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Bristol-Myers Squibb (NYSE:BMY)

Q3 2013 Earnings Conference Call

October 23, 2013, 10:00 a.m. ET

Executives

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

Lamberto Andreotti – Chief Executive Officer

Charles Bancroft – Executive Vice President and Chief Financial Officer

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

Béatrice Cazala – Executive Vice President, Commercial Operations

Francis Cuss – Executive Vice President and Chief Scientific Officer

Analysts

Seamus Fernandez - Leerink Swann

Mark Schoenebaum – ISI Group

Jami Rubin - Goldman Sachs

Christopher Schott – JPMorgan

Alex Arfaei - BMO Capital Markets

Tim Anderson – Sanford C. Bernstein

Andrew Baum – Citi

Steve Scala – Cowen & Company

Vamil Divan - Credit Suisse

Gregg Gilbert – Bank of America Merrill Lynch

Operator

Good day. Welcome to today’s third quarter earnings 2013 earnings release conference call. This call is being recorded. At this time, I would like turn the call over to Mr. John Elicker, senior vice president, investor relations and public affairs. Please go ahead, Mr. Elicker.

John Elicker

Thanks, operator, and good morning everybody. Thanks for joining us to review our Q3 results. With me this morning with prepared remarks are Lamberto Andreotti, our chief executive officer, Charlie Bancroft, our chief financial officer. And this morning, also with prepared remarks, will be Francis Cuss, our chief scientific officer. And then joining for Q&A are our two commercial leads, Executive Vice President Béatrice Cazala, and the president of U.S. operations, Giovanni Caforio.

Before I turn it over to Lamberto, I just want to cover the Safe Harbor language. As you know, during the 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. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available at our website, bms.com.

Lamberto?

Lamberto Andreotti

Thank you, John. Good morning everyone. This is an important time for Bristol-Myers Squibb. The third quarter marked our return to growth with respect to both sales and earnings, as we made our way through the Plavix loss of exclusivity. And that, combined with our continued pipeline progress positions us well for the future.

Let me elaborate on these points. With respect to sales, not only was our growth strong, up 9%, but also it was diversified, cutting across our portfolio. We drove double-digit growth in Yervoy, Orencia, Sprycel, and Onglyza, and the contribution to the top line results from Eliquis and Bydureon started to become meaningful.

This is important. It demonstrates the breadth and quality of our diversified portfolio. Yervoy remains the cornerstone of our growth in our oncology platform. I’m excited, in fact I’m very excited, by the data presented at the European Cancer Congress in September, as it confirms long term survival with Yervoy in metastatic melanoma and reinforced the overall value of this product.

Last quarter, Yervoy continued to deliver growth, most notably in Europe and our international markets. Yervoy results in the U.S. were also positive, notwithstanding the impact of a significant number of new clinical trials targeting melanoma patients with other agents. In Europe, the CHMP recently recommended that Yervoy be approved as first-line therapy in advanced melanoma.

With respect to Eliquis, I’m encouraged. We are still very far from the sales levels these products can achieve, but we are seeing definite signs of progress, especially with cardiologists, a target audience for us. We continue to execute against our strategy to clearly define the differentiated and unique profile of Eliquis.

In other countries, we will increase our peer-to-peer medical education activities, and in the U.S. you may have seen that we began our DTC advertising campaign in September for Eliquis in atrial fibrillation.

We are also working to expand our label, as we have filed an NDA for VTE prevention in the U.S., which is already an approved indication in Europe, and we plan to file our application in VTE treatment this year.

With respect to our diabetes portfolio, we continue to find our way through this very competitive space. In the third quarter, Onglyza sales grew 19% year over year, and within our exenatide franchise, Bydureon sales showed encouraging gains.

And with Dapagliflozin, we are looking forward to the FDA Advisory Committee meeting in December and the PDUFA date in January.

Now, let me make a couple of comments about our pipeline. With respect to hepatitis C, we believe that we have an interesting opportunity and we are looking forward to AASLD conference next month, when we will present new data on the Phase III trials pre-trial of our all-oral dual regimen, and we are still on track for its important submission in Japan this year.

And with respect to immuno-oncology, 2013 has been a year of exciting data for our immuno-oncology platform. Data we have presented so far this year spoke to the very real possibility of paradigm-changing treatments for a range of cancers, and next week we will present additional immuno-oncology data at the World Conference on Lung.

Now, because there is much happening related to our work in immune-oncology, I’ve asked Francis to spend a few minutes this morning to walk you through our thinking with respect to this increasingly important area for us. Francis?

Francis Cuss

Thank you, Lamberto, and good morning everyone. As you well know, we’ve been focused on expanding our efforts in immune-oncology as an area where we see a potential paradigm shift in the treatment of patients with certain cancers. We believe that immuno-oncology has the potential to be transformational in the treatment of patients suffering from various types of cancer.

The durability of response and long term survival in some patients are quite unlike anything we’ve seen in the past, as demonstrated by the long term survival data for Yervoy recently presented at the European Cancer Congress. Additionally, early data suggests that the immunotherapeutic approach has the potential to provide a benefit not only in tumors traditionally considered immunogenic, but also in other tumor types that have not typically been thought to be immune mediated.

As the field continues to evolve and expand, we believe that there may be roles for monotherapy, combination therapy, and biomarker-directed therapy, and we are therefore building our development programs to prepare for all possibilities.

Certainly, the approaches are likely to vary by tumor type as well as by line of therapy. Through our experience with Yervoy and broad programs with Nivolumab, we have a unique understanding in the field which gives us confidence that we are well-positioned to find the ultimate way to utilize these innovative therapies.

As you know, we’ve made a very large commitment to immuno-oncology. Currently, for Nivolumab alone, we have over 25 ongoing clinical trials across more than eight tumor types. We continue to explore Yervoy monotherapy in additional tumor types such as prostate and lung, as well as in combination with Nivolumab.

In addition, we have a broad portfolio of exploratory immunotherapeutic agents with varying immune mechanisms of action that allows us to explore multiple combinations. Today I’d like to provide a brief update on the status of our major programs. Let me start with lung cancer.

As a follow up to the data we presented at ASCO in June, we will be presenting updated two-year survival data from the lung cohort of prior treated patients in the Nivolumab monotherapy study known as 003 at the World Conference on Lung Cancer at the end of October.

Next up will be data from the Phase I combination study of Nivolumab with Yervoy in non-small cell lung cancer, which we expect to have in house by the end of the year. This study will provide important information on the feasibility of combinations in this tumor type and potentially inform our plans for Phase III trials starting in the first half of 2014.

Following that, we expect to have data in the first part of 2014 from our Phase II study in third line squamous non-small cell lung cancer. If the results of the study demonstrate a favorable benefit risk profile, we plan to discuss the data with the FDA and other health authorities.

Finally, we have two ongoing Phase III trials in second line non-small cell lung cancer, one in squamous and one in non-squamous, with both studies collecting information on PD-L1 tumor expression. We expect to have data from these studies later in 2014.

In melanoma, we have a broad program ongoing with trials covering all lines of therapy, which includes monotherapy as well as combination of Nivolumab and Yervoy. In previously untreated patients, both monotherapy and combination Phase III trials are underway, and a Nivolumab monotherapy Phase III trial is ongoing in advanced patients who have progressed post-Yervoy.

In renal cell cancer, our most advanced trial is focused on focused on metastatic disease, comparing Nivolumab with everolimus. Early trials are exploring the combination of Nivolumab and Yervoy in first line renal cell cancer, and we expect the data in house by the end of this year. And also, we expect early data on the potential role of biomarkers in this tumor type.

In all these three tumor types, we remain committed establishing the benefit-risk profile of Nivolumab as quickly as possible, and are closely collaborating with health authorities.

Now, regarding public data presentations, after the lung data at the World Conference on Lung Cancer, we expect the next set of presentations to be at ASCO in 2014, which may include data on the Phase I combination study in non-small cell lung cancer and potentially data from the third-line squamous non-small cell lung cancer, which is ongoing.

In addition to the programs for Nivolumab that I highlighted earlier, we’re also exploring its use in additional solid tumor types, including pancreatic, gastric, small cell lung cancer and triple negative breast cancer, as well as hematological malignancies.

So, in closing, I think you can see that we have a significant commitment to advancing the field of immuno-oncology through a broad program that is science-driven, diversified, and well resourced. We believe that this commitment, together with our expertise and experience, puts us in an excellent position in this tremendously exciting area.

So now I’d like to turn it back to you, Lamberto.

Lamberto Andreotti

Thanks, Francis. Well, clearly we see immuno-oncology as an important and exciting opportunity for us, one in which we will continue investing heavily, dedicating even more resources, time, people, and money, not only in R&D but also commercially, as we prepare for potential launches.

We are also committing the right commercial resources to our key growth drivers, most notably Eliquis, diabetes, and hepatitis C. These products and these therapeutic areas are our future, and my management team and I are determined to set the stage for long term, sustainable growth while at the same time driving short term performance.

Now, with that, I will turn the floor over to Charlie to talk through some of our key numbers. Charlie?

Charles Bancroft

Thank you, Lamberto. Net sales were $4.1 billion in the quarter. We also had solid sales performance across our entire portfolio, especially for Yervoy, Sprycel, Orencia, and Bydureon. Let me provide a few highlights.

Yervoy sales increased 33% year over year to $238 million. Yervoy continued to show strong performance in Europe. We recently received a positive opinion from the CHMP for first line use of Yervoy and hope to have marketing authorization later this year. This is an important addition to our label in Europe and will allow a broader set of patients to potentially benefit earlier in their treatment.

In the U.S., Yervoy sales softened somewhat from the second quarter. As Lamberto mentioned, we have seen an impact from a significant increase in new clinical trials targeting melanoma. Patient enrollment in metastatic melanoma trials has more than doubled since the beginning of the year, with some of that increase coming from our own clinical trials with Nivolumab.

While these clinical trials have affected the commercial opportunity at several large academic institutions, we continue to focus on growing Yervoy in the community setting, which represents approximately 60% of our U.S. sales. Recent weekly sales trends are encouraging.

We believe having the first line indication in Europe, along with the survival data presented at the European Cancer Congress, will enable us to continue to deliver strong growth. Sales of Eliquis were $41 million during the quarter.

As Lamberto mentioned, we have several initiatives focused on helping prescribers, patients, and payers understand Eliquis’ differentiated profile. Recent prescription trends are improving as we have seen consistent weekly growth during Q3. As an important leading indicator, our overall new to brand share has improved and is now nearly 20% with cardiologists.

Our diabetes portfolio had sales of $411 million in the quarter. After a period of transition in our diabetes organization, we are beginning to see more positive trends in this business. Sales for the exenatide franchise were up $193 million, up nearly 14% from Q2, mostly due to renewed new to brand growth for Bydureon and GLP-1 market expansion. Byetta sales were essentially flat versus Q2.

Sales for the Onglyza franchise grew 19% year over year to $211 million. We have stabilized our market share in the U.S., where total prescription growth is slowing. We believe the data from the SAVOR cardiovascular outcomes trial provides important clarity regarding the safety profile of Onglyza. We continue to work through the pricing and reimbursement process for Forxiga in Europe and look forward to a potential launch in the U.S. next year.

Orencia sales increased 22% to $375 million. Subcu sales have nearly doubled since Q3 2012, and now represent nearly one-third of all Orencia sales.

Sprycel sales rose 20% to $316 million. First line use of Sprycel also is growing, as we reinforced Sprycel’s broad indication to treat patients in all phases of CML.

Now, let me highlight two line items from the rest of our non-GAAP P&L. Advertising and promotion spending increased 16% to $194 million. This is driven by our increased investment behind our key commercial opportunities such as Eliquis and our diabetes portfolio. We expect to continue these investments as well as ensure we are prepared for the expected hepatitis C launch in Japan and potential launches for Nivolumab.

As I mentioned during our second quarter call, the decrease in other income and expense is largely due to the change in the structure of our relationship with Sanofi, whereby we now record royalty income in net sales.

As you have seen, we are confirming our full year 2013 GAAP and non-GAAP EPS ranges.

Before we turn to your questions, I want to make a few comments about capital allocation. Business development continues to be our top priority, and we remain committed to the dividend. Regarding share repurchases, you will recall that overall repurchase has slowed significantly in Q2, and this trend continued in the third quarter. Moving forward, we do not anticipate future share repurchases at this time.

We are now happy to answer your questions.

John Elicker

Thanks, Charlie. Lastly, we can go to Q&A now, and I would just remind everybody that in addition to Lamberto, Charlie, and Francis, we have both Giovanni and Béatrice here to handle any questions you might have. Operator?

Question-and-Answer Session

Operator

[Operator instructions.] And we’ll take our first question from Seamus Fernandez from Leerink.

Seamus Fernandez - Leerink Swann

Just a couple of quick questions. First off, on the trajectory of the Eliquis franchise, can you just give us your thoughts and expectations for should we anticipate stronger performances internationally than in the U.S.? And then why has it been so difficult? Can you just give us a little bit of a lay of the land of the competitive landscape and perhaps what competitors may have convinced physicians of early on, and how you’re going to hopefully change their mindset?

And then separately, Francis, you made an interesting comment with regard to how the Phase I trial in lung may inform a potential move into Phase III in 2014 for Nivolumab plus Yervoy in lung cancer. Can you help us better understand the thresholds as we think about it? There’s been a lot of circulating concern around potential toxicity there, but obviously the prospect of improved efficacy is something important. So just wondering how Bristol would be thinking about the threshold or at least how we should think about your move into Phase III with this potential combination, should that be the decision that you make in 2014.

Lamberto Andreotti

I will start, and then I will ask Giovanni and Beatrice to add comments on Eliquis. First of all, we expect growth for Eliquis in both the U.S. and international markets. And in some of the international markets we have just launched. In the U.S. we launched earlier. In other countries we launched earlier. So we are at a different stage of launch, but the launch continues in both the U.S. and internationally.

We were third to the market, and we found two other agents that were entrenched in the market, especially one of them. The good news is that our clinical data is very significant, very differentiated, both the ARISTOTLE and the [unintelligible] data is good. Nobody can make the same claim.

And so we are dealing with especially one agent that is basing their strength on having launched earlier, and speaking about convenience, which we don’t think it’s really a great claim. So we will continue to work and will continue to work, and Giovanni, why don’t you start with the U.S., saying what we are doing.

Giovanni Caforio

Just to follow up on what Lamberto said, if you think about our focus in 2013 in the U.S. market, consistent with what we discussed on the last call, we are focused in a number of areas. At the beginning, we had a very heavy focus on access, and we made rapid progress there.

Then we, in parallel, shifted our focus on our presence in the hospital, and the process of entering the hospitals from a formulistic perspective and stocking is a process that requires time. We discussed that at the last call. We’ve made significant progress in the third quarter in that area.

At this point, we are stocked and present in over 80% of our focus hospitals. Our use in the hospitals has been increasing, and we’re quite satisfied, at this point, that we are at the same level of hospital presence, where [unintelligible], for example, was at the same time during their launch.

As we discussed earlier, we have a very heavy focus on medical education and peer-to-peer programs because we really have the broadest and the deepest data set in atrial fibrillation of all agents, and understanding that profile requires time and the right setting for physicians. So we have actually increased very significantly our investment in that area. We are executing a very large number of programs, and we continue to see that when physicians have the time to understand the data, they really understand the differentiated profile of Eliquis.

We also started DTC and the TV ads, and that will have an impact over time. As was mentioned before, although our uptake clearly has been slower than we had expected, we actually are making good progress in the third quarter.

Our growth over the last four weeks in key Rxes is 23%, our growth in NB Rxes is close to 20%. When you look at the cardiology setting, in a quarter during which the new to brand prescriptions of both Pradaxa and Xarelto were flat, we experienced very, very good growth. Our NB Rx share in cardiology now is close to 19%, which compares to 12% for Pradaxa. So we are continuing to make progress, and the areas of focus going forward are the same as I just described.

Béatrice Cazala

Regarding international, first let me talk briefly about Europe. We have now launched Eliquis in about 13 countries. And we saw significant growth, more than 100%, quarter over quarter. We are planning to launch in another four countries across Europe, including Italy. So this target launch also accounts for possibly the slower pace that you can see.

We are feeling positive now about access. We are focusing our launch effort mainly on the cardiologists, and we are allocating resources strongly at the hospital, but also differentiating versus the level of [unintelligible] penetration in various markets.

What makes Europe also is very different penetration of the [unintelligible], which gives us a lot of opportunities, because you go from countries where [unintelligible] are only at 2% penetration, and others where it’s already 25%. So we are clearly differentiating our investment there, and we will be very competitive in other segments of the market, in all the various markets.

We are continuing to do strong medical education. Let’s not forget that [unintelligible] [authorization] starts with the hospital. Most of the patients go to the hospital in Europe. Then we also [unintelligible] the cardiologists and the general practitioners. So we are trying to accelerate the hospital discharge and the prescription at the hospital [unintelligible], moving to cardiologists and general practitioners.

A lot of education needs to take place, and this is happening now. We are reinforcing our resources there. And as we see now more recent market data, we see that the differentiated profile starts being perceived by the cardiologists, which are [unintelligible] very important for the long term growth of the products.

Francis Cuss

We were very encouraged with the melanoma data with the combination, and we were pleasantly surprised with the tolerability that we saw there. But as you appreciate, lung cancer is a different indication, and we will be looking, clearly, at the therapeutic index. We don’t have the data yet, and I can’t speculate about what we will see. But just to remind you that of course what we believe is one of the most valuable aspects of immunotherapy is the durable response. And that data set will be evolving over the next 6 to 12 months. And of course our hope will be combination that we will see an enhanced, durable response.

Operator

We’ll take our next question from Mark Schoenebaum with ISI Group.

Mark Schoenebaum - ISI Group

On diabetes, I was wondering if you could tell us what you were able to realize in price for the DPP4 franchise if possible, in the quarter, in the U.S., most importantly, if that’s possible. Number two, I’d love to get your perspective on the increased rates of hospitalizations for heart failure seen in the SABRE trial, whether or not you think that’s going to generate any kind of regulatory scrutiny. And then finally, on Nivo, the upcoming potentially pivotal Phase II third line refractory squamous trial, what level of response would you define as success in that trial?

Francis Cuss

So, as you noted, one component of our secondary endpoint hospitalization for heart failure did occur, specifically more than the untreated group. But it is important to note, I think, that there was no increased risk of death due to heart failure overall, and in patients who entered the trial with a history of heart failure, there was no statistical different between the treatment and the primary endpoint.

So we’ve been discussing with consultants about what this may mean, and we’ve had discussions with the regulators and we’ll be making a submission of this data to see where any change to the labeling will come. That will be happening early next year.

I think it’s important to also mention that if you take the SABRE trial overall, there was clearly some benefits there in terms of diabetic control. While that wasn’t the point of the trial, it was very reassuring from that perspective, that patients treated with [Onglyza] had better control, and I think there was reassuring data around pancreatitis, even though the numbers were small in the end, and pancreatic cancer. So, overall, we felt the SABRE trial did really inform quite considerably on the use of DPP4 inhibitors, specifically Onglyza.

As far as squamous is concerned, unfortunately, like all these things, it will depend exactly on the data we see. We think, and I’ll repeat, it’s very important to consider that this is a patient population with no other options at all at the present time, and that it’s a very important aspect of this to see what the long term durable response rate is, not just the overall response rate. We think that’s important.

Charles Bancroft

Mark, I think your question was more related to the U.S. in regard to price. Overall, as we think of the Onglyza franchise, we continue to be at roughly parity with Januvia, and we did take a 5% [unintelligible] price increase in August of this year.

Operator

We’ll take our next question from Jami Rubin with Goldman Sachs

Jami Rubin - Goldman Sachs

I just have a couple of questions. Lamberto, first to you, I guess that given the significant commitment to immuno-oncology and the 25 trials ongoing with Nivolumab, and others, I’m just wondering if you’re signaling to investors that we should assume a change in the rate of growth in R&D, different from what we’ve seen the past couple of years?

And my second question relates to the hep C program. Not sure who will take this, but if you could just help us to think about the commercial opportunity in Japan from your all-oral dual regimen. The reason why I think this is tough for us to figure out is that Telaprevir was a big disappointment in Japan, even though it produced much higher cure rates from peg/riba. Your combination obviously excludes peg/riba. So how should we think about the commercial uptake, pricing, etc.? And then secondly, how long do you expect to be on that market without competitors, which, you know, as I understand, will be on your heels.

Lamberto Andreotti

Thank you for this question, because this allows me to expand on the subject of investments that both Charlie and I mentioned in our remarks. Let me say that we will continue to invest to support this immuno-oncology portfolio, and we will continue to invest behind Eliquis, hep C, and diabetes.

And all this will get the resources that they deserve, and this will increase our expenses, mostly the commercial expenses, because within R&D we have a number of programs that are ending now, and therefore we will have resources coming from within R&D to finance the additional expenses that immuno-oncology will especially require. And they are significant, by the way.

But in commercial, we have already eliminated a lot of the expenses behind the old products, and therefore we will think about increasing commercial expenses. We will be ready to launch Nivo, and we will continue to support Yervoy. And as we said, Yervoy will launch as a first line in Europe. So we will expand the commercial activities behind Eliquis in the U.S., in the early launches, and we will launch outside the U.S. and the most recent countries.

And then Charlie will speak about the investments that will be required by the launch of hep C in Japan. And finally, we have Forziga hopefully approved next year, so we will have a launch of Forziga in the U.S.

Having said that, we are extremely aware, my management and I are extremely aware, of how important it is to deliver short term results, and we will deliver them, but we consider equally, if even not more important, to build a solid foundation for sustained long term growth. So we will devote resources, in summary, as I said, to all the great opportunities we have.

Charles Bancroft

As Lamberto mentioned in his opening comments, we are very excited about our opportunity to bring the first all-oral hep C regimen to market in Japan with our genotype 1B strategy. Our registrational Phase III study of daclatasvir and asunaprevir in Japanese genotype 1B patients will be presented at AASLD in a couple of weeks, and we plan to file in Japan later in this quarter.

Remember that there are about 1.2 million people infected with hepatitis C in Japan, and about 70% of them have genotype 1B. These patients are largely elderly and many either cannot tolerate the current interferon-based standard of care or are ineligible to receive it. So that speaks to the real opportunity and why the current standard of care has not done as well, to your earlier point.

And finally, we believe we have up to an 18-month lead on both [ABVI] and Gilead in Japan.

Operator

We’ll take our next question from Chris Schott with JPMorgan.

Christopher Schott – JPMorgan

Just had three here. I guess first, we’ve seen your competitors in the PD-L1 space focusing a bit more on PD-L1 status, particularly in non-small cell lung cancer. Can you just elaborate on your view on this dynamic and what implications it has either to the size of the market or the competitive positioning of Nivo?

Second, on Eliquis, with the slower launch - I know things are accelerating a bit now - have you changed your internal peak sales assumptions on the product based on the experience thus far?

And then finally, switching to diabetes, in light of some of the moves by payers to narrow their formulary to one or two products in some of these major categories, can you just talk about how formulary dynamics play out in the space over time? And are things just becoming more challenging with payers on that portion of your business?

Lamberto Andreotti

I have a very quick answer to your question on Eliquis. No, our peak sales have not changed. And we are still very confident about Eliquis, and what the product can achieve.

Francis Cuss

Can I say a word about the PD-L1? As you remember, Chris, we reported biomarker data last year in the New England Journal of Medicine that suggested PD-L1 might be a predictive marker for the activity of Nivolumab. And as a result, we’ve been studying this throughout our broad Phase III program.

Now, it’s important to note that our clinical development plans are designed to explore both the potential predictive biomarker and to ensure that the patients who may benefit are not excluded if they’re biomarker negative. So our objective is to conduct well-controlled Phase III studies that will establish the validity of any biomarker based on overall survival. And again, it’s an important element, not just about response rate, overall survival.

And I think finally it’s hard to predict exactly how this will come out, because as you understand, the approach for developing immunotherapies is rather different from what we would use in [unintelligible] in medicines. So in immuno-oncology, we’re really targeting the host and the interaction of the tumor and the host’s immune system, as opposed to tumor mutations such as KRAS or BRAF.

That being said, I think I would say as far as we’re concerned in BMS we have a lot of experience with KRAS and [unintelligible]. We do understand what’s necessary to have a pharmacodiagnostic properly validate and to develop the data that’s going to be required for the regulators to make a decision. So I think we’re generating the data, we’ll see what the data is, and we’ll debate and collaborate with the regulators to provide perhaps a biomarker or perhaps an accelerated submission if that’s appropriate.

Giovanni Caforio

Let me make a comment on diabetes access. Clearly, as you know, this is a very big market, very competitive and crowded. And obviously it’s an area of focus for payers, and that will not change going forward. From our perspective, this is the one area in fact having a broad portfolio really creates a good platform for us to negotiate with payers through the three classes.

When we look at our competitive position, our access with Bydureon is improving, and following following the loss of Caremark at the end of last year, our access position this year with Onglyza and Kombiglyze has been good and stable.

Going into next year, as you probably know, we had two very important wins with ESI, which is a very important customer, both with respect to our position with Onglyza and [unintelligible], and most importantly with Bydureon as the preferred GLP-1. So it continues to be an area of focus for us, but we’re working very actively. We have a good portfolio, and we’ll be able to continue to compete.

Operator

And we’ll take our next question from Alex Arfaei with BMO Capital Markets.

Alex Arfaei - BMO Capital Markets

First, for Francis, I realize it’s a bit early, but could you please comment on some of the other cancer immunotherapies that you have in the clinic, and roughly when we can expect data? And then a follow up on Forxiga. Is the FDA outcome later this year simply a follow up to earlier issues? Because it doesn’t seem like one is expected for [unintelligible].

Francis Cuss

Let me be just very brief. We have ongoing trials with combinations of ipilimumab, Nivolumab, with our [unintelligible] and IL-21. Those are ongoing exploratory trials, so it’s very hard to say. They’re [unintelligible], so we’ll see when those come out. And I think excitingly, we’re going to have, before the end of the year, the LAG-3 entering the clinic. And again, those [unintelligible]. Again, very exciting.

The outcome for Forxiga, we know we have an outcome in December that the FDA, I think it’s important to note, has been working through, despite the government shutdown. We feel we’ve answered all the questions that came from the CRL. And we added additional data to the submission. Some of that was presented at the EASD in September, and some more on hypertension will be presented at the AHA in November. And this will be part of the outcome.

Operator

We’ll take our next question from Tim Anderson from Sanford Bernstein.

Tim Anderson - Sanford Bernstein

If I can go back to biomarkers, your positioning over at least initially was a little bit uncertain whether L1 expression would be highly predictive. But when I look at the data that has continued to come out, it seems like that body of evidence does increasingly support that L1 expression predicts efficacy. And I guess my question to you is has your thinking changed over time? I know your development programs are set up to look at it, but are you kind of warming up, the more data you see to the idea of L1 being predictive?

And then related to this, what other predictive biomarkers are you looking at, or is anyone in the industry looking at, that’s been promising?

And then the last question is, going back to your comment, you said the next public data downstream of World Lung Conference would be ASCO, but I’m imagining you’ll have top line results of various sorts in between. If that’s right, maybe you could outline what some of these would include. I would imagine that would be the Phase II lung cancer data and the combo data with [ipi], for example.

Francis Cuss

So I think it’s fair to say our data and others suggest that the PD-L1 biomarker will enrich full response. However, it’s also very clear that there’s a number of patients who are apparently PD-L1 negative who also respond. And I think it’s important that we don’t exclude those patients from the potential benefit. And I think it’s particularly important to say also that the data set will evolve, and we’ll get some sense of the long term response.

But that being said, we’re leaving ourselves open to take the data we generate and in discussions with the regulators to come up with the best approach.

Lamberto Andreotti

Can I make a comment, please? Not obviously very scientific, but aren’t others drawing conclusions a bit too early at this point? I mean, don’t we need more patients, more experience, before we draw final conclusions on these very important aspects?

Francis Cuss

Well, I think that’s certainly our point of view. I think we’re leaving ourselves open to go with a biomarker if that’s what the data shows, but we also want to make sure that we make sure this therapy is open to the broadest number of patients. I think as far as other predictive biomarkers are concerned, there’s a lot of work ongoing in terms of understanding that interaction between the host and the tumor. And I don’t think at this point I want to share that data, but it’s certainly an area of considerable work, both internally within BMS and externally with our collaborators.

As far as the next public data, let me reiterate what I said. The two-year lung data will be presented from 003 at the World Lung Conference in Sydney later this week. And then we will be getting considerable amounts of data over the next six months, within BMS, but the next time we’re planning to present publicly will be at ASCO, and there will be data sets, probably further data sets on 003 survival, 004, which is the combination, and potentially the third line Phase II study in non-small cell lung squamous cell.

John Elicker

And Tim, you’re right, we will also have the combo Phase I lung study in house, hopefully by the end of the year.

Francis Cuss

Both the non-small cell and renal cell.

Operator

We’ll take our next question from Andrew Baum with Citi.

Andrew Baum - Citi

Three questions please. First, can you give us an update on Urelumab, your anti-CD137? When should we expect to see some of the data from your ongoing trials? Second, could you help us understand the lower pneumonitis grade three rates that you’re seeing with Nivolumab of late? To what extent is this just a function of patient selection and management? And in actual fact, when you start looking at combination therapies, the [unintelligible] benefits of PD-L1 target data may look somewhat better? And then finally, how will the GBA decision on Galvus reimbursements in Germany impact the pricing of the class in the rest of Europe?

Francis Cuss

Urelumab, we have a couple of studies ongoing. They’re exploratory studies. They’re event-based studies. So they will be probably reporting out sometime in 2015, perhaps a little sooner. As far as the pneumonitis rate, we’re not seeing very high rates at all. We have seen [unintelligible] with both PD1 and our PD-L1. And it’s very difficult with very small numbers. I think it’s an important potential adverse event, but it doesn’t happen very often, and we do expect, as the numbers grow, to have a better sense of that. But I think it’s very hard at this point to interpret at all about whether it will be greater or lesser with either PD1 or PD-L1.

Béatrice Cazala

Regarding the GBA, you probably all heard that on October 1 a ruling was made after a class review of all the DPP-4s, and their combinations. So we’re very pleased to see that in a very difficult context in Germany for diabetes, our products, [Onglyza] and Kombiglyze, were given an added minor benefit over [unintelligible] metformin. So that happened with [unintelligible]. The others, as you mentioned, did not get any benefit.

So, what happens now in the process, and to understand what could be the outcome, is that negotiations on pricing are going to start with [unintelligible]. So obviously each company will negotiate their pricing, and we’ll see then the outcome. For us, we feel that with an additional benefit, we will be able to conclude pricing negotiations relatively quickly, and we cannot speculate what exactly [unintelligible], but we will be ready to face any opportunities [unintelligible].

Operator

We’ll take our next question from Steve Scala with Cowen.

Steve Scala – Cowen & Company

I have two followups from points made on the second quarter call. I apologize if you’ve already given this piece of information, but what is the share of Eliquis among cardiologists? I think on the second quarter call you said it was about 15%.

And on Nivolumab, on the second quarter call you stated that there was no more public disclosures this year, when indeed you do have this two-year update that you referenced a couple of times on the call coming this week, or next week. So three months ago you probably didn’t have the two-year data, but now you do, the two-year update. So I’m wondering if receipt of the data changed your language or characterization of the event.

Giovanni Caforio

Let me start with the cardiology MB Rx share. The latest data point we have is 18.9% share for Eliquis from a new patient share in cardiology.

Francis Cuss

Just to say that we always planned to present the long term data at the World Lung Conference in Sydney. You’re right, that’s not new. That was always the plan. But you’re right, the next date after that is ASCO.

John Elicker

And I think part of that we’re seeing the view that this is data from an existing study that had already been presented, so we weren’t presenting data from any new studies the remainder of this year.

Operator

We’ll take our next question from Vamil Divan with Credit Suisse.

Vamil Divan - Credit Suisse

I’ve got one on the pipeline and one on the market side. On the market side, about Orencia, you mentioned the subcu formulation. And I think you said it’s about a third of the use is now with that formulation. I think that’s consistent with what we’re hearing too. Just wondering if you’re sensing that that’s helping position you to get more comfortable moving Orencia up earlier in the algorithm, and maybe what else you can expect in terms of lifecycle management.

And then on Nivo, I realize it’s a bit early to be asking this question, but we’ve been getting this question a lot ourselves. And so on the pricing side, and there seems to be a lot of wide range of assumptions there in terms of how the combo could potentially be priced. And once again, I realize it’s early, but if there’s anything you could say just in terms of directionally how we should be thinking about that, what your framework is in terms of thinking about pricing, just because it is such a key variable in our model and I think others as well.

Lamberto Andreotti

You’re right, the pricing on Nivo is a very important subject, but we’re not willing to discuss it today. We are devoting a lot of attention to that subject. We are discussing it internally. We are collecting the right data. And obviously we will make the decision over time, and we will announce it at the very last minute.

Giovanni Caforio

Maybe let me start with Orencia in the U.S. We had a very good quarter in the U.S. The brand was up 17% versus previous year. The subcu formulation was up significantly, both versus prior year and then sequentially over the previous quarter in the U.S. That is happening exactly as you mentioned, as a result of physicians feeling more and more comfortable in using the subcu formulation earlier in the treatment paradigm. And in fact, even our promotional strategy has shifted really to promoting the value of Orencia subcu as a first line biologic. As you may have seen and know, we’re now the third most prescribed subcu agent in the U.S. and the trends continue to be positive.

Béatrice Cazala

Similarly, in international and in Europe, things are going very well for Orencia. In Europe, particularly, the market was 70%-plus in subcu, so having now the addition and the reimbursement [unintelligible], but in most markets for subcu it’s very helpful to those who are growing by more than 40% in the last quarter. So, similarly, we see more and more use, first line biologic [unintelligible] and more and more thinking about the first line biologics. [unintelligible], but also what we have noticed in the last quarter is that our IV business seems to be bottoming out and stabilizing and regrowing, so that’s also good, because we have additional growth coming from new patients, not just cannibalization.

Operator

And we’ll take our final question from Gregg Gilbert with Bank of America.

Gregg Gilbert – Bank of America Merrill Lynch

For Giovanni and Beatrice, I was curious how much does your oncology commercial effort need to expand is Nivo is approved in lung cancer, and when would you begin that expansion? And for Charlie, on tax rate, wondering what a good tax rate to use longer term would be, now that you’ve had some more time post-Plavix LOE. And does that new rate give you adequate flexibility to raise the dividend if you were choose so, and to buy back stock, if you were to choose to do so again in the future. Just wondering how much flexibility is left within your new tax structure.

Giovanni Caforio

Very quickly, on the U.S., as you know, we have a very good organization in the U.S., with a strong and diversified portfolio. We are well-resourced for [unintelligible] in melanoma. Obviously we are thinking about lung. That’s a bigger opportunity, it’s a larger prescriber base, and we will be ready to launch that as well. So we clearly will invest and grow the sales organization in the U.S..

Béatrice Cazala

And as you know, lung is really a global issue, from China to Japan to the U.S. So the global team are working with all our original team to assess in the next fiscal year how much resources we need to be ready and start early on. It’s clear that with the competitive landscape, we want to be ready and not to have the reorganize every year, each time we have an additional indication of an additional evolution. So we are working on that very actively with all our regions.

Lamberto Andreotti

Yes, this is the new paradigm in oncology, where we have multiple indications potentially coming very quickly, and therefore we are thinking, in the U.S., as Giovanni said, and outside of the U.S., as Beatrice said, of creating an infrastructure and a structure that doesn’t need to be changed at every indication. And also we need to start very early with these new prescribers, the new indication with new prescribers. Remember the work we had to do with the melanoma prescribers at the beginning to familiarize them with immuno-oncology? Well, the same needs to be done now, to much grow the base in the U.S. and internationally, to familiarize them with immuno-oncology. And they are especially the lung cancer prescribers.

Charles Bancroft

On the tax rate, you may recall that we benefited in 2013 by having the double up of the R&D tax credit from 2012. Going forward, our tax rate is very dependent upon where our earnings mix comes from. And we’ve said at least in the intermediate term we view our tax rate in the mid to high teens area. I can’t give more than that. We’re going to have to roll up the numbers and see where all the different earnings come from.

As far as the dividend, that’s an annual board decision, and that’s not one I can talk about at this point. And in regard to share repurchase, I would just reinforce what I said in my opening comments, that we do not anticipate any share repurchases going forward at this time.

Lamberto Andreotti

Thank you, Charlie. Even though this is a decision of the board, we are aware that the board and we are committed to the dividend. So I know that every comment we make on dividends might be misinterpreted. I just don’t want your comment to be misinterpreted. We are committed to the dividend, and the board will decide on it quarter by quarter and year by year.

Let me conclude the session by repeating that this is an important time for Bristol-Myers Squibb, with return to growth, our pipeline progress, and our balanced approach to delivering the results of today while laying the foundation for the results of tomorrow. Taken together, Bristol-Myers Squibb is strong and I’m convinced we are well-positioned for the future. Thank you very much, and you have a great day.

John Elicker

Okay, that’s going to conclude the call. Thanks everybody for joining. As always, the IR team here at Bristol is available for followups. Thank you.

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