Analyst Conference Summary

biotechnology

conference date: February 6, 2020 @ 5:30 AM Pacific Time
for quarter ending: December 31, 2019 (fourth quarter 2019)

Forward-looking statements

Overview: Revenue jumped y/y on Celgene acquisition. Lots of moving parts, but appears to be heading towards a strong 2020. Charges from acquisition hurt GAAP earnings, so look at non-GAAP too.

Basic data (GAAP):

Revenue was $7.95 billion, up 32% sequentially from $6.01 billion and up 33% from $5.97 billion year-earlier.

Net income was negative$1.1 billion, down sequentially from $1.4 billion and down from $1.2 billion year-earlier.

EPS (earnings per share), diluted were negative $0.55, down sequentially from $0.83, and down from $0.71 year-earlier.

Guidance:

For 2020 estimates revenue between $40.5 and $42.5 billion. GAAP EPS $0.75 to $0.95, non-GAAP EPS $6.00 to $6.20.

For 2021, non-GAAP diluted EPS is estimated $7.15 to $7.45.

Conference Highlights:

The Celgene acquisition closed on November 20, 2019, so less than half the quarter. GAAP results in Q4 include costs and expenses resulting from purchase price accounting, contingent value right fair value adjustments and other acquisition and integration expenses.

Giovanni Caforio, M.D., CEO of Bristol-Myers Squibb stated "With an expanded portfolio of high-performing brands, eight potential commercial launch opportunities, a deep and broad early pipeline, and the financial flexibility to continue to invest in innovation, the company enters 2020 uniquely positioned to transform patients’ lives through science and create long-term sustainable growth." Plans to use cash flow to deleverage debt, increase the dividend, and repurchase stock. On track to deliver $2.5 billion in synergies from the merger. Bristol has an unpecedented number of new drug or indication launches expected in the near term.

U.S. revenues increased 42% y/y to $4.8 billion. International revenue was up 21% y/y to $3.2 billion. There was a $0.5 billion charge for acquired R&D expense and $1.1 billion for acquired intangible assets. $931 million income tax expense mainly due to the Otezla transaction.

In January, 2020 announced that the FDA accepted for priority review its sBLA for Opdivo plus Yervoy for the first-line metastatic or recurrent NSCLC with no EGFR or ALK genomic tumor aberrations, with an FDA PDUFA action date of May 15, 2020. But withdrew its European application for Opdivo plus Yervoy for the first-line treatment of advanced non-small cell lung cancer (NSCLC). In November 2019 announced that the FDA accepted its sBLA and granted Breakthrough Therapy Designation for Opdivo plus Yervoy for the treatment of advanced hepatocellular carcinoma (HCC) previously treated with sorafenib, with a PDUFA of March 10, 2020.

The Phase 3 study of Opdivo plus Yervoy for melanoma in patients whose tumors expressed PD-L1 <1% did not meet its primary endpoint, in Q4 2019.

Non-GAAP numbers: diluted EPS $1.22, up sequentially from $1.17 and up 30% from $0.94 year-earlier. Net income $2.4 billion, up sequentially from $1.9 billion, and up 60% from $1.5 billion year-earlier.

Cash and equivalents ended at $16.2 billion were down sequentially from $33.5 billion. Long term debt was $46.7 billion (avg rate 3.4%), a large jump due to the Celgene acquisition. Yet approved a $5 billion stock buy-back program.

Believes cash flow will be strong, allowing for paying off debt and increasing the dividend. Believes revenue growth from newer drugs will allow growth to continue even when Revlimid revenue levels off starting in 2022.

In September, 2019, at ESMO Bristol updated data showing Part 1a of the Phase 3 Checkmate-227 study evaluating Opdivo plus low dose Yervoy vs. chemotherapy met the co-primary endpoint of overall survival in first-line non-small cell lung cancer (NSCLC) patients whose tumors express PD-L1=1%. But Part 2 of the Phase 3 Checkmate-227 study evaluating Opdivo plus chemotherapy versus chemotherapy did not meet its primary endpoint of overall survival in first-line non-squamous NSCLC patients regardless of PD-L1 status.

At ASH 2019 Bristol and its partner Acceleron (XLRN) presented positive data evaluating Reblozyl in patients with anemia associated with a range of serious and rare blood diseases. In November 2019, Celgene the FDA approved Reblozyl for the treatment of anemia in adult patients with beta thalassemia who require regular red blood cell transfusions. For Reblozyl for the treatment of anemia in adult patients with very low- to intermediate-risk myelodysplastic syndromes (MDS) who have ring sideroblasts and require red blood cell (RBC) transfusions, Bristol has an FDA action date of April 4, 2020.

In December, 2019 Bristol announced that the European Commission approved a new indication for Revlimid, in combination with rituximab, for the treatment of previously treated follicular lymphoma.

In December 2019 partner bluebird bio, Inc. announced that KarMMa, a pivotal, open-label, single arm, multicenter, Phase 2 study evaluating ide-cel (bb2121) in patients with R/RMM, met its primary endpoint and key secondary endpoint.

In December, submitted a BLA to the FDA for liso-cel, its autologous anti-CD19 CAR T-cell immunotherapy for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after at least two prior therapies.

Cost of products sold was $2.49 billion. SG&A $1.73 billion. R&D $2.10 billion. Amortization $1.06 billion. Other expense $689 million. Total expenses $8.07 billion. Operating loss $129 million. Tax expense $931 million.

Q&A summary:

First line lung strategy in Europe? Shifted focus to 9LA study in Europe. We see 227 and 9LA as thought of together in the US. The 227 data is seen as an opportunity by the FDA. 9LA adds chemo and demonstrated overall survival. The Opdivo business is performing in line with our expectations, holding market share, but under pressure from 2nd line lung, small cell, and head and neck, from competitive approvals.

Cel-mod portfolio? A necessary opportunity. Strong, durable responses in late line setting. Will share plans later this year.

CC-486? AML data at ASH was an important data set. OS improvement. Oral agent, so convenient. Only treatment to show survival benefit in setting.

About one-third of the Celgene synergies should come this year.

BCMA will need to be attacked from a variety of modalities. Looking into the pipeline to determine possible combination therapies. Hope is to expand labels to multiple lines of therapy.

2022 and 2025 prior guidance? We will not be updating those. Substantial changes like divesting Otezla make those outdated.

Revlimid erosion, how to model? Sales are currently strong. IP decisions have been favorable, did reach one settlement. We see loss of exclusivity as a slope.

Bladder cancer population is fragmented, we do see some opportunitie there. We look forward to presenting the data.

In 2021 we see strong growth. In 2022 we see the growth rate moderating as Revlimid generics enter the market.

Reimbursement on cel-mod? Part of this is that the out patient environment would move some of it into Part B. We are seeing improvements in reimbursement, but there is work to do with CMS.

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