Bristol-Myers Squibb Company (BMY) — Q4 2017 Earnings Call Transcript

Thank you, and good morning, everybody. Thanks for joining us on a Monday morning. We have a lot of information to discuss today, both from our Q4 earnings, our 2018 outlook, as well as results from 227. We are going to read the slide deck today, which we normally don’t do. So, if you're on our distribution list, we have added about 15 minutes ago, the slides are also available on our website. With me this morning are Giovanni Caforio, our CEO; Tom Lynch, our Chief Scientific Officer; Charlie Bancroft, our Chief Financial Officer, and Murdo Gordon, our Chief Commercial Officer. Giovanni, Tom, and Charlie will have prepared remarks and then, as will be available for Q&A. On slide two is our Safe Harbor language, I’ll review it quickly. The presentation contains about the company's future plans and prospects that constitute forward-looking statements and 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 results of various important factors, including those discussed in the company's most recent annual report on Form 10-K and reports on 10-Q and Form 8-K. The documents are available on the SEC, our website, or the Investor Relations Group. Any forward-looking estimates represent our estimates as of the day and should not be relied upon as representing our estimates as of any subsequent date. While we never like to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. The presentation also contains certain non-GAAP financial measures, which are adjusted to include certain costs, expenses, gains or losses and other specified items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available on our website. Giovanni?

Thank you, John, good morning, everyone. We have a lot to discuss today, so let me share an overview of the call. As you have seen, we have made an exciting announcement this morning, on our Lung Cancer Program. We consider today’s results as a breakthrough in cancer research, and we are excited for what this means for patients and for the treatment of lung cancer. These results are a strong example of the innovation that is core to our strategy. Based on our understanding of this disease, we made bold and innovative changes to our program as the science evolved. Today’s results validate our approach. I am really proud of what our R&D organization has accomplished to advance the understanding of biomarkers in the treatment of lung cancer. Tom will walk you through the details in a few minutes. We also announced a very good quarter and strong performance overall in 2017, which Charlie will share in more detail. From my perspective, we are starting 2018 with good momentum in our business, and we see numerous opportunities in oncology and outside of oncology that we will be focusing on this year. As I started to discuss in San Francisco last month, looking beyond 2018, there are multiple growth drivers that position us well for the longer term. I’ll talk more about this a little later in the call. And with that, I’ll hand it over to Tom to discuss today’s announcement. Tom?

Thank you, Giovanni. If I could ask everyone to turn to slide six. Today we are excited to announce that Study 227 met the co-primary endpoint of improved progression-free survival for the Opdivo-Yervoy combination versus chemotherapy for patients with high tumor mutational burden, or TMB, regardless of PD-L1 expression. Remember that we're looking at both pathologies in CheckMate-227. As we also announced, the DMC has recommended that the trial continue to completion for overall survival in a PD-L1 selected population in Part 1A. While we planned to present the results in an upcoming medical meeting, what I can tell you now is that this PFS data is highly statistically significant and clinically meaningful. I strongly believe that this will make a difference for patients with advanced lung cancer. Let's just put this into context. When I first began seeing cancer patients 30 years ago, the only options were chemotherapy and radiation, both marginally effective and significantly toxic. Since then, lung cancer has become a group of related diseases defined by distinct biomarkers that have transformed biology and treatment. EGFR, ALK, ROS1, RET, and PD-L1, just to name a few. Today we add TMB to this list to define a subtype of patients who clearly benefit from combination immunotherapy treatment, regardless of their PD-L1 status. As I've consistently said, Bristol-Myers Squibb is a science-driven company. These results demonstrate the strength and importance of our translational capabilities and validate the innovative changes we made to the trial design in light of how quickly the science was evolving. Perhaps most importantly, the results today further validate the role of the CTLA-4 mechanism. Lung cancer is now the third tumor where we've shown benefit with the Opdivo-Yervoy combination in a randomized trial. We look forward to the overall survival analysis from 227 as the data matures in the TMB population.

Thank you, Tom. I want to reiterate that I am really proud of what our organization has accomplished. This is an important result for lung cancer patients and we are very excited by the opportunity ahead of us. Turning to slide 16 please. 2017 was a very strong year, thanks to strong superior commercial execution and good progress in our clinical programs. We are now entering 2018 with good trends and momentum in our business. Moving to slide 17. We are starting the year in a very strong position, with good top and bottom line growth in our business. There are a number of pillars in our business that can grow in 2018 and beyond, and I am really excited about the prospects. First, Eliquis is a very important and growing franchise for us. As we exit 2017, Eliquis is the leading NOAC in its approved indications, and it has tremendous opportunity to continue to grow. With Opdivo, the existing business going into 2018 has a strong momentum. We see continued strength across the current indications for Opdivo and beyond our excitement about the First-Line Lung results announced today. We have a number of opportunities this year that we are focused on, including adjuvant melanoma and the upcoming PDUFA for First-Line renal, with study 214. With today’s results, I am even more confident that we will play a meaningful role in first-line lung cancer, and I am looking forward to continuing data readouts later this year and into next year that will build on today’s announcements. Thinking beyond 2018, we see a sustained trajectory of growth, driven by important opportunities for Eliquis and Opdivo. So, let me remind you of what those are. I previously mentioned renal cancer as part of our growth in 2018, and it also plays a role beyond this year in what we see as a significant opportunity for Opdivo. It's an area where we started to make a difference in second-line and see significant growth potential in first-line now, based on study 214. With the first-line indication, Opdivo will have a presence across the continuum of care in renal cancer. Two other areas, with a billion dollar plus potential, where we are focused, are gastric cancer and HCC. Diseases with high unmet need and poor outcomes. Based on what we have seen from Phase 1 and 2 data on Opdivo in these tumors, and anticipating data readouts from our Phase 3 program this year and next year, we believe these are important areas driving growth in the near and medium term. In addition, we have important opportunities in small-cell lung cancer later this year and head and neck in 2019. Finally, our emerging pipeline across all therapeutic areas is one of the most promising in our history, with several opportunities contributing to sustained growth. We are excited with several programs moving forward, such as IDO and LAG-3 in oncology and from our non-oncology pipeline, where we'll see FGF21 and TYK-2 moving to the next stage of development this year. All of what I just described gives me confidence in our future and in our ability to continue to deliver on our strategy. The significant opportunities are ahead of us and require to ensure the right level of investment behind R&D and certain commercial capabilities, and we are doing just that. Turning to slide 18 please. A year ago, I spoke about the work we were doing to evolve our operating model. And today, I'm pleased to say we are delivering across the company, with a disciplined approach to resource allocation. We are creating a better company that moves fast and is more competitive. We are strengthening our capabilities, particularly in translational medicine, and we are investing in our pipeline and commercial capabilities to support future growth. These will continue to be critical focus going forward. With that, I'll hand it over to Charlie Bancroft, who will discuss some specifics on the quarter and how we are thinking about our financials.

Thank you, Giovanni and Tom, for your very exciting comments. Let me start by saying we delivered a very good 2017 with robust revenue and earnings growth, driven by strong execution across the company. Moving to slide 20. While total revenues grew 7% for the year, our prioritized brands were up 27%, as Giovanni just highlighted. The exceptional product performance on key brands drove the EPS growth. With that, I'll provide some color on the strong trends we are seeing with Opdivo. It was another solid quarter for our Opdivo franchise. We delivered $1.4 billion of worldwide revenue and almost $5 billion in sales on a full-year basis. Similar to previous quarters, we were successful in maintaining our leading share in the second line lung and saw strong performance in other tumors such as renal cell. While the trends are early, Opdivo has rapidly penetrated the second line HCC market, and we are seeing good uptake of Opdivo in the adjuvant melanoma setting. Outside the U.S., Opdivo continues to lead in key markets such as Germany, France, and Japan. Excluding the sales deferral impacting Q4 of 2016, international sales of Opdivo were up over 64% in the quarter. With these strong Opdivo trends and today's announcement, we see meaningful opportunities for growth in both the near and medium term. Turning to Yervoy, we are seeing pressure on U.S. sales due to the adoption of Opdivo in the adjuvant melanoma setting. Going forward, we expect these trends to stabilize and our outlook remains positive with the potential launches in the first line renal cell and first line lung. From the franchise perspective, we expect the growth of Opdivo in adjuvant melanoma to more than offset the erosion of Yervoy. Our strong commercial execution across the portfolio also resulted in substantial growth for Eliquis in the quarter. In the U.S., Eliquis extended its leadership position with almost 50% TRx share of the NOAC market. Internationally, we are seeing similar trends and strong brand momentum in leading new-to-brand share in top European markets. With this performance in mind, we believe Eliquis is well positioned for a period of sustained growth going forward. Now turning to slide 21 and our non-GAAP P&L. I’ll start with our gross margin which continues to be strongly influenced by product mix. The strong growth of Eliquis and declining virology franchise erode most of the pressure on our margin in the quarter. Moving to OpEx and building on Giovanni’s comments about resource allocation, the increased investment in R&D during 2017 while prioritizing spend in MS&A. This was enabled by our ongoing operating model evolution that we will continue to execute going forward. With respect to our tax rate, the favorability in the quarter was primarily driven by earnings mix. And thinking longer term and taking into account tax reform, we expect our tax rate to be in the high teens within the coming years. With tax reform in mind, turning to slide 22, we see no change to our balanced approach to capital allocation. Business development remains a top priority for us, and 2017 was a very active year in which we executed over 50 transactions. We expanded our translational capabilities, we licensed new assets and technologies, and we entered several late-stage clinical collaborations. The ISM acquisition, our partnership with Foundation Medicine, and our new relationship with Halazyme are a few important examples of transactions we executed last year. We also remain committed to our dividend; 2018 marks a ninth consecutive annual increase. With respect to repurchase, we bought back $250 million in the quarter and nearly $2.5 billion for the year. Taking together, we returned over $5 billion to shareholders in 2017. Turning to slide 23 for additional color around 2018 guidance. Our full year and non-GAAP EPS guidance represent strong growth over 2017 in spite of the roughly $200 million impact from the change in accounting rules affecting how certain royalties are recorded. On gross margin, we expect additional pressure to be driven by the continued growth of Eliquis and erosion of virology to be somewhat offset by the growth of Opdivo. Our approach on OpEx reflects the continued prioritization in R&D while we drive efficiencies in MS&A. In conjunction with today’s announcement, our guidance includes investments supporting the educational efforts to commercialize TMB. A quick note on OI&E, we have restructured a portion of our future AV royalty rights and therefore will receive higher royalties in 2018 and 2019. Our tax rate of 20 to 21% takes into account tax reform and as I mentioned, the potential for further favorability over the next few years. In conclusion, we have a very solid 2017 with strong execution across the board. We are well positioned to grow in 2018 and today’s announcement increases our conviction in the growth outlook for the company. I’ll now turn it back to John for Q&A.

Thanks, Charlie, and I think we’re ready to go to the Q&A session. So as a reminder, we have Giovanni as well as Murdo here for any of your questions. Go ahead, please.

Seamus, we can’t hear you.

Good morning, thank you very much for taking the questions and congratulations on the results. I am just curious, why is overall survival not being evaluated based on TMB as well? We know from CheckMate-26 that Opdivo monotherapy showed very encouraging results in this setting. How come Opdivo monotherapy is also not being included in the TMB analysis? Thank you very much.

Alex, thank you. I’ll take both of these questions. Let me just take the second one; I can address it probably quicker than I will talk a little bit about the endpoints in the first one. So, just to remind everybody, what we are reporting today are the two co-primary endpoints, so we are reporting the PFS in the combination therapy, which is a co-primary endpoint in the TMB high group, and there we’re reporting the fact that the second co-primary endpoint, which is the test for overall survival in the PD-L1 group, is continuing for maturity. We have not seen any overall survival data; I think that’s very important to mention. So we have not seen any overall survival data. The second thing to say is we are not going to be reporting any secondary endpoints on the call. The data is very fresh to us, and we look forward to reporting those at important medical meetings, and we also look forward to publishing that as soon as we possibly can. Let me just say a few things about endpoints and trials. A couple of things: as a physician, we think that PFS and overall survival are both important endpoints; physicians use both endpoints to be able to make decisions. I’ll also say that when you have PFS, particularly in a very large, well-powered trial, you are able to get a very good sense of potential benefit, and that does predict good benefits for patients. We are very encouraged by the PFS data we see in the TMB population.

Okay, great! Sorry, there was some problem with my phone system here. Well, first of all, I just want to echo the sentiment on the Eagles, from what you said in Boston; it was a unique event, so thanks for that comment there, Charlie. Second, in terms of the difference in the study design. Congratulations on the creative change to incorporate TMB. Just hoping you could give us a little bit of color on whether or not you guys have a relatively complete understanding of the benefits of the combination over Opdivo monotherapy? I know that you did comment a little bit on that on the margin, but does the clinical significance apply more to TMB and the analysis therein, or to the combination of Opdivo plus Yervoy? And then secondarily, as we think about the longer-term opportunities, Giovanni, just hoping you could give us a little bit of color on how you’re feeling about the Opdivo plus Yervoy combination as a continuous treatment, given some of the safety concerns, or at least the safety information that we’re seeing out there? Again, the significance I think is clear, but we're just trying to get a better sense of directionally how confident you are that the Opdivo plus Yervoy regimen, particularly as a continuous combination therapy after six-week treatment cycles, is something that you think is going to really work its way into the lung cancer regimen over time? Thanks.

I've got to say, as a Patriots fan, die-hard Patriots in the sea of Eagles fans here, it's been a rough morning. If we didn't have 227 reports, I don't think I would have gotten through it. So let me just address a couple of your points here that I think are well crafted and are important. The first thing I'll say is that I feel very confident that this is both a TMB story and an Opdivo-Yervoy story, and I think both are important. Because first, understanding the biology and selecting the patients who are going to benefit most, TMB looks like a very powerful biomarker. As I mentioned, we're looking at it across our spectrum of IO agents, including our next-gen agents. The second point comes down to the contribution of components and how important Yervoy is? For me, I have felt for some time that Yervoy is performing extremely well in a number of different settings. Remember, there is benefit in melanoma, benefit in renal cell cancer, and now benefit in this case, in non-small cell lung cancer. What I can tell you is that our analysis of the data thus far makes us very confident that Yervoy is a big part of what we're seeing today. It's not just Opdivo, but Yervoy is a part of this as well. I want to mention, as you said, it’s low dose Yervoy that's given every six weeks and has that advantage of being well tolerated by patients as we move forward. So I think that it's not just TMB or the combo; it really is a story about both, and I'll turn it over to Giovanni for his thoughts.

So, I just had a couple of comments. First of all, I want to strengthen again, reinforce what Tom was saying about the importance of the combination of Opdivo and Yervoy. This is the third tumor type in which we have seen data that makes us really excited about the potential of this combination: melanoma, renal, and now non-small cell lung cancer. The second thing that I want to say is that I'm quite proud of the work we’ve done in optimizing the regimen. I think that's really important—the dose and schedule of Yervoy as part of the combination are really important. Based on the totality of the data that we have seen so far, our confidence in our broad lung cancer program has only increased. I think that’s important because in parallel, it also strengthens the overall growth outlook for the company. So obviously it starts with patients, but I think this is a really important time for the company overall as well.

Thank you. Just a couple of questions. Maybe please first if you can address the commercial implications of TMB. I'm just curious what payers, KOLs, and doctors are saying about TMB. I know this is new and exciting but how typical is this in their practice? If you could talk about the size of the frontline lung market affected by patients with high TMB, your press release said that 45% of patients expect high TMB, but is that 45% of the total market, or is that 45% of a share of the market? I ask because when we look back at CheckMate-26, I think you evaluated 60% of the population. So, if you could put that into perspective. And then just lastly, maybe for you, Tom, how confident are you now in hitting overall survival and for part 1A of the study? Did I hear you right? I think earlier you said that you would also look at OS and TMB, although I wasn’t clear. Lastly, is this a highly registrational trial? Thanks very much and congratulations.

Thanks, Jami. First of all, I’m also excited that we were able to announce what we’ve been able to do today. Clearly, following the science and looking at tumor mutational burden as a biomarker has been the right scientific approach in first line lung cancer. Congratulations to Tom and his team for being able to deliver on that. We are also commercially and medically very excited about TMB. It appears to be a highly predictive biomarker. As you know, the Foundation 1 test was recently FDA approved. In parallel to that FDA approval, they are pursuing a national coverage determination for CMS Medicare coverage and reimbursement of that test upon indication as companion diagnostics. We are very excited about that. In terms of the size of the front-line lung cancer population, clearly you know the design of 227—we designed this trial to exclude ALK- and EGFR-positive patients. So, the 45% number applies to the TMB patients that were tested in the trial. I think you alluded to the ascertainment rate—while it was 60% in the trial, we have a lot of confidence that that will rise with improvements to methodologies, pathology techniques, as well as surgical techniques. We’re hopeful that this will improve over time. I would say that we’re very ready for this; the team at Bristol-Myers Squibb has been focused on the translational side but also on helping educate physicians. I would say in the academic centers, there is a high degree of awareness of TMB, and there is already quite substantial testing today. I would say it gets much lower than that when you go out into community oncology, and that’s where we’re focusing a lot of our educational and continuing research efforts. We have an ongoing safety clinical trial in first line lung cancer looking at patients with Opdivo and low dose Yervoy being treated after having their TMB accessed. That’s being conducted through our I-O icon network; we have a great partnership with a large network in community oncology, so it will help to be able to generate data and describe the safety profile of the drug on a much larger community base population. And then, of course, as we pursue regulatory approval, the commercial organization will be ready to focus on a number of different important audiences inclusive of the ones you mentioned. Lastly, I would say from a payer perspective, this is a very positive event. Both clinicians and payers have been looking for a better way to segment the first line lung cancer market, and I think with the advent of the exciting information that we have, we hope will be presented, as Tom said, at an upcoming Scientific Congress and published thereafter. We hope that we will be able to go to payers in the U.S. and around the world and say this is a patient population that discretely benefits from low dose Yervoy plus Opdivo. So, we are very excited about that commercial ramp. Thanks.

I mean just echo something that Giovanni said: when you have a dataset like this, which is highly statistically significant, and most importantly, probably more importantly, clinically meaningful, I think that does increase our confidence in a number of different elements of our entire lung cancer program. Not just study 227 remember, we have got study 9LA, which is coming after this via part 2, which will only be chemo combo, and then we have our IDO studies, so I think that’s an important finding today. I think the second thing you asked is about whether we were looking at OS and TMB. As I mentioned earlier, we will be looking at overall survival and TMB as you know, that’s event driven, and we look forward to seeing that data when the required number events occur at that point. Your final question was: do we look at this data as registrational? I think as we said earlier, we are eager to share this information with regulators in the United States and in the EU because we believe this is going to make a big difference for doctors and for patients.

Thank you and congratulations. Three questions please. Obviously, we are operating in the dark, so we haven’t seen the 189 or 227 or the mono data from GT-7, but with that in mind, three questions. Number one, is it going to be the enemy of the great care? What I mean by that is the low friction associated with Keytruda chemo problematic in persuading clinicians to adopt the more expensive and arguably more toxic therapy which requires educational support? And then along the same lines of that, in terms of friction, you mentioned the need for continued education, but also there is a 12-day turnaround for TMB. To what extent can that be addressed, and how quickly can we migrate to the liquid TMB assets here? The last question is in terms of cutoff, which picked up on one of Tom's points about the relevance of TMB to identify patient populations and other indications. Do you have a firm sense that this cutoff is transferred across indications exactly, which is much apparent decision and anything driven by science in terms of identifiable number? There is that consistency here or is it going to be around the indication-by-indication basis? Many thanks and congratulations again.

Charlie, why don't you start with commercial and then Tom can go?

Yeah, thanks Andrew. I think the way I would approach my view of the first line lung cancer market is, we've known for a while that PD-L1 expression has been a perfect biomarker in being able to stratify and select patients. Now with this very large dataset, we've been able to establish the value of a high predictive biomarker in TMB. We have a compelling profile of Opdivo plus low dose Yervoy as a result. I think that really is an opportunity for us to redefine the way in which clinicians, payers, and patients think about first line lung cancer. I think there will still be a role for PD-L1 expression to play to understand where other options and other treatment modalities should be used. I think the compelling nature of these data and the predictive nature of TMB will allow us to establish a very good presence in the market. I would also say that the partnership with Foundation Medicine has been a good one for us. We're working very closely with them to understand the logistics of how TMB testing and patterns of testing are currently occurring. I would say that academic centers are doing very well in turnaround time and tissue ascertainment. I think that will propagate into the community. It will take some time, and obviously when physicians see a very compelling clinical profile, I think that is likely to lead to an acceleration in testing and an improvement in turnaround times. Our hope is that we would establish testing for TMB as a panel type of test as a test that occurs early in the diagnosis of a patient, so it is available to the primary treating physician early in that treatment decision-making process. That’s our goal going forward. So, the turnaround time today will hopefully not be an impediment as we go forward. For the liquid biopsy question, I'll turn it back to Tom.

I think one of the things that I would start off by saying is that I'm incredibly proud of our translational capability, as Giovanni mentioned in his remarks and how we approach this. Let me give you a little sense of how we got to a cutoff of 10 for TMB. What we gave as we looked at a number of studies that we have done in lung cancer. We looked to study 12, study 568, we looked at study 26. We looked at different cut points of the tumor mutational burden that were able to best segregate outcomes and to get the best responders and better benefits than others. We arrived at a cut-point of 10. Now I have to stress, this is very early in the understanding of this biomarker. This is the first important report of it applied to a randomized trial. This analysis itself was a prospective analysis, and I think that’s important to keep in mind. You have to think about other biomarkers. Look at how we understand how to use receptant in patients with breast cancer— is it two-plus or is it three-plus? It became clear that amplification was the key issue, so it really is early in the process. While I think the data I've seen that 10 is going to be the number, I hope 10 is going to be the number forever, can I promise you that someday we're not going to find out that the number should really be 8 or 12? As other companies and other investigators look at this in their datasets, will we learn more? Absolutely, and I remain open to collaborating across investigators in that respect. The second thing about the test that’s important is this is a highly validated test. The number might be something with time that might get adjusted on an indication-by-indication basis. The test itself is solid, and we feel very good about that. That brings us to the last question we were asked: when do we think blood-based assays will come in? There is great promise for blood-based assays, and I think that will make this process much easier for patients. On the other hand, we don’t quite have it yet; we’re close. Again, we look forward to working with a number of diagnostic companies to improve how we can create better ways of looking at TMB.

Great, thanks very much for the questions and congrats on the data. Just the question on this TMB data set and the competitive landscape in frontline. When you consider the other data sets from these all-comer chemo combo data sets out there, what sort of hurdle do you consider as you think about the commercial opportunity here? Do we need to see improved hazard ratios in this TMB population relative to some of those overall competitor data sets for chemo combo data sets that you talked about, or do you think it's really a debate of some physicians preferring IO-IO versus IO-chemo? Just trying to get a little bit of sense of how you’re thinking about that. My second question was just clarifying your earlier comments on filing. Do you think there is a potential pathway to file this data earlier than the late 2018 or 2019 read-out from the OS arm of the study? I’m sure you understand a little bit on the filing dynamics there. Thanks so much.

Let me start, and then I’ll ask Murdo and Tom to jump in. So first of all, the progression-free survival was the core primary endpoint of this study, and so given the strength of the data, as Tom mentioned, we will discuss that with regulatory authorities. That was the core primary endpoint of the trial, and in the TMB part of the study, the data is mature and ready. With respect to your question about competitiveness, I think what’s important here, obviously, Tom has said many times, and we believe that lung cancer is a very heterogeneous disease; it is a very broad set of diseases. In fact, you know, 30% of it is treated by physicians in the academic and hospital setting; up to 70% is done in the community. It's obvious that, depending on competitive data sets and our data, there will always be physician preferences in patient profiles that may indicate different treatment options. But the important factor is the ability to identify a patient population that has potential to respond to the treatment strategy with the regimen of Opdivo plus Yervoy. What’s also important is the ability to identify patients that are unlikely to respond, and both are really critical. I think the biomarker here is very important, as it identifies the population of patients that should be treated in our mind, based on the data, with Opdivo plus Yervoy, and it also helps to define which patients may benefit from a different treatment strategy. It is clear that for patients with low TMB, going for a combination of immuno-oncology agents may not be the right strategy. There is clearly room in this market for most evolved treatment strategies, but the data is very compelling.

Thanks Giovanni; I would also echo the way the market is right now. There is a lot of questions on the mind of treating physicians on what to do in lower PD-L1 expressing patients in terms of treatment options available. We know what the PD-L1-21 G-set dataset is; we haven’t, as you mentioned, seen the 189 datasets, but there are still patients in the market who have low PD-L1 expression levels who are not receiving immunotherapy options. With the TMB biomarker, we are able to look across all PD-1 expression, in rich for a population with TMB, and we are able to demonstrate a benefit in PFS with Opdivo plus low-dose Yervoy, which I think is a very compelling treatment option for clinicians going forward. The combination of PD-L1 and TMB markers can also be, as Giovanni said, a very useful way to select patients who need immune checkpoint inhibition. Given the broad program that we have with 227 and other clinical trials that Thomas described, we will be able to answer many of those questions going forward. I am excited about that; I think that over the next year and a half to two years, we will be able to help physicians out there understand exactly when and where to use which treatment option, and I am also pleased that we are developing all of those treatment options within our portfolio.

Now I just think I echo both of those comments. One of those two comments, again, I think I look at this as data that we eagerly look forward to sharing with regulatory agencies, and I think that answers your question about how we are going to proceed.

Great. Thanks very much for taking my questions. Just two more on 227. So, just following up on prior comments. Solid, very positive comments and data on TMB and PFS. I'm still wondering why you've decided to stick with PD-L1 as the driver for the OS analysis for Part 1. Why did you not change that to be TMB? I know you can't talk about that endpoint now, but maybe you can clarify why the decision was made in that way. Second, you mentioned Part 1B is now finished, and I'm curious as to why that is not continuing to clinical OS data. Why are we stopping that one? Was there something that you found in the interim analysis, or was that always the plan to not look for OS benefit in that population?

Vamil, thank you for your questions. I'd say a couple of things to answer them. The first question is, Part 1B is finished because we used patients from Part 1B that were PD-L1 negative, but high TMB in the TMB analysis. The second thing is that we then designed Part 2, which is testing the Opdivo chemotherapy question across a broad group of patients, regardless of their PD-L1 status. I think your question on the first part of your question on overall survival for TMB versus overall survival in the PD-L1 reflected patient population. Because this study is so large, that’s one of the things, again, people asked earlier how do we change it and why do we change it. We wanted to have optionality to look at a couple of important questions and value reporting PFS on this; we just haven’t seen the OS data for TMB, and so it's entirely that we will see OS data from TMB. We look forward to seeing that data, but we have just not seen that data at this point; we’re waiting for that data set to mature. At the same time, we have this preserved ability to look at overall survival in a PD-L1 population, and I think those are really important points to convey. Part 1B was the smallest of all three parts of study 227 and part-2 has almost 750 patients. If you’re wondering about the chemotherapy question with Opdivo, that will be answered in part-2 of our study.

Yes, couple. First of all, I just want to try and understand. Remind us about O26 and when you describe that you hit on PFS but not on OS. Why in this case do you feel confident that what are the key differences so that we can have more confidence that you’ll hit on OS finals year? The second question, each quarter you guys are pretty good about giving us Opdivo sales and the breakdown of where it comes from. So, if you could do that for the quarter, that will be helpful. Then third, you mentioned FGF; I know we’ve been waiting. Did you actually talk to the FDA? Have you signed off on Phase 3? When will you begin, and what should we be looking for as endpoints there? Thanks.

So, Mark, let me start with the FGF-21. As you know, we had discussed that we were in conversation with the FDA to start the next phase of development for FGF-21. One of the veins we discussed with the FDA was the fact that we had not included a post-treatment biopsy of different doses, so we’ve decided to go ahead with the study that we’ll be looking at post-treatment biopsies before we move into a large phase-3 study, and that study is starting right now.

To quickly address the question on the O26, I assume you’re talking about the O26 retrospective look that we presented at ACR last year that showed a PFS; I think you separate that by PFS based on TMB in that setting. There is a lot of crossover, remember, in O26, and it was again used to generate hypothesis-generating data. It was not a predefined, pre-specified prospective analysis like 227 was.

For Opdivo sales by major tumor type, I'll give you U.S. numbers and can give you a worldwide after that. We currently enjoy roughly 44 to 50% of our business from lung—that’s all lungs because we continue to get a bit of off-label first line lung cancer usage, particularly in squamous. In renal, about 18 to 22%; head and neck around 5 to 10%; melanoma, 14 to 20%; and then kind of all others, you should think of this probably as an early update in leading indications because of the approvals now in HCC and adjuvant melanoma. We've got about 9 to 15% there, and the reason I give ranges is it's very hard, obviously, to get specific point estimates by tumor types. I’ll just give you the lung number. When you go worldwide, that claims to between 50 and 60%, and that’s because of the strength we have in ex-U.S. markets in lung cancer, due to the leading position we have established through earlier access approval, particularly strengths in markets like Japan and France. So, it’s very strong performance in lung outside the U.S.

Certainly, last question coming from Jason Gerberry from Bank of America, Merrill Lynch. Please go ahead, your line is now open.

So just one quick regulatory question on 227. So, is the thought that you would need in TMB high favorable OS as a secondary endpoint to gain full approval? The European approval or would the co-primary endpoints in different sub-populations be registration enabled? I just wanted to clarify that in light of Merck’s comment earlier in their 3Q about needing OS to drive approval in the target population they are going after. Then just one other question. Can you provide the proportion of how prevalent TMB high is in PD-L1 negative patients? Thanks.

Jason, let me just maybe answer that question. We are not going to comment more on our regulatory interactions, but I just want to stress that the TMB part of the study met its primary endpoint, and the primary endpoint is progression-free survival in that study. We look forward to discussing that with the regulatory authorities around the world. Thomas said earlier that we have just received the topline data; there are a significant number of secondary analyses that we will be conducting, and we look forward to presenting that data together with other analyses at a future meeting. Obviously, as we have mentioned, the study looked at TMB regardless of PD-L1 expression, and so it included patients across the full spectrum of PD-L1. So, let me just close and thank everybody for participating in the call. In closing, I would like to reaffirm my enthusiasm for the results we have shared with you today and during my career, I have many, many years in oncology. I can't remember a time in which cancer research was advancing at the speed that we are experiencing today, and I am very proud that we are at Bristol-Myers Squibb at the forefront of incredible scientific advances. We had a great year in 2017, and I am very confident in the multiple opportunities that we are pursuing to build a strong future for the company in 2018 and beyond. Thank you.