Bristol-Myers Squibb Company (BMY) Q1 2016 Earnings Report, Transcript and Summary

Good morning. My name is Tiffany and I will be your conference operator today. At this time I would like to welcome everyone to the Bristol-Myers Squibb 2016 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. Thank you. John Elicker, you may begin your conference. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thank you, Tiffany, and good morning, everybody, and thanks for joining the call on what I know is a very busy day for all of you. Before we get to the call, let me take care of the Safe Harbor language. During the call we will 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 subsequent date. We specifically disclaim any obligation to update forward-looking statements, even if our estimates change. We will also discuss certain non-GAAP financial measures adjusted to exclude certain specified items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available at our website. Joining me this morning are Giovanni Caforio, our Chief Executive Officer and Charlie Bancroft, our Chief Financial Officer, who will both have prepared remarks. And then joining for Q&A is Francis Cuss, the head of R&D, and Murdo Gordon, our Head of Worldwide Markets. Giovanni? Giovanni Caforio - Chief Executive Officer & Director: Thank you, John, and good morning, everyone. We just finished a very good quarter. Performance across the organization was strong. And we had some important clinical and regulatory advances in our immuno-oncology portfolio. We have entered the period of growth I've discussed before. We had $4.4 billion in sales, 9% growth over the previous year, which is especially strong, given the loss of exclusivity for Abilify in April last year. And the fact that we no longer book sales for Erbitux due to changes in our agreement with Lilly. Let me share just a few of our highlights. And Charlie will then provide more details about our key brands. Starting with Eliquis. Global sales for the quarter were $734 million, more than doubling sales from a year ago. Quarter-on-quarter growth was more than 20%. And we continued to make progress towards market leadership in key markets globally. In the U.S., Eliquis is now the number one novel anticoagulant in new-to-brand prescriptions for both AFib and VTE across all physicians. Beyond the U.S., Eliquis is the number one NOAC in new-to-brand prescriptions among cardiologists in 12 markets around the world. Based on this performance we are well on our way to becoming the number one NOAC globally. Our hepatitis C portfolio delivered strong performance as well with $427 million in revenues in the first quarter. I'm very pleased with our strong performance, particularly in the U.S. This is however, a very competitive and highly dynamic market. And we do expect competitions to have a significant impact on our business in the U.S. for the rest of the year, as we've already seen in Japan. Orencia and Sprycel also had good quarters. Orencia had revenues of $475 million, up 19% from a year ago. Sprycel posted sales of $407 million, up 9% from last year. Regarding immuno-oncology, we've had a very strong start of the year, building on our leadership position. Commercially, the launch of Opdivo continues to accelerate, based on continued approvals and new indications around the world. First quarter sales were $704 million. The recent adoption of Opdivo remains strong in markets where we have launched with PD-1 dollar shares of more than 80% in the U.S. and comparable shares in other key markets, including Germany, France, and Japan. In lung cancer Opdivo remains the clear leader across histologies. Our key competitive advantages remain, our overall survival data, and the fact that physicians can treat patients with Opdivo, regardless of PD-L1 expression. In melanoma we have the broadest portfolio of treatment options in both the adjuvant and the metastatic setting, including the first immuno-oncology combination with Opdivo and Yervoy. Opdivo based treatments are the leading treatments in new patients in first-line melanoma in the U.S., driven by strong adoption of the combination regimen. The adoption of our combination therapy has been strong in both academic and community settings. And in renal cancer overall survival and durability of response with Opdivo are recognized by prescribers. And Opdivo is the leading treatment for newly diagnosed second-line patients. With respect to R&D we are already off to a good start in 2016. Earlier this month the European commission approved expanded use of Opdivo in non-squamous, non-small cell lung cancer and in advanced renal cell carcinoma. And we received a positive CHMP opinion for our Opdivo plus Yervoy combination for the treatment of melanoma. In addition, we have received breakthrough designation for our Opdivo filing in the U.S. for the treatment of classical Hodgkin lymphoma. Our filing has been granted priority review by the FDA, and the EMA has validation our application. Overall, Opdivo has the potential to become the first PD-1 inhibitor approved in a hematological malignancy in the U.S., in Europe, and in Japan. Earlier this month at AACR we presented data from our CheckMate -141 study in patients with head and neck cancer. The study, which was stopped earlier this year, is the fifth tumor type with overall survival data for Opdivo, compared to a standard of care. And earlier this week we received breakthrough therapy designation from the FDA in head and neck cancer. We also presented for the first time two-year overall survival data from our Opdivo plus Yervoy regimen, CheckMate -069, in patients with advanced melanoma. We continue to believe that the Opdivo plus Yervoy regimen provides the best opportunity for patients to benefit from the long-term survival opportunity that immunotherapy offers. Looking ahead, ASCO will again be an important meeting for us. We will be presenting longer-term follow-up from some studies that have previously been presented, including the combination of Opdivo and Yervoy in non-small cell lung cancer from CheckMate -012. In addition, we will be presenting data in new tumor types for Opdivo monotherapy. And we are looking forward to presenting new data from studies of our Opdivo plus Yervoy combination, including data in new tumors not previously presented. And lastly, you'll see the data from registrational studies, including Hodgkin lymphoma and head and neck. All in all, I am very proud of our accomplishments within immuno-oncology, including our ability to establish Opdivo as the leading immuno-oncology agent, one that is foundational and a standard of care within its approved indications. Going forward, we remain fully committed to further strengthening our position. I'm confident we are making all of the right investments. From both a commercial and an R&D perspective, continue to execute our strategy in immuno-oncology and further strengthen our leadership position. Before turning the floor over to Charlie, let me say that I am very confident and optimistic about our future here at Bristol-Myers Squibb. Our increased sales and EPS guidance reflects the strength of our overall business. We have significant growth opportunities in I-O, where we have advanced our leadership position with Opdivo. Eliquis is well on its way to becoming the number one novel anticoagulant. The performance of our underlying portfolio remains very strong. And we are advancing a diverse, innovative, and promising pipeline by combining our internal R&D efforts with a continued focus on business development, seeking to develop transformative medicines for patients in need. And with that I'll turn the floor over to Charlie. Thank you.

Thank you, Giovanni. Good morning, everyone. As Giovanni mentioned, we had a very good quarter, driven by strong performance across our key products. Overall, FX had a negative 2% impact on sales and about $0.03 on EPS. Giovanni covered the sales performance highlights from some of our key growth drivers. I will just add some additional color. Eliquis continues to do very well. Sales in the U.S. were $468 million, which includes a one-time positive adjustment related to the Medicare coverage gap of $25 million. We continue to see strong performance for Opdivo across the three tumors. Opdivo continues to be the most prescribed drug for new patients in lung cancer. Renal has also seen strong early adoption. And in melanoma the strong performance of the Opdivo/Yervoy regimen is contributing to the growth for both Opdivo and Yervoy. Opdivo has now been approved in 50 countries. International sales in Q1 were $110 million. Until recently the EU approval was in squamous lung cancer and melanoma only. Pricing and reimbursement for melanoma and squamous lung cancer has been secured in most of the major markets and uptake remains strong, notably in Germany and France, where we are operating through an early access program. Additional indications for renal and non-squamous lung cancer have now been approved in the EU. The CHMP has also granted a positive opinion for the Opdivo/Yervoy regimen in melanoma. Yervoy sales in the U.S. grew 10% over last year, based on the strength of the regimen, which as Giovanni mentioned has seen strong adoption in first-line melanoma. Internationally, sales were down over 50% as Yervoy monotherapy remains under pressure from Opdivo and Keytruda. We expect that to continue until the launch of the regimen, which should take place over the next year or so. Our hep C business was strong in the U.S. and Europe, where Daklinza is holding up well, primarily in the genotype 3 patient population. We do, however, expect competition to significantly impact the business in the second half of the year. In Japan, where we are competing in a genotype 1 population, new competitive launches have led to significant drop-off of our business there. The launch of Empliciti in the U.S. is going very well, with sales in the quarter of $28 million. We are seeing good usage in key accounts in the U.S. In Europe, we have a CHMP-positive opinion and hope to gain approval later this quarter. We do think reimbursement will be a bit more challenging there, given that multiple myeloma is a longer-term treatment and combining novel therapies could be challenging for payers. We continue to see competitive pressures on our HIV business, with sales of Reyataz and Sustiva down from prior year. Recent competitive launches are expected to further impact the Sustiva business in particular. Gross margin was 76% during the quarter, down 370 basis points compared to the same period last year. You will recall that we had a favorable FX impact on international inventories sold last year. In addition, our gross margin was impacted by product mix, driven by Eliquis and the loss of Abilify, where we had full quarter of sales in the first quarter of last year. MS&A, which now includes A&P, was up about 4% due to investments in Opdivo, Eliquis, and Empliciti, offset by lower spend on older products, including Erbitux, which is now fully supported by Lilly. Additionally, there was a $36 million favorable adjustment related to our prior year pharmacy based on the actual invoice received. R&D expenses were up 17%. The increase in spending was due to higher clinical costs, including study supplies, new business development and research alliances, and I-O trials. We also had higher medical investments, including data generating studies and field support. Other income and expense is up approximately $160 million versus prior year. Diabetes royalties are higher due to increased sales and the transfer of future Amylin related royalty rights, which will lead to increased royalties over the next few years. Recall that due to the tiered structure of the agreement with AstraZeneca, the diabetes royalties are somewhat front loaded and will decline throughout the year. In the quarter, total royalties for Erbitux were approximately $60 million and were recorded in other income. Moving to guidance. We are increasing our non-GAAP EPS guidance range by $0.20. Our new range assumes current foreign exchange rates. With the dollar weakening against the yen and euro, we now expect the negative impact of FX on EPS to be between $0.06 and $0.08. This is approximately a $0.04 improvement since original guidance, of which $0.01 has already been realized in Q1. We raised revenue guidance due to the strong trends across the business, primarily Opdivo and Eliquis. The negative FX impact on revenues is now expected to be approximately 1%. We are increasing our guidance on MS&A, mostly due to higher commercial spending on I-O, including additional DTC spend. The increased investments in R&D are primarily for clinical study supplies, new BD [business development] alliances, and the development of additional biomarkers and diagnostics in oncology. Overall, a strong start to the year, which provides us with great confidence in how we see the full year. Now we'd be happy to address your questions. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thank, Giovanni and Charlie. And, Tiffany, I think we're ready to go to the Q&A. Just to remind everybody that in addition to Giovanni and Charlie, both Francis and Murdo are here to handle any questions you might have. Tiffany?

Your first question comes from the line of Chris Schott with JPMorgan. Your line is open.

...much. And then congrats on the strong results here. First question is can you talk about the commercial ramp of Opdivo in Europe in lung cancer now that you have the broader label? Are you expecting similar dynamics for the U.S. in terms of rapid uptake? Or do you see any hurdles being put in place that could limit use in for example PD-L1 positive patients? The second question was just on the timelines for Opdivo in first-line monotherapy in lung. And you've been talking about a readout late this year, I think it's about 18 months from the time your study completed enrollment. I'm just trying to get a little color as to what's taking so long in terms of getting the data here? In that it seemed like much of your control arm would have progressed well ahead of that target? Thanks so much. Giovanni Caforio - Chief Executive Officer & Director: Chris, thanks. This is Giovanni. Murdo will address your question on international Opdivo sales. Let me say that we are very pleased with how reimbursement negotiations and activities are going internationally. That really reflects the value of Opdivo and the data. And then Francis will cover your question regarding timing for first line. Murdo Gordon - Senior Vice President & Head-Worldwide Markets: Yeah, thanks, Chris. Overall we're feeling very good about what's happening in Europe. Our performance in Germany and France has been very good. France is hard to see, because we're currently not recognizing those sales until future price negotiations. But we are doing very well across the indications that we have. If you will recall we have our indication in metastatic melanoma, squamous lung at the beginning of our uptake curve, and then recently additional approvals coming in that are yet really showing in our demand curves. We've also seen, as Giovanni mentioned, very good response to the value of Opdivo in terms of our reimbursement negotiations. Many of those negotiations and discussions with the various governments in Europe have gone quicker. So we now enjoy good access in Germany, France, as well as recently Italy, Spain, and the Netherlands. We're continuing to work with – and these are relatively – these are all broad indications. No restrictions on PD-L1 status. And we're working on additional things for the new indications in non-squamous when we have those discussions. The other thing I will say is that we are still working through the HTA markets, so Canada, U.K., Australia. And as anticipated those will take a little bit longer. I will turn it over to Francis. Francis M. Cuss - Chief Scientific Officer & Executive VP: Good morning, Chris. Given the success we've had with our clinical trials, we're actually very confident in our ability to determine the appropriate time to perform the analysis of I-O studies. You'll appreciate this a result of having developed the broadest I-O dataset in lung cancer and having considerable experience now with applying non-proportional analyses to PFS and OS curves. Now regarding CheckMate -026, we said that both the events and the timing of the follow-up were important considerations for the timing of the analysis. And I want to say that based on what we now know about the progress of the trial and the current event rate, we believe we could have the results from CheckMate -026 in the third quarter, which as you appreciate is earlier than we had previously estimated. Now I just want to emphasize, there are always risks inherent in clinical trials. But this change in timing of having the data does not increase it for the CheckMate -026 study. Thanks. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks for the question, Chris. Tiffany, next question, please?

Your next question comes from the line of Seamus Fernandez with Leerink. Your line is open.

Hello. Thanks for the question. So just a couple of quick questions on the increase in R&D spending. Can you just help us understand the quality of the increase? And what drove the increased guidance for R&D spending? Just it's noteworthy that you recently started the phase 2 FRACTION lung study, which includes your LAG-3 antibody, as well as Sprycel. So just interested to better understand the R&D spend increase. And if that's driven by the promise of I-O combinations? And then the separate question on FRACTION lung specifically. Is it possible that this study – given the fact that it incorporates and includes immunotherapy refractory patients, is it possible that it could be utilized as an – for an accelerated path to approval, should it show impressive results? Thanks. Giovanni Caforio - Chief Executive Officer & Director: Seamus, thank you. Francis will address your questions on R&D broadly. Francis M. Cuss - Chief Scientific Officer & Executive VP: Right. So let me just say, Seamus, that – let me give you a little bit of background on FRACTION. This is an innovative Phase I/Phase II design for early combination trials. And as you appreciate we have a number of potential combinations at the moment. And this allows us to look at promising signals of activity, to actually also test hypotheses about the underlying biology of combinations, and you know we're – as well as checkpoints, we have a number of non-affecter (22:01) mechanisms as well. And of course to generate data to inform future combinations. So therefore, the FRACTION trial should allow us to efficiently identify the activity of promising novel combinations and quickly move them into potentially registrational trials. Now as we've said, data from our early assets have started to come into house this year. And we're moving forward with the anti-LAG-3 antibody refraction study, as we think there is an opportunity to improve upon Opdivo monotherapy or the combination of Opdivo and Yervoy, particularly as you say in those patients who don't respond initially or who relapse. I think the important thing to say and to put this in the context, the broader context, is that we are very confident in our broad strategy in first-line lung. And we want it to address a very broad population. Now we clearly have emphasis on first line. We already have second line. But we do believe that the Opdivo/Yervoy regimens could further improve overall survival. And I want to note that we're really looking forward to presenting additional data from [CheckMate] -012 at ASCO. So overall, we want to ensure that as many lung cancer patients as possible can benefit. And whether that's with monotherapy, combination Opdivo/Yervoy, exploring other combinations, which FRACTION will allow us to do more quickly and efficiently, and whether that's targeted therapies or indeed chemotherapy. So very broad program. Thank you.

Yeah. And let me just – Seamus, just a couple of points on the R&D line. So in the quarter we were up 17%. But there are timing issues that relate to any quarter year to year. For the full year, as I mentioned in my comments, we are raising guidance slightly. We were at high single digits for R&D, and now we're in low double digit. Part of it's some of the things that Francis had mentioned and what I mentioned in my comments regarding clinical study supplies, some of the new BD things that happened since year end, and additional biomarker diagnostic work in oncology. They're the main elements. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Seamus. Tiffany, can we go to the next question, please?

Your next question comes from the line of Jami Rubin with Goldman Sachs. Your line is open. Jami Rubin - Goldman Sachs & Co.: Thank you. Just a couple questions for you, Francis. The first one is more related to the near term. Obviously investors are very focused on the upcoming front-line lung studies from both Merck and you guys. Can you compare and contrast the two first-line monotherapy trials of Opdivo versus Keytruda? Since that's obviously what we're focused on? And I think that investors seem to have more confidence in the Merck trial, because they are looking at the highest expressors of PD-L1 expression compared to your trial. So I think there's more confidence that they're going to hit on PFS versus Bristol-Myers. Plus, there's also worry out there about PFS being a challenging end point, just given that chemotherapy works pretty well in front line lung. So if you can address that first. And then secondly, a more, bigger picture strategy question for the long term. Obviously monotherapy Opdivo is doing extremely well. But as you know doctors prefer combination therapy in treating cancer patients. And they also want to move away from chemotherapy. So can you set the stage for Opdivo combination strategies? And the outlook over the next couple years? Given that a number of companies have chosen the different path, which is chemo combo. Thanks very much. Giovanni Caforio - Chief Executive Officer & Director: Jami, this is Giovanni. Let me just start with your second question and give you my perspective on strategy in first-line lung cancer. Francis will add to my comments and then answer specifically your questions about study design. I feel very strongly, and I am very optimistic about our strategy in first line. Because we obviously have a lot of experience in lung cancer through our second-line registrational strategy, which has given us not only a very broad approval, but also very clear insight into physicians' prescribing behaviors, the adoption of Opdivo, the speed at which chemotherapy has been abandoned. And while there obviously are differences between first line and second line, we really think we have developed a deep knowledge of this market, specifically as it relates to immunotherapy. So when you think about our strategy, our approach is broad and informed by science. We have, I am convinced, the right approach of investigating monotherapy, both in a broader population of PD-L1 positive patients and in a subset of patients that express PD-1 at a higher level. We have advanced a really exciting combination strategy through Study -012 and obviously the Phase III study on going. And we are also investigating the right combination of chemotherapy in the right patient subgroups. And so when you look at the totality of our first-line lung strategy, we believe it is the broadest approach. It is informed by data and science and a really strong understanding of market dynamics. Francis M. Cuss - Chief Scientific Officer & Executive VP: Thanks, Giovanni. Good morning, Jami. So let me emphasize. We've really taken great care in the design of Study -026, in its choice of its end point, the optimal timing of the analysis, which I just mentioned, the role of non-proportional, the hazard ratio, the role of PD-L1 expression, the sample size. And we've used the results of many of our published and unpublished data to look at this. And essentially we remain very confident. We think we've got the optimal balance of speeds and design. And to deliver results, not just in a narrow population, but in the widest population of first-line lung patients, as we've done with other studies of Opdivo recently. Just to be very specific, in the trial design we're looking at both strongly expressing patients and patients with any level of expression. We have not actually disclosed the actual level of what strongly expressing PD-1 is, but it's lower than 50%. It's not clear to us that you need to have very high levels of PD-L1 expression to benefit from treatment. And if you'll recall the OS curves from -057, the shapes of the Kaplan-Meier curves were similar across the 1%, 5%, and 10% cutoffs. So overall, everything we know has gone into this study. We're very happy with the way it's progressing. As I said without additional risk to the analysis, we were able to bring forward the analysis this summer. And we look forward to seeing that data then. Thanks. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Jami. Tiffany, can we go to the next question, please?

Your next question comes from the line of Colin Bristow with Bank of America. Your line is open.

Thanks for taking the questions and congrats on the quarter. So on the CheckMate -568 study, to what extent do you see this data set, along with what we'll have from CheckMate -012, facilitating addition to the treatment guidelines ahead of formal regulatory approval? And then in terms of CheckMate -012 and the data at ASCO, can you give us some sense of the incremental duration of data we'll see, versus what was presented at World Lung? And then just finally, Eliquis, clearly a great quarter. Where do you primarily see growth from going forward? And how do you see the approval of an antidote to impact the growth of this class, given there's one currently under review? Thanks. Giovanni Caforio - Chief Executive Officer & Director: Murdo, why don't you start with Eliquis? And Francis will cover - Murdo Gordon - Senior Vice President & Head-Worldwide Markets: Sure. Thanks, Colin, for the question. Yeah. We're really pleased with the Eliquis performance across all of our worldwide markets, inclusive obviously of the U.S. More than doubling our volume from first quarter last year. So really, really strong. We're seeing this growth really across all markets, in cardiology, in hospitals, and in the community setting. So we have very strong new-to-brand prescription shares evolving. We're now the number one NOAC in the U.S. in atrial fibrillation and VTE treatment. So we're very, very pleased in new-to-brand Rx there. That's a 47% share. And we're now within 10 points of our closest competitor, Xarelto, in TRx share in the U.S. So we've got nice leading indicators. We think we will continue to evolve that market share in cardiology and in primary care across all of our major markets in VTE and in AF. So really that's going to be a continued trend that we're driving. We see very good leading indicators, as I've mentioned before. We see cardiology as that leading indicator. And we see our hospital business there. So we're feeling quite good about it. Francis M. Cuss - Chief Scientific Officer & Executive VP: Good morning, Colin. So I think it's interesting, in first-line lung most companies are taking a fairly similar approach to monotherapy, as we've heard by looking in the RITs population. But on the other hand the strategies with combination regimens like the Opdivo/Yervoy one that's we'll see in [CheckMate] -012, approaches there are quite different. Some are focused as you know on combinations with chemo. Others are looking at combinations for low or PD-L1 non-expressors. We actually believe our strategy is quite differentiated. And we believe that – and I want to reemphasize this – that I-O combinations, specifically Opdivo/Yervoy, is the best way to improve upon survival expectations for the patients over the long terms. Now we're very encouraged by the safety and efficacy of dosing of the regimen in non-small cell lung, based on the data we presented last year at the World Lung Conference. And we're really looking forward to presenting an update of the CheckMate -012 at ASCO in June. So that will be a more mature dataset. And of course it's under embargo, so I can't say anything more about it now. But we are looking forward, with that and everything else in June, to really an exciting ASCO for us. Because as well as the updates on existing tumors, we're going to be looking at new tumor – effects in new tumors and data from registration studies in Hodgkin's and head and neck. So let me just finish by talking about the CheckMate -568 study. And I want to really emphasize that we have full confidence in the CheckMate -227, which is the definitive randomized registration study for first-line lung in non-small cell lung. So – but we do, however, believe that the experience we gain from single-arm studies of combinations like -568 can help inform us about future medical practice as part of the expansive data generation strategy that you've heard from Giovanni and myself. Thank you. Murdo Gordon - Senior Vice President & Head-Worldwide Markets: Colin, just one other point. You asked me about the Portola as a catalyst for Eliquis. Fortunately, Eliquis has one of the lowest bleeding rates in the NOAC class. However, we do feel that the advent of the antidote should increase the comfort level for some physicians who continue to prescribe Warfarin, albeit a modest one. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Colin. Tiffany, can we go to the next question, please?

Your next question comes from the line of Tim Anderson with Bernstein. Your line is open. Timothy Minton Anderson - Sanford C. Bernstein & Co. LLC: Thank you. A few questions. So just going – just sticking on CheckMate -568. You have [CheckMate] -227 running. That's an OS trial. It's a larger trial. Suddenly you start -568, which is a Phase II study, looking at the same doses in front-line lung. I still kind of am struggling to figure out why you started that trial. My guess was maybe it's a way to get early registration ahead of having -227 results, which may not come out until 2018. So really what's the purpose of -568? And then on [CheckMate] -026 can you confirm that you have really the same exact efficacy endpoints and statistical analysis plan for that trial as you did maybe six months ago? I know the timeline has moved around a little bit. And now you're saying in third quarter. And then last question on the fractional lung trial, 685 patients. Is that going to be amortized across the three current arms? Or does that anticipate other combo arms coming in? And some of that 685 patients going to arms that have yet to be revealed? Giovanni Caforio - Chief Executive Officer & Director: Tim, let me start by [CheckMate] -568. And as we've said before, we have a very broad strategy in first-line lung. And obviously because of the strength of the profile of Opdivo and the importance of first-line lung, every study gets, rightfully, a lot of visibility. There are registrational trials, practice informing trials. And -568 is really a practice informing trial as we've designed it. The Phase III study [CheckMate] -227 is really the critical registrational strategy there. That's really the way to look at it. Obviously as we've demonstrated before, we are executing our strategies very rapidly, with speed. There are degrees of flexibility and optionality built into every one of our trials. But that's really the reason why we did -568 is to inform medical practice. Francis will address your question on FRACTION and [CheckMate] -026. Francis M. Cuss - Chief Scientific Officer & Executive VP: Good morning, Tim. So let me say again, and I want to reiterate, we have not changed our analysis at all. The PFS analysis will be on the hazard ratio of the PFS curves in the strongly expressing population, as we've said before. And of course this takes into account the totality of the Kaplan-Meier curve. If the primary endpoint of PFS is strongly – is met in the strongly expressing patients, we'll also look at all the randomized populations, which includes all those that express at the greater than 1% level. That hasn't changed either. And overall survival is a secondary endpoint and will also be analyzed, as this is obviously clinically important. But I think it's worth reminding everyone that OS could be confounded by the crossover, which is allowed within this particular trial. So let me just say nothing has changed in terms of the analysis. What we're able to do as we've watched the drug – I'm sorry. As we've watched the study mature in terms of the duration of therapy and the event rate is that we're able to advance it forward without any increased risk to the study. Now just a quick note on FRACTION. FRACTION is a study that gives us enormous flexibility. So you've picked up on an interesting point. There are a lot of patients in this. But it allows us, depending on the data, to move to additional arms or to ramp up in the arms there. So it's not the same as you would expect for a registrational study, where you come up with the number at the beginning. It's about efficiency. It's about speed. It's about being able to identify signals and move quickly, should we see them. So thank you very much. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Tim. Can we go to the next question, please, Tiffany?

Your next question is from the line of Mark Schoenebaum with Evercore ISI. Your line is open.

Hey, guys. Thanks a lot for taking the question. Francis, maybe for you, just you've touched on this, but just to hit it directly on the head. Would you mind comparing and contrasting your front-line lung cancer trial with the trial that Merck is running? And the reason I'm asking is, it's possible we may see the Merck data first. Don't know. But if Merck were to fail for some reason on the PFS endpoint, how should we think about that in terms of reassessing odds that your trial would hit on PFS or not? As I know there are some design differences that are important, I'd love to hear you articulate those for us. And then also I don't – only one other question. I know it may be too early. And I know companies don't often like to provide this data. But can you give us any sense of where you're seeing duration of therapy in second-line lung right now? Thank you very much. Giovanni Caforio - Chief Executive Officer & Director: Mark, let me just add a couple comments there. First of all, on Study -026 it's obviously not appropriate to speculate on other trials. Let me just reiterate. We are very comfortable about the design of our trial. We are very comfortable about the depth of understanding that went into the statistical plans. And we are increasingly comfortable about the choices we've made in terms of the dosing and schedule of Opdivo, as it relates to the efficacy we are seeing, both in the marketplace and in clinical trials. And I think it will be important to really look at the results of our study to understand the performance of Opdivo in the first-line setting in lung cancer. With respect to length of therapy in lung, as we have seen get post approval, Murdo will give you some perspective there. Murdo Gordon - Senior Vice President & Head-Worldwide Markets: Sure, Mark, as you hinted it is early days. And we would prefer to have a 2-year in-market experience, so that we can do a full 1-year look back and provide more quantitative estimates of the duration of therapy that we're seeing in the second-line lung market. I would say we're very encouraged by the long-term follow-up data that were presented at AACR. So we expect to see duration of therapy in line with clinical trials and hopefully even a bit longer. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Mark, for the questions. Tiffany, could we go to the next one, please?

Your next question comes from the line of Geoff Meacham from Barclays. Your line is open.

Morning, guys, thanks for the question. So a lack of testing has been obviously a very differentiated factor for Opdivo thus far. Is there any updated thoughts on how that's going to evolve commercially, when you look to first-line lung? And the second part of it does this harmonization of any technologies for testing matter to you guys? Help, hurt, or sort of indifferent? Thanks. Murdo Gordon - Senior Vice President & Head-Worldwide Markets: Okay. So, Geoff, I'll start. It's Murdo here. We're seeing some evolution in testing. And it's primarily in the first-line setting, when tissue is available. So we're seeing 1% or 2% increases month over month. We're currently running at about 30% of patients being tested. And over 60% of that is in the front-line patient setting. So very few second-line patients continue to be tested. So clearly, we have decided to commercialize our companion – sorry – our complementary biomarker PD-L1 test. We have a full commercial effort behind that. And we are setting the stage for what could happen in the front-line setting, which would be a testing market, as that's how we've defined our clinical trials. Francis M. Cuss - Chief Scientific Officer & Executive VP: Good morning, Geoff. So I think what you're referring to is the blueprint study at the AACR. And just to remind everyone, these were the Phase I result, so a two-phase effort to compare four of the PD-L1 diagnostic assays across 39 non-small cell lung cancer tumors. This was cross industry collaboration between four pharmaceutical companies, including us, and two diagnostic companies. And the idea was to provide greater clarity on the analytical performance of each assay. Now the results indicated that two of the assays appear to be highly correlated. And three of the four assays were analytically similar. And in this first phase of the study, while some differences were due to scoring approaches and selective cutoffs, the assays were deemed not identical and interchangeable at this point in time. And I think one would say these preliminary results are not intended to alter the current guidelines for each diagnostic. But also I want to say is, very importantly, these findings confirm the quality and the utility of our assay. So anyway we're moving forward into the second phase. We'll have to see how that goes. But obviously we're working hard with others to try and get to a point where there is some interchangeability. Thank you. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Geoff, for the questions. Tiffany, could we go to the next one, please?

Your next question comes from the line of David Risinger with Morgan Stanley. Your line is open. David R. Risinger - Morgan Stanley & Co. LLC: Thanks very much. So I have a couple questions. First of all, with respect to ASCO I believe that you're going to be providing some updated data from CheckMate -012 that helped inform your dosing for the Opdivo plus Yervoy combo in [CheckMate] -227. Could you just provide some more color on that? Second, with respect to LAG-3 I noticed that you delayed and also downsized your key LAG-3 trial, so that was downsized from 540 to 360 patients and pushed out from September of 2016 to May of 2018. Could you discuss that? And then finally, is there any other commentary you can offer on your other novel I-O agents? Thank you. Francis M. Cuss - Chief Scientific Officer & Executive VP: Good morning, David. So let me just talk about ASCO. And I just want to reiterate, we're really looking forward to ASCO. And there will be a number of areas of interest for us, as well as the updating longer term data on previous studies. But you did specifically ask about that. Obviously I'm under embargo, the ASCO embargo, so I can't really give you any more color. But what we have done in the past, and you should expect, is that in these studies, particularly ones that are particularly interesting, we are presenting updated data, where the patient follow-up is extended. And in the context of immuno-oncology, the durability responses is a particularly interesting aspect of this. So one would expect a complete update of the whole data set. As far as LAG-3 I think as I've already said, I was – and I appreciate how closely people look at the ClinTrials.gov data. But particularly in the FRACTION context, particularly these adaptable and flexible trials. Some of the changes, even quite large changes in numbers of people and duration, don't necessarily correlate with how the drug is and isn't going. And particularly in this trial, I think we removed one site or a country. And as a result you saw a big change in the numbers. So it's not representative of the progress. As far as novel I-O combinations I did want just to say that first of all, we're very excited about the progress we're making with what has now become a fairly conventional, but still effective, I-O combination of Opdivo and Yervoy. As you appreciate it's – as Charlie mentioned, it's approved in the United States now. And should be approved soon in Europe. And we have a number of trials ongoing and planned. Some registration in lung and renal as you mentioned, others exploratory. And you'll be seeing data from some of those at ASCO also. We're also continuing to bring novel I-O agents into the clinic. We now if I'm correct have six other possible combinations. And OX40 should come into the clinic in June. And the CD73 we hope later in year. So we're very excited about the opportunity this offers us to really expand the opportunity for patients to get those durable responses across the broadest number of patients possible. Thank you. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Dave, for the questions. Tiffany, can we go to the next?

Your next question comes from the line of Gregg Gilbert with Deutsche Bank. Your line is open.

Thank you. First on Opdivo, I would like your view if PD-1s work well and move strongly into front-line lung, to what extent do you think the second-line lung opportunity moderates in size? And, Murdo, on Opdivo pricing in the U.S., are there any signs that payers are looking to negotiate price in any way? Or do you pretty much get a label, get added to the compendia, and your price is your price? And lastly, just a quick one for Charlie. On U.S. Eliquis in the quarter, was there any creep up in trade inventories or improvement in gross to net? I think revenues were up quite a bit more than the impressive Rx growth in Q1 versus Q1. Thanks. Giovanni Caforio - Chief Executive Officer & Director: So let me just start maybe, Gregg, with a perspective on second-line lung and what happens going forward, should there be a rapid penetration of Opdivo in first line. My perspective is that that really puts into context our strategy with novel agents, where we've consistently said that we're looking at really understanding the basis for patients that don't respond or progress following the response. I think FRACTION, as Francis mentioned, is a great trial for us to test hypothesis and advance our early pipeline very strategically. It also underlines the importance of the breadth of our early pipeline with up to eight agents in early clinical development this year. And obviously we're also investigating what happens in terms of retreatment potential and other evolution in how the sequence of care in lung cancer happens. That really positions us very strongly, because of the totality of what we have going. Murdo? Murdo Gordon - Senior Vice President & Head-Worldwide Markets: Yeah, thanks, Gregg. Your question regarding pricing in the U.S. on Opdivo. So far we've actually seen very good access to Opdivo and a good appreciation of its value across all of its current indications. And are close to 100% reimbursement without restrictions to those indications. We're also seeing continued strong reimbursement of Yervoy and very good reimbursement of Yervoy plus Opdivo in regimen and in combination in metastatic melanoma.

Yeah. And, Gregg, on your question on the U.S. Eliquis, as I mentioned in my comments we did have a one-time positive adjustment due to the Medicare coverage gap. That was about $25 million. And there was a slight increase in (51:03) inventories, we think up to about $40 million. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Gregg, for the questions. Tiffany, go to the next one, please?

Your next question comes from the line of Steve Scala with Cowen. Your line is open. Steve Scala - Cowen & Co. LLC: Thank you. I believe it was stated on the Q4 call, which was three months ago today, that there are or were no interim looks at CheckMate -026. And that Bristol did not expect early stoppage relative to the November 1 completion. So a summer stoppage is a very positive development. Has anything changed but the event rate? It would seem to me that the company would be able to predict with great precision the standard of care event rate. So should we consider a scenario where the increased number of events are likely in the Opdivo arm? I know you don't know. But is that a reasonable conjecture? Or alternatively, what else could be driving this higher event rate? Thank you. Francis M. Cuss - Chief Scientific Officer & Executive VP: Steve, I think it's – I would be very careful about speculating at all. Let me just say – and I want to repeat what I've said already. We make a decision based on the event rate and the duration of therapy. And in this particular study, for all the reasons we've already discussed, it's really important to get that right. We believe based on our experience and our record of success, we have – or we will be getting it right. But I can't speculate about the result. I do think all I would say is, if this was – if I knew the results and I knew how to predict exactly the events, we wouldn't need to do the trials. So the thing is there is always a degree of uncertainty in this. But I don't think where we are towards the end of a trial, there is any uncertainty left in terms of months and months. So we are looking at the third quarter with a good deal of confidence. And I just want to repeat again, it's without any reduction in – oh, I should say no increase in the risk in terms of the study design. Giovanni Caforio - Chief Executive Officer & Director: And, Steve, this is Giovanni. Just to maybe address another of the elements you highlighted. So first of all, our timing in Q3 is not driven by an interim analysis. It's driven by our understanding of the completion of the study. And the time change is not driven by an increase in event threads. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Steve. Tiffany, could we go to the next questions, please?

Your next question comes from the line of Andrew Baum with Citi. Your line is open.

Thank you. Three questions, please. First, could I press Francis on how Bristol's thinking on the role of chemo to potentiate I-O agents, namely nivolumab, has evolved? There's been some recent publications on reduced clonality with chemo. Some publications on impact of chemo dependent on Immunoscore. Obviously you have your own clinical experience with the drug. But I just wondered whether you are more sympathetic or less sympathetic to advancing chemo in combination with PD-1 blockade? Second, one of your competitors, AbbVie, just made a material acquisition of a company with a DLL4 conjugated monoclonal for small-cell lung cancer. Obviously Opdivo is being developed in that setting. I'm interested in your views of that particular target versus a PD-L – PD-1 modality. And then finally, there are a proliferation of PD-1 monoclonals not yet approved but in development from a variety of biotech and pharma companies. Could you just remind us of Bristol's stance regarding prosecuting your intellectual property? And what you think the ultimate outcomes are going to be here for the late entrants? Thank you. Giovanni Caforio - Chief Executive Officer & Director: Andrew, let me just – this is Giovanni. Let me just start with a couple comments. And Francis will follow up on some of your questions as well. So first of all, with respect to intellectual property. Obviously as the leader and the innovator in this field, we have a broad estate of patents and intellectual property, which we are defending vigorously. There are a number of legal proceedings ongoing, some of them initiated by us, some of them initiated by Merck in the U.S. and Europe and Australia. I would say that in the cases in which we have received an opinion from courts, we are very pleased with the initial developments there. And many of those cases will take a long time to conclude. But we feel very strongly about where we are from an IP perspective. And we are optimistic about the first court decisions. With respect to the business development activity you mentioned at the beginning, obviously we know the field in lung very well. As you also know, we have a clear priority in business development. We look at many opportunities all the time. And we look at the value of platforms in the context of what our programs are. And as Francis will tell you we have strong confidence in the breadth and depth of our pipeline, specifically as it relates to small cell and non-small cell lung cancer. Francis M. Cuss - Chief Scientific Officer & Executive VP: Good morning, Andrew. So first of all, let me just reiterate. We believe that the I-O combination is the best way to improve upon the expectation, the long-term expectations of patients. But we have got some trials based on a very robust set of data with various chemo/Opdivo regimens with considerable follow-up as well. So just to remind you we have, as part of our [CheckMate] -227 study in the non-expressor population, a chemo combination. And we also have actually a CheckMate -370, which is a treatment informing a study in the community, looking at different approaches, different regimens, different sequencing of chemo. So while we're focused on I-O/I-O combinations, we're certainly open to the idea of chemo in certain patient segments. I think as far as the small-cell lung cancer, which you intimated from your question about DLL4, chemotherapy there has an important role to play. And DLL4 is – the target is one way of addressing that with an ADC. We think Opdivo and Opdivo/Yervoy combinations – and we'll be presenting data on this at ASCO coming up – have an important role to play in small-cell lung cancer, both on their own or potentially in combination with other regimens. Thank you. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Andrew. Tiffany, I think we have time for two more questions.

Your next question come from the line of Vamil Divan with Credit Suisse. Your line is open. Vamil K. Divan - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks so much for taking my question. So two more again on sort of the earlier stage I-O assets. One, if you could just comment on CD137. I don't think I've heard you guys mention much about that one recently, unless I missed it. And Pfizer does seem pretty optimistic with what they're seeing, that mechanism, so just curious on your thoughts. And then you did touch on the CD73 and said that's moving into the clinic this year. I think just there seems to be a lot of excitement around this adenosine pathway approach from a lot of companies. I'm curious if you can just kind of give your views on that approach as a monotherapy versus combination therapy? And then touch on sort of CD73 versus maybe directly going after the adenosine receptor with like the A2A receptor blockade sort of approach? And which one – what might be the advantage or disadvantage of the two? Thanks. Francis M. Cuss - Chief Scientific Officer & Executive VP: Good morning. So let me first of all talk about 137. We will be – we've said for a while we will be presenting data later this year. And we will be doing that. And we have studies in monotherapy in a number of tumors and in combination with NIVO and actually other agents too. I think what's important to say here is that we believe the bar has been raised and will be continued to be raised quite high by the combination of Opdivo and Yervoy. So I think that's the benchmark to which we are looking to, as we look at the data and consider whether to bring further combinations forward. As far as CD73, I'd draw your attention to the fact we presented data on this at the AACR. It's one of a number of non-effector mechanisms we're looking at in combination. We believe we're certainly at the front of this. And we're certainly looking forward to bringing it in and moving it into our FRACTION approach to efficiently and quickly see if there's some activity there. Vamil K. Divan - Credit Suisse Securities (USA) LLC (Broker): Thanks. John E. Elicker - Senior Vice President, Public Affairs & Investor Relations: Thanks, Vamil. And, Tiffany, could we go to our last question, please?

Your last question comes from the line of John Boris with SunTrust. Your line is open.

Thanks for taking the questions. And congratulations on the results. First question for Murdo. In first-line lung cancer when you segment the market, and if you look at a label where you're restricted to just greater than or equal to 50% of PD-L1 patients, what percent of the market in first-line does that represent? Versus having a label that would have one, five, 10, or any positivity in PD-L1? Second question for Murdo and Francis on the regulatory timing around Hodgkin's lymphoma and head and neck cancer. Can you give some clarity on filing in U.S., Europe, Japan? And then on the commercial side what additional incremental investment do you have to make on those two indications? You obviously have the Sprycel salesforce in place, but don't actively sell in head and neck. Just a little bit of clarity on investment. And then lastly for Charlie on leverage with the revenue going higher, and potentially going higher in the out years, as you optimize all of these indications, how are you thinking 2017 and beyond about operating leverage? Thanks. Murdo Gordon - Senior Vice President & Head-Worldwide Markets: Okay, John, I'll try and handle the first and part of the second question. And then Francis and Charlie can jump in as required. So first-line lung segment. If you take a 50% cut off you're talking about 25% of the market, approximately. And if you take a greater than, let's say 1% cutoff, you're looking at about 70% of the market in terms of relative size. When it comes to second line – sorry – your second question. When you look at the other indications in the U.S. we believe we've invested appropriately for commercializing those indications. However, we've stated we want to be leaders in I-O. Right now we have dominate share of voice in all our core tumors. We think we can continue that with the hematological team that we have currently selling Empliciti and Sprycel. I think Hodgkin's lymphoma fits in really nice there, and there's a good customer overlap. And then other solid tumors, we think we're appropriately resourced as well for. Francis M. Cuss - Chief Scientific Officer & Executive VP: So let me very quickly say, the FDA has accepted our sBLA. We've got priority review. The EMA has validated our type 2 variation. The Japanese Ministry of Health has validated our application, and where we're presenting the data at ASCO in June. Thanks. Giovanni Caforio - Chief Executive Officer & Director: And obviously that's on Hodgkin lymphoma. Head and neck we are working on the dataset in anticipation of a submission.

Yeah, John, just on your question on leverage. Even our revised guidance in 2016 provides roughly (1:04:09). And as we stated many times (1:04:15) going forward throughout the decade, throughout the rest of this decade, but also beginning more acutely next year. Giovanni Caforio - Chief Executive Officer & Director: Thanks, everyone. So we are at the end of the call. I would just like to thank all of you again for your questions. I reiterate that we're off to a really strong start in 2016. We're beginning the chapter of growth I've discussed before. And we are successfully laying a strong foundation for our future. Thanks, everyone.

This concludes today's conference call. You may now disconnect.