Bristol-Myers Squibb Company F4Q08 and Full Year Earnings Call Transcript

| About: Bristol-Myers Squibb (BMY)

Bristol-Myers Squibb Company (NYSE:BMY)

F4Q08 and Full year Earnings Call

January 27, 2009 10:00 am ET


John Elicker -Vice President Investor Relations

James M. Cornelius - Chairman and Chief Executive Officer

Lamberto Andreotti - Chief Operating Officer, Executive Vice President

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

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


John Boris - Citigroup

Jami Rubin - Goldman Sachs

Roopesh Patel - UBS

David Risinger – Bank of America

Tim Anderson – Sanford Bernstein

Barbara Ryan - Deutsche Bank Securities

Steve Scala - Cowen and Company

Seamus Fernandez - Leerink Swann

Chris Schott - J.P. Morgan

Tony Butler - Barclays Capital


Good morning ladies and gentlemen and welcome to today’s Fourth Quarter 2008 Earnings Release Conference Call. (Operator Instructions). This time I would like to turn the call over to Mr. John Elicker, Vice President of Investor Relations. Please go ahead Mr. Elicker.

John Elicker

Good morning everybody and thanks for joining us to review fourth quarter full year results as well as discuss our ’09 guidance. I know there is a lot going on in the markets today, so thanks for taking the time.

With me this morning are Jim Cornelius our Chairman and Chief Executive Officer and Jean-Marc Huet our Chief Financial Officer. Jim and Jean-Marc will have prepared remarks and then also joining us for the question-and-answer period are Lamberto Andreotti our Chief Operating Officer and Elliott Sigal our Chief Scientific Officer. Before I turn the call over to Jim let me just make a few quick legal comments.

During the call we will make statements about the company’s future plans and prospects including statements about our financial position, business strategy, research pipeline concerning product development and product potential that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995.

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 most recent annual report on Form 10-K, periodic reports on 10-Q and current reports on Form 8-K. These documents are available from the SEC and Bristol-Myers Squibb website or from Bristol-Myers Squibb Investor Relations.

In addition any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date.

While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates change. Jim?

James Cornelius

Thanks John, good morning everyone and thank you also for joining us. Earlier today we announced very strong results for the fourth quarter and the full year of 2008. We also shared an earnings per share guidance range for 2009, which will be wider than usual, with major external uncertainties potentially affecting our results. However, our outlook continues to be positive and is tracking our long-range plan.

I am particularly proud of the hard work we have done over the past year to execute our BioPharma strategy. Our results in the quarter and in the year show clearly that our strategy is working in the short term. We are delivering on our promises, reaching our financial goals, advancing our string of pearls strategy at a rapid rate and expanding our productivity initiatives globally. We are executing against our plans with speed and with rigor in all areas. As a result our corporate transformation to a BioPharma leader has been relatively quick and decisive.

Our financials underscore another strong quarter with improving profit margins leading to very solid operating performance capping off an excellent year. In the quarter we had diluted earnings per share from continuing operations of $0.61 on a GAAP basis and $0.46 on a non-GAAP basis. For the year we had diluted earnings per share from continuing operations of $1.59 on a GAAP basis and $1.74 earnings per share on a non-GAAP basis.

Compared to the fourth quarter of last year company net sales were up 4% in the quarter or 8% excluding the negative impact of foreign exchange rates. In the quarter, our important medicines such as Plavix, Abilify, Sustiva, and Baraclude continue to achieve significant sales growth around the world.

During 2008 we continued to fund our rich pipeline at all stages. We submitted Onglyza for diabetes both in the US and Europe. We presented encouraging Phase II data for dapagliflozin, which represents a new mechanism for diabetes, as well as promising Phase II data for Apixaban in acute coronary syndrome. We also shared promising early clinical data on both our gamma-secretase inhibitor for Alzheimer’s disease and our NS5A compound for hepatitis C. Just last week we received approval for SPRYCEL in Japan.

In the coming year, this year, we budgeted monies for further advancement of our portfolio and pipeline. We are preparing for an FDA decision on Onglyza. We are poised to submit our novel biologic [belatasup] for the prevention of rejection in kidney transplant in both the US and Europe this year. In addition we are looking forward to presenting the first Phase III data on dapagliflozin as well as additional Phase III data for Apixaban and [belatasup] at major medical meetings scheduled for this year.

Our string of pearls strategy is building on the opportunities we have developed internally. We are identifying acquisitions and alliances that can amplify and advance our work and key therapeutic areas, particularly those with high unmet medical need such as Alzheimer’s disease, hepatitis C, solid tumors, cardiology and hematologic malignancies. For us it is a dramatically different approach to business development and is helping us in our goal to create a strong Phase III pipeline in the 2010, 2011 timeframe.

Since we started with our acquisition of Adnexisin the fall of 2007 we have had a total of six new pearls. In recent months we added Exelixis in two novel cancer programs and with ZymoGenetics for a novel early stage interferon in the development for the treatment of hepatitis C.

Overall we put our cash to good use with this strategy and we continue to actively seek and evaluate opportunities while we ended the year with $8 billion of cash and equivalents still in the bank.

Again this quarter we managed expenses well in keeping with our promise to become more productive. We have made solid strides resetting our cost base since December of 2007 when we first announced that we would achieve $1.5 billion in cost improvements over three years through our productivity transformation initiative. Based on that success, last July we announced an expansion of the initiative to achieve an additional $1 billion in cost improvements by the end of 2011.

Our productivity goals touch all areas of the company and have become part of the Bristol-Myers Squibb culture. With manufacturing, for example, we continue to focus on our network to reach a reduction of more than 50% by 2011 and that is down from 27 plants in 2006. With these changes and others underway we are becoming the mid-size company that is leaner, more agile, and better able to execute our strategy and adapt quickly to the challenges and opportunities in the external environment.

Based on our strong strategic execution in 2008, I am very confident that we are well positioned for success in 2009.

We are providing guidance that our earnings per share in the range of $1.58 to $1.73 for 2009 measured on a GAAP basis and in the range of $1.85 to $2.00 per share on a non-GAAP basis. We also continue to project that non-GAAP earnings per share from continuing operations will grow at a minimum 15% compounded annual growth rate, that is from the 2007 base, through 2010 and that is without rebasing for ConvaTec. I believe that is one of the best growth rates in the industry.

I am pleased with the overall financial health of the company, especially at a time when so many companies across America are struggling. Our monetization on non-Pharma assets and the reallocation of resources has put us in a great position to execute against our business development strategy.

In summary, we are prepared for another successful year for the company. Our management team is confident that we are in a much better position now, compared to a year ago, to adapt quickly and face the global challenges in 2009 and the coming years. In doing so we will continue to deliver on the commitments we have made both to our shareholders and our patients.

Thanks again for listening today on a busy day. I will now turn the call over to Jean-Marc for some color on the details in the financials.

Jean-Marc Huet

Thank you very much Jim. I will first review the Q4 results and the 2009 guidance before turning to questions. Let me start with revenues.

Our total Q4 sales form continuing operations were up 4%, or at a very healthy 8% excluding foreign exchange. Sales for the quarter included a -4% due to foreign exchange, but a +5% from price and 3% from the increase in volumes. When it comes to full 2008 our sales were up 13% or a good double-digit growth of 11% excluding foreign exchange.

Q4 Pharma sales were up 4% or 8% excluding foreign exchange. This was broad-based growth that we was across the whole portfolio driven by Plavix, Abilify, our virology business, as well as our newer products.

Let me start with our CV met business. Our US Plavix sales were up 11% for the quarter. This is true sales growth as there is no impact from Apotex. In particular we are seeing very good growth in new patient starts in PAD.

Turning to neuroscience, Abilify was up 31% and 36% in the US. We witnessed a 31% growth in US prescription trends which is approximately 5x the antipsychotic market growth. This reflects our execution against the opportunities in bipolar and the new major depressive disorder indication which has been supported by a strong DTC campaign in the second half of last year.

Growth in Europe was supported by the bipolar indication which was launched in mid-2008.

Now I will turn to virology. Reyataz decreased 1% globally, although trends in both the US and Europe remain strong. US prescription trends grew at +14% in Q4 although US sales were only 4% due to some inventory work down in Q4 2008.

Our International business is also strong, but was somewhat negatively impacted due to foreign exchange.

Sustiva franchise sales were up 15% globally behind the strong performance of Atripla. Baraclude sales were at $153 million up 55% with over $100 million outside the United States.

Now I will turn to immunology. Orencia sales were at just south of $130 million as we continue to make good progress in being the first line biologic of choice in the US.

Lastly, oncology. Erbitux sales were flat at $182 million compared to Q3. This was mostly due to lower sales in later lines of treatment for colorectal cancer. We do expect this market to be a growth driver long term, as oncologists are able to identify those patients most likely to benefit based on KRAS testing. Global Sprycel sales were at $86 million with continued growth in both the US and Europe. Finally with Ixempra launched in the US last year generated sales of $25 million.

Sales from Mead Johnson, our nutrition business which represents approximately 13% of company sales, increased 6% or again 11% excluding foreign exchange to $707 million.

In summary, we had high quality revenue growth, be it for the quarter or for the year, in each business and geography. The US pharmaceuticals business was particularly strong at +13%.

Let me now turn to expenses: Excluding specified items, gross margin increased by 310 basis points to 71.8% compared to the fourth quarter in 2007. Favorable mix in the Pharma business, manufacturing cost improvements, and some non-recurring costs that took place in Q4 ’07 were only partially offset by inflation. Excluding specified items again, full year IE for 2008 gross margins were up 150 basis points to 70.2%.

If you look at the gross margins, again excluding specified items for the pharmaceutical business, they were up 170 basis points at 71.8%. Mead Johnson was stable at 62.7% down approximately 50 basis points from last year. So, we had a very good growth of gross margins be it in the quarter or for the year.

Now turning to other cost items: Again excluding specified items marketing, selling and administration was down 3% or roughly flat if you take FX out of the equation. Importantly G&A was down 6% or 2% excluding foreign exchange. Advertising and promotion was down 3% or roughly flat for the quarter if you exclude FX.

Turning to R&D: Excluding specified items, this was down 2% to $870 million, or roughly flat excluding exchange. Full year R&D was up 5%. This is significant, as productivity has enabled us to fully fund R&D and integrate the business development opportunities that took place during 2008.

Now turning to our effective tax rate, which from continuing operations before minority interest and income taxes and excluding specified items was at 16.5%. This lower rate reflects the R& tax credit which we took in the fourth quarter of last year and a sooner than expected reserve release. The full year rate was 22.3%.

Our financial condition has improved in the quarter as our cash and cash equivalents increased to approximately $8 billion as a result of firstly strong operating cash flows, but also the proceeds from the ImClone transaction. A significant majority of this cash is on shore and remains invested in Treasury and Treasury Backed Securities, reflecting a conservative investment policy that we initiated earlier in 2008.

So, today we have a net cash position of $1.5 billion versus a net debt position of $4 billion where we were at this time last year. We also expect to receive proceeds from the proposed 10% to 20% IP of Mead Johnson in the first half of 2009 and we also, importantly, announced a working capital initiative during the quarter with the goal of improving cash flows by approximately $1 billion by the end of 2010.

While we recognize the need to maintain a strong balance sheet we are also in a very strong position to continue pursuing business development opportunities.

Let me now give you a quick update on auction rate securities:

During the quarter we sold some of the assets and we reduced the carrying value of some as well. As a result the original carrying value of $811 million at the end of 2007 has now been reduced to under $100 million, representing interest in insurance securitizations.

In general, very strong sales, excluding FX, improved gross margins, and effective expense management has driven improvement in pre-tax as well as net margins.

Non-GAAP EPS from continuing operations grew by 53% to $0.46 from $0.30 in Q4 of 2007. Our GAAP EPS from continuing operations was at $0.61 as the gain from the ImClone transaction more than offset other specified items. The full reconciliation of GAAP to non-GAAP EPS adjusted for ConvaTec is posted on our website.

Now let me turn to guidance. We are issuing full year 2009 GAAP and non-GAAP guidance. Our non-GAAP EPS guidance is $1.85 to $2.00. As Jim mentioned, we are also confirming our three year minimum 2008 to 2010 15% EPS compound annual growth on a non-GAAP basis and that is without rebasing for ConvaTec in 2007.

Let me just go through some highlights when it comes to our 2009 non-GAAP guidance.

First our revenue growth will be in the low single-digit range. This assumes FX rates similar to those that we saw in Q4 and 2008. Importantly without FX our revenue would be up in the mid to high single digit level for 2009.

Secondly, we expect gross margins to improve slightly based on mix as well as continued productivity improvements. A&P should increase in the low to mid single digits as we continue to invest in the business and we continue to invest behind and potential new product launches in ’09.

SG&A should be down in the low to mid single digits driven particularly by productivity. Again, when it comes to investments R&D should be up in the mid single digit range.

Lastly, we expect our effective tax rate to be approximately 24%.

As we exit 2008 we are very pleased with the operating performance of the business and the outlook for 2009. However, given some of the challenges facing the industry and potentially Bristol-Myers, I believe we have been appropriately balanced in issuing our 2009 guidance. I do expect that we will update our guidance as the year progresses. As such, our guidance range acknowledges some of the challenges facing our business and industry in ’09 such as potential new competitions, potentially from Plavix and Abilify, takes into account currency fluctuations and the overall economic situation and the potential impact that may have on our business.

In summary, our fourth quarter underlying operating performance was very strong. We saw solid sales growth, improved gross and pre-tax margins, resulting in a 53% increase in non-GAAP earnings per share. The company continues to be focused on execution against our strategy and continues to deliver growth and improved operating leverage based on product mix and our productivity initiatives. Thank you.

John Elicker

Thanks Jean-Marc and Jim. I think we are ready to go to questions now.

Question-and-Answer Session


(Operator Instructions) Your first question comes from John Boris with Citigroup.

John Boris - Citigroup

My first question is for Elliott. Yesterday there was an early communication from the FDA on a safety review on clopidagril, most notably on patients that are poor metabolizers and on a drug interaction with proton pump inhibitors. Is this something you are anticipating that could end up in your label before you complete these additional clinical trials, or will the FDA wait until you conduct those clinical trials before there is any change to the label?

Secondly, also related to Plavix, can we just get an update on the current OASIS 7 trial? Enrollment and when we might see final results on that.

Then I have a question for Jean-Marc on working capital. Can you provide a little additional color on how you plan on getting the billion out by 2010 and the timing of how you see that billion coming.

Elliott Sigal M.D., Ph.D

Yes, the FDA made a statement yesterday. We are working very closely with not only the FDA, but the health care authorities around the world, to ensure that our advice continues on Plavix to use this important medicine in a safe and effective way. I can’t comment, at this time, on what labeling changes will occur. We are very interested in adding information that would help both physicians and patients receive appropriate guidance on the use of the drug. We are committed to the safe and effective use of Plavix.

I will say that the variability of response of any drug is certainly a phenomenon that resides with any drug. It has been very complex to examine this for clopidogrel and recent publications have focused our attention on new science with regard to variability of Plavix that may be linked to certain drug interactions like the proton pump inhibitors and also to specific genetic variation. Some of the information has been contradictory and so we are working closely with the FDA and other authorities to review this issue and provide more data. We are looking at ongoing studies, analyses of completed studies, and select new studies to further define the metabolism of the drug and the effect of the interaction with PPIs, the PK and PD is influenced by genetic variation and different dosing regimens.

I think the most important thing that we can state at this time, that has been stated by the FDA, that health care providers should continue to prescribe and patients should continue to take Plavix as directed, because it has demonstrated benefits in preventing blood clots that could lead to heart attacks or strokes and they should reevaluate the need or the continued use for a PPI or alternative medicines. Within a matter of months we hope to have more data with regard to the PKPD establishing whether or not there is an interaction or, more importantly, how to take concomitant medicines with Plavix.

Lamberto Andreotti

Maybe I can add something from a commercial point of view. The information on possible interaction with proton pump inhibitors has been out for some time now and we have not seen any significant commercial impact. As of today we are making the communications from the FDA available to all our people and we will allow them to address questions that might come from doctors and we will allow them, if questions are asked, to confirm that the FDA mentions the fact that clopidogrel has demonstrated benefits in preventing blood clots that could lead to a heart attack or a stroke and the FDA says the health care providers should reevaluate the need for starting or continuing treatment with proton pump inhibitors.

In the FDA communication, it also indicates that there is no evidence that other drugs that reduce stomach acid, such as H2 blockers or antacids, interfere with the antiplatelet activity of clopidogrel.

It seems to me that as of today this communication is more on the management of heart burn, stomach acid, than on the management of Plavix. Obviously our R&D colleagues at BNS and Sanofi will work actively at delivering the data the FDA wants, but we believe that there is enough already that we know and that is in this communication that can make us continue to support Plavix. In fact, Plavix in the fourth quarter, as Jean-Marc was saying, continued to grow and the 11% growth in the US included a 4.4% growth in volumes.

Elliott Sigal M.D., Ph.D

John, you did ask about the OASIS or the current trial, which is our high loading dose trial comparing 300 milligram versus 600 milligram loading dose plus a one week increase maintenance dose with the 600 milligram arm. This is an event driven trial, so although we initially looked forward to having data in the first or second quarter this year, due to a lower than expected event rate in the trial sample size has been increased to maintain study power and we are looking forward to having results by the end of the year.

Lamberto Andreotti

Maybe just turning onto working capital, let me just start broader in terms of cash flow. We are focused on CapEx as well as working capital and have been doing so on an increasing basis over the last six to nine months. This whole topic has received more management focus, we are investing in our systems, and our compensation is in line to be much more focused on these different line items.

Very briefly, when it comes to CapEx we continue to invest in the business. Very specifically our biologics plant in Devons, but we are going to be more closer and accountable to our actual capital expenditures going forward. But, we will continue to invest, which I think is an important point to mention.

On the three pillars of working capital, which will bring us to our billion by the end of 2011 based on 2008 sales, it is receivable, inventories, and procurement. Receivables are receiving a lot of attention within the markets as well as in the regions not only from a cash, but also from a risk management perspective and we have made good progress over the last six months.

Inventories, which is something that we have worked on for a longer period of time, is a line item within working capital which will continue to improve as we continue to rationalize our manufacturing.

Lastly on procurement, we have spent a lot of time from an organizational perspective putting the right people, and we will continue to do so, putting the right people in place to make sure that we take the necessary strides to become best in class on the procurement side.


Your next question comes from Jami Rubin with Goldman Sachs.

Jami Rubin - Goldman Sachs

This is a question for Jim. I was wondering if you saw the Pfizer/Wyeth deal as a one on transaction or the beginning of another wave of industry consolidation.

My second question relates to where Bristol would stand in that sort of strategic realignment. If you could talk about your string of pearls strategy and whether or not you see opportunities for bigger acquisitions that move the needle more than a string of pearls deal.

My last question relates to Plavix in Europe. Jean-marc if you could comment on what you are seeing today with respect to generic Plavix and what your guidance assumes for 2009.

James Cornelius

Well Jami that is a set of very far encompassing questions. As company policy we don’t like to comment on the strategic actions of our competitors. That being said, we read all of the same materials that have been made public and we are working hard to make sure our people focus on Bristol-Myers Squibb strategic plans not the reaction to that announced transaction.

As I said in my prepared remarks, the string of pearls is very much on track with six completed. I believe they have been complimentary or expanded the areas that we felt needed to be fixed for added to and I will turn it over to Elliott to describe where we think we are going in ’09.

Elliott Sigal M.D., Ph.D

Jami, we have been on two tracks with regard to the string of pearls. You have seen evidence, multiple deals as evidence of building the Phase III pipeline of 2011, but we also look at important opportunities that could add both revenue as well as pipeline. With our cash position we are looking continuously for opportunities, should they make sense, to improve the business in stage 2 which is targeted to our phase of the business to raise the floor of earnings after Plavix exclusivity laws, as well as signal the rise of earnings in stage 3.

All of the deals done so far have been done under the guise of building the 2011 Phase III pipeline even stronger than where we are now, to help signal the health in stage 2 and stage 3 and all of these deals are done in that area while building on our core competencies in areas such as hepatitis C, hematology, Alzheimer’s, and CV.

Lamberto Andreotti

I would probably take the Plavix Europe question. I think it has not changed much in weeks as far as Plavix generic competition in Europe is concerned. There is still two generic companies marketing a sort, an alternative sort of Clopidogrel in Germany, launched in August. What they have is a limited indication. They do not have the full label of Plavix in Germany. What we have seen so far is as of December 2008 they had taken approximately 25% of market share units with the pricing of their product at a 20%-30% discount versus Plavix. So it is a less aggressive update curve then you generally see with generic products in Germany.

There are a number of other applications that have been filed in Europe after July15 for approval in Germany and elsewhere of other versions of clopidogrel. There is now news about those additional applications, but in our plans for 2009 we have included some further approvals of some of these applications.

We continue to support Plavix very, very fiercely and aggressively in Germany and elsewhere. We have a good product profile there and the results that we see in Germany are not only due to the fact that generic competition has a varied use label, but to the fact that we are behind Plavix very aggressively.

Jean-Marc Huet

Just to reaffirm what Lamberto says Jami, is when looking at the guidance of $1.85 to $2.00 we have taken the various different scenarios for Plavix Europe in to account when coming up with that range.


Your next question comes from Roopesh Patel with UBS.

Roopesh Patel - UBS

I have a couple of follow up questions on 2009 guidance. I am just curious what it assumes in terms of A) contribution from saxagliptin, B) the extent of benefits from the productivity transformation initiative and C) what would be the potential impact to this guidance from the intended IPO of Mead Johnson Nutritionals’ business in the first half of this year.

Then separately, I have a question on Erbitux. If you could just comment on the expected timing for the lung cancer filing now in the US and whether or not you expect growth out of Erbitux before that comes through.

Jean-Marc Huet

Maybe I will just start off in terms of productivity and I will let Lamberto make mention about saxagliptin and then we can take some of the other questions from you.

Productivity, like Jim said, is something which is really becoming part of our culture, so rather than just single out productivity I think that what you are seeing on each and every line item, we are becoming more productive. So if you take the $2.5 billion of productivity initiatives, I think we mentioned in the press release that just north of $1 billion has actually been identified and executed upon, $2.5 billion has been identified; so will get close to that number as the year goes by. But, we are being productive in all senses of the world and that also permits us to continue to invest and investing will be within R&D, but it is also with respect to saxagliptin, so maybe Lamberto.

Jean-Marc Huet

To saxagliptin I can say that you know we have filed in both the US and in Europe. We are getting ready for a launch, if we get approvals. We are working very, very closely and actively with AstraZeneca to get ready. Safe sources have been put together. A medical support is in place and we are giving attention to being ready for inclusion in formularies’ in both the US and Europe. The strength of the clinical data is known at this point and we believe we have a competitive profile to position the product it the field of diabetes in both the US and Europe. We are ready as soon as Elliott delivers an approval to us.

Jean-Marc Huet

Just on your point on the MJ IPO, again, looking at guidance we do take into account that we will lose between 1-% to 20% of income as a result of the IPO and so that has been factored into our guidance.

Jean-Marc Huet

And obviously for saxagliptin we will not expect a big contribution to earnings per share this year. In fact the expenses relating to the launch of saxagliptin will be very significant in terms of both safe forces and A&Ps. We are building saxagliptin not for 2009 but for a much longer period of time.

James Cornelius

Roopesh, finally you asked about the timing on the resubmission of the lung cancer filing for the indication for Erbitux. I don’t have a firm timeline for you at this time. I do believe this is a manageable issue of comparability between the clinical supplies that came from one source and what we market in the US. We felt that we initially had this answered. We respect the fact that the FDA is asking for more information. We think we can do this in a relatively expeditious way, but we are still talking with the FDA about additional data that will satisfy everybody so that we can move forward with this very important indication and, I believe, very exciting mortality data o this new indication for Erbitux; so we will be able to tell you more as the year progresses.


Your next question comes from David Risinger – Bank of America.

David Risinger – Bank of America

With respect to Reyataz the sequential growth moderated a little bit in the fourth quarter versus the third quarter of ’08. Could you just talk a little bit about the momentum that you see for 2009 for Reyataz?

Second, could you please walk us through your development and launch plans for saxagliptin SUS.

Jean-Marc Huet

David, I would suggest that we don’t consider Q4 as very indicative of the overall performance of Reyataz. There are a number of factors that had negatively affected the reported results of the product. I will mention three of them.

One is foreign exchange. Obviously that is to be seen and might continue. But, the other two are related to the timing of some supplies to our Latin American markets and most important, in the US the very specific depletion of inventories we had in the fourth quarter of 200, inventories were falling in pharmacy levels but we don’t expect it to continue in the following quarters. So if you look at the performance in the US, for the quarter we have 4% reported growth. In fact TRX for total prescriptions grew 14%.

What is happening in the third agent market is the market continues to grow. In fact it has accelerated growth. Our market share with the two agents that we have in that market, so Sustiva triple and Reyataz our market shares have not grown significantly but remain big, steady and we have product number 1 Sustiva triple and product number 2 Reyataz in that market, very far from product number 3 and the others.

The new HIV8 products are mostly used in the late stages of the disease and what we see is their use is add on. Therefore they do not display our products, but they are added on to our products that remain very strong in naïve patients and in early stage patients. The market is growing because there is an added on use of this new agent in the late stages of therapy, but the position of Reyataz and Sustiva triple in the third agent market, those positions remain as they were in the previous quarter.

Erbitux in Europe we are ready to launch. We will be ready to launch, obviously if we get the approval. The timing of the approval might be different than the timing in the US. We have work going on at the regional and local levels with AstraZeneca and what I said before applies also to Europe. We have safe sources in places, we have medical activities continuing in all countries, and we are giving particular attention to this product as far as access is concerned; so we are preparing the pricing and having more stability discussions at the regional and local levels there.


Your next question comes from Tim Anderson with Sanford Bernstein.

Tim Anderson – Sanford Bernstein

Jim, the biggest overhang on your stock is the patent cliff starts in 2012 and I am hoping you can talk about specific levers you can pull to address this period beyond just pushing your own compound through the pipeline and beyond pursuing your string of pearls that will translate into new product flow, only slowly. One lever would seem to be extending the Abilify contract with Otsuka, for example, I am not sure what the others would be, such that you can lessen the P&L hit you otherwise will face in that 2012-2013 timeframe. The string of pearls approach doesn’t seem like it will adequately address this period unless you start doing bigger deals.

James Cornelius

Well Tim you put your finger, obviously, on the big strategic issue. We call it stage 2 in the house. As you know we did everything we could to get stage 1 to a 15% compounded annual growth rate for at least three years and we have just now, meaning late last year, and activities continuing in early this year, to address things that can affect stage 2.

We are not at a stage where we can go public with any of those discussions, so I am confident we are examining the right levers, as you described them.

Finally the string of pearls, there are companies out there that have existing revenue: they are on the target list and we will just have to see how the string of pearls plays out for the remainder of ’09. We are as busy in ’09 and we were in ’08 and I am optimistic that somewhere along the line we will get some products in there. In the meantime the two productivity programs are really are really lowering the cost base of this company quite dramatically.

We can’t see the full impact of that yet, because some of it has to do with people, some of it has to do with plants, which take awhile to close and reallocate the production of other units, so that is the third lever is when we get to that stage 2 I think we will be a much leaner, smaller, more agile company than we are today. Those three should give us a starting point then for stage 3 which is continued growth of the current products, plus the new products, plus the string of pearls if they are fortunate to get through the regulatory process.

We are busy at work doing stages 1, 2 and 3.


Your next question comes from Barbara Ryan - Deutsche Bank Securities.

Barbara Ryan - Deutsche Bank Securities

In the second page of your release you mentioned that the tax rate from continuing operations is 22.5% and then obviously the reported result for non-GAAP adjusted excluding special items is 16.5%. I am just wondering if you can tell us what specifically the true up was for the R&D tax credit, specifically in the fourth quarter.

Jean-Marc Huet

Okay. We haven’t discussed this up until now, so thank you very much for the question.

There are two drivers behind our tax rate in the fourth quarter. The most important one is the R&D tax credit. I think the good news is that this is something that we will enjoy and that we know we will enjoy for 2009 and as a result our tax rate will be more even as we go through the quarters. There are also one or two release reserves that actually took place in

Q4, so those are the two main items.

If you look over the year, we are at around 22%, 22.5% and our guidance is basically at around 24% for next year, so that is a small decrease in our tax rate and that is primarily [audio gap] for next year.


Your next question comes from Steve Scala with Cowen and Company.

Steve Scala - Cowen and Company

Units in non-US markets were down a bit in Q4. I am wondering if you will elaborate on the cause of this trend. Was this the effect of Plavix in the EU or was there some other trend?

Secondly I am wondering if there is any news to report on the 11F8 writes disagreements with Lily.

Lamberto Andreotti

I think that our portfolio of products outside of the US is undergoing a big evolution. We are, as you know, directing products; we are moving products from our own units to distributors and thinking about what we call mature brands, because our strategy is to focus on the same portfolio everywhere around the world. There is a lot that is fluctuating in the mature brands of Bristol-Myers Squibb in terms of performance and sales.

If we look at the sales in the individual regions in the quarter we have EMEA, Europe, Middle East and Asia grew overall by 5% net of the facts and what we call the key and new products, that group of products, grew in total by 20%. So you see that the performance of the key and new products in that region is very different than the performance of the mature brands in that region.

I can continue the same way for Latin America and Japan and the other region in Latin America, for example. Another example would be we have divested a number of products. We have closed certain operations in Central America and then we have taken a big number of mature brands and given them to Merck for distribution in a number of countries. So we are reporting lower sales than what we were reporting there.

In summary, our key products and our new products are doing as expected and doing well in the International markets as they are in the United States.

James Cornelius

On 11F8 there is really nothing brand new to report. This humanized version of Erbitux is still in dispute. ImClone is obviously now owned by Lily. Should we not be able to resolve the differences there as to the ownership, by contract it goes to arbitration. I will report we have had some productive discussions with Lily and we will have more to report on that as the year goes on.


Your next question comes from Seamus Fernandez with Leerink Swann.

Seamus Fernandez - Leerink Swann

This question is for Elliott. Can you tell us if you have been informed about whether or not saxagliptin will go to a panel? It is our understanding that there is a second date scheduled after the liraglutide panel. I believe that that panel actually falls after your PDUFA date.

Secondly, can you let us know if the renal study that is underway with saxagliptin is required for approval, when could those data actually be added to the FDA dossier?

Then lastly, Jim this is a question for you. Can you just remind us of the timing of your transition or your planned transition and if the board is currently considering candidates for your replacement? Not that I am trying to chase you out of the position.

James Cornelius

I don’t want to be chased out of position. I don’t have any contracts and it is starting to be fun.

Elliott Sigal M.D., Ph.D

I will be happy to go next. This is Elliott, Seamus and you asked about the progress on saxagliptin. First I would like to correct something. Our PDUFA date is April 30. If the agency decides to have an advisory panel I believe they have plenty of time to do so. We have noted, as you have, that there is more than one day scheduled in the first week of April. I would say that the FDA Amendments Act of 2007 states that advisory committees are expected for all NCEs absent and articulated reason; therefore it is our practice always to prepare for one. We have teams in both companies ready for an advisory committee. The official announcement of an advisory committee comes in the Federal Register by the reviewing division. So, we get prepared, I think they have time to have one.

You asked in general about the data that would be needed for approval and you asked about the renal study. The renal study is progressing and will be available late in ’09; however it is not my feeling that the renal study is needed for an evaluation of the current program.

I do note that the CV guidelines came out after our submission; however before our submission clearly the thinking from the agency was evolving to prescribe extended exposure, certain types of patients to expose the drug to and we followed all of those guidelines and we submitted a program that has over 5,000 subjects, 400 treated with saxagliptin, multiple patient conditions, and about 1,500 patients received saxagliptin for at least a year of the 3,000 that had been studied in Phase III. We do not see any cardiovascular signal and we think the database that has been provided allows application of the guidelines and we are working closely with the FDA to assure people that the new standards put in place are adhered to; because we think the new guidelines are an important advance for patients in assuring cardiovascular safety.


Your next question comes from Chris Schott with J.P. Morgan.

Chris Schott - J.P. Morgan

Just maybe on the diabetes line here, can you just also update us following those recent CV guidelines for dapagliflozin and just expectations of a filing line for this product or just maybe any comments you might have on what changes you might need to make to your clinical program as relative to those CV guidelines.

Also on the R&D front Sprycel, just update timing on the front line on head-to-head data when we can think about that.

Then maybe just a broader question, when we think about macro economic impact to your business and thinking about 2009 guidance can you just kind of quantify what is reflected in your guidance? Are you seeing a macro economic impact already or is this more something we should expect as the year progresses?

James Cornelius

Chris, you asked questions on diabetes in general, dapagliflozin in particular. Let me take the question on Sprycel first line. We are running the first line study head-to-head with Glevac. The study is, as of last year, fully enrolled and we data will be maturing towards the end of the year. We will see some data in 2010, as we have said before. I am quite excited about the progress of the Sprycel life cycle management not only in solid tumors, but certainly in the hematologic applications.

With regard to the CV guidelines on dapagliflozin, I will say that we are working with the agency to fully integrate everything going forward, because we had anticipated that this agent should be exhaustively studied in terms of safety and efficacy, we had already designed a very large trial studying characteristics of safety. I think the addition of the CV guidelines won’t materially impact. I don’t have the filing schedule, but I don’t have a specific filing date to announce at this time. AZ and Bristol-Myers are working very hard and I think we can incorporate all of the guidelines in our planned dapagliflozin program.

I did mean to say with saxagliptin we will see Phase III data at the ADA or at the European Society, so either in June or September and that is an important event for us. We also have exciting Phase IIv data on insulin refractory patients that we hope to submit and talk about at ADA in June.

With regard to saxagliptin I meant to say that one of the ways to differentiate is to capitalize on the pharmaceutical properties of saxagliptin. It is a very potent pill. It is a small pill that enables combination products to be more readily formulated. We worked out an exciting formulation with saxagliptin and metformin XR and we hope to have a US submission for the first once daily fixed dose combination of those two ingredients by the end of the year.

Lamberto Andreotti

As far as the overall financial crisis going on around the world and its possible affect on our business, let me first start by saying that we are not seeing much of an effect on the markets that are significant to us, our reference markets so far.

We are obviously looking at the evolution of the situation and we are very mindful of the possibility that less money will be available to individual payers and collective payers like the government and therefore there might be additional actions on prices or by the government to payers and there might be less money available by needy patients for their healthcare expenses and we have reflected some of that in our guidance of 2009.

What we are convinced of is that we have a portfolio of products that are addressing significant unmet medical needs or medical needs and therefore we should be less affected than some others in this situation. We don’t have lifestyle products or secondary products. Our focus is on the innovative biopharmaceuticals and therefore we are a bit less negative about the short-term outlook than others.


Your final question comes from Tony Butler with Barclays Capital.

Tony Butler - Barclays Capital

Elliott it appears Orencia was somewhat neglected throughout this call, but I am curious if you could provide us with an update on the timing of psoriatic arthritis data release as well as lupus nephritis in generalized lupus.

Elliott Sigal M.D., Ph.D

Thank you, Tony. I never like to ignore Orencia, Orencia is doing very well on all accounts and we are excited about the developing life cycle extensions of new indications as well as new formulations; so the big events this year that I tell people about, that I am looking forward to is the subcutaneous program is producing Phase II data, safety data first that we hope to have at the American College of Rheumatology in October. At that meeting as well we should have Phase II data on psoriatic arthritis. Last year we had a Phase II study on lupus that informed how our generalized lupus program should move forward in Phase III and that work continues. The lupus nephritis Phase III study is continuing and I don’t believe we will see that data this year. But, Orencia remains exciting both in the market and in clinical development.

John Elicker

Thanks Tony, and thanks everybody for your questions. I am going to turn the call over to Jim for some closing remarks.

James Cornelius

These can be quite brief. We have made tremendous progress in 2008 on the BioPharma strategy and we expect that progress to continue into 2009 as evidenced by our guidance range.

Operating performance is improving and we continue to project the three year earnings per share compounded growth rate at 15% and I am particularly pleased about our productivity efforts as we make headway on those and raise our profit margin.

Thanks everybody for taking the time and attention this morning.

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