Bristol-Myers Squibb Company

Good day and welcome to the Bristol-Myers Squibb 2020 Second Quarter Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Tim Power, Vice President, Investor Relations. Please go ahead, sir.

Thanks, Orlando, and good morning, everyone. Thanks for joining us today for our second quarter 2020 earnings call. Joining me this morning with prepared remarks are Giovanni Coforia, our Board Chair and Chief Executive Officer, and David Elkins, our Chief Financial Officer. And also participating in today's call are Chris Berner, our Chief Commercialization Officer, the DMF Med, President Hematology, and Sumit 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 follow along with for David and Giovanni's remarks. But before we get going, I'll read our forward-looking statements. 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 their estimates change. We'll also focus our comments on our non-GAAP financial measures, which are adjusted to exclude certain specified items. Reconciliations of these non-GAAP financial measures The most comparable gap measures are available on bms.com. With that, I'll hand it over to Giovanni on slide three.

Thank you, Tim, and good morning, everyone. I hope that everyone is remaining healthy and safe. As we continue to navigate the impact of the pandemic, I want to thank our colleagues around the world whose commitment to our mission and dedication to our patients has enabled us to continue delivering our medicines to those who are relying on us. Before starting the call, let me briefly comment on yesterday's news on Eliquis. We believe the IP for this medicine reflects the innovation we have brought to help patients with AF and VTE. In this regard, we are very pleased by the court's decision to rule in our favor on both patents. Let's turn to slide four. We have delivered another very strong quarter with solid commercial performance including a promising start with multiple launches, strong financial performance, and the achievement of important clinical and pipeline milestones that reinforce our long-term potential. Our ability to advance the business was enabled in part by our integration efforts. Our teams are working well across the organization. Our systems are coming together and we are on track to deliver 2.5 billion in synergies by the end of 2022. With a strong foundation, a broad and deep portfolio and pipeline, and significant financial flexibility, I have never been more confident in the future of Bristol-Myers Squibb. Before I discuss our results, I will take a moment to talk about how our teams are coming back to the workplace and into the field. We are taking a thoughtful and phased approach to our return to the workplace. Our timelines and circumstances vary by market, and we are taking significant measures to protect the safety of our colleagues while we continue to deliver medicines to patients and enhance our long-term competitive position as a company. In locations where country restrictions permit and we can ensure the safety of patients, providers, and colleagues, we have resumed recruiting for our clinical trials. Our discovery researchers have returned to our laboratories to continue their vital work. Depending on local and regional conditions in the US and globally, our sales and medical teams are continuing to effectively engage virtually, and where possible, returning to the field. We also continue to support the global COVID-19 response effort in a variety of areas, including working with researchers, the biopharma community, and the broader life sciences industry on ways to accelerate therapies for COVID-19. While uncertainty remains with how the COVID-19 pandemic will evolve, we have plans in place to adapt and ensure that our business continues to operate well. Now, let me turn to the quarter on slide five. David will provide more details later in the call, so I'll take a moment to cover the highlights. First, I'm very encouraged by the resilience and strength of our business and the robust demand for our medicines, enabled by strong commercial execution. We posted $10.1 billion in sales, and while COVID-related inventory and demand dynamics had an impact on sales of our medicines in Q2, underlying dynamics remain very positive and fully aligned with our expectations. During the quarter, we also made important progress with our pipeline. We achieved two first-line lung cancer approvals for dual IO therapy. We delivered positive pivotal phase three results for Ziposia in ulcerative colitis, which we look forward to discussing with health authorities and presenting at a future medical meeting. And we also made good progress with the regulatory process for our cell therapy medicines. particularly the submission of Idacel. Also, during the second quarter, we have launched several of our new medicines and new indications. And while we are clearly in the launch cycle, early in the launch cycle, we are seeing encouraging initial performance. We are off to a very good start with our Obdivo plus Yervoy launches in first-line lung, with encouraging initial feedback from physicians and good indications of early adoption. This supports our expectation that Opdivo will return to annual sales growth in 2021. We have launched Ziposia with a best-in-class S1P label in MS, and we are pleased with the feedback from customers so far, including with respect to the ease of treatment initiation. And we're very encouraged by the adoption we've seen with Reblozil in MDS. Early demand trends support our view that this will be an important drug for patients and for the company. And we further strengthened our financial position with strong operating results and cash flow. The results we've delivered in the quarter provide a strong foundation for the future. So looking forward and turning to slide six, As we discussed during our investor series in June, we are executing on an unprecedented number of new launch opportunities. And across almost every one of our new products, we have the potential to build on our initial launch success with additional new indications, benefiting more patients and growing our business. We believe that the new products we bring into market provide us with an opportunity to renew our portfolio for the long term. In fact, we estimate that the new launches, together with their lifecycle management opportunities, could deliver approximately $20 billion in peak revenue on a non-risk-adjusted basis. During the quarter, we began to realize this potential, having launched several new products and indications. And we also delivered key clinical data to potentially expand the use of Ziposia. Later this year, we expect key data for our TIK2 inhibitor, which we believe is an asset with significant potential as a broad-based autoimmune medicine. In fact, we have recently received Phase II data for TIK2 in psoriatic arthritis, reinforcing this view. We look forward to presenting the data at an upcoming medical meeting and embarking on a phase three program in this indication. And finally, in the very near term, we are looking forward to the U.S. PDUFA dates for CC486 in September and LysoCell in November. And of course, beyond our new launches, we have a pipeline full of promise. Turning to slide seven, I am encouraged by the progress with the next wave of medicines that are emerging. Our pipeline includes more than six assets that have achieved proof of concept or are close to it, spanning multiple disease areas. In IO, we have our Lactree inhibitor, Relathlimab, with potential Phase III data later this year or early next year, as well as Bempeg, partnered with Nectar. In multiple myeloma, we have two cell modes, Iberdomide and CC92-480. and our BCMA T-cell engager. In cardiovascular disease, we see promise in our factor 11a inhibitor. And finally, in immunology and GI, we are looking forward to taking Sandacumab into phase three trials in the eosinophilic esophagitis. All of these agents could have significant commercial potential. When I look at our portfolio, I'm confident that the opportunities we have with our new launches life cycle management programs, and earlier pipeline assets have the potential to strengthen our position in key therapeutic areas, such as expanding our franchise in hematology and sustaining a leadership position in multiple myeloma, broadening our presence in immunology with our TIK2 inhibitor, and establishing a GI franchise starting with Ziposia, and renewing our franchise in cardiovascular. Along with these opportunities, our financial flexibility enables the external sourcing of assets and innovation to complement our internal R&D efforts. Now, moving to slide eight. Our future has never been brighter. In the first half of the year, we've executed very well, realizing a number of important accomplishments while integrating the company. These accomplishments all point to our opportunity to successfully renew our portfolio for the long term. None of this would be possible without the tireless efforts of our extraordinary teams around the globe. I'm very proud of our colleagues and thank them for their focus and dedication. We have incredible talent in the company, and it is our priority to continue to attract, retain, and develop the best people. Before I hand it over to David, let me provide our perspective on the recent executive orders in the U.S. We are supportive of increasing access to medicines and reducing the out-of-pocket cost of medicines for seniors. Actions like the rebate rule would help achieve these goals. However, the IPI would not. The industry, physicians, and patient groups are very concerned about and firmly disagree with the administration's decision to sign the executive order on IPI. We believe that IPI has the potential to impose price controls from countries where government-run healthcare systems and price controls do not appropriately reward innovation and where too often patients do not even have access to new medicines. The policy of importing price controls from foreign countries, which the administration has described as having socialist healthcare systems, would have a significant impact on our industry in the U.S., starting with our ability to continue to invest in R&D and lead innovative research to treat disease at a time when we are leading the fight against COVID-19. I'll now hand it over to David to walk you through our financials for this quarter. David?

Thank you, Giovanni. Hello, everyone, and thank you again for joining our call today. As Giovanni mentioned, I continue to be very impressed by the execution of our teams in the wake of COVID-19. Our exceptional second quarter and first half results depict the resiliency of our portfolio. So now let's dig in a bit more on our recent performance, turning to slide 10. We had a solid top-line performance in the second quarter of $10.1 billion, including significant unwinding of the COVID-related stocking in the first quarter. On a performer basis, sales were flat year over year, as inventory built in the first quarter reversed in the second. Importantly, if you look at our half-year results, sales were strong at $20.9 billion, growing 6% year over year, with growth across the vast majority of our prioritized brands. Now let's turn to our key brand performance, starting with Eloquist on slide 11. Eloquist's demand trends remain robust, with double-digit TRX growth of 20%, in the U.S. versus prior year. As mentioned, we saw significant favorable impact from channel and patient-level stocking due to COVID in the first quarter, which, as expected, largely reversed in Q2. Second quarter global sales were approximately $2.2 billion, growing 6% versus prior year. If you look at the sales in the first half of the year and wash out the quarterly noise, sales were very strong, up 21% versus the first half of 2019. We would like to remind you of second-half dynamics related to the coverage gap of Eliquis. As we've explained in the past, we accrue our liability related to this patient population when they enter the donut hole, which reflects a substantially higher impact in the second half of the year. Recall that there was a step-up in the liability in 2019 where the manufacturer responsibility increased from 50% to 70%. Though this factor has not changed for the full year in 2020, there are additional drivers to keep in mind. First is our mix. Medicare is an increasingly large component of Eliquis, and second is the size of the coverage gap per patient. It increased in 2020 compared to last year. This further increases the gross to net accrual in the third and fourth quarters. Because of these gross to net phasing dynamics, as we've seen before, we expect Eloquist net sales in the second half of the year to be lower than the first half of the year, despite the strong underlying demand growth. From a COVID perspective, though we saw new brand levels unfavorably impacted, we are seeing positive recovery signals of patient access to healthcare providers and cardiologists from the lows we experienced in April and May. Looking forward, we continue to expect significant future growth driven by Eloquist's number one position among the NOAC class due to the coverage, of total brand share to new brand share and continued erosion of warfarin. Turning to Opdivo on slide 12. In the US, we continue to see strong share across key indications. Stabilization of IO eligibility in second-line lung and strong share within the RCC market. With respect to COVID, we saw some demand pressures due to patient access to hospitals and infusion centers, which we estimate to be in the low to single digits. We are starting to see recovery signals with patients' ability to access centers. Internationally, COVID has impacted patient starts across tumors, with melanoma being the most impacted. Despite COVID impact, our IO franchise has remained strong shares across all our key indications. Now, moving to the frontline lung approvals for Opdivo plus Urovoia in May, based on Checkmate 227 and 9LA. We are very encouraged by how the launches are going. While it's still early days, we believe it's going well, if not better than expected, particularly in light of COVID and launching in a virtual environment. We have already achieved market share in the mid-single digits. For 227, we are seeing use of Opdiva Plus Europe across histologies and PD-L1 expression. What we're hearing from prescribers is they are impressed with the depth and durability of response, as well as the long-term survival data. With respect to 9LA, this gives physicians another option in first-line setting, limiting the use of chemo and addressing the needs of patients with rapidly progressing disease. Based on these promising launches in the U.S., we expect Abdiva to return to annual sales growth in 2021. Moving on to our in-line multiple myeloma portfolio on slide 13, Revlimed and Pomlos continue to perform well, delivering strong year-over-year sales growth, up 6% and 21% respectively. Growth was primarily driven by increased treatment duration due to demand for Revlimid and Pomelus-based triplet therapies. As previously mentioned, the impact of COVID on the brands was modest due to the oral administration of Revlimid and Pomelus. There was some stocking impact in the prior quarter, ex-US. However, the REMS program in the US resulted in limited stocking compared to other brands like Eliquis. When looking at our sales year-to-date, both Revlimid and PalmList grew double digits, up 10% and 25%, respectively. Now I'd like to take a moment to highlight some of the recent launches on slide 14, starting with RedBazil. We're extremely pleased with the virtual launch of RedBazil post the approval in April for RS-positive MDS-associated anemia. Physician experience in beta-thal and the medalist data published in the New England Journal of Medicine in January led to substantial acknowledgement of the clinical value of Reblazil and pent-up demand leading to the MDS launch, which contributed to strong sales in the quarter. Physician feedback remained positive with significant awareness of the approval. While still early, we are very pleased with the launch and patient retention of the product, where a majority of eligible patients have already received their second and third cycles of treatment. We have recently received approval in Europe, and we look forward to launching Rebazil in the various markets across the world over the next 6 to 12 months. Now, turning to Ziposia, we are also very pleased with our best-in-class S1P label in multiple sclerosis. And while very early in the launch, we are very encouraged on how things are progressing so far. We have already made great progress on the payer front with strong day-one access, including express scripts. It is important to remember that MS market does not change over quickly, and it takes time to penetrate due to patients' long duration on their medicine. With that in mind, we are pleased with the initiation we have seen across multiple prescribers and centers. Now let's move to our balance sheet and the strength in our capital allocation on slide 15. We continue to generate a significant amount of cash flow from operations with over $4 billion generated in the second quarter. We ended the quarter in a strong liquidity position with approximately $22 billion in cash and marketable securities, reducing our net debt to $24 billion. Our capital allocation providers remain unchanged, leveraging and achieving less than one and a half times debt to EBITDA ratio by the end of 2023. We continue our commitment to our dividend and investing in future innovation through business development. So now let's turn to slide 16 and review the guidance. Last quarter, we provided assumptions around how we view the impact of COVID-19 crisis on our business. Our view today has not changed. As a reminder, we assumed the peak impact would occur in the second quarter with a return to a more stable business environment in Q3 and minimal impact in Q4. So far, the key factors we assumed are also playing out as we expected. Those were products that saw significant advance buying at the end of Q1 will see that inventory work down during the rest of the year, mostly in Q2, which I described earlier. The remaining inventory will work its way out in the second half of the year. The second factor was the reduction in new-to-brand prescriptions and physician-administered products during Q2, recovery in Q3, and fully recovered in Q4. And lastly, we were planning to resume all clinical trial activities by year-end where restrictions have been lifted. Now, based on the strength of our results in the first half of the year, we are narrowing our revenue range, updating our tax rate, and as a result, increasing our 2020 adjusted EPS guidance. We now expect revenue to be between $40.5 billion and $42 billion based on strong performance and currency improvements. We expect expenses to be at the high end of our range as we invest in our launch products and accelerate the resumption of clinical trial activities in the second half of the year. And we expect our tax rate to be between 16% and 17%, primarily driven by favorable post-closed tax initiatives and earnings mix. With these changes, we are increasing our EPS range to $6.10 to $6.25. Our revenue guidance takes into account the donut hole effect affecting Eloquist in the second half of the year. And as I discussed earlier, as well as the competitive dynamics associated with some of our established brands, remember, as I mentioned earlier in the year, we project revenue from our established brand portfolio to decrease about 30% for the full year on a performance basis compared to 2019, which is mainly coming from our international business. Lastly, as Giovanni mentioned, we are on track to deliver the $2.5 billion of synergies by the end of 2022, with one-third of those expected to be delivered this year. Before we move on to question and answer, I want to close out by saying how delighted I am with our robust execution in the first half of the year. I discussed a great deal about the financial strength of the company at our investor series a little over a month ago. Our performance in this global pandemic illustrates just how resilient our business remains, as well as our ability to be agile in a changing environment. I therefore remain confident in our long-term outlook for the company. I'll now turn the call back over to Tim and Giovanni for the question and answer. Thanks, David.

Orlando, could we go to our first question, please?

Absolutely. And if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, press star one to ask a question. We'll pause for just a moment to assemble the queue. All right, and we'll take our first question from Jeff Meacham with Bank of America.

Hey, guys. Good morning, and thanks for the question. I've just had a few quick ones. On Opdivo, based on demand trends you've seen so far and long, does that change your view of growth looking to 2021? Maybe just be helpful to get a a little bit more detail of a commercial view looking to what happened in 2Q from Lung. And then just with respect to the pipeline, you know, TIC2 will be obviously a big growth driver and a category you have some experience with. When you look to that brand, maybe just help us with the opportunities that you see for TIC2 for differentiation and and what investments commercially that you have to make to really maximize the value there. Thank you.

Thank you, Jeff. So two important questions, and as I mentioned in my remarks, we feel good about both with the opportunity for Opdivo and the remarks we've made about the first-line launch so far and TIC2, particularly as we've now seen a second phase two study in psoriatic arthritis. But let me just ask Chris to give you more color on both Opdivo and TIG2.

Sure, so thanks for the question Jeff. Let me start with first line lung because I think that's probably on a number of folks' minds. The lung launches are going very well and in fact are tracking at or maybe even a bit ahead of our expectations. And let me highlight just a few things. From a share standpoint, it's still very early days, but share is currently in the mid-single digits, and we've seen very good momentum in the uptake here. Importantly, we've seen uptake across all PD-L1 segments as well as across histology. And the uptake has been particularly good, I would say, in the PD-L1 1-49 segment. As expected, given the timing of approval and the relative immaturity of the data, the uptake of the 9LA regimen has lagged two to seven. However, in recent weeks, we've even seen an uptake in the use of dual IO with chemo. And again, this appears to be across subgroups. So good momentum on utilization. Execution has been particularly good, especially given the dynamics of COVID. Most of the engagements remain virtual. but we're seeing very good engagement between the sales force, even in a remote environment with key customers. Position reaction has largely been aligned with expectations in our previous conversations with depth and durability of response of these agents with a manageable safety profile being the primary message. So what I would say is it's still early days, but we're very happy with the utilization that we're seeing. We've got good execution. Position reaction continues to be positive. We're very pleased that in spite of entering First Line Lung as the third company to market, our shares now after eight weeks are putting us as having the second most widely used regimens in the space. And as it relates to the growth, as Giovanni mentioned, we still see Avivo as a growth brand going forward. The fundamentals of the business today continue to be relatively strong. We've got relatively stable base of business in the U.S., The second-line lung dynamics continue to play out as we had expected both in the U.S. and ex-U.S. The early launch in lung is performing well, and we've got good fundamentals ex-U.S. And then if you think about 2021 with the strong 9ER data that we talked about in the last quarter, we feel really good about the growth opportunities that we see for Updivo starting in 2021. With respect to tick, very excited, obviously, about the data that we have already presented with Phase II and psoriasis. The psoriatic arthritis Phase II data is, we think, if it plays out in the Phase III, going to be compelling. Remember, this is a disease area that's large. Over 2 million people are diagnosed in the U.S., EU5, and Japan with psoriatic arthritis, and there's still significant unmet need here. Two-thirds of the patients, for example, who are stable on DMARDs continue to have disease activity, and there's considerable dissatisfaction with existing oral agents when you look at the totality of the profile, both efficacy and safety. So obviously early days, but we're excited about what we're seeing there.

And we'll move on to our next question from Terrence Flynn with Goldman Sachs.

Great. Thanks for taking the questions. Maybe just two for me as well. Just was wondering if you can give us an update on the timing of some of your Opdivo adjuvant studies. I know 816 for neoadjuvant lung and 274 for bladder were potentially expected later this year. So just wondering any update on timing and how you're thinking about those opportunities. And then the second I had is I didn't see any mention of 2021 guidance in the release. Just wanted to confirm that there were no changes on that front. Thank you.

Thank you, Terrence. Let me just briefly comment on guidance, and then I'll ask Samit to give you a perspective on the adjuvant readout. So based on where we stand today, we are reaffirming the guidance for 21. There is really nothing that has changed. The assumptions for COVID are playing out as we thought. The business is strong. We've given you some comments on early positive indicators, of course. There is a number of considerations that we discussed last quarter, they remain very valid today. We've made a number of assumptions regarding COVID, particularly the end of the year and into next year. I think we'll have to see how those play out. And obviously, as you know, there is significant variability there. And at this point, we've not really included any impact from U.S. healthcare reform in our assumptions because there, again, it's early days and difficult to understand what any impact may be. But when you look at our assumptions and the strength of our business, we're reaffirming the guidance for 21 at this point.

Samit? Thank you, Giovanni, and thanks to answer the question. I've given certainly many opportunities in front of us beyond the still available opportunities in the metastatic setting. We're looking forward to a few readouts within the overall holistic program that we have across several tumor types. The ones that we're looking forward to in 2020 would be melanoma, checkmate 915, potentially leading out towards the end of this year. And then, of course, muscle-invasive bladder cancer, checkmate 274 is the other one. And then you already mentioned a potential PCR endpoint readout for non-small cell lung cancer at the end of this year. And then in 2021, we're looking forward to the readout for esophageal cancer as well. And then others come in 2022 and beyond. Thanks so much.

Arlanda, can we go to the next one?

Absolutely. We'll take our next question from Chris Schott with JP Morgan.

Great. Thanks so much for the questions. I guess first for me was on TIK2. Can you just elaborate a little bit more on the safety profile of the product that you saw in the psoriatic arthritis study? Is there anything that's new to report relative to what you saw with psoriasis, or is it a similar kind of profile that you saw there? And then my second question was coming back to Opdivo and First Line Lung. Just any comments of where you think you can get to from a share perspective given this strong initial launch? And when we think about the ex-US opportunity here, Do we just compare and contrast how you're thinking about that versus the U.S., given the lack of a 227 label ex-U.S.? Thanks so much.

Thank you, Chris. Samit, why don't you start on TIK2, and then Chris can provide some update on TIK2.

Thanks. Chris, thank you for the question for TIK2. As already alluded to a little bit by Giovanni and then Chris earlier, really excited for TIK2 overall. And we've seen the profile, as you saw, in psoriasis in the Phase II study, And we see similar results in terms of trending, in terms of safety, and really looking forward to presenting this data in the next medical conferences. Overall, as we've said, we are excited about the data to be able to now plan the phase three program in psoriatic arthritis and looking forward to the readout towards the end of the year for the psoriasis program for the first study and then the second study in the first quarter of next year. So nothing to report as a differentiation at this time from what we've already known from a safety perspective. So Chris, do you want to take over the up-to-date question?

Sure. Thanks for the question, Chris. So one of the things that we're most pleased about with respect to what we're seeing in the early dynamics in the U.S. is that as we had suspected, physicians are not pigeonholing the dual IO regimen to a specific patient type. In fact, as I mentioned before, we're actually seeing good uptake of the 227 regimen, really across segments, across PD-L1 expression levels, as well as across histologies. What I would say with respect to the patients that have gone on therapy thus far, within the 1 to 49 segment, the patients are generally those who are requesting non-chemo options, or they may be frail patients who can't tolerate chemotherapy. We are seeing some utilization in the greater than 50% population for patients who want or maybe need a more aggressive option than single agent PD-1. And then with the 9LA regimen, we're seeing patients who are young, maybe they're fit patients with severe disease, but they're motivated to have a more aggressive option. So those are the types of patients that we're seeing right now. Importantly, as I think about the opportunity to continue to grow here, again, I think we're going to continue to emphasize the opportunity for dual IO therapy across all patient subtypes. We have not seen as much utilization yet in the PD-L1 negative unknown or untested segment. That's an area where IO is generally under-penetrated, so that's obviously an opportunity with the 9LA regimen. So we think we have a number of opportunities where we can continue to drive utilization across patient segment types in the U.S., Outside of the U.S., obviously, we won't have 227 on label. However, I'd say a couple of things. First of all, the data will be publicly available, and obviously, as appropriate, our medical teams will be engaging on that. The 9LA data, by the time we launch, will obviously continue to mature. That data does provide us an entree into the PD-L1 negatives. So those are some of the dynamics that I think will be at play as we get into the ex-U.S. market. Again, I think we'll continue to update you as we get closer to the timing of that approval.

Perfect. Thanks, Chris. Fernando, I think we're ready for the next one.

Okay. And next, we'll hear from Tim Anderson with Wolf Research.

Thank you. I have a question on the Alice Coast patent ruling. Your press release last night said you expect generics sometime after 2026 but before 2031. I think everyone on the analyst side expects generics around mid-2027, assuming you get pediatric exclusivity. But I'm wondering if that exclusivity could actually extend beyond that based on that press release language. You've done settlements with lots of generic challengers. You've never made any of those terms public. So is there a reasonable possibility that generics don't arrive until something like 2028 or maybe even later? And then on azanamide and ulcerative colitis from the TrueNorth trial, Will there be something differentiating in the data relative to the current in-market competitors besides this just being a different mechanism?

Thank you, Tim. Let me start on Eliquis, and then Samit will provide some comments on TrueNorth. So first of all, let me say we've always been confident in the strength of the IP for Eliquis. And as you alluded to, and just as a background, the IP covering Eliquis is a compositional matter patent which expires in November of 26 with a potential pediatric extension to May 27 and a formulation patent which expires in 31. And we're very pleased with the outcome when the strength of both patents has been confirmed yesterday. So this does mean that there is potentially some extension beyond the 2026 composition of matter patent, obviously if we are successful at maintaining the formulation patent upon appeal. And you are right that we've settled with a number of companies, and the terms of those settlements are confidential.

Thank you. I'll take on the Ozanamod question. Thanks for the question, Tim. I think a couple things to note. Number one, the current treatment pattern for patients with ulcerative colitis primarily is dependent on biologics. And I think there is still an underserved patient population because of the need for additional treatments. And a therapy that is safe, effective, and can actually be delivered orally is going to be important. And then if you recall, the trial actually enrolled patients both who were biologic naive as well as biologic pretreated. there is an opportunity over here for patients to be treated in the prebiologic setting as well. Ziposia, as you've seen from the MS label, is the best-in-class safety profile with the absence of the first dose monitoring, both for the cardiovascular aspect of it and the lack of required broad-based ocular testing in this drug. Now, from the Phase III UC trial perspective, as we look at Ziposia, and obviously the data will be presented in the future, medical meeting. But it has not only met the primary endpoint, but we see very important, very significant results in the secondary endpoints as well, including the improvements in the endoscopic findings, which is very uncommon for many of the drugs out there. And these are very stringent definitions that have been used in the trial. So overall, what I would say is from a safety perspective, as well as from the efficacy perspective, you will see that this drug, which can be given orally, is differentiated, and we are looking forward to the dialogue with the health authorities and agencies for submission. Chris, I wonder if you would like to comment as well.

Sure. The only thing I would add to what you said, Samit, is that remembering you see the unmet need here is really for oral options with efficacy that's comparable to biologics but with a better safety profile than you see with existing biologic agents and JAK inhibitors. There's obviously in this space a lot of competitive noise and the data are going to evolve, and clearly we need to wait for the full TrueNorth data set to be presented, but based on what we know today and the data that we've seen, we feel very good about the Ziposia profile in UC. The efficacy appears to be in line with biologics, but with better safety, and specifically we're not seeing either here or in the MS profile the rates of serious infections or thrombosis or malignancies that have led to black box warnings. for a number of the TNF inhibitors and JAKs. So given the chronic nature of this disease, we think Zipozy is going to have a role to play. It's an oral agent. As you noted, Tim, in your question, it has a unique mechanism of action, which actually is important given the chronic nature of this disease, and it offers a better benefit-risk profile potentially than existing agents.

Thanks, Chris. I think we're ready for the next one, Orlando.

And we'll go to Steve Scala with Cowan.

Thank you. If I can ask three follow-up questions. First on Eloquist, are the settlement dates fixed now, although undisclosed, or in some way are they dependent on the 2031 patent? Secondly, you've said many times that Updivo is likely to return to growth in 2021. Can you clarify, is that for the full year, the second half of 21, the fourth quarter of 21, and is it dependent on adjuvant loan approval? And then lastly on IDASEL, has the FDA indicated that they still plan to review IDASEL in an eight-month review cycle, or have they not said that one way or the other? Thank you.

Thank you, Steve. Let me maybe take the three very quickly. So as I mentioned, the details of those settlements which are complete are confidential. And again, as I said, You know, there is clearly potential for some extension beyond 26. I would say in between 26 and 31, depending on the outcome of the appeal. And I don't think there's anything more that we can say about that. With respect to Opdivo, what we've commented on is that the brand has an opportunity to grow in 2021. We're not really providing quarterly. breakdowns of the growth, but we feel really good about where we are based on the strength of the current business and what Chris has mentioned earlier about first-line lung and the approval potential in first-line renal based on 9ER. And this would be the main driver. I think the only thing we can say for IDASEL is what we've already communicated. We have requested a priority review. but it's obviously the agency's decision to make that comment. Samit, anything?

Yeah, I think in addition to that, we have a breakthrough therapy designation as well. So overall, the agency will take a look at the data itself, which we are really excited about, and then, of course, the overall status of the program that we have. Chris, anything to add on Opdivo?

No, I think you've covered Opdivo well. What we've said is that the trajectory of the growth... will be determined by the adjuvant indications, but we feel very good about the growth opportunities starting in 2021 based on the dynamics I mentioned.

Right. Can we go to the next one, please?

And we'll hear from Kushal Patel with Guggenheim Securities.

Hi, Tim. Thanks so much for your question on behalf of Seamus. So, you know, in terms of the, you know, the reaffirmation of the 2021 EPS guidance, I was just wondering in relation to that how the integration efforts and just expense management in the P&L was progressing and how that might play through in 2021, especially with R&D increasing as, you know, trials ramp up, presumably. And, you know, just pushing pulls for, I guess, the synergies there and then potentially any comments in regards to the elections. And then the second question, just with the cash pile building up, you know, wondering how the team is thinking about, you know, deals in the future, maybe bolt-ons, just any color there would be nice. Thanks.

Thank you. David? Yeah, so thank you for the question on the integration and synergies. Because Giovanni and I both said on the integration side of things, we're really pleased with how quickly everything has gone And we're very fortunate to get the, you know, the vast majority of people in the roles over 90% prior to COVID situation hitting us, which was very fortunate because everybody knew their roles and the reporting relationships. And that really enabled everyone to come together. I think also just having a crisis like this, everyone's working remotely and getting through it and the way everyone's reacted to focus on meeting patient needs and making sure we're getting product at the door. as really I think the cultural integration has sped up. And we've seen that through the surveys we've done from an employee engagement perspective. You also know, you know, on the integration side of things, we mentioned before that we announced all the major sites around the world, and there was a high overlap there. So people know where they're going to be working. So, again, that helps from a cultural aspect. On the synergy side, you know, as I said in my call, things are going very well. We're going to achieve one-third of those next year. I think the team is doing an amazing job. Within a couple weeks after us closing the deal, we got all of our major suppliers together, and we saw about $1 billion of the $2.5 billion coming from third parties. We feel very, very confident in how we're executing against those synergies.

With respect to capital allocation, you had a question. Nothing really has changed with respect to capital allocation. And what I would say is that, as we've said in the past, our priority for capital allocation, the central pillar of that has always been to continue to source external innovation through business development. So that's very much a priority for us. And as you know, we look at business development from the perspective of deals that are sort of aligned strategically with the therapeutic areas we know well where there is a potential for breakthrough science and obviously we're disciplined from a financial perspective. So we're very active looking at potential deals across the board to strengthen our discovery platform, increase the number of collaborations we have and pretty much across the board. So you are right that our financial positions continues to strengthen. and business development remains an area of focus for us. Thanks, Giovanni.

Rolando, could we go to the next one, please?

Yes, we'll hear from Andrew Baum with Citi. Thank you. A couple of questions, please.

Firstly to Giovanni, could you give us the true level of concern in the industry, but also in Bristol regarding the president's executive order on most favored nations, IPI, that you referred to in your opening comments. Ostensibly, it would seem that the requirement for having a favorable CBO score and the HHS being able to validate that is a requirement which doesn't seem likely given what happened last time. So what is the real risk that that changes and therefore this proposal has legs I'm just trying to understand how real the threat is and whether something has changed and we shouldn't be quite as relaxed as we are given the last time around. Second, perhaps Sumit could talk to some of the forthcoming data at ESMO. You have a deep tranche of immuno-oncology agents, CCR25, IL-8, among others. What data will we see at ESMO? And then finally, just on the COVID impact for Eliquis, ex-US, particularly in Europe, where obviously there's a delay in reimbursement. How much scope do you see for NOAC market share increases as a function of COVID and trying to keep patients out of medical centers from getting their INR measures? Thank you.

Sure. So let me start on government-related issues. Samit will cover ESMO, and then Chris maybe can can give you some insights into your question on demand. So first of all, let me say, Andrew, I think it's really early to provide any more granular assessment. As you know, we have not seen the IPI executive order yet. And so with respect to that, there is some level of uncertainty with respect to really what is in the order and and what a path to implementation may be. I want to say again what I said in my opening remarks. We feel very strongly that it is not the right direction for the U.S. to go. I think our view is shared and not just across the industry, but providers and patients' associations and other policy stakeholders are aligned with our view. I think the solution to patient affordability issues in the U.S. is to work on patient affordability issues. It is really not to import models and pricing labels that are not working internationally into the U.S. And quite frankly, the IPI doesn't do as much for patients as we should be doing for patients. So our industry continues to be really open to discussing different types of solutions with the administration that would help patients more, but also would enable us to continue to invest in innovation. I think that's really important at a time in which everybody understands the importance of our industry, which quite frankly is primarily a U.S. industry in fighting disease. The impact of IPI in the version at least we knew would be extremely significant on our industry and the ability to continue to invest in innovation. We hope that we are able to move into directions that are better for patients in the U.S. From our perspective, when you think about our portfolio, it's clearly much more differentiated today than it was in the past across multiple segments. When you look at our sales, it's about 40% internationally and 60% in the U.S. Part B, just the As a reference point, it's about 15% of our business. With respect to your question about the rebate rule, I think we would have to see how HHS goes about really thinking about the various sort of implications of a rebate rule and assess what the cost of that would be versus the benefits. So I'm not sure I can really speculate on how that would be certified and whether the issues that were raised in the previous version would even be an issue at all at this point. I think that's as much as I know at this point.

Samit? Thank you. Thanks, Andrew, for the question on ESMO. I think the way to look at it is there are several presentations are data that are being presented as more primarily from the phase one studies and some updates. But the most important one to focus on would be Checkmate 9-ER for renal cell cancer because that certainly is a differentiating therapy. And as Chris mentioned earlier, as well as you heard in the other comments in earlier presentations, inclusive of all subtypes are both and inclusive of the favorable risk population, which is currently not covered through our data in the dual IO setting. There will also be that update on the dual IO with a four-year follow-up for that study. So those two are going to be key as they provide a better way to look at treatment for patients with renal cell cancer with the dual IO. And then, of course, we're looking at potentially getting the 9ER approval later. And so that will certainly provide an additional way to treat these patients from a safe and effective medicines perspective. There was a third question.

Yeah, so thanks, Andrew, for the question on Eloquus. So let me just say at the outset that fundamentals for Eloquus remain very strong both in the U.S. and ex-U.S. We're the number one OAC in 12 markets now globally. We're the number two in five additional markets. And the fundamentals, again, are very strong. With respect to COVID impact, There are really two things that are at play. As David mentioned, there's an inventory workdown of the inventory build that we saw in Q1. That's the largest COVID impact that we've seen for the quarter. That's mainly been in the U.S., though not exclusively, but the main impact was in the U.S. And then there's been a smaller impact on demand, and that's reflective of the fact that the OAC market has been impacted by new patient volumes that have come down The negative impact was most significant in April. It's begun to recover. We've really not seen an impact on total patient volumes. As you note, one of the potential upsides for Eliquis has been, first of all, that Eliquis has been disproportionately unaffected by COVID relative to other players. And then secondarily, we have seen, as you alluded to, in a number of markets, the desire to try to keep patients out of hospitals and institutions, and that's impacted Warfarin share. So we've seen a decrease in Warfarin share from about 16% at the end of the first quarter to about 14% in June, and that's reflective of We think new patients initiating on DOACs as opposed to Warfarin, as you allude to, unlike Warfarin, DOACs don't require extensive monitoring or dose adjustments. And so as a result, we've seen some IDNs and a number of governments seek to reduce exposure of those patients. And Eloquus has disproportionately picked up that share loss. So that's certainly been an opportunity coming out of COVID.

Thanks, Chris. Let's go to the next one.

And we'll hear from Naveen Jacob with UBS.

Hi, thanks for taking my question. Can you hear me okay? Yes, yes, Naveen. Perfect, thanks. Just a few, if I may, on Reblazil, a strong quarter, wondering how much inventory bill there was relative to demand. And if you could remind us about the timing of the first-line MDS study readout. Are there any interim analyses that could happen there? earlier than the final look, and then also the timing of the MF study, please. And then just a question on your early stage pipeline. I think you recently moved your LPA antagonist into phase two for IPF. Wondering if you could discuss any kind of activity that you may have seen in phase 1B that moved that decision to move that asset into phase two.

Thank you, Navin. Why don't we ask Nadim to start, and then Samit will cover a couple of your pipeline-related questions.

Great. Navin, thanks for your question. So one thing I do want to reiterate that you heard earlier, overall, we're very encouraged by the launch of WebLazil, and especially the ability of our commercial teams to pivot to a virtual launch. And we have seen good early adoption so far, especially, and I think some key factors here are the significant unmet need in MDS, especially in ESA refractory patients, the unique mechanism of action of RevlaZone. Of course, our field teams that have very good experience and knowledge of MDS and the relationships of MDS prescribers has allowed us to get that access. And we have good access with payers now that we have a permanent J-code since July. So, Coming back to your question, Naveen, there are some kind of short-term dynamics here, partly COVID and the impact of blood shortage. On your specific question about inventory, this is a product that's shipped directly to our customers and sites, so that isn't really in play here. The one area that could be a little bit in play here is, of course, with a new treatment addressing a significant unmet need, you do get a pent-up demand for with new oncology agents. So there likely is somewhat of a bolus effect going on. But as I said, we're very pleased with the progress so far, and the team's focused on both new patient initiation as well as patient persistence. And what we're seeing is encouraging. We're seeing new patients continue to initiate, and we're seeing most patients go on to receive their second and third treatment. Customer feedback remains very good. Brand awareness is high, driven by our field teams. So we are encouraged, but as I said earlier, there is a little bit of a bolus effect too, so we'll see how that dynamic continues to play out through the rest of the year, but very pleased with the progress so far. Samit?

Yeah, thank you. From the command study perspective, it's a phase three study, as you know, in the first line setting, which includes both RS negative and RS positive patients, and that study is currently enrolling. We're looking at readout coming in 2022, late 2022 timeframe. The myelofibrosis study is just starting off, so that will take a little while to get going, and we'll obviously provide the timelines again 2022 and beyond. For the interstitial pulmonary fibrosis side, as you are aware, we had presented the data and published the data in IPF as well, where we'd seen interesting results where the side effects were there for the blood pressure effects as well. So we are now investigating in the phase two study, looking at seeing what we can do in terms of management of the side effect, and the molecule is going to be investigated there, which will then decide how we proceed further with that molecule into a later stage trials, but we have to wait to see the data when it reads out.

Great, I think we've got time maybe for one very last quick question, Rolando.

All right, we'll get that question from Matt Phipps with William Blair.

Thanks for taking my questions. Just ahead of the ESMO presentation of the 9ER data, can you remind us on your positioning of that regimen in RCC? Do you think it can meaningfully grow Opdivo total sales in RCC, or is it really more going to just shore up Opdivo across the different regimens? And then just a quick second one, you know, with some of the COVID-related impacts on infusion center access, have you all thought about accelerating timelines for subcutaneous Opdivo Looks like you recently started another trial that combines Cephiofivo and Uribo. Thanks.

Thank you, Matt.

Sorry, Giovanni. Yeah, maybe I'll start with renal cell. So just the baseline of where the business is today, Matt, is that market share is roughly unchanged from – The last quarter, our overall share of Opdivo, Yervo, and first-line renal is between 30% and 35% on the upper end of that for our labeled indication. And then, importantly, we are under-penetrated, as you would expect, in the favorable patient population, which is currently off-label. And the way we're thinking about 9ER is, first of all, we're very happy with the data that we've seen both on OS and PFS. We're also very encouraged by the safety profile. And so as we think about positioning this agent, while it's still early days and we need to see the full data set being presented, we think these data provide a very compelling opportunity with respect to existing IoTKI options. So there's a clear opportunity, we think, to drive share from existing IoTKI regimens in this space. TKI monotherapy is still a fairly sizable percentage of first-line use. It's about 30% in first-line today, mostly in the favorable population. We think that's an opportunity for us as well, because remember, 9ER, was conducted across risk status as well as it included the favorable patient population. So we think there's a real opportunity for us to continue to drive share in that population as well. And so, you know, I think that the last thing I would say about the opportunity we have here is if you remember our position in renal cell, we have both monotherapy in the second line setting. We have Opdivo and Uruguay in first line. And this gives us another option with IO plus TKI. In fact, we'll be the only company with that many different modalities at play. And so we think we're going to have a very strong position with 9ER in first line. It's going to be an important opportunity for us to continue to grow the brand starting in 2021 when it's approved.

Yeah, thank you, Chris. And when it comes to sub-Q development, so we are continuously working on that and making good progress on that and looking forward to the readouts of the Phase I study where we're looking at the PK parameters where we'll be able to then compare it to the IV parameters and then plan on the next stage of development in concert with our communications with the health agencies.

Thank you. Thank you, and thanks, everyone. Thanks for participating in the call. In closing, let me just... say again, we had a very successful quarter. I'm very proud of how our teams have executed despite the challenges of the pandemic. We advanced our pipeline. We delivered strong commercial execution. We've continued to supply our medicines to patients, and we are very well positioned for the future. Our pipeline has increased potential to transform patients' lives through our science. Thanks, everyone, for participating in the call, and as always, our team will be available to answer any other questions you may have. Thank you.

And ladies and gentlemen, that does conclude today's call. We thank you for your participation. You may now disconnect.