Bristol-Myers Squibb's CEO Discusses Q3 2011 Results - Earnings Call Transcript

 |  About: Bristol-Myers Squibb Company (BMY)
by: SA Transcripts


Good day, and welcome to today's third quarter 2011 earnings release conference call. This call is being recorded. At this time, I would like to turn the call over to Mr. John Elicker, Senior Vice President of Investor Relations. Please go ahead, Mr. Elicker.

John Elicker

Thank you, Celia. Good morning, everybody, and thanks for joining us to review and discuss our Q3 results. With me this morning are Lamberto Andreotti, our Chief Executive Officer; Charlie Bancroft, Executive Vice President and Chief Financial Officer; Elliott Sigal, Executive Vice President, Chief Scientific Officer; also Beatrice Cazala, also Executive Vice President Commercial and EU and Emerging Markets; and for the first time, Giovanni Caforio, President of our U.S. business.

Before we get started, let me take care of the legal requirement. During the call, we will 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 8-K. These documents are available from the SEC, the BMS website or from 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.

During the call, we will also discuss certain non-GAAP financial measures adjusted to include certain costs, expenses, gains and losses and other specified items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available on the company's website at

So Lamberto and Charlie will have prepared remarks, and then we'll go to your questions. Lamberto?

Lamberto Andreotti

Yes. Thank you, John. Good morning, everyone. Before I talk about the results of the third quarter, I want to note a few management changes that we have recently made, changes that underscore our commitment to growth and recognize the talent of our senior executives.

I have promoted Giovanni Caforio to President U.S. Pharmaceuticals, and he has joined my senior management team. Giovanni is a physician with a strong business background, and this is a natural career step that builds on his senior operational experience and strategic leadership in our European, U.S. and global commercialization units.

And I've also appointed Charlie Bancroft and Beatrice Cazala to the position of Executive Vice President, expanding their respective roles and responsibilities. Naturally, I am very pleased by how these changes will strengthen our already strong management team.

So with that, let's go back to the subject of this call. We have just completed another very good quarter with strong sales, solid financials and significant R&D and business development achievements. In short, we proved that once again, that our BioPharma strategy is on track, delivering results today, while building a sound foundation for tomorrow.

With third quarter net sales of $5.3 billion, we delivered an 11% increase over last year. That is double-digit growth for the second straight quarter. We also reported non-GAAP EPS of $0.61 in the quarter compared to $0.59 a year ago. Our top line performance was strong across a wide range of products. This includes, of course, YERVOY, our breakthrough treatment for metastatic melanoma, which in only its second quarter on the market, had worldwide sales of $121 million. I note that sales should have been $148 million instead of $121 million if we have not changed our returns policy, which Charlie will describe later in the call.

During the second quarter, we launched YERVOY in Europe with a few countries that have already started recording sales, while others have initiated their pricing and reimbursement discussions. In the U.S., brand awareness of YERVOY is at virtually 100%, and the number of accounts ordering the product continues to increase month-over-month. And most importantly, update for YERVOY remains strong, both in hospitals and community-based treatment centers.

Moving to our pipeline, we continue to deliver good news, most notable of which was the announcement of the full results of the ARISTOTLE clinical trial on ELIQUIS, apixaban at the ESC Congress in Paris. The results are that Phase III studies were very positive and demonstrated ELIQUIS statistical superiority to warfarin with respect to reducing the risk of stroke and reducing the risk of bleeding in patients with atrial fibrillation. Atrial fibrillation is the leading cause of stroke, affecting approximately 10 million patients worldwide. The results were remarkably consistent across all subgroups and demonstrated a statistically significant improvement in mortality.

This is a very important, very encouraging development, one that underscores the strength and promise of our pipeline. And I would like to acknowledge the tremendous work of our research and development organization and it's their steadfast commitment to both follow the science and work in good sync with the business organization in the development of ELIQUIS. In Europe, we have already launched ELIQUIS for venous thromboembolic events, VTE, and we'll let you know when the AZ submission has been accepted in the U.S. and we get -- when the get a PDUFA date, which we should receive before the end of the year.

Business development continues to be a priority in how we think about capital allocation and strengthening our pipeline. We have had 5 key pipeline developments related to our single pill initiative in the last few months. We started off the third quarter with an agreement with Innate Pharma for the development and commercialization of a novel immuno-oncology biologic in Phase I. And then another one, to acquire Amira Pharmaceuticals, a company focused on small molecules for fibrotic diseases. Through an agreement with Ambrix, we then received exclusive worldwide rights to research, develop and commercialize novel biologics in diabetes and heart disease. And very important for our immuno-oncology portfolio, through an agreement with Ono Pharmaceuticals, we expanded our territorial rights on the anti PD-1 that we are developing for a variety of tumor types including renal cell carcinoma and melanoma.

Finally, we announced yesterday our new partnership with Gilead to develop and commercialize fixed dose combination containing our REYATAZ and their boosting agent cobicistat.

So taken as a whole, it was a very good quarter for us. Executing against our biopharma strategy, we continue to drive short-term results while building a solid long-term foundation, delivering strong sales while strengthening our pipeline. This is a good timing, the life of our company. But we do not rest on our laurels. We deliver today and plan for tomorrow. Thank you.

And with that, let me turn it over to Charlie.

Charles Bancroft

Thank you, Lamberto. We did have a very good quarter. We delivered non-GAAP EPS of $0.61. Sales growth across our key brands was partially offset by an increase in investment spending, the pharmacy and a higher effective tax rate versus the same period last year. Included in our third quarter EPS is a negative $0.04 impact due to U.S. healthcare reform. This impact is primarily from the pharmacy and the donut hole coverage, both of which were incremental in 2011.

I now want to give you some brief highlights from our third quarter financial results before we go to your questions. We reported third quarter net sales of $5.3 billion, up 11% compared to last year. Volume was strong, providing a 6% favorable impact on sale. Price was favorable by 2%, and foreign exchange contributed 3% of sales. The U.S. healthcare reform coverage gap implemented in 2011 and EU measures, together at just under a 3% negative impact on sales.

As I look at the third quarter sales performance, I am very encouraged by the trends in many of our key brands that are important to our future growth. This includes continued strong performance for BARACLUDE, ONGLYZA, SPRYCEL and ORENCIA. This was another very good quarter for YERVOY, and we believe this reflects both a compelling profile of the drug and the execution of our commercial model.

As Lamberto mentioned, we reported YERVOY sales of $121 million in the quarter. Excluding the sales deferral, YERVOY sales would have been $148 million. Last quarter, we discussed U.S. YERVOY sales in 3 categories: A stocking element, a bolus or onetime element and underlying demand. I'll cover those 3 again, but first, I'll address the sales deferral. As a result of our customer model and our ability to connect with the entire unit of care, we've identified an opportunity to implement a new returns policy to alleviate financial concerns physicians have raised related to potential YERVOY returns.

Since the prevalence of this disease is quite low, many community oncologists see only a few patients each year. If the intended patient does not use the ordered drug, it may be some time before the oncologists has another eligible patient. We believe that the new policy will remove such concerns and facilitate greater uptake by these physicians.

From a historical perspective, typically, we use a returns trend based on history of returns, but we don't yet have enough history to reliably estimate the returns for YERVOY under this new policy. So accounting standards require that we only book the sale when the product is used. As a result, we are deferring $27 million of sales, which corresponds to our estimate of the inventory in the channel at the end of Q3.

Now back to the 3 categories of U.S. YERVOY sales. Wholesalers are holding approximately 2 to 3 weeks of inventory, which is a build of $10 million to $15 million this quarter. We estimate that the bolus accounted for about $10 million to $20 million of our Q3 sales, and that we should see little to no impact moving forward. The largest driver of our third quarter sales were strong demand. New patient starts are split approximately 60% in first line and 40% in second line. Access in reimbursement has gone very well, and we now have a C code, allowing hospitals to be reimbursed. And we expect a permanent J code in January.

As Lamberto mentioned, we are in the process of launching YERVOY in Europe and reported $12 million in international sales. We are working with authorities to try and obtain full reimbursement in the major European markets, which is expected over the course of 2012.

As I move to the rest of our product performance, please remember that foreign exchange did have a positive impact on all of our global brands. Performance excluding foreign exchange is available on our website. BARACLUDE, our treatment for hepatitis B, was up 36%, including 43% growth internationally. BARACLUDE's long-term efficacy, safety and 5-year resistance data has strengthened its position as the preferred first-line agent.

The ONGLYZA franchise delivered sales of $127 million, a 13% increase sequentially versus the second quarter. The franchise delivered 15% prescription growth versus 5% for the class. Going forward, we are focused on commercial execution and positioning our data in renal patients and our head-to-head study versus SUs.

SPRYCEL was up 47% in the quarter, reflecting successful commercial execution and the launch of the first-line indication. In the U.S., our rolling 3-month share indicates we are the leading second-generation agent in first line with over a 15% share.

ORENCIA was up 27% as we continue to make progress in becoming the IV biologic of choice, highlighting efficacy and durability of response. We have recently launched our subQ formulation, allowing us to compete in the 2/3 of the market that is currently subQ.

ABILIFY was up 14% in the quarter despite the step down in our contractual share of net sale. ABILIFY prescriptions were up 4% in the U.S., roughly double the market growth. International sales were also strong, up 27%.

Now let me give you just a few comments from the rest of our P&L. I will focus my remarks on our non-GAAP results. Reconciliations to our GAAP results are available in our press release and on our website. Gross margin was 74%, up 10 basis points compared to the third quarter last year. Advertising and promotion expenses were down 11% at $205 million for the quarter. Less spending on the promotional of PLAVIX and AVAPRO was partially offset by increased investment spend on new products and indications.

Marketing, selling and admin expenses increased 15%. This is due primarily to the pharmacy which is recorded in G&A and the negative impact from foreign exchange. Excluding the pharmacy, MS&A was up 10% with just under half driven by foreign exchange. We did have increases in investment spending behind YERVOY, NULOJIX, and ELIQUIS.

R&D increased 8% driven by overall portfolio spend and the ZymoGenetics acquisition. The effective overall tax rate was 26.4% in the quarter. The increase, compared to the third quarter 2010, is primarily due to certain tax settlements last year. Earnings mix had a negative impact in this quarter, and the pharmacy had a negative 1% impact. As I've mentioned, I expect a favorable impact from the resolution of certain discrete items during the fourth quarter.

We have refined our 2011 GAAP and non-GAAP EPS guidance. Our non-GAAP guidance for 2011 is now $2.25 to $2.30. Overall, we are seeing good sales trends for our key products including YERVOY. At the same time, we are selectively increasing our investments in these products as we look to maximize the value of our portfolio. The only change to our line item guidance is MS&A, where we now expect a low double-digit increase. As I look back over 2011, there are 2 main drivers from our original expectations for MS&A. First, based on changes in FX, we've seen a more negative impact. Second, we have increased investment in our products that should contribute to our long-term growth.

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

Lamberto Andreotti

Thanks. So, Celia, I think we're ready to take questions. And just a reminder that in addition to Lamberto and Charlie, we have Elliott, Beatrice and Giovanni here for any questions that you might have. Celia?

Question-and-Answer Session


[Operator Instructions] We'll go first to Tony Butler with Barclays Capital.

Charles Anthony Butler - Barclays Capital, Research Division

Two brief questions, if I may, one on YERVOY. Do you have some information about a percentage or rough percentage of patients that may actually take a second dose or have taken a second dose versus those who have only had one dose or maybe naive to that second dose? And then the second question, please, for Elliott. Elliott, in the dapagliflozin panel there were comments around liver injury and Hy's Law -- some consternation around Hy's Law. Can you comment on the new data sets that have been submitted with respect to liver injury with dapa in those patient sets?

Elliott Sigal

Tony, this Elliott. I'll go first on the question of dapa. We haven't presented the scientific study that we are submitting. I think the key thing for today is that we're working closely with the FDA to answer questions that arose in the Advisory Committee. And we had 2 significant studies that study about 1,800 patients with Type 2 diabetes. These were Phase III studies that ended late in the review. They were originally designed in special populations. In this case, high-risk cardiovascular patients. They afford us the opportunity to describe not just the efficacy but the safety. And we believe this additional information will help the FDA make a decision. And we're pleased that we have a major amendment which resets the clock 90 days and we have a new PDUFA date at the end of January. Giovanni?

Giovanni Caforio

Yes. As you know, we are accumulating increasing experience with the use of YERVOY in the market in the U.S. for both naive patients and patients in later lines of therapy. Many patients are receiving more than one dose, and that depends clearly on the line of therapy and the experience with the product. But many patients are receiving more than one dose. And as you remember, the approved course includes 4 doses of YERVOY.


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

Jami Rubin - Goldman Sachs Group Inc., Research Division

Lamberto, this is a question for you. Recently, Bristol's management has been signaling an increased appetite to pursue larger Strings of Pearls than you have in the past. And I'm just wondering if you can give us a sense for what it is you think you actually need, I mean Bristol has had such great success with its first wave of new products and looks like an exciting second wave of products. So maybe if you could articulate what it is you would be looking for? And related to that, is it that you're concerned about the 2012, 2013 cliff, or are you looking to acquire something to augment 2014 and beyond? If you could just sort of provide color around your thinking on M&A, that would be appreciated.

Lamberto Andreotti

Yes, Jami. Yes, there is lots of talking about the size of potential acquisitions we are interested in. Let me put it this way. Business development remains one of our top priorities. I mean, the 2 deals we completed during this quarter, Amira and Innate, are clear examples of things that we are interested in. What we are interested, given the underlying fundamentals of the company, we're interested in opportunities that improve the long-term growth of the company. So we continue to look at opportunities that are good strategic fit, but are scientifically sound and that makes sense from an economical point of view. And we will stick to our discipline. So at the same time, we are also looking at opportunities of licensing -- on the acquisitions front, the licensing of small molecules and biologic agents. And then again, all this is to bolster our pipeline and all this is to improve the long-term growth of Bristol-Myers Squibb.


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

Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division

I'm wondering if you can give us an idea how we should think about spending reductions in 2012 related to PLAVIX and AVAPRO going off patent? We modeled that SG&A will go down a fair bit next year, but I'm wondering, maybe that's not realistic because of the need to ramp up spending on products like ELIQUIS? And then on YERVOY, in that segment, that 50% of patients where you'll be competing directly against vemurafenib, how are things shaking out in terms of the choice of first-line agent? And also any update on where anyone is for the biomarker for YERVOY?

Lamberto Andreotti

Sure. We will take this -- let me make a short premise. We are obviously focusing our attention to delivering good quarters, quarter-after-quarter. But at the same time, we are very interested in continuing to grow this company in the long term. So when we look at 2012, we consider, obviously, the importance of delivering results in 2012, but also the importance of building the assets that we have in our portfolio, in our pipeline. And this is the spirit that we follow in planning for the next year.

Charlie, you want to go?

Charles Bancroft

Yes. As you're aware, we've delivered between 2008 and 2010 $2.5 billion worth of cost savings or cost avoidance. As a result, our P&L already reflects significant improvements in expenses that we've made over last few years. As it relates to PLAVIX and AVAPRO, over the last couple of years, we have also been rationalizing our expenses on those 2 brands as they come near end of life for those. But we have retained the appropriate infrastructure to help us successfully launch our new products. We, therefore, don't anticipate significant reductions in our expenses as these brands go off patent next year. Lastly, I would also comment, we will continue to invest in R&D, which is critical for our long-term success as a pure play biopharma company.

Giovanni Caforio

On YERVOY and Zelboraf, I would say at this point, it's too early to assess the impact on Zelboraf in the market. And we will need to assess how the process of BRAF testing progresses and prescribing patterns evolve over time. It is clear that Zelboraf has a good response rate, but the ultimate goal of treatment in metastatic melanoma regardless of BRAF status is really to maximize long-term survival. And YERVOY has extremely strong data from that perspective. We continue to believe that in the long term, the 2 products are complementary for patients with metastatic melanoma in positive BRAF status.

Elliott Sigal

Tim, this is Elliott. Your question on biomarkers, we continue our research in-house and our collaborations and following the best we can, independent investigation in predictors of safety and efficacy of immunotherapy area. I'm not aware of any breakthroughs in this area at this time.

John Elicker

Can we go to the next lesson, Celia, please?


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

David Risinger - Morgan Stanley, Research Division

I have 2 questions. One is commercial and then one for Elliott. So I was just hoping that you could explain to us a little bit more detail on where BRAF testing stands now. For example, if someone is diagnosed with metastatic melanoma today, is there effectively no chance that they're getting YERVOY in the immediate future because they're going to be tested for BRAF and thus potentially go on Roche's therapy? Is that what's happening? And thus, it will cause a pause in some patient demand? So that's my first question. And then second, just wanted to extend my congrats, Elliott, on the Ono announcement. Could you just go into some detail on your enthusiasm for PD-1 and the clinical trial time line in coming years for validation?

Lamberto Andreotti

Giovanni, why don't you take the YERVOY question?

Giovanni Caforio

Again, on Zelboraf and BRAF testing, I would say that it really is very early to assess what dynamics are developing in the marketplace. As we look at our Q3 performance, we estimate that YERVOY had approximately 30% market share across lines of therapy in the U.S. And that is regardless of BRAF testing. We know that physicians will adopt BRAF testing in both the institution and the community. And again, as I said before, we believe there is room for both YERVOY and Zelboraf in the treatment of BRAF-positive patients. But those -- that this treatment pattern, clearly, will evolve over the next few months.

Elliott Sigal

David, this Elliott. I share the excitement about working on PD-1 and having the rights with our new partner, Ono. Data, as you know, from a very early Phase Ib dose escalation study in solid tumors was presented in ASCO 2010. We will be presenting, hopefully, at ASCO 2012 data on renal cell carcinoma, melanoma and lung. In early clinical trials, since we saw multiple tumor types, including the lung, have interesting activity, and we think the safety profile is, at this point, quite acceptable, we are planning registrational trials in multiple tumor types. These trials will become public and on in early '12, and we will have more to say about them. The -- under the agreement, to remind everybody, we obtained worldwide rights to PD-1 excluding Japan, Korea and Taiwan. But this extended our reach beyond North America, significantly worldwide. And we will -- and that's very exciting to us.


We'll go next to John Boris with Citi.

John T. Boris - Citigroup Inc, Research Division

First question for Lamberto. As a significant amount of the -- or a significant number of the Phase III assets have been derisked, some have been commercialized. You do that in 2013 minimum guidance out there, but going forward, how should we be thinking about the long-term growth trajectory of Bristol and why the success that you've had with your pipeline. And then second question for Elliott, on the hepatitis C portfolio, one of the ASLB extracts had some pretty unique data on SVRs in genotype 1b in Japanese patients. It seems as though you're at a critical juncture of rolling out a lot of different clinical trials for your hep C portfolio. But could you maybe provide a framework for how you see at least your portfolio is going to be going after that disease state?

Lamberto Andreotti

Okay, John. Just a clarification, when we updated our long-term guidance in July and when we did that, we said that we are not going to update it every quarter. So we did that at that time, and we will speak again about it in the future when we update also 2012 guidance. What -- how do I think about the future? I think in an optimistic way. We see, as you say -- you said, a number of our pipeline products making to into the market, we've -- supported by good clinical data, clinical data that is not only important from a prescribe -- a prescription point of view, but also for access. We seem to have found the right way of commercializing products. I mean, what we see in the commercialization of YERVOY is for sure innovative and for sure is effective. So we think that we are delivering what we are planning to deliver, a company with a totally renewed pipeline after the loss of PLAVIX and AVAPRO, and with interesting situations are having a portfolio very diversified in very different areas with some products, but are shaping up to be bigger than probably most people were thinking of not long ago. And this is, again, good clinical data, strong attention to reimbursability and pricing and innovative ways of managing customers.

Elliott Sigal

John, this is Elliott. Indeed, hepatitis C is a rapidly evolving field. Our development strategies take into account different genotypes, perhaps different polymorphisms of the host and different geographies. And consequently, we believe multiple therapeutic approaches may be needed given the diversity of the patient populations around the world. Based on the breadth of our portfolio, with several small molecule mechanisms and the interferon lambda, we believe we're well positioned in this area. We were the first EASL to show that a combination of 2 oral agents could indeed cure a subset of populations. That was correlated with patients that had genotype 1b, when the NS5A was paired with a protease inhibitor. We followed that up in Japan, as you referred to, that we will be presenting at the liver meetings because the predominant genotype in that geography is 1b. We have a very exciting program of both the dual approach and the quad approach in a variety of patient populations. Our NS5A inhibitor is in Phase III now. Several studies are ramping up. We will be doing a variety of studies for different situations around the world, as I mentioned. And we are following up the use of NS5A with a protease inhibitor alone and in combinations with PEG-Interferon alfa and ribavirin. And we have Phase III starting relatively soon for interferon lambda.


We'll go next with Christopher Schott with JPMorgan.

Christopher Schott - JP Morgan Chase & Co, Research Division

Just had 2 questions on ELIQUIS. I guess the first, how relevant in your view is positive ACS data for XARELTO relative to ELIQUIS when considering the ACS opportunity given some of the co-morbidities that exists between these populations? And then second, if XARELTO were to be delayed at its PDUFA in a few weeks, does that meaningfully change your marketing approach and commercial outlook for ELIQUIS or is it really not that relevant in your view?

Elliott Sigal

Yes. We recognize that the top line data of XARELTO showed in the Atlas trial that you referred to, that it met its primary efficacy endpoint, but there was also statistically significant higher major bleeding rate. So all I really can say at this point that I think it's wise to wait and see the detailed results of the Atlas trial to fully understand the benefit risk profile. And I think we would do the obvious analysis there. But as you referred to, the major opportunity in this area that we see as an atrial fibrillation. We're quite excited about ELIQUIS profile that's emerging from the clinical data, better in safety and better in efficacy. Our colleagues in commercial feel that this is -- combined with ARISTOTLE and AVERROES, a very important position to be in to meet the needs of patients and physicians. And I'll just mention that we should all realize that there are 3 programs that are pioneering in this area. So there will be mixed results in different trials. And we're just happy right now with what we're doing in atrial fibrillation and our life cycle.

Beatrice Cazala

Confirming what Elliott was saying, we're awfully excited about both the ARISTOTLE and AVERROES results. So when you're asking about XARELTO coming into the market, it has been in our planning from the beginning and coming as a sub-agent. We have been working very hard, looking at all the market opportunities and those segment opportunities, both from the specialists, as well as a primary care standpoint where we see that our profile, having shown both efficacy against population which have been using warfarin where we have also shown that our patient have not used warfarin and have been using aspirin. We see there that our product profile will be very accepted by both generalist and primary care physician. So our perspective there is we're very strong versus the market analysis, and we would be monitoring very carefully what both products continue to do, as well as what XARELTO will be doing in the marketplace in the early days.

Lamberto Andreotti

In summary, Chris, with second and third, we are very happy we have ELIQUIS. And we are very happy of how the product has been developed and having ARISTOTLE and AVERROES, 2 important favorable results that we have. And so we're very happy that out of the 3, we have ELIQUIS.


We'll go next to see Seamus Fernandez with Leerink Swann.

Seamus Fernandez - Leerink Swann LLC, Research Division

So, this question is actually -- I guess first question is for Charlie and Beatrice. Can you talk about a little bit, as we talk about 2012, how you're considering the impact of global price pressures and any specific markets that you think we -- are worth thinking about relative to what some other groups have talked about where you might see less or greater exposure than the group? And then just secondly for Elliott, can you help us think about what the goal of therapy or treatment would be with anti PD-1, specifically in lung cancer? We know, again, the goal of therapy is cure with ipilimumab, and we have seen something close to that in a small percentage of patients. Is the hope that -- and the possibility that, that could also be seen in lung cancer?

Beatrice Cazala

So regarding the environment of global pricing, the focus of our attention at the moment, as you may imagine, is Europe. We have been operating in a negative pricing environment for some time there, and we have had historically projected about 2% to 2.5% pricing impact every year. For '11, our estimation that was safety measure will have a mid single-digit impact on the sales is being shown now to be what we see in our numbers. So our current plan are reflecting similar impact for next year. However, as the economic situation in Europe continue to be of concern, it is possible that there could be additional measures that could be implemented and will further affect our industry. In those cases, should that happen, we will adjust our expectation and plan accordingly. You were asking about specific markets. Obviously, we are huge across Europe, specifically, to look at country-by-country, understand the situation. We are looking at all our launches very carefully and are negotiating all our assets. The good point for our portfolio, as you know, is that we have an innovative compound. All our discussion today are happening with our products with an innovative portfolio. So that put us in the more favorable position than if we have not. We see clearly across Europe all the market of the continent. They are looking carefully at pricing of mature products. So to that effect, we feel comfortable that being aware that market-by-market, there could be differences with our innovative portfolio, we will be able, over time, obviously, as it takes time in some markets, to get there with our new innovative compound.

Elliott Sigal

Seamus, this is Elliott. I think I have to reiterate that this is early days with anti-PD-1, and certainly, even with immunotherapy. However, based on the data, we've become firm believers that there are ways to reactivate one's own immune system to fight malignancies -- that these responses in some patients may well be durable. If we begin to accumulate experience of 5 years, as we may be approaching with some patients with melanoma, we could one day, hopefully, talk about cures. But it's too early at this point. These 2 approaches are different in their mechanism of activating T-cells. They give somewhat different safety and efficacy profiles and perhaps different relevance, different tumor types. As we've said, we're testing multiple tumor types with anti PD-1, including lung. We will ramp up to a Phase III program. We'll be talking more about next year, and I think immuno-oncology remains a very important priority for Bristol-Myers Squibb.


We'll go next to Barbara Ryan with Deutsche Bank.

Barbara A. Ryan - Deutsche Bank AG, Research Division

They've already been answered. I appreciate it.


We'll go next with Catherine Arnold with Credit Suisse.

Catherine J. Arnold - Crédit Suisse AG, Research Division

I have 2 questions, one on your earnings outlook and then another on ORENCIA. I guess my earnings outlook question is a little rhetorical because I don't expect you to give me 2012 guidance right now. But I just want to point out that, obviously, when you gave 2013 trough guidance, that was in March 2010. And certainly your world has changed a lot since then, and certainly for the good. So as I think about the combination of the near-term step up investments that you guys are making, the early stages of patent had with next year, but then, the ramp up of new products following, I guess I don't see why 2013 is really the relevant trough anymore and that next year, actually, might really be the trough. So I guess I wanted to see if you could comment on that logic? On ORENCIA, I wondered if you could give some color on how you think about the subQ launch as an inflection point to the baseline franchise growth. And that whenever the product has matured do you anticipate that the subQ piece of that is the majority of the market like you see in the overall biologic space for RA?

Lamberto Andreotti

Catherine, let me take your first question. Give us time until January to come out with our 2012 guidance. And -- but when you think about 2012 for us, do the way we do it, we think that 2012 is a very important year where, thanks to good things that we have from our R&D, we can continue to grow ELIQUIS, we can have the opportunity to grow YERVOY, establish ELIQUIS and possibly start working on that but -- so it will be a year investment. That will be clearly important for the years to come. As far as 2012, I think that my recommendation is that we internally, and you externally, will also look at how generic competition works nowadays. We have 2 big products losing exclusivity next year, AVAPRO and PLAVIX. In PLAVIX, remember, losing exclusivity with a lot of generic from the very first day. So we are refining our analysis of how we will suffer because of the loss of exclusivity. And I suggest that everybody does the same exercise because there might be a disconnect between what the reality is and what some might project for PLAVIX. But going back to my message I'm giving you, we are building a strong portfolio, and we are committed to it. And at the same time, we are very careful in not losing our, by now, consolidated attention to productivity in all across the entire company.

Beatrice Cazala

Regarding ORENCIA, we we're very pleased with, as you heard Charlie, with our performance with the IV today. And this has been growing by 12% over the last year. So we have a significant presence in the IV market, and we are obviously very pleased to have now launched our subQ formulation, which we'll be able to assess what will be the 2/3 of the RA patient that prefer the subQ segment. We were not able to compete in that market segment. So our plan are, clearly, to position the ORENCIA subQ as a biologic of choice in first line, but also to recognize that many patient with subcutaneous agent would also be a possible patient for ORENCIA subQ. We expect, however, that initially, the early adoption will come from current prescriber for ORENCIA, and we expect some portion of our patient, particularly those covered by commercial insurance, would switch to the subQ. However, we are planning, to your question, to continue investing in organic ORENCIA growth and to plan to grow the IV also. The IV represents still 1/3 of the patient population that prefer that formulation. So we consider a great competitive advantage to have both formulation now to compete in the marketplace in an increasing competitive RA market.


We'll go next to Mark Schoenebaum with ISI Group.

Mark J. Schoenebaum - ISI Group Inc., Research Division

Just on -- I want to push you a little bit on the use of cash in an earlier question. Did I understand correctly that your focus is mainly on license deals as opposed to outright M&A, or did I misunderstand your response to an earlier question? And then maybe a question for Elliott, and then also, I'd be interested in the commercial perspective. At this point, after you review all the data, do you expect to have explicit FDA label claims for mortality and superiority in stroke prevention over warfarin. And then commercially, do you think that, that is even needed given the data as it stands?

Lamberto Andreotti

Mark, probably I was not very clear what I said before. I mentioned the licensing because what I wanted to say there is that we have entered in licensing both biologics and small molecules. But business development for us includes, obviously, acquisitions of products, companies and technologies. So the acquisition piece is a significant element of our business development program. And we, senior management of this company, spend a good time in assessing the different opportunities we have there. So it's both acquisitions and licensing.

Elliott Sigal

Mark, this is Elliott. You had a question on ELIQUIS labeling and what is needed. It's premature to talk about labeling at this point. Certainly, the clinical data needs to be in the label to fully inform the type of clinical investigation that was done. But I think what's needed in this field is an anticoagulant that's oral, better than Coumadin in both efficacy and safety. Essentially, physicians, I believe, are looking for an improved therapeutic window. They know Coumadin well as having a narrow therapeutic window. And I think they are very concerned, in general, about delivering adequate anti-coagulation to achieve superiority in stroke prevention, while improving the side effect profile of available medicines. So this, I think, will expand the market to the 40% or 50% of patients that are not on Coumadin, but should be, and be a very important option for patients that are anti-coagulated because it's better in efficacy and better in safety.

Lamberto Andreotti

And I think that the good practice we have here is not to comment about labels before we complete our conversations with the regulatory agencies. We had a very good dialogue with the agency here and agency in Europe and I think that we should get those discussions between us and them. And obviously, disclose the information that becomes relevant when it is relevant.


We'll go next too Gregory Gilbert with Bank of America Merrill Lynch.

Gregory B. Gilbert - BofA Merrill Lynch, Research Division

I'll ask 3 up front. First, on YERVOY, I don't want to put words in your mouth, but it sounds like you would not expect quarterly sales to go down during this Zelboraf launch phase and the possible ramp up of a genetic testing. That's first. Second, does your interaction with the FDA, Elliott, on dapa make you confident in the product's approvability despite the panel's outcome? And third, do you have any comments on the early, but interesting, data in hep C that Abbot shared recently on their 4 drug regimen?

Lamberto Andreotti

On YERVOY, a couple of comments. As you know, YERVOY's approved in a relatively broad indication regardless of BRAF status. We are actually very pleased with increased penetration in the marketplace, both in the institutional setting and in the community setting. And so if you look at Q3 sales versus Q2 sales, the percentage of sales that came from the community setting rose from 30% to 50% as an indicator of increased adoption in the community. So while, as I said before, it is really too early to predict how the launch of Zelboraf is going, there is clearly a significant opportunity that continues to exist for YERVOY in the marketplace.

Elliott Sigal

Greg, this is Elliott. With regard to the question on dapagliflozin, I cannot pre-judge how the review will end up. However, I do have confidence in the benefit risk of this compound and the data that supports it. I think the advisory committee gave some clear direction in their discussion and raised points that, hopefully, can be answered by the new clinical data that we submitted. But we'll have to work with the agency to appropriate conclusion. With regard to hepatitis C, I think there's a very fast evolving area. I don't like to comment on data before I see it. The data really hasn't been released yet. But we do believe, as we've shown, that it is possible to get cure, at least, in some patients with certain regimens. And I believe that NS5A will play an important role in our program for that reason, paired with either our internal agents or agents that are becoming available.


We will go next to Steve Scala with Cowen.

Steve Scala - Cowen and Company, LLC, Research Division

I have 3 questions. First, on apixaban, it sounds as though you have already filed it for atrial fibrillation for the U.S. because you said you would tell us when it was accepted by the end of the year. So can you tell us when it was filed? Second, the ORENCIA subQ label offers the option of an IV loading dose. In clinical practice, how often do you believe an IV load will be used? And what sort of impediment will this be to adoption? And then thirdly, on apixaban's ADOPT trial, my understanding is that it was originally going to be presented at ASH. But now it's going to be presented at AHA. Elliott, can you help me think of reasons why the data would be presented at an earlier, higher-profile meeting other than the data is very strong?

Beatrice Cazala

Regarding ORENCIA and your question about the loading dose options, clearly on that one, we have looked at it very carefully, and we have plans to work with all the physician to use the drug. However, we believe that there is the option of using it or not using it. We believe that the usage will land where the patient and the physician agree, and the way they are going to be able to organize the unit of care to be able to do it. So on a case-by-case, I think the situation will evolve and we'll be monitoring carefully. Our planning at the moment do not [indiscernible] when it is going to be used.

Elliott Sigal

Steve, this is Elliott. I can't improve upon the statement Lamberto has already made, that we'd like to inform you when we know what the -- when the PDUFA date is disclosed. On apixaban, I don't have any more granular timelines than that. I'm not -- I wouldn't attach any significance, one way or the other, on the ADOPT trial. I'm not aware of our plan to put this at ASH. I would just say, ADOPT is a part of our comprehensive global clinical program designed to explore multiple indications. And as a reminder, there have been mixed results among the different programs in this area. We investigated here 2.5 milligrams twice daily in a patient population that was at risk of developing deep vein thrombosis when they're hospitalized for an acute medical illness like congestive heart failure and other risk factors. And we're going to present this in a few weeks.


We'll take our final question from Marc Goodman with UBS.

Marc Goodman - UBS Investment Bank, Research Division

Yes, I was hoping you can remind us just some of the key launches that will be coming up like in Japan and Asia, emerging markets areas that haven't been that critical growth drivers for you lately, but what about it for the next year?

Beatrice Cazala

Well if we look at our key markets, at the moment, actually, we are just launching in China ONGLYZA -- got approval before the summer, so it's -- September was the launch. We also have SPRYCEL still online also approved in China, and we are launching it. We have significant performance at the moment from the launch of ONGLYZA in India, which is doing very well. And we are preparing in some of those markets to be ready very soon to introduce next year our fixed dose combination of ONGLYZA [indiscernible]. So those are the focus of what we have. We are successful with also our launches of SPRYCEL in Japan. So we are very comfortable with the growth that we have in those market.

Lamberto Andreotti

So let me conclude that. And, Mark, I think the interesting thing is that, over the years, we have significantly improved our global development of products. So we have managed to obtain approvals in the different geographies in a much more limited amount of time than we did in the past. And our goal is to have countries like Japan and China, very close in terms of approval time to the rest of our geographies.

Now general comment to conclude the call, this was a very good quarter for us, executing our -- against our biopharma strategy. We continued to drive short-term results while building solid long-term foundation. I said, delivering strong sales, while strengthening our pipeline. We are excited about what we have delivered so far, and we'll continue to work at delivering results in the next quarters and years with the same energy and devotion for innovation that we have proved to have over last years. Thank you.

John Elicker

Okay. Thanks, everybody. That concludes the call. Just as you know, Terry, Tim and I will be available for any follows ups you might have. Have a great day. Thank you.


That concludes today's conference. We thank you for your participation.

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