Bristol-Myers Squibb Q3 2023 Earnings Call Transcript

Presentation

[Operator]

Hello and welcome to the Bristol-Myers Squibb Third Quarter 2023 Earnings Conference Call. [Operator Instructions].

I will now turn the conference over to Tim Power, Vice President of Investor Relations. Please go ahead.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thank you, and good morning, everyone. Thank you for joining us this morning for our Third Quarter 2023 Earnings Call. Joining me this morning with prepared remarks are Giovanni Caforio, our Board Chair and Chief Executive Officer; Chris Boerner, our Chief Operating Officer and CEO designate; and David Elkins, our Chief Financial Officer. Also participating in today's call are Adam Lenkowsky, our Chief Commercialization Officer and Samit Hirawat, our Chief Medical Officer and Head of Global Drug Development.

As you'll note, we've posted slides to bms.com that you can use to follow along with for Giovanni, Chris and David's remarks. Before we get started, I will read our forward-looking statement. During this call, we'll 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 important 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 future date. We specifically disclaim any obligation to update forward-looking statements even if our estimates change. We'll also focus our comments on our non-GAAP financial measures, which are adjusted to exclude certain specified items. Reconciliations of certain non-GAAP financial measures to the most comparable GAAP measures are available at bms.com.

With that, I'll hand it over to Giovanni.

[Giovanni Caforio, Board Chair and Chief Executive Officer at Bristol-Myers Squibb]

Thank you, Tim, and good morning everyone. Q3 was a solid quarter for the company. We delivered sales growth for our inline and new product portfolios and continued to advance the renewal of our business delivered important clinical and regulatory milestones and further strengthened the long-term prospects of the company through the planned acquisition of Mirati. On my 49th and last quarterly earnings call, I am proud of where Bristol-Myers Squibb is today. We have built a highly-diversified business. The strength of our inline products and the potential of the launch portfolio gives us confidence in the ability to navigate the Revlimid Alloy through 2025. The focus is clearly on the second half of the decade. We continue to strengthen our position thanks to a growing registrational stage pipeline and the ability to source external innovation through business development.

Our R&D Day highlighted the breadth and depth of our research efforts, which provide us with confidence in the long term sustainable growth of the business. It has been an honor and privilege to work alongside my talented and dedicated colleagues at BMS over the past 23 years and to help grow this company into the industry leader it is today. You all know, Chris, very well and I am sure you will share my confidence in him as a leader. I'm excited to see the company's continued progress in delivering against our critical patient-centric mission. My sincerest gratitude goes out to all our employees for the work they have done and will do to enable BMS to improve outcomes for millions of patients around the world.

With that, I'd like to turn it over to Chris to talk more about the quarter.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Thank you, Giovanni. Before I dive in on a more personal note, I want to recognize Giovanni for his tremendous impact on the organization. He has consistently focused on ensuring that we are strengthening our company while delivering for patients and I wish him every success in his next chapter.

Let's start with our third quarter overview on slide 5. As Giovanni said, we delivered continued top-line growth for the inline and new product portfolio during Q3. We also advanced our pipeline and announced an important business development transaction with the planned acquisition of Mirati. You'll have seen that we are increasing our non-GAAP EPS guidance for the year. We also updated our target for our new products to grow to more than $10 billion in 2026 and for our operating margin to be above 37%, while reaffirming our other 2020 to 2025 guidance. I will give you more color on our outlook in a moment. So let me step-back and provide some context.

Let's turn to slide 6. As I told you last month at our R&D Day, my objective as incoming CEO is to continue to position our company for sustainable long-term growth. Three levers, I outlined there, were commercial execution, R&D leadership and strategic business development. I'd like to take a minute to tell you where we are on each of these starting with commercial execution on Slide 7. David will provide more details in his remarks about our commercial results but let me describe how I think about our performance and outlook.

Let's start with our key in-line products where we are seeing good growth. Eliquis demand growth in the US is strong with continued opportunities for growth going-forward. Consistent with previous years, revenues in Q3 were impacted by gross-to-net adjustments. We expect these to normalize through Q4 as we've seen in previous years. Opdivo continue to see good demand growth in Q3. Importantly, we've delivered a number of important future growth drivers with new data and approvals during the quarter that I will describe momentarily. David will provide highlights for the remainder of the in-line and new portfolio.

Turning to the new product portfolio. Overall, our new products continue to perform well providing confidence in the portfolio's growth potential and ability to diversify our business over the long term. I would characterize the performance of these products in three categories. First, we are seeing strong performance for a number of products including Reblozyl, Opdualag and Breyanzi. Specifically for Reblozyl, we're seeing strong growth with a broad label for commands. As Adam can discuss further, we're seeing encouraging trends in both first-line and second-line. We are also very pleased to see that the NCCN guidelines recognize the importance of Reblozyl as an important treatment in first-line MDS for both RS positive and RS negative patients. For Opdualag growth was also robust for the quarter and the product is on the path to become the new standard-of-care in first-line melanoma. This product has considerable growth opportunity remaining in its existing indication and we are continuing to study its potential in future indications with Samit can speak to. Breyanzi performance was strong for the quarter and we expect strengthening performance for this product heading into 2024 as manufacturing performance and supply continue to improve.

Second, there are a couple of products notably Camzyos and Sotyktu where performance is strong, the growth has been slower than expected. For Camzyos, we continue to see steady increases in using all feedback metrics from customers and patients continue to be very strong. At the same time getting getting cardiovascular accounts onboarded and the pace of getting patients onto therapy as patients may see their cardiologists only one to two times per year has resulted in a longer adoption curve. As we have shared, we expect consistent and steady growth akin to a cardiovascular launch for this important product and we remain confident in our long-term projections. For Sotyktu, the profile continues to be strong and we're seeing nice increases in share. Access continues to be the main constraint for this brand, and why we will see broad and meaningful access to improvements in 2024 getting to zero step edits will take a bit longer than anticipated for some key plans given emerging payer dynamics in the immunology market. Importantly, for both of these products, our peak expectations remain unchanged, but the time to peak will shift.

Finally, I would highlight Abecma and Zeposia where performances lagged expectations. For Abecma, in-class competition in dynamics was BioSpecifics in late-line multiple myeloma have impacted performance. At the same time, real-world data generated by consortium of KOLs demonstrates that our efficacy, safety and reliability are quite competitive. This has been further strengthened by recent data in triple class refractory patients who receive bridging therapy presented at the IMS Conference. Our focus will be on ensuring our teams are fully leveraging this breadth of data to effectively reinforce the profile of this important treatment.

For Zeposia, performance remained strong in MS and UC access has been a constraint that will require continued focus to unlock future growth. Again, Adam can provide additional context. Taken together, we now expect sales from this portfolio to be $3.5 billion in 2023, this is slightly lower than we had expected at the start of this year. Looking-forward, we see continued growth. In the medium term, we do expect to achieve greater than $10 billion in sales for this portfolio in 2026 rather than 2025. The commercial team is laser-focused on building on the momentum, our performance in the quarter, and importantly accelerating performance where necessary. We are also further increasing our investment behind selected brands to ensure performance accelerates. Finally. I would highlight that our new product portfolio will expand this quarter with the addition of Repotrectinib next month and upon completion of the Mirati transaction Krazati.

Turning now to our R&D engine on slide 8. As I mentioned the last month we have exciting opportunities to strengthen our pipeline and deliver more important medicines to patients across therapeutic areas, including expanding our registrational pipeline from 6 to 12 assets over the next 18 months. Since our R&D Day, we continued to make progress. In Oncology for Opdivo, we delivered several growth drivers including U.S. approval in stage II adjuvant melanoma. Presentation of positive data for peri-adjuvant lung with CheckMate-77T and for first-line bladder cancer with CheckMate-901, and importantly we've met the co-primary endpoints for the subcutaneous Nivolumab trial CheckMate-67T. This has the potential to open a regulatory approval in indications that constitute approximately 65% to 75% of today's Opdivo business in the U.S. and extend franchise durability into the 20s, 30s. You may have also seen that Mirati presented encouraging PD-1 combination data in first-line lung cancer at ESMO. These data further strengthened our conviction in the potential of Krazati and the value it will add to our oncology portfolio.

In immunology, our LPA-1 inhibitor has now been granted breakthrough therapy designation in progressive pulmonary fibrosis by the FDA. This builds on the previously granted Fast Track designation from FDA for the idiopathic pulmonary fibrosis indication. These actions reinforce the potential importance of this asset in these diseases with high unmet medical need and importantly our CD19 NEXT T-Cell therapy is making progress. We have started dosing patients in our lupus study and today I can disclose that we have now achieved clearance from the FDA to begin our MS trial. These are important milestones that illustrate our strategy of rapidly advancing cell therapies into immunologic diseases and becoming leaders in this space. And we are moving forward with other assets in our pipeline. You can expect to hear more about our Hematology assets at ASH later this year and about ARLDD at a medical conference early next year.

Turning to business development a key priority for capital allocation on slide 9. As you know, BD has been a key component of our strategy to supplement our internal innovation. Our recently-announced planned Mirati acquisition is an excellent example of a transaction with great strategic fit compelling science and financial soundness. Through this acquisition, we are strengthening and diversifying our oncology portfolio with the addition of Krazati and potentially PRMT5, along with a pipeline of future KRAS inhibitors and enabling programs. We maintain significant cash flow to support continued investments in business development and this will remain a top priority for capital allocation for the company.

Turning now to our scorecard on slide 10. I've already discussed many of the positive recent milestone achievements noted here. While we recently learned that the second-line HCC study for Opdualag did not support moving forward in a registrational trial for this indication, we have a second study underway in first-line liver cancer that we expect to read out next year. In addition, as discussed already, we've seen a number of important accomplishments not included on this slide notably, first-line bladder and subcu Opdivo. All of this speaks to continued strong pipeline execution and the progress of programs that will become important catalyst for the future growth.

Turning to slide 11. When you add everything up as we discussed last month, we have numerous levers to drive growth into the back half of this decade and beyond. I am confident in our ability to transform our portfolio, both organically as well as through business development and to deliver new medicines for patients.

With that, I'll turn it over to David to walk you through our product performance and financial results in more detail. David.

[David Elkins, Chief Financial Officer at Bristol-Myers Squibb]

Thank you, Chris, and thanks to all of you for joining our third quarter earnings call.

Turning to slide 13. Let's discuss our top line performance unless otherwise stated all comparisons are made versus same period in 2022 and sales growth rates will be discussed on an underlying basis, which excludes the impact of foreign exchange. Total company sales in the third quarter were $11 billion driven by continued growth of our in-line and new product portfolio, offset by the expected decline in Revlimid sales.

Let's move to our new product portfolio on slide 14. During the quarter, we delivered solid growth for the portfolio with $928 million in revenue. Growth was strong across the portfolio. Though we have seen an impact of Abecma from both manufacturing site maintenance in June and from increased availability and usage of alternative BCMA targeting therapies for multiple myeloma. Based on our performance year-to-date, we now expect a new product portfolio to deliver roughly $3.5 billion for the full year 2023. This was primarily due to the impacts of our cell therapy franchise particularly Abecma. As Chris mentioned, we are laser-focused on continuing to accelerate growth of our in-line and new product portfolio into the next year and beyond.

Let's discuss the performance of our solid tumor products on Slide 15. Our flagship oncology product Opdivo continues to grow well with sales up 11% globally. In the U.S., Opdivo grew 9% primarily driven by demand. Sequentially, sales grew double digit driven by demand and a reversal of roughly $50 million of unfavorable buying patterns in the second quarter. Outside the U.S., third quarter revenues increased 15% primarily driven by demand for indications such as lung and gastric cancer. This performance along with potential new launch opportunities and peri-adjuvant lung and first-line bladder, as well as in recently approved adjuvant melanoma indication reinforce our confidence in the continued growth for Opdivo.

As Chris mentioned earlier, we now have positive data for the subcu formulation. We believe this supports the potential for an important new option for patients and strengthens the franchise longevity into the next decade. With respect to our next-generation IO asset Opdualag revenue nearly doubled, as we build share in first-line melanoma. In the U.S., we now see market share of roughly 25% with additional room to grow particularly in the approximately 15% of patients that are still receiving PD1 monotherapy. Opdualag has become a new standard-of-care in patients with metastatic melanoma where BMS total share of 65% in this important market.

Let's now turn to cardiovascular on Slide 16. Eliquis continued to grow with $2.7 billion in revenue in the quarter. In the U.S., sales grew 4% year-over-year driven by strong demand growth, offset by unfavorable gross to nets due to channel mix including impact of approximately $75 million in Q3. Internationally, sales were primarily impacted by generic entries in Canada and the UK and pricing pressures we mentioned in the past. At the same time, we're encouraged have successfully defended our IP in several EU countries this year including France, Norway and Sweden.

Moving to Camzyos our first in-class obstructive HCM product, we are pleased with the continued growth of the product delivering $68 million of revenue in the quarter. In the U.S., we added roughly 1,000 patients both to our hub and to commercial defense. We are very encouraged to see good persistence with roughly 3,500 patients now on commercial drug. Our patient base continues to grow as we steadily bring more patients under treatment and convert to commercial defense.

Turning to our hematology products on slide 17. Starting with Revlimid, global sales in the quarter with just over $1.4 billion. At this point, we expect revenues of approximately $6 million for the full year primarily due to higher level of demand for lenalidomide. Now on to Pomalyst, global revenues were down 2% versus prior year, mainly due to free product dynamics in the U.S. we described in July. Internationally, demand for Pomalyst was stable. Revenues also benefit from a $40 million clinical supply purchased during the quarter.

Turning to Reblozyl which generated revenues of $248 million in the quarter. In the U.S. revenue growth accelerated increasing 28% year-over-year primarily driven by increased demand. With the commands approval, we are seeing increased use in first-line as well as an increase in second-line patients that are rapidly switching from ESAs to Reblozyl along with the continued increase in duration of treatment. Though it's early in the launch in first-line MDS, we're hearing very positive feedback on the profile, especially in the community setting. Overall, we're encouraged by the strong label for Reblozyl in first-line MDS associated anemia and we believe it sets us well to deliver this medicine to more patients with this disease.

Moving to Abecma with revenue of $93 million in the quarter. This was impacted by the manufacturing site maintenance in June and the use in availability of other BCMA targeting agents.

Turning to Reblozyl, sales in the quarter were $92 million, more than double versus prior year and down slightly compared to prior quarter due to timing of infusions. As we mentioned in July during the quarter we remained constrained with respect to vector. However, with continued strong demand in second and third line plus large B-cell lymphoma and an expected increase in supply next year, we are confident in our ability to grow in 2024 and beyond. Let's move to our immunology products on slide 18. Global sales for Zeposia were $123 million, up 75% compared to prior year. In the U.S. in addition to $15 million contribution due to favorable gross-to-net and inventory in the quarter, we continue to be pleased with the momentum in multiple sclerosis with the best-in class share within the S1P class and continued volume growth in very competitive ulcerative colitis market. Outside the U.S., sales increased mainly due to demand in and as.

Turning to Sotyktu. Underlying launch trends remained strong. Sales in the quarter were $66 million which included a clinical supply purchase of approximately $30 million and we saw continued strong volume demand during the quarter. With over 38,000 script equivalents dispensed since launch, we delivered over 15,000 script equivalents in the U.S. during the third quarter. Within the oral category, our share is now roughly 40% reinforcing that Sotyktu is establishing a position as the oral of choice in this market and we are making progress converting covered CVS patients from the free drug program to commercial dispense. We expect this will take on average two to three months per patient. Building on our momentum, we continue to expect the further strengthening of access next year.

Now moving to the P&L on 19. I will focus my remarks on a few non-GAAP key line items having just covered sales performance. Compared to Q2 gross margin was favorably impacted by-product mix. Acquired in-process R&D in the quarter was $80 million, which was partially offset by $12 million of licensing income resulting in a net impact of $0.03 cents of EPS. The reduction in the effective tax-rate during the quarter was primarily due to recently issued Section 174 guidance regarding deductibility of certain research and development expenses. This resulted in an adjustment in the quarter to our estimated tax rate. Overall, third quarter earnings per share was $2 per share, growing approximately 1%.

Turning to the balance sheet and capital allocation on slide 20. Cash-flow generation and our balance sheet remained strong. Cash flow from operations in the quarter was approximately $4.8 billion with over $8 billion in cash and marketable securities on hand at the end of Q3. Our capital allocation approach remains focused on business development as a top priority with the planned acquisition of Mirati as an example. We also remain focused on growing our dividend and on opportunistic share repurchases. In this regard, during the quarter, we executed $4 billion ASR and expect that to be completed by the end-of-the year. Today we have roughly $2 billion of authorization outstanding.

Lastly, turning to our 2023 non-GAAP guidance on slide 21. We continue to expect revenue to decline in the low single digits compared to last year. As mentioned, we expect new products to be about $3.5 billion this year and for Revlimid to deliver about $6 billion. Turning to Opex, we continue to expect roughly low-single digit decline compared to last year, corresponding to roughly $4.4 billion expected in the fourth quarter. Based on the changes to the tax I described earlier, we are revising our full-year effective tax-rate to 15.5%. With respect to our earnings, we have increased the midpoint of our non-GAAP EPS guidance and narrowed the range to $7.50 to $7.65.

And with respect to our medium-term guidance on slide 22. As Chris described earlier, we reaffirm our low-to mid-single-digit revenue CAGR from 2020 to 2025 and the $8 billion to $10 billion growth from our in-line portfolio during this period. We have adjusted our new product portfolio target to greater than $10 billion in 2026, a year later than previously communicated. And with respect to operating margin, fixing our target to greater than 37% through 2025 to reflect continued strong profitability while enabling flexibility to invest in future growth and incorporating dilution from Mirati.

Now before we turn it over to question-and-answers, I'd like to recognize Giovanni's leadership for the company and thank him for his considerable contributions in transforming BMS. Also want to acknowledge the hard work of our teams around the world during the quarter. I know that our people remain focused on delivering for patients and we'll continue to do so under Chris' leadership moving forward.

I'll now turn the call back over to Tim, Giovanni and Chris for Q&A.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks very much, David. Before we go to the first question, we know it's a very busy morning. We want to get to as many questions as we can. So if you can try to keep to just one question per person that would be very much appreciated. Keith, can we go to the first question please.

Questions and Answers

[Operator]

Yes, thank you. [Operator Instructions].

And the first question comes from Chris Schott with JP Morgan.

[Chris Schott, Analyst at JPMorgan Chase and Company]

Great, thanks so much. Just - maybe for me just a bigger-picture question. You're lowering the 2025 targets. It sounds like there's a couple of products that adoption is just taking longer than expected. I guess what gives the company confidence that this isn't kind of a different dynamic with some of these products that isn't going to enable maybe there's some of those longer-term targets as you look out to 2030 that you've announced before. So maybe just kind of elaborate a little bit more on how much of - how do you make sure the company's positioning itself to hit those longer term peak sales and do industry maybe just rethink some of the the peak sales potential somebody's assets, given what we've learned from the launches over the last year or so. Thanks so much.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Thanks, Chris. This is Chris, I'll start and then I'm going to turn it over to Adam. I think it's important to step back and be clear on what we said on this call. First, I think it's important to recognize that for the new product portfolio in totality we continue to see very strong long term potential consistent with what we've said previously. There has been no - no change in the conviction for this portfolio overall, and in fact the question really is a question of when, not if. We have, however, recognize the timing change that we've communicated today and that's really around a few things. First, there are as I mentioned in the prepared remarks, a number of products where expectations, where performances, achieving if not exceeding expectations. However, we also have to acknowledge that there are a few products where the dynamics are different. For products like Sotyktu and Camzyos, the reality is, while while the long term potential for these products remains unchanged. It's taking a bit longer and Adam can speak to those dynamics and there are a couple of products where performance needs to needs to change.

And so, for example, with Abecma. and Zeposia, we know that we've got challenges there. The team is reorienting and making sure we've got the right resources and focus on delivering for those products, but I think it's important that when you step back and look at the portfolio in totality, our conviction around these products and the importance of these products will play in terms of driving long term growth and helping us diversify the business that remains unchanged. When you didn't layer on that to good in-line performance with products like Eliquis and Opdivo, we're as confident as we have been on the long term growth profile of the company that the focus right now is around executing on the commercial side, continuing to move the pipeline forward and ensuring that we've got the right focus on bringing innovation and externally with business development. Adam, anything you would - you would add.

[Adam Lenkowsky, CCO at Bristol-Myers Squibb]

No, I think you covered it very well.

[Chris Schott, Analyst at JPMorgan Chase and Company]

Thanks.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Thanks, Chris.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, Chris and can we go to the next question please.

[Operator]

Yes, and that comes from Geoff Meacham with Bank of America.

[Geoff Meacham, Analyst at Bank of America Merrill Lynch]

Good morning, everyone. Thanks for the question. You have recent data in for subcu Opdivo. I guess the question is what's the incremental benefit here and maybe how strategically important is this - is this approach just given IRA implementation and potential opportunities to extend LOE. Thank you very much.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Thanks, Jeff. I'll start. In spite of a lot of the progress when you look at IO, there's still opportunities we know to improve patient experience and address the treatment burden that exists with these assets. I mean, that's really where subcu comes into play and we're very pleased with the data that we've seen with 60, 70, the data are compelling in our view and we look-forward to after we finish the review presenting those at an upcoming conference. and obviously engaging with regulators. The way we've thought about the subcu program consistently is that this would address specific patient needs as well as the opportunity to address those centers where, for example, [Indecipherable] a premium and that's still where we think this will go. We think that it's indications will represent somewhere between 65% and 75% of the Opdivo business as of today and with focused effort we think we can convert roughly about 50% of the overall business over-time and so that's really how we're thinking about it and if you sort of were successful in doing that, we think this has the potential to extend the franchise into the early 20s, 30s.

[Geoff Meacham, Analyst at Bank of America Merrill Lynch]

Thanks, Chris.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Keith, could we go to the next question please.

[Operator]

Yes, now comes from Luisa Hector with Berenberg.

[Luisa Hector, Analyst at Berenberg Bank]

Hi, thank you for taking my question. Still on the medium term outlook, can you confirm that there is no contribution from Mirati in that guidance and then perhaps some comments around the lower margin expectation just is that purely linked to the new products, revenue guidance or other - other factors at play. Thank you.

[David Elkins, Chief Financial Officer at Bristol-Myers Squibb]

Thanks for the question. So the long term guidance new product portfolio does not include anything related to from Mirati sales perspective. If you do recall, we did say the dilution next year relate to Mirati is about $0.35. As it relates to the margin that does factor in how we view our margin going forward. If you recall previously our mid term guidance margins above 40%, but we continue to see opportunity invest in our launch portfolio and invest behind products like Camzyos and Sotyktu as well as R cell therapy, but also we continue to see opportunities in our portfolio as you know we had multiple readouts this quarter, LPA being one of those as well as additional indications for Opdivo and we have first-line commands. But as we step back and what we showed at R&D Day, we see opportunities to continue to accelerate our R&D pipeline. So that's why we revised our guidance to incorporate the dilution from Mirati but as well as the investments that we're making in new product portfolio and the R&D portfolio.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, David. Keith, can we go to the next question please.

[Operator]

Yes, and comes from Seamus Fernandez with Guggenheim.

[Seamus Fernandez, Analyst at Guggenheim Partners]

Thanks for the question. So. Just trying to get a little bit of a better sense on the 37% margin guidance. Is that something that we should anticipate is a potential floor in 2024 as you lose the KEYTRUDA royalty or is it really sort of a sequential floor for margins in 2025 as you lose Sprycel and Pomalyst following the loss of the KEYTRUDA royalties. So just trying to get a sense of kind of the path to 2025 as we move through the balance of this year. Thanks.

[David Elkins, Chief Financial Officer at Bristol-Myers Squibb]

Thanks, Seamus, for your question. And the 37% guidance is a floor that we provided as we look-forward to that mid term period, which is 2025, we haven't provided guidance yet, we'll do that in the fourth-quarter earnings calls release to 2024, which I think it's what your question is getting after I'd say the one thing to think about it, it's one. We've talked about Revlimid in the past that we said - we've revised Revlimid guidance this year from $5.5 billion to $6 billion and we still see next year stepping down to about that $4 billion and then we'll update you on all of the other line items when wo do our fourth quarter earnings as far as profitability next year, but you should think about the operating margin as a floor as we look forward through 2025.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, David. Thanks for the question, Seamus. Keith, can we go to the next question please.

[Operator]

Yes, and that comes from Chris Shibutani with Goldman Sachs.

[Chris Shibutani, Analyst at The Goldman Sachs Group]

Thank you very much. You made some comments about Sotyktu and the reimbursement environment as that is evolving and the constraints that you have perhaps from Adam or whoever would be appropriate, you comment further about what you're seeing there and how we should be thinking about the cadence. I think the setup had been that 24 will be an opportunity and that seems to be slightly different.

[Adam Lenkowsky, CCO at Bristol-Myers Squibb]

Chris, thank you for the question. First I want to say we're very pleased with the performance of Sotyktu. Our goal remains to be the standard-of-care in the oral market. In fact, as you heard, we have achieved now a 40% share of newly written prescriptions and we're the third most newly prescribed systemic therapy and we've done that in a little over a year post launch. Now, as you have stated, our focus really is around accelerating access and we anticipate achieving broader access in 2024 and continuing in 2025, remember today Sotyktu is not covered on approximately 80% of lives in the United States and so we expect to see significant improvements coming next year we're in the rose of negotiations with the PBMs. So we would expect to see a market improvement in 2024 and that could continue into 2025, where we would expect to have very broad access across to PBM and that's we're very confident in our ability to achieve that.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Okay. Thanks, Adam. Please go to the next question, please Keith.

[Operator]

Yes, and that comes from Stephen Scala with TD Cowen.

[Steve Scala, Analyst at TD Cowen]

Thank you very much. Regarding the mid term guidance changes I'm a bit puzzled as to why now, particularly when you had a major meeting last month and time to go through the specifics. I'm sure these changes were evident at that point or wait until Q4 when you have to set the stage for 2024 and beyond. I think the answer will be that that was an R&D meeting last month, but still Chris, you open the meeting by kind of setting the stage and tone for the company. So I'm just wondering why you're setting these changes in on our Q3 call. Thank you.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Sure, Steve, let me take that and then David can provide additional color. So the timing of the shift is really driven by the fact that in the short term we have seen additional trends mainly around back them up that have required that we change our short term guidance and that's giving the guidance for the new product portfolio for this year and as we've said we expect that portfolio to be roughly $3.5 billion this year and that is slightly less than what we had anticipated when we began this year. As a result of that change and what we're seeing with the new product portfolio the dynamics of which I described in the prepared remarks, we made the decision that we wanted to update the 25 guidance. As we anticipated that would be a question that would come out on this call and so that's why we made the decision to change the 2025 guidance and then of course as we get into next year, will provide additional color as to how we expect 2024 to proceed, but that was really the motivation for the timing of why we decided to make the changes in guidance today.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, Chris. Keith could we go to the next question please.

[Operator]

Certainly and that comes from Terence Flynn with Morgan Stanley.

[Terence Flynn, Analyst at Morgan Stanley]

Hi, thanks for taking the questions. I guess, Chris, maybe for you, just the launch reboot strategy for some of these - some of the drugs that have come in below your expectations, maybe you could just walk us through each of those and some of the steps you're taking, and why you're confident that that's going to have perhaps success. Thank you.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Sure, Terence. Let me start and then I'll ask Adam to provide some specifics, really around the products where we think we're going to need to have either a reboot or where we are moving to accelerate. I think the way I characterize in the opening remarks is right, we have a number of products which are either hitting or exceeding our expectations certainly Opdualag, Reblozyl is performing very, very well. Breyanzi as David alluded to we saw good performance in the quarter but importantly, we're seeing very strong manufacturing performance and we anticipate both supply and the quality of manufacturing for that product to improve and given the profile of the drug we have every expectation that's going to continue to perform very well as we get into 2024. So those products we feel very good about.

For Sotyktu and Camzyos, the dynamics are the products are just taking a bit longer and the trajectory for those products requires that we think about the time to peak being shifted back. What's important and Adam can speak to this as the fundamentals for both of those products continue to be very, very strong, we had good strong share for Sotyktu, we anticipate given the quality of that data and what we're seeing from customers, this will become the oral standard of choice, which is remember what the objective was when we launched the product. And for Camzyos every metric across this product, whether it relates to how physicians see the product and how patients see the product remains very strong. The dynamics in the cardiovascular market are such that that's just simply going to take a bit longer. I'll have Adam speak to any additional color on those two products, but mainly focus on Abecma and on Zeposia.

[Adam Lenkowsky, CCO at Bristol-Myers Squibb]

Yes. Thanks, Chris and thanks, Terence, for the question. I would like to add a little bit more color. As you heard, we have said that we are seeing continued impact from additional BCMA agents pressuring Abecma growth and so our teams are focused on number one, expanding our site footprint both in the US and internationally. We're differentiating conceptualizing Abecma real world data for physicians, which really look very similar and consistent with our clinical trials and we're educating on the sequencing and some of the emerging data that the use of cell therapy ahead of BioSpecifics is ultimately better for patient outcomes. We're also very pleased with the progress we've made on manufacturing around our predictability and low out of spec rates. So that's what we're really doing around Abecma.

As it release to Zeposia, as Chris mentioned, and then I'll shift to the others. We continue to see quarterly demand growth. MS is really driving that growth and so we've made a lot of progress on the MS front even in a declining oral market in favor of DSO and so we continue to expect growth in the MS market, now we have but certainly an opportunity for continued growth in UC. We're making progress, but our access challenges they remain and we're working to improve our access position but we're also seeing progress in Zeposia in the first-line setting post ASA as physicians are identifying Zeposia really as a good treatment option based on its efficacy and safety profile. So we're focusing there on expanding breadth of prescribing and continuing to really drive adoption across broader use of physicians. So for those reasons, we do expect to see continued growth and uptake for Zeposia.

Now as it relates to Camzyos and Sotyktu, as Chris opened, he talked about the importance of those two products and really not a matter of yes, but a matter of when, and that's why we made that decision. And so for Camzyos, we are pleased with the uptake there. The focus on Camzyos remains to continue to increase our breadth in our COEs. Go outside of the COEs to the non-centers of excellence to expand utilization, we're seeing doctors get much more comfortable in -in using the patient response has also been very, very strong there and continuing to bring patients out of the hub. Remember, these patients are going to be on treatment for a very long-time. And then finally just, again, I'll just close on Sotyktu, I mentioned some of the key areas that we focus on around access and David talked about pulling through those patients through - through the hub, but we also continue to drive breadth of prescribers where we're making really meaningful progress and reinforcing our superior efficacy profile compared to Otezla.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, Adam. Keith, could we go to the next question please.,

[Operator]

Sure and that comes from Evan Seigerman with BMO Capital.

[Evan Seigerman, Analyst at BMO Capital Markets]

Hi guys, thank you for taking my question. This was on Mirati, so Krazati and the general KRAS G12C classes recently really fallen below expectations. Can you just walk me through your thinking of the opportunity for Krazati, what's the key value driver here in the acquisition and what can you do differently versus Mirati to accelerate growth of this asset.

[Adam Lenkowsky, CCO at Bristol-Myers Squibb]

Yeah, thanks Evan for the question. And we're very confident in Krazati significant commercial opportunity as we believe this is a best-in class KRAS G12C. The real opportunity for Krazati is in the first-line setting and so in lung cancer and so we have Mirati has started their phase-III study in combination with PD1. We'll also see data around the triplet to PD1 chemo KRAS. I think that another significant advantage of - of Krazati where it can combine with multiple agents including PD1, [Indecipherable] to understand the potential of opportunity - that opportunity, but we think this could bring significantly greater upside to this opportunity and then also we're very excited about the other assets that - that Mirati has PRMT5, KRAS G12C and the SaaS one inhibitor, which we think also showing very promising early efficacy. So taken together, we do believe that this is a really exciting deal for the company and will be a strong catalyst of growth in the back end of this decade.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, Adam. Keith, can we go to the next question please.

[Operator]

Yes, and that comes from Carter Gould with Barclays.

[Carter Gould, Analyst at Barclays]

Good morning, guys. On Abecma, can you help frame as you mentioned some of the headwinds and some of those obviously transient in nature. How should we think about how long it might take to get back to sort of the run rate you are seeing in the first-half of '23 and I guess along those lines as well given some of the commentary on the guidance, just your confidence on an on-time approval of KarMMa-3. Thank you

[Samit Hirawat, Chief Medical Officer at Bristol-Myers Squibb]

So let me do this - let me just start off with the KarMMa-3 part first. As you know that we have a PDUFA date in December and that's all pretty much we can comment on, as we continue to work with the regulatory agencies to bring it forward.

[Adam Lenkowsky, CCO at Bristol-Myers Squibb]

Yeah, Carter, I'll just expand on that just a little bit. We mentioned two things in last quarter's earnings remember, number one, the [Indecipherable] maintenance that occurred in June would dampen Q3 sales and we're seeing that happen. However, we also see continued impact from additional BCMA targeted agents so we knew this going to be a highly competitive market, putting pressure on growth and I talked about what we're doing to really stabilize that business and returning to growth. Clearly, a KarMMa-3 approval would move Abecma into earlier lines of treatment and be a catalyst to return Abecma to growth by opening up of significant larger patient pool, but as Samit said, obviously we have to wait to see that approval come.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, Adam. Can we go to the next question please.

[Operator]

Certainly - certainly that comes from Andrew Baum with Citi.

[Andrew Baum, Citi at Bristol-Myers Squibb]

Thank you. A question for Adam, many of your predecessors has been scarred is trying to get off the bridge on to reimbursed plans. Are you still confident that you're going to be able to by the end of this year, get 60% of your CBS insured patients off the bridge on reinvest status.

[Adam Lenkowsky, CCO at Bristol-Myers Squibb]

Yeah, Andrew, thanks for the question. So conversion is going as we expected. We are focused on pulling through the early access win for Sotyktu at CBS and shifting those patients to commercial product from bridge. As I said last time on the call it takes about two to three months for patients to move from bridge to commercial and we have started to see that conversion happening towards the end of Q3. We believe the majority of CBS patients will be coming out of the hub by Q4 and start to see some benefit towards the tail end of Q4 and into Q1. We're also seeing new patients on CBS move very quickly into commercial products. So that's also helping to accelerate performance. So I talked earlier that coupled with broader formulary access in January of 2024, we are confident that we'll be in a strong accelerator of growth for Sotyktu in 2024 and beyond.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thank you, Adam. Keith, could we go to our next question, please.

[Operator]

Yes. [Operator Instructions]. And the next question comes from Tim Anderson with Wolfe Research.

[Tim Anderson, Analyst at Wolfe Research]

Thank you. So you gave product specific peak sales target out to 2030. I think you did that for almost 10 products. Are any of those trending ahead of - of what those prior targets where we've heard of several things it sounds like where it might be trending below that and are we going to get updated 2030 targets, on those same list of products at some point. Thank you.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

So, Tim, let me start and I'll ask Adam to comment on how we're seeing performance trends overall, but what I would say is look I would go back to how I characterize the new product portfolio at the beginning. We launched nine new products over the last 2.5 years and it's a portfolio of products and where you're seeing some products perform at or better than expected. I think when you factor-in some of the early manufacturing constraints that we had I look at our product like Breyanzi the best-in class profile that product has considerable opportunity to meet or exceed expectations. Look I think we knew the competitive dynamics around Abecma coming into this launch. I fully expect that the team is going to get that product back on track as it relates to competition from other BCMA targeted agents, but in the long run that - that product will continue to be a competitive product for us and then certainly as we look at the opportunity for a product like Camzyos and a product like Sotyktu we think the long-term profit potential still remains on-track and possibly for a product like Camzyos in excess of what we had anticipated and then as you would expect in any portfolio product, there are a couple of products where performance is lagging. We've highlighted what those are, but maybe I'll ask Adam to comment on any additional underlying dynamics you wants to speak to.

[Adam Lenkowsky, CCO at Bristol-Myers Squibb]

Yeah, thanks for the question. I think when we looked at totality of a portfolio, we obviously see some products that are ahead where we projected them to be at peak and some are tracking behind, but taken together, we don't see any changes in what we had discussed, which is a non risk-adjusted basis that is the new product portfolio could exceed that objective by 2030. Chris talked about some of the pushes and pulls. I just - I would just add Reblozyl is certainly a product that we're seeing that he is tracking at or even ahead of expectations with the commands playable Camzyos. We also see that tracking ahead in the longer term. Yes, it's taking slower than we initially guided to, but it's tracking very similar to a very, very strong cardiovascular launch and so we expect that adoption to continue with sustained growth into the long term. Chris mentioned Breyanzi, Breyanzi has been seen as the best-in class CART cell therapy agent and coming into next year, we're going to be in a much better supply position and that is going to help accelerate and catalyze that product. And then also Sotyktu as well because we think about Sotyktu once we are able to secure access early next year, we'll see acceleration in PSL, but we also have important data readout. As you know, coming in PSA and in SLE or lupus, which will all contribute to having Sotyktu exceed potentially our expectations in the back-end of the decade.

[Chris Schott, Analyst at JPMorgan Chase and Company]

So, Tim, just to close it out. We had said that - that product portfolio had $25 billion plus potential. Where we sit today, we still see that potential at least $25 billion as we get to the end of this decade.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, Chris. We go to the next question please, Keith.

[Operator]

Yes, and that comes from David Risinger with Leerink Partners.

[David Risinger, Analyst at SVB Leerink Partners]

Yes, thanks very much. So I just wanted to sort of pivot to 2026, so considering that you extended the new product portfolio revenue guidance to '26, could you please comment on both the in-line product segment and the recent LOE segments for '26 specifically how you'd frame the magnitude of potential declines for Eliquis and Revlimid given the - the pressures that they are set to face. Thank you, very much.

[David Elkins, Chief Financial Officer at Bristol-Myers Squibb]

Thanks, Dave. Just as a reminder, as far as the only change that we made was from a new product portfolio going to '26, we're not providing 2019 guidance for the other line items, but what - I would like to do is just remind you there's really no change to in-line portfolio growing from 2010 to 2025 at $8 billion to $10 billion, so very confident that and I think that double-digit growth you saw in Opdivo year-to-date, as it demonstrates our continued confidence there. And the only change that we've made in relation to the guidance was in that new product portfolio to '26 as it relates to the LOE. Again, we increased the guidance this year for Revlimid from 5.5% to 6% and as we said on the second-quarter is really no change to how we're looking at, which is pretty consistent with where consensus is for '24 and '25, dropping down to about $4 billion next year and $2 billion in '25 and remember by the time we finish this year Revlimid will be beyond 60% of the erosion of that product, so and a significant portion of our growth going-forward it's going to be represented by that in-line and new product portfolio, LOEs in 2025 would be less than 10% of our total revenue. So we'll have a much younger portfolio by time we get to 25 and set us up well for '26 and that's where we stand today.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks, David. Can we go to next question please, Keith.

[Operator]

Yes, that comes from a Robyn Karnauskas with Truist.

[Robyn Karnauskas, Analyst at Truist Securities]

Hi. I mean I think all the questions are focused on near-term, but I has gotten a lot of bullish indicators on your lunches thinking more longer term like next year. We've heard from KOLs that LVEF dropped in the real-world for Camzyos seems to be better than what we've seen in the clinical trials. Maybe you can provide some color on what you're seeing and how that impacted uptake and I think big picture, do you see any potential for changes to run because what you're saying. Thanks.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Thank you, Robyn. I think what we have heard and what be - what Adam has talked about in the past as well that overall profile for Camzyos as we think about patients and the prescribers remains very, very positive and we remain very confident on that profile as well. As it relates to the REMS impact look these are data that we have to collect for a long time from [Indecipherable]. There is no commitment in terms of really getting the ramps change, but certainly we will continue to try as more and more data evolves and more and more data - more and more patients are put on Camzyos. Overall once the patient goes on Camzyos, we have not heard of any stories of patients trying to get off Camzyos. In fact, even if they have to interrupt for any other reasons, they want to go back on the drug because of the benefit that they see in their quality-of-life and how they perform on their overall daily living.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Thanks so much. Can we go to the next question please.

[Operator]

Yes, and that comes from Mohit Bansal with Wells Fargo.

[Mohit Bansal, Analyst at Wells Fargo Securities]

Great, thank you for taking my question. And my question is regarding - my question is related to Sotyktu because it seems like in prepared remarks you mentioned that Sotyktu contracting to zero stop edits - stop edits may run to 2025 and you mentioned because there are some changes in the immunologic contracting market, can you please help us understand them a little bit better what are these changes and how should we think about the long-term net pricing for this category. Thank you.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Yeah, Mohit. Thanks for the question. I'll take that one so as I said we are working to improve significantly our formulary access in 2024 and as I said we have approximately 80% of lives today that are not covered on Sotyktu. We expect that to change dramatically as we move-in next year. However, when you look at where we will likely be in 2024, we will likely have the majority of our business in either a zero or one step edit position. When we're talking to PBM and the reason why we're talking a little bit about 2025 PBMs are really thinking about different ways to manage the PSO class as well as broader immunology class with now more-and-more biosimilar HUMIRA coming into the market and so those decisions have not yet been finalized for 2025 but as I stated we are very confident that we will see a significantly broader access position next year. So we'll go from non-covered to being covered, which will be a really nice growth opportunity for Sotyktu as you move into early next year.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Okay let's go to the next question please.

[Operator]

Yes, and that comes from Olivia Brayer with Cantor Fitzgerald.

[Olivia Brayer, Analyst at Cantor Fitzgerald]

Hey, good morning and thank you for the question. M&A has obviously been something that you guys have leaned to. So does that strategy change at all after the Mirati deal and if there is still an appetite for mid sized deals are there certain areas that may be best fit your growth strategy going-forward.

[David Elkins, Chief Financial Officer at Bristol-Myers Squibb]

So let me take that one. So as we've said consistently business development remains the top priority for capital allocation at the company. I would say is at a macro-level, the way we think about business development is somewhat consistent with the way we've always thought about it, which is we are going to be looking for deals that are scientifically interesting and related to things that we know well. They're going to be strategically relevant for the company and of course they have to be financially sound. The one thing that I would add is that we're going to index more heavily on those deals that enhance the growth profile of the company that's an area that we remain fixated on as a management team and so I think that's going to factor into how we think about business development going-forward and we're gonna see areas of course that enhance the portfolio or help us to continue to give us capabilities or products that we don't have today. I think in some ways, that's how you can think about Mirati. Mirati continues to diversify our oncology business away Oncology towards targeted therapies. We're very excited about that opportunity, but I think generally speaking the way we approach business development we largely consistent again will be focusing on great science that can enhance the growth profile of the company.

[Tim Power, Vice President of Investor Relations at Bristol-Myers Squibb]

Great, thanks. Keith, can we go to our last question please.

[Operator]

Yes, and that comes from Dane Leone with Raymond James.

[Dane Leone, Analyst at Raymond James]

Hi guys, this is Sean on for Dan. Thanks for taking the questions. It does appear maybe we can get a little bit more color on those Camzyos script trends, it does appear that the number of patients entering the hub, maybe slightly slowing so just any further color on what you've been hearing from physicians on the burden [Indecipherable] the REMS program is and what you expect for further growth. Thanks.

[Chris Boerner, Chief Operating Officer at Bristol-Myers Squibb]

Sure, Sean. I'll take that question. So we're very pleased with what we're seeing in the launch of Camzyos. We continue to see week-over-week consistency in patient starts and rapid conversion of patients from the hub to commercial as well said we would expect to see steady, consistent and sustained uptake for this product into the - the distant future. We don't expect an inflection, but rather an accumulation of patients coming on treatment and staying on treatment for a very long period of time. So right now, we've got 5,000 patients in the hub and approximately 3,500 patients on commercial products. So that coupled with patient and physician feedback, which continues to be very strong. We're focusing on driving penetration or the top centers where we have 90% adoption in our top 100 centers and expanding use outside of those COEs. We're also focused on increasing diagnosis rates by activating patients and as you know we recently received approval internationally as well in Europe. So that will also be a contributor to growth. So taken together, we are very confident this will lead to continued and sustained growth of this important product.

[Giovanni Caforio, Board Chair and Chief Executive Officer at Bristol-Myers Squibb]

So maybe I'll close. So first thank you - thank you all for joining the call. I know it's a very busy day, what I would just say to summarize where we are as look this team has continued to be fixated on driving the growth profile of the company, how we go about doing that is, as we've discussed on the call, we're going to continue to drive-in line product performance, the new product portfolio. We have continued very strong convention - conviction in the long-term potential of this portfolio, our focus is going to be continuing to drive where we have momentum today and accelerate those products where we need to accelerate and that focus on execution, transcends across the entire portfolio, including continuing to drive execution in R&D and continue to find and source really attractive assets externally and with that we'll close the call. And as always, the team is available to answer any questions following today's discussion. Hope you all have a good day and the rest of the week.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Tim Power, Vice President of Investor Relations
• Giovanni Caforio, Board Chair and Chief Executive Officer
• Chris Boerner, Chief Operating Officer
• David Elkins, Chief Financial Officer
• Adam Lenkowsky, CCO
• Samit Hirawat, Chief Medical Officer

Analysts

• Chris Schott, JPMorgan Chase and Company
• Geoff Meacham, Bank of America Merrill Lynch
• Luisa Hector, Berenberg Bank
• Seamus Fernandez, Guggenheim Partners
• Chris Shibutani, The Goldman Sachs Group, Inc.
• Steve Scala, TD Cowen
• Terence Flynn, Morgan Stanley
• Evan Seigerman, BMO Capital Markets
• Carter Gould, Barclays PLC
• Andrew Baum, Analyst
• Tim Anderson, Wolfe Research
• David Risinger, SVB Leerink Partners
• Robyn Karnauskas, Truist Securities
• Mohit Bansal, Wells Fargo Securities
• Olivia Brayer, Cantor Fitzgerald
• Dane Leone, Raymond James