Bristol-Myers Squibb Company

Good morning, everyone. Welcome to the Bristol-Myers Squibb second quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please see a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Tim Power, Vice President of Investor Relations. Mr. Power, please go ahead.

Thank you. Good morning, everyone, and thanks for joining us this morning for our second quarter 2023 earnings call. Joining me this morning with prepared remarks are Giovanni Coforio, our Board Chair and Chief Executive Officer, and David Elkins, our Chief Financial Officer. Also participating in today's call are Chris Berner, our Chief Operating Officer, Adam Linkowski, our Chief Commercialization Officer, and Sumit Herawat, 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 Giovanni and David's remarks. But before we get started, I'll read our forward-looking statement. During this call, we'll make statements about the company's future plans and prospects that constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's SEC filings. These forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates as of any future date. We specifically disclaim any obligation to update forward-looking statements even if our estimates change. We'll also focus our comments on our non-GAAP financial measures, which are adjusted to exclude certain specified items. Reconciliations of certain non-GAAP financial measures to the most comparable GAAP measures are available at bms.com. With that, I'll hand it over to Giovanni.

Thank you, Tim, and good morning, everyone. Starting on slide four, as you will have seen in our press release this morning, today we updated our outlook for 2023. The updates were driven by a significant change in our expectations for RepliMed and, to a lesser extent, Pomalyst for the year. Let me say that we do not take an adjustment of this magnitude lightly. Before I provide you with more detail, when I look at the company overall, I am encouraged by the strength of the in-line and new products, as well as the progress with our pipeline. These are the drivers that will enable us to renew our portfolio and strengthen our business in the future. The impact we are discussing today is limited to Revlimid and, to a lesser extent, Pomalyst, and we expect it to be relevant only to this year, as I'll discuss shortly. Importantly, our inline and new product portfolios remain on track. We are pleased with continued strong performance from our inline business and are confident in our ability to roughly double revenue from our new products this year. In fact, our new product portfolio is already annualizing at $3.5 billion as of Q2. As a result of these strong trends, we are reaffirming all our financial commitments for the 2020-2025 period. Given our confidence in our future, this morning we also announced our intention to execute a $4 billion accelerated share repurchase in the third quarter. Let me now provide some details on today's update. Our revised guidance reflects a $1 billion decrease for Revlimid, and we are now guiding to approximately $5.5 billion in 2023. Combined with a roughly $300 million impact for Pomalyst, these changes account for our revised guidance on revenue and EPS ranges. As you know, we are navigating generic entry for Revlimid. though this is not the driver of our revision in outlook. Concurrent with entry of the most recent wave of generic volumes, we saw some softness in Revlimid sales beginning at the end of the first quarter. As we looked into its drivers, we recognized there had been an unusual increase in utilization of three drug provided by the independent BMS Patient Assistance Foundation starting at the same time. In Q2, the number of patients on free drug continued to increase and reached a level significantly higher than normal. The impact on Revlimid and Pomalyst revenues also accelerated in Q2. This issue is the main driver of our revised guidance. The situation is complex, and to explain it, I'll turn to slide five to remind everyone of some of the ways we meet our commitment to support eligible patients who can't afford their medicines. For commercially insured patients, we provide the co-pay support to eligible patients. Under U.S. law, however, we cannot provide co-pay support to government-insured patients, such as Medicare patients. There are third-party independent charitable foundations that provide financial assistance to patients to help with out-of-pocket costs, including Medicare patients. These charitable foundations are supported financially in a variety of ways. This includes contributions from donors, including BMS, consistent with HHS guidance. Additionally, we donate BMS products to the independent BMS Patient Assistance Foundation, which provides free medicine to all qualified patients who are not financially supported elsewhere. Importantly, to comply with government guidance, once patients enter this program, the BMS Patient Assistance Foundation provides free product through the end of the calendar year. Earlier this year, funds at independent third-party charitable foundations, the ones that provide financial assistance to eligible multiple myeloma patients, closed for a period of time. This was because the collective funding from donors was not sufficient to meet the need for co-pay assistance for the patients taking the variety of medicines that the multiple myeloma funds support. We believe the funds closing for a period of time was the primary driver for an increase in patients requesting free product from the independent BMS Patient Assistance Foundation. During the second quarter, the level of free product utilization continued to increase and ultimately reached a level that was significantly higher than normal. These dynamics were building while we were also navigating the most recent wave of generic volumes for Revlimid. Today, we are able to provide you with an update on our company guidance for the year that incorporates the impact from both Revlimid and Pomalyst. I want to underscore that we do not expect these dynamics to continue into next year. This is based on two key factors. First, the BMS Patient Assistance Foundation has seen applications for free product returning to normal levels. Second, changes in Medicare Part D coverage taking effect in 2024 will help improve patient affordability. This should directly impact the number of patients needing to access the free drug program. To sum up what this means financially, we estimate the impact of the increase in patients receiving free product to be approximately $330 million for Revlimid and Pomalyst in Q2, with about 80% of that being Revlimid. Because the BMS Patient Assistance Foundation provides free drug for the calendar year, the impact for Revlimid and Pomalyst will be more significant for the full year. approximately $1 billion and $300 million, respectively. Since revenues for Revlimid are lower than expected this year, we now expect a lower step-down of approximately $1.5 billion in 2024 and $2 billion in 2025. Now, turning back to the products that will be key to our future, let me turn to slide six and our new products. Here you can see that we continue to deliver very strong growth and remain on track to roughly double revenue for this portfolio this year. David will provide more details in a few minutes. And we see good momentum and growth opportunities across the portfolio. including progress with accelerating access for Cetictu, building demand and conversion to commercial dispense for Camxios in the U.S. and achieving approval in Europe, continuing to build capacity for our cell therapy assets, as well as growing Reblozil in its current indications in advance of an exciting future launch with Commands. On slide seven, I would like to remind you of the targets we've provided for our new product portfolio. The process of renewing our portfolio and growing the business for the long term centers first on our nine recently launched products. The combination of our scientific innovation and commercial execution gives us great confidence in the growth trajectory of this set of products. We continue to expect to deliver 10 to 13 billion of revenue from this portfolio in 2025. And the opportunity remains significant, with 25 billion plus of potential revenue in 2030 on a non-risk-adjusted basis. Importantly, we are continuing to further de-risk these products with opportunities such as commands for Rebruzo, CLL, and follicular and mantle cell lymphomas for Brianzi, and many more. Which brings me to our scorecard, outlining our strong pipeline execution on slide 8. As I mentioned, we are making progress de-risking our new products as well as accelerating our pipeline more broadly. and we achieved some important clinical milestones this quarter. During the second quarter, we presented exciting data for our LPA1 agonist in idiopathic pulmonary fibrosis. The Phase II data for this drug showed more than a 60% reduction in the rate of decline in lung function without any of the GI tolerability issues associated with existing drugs. With the proof of concept also achieved in progressive pulmonary fibrosis, we look forward to presenting more data for this asset, and we are rapidly moving to phase three trials. ASCO and EHA were important meetings for us this year. In addition to presenting the reblozil commands data, strong data was presented for Obdivo in first-line classical Hodgkin lymphoma and for our GPRC5D cell therapy program in multiple myeloma. And we are excited to move this into registrational trials. These underpin the growth potential of our IO franchise and the incredibly exciting opportunities we see ahead for our leading cell therapy platform, including into new areas such as immunologic diseases. We have also announced a positive outcome from our Checkmate 901 trial of Obdivo and chemotherapy in cisplatin-eligible first-line metastatic bladder cancer. Not only is this a very positive development for these patients, it speaks to the breadth of opportunity in our pipeline beyond what's shown on this slide. We have a rich and broad pipeline that we continue to advance rapidly. We are looking forward to sharing more about the opportunities we see coming from our scientific research at our R&D day in September. Now, I'd like to spend a minute to take stock of where we are on our portfolio renewal journey. Turning to slide 9, with 60% of the revlimid erosion behind us at the end of 2023, we are well on track to meet our commitment of growing revenue low to mid-single-digit CAGR from 2020 to 2025, when, as we have told you, our recent LOEs will represent at most 10% of our revenue. The profitability of our business, with operating margin of at least 40%, provides us with the financial flexibility needed to continue to invest in our future. Turning now to slide 10, I want to reiterate that our focus and our confidence in the renewal of our portfolio are as strong as ever. This rests on our in-line and new product portfolios and our pipeline as the key drivers of our performance beyond 2025. and we are pleased with where we are. There are four important levers which will enable us to renew our portfolio in the second half of the decade, as Eliquis and Opdivo lose exclusivity. The continued growth of the nine medicines in our new product portfolio from 10-13 billion in 2025 to realization of their full potential of at least 25 billion on non-risk adjusted revenue by the end of the decade, the potential launch of six registrational stage assets with meaningful contributions before the end of the decade, continued progress with our early stage pipeline, and potential external innovation through business development. We are executing well on all four fronts. I'm excited and confident about what the future holds for Bristol Myers Squibb. Before I turn the call over to David, I want to thank our teams globally for the commitment to our patients and focus on our business. David will now walk you through our product performance and financial results in more detail.