Bristol-Myers Squibb Company (NYSE:BMY) Q4 2022 Earnings Call Transcript

Bristol-Myers Squibb Company (NYSE:BMY) Q4 2022 Earnings Call Transcript February 2, 2023

Operator: Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bristol-Myers Squibb Fourth Quarter 2022 Earnings Conference Call. I would now like to turn the conference over to Tim Power, Vice President of Investor Relations. Please go ahead.

Timothy Power: Thank you, and good morning, everyone. Thanks for joining us this morning for our fourth quarter 2022 earnings call. Joining me this morning with prepared remarks are Giovanni Caforio, our Board Chair and Chief Executive Officer; and David Elkins, our Chief Financial Officer. Also participating in today’s call are Chris Boerner, our Chief Commercialization Officer; and Samit Hirawat, our Chief Medical Officer and Head of Global Drug Development. As you’ll note, we’ve posted slides to bms.com that you can follow along with for Giovanni and David’s remarks. Before we get going, I’ll read our forward-looking statements. During this call, we will make certain statements about the company’s future plans and prospects that constitute forward-looking statements.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company’s SEC filings. These forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates as of any future date. We specifically disclaim any obligation to update forward-looking statements even if our estimates change. We’ll also focus our comments on our non-GAAP financial measures, which are adjusted to exclude certain specified items. Reconciliations of certain non-GAAP financial measures to the most comparable GAAP measures are available at bms.com. With that, I’ll hand it over to Giovanni.

Giovanni Caforio: Thank you, Tim, and good morning, everyone. Starting on Slide 4. I am pleased to report another strong quarter for Bristol-Myers Squibb, concluding a very successful year. Last year was an important year for our company, the first with Revlimid generics. Given that, I am very proud to say that in 2022, we grew our business and made tremendous progress advancing our pipeline, including launching three new first-in-class medicines and progressing six promising programs into registrational development. While David will provide additional details on the financials in a moment, I will point out a few highlights. Last year, we delivered revenue growth of 3%, adjusting for foreign exchange. Importantly, growth was driven by our in-line and new product portfolios.

So I am pleased to note that we delivered continued strong growth in the fourth quarter for these assets, up 12% adjusting for foreign exchange. We also grew our earnings, including non-GAAP EPS growth of 8% for the full year. As we start 2023, I am confident we have established a strong foundation for Bristol-Myers Squibb. As you will note from our guidance, we expect to grow both revenue and non-GAAP EPS this year. Importantly, we remain on track to achieve the commitments we have made for 2025. Given increasing confidence in our new product portfolio and continued progress with our broader pipeline, we see multiple paths to growth through 2030. Let me now provide some perspective on 2022. On Slide 5, you can see our overall pipeline execution last year.

I am very pleased with our progress, which further supports renewal of our portfolio. While we advanced on many fronts, I would like to highlight a few accomplishments: Approval of three first-in-class medicines, including Opdualag, Camzyos and Sotyktu, which address areas of high unmet medical need and have significant commercial potential. Further progress expanding the reach of our new product portfolio, including an important expansion opportunity for Reblozyl in first-line MDS with COMMANDS, positive top line results of KarMMa-3 based on which Abecma is the first BCMA CAR-T to have demonstrated superiority to standard regimens in relapsed and refractory multiple myeloma. And initiation of registrational trials for Sotyktu in lupus. Remember, in the Phase II study, Sotyktu demonstrated an encouraging profile in this hard-to-treat disease.

We believe lupus can be an important expansion opportunity for the brand. Progress with the next generation of medicines includes important proof-of-concept data for milvexian in secondary stroke prevention, enabling the initiation of the Phase III program this year and a positive trial for our LPA1 asset in lung fibrosis. This asset has come into focus only recently and is a prime example of the optionality that comes from having a broad pipeline. We are looking forward to presenting data and starting Phase III trials for this asset later this year. On Slide 6, you can see how we strengthened the outlook for our new product portfolio, which, as you know, is central to our strategy of renewing our portfolio over the coming years. Our pipeline execution and strong commercial momentum position us well to achieve $10 billion to $13 billion of risk-adjusted revenue in 2025.

And as a result of the strong progress with our pipeline, we have significantly de-risked the $25 billion plus of long-term non-risk-adjusted revenue potential. As you can also see on this slide, we continue to see exciting catalysts ahead for these assets. So turning to our scorecard for this year on Slide 7. It’s encouraging to observe the breadth of catalysts we see ahead as a company in the near term. I’ll point out a few highlights. Just last week, we announced our Phase I/II trial for Breyanzi in relapsed refractory CLL met the primary endpoint. In Europe, we expect to launch Camzyos in obstructive HCM and are pleased to have received positive CHMP opinion for our first and only selective TYK2 inhibitor, Sotyktu. Our ROS1 inhibitor, repotrectinib is expected to be filed in the U.S. in lung cancer.

We have an important expansion opportunity for Reblozyl in first-line MDS. Along with our partners at Janssen, we have embarked on registrational trials for milvexian, and we expect to move Abecma into earlier lines of therapy. Finally, we are further advancing our multiple myeloma CELMoD program with a head-to-head study of iberdomide versus Revlimid in the post-transplant maintenance setting. As we have done in the prior years, we look forward to updating you on our progress as we continue to advance our pipeline and further support our portfolio renewal. Turning to Slide 8. I I’d like to remind you about what we’ve accomplished in the past few years and how that prepares us well for the near, mid and long term. When we began the transformation of our company three years ago, we told you what we believed we could achieve and we have delivered across the board.

Financially, we have grown our company, over delivered synergies, reduced our debt and generated significant cash flows. We have launched all nine new medicines, including three first-in-class products that were approved last year. And we’ve continued to execute disciplined business development to further support our growth profile in the future. Our record of execution further strengthens my confidence in our ability to renew our portfolio and deliver long-term growth. With all of this in mind, let me move to Slide 9 to discuss our outlook for this year and beyond. As you know, we expect to drive growth through 2025 and sustain strong profitability as we transform our portfolio. And that journey continues this year. We delivered growth through Revlimid generics in 2022.

And as you can see from our guidance today, we expect to continue to grow this year. With the focus turning to the second half of the decade, we continue to see multiple paths to growth, driven by growth of the new products, contribution from our advancing late-stage pipeline, including milvexian LPA1 and the CELMoDs, and significant optionality from our early pipeline, complemented by flexibility for additional business development. All the while, we are transforming our portfolio to be younger, more diversified and more resilient in the face of an increasingly complex pricing environment in the U.S. and internationally. Before I turn to David, let me express my gratitude to our teams across the globe, starting with our research and development organization, which had a stellar 2022.

As you will have seen, this week, we announced Dr. Rupert Vessey’s decision to retire, effective July 3. I want to thank Rupert for his extraordinary contributions since he joined BMS as a result of the acquisition of Celgene. Rupert led the successful integration of research and the development of a strong pipeline across all stages of development. We are now combining development across early and late stage under Samit’s leadership and preparing to transition the research organization to report to Dr. Robert Plenge, who will serve as EVP and Chief Research Officer, when Rupert retires this summer. The focus and determination of these leaders and all of our teams will enable us to continue to deliver for the patients depending on us. I’ll now turn it over to David to walk you through the financials.

David?

David Elkins: Thank you, Giovanni, and thank you all again for joining our call today. I know this is a busy morning for all of you. As Giovanni mentioned, 2022 was another solid year of execution for Bristol-Myers Squibb. Let’s get started with our top line performance on Slide 11. Unless otherwise stated, all comparisons are made versus the same period in 2021 and sales performance growth rates will be discussed on an underlying basis, which excludes the impact of foreign exchange. We delivered on our full year commitments with sales of approximately $46 billion with growth of 3%. Demand for our diversified in-line and new product portfolio was strong, with revenue growth of 13% for the year, more than offsetting the loss of exclusivity for Revlimid in the first year of generic entry.

Let me dive deeper now into fourth quarter and full year performance of our new product portfolio on Slide 12. Global revenues in the quarter were $645 million, up 87%, while full year revenues topped over $2 billion, nearly doubling over 2021. With nine new product approvals and multiple additional indications coming to fruition, we have an increasingly de-risked new product portfolio. This provides us confidence that we are on track to deliver the potential of our new product portfolio with $25 billion of non-risk-adjusted revenue expected at the end of the decade. Moving to Slide 13 to discuss our performance of our solid tumor portfolio. Global Opdivo sales reflect strong demand for our newly launched and core indication with double-digit growth in the fourth quarter and the full year.

In the U.S., fourth quarter revenue saw full year sales grow strong, growing 13% and 15%, respectively. This growth was primarily driven by demand for our new metastatic and adjuvant indications, partially offset by declining second-line eligibility as well as some use of Opdualag in first-line melanoma. Internationally, revenues grew 20% in the fourth quarter and 14% for the full year. Fourth quarter revenue growth was largely driven equally by demand and timing of shipments. Demand was primarily driven to new indications, particularly first-line lung and upper GI cancers. As we look to this year, we expect growth of Opdivo to continue. This growth will come from an expanded indications in both early and late-stage cancers. Now turning to our first-in-class LAG-3 inhibitor, Opdualag, which had an impressive first year on the market.

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Approved in the U.S. in late March, Opdualag generated sales of $252 million in 2022. Sales in the fourth quarter had strong sequential growth of 24% versus quarter three, with first-line melanoma market share now in the high teens. We continue to see room for growth of Opdualag in first-line melanoma, where PD-1 monotherapy share still is approximately 20%. And further potential with pivotal studies in adjuvant melanoma and second-line plus colorectal cancer underway. On Slide 14, let’s discuss our growing cardiovascular portfolio, starting with Eliquis, which had another great year. Global revenues in the fourth quarter and the full year grew 6% and 14%, respectively. In the U.S., fourth quarter sales increased 15%, driven primarily by demand and favorable gross to net adjustments.

Internationally, Eliquis is the leading OAC in many countries. Given high market shares across these countries, demand growth has been offset by pricing measures as well as generic entry in Canada, the UK and the Netherlands. Now turning to our first-in-class myosin inhibitor, Camzyos. Sales in the fourth quarter were $16 million. We are pleased with the progress we have made since the launch in May of 2022. We laid a strong foundation of REMS certify over 2,600 healthcare professionals and enabled key centers to get operationally ready to make Camzyos available to patients. We also significantly increased the number of patients on commercial dispensed drug, which provides strong momentum heading into this year. We look forward to continuing this momentum as well as bringing Camzyos to European patients with approval expected by midyear.

Moving to our hematology portfolio on Slide 15, starting with Revlimid. Global sales for the full year were approximately $10 billion, impacted by generic entry. As we noted last year, we expected variability quarter-to-quarter. And in 2022, we saw slower-than-anticipated utilization of generic lenalidomide in the U.S. With favorability in 2022 and anticipated increase in generic volume this year, we expect Revlimid revenues to be approximately $6.5 billion in 2023. We continue to expect an average $2.5 billion annual step down as a reasonable assumption for 2024 and 2025. Pomalyst global revenues continue to grow in the fourth quarter and for the full year, driven primarily by demand for triple-based regimens in earlier lines of therapy and extending duration of treatment for patients.

As usual, in the first quarter, I would like to remind you of the typical seasonality Revlimid and Pomalyst experience due to patients entering the Medicare Coverage Gap early in the year. Now moving to Reblozyl, our first-in-class EMA. Demand for Reblozyl was strong with fourth quarter and full year sales growing over 30%. In the U.S., revenues grew over 20% in both the fourth quarter and full year. We have made great progress since launch by increasing patient adherence, extending treatment durations and accelerating switches when ESAs fail. Internationally, Reblozyl continues to launch in different markets across the globe with launches now in 16 markets outside the U.S. Growth continues to be driven by demand in both MDS and beta thalassemia-associated anemia and attaining reimbursement in additional countries.

Turning to our differentiated cell therapy portfolio, Abecma and Breyanzi. Our first-in-class BCMA cell therapy, Abecma, continued its robust performance. Global revenues for the full year were $388 million versus $164 million in 2021. This represents strong growth year-over-year reflecting significant patient demand and the work the company has done to increase manufacturing capacity. We remain focused on continuing to ramp up capacity and believe this will enable us to get Abecma to more patients with highly refractory myeloma as well as preparing to move into earlier lines of therapy. Lastly, moving to our best-in-class CD19 cell therapy, Breyanzi. Global sales for the year were $182 million, more than doubling over 2021. Sales in the quarter reflect strong demand and hard work of our teams to expand supply.

Looking to this year, we continue to expect growth driven by demand for Breyanzi in second-line plus large B-cell lymphoma, and we remain focused on continuing to build manufacturing capacity to further support the uptake and prepare for additional indications. Now let’s move to our expanded immunology portfolio on Slide 16, starting with our first-in-class S1P agonist, Zeposia. Fourth quarter sales grew 69%, while full year global sales nearly doubled, driven by increased demand in multiple sclerosis and ulcerative colitis. Our strategy to expand volume and to improve commercial access is materializing. We’ve made progress with several plans with either 0 or 1 step edit, which will meaningfully expand access as we move in 2023. We expect continued growth of Zeposia to evolve primarily from MS today to UC over time.

And remember, as with any new immunology medicine heading into the first quarter, the typical dynamics of co-pays resetting each year tend to impact the first quarter performance as additional co-pay supports affects gross to net adjustments. Internationally, we are continuing to focus on securing reimbursement in additional markets to get Zeposia to more patients living with MS and UC. Finally, turning to our first-in-class TYK2 inhibitor for moderate to severe plaque psoriasis, Sotyktu. We’re extremely pleased with the U.S. launch so far. Still early days, but physician feedback has been outstanding. As of December, we had over 2,000 script equivalents on Bridge and commercial drug. Since then, we continue to make progress in new scripts and see that the use of Sotyktu is roughly evenly split across systematic naive patients, Otezla switch patients and biologic switch patients.

We remain focused on driving demand for this new medicine as the oral choice and ensuring as many patients as possible get Sotyktu to enable broader formulary positions in 2024. Internationally, we are now approved in Japan and in Canada with expected European approval by midyear. Switching gears to our fourth quarter P&L on Slide 17. Having just covered sales performance, let me walk you through a few non-GAAP key line items. As expected, fourth quarter gross margin was impacted primarily by product mix and higher manufacturing costs. For the full year, gross margin was in line with our prior guidance at approximately 79%. Excluding acquired in-process R&D, fourth quarter and full year operating expenses decreased primarily due to reallocation of investments behind our growth opportunities and the impact from foreign exchange and dilution from the Turning Point acquisition.

Acquired in-process R&D in the quarter was $52 million, which was partially offset by $16 million of licensing income that benefited OI&E in the quarter. Fourth quarter effective tax rate was approximately 11%, driven by earnings mix and onetime items with the full year tax rate of approximately 15%. Overall, fourth quarter earnings per share was $1.82. From a full year perspective, we ended the year at the upper end of our guidance range at $7.70, representing 8% over previous year. Moving to the balance sheet and capital allocation on Slide 18. Cash flow from operations in the fourth quarter was $3.3 billion. The company’s balance sheet remains strong with approximately $9 billion of cash and marketable securities on hand as of December 31.

Our capital allocation priorities are unchanged. Business development remains a top priority to further renew and diversify our portfolio and strengthen our growth outlook while also focused on balance sheet strength and returning capital to shareholders. We have executed several early stage business development deals as well as acquiring Turning Point Therapeutics last year. Our strong balance sheet allows us to be size-agnostic on deals. As it relates to balance sheet strength in 2022, we reduced debt by over $5 billion, and we are committed to maintaining a strong investment-grade credit rating. And finally, as it relates to returning capital to shareholders, we have a longstanding track record of paying dividend for 91 consecutive years and recently grew the dividend for the 14th consecutive year.

We remain committed to growing the dividend, subject to Board approval and continue to be opportunistic on share repurchases, with approximately $7 billion remaining in our share repurchase authorization. Let me close with our 2023 non-GAAP guidance on Slide 19. Due to unpredictable macroeconomic factors and large swings in foreign exchange last year, we are providing guidance on a reported basis as well as an underlying basis, which assumes currency remains consistent with prior year. We expect 2023 revenues to grow approximately 2% on a reported and constant currency basis. This reflects our confidence that our in-line and new product portfolios will more than offset the LOE impact from Revlimid and Abraxane. We expect Revlimid sales to be approximately $6.5 billion, which assumes additional step-up to generic manufacturers later in Q1 as well as continued variability quarter-to-quarter.

With the momentum of our new product portfolio, we expect it to roughly double versus last year and will be approximately $4 billion. As it relates to our line item guidance for the year, we expect our gross margin to be approximately 77%, which reflects a shift in product mix. We do not predict acquired in-process R&D. So excluding this, we expect our total operating expenses to decline in the low single-digit range. This reflects a reallocation of cost and efficiency initiatives in MS&A as we continue to invest in our new launches. R&D expenses are expected to be largely in line with last year due to our dynamic portfolio of studies reading out and new study starts. We project our tax rate to be approximately 17%, reflecting changes to Puerto Rico tax laws and product mix.

Finally, we expect to grow our non-GAAP earnings per share with a range of $7.95 to $8.25. This represents growth of approximately 5%. Excluding prior year acquired in-process R&D, adjusted EPS would grow approximately 2%. So before we move over to Q&A, I want to thank our colleagues around the world for the strong performance in 2022. Our strong execution in 2022 and our commitments for 2023 reflects the resiliency of our business and the renewal of our product portfolio. The performance in the year positions us well for long-term growth. I’ll now turn the call back over to Tim and Giovanni for questions and answers.

Timothy Power : Thanks very much, David. I know it’s a very busy schedule today. So we’re going to get into the Q&A. If you could keep questions just to one, that would be very helpful. Dennis, could we go to the first question, please?

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Q&A Session

Operator: Yes. The first question is from the line of Chris Schott with JPMorgan. I’m sorry. It’s from the line of Geoff Meacham with Bank of America.

Geoffrey Meacham : Okay. Hi, everyone. Thanks for the question. I’ll keep it to one. So TYK2, I realize it’s early days in the launch. But what are the opportunities to improve formulary positioning this year as your market share improves? And do the many biosimilars launching this year, HUMIRA as well as across the board, have an impact on any of these PBM discussions?

Christopher Boerner : Sure. Thanks for the question, Geoff. This is Chris. I’ll take it. So first, we’re very happy with the performance Sotyktu. It’s obviously early days, but as is reflected in the remarks that David just had the reception for the product has been very, very good. The feedback that we’re getting on the profile coming from customers is good. We now have over 2,000 scripts. As of the end of November our market share for the oral market in moderate-to-severe psoriasis is roughly 35% for new products. And it’s roughly 12% if you look at the overall market, and that’s just after two full months of launch. So very happy with what we’re seeing in terms of the momentum coming out of Q4. And as it relates to whether we can accelerate the access position, I think the way we would characterize it is the base case continues to be 2024 for moving into a better access position.

That said, we’re doing everything we can to possibly accelerate that. We’re obviously having good discussions with payers. And the strategy that we have for potentially accelerating that remains unchanged, which is continue to drive demand as quickly as possible for this product. And the good news is we have the profile, and we’re seeing the feedback from customers that we think will enable us to do that. As for the impact of biosimilars, obviously, this is a dynamic environment. You’ve seen a number of movements just in the last few weeks. What I would say is that our approach to gaining access really doesn’t evolve based on what we know about biosimilars. We think 2023 is going to be a transition year for biosimilars. Clearly, the strategies of companies and PBMs will continue to evolve.

So it’s something we’ll stay on top of. But as we said right now, certainly, the strategy that we have for Sotyktu doesn’t change.

Operator: The next question is from the line of Chris Shibutani with Goldman Sachs.

Chris Shibutani : With Camzyos, that progress of rolling that out, you have previously talked about the different mix of centers of excellence, and you gave us a patient number. Can you give us a sense for what the relative distribution is of those larger centers versus perhaps maybe smaller practices? Are you seeing momentum with the setup of certifications and essentially the patient flow that you are hoping for at the pace so far?

Christopher Boerner : Sure. Thanks for the question, Chris. We’re seeing a nice acceleration of both patient and physician dynamics for Camzyos. As I think David mentioned, we now have over 1,800 patients who have been prescribed. Importantly, we’re seeing good and increasing conversion of those scripts to commercial drug. You may recall that in the third quarter, we talked about 30% of scripts that converted over to commercial drug. In Q4, that was 50%. So we’re gaining momentum there. And the feedback that we’re getting from the centers of excellence continues to be very strong. And so we’ve seen a nice pickup. And what I would say is that, that pickup has accelerated over the course of the fourth quarter. Recall that we are targeting approximately 500 accounts nationally.