David Elkins
Executive Vice President and Chief Financial Officer at Bristol-Myers Squibb
Thank you, Chris, and good morning, everyone. I will begin with the highlights of our quarterly sales results on Slide 12. Let me start with a brief reminder that unless otherwise stated, all comparisons are made from the same period in 2023 and sales growth rates will be discussed on an underlying basis, which excludes the impact of foreign exchange. All references to our P&L are on a non-GAAP basis.
Our performance during the second quarter reflects focused execution across the business, including a 21% increase in our growth portfolio and a 3% growth in our legacy portfolio. The growth portfolio continued to increase as a proportion of our total sales and now represents about 46% of the business. Expenses during the quarter came in more favorable than expected, reflecting our focus on driving operational excellence and timing of spend, resulting in a slightly higher operating margin of roughly 40%. These results support our positive outlook for 2024 and our updated financial guidance. Second quarter sales performance across our key therapeutic areas reflect continued momentum for several important growth brands, including Reblozyl, Camzyos, Breyanzi and Opdualag. While we saw growth across our immunology business, we recognize there is still more work to do, particularly with Sotyktu in this highly competitive category. There are also some inventory and gross-to-net favorability across several growth brands this quarter, which will be important to take into consideration when phasing sales in the second half of the year.
Let's take a closer look at our key brand performance, starting with our oncology franchise on Slide 13. Opdivo remains an important product within our immuno-oncology business. Sequentially, global sales were up driven by demand and an estimated benefit of $65 million related to customer buying patterns in the U.S. We expect growth this year to be in the mid-single-digit range as core indications mature and we await additional regulatory actions, including FDA approval in the periadjuvant lung expected in October. And our I-O franchise is further strengthened with Opdualag, which delivered another quarter of double-digit growth driven primarily by higher demand. Outside the U.S., we see encouraging trends across several newly launched markets and remain focused on securing reimbursement. As we said previously, we are pursuing further development of Opdualag in a segment of first-line lung cancer, and we remain on track to initiate our Phase 3 registrational program later this year. These expansion opportunities, coupled with the pending approval of nivolumab subcu further support extension of our I-O franchise into the next decade.
In cardiovascular on Slide 14, Eliquis remains the market leader anticoagulant worldwide with global sales of more than $3 billion. In the U.S., sales were primarily driven by higher demand and market share gains. Sequentially, as is typical in the second quarter, U.S. sales reflect an unfavorable gross-to-net impact as patients begin to enter Medicare coverage gap. As a reminder, these dynamics are more acute in the second half of the year, resulting in lower sales versus the first half.
Turning to Camzyos, second quarter sales more than tripled compared to the prior year. Sequentially, U.S. sales were driven mainly by demand. U.S. demand in the second quarter was led by an increase of approximately 1,300 commercially dispensed patients since Q1, bringing the total to almost 6,900 patients on commercial drug. This growth demonstrates steady and consistent adoption. Outside the U.S., sales growth reflects the timing of reimbursement in approved markets. And globally, we see significant room for future growth.
Let's turn to hematology on Slide 15. Sales of Reblozyl in the quarter grew 82%, with growth in both U.S. and international markets. In the U.S., sales benefited from higher demand driven by first-line MDS-associated anemia and some favorable inventory and gross-to-nets. Outside the U.S., the brand is approved in approximately 40 countries, including recent broad label introductions in Europe and Japan. We look forward to seeing the first-line indication reimbursed across the globe. In cell therapy, we saw quarter-over-quarter sales growth with Abecma, driven largely by ex U.S. We continue to work through the competitive dynamics in multiple myeloma by discussing our KarMMa-3 data with customers. Breyanzi grew 55% in the quarter, which was driven by growth across multiple indications and expanded manufacturing capacity. International sales growth reflected strong demand in markets such as Germany, France and Japan.
Now moving to immunology on Slide 16. Performance of Sotyktu continued to be impacted by competitive environment and the quality of commercial access in the U.S. At the same time, during Q2, we achieved improved commercial access across multiple large PBMs with zero step edits. And starting earlier this month, we added another large PBM as we discussed last quarter. We now have greater than 60% of covered lives with favorable access. As a result, in the near term, we anticipate modest incremental gross-to-net pressure on revenue growth, which will be offset by demand growth over time.
Now turning to Slide 17, I will highlight some components of the P&L. In addition to solid commercial execution, our second quarter performance reflects a focus on financial discipline and steady progress against our $1.5 billion cost savings program we discussed on last quarter's call. As a reminder, we plan to reinvest the cost savings into higher growth opportunities to drive greater patient impact and accelerate our sales growth in the second half of the decade. Gross margin came in favorable this quarter, driven primarily by product mix. Operating expenses, excluding in-process R&D, were impacted by higher deal-related spend, partially offset by cost savings related to our efficiency initiatives and the timing of planned expenditures. On a sequential basis, expenses came in lower than anticipated due to timing of planned investment spend that shifted to the third quarter. Our tax rate in the quarter changed from 16.9% in the prior year to 14.1%, primarily due to a release of income tax reserve. Overall, earnings per share was $2.07 in the quarter.
Now moving to the balance sheet and capital allocation highlights on Slide 18. Both our growth and legacy portfolios delivered solid revenue growth in the quarter, with legacy continuing to contribute to our robust operating cash flow of approximately $2.3 billion. When we closed the quarter on June 30, we had approximately $7 billion in cash, cash equivalents and marketable debt securities on hand. During the second quarter, we reduced our total debt position by $3.1 billion, including roughly $2.7 billion of commercial paper and $400 million of long-term debt. These actions are consistent with our plan to pay down approximately $10 billion of debt over the next two years. In terms of capital allocation, we are prioritizing opportunities that will further strengthen our long-term growth outlook, while remaining committed to our dividend.
Please turn to Slide 19 to walk through the details of our guidance. On Q2 performance, focused execution across the business generated top line growth and driving operational excellence. These results provided support for updated full year guidance. As is our practice, we provide revenue guidance on a reported basis as well as on an underlying basis, which assumes currency remains consistent with prior year. Our guidance for the full year revenue is now low single-digit growth, which we now expect to come in at the upper end of the range. This is due to the continued performance of our growth portfolio and better-than-expected sales of Revlimid.
With respect to gross margin, we are raising our guidance to reflect the impact of sales mix. Excluding acquired in-process R&D, we continue to expect our total operating expenses to be at the upper end of low single-digit percentage increase range. This reflects incremental costs associated with the recent acquisitions, partially offset by the realization of savings due to our productivity initiative. Given the delay in timing of anticipated expenses in Q2, we now expect a step up in Q3. Overall, our previous operating margin target of at least 37% for the full year remains unchanged. For OI&E, we now expect annual expenses of approximately $50 million due to higher-than-anticipated estimated royalties and favorable net interest expense. The annual tax rate will be affected by one-time non-deductible expenses of Karuna acquired in-process R&D charge, which impacted our non-GAAP net income in the first quarter. Excluding this impact, the estimated underlying tax rate for the full year is still expected to be about 18%. As a result of these changes, we are raising the range of our 2024 non-GAAP EPS guidance to between $0.60 and $0.90.
Let's walk through the phasing of our sales for the full year. Year-to-date, our growth portfolio has grown approximately 16%, and we anticipate a similar rate of growth in the second half. In relation to phasing of product sales in the back half of the year, keep in mind the typical product seasonality we expect to see in the business in the third quarter. Also, we had roughly $150 million in stocking in the second quarter, and we anticipate reversing in the Q3. Normalization of these dynamics next quarter will likely temper sequential growth. However, as a result of these dynamics and the strength of our underlying business, we expect strong growth across the portfolio in the fourth quarter. And for Revlimid, while we continue to monitor variability from generics and other dynamics, we now expect full year sales to be at the higher end of our $4.5 billion to $5 billion sales range.
In closing, we have entered the second half of 2024 with sales momentum building in key brands and financial discipline driving a leaner and more agile organization. And as Chris said, we are excited about the long-term opportunity ahead of our emerging neuroscience platform, with the anticipated FDA approval of KarXT in September. We are committed to investing in high-growth areas, where we have competitive advantages to meet the needs of our patients.
And with that, I'll now turn the call over to Tim for Q&A.
