Bristol-Myers Squibb Company (BMY) — Q2 2015 Earnings Call Transcript

Thanks, Mike. And good morning, everybody, and thank you for joining our second quarter earnings call. With me this morning are Giovanni Caforio, our Chief Executive Officer; Charlie Bancroft, our Chief Financial Officer; Francis Cuss, our Chief Scientific Officer; and Murdo Gordon, Head of our Worldwide Markets. Giovanni and Charlie will have prepared remarks, and then Francis and Murdo will be available for Q&A. I'll take care of the legal requirement before I turn it over to Giovanni. During the call, we will make statements about the company's future plans and prospects that constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various other factors, including those discussed in the company's SEC filings. These forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates as of any subsequent date. We specifically disclaim any obligation to update forward-looking statements even if our estimates change. We will also discuss non-GAAP financial measures adjusted to exclude certain specified items. Reconciliations to these non-GAAP measures to the most comparable GAAP measures are available at our website. Giovanni?

Thank you, John, and good morning, everyone. It is a privilege to be here as CEO to lead today's call with you, and to share my excitement about our future and the opportunities ahead of us. Building on our success over the past few years, we are starting an exciting new chapter characterized by growth, pioneering transformation in cancer treatment, and enhancing our diversified portfolio of specialty medicines. We are beginning this next chapter from a strong foundation with a proven strategy, a robust portfolio of marketed products, a promising pipeline, and exceptional talent. I am confident that we are well positioned to strengthen our leadership in immuno-oncology through Opdivo. I also believe we can fulfill the potential of our portfolio and pipeline, both within and beyond immuno-oncology. As I mentioned, we are entering a growth phase. Over the next five years, we anticipate that growth will primarily stem from Opdivo and Eliquis, with substantial contributions from the rest of our existing portfolio of innovative medicines. With Opdivo, we will capitalize on our leadership in lung, melanoma, and renal cancers. In non-small cell lung cancer, we are well positioned due to two positive Phase III studies showing improved overall survival. In melanoma, Opdivo and Yervoy are currently marketed, and we believe the combination will be a key treatment option for patients. In renal cancer, the early stop of study 25 announced this Monday due to an advantage in overall survival confirms Opdivo’s potential in this critical area where there is still a significant unmet need, and we have a notable time advantage over other competitors. This morning, we announced that the European Commission validated two Opdivo applications, one for non-squamous cell lung cancer and the other in combination with Yervoy for metastatic melanoma. Additionally, our Opdivo development program is extensive, with ongoing studies across various tumors, and we are confident this will enhance our opportunities over time. With Eliquis, due to its extensive label and strong prescription trends, we are optimistic and look to build on our momentum. As for the rest of our marketed products, trends are favorable, and we have the right resources to continue competing and growing. In the long term, we are dedicated to maintaining a diversified portfolio, including diversification within immuno-oncology into new mechanisms and combinations, as well as expanding into key areas such as fibrosis, heart failure, immunology, and certain genetically defined diseases. Over the past several months, I have evaluated our growth opportunities, which are unprecedented for us, and I have focused on what is necessary to maximize them. I am fully committed to making the right strategic investments, and as indicated in April, we have identified areas for additional investment beginning in the second half of the year. This includes investments in commercial functions to ensure we are globally resourced to compete, particularly for Opdivo, Eliquis, and Elotuzumab. It also involves investments in R&D, especially in immuno-oncology, to accelerate and broaden programs where possible, as well as in early discovery to speed up new mechanisms and combinations, and enhancing our medical organization for data generation and increasing field medical resources. Now regarding our second quarter, I am very pleased with our results. Sales were strong, and we achieved significant clinical and regulatory milestones during the quarter. We reported 7% overall sales growth year-over-year, showcasing the strength of our products across all markets. Charlie will delve into the key aspects of our performance in more detail. Let me take a moment to highlight immuno-oncology. For Opdivo, we have experienced an outstanding year with three early study stops, crucial data presented at ASCO, three filings, three approvals, and commercial launches in both the U.S. and Europe. In the U.S., we are observing early positive trends for Opdivo regarding access, reimbursement, and adoption, and I am optimistic about our trajectory. Lung cancer represents a significant opportunity for our company. We were first to market with squamous cell, and Opdivo is now on NCCN guidelines for non-squamous cell cancer. In Europe, we have secured approval for Opdivo in both first- and second-line metastatic melanoma, and just this week we received approval for squamous lung cancer. While most data from our immuno-oncology programs has been positive, we acknowledge that not every study will succeed, as demonstrated by the two studies for Yervoy in prostate and small cell lung cancer which did not achieve their primary endpoints. Francis can provide further commentary, as we remain committed to Yervoy, which is a crucial aspect of our immuno-oncology strategy in combination with Opdivo across multiple tumors. Additionally, we anticipate completing the filing for 57 data in the U.S. and Europe in the coming weeks. We are also working on submissions for Elotuzumab based on ELOQUENT-2. Now, regarding Hepatitis C, we had a strong second quarter. Performance was solid in both Japan and Europe, and we experienced a one-time impact from previously deferred revenues in France. We have also made significant progress in the U.S., filing Daklinza in combination with sofosbuvir for treating genotype 3 patients, with a PDUFA date set for August 13. We plan to make supplemental filings later this year in other challenging treatment areas. The Hepatitis C market continues to evolve rapidly. Given our focused strategy and the competitive landscape, we do not intend to pursue regulatory approval for our triple regimen or TRIO in the U.S. or Europe. We will continue to assess our filing strategy on a country-by-country basis and will make determinations based on the specific needs of patients in each region. Looking ahead, we expect competitive launches later this year to impact our business, particularly in Japan. Nevertheless, we will persist in executing our Hepatitis C strategy, focusing on addressing the needs of specific difficult-to-treat populations, which may differ by market. With that said, let me now hand over the floor to Charlie, who will walk you through key elements of our performance in Q2 and the financial implications reflected in our updated guidance.

Thank you, Giovanni, and good morning, everyone. As Giovanni mentioned, we had a very good quarter, which was driven by strong sales growth of 7%, or 16% excluding the impact of foreign exchange. Overall FX had a negative impact on EPS of approximately $0.06. Let me provide a few highlights. Eliquis sales were $437 million, up 23% sequentially from the first quarter, with good growth both in the U.S. and internationally. We continue to see strong new-to-brand prescription trends with both cardiologists and primary care physicians across the broad market. Opdivo sales were $122 million for the quarter. We are seeing strong performance metrics with the approval in lung cancer, with encouraging early trends in terms of access, reimbursement, and abandonment of chemotherapy in second-line squamous lung cancer in the U.S. Additionally, we received EU approval in both first and second-line melanoma last month and have launched in Germany, where early trends are strong. And, as noted by Giovanni, we just received approval for squamous lung cancer in the EU as well. Opdivo has now been approved in over 30 countries. Yervoy sales in the U.S. were $136 million in the second quarter, a 21% decrease from the prior year. Outside the U.S., sales totaled $160 million, which is a 28% increase excluding FX. As expected, we are seeing an impact on Yervoy from the PD-1 class in the U.S. This will likely continue in the short term until the Opdivo plus Yervoy combination regimen is approved later this year. Longer term, we believe Yervoy could have an important role to play in combination with Opdivo in multiple tumors. Hepatitis C sales were very strong for the quarter at $479 million. Included in sales for the quarter is a one-time positive impact of $170 million related to an early access program in France that had previously been deferred until pricing was finalized. This now happened in Q2. Hepatitis C sales performance in Japan was strong, but as you know, the competitive landscape continues to evolve. We continue to see solid growth from both Orencia and Sprycel, which grew 15% and 10%, respectively. HIV sales were down 14% as the HIV market is increasingly competitive and having an impact on our business. Now let me highlight a couple of items from our non-GAAP P&L. Gross margin was favorable 80 basis points compared to the prior year, primarily due to positive impact from foreign exchange, partially offset by product mix related to higher sales of Eliquis and lower sales of Abilify. Compared with our first quarter, gross margin is down 360 basis points. Recall that last quarter we had a one-time benefit of previously accrued royalties and a full quarter of Abilify sales. Operating expenses were somewhat higher than last year as we have been investing behind Eliquis, Hepatitis C and Opdivo. Our tax rate for the quarter is 2 percentage points higher than last year. Our quarterly tax rate will fluctuate based on earnings mix, and remember that the R&D tax credit has yet to be passed by Congress. Now let me provide some comments on our revised guidance. For revenues, we have increased our guidance range based on strong overall sales trends with our key growth products, including Eliquis, Hepatitis C, Orencia, and Opdivo. In thinking through sales for the remainder of 2015, I would like to highlight a few dynamics. In Hepatitis C, I mentioned there was a one-time positive impact of $170 million from France. This will not recur. Additionally, Hepatitis C will become increasingly competitive for us, particularly in Japan, where we expect a significant impact on our sales going forward. As I commented earlier on Yervoy, we are seeing an impact on the U.S. business from the PD-1 class. Also remember that we've restructured our Erbitux agreement. We expect Lilly to take over full commercialization in October, at which point we will no longer book sales, but will instead record the royalties we receive in other income. I will now move on to operating expenses for the remainder of this year. As Giovanni mentioned, we are committed to making the right investments to capitalize on what we think are real growth opportunities. As you recall, I mentioned in April that we were in the process of reviewing additional new investments. We have since made strategic choices to invest in programs that we feel are necessary to maintain the leadership position of immuno-oncology as well as to support other important growth products including Eliquis and Elotuzumab. These investments are included in our revised guidance. Commercially, we are adding resources globally to fully support the launches of Opdivo and Elotuzumab and also behind Eliquis to support continued strong growth. For Opdivo, we are making additional investments in R&D, medical, advertising and promotions, and we are increasing investments to accelerate Opdivo development programs where possible, and also to accelerate the development of new mechanisms and additional combination regimens. We are adding resources in our medical organization, which include additional trials to generate data and also increase field medical resources, which will be important for driving awareness of Opdivo both in the U.S. and around the world. These investments are not discrete. These are programs that are beginning in the second half of this year but will continue into 2016. In summary, we are encouraged by our good clinical results and strong underlying sales trends and metrics from our key brands that are important to our future growth outlook, and in order to capitalize on our growth, we are making the right strategic investment. I'd be happy now to address your questions.

Thanks, Charlie and Giovanni. Mike, I think we are ready to go to the Q&A. And let me just remind you that in addition to Giovanni and Charlie, both Francis and Murdo are here to take any questions you might have. Mike?

Thank you. I have a couple of questions. First, in Bristol's all-comer trials versus its PD-L1 selected trials, is there a meaningful difference in the rate of patient enrollment? And if yes, is that due to the challenge of finding patients who have that level of selectivity, or is it due to physician reluctance to do the screening for expression in the first place? And secondly, Roche implied this morning that the chemo-combo data they will show at ESMO will continue to show strong results. Has Bristol considered taking another look at chemo-combos based on Roche's continued success with those combinations? Thank you.

Well, good morning, Steve. It's Francis Cuss here. Thank you very much for that question. We have not seen any difficulty in recruiting patients for any of our studies with Opdivo or indeed the combination. It is certainly not related to the ability to look for PD-L1 expression or not. I would say, as a physician, the less one has to do to treat a patient and really have a good idea of the benefit, that makes a lot of sense. So we are very happy that we're heading towards broad labels for the tumors we're looking at, and we've fully characterized the PD-L1 expression. Moving to the combinations with chemotherapy, we believe we have a very comprehensive data set now with various chemotherapy Nivo combinations – probably with the longest follow-up in the industry. Based on our comprehensive data from CheckMate-012, combinations of Opdivo with conventional chemo regimens may sometimes achieve high and durable responses. However, we've seen with longer follow-up that the survival at a year was actually no different for Opdivo combinations with chemo compared to Opdivo monotherapy. In effect, what we saw was additive but non-durable response rates at the cost of additional toxicity. Just to put this in context, we showed at ASCO that the one-year survival for Opdivo monotherapy was about 70% to 85% regardless of PD-L1 expression. So we are focused on the Opdivo Yervoy combo and will, in addition, continue to explore other scientifically driven combinations to advance our first-line strategy and our position. We are additionally interested in nontraditional chemo-combo regimens including innovative approaches to sequences and maintenance. Let me just remind you, our strategy for first line is to improve survival and replace chemotherapy. To do this, we are exploring multiple Opdivo combinations as well as monotherapy and earlier I-O assets, targeted therapies, and chemo, both internally and externally. Thank you.

Steve, let me just add to what Francis just said. This is Giovanni. With respect to your first question, we're actually very excited that we are enrolling ahead of schedule, as Francis said. That's clearly an indicator of the interest in the first-line trial with Opdivo. And with respect to your chemotherapy question, what's really interesting is that in the very early days of our launch in second-line, we are seeing the speed at which chemotherapy is being abandoned. There are clearly concerns regarding long-term efficacy, and the side effects are something that physicians and patients are actually very excited to abandon as well. So I think that's an important early learning from the marketplace.

Thank you, Steve. Mike, can we go to next question please?

Hi, I have three questions, if I may. Firstly, I'm just interested in your reaction to the negative news in relation to the Yervoy trial in small cell lung cancer. My understanding is the tumors have very high mutational loads, plus smokers, they may have had prior radio therapy. I mean, all of the factors that you may increase the propensity of response. So any additional insights you have on that, and what it means will be interesting. Second, I saw some commentary that potentially the ARISTOTLE data may allow for approval in some sub-types of atrial fibrillation which is not possible for your competitors in that space. To what extent do you intend to pursue this? And could it be used as an additional competitive tool in that market? And then finally, your guidance, although raised, continues to look very achievable. Are there any additional headwinds that perhaps we ought to be considering that we're not taking into account? Many thanks.

Good morning, Andrew. I'm obviously disappointed that the studies in small cell and prostate didn't meet their primary endpoints with Yervoy. I think it's really important to say we never expected that every I-O agent in every tumor was going to be successful. But again, we are here to follow the science and generate the data. It's also fair to say that based on the pre-clinical science and the promising clinical data we've seen, our strategy is rapidly evolving to studying combinations of Yervoy and Opdivo in multiple tumors. Just to talk about small cell for a moment, we presented data at ASCO – that's the CheckMate-032 study – that showed activity in platinum-sensitive and resistant patients in both monotherapy, but even more interestingly in combination, and with very good tolerability. It's also important to say we've shown activity in prostate cancer with Yervoy even though we didn't meet our primary endpoints. I think we believe in the importance of the complementary mechanism of action in immuno-oncology. We are firmly committed to Yervoy, which I think is a very important part of our combination strategy, combined with Opdivo in multiple tumors. I think we're making very good progress at the moment in melanoma with validation of our EU combo filing just this week. We have the upcoming PDUFA date at the end of September for the U.S. 069 filing. In terms of the ARISTOTLE data, I'm not going to get into the details of our regulatory strategy around this, but we are looking at every opportunity to use what we believe is a very important data set, talking to KOLs and regulatory authorities in terms of providing additional information for this very important area.

Andrew, this is Charlie. I'll briefly touch on your guidance question. We raised guidance because we feel very strongly and encouraged about our sales trends about the key products that are not just for us now, but as we look into the future. We did have some one-off items, like the French ATU, which helped us in the first half. Also remember, we had Abilify in the first basically in the first quarter that doesn't replicate. I would also mention that gross margin in the first half of the year was averaged at 78%. I've guided to 76%. We are starting to see the unwind of the favorable foreign exchange we saw in the first half. Also remember that the expenses that both Giovanni and I spoke about earlier largely accrue to us in the second half of this year.

And just to add on that, Andrew, I would say, as I mentioned at the beginning, we really are entering a period of exciting growth. I am very encouraged by the fact that we have very strong clinical momentum, good progress on the regulatory front, and strong commercial execution. You'll see the trends for our growth products continue. Charlie described some of the dynamics in the second quarter, but we've made a decision to make a number of strategic investments at a time when we really are in a position of strength, beginning an important phase of growth. I am confident in how this chapter that I describe between now and 2020 will play out for us.

Thanks, Andrew, for your questions. Mike, can we go to the next question please?

Thanks so much for taking the question. Two if I could. So one is you mentioned the diversification that you want to do both within I-O but also outside of I-O. Given how large most of us feel the I-O opportunity is going to be for you, to remain well-diversified outside of I-O, I'm curious if you feel you need to do some sort of larger acquisition in order to gain a presence in some of the areas that you talked about that match up to sort of what you're going to be getting in the I-O side of things. And then second, just you touched on this a little bit earlier, but in terms of the combination approaches in the front-line setting for lung cancer. Obviously, a lot of focus has been on Opdivo and Yervoy. Can you just at a high level, Francis, give us a sense of some of the other combinations that you're working on? Which ones are you most excited about? I know you have a number that are in progress. But based on your early data, which ones would you say you are most optimistic about for potentially giving us positive data in the future? Thanks.

Yes, Vamil. Thank you. This is Giovanni. Let me just answer the first question on diversification. Then Francis will make some comments on combination strategies. My perspective is that obviously at the center of our strategy is immuno-oncology. As I said at the beginning, when we think about the next period of growth between now and 2020, the next five years, our growth will come disproportionately from Opdivo and Eliquis. Within Opdivo, there is an element of diversification as well because our staffing strategies are really focused on lung, melanoma, and renal cell. We are, however, expanding into a large number of other tumor opportunities. Longer term, we believe we have an exciting early pipeline within immuno-oncology, and in a select number of areas in which we are focused that can drive our growth in the medium and long-term. These areas are the ones we've discussed before. So CV with a focus on heart failure, immunology, and the areas of fibrosis and genetically defined diseases. In all of those areas, we have ongoing programs which are early, but potentially transformative. With respect to how we complement that, our business development strategy is unchanged, and it's really the strategy that we've articulated before. One of our core strengths as a company is our ability to complement internal R&D with business development. We've clearly demonstrated that in fibrosis with the recent agreements we had and even in CV through our deal with uniQure. You will see us continue to execute our strategy in business development to complement our internal programs there.

Good morning. Let me just draw you back a little bit just to talk about our first-line lung strategy because I think it's very important. We have two studies in first-line, two registration potential studies. One in monotherapy in PD-L1 expressing patients, and this provides the quickest way to bring Opdivo to first-line patients. Based on the data we presented at ASCO, we are very enthusiastic about that study. We also have a registration study of Opdivo and Yervoy together, which is started in both expressers and non-expressers of PD-L1. That's the next likely potential positive study. We believe that Opdivo will be foundational, and that the Nivo combos have the best potential to further improve survival and replace chemotherapy, as Giovanni mentioned earlier.

Great. Thank you, Vamil, for the questions. Mike, can we go to the next one please?

Thank you. Charlie, this is for you. First, are you signaling higher levels of investment spending now because you think that the opportunity set for I-O is even bigger than you had originally imagined? Or is it because the market has become more competitive? And secondly, can you commit to investors that we will see significant bottom-line leverage? Because it sounds like you're pushing that out a bit. Is that the right way to look into this? Is that going to be next year? Is it going to be in 2017? And again, does the renewed higher level of spend delay the margin leverage or does it actually accelerate the margin leverage? Or strengthen it rather. Thanks very much.

Thank you, Jami. I think the I-O opportunity, as we see it, with the continued good clinical outcomes, stoppage of trials, I think we mostly see it as our opportunity to just continue to reinforce our leadership position in I-O. Clearly, we recognize that I-O is immensely competitive and that has a small factor, but I think it's largely due to how we see our competitive position within the overall I-O space. As it relates to the bottom line and how we potentially see leverage, to seize on that opportunity as we continue to see the evolution of that and our performance in the market, we see that it's required to continue to invest to maximize that opportunity. I can't comment on 2016, but as I look further out to the back end of this decade, I will say that ultimately this will improve our leverage.

Let me just further reinforce the point that Charlie has made. When you look at our immuno-oncology opportunity, there is very strong momentum from a clinical perspective. I think it's fair to say our strategies have been validated clearly this year. There is extremely good execution from a regulatory perspective, not only in the U.S. but in Europe and internationally as well. Commercial execution is strong. The early indicators are encouraging. Our decision to incrementally invest is really one that starts from our position of strength and the confidence we have in the magnitude of the opportunity in the medium and longer term. As I said at the beginning, for us, this is an unprecedented set of opportunities and we're making the right investments behind them. We are very conscious of the comment you made with respect to leverage and increased profitability. As we look at this period, we see that happening, as Charlie said.

Thanks, Jami. Mike, can we go to the next question please?

Thank you. A few questions on immuno-oncology. Can you talk about how you think the PD-L1 biomarker will play out in Europe, in the near or intermediate term? There have been several companies that have commented that they think European payers, and maybe even regulators, will be more aggressive in pushing the biomarker as a treatment decision tool in lung cancer. Second question is in first-line lung in PD-L1 negative patients. Do you see any opportunity for PD monotherapy? Or at this point, is it really only looking like combination is going to be the path forward again in biomarker negative patients? The reason I ask is, obviously, there's some divergence in how it seems to be working in second-line, versus how it may work in first line. And then Opdivo pricing in Germany. Can you just mention where you are relative to the U.S.?

Yes. Tim, let me just start on the first part of the question. Murdo will further expand on Europe, including the pricing in Germany, and then Francis can answer your comments on first-line. I think we're in a very, very strong position globally, having a data set across all patient populations that enable us to describe to physicians, patients, and payers the role of biomarkers. I think it's important that our strategy has been validated. The role of biomarkers is different; it depends on the line of therapy and the tumor. But we have the right data sets to have those discussions. We are receiving strong feedback from physicians, including in Europe, regarding our strategy. I'll ask Murdo to give you some more insights there.

Yes, thanks, Giovanni. Thanks, Tim, for the question. We are, as Giovanni highlighted, hearing from European thought leaders that, consistent with the perspective of U.S. thought leaders post-ASCO, the role of PD-L1 is unclear in selecting patients. That being said, given the nature of the healthcare systems across Europe, we could end up in discussions with payers in Europe where they are seeking to restrict Opdivo in second-line patients in lung cancer. We will work closely with each of the payers in Europe to help them understand the full breadth of the data, as Giovanni has highlighted. We are in a position to describe the efficacy of Opdivo across a broad range of second-line patients, across a broad range of histologies. In Germany, we've been fortunate; we've had a very quick start. As you know, reimbursement is not a barrier to initial launch in Germany. We have a public price of €7,421 roughly per month, and that was listed July 15.

Good morning, Tim. I think it's absolutely clear that the bar is higher in first-line because of the benefits seen with combination therapy. As a result, we have focused on the PD-L1 monotherapy population and our combination therapy study with Yervoy and Opdivo. We have primarily looked at that. That being said, we believe we've seen interesting data we've presented at ASCO in terms of durable responses in PD-L1 negative patients in first-line. We don't think we've got to a point yet where we're comfortable understanding whether it's appropriate to go directly against the platinum doublers, but there's lots of other combinations too, as I mentioned. Beyond Yervoy and Opdivo, we have earlier I-O assets, targeted therapies, and these nontraditional chemo-combo regimens I talked about. I think there's a lot of opportunity, and we're looking at all of them. But we're leading off with the Yervoy Opdivo combination in the negative patient population, which is the nearest term for us.

Thanks, Tim, for the questions. Mike, can we go to the next one please?

Thanks for taking the questions. First one just Opdivo related on renal cancer. Any thoughts around the publication and presentation strategy along with your regulatory strategy for renal? Can we get an update on your hematology glioblastoma multiforme head and neck trials? It seems as though those trials seem to be enrolling with potentially data sometime in 2016. So any update there? On HCV, on the $170 million, can you provide any update on what the price was per patient that you secured in the French market? And then lastly on Eliquis, just any quantitative metrics that you have on the new to brand share in cardiology and primary care would be helpful? Thanks.

Sure. So why don't Francis start with your questions on renal and hematology, and then we'll take the Hep C questions.

Good morning, John. We were very excited when the study was stopped early based on the top-line data from the interim analysis. The fact that Opdivo demonstrated an improvement in overall survival versus the standard of care we believe from previous studies is just about unique. I can't talk more about the data before it's presented, but I will say we're working with the investigators on a future presentation and publication of results as soon as possible. In terms of our regulatory strategy, I'm not going to go into detail, but as you've seen, we've shown recently in melanoma and lung that we can work together quickly with the FDA and other health authorities. We'll be looking to submit that data as soon as possible. Regarding the other data that might be coming out, I think in addition to the nine registration studies in the last year that we've had positive data, we have a further 25 either ongoing or planned. You mentioned some of them. As we look forward, as recruitment is going well, we may see information next year in Hodgkin's, non-Hodgkin's lymphoma, and bladder potentially and others. We're going to continue seeing differentiated data, which is what we're trying to do. But in the near term, with all the differentiated data we've had, we're certainly focusing on getting those submissions in and getting the broadest label we can as quickly as possible.

John, regarding the ATU in France, it's a program that was open from the beginning of March until the end of October. We accrued roughly 4,000 patients in that program. The price for a 12-week supply was €25,500, and that's public.

Great. Thanks, John, for the questions. Can we go to the next one, Mike, please?

Oh, hey guys, just a couple of questions. One, on World Lung, we're obviously going to see the updated data from the Nivo/IPI Phase II that presumably informed the dose selection for Phase III. I was wondering, I realize you can't give us any data, but I was just wondering if we would see one-year overall survival data from the Phase III regimens. And if so, should we hold those data to the benchmark you provided for Nivo monotherapy, which you stated was 70% to 85% overall survival in the first-line setting? And second, given the deal activity out there this year, especially gobbling up some of these biotechs, is your strategy to generally do smaller deals, or do you feel that there's a valuation disconnect in the mid-cap biotech universe? I ask this because John Lechleiter over at Lilly actually stated on his earnings call that he thinks mid-cap biotech is in a bubble. Thank you.

Good morning, Mark. First of all, as you say, you'll be glad to hear—finally you will be hearing about the 012 data on the combination. These are the combinations, the regimens that we have taken forward into our trial, the 227 trial. We're excited about it. We've consulted with thought leaders, and they recommended we go forward with these. I'm not going to talk specifically about the regimens, but I'll say these are pretty large studies of large numbers of patients for an early study, approximately 50 per group. We have data on all patients up to about six months, but as you appreciate as these mature, some of them are further out and will continue to inform going forward. I'm afraid you'll have to wait for specifics until it's presented.

On business development, let me reiterate that our strategy does not change. We are indifferent concerning the size of the opportunities, but I will ask Charlie to comment further.

I would just say that, John, we have a lot of balance sheet flexibility to do deals of various sizes. I think our sweet spot, historically, has been in smaller type deals. I wouldn't necessarily say that that's all we look at. We look at a number of things. Regarding mid-cap biotech prices, if you look at how they've performed over the last several years compared to larger cap pharma or to the S&P, they've significantly outpaced. So there is significant valuation. I'd hate to call it a bubble because who knows how long this may last, but it is well outperformed the market.

Thanks, Mark, for questions. Can we go to next one, please, Mike?

Thanks. I have a couple of questions. First, as we think about the CheckMate – 012 data, Francis, can you just give us generally what features drove the recommendation internally and by your thought leaders to utilize this data set? Because I think we're all wondering how should we think about this, and how did it inform 227? In terms of response rate, survival duration, depth of response, what were the features that you think were differentiated? Separately, your comments on the data sets in combination with chemotherapy are helpful, but when might we see that data showing the diminishing of the durable responses over time? Finally, in terms of how uptake is occurring in the market today, what data can you share with us regarding the mix? So what percentage of Opdivo patients are melanoma patients? What percent are squamous lung and what percent are non-squamous? If I could just one final question: there was a second kidney cancer study that announced data and provided the data in their press release with regard to overall survival. How do you see Opdivo competing with that asset, Cabozantinib, in the public market? Thanks.

Seamus, why don't we start with your questions on 012 and lung broadly for Francis, and then we'll go to Opdivo uptake, and Murdo will give you some insights there.

Okay. So when we look at the data set, our focus is really on maintaining the kind of efficacy we've seen in the combination, but wanting to get as close in terms of tolerability to Nivolumab monotherapy. The first thing to look at will be tolerability. As far as efficacy is concerned, we've focused on durability of responses, overall survival, or one-year landmark survival. We have six months survival for all patients in this study, and it is maturing. It's about this therapeutic index both tolerability and efficacy. Regarding the chemo data, we've presented some of that. Obviously, as is important with these exploratory studies, the data matures and continues to become more informative with time. We don't have any plans to present yet, but obviously, sometime in the future, we will be doing that.

Seamus, we're really excited about what we're seeing in the market with Opdivo. The initial launch in melanoma was very strong. In second line, we are seeing that we are at parity with Keytruda in the community setting, and we are gaining good market share in the institutional setting. I will say in melanoma, we're also seeing some off-label usage since ASCO of PD-1 inhibitors in front-line, which has put some pressure on Yervoy, but Opdivo is seeing lift in a non-promoted setting there. In lung, we've had very rapid penetration of the squamous second-line market. We're getting about two-thirds of new patients there, and that happened very rapidly. Since the NCCN updated post-ASCO, we've also seen a nice uptick in lung overall. Clearly, that's another off-label indication, given that we're only promoting in squamous right now. I would say very soon we'll see lung eclipsing our melanoma business, and we'll see some nice growth out of Opdivo this year.

So it's early days, but the trends we are seeing are really encouraging. I should say that our launch in Germany is, as we mentioned before, off to a really strong start as well. It's still early there, but execution so far has been very strong.

Thanks, Seamus, for the questions. Mike, I think we have time for one more. We're at the bottom of the hour here.

Thanks. Just a couple quick ones. First, Giovanni, just so I'm clear on your theme of diversification which has been quite clear since you took over. It sounds like you think the portfolio will naturally diversify as it is now, combined with your pipeline and licensing efforts. Am I missing something? Are you suggesting that Bristol needs to do more of something to diversify faster than it already is? I just want to be clear on that. And my second question on Opdivo, I'm curious if any payers have tried to get you into a contracting environment yet with two similar therapies out there now, albeit with different data sets and others to come. Thanks.

Okay, let me comment quickly on the diversification issue. I think that when we look at our business, the period between now and 2020, the next five years, the growth, as I said, will clearly come disproportionately from the growth of Opdivo and the potential of Eliquis. Within Opdivo, there is a degree of diversification. Long term, as we think about a second cycle, we are thinking about our early pipeline generating opportunities that are more diversified for us within immune-oncology, as Francis mentioned; we have assets in the clinic; we're bringing six more assets into the clinic. There is an element of diversification already within immuno-oncology, but we also have exciting early programs in the other areas. It is a concept that does not require us to change our approach; in fact, what I mentioned at the beginning is important is that our business development strategy remains the same. Let me ask Murdo to provide some perspective on payers.

Thanks, Giovanni. Thanks, Gregg. We've been fortunate with the quality of data that have been generated behind Opdivo, the value that we've been able to establish for patients with metastatic melanoma and non-small cell lung cancer, and I think that's been recognized by payers. We've established very broad and very rapid access in the U.S. The breadth of indications that we hope will follow will also further strengthen our ability to weather any attempt that payers may have to restrict these agents, which is very difficult to do in the oncology area with drugs like Opdivo that benefit overall survival. We feel very good about our current access and our ability to sustain that going forward.

So thanks, everyone. Let me just close the call by saying again, we had a very strong quarter. We have good momentum with our long-term growth drivers, significant clinical progress, strong regulatory developments, very good commercial execution, and trends in the marketplace. We are making the right investments. It is clear to me that we are well on our way and entering an exciting period of growth for the company. So thanks, everyone, and have a good day.

Okay. Thanks, everybody. Mike, that's going to conclude the call. As always, if you have follow-ups, you can reach me or Randy or Bill later today or tomorrow. Thanks.