BMYMP - Bristol-Myers Squibb Company (BMY) Morgan Stanley 21st Annual Global Healthcare Conference (Transcript)
2023-09-11 10:15:27 ET
Bristol-Myers Squibb Company (BMY)
Morgan Stanley 21st Annual Global Healthcare Conference
September 11, 2023 08:00 AM ET
Company Participants
Giovanni Caforio - Chairman of the Board & CEO
Christopher Boerner - EVP & COO
Conference Call Participants
Terence Flynn - Morgan Stanley
Presentation
Terence Flynn
Great. Well, thanks. Good morning, everybody. Thanks for joining us. I'm Terence Flynn, the U.S. biopharma analyst at Morgan Stanley. Very pleased to kick-off the conference this morning with Bristol-Myers.
Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, reach out to your Morgan Stanley sales rep.
Joining us today from the company, we have Giovanni Caforio, Chairman and CEO; and Chris Boerner, who is Chief Operating Officer and CEO Elect, will take over in November. But thank you very much both for being here and congrats both on next steps.
Giovanni Caforio
Thank you. Good to be here.
Question-and-Answer Session
Q - Terence Flynn
So I thought we get started. There's obviously some news over the last couple of weeks on the IRA. And it impacts companies across the sector. Obviously, Bristol has a couple of drugs that will be under negotiation here. And so I just wanted to start to know if there's anything you're doing to kind of navigate this post IRA world that the industry will be dealing with here in the 2026 time frame.
Christopher Boerner
Well, maybe I'll take that one, Terence. So first, I think at a macro level, we've been anticipating IRA and the price setting components of IRA for some amount of time. So what I would say, at the highest level is that we feel very good about the team that we have in place to navigate this, the capabilities that we've built. Importantly, we've connected those capabilities to key parts of the organization where we're going to have to make decisions as a result of the changes that have taken place as a result of IRA.
So for example, our access team is tightly connected with our R&D organization. And that's where we think there will be some changes that we'll have to be thinking about as we make new investment decisions. So we feel absolutely great about that. There's still a lot we don't know about how the actual negotiation and engagement with CMS will take place, but we feel good about where the teams are.
I think to no one's surprise, Eliquis was on the first list. And what I would say about that is, first, when we begin to engage with CMS, which will be likely later this year and early first quarter of next year, our primary focus is going to be on defending the value of that product for patients as well as for the health care system. And fortunately, we have a wealth of clinical real-world pharmacoeconomic data in order to do that. So that's objective number one.
Then obviously, we'll see how the discussions go in terms of the impact. But the way I would think about that impact is, keep in mind a few things. First, we split the economics with Pfizer. And so for every $100 of sales that we have on Eliquis, $50 of that goes back to Pfizer in the form of COGS. Second, not all of that business is Medicare. When you look at demand for Eliquis, it's about 60% Medicare. And then very importantly, keep in mind that this is a heavily managed segment. And so Eliquis is a heavily discounted product already.
So as you try to contextualize the impact for Eliquis, the impact is going to be determined by the difference between the net price today and the ultimate government set price (ph), not the gross price. So that gives you some overall context. So again, we don't know exactly how this is all going to play out, but what I feel entirely comfortable with is, we've got the right capabilities to navigate.
Terence Flynn
Yeah. Great. And when do you expect we get more visibility? Like, obviously, you're going to have these conversations back and forth. What's going to be the form will -- or will we even know where that discounted price ends up or is this something that's going to be more kind of behind the scenes and then we'll just see it show up in kind of net sales?
Christopher Boerner
Yeah. The sequence of events is, we'll begin to engage with CMS when they come forward with their first offering, which is in Q1 of next year, then there will be a period of negotiation that will entail between the company and the agency, and then we'll have a final decision later in the summer, early fall of next year.
Terence Flynn
Okay.
Giovanni Caforio
Okay. I think, Terence, if I may, this -- the process is obviously one of the big concerns that we have because, first of all, obviously, as you know, it's not really a negotiation because it's government price setting, and there is no opportunity for us to not accept the price that ultimately CMS decides. But there are some limitations also in terms of what we can disclose during the process. So unfortunately, I think it will be more of an opaque process that we would like it to be. And that's one of the big concerns we have with the IRA that we feel that both in terms of its intent and the process that is followed is clearly not a regulation that will do a lot of good things for patients, but definitely has the potential to generate significant concerns with respect to our ability to continue to invest in innovation, particularly in oncology, as you know.
Terence Flynn
Well, maybe that's a good segue to my second question, which is just – you are one of the several companies has filed a lawsuit against this -- against the IRA. So maybe just walk us through kind of the basis there and then next steps, again, similar type question, when will we know more about the outcome of that?
Giovanni Caforio
Yeah. So it's difficult to comment and speculate on ongoing litigation, of course. But let me tell you that we obviously thought about the decision to file a lawsuit because it's clearly an important decision. And the reason why we decided it was the right thing to do is, because we have some serious concerns with a number of elements of the legislation. And of course, the absence of objective economic value criteria in setting the price, the inability of the industry to accept or refuse the proposal because remember, the only alternatives that exist are either exiting Medicare with the totality of your business or paying a 90%-plus tax on the revenue of the product you don't accept the price for. These are two of the things that concerned us the most.
I think what concerns us also with the legislation is that, in fact, when you look at every other country in the world, once you negotiate reimbursement price, you have open an access to the totality of the market. And in this case, while there is a requirement that a product will be placed on formulary, there is actually no requirement that it be in a preferred position. And you can think about scenarios where, in fact, products that have a lower price may become actually disadvantaged from an access perspective and therefore, patients suffer.
And the thing that we were also really worried about is this arbitrary separation of nine and 13 years for more molecules versus biologics at the time, in which science is actually enable us to develop so many small molecules. So I think with respect to timing, it's clearly uncertain at this point because it's in the courts. There are some -- all the lawsuits that have been filed maybe -- may have some action later this year, but I would expect the most of the activity in courts will be next year.
Terence Flynn
Okay. Great. Maybe segueing on to the fundamentals. So obviously, capital allocation remains front and center. Giovanni, under your leadership, you've been reshaping the company here in preparation for some of these big upcoming LOEs. So maybe just remind us kind of capital allocation priorities. I know business development is probably top and center. But how should we think about that and again, as we think about deal size, where is the appetite for another larger deal while as Celgene?
Giovanni Caforio
Well, what I would say at the outset is that our approach to capital allocation remains unchanged. Business development continues to be the top priority. I think the criteria that we have historically talked about around business development deals remains the way we think about them and how we'll frame them. Deals need to make strategic sense. Obviously, they need to be scientifically in areas where we feel like we can be a leader and then obviously, they need to make financial sense.
The only thing I would add to that is to say that clearly, as we think about the company going forward, in particular, our ability to continue to drive consistent, sustainable and reliable growth, particularly in the back half of the decade. We're going to be very focused, obviously, on deals that enhance the growth profile of the company. So that's going to be an important consideration. But BD remains the top priority. We also remain committed to the dividend and growing that dividend subject to Board approval. And then we'll continue to be opportunistic with respect to share buybacks.
Terence Flynn
Okay. I guess one question I got post-earnings was, is the share repo indicative of a lack of compelling deals now out there or is this something that again, you want to just, as you mentioned be opportunistic, I guess, how should we think about that?
Giovanni Caforio
Well, I think the good thing is, we continue to have a really strong financial position with lots of flexibility. And so, I wouldn't see the share repurchase decision, the ASR, as indicative of anything from a business development perspective. It was the right time for us to do it given our belief in the fundamentals of the company and where we are. But it is not indicative of lack of focus or opportunities in business development. Of course, as we've always said, we want to be disciplined from a business development perspective. And the issue is not just driving an acquisition for the sake of it. There must be a real opportunity to generate significant value for shareholders.
Terence Flynn
Okay.
Christopher Boerner
And ultimately, as you know, we have the financial flexibility and have considerable firepower to do business development when we get the right deal to be done.
Terence Flynn
Okay. And again, another big focus of the company is the new product cycle. I know those are also top of mind for folks here. You guys have guided to doubling sales of those new launches this year versus last year and I know we'll get into a number of these new products. Just looking at consensus, I think consensus models have touched below your guidance for a doubling of sales. So as you think about -- is there any one disconnect as you look at that versus your expectations as you go through consensus?
Christopher Boerner
Well, what we've said is, and we reiterated this coming out of the second quarter that our objective this year is to roughly double sales for that product portfolio. And as we look at where the market, the market as you point out has been considerably focused on this. And we think when we look at consensus it constitutes roughly doubling of sales. And so those estimates are a reasonable starting place to think about it. What's important, though, and we talked about this a bit coming out of the second quarter is that when we look at that portfolio of assets, we see considerable momentum, and that momentum is important not just for this year, but as we get into the middle of the decade.
So when you look at a product like SOTYKTU, where we continue to drive volume there, we saw a nice increase in TRxs in the second quarter. We got a nice win with respect to access in the advanced formulary portion of CVS. That's an important catalyst for us. We saw a nice catalyst with Reblozyl and the label that we got, an all-comers label in the first-line MDS setting, that's going to be a catalyst for us. We continue to see nice uptake on Camzyos. Opdualag continues to perform well. We've made good progress on the manufacturing side for our cell therapy assets and those are going to be important drivers of growth as we look at not just this year, but next year and beyond. So I think the fundamentals of those products are what we feel position us well, not just for this year but really again as we go into the middle of the decade.
Terence Flynn
Okay. Great. And I think we'll go through a number of these now. SOTYKTU, obviously, one of the newer launch products, oral immunology product. Chris, you mentioned this, the CVS coverage decision. So maybe just give us an update on kind of how you're progressing beyond CVS. I know 2024 was really kind of the big focal point, is there a chance that you could pull some of these decisions more in the back half of '23 similar to CVS?
Christopher Boerner
Yeah. Well, I mean, obviously, as we've said, when you think about how we get access from this product, the important thing is that we drive volume. We saw a nice almost doubling of TRxs between Q1 and Q2. The feedback that we're getting from physicians on the product continues to be very strong. The majority of the use is still in the community setting. That's where most of these patients set.
And the nice thing that we saw, and this is important for where we ultimately want to position this product, which is about the oral standard of care for initial use for psoriasis patients. We saw about 40% to 45% of patients in the second quarter were naive to any other therapy. And so that's a nice increase, and that's ultimately the patient population we're going after. So the volume dynamics there are the thing we continue to stay focused on. And we've always said that's going to be the thing that will be important to potentially accelerating some of these access wins.
CVS is an important acceleration that we saw. It represents about 30 million patients or 15% of total patient volume. Certainly, there are options that we're exploring to move phase forward. We're certainly (ph) incented to do that. But as we've talked about consistently, we need to be disciplined about the gross to nets that you pay to do that, and so we continue to anchor on the 2024 cycle as where we'll see more of a step function. But obviously, the team is out doing everything we can to try to accelerate that.
Terence Flynn
Okay. And maybe just remind us how long it takes to move a patient off of bridge on to commercial because that's the other thing we think about our models and kind of pacing of those patients moving over to full coverage.
Christopher Boerner
Well, right now, we're focused on two things around these CVS patients. One is ensuring that every new CVS patient two (ph) is covered with no steps goes immediately on to commercial drug. And then the other, as you point out, is getting the patients to transition from Bridge And so that's about a two to three month process to get that done.
Terence Flynn
Okay. Got it. Okay. And again, I guess you touched on the mix already in terms of this 40% to 45% naive. I think the other question we get a lot is, as you think about moving into the mild (ph) segment, are you confident you can do that based on the – that label you have now or is there more work you need to do to be able to move into the more mild segment of the population?
Christopher Boerner
Well, our focus right now is on moderate to severe and we are fixated on becoming the standard of care in that moderate to severe patient population. So I would say that's going to continue to be the primary focus for us.
Terence Flynn
Okay. And again, you touched on this a little bit, but the breadth of the prescriber base. You said most of this is in a community setting. But just, again, walk us through kind of where you stand in terms of breadth of prescribing right now?
Christopher Boerner
Yeah. So when we targeted the initial launch, it was going after the highest prescribers, that's what we typically do in any launch and we’re going to say, we're getting good breadth of use in or depth of use in that patient -- that physician population. Beyond that, the team is focused on now going to the second and third order [indiscernible] accounts. And that's again where you're going to see a lot of volume in the community. It's a bit more dispersed, but that's increasingly becoming our focus as we've driven additional penetration in those top-tier accounts.
And again, the fact that we had -- and this was true really coming right out of the gate. So much of the use in the community setting was a good sign for the long-term potential for this product in psoriasis. And of course, psoriasis is just the first indication for this product. We already have physicians very excited about using this in psoriatic arthritis, for example. And then I think we've discussed in the past, we've got ongoing development programs for this asset in showrooms as well as in lupus, which is a very exciting opportunity.
Terence Flynn
And can you refine for us in terms of that breadth of prescriber base? Are you like over 50% of your targets or 60% at this point or...
Christopher Boerner
Yeah. So we've actually covered well over 50% of our targets. The focus though, is within those targets to drive additional depth of use and so that's where the team is now.
Terence Flynn
Okay. Great. And these are, again, more Samit questions, if Samit was here. But again, Chris, you could put your Samit a hat on here and help us out. So one question we get a lot of just the future dynamics here from some of these next-gen TYK2 and also oral IL-23. So as you look out, how do you think the competitive landscape is going to play out? Obviously, we have first-to-market advantage. But again, we've heard the argument from the others in terms of selectivity profile. So how do you see this evolving as you look out several years down the road?
Christopher Boerner
Well, when we launched into this market, we knew right off the bat it was going to be competitive, competitive in terms of the on-market activity day one, but also competitive in terms of development activity. Obviously, we expected that there would be next-generation TYK2 assets. I would say, with respect to those products, it's not clear that there's any clear differentiation. And as you point out, we have a considerable head start in terms of being on the market already.
The IL-23 data is interesting. Having said that, it's difficult to know exactly how to interpret given we don't know exactly what the dose will be. And ultimately, we're going to have to continue to see what plays out in the Phase III data. Having said that, we feel great about the profile that we have with so TYK2. We feel great that it enables us to deliver what we are focused on doing, which is making it the standard of care for those initial patients who are getting the systemic oral therapy. We have two Phase III studies, both of which show a significant improvement in efficacy and safety over the current standard of care. And so that's a great starting point. And frankly, it sets a pretty high bar for any competitor that's going to come.
Terence Flynn
Okay. And then just a related question is you're running some additional studies. One of those is in ulcerative colitis, you're looking at a higher dose here. I think the team has set data later this year. So maybe help us frame expectations here. I know the first UC study, you didn't see an ideal profile, so you went to a higher dose. So how should we think about this next upcoming study?
Christopher Boerner
We actually have the data in-house. And while we're still analyzing that data, the way I would think about it is, we're not surprisingly based on the earlier study that you referenced, not going to be pursuing that indication. Having said that, one, that indication was not required to get to the $4 billion plus peak sales that we had articulated for the product. And the other indications that I referenced previously are ongoing and we're very excited about. And I would highlight, in particular, lupus, lupus is a big indication. It's an important indication. And just as a shameless plug for our R&D Day on Thursday, we're actually going to talk about some of what we've been seeing with that program and what makes us excited about it. But clearly, SOTYKTU is going to be an important drug in psoriasis, as I mentioned, there's excitement in psoriatic arthritis and we're very excited about the possibilities for this asset to be a meaningful improvement for patients with both [indiscernible] and lupus as well.
Terence Flynn
Okay. And as lupus just remind us stage like you're moving that into Phase III, I think you've said.
Christopher Boerner
Yeah.
Terence Flynn
Okay. And so how -- any projections in terms of time line for data?
Christopher Boerner
'26.
Terence Flynn
'26. Okay. Great. Okay. Well, let's move on, just in the interest of time. Camzyos, again, another one of the important new product cycles for the company. Maybe just speak to us here about kind of the work you're doing to build this market. I know initially, the focus was on a lot of the specialist academic centers. Now you're broadening out into the community, leveraging the Eliquis sales force. So as we think about kind of back half of this year into '24, what are kind of the key execution steps that the team is doing now to kind of continue to drive this launch?
Christopher Boerner
Yeah. Obviously, continuing to drive utilization in the centers of excellence, which as you point out were the focus that we had at launch. Early this year, we did expand to our retail team, the Eliquis team that began to go well beyond that population of physicians with the idea being that some of those accounts would want to prescribe Camzyos directly. Many others who would be referring those patients into centers of excellence. And I would say that rollout has continued to go well. We've seen a nice increase in terms of the number of REMS-certified (ph) physicians.
Now it's roughly up to 4,000 physicians. We saw a nice increase also in the number of patients being prescribed Camzyos. We had an increase of about 1,100 patients between Q1 and Q2. So we feel good that we're continuing to see a nice increase in patient volume. There are no -- unlike the SOTYKTU conversation. There are no dynamics really to be concerned about on the access side. These patients will convert over to commercial drug. We put them on bridge just to get them through the initial process of getting on to therapy, so that process is going well. We've seen a nice acceleration of that as customers and payers get more familiar with the product.
And the most important thing, which I think feeds to the long-term potential of this product in obstructive HCM is that patients are staying on drug consistent with our expectation, which is we see very low drop-off for patients on Camzyos. And by the way, we saw this also in the clinical trials. And why that's important is because it speaks to the profile of the product. This has really been a product that has exceeded our expectations in terms of the feedback that we get from patients as well as the feedback that we get from customers.
And again, we're going to talk more about some of what we're seeing actually with this product in the real world on Thursday, where we're actually beginning to see the remodeling of the heart, and we've got some data that's come forward that we'll be talking about on Thursday, would suggest that this product is having a real profound impact on patients, and that bodes well for the long-term potential of this product.
Terence Flynn
Okay. Maybe just to drill down again similar to SOTYKTU. I think you said 60 centers of excellence, you were targeting before. 20% of the patients are treated there. And then you brought end that to 500 centers. So is that breadth of prescribing now across all those centers pretty much and are you going even beyond that 500?
Christopher Boerner
Yeah. Well, obviously, as you get out into 500 centers, the breadth is going to be a bit more variable just given the timing of the launch of this. What we have seen that's really important is within those centers of excellence, which -- some of which as we pointed out were a bit slow in getting up and running, those centers are now -- we feel good about the volume of patients they're seeing. We feel good about that they've got the internal processes to manage this product. So within the centers of excellence, we've seen very good increasing depth of use.
And then obviously, as you get into the broader community of cardiovascular accounts, it's going to be a bit more variable, and that's going to take some time for us to get those patients in. Remember about 75,000 patients roughly are diagnosed and symptomatic with this disease. And so this isn't a massive population. So there's a bit of when these (ph) accounts see these patients. But we've got good coverage with our team. And obviously, the Eliquis sales force has been out engaging with these accounts for many, many years. So we know these customers exceptionally well.
Terence Flynn
Okay. Maybe just the last one on Camzyos is just, again, similar to SOTYKTU, there's a competitor that's going to have some Phase II (ph) data later this year. Just speak to maybe differentiation here versus [indiscernible]?
Christopher Boerner
Based on the data that we've seen, we sort of stand by the initial statements we said, which is we do not see a differentiated competitor in this space. Now obviously, it's early days, and we've got to see data evolve, but based on what we've seen, we see no reason to believe that we have a differentiated competitor coming.
Terence Flynn
Okay. Great. Maybe just moving on to the CAR-T side. Obviously, Bristol is one of the companies here that has a very entrenched position in this space for a long time now. Abecma, one of the two key products for the company. Maybe just speak a little bit more about 2Q dynamics and then how to think about KarMMa-3 and the implications of that label?
Christopher Boerner
Sure. So in the second quarter, Abecma sales in the U.S. were negatively impacted mainly by competitive dynamics from bispecifics. And what we saw during the period when really both cellular therapy assets in multiple myeloma were experienced manufacturing challenges, and we saw an increased use of bispecifics in that fourth-line plus patient population. So the team is focused squarely on addressing those competitive dynamics. We obviously have strong clinical data to do that. The real world data that again has come out from ASCO this past year confirms that we see at least as good if not better performance for Abecma relative to our clinical data that's not necessarily true for competitor cellular therapy products.
And we also have data that's now been published which we’re using in the field, which shows that it is better to use a cellular therapy before a bispecific, and that's important in terms of addressing some of those bispecific dynamics. And so the team is squarely focused on those. And so, as we look forward for this year with Abecma, what we expect to see is we had a manufacturing shutdown that will impact Q3. So we think Q3 sales will be roughly in line with Q2, but we'll return to growth again as we get into Q4. And then that's where KarMMa-3 becomes relevant, but PDUFA date for KarMMa-3 is in December of this year. And that's going to be an important opportunity for us to potentially move this product into earlier lines of therapy for patients.
Terence Flynn
Do you think that will help blunt the impact of bispecifics as you think about moving up because of bispecifics, we'll still have this late line label or how does that play out once you have KarMMa-3?
Christopher Boerner
Yeah. I mean, I think having a broader patient population and potentially an earlier patient population is going to be important, and it's going to be important not just for Abecma before the class because obviously, you've seen really across the entire portfolio of cell therapy assets here, a movement into earlier lines of therapy. And again, we've got pretty compelling data suggests that it's in the best interest of patients to have two options here, cellular therapy and bispecifics and that the sequencing matters and that if you reverse that sequencing, you make it much more difficult for patients to have a viable cell therapy option. And so treating first with cell therapy and then with the bispecific is in the best interest of patients.
Terence Flynn
Okay. Got it. And maybe just, again, you might speak to some of this at the R&D Day, but you're also working on another CAR-T targeting GPRC5D, had some interesting data, I think, I forget if I was at ASCO or ASH recently. Maybe just any update on that program and when that might reach the market?
Christopher Boerner
Yeah. We presented that data at ASH last year, and it was very well received. We're excited about the target. Obviously, you've seen some other products that are targeting that, that are not cellular therapy, we actually think that and we will discuss this at R&D Day that one of the things we've tried to do consistently in R&D is target the focus of a drug with the right modality for administering that product, and we feel strongly that for GPRC5D a cellular therapy is an ideal modality for how to administer that. We're excited about it and it's entering the next phase of development now, and we'll talk more about it on Thursday.
Terence Flynn
Okay. And maybe just last one on myeloma is the foundation dynamics that you talked about in the second quarter, I think there's still some debate about your confidence that those won't persist again later this year into next year. So any additional color you can offer on that side?
Giovanni Caforio
Yeah. I don't -- I can take that. Nothing has changed really versus what we said on the second quarter earnings call. As we mentioned, we were looking at two parameters in assessing whether that dynamic would continue. The first one, we've continued to see the funds that support multiple myeloma patients that independent third-party foundations to be open. And most importantly, when we look at free -- demand for free product in our BMS foundation, those numbers have been returning to normal. So I continue -- we continue to think about this as an event that impacted this year. And obviously, the reason why it was prolonged throughout the year, as we also mentioned is because once a patient enrolls in receiving free product from the BMS Foundation that continues for the calendar year, but we don't see that as repeating next year.
Terence Flynn
Okay. Maybe just the last one is on operating margins. You guys have laid out 40% target through '25. Gross margin as a headwind as Revlimid goes generic. So is SG&A kind of the key lever that we should think about in terms of you guys being able to meet that 40% margin?
Giovanni Caforio
I think it's a combination of factors. So first of all, gross margin, which is an important element is driven by mix. And so you mentioned Revlimid and the entry of generics eroding and we see a period of time during which gross margin declines as a result of that. But then when you look at what drives the growth of the company going forward, there are a number of high gross margin products in our new product portfolio. And so as Eliquis becomes a smaller contributor to growth over time and some of the high margin new products accelerate their growth, we see a recovery in gross margin as well.
So I would say, you mentioned SG&A. Of course, we've always been very disciplined. And when you look at our expense base in managing expenses carefully and we will continue to do that going forward. At the same time, we will continue to fully support the renewal of the portfolio, the development of the pipeline, the launch of new -- the new assets competitively. And the reason why we established an objective of 40% is clearly to indicate that as our business transitions to a new portfolio, it will remain highly profitable and that continues to be very much true.
Terence Flynn
Great. Well, I think we're up against time. But thank you both very much and thanks a lot.
Giovanni Caforio
Thank you.
Christopher Boerner
Have a good day.
Giovanni Caforio
Have a good day. Thanks.
Christopher Boerner
Thank you. Appreciate it.
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Bristol-Myers Squibb Company (BMY) Morgan Stanley 21st Annual Global Healthcare Conference (Transcript)