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Executives

Beatrice Cazala - Member of Management Council, President of Global Commercialization and President of Europe Operations

Elliott Sigal - Chief Scientific Officer, Executive Vice President, Member of Management Council, Member of Executive Committee, Member of Science & Technology Committee and President of Research & Development

Lamberto Andreotti - Chief Executive Officer, President, Chief Operating Officer, Director, Member of Management Council, Member of Science & Technology Committee and Member of Executive Committee

Charles Bancroft - Chief Financial Officer and Member of Management Council

Tony Hooper - Member of Management Council and President of Americas Operations

John Elicker - Investor Relations Executive

Analysts

Catherine Arnold - Crédit Suisse AG

David Risinger

John Boris - Citigroup Inc

Tim Anderson - Bernstein Research

Jami Rubin - Goldman Sachs Group Inc.

Christopher Schott - JP Morgan Chase & Co

Seamus Fernandez - Leerink Swann LLC

Marc Goodman - UBS Investment Bank

Charles Butler - Barclays Capital

Bristol-Myers Squibb (BMY) Q4 2010 Earnings Call January 27, 2011 10:30 AM ET

Operator

Good day, everyone, and welcome to today's Bristol-Myers Squibb Fourth Quarter Earnings 2010 Earnings Release Conference Call. [Operator Instructions] At this time, I'd like to introduce your host, Mr. John Elicker, Senior Vice President, Investor Relations. Please go ahead, sir.

John Elicker

Thanks, Anthony, and good morning, everybody. Thanks for joining us here in snow-covered Princeton, New Jersey. With me are Lamberto Andreotti, our CEO; Charlie Bancroft, our CFO; Elliott Sigal, our Chief Scientific Officer, Beatrice Cazala, Senior Vice President, Commercial Operations, with responsibility for Global Commercialization, Europe and the Emerging Markets; and also Tony Hooper, also Senior Vice President, Commercial Operations, with responsibility for the U.S. and Rest of World. This morning, Lamberto and Charlie will have prepared remarks, and then we'll go to your Q&A.

Before we get started, let me take care of the legal requirement. During this call, we'll make statements about the company's future plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's most recent annual report on Form 10-K and reports on Form 10-Q and Form 8-K. These documents are available from the SEC, the Bristol-Myers Squibb website or from BMS Investor Relations. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates change.

With that, I'll turn it over to Lamberto.

Lamberto Andreotti

Well, thank you, John. Good morning, everyone. We have just completed a good quarter, which wraps up another successful year for the company despite the challenges associated with healthcare reform in the U.S. and economic pressures in Europe. In previous calls and meetings, we from Bristol-Myers Squibb talked a lot in area that other companies of U.S. healthcare reform and European prices. I think that at this point, we should take these two factors for granted and move forward. Today, it is more important to describe how our achievements in 2010 have helped to position the company well for the longer-term growth.

Specifically, 2010 was a groundbreaking year with respect to clinical data, a real testament to our BioPharma strategy and our exclusive focus on pharmaceuticals. We presented overall survival data on ipilimumab in second-line metastatic melanoma. The AVERROES study was stopped early due to overwhelming efficacy. The attractive profile on dapagliflozin continues to emerge, and we shared encouraging data on our Hepatitis C portfolio.

We also made significant progress on our String of Pearls initiative. Most importantly, we acquired ZymoGenetics while we continued to integrate Medarex.

We remain focused on increasing shareholder value. We increased our dividend for the second consecutive year. We initiated a share repurchase program of up to $3 billion in common stock. We bought back debt, and we still ended the year with $10 billion in cash. You may have also noticed that we restructured our foreign legal entities, and this resulted in more than 85% of our cash now being held in the United States. Charlie will talk more about that.

With respect to manufacturing, we delivered on our optimization plan and continued to improve our costs, but we faced some challenges. We take very seriously the quality issues raised in the Manati warning letter and the voluntary AVALIDE recall. I personally have devoted a significant amount of time to ensure understanding of what happened, and that we take all necessary action to remediate the issues, informed also by assessment from third-party quality consulting experts. In fact, our plant in Manati is inspection-ready, and we are looking forward to a re-inspection.

Let me turn to some highlights from the fourth quarter. We had good sales growth in some of our key brands, which are important to our future growth, including SPRYCEL, ORENCIA, BARACLUDE and the ONGLYZA franchise. We continue to have positive news on our pipeline. We received regulatory approval for SPRYCEL for use in a stress-line testing in the U.S. and Europe and for KOMBIGLYZE in the U.S.

We completed key regulatory submissions. We submitted dapagliflozin for regulatory review in both the U.S. and Europe. The European Medicines Agency has already validated our submission there, and we are awaiting acceptance of the submission in the U.S.

In 2011, we will build on the momentum created in 2010, as we continue to position our company for long-term success as a focused, differentiated BioPharma company. There are several upcoming key events that will help shape our future. The first milestone is regulatory action on our filing for ipilimumab, as well as the first-line data, both expected during the first quarter. We are very excited about this product, and we are ready to launch it.

Between 2011 and 2012, we anticipated up to five possible new product approvals. In addition to ipilimumab, the other four are belatacept for organ transplantation, ORENCIA in a subcutaneous formulation, dapagliflozin for diabetes and apixaban, our anticoagulant. For apixaban, based on discussions with the FDA and in agreement with Pfizer, we expect to submit the AVERROES and ARISTOTLE studies together in the U.S., which will cover the broadest spectrum of patients in one single filing. We expect to have top line data on ARISTOTLE in the second quarter of this year and submit in the U.S. and Europe either in late Q3 or Q4.

In 2011, we are also anticipating four significant Phase III transitions in hepatitis C, Alzheimer's disease and oncology. And finally, in 2011, we expect strong sales strength for new brands and indications, including KOMBIGLYZE and SPRYCEL. All this adds up to our 2011 guidance that you have seen in the press release and that Charlie will review.

In the release, we have also reaffirmed our 2013 guidance. Over the past few weeks, we have heard questions from many of you about our earnings in 2013, given some of the external challenges. Well, we have listened and have decided to review our longer-term plan, and we are reaffirming 2013 minimum non-GAAP EPS guidance of $1.95. Our earnings release contains important information regarding our assumptions underlying this guidance.

Taken together, 2010 was a good year for Bristol-Myers Squibb. I'm very happy with the progress we have made over the past year, strategically and financially, and feel very confident about our future. Most importantly, we have continued to strengthen our base and positioned ourselves for significant growth over the next few years, particularly for 2013 and beyond. Our sales are up. Our financials are strong, and our pipeline is robust. And with that, let me turn it over to Charlie.

Charles Bancroft

Thank you, Lamberto. We did have another solid quarter. We delivered non-GAAP EPS of $0.47, strong sales growth in most of our key products and continued focused expense management was offset by a higher effective tax rate compared to Q4 2009. Included in our fourth quarter EPS is a negative $0.02 impact of U.S. healthcare reform.

I now want to give you some brief highlights from our fourth quarter financial results and talk about guidance before we go to your questions. We reported fourth quarter net sales from continuing operations of $5.1 billion, up 2% compared to last year. U.S. healthcare reform had a 1.5% negative impact on net sales in the quarter, and incremental EU measures had a negative impact of under 1%. Volume was up 2%.

As I look at the fourth quarter sales performance, I am encouraged by the trends in many of our key brands that are important to our future growth. This includes BARACLUDE, ONGLYZA, SPRYCEL and ORENCIA. BARACLUDE, our treatment for Hepatitis B, was up 25%, including 28% growth internationally. Full year sales for BARACLUDE were $931 million, with over 80% of our business outside the U.S.

The ONGLYZA franchise delivered sales of $73 million. Compared to the third quarter, sequentially our business was up over 40% in the U.S. and doubled internationally. We are in the process of launching KOMBIGLYZE and expect it to be a key component of the franchise growth. SPRYCEL was up 42% in the quarter. And as you know, we recently received the first-line indication in both the U.S. and Europe. We believe this represents a meaningful long-term opportunity and are off to a good start.

ORENCIA was up 20% as we continue to make progress in becoming the IV biologic of choice. At the same time, we are preparing for the potential launch of our subcu [subcutaneous] formulation in the U.S. later this year.

The AVAPRO/0AVALIDE franchise was down 26% in the quarter. This includes the impact of the AVALIDE recall and supply interruption in five markets, the U.S. Mexico, Canada, Puerto Rico and Argentina. AVALIDE net sales were negatively impacted by approximately $60 million in the quarter. Full year AVALIDE sales in the affected markets were $355 million in 2010. As we move into 2011, resupply to the market is not certain. And therefore, we are assuming a meaningful impact from an extended supply interruption.

Lastly, our mature brands declined 14% or $125 million compared to last year. Divestitures in and rationalization of our non-strategic mature brands portfolio represents approximately 50% of the decline.

The full year impact from U.S. healthcare reform in 2010 was about $0.10. Our estimated incremental impact for 2011 is approximately $0.15. This reflects the annualization of managed Medicaid, expected PHS expansion and the new impact from both Part D Donut Hole coverage and the pharma fee. As a reminder, we share in part both the sales and pharma fee impact with our partners.

Now let me give you just a couple of comments from the rest of our P&L. Advertising and promotion expenses were down 19% to $271 million for the quarter. The decrease is due to less spending on the promotion of PLAVIX and AVAPRO, products at the end of their life cycle, and to Otsuka sharing of certain ABILIFY, SPRYCEL and IXEMPRA expenses. This was partially offset by increased investment spend on new products and indications.

The effective overall non-GAAP tax rate on earnings from continuing operations was 25.7% in the fourth quarter. The tax rate reflects the full year impact of the R&D tax credit, which was partially offset due to earnings mix between high- and low-tax jurisdictions. Our full year non-GAAP rate was 23.6%, right in the middle of our 2010 guidance range.

As Lamberto mentioned, we restructured certain of our foreign legal entities, resulting in 85% of our $10 billion in cash and marketable securities now being held in the U.S. There was an associated $207 million tax charge, which is included as a specified tax item.

Let me turn to guidance. We have issued 2011 GAAP and non-GAAP EPS guidance. I'll cover our non-GAAP line-item guidance. We expect sales growth to be in the low mid-single digits. This includes the impact from U.S. healthcare reform, expected EU pricing pressure, another step down in our contractual share of ABILIFY and the AVALIDE supply issue I mentioned earlier. We expect the incremental sales impact from Medicare Part D coverage gap to be approximately $250 million. Gross margin percent should be consistent with 2010. Advertising promotion is expected to decrease in the mid-high single-digit range. This reflects continued life cycle management of PLAVIX and AVAPRO, partially offset by investments in new products and indications.

MS&A is expected to increase in the mid-single-digit range. This includes the impact of the U.S. healthcare reform pharma fee expected to be approximately $250 million. Excluding this fee, MS&A should be roughly flat.

R&D is expected to increase in the mid-single-digit range. This includes the impact from ZymoGenetics and investments across our portfolio. We expect our tax rate to be between 25% to 26%. The pharma fee adds approximately 1% to the tax rate. Additionally, our expected change in earnings mix will also drive our rate higher. As in past years, we are assuming a few tax discrete items in 2011, which will cause some variability in our quarterly rate based on timing. Finally, we are also confirmed, our 2013 non-GAAP floor guidance of $1.95.

Moving forward, we do not plan on updating our long-term guidance on a quarterly basis and you should expect updates to 2013 annually in July, consistent with our longer-term planning cycle.

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

John Elicker

Thanks, Charlie. And Anthony, I think we're ready to go to Q&A at this point. And just as a reminder, in addition to Lamberto and Charlie, we have Elliott, Beatrice and Tony here to take your questions. Anthony?

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Jami Rubin at Goldman Sachs.

Jami Rubin - Goldman Sachs Group Inc.

My first question is for Lamberto. The fact that you've reiterated your minimum 2013 guidance of $1.95, just to refresh my memory, when you first gave that guidance, it did not include U.S. healthcare reform. Then you reiterated it. But after the second reiteration, it did not include European healthcare reform or European austerity measures. Could you just reiterate for us whether or not this 2013 guidance now incorporates European austerity measures, and obviously what the offsets are to that? And then I have some questions for Elliott on ipilimumab. First, just curious to know your conviction level that FDA will approve second-line ipi [ipilimumab] if front-line data is not available? And secondly, for the front-line study, just curious to know if you have a sense of what the life expectancy of the control arm is. The six-plus months or so is from the Genasense trial which is now about five years old. And since then, the standard of care has probably improved. And if that is the case, is the trial adequately powered to detect a difference in your opinion? And just lastly, if you could provide more granularity on the timing of front-line, when you expect to receive if all the events have occurred, if they've occurred, and when and how that will be communicated to the street.

Lamberto Andreotti

As I said in my remarks, we were not originally planning to issue guidance for 2013, because we thought that was not strictly necessary. But we listened to you and many others who indicated to us that this was significant and relevant to shareholders, and therefore we did a good exercise of reviewing our plans and projections. And hence, we confirmed what is confirmed this morning. Obviously, we included in the guidance, all the things we know about products, about markets and including what we know of the European pricing situation. I would like Charlie to elaborate a little bit more on that.

Charles Bancroft

Yes. The $1.95 was a floor guidance that we've provided. So some of the measures -- and we know we are -- the industry and Bristol-Myers Squibb is facing many external measures, U.S. healthcare reform and the EU pressures, but there's also other pressures from other countries. We know we will have to maximize the opportunities we have, both on the revenue and cost side. And given the progress we're making advancing our pipeline and the great clinical data we've discussed over the past year and our continued focus and commitment to productivity, that we are confident that at this point, based on the assumptions we have, out of our $1.95 floor guidance. Ellie?

Elliott Sigal

Yes, Jami, you have some questions on ipilimumab. I remain very confident about this new medicine and in fact of the new paradigm of immunotherapy. And our first approval, and we do expect this year in metastatic melanoma in pretreated patients, I can say that we are actively engaged with the agency in all the types of activities you would imagine, that would be moving towards an approval by our PDUFA date, in March 26. It's impossible to predict with confidence an exact date, but we are on track for approval for that PDUFA date. And we are working through our medical group, with our commercial colleagues, so that we are properly prepared for launch. And Tony will say a little bit more about that. You have some comments about life expectancy. And part of my confidence comes not only from the very important Phase II studies and the result of -020 and the clear survival benefit, but also because of how long -024, the front line study has taken. The median age of the median survival time period for the group that is currently being followed, which is blinded, exceeds three years. And we think this is quite remarkable. As you know, the standard of care predicts a 75% mortality rate in the first year and less than a 14% survival rate at year two. And so our statistics show us that we are adequately powered. We are close to achieving the required number of events, and I have great confidence that this study will be concluded in the first quarter. I do not believe we need to submit any more study information to work with the FDA. Our focus is on the adequate communication of the unusual mechanism, the unique mechanism of action and the safety, to ensure appropriate use in order for patients to achieve maximum survival benefit. And the communication of the results, our goal would be to present at the scientific forum hopefully at ASCO this year.

John Elicker

And Tony, would you say something about our collaboration for market readiness?

Tony Hooper

First of all, we have product available and the U.S. organization; both the commercial organization and the medical organization are both ready and able to launch this product in the first quarter of 2011. We've taken our extensive experience and knowledge in the specialty market around oncology, HIV, as well as our recent experiences in the launches of both ORENCIA and SPRYCEL and applied this to evolve what we consider to be a rather effective and exciting, innovative new customer model as we plan to go to market. We've identified that the patient journey with this particular disease is a complex one, and we need to understand the unit of care as opposed to just the physician treating the patient. And all our focus is around ensuring that in the patient journey, we have access to the patient and the patient has access to information, help and care to ensure we can maximize the value of the asset.

Lamberto Andreotti

John, I would like to make a final little comment on 2013. Please let us work on delivering 2011, 2012 and 2013. So don't ask us to deliver projections every time something happens. As Charlie said, we will be readjusting our projections every year when we deliver our strat plan. Our thought now is to deliver the results, not in reviewing projections every other month. Thank you.

Operator

We'll take our next question from Tony Butler at Barclays Capital.

Charles Butler - Barclays Capital

Comments around apixaban and the Xa market, and given the strength early on of PRADAXA once it's been launched. Elliott, I'm curious how you might think even in the backdrop of perhaps XARELTO being in the market, how you think this market's going to play out, and what are the pushes and pulls and the attributes that apixaban may need to show, such that as possibly third to market, it may actually garner a substantial or any share when it comes out.

Elliott Sigal

I'll say a few words from a medical standpoint on our development strategy that we’ve worked carefully with Beatrice. And she will amplify her opinion of the market. From the very beginning, we've had the feeling that this new age of oral anti-coagulation that would replace Coumadin in many patients in preventing stroke and atrial fibrillation and standard of care that often includes aspirin, where Coumadin is not administered 40% or 50% of the time in high-risk patients is going to be a tremendous opportunity, and there will be multiple entrants. We are pleased to be at the pioneering edge of this and have, from the beginning, committed to a differentiated product that meets the medical need of powerful efficacy, with better safety and tolerability and ease-of-use than Coumadin. And as the data has emerged from our competition, we are gratified to see the market uptake and the excitement about the whole new class. And we continue to see a need for the differentiation that we have aimed from the beginning of our development program, powerful efficacy as you saw in AVERROES, a very attractive major bleeding profile. And when we see ARISTOTLE, what we must look for is comparability to Coumadin and hopefully superiority in bleeding, safety and tolerability. This program is unique and including studying of patients that are intolerant or unable to take warfarin and in going for the exact benefit risk of powerful efficacy with improved safety. And from what we've seen from our own data so far and from the competition, we're happy with our differentiation strategy. Beatrice?

Beatrice Cazala

First, I would like to remind people that over the last few years, we have always analyzed the market as conveying probably third. Overall analysis and markets insight have been collected with a view of what will happen when we introduce the product. So we have gathered extensive patient insight and extensive physician insight, and we truly believe that in this market, which will be developed because a lot of patients today are not treated, and they will be treated by this new category of product. But as the years go by, as you see the variation and the evolution of the reaction to the product, we will strongly position our product as very important for the risk benefit that we will develop. So in terms of our ability to position the product, we have a strong feeling that the 50 will be very important, not just the efficacy and the discontinuation rate that we're currently seeing both in the warfarin patient but also in the patient that are using aspirin, and that we will see a gathering momentum with the new usage of the patient replacing warfarin will create the opportunity for us.

Operator

We'll go next to Seamus Fernandez at Leerink Swann.

Seamus Fernandez - Leerink Swann LLC

So a couple of things in the guidance for next year. Can you just talk a little bit about the upward pressure on the tax rate? We did see a pretty impressive change in the tax rate in the fourth quarter. You attribute this to mix. I'm just wondering if repatriation also is playing a role in the rate in the fourth quarter of this year. And then for next year, is a lot of that -- we're estimating about one percentage point of that could be attributed to the pharmaceutical excise tax that you're estimating in there. Just wondering if that's the factor in 2011? And then separate question on apixaban. Elliott, maybe if you could address for us the question of the ITT versus per-protocol analysis. We did see some potential anomalies in the ROCKET AF study at least that were explained to us. Just wanted to know how Bristol is going to manage those potential issues or is managing those potential issues in the context of ARISTOTLE.

Charles Bancroft

This is Charlie. The movement of cash had no impact on our non-GAAP effective tax rate either in the fourth quarter or has no impact on our rate in 2011. And as I mentioned, and as you noted, a portion or about 1% of our increase in the tax rate is due to the non-deductibility of the pharma fee. In addition, our initiatives over the past few years to reduce our manufacturing network, as well as evolving our entire portfolio; we have been experiencing a shift in earnings from low tax to more high tax jurisdictions, which has had some increase in our underlying rate. So when I talk about mix, it's a combination of those two things, which has put pressure on our rate in 2011. As we think about that moving forward, we think that we will be in line with that rate as we think about our -- as what we know today on our tax rate.

Elliott Sigal

So Seamus, on the apixaban analysis plan, and I think you're referring to the discussion that ensued after the ROCKET data was discussed on what's the standard way to treat the primary efficacy analysis, and I respect the investigators involved, but the standard way to treat this analysis is an intention to treat for the efficacy, for the primary efficacy analysis. And that's our agreed-upon plan with the agency, and it's also an analysis we believe all regulatory authorities want to see. And also, the other question that we get a lot is the time and therapeutic range, the INR for warfarin in the study, because you want to be monitoring this closely to have a very good comparison with well-controlled patients on Coumadin to the extent possible. We are monitoring this very closely in the trial. And we believe that the proportion of warfarin patients in the therapeutic range will be closer to what was seen in the RE-LY trial. That's the mid-60s rather than the ROCKET trial, which was under 60%.

Operator

We'll go next to John Boris at Citi.

John Boris - Citigroup Inc

I guess, first question for Lamberto. One thing that has obviously been challenging has been the commercial model. You are on the cusp of launching five new assets. Can you help me understand how Bristol is adapting this commercial infrastructure to accommodate the assets that you're about to launch? And how should we be thinking about launch curves of some of these assets? The second question just has to do with if ipilimumab. I thought you had indicated there was an inspection that had to occur at the Manati facility. I believe ipi [ipilimumab] being manufactured out of that facility, you have a PDUFA date of March 26. Does that inspection have to occur before that in order for the FDA to approve the product? Or is that not linked or tied to it? And then last question just has to do with the four assets, Elliott that you'll put into Phase III development. Can you just give some commentary around elotuzumab and its rank within those four assets in terms how you allocate assets across those four assets going forward?

Lamberto Andreotti

Yes, let me start with a very quick answer to your second question, ipi [ipilimumab] is not put manufactured in Manati. So ipi [ipilimumab] and Manati are totally disconnected. I probably can take this as an opportunity to make a couple of comments about, again, about our manufacturing. I think that, as I said in my comments before, John, we are very happy at what we delivered in terms of optimization plan of our manufacturing network and improvement of our costs. But we also taking very seriously a couple of quality issues that were raised in that warning letter of Manati, that I believe doesn't affect ipilimumab and the AVALIDE recall sites. I personally spend a lot of time to understand what happened. And based on the assessment that I also received not only from my people, but also by third-party quality consulting experts, I believe that we do not have systemic issues with our manufacturing facility. As I said before, and I think Charlie repeat it, we are ready for inspection in Manati. And in fact, we are eagerly waiting for that inspection. You were asking about the commercial model. This is a very important question. We have two important factors, the evolution of the market environment and the number of products that we are going to launch if we get an approval as we hope. We have devoted a lot of time at modifying things according to the requirements of the marketplace. I think we are very ready for the launch of ipilimumab. But as Tony was saying before, we have moved to a totally different model than the one we have used in the past. We have tested a lot of components of that model with existing products, so we feel very confident that we have a global approach to the different people involved in dealing with ipilimumab from prescribers to nurses to reimbursement specialists to patients in a very innovative way. And the same is happening for all our other launches or expected launches. So there is a lot within that technology, a lot in base technology, a lot we've invested in creating the right files that will allow us to be more effective in targeting our promotion. And the technology is also helping us to make the work of our reps better, more focused, more targeted and support that work with peer-to-peer, web-based interactions and giving access to relevant information to all our stakeholders, when they want them and in the format that is more convenient to them.

Elliott Sigal

John, you asked about elotuzumab. Our biologic in the treatment of multiple myeloma, which Lamberto mentioned, we will, I believe, transition into Phase III this year. I'm very excited about that. I just want to distinguish between the five drugs we're working very hard with to get approved by the end of '12 and at the same time sustain the Phase III pipeline by four transitions into Phase III, including elotuzumab. So the five that we're trying to get approved, we've been talking about ipilimumab, apixaban, dapagliflozin, belatacept and Brivanib. Of those, we've seen the Phase III data and are in regulatory discussions with all but Brivanib. Brivanib, we will see the first Phase III data sometime this year, and we'll be able to make some decisions about its course forward and its evolving profile. To that group of five, which can potentially be approved by the end of '12, beginning this year, I would add an important catalytic event of ORENCIA subcu. At the same time, there are four compounds we hope to potentially transition to Phase III this year. I am very sure elotuzumab will go into Phase III for the treatment of multiple myeloma. It's an antibody that is directed to a very specific cellular protein on myeloma cells, and we've had very important response and insights on how to improve current regimen. And we have two Hepatitis C programs that I expect to transition to Phase III. One is our novel first-in-class 5A, and one is our potentially superior Interferon Lambda. We have a lot of clinical data we'll be discussing at scientific forums on our whole portfolio, both at EASL at the Liver meetings, the first in April and the second in November. And this data will give insights to the doses that we will be taking in to Phase III and we'll be talking about our Phase III strategy later in the year. The one program that we are waiting for more Phase II data on before a decision of transition is our gamma secretase in Alzheimer's. We believe we have a more specific inhibitor in this pathway than predecessors. We want some confirmatory data. We are studying both pre-dementia, as well as mild to moderate. And we'll be getting some data early part of the year and making some decisions hopefully, moving to Phase III by the end of the year.

Operator

We'll go next to David Risinger at Morgan Stanley.

David Risinger

The first is with respect to ARISTOTLE, just wondering, Elliott, if you're still expecting to present that study at the Paris Cardiology Review (sic) [European Society of Cardiology Meeting] in May. And then second, with respect to the comment in the press release about R&D spending in 2011, I'm hoping that you can put that into context. The press release said that 30% to 40% of 2011 R&D spending will be on Phase III assets. If you could maybe put that in perspective relative to the historical percentages and maybe what you understand the industry average is for major pharmaceuticals companies in terms of percentage of R&D spending on Phase III assets.

Elliott Sigal

On ARISTOTLE, we are working to present that in September in Paris at the European Society of Cardiology and hope to have a submission around that time, late Q3 or early Q4. There's a new SEC requirement that has led to our disclosure of some more specific information than we have historically done with regard to late-stage development. We put in the press release specifically all the different items that go into R&D, so that you see, in addition to discovery, early clinical, you have late clinical support and support for marketed products. Those two last components form the numerator for the 30% to 40%. But in addition, we add in to the denominator, not only the research and early clinical, but also the Phase IV marketed supported products, some biologics work that supports the pipeline in manufacturing, the medical support for products that are in the market, as well as some very important aspects of -- well, I mentioned of the Phase IV that are done jointly in the regions. That percentage is about the same as has been tracking, 30% to 40%, over the last several years. However, in the pipeline, we are clearly investing in sustainability as some compounds are taken down from Phase III. We're investing in others, I mentioned four potential transitions, and we're expanding our support in R&D for late-stage development, as well as medical support for marketed products, both in Phase IV and in medical personnel.

Lamberto Andreotti

It's Lamberto. I think that the totals do not reflect the good work that Elliott and his team have done an improving productivity of R&D. So we are projecting certain levels to spend that allow us to finance all the projects that we consider of primary importance in the different stages of development, and we are also able to do that, because R&D, like all the other units of this company, has improved its productivity through different actions and different activities that have been very important over the last few year's and will continue to be important.

Operator

We'll go next to Tim Anderson at Sanford Bernstein.

Tim Anderson - Bernstein Research

A couple of questions related to ipilimumab and then on apixaban, maybe starting with apixaban, just to clarify something. So I think the original hope was on AVERROES, you might get priority review. If you're bundling that now with ARISTOTLE into one filing, does that essentially knock out the possibility of getting a priority review that'll most likely be a standard review? On ipilimumab, I have two questions. One is the regulatory status of ipi [ipilimumab] in Europe. I'm wondering if regulatory authorities might have a problem with the control arm in the 020 trial. And then Elliott, I'd be curious to get your thoughts on the only direct competitor in this category, which is Tremelimumab, which as you know, has been kind of resurrected from the ashes. And they apparently are studying their drug in conjunction with a biomarker. And I'm wondering if you can talk about biomarkers with this mechanism of action and what you see going forward related to your compound?

Elliott Sigal

With regard to regulatory progression in Europe, we're engaged with the regulatory authorities on 020. We are supplying them with all the information that they ask for. I wouldn't say we have identified issues, but the whole file as I've talked about before, does address the validity of the control arm, which we stand behind, as well as the patient population, in the setting of a very significant survival event in pretreated patients where there is no approved therapy. So I'm pleased with the progress so far, but I don't have any more than that to report in Europe. And with regard to apixaban, what the key message is today that instead of doing this in two stages, a narrower indication with AVERROES, given the proximity of ARISTOTLE, and quite honestly, the complexities that we could imagine with ensuring appropriate use with just that indication and the need to really see the comparability as the field has changed with warfarin, we feel, with Pfizer and after consultation with the FDA, that we have a much stronger application waiting to file by the end of Q3, early Q4 for the broadest possible opportunity. In both cases, we have included AVERROES, which may entitle one to review on a priority basis, but that's a decision that the FDA will make when they look at the file, look at the field and give us a filing decision and a categorization decision. I believe this is an area of unmet medical need, and we'll make those cases. With regard to the competitor, I do understand the biomarker possibilities. We don't have data that really has allowed us to pick out a very favorable biomarker, but we're constantly searching for this. We have a biomarker study. And we're looking at ways to predict. I will make a very important point though. And most of our outside advisers have strongly urged that, although we're going to do biomarker work in parallel, the most important thing that we can do is to add combinations of drugs, existing and novel target agents, to try to increase the small but significant number of patients that have a remarkable durable response. The key to this drug is durability. We want to maximize the efficacy by combination therapy, use it in earlier lines, different tumor types, as well as look for biomarker results.

Operator

We'll go next to Catherine Arnold at Crédit Suisse.

Catherine Arnold - Crédit Suisse AG

I have two questions. One is related to ipilimumab, for Elliott, and then on the U.S. cash flow for Charlie. On ipilimumab, could you remind me of the allowance for patients in the DTIC arm to transition to other experimental agents on the trial? And if you have any kind of data as to what percentage of patients have done that so far? And then also on ipi [ipilimumab], in terms of BRAF, there was I think an expectation that at some point, there would be a combination study of ipi [ipilimumab] and BRAF in patients with that mutation, and I wondered if you have any definitive plans at this point to do that. For Charlie, I wondered if you could give us a little bit more color. You've been very helpful on the U.S. versus x U.S. cash flow. But how should we be thinking about the percentage of cash even in a range or directional sense in 2012 and 2013, with the patent expiries affecting your net income and changing the geographic placement of income?

Elliott Sigal

Catherine, with regard to the specific question on the trial design and conduct of -024, the front-line study with dacarbazine, let me just say that we've done everything we can to reduce things like crossover and anything that would introduce confounding. I don't have the exact disposition table, and we will have those results by the end of the quarter. With regard to BRAF combination, this is a very exciting field. It's in our strategy to add to ipilimumab targeted agents and other agents to increase that percent of response. We have an internal program that's ongoing with that combination. And we think that by the time BRAF inhibitors are out there, it's our responsibility to test the combination of the two and work out regimens that maximize the effect for patients in combination with ipi [ipilimumab].

Charles Bancroft

On the cash between the U.S. and overseas; in the U.S., although it's our biggest business, we also have some of our biggest expenses when we think about R&D, our dividend and predominantly, our acquisitions. So for business reasons, we were fortunate to be able to restructure some of our foreign legal entities to be able to move cash to the U.S., where generally, we have more overseas cash than we do in the U.S. As to your question, specific to the near-term of '12 and '13, we still feel that we will have cash in the U.S. And that will be, in our view, a strategic advantage for us.

Elliott Sigal

Just to confirm, we started the year at 85%.

Charles Bancroft

At 85%, yes, cash in the U.S.

Operator

We'll go next to Marc Goodman at UBS.

Marc Goodman - UBS Investment Bank

In the quarter, could you just tell us was there a KOMBIGLYZE stocking? And it seemed like there might have been some major inventory changes for ABILIFY and PLAVIX. Can you just talk about that? SPRYCEL first-line CML, did it start to have an impact in the quarter, do you think? And then just one other question is your thoughts on the strategy of the Pharmasset deal.

Tony Hooper

So in response to your first question around KOMBIGLYZE, there was only about $5 million of stocking in the market for KOMBIGLYZE. As you know, we've learned a lot from the ONGLYZA launch that access early on in the promotion of this product was very important. So we actually did a small amount of stocking, did a huge amount of work around access, which allowed us by the beginning of January, in fact, to have 83% of all our accounts listed with KOMBIGLYZE and about 25% of accounts already on tier 2. SPRYCEL, as you know, Tasigna got their first line indication about 4 1/2 months before us and the most recent data I've seen was the November data, which already showed that Tasigna was taking about 12% of all new first-line patients and SPRYCEL was already taking 9%, so already a very strong response in the marketplace from our first-line indication.

Charles Bancroft

Yes, Mark, and you asked about the strategy around the Pharmasset deal. First of all, at a higher level, the strategy in Hepatitis C is to look at multiple mechanisms of small molecules and to deliver a superior interferon. We think this is going to be a field modeled after HIV of combination therapy. We have a chance of cure, to increase that cure rate and reduce the tolerability issues with the therapy and increase the number of patients that are being treated. We have a first-in-class 5A inhibitor in the field and we're very impressed with Pharmasset's capabilities in the nucleoside area. And so we are combining those two agents with and without ribavirin, to see if an all oral regimen of that nature, two new drugs and an older drug can treat patients. This is a clinical trial agreement. We have our own combinations, and we have an openness to working with others with regard to delivering the best treatment regimen to patients.

Tony Hooper

This is Tony. Let me just come back and answer your question on inventory as well. Yes, we did in fact see towards the end of the year a slight build in ABILIFY inventory. We estimate between about $20 million and $30 million. And we're seeing most of that moving out of the market in the first quarter of this year. ABILIFY was also up about $25 million in inventory. We haven't seen much change in the marketplace, however. But I see that will be gone by the end of the first quarter.

Operator

We'll take our final question from Chris Schott at JPMorgan.

Christopher Schott - JP Morgan Chase & Co

I just had two questions here. First was following up an earlier question on SG&A. Could you just qualitatively comment on SG&A spend longer term? I think, you've highlighted the company is pretty lean after multiple rounds of cost cutting. It seems like there should be some incremental spend here, with obviously, some important launches next few years. Are there further savings to be had here? Or should we anticipate an upward bias towards spend, over the next couple of years? Second question is on cash deployment, any changes in priority with the company now holding about $4.5 billion of net cash, with most of that cash in the U. S? And do we ever increase in clarity on the pipeline; is how you're thinking of the preference between kind of share repo, mid-stage deals and in market transactions?

Lamberto Andreotti

Chris, let me start and then Charlie will elaborate. I said many times and I will say it again today. We are very focused on preparing for the adequate development and launch of all the new, fortunately many new, assets we have. Therefore, we are allocating the right resources to the completion of the development and the launch of those assets. Having said that, we have learned over the years that there's always space for additional productivities, therefore, without starving any of the launches or without under-allocating resources there, we will continue to look at opportunities of delivering productivity. Again, my first priority and the priority of my management is both to deliver growth, and growth means successful launches of many different assets. Charlie?

Charles Bancroft

In your question to cash; our higher U.S. cash balances does give us indeed flexibility when we think about capital allocation. And our first priority has always been, and we've stated this, business development, where we focus on strategic and financially-sound deals. Notwithstanding any deals, we always look at how we think about deploying capital and what are in the best interest of shareholders.

John Elicker

Thanks, Chris, and thanks, everybody, for your questions. Again, Bristol-Myers Investor Relations is here to handle any follow-ups. And before we wrap up the call, Lamberto has some closing comments.

Lamberto Andreotti

I'll be very concise. Jami said we were very concise at the beginning, and I would be even more concise now. Thank you, again, for your questions. I would like just to reiterate one key point. BMS is clearly in a strong position financially and operationally, with $10 billion in cash, a robust pipeline and a streamlined operation. We are poised for solid sustained growth. Thank you very much.

John Elicker

Thank you, everybody.

Operator

And this does conclude today's presentation. We thank everyone for their participation.

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