Bristol-Myers Squibb Company (BMY) Q3 2010 Earnings Report, Transcript and Summary

Good day, and welcome to today's Third Quarter Earnings 2010 Earnings Release Conference Call. [Operator Instructions] At this time, I would like to turn the call over to Mr. John Elicker, Vice President, Investor Relations. Please go ahead, sir.

. Thanks, Pat, and good morning, everybody. Thanks for joining us to review our third quarter results. With me today are Lamberto Andreotti, our Chief Executive Officer; and Charlie Bancroft, our Chief Financial Officer. They'll have prepared remarks. And then joining us for Q&A are Elliott Sigal, our Chief Scientific Officer; Beatrice Cazala, Senior Vice President, Commercial Operations, with responsibility for Global Commercialization, Europe and Emerging Markets; and also Tony Hooper, Senior Vice President, Commercial Operations, with responsibility for U.S., Japan and other international markets. Before we get started, I want to take care of the legal matters. During this call, we'll make statements about the company's future plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. 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 recent report on 10-K and reports on 10-Q and 8-K. These documents are available from the SEC, the BMS website or from Bristol-Myers Squibb Investor Relations. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if estimates change. During the call, we'll also discuss certain non-GAAP financial measures, adjusted to include certain costs expenses, gains and losses and other specified items. Reconciliations to these non-GAAP financial measures to the most comparable GAAP measures are available on our website. Lamberto?

Thank you, John. Good morning, everyone. We have completed another quarter in which we continued to successfully deliver against the execution of our strategy. Let me walk you through the highlights. Our financial performance in the quarter was solid. Double-digit growth in earnings per share demonstrate our ability to operate in a very challenging environment as we continue to see the impact of U.S. healthcare reform and are beginning to see an impact from incremental pricing pressures in Europe. Despite these challenges, operationally, we are completely focused on growing our portfolio of innovative products and preparing for the potential launch of new products during the fourth quarter and into 2011, all while continuing to deliver on productivity initiatives across the entire company. As you have seen in our release, we are reaffirming our guidance for 2010 GAAP and non-GAAP EPS. Strategic and disciplined capital allocation remains a key part of our BioPharma strategy. We finished the quarter in a very strong financial position, with approximately $10.9 billion in cash and marketable securities. Business development remains a top priority for capital allocation, and we also remain committed to the dividends, and are actively engaged in the share repurchase program begun in the second quarter. In October, we completed the acquisition of ZymoGenetics, the transaction built on our long-term commitment to virology by giving up full ownership of PEG-Interferon lambda currently in development for Hepatitis C. We are looking forward to present 12-week Phase IIb data on lambda and our small molecule antivirals in development for Hepatitis C, at AASLD [American Association for the Study of Liver Diseases] between October 29 and November 2. In addition, we are excited by the seven early clinical and preclinical programs from ZymoGenetics that expands our strong biologic capability in oncology and immunoscience and by the FDA-approved specialty surgical biologic, RECOTHROM. On a less positive note, we received a warning letter from the FDA about certain processes and practices to be improved or remediated at our manufacturing facility in Manati, Puerto Rico. We have provided a response to the FDA warning letter, including details of the actions that we are taking, and we expect that Manati facility will be inspection-rated by the end of the year. Manufacturing continues uninterrupted at Manati, and I want to assure you that resolving the issues in Manati is one of our top priorities. This was another good, very good quarter for clinical data. We presented key data from our cardiovascular and diabetic franchises at important medical meetings. At the European Society of Cardiology meeting in August, we presented the preliminary results of the Phase III AVERROES trial for apixaban, or ELIQUIS, as we will market it, in patients with atrial fibrillation, who are unsuitable for treatment with warfarin. The preliminary results demonstrated that apixaban significantly reduced the relative risk of a composite of stroke or systemic embolism by 54% compared with aspirin, without a significant increase in major bleeding. We believe this is an area of significant unmet medical need and is up to 40% to 50% of patients are identified as unsuitable for treatment with warfarin. Today, now I'm glad to inform you that based on the strength of these data, we, along with our partner Pfizer, have already initiated a rolling submission with the FDA. We expect the submission to be complete in the early part of 2011. For dapagliflozin, we have now presented results from five of the total 11 Phase III studies for this novel, first-in-class diabetes compound. We are excited by its potential emerging profile that balances a triad of benefits: good HbA1c control, improvements in blood pressure and increased weight loss, with what appears to be a manageable safety and tolerability profile. We and our partner AstraZeneca are on track to submit, as previously announced, our application for the marketing authorization of dapagliflozin in Europe by the end of 2010, early 2011. Today, now I have also good news for dapagliflozin in the U.S. I am pleased to announce that we have completed the analysis of cardiovascular data mandated by the new FDA guidelines. And based on that analysis, we plan to submit also in the U.S. at the end of 2010, early 2011. We also submitted a response to the FDA, a complete response letter regarding the BLA [Biologics License Application] for neurologics. We have been advised that we must resolve the issue at Manati prior to gaining approval of the pending BLA. And based on our assumptions, when Manati will be inspection-rated by the end of the year, we hope to hear the decision on the BLA in the second quarter of 2011. On the regulatory front, last week, we achieved a positive opinion from the CHMP [Committee for Medicinal Products for Human Use] in Europe for SPRYCEL first line, and we look forward to progressing there. We are anticipating there are other key regulatory decisions in the coming months. In the U.S., we expect to hear the FDA's decision for both SPRYCEL first line and for the fixed-dose combination of ONGLYZA and metformin by the end of this month, the month of October. Additionally, we feel very positive about the prospects for ipilimumab, and we'll continue to work with the FDA and other regulatory agencies on its approval. Now let me turn it over to Charlie.

Thank you, Lamberto, and good morning, everyone. We did have another quarter of solid growth. We delivered non-GAAP EPS of $0.59 or 26% increase over last year, supported by sales growth in most of our key products and continued expense management. Included in our third quarter EPS is a negative $0.02 impact of U.S. healthcare reform. I want to give you some brief highlights from our third quarter financial results and talk about guidance before we go to your questions. The company reported third quarter net sales from continuing operations of $4.8 billion, flat compared to last year, or up 1% net of foreign exchange. U.S. healthcare reform had a 1.6% negative impact on net sales in the quarter and incremental EU measures had a negative impact of just under 1%. Volume was up 1%. The third quarter sales performance was driven in large part by strength in our Virology Franchise, PLAVIX, ORENCIA and SPRYCEL. Growth in these brands was primary offset by declines in our mature brands. Our Virology Franchise had solid global sales growth, up 8% from a year ago. This sales strength demonstrates the continued strong demand for REYATAZ and SUSTIVA franchise, and BARACLUDE across both our U.S. and international markets. U.S. PLAVIX sales grew 9% in the quarter. In Europe, we saw a continued erosion of PLAVIX as generic clopidogrel was available in most of the countries. As we said, we expect erosion of PLAVIX sales in Europe to begin to slow, but it will continue. The impact is primarily recorded in equity income from affiliates in our P&L. In the U.S., ABILIFY prescription demand increased to 3%. And while lower growth than Q2, ABILIFY continues to grow faster than the market. However, ABILIFY reported sales in the U.S. were down 11% due to the negative impact of U.S. healthcare reform and reduction in our share of net sales under the revised contractual terms sales with Otsuka. Lastly, our mature brands declined 19% or $169 million compared to last year. Divestitures in and rationalization of our non-strategic mature brands portfolio had a negative impact year-over-year of approximately $65 million. In aggregate, U.S. healthcare reform, EU pricing measures, the ABILIFY contract extension and mature brands divestitures had a combined negative 4% impact on our reported total company sales in the quarter. The impact from U.S. healthcare reform has been slightly less than our original estimate, and we now expect a $0.10 impact for 2010. Our estimated impact for 2011 EPS has not changed, given the annualization of managed Medicaid, expected 340B hospital expansion and the new impacts from the Part D Donut Hole coverage and the pharma fee. Now let me give you some highlights from the rest of our P&L. I will focus my comments on our non-GAAP results. Reconciliations to our GAAP results are available in our press release and our website. Gross margin increased 80 basis points to 73.9% compared to the third quarter of 2009. Improvements in product mix, productivity and impact from foreign exchange were only partially offset by the impact from the changes in the contractual agreement with Otsuka. Advertising and promotion expenses were down 10% to $231 million for the quarter. The decrease is due to less spending on the promotion of those products at the end of their life cycle and to Otsuka's reimbursement of certain ABILIFY, SPRYCEL and IXEMPRA expenses. This was partially offset by increased prelaunch spending on new products and indications. Equity income from affiliates declined 50%, driven by continued erosion of PLAVIX sales in Europe, as I mentioned earlier. The effective overall non-GAAP tax rate on earnings from continuing operations was 20% in the third quarter. The lower tax rate was primarily due to the favorable resolution of certain tax audits. You should note that this reserve release was assumed when we gave our full year guidance. Our guidance remains between 23% and 24% for the year, assuming passage of the R&D tax credit. As a reminder, we only account for the tax credit in the quarter in which it happened. Let me turn to guidance. As Lamberto mentioned, we are operating in challenging times. Macroeconomic issues, U.S. healthcare reform and incremental pricing pressure in Europe are all having an impact on our business. As demonstrated by our third quarter results, we have been very efficient in managing our expenses to help offset some of this impact. However, moving forward, these challenges will create a headwind. We believe we have a very attractive portfolio and while we remain keenly focused on productivity, we are also committed to making the appropriate investments required to maximize the long-term value of our assets. We are confirming our previous 2010 GAAP and non-GAAP EPS guidance with a few adjustments to our non-GAAP line item guidance. We expect Q4 sales growth to be consistent with Q3, resulting in low to mid-single-digit growth for the year. Advertising and promotion should decrease in the low double-digits as compared to our original guidance of a high single-digit decrease. R&D will increase in the mid-single-digit range. As I said, we expect our tax rate to remain between 23% to 24%, assuming the R&D tax credit is passed in Q4. In closing, we have a solid third quarter, double-digit EPS growth supported by key brands, good management of expenses, a strong cash position, confirmation of our 2010 EPS guidance and the continued positive of our innovative pipeline. I would now like to turn it over to your questions.

. Thanks, Charlie, and thanks, Lamberto, for the remarks. I think we're ready to go to the Q&A. And if I just could -- a quick reminder to folks, in addition to Lamberto and Charlie, we have Elliott, Beatrice and Tony here to answer any questions you might have. Pat?

[Operator Instructions] We'll now take our first question from David Risinger of Morgan Stanley.

I have three questions. I guess, the first is for Lamberto. Lamberto, I was hoping that you could characterize the x U.S. price pressure that you expect in 2011 versus what you've experienced in 2010. And then for Elliott, I'm hoping that you can update us of the first-line event rate and the expected timing of study readout. And then finally, if you could just provide any comments on the three-year belatacept data.

David, I will talk about the impact on our prices, but I will ask Beatrice to continue. For sure, what we said and others we have said, what we have seen in 2010, we expect in 2011 is a combination of negative actions by a huge number of countries all at the same time. While in the past, there was a couple of major countries and a few minor countries asking and the others were staying on their pricing patterns, what we see now is a combination of everything at the same time. So Beatrice is going to get your numbers.

Yes, we have looked now at all the key markets where we have a better idea of what could be '11 features. And we believe that in addition to the current labor pressure we have had in Europe, we probably will have an additional 1% to 2% incremental to historical level pressure once we have combined all various form of government measures and pricing and some time for impact of cost across the regions.

Yes, and I would just like to add because Beatrice is referring to 2010, in which we have historically had 2% to 2.5% and we budget that and we manage that, that's been typical as Lamberto mentioned. What we see now in the third quarter is roughly a 4% impact due to EU pricing pressures and on an annualized basis, we think it's 1% to 2% higher than our historical levels. And when we move forward into 2011, it's probably in the mid-single-digit range incremental to what we have in our historical levels.

David, with regard to the R&D questions, this is Elliott. On ipilimumab as you know, we are under a regulatory review both in the Europe and U.S. on our '20 study, which is in pretreated patients. And those reviews are progressing in patients that have not received treatments in metastatic melanoma. Our study '24 continues, it is event-driven. It is comparing, adding to standard of care dacarbazine versus dacarbazine alone. And we are estimating that we will have results in early '11. With regard to belatacept, we have answered the complete response, including the submission of the 36-month data. I'm encouraged by the data. I believe it supports the benefit/risk profile of belatacept, and we expect this data at the American Transplant Congress meeting in May of '11.

We'll now take our next question from Jami Rubin out of Goldman Sachs.

For you, Elliott and Beatrice, lots of noise obviously around the anticoagulant marketplace with the recent approval and launch of PRADAXA and the upcoming data release of ROCKET AF in the next couple of weeks. Can you frame for us the opportunity that you see in the anticoagulant market? And assuming that apixaban is third to the market, just given the timing of the large Phase III AF [atrial fibrillation] trials, what will your marketing message be? Obviously, you're a twice-a-day drug versus XARELTO, which is a once-a-day drug. So if you could elaborate on that, please? And then secondly again, on ipilimumab, FDA is holding a panel meeting on December 2 related to the '20 study, what is the strategy around the balancing the front-line study with the second-line study, given that just around the PDUFA [Prescription Drug User Fee Act] date, December 25, Elliott, you said that the front-line study would be reporting out?

Jami, this is Elliott. Let me just correct my statement that if the first-line study is event-driven, we have been continually projecting when we would have it. And I think it would be probably towards the end of the first quarter of '11. But the application in front of the agencies have to do with the benefit/risk around the second-line patients, and I think the data is robust with a survival benefit. And that is the data that we are engaged in discussing with the FDA and those regulatory authorities abroad. Let me just say that with regard to anticoagulants, in general, I think both Beatrice and I, representing the company, agree that this is a huge new opportunity. There will be different profiles of drugs out there. Our belief medically and commercially from the very beginning was that doctors and patients wanted a safer Coumadin, so to speak. The big unmet medical need is the less bleeding so that we can administer this drug to patients and achieve some benefit. We are struck by the large percentage of patients that go untreated, even though efficacy of Coumadin is known, and often offered aspirin, a less efficacious drug, because of the fear of the benefit/risk in the narrow therapeutic window of Coumadin. And hence, AVERROES was performed in patients that could not tolerate or could not take Coumadin. Based on that data that we presented to European Society of Congress, we think that, that stands on its own. We are in a fast-track procedure with a rolling submission and hope to complete that by the beginning of next year, sometime in '11 of the first quarter. Meanwhile, we await the profiles. We still see major opportunity. I'll let Beatrice comment further. And we are anxiously awaiting the ROCKET data --

Yes, Jami. Overall market research and also discussion with patient, physician, from generalist to our European leaders, clearly emphasize the need for a product at least as efficacious as warfarin, but is easier to use in addition to safer to use. So what we see there is a strong role for more usage, and you see a number of patients that are not treated to date, not just the warfarin patients that can be switched, it's also all the patients that are not treated at all or were treated by aspirin previously. You see large discontinuation in those trials for aspirin, for warfarin. So we know very likely, we'll be coming served, but you may have surprise, you never know after November. Obviously, being served doesn't mean that untapped potentials, that is not room for you. We believe we have a large opportunity there. And our profile, as you probably heard, in ESC [European Society of Cardiology] was very well-received and is very encouraging in terms of having fully demonstrated versus aspirin our benefit/risk with a very good bleeding profile. So the BID question, which was a specific question, product size BID, we don't know what their profile is going to be from efficacy, safety. So it's also a population with multiple probabilities and they are taking drugs. They are taking several of those drugs and some of them are also BID. So we don't believe BID would be a -- it would really be a risk/benefit in the various population will be what drive our potential.

Our next question comes from John Boris out of Citi.

Just two questions that I have, first one for Lamberto. Obviously, with the bounty of life cycle management programs and also new product opportunities, there is certainly a certain level of investment that has to go behind those brands in the 2011, 2012 time period relative to the longer-term guidance that you've given in 2013 and beyond. Can you just help us understand or think through how you're thinking about level of investment and how that investment might be different commercially going forward with the business model? Is it more important to exceed targets in '13 relative to investment in '11 and '12 or vice versa? And then second question, just a financial question on share repo. Did you repurchase shares in the quarter? They were a little bit lighter than we had expected? And can you tell us how much you repurchased?

Let me take your question on 2011-2013, and I will ask Charlie to give some more details. But I will start. The way I see it, John, I see that we are flat. We have a very strong pipeline. And we continue to have a good clinical data that allows us to look at the future with optimism. We continue to consider the build of that strong pipeline, the successful launch of a new product is a big priority. At the same time, we are pretty good at managing expenses and delivering productivity. We have been doing it, and we will continue to do it, especially when we can go into life cycle management for the older brands. So when we look at the future, we see a good pipeline. We see some important investments to make behind that pipeline. Yes, there are headwinds for U.S. healthcare reform and a European pricing. We will have to bear the impact of ZymoGenetics and the revised terms of Otsuka. But we will continue to keep 2013 well in mind, but at the same time, use our skills and experience and productivity to invest where we need to invest, that means the products of the future, and take money away from a more mature brand and continuing productivity. There is a new customer model that we are incrementally implementing in the market and that, too, will help us relieve some of the pressures in 2011. Charlie, do you want to add something here?

No, I would just add that we have a strong heritage of productivity. As you know, we had two programs in combination of $2.5 billion in overall productivity savings. We're not announcing additional wage, but we've done probably more importantly is embed a culture of continuous productivity in the entire business. And we still see that there are opportunities, but the opportunities are within procurement, selective integration through partnerships and further outsourcing. We continue to look at streamlining the organization, not just to reduce some level of expenses, but also to become a more focused and efficient organization. So we are keenly focused and will continue to be on cost management. But as Lamberto said and I said in my comments, we have to appropriately invest against our future assets. Your question on the share repurchase, we had $189 million in the quarter. We do a combination of 10b5-1 type of purchases as well as open-market purchases. We stopped some of the open-market purchases in the quarter because of the ZymoGenetics acquisition. We felt that it was inappropriate to continue those while we work in those negotiations.

Next question comes from Tony Butler out of Barclays Capital.

Lamberto, I respect your comments about the Puerto Rican facility and it being a priority. But can you actually suggest that there's heightened vigilance that every manufacturing facility, principally because I suspect the FDA will come in and inspect a number of facilities given the number of products that you hope will be coming to market. And then the second question is likely for Tony Hooper, have actually launched ORENCIA in Japan?

Yes. Your question is how much attention we are giving to all facilities, besides Manati. First of all, in Manati, we are taking very seriously, as I said, we are taking all the actions that we believe we need to take. We have hired one of the best consulting firm to support us in dealing with the changes we must implement there. And we feel very confident -- we are very respectful of the FDA request, and we feel very confident that we are meeting them. As far as the other manufacturing facilities, we do not anticipate any impact to any of our sites because the issues that were highlighted in one letter were very specific to Manati. But we take the matter very seriously, and we are reinspecting and reinforcing our activities and quality assurance activity also in the other -- GMP compliance is our key goal. And I feel confident how we are throughout our manufacturing network.

So your question is about ORENCIA in Japan. The answer is yes. We actually effectively launched in September this year. The team in Japan, in fact, is a well-experienced team, who recently with the launches of ERBITUX, BARACLUDE and SPRYCEL, have shown they can already execute exceptionally well in the marketplace. And we have great expectation for Japan.

Next question comes from Tim Anderson out of Sanford Bernstein.

Your comment on 2013 guidance, I don't see that in the press release. It was in the second quarter press release. Are you reconfirming that or not? And then second question is on apixaban, can you frame out in more detail the U.S. regulatory review process from here now that you've started a rolling submission? To me, that's suggests the final, major missing piece to that application would be ARISTOTLE. And then at some point after that is submitted, FDA would make its final decision, is that the correct way to think about it? And what is the timing of ARISTOTLE?

Tim, this is Charlie. On 2013 outlook, we did provide an update on our long-term guidance in July. And we would expect to update you again around the same time next year, as we do not plan on doing financial projections on a quarterly basis.

Tim, Elliott. With regard to apixaban, so here's the regulatory process and I would say that they're distinct. We decided, as we mentioned earlier, to take those very exciting data in an area of unmet medical need with a very important trial, 5,500 patients, and discuss with the FDA its fileability. And we have agreed and they have accepted the beginning of a rolling submission. That process looks like the following. The actual filing would occur when the last module takes place on AVERROES, and that we expect to happen within the first quarter of '11. We are submitting modules on a rolling basis, so that the individual division leaders can be prepared for that submission. The next decision point by the FDA is to complete that file. I have no indication that ARISTOTLE would be required. Although during the review, there's always a possibility that more information is needed. But our understanding is that this will be an AVERROES filing, and there will be a decision to be made upon filing of whether or not this is considered priority review. That's the process on AVERROES. And for now, I view them separate from ARISTOTLE.

Tim, let me go back on 2013 and beyond. Because obviously, as Charlie said, we are not going to update any guidance. But it is clear that our focus here, senior managers of this company, we are focusing a lot on how we are building the pipeline and the company in 2013 and beyond. Every time we have additional good clinical and regulatory news, we feel more confident about the future, but we are also aware that we must invest, continue to invest behind building the future. Hence, the decisions that we will make in 2011, on one hand, we have to deal with the headwinds that I mentioned before while answering John's question. And we will continue to use our skills and experience in productivity, but we are not going to sacrifice investments behind what we have in 2013. We feel very fortunate in this company for having a very strong and rich pipeline, and our priority again is to invest properly and adequately behind it.

Our next question comes from Steve Scala out of Cowen and Company.

I have one financial question and then two pipeline questions. First, fiscal 2010 EPS guidance implies Q4 EPS between $0.41 and $0.51, with the lower end down double-digits. After such a phenomenal nine months, why is the lower end even possible and even the top end would appear to be a big deceleration post such a great year? And the headwinds that you talk about in Q4 really shouldn't be that much different than Q3. So that's the first question. And then two for Elliott. I believe Bristol has the modified release apixaban data in-house, but to my knowledge, we haven't seen that data yet. So can you summarize that? And then lastly also for Elliott, do you have the Phase II gamma secretase data in-house, and assuming Phase III will initiate in 2011 versus Q4 of '10, why is there a delay versus what was stated at the March analyst meeting?

This is Charlie. In regard to guidance, we did update the line item guidance, and you saw in our overall top line, which we're expecting to be roughly at the same level of growth that we had in Q3. On top of that, we have the U.S. healthcare reform and European pricing pressures also mounts a little bit further, a little bit more accelerated in the fourth quarter than what we've seen through Q3. And then also, the tax rate, which was particularly low in the third quarter due to the tax relief. We don't have that same like event in Q4, in addition to the acquisition of ZymoGenetics, which we have mentioned when we did the deal was roughly $0.03 dilutive to Bristol-Myers Squibb.

On apixaban, we have been experimenting with modified release. I don't have any data. I have not personally reviewed it. We will no doubt be describing it next year. We're pretty satisfied with how apixaban is targeting this particular area. So I don't have any update on the modified release. With regard to the gamma secretase program, I thought I had indicated that the Phase III might start early next year. Maybe at the beginning of the year, I got very optimistic. I would not signal that as a major concern other than we want to be very, very careful in this field. We are pioneers in this field. There is risk in this field with the new mechanism, but the unmet need is unbelievable and our company has to be in this area in some of our portfolio. We are still reviewing our Phase II data. And we are going to take another look at our Phase II data because one of the studies continues are early in the year. I will say that the compound that has gone before is non-selective, and I think a lot of the concerns they had was because of a lack of a therapeutic window. We had a non-selective compound maybe 10 years ago in the clinic. We spent a long time developing a more selective compound. We have a selective compound and hence, a possibility of a therapeutic window. That's not to say I know whether or not the beta amyloid hypothesis is going to work, but I do believe we'll have an ability to test it in Phase III and are making that decision next year.

Our next question comes from Seamus Fernandez out of Leerink Swann.

Can we just talk about the volume that you're actually seeing overall? Looks like the volume growth is kind of slowing over time, both non-U.S. and in the U.S. I acknowledge that some of the pressure on the top line very clearly is coming from price pressures. But how could healthcare reform and some of those changes in Europe actually influence volume? And how could we anticipate seeing volume acceleration in some of the different markets?

This is Tony. Let me talk first a bit about the data seen from organizations like WK and IMS are showing that the market in the U.S. from a volume perspective has declined to pretty much a flat 1% during the entire 2010. This compares with a growth in 2009. It went from about 1% to about 3%, so clearly, a flat market at the moment. When you decompose that, you see that the branded products are probably declining at about 13% and the generics are growing at about 5% or so. So net-net, an overall decline in the marketplace. The healthcare reform itself is not playing that much of a role at the moment. The economic situation, obviously, yes. One, I think a lot of patients have come out of COBRA, extended benefits are now having to struggle to find access to healthcare. Number two, we are seeing an increase in the level of abandonment at the pharmacy level, i.e. patients who take prescription to the pharmacy and then decide not to fill it. When you decompose that data, you see there's quite a dramatic difference between new RXs versus continued RXs. New RXs in some categories, such as ABILIFY, have gone high as 22%, 23%. So patients are really having a problem to manage that. Obviously, we've stepped in as quickly as we can to assist patients from a co-pay perspective to drive that forward. I think that the Medicaid Part D healthcare reform for next year will obviously help us, as more patients will be able to afford the drugs as they move through the donut hole. Beatrice?

Yes, if you look at Europe, we have several phenomenon. One is basically through government measures, pricing pressure and also encouragement of generic prescription. So you see a shift of volume most generally. You see also some effect of the crisis in some of the market, like Spain, obviously, where you have high unemployment. So you see some volume pressure. For BMS per se, what to see is a shift of some large GP brand, like PLAVIX, where we lost the patent, to our specialty care innovative compound, where we have less volume but a mix of price volumes very differently. So in that overall situation, I think, look at the open situation, we feel that with the launch of specialty care as far as we have, we'll be able to protect with all the appropriate price volume relation that we have in excess, our growth potential on the specialty brand. So we feel comfortable that, that will help us. But you'll certainly see it declining to a little bit to the environment and also to our own portfolio evolution.

Our final question comes from Chris Schott out of JPMorgan. Christopher Schott - JP Morgan Chase & Co: Just a quick question on apixaban then two on the diabetes franchise. First on apixaban, when we look at that 40% to 50% of the AF markets that are patients intolerant or inappropriate for warfarin, given aspirin, or go untreated, do you believe you can rapidly build this market? Or do you think this is going to be a market that takes significant education for physicians to get comfortable taking a different approach with a product, like apixaban, with these patients? And then on the diabetes franchise, first on ONGLYZA. Should we anticipate a change in message around the franchise as we anticipate your introduction of your metformin combo, given the more modest growth in the entire DPP-4 market? Would you consider switching your message to focus more on market share as compared to market growth with the combination approval? And then finally, when we consider the peak sales opportunity for dapa [dapagliflozin] as compared to ONGLYZA, I guess, any thoughts on how you compare the two of those?

. On apixaban, when we looked at the market of patients that are not taking warfarin, some of them are patients that were treated by the specialist and then discontinuing because of side effects or because it's not fully monitored and they had to make trade-offs. So we feel that market segment is going to be accessible relatively quickly because it goes to the normal prescription of the specialist. The area where the patient are not treated at all and we certainly need to have a business model that links very closely the specialist and the general practitioner, and we are working on those aspects with all our teams around the world to understand how to build a model that captures those population quickly. That's why we are very encouraged by our overall data because actually, it clearly shows that they were thinking of fast appearing the product that is significantly superior in efficacy and safer in term of the usage. So we believe with that data, we will have a unique opportunity to accelerate the usage of A-fib. A-fib is very concerning the number of stroke and very severe and debilitating strokes. So the whole message for all the companies around the disease itself is going to help with that segment. So we feel confident that it may appear that it may be still worth to start it, that we have form the ways to generate prescription quickly.

We have felt that the only way to tap this really large market is to really have data, and we have the only program that has the study. Nobody will be able to do a study comparing aspirin if apixaban is approved. That will not be something that people will ever be able to try. They will all have to do non-inferiority studies against apixaban. In this day and age, we value that information. We tested it with payers. And we see a great contribution and that's why I think we're getting fast-track status. Major bleeding, aspirin-like safety, measure-by-measure bleeding with Coumadin-like efficacy should be a powerful message. And Beatrice and I are working hard to prepare the market on that.

So if I can move to ONGLYZA quickly, when I look at the data over the last couple of weeks, it's pretty clear that ONGLYZA has reached about a 25%, 26% share of the new naive RXs in the U.S. marketplace. When you look at monotherapy situation, we take about one in three patients. And as we evolve towards the launch of the fixed-dose, it becomes pretty clear that the growth of the DPP-4 market has not met our expectations. When you assume that more than 40% of diabetic patients are not being properly controlled, there continues to be a huge need for us to educate physicians and patients about the need to add product to the existing regiments. So I think when we come to market with fixed-dose combination, it will be a combination of looking to drive market growth and then, of course, to compete within that market for market share.

. So if we now go to your question on the dapagliflozin and its potential, especially as it relates to DPP-4. The product profile is unique and we have a very differentiated model faction. The product will and is arching independently from insulin, providing a very different pathway to completing the diabetes patient treatment with additional benefit that we are concerning more and more in our clinical trials on the possible weight loss as well as possible blood pressure benefit. So when we look at the market, we believe that with the unmet need and the growth and the noise in the market and the education on diabetes and the large number of diabetic program across government around the world and the heightened awareness of what needs to be done, there will be a large potential for a category of that providing that available benefit. So when we compare DPP-4 and dapagliflozin sales, we believe this will be a full class on its own and we'll take a significant share, and there should not be too direct competition when you start segmenting the patient population.

. Thanks, Chris , and thanks, everybody, for your questions. I want to turn it over to Lamberto for some final comments.

Yes. Well, thank you for your questions. Well, just a few closing remarks. First, as our results demonstrate, operationally, things are going well here at Bristol-Myers Squibb. And we are glad to confirm 2010 guidance despite the negative impact of U.S. healthcare reform and the pricing issues in Europe. Second, our new positive clinical data provide great momentum for our pipeline, and continued confidence in our longer-term strategic vision. I have just written a message to my executives of this morning, inviting them to take a minute to absorb all the good clinical news we have, enjoy that news and confirming to them that we will continue to invest in helping ensure the promising future that our pipeline will deliver. Third, our business development strategy, String of Pearls, remains a priority. We are pleased with our recent acquisition of ZymoGenetics, and we will continue to look for other transactions that complement our internal efforts to help patients today against serious disease. Well, thank you again for joining us today, and thank you for your attention.

That concludes today's conference. Thank you for your participation.