Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

John Elicker - VP, IR

James M. Cornelius - CEO

Andrew R.J. Bonfield - EVP and CFO

Elliott Sigal - EVP and Chief Scientific Officer

Lamberto Andreotti - EVP and COO

Analysts

David Risinger - Merrill Lynch

Steve Scala - Cowen & Company

Barbara Ryan - Deutsche Bank Securities

Roopesh Patel - UBS

Tim Anderson - Sanford Bernstein

John Boris - Bear Stearns

Jami Rubin - Morgan Stanley

Robert Hazlett - BMO Capital Markets

Christopher Schott - Banc of America Securities

Unidentified Analyst - Columbia Management

James Kelly - Goldman Sachs

Tony Butler - Lehman Brothers

Bristol Myers Squibb Co. (BMY) Q4 FY07 Earnings Call January 31, 2008 10:00 AM ET

Operator

Good day and welcome to today’s Fourth Quarter Earnings 2007 Earnings Release Conference Call. Today’s 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, Mr. Elicker.

John Elicker - Vice President, Investor Relations

Thank you, Cindy, and good morning everybody. Thanks for joining us on the call. We are here this morning to review our fourth quarter results and as well as our full year results. Joining me on the call are Jim Cornelius, our Chief Executive Officer, Andrew Bonfield, our Chief Financial Officer, Elliott Sigal, our Chief Scientific Officer and Lamberto Andreotti, our Chief Operating Officer.

Before we get started and I turn it over to Jim and Andrew for prepared remarks, let me just take care of some of the legal requirements.

During the call, we may make various remarks about 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 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 in our periodic reports on Form 10-Q. These documents are available from the SEC, the BMS Web site 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 the call over to have Jim.

James M. Cornelius - Chief Executive Officer

Thanks, John. Good morning, everyone. I am going to make a few remarks about our financial performance last quarter, and last year as well as our outlook through 2010. I will also provide some context for the major financial impacts of last quarter and how they fit into our transformation to a next generation BioPharma Company.

From an operating standpoint our fourth quarter performance brought a strong conclusion to a good year. The 33% Q4 ’07 reported revenue growth is really a 13% sales growth when you exclude the estimated impact of the launch of generic Clopidogrel in 2006. We achieved this growth through excellent marketplace execution on our key products.

From an accounting standpoint, of course, we had to adjust earnings before distinct and significant financial items. Three of these expected items stem from activities that directly support our BioPharma strategy and each of these items I think was well flagged during our December investor’s meeting. The fourth was not planned and resulted from an impairment related to our short term investment portfolio which unfortunately reflects the state of the global credit markets.

Excluding these four items the company earned $0.35 and that exceeds the top end of our recent guidance range for the quarter and $0.01 ahead of the consensus analyst estimates for the quarter.

Now, I am going to touch on each of the four special items briefly. First, the sale of medical imaging which we completed earlier this month supports our strategy to actively manage a mix of products and businesses to better focus on specialty and biologic medicines. Following GAAP accounting procedures we reported medical imaging as a single line discontinued operation, which had contributed earnings per share of $0.02 in the fourth quarter and $0.10 for the full year. Second, our October purchase of Adnexus Therapeutics supports our business development strategy to expand our biologics capabilities and pipeline. Internally we call this strategy the string of pearls. It is as we look at potential acquisitions that can fuel our future growth.

As part of the Adnexus acquisition, we recorded a one time in-process research and development charge of $230 million that reduced our GAAP EPS by $0.12 last quarter. Third, we are right on track to achieve $1.5 billion in cost savings and cost avoidance by 2010 as part of our Productivity Transformation Initiative. This collection of company wide efforts is making us more nimble and flexible and better able to execute our next generation BioPharm strategy. We continue to streamline corporate and support functions, rational manufacturing and better position our global supply network. For example, we announced last quarter the impending closure of two of our manufacturing facilities in Puerto Rico. Our productivity efforts further reduced GAAP EPS by $0.12 in the fourth quarter. The fourth financial item which accounts for $0.14 of our GAAP EPS was due to an impairment of some of our short-term investments. Global credit crisis has impacted a small portion of our short term investment portfolio. Our CFO Andrew Bonfield will provide more details on this in just a moment.

At this point, it is important to emphasize this situation, where our short-term investments will not affect in any significant way the Company’s liquidity or financial flexibility. The Company has more than enough cash to fund the strategy and we expect stronger operating cash flows from the business to fund the higher dividend we are delivering to investors. Our Company is now at the beginning of a growth cycle, as evidenced by the strong underlying operating momentum in the fourth quarter and for the year. We continue to realize solid gains from our key products and franchises that treat, cardiovascular disease, psychiatric disorders and viral illnesses.

In particular PLAVIX grew by 13% when adjusted for the negative impact of the competition from generic Clopidogrel in 2006, ABILIFY grew by 28% in the quarter. Sales of REYATAZ which is part of our very successful of veralogy franchise increased 31% in the quarter. Among the commercial successes driving our growth were several from our newer specialty in biologics medicines. We are pleased with the initial market uptick, for IXEMPRA which we just launched in October and ORENCIA’s years’ sales were strong as were SPRYCEL’s overseas sales. Our lifecycle development strategy to build pipelines within our products were approved in November when we gained approval to market ABILIFY as an add-on treatment to anti-depressant therapy in adults with major depression. Our R&D organization continues to advance our pipeline. We remain on track to submit Saxagliptin by the middle of this year and we plan to present additional data at ADA this year.

At ASCO, we expect the strong showing with new clinical data on SPRYCEL, IXEMPRA, and ERBITUX. Strategically we are executing our plan to emphasize specialty in biologics medicines. Just as we sold medical imaging and purchased Adnexus we remain open to opportunities for possible alliances, partnerships, external acquisitions and other business arrangements that enhance our ability to make important medicines that help patients prevail against serious disease. Among our employees, the productivity transformation I described is inspiring our culture of continuous improvement. In light of our strong product growth, promising pipeline and progress executing our strategy we maintained a positive outlook. For this reason we are reaffirming our non-GAAP EPS growth average of at least 15% through 2010, from the 2000 base year subject to the same assumptions as we explained in December.

Thank you for listening. I would now like to turn the call over to Andrew for a more detailed review of the quarter.

Andrew R.J. Bonfield - Executive Vice President and Chief Financial Officer

Thank you Jim. I will discuss our fourth quarter results and guidance before we go to your questions.

As you have seen from our release, we recorded a loss from continuing operations of $0.07 per share for the quarter which includes the impact from specified items and a sale of medical imaging now recorded as a discontinued operation. Adjusting for specified items and medical imaging, fully diluted earnings per share on a non-GAAP basis were $0.35 for the quarter and $1.48 for the full year. This is above the top end of the range we guided you to in December. The full reconciliation of GAAP to non-GAAP earnings per share is posted on our website and I will discuss some of the specified items in more detail later on. Total Company’s sales from continuing operations were $5.4 billion, up 33% or approximately 13% excluding the impact from generic Clopidogrel in the fourth quarter of last year. Overall, we saw a 3% benefit from price, a 5% benefit from foreign exchange and a 25% increase in volumes.

Worldwide pharmaceutical sales excluding generic Clopidogrel, increased by 13% to $4.4 billion reflecting the strong sales of key products and a 4% benefit from foreign exchange. Our healthcare group generated sales of a $1 billion, up 9%, including a 5% benefit from foreign exchange. This excludes medical imaging, which as I mentioned a moment ago, is now recorded as a discontinued operation. Sales in our U.S. pharmaceutical business increased by an underlying, 11% to 13% to $2.5 billion. Sales in our international pharmaceutical business increased by, 16% to $1.9 billion, including a 10% benefit from foreign exchange. World wide recorded PLAVIX sales were $1.4 billion, up 177%. U.S. sales for PLAVIX were $1.2 billion.

Excluding the impact from generic competition, global PLAVIX sales would have been up 10% to 15% in the quarter behind molecule script demand growth up about 6% in the U.S. Scripts growth trends for all other key products were also strong. ABILIFY, REYATAZ and the SUSTIVA franchise all had double digit script and sales growth in the quarter. Sales for ABILIFY were up 23% in the U.S. behind 11% script growth and the timing of price increases. International sales were up almost 50% driven by continued growth across Europe and a 16% benefit from foreign exchange. Sales of REYATAZ in the U.S. were up 15% behind 12% script growth. International sales increased by 52%. SUSTIVA franchise sales were up 17% globally behind the strong performance of ATRIPLA. ORENCIA generated sales of $75 million and U.S. sales were up 16% compared to the third quarter. Global SPRYCEL sales were $56 million, including another strong quarter in Europe.

BARACLUDE generated $99 million in global sales. International markets are performing well, with sales up $70 million for the quarter. IXEMPRA, just launched in the U.S., generated sales of $15 million. Excluding specified items the gross margin increased by 240 basis points to 68.7% due to the positive impact from strong sales from PLAVIX. Our virology business ABILIFY, SPRYCEL, and BARACLUDE. Compared to the third quarter, the gross margin increased by 40 basis points. Positive makes in our pharmaceutical business was partially offset by lower margins in the Healthcare Group.

The gross margin in the pharmaceutical business was 70.4%, up 80 basis points from the third quarter. Gross margin from Mead Johnson was 61.9%, down 140 basis points from the third quarter, primarily due to unfavorable dairy prices. ConvaTec gross margins were 69%, up 20 basis points from the third quarter.

Marketing, selling, and administration expenses increased by 4% for the quarter, mostly due to foreign exchange. Advertising and promotion spend increased by 16%. This reflects increased investments in PLAVIX, ABILIFY, and Orencia DTC advertising and spending behind the IXEMPRA launch.

Excluding specified items, research and development expense for the quarter increased 20% to $903 million. This reflects higher development spending, increased investment in science and medical personnel, as well as field medical support.

The effective tax rate from continuing operations before minority interest and income taxes and excluding specified items was 22%, and the full year rate was 20%, which was inline with our previous guidance. Net debt increased to $4 billion from $2.5 billion at the end of the third quarter, reflecting the impact from the Adnexus acquisition and the reclassification of auction rate securities to non-current assets.

We did have a significant impact from specified items and discontinued operations this quarter. Three of these, as Jim mentioned, were previously identified. First, Medical Imaging, now as a discontinued operation, would have contributed $0.02 for the quarter and $0.10 for the full year. Second, the acquisition of Adnexus resulted and in-process R&D charge of $230 million. Third, we recorded a charge of $292 million related to the execution of the productivity initiative. This reflects the pending closure of several manufacturing facilities, including two sites in Puerto Rico.

Let me discuss the fourth item. The impairment charge related to our investments in auction rate securities, which have no impact on that financial flexibility. For nearly a decade, the Company has maintained a portfolio of auction rate securities classified as marketable securities on the balance sheet.

Whilst, these securities have a long-term maturity, they have been treated a short-term investments due to the ability to sell them at monthly auctions. Auction rate securities are structured with a variety of different asset types. The auction rate securities remaining in our portfolio at the end of the year include collateralized debt obligations, mortgages, corporate bonds, and insurance securitizations, which were packaged as AAA/AAA securities. BMS investments in this market have always traded at or near par value and have never had any liquidity issues.

For the Company’s investment policy, we have historically only invested in AAA rated securities. During the later part of 2007, due to the uncertainties in the credit markets, some of these securities were not able to be sold at auctions and the sponsoring brokers did not make a market in the ARS securities. The third party valuation models we have used amongst other factors has led to the $275 million impermanent impairment charge. We like to note that there have been no defaults on interest or principal payments to date, and all of these securities currently retain at least one AAA rating. Finally, I want to reaffirm that there will be no impact on the overall financial flexibility as we move forward.

As you have seen in our press release, we are updating our full year 2008 GAAP and non-GAAP guidance. Our GAAP guidance is now $1.36 to $1.46 per share, reflecting the impact of Medical Imaging and our expectations related to the productivity initiative. We have changed our non-GAAP guidance to $1.60 to $1.70 per share. This change reflects the sale of Medical Imaging, which I have noted in our December Investor Meeting.

Our line item guidance remains unchanged. As Jim mentioned, we're also confirming our three year minimum 15% compound annual growth in earnings per share on a non-GAAP basis with 2007 being the base year.

So, in summary, our fourth quarter underlying operating performance was strong. Key products, newly launched products, and other health care businesses continue to perform well. The Company has entered into a period where we expect topline growth and improved operating leverage based on product mix and our productivity initiatives. The strength of our business is reflected in our guidance for 2008.and our outlook through 2010.

With that, I will hand it back to John for the question-and-answer section.

John Elicker - Vice President, Investor Relations

Thanks Andrew. And now Cindy, I think, we are ready to go to questions. And just as a reminder, in addition to Jim and Andrew, we have Lamberto and Elliott here for any questions you might have for them. Cindy, if we can go ahead.

Question and Answer

Operator

Thank you. The question-and-answer will be conducted electronically. [Operator Instructions].

And we will take our first question from David Risinger with Merrill Lynch.

David Risinger - Merrill Lynch

Thanks very much. Looking forward in 2008, I was hoping that you could just run through the most exciting pipeline developments to watch from your perspective? Thank you.

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Thank you, David. This is Elliott. As you know, we are building our very important products that have made it to the market to expand the label, though we're working significantly with ORENCIA and ERBITUX and SPRYCEL. We have data coming out this year on ORENCIA with regard to earlier treatment in rheumatoid arthritis we have hopefully an acceptance or approval in juvenile rheumatoid arthritis. We have some exciting data on ERBITUX that you know, we've all been following and presenting data on ASCO in oncology data on ERBITUX and Ixabepilone with regard to our ERBITUX I'm excited to talk about the data on lung cancer. We’ll be working with health authorities with regard to earlier lines of treatment in colorectal cancer. With SPRYCEL we’ll be presenting data on prostate cancer we also have exciting trials going in breast cancer.

We are working around the world on extending the applications for ABILIFY as well as ORENCIA. We will have some data at the ADA on both Saxagliptin and Dapagliflozin. We will be filing Saxagliptin in the middle of the year and as we outlined in December. We have Phase III data on Apixaban that will be described at the end of the year. We're also going to be getting some Phase II data on acute coronary syndrome. So, we are building out not only the marketed drugs with new indications and expanded opportunities in the future where they‘ve already made it to market, but we will also be bringing the pipeline forward. In oncology, we're making a major play with ERBITUX. We’ll be talking about our data on Ipilimumab. And we will have by the end of the year data on our transplant drug Belatacept that we’ll be reviewing internally and then be making a filing decision on that. So, a lot of good momentum this year earlier in the pipeline as I detailed December 5. I am excited about our progress in both hepatitis C and Alzheimer's, but that’s earlier we’ll have more to say at the end of the year.

John Elicker - Vice President, Investor Relations

Thanks David. Cindy, you can go to the next question.

Operator

We’ll take our next question from Steve Scala from Cowen & Company.

Steve Scala - Cowen & Company

At the Analyst Meeting, Bristol noted that topline data from the Saxagliptin renal study would be available on the second half of the ’08. AstraZeneca indicated on its call that this data was not on the critical path. But that does seem a bit unusual given the FDA’s cautious posture. Do your recent conversations with FDA leave you completely confident that this data is not going to be necessary for filing around mid-year? Thank you.

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Steve, I think it might look confusing from outside. But let me just point out I can't possibly know the data that Novartis is looking at. I've heard of different safety issues. All I can say is I don’t see that… those safety issues in our clinical data on Saxagliptin. I will also say we worked very closely with health authorities around the world to make sure that they understand our filing strategy and that we satisfy them with regard to the exposure of the drugs under different conditions and although we are still looking at our Phase III data and I’ll add that caveat, I remain confident in our guidance we gave December 5, that we will be submitting in the middle of the year. So, of course, our partner AstraZeneca is saying the same thing. We have enough data on renal patients. We think to advice how this medicine should be used. We haven’t been asked for specifically any more data than what we plan to deliver. But we do have a practice of studying after we submit and after we have on the market, more and more aspects of our drugs so that our physicians understand how to use it in a variety of situations. So, that we answer questions as deep as possible. And so, the… we proactively initiated a renal study that will have data for as you mentioned at the end of the year, beyond what we have already. But we plan to submit in the middle of this year and that is also subject to perhaps ongoing data review. But I am confirming exactly what you asked me about.

John Elicker - Vice President, Investor Relations

Thanks Steve. Cindy, can we go to next question.

Operator

We will take our next question from Barbara Ryan with Deutsche Bank.

Barbara Ryan - Deutsche Bank Securities

Thank you. Elliot so nicely answered my question. Thank you.

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Thank you Barbara.

Barbara Ryan - Deutsche Bank Securities

Thank you.

Operator

We will take our question from Roopesh Patel with UBS.

Roopesh Patel - UBS

Thanks. Andrew, I have a few questions related to the Company’s exposure to subprime securities. So, if I understand correctly, there’s $2.2 billion at the end of the year in cash and marketable securities. Separate from that, the Company had $811 million in auction rate securities which you have written down. Can you give us a sense for how this $2.2 billion breaks out between cash and other short-term investments, specifically CDOs and mortgages? And whether or not there is any risk that you might have to basically impair the value of those? And then just lastly, what is your interest… what is the interest rate that you are getting on the auction rate securities? Thanks.

Andrew R.J. Bonfield - Executive Vice President and Chief Financial Officer

Okay. Thanks Roopesh, let me try and give you an overview. The $2.2 billion we had on that balance sheet at the end of the year was invested in money market funds. It was in bank time deposits, and there was $400 million of floating rate notes in that total. There was no exposure left of any auction rate securities and none of the underlying securities from the $2.2 billion have any exposure to subprime. Obviously, since, we have gone through this review in and impairment of auction rate securities, we have switched the portfolio and now as of today’s date, around about 60% of that cash on hand and cash on multiple securities is in T-bill and T-bill related funds. That movement has been done as we have seen the market flight of security. We have done the same thing. We have time deposits remaining on hand, which as those… we keep looking at the bank counter party risk and we will make decisions about what we do with that cash as those deposits mature. And then we have the $400 million of floating rate notes.

On the auction rate securities, the write-down, $275 million is a permanent impairment. There was $117 million in temporary impairment written down against other comprehensive income on the balance sheet. That is mainly due to liquidity issues. The auction rate notes that we have actually permanently impaired. We have written down significantly based on the third party valuations we have received. There is some remaining exposure obviously to subprime, but as I have noticed… noted none of those securities get defaulted in the either interest or actually in principal. So, obviously, we will hopeful that we would have to be realized at least what we have written down to.

The net balance on that balance sheet now shown in other non-current assets is around $400 million. Most of the $400 million actually relates to securities, which have a corporate bond or XXX insurance regulations securitization, which we don’t expect to be effective by the current credit issues. So, I think we have actually cleared out most of the exposure. We don’t expect any further significant exposure. But obviously, if the credits crises continues to expand across the market, there maybe risk to some of our corporate bonds. So, effectively the $2.2 billion again just to reiterate. There is nothing left in that related to auction rate securities. That is all cash and actually since the year-end, we have added another $500 million would be with… proceeds from medical imaging.

John Elicker - Vice President, Investor Relations

Thanks Roopesh. Can we go to the next question, Cindy?

Operator

Yes. Our next question will come from Tim Anderson with Sanford Bernstein.

Tim Anderson - Sanford Bernstein

Thank you. Since your Analyst Meeting in May last year, I have been trying to kind of think about what you will do to the proceeds from selling off or divesting different divisions you have that are currently possible. And I guess my question is, if you are going pile those funds in unprofitable ventures like Adnexus, it seems like debt ends up dragging down your earnings in the intermediate term. I am wondering if that’s the strategy you intend to do with an eye towards the long-term or really is the goal here to go more after profitable companies… ordinarily profitable companies and ventures. And then the second question is, just on REYATAZ and the future performance of that product. How nervous should we about that given that Merck’s efavirenz is slowly be moving more from a salvage setting into a second line setting?

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Let me start on a little more description on the string of pearls. So, I think you have described it quite accurately. We have some very valuable brands which are in their respective industries really extremely profitable. So, if we are successful on selling them and paying the taxes, then the objective is defined. Companies like Adnexus or possibly there are companies largely than Adnexus that have some current revenues and plug them in, in support of the overall BioPharma strategy. So, 2008 in a sense is a transition year as we execute that strategy. We have an obligation obviously to update our guidance should we have a successful sale because we will be missing that revenue earnings going forward. But hopefully, wouldn’t do this on us, it’s absolutely, absolutely in support of the teacher strategy which calls for growth.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

I am Lamberto. About the Merck’s launch, it is clear that out of the recent launches in HIV, the Merck launch is the one that we are monitoring more closely. We believe that their product is important, but we don’t believe that it is a very competition to our HIV franchise. The majority of their stake will come from patient that reinitiate therapy after having run out of satisfactory treatment options or have a highly treatment experience patients and that we get it as a down therapy. Obviously, they will continue their development in earlier align to therapy where there will be more direct competition to both REYATAZ and SUSTIVA still we believe that we have solid strong evidence on efficacy and resistance profile for REYATAZ to continue to grow it. The performance of REYATAZ in 2007 was very good we increased the sales of REYATAZ versus prior year in the quarter by 31% and if you take REYATAZ and by the way REYATAZ is by now the biggest protease inhibitor in the U.S. market. Then if we combine REYATAZ and our dealer franchise, which includes ATRIPLA if we can conclude that one out of two or more than one or two patients on HIV treatment in the U.S. receive a Bristol-Myers Squibb product as therapeutic agents. So, we continue to work our REYATAZ. We have recently launched the new formulation and we are confident of the strength of our products.

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Tim, this is Elliott. If I could just add to Lamberto’s comment about our research efforts. Certainly, we're in a good position with very strong multiple medicines in a place where there are many combinations as you see what we did with Gilly Edward ATRIPLA we are looking at our different compounds and how they can be combined with things in our portfolio and in other peoples portfolio we hope to be saying more about that this year so, it’s a very important strategy in the area where people take multiple medicines, if you have a portfolio like we do when new agents come out in different classes. It does present an opportunity and we work on those as well as other new mechanisms in this field.

John Elicker - Vice President, Investor Relations

Thanks Cindy can we go to the next question.

Operator

Our next question will come from John Boris with Bear Stearns.

John Boris - Bear Stearns

Okay. Just a couple of questions and thanks for taking them. A question for Jim back to one of the two matters. Can you just give a little color on the demand for the assets both official and can you… and how you think about it from a decision making standpoint. The decision to sell of course there’s tax implications for sale relative to a joint venture or partnership and I guess you've described the strategy as you string a pillar of pearls being biologics, but if you are able to identify assets that were complementary to the small molecules side, you have got a great HIV franchise as an example, that you could bolt-on there, would you object to bolting on those types of assets in the small molecules side. Question for Elliot, just an update on the high dose PLAVIX trial, and then one for Lamberto on the launch of your anti psychotic in resisting depression on ABILIFY, just what the contribution of growth is and how that’s rolling out and being accepted within the community. Thanks.

James M. Cornelius - Chief Executive Officer

Let me correct the misinterpretation of you are misunderstanding of a string of pearls, we don’t have any bias, small molecule versus large, it’s biased towards growth. The string of pearls strategy is moving forward with more concrete evidence and momentum inside the house and I think we are pleased with the negotiation, discussions that we are having with various companies. On ConvaTec sales, as I mentioned it’s an extraordinary brand, highly profitable, we haven taken the next step by officially putting an offering memorandum out, and I am not going to give the exact numbers but we have been overwhelmed by the early preliminary interest in buying ConvaTec from us.

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Yes, John, it’s Elliot. Also let me just reiterate, Jim’s direction on the string of pearls. It has to go out after long term growth, and perhaps some short term opportunities of course. I don’t think you will see an affinity for the type of deals like in Adnexus which is next generation technology, you will see a focus of complimenting in our pipeline and our focus on unmet medical needs and where we need to present this company in 2012 and beyond. With regard to your question on the current trial on PLAVIX also called OASIS 7, the same trial that we are doing with Sanofi Avantis to asses the clinical efficacy and safety of a PLAVIX loading dose of 600 milligrams followed by a short course of a 150 milligrams and then 75 milligrams versus standard doses in the label of a loading dose of 300 milligrams, maintenance of 75 milligrams. In patients with acute coronary syndrome, undergoing PCI, the primary outcome of the study is a composite of cardiovascular depth, stroke or MI of 30 days. Results are expected by the fall of 2008. We have been working very carefully with regard to the recruiting, and we understand that this is information that people are going to want to know, with to add to the large body of information on PLAVIX and deal appropriately within a fit risk in these patients.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

And as far as ABILIFY is concerned we are launching ABILIFY in the new indication of adjunct treatment of depression in this varied age. So, we do not believe that any of the growth that we have recorded for ABILIFY in the fourth quarter is related to that indication. With this indication, we are entering a $10 billion market. The market for depression where there is 40% to 60%, not adequate response, that is recorded by outside sources. We believe, we understand that already now , there are approximately $1 billion of those $10 billion that come from a typical product like ABILIFY and the fact that we are present in that market already with the other indication make us believe that presently we have approximately 100,000 patients and $200 million in sales. So, this is where the base from where we are starting and we are obviously very excited of having the first indication ever for an anti psychotic… sorry typical psychotic in this indication. We have restructured our sales force for ABILIFY and this has allowed us to have a much better coverage of the market. This has allowed us to add new… 15,000 new physicians to our colleagues and we believe that these 15,000 new physicians are very important for the new indication.

We are launching very strong medical and educational publication plan and we’ll soon reach and educate patients. There are a lot of patients in the depression market but are unsatisfied with their present treatment and proper communication to them, without discussing their issues with their doctors and we are making available to their doctors a good new product to prescribe. The overall performance of ABILIFY, the fourth quarter was good, I think it was good both in the U.S. and Europe, and as I said before, all that comes from the indications that we had received before. We have some additional indications coming for both the U.S. and Europe and we are getting ready to launch both of them.

John Elicker - Vice President, Investor Relations

Thanks John. Cindy, can we go to the next question please?

Operator

Yes, our next question will come from Jami Rubin with Morgan Stanley

Jami Rubin - Morgan Stanley

My question was answered.

Operator

We will take our next question from Bob Hazlett with BMO Capital Markets.

Robert Hazlett - BMO Capital Markets

Thanks. Just a clarification on some of the investments again. Has the investment policy been formally changed with regard to these types of investments? And when does the temporary impairment become permanent. What are the triggers there? And then on a pipeline question Ipilimumab. Is a vaccine a part of any of the regimens for the data that we expect to come out during 2008. Thanks very much.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Bob, the question on investment guidelines, we have always invested in AAA securities and we will continue to invest in AAA securities this time being as far as possible T bills rather than auction raised securities. So, yes they have been changed in that regard. On what is the trigger for permanent versus temporary impairment, there are a number of factors that have to be taken into account, including the length of time the company intends to hold the security. Whether there has been deterioration in credit quality. For those bonds where we have taken a temporary impairment, most of those have either a corporate bond backing or an insurance securitization backing where we have not seen any credit deterioration as yet, that’s why those impairments are seen as temporary, in other words, there’s liquidity issues in the market rather than actual underlying credit deterioration in the market, obviously with those bonds which are exposed to CDOs and subprime and residential mortgages where they have different layers of securitization. We obviously have said there is obviously credit deterioration in the market given the rate to fall from subprime mortgages which will eventually have an impact on those bonds and so that’s why we triggered the permanent impairment and that’s in line with FAS 115.

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Bob, this is Elliot Sigal. I don’t anticipate the release of any data with regard to vaccines in any registrational trials this year. We will be hopefully talking at ASCO this year on our mono therapy data for second line advanced melanoma, that Ipilimumab have and we will be seeing some data on the combination with the carbazine for first line advanced melanoma in the second half of 2008 and we haven’t decided where those would be presented yet.

John Elicker - Vice President, Investor Relations

Thanks Bob. Can we go to the next question Cindy?

Operator

Our next question will come from Chris Schott with Banc of America.

Christopher Schott - Banc of America Securities

Right. Thank you. I just have two quick questions. First on ORENCIA, can you talk about the European rollout? Any changes to strategy relative to the U.S. launch either in terms of the segment of the market we’re really targeting in on or the competitive agents you’re focusing in on? And then second, can you just update us on the enrolment of the Apixaban apex studies please? Thank you.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

Starting with ORENCIA in Europe, we had $6 million sales in Q4, four months inline with our expectations. It is important to know that we do not have the same label in Europe as in the U.S. And therefore, it is smaller targets that we have there. We have investments in all major European countries with the exception of the U.K. We have case open we've nice in the rest of the European Union. And all our prices are comparable to those of the U.S. What is important is that we are getting patients. 80% of our patients treated who are in Europe are in line after second TNF and we have 20% our sales coming from the first line. Going to the U.S., I think we are consolidating our plans and we are making them more aggressive and we see the results of this. We continue to focus on efficacy and durability. We have new data that allow us to focus upon those, and we will continue to focus mostly on the ID market. Therefore, we are focusing on REMICADE. We have intensified our direct-to-consumer. You may have notice that we… in November we launched a full DTC campaign, which seems to initially seem to be given positive results. And we have become more aggressive in our coupe d’ assistance programs starting in October. And the results as they said, seem to be there. So, we have not changed our strategy, we continue to work according to that strategy we described in December and we start seeing the results from the intensification of our activities.

John Elicker - Vice President, Investor Relations

Thanks Chris, can we go to the next question. I’m sorry Elliott did you want a--?

Elliott Sigal - Executive Vice President and Chief Scientific Officer

Chris had a question on Apixaban, I don’t have a specific quantitative follow-up, but qualitatively this program is off to a great start. I really like the collaboration with Pfizer. We have two very expert excellent teams are involved in this. I am pleased with the enrollment on Atrial fibrillation. Although, it remains early days. I’ll remind you we have two studies in Atrial fibrillation. One uses Morphin as a comparator the other uses Aspirin, and those patients who can’t tolerate, or are considered ineligible for Morphin, this specifically is a very important area, one that could indeed expand the market. We have a very robust program as we’ve outlined. It’s been developed also for the prevention and treatment of arterial and venous thrombosis in both acute and chronic settings. So, we’ll first be out hopefully in the market. With regard to the Orthopedic market, the medical market, the treatment of deep vein thrombosis, and the chronic treatment of stroke prevention and Atrial fibrillation. We will have Phase II data on acute coronary syndrome. We hope to target this sometime in September of ‘08 for public discussion. We also have Phase III data of for deep vein thrombosis prevention, which we hope to target for the ASH meeting, American Society of Hematology in December of 2008.

John Elicker - Vice President, Investor Relations

Cindy, can we have the next question?

Operator

Our next question will come from [inaudible] with Columbia Management.

Unidentified Analyst - Columbia Management

Yes, Andrew, a question please on the ARS. Can you tell what the remaining... could you just give some more detail on what the remaining liability is going to be beyond this 14 packs that you have taken today? What is your minimum and maximum that you're likely to report as a write off in the future please?

Andrew R.J. Bonfield - Executive Vice President and Chief Financial Officer

Well, as I indicated Harlin, I think we have actually taken most of the impairment that we expect that is related to subprime mortgage and to related issues the balance that we have on the balance sheet of $400 million, which is non-current assets, it’s mostly insurance securitizations and other corporate bonds and we don’t… sitting here today, there is no… unlikely to be any additional exposure. However obviously if credit markets deteriorate and these sort of markets start having a problem which will then be worried about broader things rather than just whether we’re taking a charge per board across the economy, that would be where we took the additional write-offs. So, unlikely to do any more but obviously we have to be prepared to accept that if credit markets do deteriorate, there may be further.

John Elicker - Vice President, Investor Relations

Hey, thanks Harlin. And Cindy I think, we have time for two more questions.

Operator

We’ll take our next question from James Kelly with Goldman Sachs.

James Kelly - Goldman Sachs

Thank you very much. Most of my questions have been answered. I just want to ask another follow-up question about the potential divestitures of the non-pharmaceutical businesses. Bring it to a little bit more about defined time line here on the impact to the earnings and Jim. If you think about the 2012 period where there is likely to be another patent cliff and something that’s a more stable set of cash flows and earnings like the non-pharma businesses now could be an important chunk of the earnings. How should we think about the balance between potentially trading off more volatility if you go for the string of pearls strategy with any sort of… with the proceeds from this versus being able to think more about the un-stability out in the period of patent clip? Thank you.

James M. Cornelius - Chief Executive Officer

The whole strategy is driven by the patent clip and a strong belief that the BioPharma strategy is the correct one for the Company. We obviously control the timing and whether we sell any or all of these assets, so we have two parallel activities. We’ve got the… what do we expect to get from the various brands and at what time and that is concurrently running with the string of pearls active listing of companies and engagements and discussions about which companies fit which piece of our R&D strategy. What areas do we need to compliment, we’re looking for adjancies, we’re looking for complimentarity, so could be… and we said this in December, that we don’t sell any of them but we have to have an active process underway, conscious decisions supported 100% at the board level to make this shift if they makes sense. To make sense, you got to have some things to buy and add as we did with Adnexus which was the purchase of about $0.5 billion. It brought new people, potentially new product line, new capabilities, and as we sit here today, the Adnexus acquisition couldn’t be going better.

John Elicker - Vice President, Investor Relations

Thanks Jim. I think, Cindy we’re going to go to our last question.

Operator

Our last question today will come from Tony Butler with Lehman Brothers.

Tony Butler - Lehman Brothers

Thanks very much. Jim still on the same question that Jim Kelly and others have asked on the asset sale. You made a goal of 15% earnings through the end of the decade. You stated that in December and reiterated it today. Again, refresh my memory please on… is that based on having all of those three assets and an additional pharmaceutical business within your umbrella and more importantly, as you potentially sell those assets and earnings do change, do you think that 15% guidance actually goes higher. And then the second question is just briefly around SPRYCEL. Why have you had a label change to the 100 milligram dose. The question is, do we see any change at the physician level based upon that dosing change at all? Thank you.

James M. Cornelius - Chief Executive Officer

The baseless assumption, back in December, based on the strategic planning that we had done at that time, did include the various brands of the healthcare group. And we will have to adjust that going forward, if we were, for example to sell all of them. We’re quite conscious that the productivity initiative will contribute $1.5 billion, but we’ve already started Phase II of that, so we’re not sure what that will yield us but we’re going to have a continuous productivity effort around here and keep the 15% goal in front of all our employees.

Lamberto Andreotti - Executive Vice President and Chief Operating Officer

And as far as price is concerned, the new dosing regimen of 100 milligrams once daily was granted in Europe in September and in the U.S. I believe a couple of months later. So what we can say now is that we are only finally allowed to discuss with doctors the important change and we believe that we will see some differences, because this will allow to use SPRYCEL with similar efficacy and improved polaribility and the important section of the market that is one on current patients, the increase in polaribility obviously is an important element that we will facilitate the use in chronic patients.

John Elicker - Vice President, Investor Relations

Okay. Thanks Tony. And thank you everybody for your questions, obviously… we are available if you have any follow ups so let just turn the call over to Jim for some closing remarks.

James M. Cornelius - Chief Executive Officer

John, thank you. I appreciate all the questions and interest in our Company from my perspective, I couldn’t be more pleased with the revenue results. I think all of you understand that revenue drives the business. So some combination of a really good performance of the sales people, and there’s four teams are delivering along with, as Elliot described, in an unusually busy year on a clinical side, suggests that all our goals can still be intact for 2008. I think Andrew has done a good job of fixing his organization, moving to a safer interpretation of what AAA means and we think we’re in an excellent position. The industry is going through some interesting and difficult times. We expect to be a winner in this industry. Thanks for your attendance today.

Operator

Thank you. That does conclude today’s conference. You may disconnect at this time.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Bristol-Myers Squibb Co. Q4 2007 Earnings Call Transcript
This Transcript
All Transcripts