BRISTOL-MYERS-SQUIBB Earningcall Transcript Of Q2 of 2024

Christopher S. Boerner -- Chairman and Chief Executive Officer

Thanks,  Tim,  and  thanks,  everyone,  for  joining  us  this  morning.  Starting  on  Slide  4.  Our

second-quarter results reflect continued progress against our strategy to position BMS for long-term

sustainable  growth.  In  Q2,  we  continued  to  strengthen  commercial  performance  with  uptake

accelerating across a number of our marketing products.

Growth  portfolio  revenues  increased  18%  year  over  year  or  21%  excluding  the  impact  of  foreign

exchange. This portfolio is on track to be a larger component of our overall mix moving forward. We

also advanced our pipeline, demonstrating the strength of our portfolio and the development of our

first or best-in-class assets. This includes U.S.

regulatory approvals for Breyanzi, Krazati and Augtyro. We also achieved a number of milestones

this quarter for our IO franchise, including European approval in first-line bladder cancer presented

data  at  ASCO  in  first-line  liver  cancer  and  are  progressing  to  a  more  convenient  subcutaneous

formulation of nivolumab, where we now have a PDUFA date from the U.S. FDA of December 29th.

The EMA is also reviewing our subcu application.

Page 2

Before we get into more details around quarterly performance, on Slide 5, I'd like to step back and

take stock of where we are as a company and where we are headed. As discussed previously, we

are focusing on reshaping BMS to achieve sustained top-tier growth and maximize long-term value.

We're  doing  this  by  focusing  on  three  key  objectives:  First,  we  are  focusing  our  portfolio  on

transformational  medicines  where  we  have  a  competitive  advantage.  This  means  advancing  and

where  possible,  accelerating  first  or  best-in-class  treatments  across  our  therapeutic  areas,

prioritizing  pipeline  assets  with  meaningful  growth  potential,  and  discontinuing  programs  that  no

longer meet our threshold for return on investment.

Through these actions, we are ensuring our R&D efforts are focused on programs where BMS has a

right  to  win  and  where  we  can  deliver  compelling  ROI  to  shareholders.  Second,  we  are  actively

driving  greater  operational  excellence  throughout  the  organization.  This  includes  streamlining  our

operations and focusing the organization on what matters most, becoming more efficient in how we

operate, 

improving  R&D  productivity,  and  driving  a  culture 

that  emphasizes  speed  and

accountability.  We're  executing  on  our  cost  reduction  efforts  and  are  on  track  to  achieve  the  $1.5

billion in cost savings we announced in Q1.

Third, we are strategically allocating capital for long-term growth and returns. We remain focused on

ensuring  we  are  investing  behind  our  growth  portfolio  and  most  critical  pipeline  assets.  Business

development and partnerships remain important for us and we continued to strengthen our balance

sheet  while  maintaining  our  commitment  to  returning  cash  to  shareholders.  Taken  together,  these

actions  are  ensuring  we  are  focused  on  the  highest  value  activities  across  the  organization,

tightening our execution where needed, and accelerating our ability to deliver important medicines to

patients.

Page 3

On that note, turning to Slide 6. Our objective of generating top-tier growth requires us to deliver on

the potential of our pipeline. In hematology, oncology, we are driving leadership by extending our IO

business  and  broadening  our  focus  to  include  cell  therapies  and  protein  degraders.  We  have  also

expanded into ADCs and radiopharmaceuticals.

In  cardiovascular,  we  are  leveraging  decades  of  expertise  to  deliver  new  treatment  options  in

thrombosis, heart failure, and cardiomyopathies. In immunology, we're focusing our R&D efforts on

therapies that reset the immune system with a potentially transformational program in cell therapy.

And  finally,  we  are  reestablishing  our  presence  in  neuroscience  starting  with  KarXT  in

neuropsychiatry, followed by an exciting pipeline in neurodegeneration, which continues to advance

nicely. On Slide 7, let me update you on our progress with KarXT specifically.

We  have  two  main  objectives:  preparing  for  the  upcoming  launch  and  executing  against  a  robust

clinical  program  to  expand  this  important  therapy  into  multiple  indications.  We  are  rapidly  building

out  the  necessary  infrastructure  ahead  of  KarXT's  anticipated  FDA  approval  in  late  September.

We're  excited  about  the  commercial  potential  for  this  product.  Adam  can  speak  more  about  our

launch prep in Q&A.

As previously discussed, we are also expanding KarXT to additional indications with data expected

in  adjunctive  schizophrenia  in  2025,  in  Alzheimer's  disease  psychosis  in  2026.  Our  plans  to  start

trials in both Alzheimer's agitation and bipolar disorder are on track. Finally, we have also initiated

planning  for  two  new  indications  for  this  product  in  autism  spectrum  disorders  and  Alzheimer's

cognition. On Slide 8, I want to highlight a few important pipeline milestones across our therapeutic

areas this year.

In hematology and oncology, we're extending our IO franchise with nivolumab subcu and lung data

Page 4

for Opdualag. With the anticipated launch of the subcutaneous formulation of nivolumab at the end

of this year, we continue to estimate that at least 30% to 40% of U.S. patients being treated with IV

will  convert  to  the  more  convenient  subcutaneous  administration  across  multiple  indications.  This

ultimately allows patients to benefit from the standard of care cancer medicine into the next decade.

With Opdualag, we plan to share phase 2 proof-of-concept data soon. This supports initiation of a

phase  3  study  in  a  subset  of  patients  with  first-line  non-small  cell  lung  cancer  later  this  year.  In

immunology, we expect to see data this year for CD19 NEX-T. By resetting the immune system, we

believe this therapy can deliver meaningful benefits for patients across multiple indications.

We  have  also  completed  enrollment  of  our  two  phase  3  trials  for  Sotyktu  in  psoriatic  arthritis  and

now  expect  to  see  data  later  this  year.  Looking  ahead,  on  Slide  9,  we  will  begin  to  see  important

data readouts for our pipeline in the second half of this year with momentum building through 2026.

A few to focus on include LPA1 in pulmonary fibrosis. Our registrational multiple myeloma pipeline,

including  GPRC5D  cell  therapy  and  our  CELMoDs  Iberdomide  and  Mezigdomide,  and  of  course,

Milvexian, which has the potential to be the only oral Factor XIa inhibitor in atrial fibrillation.

All  have  the  potential  to  deliver  significant  benefits  for  patients  and  form  a  large  commercial

opportunity for the company. With increasing pipeline momentum, we are confident in our ability to

further strengthen our growth profile. Let me close with our outlook on Slide 10. Given the strength

of our Q2 results and the confidence we have in the remainder of the year, we now expect to deliver

top-line growth at the upper end of our guidance range.

We are also raising our guidance range for full-year EPS. And David will discuss these updates in

more detail shortly. Let me summarize by noting that in Q2, we took notable steps forward on our

journey to drive sustained long-term growth. While there is more work to do, we are strengthening

Page 5

the  foundation  for  that  growth  by  progressing  what  is  a  catalyst-rich  pipeline,  growing  our

commercial portfolio, and maintaining a strong balance sheet that provides strategic flexibility.

I want to thank the employees of BMS for their contributions in the quarter and their commitment to

delivering breakthrough medicines to more patients even faster. Let me now hand it over to David.

David V. Elkins -- Executive Vice President, Chief Financial Officer

Thank  you,  Chris,  and  good  morning,  everyone.  I'll  begin  with  the  highlights  of  our  quarterly  sales

results on Slide 12. Let me start with a brief reminder that unless otherwise stated, all comparisons

are made from the same period in 2023, and sales growth rates will be discussed on an underlying

basis, which excludes the impact of foreign exchange. All references to our P&L are on a non-GAAP

basis.

Our  performance  during  the  second  quarter  reflects  focused  execution  across  the  business,

including a 21% increase in our growth portfolio and a 3% growth in our legacy portfolio. The growth

portfolio continued to increase as a proportion of our total sales and now represents about 46% of

the  business.  Expenses  during  the  quarter  came  in  more  favorable  than  expected,  reflecting  our

focus on driving operational excellence and timing of spend, resulting in a slightly higher operating

margin  of  roughly  40%.  These  results  support  our  positive  outlook  for  2024  and  our  updated

financial guidance.

Second-quarter  sales  performance  across  our  key  therapeutic  areas  reflect  continued  momentum

for  several  important  growth  brands  including  Reblozyl,  Camzyos,  Breyanzi,  and  Opdualag.  While

we  saw  growth  across  our  immunology  business,  we  recognize  there  is  still  more  work  to  do,

particularly with Sotyktu in this highly competitive category. There are also some inventory growth to

Page 6

net  favorability  across  several  growth  brands  this  quarter,  which  will  be  important  to  take  into

consideration when phasing sales in the second half of the year. Let's take a closer look at our key

brand performance, starting with our oncology franchise on Slide 13.

Opdivo  remains  an  important  product  than  our  immuno-oncology  business.  Sequentially,  global

sales were up driven by demand and an estimated benefit of $65 million related to customer buying

patterns  in  the  U.S.  We  expect  growth  this  year  to  be  in  the  mid-single-digit  range  as  core

indications  mature  and  we  await  additional  regulatory  actions,  including  FDA  approval  in  the

periadjuvant lung expected in October. And our IO franchise is further strengthened with Opdualag,

which delivered another quarter of double-digit growth driven primarily by higher demand.

Outside  the  U.S.,  we  see  encouraging  trends  across  several  newly  launched  markets  and  remain

focused on securing reimbursement. As we said previously, we are pursuing further development of

Opdualag  in  a  segment  of  first-line  lung  cancer,  and  we  remain  on  track  to  initiate  our  phase  3

registrational  program  later  this  year.  These  expansion  opportunities,  coupled  with  the  pending

approval of nivolumab subcu further support extension of our IO franchise into the next decade. In

cardiovascular on Slide 14, Eliquis remains the market leader, anticoagulant worldwide with global

sales of more than $3 billion.

In the U.S., sales were primarily driven by higher demand and market share gains. Sequentially, as

is  typical  in  the  second  quarter,  U.S.  sales  reflect  an  unfavorable  gross-to-net  impact  as  patients

begin to enter Medicare coverage gap. As a reminder, these dynamics are more acute in the second

half of the year, resulting in lower sales versus the first half.

Turning  to  Camzyos,  second-quarter  sales  more  than  tripled  compared  to  the  prior  year.

Sequentially, U.S. sales were driven mainly by demand. U.S.

Page 7

demand  in  the  second  quarter  was  led  by  an  increase  of  approximately  1,300  commercially

dispensed  patients  since  Q1,  bringing  the  total  to  almost  6,900  patients  on  commercial  drug.  This

growth  demonstrates  steady  and  consistent  adoption.  Outside  the  U.S.,  sales  growth  reflects  the

timing  of  reimbursement  in  approved  markets.  And  globally,  we  see  significant  room  for  future

growth.

Let's turn to hematology on Slide 15. Sales of Reblozyl in the quarter grew 82% and with growth in

both  U.S.  and  international  markets.  In  the  U.S.,  sales  benefited  from  higher  demand  driven  by

first-line MDS-associated anemia and some favorable inventory in gross to nets.

Outside the U.S., the brand is approved in approximately 40 countries including recent broad label

introductions  in  Europe  and  Japan.  We  look  forward  to  seeing  the  first-line  indication  reimbursed

across  the  globe.  In  cell  therapy,  we  saw  quarter-over-quarter  sales  growth  with  Abecma  driven

largely  by  ex-U.S.  We  continue  to  work  through  the  competitive  dynamics  in  multiple  myeloma  by

discussing our KarMMa-3 data with customers.

Breyanzi  grew  55%  in  the  quarter,  which  was  driven  by  growth  across  multiple  indications  and

expanded  manufacturing  capacity.  International  sales  growth  reflected  strong  demand  in  markets

such  as  Germany,  France,  and  Japan.  Now  moving  to  immunology  on  Slide  16.  Performance  of

Sotyktu continue to be impacted by competitive environment and the quality of commercial access in

the U.S.

At the same time, during Q2, we achieved improved commercial access across multiple large PBMs

with 0 step edits. And starting earlier this month, we added another large PBM as we discussed last

quarter. We now have greater than 60% of covered lives with favorable access. As a result, in the

Page 8

near term, we anticipate modest incremental gross to net pressure on revenue growth, which will be

offset by demand growth over time.

Now turning to Slide 17, I will highlight some components of the P&L. In addition to solid commercial

execution,  our  second-quarter  performance  reflects  a  focus  on  financial  discipline,  and  steady

progress  against  our  $1.5  billion  cost  savings  program  we  discussed  on  last  quarter's  call.  As  a

reminder,  we  plan  to  reinvest  the  cost  savings  into  higher  growth  opportunities  to  drive  greater

patient  impact  and  accelerate  our  sales  growth  in  the  second  half  of  the  decade.  Gross  margin

came in favorable this quarter, driven primarily by product mix.

Operating  expenses,  excluding  in  process  R&D,  were  impacted  by  higher  deal-related  spend,

partially  offset  by  cost  savings  related  to  our  efficiency  initiatives  and  the  timing  of  planned

expenditures.  On  a  sequential  basis,  expenses  came  in  lower  than  anticipated  due  to  timing  of

planned investments that shifted to the third quarter. Our tax rate in the quarter changed from 16.9%

in  the  prior  year  to  14.1%,  primarily  due  to  a  release  of  income  tax  reserve.  Overall,  earnings  per

share was $2.07 in the quarter.

Now moving to the balance sheet and capital allocation highlights on Slide 18. Both our growth and

legacy portfolios delivered solid revenue growth in the quarter, with legacy continue to contribute to

our  robust  operating  cash  flow  of  approximately  $2.3  billion,  and  we  closed  the  quarter  on  June

30th, we had approximately $7 billion in cash, cash equivalents and marketable debt securities on

hand. During the second quarter, we reduced our total debt position by $3.1 billion, including roughly

$2.7  billion  in  commercial  paper  and  $400  million  of  long-term  debt.  These  actions  are  consistent

with our plan to pay down approximately $10 billion of debt over the next two years.

In  terms  of  capital  allocation,  we  are  prioritizing  opportunities  that  will  further  strengthen  our

Page 9

long-term growth outlook, while remaining committed to our dividend. Please turn to Slide 19 to walk

through  the  details  of  our  guidance.  On  Q2  performance,  focused  execution  across  the  business

generated  top-line  growth  and  driving  operational  excellence.  These  results  provide  support  for

updated full-year guidance.

As  is  our  practice,  we  provide  revenue  guidance  on  a  reported  basis  as  well  as  on  an  underlying

basis,  which  assumes  currency  remains  consistent  with  prior  year.  Our  guidance  for  the  full-year

revenue  is  now  low  single-digit  growth,  which  we  now  expect  to  come  in  at  the  upper  end  of  the

range.  This  is  due  to  the  continued  performance  of  our  growth  portfolio  and  better-than-expected

sales of Revlimid. With respect to gross margin, we are raising our guidance to reflect the impact of

sales mix.

Excluding acquired in process R&D, we continue to expect our total operating expenses to be at the

upper end of low single-digit percentage increase range. This reflects incremental costs associated

with  the  recent  acquisitions,  partially  offset  by  the  realization  of  savings  due  to  our  productivity

initiative. Given the delay in timing of anticipated expenses in Q2, we now expect a step up in Q3

Overall, our previous operating margin target of at least 37% for the full year remains unchanged.

For  OI&E,  we  now  expect  annual  expenses  of  approximately  $50  million  due 

to

higher-than-anticipated estimated royalties and favorable net interest expense.

The  annual  tax  rate  will  be  affected  by  onetime  nondeductible  expenses  of  Karuna  acquired

in-process  R&D  charge,  which  impacted  our  non-GAAP  net  income  in  the  first  quarter.  Excluding

this impact, the estimated underlying tax rate for the full year is still expected to be about 18%. As a

result of these changes, we are raising the range of our 2024 non-GAAP EPS guidance to between

$0.60 and $0.90. Let's walk through the phasing of our sales for the full year.

Page 10

Year to date, our growth portfolio has grown approximately 16%, and we anticipate a similar rate of

growth in the second half in relation to phasing of product sales in the back half of the year, keep in

mind the typical product seasonality we expect to see in the business in the third quarter. Also, we

had roughly $150 million in stocking in the second quarter, and we anticipate reversing in the Q3.

Normalization  of  these  dynamics  next  quarter  will  likely  temper  sequential  growth.  However,  as  a

result  of  these  dynamics  and  the  strength  of  our  underlying  business,  we  expect  strong  growth

across the portfolio in the fourth quarter.

And for Revlimid, while we continue to monitor variability from generics and other dynamics, we now

expect full-year sales to be at the higher end of our $4.5 billion to $5 billion sales range. In closing,

we have entered the second half of 2024 with sales momentum building in key brands and financial

discipline driving a leaner and more agile organization. And as Chris said, we are excited about the

long-term  opportunity  ahead  of  our  emerging  neuroscience  platform.  with  the  anticipated  FDA

approval of KarXT in September.

We are committed to investing in high-growth areas where we have competitive advantages to meet

the needs of our patients. And with that, I'll now turn the call over to Tim for Q&A.

Timothy Power -- Vice President, Investor Relations

Thanks, David. Rocco, could we go to the first question, please?

Operator

Page 11

Questions & Answers: