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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

Elliott Sigal – Chief Scientific Officer, Executive Vice President and President of Research & Development

Giovanni Caforio, M.D. – President, U.S. Pharmaceuticals

Béatrice Cazala – Executive Vice President, Commercial Operations

Francis Cuss – Executive Vice President and Chief Scientific Officer

Analysts

Gregg Gilbert – Bank of America Merrill Lynch

Jami Rubin – Goldman Sachs

Andrew Baum – Citi

Tim Anderson – Sanford C. Bernstein

Seamus Fernandez – Leerink Swann, LLC

David Risinger – Morgan Stanley

Marc Goodman – UBS

Mark Schoenebaum – ISI Group

Steve Scala – Cowen and Company

Christopher Schott – JPMorgan

Tony Butler – Barclays Capital

Bristol Myers Squibb Co. (BMY) Q2 2013 Earnings Conference Call July 25, 2013 10:30 AM ET

Operator

Good day, ladies and gentlemen. Welcome to today’s 2013 Second Quarter Earnings Conference Call. This call is being recorded. At this time, I would like turn the conference over to Mr. John Elicker, Senior Vice President, Investor Relations and Public affairs. Please go ahead, sir.

John Elicker

Thanks, Catherine, and good morning everybody. Thanks for joining us to review our second quarter results. With me this morning are Lamberto Andreotti, our Chief Executive Officer; and Charlie Bancroft, our Chief Financial Officer, and both Lamberto and Charlie will have prepared remarks. Also joining for the Q&A portion are Francis Cuss, our Chief Scientific Officer, who formally took over on July 01. Béatrice Cazala, who is Executive Vice President of Commercial Operations and joining us from Rome is Giovanni Caforio, Giovanni has been kind enough to join us from our Rome Offices as he dealing with from family health issues over there. So before we get started, let me cover off the legal requirements.

During this call, we'll make statements about the Company's future plans and prospects that constitute forward-looking statements. 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. Reconciliation’s of these non-GAAP financial measures to the most comparable GAAP measures are available at our website bms.com.

Lamberto.

Lamberto Andreotti

Well, thank you, John. Good morning everyone. We have just completed another very important quarter for our company. We made good progress in R&D including the presentation of key data and advances on the regulatory front. We demonstrated real strength in the performance of comp of our key products, namely YERVOY, SPRYCEL, ORENCIA and with our other franchise.

And with respect to ELIQUIS® and our diabetes franchise in [Americas] we did well but in some we did not get the results we wanted and we need improvement. All necessary actions are in places to help us realize the sales and market share that our product can achieve.

Let me elaborate on this point. Clinically the big news first quarter will the ASCO meeting at which we presented very exciting data the demonstrated at our immuno-oncology portfolio has a very real potential which significantly changed the treatment paradigms for patients with a range of concepts. Granted we still have a lot of work to do but the promise of our immuno-oncology work is evident and presents us with important opportunities that we are committed to invest behind.

YERVOY is performing well in all markets and we continue to develop it in new indications. We have seven potential registrational trials underway on Nivolumab in three separate cancer types, renal, lungs, and melanoma. And we are considering additional tumors, and we have other products at an earlier stage of development.

Significance is the fact that we are developing our immuno-oncology assets in both monotherapy and combination and ASCO we presented the results of our Phase III trials combining Nivolumab and YERVOY in patient with advanced melanoma the first such clinical trials to combine to immuno-oncology agent. Simply stated the results of this Phase I trial were striking.

We will continue as I said to devote significant resources to our exciting immuno-oncology program. Regarding ELIQUIS we made progress with respect to life cycle management in the U.S. we filed for VTE prevention an indication already approved the and launched in Europe and other international markets. We presented the results of the amplified study of ELIQUIS at the IFDH Congress results that forward speak to the strong safety and efficacy profile of ELIQUIS in this case for patients in VTE treatment and we plan to file later this year.

Commercially the global launch is well underway and there are being some positive indicators especially concerning our work with cardiologists, but the results appear far from the levels that I believe ELIQUIS can reach thanks to each profile that is strong and well differentiated. Together with Pfizer we’ve identified various opportunities for improvement and not intensifying our access efforts and our field medical and promotional activities. Additionally, we’ll be initiating our DTC campaign in the U.S. in the first quarter.

Regarding diabetes, as you know we announced the topline results from our SAVOR study ONGLYZA and why we will have to wait until September for a fuller analysis we were pleased that the drug met its primary face the objective. With respect to FORXIGA, we have great (inaudible) application with the FDA in just this morning perfect timing. The FDA notified us that it would consider factory submission completed and gave out the new PDUFA date of January 14, 2014. We look forward to working closely with FDA in the coming months to review the filings and we are preparing for a likely (inaudible)

Diabetes is an important therapeutic area for us. We have a strong portfolio in an increasingly more competitive and more crowded space. And we and AstraZeneca had made the determination to increase our commercial investment behind the portfolio.

Turning to the rest of our products, this was the last quarter affected by the loss of Plavix last year and excluding Plavix and Avapro/Avalide we deliver us solid double-digit growth last quarter.

Again I would especially pleased with the performance of our key products namely YERVOY, SPRYCEL, and ORENCIA products that are important for the future of Bristol-Myers Squibb. And taking as a whole, I’m increasingly happy about the trends and diversity of our portfolio. A number of things can and will be improved, but we are moving in the right direction with the right products.

As you have seen we have updated our financial guidance, we are including our outlook for revenue. The reduction is related largely to two factors, foreign exchange and the recall of Fervex a local OTC product in France and other international markets. Charlie will discuss these two factors that affect our top-line. What I want to make clear is that, while we continue to look for opportunities to be more efficient across the entire organization, we are also protecting key R&D and promotional expenses.

As we know they are important investments for our future success. Again, taken as a whole, this was an important quarter for Bristol-Myers Squibb. Our focus on balanced execution remains the right approach, focusing on driving short-term results, while lay the foundation for long-term growth.

With that let me turn the phone over to Charlie for a closer look to some of our results. Thank you.

Charles Bancroft

Thank you, Lamberto and good morning everyone. As you have seen, we delivered non-GAAP EPS of $0.44 and reported double-digit sales gains in our key brands. Excluding Plavix and Avapro, global sales grew 10%, led by YERVOY, SPRYCEL and ORENCIA. Let me provide some highlights. YERVOY’s sales were $233 million, an increase of 44%. YERVOY continues to post strong sales growth as physicians embrace YERVOY’s durable long-term survival benefit and efficacy in a broad range of patient.

In the U.S., we continue to do well in the hospital setting and we are seeing strong growth with community-based oncologists. YERVOY also completed a best quarter in Europe and had strong quarter in South America and Australia as well. You may recall that during Q1, there was a 25 million returns reversal in our reported YERVOY sales.

ORENCIA Sales increased 21% to $352 million. We continue to see strong growth in the ORENCIA’s share of biologic-naïve patients as we expand access, imbursement and the promotion for ORENCIA subcu. While sales of the IV in subcu formulations are both growing, subcu continue to set the pace and now represent nearly 30% of all ORENCIA sale.

By early fall, we plan to launch ORENCIA subcu in seven additional market in Europe were new guidelines announced last month at (inaudible) recommend ORENCIA as a first-line biologic for patients with rheumatoid arthritis.

SPRYCEL grew 28% to $312 million. The first-line trial and usage of SPRYCEL continues to grow in all market, especially among physicians who traditionally select a first generation PKI for patient with CML. We also continue to educate prescriber about the revise NCCN guideline, which incurred switching earlier at three months of treatment milestones have not been met.

Sales of ELIQUIS were $12 million during the quarter, while the initial launch has been a bit slower than we anticipated, we and Pfizer are aligned and continued belief that ELIQUIS will be the leading new agent in this market overtime.

As Lamberto mentioned, there are areas in which we had a good start, particularly in cardiology. But we clearly have identified areas for improvement to ensure the differentiated profiles of ELIQUIS is recognized by provision and patient.

In order to help ELIQUIS game momentum in the U.S. we will be increasing our medical educational activities with physicians in key territories. We also will launching a DTC campaign during the third quarter. Outside the U.S. we’ve plan to launch ELIQUIS in nine additional countries by year-end.

Our diabetes portfolio had sales of $215 million in the quarter. Clearly, the diabetes market has becoming increasingly competitive and we along with our partner AstraZeneca recognized the need to adequately resource this business and execute better to drive growth, and therefore, planned to increase our commercial investment in the second half of the year.

Sales for the ONGLYZA franchise were up 40%, this includes a favorable impact from a $26 million return reversal in the U.S. As you will recall there was a significant change in formulary status at Caremark late last year. We believe we are seeing signs of stabilization in franchise performance at our TRX here move slightly excluding the Caremark in time.

For BYDUREON and BYETTA Q2 was the first quarter in which we had full commercial control of the [genotype] franchise on a worldwide basis, having taking over the international market on April, 01. BYDUREON had a good quarter at sales in the U.S. were up 10% sequentially. With AstraZeneca, we will be increasing our resources behind by BYDUREON.

For BYETTA, we will focus our promotional efforts in combination with long acting insulin. We’re in the process of launching for CV in Europe and as Lamberto mentioned the FDA just accepted our regulatory resubmission in the U.S.

We also posted solid gains in our global HIV and Hepatitis B with sales totaling $1.2 billion in the quarter. REYATAZ global sales were $431 million, a gain of more than 6%, driven in part by the timing of tenders in Brazil. Sales of ATRIPLA and SUSTIVA also rose 6% to $411 million. ATRIPLA remains the number one single tablet regimen.

I also want to address and recall we undertook during the second quarter for three of our matured brands outside the U.S. which together had 2012 full year sales of approximately $100 million. The largest of these brands is Fervex an OTC product for cold and flu symptoms. This was a voluntary recall based on quality concerns from the third-party supplier and there has been no product complaints or reported adverse health events.

In Q2 the estimated pretax impact of this recall was about $54 million or $0.02 per share. This includes an inventory write-off, sales returns and estimated loss sales. We are pursuing several options to get the product back on the market which we don’t expect to occur until sometime in 2014 with that assumption we estimate an additional $30 million pretax impact during the second half of 2013.

Now let me highlight two line items from the rest of our P&L. I will quote with our remarks on our non-GAAP results. As John mentioned reconcilations to our GAAP results are available on our press release and on our website. First I want to comment on other income and expense, a line item we do not usually discuss. Prior to the restructuring of our agreement with Sanofi at beginning of this year, we had reported royalties from certain international markets in this line. Following the restructuring any royalties from these markets are reported as revenue.

The impacts of other income and expense this quarter is roughly $40 million. Secondly, our non-GAAP tax rate was 13.8% during the quarter primarily driven by favorable earnings mix and an adjustment to our reserve associated with the legal entity restructuring we did late last year.

Finally regarding guidance, we are revising our full-year 2013, non-GAAP EPS guidance range to a $1.70 to $1.78. We are also making the following line item revision. 2013 sales are expected to be between $16 billion and $16.5 billion. In addition to the recall that I discussed earlier foreign exchange is having a significant impact on our sale, particularly a Japanese Yen. At current rates, we estimate that sales will be negatively impacted by approximately $180 million as compared to our original expectations.

Gross margin is now expected to be approximately 73% primarily driven by product mix. A&T is now expected to increase in the mid single-digit range. While we are increasing resources behind certain growth spend, we have been more efficient with some of our mature product spend. And finally our full-year effective tax rate is now expected to be approximately 15%.

At this time, we would be happy to answer to your question.

Francis Cuss

So Catherine I think we are ready to go the Q&A portion and I would just remind people that in addition to Lamberto and Charlie, we have Beatrice, Francis and Giovanni here to take any questions that you might have. Catherine?

Question-and-Answer Session

Operator

Yes sir. (Operator Instructions) We will take our first caller Gregg Gilbert from Bank of America. Please go ahead.

Gregg Gilbert – Bank of America Merrill Lynch

Yes hi good morning. I was curious when we will see any new data on the

Wal-Mart in any tumor type and also some commentary on ELIQUIS and maybe some specifics around which you are doing there to get the product going other than access related issues. Thanks.

Lamberto Andreotti

Why don’t you – why don’t I start. Thank you this gives me the opportunity of saying couple of things about, a couple of additional things about, Lamberto and then Francis will continue, with more specific answer to your question. I want to confirm that we are aggressively invest in this immuno-oncology portfolio that we have and it will not be clearly an important component of this portfolio that we started to build with YERVOY.

We believe that based on the data we presented at ASCO, we believe that transformational potential of immuno-oncology and we feel good about our leadership position in this area. Others are working also in this area, we’ve company that working also in this area, but we are committed to remain at the forefront through a program that is science driven that are device entity and actually go. Let's go back to, to PD-1 and the question on the disclosure out data.

Giovanni Caforio

Thank you, Gregg, we are very encouraged by the progress at both our Phase III and early trials. We expect to get data from our ongoing Phase II study and third line squamous non-small cell lung early in 2014 depending on the results of that and our discussions with regulators that may lead to a submission and obviously an opportunity to present that at ASCO.

In addition we have combination data from Nivolumab and YERVOY ongoing renal cell carcinoma and non-small cell lung this is 1b study and we will be seeing in-house that data before the end of the year that will help us to determine how to go forward with further studies in that combination. Again this will be presented at ASCO next year. Thanks.

Lamberto Andreotti

Yeah, Giovanni I think this is not unexpected question of the ELIQUIS options just to answer, but let me just say before you do that your line may (inaudible). I personally my higher management team our colleagues at Pfizer are convinced that the clinical profile of ELIQUIS is unique and differentiated. We are the only agent with superiority clients versus (inaudible) in the freaky outcomes of stroke and systemic embolism, major bleeding and mortality. And the other two new agents cannot make the same attributable to the [R&D] claim.

So we have things to do, we are convinced that new supportive actions we identified with Pfizer will either results and we continue to believe, I personally continue to believe and everybody here continues to believe that ELIQUIS will be the leading new agent overtime.

Giovanni, why don’t you go into the specifics of actions?

Giovanni Caforio

Yes thanks you. Good morning. I would say following up to what Lamberto just said there are really four areas in which we are focusing on, I’ll touch on those very briefly. We had really good access early in launch with a large percentage of lights covered in both commercial and Medicare, the focus now for the second part of the year is actually increasing, preferred status coverage in both areas and currently as you know in Medicare that is very important.

The second point is, with hospital formulary listing and stocking we had somewhat of a slow start there, we are now back on track, but clearly in the second part of the year we’ll be working very actively to fully close that gap. The third one is penetration in cardiology, as Lamberto mentioned; we actually have had a good initial uptake in cardiology when you look at new two brands share in MBRX share we are at roughly 15% at this point in cardiology, which is in line with PRADAXA and when you look at our switch share in cardiology this above 20% or significant for PRADAXA.

We have clearly seen that physicians that are exposed to the full dataset find that profile to be very compelling and so in the second part of the year we are planning a significant increase in the number of promotional medical education events and peer-to-peer interactions with physicians through the medical organization. And finally as was mentioned before we would be fasting a DTC campaign in Q3 and those are really the four areas we are focusing on.

Lamberto Andreotti

Thanks Greg for the questions. Catherine can we go to the next one?

Operator

Yes sir. Jami Rubin with Goldman Sachs. Please go ahead.

Jami Rubin – Goldman Sachs

Thank you just a couple of follow-ups. The $12 million in sales that we recorded this quarter for ELIQUIS, just was wondering they don’t seem to match with prescription trends that we have seen during the second quarter and not that we think the trends have been so spectacular, but there does seem to be a disconnect where they are scripts that were nut shelled returns just trying to understand that. And then Francis if you could elaborate a bit more on PD-1, just curious to note post ASCO did you see a bump at all in enrollment and just curious to know how enrollment is going with your trial and then also interested in what trials have you started with other immuno checkpoints in combination with PD-1 outside of three tumors you have already studied. Thanks.

Francis Cuss

Giovanni, do you want to answer the question on prescriptions and sales of ELIQUIS?

Giovanni Caforio

Yes in the U.S. only demand sales in the quarter was $16 million and so the $12 million really relates to a work down in the initial inventory, which was built in Q1 when we started distribution of the products. But the demand in the quarter for the U.S. market was $16 million. And in terms of abandonment and rejection rates. We’re doing quite well. It’s in line with our forecast because our reimbursement support programs are working quite effectively.

Lamberto Andreotti

Jamie, thank you. So we’ve had no difficult at all recruiting. What has bumped up after ASCOs obviously with combination studies we have ongoing. And actually requests for many different other tumors in compassionate use. There is a lot of interest.

In terms of other tumors and other combinations, I’d say, we’re looking already at – have it just on carcinoma and hematologic relating piece with Nivolumab and we plan to start very soon a clinical program exploring both monotherapy and the Nivolumab YERVOY combination in the number of additional tumor types, strictly those with higher met needs such as head and neck glioblastoma, colon cancer with high microsatellite instability pancreatic gastric, small cell lung triple makes the breadth. A whole combination of studies, which I think will inform us about where we will see both from monotherapy and combination, where we go next. Thank you.

Giovanni Caforio

Thanks, Jamie. Catherine, next question please.

Operator

Andrew Baum with Citi. Please go ahead.

Andrew Baum – Citi

Hi, three questions if I could. You have on your bottom line data you presented ASCO was remarkable with much return and safety and efficacy. And should we expect within the non-small cell combination cohort in the safety, you’re going to present at slightly less picture in term of safety given, some of these patients presumably have latest therapy just thinking of the combination impact on [efavirenz].

Second there is a lot of excitement about LAG3 as a target you will identify that with a new portfolio one of high interest, you have meant today. Is there any problem here with anti-therapeutic, antibody to explain delay? And then finally if you could comment on the fourth coming ruling from election in relation to the ONGLYZA/KOMBIGLYZE what are your expectations there with regards pricing for both things? Thank you.

Lamberto Andreotti

So Andrew, let me start with the non-small cell lung combination. As I just mentioned, we are ongoing with 1b study. We’re obviously looking carefully at safety and efficacy and we will have structure in-house towards the end of the year beginning next year.

Obviously, we’re also looking at monotherapy and so we got a couple of options here, because those are in Phase III. As far as LAG3 is concerned, as you say we are very excited about LAG3. There is no particular delay with due to go in to the clinic before the end of the year. And of course the exciting about this is an area of interest around exhausted T-cells, which of course is NUEVO, YERVOY, and of course LAG3 is doing very well. So with no delay, we’re very excited to get in.

Andrew Baum – Citi

Okay, I got we are more from excitement of science still the reality of Germany?

Béatrice Cazala

Okay. So from everybody just to remind you quickly what the process is in Germany now. We have a process for (inaudible) which is three step process (inaudible) your product. They come up with rolling. This rolling is not binding and advised to the GBU which is signaled because of looking at this product. They come up with rolling there and then they start to a negotiation with them. So it is a lengthy process going over a period of time, which usually last about a year so, at this stage you will such company going slow and assessment before actually it was KOMBIGLYZE and KOMBIGLYZE what I have said to equate and soon our assessment which will be it.

Those two first step has been completed for KOMBIGLYZE and actually there was a different in the ruling between the equate which give us more stability and GBA which come from the things that was additional benefit. So now we will answering the negotiation from KOMBIGLYZE and we cannot comment further on this past.

I think now to the over world class of (inaudible) for the evaluation so we quick first and then residue so that GBA asset going to start, what we have in our hand is a ruling a few weeks ago ruling of equates ongoing and it include ONGLYZA-1 not the KOMBIGLYZE. So we are now expecting to see the GBA ruling and then we will go into the formulation.

So it will be pre-mature now to discuss obviously we will come out of that, what we know however is that there is a chance to be able our views of benefit of those assets and the importance of those DPT-IV in the treatment of diabetes with very good efficacy and safety. So we see up anything and we are looking forward to continue the discussion with the GBA in this front.

Francis Cuss

Thanks Andrew, Catharine can you go to the next question please?

Operator

Yes sir, Tim Anderson with Sanford Bernstein, please go ahead.

Tim Anderson – Sanford C. Bernstein

Thank you couple of questions, YERVOY can you talk about your level of enthusiasm for the upcoming Phase III prostate cancer data that starts around the corner. And can you talk about the commercial opportunities for that litigation in terms of how the trial was designed in often terms of the current competitive landscape? And then on PD-1, I know you guys are pushing into likely pushing the additional combination trials with PD-1 in YERVOY, but how much do you outside of Pfizer and folks internally think that the initial combo data in melanoma portals that you will have success in other tumor types with base on what you know about things like tumor biology?

Béatrice Cazala

So just let me start Tim with the YERVOY, as you know lifecycle management program with YERVOY, there are two prostate cancer studies ongoing, one which as you say we will be presenting later in the year is more advanced cancer, I think we are modestly enthusiastic about that in the sense which is a very heavily treated group. We have another ongoing study which will be in earlier lines which we believe when we have those results we will take the two together and have an idea of the value there.

Just talking about PD-1 for a moment, I think there are two ways to look at the combination trial, obviously in advanced melanoma the results are pretty extraordinary clearly that does provide some evidence to the opportunity for increased response rate, but the other way to look at this might be that in certain tumors where traditionally immunotherapy hasn’t had any effect, the combination might actually have some effects, particularly in those where there is lots of unmet needs.

We’re being encouraged to look very broadly to signal detection work and they go on from there. So we’re hopeful, but we have yet to get lot of the data, but we will do over the next 12 months.

Lamberto Andreotti

And Tim, I think we have discussed the commercial aspects of YERVOY close that once we have at both trials and we have analyzed that.

Tim Anderson – Sanford C. Bernstein

Thanks.

Lamberto Andreotti

Thank you, Tim. Catherine, can we go to next question please?

Operator

Yes, sir. Seamus Fernandez from Leerink has our next question. Please go ahead.

Seamus Fernandez – Leerink Swann, LLC

Oh great. Thanks very much. Just a few questions on dapagliflozin and then also first off on dapagliflozin. Can you talk a little bit about the reasons for an advisory committee specifically, you mentioned that likely was going to be discussed and can you give us a little bit of a flavor of what has been changed or improved meaningfully with the new filing versus some of the questions that had been raised by FDA historically?

And then secondly, as we think about the investments that you’re talking about both behind the primary care franchises and also the investment behind the immuno-oncology portfolio, obviously this is going to be likely pretty costly, you hopefully will also have a launch of dapagliflozin next year. How should we be thinking about your ability to kind of manage the cost structure relative to the longer-term opportunity? Thanks a lot.

Lamberto Andreotti

Hi, Seamus, thank you. The DAP data, we are submitting significantly enhances the information we provided in our first submission. And in addition to many of the questions raised by the FDA is part of the, I should say all the questions raised by the FDA is part of that complete response letter. Part of the reason for the outcome is that the original outcome as you recall that was a vote not to approve. So the FDA felt it was important to come back and present our broader portfolio of information now and for the advisory committee to apply as part as recent initiatives say we will have a couple of studies on CV risk which are now two years in, those are in patients with a history of CV disease who are diabetic and two new studies which weren’t in original (Inaudible) specifically studying blood pressure and glycemic control in diabetic patients.

As you heard earlier we now have PDUFA date of early January, we’re preparing for the advisory committee with a hope of getting approval then.

Lamberto Andreotti

So about investments Charlie will give you today first of all it is a great problem to have because when you have multiple assets behind which you can invest that means that you have a good portfolio and I feel very good about it having said that yes we have a lot of investment that are needed to support that pipeline and that portfolio. Excuse me if you think about 2015 when we were looking at we are preparing for the revision of the guidance we obviously look at expenses and when we are facing the service recall and the foreign exchange we can see that whoever we had to cut expenses significantly and we decided not to go beyond looking politicians is because we believe we need to support the portfolio, the launches and the pipeline we have, Charlie.

Charles Bancroft

Yeah, thanks Lamberto. I would just say as a general premise given our legacy and heritage of productivity we will continue to drive efficiencies throughout our P&L as part of our everyday business. But having said that we need to balance the short-term and long-term as we build a solid foundation for sustained long-term growth and as Lamberto mentioned, we have a lot of very unique opportunities in front of us.

Let me frame it by saying, if I look at the portfolio, we are taking out almost all ABILIFY expenses as I think about 2013, as we transferred most commercial responsibilities to Otsuka. And we’ve also optimized our matured brands and in-line brands, although we continue to look for efficiencies there. So moving forward, when we think about ELIQUIS in the continued rollout of launches, the annualization of DTC spend in the U.S., obviously there’ll be more spend going forward.

And same thing with diabetes as we brought up another sales force and potentially launching Forxiga in the U.S. and we’re also rolling out Forxiga launches globally, you would see incremental expenses there, as well. And there’s been some questions already on IO, that’s a unique and compelling opportunity for Bristol-Myers Squibb, so moving forward from 2013 that will be an area of focus.

And then lastly in Hepatitis C, we do have a unique and significant opportunity in Japan. And sort of one-offs in different countries as the portfolio evolved that we will see incremental expenses as we think about our Hepatitis C program as well.

Francis Cuss

Great, thanks a lot. Can we go to the next question please Catherine?

Operator

Yes sir. David Risinger with Morgan Stanley, please go ahead.

David Risinger – Morgan Stanley

Thanks very much. I have three questions please. The first is, could you just provide a little bit more clarity on whether there’s going to be any public disclosures of any incremental PD-1 data in any cancer later this year or whether we need to wait until early 2014, second with respect to YERVOY and prostate cancer given the scientific communities interest in immuno-oncology I'm surprised that you are not going to be disclosing the YERVOY data the Phase III trial results I think that they are completing on clinicaltrials.gov its indicated for completion in September.

So could you provide some more color on that, I know that the first line monotherapy study has a completion data in January of 2016. So just wondering if you know we need to wait a couple years for the prostate data disclosure. And then finally I was hoping that you could review the Hep C opportunity in Japan and the timing for launch. Thank you.

Lamberto Andreotti

Well, Francis you start.

Francis Cuss

David thank you. So let me be very clear, there won’t be any public disclosures during this year, obviously the third line lung data if it’s good after discussion with the regulators we would certainly disclose that should we be making a filing. As far as YERVOY prostate cancer is concerned we will be providing that data at ESMO later this year and my point really earlier on was that when we look at prostate we will be looking at the whole prostate area together with the early line study that you commented about which will be viable on 2016.Thank you.

Lamberto Andreotti

Sorry, if you want to Ann will.

Ann Powell Judge

Yeah, as I mentioned earlier regarding Hep C, we believe that we have a unique and significant opportunity to have the first fall for our regiment in market in Japan with our GT, genotype 1b strategy, and we think that we have 18 months to a two year lead on both Abbott and Gilead had in Japan. So our registration on Phase III study of our NS5A declared as we are in NS3 for now and in intolerant GT or genotype 1b patient is expected to be presented at AASLD November, and we expect the file before the end of this year with approval on sometime in the second half of next year. Just as reminder, we had about 1.2 million to 1.5 million people in Japan infected with Hepatitis C and about 70% of them are genotype 1b.

Francis Cuss

All right. Thanks, Dave. Can we go to the next question please, Catherine?

Operator

Yes, sir. Marc Goodman with UBS; please go ahead.

Marc Goodman – UBS

Yes, couple of questions. First, Lamberto, in the past you’ve actually said that you bought that R&D spend would be relatively flat for the next couple of years. So I was curious if that has changed and as part of the previous couple of questions about spending if there will be increased spending in R&D, and we should expect that relative to what you are spending this year, because of the immunotherapy?

Second question is that guidance changed on sales, I was curious whether the ELIQUIS ramp slower than expected, if that also baked into your lower guidance sales or is that basically doing what you thought it was going to be doing? And then in diabetes, can you update us just on the reimbursement that the payer issue pricing, what’s happening? Are you on formularies, is it that the issue or is it a marketing issue, and just curious, your thoughts on that? Thanks.

Lamberto Andreotti

I would start to it comments on the R&D. The R&D expense it is a very important subject and we have still discussing this subject within our Company it is clear that the opportunity associated for us and for the patients associated with immuno-oncology are increasing and therefore Francis and Charlie and I together with our teams are looking at level of investments that which we require as Charlie mentioned we also have other investments that involve R&D, and then our commercial organizations we are looking at in defining the budget for next year.

I think I can could clarify on ELIQUIS, the sales for this quarter were below what we were expecting. But today then and is there something that’s you were still at the launch stage and so these guidance is are related to the performance of ELIQUIS we seen.

Charles Bancroft

I would just add to that Mark is that when we look at guidance and as we projected it we take our product trend into account. The bigger issues as I mentioned were FERVEX and the total year impact as we see it for FERVEX is going to be over $80 million FERVEX and the other two products and then FX as I mentioned had a $180 million impact. So they were the larger ones that we take into account all product, all product trends.

Lamberto Andreotti

Giovanni, would you want to answer the question on diabetes?

Giovanni Cafori

Yes, it’s Giovanni. So to answer your question the comments made before was specifically related to coverage with Caremark we lost the coverage at the end of last year and that had a meaningful impact on our ONGLYZA sales coming into this year, we've seen that impact primarily in Q1 at the beginning of Q2 we believe that impact that has now stabilized, beyond that plan, we continue to have good access with ONGLYZA and KOMBIGLYZE across the majority of the market. And on the other side of exenatide our preferred access in both commercial and Medicare for BYDUREON has actually been proving following the launch and steadily improving this year as well.

So although diabetes clearly from a pricing and rebates perspective, it’s an increasingly competitive area, over all the access to our portfolio is quiet good. The Caremark issue was a very significant issue, it was one issue that impacted as in 2013 for (inaudible).

Francis Cuss

Great thanks Mark. Can we have the next question please Catherine?

Operator

Yes sir. Mark Schoenebaum with ISI Group please go ahead.

Mark Schoenebaum – ISI Group

Hi guys thanks a lot for taking the question, I appreciate it. My first one is on ELIQUIS. Is it that the message, the data message on the superiority isn’t being disseminated properly or is that you’re seeing resistance to acceptance of that message? And then on NEVO if I may, you’ve been pretty clear about the filing – the potentially filing timeline in (inaudible), at least in my mind I’m really confused about the potential filing timeline in melanoma. I was wondering if you could – as a monotherapy. I was wondering if you could, are you willing to clarify that at all. And then just finally, obviously, there’s been a lot press reports around M&A activity in the space not including Bristol, but I just think it might be a good time to get your updated thoughts on use of capital and the size of the deal that you might consider theoretically. Thank you very much.

Lamberto Andreotti

Let me talk to the use of capital and then I will ask Giovanni and Francis to answer your questions, and I think we’ve sent PD-1 respectively. Our use of capital priorities have not changed and they include business development, they include a mark investment in business development. So we continue to look at opportunities outside that assessment assess that financial volume of those opportunities as well as it fit with our portfolio and pipeline. So we continue to be constantly looking about way that is financially clever and disciplined. Giovanni do you want to talk about ELIQUIS?

Giovanni Caforio

Yes. So the message is actually resonating quite well and when you look at the messages that are recalled by physicians, the first three messages that are recalled in very high percentages are stock reduction, the bleeding data and the mortality data.

Obviously, the dataset is one of the most comprehensive datasets that exist and we’ve seen that physicians that are exposed to a medical education program and have the opportunity to learn about the profile typically become believers and styles and that’s the reason why we are strengthening the investment in medical education programs and appear to be events in the second part of the year, because when physicians are exposed to the full dataset, it actually resonates quite well.

Francis Cuss

Great, thanks Mark. Next question please. Go ahead sorry.

Lamberto Andreotti

Yeah, Mark, just to say, I’m not going to comment specifically on the timing, but what I will say is we are encouraged about the progress of the three trials we had ongoing in melanoma, two of them with – monotherapy and one with the combination. Interim analysis are embedded in all these trials we have overall responses, one with primary endpoints. And certainly there is the – we’re looking at other ways to accelerate as well. So we’re enthusiastic about the Phase III program give there is a lot of option. Thank you.

Charles Bancroft

Sorry, Francis and thank you Mark for those questions. Can we go the next question please Catherine?

Operator

Yes sir, Steve Scala with Cowen. Please go ahead.

Steve Scala – Cowen and Company

Thank you, I have two questions. You have already given a very through assessment of ELIQUIS, but on the Q1 call the company said that ELIQUIS was on track and the access was ahead of plan. So I'm wondering what is change then the last three months for instant have competitors reacted in unexpected ways for instant. Second maybe assume that if there were any pancreatic findings and saver that would have been told that already. Thank you.

Lamberto Andreotti

Sure, Giovanni I can comment, first of all Steve that was a good question on ELIQUIS and Giovanni can give you a good answer. And then you will talk about bigger.

Giovanni Caforio

Yeah Steve this is Giovanni. I guess going back to what we said at the beginning we had very good success with access from early on and continue to have over 80% of life’s covered under commercial space and over 75% of life’s covered in America space. My comment was there covered life’s had the beginning as always primarily non-preferred status, we are currently working and completing contract negotiations to increase the percentage of life’s that are in the preferred status and that’s normal. With respect to performance our update in cardiology has been quite good it has been quite good at the beginning, the last few weeks have been more I would say flat than the first part of the uptick curve, part of that was leading to a number of weeks where they were short weeks because of vacation in the U.S. but the uptake in cardiology continues to be good and what we want to see in the second part of the year is that uptake to accelerate and to broaden in some segments of primary care and we haven't seen that yet.

Charles Bancroft

Just not going to comment anymore about save the results but of course as you know they will be presented on Labor Day at the ESC. I think many of us were very encouraged by the recent meeting at the NIH where for two days this item was discussed and I think not many people (inaudible) that we have that there really wasn't any indication that either GLP-1 based therapy more – were associated with the risk of pancreatic carcinoma, thank you.

Lamberto Andreotti

Thanks Steve, Catherine I think we only have time for two more questions.

Operator

Thank you. Chris Schott with JPMorgan, please go ahead.

Christopher Schott – JPMorgan

Great, thanks very much. Just a couple here, one just a quick one following up on ELIQUIS I guess you mentioned the potential for a broader uptick in PCP as we go later this year. In that setting how much of a hurdle do you think the breadth of your current label in light of [DPP] is in terms of a uptick relative to Xarelto in that setting. Second question following upon business development it's not a bias more towards in-market products versus pipeline at this stage (inaudible) very significant assets to invest in with the immunotherapy platform.

Does that lend itself towards looking more at in-market products that could maybe provide more near-term operating profits through invest back into that internal pipeline and then finally DPP-4 is just more broadly category growth has slowed a bit here just what's your expectation going forward is that something you think this is a kind of a norms, can we reaccelerate growth in the category, just give any comments you might have on the broader category? Thank you.

Lamberto Andreotti

Giovanni, you will take ELIQUIS and DBP force on business development group. Now I think that if I would tell our idea has now changed. So we continue to look at a full range of opportunities that goes from in market products to early stage on the assets.

And it is clear that even though we have an interesting portfolio of our all interesting pipeline ourselves. We must be very careful on not loosing opportunities outside there to integrate our pipeline without assets that come from the outside. So yes, there is continuing activity to identify early, also early assets that can make our presence in our DBP areas stronger. Giovanni.

Giovanni Caforio

Yes, so to answer this on early question primary care. The biggest hurdle in primary care has really been so far the intention of warfarin. If you compare primary care, in cardiology about two-thirds of new patients today at over discussed on a new agent in primary care, two-thirds patients are still started of warfarin and there clearly a differentiated profile like the profile of ELIQUIS has the potential to accelerate over time that transition. We don’t see the breathe of indications as a major factor there, but of course as you know we are working to broaden our indication set as well.

And then on DBP force, a lot of the acceleration that we saw last year for DBP forces in U.S. was really related to the very rapid erosion of the [PZDs] the slowdown this year has really been related primarily to that process endings. But we continue to see opportunity for growth of DBP-4s clearly the very accelerated growth of last year was linked to a number of factors including the erosion of TCDs.

Lamberto Andreotti

Okay. Thank you, Chris. And Catherine, can we go to our last question please?

Operator

Yes, sir. And our final question comes from Tony Butler with Barclays Capital.

Tony Butler – Barclays Capital

Thank you very much for taking the question. Lamberto, I believe you made reference to increasing resources around the entire diabetes franchise with Astra and I wanted to understand that a little more fully. Is Astra fully engaged with the amount of resources that the joint venture wish to just spend in that category and importantly have they already been engaged with BYDUREON because I think your comment was toward BYDUREON specifically? Thanks a lot.

Lamberto Andreotti

Tony, in fact Astra has been very engaged and we have discussions with AstraZeneca at all levels including discussion between Pascal Soriot and myself about how to improve our presence in diabetes. It is not necessary through that we have only invested or decided to invest more behind BYDUREON, the U.S. we are adding an additional sales force, but it’s mostly focused on. So its entire portfolio that we are supporting and again Astra is engaged and we are engaged equally and we continue to work together to optimize the individual asset and the entire portfolio.

Tony Butler – Barclays Capital

Thank you, Lamberto.

Lamberto Andreotti

Thank you, Tony. And with this thank you. We as I said, we just complete and have a very important quarter for Bristol-Myers Squibb, a quarter that is characterized by the balanced execution between commercial sales and clinical R&D advances. A quarter there is progress on driving near-term results and making long-term investments. Thank you very much everybody.

Francis Cuss

Catherine. That concludes the call, I appreciate everybody taking the time to join us and have a great rest of the day.

Operator

Thank you. And again ladies and gentlemen that does conclude today’s conference. Thank you all again for your participation.

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