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Executives

Charles Bancroft - Chief Financial Officer, Executive Vice President and Member of Management Council

Giovanni Caforio - President of U.S. Pharmaceuticals

Beatrice Cazala - Executive Vice President of Commercial Operations

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

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

John Elicker - Investor Relations Executive

Analysts

Charles Anthony Butler - Barclays Capital, Research Division

David Risinger - Morgan Stanley, Research Division

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

Seamus Fernandez - Leerink Swann LLC, Research Division

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

Jami Rubin - Goldman Sachs Group Inc., Research Division

Christopher Schott - JP Morgan Chase & Co, Research Division

John T. Boris - Citigroup Inc, Research Division

Catherine J. Arnold - Crédit Suisse AG, Research Division

Bristol-Myers Squibb (BMY) Q4 2011 Earnings Call January 26, 2012 10:30 AM ET

Operator

Good day, and welcome to today's Bristol-Myers Squibb 2011 Fourth Quarter Earnings 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, Investor Relations. Please go ahead, Mr. Elicker.

John Elicker

Thank you, Alicia, and good morning, everybody. Thanks for joining us on the call today to discuss our fourth quarter results. Joining me this morning are Lamberto Andreotti, our Chief Executive Officer; Charlie Bancroft, our Chief Financial Officer, and they'll have prepared remarks. And then joining also for Q&A, Elliott Sigal, our Chief Scientific Officer; Beatrice Cazala, our Commercial Lead for Global Commercialization, as well as responsibility for Europe; and Giovanni Caforio, who runs our U.S. business.

Before we get started, I'll take care of the legal language. 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 8-K. These documents are available from the SEC, the BMS website or from Bristol-Myers Squibb 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'll also discuss certain non-GAAP financial measures adjusted to include certain costs, expenses, gains and losses and other specified items. Reconciliations to these non-GAAP financial measures to the most comparable GAAP measures are available on the company's website.

Lamberto?

Lamberto Andreotti

Thank you, John, and good morning, everyone. Well, we have just completed a very good, very important year for us, one during which we delivered solid results while setting the stage for a strong future. We grew our sales by 9%, and we are very proud of the performance of our innovative and diversified portfolio, as exemplified by the growth of many of our key brands like ORENCIA, SPRYCEL, BARACLUDE, ONGLYZA and YERVOY. We made some promising advances, with respect to our pipeline, the most important of which were those regarding ELIQUIS. And I believe we continue to be good stewards of shareholder capital as we executed multiple strategic transactions, while at the same time, we increased our dividend and continued our share repurchase program.

Two of the most notable developments in 2011 concern YERVOY and ELIQUIS. As you will recall, YERVOY was launched in the U.S. in March with a broad indication for therapy for metastatic melanoma with a significant overall survival benefit demonstrated in 2 Phase III studies.

YERVOY was also approved in Europe and launched in a number of countries there including Germany, while we are working through the process of access and reimbursement in the rest of the region. The safe performance of YERVOY definitely proves a significant success -- a significant acceptance by the oncologist community.

With respect to ELIQUIS, the big news came over the summer with the announcement of the ARISTOTLE study results. The ARISTOTLE results demonstrated its superiority of ELIQUIS we were referring with respect to both safety and efficacy in patients with atrial fibrillation. In fact, it was a triple win, and that the study demonstrated a significant reduction in stroke, bleeding and mortality, making ELIQUIS the only new oral anticoagulant to show a significant reduction in all these 3 areas. This reinforced the earlier AVERROES study, which demonstrated the superiority of ELIQUIS to aspirin regarding efficacy with no increase in the risk of bleeding.

We are preparing the launch of ELIQUIS as we are expecting regulatory decision this year on the atrial fibrillation indication in both the U.S. where the PDUFA date is March 28 and in Europe. We've also filed it in Japan and various other countries.

Taken altogether, the sales, launches, the business transactions and the clinical advances, 2011 was certainly a great year in the life of our company. That said, with all these positive events, the nature of our business often entails setbacks, too. The complete response letter concerning dapagliflozin received last week from the FDA is a case in point. We are very disappointed by this FDA decision as we remain confident in the benefits-risk balance of dapagliflozin, and we know there's a big unmet medical needed in diabetes that requires new therapies. We are committed to working through the approval processes with the health authorities here in the U.S. and around the world.

In any case, one setback does not block us or make us change our strategy. As you have seen in the financials we have just released, we have intensified our investments behind our launches, as we are convinced that this is exactly what we need to do to build our future. And we have continued to implement our String of Pearls program.

At the beginning of the year, we announced our intention to acquire Inhibitex, building on our long-standing presence in biology, adding to our already broad portfolio of hepatitis C assets and strengthening our position to better serve the estimated 175 million people chronically affected with hepatitis C around the world.

I am confident in the long-term growth potential of this company. I recognize that there are hosts of serious external challenges, but I have several good reasons to look at the coming years with optimism. Specifically, the sales of many of our currently marketed products are expected to continue to increase. Our recent and expected launches holds great promise. Our robust late-stage pipeline, particularly the work we are doing in immuno-oncology and hepatitis C, is very exciting and very encouraging. And the overall sustainability of our R&D, supported by our String of Pearls approach to business development has planted the seeds for continued growth.

We have already begun transitioning to our portfolio of the future and are diligently leading the company towards a long-term growth position. The balance between establishing this long-term growth and delivering short-term results is reflected in our 2012 guidance that you have seen in the press release of this morning and that Charlie will review in a moment.

Before he does this, let me say once again that 2011 was a very good year for Bristol-Myers Squibb. And as we have turned the corner into the very important year in which we will lose the exclusivity for PLAVIX and AVAPRO, I am optimistic because we have the products, we have the pipeline, and we have the culture and management team to go beyond those losses of exclusivity and deliver a successful future.

And now let me turn it over to Charlie.

Charles Bancroft

Thanks, Lamberto. We did have a solid quarter which caps a good year for BMS. In the fourth quarter, we delivered non-GAAP EPS of $0.53. Sales growth across our key products was partially offset by an increase in investment spending in the pharmacy. We reported fourth quarter net sales of $5.5 billion, up 7% compared to last year. Volume was strong, providing a 4% favorable impact on sales. Price was also favorable by 3%, and foreign exchange was neutral. The U.S. healthcare reform coverage GAAP implemented in 2011 and EU measures, together, had a 3% negative impact on sales. As Lamberto mentioned, we are pleased by the trends of our key brands that are important to our future growth. Let me provide a few highlights.

We continue to be encouraged by the performance of YERVOY. Until the introduction of YERVOY in Zelboraf last year, no new agent has been approved for metastatic melanoma in over a decade. The market is now in a state of transition as physicians become more familiar with these new medicines. During Q4, we saw an increase in the adoption of the 2 new agents and broader use of BRAF testing.

During the quarter, we reported YERVOY sales of $144 million, with U.S. sales of $118 million, which we believe represents underlying demand with no real impact from either the bolus effect or inventory movement. We continue to make good progress on expanding our prescriber base and access. Importantly, we received a permanent J code in the U.S. earlier this month.

As you know, the process for getting access and reimbursement in Europe takes time as negotiations occur in each country. But we expect the profit will be commercially available and reimbursed in most of our top 8 countries by the middle of the year and in almost all EU countries by the end of 2012. We believe that our YERVOY customer model continues to provide valuable education and service to our customers, effective support to our patients and that it enables us to move the business forward.

Our virology franchise had a very strong quarter with BARACLUDE, REYATAZ and SUSTIVA, all posting double-digit gains. You should note that SUSTIVA sales in the U.S. included a $31 million positive year-to-date adjustment for our higher share of overall ATRIPLA sales.

The ONGLYZA franchise delivered sales of $153 million, a 20% increase sequentially versus the third quarter. In the U.S., the franchise delivered 16% prescription growth. Going forward, we are focused on driving adoption earlier in treatment as the first add-on to metformin. Also, the FDA recently approved ONGLYZA in combination with insulin, which will be important to many endocrinologist.

SPRYCEL was up 34% in the quarter, reflecting successful commercial execution and launch of the first-line indications. We continue to make share gains in both first-line and the continued expansion of the second-line opportunity.

The ORENCIA franchise was up 27%. Our IV volume outperformed the market, up 8% versus last year compared to 1% for the overall market. ORENCIA subcu was launched during the fourth quarter in the U.S. and had sales of $16 million, nearly half of which is related to stocking. The prescribing base is broad, and there seems to be real interest in an alternative mechanism in the subcu space.

Now let me give you just a few comments from the rest of our P&L. I will focus my comments on our non-GAAP results. Reconciliations to our GAAP results are available in our press release and on our website.

Gross margin was 75.2%, up 230 basis points compared to fourth quarter last year. This increase was driven in part by favorable product mix. Also recall that in fourth quarter of 2010, we had the write off related to the AVALIDE recall.

Marketing, selling and admin expenses increased 22%. You can think about the increase in 3 categories: the pharmacy, some specific onetime expenses and investment behind new key and new products. As you will recall, the pharmacy was effective in 2011 and increased MS&A by $55 million in the fourth quarter. We also incurred approximately $70 million of onetime expenses during the quarter, including bad debts in Europe, as well as additional foundation and grant funding. The remaining was driven by increased investment spend behind our new brands, partially offset by lower marketing spend on PLAVIX and AVAPRO, as they are at the end of their life cycle.

Advertising and promotion expenses were up 5%, at $285 million for the quarter, also reflecting increased investment behind newer products and indications. R&D increased 7%, driven by overall portfolio spend and clinical supply costs for trials expected to start in 2012. The effective overall tax rate was 24.9% in the quarter. The decrease compared to fourth quarter 2010 is primarily due to the resolution of certain discrete items during the quarter, which I mentioned in October.

Now turning to guidance, we have issued our 2012 GAAP and non-GAAP EPS guidance of $1.90 to $2. I will cover just a couple of items. The rest of our P&L line item guidance, you’ll have seen in our press release. We expect sales to be in the $17.2 billion to the $18.2 billion. This assumes full year 2012 worldwide sales of PLAVIX to be approximately $2.7 billion. PLAVIX sales will primarily depend on erosion rates from generic competition, inventory levels in the channel and expected returns. MS&A expense is expected to decrease in the mid-single digit range. This includes an expected incremental pharmacy expense of approximately $35 million in 2012.

And finally, on a topic that I know many of you are focused on, let me comment briefly on 2013. We last confirmed 2013 floor guidance of $1.95 to non-GAAP EPS in July. There have been a number of both positive and negative developments since that time, some specific to BMS and others affecting the industry. Our current plan is to provide 2013 EPS guidance in January of next year, which is our normal practice.

At this point, let me share some of our high-level thinking. First, we are excited about the future of our company, and we are committed to balancing the short-term results with the need to invest for our long-term growth. Clearly, we are all facing macroeconomic challenges such as foreign exchange and austerity measures around the world.

During 2011, we had several important successes in our portfolio, including the launches of YERVOY and ORENCIA subcu, and we are excited about the potential approval and launch of ELIQUIS and A-fib this year. We will need to invest behind these and other growth opportunities.

We continue to view business development as a key priority of a balanced capital allocation approach, and we recently announced our intention to acquire Inhibitex. This is roughly $0.04 dilutive in 2012 and roughly $0.05 in 2013. We continue to drive efficiencies throughout our P&L as part of our everyday business. However, we believe that we have a very attractive portfolio, and we are committed to making the investments required to maximize the value of our assets.

I would conclude by saying, it continues to be our objective to meet 2013 guidance. I will now turn it over to your questions.

John Elicker

Thanks, Alicia. I think we're ready for the questions. Lamberto and Charlie, thanks for your remarks. I would just remind everybody that in addition to Lamberto and Charlie, we have Elliott, Beatrice and Giovanni here for any questions you might have. Alicia?

Question-and-Answer Session

Operator

[Operator Instructions] And we'll go first to Tony Butler from Barclays Capital.

Charles Anthony Butler - Barclays Capital, Research Division

Two questions, one has 2 parts. Charlie, thanks for your comments on '12 and '13, but I was curious if you might be able to help with the pacing of the decline of expenses for A&P and marketing and sales, so the pacing throughout the calendar year for '12 would be helpful. And also, as you think about -- if assuming Gilead gets approval for Quad, and they remove marketing for ATRIPLA, would you pick up any of that through your efforts throughout '12? And then the second question really relates to XARELTO and PRADAXA scripts to date and how you really think about the market. And I recognize your label error, or I think we all have expectations that your label may be substantially different, but how you think about expectations in the marketplace today given 2 other agents in the market are already hitting the cardiologists?

Charles Bancroft

Yes. I would start with the overall pacing question. I don't see any dramatic change in the investment. Remember in -- beginning in 2010, we already started life cycle flexing of PLAVIX at that point. And it pretty much concluded a full life cycle flexing including going dark on DTC beginning in the third quarter of 2011. I would say that from an overall EPS standpoint though, you can imagine at PLAVIX will start seeing the decline in PLAVIX beginning in the second quarter. So from an overall standpoint, our first quarter would look better than the next 3 quarters of 2012 on an EPS basis.

Lamberto Andreotti

I can continue on with a comment on ATRIPLA, and then I will ask Giovanni to take the comment on 2 potential competitors to ELIQUIS. First of all, SUSTIVA and the SUSTIVA franchise, which included ATRIPLA. We are very proud of the results that we have achieved and we continue to achieve with that franchise. But in the U.S. it, remember, it remains the #1 prescribed HIV regimen. We will continue to support it. And yes, Gilead has the option of independently determine their level of support to ATRIPLA, but we, BMS, are committed to continue to provide the right appropriate commercial investment behind the entire franchise. We believe in the product, strong product, strong franchise and we'll continue to invest behind it. I think there was a question on ELIQUIS and maybe Beatrice, you want to speak about it?

Beatrice Cazala

Yes. It's clearly a global question in terms of how we see the market evolving. So your question is fair as we have 3 products, obviously, and it will be the third one. We have always planned for that. However, as you know, we have a very differentiated profile versus the other agents, both warfarin, aspirin, but also the new agent. So we have demonstrated superiority and efficacy at 21% distribution for strokes, systemic embolism versus warfarin; superiority in bleeding with a 31% risk reduction in major bleeding; and also superiority on all-cause mortality with an 11% risk reduction. So those studies, both ARISTOTLE and AVERROES constitute for us a good base to saying that out products will provide significant benefit to a broader range of patient and this around the globe. So we consider that they are several key opportunities for ELIQUIS. The first one will remain in newly diagnosed patient. Those patient are a significant number. We have 1.2 million patient in the U.S., EU and Japan, which are newly diagnosed with A-fib every year, and they could potentially benefit from stroke-prevention therapy. You know that many patients are receiving also severe chemo treatment with warfarin and aspirin. And those patient represent several very important opportunity in this evolving market. About an additional 20% of the patient also receive aspirin and anti-platelet therapy, because they are unable or unwilling to take warfarin. So when you look at those patterns, we believe that the treatment practice, we don't see a coagulation will differ significantly around the globe, the market having higher level of warfarin usage from higher level today of aspirin usage and the penetration of new mode of action will bear differently according to those markets. So we believe that 2 strong trials and the evidence based on those trials will make an important case for our products to be successful even as a sub-agent. When you talk about the prescriber and PRADAXA and the prescription with a specialist, we think that both the cardiologist and the primary care physician have an important role to play in the preventing -- prevention of stroke in a few patient. Those cardiologists are very important in terms of initiation of therapy, especially as you know, half of the patients are initiated at the hospitals. So that would be also a key focus for us. And the primary care patient -- physicians, sorry, are playing a much greater role in the ongoing management of the patient over time. So our focus will be both there, and we have -- actually preparing to look at how to put our customer model around those target patients. And Giovanni will comment on the market preparedness, specifically for the U.S.

Giovanni Caforio

So this is Giovanni. With respect to launch readiness in the U.S., we've been working very closely with Pfizer to finalize the strategies and plans for launch, and we will be very well prepared if we are approved on our PDUFA date at the end of March. As you know, we've learned that establishing early access and reimbursement is very critical for the successful launch. So our initial focus after approval will be on payer discussions. And during that period, we will be preparing our sales force and that medical teams to begin promoting and supporting the product.

Operator

We'll go next to Jami Rubin from Goldman Sachs.

Jami Rubin - Goldman Sachs Group Inc., Research Division

I have a couple of questions. My first question is for you, Elliott. If you could sort of flesh out for us the various scenarios with respect to the hep C market and data releases this year. I think investors are nervous about the value proposition of NS5A if 7977 were to report out very positively. So if you could comment on that? And how did you get comfortable with the tox profile of the Inhibitex 189 nuke given that toxicities were seen at higher doses? I'm just wondering that if you saw data before you made the offer and when we can expect to see that 12-week data. And then just lastly on the revenue guidance of $17.2 billion to $18.2 billion, if you could just talk about the variables. My sense is that that's mostly PLAVIX, but I'd be interested what sort of number or magnitude you're assuming for apixaban?

Elliott Sigal

This is Elliott. On hepatitis C, we have a big commitment to remain and become a leader in the field following upon our legacy in virology, HIV and our now blockbuster drug, BARACLUDE of hepatitis B. And we began 10 years ago with the thought that multiple mechanisms would be needed. Clearly, the field in science is changing drastically. There will be less of a role, nevertheless, a role for interferons, but a primary focus on all oral agents. We believe that it will require 2 new direct-acting antivirals at a minimum. We, therefore, feel that the 5A, with all its properties and its advancement and about 1,000 patients' safety profile, its efficacy will be a good contributor to that future regimen and do believe that a nuke, like the one that we acquired or about to acquire from an Inhibitex will be an excellent partner. It is true that this year will unmask a lot of data, nucleotide with ribavirin in genotype 1. Nobody knows exactly how that experiment is going to unfold. We feel that could be improved upon with an agent like 5A and the nucleotide. We are collaborating with the Pharmasset, Gilead, nuke and 5A. That data will be available at EASL this year. The particular nuke that we have added now to our portfolio, and I should mention, we have several ongoing BMS-owned all-oral regimens with a protease, a non-nuke, a protease and a 5A and different combinations of ribavirin. And now with our nuke, after the acquisition of Inhibitex, we have the combination of 5A as a major target, as well as some collaborations with the next-generation medicines. The 12-week data on -- of the nucleotide on top of standard of care should be available towards the end of the year and, hopefully, at the Liver meeting by the end of the year, at EASL, the INX Inhibitex drug on 7 days with ribavirin will be discussed, we hope. We were particularly attracted to this particular nuke because of the new platform that's used to, I think, circumvent the problems that people have had in this area for toxicity before. We got comfortable by the fact that we saw no mitochondrial toxicity, which we think's been the root of problems in the past. We have a strategy to use lower doses because of its synergy perhaps with ribavirin, but importantly with other agents such as 5A. And this year, we'll be trying to find the right dose of that compound with our combinations for the goal of having an all-oral pan-genotypic regimen. Charlie?

Charles Bancroft

Okay, let me give you a little bit of context on how we think about sales in 2012, Jami. We gave you some guidance on how we think about the evolution of PLAVIX and the variables surrounding that. Also for us on a reported basis, FX can always be an issue. And then as it relates to product flow, the big issues will be new product sales evolution, not just on ELIQUIS, but also YERVOY, ORENCIA subcu. We're not giving specific sales targets for those, and also the European measures. Right now we think we don't have a balanced view on that. If things got significantly worse, that could also impact how we think of 2012.

Operator

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

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

A couple of questions on guidance. On the 2012 revenue guidance, the top end of that is just below where consensus has been, and the bottom end of that is about $1 billion below where consensus is. And I'm wondering, when you look at analyst models, where you think things are being mismodeled the most? And then on 2013 guidance, you felt comfortable enough to give that guidance a while ago, I think it was early 2010, and there were a variety of unknowns back then, too. So I'm wondering what's so different now such that you're not wanting to update that guidance when 2013's closer now than it was back then. What are the biggest few variables that you feel you need more visibility on before you can reconfirm that number?

Charles Bancroft

Let me talk a little bit about 2012. I can't comment on any analyst model per se, but I would say that a variable that, as we see it, is FX. The average FX rate in 2011 for the euro, for example, was $1.39, as we reported it. In our updated guidance, we said we were using more current FX rates. So at the top line, it's closer to something around $1.30.

Lamberto Andreotti

So -- and about 2013, I know we will go back to this guidance, not guidance for 2013. Let me just state a few things, repeating what Charlie said. One, we are one year away from 2013, and we will provide EPS guidance for 2013 in January of next year, one month -- one year from now. Two, there have been a number of both positive and negative developments -- I'm repeating, positive and negative developments since we last confirmed guidance -- minimum guidance for EPS in July last year. And three, we have -- and that Charlie said that very clearly, our objective remains that of meeting guidance. So this is what we want to say today about 2013.

Operator

We'll go next to John Boris from Citi.

John T. Boris - Citigroup Inc, Research Division

As Lamberto had characterized the triple win on ELIQUIS of decreased stroke, bleeding and mortality, when you've taken that product concept to the cardiologists, which you clearly indicated as an important prescriber, how does that play with -- relative to the stickiness of warfarin? It seems as though the most challenging thing has been to get that physician type to make the switch. Do you need additional clinical work to facilitate that switch, or can you share with us how you're thinking about that both in the U.S. and in Europe? And then second question for Charlie, a nice surprise on the gross margins in the quarter. How should we be thinking about the mix at least going into 2012 that shapes the gross margin guidance that you've given and how you see that evolving over the longer term?

Giovanni Caforio

Yes, this is Giovanni. The first comment I would make on the U.S. market is even with the launch of PRADAXA and XARELTO, there continues to be a very high unmet medical need in atrial fibrillation. And we know that warfarin has been the standard of care for over 50 years. So given that long history, physicians have used warfarin for a long period of time and changing that behavior and making them comfortable with using a new agent is an important task we will be focused on. The second point I would make is that because of the profile of ELIQUIS and the data that was described before, we are convinced that it is a differentiated product, not only versus warfarin, but also versus the new agents. And that -- it may have a very compelling profile, both in the specialty segment and also with primary care physicians.

Charles Bancroft

As it relates to your question on gross margin, I think -- and we've stated this before that PLAVIX, overall, as that comes off patent, was basically at our overall company gross margin. AVAPRO and AVALIDE being slightly less. So those 2 products coming off patent don't really have much of an impact on margin, although PLAVIX being so large was a stabilizer of our overall gross margin. So we expect we would eventually have more variability depending on portfolio mix, which is, by and large, our largest movement within our overall gross margin. So you can think about it in 2 ways. We have partnered product of ONGLYZA and apixaban, which carry a much lower margin because we report our shared partner profit through gross margin. But then some of our other products like HIV, YERVOY and potentially moving to Devens will provide with a stronger margin over time.

Elliott Sigal

John, this is Elliott. Let me just add on ELIQUIS to Giovanni's very good comments about this -- the competitor, warfarin. From the design, very early designs to the clinical program, the goal was to achieve a powerful agent that reduced stroke with less bleeding. No other agent other than ELIQUIS has that clinical data to substantiate that profile. And in our work with physicians and market research and payer research, to be able to give now a more convenient class of drug, but achieve greater efficacy with less bleeding, over 30% less significant bleeding, we think will be a very attractive alternative. And also, if you look across the clinical trials, the tolerability of this drug also stands out in terms of people staying on the drug, in terms of less GI tolerance and less potential MIs.

Operator

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

David Risinger - Morgan Stanley, Research Division

I have a couple of YERVOY questions and then a few PD-1 questions. The first on YERVOY. Charlie, I was hoping that you could talk about the sales deferral. Just update us. I think that in the third quarter, you had a $27 million sales deferral. Was that effectively booked in the fourth quarter? And then was there a new fourth quarter deferral amount that you can provide? And then in terms of YERVOY's out-year sales potential. This is a higher-level question. Should we be thinking about the ex-U.S. sales potential longer term being bigger than the U.S. given a much greater patient numbers, potentially offsetting lower prices? Is that a reasonable assumption? And then for Elliott, you are obviously starting Phase III for PD-1 in renal and lung cancer soon. I'm just wondering if you could first talk about the potential place of PD-1 in the increasingly crowded renal market. And then on the lung cancer side, since that's considered by some to be a more difficult target for immunotherapy, can you just talk about your confidence in PD-1 in lung cancer, please?

Charles Bancroft

Okay, David. Sure, I'll take the first part of your question as it related to the YERVOY sales deferral. As you point out, we had a sales deferral of $27 million in the third quarter -- or excuse me, in the -- yes, third quarter of last year. And there's really been no change of that in the fourth quarter.

Beatrice Cazala

Regarding your question of potential -- if we'll consider melanoma per se because you have 2 questions for YERVOY, so it's the melanoma and the other indication long term. So if you will get melanoma outside of the U.S., you have a limited number of patient where the disease is highly prevalent. We consider even within Europe that you have about 8 countries -- within the Europe itself, you have about 8 countries which are accounting for 75% of the metastatic melanoma. And so, basically, when you look at that and you also have to consider within melanoma that our indication so far in Europe has being granted for more limited number of patient than the U.S. because we have the pretreated patient prior -- with prior line of chemotherapy first and our ability to expand that indication over time. The time it will take to take access, we consider that in the next few years, is very likely that the U.S. will remain leading in our volume for the product.

Elliott Sigal

Yes. So, David, the PD-1 question has to do with our confidence in some of the tumor types. We are confident based on data that we've seen, the activity in the Phase I, Phase II studies of multiple tumor types. We'll be presenting data from these studies at the American Society of Clinical Oncology later this year. We are impressed with the durability and the response rate. And so far, although it's early, the safety profile. We're also attracted to the possibility of targeting within different tumor types by potential biomarkers, and we're very interested, specifically, in lung cancer and this huge unmet medical need by having a foundational therapy that may be improved upon by adding additional chemotherapeutic agents, or sequencing them, as we are learning with ipilimumab. So the development is progressing well. We continue to investigate. It’s used in a variety of tumor types such as renal, lung and melanoma. And we will be in Phase III in lung cancer with PD-1 this year, as well as renal cancer.

Operator

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

Seamus Fernandez - Leerink Swann LLC, Research Division

So just a couple of quick questions. Elliott, can you give us your thoughts on the likelihood of a panel actually being heard, and why a panel may not actually be necessary for ELIQUIS? Second, Charlie, with regard to my look at the guidance for 2012, when I kind of take the midpoint of each of these things, it looks like there are 2 kind of swing factors. One might be the share count, and then the other might be the amount that's actually paid out to Sanofi on the $2.7 billion. How should we be kind of thinking about those swing factors relative to the 2012 guidance?

Charles Bancroft

I'll take your second part first then, Seamus. On the share count, you have known that we have gone through our original $3 billion authorization going back to 2010. We've got through about $1.8 billion year-to-date on that program and about $1.2 billion remaining. I mean, it's really BD-dependent, but assuming no significant BD, we will probably work through the remaining $1.2 billion in 2012. And the second part was related to Sanofi. We gave the guidance at the top line. You understand that the gross margin is roughly the same. We said that as far as our overall company margin, and we pay out in minority interest half to Sanofi, not controlling interest. So that's how you can think of the financials related to PLAVIX.

Elliott Sigal

This is Elliott. On your question about the ELIQUIS Advisory Committee, if one happens, the decision to schedule an Advisory Committee is completely up the discretion of the FDA, and they make those announcements. We always prepare for an Advisory Committee. But at this time, I know of no plan to have an Advisory Committee. And the date of the action is March 28.

Operator

We'll go next to Catherine Arnold from Credits Suisse.

Catherine J. Arnold - Crédit Suisse AG, Research Division

I have 2 questions, one is for Elliott on hepatitis strategy. Do you have a need to expand what you're doing on the combined ability with PI? Then obviously, you have the collaboration with TMC435. But you've got multiple efforts, obviously, now with the nukes. So, I'm just wondering how you're thinking about PIs as part of this? And secondly, on YERVOY, particularly in the United States, could you give us an update in terms of the use of that agent in terms of the number of cycles per patient by line of therapy BRAF status? Just a little bit more color behind that good number.

Elliott Sigal

This is Elliott on the hepatitis C question. I believe for now, it's wise to consider 3 major agents in achieving an all-oral regimen or a subset of 3 major classes for the different challenges around the world, the different genotypes and until more science is known. And that includes the protease inhibitor, a 5A and a nucleotide. And I'm pleased that we have the lead 5A. We now have a very exciting nuke, where they're very scarce, and we're very excited about, although at an early stage, what it can do in combinations with other medicines. And we do have an important collaboration with J&J on perhaps the next PI to enter the field that has very interesting characteristics, and that collaboration will continue. So we have, with our own protease inhibitor, found that a 5A will cure nearly all patients with genotype 1b. And that is a very important opportunity where that genotype is predominant in Asia and almost exclusively exist in Japan. And we're in Phase III with that. And I think that may well be one of the first, if not, the first all-oral regimens that are attacking genotype 1. We are running a global program. We are adding to that regimen ribavirin for broader coverage. And, of course, we are anxious to get the nucleotide 5A data from our Pharmasset, Gilead collaboration, and would hope that, that collaboration would continue, or it could be an opportunity for Inhibitex acquisition when it completes.

Giovanni Caforio

Yes, this is Giovanni. With respect to the performance of YERVOY in the U.S. in Q4, as Charlie mentioned, our demand was $118 million, and we estimate that we had a share of 25% to 30% of the total metastatic melanoma market across first and second line, which is similar to what we had reported for Q3. We saw a number of important developments. We did see increased penetration in both the hospital segment and the community with an increase in the number of prescribers in both settings, and we continue to see that approximately 50% of our business is coming from the community and 50% from the hospital. In the fourth quarter, approximately 70% of our business came from the first line and 30% for the second line. We did see a significant increase in the share in BRAF-negative patients, reflecting the fact that new agents will increasingly adopt. And we did see a lower share in BRAF-positive patients. However, we continue to believe that the 2 products are complementary in this patient population, and we do expect that the use of YERVOY in BRAF-positive patients will continue to increase over time as a result of a number of factors. First, physicians will be -- continue to be increasingly comfortable with using new agents. They will understand the profile of the 2 agents, and patients on Zelboraf will continue to progress over time. So the other comment I would like to make relates to access and reimbursement and where we always -- where we also have made good progress. We've seen relatively quick reimbursement cycles in both the commercial and the Medicare space. And we expect reimbursements to further improve the community since we have a permanent J code now, as of January 1. Finally, some payers have implemented medical policies, and all of those are very consistent with our broad label.

Operator

We'll go next to Chris Schott from JP Morgan.

Christopher Schott - JP Morgan Chase & Co, Research Division

Just a few questions. The first was on the 2012 sales and marketing and advertising and promotion budgets. You mentioned much of your PLAVIX-related expenses were kind of scaling down over the last couple of years. Can you just help us understand what's driving that fairly sharp drop in expenses in '12, especially when we're kind of thinking of the launch of ELIQUIS this year? Second question was on ELIQUIS. There's been multiple reports questioning PRADAXA's bleed signal and overall safety. And it seems on one hand, this is really placed to your profile pretty nicely, but can you just talk about the risk that this noise creates hesitation among physicians for all new agents entering the market and ends up being actually a headwind for your launch. Is that something you are concerned about or think about? And the final question, which is on Brivanib, what's the timing for the next studies here? And can you just comment on your confidence level in the program at this point?

Elliott Sigal

I'll answer quickly. Brivanib will have the head-to-head with sorafenib later this year and will -- that's an important study to complete our understanding of the profile and we'll have more to say. Clearly, the first 2 studies have been showing active drug, but have been disappointing in moving forward, but the most important study in my mind is the head-to-head with sorafenib and I'd have to say, with carcinoma earlier line of therapy patients that haven't had a lot of therapy. So I -- that should be known towards the end of the year. With regard to ELIQUIS and the bleeding that people are seeing in the marketplace or concerned about -- and I don't want to quote data on somebody's drug in that regard, but I will say the profiles are clearly different, and it's not surprising. We were after, from the beginning, powerful efficacy with less bleeding than Coumadin. So I don't believe people will or should take this as a class effect, in particular, PRADAXA is inhibiting a factor 2A or Thrombin in itself, and we are inhibiting 12 -- 10A intentionally from the beginning to be upstream and have the control of delivering efficacy without as much bleeding. So everything we've done from the beginning with the design of ELIQUIS has been to pick the right target to widen the therapeutic window and to focus on 10A and the right dose and regimen and the right patient populations. And we've ended up, fortunately, with what we wanted, which is a more powerful agent than warfarin, an agent that can be used where warfarin cannot be used and a safety profile in terms of major bleeds that is comparable to aspirin. And no other drug can say that. And I think that is gaining value in our research with the payers and physicians and we are anxious to have an opportunity to launch the drug, should it be approved.

Charles Bancroft

On your question, Chris, related to, I think, primarily MS&A and our expense lines. First, I would say, we continue to have a strong focus on productivity throughout the organization. So there are some savings that continue from our programs. Two, you may recall my comment that I mentioned some onetime items related to bad debt expenses in the EU in foundation and grant spending. And also, we have been ramping down spend -- expenses on PLAVIX in 2011. There were some still from savings year-over-year as we think about that. And we also began spending on ELIQUIS in 2011, and we are transitioning sales forces from PLAVIX, in some cases, into ELIQUIS.

Operator

We'll go next to Mark Schoenebaum from ISI Investments.

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

Number one, I appreciate all the comments on ELIQUIS. Is there any market research that you'd be willing to share with us in terms of awareness, intent to prescribe, et cetera? And then number 2, Elliott, is it possible for you to tell us when you may be in a position to initiate a trial where your new nuke is part of an all-oral regimen? And then finally, a question that may be impossible to answer, but it's on my mind. If the Supreme Court were to throw out the mandate in the Healthcare Reform Bill this spring, would you consider that a material event for the out years in your business?

Giovanni Caforio

On ELIQUIS -- this is Giovanni. I would repeat what we said before. We are working very actively to prepare for launch and our launch ready for the potential PDUFA date at the end of March. We are very positive about the profile and the differentiation of the product. And we are ready to execute a launch if we are approved at the end of March.

Elliott Sigal

Yes. And, Mark, this is Elliott. So we're very excited to -- hope to close the deal with Inhibitex. We've already designed generally some plans of what we'd like to do should it close. And in addition to conducting the Phase II study on top of standard of care and reporting that out and sharing with everybody some of the other science, we are doing combination studies this year to see the interaction of 5A with INX, with or without ribavirin and to pick just the right dose for the efficacy. And I would say that, that kind of all-oral trial will give us an idea in patients by the end of the year of what doses we could take into Phase III.

Lamberto Andreotti

I think that's -- on your last point, I don't think we foresee any significant or material change in whatever decision is taken by the Supreme Court. And we believe that we will continue to be affected, as we are, by -- significantly affected as we are by the healthcare reform that was implemented in the past.

John Elicker

Great. Thanks, Mark, and thanks, everybody, for all your questions. I will turn it over to Lamberto now for some closing comments.

Lamberto Andreotti

Yes. Thank you, again, for your questions. I would like to reiterate one key point. This is a very good moment in the life of Bristol-Myers Squibb. We see it in our numbers. We see it in our products, and we see it in the lives of the patients we serve. So I'm confident that we will also continue to see it in the years to come. Thank you.

John Elicker

Okay, Alicia, that about wraps it up. Thanks very much.

Operator

That does conclude today's conference. We appreciate your participation.

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