Bristol Myers Squibb Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 26, 2023

Key Takeaways

  • BMS raised its full-year 2023 non-GAAP EPS guidance to a narrowed range of $7.50–$7.65 and set medium-term targets for >$10 billion in new product sales by 2026 (vs. 2025) and an operating margin above 37%.
  • The company announced a planned acquisition of Mirati Therapeutics to strengthen its oncology portfolio with the KRAS G12C inhibitor adagrasib (and PRMT5 programs), while maintaining strong cash flow for further business development.
  • Key R&D milestones include subcutaneous Opdivo meeting co-primary endpoints in CheckMate-67T (potentially covering 65–75% of current U.S. indications and extending the franchise into the 2030s) plus new breakthrough designations in immunology and progress on CAR-T programs.
  • In-line products Eliquis and Opdivo delivered double-digit growth, and launches like Reblisal and Opdualag performed well, but brands such as Abecma and Zeposia lagged due to competition and access hurdles, prompting targeted commercial investment.
  • Revlimid is expected to generate ~$6 billion in 2023 before declining to ~$4 billion in 2024 and ~$2 billion in 2025; the company expects LOE impact to fall below 10% of total revenue by 2025, with newer products set to replace lost sales in the back half of the decade.
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Earnings Conference Call
Bristol Myers Squibb Q3 2023
00:00 / 00:00

There are 22 speakers on the call.

Operator

Hello, and welcome to the Bristol Myers Squibb Third Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. Please note, this event is being recorded.

Speaker 1

I would now like to turn the

Operator

conference over to Tim Power, Vice President of Investor Relations. Please go ahead.

Speaker 2

Thank you and good morning everyone. Thank you for joining us this morning for our Q3 2023 earnings call. Joining me this morning with prepared remarks are Giovanni Caforio, our Board Chair and Chief Executive Officer Chris Berner, our Chief Operating Officer and CEO Designate And David Elkins, our Chief Financial Officer. Also participating in today's call are Adam Lankowski, our Chief Commercialization Officer I'm Samad Herawat, our Chief Medical Officer and Head of Global Drug Development. As you'll note, we've posted slides to bms.com that you can use to follow along with Before we get started, I will read our forward looking statement.

Speaker 2

During this 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 future date. We specifically disclaim any obligation to update forward looking statements even if our estimates change. We'll also focus our comments on our non GAAP financial measures, which are adjusted to exclude certain specified items.

Speaker 2

Reconciliations of certain non GAAP financial measures to the most comparable GAAP measures are available at bms.com. With that, I'll hand it to Giovanni.

Speaker 3

Thank you, Tim, and good morning, everyone. Q3 was a solid quarter for the company. We delivered sales growth for our in line and new product portfolios And continued to advance the renewal of our business, delivered important clinical and regulatory milestones And further strengthened the long term prospects of the company through the planned acquisition of Mirati. On my 49th and last quarterly earnings call, I am proud of where Bristol Myers Squibb is today. We have built a highly diversified business.

Speaker 3

The strength of our in line products and the potential of the launch portfolio Gives us confidence in the ability to navigate the Revlimid LOE through 2025. The focus is clearly on the second half of the decade. We continue to strengthen our position, thanks to a growing registrational stage pipeline and the ability to source external innovation through business development. Our R and D Day highlighted the breadth and depth of our research efforts, which provide us with confidence in the long term sustainable growth of the business. It has been an honor and privilege to work alongside my talented and dedicated colleagues at BMS over the past 23 years and to help grow this company into the industry leader it is today.

Speaker 3

You all know Chris very well, and I am sure you will share my confidence in him as a leader. I'm excited to see the company's continued progress In delivering against our critical patient centric mission. My sincerest gratitude goes out to all our employees With that, I'd like to turn it over to Chris to talk more about the quarter.

Speaker 4

Thank you, Giovanni. Before I dive in, on a more personal note, I want to recognize Giovanni for his tremendous impact on the organization. He is consistently focused on ensuring that we are strengthening our company while delivering for patients, and I wish him every success in his next chapter. Let's start with our Q3 overview on Slide 5. As Giovanni said, we delivered continued top line growth for the in line and new product We also advanced our pipeline and announced an important business development transaction with the planned acquisition of Mirati.

Speaker 4

You'll have seen that we are increasing our non GAAP EPS guidance for the year. We also updated our target for our new products to grow to more than $10,000,000,000 in 2026 and for our operating margin to be above 37%, while reaffirming our other 2020 to 2025 guidance. I will give you more color on our outlook in a moment. So let me step back and provide some context. Let's turn to Slide 6.

Speaker 4

As I told you last month at My objective as incoming CEO is to continue to position our company for sustainable long term growth. Three levers I outlined there were commercial execution, R and D leadership and strategic business development. In his remarks about our commercial results, but let me describe how I think about our performance and outlook. Let's start with our key in line products, Eliquis demand growth in the U. S.

Speaker 4

Is strong with continued opportunities for growth going forward. Consistent with previous years, revenues in Q3 were impacted by gross to net adjustments. We expect these to normalize through Q4 as we've seen in previous years. Opdivo continued to see good demand growth in Q3. Importantly, we've delivered a number of Important future growth drivers with new data and approvals during the quarter that I will describe momentarily.

Speaker 4

David will provide highlights for the remainder of the in line Turning to the new product portfolio. Overall, our new products continue to perform well, providing confidence In the portfolio's growth potential and ability to diversify our business over the long term. I would characterize the performance of these products In 3 categories, first, we are seeing strong performance for a number of products, including REBLISIL, Abdulag and Briyonzi. Specifically for REBLAZIL, we're seeing strong growth with a broad label for commands. As Adam can discuss further, we are seeing encouraging trends in both first line and second line.

Speaker 4

We are also very pleased to see That the NCC and guidelines recognize the importance of REBLISIL as an important treatment in first line MDS for both RS positive and RS negative patients. For Optulag, growth was also robust for the quarter and the product is on the path to become the new standard of care in first line melanoma. This product has considerable growth opportunity remaining in its existing indication and we are continuing to study its potential in future indications, which Samit can speak to. Brianca performance was strong for the quarter and we expect strengthening performance for this product heading into 2024 as manufacturing performance and supply continue to improve. 2nd, there are a couple of products notably KEMZYOS Cardiovascular accounts onboarded and the pace of getting patients on to therapy as patients may see their cardiologists only 1 to 2 times per year Has resulted in a longer adoption curve.

Speaker 4

As we have shared, we expect consistent and steady growth akin to a cardiovascular launch for this important product and we remain confident in our long term projections. For SOTIC II, the profile continues to be strong and we're seeing nice increases in share. Access continues to be the main constraint for this brand and why we will see broad and meaningful access improvements in 2024, Getting to 0 step edits will take a bit longer than anticipated for some key plans given emerging payer dynamics in the immunology market. Importantly, for both of these products, our peak expectations remain unchanged, though the time to peak will shift. Finally, I would highlight Abecma and Zeposia, where performance has lagged expectations.

Speaker 4

For Abecma, in class competition and dynamics with bispecifics In late line multiple myeloma have impacted performance. At the same time, real world data generated by a consortium of KOLs demonstrates that our efficacy, safety and reliability are quite competitive. This has been further strengthened by Our focus will be on ensuring our teams are fully leveraging this breadth of data to effectively reinforce the profile of this important treatment. For Zipposia, performance remains strong in MS. In UC, access has been a constraint that will require continued focus To unlock future growth, again, Adam can provide additional context.

Speaker 4

Taken together, we now expect sales from this portfolio To be $3,500,000,000 in 2023, this is slightly lower than we had expected at the start of this year. Looking forward, we see continued growth. In the medium term, we do expect to achieve greater than $10,000,000,000 in sales for this portfolio in 2026 rather than 2025. The commercial team is laser focused on building on the momentum of performance in the quarter and importantly accelerating performance where necessary. We are also further increasing our investment behind selective brands to ensure performance accelerates.

Speaker 4

Finally, I would highlight That our new product portfolio will expand this quarter with the addition of repotrectinib next month and upon completion of the Mirati transaction, CRISATI. Turning now to our R and D engine on Slide 8. As I mentioned last month, we have exciting opportunities to strengthen pipeline and deliver more important medicines to patients across therapeutic areas, including expanding our registrational pipeline from 6 to 12 assets over the next 18 months. Since our R and D Day, we've continued to make progress. In oncology, for Opdivo, we've delivered several growth drivers including U.

Speaker 4

S. Approval in Stage 2 Adjuvant Melanoma, Presentation of positive data for periaduvant lung with CheckMate 77T and for first line bladder cancer with CheckMate 901. And importantly, We've met the co primary endpoint for the subcutaneous nivolumab trial CheckMate 67T. This has the potential to open a regulatory approval in indications that constitute approximately 65% to 75% of today's Opdivo business in the U. S.

Speaker 4

And extend franchise durability into the 2030s. You may have also seen that Mirati presented encouraging PD-one combination data In first line lung cancer at ESMO, these data further strengthen our conviction in the potential of Crizati and the value it will add to our oncology portfolio. In immunology, our LPA1 inhibitor has now been granted breakthrough therapy designation And importantly, our CD19 NEXT T cell therapy is making progress. We have started dosing patients in our lupus study and today I can disclose that we have now achieved clearance from the FDA to begin our MS trial. These are important milestones that illustrate our strategy of rapidly advancing cell therapies into immunologic diseases and becoming leaders in the space.

Speaker 4

And we are moving forward with other assets in our pipeline. You can expect to hear more about our hematology assets at ASH later this year and about AR LDD at a medical conference early next year. Turning to business development, a Key priority for capital allocation on Slide 9. As you know, BD has been a key component of our strategy to supplement our internal innovation. Our recently announced planned Mirati acquisition is an excellent example of a transaction with great strategic fit, compelling science and financial soundness.

Speaker 4

Through this acquisition, we're strengthening and diversifying our oncology portfolio with the addition of Crizati And potentially PRMT5 along with a pipeline of future KRAS inhibitors and enabling programs. We maintain significant cash flow to support continued investments in business development and this will remain a top priority for capital allocation for the company. Turning now to our scorecard on Slide 10. I've already discussed many of the positive recent milestone achievements noted here. While we recently learned that the second line HCC study for Optulag did not support moving forward in a registrational trial for this indication, We have a second study underway in first line liver cancer that we expect to read out next year.

Speaker 4

In addition, as discussed already, we've seen a number of important accomplishments not included on this slide, notably first line bladder and subcu Opdivo. All of this speaks to continued strong pipeline execution and the progress of programs that will become important catalysts for the future growth. Turning to Slide 11. When you add everything up, as we discussed last month, we have numerous levers to drive growth into the back half of this decade and beyond. I am confident in our ability to transform our portfolio, both organically as well as through business development and to deliver new medicines for patients.

Speaker 4

With that, I'll turn it over to David to walk you through our product performance and financial results in more detail. David?

Speaker 5

Thank you, Chris, and thanks to all of you for joining our Q3 earnings call. Turning to Slide 13, let's discuss our top line performance. Unless otherwise stated, all comparisons are made versus the same period in 2022 And sales growth rates will be discussed on an underlying basis, which excludes the impact of foreign exchange. Total company sales in the 3rd quarter were $11,000,000,000 driven Continued growth of our in line and new product portfolio, offset by the expected decline in Revlimid sales. Let's move to our new product portfolio on Slide 14.

Speaker 5

During the quarter, we delivered solid growth for the portfolio with $928,000,000 in revenue. Growth was strong across the portfolio, Though we have seen an impact of Abekma from both manufacturing site maintenance in June and from increased availability and usage alternative BCMA targeting therapies for multiple myeloma. Based on the performance year to date, we now expect the new product portfolio to deliver $3,500,000,000 for the full year 2023. This is primarily due to the impacts of our cell therapy franchise, particularly our bekma. As Chris mentioned, we are laser focused on continuing to accelerate growth of our in line and new product portfolio into the next year and beyond.

Speaker 5

Let's discuss performance of our solid tumor products on Slide 15. Our flagship oncology product Opdivo continues to grow well with sales up 11% globally. In the U. S, Opdivo grew 9%, primarily driven by demand. Sequentially, sales grew double digit, driven by demand and a reversal of $50,000,000 of unfavorable buying patterns in the 2nd quarter.

Speaker 5

Outside the U. S, 3rd quarter revenues increased 15%, primarily driven by demand for indications such as lung This performance along with potential new launch opportunities in periadjuvant lung and first line bladder As well as in recently approved adjuvant melanoma indication reinforce our confidence in the continued growth for Opdivo. As Chris mentioned earlier, we now have positive data for the subcu formulation. We believe this supports the potential for an important new option for patients And strengthens the franchise longevity into the next decade. With respect to our next generation IOS at Optilag, revenue nearly doubled As we build share in first line melanoma, in the U.

Speaker 5

S, we now see market share of roughly 25% with additional room to grow, particularly in the approximately 15% of patients That are still receiving PD-one monotherapy. Opdulaiq has become a new standard of care in patients with metastatic melanoma, where BMS total share is 65% Let's now turn to cardiovascular on Slide 16. Eliquis continued to grow with $2,700,000,000 in revenue in the quarter. In the U. S, sales grew 4% year over year, driven by strong demand growth offset by unfavorable gross to nets due to channel mix, including impact of approximately $75,000,000 in Q3.

Speaker 5

Internationally, sales were primarily impacted by generic entries in Canada and the UK and pricing pressures we've mentioned in the past. At the same time, we're encouraged successfully defended our IP in several EU countries this year, including France, Norway and Sweden. Moving to KENSYIS, our 1st in class obstructive HCM product. We are pleased with the continued growth of the product delivering $68,000,000 of revenue in the quarter. In the U.

Speaker 5

S, we added roughly 1,000 patients, both to our hub and to commercial dispense. We are very encouraged to see good persistence with roughly 3,500 patients now in commercial drug. Our patient base continues to grow as we steadily bring more patients on the treatment and convert them to commercial dispense. Turning to our hematology products on Slide 17, starting with Revlimid. Global sales in the quarter were just over $1,400,000,000 At this point, we expect revenues of approximately $6,000,000,000 for the full year, primarily due to higher level of demand for lenalidomide.

Speaker 5

Now on the POMALYST, global revenues were down 2% versus prior year, mainly due to free product dynamics in the U. S. We described in July. Internationally, demand for PAMALA was stable. Revenues also benefit from a $40,000,000 clinical supply purchase during the quarter.

Speaker 5

Turning to REBLISO, which generated revenues of $248,000,000 in the quarter. In the U. S, revenue growth accelerated, increasing 28% Year over year, primarily driven by increased demand. With the COMMANDS approval, we are seeing increased use in first line as well as an increase in second line patients That are rapidly switching from ESAs to Revocel, along with the continued increase in duration of treatment. Though it's early in the launch in first line MDS, We're hearing very positive feedback on the profile, especially in the community setting.

Speaker 5

Overall, we're encouraged by the strong label for Revlissel in first line MDS associated anemia, And we believe it sets us well to deliver this medicine to more patients with this disease. Moving to Abekma with revenue of $93,000,000 in the quarter. This was impacted by the manufacturing site maintenance in June and the use and availability of other BCMA targeting agents. Turning to Revlissel, sales in the quarter were $92,000,000 more than double versus prior year and down slightly compared to prior quarter due to timing of infusions. As we mentioned in July, during the quarter, we remain constrained with respect to vector.

Speaker 5

However, with continued strong demand in second and third line plus large B cell lymphoma And an expected increase in supply next year, we are confident in our ability to grow in 2024 and beyond. Let's move to our immunology products on Slide 18. Global sales for ZYPOSIA were $123,000,000 up 75% compared to prior year. In the U. S, in addition to $15,000,000

Speaker 6

contribution due to favorable gross to nets and inventory in the quarter,

Speaker 5

we continue to Gross to nets and inventory in the quarter. We continue to be pleased with the momentum in multiple sclerosis with the best in class share within the S1P class And continued volume growth in very competitive ulcerative colitis market. Outside the U. S, sales increased mainly due to demand in MS. Turning to Sutiktu.

Speaker 5

Underlying launch trends remained strong. Sales in the quarter were $66,000,000 which included a clinical supply purchase of approximately $30,000,000 and we saw continued strong volume demand during the quarter With over 38,000 script equivalents dispensed since launch, we delivered over 15,000 script equivalents in the U. S. During the Q3. Within the oral category, our share is now roughly 40%, reinforcing that Satyto is establishing a position as the oral of choice in this market, And we are making progress converting covered CVS patients from the free drug program to commercial dispense.

Speaker 5

We expect this will take on average 2 to 3 months per patient. Building on our momentum, we continue to expect the further strengthening of AXIS next year. Now moving to the P and L on Slide 19. I will focus my remarks on a few non GAAP key line items, having just covered sales performance. Compared to Q2, gross margin was favorably impacted by product mix.

Speaker 5

Acquired in process R and D in the quarter was $80,000,000 which is partially offset by $12,000,000 of licensing income, resulting in a net impact of $0.03 of EPS. The reduction of the effective tax rate during the quarter was primarily due to recently issued Section 174 guidance Regarding deductibility of certain research and development expenses, this resulted in an adjustment in the quarter to our estimated tax rate. Overall, 3rd quarter earnings per share was $2 per share, growing approximately 1%. Turning to the balance sheet and capital allocation on Slide 20. Cash flow generation and our balance sheet remains strong.

Speaker 5

Cash flow from operations in the quarter was approximately $4,800,000,000 With over $8,000,000,000 in cash and marketable securities on hand at the end of Q3. Our capital allocation approach remains focused on business development as a top priority With the planned acquisition of Mirati as an example, we also remain focused on growing our dividend and on opportunistic share repurchases. Lastly, turning to our 2023 non GAAP guidance on Slide 21. We continue to expect revenue to decline in the low single digits As mentioned, we expect new products to be about $3,500,000,000 this year and for Revlimid to deliver about $6,000,000,000 Turning to OpEx, we continue to expect roughly low single digit decline compared to last year, corresponding to roughly 4 $4,000,000,000 expected in the 4th quarter. Based on the changes to the tax I described earlier, we are revising our full year effective tax rate to 15.5%.

Speaker 5

With respect to our earnings, we have increased the midpoint of our non GAAP EPS guidance and narrowed the range to $7.50 to $7.65 And with respect to our medium term guidance on Slide 22, as Chris described earlier, we reaffirm Our low to mid single digit revenue CAGR from 2020 to 2025 and the $8,000,000,000 to $10,000,000,000 growth from our in line portfolio during this period. We have adjusted our new product portfolio target to greater than $10,000,000,000 in 2026, a year later than previously communicated. And with respect to operating margin, we are seeing our target to greater than 37% through 2025 to reflect continued strong profitability, Now before we turn it over to question and answers, I'd like to recognize Giovanni's leadership of the company and thank him for his considerable contributions in transforming BMS. I also want to acknowledge the hard work of our teams around the world during the quarter. I know that our people remain focused on delivering for patients And we'll continue to do so under Chris' leadership moving forward.

Speaker 5

I'll now turn the call back over to Tim, Giovanni and Chris for Q and A.

Speaker 7

Great. Thanks very much, David. And before we go to the first question, we know it's a very busy morning. We want to get to as many questions as we can. So if you can try to keep to just One question for person that would be very much appreciated.

Speaker 7

Keith, can we go to the first question, please?

Operator

Yes. Thank you. We will now begin the question and answer session. And the first question comes from Chris Schott with JPMorgan.

Speaker 8

Great. Thanks so much. Just maybe for me just a bigger picture question. You're lowering the 2025 targets. It sounds like there's a couple of the products that Adoption is just taking longer than expected.

Speaker 8

I guess what gives the company confidence that this isn't kind of a different dynamic with some of these products that Isn't going to enable maybe some of those longer term targets as you look up to 2,030 that you've announced before. So maybe just kind of elaborate a little bit more How much of how do you make sure the company is positioning itself to hit those longer term peak sales? And do we need to maybe just rethink some of the This is Chris. I'll start and then I'm going to turn it over to Adam. I think it's important to step back and be clear on what we've said on this call.

Speaker 8

First, I think it's important to recognize that, for the new product portfolio in totality, we continue to see very strong long term J. Rice:] Potentially consistent with what we've said previously, there's been no change in the conviction for this portfolio overall. And in fact, The question really is a question of when, not if. We have, however, recognized the timing change That we've communicated today and that's really around a few things. First, there are, as I mentioned in the prepared remarks, a number of products Where expectations where performance is achieving, if not exceeding expectations.

Speaker 8

However, we also have to acknowledge that there are a few products where The dynamics are different, for products like Sotek II and KAMZYOS. The reality is while the long term potential for these products remains unchanged, It's taking a bit longer and Adam can speak to those dynamics. And there are a couple of products, where performance needs And so for example, with the Beqma and Zeposia, we know that we've got challenges there. Team is reorienting and making sure we've got the right resources and focus on delivering for those products. But I think it's important that when you step back and look at the Portfolio in totality, our conviction around these products and the importance that these products will play in terms of driving long term growth And helping us diversify the business that remains unchanged.

Speaker 8

When you then layer on that to good in line performance with products like Eliquis and Opdivo, We're as confident as we have been on the long term growth profile of the company. The focus right now is around executing on the commercial side, Continuing to move the pipeline forward and ensuring that we've got the right focus on bringing innovation in externally with business development. Adam, anything you would add?

Speaker 9

No, I think you covered it very well.

Speaker 7

Thanks.

Speaker 8

Thanks, Chris.

Speaker 7

Thanks, Chris. Keith, can we go to the next question please?

Operator

Yes. And that comes from Jeff Meakim with Bank of America.

Speaker 8

Good morning, everyone. Thanks for the question. You have recent data in for subcu Opdivo. I guess the question is, what's the incremental Benefit here and maybe how strategically important is this approach just given IRA implementation And potential opportunities to extend the LOE. Thank you very much.

Speaker 8

Thanks, Jeff. I'll start. In spite of a lot of the progress, when you look at IO, there are still opportunities we know to improve Patient experience and address the treatment burden that exists with these assets. I mean that's really where subcu comes into play and we're very pleased with the data that we've seen with 67T, the data are compelling in our view and we look forward to after we finish the review presenting those at an upcoming Conference and obviously engaging with regulators. The way we thought about the subcu program consistently is that this would address Specific patient needs as well as the opportunity to address those centers where, for example, chair time is at a premium.

Speaker 8

And that's still where we think this will go. We think that these indications will represent somewhere between 65% 75 And with focused effort, we think we can convert roughly about 50% of the overall business over time. And so that's really how we're thinking about it. And if you sort of were successful in doing that, We think this has the potential to extend the franchise into the early 2030s.

Speaker 7

Thanks, Chris. Keith, could we go to the next question, please?

Operator

Comes from Louise Hector with Berenberg.

Speaker 10

Hi. Thank you for taking my question. Still on the medium term outlook, can you confirm that there is no contribution from Mirati In that guidance. And then perhaps some comments around the lower margin expectation. Just is that purely linked To the new product revenue guidance or are there other factors at play?

Speaker 10

Thank you.

Speaker 11

Thanks for the question. So the long term guidance to new product Folio does not include anything related to from a Mirati sales perspective. If you do recall, we did say the dilution next year relate to Mirati is about 0 $3.5 As it relates to the margin, that does factor in how we view our margin going forward. If you recall, previously, our midterm guidance was margins above 40%. But we continue to see opportunity to invest in our launch portfolio and invest behind products like Kamsayas and Satiktil as well as our cell therapies.

Speaker 11

But also, we continue to see opportunities in our portfolio. As you know, we had multiple readouts this quarter, LPA being one of those, as well as additional indications for Opdivo, and we had first line commands. But as we step back and what we shared at R and D Day, we see opportunities to continue to accelerate in our R and D pipeline. So that's why we revised our guidance to incorporate the dilution But as well as the investments that we're making in the new product portfolio and the R and D portfolio.

Speaker 7

Thanks, David. Keith, can we go to the next question, please?

Operator

Yes. And that comes from Seamus Fernandez with Guggenheim.

Speaker 11

Thanks for the question. So

Speaker 12

just trying to get a little bit of a better On the 37% margin guidance, is that something that we should anticipate is A potential floor in 2024 as you lose the KEYTRUDA royalty Or is it really sort of a sequential floor for margins in 2025 As you lose Sprysel and Pomalyst following the loss of the KEYTRUDA royalty.

Speaker 9

So just trying to

Speaker 12

get a sense of kind of the path to 2025 as we move through the balance of this year and next year. Thanks.

Speaker 11

Yes. Thanks, And the 37% guidance is a floor that we've provided as we look forward to that midterm period, which is 2025. We haven't provided guidance yet. We'll do that on the Q4 earnings call as it relates to 2024, which I think is what your question Getting after, I'd say the one thing to think about is, 1, we've talked about Revlimid in the past And that we said, we've revised Revlimid's guidance this year from $5,500,000,000 to $6,000,000,000 And we still see next year stepping down to about that $4,000,000,000 And then we'll update you on all the other line items when we do our Q4 earnings as far as profitability next year. But You should think about the operating margin as a floor as we look forward through 'twenty five.

Speaker 7

Thanks, David. Thanks for the question, Seamus. Could we go to the next question please?

Operator

Yes, certainly. And that comes from Chris Shibutani with Goldman Sachs.

Speaker 13

Thank you very much. You made some comments about So, Tiptoe and the reimbursement environment as that is evolving and the constraints that you have, perhaps from Adam or Could you comment further about what you're seeing there and how we should be thinking about the cadence? I think the setup had been that 24 would be an opportunity and that seems to be slightly different.

Speaker 9

Chris, thank you for the question. First, I want to say we're very pleased with the performance of Sutiktu. Our goal remains to be the standard of care In the oral market, in fact, as you heard, we have achieved now a 40% share of newly written prescriptions and we're the 3rd most Newly prescribed systemic therapy, and we've done that in a little over a year post launch. Now as you have stated, our focus really is around Accelerating access, and we anticipate achieving broader access in 2024 and continuing in 2025. Remember, Today, STATIK II is not covered on approximately 80% of lives in the United States.

Speaker 9

And so we expect to see Significant improvements coming next year. We're in the throes of negotiations with the PBMs. So we would expect See a market improvement in 2024 and that could continue into 2025 where we would expect to have very broad access across the other 2 PBMs. And that's we're very confident in our ability to achieve that. Perfect.

Speaker 9

Thanks, Adam. Could we go to

Speaker 7

the next question, please, Keith?

Operator

Yes, sir. And then that comes from Steven Scala with TD Cowen.

Speaker 14

Thank you very much. Regarding the midterm guidance changes, I'm a bit puzzled as to why now, particularly when you had a major meeting last month and time to go through the specifics. I'm sure these changes were evident at that point or wait until Q4 when you have to set the stage for 2024 and beyond. I think the answer will be that, that was an R and D meeting last month. But still, Chris, you opened the meeting by kind of setting the stage and tone for the company.

Speaker 14

So I'm just wondering why you're fitting these changes in on a Q3 call. Thank you.

Speaker 8

Sure, Steve. Let me take that then David can provide additional color. So the timing of this shift is really driven by the fact that in the short term, We have seen additional trends mainly around Abekma that have required that we change our short term guidance and that's Giving the guidance for the new product portfolio for this year. And as we said, we expect that portfolio to be roughly $3,500,000,000 this year, and that is slightly less than what we had anticipated when we began this year. As a result of that change and what we're seeing with the new product The dynamics of which I described in the prepared remarks, we made the decision that we wanted to update the 25 guidance.

Speaker 8

As we anticipated, that would be a question that would come out on this call. And so that's why we made the decision to change the 2025 guidance. And then, of course, as we get into next year, we'll provide additional color as to how we expect 2024 To proceed, but that was really the motivation for the timing of why we decided to make the changes in guidance today.

Speaker 7

Thanks, Chris. Keith, could we go to the next question please?

Operator

Certainly. And that comes from Terence Flynn with Morgan Stanley.

Speaker 15

Hi. Thanks for taking the questions. I guess, Chris, maybe for you, just the launch reboot Strategy for some of these, some of the drugs that have come in below your expectations. Maybe you could just walk us through each of those and Some of the steps you're taking and why you're confident that that's going to have success. Thank you.

Speaker 8

Sure. Terrence, let me start and then I'll ask Adam to provide some specifics really around the products where we think we're going to need to have either a reboot or where we are moving to accelerate. I think the way I characterized in the opening remarks is right. We have a number of products which are either hitting or exceeding our expectations. Certainly, Optulag, Revlisil is performing very, very well.

Speaker 8

Briyansi, as David alluded to, we saw Good performance in the quarter, but importantly, we're seeing very strong manufacturing performance and we anticipate both supply and the quality of manufacturing for that product And given the profile of the drug, we have every expectation that's going to continue to perform very well as we get into 2024. So those products we feel very good about. For SOTIC II and KANZYOS, the dynamics are the products Are just taking a bit longer and the trajectory for those products requires that we think about the time to peak being shifted back. What's important, and Adam can speak to this, is the fundamentals for both of those products continue to be very, very strong. We got good strong share For SOTIC-two, we anticipate given the quality of that data and what we're seeing from customers, this will become the oral standard of Choice, which is remember what the objective was when we launched the product and for KAMZYO's every metric across this product, whether it relates to how physicians see the product and how The dynamics in the cardiovascular market are such that that's just simply going to take a bit longer.

Speaker 8

I'll have Adam speak to Any additional color on those two products, but mainly focus on APECMA and on ZYPOSIO?

Speaker 9

Yes. Thanks, Chris, and thanks, Terrence, for the question. Let me just add a little bit more color. As you heard, We have said that we're seeing continued impact from additional BCMA agents pressuring Beqima growth. And so our teams are focused on, Number 1, expanding our site footprint, both in the U.

Speaker 9

S. And internationally. We're differentiating and sectionalizing Abekimel real world data for physicians, which really look Very similar and consistent with our clinical trials, and we're educating on the sequencing and some of the emerging data that the use of cell Therapy ahead of bispecifics is ultimately better for patient outcomes. We're also very pleased with the progress we made on manufacturing around our predictability and low out Great. So that's what we're really doing around Abekma.

Speaker 9

As it relates to ZYPOSIA, as Chris mentioned, and then I'll shift to the others, We continue to see quarterly demand growth. MS is really driving that growth. And so we made a lot of progress on the MS front even in a Declining oral market in favor of B cell. And so we continue to expect growth in the MS market. Now we have Certainly an opportunity for continued growth in UC.

Speaker 9

We're making progress, but our access challenges, they remain and we're working to improve our access position. But we're also seeing progress in ZEPOSIA in the first line setting post ASA as physicians are identifying ZEPOSIA really as A good treatment option based on its efficacy and safety profile. So we're focusing there on expanding breadth of prescribing and Continuing to really drive adoption across our broader use of physicians. So for those reasons, we do expect to see continued growth An update for Zepozia. Now as it relates to KAMZYOS and STATIKTU, as Chris opened, And he talked about the importance of those two products and really not a matter of if, but a matter of when, and that's why we made that decision.

Speaker 9

And so for KAMZYOS, we are pleased with the uptick there. The focus on KAMZYOS remains to continue to increase our breadth In our COEs, go outside of the COEs to kind of the non centers of excellence to And utilization, we're seeing doctors get much more comfortable in using the patient response has also been very, very strong there and continuing to bring patients out of the hub. Remember, these patients are going to be on treatment for a very long time. And then finally, just again, I'll just Close on to take 2. I mentioned some of the key areas we're focused on around access and David talked about pulling through those patients Through the hub, we also continue to drive breadth of prescribers where we're making really meaningful progress and reinforcing our superior efficacy profile Compared to Otezla.

Speaker 9

Thanks, Adam. Keith, could we go

Speaker 7

to the next question, please?

Operator

Sure. And that comes from Evan Seyhrman with BMO Capital.

Speaker 9

Hi, guys. Thank you for taking my question. This one's on Roddie. So, CRISADE in the general KBRS G12C class has recently really fallen below expectations. Can you just walk me through your thinking of the opportunity for Trazati?

Speaker 9

What's the key value driver here in the acquisition? And what can you do differently versus Mirati to accelerate growth of this Yes. Thanks, Evan, for the question. We're very confident in Pezody's significant commercial opportunity as we believe this is a best in class KRAS G12C. Remember, the real opportunity for KRYSTALI is in the first line setting and so in lung cancer.

Speaker 9

And so we have Mirati has started their Phase 3 study in combination with PD-one. We'll also see data around the triplet to PD-one chemo KRAS. I think that's another significant advantage Of Quezada, where it can combine with multiple agents, including PD-one, we'll obviously need data to understand the potential of the opportunity that opportunity. But We think this could bring significantly greater upside to this opportunity. And then also we're very excited about the other assets That Mirati has PRMT5, KRAS G12D and the SARS-one inhibitor, which we think Also showing very promising early efficacy.

Speaker 9

So taken together, we do believe that this is a really exciting deal for the company and will be a strong catalyst of

Speaker 7

Thanks, Adam. Keith, can we go to the next question, please?

Operator

Yes, sir. And the next comes from Carter Gould with Barclays.

Speaker 16

Hi. Good morning, guys. On Beqma, can you help frame you mentioned some of the headwinds and some of those are Transient in nature, how should we think about how long it might take to get back to sort of the run rate you were seeing in the first half of twenty twenty three? And I guess along those lines as well, given some of the commentary on the guidance, just your confidence in an on time approval of Karma 3? Thank you.

Speaker 17

So let me this is Samit. Let me just start off with the Karma 3 part first. As you know that we have a PDUFA date in December, and that's all pretty much we can comment on As we continue to work with the regulatory agencies to bring it forward.

Speaker 9

Yes. Carter, I'll just expand on that just a little bit. We mentioned 2 things in last Number 1, the S-twelve maintenance that occurred in June would dampen Q3 sales, and we're seeing that happen. However, we are also seeing a continued impact from additional BCMA targeted agents. So we knew this is going to be a highly competitive market, Putting pressure on growth, and I talked about what we're doing to, really stabilize that business and return to growth.

Speaker 9

Clearly, a KARMIT 3 approval would move Avecma into earlier lines of treatment and be a catalyst to return Avecma to growth By opening up a significant larger patient pool, but as Sumit said, obviously, we have to wait to see that approval come.

Speaker 7

Thanks, Adam. Can we go to the next question, please?

Operator

Certainly. That comes from Andrew Baum with Citi.

Speaker 18

Thank you. A question for Adam. Many of your predecessors has been stalled trying to get off the bridge on to reimburse plans. Are you still confident that you're going to be able to, by the end of this year, get 60% of your CVS insured patients Off the bridge, on to the reimbursed status.

Speaker 9

Yes, Andrew, thanks for the question. So conversion is going as we expected. We are Focused on pulling through the early access win for Satitu at CVS and shifting those patients to commercial product from Bridge. As I said last time on the call, it takes about 2 to 3 months for patients to move from bridge to commercial. And We have started to see that conversion happening towards the end of Q3.

Speaker 9

We believe the majority of CVS patients will be coming out of the hub by Q4 and start to see some benefit towards the tail end of Q4 and into Q1. We're also seeing new patients on CVS move very quickly into commercial products, so that's also helping to accelerate performance. So I talked earlier, that coupled with broader formulary access in January of 2024, We're confident that will be a strong accelerator of growth for STATIK II in 2024 and beyond.

Speaker 7

Thank you, Adam. Keith, could we go to our next question please?

Operator

And the next question comes from Tim Anderson, Wolfe Research.

Speaker 19

Thank you. So you gave product specific peak sales targets Out to 2,030, I think you did that for almost 10 products. Are any of those trending ahead Of what those prior targets were, we've heard of several things, it sounds like, where it might be trending below that. And are we going to get updated 2,030 targets on those Same list of products at some point. Thank you.

Speaker 8

So, Tim, let me start and then I'll ask Adam to comment on How we're seeing performance trends overall, but what I would say is, look, I would go back to how I characterize The new product portfolio at the beginning, we've launched 9 new products over the last two and a half years, and it's a portfolio of products, and we are seeing some products perform at or better than expected. I think When you factor in some of the early manufacturing constraints that we had, I look at a product like Brianca, the best in class profile. That Product has considerable opportunity to meet or exceed expectations. Look, I think we knew the competitive dynamics around the Beqma coming into this launch. I fully expect that the team is going to get that product back on track as it relates to competition from other BCMA targeted agents.

Speaker 8

But In the long run, that product will continue to be a competitive product for us. And then certainly, as we look at the opportunity for a product like KAMZYO's And a product like SOTIC II, we think the long term potential still remains on track and possibly for a product like KAMZYOS in excess of What we had anticipated. And then as you would expect in any portfolio product, there are a couple of products where performance is lagging. We've highlighted what those are, but maybe I'll ask Adam to Comment on any additional underlying dynamics he wants to speak to?

Speaker 9

Yes. Thanks for the question. I think when we looked at totality of a portfolio, We obviously see some products that are ahead, where we projected them to be at peak and some are tracking behind. But taken together, we don't see any changes in What we had discussed, which is on a non risk adjusted basis, that the new product portfolio could exceed that objective by 2,030. Chris talked about some of the pushes and pulls.

Speaker 9

I would just add, I think, Rebolzil is certainly a product that we're seeing that is Tracking at or even ahead of expectations with the commands label. CamZios, we also see that tracking ahead In the longer term, yes, it's taking slower than we initially guided to, but it's tracking very similar to a very, very strong cardiovascular launch. And so we expect that adoption to continue with sustained growth into the long term. Chris mentioned Briansy. Briansy has been seen as the best in class Cell therapy agent and coming into next year, we're going to be in a much better supply position and that is going to help accelerate and catalyze that product.

Speaker 9

And also, Satikdu as well, because if you think about Satikdu, once we are able to secure access early next Tribute to having CITIG to exceed potentially our expectations in the back end of this decade.

Speaker 8

So Tim, just to close it out, we had That product portfolio had $25,000,000,000 plus potential. Where we sit today, we still see that

Speaker 20

Yes. Thanks very much. So I just wanted to sort of pivot to 2026. So considering that you extended the new product portfolio revenue guidance to 26, could you please comment on both the inline product segment and the recent LOE segments for 20 6, specifically how you'd frame the magnitude of potential declines for Eliquis and Revlimid given the pressures that they are set to face. Thank you very much.

Speaker 11

Thanks, Dave. Just as a reminder, as far as the only change that we made was from a new product portfolio going to 26. We're not providing Nine item guidance for the other line items, but what I would like to do is just remind you, there's really no change to that in line portfolio, Growing from 2010 to 2025, dollars 8,000,000,000 to $10,000,000,000 So very confident in that and I think double digit growth you saw in Opdivo Year to date, it demonstrates our continued confidence there. And the only change that we've made in relation to the guidance was in that new product As it relates to the LOE, again, we increased the guidance this year for Revlimid from 5.5 to 6. And as we said on the Q2, there's really no change to how we're looking at it, which is pretty consistent with where consensus is for 2024 and 2025, dropping down to $4,000,000,000 next year and $2,000,000,000 in, 2025.

Speaker 11

And remember, by the time we finish this year, Revlimid will be beyond 60% of the erosion of that product. So and a significant portion of our growth going forward is going to be represented by that in line and new Portfolio LOEs in 2025 would be less than 10% of our total revenue. So we'll have a much younger Our portfolio by the time we get to 25% and set us up well for 26%. And that's where we stand today.

Speaker 7

Thanks, David. Go to the next question please, please.

Operator

Yes. Next comes from Robert Karnauskas with Truist.

Speaker 21

Hi. I mean, I think all the questions are focused on near term, but I have gotten a lot of bullish indicators on your launches thinking more longer term like next year. We've heard from KOLs that LVEF drops in the real world for KINZYO seem to be better than what we're seeing in the clinical trials. Maybe you can provide some color on what you're seeing and how that impacted uptake? And I think big picture, do you see any potential for change

Speaker 17

Thank you, Robin. I think what we have heard and what we what Adam has talked about in the The overall profile for Chemsios as we think about patients and the prescribers remains very, very positive and we remain very confident on that profile as well. As it relates to the REMS impact, look, these are data that we have to collect for a long time from the real world. There is no commitment in terms of really getting the REMS changed, but Certainly, we'll continue to try as more and more data evolves and more and more patients are put on Chemsyros. Overall, once the patient goes on Chemsyros, We have not heard of any stories of patients trying to get off Chemsyros.

Speaker 17

In fact, even if they have to interrupt for any other reasons, They want to go back on the drug because of the benefit that they see in their quality of life and how they perform on their overall daily living.

Speaker 7

Thanks so much. Can we go to the next question please?

Operator

Yes. And that comes from Mohit Bansal with Wells Fargo.

Speaker 1

Great. Thank you for taking my question. And My question is regarding my question is related to Sotiktu, because it seems like in prepared remarks you mentioned that So, stick to contracting to 0 stop edits, stop edits may run into 2025. And you mentioned because there are some changes in the immunologic contracting market. Can you please help us understand them a little bit better?

Speaker 1

What are these changes? And how should we think about the long term net pricing for this category? Thank you.

Speaker 9

Yes, Mohit, thanks for the question. I'll take that one. So as I said, we are working to Improve significantly our formulary access in 2024. And as I said, we have approximately 80% of Live today that are not covered on Sotyctu. We expect that to change dramatically as we move into next year.

Speaker 9

However, when you look at where we will likely be in 2024, we will likely have the majority of our business When we're talking to PBMs and the reason why we're talking a little bit about 2025, PBMs are Really thinking about different ways to manage the PSO class as well as the Board of Immunology class with now more and more Biosimilar Humira coming into the market. And so those decisions have not yet been finalized for 2025. But as I stated, We're very confident that we will see a significantly broader access position next year. So we'll go from non covered to being covered, Which will be a really nice growth opportunity for Sotiktu as we move into early next year.

Speaker 7

Kevin, let's go to the next question, please.

Operator

Yes. And that comes from Olivia Bray with Cantor Fitzgerald.

Speaker 6

Hey, good morning and thank you for the question. M and A has obviously been something that you guys have leaned into. So does that strategy change at all after the Mirati deal? And if there is still an appetite for midsize deals, are there Certain areas that maybe best fit your growth strategy going forward?

Speaker 8

Sure. Let me take that one. So as we've said consistently, business development remains the top Priority for capital allocation at the company. I would say is at a macro level, the way we think about business development is somewhat consistent with the way we've We've always thought about it, which is we are going to be looking for deals that are scientifically interesting and related to things that we know well. They're going to be strategically relevant for the company and Of course, they have to be financially sound.

Speaker 8

The one thing that I would add is that we are going to index more heavily on those deals Enhance the growth profile of the company. That's an area that we remain fixated on as a management team. And so I think that's going to factor And we're going to see areas, of course, that enhance the portfolio or help us to continue to Give us capabilities or products that we don't have today. I think in some ways that's how you can think about Mirati. Mirati continues to diversify By our oncology business, away from oncology towards targeted therapies, we're very excited about that opportunity.

Speaker 8

But I think generally speaking, The way we approach business development will be largely consistent. Again, though, we'll be focusing on great science that can enhance the growth profile of the company.

Speaker 7

Thanks, Keith. Can we go to our last question, please?

Operator

Yes. And that comes from Dane Leone with Raymond James.

Speaker 9

Hi, guys. This is Sean on for Dane. Thanks for taking the questions. It does appear maybe we can get a little bit more color on those KAMZYOS Script trends, it does appear that the number of patients entering the hub may be slightly slowing. So just any further color on what you've been hearing from physicians on the burden how burdensome the REMS program is And what you expect for further growth?

Speaker 9

Thanks. Sure, Sean. I'll take that question. So We're very pleased with what we're seeing in the launch of Kamsiose. We continue to see week over week consistency in patient starts And rapid conversion of patients from the hub to commercial.

Speaker 9

As we've all said, we would expect to see Steady, consistent and sustained uptake for this product into the distant future. We don't expect an inflection, but rather an accumulation of patients coming on to treatment and staying on treatment for a very long period of time. So right now, we've got 5,000 patients in the hub and approximately 3,500 patients on commercial products. So that coupled with Patient and physician feedback, which continues to be very strong, we're focusing on driving penetration in our top centers where we have 90% adoption in our top 100 centers and expanding use outside of those COEs. We're also focused on increasing diagnosis rates By activating patients, and as you know, we recently received approval internationally as well in Europe.

Speaker 9

So that will also be a contributor to growth. So Taken together, we're very confident this will lead to a continued and sustained growth of this important product.

Speaker 8

So maybe I'll close. So first, thank you all for joining the call. I know it's a very busy day. What I would just say to summarize where we are is, look, this team has continued just to be fixated on driving the growth Profile of the company, how we go about doing that is as we've discussed on the call, we're going to continue to drive in line product performance. The new product portfolio, We have continued very strong conviction in the long term potential of this portfolio.

Speaker 8

Our focus is going to be continuing to drive where we have momentum today and accelerate those products where we need to accelerate. And that focus on execution transcends across the entire portfolio, including Continuing to drive execution in R and D and continue to find and source really attractive assets externally. And with that, we'll close And as always, the team is available to answer any questions following today's discussion. Hope you all have a good day and the rest of the week.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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