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Bristol-Myers Squibb Company isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to the Bristol-Myers Squibb Fourth Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tim Power, Vice President and Head of Investor Relations. Please go ahead.

Tim Power: Thank you, and good morning, everyone. Thanks for joining us this morning for our fourth quarter 2023 earnings call. Joining me this morning with prepared remarks are Chris Boerner, our Chief Executive Officer; and David Elkins, our Chief Financial Officer. Also participating in today’s call are Adam Lenkowsky, 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 use to follow along with for Chris and David’s remarks. 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. And with that, I’ll hand it over to Chris.

Chris Boerner: Thanks, Tim, and good morning to all of you. I’m very pleased to be speaking to you on our earnings call for the first-time as a CEO, and I’m excited about the opportunity for our company to continue to deliver transformational medicines for patients. Please turn to Slide 4. Q4 2023 was a good quarter, including strong sales momentum in our inline and new product portfolio with 9% growth and nearly $10 billion in revenue with growth across multiple key brands, including Eliquis, Opdivo, Reblozyl, Opdualag, Breyanzi, Camzyos and Sotyktu. We also continued to generate significant cash flows from operations of $4.3 billion in the quarter. And as you’ll hear from David in a few minutes, we expect to grow our business this year.

During the fourth quarter, we also achieved important pipeline milestones and several key business development transactions to strengthen our growth profile. This is an important time for BMS. I know that many of you are focused on our strategy to navigate the decade and on the importance of disciplined execution at the company. We are writing the next chapter for BMS and with that comes an opportunity for change. So let me take a few minutes to tell you about our strategy to navigate our LOEs and be very clear about my focus on execution. Let’s go to Slide 5 and how we see the company today. When we look at our business, it’s comprised of two portfolios. First, we see a legacy portfolio of well-established products facing headwinds such as IRA.

Though this portfolio is declining, it is expected to continue to generate strong cash flows to enable investment in our future growth drivers. Second, we see an expanding portfolio of growth products, many of which are relatively newer to the market and have significant expansion potential. When you look at these portfolios combined with our exciting pipeline, you can see how it all comes together as depicted on Slide 6. As we think about this decade, we see three distinct periods; a near-term growth period, a transition period, and potential for sustainable top-tier growth, which we plan to drive in the back end of the decade. Between now and the middle of the decade, our focus will be on maximizing the opportunity we have with our growth portfolio.

This, along with pipeline execution, can best position the company into the transition period. Then, starting around 2026, our exposure is most acute and our focus will be on shortening the transition period as much as possible by accelerating our R&D programs, executing on product approvals and launches while maintaining P&L discipline. Finally, in the latter part of the decade, around 2028 and beyond, we plan to deliver sustainable top tier growth, and we have the portfolio, pipeline and financial flexibility to support this opportunity. Many of you recognize the first two periods. However, the late decade return to growth phase is less appreciated externally, including a number of important products that are not fully appreciated in consensus models today.

What supports our confidence is our expanding pipeline, recent deals, and newly launched products. Our strategy is to minimize the transition period coming in a few years while maximizing our growth in the back part of the decade. Turning to Slide 7. My confidence in our strategy is supported by the fact that compared with other companies that successfully navigated similar periods, we have some clear strengths, and expanding growth portfolio across multiple therapeutic areas, an exciting pipeline, differentiated platforms and continued financial strength to further invest for growth with business development. And the momentum from our most recent quarter to capitalize on these strengths is clear from Slide 8. In October, we told you we would strengthen commercial performance and during Q4, we have been making progress.

We have increased investment behind key growth brands such as Camzyos and Sotyktu. We are re-accelerating growth for Reblozyl by capitalizing on the launch of the commands indication in first-line MDS. Our efforts to further establish Opdualag as the standard of care in first-line melanoma are driving further growth. And we have made progress expanding capacity for cell therapies, particularly setting up Breyanzi for significant expansion this year. In R&D, we delivered important milestones, including recharging our early-stage pipeline with 10 INDs as we told you we would do at our R&D Day, delivering the approval of Augtyro in first-line ROS-positive lung cancer, and advancing our key platforms, including initiating our CD19 NEX T study in multiple sclerosis for our cell therapy program, and showing early, but important Phase 1 data for the AR LDD prostate asset from our targeted protein degradation platform.

Importantly, we have been active in business development. Specifically, we further diversified our Oncology portfolio with targeted oncology assets such as Krazati and PRMT5 from the recently completed Mirati acquisition. The planned addition of a differentiated bispecific ADC from SystImmune with exciting Phase 1 data across tumors, including lung and breast cancers, and the planned acquisition of RayzeBio, bringing important radiopharmaceutical assets, pipeline and manufacturing capabilities. And we announced the planned acquisition of Karuna Therapeutics, bringing KarXT, which we believe will be a transformational medicine for patients with schizophrenia, Alzheimer’s psychosis and potentially other indications with multi-billion dollar sales potential.

We are looking forward to launching this medicine after closing the transaction later this year. These deals add important growth substrate to our company and diversify our portfolio for the long term. Let’s turn to Slide 9. Execution for me is a top priority. Starting with Commercial. The focus is on continuing to accelerate performance for key growth drivers. This means ensuring the right resourcing and investment levels across our most important brands. And it means having the best people and driving accountability for delivering results. In R&D, building on the momentum I described coming out of last quarter, as we highlighted at our R&D Day, we have a strong pipeline with the potential to deliver over 16 enemies through the late 2020s.

And here, we need to accelerate and deliver top-tier productivity. We are also taking a hard look at our pipeline to prioritize investments for projects with higher return opportunities and discontinuing lower priority programs and our OpEx base. As we told you, we are going to absorb the OpEx from Karuna. This means we need to make room for these assets by focusing our OpEx base to increase efficiency and productivity. We have begun executing across all three fronts and look forward to updating you on our progress in future quarters. We plan to grow our business this year as shown on Slide 10. David will provide much more detail on our guidance in a few minutes. But what’s important from my perspective is that getting our long-term plan to work requires us to deliver well in the short term.

A few weeks ago, I reaffirmed our long-term targets as of that date. At that time, I also said, we were going back to our historical practice of providing mainly annual guidance with total company rather than product-level revenue targets. Therefore, we will not be updating those long-term targets moving forward. With that in mind, you can see that our growth portfolio is strengthening and our guidance reflects expected top-line growth this year. Before I hand the call over to David, I would like to thank my BMS colleagues for their efforts at serving patients during 2023, and for their enthusiasm for embarking on our next chapter as a company. David?

David Elkins: Thank you, Chris, and thank you all again for joining our call today. As Chris mentioned, this is an important time for BMS, as we embark on our next chapter, transforming our portfolio. Our performance in 2023 reflect a continued strong growth of our inline and new product portfolio and the ongoing erosion of Revlimid. Let’s get started with our top-line performance on Slide 12. Unless otherwise stated, all comparisons are made versus the same period in 2022 and sales performance growth rates will be discussed on an underlying basis, which excludes the impact of foreign exchange. We delivered sales of approximately $45 billion in 2023, which reflected 8% growth from our inline and new product portfolio, offset by unfavorable impact of generic entries.

During the year, we saw continued strong demand for our key inline products such as Eliquis and Opdivo, while newer products gained traction in the respective markets. If you turn to Slide 13, you see our 2023 sales split between legacy and growth portfolio that Chris spoke about earlier. This is how we will report our business as we move forward. What I can tell you is the transition of the business is already well underway from our legacy to our growth portfolio. For 2023, our growth portfolio delivered approximately 15% growth. This supports our strategy that Chris discussed earlier. We see our legacy portfolio providing a solid foundation for cash flow generation in near term, while the products within our growth portfolio grow in significance.

Let me dive deeper into our fourth quarter and full-year sales performance starting with our Oncology portfolio on Slide 14. We are pleased with the robust demand for Opdivo, which achieved strong global sales growth for the year. In the fourth quarter, U.S. sales grew 12%, primarily driven by increased volume and core indications, including first-line lung, upper GI and adjuvant bladder cancer, partially offset by optilized growth in first-line melanoma. During the quarter, U.S. and international markets each benefited from approximately $50 million of favorable stocking. Internationally, sales grew 4%, led by increased demand for lung and gastric cancer indications and from expanded reimbursement. Turning to Opdualag, which more than doubled its full year sales in 2023 and is now a standard of care treatment first-line melanoma.

In the fourth quarter, U.S. sales grew 80% versus the prior year, and 15% sequentially, benefiting from its strong market share position. With respect sales of Augtyro in the fourth quarter, we launched in late November and upon U.S. approval and Q4 sales reflect the initial wholesaler stocking. During 2024, we look forward to bringing this important medicine to more patients. Let’s turn to our Cardiovascular on Slide 15. Eliquis generated over $12 billion in sales in 2023 and continues to be the number one oral anticoagulant globally. In fourth quarter, sales grew primarily driven by demand in the U.S., as we continue to gain market share from competitors. Internationally sales in Q4 were broadly flat, driven by generic entry in several European markets.

Sales of Camzyos in the fourth quarter and full year were strong, including $88 million in Q4. As of December 31, we had roughly 4,500 patients on commercial drug. And on average, we have been adding roughly 1,000 patients to commercial drug per quarter. The momentum in the U.S. for Camzyos is expected to continue in 2024, and internationally we expect modest near-term sales contribution based on timing of reimbursement in newly launched markets. Turning to our Hematology portfolio performance on Slide 16, starting with Revlimid. Global sales for the full year were approximately $6 billion. Looking forward, we anticipate continued variability in Revlimid sales quarter-to-quarter based upon historic patterns and specialty pharmacy dispensing.

We anticipate an additional volume of U.S. generics to enter the market in March. We continue to forecast a step-down in Revlimid revenues in the range of $1.5 billion to $2 billion this year. Now moving to Reblozyl. Global sales grew 40% in 2023, surpassing $1 billion on an annualized basis for the first time. For the quarter, Reblozyl generated 60% sales growth, driven by strong demand and supported by a broad U.S. first-line label. Sales grew 75% in the U.S. in Q4. Internationally, Reblozyl continues to be launched in different markets across the globe, including recently in Japan. Turning to our cell therapy portfolio. Starting with sales of Abecma in the U.S., we continue to experience competitive impacts, while ex-U.S. demand remained strong in the quarter.

We remain focused on demonstrating the benefits of the product profile to our customers in anticipation of expanded use in the U.S. upon the potential approval of KarMMa-3 data in third-line plus setting. Abecma was recently approved in Japan in the third-line setting based on KarMMa-3 data. And last week, we received positive CHMP opinion. Moving to Breyanzi. Global sales doubled year-over-year, reflecting the strength of its clinical profile and an improved manufacturing capacity. We are pleased to have received FDA priority review for all three of our expanded indications for Breyanzi, and look forward to the PDUFA date in March for Chronic Lymphocytic Leukemia and additional PDUFA dates in May for Follicular and Mantle Cell Lymphoma indications.

Looking to this year, we expect to see strong sales growth starting in the second quarter, driven by improved supply capacity and the potential for these new additional indications. Moving to Immunology on Slide 17. Global sales of Zeposia in 2023 grew 72% to $434 million, driven by increased demand in multiple sclerosis and ulcerative colitis. We remain focused on driving growth across both indications. For 2024, keep in mind the typical impact of U.S. Zeposia sales in the first quarter due to copay assistance for commercially insured patients whose benefits reset. With Sotyktu, our goal continues to be driving demand and broadening access. We made good progress on both fronts in the fourth quarter. Fourth quarter sales in the U.S. also benefited from a clinical supply purchase of $17 million.

When you strip out the one-time purchases in Q4 and Q3, we showed strong underlying sequential sales growth of approximately 40%, reflecting good pull-through from CVS and increased demand. Going forward, the way to look at our progress in the U.S. is through commercially paid prescriptions. As we build volume and improve access, we will be subject to higher rebates, which is something to keep in mind as you model Sotyktu for 2024. Of course, Adam can talk more about this in the Q&A portion of our call today. Internationally, we expect Sotyktu to gain additional country regulatory and reimbursement approvals over time. Switching gears to our fourth quarter P&L on Slide 18. Having just covered sales performance, let me walk through a few non-GAAP key line items.

Gross margin as a percentage of sales decreased approximately 150 basis points to 76.4% compared to prior year due to product mix and lower hedge settlement gains. Excluding acquired in-process R&D, fourth quarter and full year operating expenses decreased primarily due to timing of expenses in 2022. The fourth quarter decline was partially offset by increased investments in Camzyos, Sotyktu and the timing of pipeline investments. Acquired in-process R&D in the quarter was $600 million, which was partially offset by licensing income, resulting in an unfavorable net impact of $0.20 of EPS. The fourth quarter effective tax rate was approximately 14.9%, driven primarily by earnings mix. Overall, earnings per share was $1.70 in the quarter and $7.51 for the full year.

Now moving to the balance sheet and capital allocation on Slide 19. Our financial position remains strong, with approximately $12.6 billion in cash and marketable securities on hand as of December 31, as we generate cash flow from operations of $4.3 billion in the fourth quarter. Through our strong financial discipline, we have been able to invest in our business and further expand our portfolio, maintain strong operating margins, pay down debt and return significant cash to shareholders through share repurchases and dividends. Over the past three years, we’ve returned over $30 billion in shareholder distributions, including the dividend, which we have increased annually for 15 years in a row. As you know, we’re going to be taking on additional debt this year to finance our planned acquisitions of Karuna and RayzeBio.

However, with our strong financial position, we plan to utilize our cash flow to pay down our debt as we’ve demonstrated in the past. Our plan is to repay approximately $10 billion of debt over the next two years to improve our leverage profile. Before turning to our line item guidance, let me close with our 2024 non-GAAP guidance on Slide 20, which includes Mirati, but excludes the future impact of pending transactions, SystImmune, Karuna and RayzeBio. As we did in 2023, we were providing revenue guidance on a reported basis, as well as on an underlying basis, which assumes currency remains consistent with prior year. We expect 2024 revenues to increase in a low-single digit range, reflecting our confidence in the growing momentum of our growth portfolio.

Excluding foreign exchange, we expect revenues to increase in the low-single digit as well. Driving our momentum this year will be increasing the sales in our growth portfolio from products like Opdivo and our recently launched products. As we said previously, we expect a more modest pace of growth than last year for Opdivo, with the potential for acceleration in the back half of the year from new indications. And while our legacy portfolio includes assets that are maturing, we expect strong growth from Eliquis in the U.S. this year. As it relates to quarterly progression of our sales, a few reminders. For products like Revlimid, Pomalyst and Camzyos, keep in mind the typical impact on sales in the first quarter due to patients entering the Medicare coverage gap early in the year.

And for Eliquis, the coverage gap dynamic works in the opposite direction, where we expect sales in the first half of the year to be higher than in the second half. As it relates to our line item guidance for the year, we expect gross margin to be approximately 74%, which reflects an evolution of our sales mix and the non-recurrence of hedging gains from last year. Excluding in-process R&D, we expect our total operating expenses to increase in a low-single digit range, reflecting the additional costs of Mirati and the reallocation of costs and efficiency initiatives in MS&A, as we continue to invest in our new product launches. This aligns with our previous operating margin target of at least 37%. This means we will remain focused on driving operational efficiencies across the organization, including portfolio prioritization, to enable us to invest for growth while maintaining high productivity.

We expect OI&E to be approximately $250 million of income, reflecting the PD1 royalty step down in January from 6.5% to 2.5%, as well as the financing costs related to the Mirati acquisition. We project our tax rate to be approximately 17.5%, reflecting an increase due to the non-recurrence of one-time tax benefit that occurred in the third quarter of last year, plus the anticipated impact of Pillar 2. Finally, we expect to deliver non-GAAP earnings per share within the range of $7.10 and $7.40. For clarity, our 2024 guidance excludes the three pending transactions. As a reminder, SystImmune is expected to add about $800 million in in-process R&D. Karuna is expected to be about $0.30 dilutive to earnings relating to financing costs as we plan to absorb the OpEx. And RayzeBio would be approximately $0.13 dilutive to earnings with half in financing and the other half in OpEx. When we report in Q1 in April, we will update our guidance to reflect the deals that have closed at that time.

Before we move to the question-and-answer session, I want to thank all of our colleagues around the world for their hard work and dedication in 2023. This is an exciting time for BMS as we rewrite a new chapter and maintain a singular focus on improving our growth profile over the course of the decade. I believe that our focused financial discipline coupled with a strong cash flow generation are key advantages that will enable us to further diversify our portfolio and invest in growth opportunities to deliver for patients and our investors. I’ll now turn the call back over to Tim and Chris for Q&A.

Tim Power: Question, please. But before we do, just a reminder. It’s obviously a busy morning for everybody. And to the extent, you can keep to just one question so we can get to as many people as possible. We would appreciate that. So let’s go to our first question, please.

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Operator: The first question will come from Luisa Hector of Berenberg. Please go ahead.

Luisa Hector: And good morning. Maybe I’ll start with Abecma because you have the FDA Ad Comm (ph) coming up, so just your level of confidence heading into that. Any comments on how the label changes are impacting or not for all CAR-Ts and just any pressure that you’re seeing from [indiscernible] and how that might evolve in 2024? Thank you.

Chris Boerner: First, we’ll have Samit to answer and then go to Adam.

Samit Hirawat: Thank you, Lisa, for the question. From Abecma perspective KarMMa-3 data, we’ve shared updated data at ASH last year. And as you saw, it was very clear what is driving the overall survival curves. It’s because of the crossover that the patients have allowance for the progression of their disease on the standard-of-care arm. And therefore, that curve does benefit and therefore you see much of impact on that overall survival benefit that these patients are getting. We are very confident and we are very much looking forward to having that dialog and discussion with the regulatory authorities and looking forward to getting this product to the patients as soon as possible. So the second part that you asked about the label updates that the FDA is seeking right now for all CAR-T products around T-Cell malignancies.

Once again, we’ve treated thousands of patients. And from our perspective, as we look into our data, we do not see a positive relationship two (ph) CAR-T cell therapies in terms of Breyanzi and Abecma. So we will continue to have the dialog with the regulators on that as well as we look to the final wording the FDA will decide. With that, let me pass it onto, Adam.

Adam Lenkowsky: Thanks, Luisa, for the question. So we do expect growth in 2024 for Abecma. Commentary is a key catalyst for growth this year. And as Samit said, we do look forward to the ODAC to reinforce the benefits of Abecma in a triple exposed patient population. As you can imagine our commercial teams have been launch-ready for some time and we’re also seeing continued strong international performance. And we’ll launch both Abecma and Breyanzi in a number of new countries this year. We’ve stated that, we’re seeing continued impact from additional BCMA agents. This is a highly competitive market and putting some pressure on Abecma growth. But our teams are squarely focused on opening new accounts, expanding our site footprint, not just internationally, but also in the U.S. And coating the gap on efficacy perception, including solidifying any misconceptions around Abecma’s efficacy and reinforcing Abecma’s safety profile, particularly as it relates to CNS neurotoxicity.

So taken together, we’re confident in Abecma’s profile, looking forward to the ODAC, and I’m confident that will be more competitive this year.

Tim Power: Thanks, Adam. Can we go to the next question please, Andrea.

Operator: The next question comes from Chris Schott of JPMorgan. Please go ahead.

Chris Schott: Hi. Great. Thanks so much for the question. Just maybe a bigger picture question on the new launches. I think those new launches did about $3.6 billion in 2023. And I know you’re not giving longer-term targets. But just any — just rough framework of how to think about those sales in 2024, I guess, is there a target you’re providing? If there is not a target, can you maybe just talk a little bit about any areas you see that maybe you’re more or less optimistic versus where street consensus is? I know there’s just — there’s quite a bit of focus on the trajectory of those ramps. Thanks so much.

Chris Boerner: Thanks for the question, Chris. Maybe I’ll just start very quickly and then I’ll turn it over to Adam. As we had mentioned, not going to be providing individual product-level guidance, and I think we had alluded to that when we met at JPMorgan three weeks ago. But we did give, and we’ll continue to give company line item guidance, as we did today. And then you’ll see, as we report it today, we’re going to be talking additionally about the growth portfolio that we have, which is going to be important as we think about the business going forward. Adam, do you want to talk about the new launches?

Adam Lenkowsky: Yeah. So thanks for the question, Chris. I mean, we’re coming off a good quarter and we have a strong foundation for growth to build upon. We’re focused on continuing to accelerate our new product portfolio and maximizing the ten launches that we’ve had over the last four years. We’re certainly prioritizing the execution of our new launches and adding investment to accelerate the performance of our growth portfolio for products like Camzyos, Sotyktu Breyanzi. You’ve also seen the strong performance from Reblozyl and Opdualag. We also have some of our growth products like, Eliquis and Opdivo, which will continue to contribute significant growth in 2024. And finally, we’re readying for the launch of KarXT in September, which we’re excited to launch this product, which will be the first new treatment in decades for schizophrenia, and also brings a multi-billion dollar opportunity to the organization.

So adding it up, that’s why we’re excited to continue to drive commercial performance in an important 2024.

Tim Power: Right. Andrea, could we go to the next question, please?

Operator: The next question comes from Chris Shibutani of Goldman Sachs. Please go ahead.

Unidentified Participant: Good morning, everyone. Thank you for taking our questions. This is Charlie on for Chris. We had a question on the subcutaneous Opdivo strategy for a potential launch there. We heard from one of your competitors yesterday on their potential for a subcutaneous CPI, where they were considering — what sort of like a careful pricing strategy in the context of potential intravenous biosimilars that could be on the market at the same time. So just wondering how you’re thinking about pricing on a potential subcutaneous Opdivo? Thank you.

Chris Boerner: Adam?

Adam Lenkowsky: Yeah. Thanks, Charlie, for the question. So we’re not going to comment on the pricing of subcu, but what I can say, as you know, we announced positive results of our subcu Opdivo study in the quarter, and we anticipate a launch early next year. As a result, we have the opportunity to potentially benefit thousands of patients well into the next decade with subcu Opdivo. I think an important thing to keep in mind, remember, subcu has the potential to address the treatment burden for both patients and physicians due to less than 5 minute infusion time. And we’ve talked about our ability to convert roughly 30% to 40% of the overall U.S. Opdivo business into subcu. And that’s why we would expect to see this franchise endure into the next decade. So we certainly look forward to bringing this important formulation both to patients and physicians.

Tim Power: Let’s go to the next question please, Andrea.

Operator: The next question comes from Andrew Baum of Citi. Please go ahead.

Andrew Baum: Yeah. Thank you. A question for Adam. Have you rethought the use of bridge programs for launches in the U.S., following your Sotyktu experience? And then, same topic. Realistically, how long do you think it will be before Sotyktu starts printing revenues through the combination of broader coverage as well as just getting these patients off the bridge? Thank you.

Chris Boerner: Adam?

Adam Lenkowsky: Great. Thanks, Andrew. Let me just take the second question first and then I’ll answer as well, the bridge question. So Sotyktu is an important brand for the organization and we are executing into our plan. We shared last year, we’re focused on two areas. The first is driving demand at the top of the funnel, and the second is, securing access. And of course, as you mentioned, pulling through those patients from bridge to commercial and we’re making progress against both. You heard from David, when you normalize sales, excluding clinical trial, orders, net sales increased about 40% versus Q3. And access is critically important in this highly competitive market to drive commercial sales. So we’ve secured ESI and now Cigna in a one-step position that adds another 40 million lives approximately to complement CVS, which is in a zero step position, will continue to be this year, and that’s approximately 25 million lives.

And we’re actively negotiating with other payers, and look forward to updating you on additional progress in due course. This year, it’s really important to focus on increased paid commercial prescriptions for Sotyktu. We will continue to build volume from both new patients that are going to move directly onto Sotyktu at the specialty pharmacies, which, quite frankly, become easier with the improved access that we have now, as well as moving patients out of bridge and onto commercial products. David talked about where we are today, but in Q1, we expect to see around 10,000 paid prescriptions for Sotyktu. And he also mentioned, there will be an increase in gross net due to broader rebating, which was needed to secure improved access, that impacts net sales in Q1.

But we expect to see good momentum in growing our base of paid prescriptions this year. And we plan to get roughly double that level around 20,000 prescriptions in Q4. And that volume momentum will more than offset the gross-to-net reset in Q1 as the year progresses. As you also asked around conversion, conversion is going exactly as we expected. We’ve made very good progress in shifting patients from CVS from the bridge to commercial products. We talked about taking around two months to three months for patients to move from bridge to commercial, and as a result, you saw that 40% sequential growth that excluded the clinical trial purchases. And so we’ll continue to drive demand and work to continue to improve moving patients from our bridge with our ESI and Cigna wins in 2024, and also work to secure improved access in 2025 as well, where it makes financial sense to do so.

Tim Power: Thanks, Adam. Andrea, let’s go to the next question, please.

Operator: The next question comes from Seamus Fernandez of Guggenheim Securities. Please go ahead.

Seamus Fernandez: Thanks very much. So just a quick one here. On Reblozyl, the continued strength of the brand and the acceleration that we’re starting to see. Can you just talk about what’s driving that incrementally? And maybe give us a little bit of a sense of how we should be thinking about the international opportunity for Reblozyl, in particular? Thanks.

Chris Boerner: Adam?

Adam Lenkowsky: Yeah, Seamus. Thanks for the question. The first-line MDS launch is progressing very well in the U.S. with strong demand, supported by our broad label in an RS-agnostic patient population. Just take you back, we launched in late August, and initially after the launch, we saw rapid switches from ESAs to Reblozyl. But we’re now seeing strength in first-line use across the RS-positive population and we’re steadily building momentum in the RS-negative patient population, particularly in the community setting, where the majority of patients are treated. We also have, after the ASH presentation, we’ve heard feedback from both academic and community physicians recognizing the durability of response and the ability to remain transfusion independence as key features of the brand.

So we’re very pleased with the launch as you know, we’re seeing strong sales performance. We expect that to continue this year. And Reblozyl was also approved in Japan in mid-January. We’re seeing, nice uptake there and we expect European approval in the first half of this year.

Tim Power: Great. Let’s go to our next question, please, Andrea.

Operator: The next question comes from Tim Anderson of Wolfe Research. Please go-ahead.

Tim Anderson: Thank you. On Sotyktu, I think it was at Q3, you had mentioned it would take longer to get no-step edits. So I’m wondering what the current step edits are exactly. What brands do patients have to step through? Is it Otezla primarily, or is it Humira either brand or biosimilar or what exactly?

Adam Lenkowsky: Yeah, Tim. Thank you. So as I mentioned, we’ve secured additional access at ESI and now Cigna in a one-step position. And so that really is regardless of the product. So that could be a step after Otezla or it could be a step after IL-17s or the IL-23 agents in the market. But what’s important is that that adds another 40 million lives to complement our zero-step edits in CVS. So taken together, that’s 65 million lives today. And we’re continuing to actively negotiate with payers. And we will update you on additional progress, over the coming months.

Tim Power: And our next question, please, Andrea.

Operator: The next question comes from Trung Huynh of UBS. Please go ahead.

Trung Huynh: Hi, guys. Thanks for taking my question. Just on IRA, I realized there’s not much you can say about the negotiation where I think CMS has just sent their initial offer. But I was wondering about more, how do you think about the impact? So, for Eliquis, given the patient mix is largely skewed towards Medicare, do you think there could be a potential uplift that could help offset that pricing erosion and how do you anticipate the commercial spillover from those pricing impacts?

Chris Boerner: Yeah. Thanks for the question. I’ll take that. So, as it relates to IRA, we do expect an improvement in patient affordability as the patient out-of-pocket changes for patients this year and into next. We’ll see this more acutely next year as out of pocket max is capped at $2,000 and then the patients have 0% liability thereafter. More broadly, though, we largely don’t expect Medicare Part D design changes to impact our portfolio because that’ll largely take effect in 2026 when branded Revlimid will be fully eroded. As it relates to commercial spillover, I think it’s important — we always look at multiple planning scenarios, including the risk of spillover, but also the potential opportunity, as I just shared, around patient affordability.

So there are pushes and pulls there with changes in the benefit design. We are going to have to continue to manage potential spillover risk to commercial with the transparency of the MFP price on September 1. But we also do that today as we manage both books of business. And we’ll need to continue to remain disciplined across our commercial payers. And at the same time, just because a payer wants to include this in negotiating mix in commercial, it certainly doesn’t mean that we have to agree there. So we expect continued strong performance this year for Eliquis in the U.S. and expect significant growth through the end of 2025.

Tim Power: Thanks, Adam. Let’s go to the next question, please.

Operator: The next question comes from Geoff Meacham of Bank of America. Please go ahead.

Geoff Meacham: Hey, guys. Good morning, and thanks for the question. Chris or David, on capital allocation, you guys have some deals closing, obviously, in the first half of this year. But would you say the balance of the year is more of a pause on deals with the focus on integration, or would bolt-on still be of interest? I’m just trying to get a sense with all the launches operationally, whether newer products or more products and integration could be a distraction to what you’re doing commercially. Thanks.

Chris Boerner: Thanks for the question, Geoff. I’ll take that one. So, as we’ve discussed previously, as we think about capital allocation business development continues to be a top priority for us. Obviously, we’ve just executed a number of deals towards the end of last year, and we’ve got to stay focused on executing those deals. Having said that, we certainly are going to continue to be interested in bringing innovation into the company that makes strategic and financial sense to do so. I would characterize those a bit more as bolt-on opportunities at this point. We’re also, of course, continuing to look at partnerships and licensing deals as well. But that’s how I would characterize it. Business development is still a priority.

Tim Power: Thanks, Chris. Let’s go to the next question, please.

Operator: The next question comes from Matt Phipps of William Blair. Please go ahead.

Matt Phipps: Hi. Thanks for taking my question. Samit, I was wondering if you could give us a sense of how many SLE patients do you expect to treat with the next T — CAR-T program this year? And is the next step after this Phase 1 study straight to a pivotal? Do you have a sense yet of what that looks like?

Chris Boerner: Samit?

Samit Hirawat: Yeah. Thank you for the question, Matt. Look, we are in the dose escalation phase. As you can recall, we have to go through one patient by one patient in the beginning, but very soon we’ll be able to treat a number of patients at the same time. I can’t give you a number in terms of how many patients we intend to treat at this time, but certainly the trial will remain open as we want to certainly get a good understanding of the efficacy and safety profile at the right dose for patients with SLE, who have advanced disease. We do intend to present the data later this year, emerging from the first trial. In terms of what the next steps would be, we will be engaging with some data in hand with the regulatory agencies in terms of defining what the trial should look like.

In this particular case, would a single-arm open-label study such as has been done with immunological malignancies? Will that be the acceptable approach, or will the regulators require a randomized approach? Those are yet to come, but certainly looking forward to the emergence of this data and presenting that later in the year.

Tim Power: Let’s go to the next question, please, Andrea.

Operator: The next question comes from Steve Scala of TD Cowen. Please go ahead.

Steve Scala: Thank you very much. I believe Milvexian’s Afib trial right around now is at the point where Bayer stopped its Factor XI Afib trial. Can you reassure us that events in the Milvexian Afib trial are progressing as expected? And Samit, based on everything are you very confident in Milvexian Afib? The trial has been underway for approaching a year. So I would imagine some sort of look has already been taken. Thank you.

Chris Boerner: Samit?

Samit Hirawat: Thank you, Steve for the question. Very thoughtful as always. What we can tell you is the trial is continuously progressing — on all three trials of Af, secondary stroke prevention and ACS. Enrollment is going very well. And certainly, the DMC continues to oversee the trials, and we do not have any indication from the DMC otherwise. We will continue to look at the data from a perspective of safety, as well as the DMC will continue to look at the data. There’s nothing more to report at this time. I would say one thing, though, that assuming just because a competitor trial failed for whatever reasons and the doses that they picked, we don’t have that same philosophy. We actually did conduct two very well designed studies. We picked differential doses between atrial fibrillation versus SSP and ACS, and those are the reasons to believe. And we will certainly be looking forward to the readout of these trials in ’26 and ’27.

Tim Power: Thank you Samit. Andrea, can we go to the next question, please?

Operator: The next question comes from Terence Flynn of Morgan Stanley. Please go ahead.

Terence Flynn: Great. Thanks so much for taking the question. I was just wondering, if you could elaborate on your thoughts on Breyanzi commercial potential this year, particularly in the second-line setting and how the final OS data might impact that? And then, anything you’re seeing with respect to outpatient treatment for Breyanzi here? Thank you.

Chris Boerner: Adam and Samit?

Samit Hirawat: Yeah, certainly. Thank you. So I’ll start off and then pass it on. R&D always comes first before commercial. So I’ll start off with Breyanzi. Certainly, looking forward to these three PDUFA dates that Adam had mentioned earlier, as well as David in his remarks for Follicular Lymphoma and Mantle Cell Lymphoma and CLL. And then, of course, planning to do a little — few more trials in these lymphoma patients, because that remains a very high unmet medical need. And then, of course, there are multiple other cell therapy products that are in development. So we’ll be talking more about that. From the outer spec or the continuation of those discussions, we continue to engage with the regulatory authorities and we’ll update at a later date once we have an inkling in terms of where we are landing on that. Adam?

Adam Lenkowsky: Yeah. Thanks for the question. So we’re pleased with Breyanzi performance in the quarter. We saw a double-digit growth quarter-on-quarter. We also expect to continue to make good progress with Breyanzi in 2024, supported by strengthening of our vector supply. In fact, we will see supply materialize even further in Q2 and expand to support our new indications for Breyanzi starting with the plan CLL indication in March, where Breyanzi will be the first and only cell therapy agent to have this indication. As Samit alluded to, we’re making good progress in reducing turnaround time out of spec and drug product capacity. So now, as we move through the course of the first half of the year with this broad label and LBCL, and now with three FDA prior reviews in the first half of the year, Breyanzi has the potential to treat the broadest array of B-Cell malignancies of any CAR-T.

And these indications, we believe, will double the addressable patient population for Breyanzi. So we’re very pleased with what we’re seeing, the progress that we’re making. We are seeing increases in outpatient use because of the best-in-class safety profile that Breyanzi brings, and we expect strong demand growth this year.

Tim Power: Let’s go to the next question please, Andrea.

Operator: The next question comes from Evan Seigerman of BMO Capital Markets. Please go ahead.

Evan Seigerman: Hi, guys. Thank you so much for taking my question. So, last week you presented initial data from your androgen receptor ligand-directed degrader at ASCO GU then hosted an event for the cell side. Samit, I’d love for you to speak to why you think it’s important for investors and analysts to pay attention to a Phase 1 asset at a company as large as Bristol Myers. I know you have a lot going on in your pipeline. Why should we be focused on things like this? Thank you.

Chris Boerner: Samit will start and then I’ll turn it to Adam to get some feedback from KOLs on this product.

Samit Hirawat: Thank you, Evan. I think it’s a good question, and the reason we believe that it is important for us to be able to highlight this are multifold. Let me start off by saying, remember last year at R&D Day, we had said that there are two platforms that are very critical and we believe in, and we are continuing to progress on them. ARLDD, the molecule is the first protein degrader from that platform that goes into solid tumors. And we wanted to absolutely be able to demonstrate that it is, as we anticipated, it is progressing well, showing efficacy and manageable safety profile in patients with late-line prostate cancer. As you saw from the data, the PSA-30, PSA-50 reductions, the durability of that — and those are truly correlated if you look at the data sets as well as in literature, the correlation of that impacting the overall survival.

So we are truly excited about what we’ve seen thus far. We are of course enrolling more patients. We are in the dose optimization phase. We’ve had interactions with regulatory authorities and now planning for initiating the next phase of development registration trials within the next six months to twelve months. Let me just pass it over to Adam to comment further from his perspective as well.

Adam Lenkowsky: Yeah. Thanks, Evan. Thanks for the question. So we’re excited about, as Samit said, the platform of protein degradation and as it relates to ARLDD in prostate cancer. This diversifies our IO portfolio even further to complement some of the recent deals. We had a number of KOL and community feedback coming out of the ASCO Gu presentation. And appeals have been enthusiastic about the profile, particularly around the efficacy of the asset, the durability of response. And when we asked community physicians, they were reassured around the safety profile as well, stating that it was a manageable safety profile. And they were enthusiastic about moving this into Phase 3 registrational studies, and look forward to having the opportunity to treat patients with late-line prostate cancer.

Tim Power: Let’s go to the next question please, Andrea.

Operator: The next question comes from Carter Gould of Barclays. Please go ahead.

Carter Gould: Great. Thank you. Good morning. Thanks for taking the question. For Adam, I wanted to come back to Camzyos. You sort of have shown a pretty steady kind of addition of sort of the same number of patients for each quarter. I would expect sort of now that you’ve gotten your feet underneath with the launch. That number would be increasing sort of, each quarter like we see with most launches, which I guess suggests there’s some other sort of gating factor, whether that’s logistics or whatnot. Can you maybe, elaborate on what you’re seeing and whether you disagree or agree with kind of how I frame that there? And to whatever extent you can comment on the trends going forward in ’24? Thank you.

Chris Boerner: Adam?

Adam Lenkowsky: Sure, Carter. Thanks for the question. So we are continuing to make very good progress with Camzyos. As we talked about, we’re investing further behind the brand in unbranded and branded direct-to-consumer. We do expect to see continued steady and consistent growth. As David mentioned in his opening remarks, we’re averaging around 1,000 patients on a quarterly basis. Patient and physician feedback continued to be very positive. Remember, these patients are going to be on treatment for a very long time. And taking you back to JPMorgan, if you recall, Chris showed an analog where Camzyos is tracking akin to a very strong TV launch, in this case, Entresto. So this is the way that cardiovascular launches uptake. And we are focused on continuing to drive breadth in our top COEs. We’re continuing to expand outside of our top COEs, and we’re working to increase diagnosis rates by activating patients via our new DTC advertising.

So that coupled with new launches internationally, we are confident that this is going to lead to continued and sustained growth for this important brand.

Tim Power: Let’s go to the next question please, Andrea.

Operator: The next question comes from Mohit Bansal of Wells Fargo. Please go ahead.

Unidentified Participant: Hi. This is Serena on for Mohit Bansal. Thanks for taking our question. So I wanted to ask about the Phase 2 Opdualag readout coming out early this year in first-line lung cancer. I was wondering how meaningful you think this data could be considering that the comparator arm is Opdivo Chemo versus Opdivo Yervoy being the approved regimen. Thank you.

Samit Hirawat: Thank you for the question. Obviously, we’re looking forward to seeing the data for Opdualag, a randomized Phase 2 study looking at the combination of Opdivo relatlimab plus chemotherapy comparing to Opdivo Chemo. The intent of doing this is twofold. One, we wanted to get the contribution of component question out right away so that we can show the contribution of relatlimab on top of Opdivo with chemotherapy. And number two, we also wanted to plan this study so that we can — when we do go to Phase 3, the appropriate control arm that is most widely used right now is pembro-chemo. And therefore we are set for that, dependent, of course, on the data. So later this quarter and this year, you will be able to hear about the data. And then based on the data, we will be making decisions on where to go with this drug.

Tim Power: Perfect. Thanks, Samit. Let’s go to the next question, please.

Operator: The next question comes from Robyn Karnauskas of Truist Securities. Please go ahead.

Unidentified Participant: Hey, guys. Thank you so much for taking my question. This is Kuban (ph) for Robyn. I have a follow-up question on Camzyos. Just wondering if you can talk a little bit about, how you think the recent data from a competitor might broadly impact the landscape in HCM. Obviously, the drug is not approved yet, but do you see these data improving awareness? And based on that, do you expect to see any sort of inflection points? And also can you talk a little bit more about your efforts ex-U.S.? And if we should continue to see steady growth or any sort of inflection points based on the reimbursements that you expect? Thank you.

Chris Boerner: Samit and Adam?

Samit Hirawat: Yeah. Thank you for the questions. The way we would look at it is that the competitor data actually further strengthens our confidence in Camzyos. And within the Camzyos clinical trials, we now have three Phase 2 trials that have read out with amazing transformational data. You’ve seen the data for Explorer, you’ve seen the data from Weller, and recently we had the readout of a Phase 3 trial in Japan as well, which replicates the results that we’ve already seen for the first two trials. As Adam would tell you, we’ve treated now thousands of patients and that data also continues to showcase the efficacy of the drug as well as maintains the safety of the drug. As you will see when the data are presented from the real-world setting at ACC, what the overall safety profile of the drug is.

So in general, what I would say is that Camzyos lives up to its promise of a transformational potential for the patients. And any patient who goes on that drug usually doesn’t want to come off because of the benefit that they’re achieving.

Chris Schott: Adam?

Adam Lenkowsky: Yes. Thanks for the question. So certainly when we look at the top-line data from SEQUOIA is consistent with our internal expectations, we’ll obviously need to see the data set, but ultimately we don’t see any clinically meaningful differences in the data. In fact, when we spoke to many TLs after those data were shared, they have stated that apocampton (ph) data appears similar and undifferentiated from Camzyos. They also, of course, want to see the broad data set. They also talked about the difference in PVO-2 being not a clinically meaningful endpoint. And likely any differences are due to differences in patient populations across the two studies. I can show you we will certainly be prepared for apocampton (ph) when it comes to market with our leading cardiovascular organization and we have maintained a consistent view that we will remain leaders in this space.

I’ve also said though, that important thing to keep in mind with this class is we do see that another competitor could be a net positive to help drive awareness for patients with symptomatic OHCM and increased diagnosis rates, which is also really important. Finally, as relates to expansion outside of the U.S., we’re just starting to see expansion outside of the U.S. We’ve launched in Germany, we’ll prepare to launch in Japan, in China in mid-year, and a host of other markets. So we’ll start to see those sales manifest in the back end of the year and into 2025.

Tim Power: Right. Let’s go to the next question please, Andrea.

Operator: The next question comes from James Sheehan of Deutsche Bank. Please go ahead.

James Sheehan: Good morning, guys. Thank you for taking the question. Just wanted to circle back on Zeposia. Adam, I think you mentioned earlier or late last year the access was still improving for UC. Is that access going to improve meaningfully this year or is it going to take a little bit more time, sort of like a similar situation to so tick two and psoriasis?

Adam Lenkowsky: Yeah. Thanks for the question. So overall we’re seeing solid and continued quarterly and year-on-year growth. As David shared, we showed 66% growth versus prior year. And I think Zeposia has been really tail of two launches. MS performance amongst the oral competitors is solid. We expect continued share growth there. And we’re growing in the face of a declining oral market in favor of B-Cell agents. We continue to have an opportunity for continued growth in UC, which as you know, is a very competitive know. We’re making progress as volume and share are increasing. We are focused on expanding the breadth of prescribers. We’re continuing to position Zeposia earlier in lines of treatment and the opportunity for additional indications like Crohn’s disease, the data read out later this year will also add to the sales for Zeposia.

So again, we do expect to see continued growth for Zeposia as patients continue to accumulate and physicians continue to gain experience with the product.

Tim Power: And maybe time for one or two more. Let me go to next question for now. And then one after that, Andrea.

Operator: Okay. The next question is from Akash Tiwari of Jefferies. Please go ahead.

Akash Tiwari: Hey. Thanks so much. Can you comment on what drives your confidence on the Alzheimer’s psychosis trials reading out positively? Any color on what percent of patients you think we’ll be able to get on the high-dose of KarXT? And what percent of dropouts do you think will occur in the treatment arm through these the depth trials? Should it be roughly similar to what we’ve seen in the schizophrenia study? Thank you.

Chris Boerner: Samit?

Samit Hirawat: So thank you. Thank you for the question, Akash. Look, our confidence in trial remains very high. And the reason for that is if you go back to the first publications of the Xenomaline trial, that was a study that was published, I think in 1997, in fact. And if you look at that data, that was a positive trial, which tells us that M-1 M-4 muscular agonist (ph) do work over there. The obvious issue over there was the toxicity due to the peripheral muscarinic agonism that was seen. So that combination with Trospium has led to obviously better outcomes as we saw in schizophrenia. The trial in AD psychosis is right now at the beginning stages, so the doses are being tested right now. So it’s hard to comment on what the dose utilization would be, whether patients will be on the highest doses.

It’s too early to tell. We’ll have to get into it. But of course, Karuna and us, we continue to operate as separate companies right now. And once the transaction closes, then we’ll be able to get deeper into it and look at what the future looks like. So we’ll be talking about it at a later date. Thank you.

Tim Power: And let’s go to our last one please, Andrea.

Operator: The next question comes from Rajesh Kumar of HSBC. Please go ahead.

Rajesh Kumar: Hi. Good morning. I appreciate that you can’t obviously you know give any color on Eliquis price negotiations. But when we look at your margin guidance this year, I’m assuming that you have made an assumption and that is implicit in that guidance, an outcome of this negotiation, or should we expect, as we get more clarity, to adjust your guidance from what you learn?

Adam Lenkowsky: So, Rajesh, thanks for the question. I’ll try to start and then I’ll turn it over to David to just talk a little bit about how we’re thinking about margin. We’re not going to be able to give any additional discussion around where we sit with IRA on Eliquis. We got the initial offer. We’re going to follow the process they have and the price will be public in September and we won’t be providing additional details around that. But maybe, David can talk to you a bit about how we think about margins generally.

David Elkins: Just overall, as we guide it, we anticipate gross margins to be about 74% this year. And that’s really driven by the LOE brands coming down. But as the growth portfolio continues to increase, obviously that’ll help offset longer term where those gross margins are going. We also said that our operating expenses grow in the mid low-single digit range. And with that, really, there’s a lot going on there that, as we said on Karuna, we’re going to find savings and efficiencies in order to cover those expenses. But also, as Adam indicated, and I said in opening remarks, we’re increasing our investments in Camzyos and Sotyktu. So with that, we’re finding from our legacy brands, refundling those resources into that. And all of that said, we’ll be able to deliver a margin greater than 37% for the year, which we feel very confident about.

Tim Power: Thanks, David. So I think that was it for the time that we have. But I thank you all for joining the call today. I know it’s a very busy day for all of you. Hopefully, you get a sense from the discussion this morning that we exited 2023 with good momentum to capitalize on the strategy that we have articulated about how we’re going to navigate this decade. And of course, we look forward to sharing the progress against that on future calls. And with that, we’ll close the call. And as always, the team is available to answer any questions following today’s discussion. And I hope all of you have a very good day and a good weekend. Thanks.

Operator: The conference has now concluded. Thank you for attending today’s presentation and you may now disconnect.