Bristol-Myers Squibb Company

and welcome to the Bristol Myers Squibb 2020 fourth 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, Lauren, and good morning, everyone. Thanks for joining us today for our fourth quarter 2020 earnings call. Joining me this morning with prepared remarks, as usual, are Giovanni Coforio, our Board Chair and Chief Executive Officer, and David Elkins, our Chief Financial Officer. And also taking part in today's call are Chris Burner, our Chief Commercialisation Officer, and Sonia Herawat, our Chief Medical Officer and Head of Global Drug Development. You'll note that we've posted slides to bms.com that you can use to follow along with for Giovanni and David's remarks. But before we get started, let me read our forward-looking statements. During today's call, we'll make statements about the company's future plans and prospects to 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 findings. 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 were adjusted to include certain specified items. Reconciliations of those non-GAAP financial measures, the most comparable GAAP measures, are available at bms.com. With that, let me hand over to Giovanni.

Thank you, Tim, and good morning, everyone. I hope you're all staying safe and healthy. I want to open by saying I'm really proud of what we accomplished in 2020. Our teams executed well commercially, advanced our pipeline, kept our integration efforts ahead of schedule and executed important business development activities. We did this while managing through the complexities of the pandemic, keeping our teams safe and our patients at the center of everything we do. Turning to slide four. In Q4, we delivered another strong quarter. commercial performance was strong, with sales increasing 10% compared to pro forma sales for the same period in the prior year. And we made significant progress to advance our pipeline. Of note, we continue to make progress with our launches, including good momentum for Opdivo Plus Hervo in first-line land, which supports our confidence in a return to growth of Opdivo this year. Reblozil, which has seen a strong launch with rapid adoption in MDS. Ciposia, which is well positioned as the S1P modulator of choice in multiple sclerosis. And Onureg, which is the only oral option with an overall survival benefit in first-line AML response maintenance. We closed the acquisition of Myocardium, bringing us Mavacantin and strengthening our existing presence in cardiovascular. During the quarter, we also continued to advance our pipeline, including regulatory filings and approvals in our I.O., immunology, and hematology portfolio, most recently with positive top-line results for Ducrevacitinib in psoriasis. We demonstrated strong financial results, enabling an increased non-GAAP earnings per share outlook for 2021. As you will have just seen, we have entered into a licensing arrangement with Rockefeller University for the development of a dual antibody combination for the treatment of COVID-19. Though early, we believe this treatment could be differentiated with the potential for low-dose subcutaneous administration. We are pleased to partner with Rockefeller University and leverage our expertise in antibody technology and strength in development, manufacturing, and distribution. to bring this potential option to patients. Moving to slide five, let me put the performance from the quarter and full year 2020 into context. Thanks to excellent execution throughout the year, we have continued to deliver on all value drivers of the Celgene acquisition and laid a strong foundation for future growth of our new company. we are well positioned to accelerate the renewal of our portfolio and support the long-term growth of our business. Last month at JP Morgan, I shared why I have confidence in the future of Bristol Myers Squibb. The integration of Celgene has gone very well. Based on progress last year, we now expect total synergies to be close to 3 billion by the end of 2022. We have proven commercial capabilities, which enable us to fully realize the opportunities to grow our inline portfolio and support strong execution of our launches. The breadth and depth of our late-stage pipeline is reflected in the significant number of milestones delivered last year. Finally, our financial strength makes it possible for us to continue to invest in future growth, internally and externally through business development. Now turning to slide six. Overall, we are in a strong position to unlock the potential of the company we planned to build when we acquired Celgene. We're building a company with a younger, more diversified portfolio of medicines, better positioned in the second half of the decade. Let me remind you where we believe we are heading. We are confident we can more than offset the impact of near-term target expiries, including revenue. We expect to grow our revenue and earnings through 2025. We'd love to meet single-digit revenue for 2025, driven by the significant growth potential of our continuing business, which is comprised of our inline growth drivers and our launch brands. We see strong momentum for this portfolio, which excludes Revlimid and Pomalyst, with low double-digit revenue CAGR during the same period. Looking out to 2025, we expect the continuing business will represent approximately 90% of the company, with 30% of that revenue from our newly launched products. Importantly, looking out to the second half of the decade on slide 7, we have multiple sources of portfolio renewal. Our recently launched products will continue to grow. Most have significant expansion opportunities beyond the launch indication. We have a rich mid to late stage pipeline with assets such as our factor 11a inhibitor and our multiple myeloma cell bonds, iberdomide and CC92-480. We will continue to advance our diverse early R&D portfolio and further invest in business development opportunities, just as we have done with Myocardia. We believe we can achieve this while maintaining very strong profitability with operating margins expected in the low to mid-40s. Turning to our execution scorecard on slide 8. At J.P. Morgan, I outlined several important milestones that would support our success. And as mentioned, we've already delivered on a number of those. Obdivo plus Cabo was recently approved by the FDA for patients with first-line RCC. This week, we delivered the second positive phase 3 for Ducravacitinib in plaque psoriasis. supporting the filing of this potential new therapy to help authorities in the near term. Ziposia was filed for the treatment of ulcerative colitis in the US, and we look forward to launching that indication later this year. Moving to slide nine, as we think about this year, based on the strength of our business and the exciting opportunities ahead, we are increasing our long gap earnings per share guidance for 21. David will provide more details on the financials, but let me offer some perspective on key areas of focus in 2021. Commercially, we expect revenue growth across key businesses, driven in large part by the continued execution of our recent launches, of Vivo's return to growth, and Eliquis. We will continue to advance our pipeline and have important milestones ahead this year. such as Phyla in Markhampton, Phase II data for Factor XIa, proof-of-concept data for Ducravacidinib in ulcerative colitis, and initial data for ibergamide in refractory multiple myeloma. We will maintain a balanced approach to capital allocation. Disciplined business development is a top priority and provides an opportunity to further invest in future growth. David will provide more color on our consistent approach to capital allocation in a few minutes. This year, we also anticipate the U.S. policy environment will continue to evolve, and I'm confident the diversification of our portfolio will help us navigate potential changes. We agree that patient affordability needs to be improved, and we are supportive of policies that can address these issues. We look forward to working with the new administration and congressional leaders to foster an environment that supports innovation and enhances patient access to medicines. To close, I am encouraged by the strength and momentum across the company. Across our four key therapeutic areas of hematology, oncology, cardiovascular and immunology, we have leading inline medicines. significant short-term launch opportunities and a rich pipeline. Our diversified portfolio and leading position in each business allows us to be less dependent on any one product or business. I'm also immensely proud of our employees. Their talent is second to none and their commitment is inspiring. I feel very good about the future of Bristol Myers Squibb and the potential that lies before us. I will now hand it over to David to walk you through the financials.

David? Thank you, Giovanni, and hello, everyone, and thanks again for joining our call today. To turn to slide 11, I'd like to discuss our robust top-line performance for the quarter. Our teams continue to operate well in a virtual environment, delivering very strong quarterly and four-year results. For the fourth quarter, revenues grew 10% on a performant basis versus prior year. reflecting strong execution across the world. During the quarter, we also saw approximately $250 million of favorable inventory build versus the third quarter, primarily driven by Eloquus and Revlimid, as well as a 2% favorable impact from foreign exchange. Full-year revenues were equally strong and reflect the performer growth of 7%. I'll now provide additional color on the performance of our key brands and new launches. Now, starting with Eloquence on slide 12, global sales continued to perform very well, growing double digits for both the fourth quarter and the full year. In the U.S., fourth quarter sales increased 6 percent versus prior year, driven by robust 17 percent TRX growth, and an inventory build partially offset by expected higher gross to net impact from the coverage gap. Inventory build versus prior quarter was approximately $100 million. Though we saw total new scripts for oral anticoagulants declining during last year due to COVID, we are starting to see naive volumes return to pre-COVID levels. Internationally, sales remain strong with revenue of approximately $1 billion, growing 19% versus prior year. Eloquence continues to be the number one NOAC in multiple key markets internationally, including Germany, France, and the U.K. Both in the U.S. and internationally, we believe that the growth outlook for Elk West remains strong as we continue to grow the oral anticoagulant class, as well as increasing our share within the class. Turning to slide 13, global sales of Updivo grew 2% in the fourth quarter versus prior year, primarily driven by strong growth in international markets. In the U.S., the teams continue to execute well, largely through remote engagements. During the fourth quarter, we saw an expected unwind of favorable inventory we discussed last quarter. Importantly, our first-line lung cancer continues to go very well, with our share now in the low double-digit range. This is visible by the strong 20% sales growth of year-avoidant quarter versus prior year. We continue to work through the pressure of our second-line indication, which is stabilizing, and now starting to be balanced out by the momentum we're building in first-line lungs. we remain very confident in the return to growth for Opdivo in the U.S. this year. We expect continued growth in first-line lung, combined with launches and additional indications, including first-line renal with the recent approval of Opdivo plus Cabo, and the opportunity to be the first IO agent in first-line gastric, as well as several new adjuvant launches. Internationally, we continue to see strong commercial execution with growth primarily driven by first-line melanoma and RCC as we continue to secure reimbursement around the world. We are pleased with the recent Japanese approvals and the launch in first-line long with a broad label in all comers, as well as the EU approval of 9LA, and we will be working on securing reimbursements in various countries throughout 2021. Now moving to our in-line multiple myeloma portfolio on slide 14. Revlimid and Pomlox continue to perform very well with strong double-digit quarterly growth on a performant basis. Globally, Revlimid grew 18 percent, primarily driven by continued increase in treatment duration. In the U.S., fourth quarter revenues increased 15 percent, primarily driven by solid demand and inventory build compared to prior year. The inventory build versus prior quarter was approximately $100 million, and we expect this inventory build to reverse in the first quarter. Outside the U.S., revenues were strong, with growth of 24 percent in the fourth quarter versus prior year, due to growth in the triple combination, which includes new reimbursement for RVD in several countries. We should note that this strong revenue growth included an earlier-than-expected tender of approximately $80 million. POMELA's global performance revenues continue to reflect significant growth, up 21 percent, In the U.S., performer revenues increased 18% and internationally up 27%, driven by increased usage in earlier lines and longer treatment durations. As we look to the first quarter of 2021, our InVid portfolio, in addition to the Inventory Bill of the U.S., I would like to remind you of the typical seasonality of Revlimid and Pomlis experience due to patients entering the Medicare coverage gap earlier in the year. Now, moving on to our recent launches on 5-15. Our new launches contributed just over $300 million in 2020. Revizel is off to a great start with global revenues in the year of $274 million. In the U.S., we experienced significant pent-up demand from the MDS launch in Q2 and Q3. And during the fourth quarter, we began to see expected evolution from the original bolus to true underlying demand. We continue to expect growth through new patient starts early in their treatment journey. Internationally, Initial launches in Germany and Austria are going very well. We continue our launches in various markets globally over the course of 2021 as we receive reimbursement. Now turning to Soposia, strong commercial access has been secured with greater than 90 percent of U.S. commercial lives covered. We remain focused on driving demand and establishing Soposia as the leading S1P modulator in multiple sclerosis. Outside U.S., we have now launched in Germany, Switzerland, Canada, the Netherlands, and Norway, and we'll continue to secure reimbursement in other markets throughout the year. In addition to our MS launch, we now have a Biduza date for Supposia NUC in May, and look forward to building momentum of this differentiated medicine. And MAA has been validated in Europe, and we will work with European health authorities to bring this medicine to patients as soon as possible. Moving on to Onureg. Initial feedback from physicians has been very positive in establishing Onurag as the first and only oral treatment to demonstrate an overall survival benefit for first-line AML maintenance patients. With the data now published in the New England Journal of Medicine, we are focusing on educating physicians on this new maintenance therapy for patients. The MAA remains under review in the EU with approval expected this year. Now moving to our balance sheet and capital allocation on slide 16, you'll see we continue to generate a significant amount of cash flow from operations of approximately $3.4 billion in the fourth quarter. We ended the quarter in a strong liquidity position with approximately $16 billion in cash and marketable securities. Our capital allocation priorities are unchanged. Business development remains top priority. We're committed to reducing our debt and returning capital to shareholders. With respect to business development, we plan to focus on strengthening our pipeline on mid-size, bulk-owned deals that further strengthen the company into the second half of the decade. We will remain disciplined with respected deals that we execute and consistent with our criteria of being strategically aligned, scientifically sound, and financially attractive. As it relates to reducing debt, we will continue to be focused on this, further strengthening our ability to invest for growth. This morning, we announced a debt reduction transaction of up to $4 billion. Based on the bonds we are targeting, we still expect to see our leverage ratio reduced by one and a half times debt to EBITDA in 24. Importantly, we are committed to a strong investment grade credit rating, which is apparent through our willingness to use excess cash to proactively accelerate debt reduction. Lastly, we're committed to returning capital shareholders to continued dividend growth and share repurchases. We have increased our dividend for the 12th consecutive year, and recently increased our share repurchase authorization with plans to execute a total of 3 to 4 billion in share repurchases by the end of this year. Now, let's turn to our guidance for 2021 on slide 17. Let me start by giving a quick update on our synergies. As Giovanni mentioned, the integration has gone very well, and we increased our total expected synergies to approximately $3 billion by the end of 22. We achieved about $1.4 billion in 2020 and expect the remaining synergy capture to be split evenly through this year and in 2022. With that in mind, and considering the momentum we saw in the business in 2020, we've increased our non-GAAP diluted EPS guidance for 2021. Now, touching on our non-GAAP expectation and constant exchange rates, we expect high single-digit revenue growth over 2020 based on the strength of our inline products and the launches we are executing. We expect to sustain a high enterprise gross margin of approximately 80.5%. Now, I want to take a moment to touch on MS&A. In 2020, we had the opportunity to make a number of incremental and accelerated investments to support our prioritized brands and product launches. Also, with COVID recovery and higher expenses due to myocardia are reflected. For 2021, we expect MS&A to increase in the low single digit as we invest in our launches and include the full year spend for myocardium. We expect mid single digit increase in R&D as we invest behind a robust pipeline, COVID recovery plans and preclinical and clinical studies and incorporate spend of myocardium. We expect our tax rate to remain about 16%. And finally, based on the strength and the momentum in the business, we are now increasing our non-GAAP 2021 diluted EPS to $7.35 to $7.55. I would also like to provide some color on OI&E and share count. It's likely we'll see realty income and net interest expense to roughly offset each other in 2021, resulting in net neutral OI&E. Regarding our share count, we ended 2020 with approximately $2.3 billion shares outstanding which will decrease based upon the three to four billion repurchase activity we're planning in the year now before we move on the q a session i want to thank our teams around the world for delivering such outstanding results in 2020. these results demonstrate a resiliency of our portfolio and position as well for strong growth in 2021 and into the future i'll now turn the call back over to tim and giovanni for q a thanks very much david

Lauren, can we go to our first question, please?

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star 1 to ask a question. Our first question comes from Jeff Meacham with Bank of America.

Morning, guys. Thanks for the question. Just have two quick ones. For Chris, when you look at the new launches on slide 15, obviously, these are a big part of the LOE offset over time. So the question is, what do you see as the tipping point in demand for these three products? And how should we think about initial adoption for LysoCell and IdaCell later this year? And then development question for Ducrevacitinib. Just wanted to get your thoughts on safety tolerability. Not having a black box will obviously be a big commercial driver, but it's possible that recent safety data for Zalgents and a somewhat related mechanism could directly impact you guys. I want to get your thoughts on that. Thank you.

Sure. Let me start with the question on the tipping point and then also your question with respect to Lyfacel. And maybe I'll start with the question on Lyfacel and how we're thinking about the launch there. We're obviously very excited about the opportunity to launch Lyfacel in DOBCL. We expect that imminently. We are obviously going to be very much focused on ensuring at launch that sites are activated very quickly, that we're able to get patients efficiently moved on to therapy. And then, as we've stated repeatedly, really the tipping point with respect to Brianzi is going to be our ability to continue to expand the car team market by driving referrals and expanding the site footprint, and then ultimately being able to leverage what we believe to be a differentiated product profile in order to drive brand share. And so that's going to be very important. And a similar story will be for Idazel, where obviously we have a very strong position in multiple myeloma to leverage. With respect to staying in hematology of the three products that were on the slide, Weblazil, Obviously, Revlozil is off to a very good start. We're very pleased with the launch so far. The execution for this product has gone very well, and we continue to believe that Revlozil is going to play a very important role in both MDS and beta thalassemia. As we look at where the launch is at this point, we think thus far we've had very good demand. Some of that demand, frankly, has been pent up. And as we get into the first quarter and certainly into this year, we think we'll be tapping into the true underlying demand. But we continue to see real opportunity to grow this brand both in its labeled indication as well as potentially to expand into the first-line ESA-9E with the command studies and ultimately potentially into MF. And then for Onureg, Onureg is obviously off to a very good start. As David mentioned, there remains a very high unmet need for patients in first-line AML who've achieved the CR post-intensive chemo but aren't candidates for stem cell. We believe that really the opportunity here is going to be to continue to drive the benefit that we see from an overall survival standpoint with Onureg. But importantly, this is a market where there is no established treatment approach in AML maintenance. So what we're going to have to do is continue to build that market and convince physicians that it's a new paradigm to treat these patients and that there's a real urgency to treat. And then finally, to pick up on the question on Ziposia, we are very pleased with what we have seen with the opportunity for Ziposia, not only in MS, but particularly in IBD. The MS launch, we think, is going well in spite of the situation with COVID. We've seen good uptake from physicians in terms of willingness to prescribe. Importantly, the percentage of physicians who now believe that Zipposia is the best S1P is very much on track with what we had hoped for. And given the data that we saw with True North, we think there's considerable opportunity for us to drive business there as well. So very excited about the opportunity with Zipposia. Maybe I'll turn it over to Sumit.

Thanks, Chris, and thanks for the question. Let me just start first by saying that for our TIK2 inhibitor, this is not a JAK inhibitor. And the reason I say that is because of the specificity and selectivity in terms of targeting TIK2 downstream inhibition of IL-12, IL-23, and intracranial alpha, which leads to a profile that is differentiated. We do not see the signal of LAD abnormalities that are generally associated with JAK inhibitors. We do not see the signals for VTEs that are generally associated with JAK inhibitors. What we have are two very well-conducted phase three trials showing remarkable efficacy. We are very pleased with the data that we've seen, meaning the primary and secondary endpoints. And we are now looking forward to the data evolving, as Giovanni mentioned on one of the slides, in the next generation of trials that are ongoing in IBD, SLE, and beyond. So we're looking forward to the readout of those trials and very pleased where we stand.

Thanks so much. Lauren, can we go to the next question, please?

Our next question comes from Terrence Flynn with Goldman Sachs.

Great. Thanks for taking the question. I just – maybe two parts. First, on Opdivo, Chris, was just wondering if you can help us think about the cadence of contribution from some of the new approvals, so Checkmate 9ER, and then maybe on the adjuvant side, when we could start seeing some pull-through there. Is this more the growth going to be weighted to the second half of the year? And then on Factor 11A Summit, maybe you could just opine here on kind of what you're hoping to see on the profile from the initial –

phase two trial uh later this year thank you let me start terence and then i'll turn it over to summit so yeah so we're we're excited for the outlook for audivo um as was mentioned earlier in the call we do see um continued confidence that octiva is going to return to growth in 2021 and contribute meaningfully as part of the io franchise to company growth beyond that What I would say to answer your question on 9ER is, first of all, 9ER needs to be put within the context of, first of all, a very stable business that we're starting to see in the U.S., a strong business, as you saw in the numbers in Q4, ex-U.S. And then, as David mentioned, we've seen good uptake in the first-line long launch in the U.S., and it's still very early days outside of the U.S., We do see that there is a nice opportunity with 9ER and first-line renal, again, as we talked about. We've got an established footprint with Adivo plus Uroboi there, and we think that by giving us the opportunity to combine with what we believe to be a best-in-class TKI with Cabo, there's opportunity to grow that business, particularly as we think about getting into the favorable patient population. Still very early days since we were just approved on the 22nd, And then with respect to the additional opportunities, as you know, we have de-risk launch opportunities with gastric cancer in the first-line metastatic space as well as in the adjuvant space as well as with adjuvant bladder. We do think that those are going to be more indexed to the latter half of this year and then as we get into 2022 in terms of their contribution to growth. Maybe with that, I'll turn it over to Sumit.

Thanks, Chris, and thanks, Terence, for the question. For Factor XIa, we expect to have the data from the first of the two proof-of-concept studies that are ongoing, the first one being in the total replacement population. And there, we did a dose-changing study, and we are evaluating safety and efficacy of the overall Factor XIa single agent versus enoxaparin administrative contingency for these subjects. So what we're trying to see is the profile that emerges from a bleeding perspective, whether we can have a similar or better efficacy with less bleeding. More importantly, then, there will be the second study next year looking at the combination with the background therapy of the antiplatelet agents, where, again, it is very important to notice that profile, what impact it will have on bleeding. And if you are able to combine, then it opens up additional indications that we can pursue going forward. So those are the two things that we'll be watching out for defining the dose, looking at the safety, and, of course, efficacy will also be a point to review. Thank you.

Can we go to the next question, please, Lauren?

Our next question comes from Seamus Fernandez with Guggenheim.

Seamus, are you on mute?

We'll take our next question. That'll come from Steve Scala with Cowan.

Thank you. I have two questions. First, on TIK2, will Bristol conduct a large, long-term cardiovascular outcomes trial to fully convince physicians that there is no CV risk? And if not, why not? Bristol's view is clear, but prescribers don't seem convinced. And then on Opdivo, does Bristol see any risk from potential new PD-1 entrants, such as Lillie's Tyvid or Novartis' Tizolizumab, or now the Junshu coherence antibody, I assume their primary angle will be price. So what is the risk from that? Thank you very much.

Maybe I can start off, Steve, with the first question on the Covascinib. So we have just had the readout of the first phase three studies in psoriasis. Certainly, data will continue to evolve as we look at the long-term extension studies from psoriasis. We will continue to follow these. We have additional indications ongoing. We do not see the profile that has been described for JAK inhibitors from a MACE perspective, VTE perspective, et cetera. We'll have to continue to evaluate. We'll have the discussions with the prescribers, with the health authorities, in order to understand what profile is it that we need to further investigate. This is not a commercialized drug yet. So in terms of talking about whether the prescribers are convinced or not, I think that is still got to be further evaluated when we are able to present the data and share that profile fully with the community and hear their perspective with the data in hand. So I think it's too early to define what additional studies to be conducted, and we'll continue to follow that very closely.

Let me pick up on the question on any risk from new entrants on PD-1, and particularly the concern about price. So, first of all, we watch the competitive dynamics of the PD-L1 marketplace extremely carefully, as you can imagine. Something that we've been looking at considerably has been the question of commoditization. That's been with us really since we were approved with Updivo. From a U.S. standpoint, we actually don't see considerable risk from these new entrants, in part driven by a number of factors. First, oncology continues to be a very data-driven field in the U.S., and so we've got a wealth of data covering both Adivo and Urovoid, which gives us confidence. Second, we've established a very strong position across tumors And, of course, we've built very significant capabilities to operate in a competitive context, and I think we're demonstrating that now in both renal cell and lung cancer, for example. XUS, again, it's something that we're going to continue to stay very focused on. We see that in some markets you may see some risk of commoditization, but those tend to be relatively small markets for us. But in general, I would say we're very confident with our competitive position. We don't see meaningful risk with respect to commoditization from where we sit today. But it's something we'll continue to monitor.

Thanks, Chris. Lauren, can we go to the next one, please?

We'll take our next question from Seamus Fernandes with Guggenheim.

Oh, thanks. Sorry about that. So why don't we just kind of walk through this strategy in multiple myeloma, given the number of mechanisms that you guys have in play and how you see the market evolving. Chris, you know, I think, you know, this is likely falling under your auspices more so than anything. So I was just wondering if you could help us understand how you see the treatment of multiple myeloma evolving amidst the, you know, transition away from or towards relevant generics. Obviously, there's lots of opportunities out there by specific cell therapy and your sell mods? Is this simply about segmenting the market? Or do you see transformational opportunities for potential internal combinations? And then a bigger picture question for Giovanni. Giovanni, you know we're continuing to see um a lot of activity on the bd front um from your team as we think about the uh uh the next sort of leg of opportunities um are you most focused on you know sort of phase two three opportunities um and again continuing to build out the pipeline in that regard uh is it more additional legs to the stool just trying to more fully understand how you're continuing to focus your efforts on enhancing the pipeline and growing and returning the company, or not returning the company to growth, but extending the growth profile post-2025.

Thank you for the question, Samit. I mean, we start with the R&D aspect of multiple myeloma strategy, and then certainly Chris can fill in the commercial aspects of it. So as you know, beyond the MS, there are four classes of medicines that are being developed in multiple myeloma primarily. Cell therapies, certainly the ADC that has recently been approved and more to follow. There are the cell mods, and then there are going to be the combinations as you have also talked about. Then right now, what we're trying to do is to get to a stage where this disease, which is incurable, and in patients who are heavily pre-treated, are in the fourth-line plots where progression-free survival remains very low with a response rate of 30% or so. We're trying to transform that disease. So from that perspective, cell therapies are going to play a major role, and that's where iB cell is coming in to begin with, where we have shown the data, we've shown the overall response rate, we've shown the very durable and deep responses, and a very manageable safety profile. As we look towards the next generation of molecules, whether they're T-cell engagers or cell models or ADPs, T-cell engagers are going to be also very important. And as we've spoken about earlier, there could be patients who may not be able to receive cell therapies and would be more appropriate in terms of being treated through the pre-cell invaders. Of course, there are challenges right now with the formulation that we have available. We've seen data from multiple companies coming up showing that IV administration is associated well with good efficacy. There are challenges in terms of finding the right dose of administration schedule from a safety perspective. So we have to be careful in terms of how we go forward with that. And so certainly many others and we are now investigating subcutaneous formulation where it seems early data from other presentations that we've seen that the efficacy can be maintained. Of course, safety will be continuing to be evaluated. There are small numbers right now that seems to go in the right direction. Third part is the cell mods, and that's where we will show the first of the expansion data later this year. And depending on what the durability and the magnitude of the response are, we might have an opportunity to convey that to the authorities and have a discussion of how to bring it forward. But from a strategic point of view, higher level, how to move these forward, the next stage of development is definitely going to be combinations. We've shown some of the data already. If we talk about Iberdomyte, for example, data at ASH showed us high response rates when combined with desalivar and dexamethasone as well as valcade with dexamethasone. So those are the strategies moving forward in the earlier lines. We are, in a similar way, going to be investigating combinations with IDCell. And as the data evolves with the T cell engager, we look for combinations. The ultimate goal is to move cell mods much earlier in line so that we can have the comparisons versus image to be able to ultimately replace them in the longer run. And then, of course, try to move the other modalities also further up in line. But ultimately, yes, there will be segmentation of patients. Some may receive cell therapy, some may receive T-cell engagers, and there could still be an opportunity for sequencing of these modalities. Chris, do you want to add something?

Actually, I think some of you covered most of it. The only things I would add is, obviously, as Revlimid and Pomelis go generic, our focus is going to continue to be on bringing transformational opportunities forward. As you well know, Seamus, there continues to be considerable unumid need particularly for patients as they get into later lines of therapy and multiple myeloma. IdaCell is going to be an important piece of that innovative pipeline that we bring forward initially in later line therapy and then as we discussed potentially moving that into earlier lines of therapy in a broader patient population. And then as Samit mentioned, the opportunity to launch the next generation BCMA targets with T-cell engagers and potentially the next generation of small molecules, which we think have the potential to displace today's backbone. And then over time, you could envision these newer therapies being combined and targeting different patient populations across lines of therapy, and then also thinking about targeting targeting the specific type of drug to the age, performance status, or preference of patients. So we're excited about having all of these promising modalities in our portfolio. We think it gives us a unique opportunity to build on our leadership position.

Thank you, Chris. Seamus, this is Giovanni. Let me just rapidly answer your question on business development. So, first of all, I see that continuing to be the central pillar of our capital allocation strategy and continue to be focused on areas that are strategically aligned with our commercial presence and research efforts. you know, obviously we'll continue to look at things that are scientifically exciting and compelling, and definitely we will continue to be disciplined from a financial perspective. You know, there will always be a part of our business development strategy that will be about continuing to strengthen and complement our research pipeline and early stage efforts. You've seen us doing a number of deals in that space last year. I do see that continuing because it's currently our strategy. At the same time, I've been very clear, JB Morgan in my presentation as an example, that as we continue to assess later stage opportunities, Deals like the Myocardia deal, given the right assets, the opportunity to generate value, and the objective to continue to strengthen the growth outlook of the company in the second half of the decade, these are deals we're always going to be interested in.

Thanks, Giovanni. Lauren, can we go to the next question, please?

Our next question comes from Chris Schott with JPMorgan.

Great. Thanks so much. Just building on an earlier question regarding the TIK2 commercial dynamics and this kind of balance between what you see as a clearly differentiated profile emerging from the JAX, but there being some perception issue with at least some physicians in terms of the profile of the drug. How are you thinking that translates from a commercial standpoint? So on one hand, do you think that this gets largely addressed through your data presentations? And we can think about a quicker ramp here given the superior efficacy you're seeing relative to the oral on the market. or you're anticipating this could be a bit slower launch and there's going to be a big education component to getting the product established, given that over time there seems to be a larger opportunity, but more that first initial stage of the ramp? And the second question I had was on the Factor 11a. How much will the data from this first study reporting this year inform or increase or decrease your confidence in the second study? And do we really need to think about both of these Phase II programs reading out before you'll make a decision on moving the asset forward? Or based on this first study, could we see, at least in the monotherapy setting, the product moving forward? Thank you.

Chris, I'll start and then I'll turn it over to others to comment on the second part of your question. So, with respect to the opportunity that we have with TIC and sort of the pace of the commercial execution, look, I think we're excited about the opportunity that we have here. We think that based on the data we've seen from the Phase 2 as well as both PSO1 and 2, we have the opportunity to establish TIC as the frontline branded world of toys. for these patients. Now, as it relates to how quickly we'll be able to do that, clearly this is going to be a market where we've got very compelling data versus the only world that's in this space now. So we think that there we're going to have an opportunity to educate physicians relatively quickly. obviously we're going to have to work through access and the like which is part of any any new launch and that will typically take a bit of time but we think with respect to our position versus the existing world agent there we think we have a relatively relatively quick opportunity with a very very compelling data set against the only existing player there. Now, as we think about additional opportunities to expand from there, that's probably going to take a bit more time as you have competitors that have been established in this marketplace. But that's certainly the way we've been thinking about it at this point. Samit?

and chris just to be very very short because we know the time is short here and others also have questions we do believe that both studies have individually a very important goal to play to define the dose and the safety profile the time difference between the readout of two studies is not too long so i think we will obviously be able to build development plans based out of the first study. Execution will probably take into account both studies. But as I said, the time difference between the readouts is not that long. So execution-wise, both data sets will be important.

Can we go to the next question, please?

Our next question comes from Tim Anderson with Wolf Research.

Thank you. Going back to the PD-1 question about commoditization. I want to ask about China specifically. And Roche today, you know, painted a cautious picture on the China opportunity due to NRDL and local manufacturer proliferation. I'd be curious to get your view. Is this ever going to be a market that's meaningful for Bristol or other multinationals? And just as importantly, if it's happening in China in the PD1 category, why wouldn't it happen in and other disease categories, oncology or otherwise. And then second question on Revlimid, largest product now for the company, goes off patent next year. Analysts are guessing, you know, how to erode it in the first year. We don't know if it's a billion or three billion down or what exactly. And it'd be great to have some clarity on how to think about first-year erosions.

Tim, thank you. Let me start on both questions, and I'll ask Chris and David if they want to add. So, on China, let me say first of all, you know, we have a relatively small business in China, but we see an opportunity to continue to strengthen our presence in that market. At the ERVS, our pipeline continues to progress, and we have launch opportunities going forward in China. I would agree that from an NRDL perspective, it is appropriate to be cautious because of the number of PD-1 agents that have been launched at the same time, including a number of local players. And so I share the perspective there. that the opportunity in China I would be cautious about. I do believe, though, in a couple of things. So first of all, there are examples of brands in oncology and other therapeutic areas that recently have had a more differentiated profile with fewer local competitors have been able to be included in NRDL reimbursement and built to be meaningful contributors to growth. in the market. So I don't think every therapeutic area is the same and every class of drugs is the same. And specifically in our portfolio, we believe there are truly differentiated medicines that can have a very meaningful presence in China. When you look at the medium and the long term, I think actually the development opportunities in China will continue to go not only through the government channel but also over time the development of commercial insurance for what is a relatively large population of patients that would have access to that. So I do see that in the medium term the composition if you want of the marketplace in China in terms of payer dynamics will be more diversified and I think that will strengthen opportunities across the board. So we continue to be really committed to China. With respect to your question on the red limit, as you can imagine, we have a number of discussions ongoing. We have litigations ongoing with players that are continuing. We're not going to be in a position to provide multiple years. guidance going into the future, but I think we've been pretty clear in articulating our position on the red limit erosion beginning in 22. And as we've mentioned, we see the LOE portfolio of revelry and pomerist representing no more, in fact, less than 10% of the company by 2025. So the evolution of that business, I think it's pretty clear. And from my perspective, what's more important is to really look at the potential for double-digit growth who are continuing business and the growth of the total company between now and 2025. Chris, do you have anything to add on China?

Giovanni, I think you've covered it, Tim. The only thing is that I agree with Giovanni. In the medium to long term, we see significant opportunity. The NRDL is only one of the payer channels that are available. As Giovanni mentioned, there's a rapidly emerging commercial and private healthcare market there, and we think that's going to continue to be an important opportunity for locals and multinational companies. And I wouldn't over-extrapolate the dynamics for PD-1 to other therapeutic categories, just given the intense level of competition that you see in China with those products.

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

Our next question comes from David Reisinger with Morgan Stanley.

Yes, thanks very much. I have two questions. First, could you discuss why your BCMA Orviso was dropped? And second, Pistol's peak expectations for Woblosal are higher than consensus. What do you think investors underappreciate? Thank you.

Maybe I can start off from Arvisel and then certainly pass it on for Chris to comment on. But also, we always look at our portfolio overall and ensure that we are going to develop the best medicines and take them forward. All of a sudden, as you know, with a BCMA-directed cell therapy, we have either that is a front-runner, which has the data and has been submitted for review and approval, both in the U.S. as well as in EU. When we look at the all the cells evolution of the data and we put it in terms of the landscape and the evolution of data from outside as well, we believe that Ida-Cell fits perfectly in terms of further development. And all the cell platform becomes very important for the next generation of card cell development rather than the particular medicine itself. So therefore, we have not taken all the cell forward as in the current form, and we'll use the platform for evolution of the cell therapies.

david with respect to rubbleville in terms of the opportunity the way i think about it is our initial indication in mds remember that's a relatively smaller percentage of the overall mds incidence so in the u.s for example the incidence of mds is roughly 21 000 the on-label population is a relatively small percentage of that and that's because the initial indication obviously focus on those patients who are lower risk, ESA eligible, RS positive, and in the second line. So the way we think about it is, first and foremost, we've got to continue to drive utilization in the existing indication we have. We think there's continued opportunity there. Then obviously there's an opportunity to expand within MDS, and we think that the command study gives us a meaningful opportunity to both include those patients who who are RS negative and move into earlier lines of therapy. And then, obviously, beyond NDS, there are other opportunities, beta-thal, which is on label today, but then also we have additional opportunities in areas like myelofibrosis.

Thanks, Tess. Lauren, can we go to the next question, please?

Our next question comes from Ronnie Galm with Bernstein.

Good morning, and thanks for fitting me in. Two questions, if I may. First, about the party restructuring, you mentioned your support for isolating patients from paying out of pocket. The last two drafts we've seen in Congress, it's got 20% or 30% responsibility for pharma and the catastrophic part of the insurance, and obviously for giving your portfolio in oral oncology medicine it will be material. I was wondering if you can just give us a quick update where you believe the debate is standing, you know, where you're concerned around that issue heard, and is this part of which we should expect? And second, as we think about the kind of I-023 take-two mechanism coming to IBD, I was wondering if you were able to compare the efficacy level you were able to achieve with the oral versus the antibodies, and if the gaps are small enough that you can compete head-to-head with the IL-23s, assuming that mechanism becomes as dominant as it could be in those indications.

Thank you. Let me start with your question on the redesign. So first of all, there is a real need to think about redesigning benefits in a way that is more aligned with the treatments of today, and most importantly, that addresses significant affordability issues that are faced by patients because of inappropriate design of benefits and the high copay and the high out-of-pocket exposures that patients have. I think it's premature to say exactly where potential legislation in Congress would evolve. We've been very clear that we are supportive of thinking about the evolution of the design. And I think when you look at our portfolio, we are a very diversified portfolio. So depending on how the coverage gap contribution of the industry evolves, that's currently 70%. And that may actually have an impact on any quiz should that be reduced. You know, on the catastrophic side, you are right, some of the specialty oral medicines will be impacted by changes in that area. So it really depends. And, you know, when you have a diversified portfolio, there may be areas that are impacted differently. there are areas potentially impacted positively in terms of patients, but also in terms of the contribution we already make. So when we look at concrete proposals, we'll be able to assess the impact on our portfolio better. But I think it's important to remember that different medicines in our portfolio today are impacted differently in the various phases of coverage in Medicare.

Chris? Sure. So, Ronnie, we're obviously very enthusiastic about the opportunity that we have to play with potentially multiple drugs in IVD initially with Zipozy and then pending the data with Tick, potentially an opportunity with Ducravacitinib as well. The thing to keep in mind is that while IVD is a competitive space, there continues to be a need for applications drugs that have a manageable safety profile. Ultimately, we believe that uh the competitive dynamics are going to play out along a few dimensions obviously efficacy safety route of administration is very important here and because this is a chronic disease where patients are going to cycle through multiple products we think having a novel mechanism of action is important and so when you look at the two broad categories of treatments that are available today notably biologics and jack inhibitors we think our initial foray into the space was aposia is favorably positioned. For example, we think Zoposia demonstrates efficacy that is competitive with biologics in an oral formulation with an improved safety profile, certainly versus the TNF inhibitors. So we think we play very well there. And similarly, with respect to the JAKs, because he was generally competitive with JAX as well, and again, an improved safety profile. And across both of those categories, being a novel S1P in the space, we think it's going to be important.

Thanks, Chris. I know we're running short on time, but I think we have a few minutes extra maybe to get to a few more questions. If we could go to the next one, please, Laura.

Thank you. Our next question comes from Louisa Hector with Barenburg.

Hello, thank you for taking my questions. One clarification on the inventory build. You gave the numbers quarter on quarter. Can you confirm the year on year impact? And then also on the TIK2, you know, we've seen the very positive headline press releases in psoriasis. I'm wondering when we might see the data, how soon you could file and whether you expect an FDA panel And just a quick comment, perhaps, because in the press releases, you do mention the secondary endpoints, someone met, which implies someone not met. And I just wondered how crucial they were for their competitive profile of the drug. Thank you.

So on the first question, the year-over-year impacts, about $200 million in the fourth quarter of inventory bill, and that was mainly related to Eloquus and now Revlimid. We expect all of that to come out in the first quarter.

Great. So, David, I can take the second part of the question very quickly. In terms of the presentation of the data, we anticipate presenting the first of the two studies at AD later this – I think it's in the second quarter. It's in April. And then the second one, we have to find an appropriate conference in the second half of the year so that we can share the data more broadly. so the investigators can share with the community. Second, about the filing, we are working very diligently, and it is a priority for us, so we do anticipate filing quite rapidly. And of course, as soon as we have the producer date, we will be broadly communicating that and sharing that information with you and others. Third, about the FDA panel, we obviously can't comment on that. We don't know that. We have to continue to have the dialogue with regulatory agencies, and they will ultimately decide where they sit on this. So looking forward to that conversation with the health authorities. And last point around the secondary endpoints. As we've said, we've met the primary endpoint and the secondary endpoint. We are very comfortable with the data that we've seen showing the superiority not only against placebo, but also against OTSDA. And we've looked at it from a PASI 75 perspective, SPDA 01 perspective, PASI 100 perspective. So we are very comfortable with the data that we've seen thus far from both primary and secondary endpoints.

Let me go to the last one, please.

Our next question comes from Andrew Baum with Citi.

Thank you. Two questions on the factor 11a inhibitor, please. First, I'm interested in how quickly you can initiate a phase three program. I'm assuming given the high probability that you and I both put on the probability of success in the phase two, the planning for a phase three program has already begun given how want to confirm that that's the case. I'm assuming you've also identified sites as well, given both the company's previous experience. And then second, you've previously spoken to ESA, acute coronary syndrome, some of the areas that you want to go on the arterial side. Do you see any subpopulation of atrial fibrillation where you could go head-to-head versus adequate, or should we disregard the atrial fibrillation population completely from any phase three trial program? Thank you.

Thanks, Andrew. Let me start with the second question first. I don't think you should disregard atrial fibrillation from any trial further. Those are the discussions that we still need to have, and of course the conversations will need to be had both with our collaborator Janssen as well as the variator authorities that the appropriate competitor would be in the right population. So more to come on that as we gather the data and the conversations gear up. In terms of starting again the phase three studies, one, we need to see the data first from the first trial of the total knee replacement. Both of the companies, of course, want to proceed as quickly as possible. And we certainly honor the excitement that is around there. And of course, these are a priority module that we need to move forward. So we will be able to initiate phase three trials quite rapidly. You very correctly said both companies have uh the expertise in conducting these trials and with the prior experiences that we have you'll be able to initiate very quickly but certainly looking forward to see the first data i cannot share timelines yet because we have to obviously uh collaborate with jensen to be able to define those but as soon as those are available those will be shared in due course as well

Thank you, Sanat. And thanks, everyone. Let me just make a couple of comments. First of all, let me say I am excited that 2020 was a really important year for us. It was a great year, the first year for us as a combined company. Our performance was strong during a challenging year from so many different points of view. And we've established a really strong foundation for our new company. There is solid momentum in our business going into 2021, and that's reflected in our outlook for 21 and the guidance we provided today. We feel really good about the company that we're building. the way in which we are executing and delivering on the value drivers of the acquisition of Celgene. We see significant opportunities for sustained long-term growth ahead and the acceleration of the renewal of our portfolio. And we look forward to continuing to update all of you as we make progress by continuing to remain focused on execution and advancing the many priorities we have as a company. I know the team will be available to answer any additional questions, and I'd like to thank you for participating in our call today. Thank you.

And that does conclude today's conference. We thank you for your participation. You may now disconnect.