, GPP-4 does metabolize a variety of compounds other than GLP-1 and there has been a lot of research done talking about the advantages to Cytacon and other inflammatory processes relevant to the cardiovascular flag. The second of all, not only ONGLYZA, but every GPP-4 that’s been submitted has done meta analysis as a precursor to make sure there is no cardiovascular harm and interestingly all of these show a benefit, but these are just net analysis of short-term trials and it’s just hypothesis generally, the a definitive trial for ONGLYZA, should read out this year, and Béatrice, the two scenarios.

Béatrice Cazala

Obviously commercially until we see the final results. We are planning to hold up what is in those scenarios. So you can understand that if the outcome of the trial in neutral this will strongly confirm the ONGLYZA, if you get in 50 profiles, as you know the GPP-4 clock has continued to grow. Yes less than 80% of the patient in the U.S. and less than 12% of the EU patient are being treated by that category of agents. So that’s up from Savor showing that I think neutral effect on cardiovascular would reinforce the suitability of the product for broad use as a sublime agent to treat, with improving particular ONGLYZA

So knowing in the scenario where we could have demonstrated the clinical meaningful benefit in term of the outcome, we know GPP-4 so far including our label of such a benefit. So given the high rate of that in short, in a population with Type 2 diabetes, these numbers are in a significant increase adoption formula.

In addition, as we move this, categories are very focused on the prevention. This will also appeal towards a broader segment of the physician not just on the cardiology physician, also (inaudible).

John Elicker

Thanks Chris. Alicia we have less than five minutes less. I’m not sure how many questions we’re going to be able to get through but take the next one please.

Operator

We’ll go next to Andrew Baum from Citi. .

Andrew S. Baum – Citigroup Global Markets Ltd.

Good morning, a couple of questions. First to Charlie please, within your revenue and earnings guidance for next year, what have you factored in for European pricing as well as potential relating for the geological in the U.S.? And then secondly, with regard to the CML, obviously the environment is looking increasingly dynamic in terms of treatment both with generically where new competition from imatinib as well as the vast dysfunctional pure trials running. I understand that you’re running that PD-1 combination trial with SPRYCEL. Perhaps you could outline your timing and expectations for that? Thank you.

Lamberto Andreotti

Thanks, Andrew. In regard to European pricing, we don't see any led up some of the measures that we have seen, so we think it will be consistent with what we've seen in 2011 and 2012. In regard to dual eligibles you had a potential risk, but we don't have any impact of dual eligibles in our current guidance.

Giovanni Caforio

Yes, this is Giovanni. Let me just comment on the CML market specifically in the U.S. and the current dynamics. As we mentioned before, we continue to have very strong performance with SPRYCEL. We had very good sequential growth from a demand perspective quarter-on-quarter and versus prior year. That's driven by two things, the profile of SPRYCEL is increasingly valued once-daily long-term survival data, no food restriction and a good tolerability profile. And as a result of that in our commercial execution we have, a good sharing first-line and maintain our leadership in the second line setting.

The most important dynamic is that Gleevec business continues to be eroded, it’s now slightly above 70% of the market in the U.S. down again sequentially every quarter and we continue to be focused on that. We have not seen significant impact from the launch of Bosutinib, which is probably predominantly used in much later lines of therapy, and it’s clearly too early to say whether we are seeing any impact from Ponatinib, but our performance continues to be strong.

We clearly have strength and our focus on access in the U.S., because we understand that over the course of the next few years, we believe that generic will have an impact on the market, but we are very focused on that. Early on, we have good programs in place and again a strong position in the marketplace.

Lamberto Andreotti

Thanks, Andrew. Alicia, I think we have time for one more question.

Operator

We’ll go next to Alex Arfaei from BMO Capital Markets.

Alex Arfaei – BMO Capital Markets

Good morning, thank you for taking my question and congrats on a good quarter. First on ELIQUIS access, would you be able to provide any update on number of lives covered and how you compare versus competitors?

And finally, do you have any updates sort of timeline of the monthly exenatide combination? Thank you.

Giovanni Caforio

This is Giovanni. Let me start from ELIQUIS access. As I said at the beginning, this is our number one area of focus and we are already working on it. It’s clearly too early to give you any figure on lives covered on access, because we are just at the beginning of our meetings with payers. As a reminder, we will launch from a promotion perspective in early February, so we’re very, very close to launch.

As I also said at the beginning, the profile is very strong, the data is very well reflected in a good label, so we don’t expect barriers to accent and we expect to be able to execute our plans effectively.

As you know, it will be faster on the commercial space than Medicaid and Medicare. Our focus will be on working with Medicare plans immediately in order to ensure we have access in 2014, but we also will be discussing the potential for our cycle reviews early on, which could impact Medicare coverage in 2013 primarily in the second half.

Charles Bancroft

Yes and with regard to the representation of BYDUREON, we understand to keep competitive on this now first, once weekly administration of the GLP-1 preparation we have to continue to improve the presentation, the dual chamber, we aim to submit this year should be an improvement on the current presentation. we started the Phase III last year on the once weekly suspension. we are interested in the monthly. We are still working on the technical aspects of it, I have no significant update at this time.

John E. Elicker

Thanks, Alex, and thanks everybody for taking the time on the call this morning for our apologies if we did not get to all of your questions, but we are out of time. I’m going to turn it over to Lamberto for some final comments.

Lamberto Andreotti

Yeah. Thank you for your questions and congratulations to my teams for what they have accomplished in 2012. in fact, 2012 as I said before was an important year for Bristol Myers Squibb, one year that left me feeling very optimistic about our future. It was a year of transition that has set the stage for 2013. 2013 is a year of powerful, strong, successful commercial execution, and for the development of our pipeline. And the year of transition 2012 laid the foundation also for the subsequent years. Thank you very much and have a good day.

Operator

That does conclude today’s conference. we thank you for your participation.

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