Bristol-Myers Squibb's (BMY) CEO Lamberto Andreotti On Q1 2014 Results - Earnings Call Transcript

Apr.29.14 | About: Bristol-Myers Squibb (BMY)

Bristol-Myers Squibb Company (NYSE:BMY)

Q1 2014 Earnings Conference Call

April 29, 2014 9:30 AM 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 – Executive Vice President and Chief Commercial Officer

Francis Cuss – Executive Vice President and Chief Scientific Officer

Analysts

Chris T. Schott – JPMorgan Securities LLC

Vamil K. Divan – Credit Suisse Securities LLC

Jami Rubin – Goldman Sachs & Co.

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

Seamus Fernandez – Leerink Swamm, LLC

John T. Boris – SunTrust Robinson Humphrey

Andrew S. Baum – Citigroup Global Markets Ltd.

Mark J. Schoenebaum – ISI Group Inc.

David R. Risinger – Morgan Stanley & Co. LLC

Marc Goodman – UBS Securities LLC

Alex Arfaei – BMO Capital Markets

Operator

Good day and welcome to the Bristol-Myers Squibb 2014 First Quarter Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. John Elicker. Please go ahead.

John Elicker

Thanks, Jamie and good morning everybody. thanks for joining us. With me this morning are Lamberto Andreotti, our Chief Executive Officer; Charlie Bancroft, our Chief Financial Officer; Francis Cuss, our Chief Scientific Officer and Giovanni Caforio, our Chief Commercial Officer. Lamberto, Francis and Charlie will have prepared remarks and then we’ll go to your questions.

So before I turn it over to Lamberto, let me cover the Safe Harbor Language. 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.

During the call, we’ll also discuss non-GAAP financial measures, adjusted to exclude certain specified items. Reconciliations of these financial measures to most comparable GAAP measures are available at www.bms.com. Lamberto?

Lamberto Andreotti

Well, thank you, John. Good morning everyone. We have a lot to discuss today. First, I want to mention our nivolumab study in third-line squamous non-small-cell lung cancer, known as Study 063. As you know, this is something you’re all interested in. We had productive discussions with the FDA regarding the study and we will be initiating a rolling submission for this indication in the next few days. I feel extremely good about.

Having said that, we’ll switch to our first quarter results – our good first quarter results. Our non-GAAP earnings per share improved 12% to $0.46, compared to last year. And our top line performance was meaningful. Excluding our diabetic franchise, sales increased 5%, while our new and in-line brands increased 8%.

Our core products performed well with double-digit growth in Sprycel, 19%; Yervoy, 18%; Orencia, 13%, and Baraclude, 11%. Sales of Eliquis topped at $100 million threshold with positive momentum in the U.S., as well as in other markets around the world. Last year, we identified and executed against some key opportunities to accelerate the growth of Eliquis, focusing on cardiologists, increasing our investment behind medical education, driving improvement in access and launching direct-to-consumer advertising in the U.S. Our increased investments are driving results as we see improvements in prescription plan in all areas.

Together with Pfizer, we are committing even more abilities to Eliquis this year, and we are pleased that the FDA approved Eliquis for the prevention of deep vein being promoted in Q1 and hope to be able to further expand the label in both the U.S. and Europe with the inclusion of VTE treatment later in the year.

As far as immuno-oncology is concerned, Charlie and Francis will give you details to how we are performing and what we are doing and planning. Let me just say that I am glad about how the Yervoy continues to grow around the world and that we had best quarter in the U.S. since launch with strengthened demand in our community oncologists and I’m equally or even more excited about nivolumab.

During the quarter, we added new trials for nivolumab in mono therapy and combination in several new tumor types. and I’ve already mentioned our decision on the rolling submission of 063. Also our earlier stage portfolio continuously advanced to our own R&D efforts and through external collaborations such as the recently announced agreements with Five Prime. In summary, we made meaningful progress across our growth IO portfolio and we continue to build in advance our leadership position.

Moving to HCV, hepatitis C, we also made good important progress. In fact, we had potential HCV approval for daclatasvir based regimen in all of the major regions before the end of the year, beginning with Japan and continually both Europe and the U.S. With respect to the U.S., our possible approval is based on the recent NDA submission that follows the breakthrough therapy designation for our dual regimen of daclatasvir and asunaprevir.

Finally, I will briefly mention our progress in the development of an early-stage portfolio addressing genetically defined disease or GDD. Our process on GDDs is part of the redefined R&D strategies that we announced in November of last year.

Our research and development teams are currently working to identify key targets to prioritize for future development and our business development people of pursuing the standard opportunities in this area. We’ve just announced the acquisition of iPierian, a company discovering and developing the treatment of certain kinds of disease of the brain called Tauopathies is the first result of their focused areas.

Growing our marketed products and continuing to advance the development of our pipeline had been spend to our balanced approach of driving our results today, while setting the stage for tomorrow. The divestiture of our diabetes business to AstraZeneca that we completed in the first quarter is allowing us to further improve this approach, and accelerate our evolution through specialty biopharma.

Our operating model is getting simplified and streamlined throughout the entire company. At the same time, we are increasing investments and focus behind priority areas of anticoagulation, immuno-oncology and HCV, as well as in certain geographies wherever we can be more competitive.

Taking together, our first quarter results along with the work we have been doing to drive our specialty evolution, signifies a strong start, what should be an important year for us. For sometime we had been talking about our portfolio of the future, but many significant ways, that future has already started.

And many important things will happen for the company during the rest of the year, starting very soon with the presentation of a lot of data at ASCO, and continuing all of other potential developments that I mentioned with respect to Eliquis, HCV and immuno-oncology.

Some these developments will lead to increased sales in the near-term, while all of them should generate growth in the longer-term. We are working hard to continue to deliver success.

So with that, let me turn it over to Francis.

Francis Cuss

Thank you, Lamberto. Good morning, everyone. Today I’ll discuss the progress we’re making within R&D including an update on our immuno-oncology portfolio. It’s crucial for our R&D organization to execute on the near-term delivery of our pipeline, while investing to maintain a robust portfolio future opportunities. I’m confident in the progress we’ve made including the work we’ve done to accelerate our Hepatitis C program with the potential for approvals in Japan, the EU and U.S. before the end of this year.

We continue to believe that we have some interesting opportunities in this very large market. Looking ahead, we have some important opportunities stemming from our decision last year to evolve our strategic focus in R&D, and moving to areas to support the company’s evolution to specialty care biopharma company.

One new component of our R&D strategy is an explicit focus on genetically-defined diseases; by genetically-defined we mean diseases caused by mutation that we can identify and design the therapeutic approach specifically to address them by directly targeting the genetic basis of the diseases, we believe we have the opportunity to significant advance the standard of care.

We’re developing an early stage portfolio that addresses the genetically-defined diseases through the identification of key targets. Our acquisition of iPierian and its lead Tau antibody, is actually a good example of this approach. iPierian's anti-Tau approach provides us with an opportunity to develop an innovative disease-modifying treatment that’s certainly genetic-defined neurodegenerative diseases known as Tauopathies.

Our initial development focus would be in progressive supranuclear palsy, a rare brain disease with Tau dysfunction, and this could possibly extend to other neurodegenerative diseases.

Let me now turn to immuno-oncology, I convinced that immuno-oncology could be transformation in the treatment of cancer with a potential for durable responses and long-term survival offering significant promises for patient. Building on the important body of research and the experience, we have with Yervoy, we have seen significant progress in our clinical development programs for Nivo, and the rest of our immuno-oncology portfolio.

Of the more than 35 Nivo trials ongoing in many different tumors, about a third are potentially registrational. Important datasets, are now maturing, and we expect significant data readouts over the next 12 months to 18 months.

We have the first such date to read out now. We have the data from Study 063, and as you know this study assess the highly pretreated patient population where there are no other approved or recommended treatment alternatives. Our review as a result of the Study 063 reinforces our belief in the potential of Nivo to offer durable responses and demonstrate an improvement in long-term survival.

We’ve had positive discussions with the FDA regarding Study 063, and this study will be the basis for rolling submission that we will be initiating in the next few days. We expect to complete the rolling submission by year’s end, which will allow the FDA to consider additional data that will become available in the remainder of 2014. We hope to present the data at the 2014 Multidisciplinary Symposium in Thoracic Oncology in October later this year.

The results 063 marked the beginning of our data flow in lung cancer where our clinical development program has made significant progress. Our program in lung cancer addresses multiple lines of therapy, different histologies, the use of biomarkers and potential therapy with both monotherapy and combination regimens.

For example, there are two ongoing second line phase III trials in non-small cell lung cancer, one in squamous and one in non-squamous, a recently initiated first line phase III trial with nivolumab monotherapy in lung cancer for PDL-1 positive patients and we plan to begin a phase III program to study the combination regimen of Nivo and Yervoy by the end of this year.

ASCO will be a very important meeting where we will present data from new studies, as well as more material data from ongoing studies. Specifically, there will be additional mono therapy and combination data for Nivo in lung, melanoma and renal as well as data for Yervoy adjuvant melanoma.

Looking to the second half of 2014, we expect to have data in house from our second line lung cancer studies. We’re also looking forward to the first presentation of Nivo data in hematological tumors at ASH in December. Based upon the data, we believe there is significant opportunity for IO broadly across other tumor types. We’ve started potentially registrational trails in follicular and diffuse B-cell lymphoma, as well as glioblastoma, colorectal cancer, and head and neck cancer. We’ve initiated signal detection trails in pancreatic, gastric, small cell lung and breast cancer.

For many of these tumors, we are exploring both Nivo monotherapy, as well as the combination regimen of Nivo plus Yervoy. We are also pursuing additional IO assets with different mechanisms in both monotherapy and in combination. Key clinical stage assets in our early portfolio include Anti-LAG3, Anti-KIR and Urelumab.

In closing, let me remind you that our goal is to deliver to patients the potential for long-term survival across a wide range of tumors. We’ll continue to drive our programs and our trails forward as quickly robust as possible. Based on our investment, our leadership and our experience in this area, I’m confident that we’ll continue to be well positioned to accomplish this.

Now, let met turn this over to Charlie.

Charles Bancroft

Thank you, Francis, and good morning everyone. Overall, we had a good quarter. First quarter revenues excluding diabetes were strong led by Eliquis, Yervoy, Sprycel and Baraclude.

Let me provide a few highlights from the quarter. As Lamberto noted, we are pleased by the progress we are making with Eliquis. The investments that we and Pfizer made at the end of last year, along with additional investments this quarter have accelerated Eliquis’ growth around the world. In the U.S., net sales of Eliquis were $61 million, up 27% from the fourth quarter. We are seeing encouraging prescription trends in our new-to-brand share among cardiologists is now over 35%.

Outside the U.S., net sales were $45 million. In the EU, we saw particularly strong performance in Germany and had recent launches in Italy and France. Japan also had a good quarter as the prescription limitation was recently listed. Yervoy sales grew 18% to $271 million. U.S. net sales were $146 million. You will recall that there was a $25 million one-time reversal of a sales deferral during the first quarter of last year. On a demand basis, Yervoy had its best quarter in the U.S.

While Yervoy continues to grow at academic institutions, we are also seeing good growth coming from community hospitals and practices. In the EU, we saw strong performance in both France and Germany, where we have reimbursement in the first-line study. Orencia sales grew 13% to $361 million, while we continue to see solid growth; there is increasing competition for first-line use and switches, which lowered the pace of growth from the prior quarter. We are focused on improving our execution particularly in the first-line study.

One final note on sales, our U.S. business during the quarter was negatively impacted by wholesaler inventory work down, particularly with the Sustiva Franchise and Abilify. This impact was somewhat offset by an inventory build in Japan. We expect inventory levels to normalize over the next several months.

Let me spend a few minutes on the Diabetes Franchise and the impact of this quarter and the rest of the year. We completed the sale of our global diabetes business on February 1. Our first quarter results therefore, reflect one month of the historical diabetes business prior to closing and two months of impact to our P&L of the ongoing terms related to the transaction.

Let me provide some color. Total diabetes revenues were $179 million, including $153 million in product sales during January. The other $26 million for February and March is primarily related to our ongoing product supply agreement with AstraZeneca.

We expect these product supply sales to be about $10 million per month in 2014. We will report royalty income on sales made by AstraZeneca in the other income line of our P&L. These royalties were $48 million in the first quarter. We are also providing certain transitional services to AstraZeneca. These service fees were $31 million in the first quarter and are included in other income. The income from transitional services is expected to taper throughout the year and most services should be completed by year-end.

We will continue to conduct and fund certain predefined clinical trials and diabetes through 2016. The cost of these trials will be included in R&D expense. During the quarter, we received $3.3 billion from AstraZeneca for our global diabetes business. We also received an additional $100 millin in April for the approval of Forxiga in Japan.

This has significantly improved our cash balances, particularly in the U.S., which gives us increased financial flexibility. Now, let me highlight a few items from the rest of our non-GAAP P&L. Gross margin was 75.8% during the quarter, up 130 basis points compared to the same period last year. This is mostly due to product mix following the divestiture of our diabetes business.

Marketing, selling and admin expenses were down about 4% as our increased investments in Eliquis, Yervoy and our pre-launched assets in immuno-oncology and hepatitis C were offset by reduced expenses in diabetes.

Our non-GAAP tax rate was 23% during the quarter, which is higher than the same period last year. You’ll recall that in Q1 2013, we booked five quarters of the R&D tax credit. This quarter does not include the impact of the 2014 R&D tax credit, and so that’s not yet (expended) [ph].

Regarding guidance for 2014, we are adjusting our full-year 2014 non-GAAP EPS guidance range to $1.70 to $1.80, which assumes current exchange rates in the extension of the U.S. R&D tax credit. Now that we have closed the diabetes transaction, we are able to provide certain non-GAAP line item guidance, which you’ll have seen in our press release.

Now, we would be happy to address your questions.

Question-and-Answer Session

John Elicker

Okay, Jamie, I think we’re ready to go to questions for Lamberto, Charlie, Francis and Giovanni.

Operator

Thank you. (Operator Instructions) And we’ll take our first question from Chris Schott with JPMorgan. Please go ahead.

Chris T. Schott – JPMorgan Securities LLC

Great, thanks very much. I just had two questions here. First on the 063 study, can you help frame our expectations for that data relative to the response rate and survival rates we saw from the 003 study last fall, just trying to understand how we should be, obviously heard positive data, but how should we be thinking about that? And then just on timing, can you just update on ex-U.S. filing from Nivo, any comments there as always filing timelines for second-line lung for Nivo, just latest thoughts? Thanks very much.

Lamberto Andreotti

Thank you, Chris. Let me just reemphasize, we have productive ongoing discussions with the FDA. The 063 data will be the basis for the rolling submission that we’re going to be initiating in the next few days; and we will expect to complete that by the end of the year.

You’ll understand that, we don’t normally talk about the data before we present it in a scientific forum, and we are planning to present this data at the Multidisciplinary Symposium in Thoracic Oncology in October of this year.

But what I would say is, our review of the 063 data really reinforces our belief in the potential Nivo to demonstrate an improvement in the long-term survival, which we believe will be important to lung cancer patients.

And personally, I’m very happy to be moving forward with our first submission. As far a program outside the United States, the whole nivolumab program is a global program, the requirements differ in different parts of the world, and we are looking at providing, we won’t be talking about specific timing details, but we are looking at submissions, once we’ve seen the data from the squamous and non-squamous, non-small cell lung second line data, which we believe we will get the top line towards the end of the year. Thanks, Chris.

John Elicker

Great, Chris. Thanks for the question. Can we go to next one Jamie please?

Operator

Yes. Our next question is from Vamil Divan with Credit Suisse. Please go ahead.

Vamil K. Divan – Credit Suisse Securities LLC

Yes, thanks for taking the question. So the first one around Eliquis seems like you are making some traction there. Obviously, the news around Pfizer and Astra generated a lot of excitement and interest. What just your thoughts Eliquis and your commitment there. I think a lot of you are wondering would you do something similar to what you do with two diabetes products and giving to Astra any thought that Pfizer to put you on Eliquis would you go into give that back? and then the second one a little more general on the IO side, it’s good news on 063, you are moving very quickly here, all of your competitors are as well. Just how comfortable are you with the decisions? For example, with the frontline lung cancer, you’ve moved into Phase III? The amount of data and you want to diligent to or what you’re before making these decisions to move forward, how comfortable are you with the amount that you have there relative to other programs or you can take a little more time and do a little more careful analysis before deciding to make such a big decision? So if you could just talk to that that would be helpful. Thanks.

Lamberto Andreotti

So Vamil, I will start a very easy answer to your Eliquis question. No, we are not going to sell Eliquis to Pfizer. Yes, we are very committed to Eliquis. We people see around this table follow Eliquis to a great attention. We are extremely pleased of how prescription trend is improving, we are looking with particular attention with new prescriptions in the field of cardiologists, because we believe that, that our primary focus now and by building a solid position of our product in that group of specialists will generate prescription also in primary care. Giovanni?

Giovanni Caforio

Yes this is Giovanni. Let me just make a couple of comments to go into some further detail on the performance of Eliquis in the first quarter. We had a really good quarter across the board in all markets, specifically with respect to the U.S. As Charlie mentioned, we continue to see really good trend in cardiology. We also are seeing a significant improvement in trends in the primary care setting. In cardiology, our new patient share is now at 37% and in primary care it’s in the 25% range, and all of those represent significant growth versus the previous quarter, really good developments. We’re obviously ahead of production in this setting and we are continuing to strength our position overall there. That’s the result of the investments we made beginning with the second part of last year that are really generating positive momentum and good results for us.

With respect to international markets, I’ll just make a couple of comments there. Germany is clearly one of our key areas of focus and we are seeing acceleration of our growth in Germany where our new patient share now is above products and growing very nicely. And then the third market I’ll mention again is Japan where as of the end of February, our limitations in terms of reimbursement was lifted 12 months after approval. We’ve seen a very significant acceleration of our growth in Japan where our new patient share is already above products. In the switch market, we have a leading share of new patients with switches coming from all agents that are currently in the market.

And then obviously we have a number of countries where we are launching. We’ve launched more recently like France and Italy and the trends are quite solid in those markets as well.

Charles Bancroft

And we keep adequate.

Lamberto Andreotti

Daniel, thank you very much. I would say we’re very comfortable with the work we’ve put in our exploratory programs in lungs that to support the first line Phase III study. This comes really from the steps in the breath of our experience starting with the overlay, a very broad portfolio with studies, we now have with Nivo, specifically around lung cancer, as you’re aware, we have four Phase III studies – sorry four registrational studies, three Phase III studies, two in line, one in first line, and one thing I’ve learned in my career is that the time you spent trying to understand that the medicine at the beginning of the exploratory phase really does save time – save time later on.

And I would comment around the combination of Yervoy, Nivo in lungs that the 012 study continues, it’s actually providing very important information for us to design our trial, and we are on track to start that fourth Phase III study by the end of the year.

John Elicker

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

Operator

Our next question is from Jami Rubin with Goldman Sachs. Please go ahead.

Jami Rubin – Goldman Sachs & Co.

Hi. Francis, just if I could follow up please on the rolling submission of the 063. It sounds like, I mean as you said that that FDA will have the opportunity to consider other studies that are ongoing, the Phase III second-line study. What is the issue, do you think, because we had anticipated that with response rates to build response, safety, plus the ability to supplement 063 with the data from 003, what is the focus of discussion with FDA? Is it lack of statistical significance in ORR, given that this is a small patient population? If you can just, please provide us color on what precisely the FDA is looking at and what additional data you might be able to supply? And then secondly, do you have strategies in place to accelerate the melanoma indication? Thanks very much.

Francis Cuss

Thank you, Jami. I do understand your desire to understand our interactions with the FDA. and I’m sure you will appreciate that since we have ongoing interactions, I’m not going to talk about the specifics of this. But what I will say is our review of the 063 data does reinforce our belief in the potential of Nivo in terms of long-term improvements and survival in lung cancer patients. And there is considerable data, which is going to come from the Nivo clinical development in the second half of the year, which will provide opportunities for the FDA, should they need it to see that?

Turning to the melanoma program, we have a very comprehensive program, and it's progressing really well. As you know, we have three registrational studies. The second-line study of Nivo monotherapy post-Yervoy and two first-line, one with Nivo monotherapy and with Nivo and Yervoy combined. All the studies are focused on demonstrating the value of survival benefits, but we do have additional objective response, end points in all those studies and the option is doing interim analyses.

When we get the data from our interim analysis, if it should be favorable, obviously, we will be talking to the health authorities about that. Overall, I’m very encouraged by the progress of the Phase III programs, and we are exploring all the opportunities we have for accelerating those filings.

John Elicker

Thank you, Jami. Can we go to the next question, please?

Operator

Our next question is from Tim Anderson with Bernstein. Please go ahead?

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

Hi, I’m sorry. I’m just going to ask one another question on 063. Can you at least rule out that the question at hand here is not related to biomarkers, and PDL-1, expression? And then on your general approach to looking at PDL-1 expression, is the current plan to stay with the exact same day go assay that you’ve been using, I'm wondering if there’s –it’s possible that you might change that assay, because the assay so far hasn't really seem to kind of show the same types of findings that we’ve seen with Merck and Genentech.

And then on ipilimumab once we get PD-1 on the market, what are your expectations for how ipilimumab might be kind of the sequenced when physicians are trying to decide which drug to treat a new melanoma patient with?

Lamberto Andreotti

Thank you, Tim. First of all, let me say we have a comprehensive biomarker strategy where all the patients in our trials have tumor taken and positivity for PDL-1 taken. I think it's premature to make any determination yet about, for any particular tumor, about the relationship between PDL-1 positivity, and response, overall response. But our aim is to understand that better, so we can understand by monotherapy and the combinations across the entire population, not just the PDL-1 positive patients.

As far as the data or assay is concerned, we’re very comfortable with our assay, it’s performing well. We like very much the partnership with Deko, and I think it’s the very different assays between us and everyone else, and I think it's premature to take any determination about which is best. We are comfortable with ours as far as our dataset is concerned. Let me pass it over to.

Giovanni Caforio

Yes, Tim this is Giovanni. Just a couple of comments on, I guess Lamberto and Charlie mentioned we had a really strong quarter for Yervoy around the world. In the U.S., we had the strongest quarter in terms of sales since launch, and we are seeing a continuing growth of the use of the Yervoy in the academic setting, but an acceleration also, the growth of Yervoy in the community setting. And I think that’s clearly the result of all the work we have done to communicate the value of the data supporting Yervoy.

Obviously, as you know at the beginning PD-1 agents in melanoma would be used primarily in the second line setting, positive Yervoy, and so in the short-term, we believe that there will be continued growing adoption of Yervoy in the marketplace, and the trends we are seeing today are quite consistent with that. Obviously the melanoma market will change significantly over the next few weeks for a few months, and next few years, but we believe that it will be continued need for the use of Yervoy and continued use in Yervoy.

Some of it may be in monotherapy, potentially Yervoy can have a really important role to play in combination with other agents in melanoma, and obviously, we will be presenting some data in the adjuvant setting at ASCO. And that is also a very promising area for us with Yervoy.

John Elicker

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

Operator

Our next question is from Seamus Fernandez with Leerink. Please go ahead?

Seamus Fernandez – Leerink Swamm, LLC

Oh, thanks a lot. Thanks for the questions. So, maybe first off, as we think about the prospects of the survival study that’s ongoing in squamous non-small cell lung cancer and non-squamous, can you just update us on the timing, do you still expect both studies to complete towards the end of this year in the head-to-head versus this type of study.

Can you clarify the primary end point in those studies? I realize that they are ongoing survival studies, but there, particularly the squamous study is quite small. So, I’m wondering, if that primary end point is response rate there, if you can just clarify that for us.

And then, lastly, as we think about the expectations of what we could see disclosed and discussed as it relates to CheckMate 012 at ASCO. I think, really the question is, the reasons can you just offer us the reasons why CheckMate 012 did not make it as an oral abstract session presentation unlike some of your data in kidney cancer, and your data in melanoma. Thanks so much.

Lamberto Andreotti

Good morning, Seamus. So, as far as the survival the non-small cell lung second line squamous, non-squamous studies, the primary end points for overall survival, although, objective response rate is included in that. As you know, this is an event-driven study. But, our projection is that we will see top line data at the end of the year.

As far as, CheckMate 012 is concerned, I’d just remind you that, this was an exploratory study. It had many arms as you know, it actually is still ongoing. And so in other order, the data is yet mature for presentation, and we took the view of separating the different arm to different treatments into different presentations to allow a little more detail to appear in the presentation.

What I would reiterate is that, it’s a very important study for us in terms of designing Phase III combination study of Nivo and Yervoy. And we are on track to initiate that study in lung by the end of the year.

John Elicker

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

Operator

Our next question is from John Boris with SunTrust Robinson Humphrey. Please go ahead.

John T. Boris – SunTrust Robinson Humphrey

Thanks for taking the question. And it will be really just directed on ATV. I guess question for Lamberto, it would appear that you could be in a position to be able to launch not only in Japan, but potentially in Europe and U.S. Can you maybe just give some commentary on the readiness of your commercial organizational reports of this opportunity?

And then, more specifically for Giovanni in Japan, with your product concept has been of the combination agent that you have there and with the Japanese market being a more safety conscious market, how are you prepared to potentially position that compound in that marketplace, and the second part of it for Giovanni would be, on usefulness pricing, are you anticipating premium pricing going into that market, and what’s the range that you might be able to attract on usefulness pricing.

And then, lastly, I think you have more than 300 reps in that market with the crossover with selling Baraclude in that market and are you rightly scaled? thanks.

Lamberto Andreotti

Okay. Long question, but I mean, let me start and Giovanni will continue. I think we have a good opportunity in HC. I think we have a good opportunity in HC in Japan, but the more I look into the products we have, into data we have, the opportunity in the U.S. and Europe are significant and meaningful. We are ready to launch in Japan and we are getting ready to launch in although beyond the geographies. We are not going to talk about pricing. This is obviously some feedbacks. We will talk about only after we launch – of the day we launch, but we are ready. And we are – we believe that we have a good opportunity. Giovanni?

Giovanni Caforio

Yes. So John, let me expand on what Lamberto said and start from more general comment about launch readiness. as you know, we have a very strong presence in biology. We have a global brands with – brand with Baraclude that has given us a lot of experience and with working in hepatology and obviously, have a commercial footprint, which is promoting our HIV products. That is the – really the core of the organization and the resources that we will deploy to launch the hepatitis C portfolio around the world.

But obviously, in every one of our geographies, we will make incremental investments strengthen and broaden our teams and investments to launch hep C when we have approval. That’s very much the case in Japan. As a reminder, Japan is the really one of the most successful Baraclude markets for us. We have an extremely high market share and really good penetration in the marketplace there. And so the sales and medical teams that we have promoting Baraclude will be deployed to promote the dual when we get approval potentially later this year.

We also have incrementally staffed the organization in Japan by increasing the number of reps and added a team, in order to be a really well resourced and we are ready to launch from a commercial perspective. With respect to the profile of the product as you know, we have executed at Japanese specific development program for the dual with Japanese patients, we have strong dataset and at the same time, the thought leader community in Japan is very knowledgeable about this combination and the profile of the two products. and clearly, we are conducting testing to be ready for launch and the results have been encouraging. So, we’re quite excited about the opportunity in Japan. As Lamberto said, it’s too early for us to comment on pricing.

John Elicker

Jamie, can we go to next question, please?

Operator

Our next question is from Andrew Baum with Citigroup. Please go ahead.

Andrew S. Baum – Citigroup Global Markets Ltd.

Yes, good afternoon. I have a couple of questions, number one, with regard to the adjuvant Yervoy data in melanoma. Do you believe this data is to find both, and just want to confirm that you have been the full date-of-death? Second, following on from that question, can you provide an update of the real world experience and related to immune-related adverse events with Yervoy. Although this move into the no advanced testing that has addition relevance. And then, finally, just on Japan, my understanding is Gilead is maybe, 12, 18 months behind, given the existence of new patients comparing with distance your regimen in Japanese patients with the genotype, should I assume the revenue window of 18 months you demonetized before has faced significant market share erosion? Thank you.

Giovanni Caforio

Thank you, Andrew. As far as the adjuvant melanoma study, we’re actually very excited that this is part of the ASCO press program. I want to point out this is the first study that’s been reported for checkpoint inhibitor in adjuvant therapy for cancer. And as you know, that’s a limited other options in adjuvant melanoma for patients. I think it’s premature we not even presented the data yet talking about filing. But we have an event in [best invented] (ph) ASCO and I’m sure we look forward to more discussions then.

I don’t think there’s anything more to add really about real world adverse events on IO, sorry in Yervoy that very consistent I believe with what we showed in our [dosie] (ph). And as far as the Japanese funding of HCV, personally I will say we’re very encouraged about the progress with that filing looking forward to getting on the markets. And I think it’s probably premature stuff talking about competition. We’re very comfortable with the unmet needed needs and the profile of our dual.

Lamberto Andreotti

Yes, I’m not going to add that. It’s always interested to see our company trying to profile our own products and with prematurely probably based on lack of information. So we’re very excited about our Japanese opportunity and very excited about it long-term.

John Elicker

We’ll go to the next question please Jamie.

Operator

Our next question is from Mark Schoenebaum with ISI Group. Please go ahead.

Mark J. Schoenebaum – ISI Group Inc.

Hi guys, I really appreciate you taking the question. Number one on hepatitis C, I was just wondering if you would be willing to comment on whether or not your FDA application on the dual includes a request for approval for use in combination with Gilead’s Sovaldi, that would be DAC plus Gilead’s Sovaldi if possible.

And second just to build on Seamus’ earlier question, just to be really clear on this, will the Street – we actually show the primary end point data of overall survival from the second line Nivo lung trials to the street by the end of the year, or is that something that we might have to wait until ASCO 2015 to see? And then finally at ASCO coming up in the 012 trial, are we going to see data from the low dose one plus one arm of the 012 trial or is that arm just still just too early to see it. Thanks a lot.

Giovanni Caforio

So thank you, Mark. As far as the I was trailing in the U.S. for the dual, I’m not going to go into details about that because of it’s under view at the moment. But it’s certainly we will be seeking approval for the dual in genotype 1b in the United States. I’m not sure I completely understood your question about the survival data. We will be getting survival data on the two Phase III studies, second line squamous and non-squamous in-house by the end of the year. And as you know, our custom is to present these data for scientific meeting before we share it with Wall Street. So I think it’s a reasonable expectation that this will be at ASCO next year.

As far as the CheckMate 012 study in the low dose as I mentioned little earlier the number of these arms are still ongoing and that’s one that is providing important data for us as we design the Phase III study and is not mature yet to present at Otsuka.

Lamberto Andreotti

Mark just to add one thing on the disclosure of overall survival of top line data, we would work very closely like we always do with our general counsel securities lawyers and other people and senior management before we determine what disclosure was appropriate. So as usual we would just need to wait and see what happened and we would make the right decisions at that time. Can we go to the next question Jamie?

Operator

Our next question is from David Risinger with Morgan Stanley. Please go ahead.

David R. Risinger – Morgan Stanley & Co. LLC

Thanks, sorry about that. I have a number of questions on the immuno-oncology, but they should be pretty brief. I guess the first question is, should we assume the breakthrough designation is unlikely for Nivo at this point. Second, with respect to 063 the primary endpoint was response rate yet, I think you’ve only talked about long-term survival of Nivo and third line Squamous as long as being encouraging. So can you just review the study design for us for 063. Third, with respect to the Phase III second-line squamous, clinicaltrials.gov indicate that that concludes in August. So, is that just incorrect and what is the right pace to think about if that’s incorrect.

And then finally, with respect to ASCO, the combo lung trial I think has a little bit over 250 patients with 14 cohorts. Maybe you could just help us to understand how important the Nivo plus Yervoy, cohort is assuming that it’s less than 20 patients. How should we be thinking about how important that very small dataset is and what weight should we be putting on that small dataset when we see it at ASCO? Thank you.

Lamberto Andreotti

Thank you, David. So, first we’ll breakthrough designation, the FDA has many mechanisms so as to being development of oncology drugs and I think as I’ve mentioned in the past, we have fast-track designations for lung for melanoma and renal and in fact we are eligible for a rolling submission which is what was started – which Ruby started in the next few days. 063 just a little word about the study, it’s in a highly pre-treated patient population. It has at least, the patients have at least two lines of therapy full hand many of them have more than that. The primary end point is as you say projective response rate have that of course we will be – we are continuing to monitor the patients as the study precedes. As far as the Second Line Squamous, the non-Squamous studies, as I mentioned these are event driven studies and our projection is that we will have top line data, formal analysis and overall survival at the end of the year.

And finally I think the way to look at the 012 study is that it's extremely valuable for us. I want to reiterate that it's proving very informative the different arms particularly around Nivo, Yervoy, as we come to design our registrational Phase III study for the combination in lung.

Many of the arms are not mature yet, so one has to consider that when you look at the data at ASCO. But we are, overall, very excited about all the data and there’s lot always at ASCO. Thank you.

John Elicker

Jamie, I think we have time for two more questions.

Operator

Our next question is from Marc Goodman with UBS. Please go ahead.

Marc Goodman – UBS Securities LLC

Yes, just on the base business, maybe you could give us an update on Sprycel and Orencia, a little more detail what was going on there and market share boos and stuff, and you had mentioned Orencia in your prepared remarks, I was curious, if you can give us a little more detail what is out there. Thanks.

Lamberto Andreotti

Thank you Marc. This is our product set we are very proud of, and why don’t we start with Sprycel, Giovanni?

Giovanni Caforio

Yes. Let me start with Sprycel. We had a good quarter as Lamberto mentioned with Sprycel, with strong growth across the world, very good performance in the U.S., good performance in Europe and acceleration of growth in Japan. We’re continuing to see gains coming primarily from the first-line setting in the U.S. and across both lines of therapies in Europe depending on the registration and local market dynamics.

We continue in the U.S. to be above Tasigna in terms of our market share and the evolution of that share, particularly in first-line. We have seen continued erosion of the Glivec trends in the U.S. over the last few months, but in the first quarter that erosion has slowed-down, and we see somewhat of an increase of payers paying attention really to managing this category, but we are in a really good position from an access perspective. And as I said, our performance with Sprycel continues to be strong.

Marc Goodman – UBS Securities LLC

Orencia?

Giovanni Caforio

Orencia also is growing quite nicely around the world, you would remember the launch of the SubQ formulation which is really the driver of our growth at this point happened earlier in the U.S. and later in Europe and Japan, so the trends of Europe and Japan where you see more robust growth has really influenced by the more recent launches of the SubQ formulation.

In the U.S. we have seen a somewhat of a decrease in our growth and our trends have been softer in Q1, as you know, there are new agents on the market that are also growing and making that space and particularly the first-line setting more competitive. This is a very crowded market with a lot of action from payers and so it is a very competitive space.

We as Lamberto mentioned we have good plans in place to continue to focus on positioning Orencia, as a first-line choice rheumatoid arthritis. We have plans in place to strengthen our execution, increase resourcing the brand, so we’re confident that the good growth trends will continue. The first quarter in the U.S. was somewhat slower in terms of the overall trajectory of the brand.

John Elicker

Jamie, can we go to our last question please?

Operator

Our next question is from Alex Arfaei with BMO Capital. Please go ahead.

Alex Arfaei – BMO Capital Markets

Good morning. Thank you very much for taking the questions. First, on the competitive landscape, I’m sure you’re merged in a situation with AstraZeneca and Pfizer. Obviously immuno-oncology is a big reason for it and we now have the potential to be a large competitive market. Do you believe you have the commercial scale to compete effectively in immuno-oncology if that merger were to go through or should we expect additional commercial build up? And my follow-up, for Francis, on your recent acquisition, could you comment on the expense, which you think you would be exploring to sell assets in Alzheimer’s disease? Thank you.

Lamberto Andreotti

So Alex, as I talked, I think that we are more than ready to compete in immuno-oncology. And we obviously, are not only focusing on the possible new competitors that will come, but more eminent competitors are ready there. Yes, we are ready and we are ready in the U.S. and we are ready all around the world. So, nothing more to add there.

Francis Cuss

As far as the iPierian Tau monoclonal antibody is concerned, our primary focus is in PSP and potentially from (indiscernible) dimension, which also does – at least 57 patients have a genetic link. Clearly Tau may have a role to play in Alzheimer’s. But I think in the first instance we are focusing on looking at patients who have particular unmet need that we can identify from their genetic mutations. So, now the nice thing about this asset is it fits well into an early stage portfolio that we’re building in terms of addressing genetically-defined diseases. And in fact we are hoping it will be in the clinic by the end of the year or the beginning of next year. So we’re very excited about this opportunity.

Lamberto Andreotti

So let me conclude. We have three comments on immuno-oncology. First of all, as I said at the beginning of this call, I’m very happy that we will start very soon. There are information for 063. We are very much looking forward to ASCO and the additional need that we will be reviewing in the second half of this year.

And finally, we remain as confident as we’ve been in the potential for immuno-oncology as evidenced by the scale of our program, the mid scale of our program and its continued expansion.

Thank you for being with us this morning to discuss our good first quarter and many other things to look forward throughout this year. Have a good day.

John Elicker

Thanks everybody. Thanks everybody for joining. If you have follow-ups, you should get a hold of Randy, Brian and I later this morning and through the afternoon.

Operator

That concludes today’s conference. Thank you for your participation.

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