Bristol-Myers Squibb Company (NYSE:BMY)
Cowen and Company 37th Annual Health Care Conference Call
March 06, 2017 02:00 PM ET
Giovanni Caforio - CEO
Steve Scala - Cowen & Co.
Good afternoon, I’d like to welcome Bristol-Myers Squibb to the Cowen Conference representing the company is Giovanni Caforio, who is the Chief Executive Officer, also here from the company is John Elicker, In-charge of Investor Relations.
Before I turn it over to Giovanni, I would like to remind you of the analysis that we put out last Monday, which was our statistical modeling exercise of CheckMate-227. Which concluded that should Bristol work in Q3 on an interim bases at the expresser group in 227. It will stop by our calculations with near certainty. So, that would reestablish Bristol as an extremely important company in all lines of lung cancer. So, four, five months from now that would be our forecast.
So with that I will turn it over to Giovanni.
Thank you, Steve and good afternoon, everyone. It’s great to be here, let me take this opportunity to give you an update on where we are as a company. What is happening, how our strategy is evolving and most importantly the progress we’re making with executing our strategy.
If I can have the first slide, this one. Okay, that's our forward-looking information… perfect. So, I always start with this slide, this is a slide that I believe once won’t be new to many of you it clearly describes our strategy as a company. A strategy that we adopted in 2007 and I would say that our company has evolved substantially over the last few years and continues to evolve. But we remain very committed to many of the word you see on this slide.
Today we are differentiated by a pharma company with transformational assets in areas of high unmet medical need we’ll cover many of those. A company with deep R&D expertise and business development capabilities; and I believe that thanks to the investments we’ve made in order to acquire a good scale and comparative presence in oncology and other markets in which we compete we are uniquely scaled and resourced for growth going forward.
I would like to cover a few topics that relates to R&D productivity, the commercial execution of Bristol-Myers Squibb, discuss with you the work ongoing and streamlining our operating model and also describe our financial strength and flexibility.
So, starting with R&D productivity, our organization is focused on leading science, the majority of our programs are first in class, many can be best in class agents. And we’ve had great success over the last few years in renewing our portfolio of market at medicines. Today we have what we call a very fresh portfolio of medicines in the market with remaining substantial opportunity for growth going forward.
With respect to productivity, the numbers are clear in terms of new approvals coming into the market over the last few years. Our R&D organization has been consistently above benchmark. And finally with significant investment in R&D of over $4 billion per year, our level spend is comparable to be peer group companies. And clearly we are committed to continuing to invest in the right type of R&D activity.
Looking at immuno-oncology specifically, obviously that is an area of very significant focus for the company. I’m sure it is clearly the area that attracts the most attention and questions from investors and shareholders. Let me just say in the last three years since the first approval of Opdivo, our success with broadening the number of indications for Opdivo and bringing forward truly innovative science has been remarkable.
You see some metrics here, Opdivo today is approved in a bit over two year in 11 indications in the United States alone and we’ve had over 100 approvals globally. Scientifically, 15 of our registrational trials have been positive and obviously one as you know has been negative last year. Five of our Phase III trial were stopped early because of survival advantage and we have ongoing programs in 14 tumor types that have the potential for data read outs in the short and the medium term.
From the perspective of advancing science, we’d like to reference the number of New England Journal Medicine’s publication and the number of breakthrough therapy designations for Opdivo, commercially also and particular, when you think about the results of last year.
The company is executing very effectively last year as a total company, we were able to grow our top-line 17%, our earnings per share in '16 grew 40% versus 2015. And that was thanks to very strong performance across the board both in terms of therapeutic areas, in terms of products and geographies.
You see some numbers here Opdivo grew and together with Yervoy our immune-oncology franchise reached $4.8 billion in sales. I'm actually very pleased with the performance of Eliquis, which grew 80% in the market last year and became the leading agent within its approved indications in the cardiology space in the U.S. where we are actually the leading agent in TRXs in the total oral anticoagulant market including warfarin and we continue to progress our leadership in terms of NBRXs, TRXs not only in the total market in the US but also in multiple countries around the world.
And finally, strong performance with our Orencia and Sprycel some of the more established brands both growing double-digit, again this reflects the strength of our execution commercially on a global basis. I'll make a couple of comments about our operating model transformation, obviously the company has grown last year substantially as I just showed you. And there is a very good momentum from a pipeline perspective and from a commercial perspective.
About a year ago we made a decision to really challenge the way we operate as a company and allocation resources and the objective was twofold, it was really first to ensure that we had a model in place where we could allocate all of our resources to the highest priorities. And second, that we could continue as a company to move fast and operate successfully in a very competitive and dynamic marketplace.
And so we put in place a number of changes that will be executed over the last two to three years and the changes are aimed at allocating more resources to top brands in key markets, I'll remind you that 9 brands in 20 markets account for more than 90% of Bristol-Myers Squibb today. We integrated our oncology model, from a model in which we had two separate organizations for early oncology and full developments to one that works across the full spectrum of development activities.
We decided to create a much more entrepreneurial dynamic fast moving unit to accelerate some of our assets outside of oncology. We believe there is more opportunity for us to focus resources in manufacturing of biologics. And so at the same time in which we are building a large scale facility in Ireland we’ve decided to look at ways of variabilizing [ph] and streamlining our small molecule network. And obviously we are doing a lot of work to make our G&A functions cost effective and tailored to the company we are today.
The net result of this, as I said at the beginning must be a more effective and comparative company, but we are also able to maintain our total OpEx flat. And in fact four example this year we guided to flat OpEx versus last year, but within that we were able to significantly increase our investment in R&D.
Finally we are focused on shareholder value creation. We actually have a long history of successfully creating value for shareholder. We maintain a very strong balance sheet with cash and equivalents of approximately $9 million, of which 85% is internationally. We decided to opportunistically initiate a $2 billion share repurchase program and have a 10b5-1 approved and in place.
We remain committed to the dividend, which has been increased at the end of last year for the 8th consecutive year. And most importantly the balance of our capital allocation strategy enables us to continue to think about business development as one of the key strategic levers for the company.
Our 2017 priorities look very similar to the priorities I presented last year. The first one really is about driving business performance and continuing to execute effectively on all of the most important fronts. The second one is about sustaining our leadership position in immuno-oncology. Third one is continuing to diversify the company for long-term growth. And finally business development and capital allocation remain really important.
Let me just spend a few minutes now to discuss the way I think about our immuno-oncology opportunities here. As I have mentioned over the last couple of months, I really see three elements of our IO priorities and portfolio this year. The first one is our U.S. business in lung cancer, obviously there has been a lot of discussion about lung cancer, Steve referenced some of that in his introduction. And it is clear that why we have been extremely successful with Opdivo in establishing Opdivo as the standard of care in second-line lung cancer.
The clinical developments of the last eight months have somewhat transformed the landscape in lung. And so I do see that market as one that in the short-term is very competitive, particularly in the U.S. with the entry of Keytruda in a small segment of the first-line in monotherapy. The pending application for Keytruda in combination with chemotherapy in first-line lung cancer and obviously more approvals in second-line. So, that is a segment of our business, where we are working to defend our leadership position in second-line, but clearly in the short-term a very competitive market.
In the U.S. ex-lung, there continues to be strong momentum in our business. We see good performance in melanoma, primarily with our combination regiment of Opdivo and Yervoy. We see very strong performance in renal, where in second-line we continue to gain market share. We have good performance across the board with more recent launches in Hodgkin Lymphoma head and neck cancer and bladder.
So, the rest of our business actually is in very, very good position competitively and continuing to grow in the U.S. And internationally, we have been very successful with negotiating pricing and reimbursement across the world. I must say that that process is completed in a vast majority of international markets. In many cases, we are at the beginning of uptake launches and curves that look very similar to what we have seen in the U.S. one or two years ago.
With strong competitive position in many key markets, like Germany, France, Italy, Spain to mention some of the European markets. And all actually of the key markets around the world. So the dynamics of this business will be very different, depending on which one of the three buckets we discuss.
Overall, we have guided to our overall immuno-oncology business to grow this year versus last year as a whole and internationally. Obviously the competitive position is more intense in the U.S. and as we said, while our business in the U.S. can also grow this year, a lot depends on the evolution of market dynamics.
Let me now switch and very briefly touch on what has now evolved to be our program in first-line lung cancer. And as the slide describes, our program is extremely broad, we have an opportunity to study 227 and 568 to be really either in Phase III with 227 or potentially into a registrational study with 568. And test in parallel multiple hypothesis clearly at the center of our strategy remains the potential of the I-O combination of Opdivo and Yervoy.
But we have the opportunity to look at the combination of Opdivo in chemotherapy not only in period one negative patients, but actually in all comer population as well. And we are beginning to test what I think is a really interesting hypothesis to initiate Opdivo and Yervoy in parallel with two cycles of chemotherapy. And then after the two cycles continue the I-O regimen as a potential strategy to address the needs of rapidly progressing patient.
This is a broad programs probably the broadest in the industry and obviously at BMS we are extremely focused with all of our resources to ensure this program is well executed and executed on time.
Beyond first line lung cancer, our lung cancer strategy is also very broad. You see here some of the studies that led to broad approvals in second line, you see a reference to study 227 and 568 in first line lung cancer. We are also studying the potential for adjuvant and neoadjuvant studies in lung cancer, which we think is extremely important. And particularly with respect to the neoadjuvant setting there is data that suggests really important role for Opdivo as a neoadjuvant strategy in lung cancer.
While there is a lot of focus on lung cancer, we are not only a lung cancer company. As I mentioned Opdivo and Yervoy are being studied in a large number of clinical trials. There is at least a dozen clinical programs that could lead to registrational paths over the next two years. And you see some of them listed in this slide with the dates in which we expect to have data that could lead to registrational submission.
Moving to longer term, let me now spend just a couple of minutes to describe our early pipeline in immune-oncology there are currently 10 new medicines in early stages of clinical development just in immune-oncology. And we are very excited actually to have probably the broadest and best pipeline we've ever had in oncology as a company.
Obviously, we decided even within immune-oncology to broaden our scope and this slide tries really to depict the four pillars of our immune-oncology strategy today. And the way we look at addressing different points of attack and different mechanisms of action as a company.
The slide also describes primarily our internal pipeline, and obviously as a company we have an opportunity to study many of the combinations that make sense in immune-oncology by leveraging our internal assets, which provides a great opportunity for speed and flexibility. But our strategy is not limited to using our own internal assets.
We are also growing a thoroughly comprehensive clinical collaboration strategy with multiple companies. And exploring the combination of our own products with targeted therapies, chemotherapy and a number of other approaches such as radiation therapy.
There are disclosures that will begin to be made on our early pipeline during the course of this year. As we have mentioned before many of our early programs are progressing quite well. There are at least four of those programs and in the next 12 months can generate data which could lead if positive to the beginning of registrational studies.
You see here some of the data we intend to present in the first part of this year. And then potential for disclosures in the second part of 2017 on a number of really interesting programs.
The other area that I want to cover is really the area of biomarkers and patient segmentation. It is clear to us that while the first chapter of immune-oncology really has led to the establishment of Opdivo as a foundational medicine in cancer, and demonstrated the value of Opdivo in combination with the Yervoy in a number of tumor types. The future is one where multiple mechanisms of action may be combined and clearly one where also different lines of therapy need to be developed for patients across multiple tumors.
And it is therefore essential that as a company we continue to strengthen our science and translational medicine capabilities, the ability to identify biomarkers and segmentation strategies as a company. We've already invested very significantly in this space, but it is an area in which I expect you will continue to see activity at Bristol-Myers Squibb. Because clearly as a company that has such a rich pipeline, it is essential for us to continue to be at the forefront in this area as well.
You see some of the agreements with third parties on this slide. This is only part of the story, the other part of the story is clearly a strong partnership with the academic community. Several years ago, we made a decision to create what we call the internally immuno-oncology network, which is a really close network that brings together I would say approximately 15 of the leading academic institutions around the world active in immuno-oncology.
And with every one of them we have a close partnership and calibration in order to continue to generate the data that enables to us to understand how to take our programs forward. So, within oncology, this is clearly an area that will continue to receive significant attention from our perspective.
Let me just now mention in a few words what’s happening outside of oncology. And as you may remember, we decided to focus strategically our efforts in three areas outside of oncology. One is cardiovascular medicine, the other one immunoscience and the third one fibrotic diseases. They are all areas in which we have expertise either clinical assets or growing critical mass or clinical programs in general.
I’ll just point to some of the Phase II programs there. Nitroxyl Donor in heart failure, three programs in immunoscience and a number of program in fibrotic diseases. I think these are all areas where our programs continue to advance. Outside of oncology as I said earlier we do an opportunity for four of our programs to generate data in the next 12 months, which could lead to registrational programs. And I’ll also point to maybe the first disclosure coming, which is the release of interesting early data on one of our assets in fibroses Adesol [ph], later in April.
As I’ve mentioned a number of times, business development remains a critical priority for the company. In fact we are sized and we are strategically focused on considering business development as an important source of innovation for the company, which compliments internal R&D effort. You see examples of some of the things that we’ve done over the last few years. There clearly is a focus on oncology, but you’ll see that quite a lot has happened to strengthen our pipeline outside of oncology.
So in closing, let me just say that there is strong momentum in the company. We are coming out of 2016 which has been a year of extremely solid commercial execution, the company has grown 17% in sales, 40% in earnings. We have strengthened and broadened our development strategy in lung cancer specifically with respect to Opdivo and the combination of Opdivo with Yervoy. We have a dozen catalysts for the medium term -- short and medium term that can broaden further the development -- the approval of Opdivo and Yervoy in a number of tumor types.
And in the long-term we are making bright progress to advance an extraordinary promising pipeline in oncology and a select number of therapeutic areas. We are continuing to maintain a balanced capital allocations strategy and we are well resourced from a financial perspective and talent perspective to execute on our strategy. Thank you. Steve?
End of Q&A
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