BMS Q3 2023 Results 10-26-2023

Bristol-Myers Squibb had a solid Q3 with sales growth for their in-line and new product portfolios. They also made progress in renewing their business and announced the planned acquisition of Mirati. The company is confident in their ability to navigate the rev-limit LOE through 2025 and is focused on the second half of the decade. They have a strong pipeline and are committed to sustainable growth through research and development. Giovanni Coforio, the CEO, expressed gratitude to the employees and confidence in the new CEO, Chris Berner. Chris discussed the company's commercial execution, R&D leadership, and strategic business development. He highlighted the performance of their in-line and new products, with some products showing strong growth while others had slower growth than expected. They expect sales from their new product portfolio to be $3.5 billion in 2023 and aim to achieve over $10 billion in sales by 2026. The commercial team is focused on accelerating performance and inc Bristol-Myers Squibb Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I will now turn the conference over to Tim Power, Vice President of Investor Relations. Please go ahead. Thank you, and good morning, everyone. Thank you for joining us this morning for our Third Quarter 2023 Earnings Call. Joining me this morning with Prepare to Marks are Giovanni Coforio, 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 Lenkowski, our Chief Commercialization Officer, and Saman Hirwat, our Chief Medical Officer and Head of Global Drug Development. As you will note, we have posted slides to bms.com that you can use to follow along with for Giovanni, Chris, and David's remarks. Before we get started, I will read our forward-looking statement. During this call, we 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 will also focus our comments on our non-GAAP financial measures, which are adjusted to exclude certain specified items. Reconciliations of certain non-GAAP financial measures to the most comparable GAAP measures are available at bms.com. With that, I will hand it to Giovanni. 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. The strength of our in-line products and the potential of the launch portfolio gives us confidence in the ability to navigate the rev-limit 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&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. You all know Chris very well, and I am sure you will share my confidence in him as a leader. I am 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 for the work they have done and will do to enable BMS to improve outcomes for millions of patients around the world. With that, I would like to turn it over to Chris to talk more about the quarter. 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 third-quarter overview on slide 5. As Giovanni said, we delivered continued top-line growth for the in-line and new product portfolio during Q3. We also advanced our pipeline and announced an important business development transaction with the planned acquisition of Merati. 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 billion 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. As I told you last month at our R&D day, 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&D leadership, and strategic business development. I'd like to take a minute to tell you where we are on each of these, starting with commercial execution on slide 7. David will provide more details 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, where we are seeing good growth. Eloquus demand growth in the U.S. 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. Updevo continue 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. David will provide highlights for the remainder of the in-line and LOE portfolio. 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 three categories. First, we are seeing strong performance for a number of products, including Reblazil, Optulag, and Brionzi. Specifically for Reblazil, we're seeing strong growth with a broad label for commands. As Adam can discuss further, we're seeing encouraging trends in both first line and second line. We are also very pleased to see that the NCC and guidelines recognize the importance of Reblazil 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. For Brionzi, 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. Second, there are a couple of products, notably Kamzaios and Sotictu, where performance is strong but growth has been slower than expected. For Kamzaios, we continue to see steady increases in use and all feedback metrics from customers and patients continue to be very strong. At the same time, getting cardiovascular accounts onboarded and the pace of getting patients on to therapy, as patients may see their cardiologist only one to two times per year, has resulted in a longer adoption curve. 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 Sotictu, the profile continues to be strong and we are seeing nice increases in share. Access continues to be the main constraint for this brand and while we will see broad and meaningful access improvements in 2024, getting to zero 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 Ziposia where performance has lagged expectations. For Abecma, in-class competition and dynamics with bi-specifics and 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 recent data in triple-class refractory patients who receive bridging therapy presented at the IMS conference. 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 Ziposia, 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. Taken together, we now expect sales from this portfolio to be $3.5 billion 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 billion 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 selected brands to ensure performance accelerates. Finally, I would highlight that our new product portfolio will expand this quarter with the addition of Reprotrectinib next month and upon completion of the Merati transaction Krizati. Turning now to our R&D engine on slide 8. As I mentioned last month, we have exciting opportunities to strengthen our pipeline and deliver more important medicines to patients across therapeutic areas, including expanding our registrational pipeline from six to 12 assets over the next 18 months. Since our R&D day, we've continued to make progress. In oncology for Opdivo, we've delivered several growth drivers, including U.S. approval in stage 2 adjuvant melanoma, presentation of positive data for periadjuvant lung with Checkmate 77T and for first-line bladder cancer with Checkmate 901, and, importantly, we've met the co-primary importance for the subcutaneous Novolumab trial, Checkmate 67T. This has the potential to open a regulatory approval and indications that constitute approximately 65 to 75% of today's Opdivo business in the U.S. and extend franchise durability into the 2030s. You may have also seen that Merati presented encouraging PD-1 combination data in first-line lung cancer at ESMO. These data further strengthen our conviction in the potential of Krizati and the value it will add to our oncology portfolio. In immunology, our LPA1 inhibitor has now been granted breakthrough therapy designation in progressive pulmonary fibrosis by the FDA. This builds on the previously granted fast-track designation from FDA for the idiopathic pulmonary fibrosis indication. These actions reinforce the potential importance of this asset in these diseases with high unmet medical need. 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. 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. Through this acquisition, we're strengthening and diversifying our oncology portfolio with the addition of Crosati 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 OptiLag 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. In addition, as discussed already, we've seen a number of important accomplishments not included on this slide, notably first-line bladder and sub-Q optivo. 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'm confident in our ability to transform our portfolio, both organically, as well as through business development, and to deliver new medicines for patients. With that, I'll turn it over to David to walk you through our product performance and financial results in more detail. David? Thank you, Chris, and thanks to all of you for joining our third-quarter 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 third quarter were $11 billion, driven by continued growth of our in-line and new product portfolio, offset by the expected decline in RevLimit sales. Let's move to our new product portfolio on slide 14. During the quarter, we delivered solid growth for the portfolio, with $928 million in revenue. Growth was strong across the portfolio, though we have seen an impact of Abecma from both manufacturing site maintenance in June, and from increased availability and usage of alternative BCMA-targeting therapies for multiple myeloma. Based on the performance year-to-date, we now expect a new product portfolio to deliver roughly $3.5 billion for the full year 2023. This is primarily due to the impacts of our cell therapy franchise, particularly Abecma. 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. Let's discuss performance of our solid tumor products on slide 15. Our flagship oncology product, Updevo, continues to grow well, with sales up 11 percent globally. In the U.S., Updevo grew 9 percent, primarily driven by demand. Sequentially, sales grew double-digit, driven by demand, and a reversal of roughly $50 million of unfavorable buying patterns in the second quarter. Outside the U.S., third-quarter revenues increased 15 percent, primarily driven by demand for indications such as lung and gastric cancer. This performance, along with potential new launch opportunities in periadjuvant lung and first-line bladder, as well as in recently approved adjuvant melanoma indication, reinforces our confidence in the continued growth for Updevo. As Chris mentioned earlier, we now have positive data for the sub-cube 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 built share in first-line melanoma. In the U.S., we now see market share of roughly 25 percent, with additional room to grow, particularly in the approximately 15 percent of patients that are still receiving PD-1 monotherapy. OptiLag has become a new standard of care in patients with metastatic melanoma, where BMS total share is 65 percent in this important market. Let's now turn to cardiovascular on slide 16. Eloquists continue to grow, with $2.7 billion in revenue in the quarter. In the U.S., sales grew 4 percent year-over-year, driven by strong demand growth offset by unfavorable growth to the next due to channel mix, including impact of approximately $75 million in Q3. Internationally, sales are primarily impacted by generic entries in Canada and the U.K., and pricing pressures we've mentioned in the past. At the same time, we're encouraged to have successfully defended our IP in several EU countries this year, including France, Norway, and Sweden. Moving to Kinsias, our first-in-class obstructive HCM product, we're pleased with the continued growth of the product, delivering $68 million of revenue in the quarter. In the U.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 on commercial drug. Our patient base continues to grow as we steadily bring more patients onto 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 $1.4 billion. At this point, we expect revenues of approximately $6 million for the full year, primarily due to higher level of demand for lenilinamide. Now on pomelos, 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 pomelos was stable. Revenues also benefit from a $40 million clinical supply purchased during the quarter. Turning to Revlizel, which generated revenues of $248 million in the quarter, in the U.S., revenue growth accelerated, increasing 28% year over year, primarily driven by increased demand. With the command's 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 Revlizel, along with a continued increase in duration of treatment. Though it's early in the launch of first line MDFs, we are hearing very positive feedback on the profile, especially in the community setting. Overall, we're encouraged by the strong label for Revlizel and first line MDFs associated anemia, and we believe it sets us well to deliver this medicine to more patients with this disease. Moving to Abecma, with revenue of $93 million 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 Revlizel, sales in the quarter were $92 million, 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 remained constrained with respect to vector. 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. Overall sales for Zeposia were $123 million, up 75% compared to prior year. In the U.S., in addition to $15 million contribution due to favorable growth to NETs and inventory in the quarter, we continue to be pleased with the momentum in multiple sclerosis with a best in class share within the S1P class, and continued buying growth in very competitive ulcerative colitis market. Outside the U.S., sales increased mainly due to demand in MS. Moving to SUTIC2, underlying launch trends remain strong. Sales in the quarter were $66 million, which included a clinical supply purchase of approximately $30 million, 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 third quarter. Within the oral category, our share is now roughly 40%, reinforcing that SUTIC2 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. We expect this will take, on average, two to three months per patient. Building on our momentum, we continue to expect the further strengthening of access next year. Now moving to P&L on slide 19, I will focus my remarks on a few non-GAP key line items having just covered sales performance. Prior to Q2, gross margin was favorably impacted by product mix. Acquired in-process R&D in the quarter was $80 million, which is partially offset by $12 million of licensing income, resulting in a net impact of 3 cents 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, third 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 remain strong. Cash flow from operations in the quarter was approximately $4.8 billion, with over $8 billion 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 Merati as an example. We also remain focused on growing our dividend and on the opportunistic share repurchases. In this regard, during the quarter, we executed $4 billion ASR and expect that to be completed by the end of the year. Today, we have roughly $2 billion of authorization outstanding. Lastly, turning to our 2023 non-GAAP guidance on slide 21, we continue to expect revenue to decline in the low single digits compared to last year. As mentioned, we expect new products to be about $3.5 billion this year and for Revlimid to deliver about $6 billion. Turning to OPEX, we continue to expect roughly low single digit decline compared to last year, corresponding to roughly $4.4 billion expected in the fourth quarter. Based on the changes to the tax I described earlier, we are revising our full year effective tax rate to 15.5%. 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 median 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 to $10 billion growth from our inline portfolio during this period. We have adjusted our new product portfolio target to greater than $10 billion in 2026, a year later than previously communicated. And with respect to operating margin, we are increasing our target to greater than 37% through 2025 to reflect continued strong profitability while enabling flexibility to invest in future growth and incorporating in a dilution for Marati. Now before we turn it over to questions 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 will continue to do so under Chris's leadership moving forward. I'll now turn the call back over to Tim, Giovanni, and Chris for Q&A. 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 per person, that would be very much appreciated. Keith, can we go to the first question, please? Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble the roster. And the first question comes from Chris Schott with J.P. Morgan. 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. 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 we look up to 2030 that you've announced before? So maybe just kind of elaborate a little bit more on 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 peak sales potentials on some of these assets given what we've learned from the launches over the last year or so? Thanks so much. Thanks, Chris. 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. First, I think it's important to recognize that for the new product portfolio in totality, we continue to see very strong long-term potential 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 and not exceeding expectations. However, we also have to acknowledge that there are a few products where the dynamics are different. For products like SOTIC2 and Kamzaios, 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 to change. And so, for example, with the BECMA and Zeposia, we know that we've got challenges there. The 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. When you then layer on that to good in-line performance with products like Eloquus and Optivo, we're as confident as we have been in 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? No, I think you covered it very well. Thanks. Thanks, Chris. Thanks, Chris. Can we go to the next question, please? Yes, and that comes from Jeff Meekin with Bank of America. Morning, everyone. Thanks for the question. You know, you have recent data for SubQ, Optivo. 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 to LOE? Thank you very much. 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. And that's really where SubQ 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've thought about the SubQ program consistently is that this would address specific patient needs as well as the opportunity to address those centers where, for example, care time is at a premium. And that's still where we think this will go. We think that these indications will represent somewhere between 65% and 75% of the Optivo business as it sits today. 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. Thanks, Chris. Keith, could we go to the next question, please? Yes, and that comes from Louisa Hector with Baramberg. Oh, hi. Thank you for taking my question. Still on the medium-term outlook, can you confirm that there is no contribution from Merati in that guidance? And then perhaps some comments around the lower margin expectation. Is that purely linked to the new product revenue guidance or are there other factors at play? Thank you. Thanks for your question. So the long-term guidance, the new product portfolio does not include anything related to from a Merati sales perspective. If you do recall, we did say the dilution next year relates to Merati's about $0.35. As it relates to the margin, that does factor in how we view our margin going forward. If you recall, previously our mid-term guidance was margins above 40%. But we continue to see opportunity to invest in our launch portfolio and invest behind products like Chembias and Satecto as well as our cell therapies. 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 Updevo. And we had first-line commands. But as we step back and what we showed at R&D Day, we see opportunities to continue to accelerate in our R&D pipeline. So that's why we revised our guidance to incorporate the dilution from Merati, but as well as the investments that we're making in the new product portfolio and the R&D portfolio. Thanks, David. Keith, can we go to the next question, please? Yes, and that comes from Seamus Fernandez with Guggenheim. Thanks for the question. So just trying to get a little bit of a better sense 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 Spreisel and Pommelist following the loss of the Keytruda royalty? So just trying to get a sense of kind of the path to 2025 as we move through the balance of this year and next year. Thanks. Yeah, thanks, Seamus, for the question. 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 fourth quarter earnings calls. It relates to 2024, which I think is what your question is getting after. I'd say the one thing to think about is one, you know, we've talked about Revlimid in the past and that we said, you know, we revised Revlimid's guidance this year from $5.5 to $6 billion, and we still see next year stepping down to about that $4 billion. And, you know, and then we'll update you on all the other line items when we do our fourth quarter earnings as far as profitability next year. But you should think about the operating margin as a floor as we look forward through 2025. Thanks, David, and thanks for the question, Seamus. Keith, could we go to the next question, please? Yes, certainly. And that comes from Chris Saschivitania with Goldman Sachs. Thank you very much. Chris, you made some comments about SOTIC-2 and the reimbursement environment as that is evolving and the constraints that you have, perhaps from Adam or whoever would be appropriate. 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. Chris, thank you for the question. First, I want to say we're very pleased with the performance of SOTIC-2. 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 third 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 SOTIC-2 is not covered on approximately 80% of lives in the United States, 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 to see a marked improvement in 2024, and that could continue into 2025 where we would expect to have very broad access across the other two PBMs. And we're very confident in our ability to achieve that. Perfect. Thanks, Adam. Can we go to the next question, please, Keith? Yes. That comes from Steven Scala with TDGallon. 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&D meeting last month. But still, Chris, you opened the meeting by kind of setting the stage and tone for the company. So I'm just wondering why you're fitting these changes in on a Q3 call. Thank you. Sure, Steve. Let me take that, and then David can provide additional color. The timing of this shift is really driven by the fact that in the short term, we have seen additional trends mainly around ABECMA 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 $3.5 billion 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 portfolio, the dynamics of which I described in the prepared remarks, we made the decision that we wanted to update the 2025 guidance. 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. So that was really the motivation for the timing of why we decided to make the changes in guidance today. Thanks, Chris. Keith, could we go to the next question, please? Certainly. And that comes from our Terrence Flynn with Morgan Stanley. Hi. Thanks for taking the questions. I guess, Chris, maybe for you, just the launch reboot strategy for 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. 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 it in the open remarks is right. We have a number of products which are either hitting or exceeding our expectations. Certainly Optilag, Reblozil is performing very, very well. Brianzi, 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 to improve. 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-2 and Kamzaios, 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 get good, strong share for SOTIC-2. 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 Kamzaios, every metric across this product, whether it relates to how physicians see the product and how patients see the product, remains very strong. The dynamics in the cardiovascular market are such that that's just simply going to take a bit longer. I'll have Adam speak to any additional color on those two products, but mainly focus on Abecma and Onsiposia. Yes, thanks, Chris, and thanks, Terrence, for the question. Let me just add a little bit more color. We have said that we're seeing continued impact from additional BCMA agents pressuring Abecma growth, and so our teams are focused on, number one, expanding our site's footprint, both in the U.S. and internationally. We're differentiating and contextualizing Abecma real-world data for physicians, which really look very similar and consistent with our clinical trials, and we're educating on sequencing and some of the emerging data that the use of cell therapy by specifics is ultimately better for patient outcomes. We're also very pleased with the progress we've made on manufacturing around our predictability and low out-of-spec rates. So that's what we're really doing around Abecma. As it relates to Zyposia, you know, as Chris mentioned, and then I'll shift to the others, you know, we continue to see quarterly demand growth. You know, MS is really driving that growth, and so we've made a lot of progress on the MS front, even in a declining oral market in favor of B-cells. And so we continue to expect growth in the MS market. Now, we have certainly an opportunity for continued growth in UC. 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 Zyposia in the first-line setting post-ASA as physicians are identifying Zyposia 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, you know, broader use of physicians. So for those reasons, we do expect to see continued growth and uptake for Zyposia. Now, as it relates to Kamzaios and Cetictu, as, you know, 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. And so for Kamzaios, you know, we are pleased with the uptake there. The focus on Kamzaios remains to continue to increase our breadth in our COEs, go outside of the COEs to kind of the non-centers of excellence to expand 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 Cetictu. You know, I mentioned some of the key areas we're focused on around access, and David talked about pulling through those patients through the hub. But we're also continuing to drive breadth of prescribers, where we're making really meaningful progress and reinforcing our superior advocacy profile compared to a Tesla. Thanks, Adam. Keith, could we go to the next question, please? Sure, and that comes from Evan Sigerman with IBM OCapital. Hi, guys. Thank you for taking my question. This one's on Mirati. So Krizati and the General K-Risk G12C class has recently really fallen below expectations. Can you just walk me through your thinking of the opportunity for Krizati? What's the key value driver here in the acquisition, and what can you do differently versus Mirati to accelerate growth of this asset? Yeah, thanks, Evan, for the question. You know, we're very confident in Krizati's significant commercial opportunity, as we believe this is a best-in-class KRAS G12C. However, the real opportunity for Krizati is in the first-line setting, and so in lung cancer. And so we have, you know, Mirati has started their Phase III study in combination with PD-1. You know, we'll also see data around the triplet, so PD-1, chemo, KRAS. I think that's another significant advantage of Krizati, where it can combine with multiple agents, including PD-1. We'll obviously need data to understand the potential of that opportunity, but, Evan, 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 SOS-1 inhibitor, which we think also is showing very promising early efficacy. So taken together, we do believe that this is a really exciting deal for the company and will be a strong catalyst of growth in the back end of this decade. Thanks, Adam. Keith, can we go to the next question, please? Yes, sir, and then that comes from Carter Gold with Barclays. Hi, good morning, guys. Anna Beckma, can you help frame, you mentioned some of the headwinds and some of those are obviously 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 23? 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 CARMA 3. Thank you. So let me just start off with the CARMA 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. Yeah, Carter, I'll just expand on that just a little bit. You know, we mentioned two things last quarter, I don't know if you remember. Number one, you know, the S12 maintenance that occurred in June would dampen Q3 sales, and, you know, we're seeing that happen. However, you know, we are also seeing a continued impact from additional BCMA-targeted agents. So we knew this was 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 it to growth. Clearly, a CARMA 3 approval would move EVECMA into earlier lines of treatment and be a catalyst to return EVECMA to growth by opening up a significant larger patient pool. As Tom had said, obviously we have to wait to see that approval come. Thanks, Adam. Can we go to the next question, please? Certainly. This one's from Andrew Vaughan with Health City. Thank you. Question for Adam. Many of your predecessors have been scarred trying to get off the bridge onto reimbursed plans. Are you still confident that you're going to be able to, by the end of this year, 60% of your CBS-insured patients off the bridge onto a reimbursed status? Yeah, Andrew, thanks for the question. So conversion is going as we expected. You know, we are focused on pulling through the early access plan for CTIC-2 at CBS and shifting those patients to commercial product from bridge. As I said last time on the call, it takes about two to three months for patients to move from bridge to commercial, and, you know, we have started to see that conversion happening towards the end of Q3. We believe the majority of CBS 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 CBS move very quickly into commercial product, so that's also helping to accelerate performance. So I talked earlier, you know, that coupled with broader formulary access in January of 2024, we're confident that will be a strong accelerator of growth for CTIC-2 in 2024 and beyond. Thank you, Adam. Keith, could we go to our next question, please? Once again, please press star and then one if you would like to ask a question. Okay, and the next question comes from Tim Anderson, Wolf Research. Thank you. So you gave product-specific peak sales targets out to 2030. 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 2030 targets on those same list of products at some point? Thank you. So, Tim, let me start, and then I'll ask Adam to comment on how we're seeing performance trends overall. What I would say is, look, I would go back to how I characterized the new product portfolio at the beginning. We've launched nine 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 Brianzi. It's a best-in-class profile. That product has considerable opportunity to meet or exceed expectations. Look, I think we knew the competitive dynamics around the Vecna 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. 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 Kamsayo's and a product like SOTIC2, we think the long-term potential still remains on track, and possibly for a product like Kamsayo's 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. Yeah, thanks for the question. I think when we look at the 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 2030. Chris talked about some of the pushes and pulls. I would just add, I think Rebelsil is certainly a product that we're seeing that is tracking, you know, or even ahead of expectations with the commands label. Kamsayo's, you know, 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, you know, a very, very strong cardiovascular launch. And so, we expect that adoption to continue with sustained growth into the long term. Chris mentioned Brionzi. You know, Brionzi 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. And also, Satictu as well, because think about Satictu. You know, once we are able to secure access early next year, we'll see accelerations in PSO, but we also have important data readouts, as you know, coming in PSA and in SLE or lupus, which will all contribute to having Satictu exceed, potentially, our expectations in the back end of this decade. So, Tim, just to close it out, we had said that that product portfolio had $25 billion plus potential. Where we sit today, we still see that potential at least $25 billion as we get to the end of this decade. Thanks, Chris. Can we go to the next question, please, Keith? Yes. That comes from David Risinger with Larync Partners. 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 2026, could you please comment on both the in-line product segment and the recent LOE segments for 2026, specifically how you'd frame the magnitude of potential declines for Eloquus and Revlimid, given the pressures that they are set to face? Thank you very much. Thanks, Dave. Just as a reminder, you know, as far as the only change that we made was from a new product portfolio going to 2026. We're not providing line 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, $8 billion to $10 billion. I feel very confident in that, and I think the double-digit growth you saw on Updevo, you know, year-to-date, it demonstrates our continued confidence there. And the only change that we made in relation to the guidance was in that new product portfolio out to 2026. 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 second quarter, there's really no change to how we're looking at it, which is pretty consistent with where our consensus is for 2024 and 2025, dropping down to about $4 billion next year and $2 billion in 2025. And remember, by the time we finish this year, Revlimid will be beyond 60% of the erosion of that product, and a significant portion of our growth going forward is going to be represented by that, you know, in-line and new product portfolio. LOEs in 2025 would be less than 10% of our total revenue. So, you know, we'll have a much younger portfolio by the time we get to 2025, and it will set us up well for 2026. And, you know, that's where we stand today. Great. Thanks, David. Could we go to the next question, please, Keith? Yes. Next is Rob McCarnouskas with Truist. 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 ChemSciOs 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 changes to REMS because of what you're seeing? Thanks. Thank you, Robin. I think what we have heard and what Adam has talked about in the past as well, is that the overall profile for ChemSciOs, as we think about patients and the prescribers, remains very, very positive, and we remain very confident in 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 ChemSciOs. Overall, once the patient goes on ChemSciOs, we have not heard of any stories of patients trying to get off ChemSciOs. 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. Thanks, Sanat. Can we go to the next question, please? Yes, and that comes from Mohit Bansal with Wells Fargo. Great. Thank you for taking my question. My question is related to SOTIC2 because it seems like in prepared remarks, you mentioned that SOTIC2 contracting to zero-step edits may run until 2025, and you mentioned because there are some changes in the immunology contracting market. Can you please help us understand them a little bit better? What are these changes, and how should we think about the long-term net pricing for this category? Thank you. Yeah, Mohit, thanks for the question. I'll take that one. So, you know, as I said, we are working to improve significantly our formula access in 2024, and as I said, we have approximately 80% of lives today that are not covered on SOTIC2. We expect that to change dramatically as we move into next year. However, when you look at, you know, where we will likely be in 2024, we will likely have the majority of our business in either a zero- or one-step edit position. 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 SOTIC2 as we move into early next year. Let's go to the next question, please. Yes, and that comes from Olivia Bray with Cantor Fitzgerald. Hey, good morning, and thank you for the question. M&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 mid-sized deals, are there certain areas that may be best to take your growth strategy going forward? 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 that at a macro level, the way we think about business development is somewhat consistent with the way 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. The one thing that I would add is that we are going to index more heavily on those deals that 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 into how we think about business development going forward. 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 our oncology business away from oncology towards targeted therapies. We're very excited about that opportunity. 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. Great. Thanks, Keith. Can we go to our last question, please? Yes, and that comes from Dane Leone with Raymond James. Hi, guys. This is Sean for Dane. Thanks for taking the question. It does appear maybe we can get a little bit more color on those Kim Zio 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 how burdensome the REMS program is and what you expect for further growth. Thanks. Sure, Sean. I'll take that question. So we're very pleased with what we're seeing in the launch of Kim Zio. We continue to see, week over week, consistency in patient starts and rapid conversion of patients from the hub to commercial. 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. 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. 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 continues to be fixated on driving the growth profile of the company. How we go about doing that is, as we 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. 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&D and continue to find and source really attractive assets externally. And with that, we'll close the call. 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. Thank you. The conference has now concluded. 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