Bristol-Myers Squibb Q3 2007 Earnings Call Transcript

Bristol-Myers Squibb Company (BMY)

Q3 2007 Earnings Call

October 25, 2007 10:30 am ET

Executives

John Elicker - VP IR

James Cornelius - CEO

Andrew Bonfield - CFO

Lamberto Andreotti - EVP, COO of Worldwide Pharmaceuticals

Elliott Sigal - Executive VP, CSO and President, R&D

Analysts

David Risinger - Merrill Lynch

Tim Anderson - Stanford Bernstein

Barbara Ryan - Deutsche Bank

Roopesh Patel - UBS

Steve Scala -Cowen Investments

Seamus Fernandez - Leerink Swann

Catherine Arnold - Credit Suisse

Tony Butler - Lehman Brothers

Presentation

Operator

Good day and welcome to today's Third Quarter Earnings 2007 Earnings Release Conference Call. This call is being recorded.

At this time, I would like to turn the call over to Mr. John Elicker, Vice President Investor Relations. Please, go ahead sir.

John Elicker

Thank you Kim and good morning everybody. Thanks for joining us on the conference call to review our Q3 results. Hopefully, as you have gotten the release in the financial, additional financial information that we post on our website.

With me this morning is Jim Cornelius our CEO and Andrew Bonfield, our CFO who will have prepared remarks. And then joining them for Q&A are Lamberto Andreotti, who runs our pharmaceutical and medicines business and Elliott Sigal our Chief Scientific Officer.

So, before we get started and I turn the call to Jim, let me take care of legal language. During this call we may make various remarks of the Company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act 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 or Form 10-K and in our periodic reports on 10-Q.These documents are available from the SEC, the BMS website or from Bristol-Myers Investor Relations.

In addition, any forward looking statements represent our estimates, only as of today and should not be relied upon as representing our estimates as of any subsequent date. While, we may elect to update forward looking statements at some point in the future, we specifically disclaim any obligation to do so even, if our estimates change.

With that, let me turn it over to Jim.

James Cornelius

Thanks John and good morning everyone. I’m going to make a few brief comments on our financial performance this quarter and then I'll address some recent pipeline and strategic achievements. Finally, I'll update you on the status of our productivity efforts.

We are very pleased with our performance this quarter. PLAVIX and our other key products continue to grow, many at double-digit rates. We delivered EPS of $0.43 on a GAAP basis and on a non-GAAP EPS basis of $0.38. We are raising our full year 2007 non-GAAP EPS guidance to a range of a $1.42 to $1.47. We are also revising our full year 2007 GAAP guidance downward between the $1.28 and $1.33 from $1.35 to $1.45 to reflect the accounting impact of our acquisition last week of Adnexus Therapeutics, which will be accounted for in the fourth quarter of this year.

We are also reaffirming EPS guidance for 2008, range of a $1.60 to a $1.70 per share, subject to a certain assumptions and excluding charges related to our cost reduction imitative. We continue to execute our plan for the year, building out our growth franchises in cardiovascular, oncology, virology, psychiatric disorders and immunoscience, while managing cost and investing in new products and R&D.

As you know the FDA gave approval last week for our new breast cancer treatment ixabepilone, which will be marketed globally as IXEMPRA. We launch earlier this week in the U.S. and we've filed for approval in Europe. This medicine is another key step in our return to leadership in the oncology arena.

As I mentioned before, we are expanding our presence in biologics across the board, from discovery through the commercialization. Construction on our new biologics manufacturing facility in Devens Massachusetts is on plan and on budget, and we expect it will be a major provider of our biologics treatments beginning in 2011.

In addition, the $415 million purchase Adnexus Therapeutics, a privately owned Biologics Company gives us access to a proprietary next generation biologics platform that will help us discover and design new protein therapeutics, and build out our pipeline. Same time we gain a promising Phase I oncology compound Angiocept approximately 40 new scientist.

Now, I would like to update you on the status of our on going strategic review in productivity efforts. The Adnexus purchase is a good example of how we are redeploying resources to reinforce our strategic emphasis on growing specialty and biologic medicines. A separate transaction this quarter, we sold a mature non-core business, tumor brand in Japan were approximately $250 million. This sale shows how we are releasing resources they can used for investments that better suite our strategic focus as Adnexus deal does. There will be more of this in the future.

You may recall, we've been looking at strategic options in four core business clusters, that being CV, metabolics, specialty medicines, the mature brands and the healthcare group. The overall goal is increasing shareholder value by growing revenue, expanding our margins and improving cash flows.

As a part of this review, we’ve begin a significant productivity initiative across all business units. Looking to transform and streamline the company starting now and continuing over the next three years. I told you last year that is a part of that transformation we will be eliminating some physicians in the company and we will continue rationalization of facilities. As I said, we've already begin removing certain jobs and we will see more physicians eliminate in the coming weeks and in 2008.

Our work so far has validated my view that it’s possible to find significant savings at the same time making our company stronger and better focused on shareholder value, patient needs and then challenges over the current healthcare landscape.

My confidence in this strategy, our new product potential, our people and our management team at BMS, as it grows, every day I am in the CEO job. It’s amazing what a difference a year makes and employing around business outlook. I firmly believe we deliver on both current performance expectations and future growth. The real winners will be patients in their fight against serious disease.

We hope to see many of you in our Investor Conference on December 5^th. At that point we will brief you on the details of the strategic review and our productivity efforts.

Now I'd like to turn the call over to Andrew for a more detailed review of the quarter.

Andrew Bonfield

Thank you Jim and good morning everybody. I would like to briefly discuss our third quarter results and our guidance before we go to your questions.

As you have seen from our release we recorded earnings per share of $0.43 for the quarter. That includes the positive impact from the gain on the sale of the BUFFERIN and EXCEDRIN brands in Japan. Excluding specified items, fully diluted earnings per share on a non-GAAP basis was $0.38. The full reconciliation of GAAP to non-GAAP earnings per share is posted on our website as usual.

Total company sales were $5.1 billion, up 22% compared to last year driven in part by the favorable PLAVIX comparison. Overall, we saw a 4% impact from price, a 3% benefit from foreign exchange and an increase of 15% in volumes. Worldwide pharmaceutical sales increased by 24% to $3.9 billion, reflecting the impacts of generics of PRAVACHOL last year and a 3% benefit from foreign exchange.

Our healthcare group generated sales of $1.1 billion, up12% including a 4% benefit from foreign exchange; sales in our U.S. pharmaceutical business increased by 42% to $2.3 billion, excluding the estimated impact of generics for PRAVACHOL last year. U.S. sales would have been up in a 4% to 8% range.

Sales in our international pharmaceutical business increased by 6% to $1.l6 billion due to a 6% foreign exchange benefit. Worldwide record of PLAVIX sales were $1.3 billion of which $1.1 billion was recorded in the U.S., up 128%.

This reflects the impact from generic competition, estimated to be between $525 million and $600 million last year. Excluding this, U.S. sales would have been up between 0% and 8% reflecting total script growth of 7% in the quarter. Script growth trends by the key products were strong. ABILIFY, REYATAZ, SUSTIVA FRANCHISE all had double-digit script growth and sales growth in the quarter. Sales for ABILIFY were up 27% in the U.S behind 10% script growth and the timing of price increases.

International sales were up 72% driven by continued growth across Europe and the 7% benefit from foreign exchange. Sales of REYATAZ in the U.S. were up 9% behind 10% script growth.

International sales increased by 27%. SUSTIVA Franchise sales were up 18% globally, behind the strong performance of ATRIPLA. ORENCIA generated sales of $60 million and we are in the process of launching in the EU.

Global SPRYCEL sales were $46 million, including another strong quarter in Europe. BARACLUDE generated sales of $72 million globally; international markets are performing well, with sales of $50 million in the quarter.

Excluding specified items in both periods, the gross margin increased by 170 basis points to 68.2%, due to the positive impact from strong sales for PLAVIX, and our Virology business, ABILIFY, SPRYCEL and BARACLUDE.

Compared to the second quarter, reported gross margins fell by 0.6%. This was mainly due to one time price adjustment in Europe related to prior years and the decrease in the healthcare gross margins, due to adverse mix in [computech] and medical imaging.

Pharmaceutical product mix had little effect on the gross margin, despite the adverse impact of lower PRAVACHOL and higher ERBITUX sales.

Marketing, selling and administration expenses increased by 2% for the quarter, mostly due to foreign exchange rate fluctuations. Advertising and promotional spend increased by 23%. This reflects appose in spending last year in the quarter as well as increased investment in PLAVIX, ABILIFY, DTC advertising and spending behind the expected IXEMPRA launch.

Excluding specified items R&D expense for the quarter increased 4% to $767 million. This reflects higher development spending partially offset by the cost sharing impacts from our partnerships with AstraZeneca and Pfizer.

We continue to fully invest behind our late stage projects and our acquisition of Adnexus reflects our business development efforts, as we look to identify early stage opportunities to strengthen the front end of the pipeline.

The effective tax rate, excluding specified items is 21.1%, in line with our guidance for the remainder of 2007. Net debt decreased slightly to $2.5 billion, from $2.6 billion at the end of the second quarter. The impacts of the Adnexus acquisition will be reflected in the fourth quarter.

As you've seen in our press release, we are updating a full year 2007 GAAP and non-GAAP guidance. Our GAAP guidance is now at $1.28 to $1.33 a share, reflecting the impact of the Adnexus acquisition in the fourth quarter.

We have increased our non-GAAP guidance to $1.42 to $1.47 per share. This reflects a strong operating performance we've seen through the first three quarters.

Our line item guidance remains unchanged.

As I mentioned last quarter, diluted shares outstanding are increasing, and this increase was 20 million shares compared to the third quarter of 2006, primarily as a result of increased option exercises. We expect diluted shares outstanding to continue to increase in the fourth quarter.

We have also reaffirmed our full year 2008 non-GAAP guidance to $1.60 to $1.70 per share. I'll quickly review what we said last quarter. We expect revenue growth to increase in the mid to higher single digit range. This includes continued strong growth from our specialty and cardiovascular products, slower growth from the healthcare group, and sales declines from the amateur brands.

Gross margin should improve slightly compared to our 2007 expectations. We expect R&D expense to increase in the mid single digit range, and the rest of total operating expenses should be flat.

The effective tax rate should be in the 22% to 24% range, slightly higher than this year. We also expect shares outstanding to increase from current year levels.

Finally, our 2008 guidance excludes specified items not yet identified including charges related to our cost reduction initiative that are likely to be material. We will provide you more details at our December meeting.

So in summary, our third quarter performance was solid and our base business, including our key brands, newly launched products and other healthcare businesses continue to perform well. The strength of that business is reflected in our increased guidance range. We have reaffirmed our initial outlook for 2008, and look forward to seeing you at our Investor Meeting on December 5^th in New York. With that I’ll hand back to John for the Q&A Session.

John Elicker

Thanks Andrew, and Kim, I think we’re ready to go to the Q&A sessions. I would just ask people to keep their- in an effort to get as many questions in as possible, keep your question limited, if possible. And second, to remind you that in addition to Jim and Andrew, we have with us here today Lamberto and Elliott to take any questions you might have. Kim?

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from David Risinger, Merrill Lynch.

David Risinger - Merrill Lynch

Yes. Thanks very much. I have a couple of quick questions please. The first is could you provide a little bit more color on the Nutritionals business strength year-over-year and sequentially? Second, could you provide some more details on vinflunine given the sentence that you put in the press release? And then third, could you provide an update on Saxagliptin and your discussion with the FDA and whether you are still on track to file that product in the first half of the next year? Thank you.

James Cornelius

David, just on the nutritional business, business has been performing well, particularly in the international markets, that the growth trend has continued particularly around the infant formula and toddler and children nutritional in Asia and Latin America as well. In the U.S., we also saw some sales growth due to some weak contract transitions, which did benefit sales in the third quarter. You should also be aware that obviously, with the impacts of dairy prices we have been raising our prices and that has had a positive impact on sales growth in the quarter.

Elliott Sigal

David, this is Elliott and you asked about vinflunine and Saxagliptin. With regard to -- first of all, with vinflunine we are in partnership with Pierre Fabre and we have announced that we will now pursue the submission of vinflunine for the treatment of bladder cancer. With our partner we are currently reviewing the clinical development plan and we are evaluating ongoing research programs. I would step back and describe the strategy in oncology is to be able to achieve our contribution in novel cytotoxic, which we have been able to achieve with ixabepilone. We think this is very important to have novel cytotoxic that will be backbone to chemotherapy and backbone to new targeted agents. And we are expanding into biologics, other targeted agents or hormone therapy and immunotherapy, but as we make other decisions of about vinflunine, we’ll let you know

I don’t have new information on Saxagliptin. As we discussed before, we are in discussions with the FDA. The central issue has been drug levels that may result in broad clinical practice. There has been concern in the field with regards to our findings in monkeys and we have studied Saxagliptin extensively. It's well tolerated at high multiples of expected usual clinical dose, up to 10 times and 40 times and we have PK data from a single dose study in patients with renal insufficiency. Because of activities in the field, we have been proactive in initiating the dialogue with the FDA about patients with renal impairment.

And when we have more information we will let you know. Until then, we can't be more specific about the regulatory discussions. And as previously stated, we continue to plan a submission for Saxa in the first half of 2008, depending upon positive outcomes from our Phase III trails and ongoing discussions.

And I will note the recent events suggest that there is a more cautious environment everywhere, including in the FDA. In addition of approval metric show that only 25% of standard reviews received first cycle approval. And although we don't currently see a reason for delay with Saxa, there are many factors that play here that could impact time lines. We'll let you know when we have more information.

John Elicker

Thanks David. Kim, can we go to the next question please?

Operator

We will go next to Tim Anderson, Stanford Bernstein.

Tim Anderson - Stanford Bernstein

Thank you, actually another question on Saxagliptin. My understanding is that the drug has some sort of unwanted side effect on platelets like thrombocytopenia and I am wondering if you can confirm that or give us any details behind that?

Second question is on ABILIFY as it stands today, you are scheduled to hand that back to Otsuka at the tail end of 2012. And I am wondering if you can comment on the likelihood that you might be able to extend that agreement beyond 2012?

Elliott Sigal

Just quick comments on Saxagliptin, in phase II studies at higher doses there was a slight decrease in platelet counts, but the medium value stayed with in the normal range. In our un-blinded phase III studies to-date, we have not seen the signal for thrombocytopenia. We are monitoring all potential safety issues as we go the phase III program

Lamberto Andreotti

And about ABILIFY, we have an excellent working relationship with our partner Otsuka. Obviously, we entertain discussions about many things, but it is not appropriate for me to discuss what will happen after the expiration of contract in 2012?

What I can discuss today is that it is probably performing very well in the marketplace. The market is increasing, growing in the U.S., and our market share is growing too. And at the same time we have increased our price, so we had a combination of market share growth and growth of the selling price.

We have three new potential indications coming soon in uni-polar depression and to adolescent schizophrenia and adolescent bipolar indications. We have got lot of time to get ready or these indications. We have recently realigned our sales force. This will allow us to have 15,000 more doctors in our medical file, and 8,000 will be doctors that might be interested, will be interested in depression, and the rest is doctors that will be interested in pediatric indication.

As you may have known we have extended our DTC campaign. We have gone live on television. We have a new bipolar campaign and feedback from the marketplace is very positive. We are very confident about these products, its efficacy profile, and a different tolerability profile makes it a good product.

And in Europe, where we had at the beginning some concerns of not having probably positioned it fully well from a point of view efficacy, we see a good return from our refocusing our activities and we are growing in all countries in the European Union.

James Cornelius

Tim, just to add that we will have the partnership in Europe for 10 years so that actually, it will last through 2014.

Operator

We'll go next to the Barbara Ryan, Deutsche Bank.

Barbara Ryan - Deutsche Bank

Good morning. My question was asked. Thank you.

Operator

We'll go next to Roopesh Patel, UBS.

Roopesh Patel - UBS

Thank you. I've got a couple of questions on PLAVIX. First we’ve been seeing the meaningful deceleration in growth for the (inaudible) molecule. Where do you see this bottoming, by when and what do you expect to be the key drivers? And then separately, I was just wondering if could offer us your perspective on Lilly's announcement yesterday on Prasugrel, based on what you know what you think that means at a minimum for Plavix? Thank you.

James Cornelius

Thanks Roopesh. Before I turn it over to Lamberto to discuss PLAVIX trends, I don't think it would be appropriate for us to comment on Lilly's press release yesterday at all.

Lamberto Andreotti

And this is obvious and what I can say about PLAVIX and I would discuss about the performance of PLAVIX in a second. PLAVIX is the product that's been used by 70 million people around the world. It is, it’s been started in all over 100,000 cases in eight diseases and what we although it's want to remember is that its not only eight diseases but also different stages of those diseases. So we have a lot experience with its products in many indications and in many different stages of the disease.

We are very happy to be back alone in the market place in the U.S. We don’t have generic competition any longer. And we are very happy, but during that period where we had generic competition we continue to invest very effectively and very aggressively. It is true, there is a known positive factor associated with the decrease ban procedures in the U.S. It is estimated that 15% or 18% less ban procedures are taking place now in the U.S., and it's probably also true that number of patients that are admitted to hospital for ACS problems is slightly decreasing.

On the other hand, we have a PAD opportunity that continues to be big for us and important for us. And we have a lot of focus on early initiations and that continuation of the therapy over longer period of time. We have some indicators that for example, from the number of prescriptions of second prescription to that field, but these are indicators of the fact that lots of therapy is actually going out, and Medicare Part D was also from point that view.

To continue to work on early initiators, we have intensified our efforts in hospitals. We have more FTEs, full time equivalence from our sales force, in the hospital place to facilitate more initiation of therapy, and earlier implication where we have intensified DTC. We had, we started with an unbranded PAD campaign few months ago, good return from that campaign and we have now very recently moved to a branded campaign. So, yes, we are concerned about trend in the stent market, but we have many other markets to look at from and from where PLAVIX can continue to give good results. 7% growth of prescriptions year-over-year after many years in the marketplace, it seems to indicate that we have a good story.

John Elicker

Thanks Roopesh. Kim can we go to the next question please?

Operator

We will go next to Steve Scala with Cowen Investments.

Steve Scala -Cowen Investments

Thank you. I have two questions, first Bristol has said previously that its business plan assumes launch of Prasugrel in 2009. Since the company said that previously, I wonder if you would reiterate that today or perhaps not reiterated it. And secondly, for Dr. Sigal regarding Erbitux, in your opinion what type of survival advantage from FLEX would be clinically relevant to the U.S. market and does FLEX meaningfully increase your optimism for Erbitux commercial prospects?

Andrew Bonfield

Steve, just to reconfirm, yes, we did assume in our business planning that Prasugrel is launched and it will have an impact, actually small impact in 2008, and actually a bigger impact in 2009 and 2010

Elliott Sigal

Yes, Steve, this Elliot. The Erbitux data on lung that you are referring to the FLEX study, which was announced by our partner E. Merck had positive result on the primary end point for overall survival. As they have been stayed in, the data continues to be analyzed. And they will present the data next year. They have announced that they would present the data in June. So, we have to await the data presentation, and then presentation and the discussion.

I do feel that any study that has a positive effect on overall survival has a very important medical opportunity in lung cancer. We do have a second study that had a primary end point of progression free survival, when reviewed by independent radiologist it did not prove to be successful, although many secondary end points were positive.

And we are studying the correlation and the meaning of both of these studies. As you know, the studies were done with different background of chemotherapy. The FLEX study on the background is typically used in Europe, where as the one in US was our study.

We are waiting, as their survival study or the survival results of the old '99 study that did not have a conclusive primary end point of progression free survivals. So, when we get all that data together, when we continue discussions with the FDA, we'll have a better idea of where we are.

But I would want to end with the medical need that as first line metastatic lung cancer, there's a significant opportunity, because the good proportion of patients do not take Avastin, because of the concern about the side effect. And these are patients that have central lesions or mainly squamous cell carcinoma. Though it is interesting from a medical standpoint to vigorously pursue the use of Erbitux in lung cancer, and we will do so.

John Elicker

Thanks Steve. Kim, can we go to next question please?

Operator

Seamus Fernandez, Leerink Swann.

Seamus Fernandez - Leerink Swann

Thank you very much. Just actually asking for a quick update on some of the pipeline products that we know are in development. I was hoping Elliott, that if you could give us an update on the belatacept program as well as the CRF development program. I believe you have three Phase II studies with you CRF antagonist on going right now. I am just wondering, if you could give us a little bit of an update there? Thank you.

Elliott Sigal

Yes, I would like to plan a fuller update. We are planning a fuller update for you in December. We will layout for belatacept and particularly why we are interested in this from a medical and commercial standpoint; go over our Phase III studies, the updates of the Phase II data. The belatacept opportunity is very exciting and preventing rejection of organ transplantation the first indications in renal disease. We fully enroll these studies we hope to have data from our Phase III next year. What we haven't highlighted that particular program its late stage and we'd like to discuss it more fully December 5th. And I don't have any updates on our CRF program, we are running Phase II studies in depression and in anxiety, I don't have the updates for you on the science today.

John Elicker

Thanks Seamus. Kim, can we go to next question please?

Operator

Yes. Catherine Arnold, Credit Suisse.

Catherine Arnold - Credit Suisse

Thanks very much. I have two questions, first for Jim. I am speculating that you have interest in selling your ConvaTec and/or nutritional businesses. And I was wondering if you could just remind us of your view on the strategic importance business strategy, regards overall diversification to the CorePharma business? And secondly, for Elliott, I was wondering if you could just clarify your Saxagliptin exposure in human is obviously very high relative to what you expect the normal dose to be? Could you tell us if you have seen any edema and any other studies in humans from monkey’s entire exposure?

Jim Cornelius

Catherine, on the healthcare group it's much like the other three clusters. There is ongoing work as to what is the best way to enhance shareholder value there. So, again I will, like some other question in this morning, hold our final comments until December 5^th on that issue.

Elliot Sigal

Catherine, this is Elliott. On Saxagliptin, we have not seen the edema that's been described and discussed in other programs we are in middle of our Phase III studies and completed Phase 1 studies, Saxagliptin had been administered in doses up to 40 times the maximum dose and exposure been utilized in Phase III studies for two weeks as a duration. And completed Phase II study Saxagliptin was administered in doses up to 10 times the maximum dose and exposure being utilized in Phase III study for durations of six weeks.

Based on completed Phase I and Phase II studies and data from two unblended Phase III study of 24 weeks duration, we've not detected a signal for hand-foot, edema or paresthesias, or itching during exposure to Saxagliptin. We are monitoring all issues that people are theoretically concerned about in this field and we will be completing our Phase III program next year.

John Elicker

Thanks Catherine and Kim, I think we've time for two more questions?

Operator

Next question is from Tony Butler, Lehman Brothers.

Tony Butler - Lehman Brothers

Thanks, briefly, another question on Saxagliptin. Do you actually have back-up compounds, which have not illustrated the toxic effects in primates? And if you don't, why haven't you moved those forwards and if you have, how far are they subjected to the existing escrow agreement? Thanks very much.

James Cornelius

We do have a vigorous back-up program for most of our programs, including Saxagliptin. We have a variety of back-up programs. We are moving them forward. We haven't released any clinical data on that, but we'll be prepared to describe more in December with regard to our strategy, if I could.

John Elicker

Thank you Tony and Kim, I guess we will take our last question.

Operator

And our final question comes from David Risinger, Merrill Lynch

David Risinger - Merrill Lynch

Sorry, I've got a couple of quick ones. Andrew you mentioned that you have 10 years on ABILIFY. I was just wondering if that’s in the EU or if you are saying that have the partnership through 2014 in the U.S.? So, that’s my first question. And then could you just update us on the timing of the ixabepilone potential approval in the EU? Thank you.

Andrew Bonfield

David, sorry, it was what I did try and say it was 10 years in the EU. So in the EU we will have it through 2014. Obviously, it's correct. It's 10 years from launch in the U.S. so, that will be November 2012.

Lamberto Andreotti

And as far as ixabepilone is concerned, we have filed in Europe. So, we expect the normal timing for the review and approval. We are getting ready for that launch. And as we are thinking about IXEMPRA, we have launched as it was said before, in the U.S. and for that launch, we have put together a new sales force. We have a 90 plus people and 20, approximately 20 medical scientifically on people. So, we are very focused on this product. So it's an opportunity to be build over time, there is an unmet medical need there and we expect oncologists in the U.S. to get acquainted with the product over time and at the same time we expect additional data to be available on overall survival an additional indication. So, it is a product that we are building. We’ve attention and with the right people on track.

John Elicker

Thanks David. And so I would like to turn the call over to Jim for some closing remarks.

James Cornelius

Well, let me conclude by just saying the team is continuing to execute our strategy, simply increase revenues and grow earnings. We are well along in our productivity initiative. We look forward to delivering substantial savings over the next several years that we can plough back into the business and research and development at the same becoming a much more efficient and flexible company. While I have more to say about the strategic review and the productivity efforts at our Investor meetings scheduled for December 5th, we look forward to seeing you there. Thanks very much.

John Elicker

Thanks everybody for joining us, obviously, we are available for follow-up calls at our offices. Thank you

Operator

This concludes today’s conference. Thank you for your participation. You may disconnect at this time.

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