John Elicker - Senior Vice President of Public Affairs and Investor Relations Lamberto Andreotti - Chief Executive Officer Giovanni Caforio - Chief Operating Officer Charlie Bancroft - Chief Financial Officer Francis Cuss - Chief Scientific Officer.

Tim Anderson - Bernstein Mark Schoenebaum - Evercore ISI Jami Rubin - Goldman Sachs Group Inc Seamus Fernandez - Leerink Swann LLC Steve Scala - Cowen and Company LLC Andrew Baum - Citigroup Inc Vamil Divan - Credit Suisse Chris Schott - JP Morgan Chase & Co John Boris - SunTrust Robinson Humphrey Alex Arfaei - BMO Capital Markets.

Good morning. My name is Candace; I'll be your conference operator today. At this time, I would like to welcome everyone to the Bristol-Myers 2014 Fourth Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Thank you. Mr. John Elicker, you may begin your conference. .

Thanks, Candace. And good morning, everybody. My apologies for any of who you had difficulty dialing into the call. There was some confusion around start date but this -- I think we are ready to go at this point. We are here to discuss our Q4 earnings and as well we had issued our 2015 guidance.

With me this morning are Lamberto Andreotti, our CEO; Giovanni Caforio, our Chief Operating Officer; Charlie Bancroft, our Chief Financial Officer; and Francis Cuss, our Chief Scientific Officer. Lamberto, Giovanni and Charlie will have some brief prepared remarks and then we will go to your questions.

First, I'll take care of the Safe Harbor language. During the call, we will make statements about company's future plans and prospects that constitute forward-looking statements.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's SEC filings. These forward-looking statements represent our estimates as of today and should not be relied upon as representing our estimates as of any subsequent date.

We specifically disclaim any obligation to update forward-looking statements even if our estimates change. We'll also discuss non-GAAP financial measures adjusted to exclude certain specified items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available on our website.

Lamberto?.

Well, thank you, John. Good morning, everyone. First, as you all know, we announced last week that effective May 5th, I would be retiring as CEO of Bristol-Myers Squibb. While remaining on our Board of Directors and becoming its Chairman replacing Jim Cornelius. Jim's role in our company has been transformational and outstanding.

And I feel honored to have worked with him for many years. And now to take over from him as Chairman. I am very pleased that Giovanni Caforio will be successor as CEO. Giovanni is a global business leader with broad industry and management experience including a solid background in oncology.

He is also a trained physician who brings to his work an important perspective and certain insights. Importantly, Giovanni is not only been a key player in developing our strategy these past several years, he is also been one of the driving forces executing against it. So he is very good about leading our company in his very capable hands.

I am going to ask Giovanni and Charlie to walk you through our fourth quarter results, but before I do that, I will speak for a few minutes about some of the highlights of the past year because 2014 was without question an important year for Bristol-Myers Squibb. I am very pleased, I am very proud about it.

In 2014, we accelerated our evolution to being a diversified specialty biopharma company, beginning with a completion of divesture of our diabetes business. Under Giovanni's leadership, we are refocused our commercial organization to optimize global brand and market. These allowed us to drive strong sales across our portfolio and across the world.

In fact, our commercial organization had a good year delivering 6% sales growth excluding the diabetes franchise. These changes positioned us well for continued success with our portfolio of marketed and pipeline products. Under Francis's leadership our R&D organization also had a good year. Most notably with respect to our immunoncology portfolio.

Getting approval of Opdivo in the US for melanoma and with the early stoppage of two Opdivo study in melanoma lung due to very positive results. These developments underscore the strength of our I-O strategy and our I-O programs. And importance of continuing to apply the same strategy.

Beyond I-O, we made good progress across the rest of our diversified portfolio. Just to mention a few examples. We've obtained an important label expansion for Eliquis. We continue to develop interesting early asset in immunoscience and HIV.

We executed several business development transactions to make our I-O portfolio even stronger and to build the rest of our specialty portfolio in areas like fibrosis and genetically defined diseases.

And we committed significant resources to increase our biologic capacity announcing strategic investments to expand our Devens, Massachusetts facility and build a new plant, totally new plant in Ireland. Biologics now comprise about 50% of our R&D portfolio and that number will continue to grow.

So taken an altogether 2014 was a good important year for us. And strength of a strong foundation for our future, financially, commercially, clinically, by every indication Bristol-Myers Squibb is well positioned. We will of course continue to face challenges such as the economic losses of exclusivity in a very competitive market place.

But we have the right product, the right plan and the right people to find our way through it all. In that, I have no doubt. And because we are in such a good position, I feel that my decision to retire as CEO into effective proposal from our Board to become Chairman come at the right time.

And again I am very confident in Giovanni's ability to lead Bristol-Myers Squibb to build on our success over the past several years and to take our company forward. With the support of the outstanding management team that have the pleasure of putting together and lead. So with that I'd turn the floor over to Giovanni to provide our Q4 results.

Giovanni?.

Thank you, Lamberto. And good morning, everyone. Let me begin by thanking Lamberto for his kind words of support. And more generally for his exceptional leadership over the last several years. He has led our company at a pivotal time. Navigating us through a challenging but exciting biopharma transformation.

And leading us to our current position of strength. I am looking forward to continuing our work together as we transitioning to our new roles. So as Lamberto discussed, 2014 was a very good year that ended on a very good note.

During the fourth quarter, we delivered 9% sales growth across our diversified portfolio and across our key markets, excluding our diabetes franchise and impact of foreign exchange. Let me touch on some of the highlights. First, Yervoy had a very good quarter with the 41% increase.

In the US, this strong performance was driven by continued penetration into community sector. Outside the US, it was driven largely by its first line indication an improved access. Even with our success in 2014, we've recognized that the melanoma market dynamics will continue to evolve following the launch of Opdivo.

While these may impact Yervoy's short term trends, we are very well positioned. In monotherapy, both our products have demonstrated overall survival. And in combination that have the potential to offer long-term survival to the largest number of patients. Eliquis has its best quarter ever with $281 million in sales.

In the US, the expansion of the label was a key reason why sales grew 20% over the previous quarter. And we continued to make good progress in new two brand prescription by cardiologists. Outside the US, we also made good progress particularly in Germany and Japan.

Looking forward, we have every reason to believe that Eliquis' strong performance trends will continue. Regarding Hepatitis C we had a really good quarter. Generally speaking, our strategy is to focus on difficult to treat patients and the unique medical need of each market. We made important progress.

In Japan, with our dual regimen and in Europe where Daklinza is approved in combinations including sofosbuvir. In the US, we are working with the FDA and expect to be able to resubmit the Daklinza based on data from completed and ongoing studies. And lastly, we are very excited about the US approval of Opdivo.

Our commercial organization was more than ready to go at the time of approval. Shipments were ready by year's end and our people have hit the ground running. We are leveraging Yervoy's established commercial presence, building on our strong relationships with physicians and payers. In fact, our commercial organization is actively promoting Opdivo.

And within the first two weeks, we reached nearly 100% of the top accounts and already have 70% share of voice within the melanoma market. And while it is early, we are making good progress with access.

Although we are primarily focused on Opdivo for melanoma in the US and hopefully soon in Europe following our O-63 and O-70 announcements, we are also preparing for potential approvals in lung later this year. Charlie will talk about our 2014 financials and our outlook for 2015. But let me close with a few words about the coming year.

Clearly, 2015 like every year will have its challenges and its opportunities. That's a given. But I am confident that we will successfully find our way through it all by continuing to execute against our strategy and by maintaining our balanced approach of driving results today while setting the stage for tomorrow.

That means growth of our marketed products, strong product launches and continued investments in our portfolio of the future. And that means continuing to focus on leadership in immuno-oncology as a priority. But also remembering that we are a diversified specialty biopharma company. One with multiple products across multiple therapeutic areas.

And with that I'd turn the floor over to Charlie. .

Thank you, Giovanni. Good morning, everyone. I will discuss the few items from our fourth quarter non GAAP P&L and our outlook for 2015. As Giovanni covered some of the highlights on sale, I will make just a few additional comments regarding revenues during the quarter.

First, Eliquis sales were reduced by approximately $15 million in gross to net adjustments for the Medicare coverage gap.

Sustiva benefited from a $30 million annual equity share true-up related to Atripla and finally our net revenues for Plavix and abraproabolib which are captured under matured product benefited from $36 million reduction in our returns reserve. With the dollar strengthening, foreign exchange had an unfavorable impact on both the top and bottom line.

Compares to the same quarter last year the negative impact was 3% of sales and approximately $0.03 on EPS. Gross margin were 78% during the quarter, up 440 basis points compared to the same period last year, mostly due to product mix, following the divesture our global diabetes business.

Marketing and selling and admin expenses increased about 9% in the quarter due in part to increased investments in key brands including Eliquis, Yervoy, Opdivo and our HTV franchise. R&D expenses increased primarily due to timing of spending across our R&D portfolio.

Our non-GAAP tax rate was 10% during the quarter compared to almost 18% during the same period last year. Our Q4 rate reflects the full year of the R&D tax credit which was just extended in December. Now, I'd like to spend a few moments discussing capital allocation. We will continue our balanced approach to using our capital.

We feel good about the strength of our balance sheet and the flexibility these resources give us to make important investment decision. We continue to see business development as a top priority and also remain committed to the dividend, which was recently increased for the sixth year in a row.

In regard to business development, we believe that innovation must be sourced both internally and externally. We continue to look for BD opportunities that can help deliver long-term growth within our core area of interest. We are committed to fully advancing by leading immuno-oncology portfolio.

Our clinical collaboration strategy reflects our belief that combination therapy will be a key component of I-O in the future. And that we are open to exploring external I-O opportunity. Since the end of Q3, we’ve announced four additional clinical collaborations including Opdivo.

Overall, we have non clinical collaboration to study Opdivo in more than a dozen tumor types. In addition to these I-O collaborations, we also find several deals that will strengthen our specialty portfolio.

We will continue to develop and diversify our R&D and commercial portfolios focusing on high quality opportunities that are closely aligned with our diversified, specialty biopharma strategy. I will now move to 2015 guidance. We are setting our non-GAAP EPS guidance range at $1.55 to $1.70.

This range assumes current exchange rate and continuation of the R&D tax credit in 2015. As a reminder, there are several factors to keep in mind which will have an impact our 2015 revenues. Our rights to Abilify in US and most remaining international markets expire in April.

Abilify is a high margin product as we record our share of revenues without any meaningful associated cost. We will see a full year's impact on Baraclude sales in the US due to the loss of exclusivity last year. As we previously mentioned, we expect the negative impact on EPS of roughly $0.10 in 2015.

As I commented during our October earnings call, revenues from matured products and other non core assets will decline significantly this year due to a one time step down of about $400 million related to expiring agreement. In addition, I remind you that this is a declining business.

As you all know, the US dollar has strengthened against almost all currencies from 2014 average rates and quite a bit just in January. Based on current FX rates, this will negatively impact our 2015 revenues by approximately $800 million and $0.12 to $0.14 on earnings per share.

On the other hand, we expect continued growth in 2015 from the rest of our portfolio, where we are seeing strong exit trends that we believe will continue. We are also very encouraged by the accelerated approval of Opdivo to treat advanced melanoma in US and hope to receive approvals in other countries in other tumors in 2015.

We expect our full year gross margin to be approximately 74% in 2015. Our gross margin continues to be largely driven by product mix, loss of exclusivity and the structure of our co-promotion agreement for Eliquis. We expect these downward pressures to be partially offset by the growth of new products including Opdivo and our HCV portfolio.

You will see our line item guidance for AMP, MS&A and R&D in our press release. Our operating expense projections reflect our new operating model, following the divesture of our global diabetes alliance early last year.

We remain committed to invest in key opportunities including our late stage pipeline and the launch of Opdivo in the US in advanced melanoma and potential subsequent launches in other regions and indication. We also continue to drive growth of our priority plan including Yervoy, Eliquis, Orencia and Sprycel.

We will however continue to be prudent with our resources on our older brand and leverage our specialty model. Our operating expenses outside the US will also be affected by prevailing exchange rate. On the R&D side, we expect to spend less in 2015 primarily due to decrease spending on diabetes clinical trial.

Now we'll be happy to address your questions. .

Yes. I think we are ready to go to Q&A. And everybody, I just remind you that in addition to Lamberto, Giovanni, Charles, Francis is here to take any questions you might have.

Candace?.

[Operator Instructions] And your first question comes from Tim Anderson with Bernstein. Your line is now open..

Hi, thank you. Few questions if I could. Can you just outline for us when we might see human data on the next round of various checkpoint modulators that you have.

Second question is just an update on Nivolumab and Yervoy trial on lung and when that case study would be starting? Do you have the data from the earlier stage studies in hand to pick the dose? So anything on that topic would be helpful. Then last question just an update on the timing of the elotuzumab second line trial in multiple myeloma. .

Good morning, Tim. Happy New Year. First of all, let me start I think you are talking about elotuzumab, let me talk to the back and -- however quick two study which is in relapsing is a second line relapsing but not from myeloma is on track for us to see data in the first half of this year.

So obviously premature to discuss regulatory strategy but obviously if the data is positive we will be seeking to submit this around the world. As far as an update on the Opdivo, Yervoy phase 3 study first line in lung, I will say we completed the design phases there; we are on track to initiate.

We are not providing any further detail on the --details although I will say to you it is a comprehensive study, it is in a broad lung population both in terms of histology and biomarker and we will be using different doses from the tumors we so far initiated combination studies and we really -- this combination does have the potential to provide incremental benefit across the broad lung cancer population.

And as far as the earlier studies in other four compounds we had in development, what I would say they are progressing, those exploratory studies, we will be seeing dates at this year.

We have not decided yet whether we will actually share that data publicly because of the intense competitive situation, but obviously like we have during last year, we see interesting data. We would be moving fast to potentially registration study and of course you will be able to see that in clinical trials..

And your next question comes from Mark Schoenebaum with Evercore ISI. Your line is now open. .

Yes, thank you very much for taking my question. I like to offer my congratulation to Lamberto on a fantastic job. And best wishes to Giovanni on his next steps. If I may also ask on the I-O franchise.

If you could just remind us timelines for the O-57 trial on the non squamous population? When we -- when your best estimate is, from when we could -- when you will have data from the interim analysis.

And then I was wondering if you are willing to provide any color about your filings strategy for nivolumab in the second line lung cancer study now that you have one positive trail obviously in the squamous population and then just a broader question, the PBM have been and payers have been very focused on Hepatitis C and now that they seemed to be setting their sights on oncology.

And I was just wondering if being -- the company launching probably the highest profile oncology drugs or if you had any reactions to that. Thank you so much. .

Well, Mark, first of all thank you for your nice words. I hope I will make one of your videos with same comments.

And before Francis reply to your first two questions and Charlie and Giovanni to your third question, let me take the opportunity I will say few things quickly about immuno therapy because in the last few weeks -- the last few weeks have been really very excited for us at BMS and obviously for all the patients.

And what I am really glad to see the potential in immunotherapy coming to fruition, first with Yervoy and now with Opdivo. Some of the strategic target that we made when we set our development and program is putting us now in what we believe is a very strong competitive position.

We had always felt that it was important to address the broader set of patients is possible. We've also -- always believe in the importance of demonstrating a little survival and this is what counts patient, physicians and payers. And at the same time we have build our R&D people that build optionality into our clinical trial.

So while the trial were designed to show survival, overall survival we have flexibility in evaluating our end points when we can accelerate program and finally we've also always believed in the important role for both monotherapy and combination regimen.

I said all these because I believe that the recent results of our studies are validating our strategy. And now Francis you want to answer question on 56 or 57 and nivocyclomab [ph].

Thank you, Mark. Good morning. Honestly, I was very pleased when the O-17 study second line squamous study was stopped early. We are reviewing the data in house and with our experts in lung cancer outside the company.

We will be sharing the data with numerous regulatory authorities and we believe it is a very important event for both patients and for BMS. We've not made yet a decision when and where we will be presenting that data.

As far as O-57 is concerned, as you are aware that is an event driven study, which means that the patients -- the interim study will be triggered once we reach the right number of events. It is also a different population to the squamous population in the sense that there are more therapeutic options to these patients.

And they tend to be better with chemotherapy. So that's running behind -- that's why that's running behind the O-17 study.

We obviously remain very confident about our trial design and the potential for Opdivo in lung cancer but obviously like every other study; I am looking forward to actually seeing the data before we can comment on what we will do next..

Mark and this is Giovanni. Thank you for your comments. With respect to PBMs and pricing and access in general, first of all, let me say that we've been operating in an environment with headwinds from a pricing and reimbursement perspective for quite some time. We understand that will continue including the US.

A good example for us is Yervoy where over the last few years, we were able to work with payers around the world very proactively and effectively and Yervoy today is really reimbursed in every market around the world accordingly to label and access for patients has not been an issue.

So when we think about this issue going forward obviously the first starting point is to have truly differentiating data and product profiles. And that's one of the reasons why for example as Lamberto mentioned we are focused on overall survival as a main point for our trial.

The second one really is working collaboratively with payers around the world. We have very strong history of having done that in the past. And we continue to look at that as a priority for us. The third one is we price our products based on the value they offer to patients and the healthcare system.

And as importantly we have in the US and other parts of the world, one of the most comprehensive and most effective reimbursement and patient support program in oncology and in the industry. So we are very focused on pricing an access, we are investing in this area and we are going to be proactively addressing every one of the area mentioned. .

And your next question comes from Jami Rubin with Goldman Sachs. Your line is now open..

Thank you. And I offer my congratulation to Giovanni and Lamberto.

Fantastic job, it has been a pleasure and I am sure we will continue to see each other, but question for you Francis, I am wondering if you could share your observations about Merck's lung strategy? How your lung data and indications might compare to there? They seemed to have breakthrough designation in population that accounts for 70% to 80% of lung compared to what we are seeing with you guys so far.

So I am wondering if you could just comment on that. And secondly can you help us to think about and maybe Giovanni this is for you.

Help us to think about the launch trajectory of this drug Opdivo, why -- how do we think about -- clearly what's going to drive sales will be label expansion and how do we think about the timing for label expansion and are you going to the FDA with O-17 now, are you planning to wait for the O-57 report out? Thanks very much. .

Thank you, Jami. Happy new year to you. I am not going to comment really on Merck's strategy, but I would like to take the opportunity to comment on ours. And we have a very broad development structure in lung cancer as you know. We have 10 ongoing studies, we have 11 just about to start, and that's the first line combination study.

And it is basically all population, all histology, all lines of therapy and both PD-L1 positive and negative. So it is a very comprehensive study and I think it is important to note that we have actually made significant progress over the last year.

I think I told you all a year ago, it's going to be big year for data, for Opdivo and we would know lot more about Opdivo at the end of the year, and I think we've shown that particularly last few weeks which have been very exciting.

So we completed our own submission for the third line of study in the United States and just to remind you we did make a submission having validated in Europe around the middle of the year.

As you heard on the call, we couple of weeks ago we announced that the squamous study had been stopped because of Opdivo was superior in terms of overall survival. An overall survival we believe is the gold standard in cancer and very important attribute we believe I-O agent such Opdivo.

And of course this marks the first time that any PD-1 has shown over sign in cancer, it is not the first time we've shown superiority, we of course showed it earlier last year in melanoma as well. As I just noted before, we are moving forward with the events proceeding in the non-squamous population.

And we should, if our projections are right, get to that by the middle of the year. We also have a first line study underway, that started about a year ago. It is in PD-L1 positive patient and it is our intend to go beat chemotherapy double is in first line as we have already done in melanoma and in second line squamous.

And just to rounded out I did mention then we will be starting a comprehensive study first line with our combination in this half of the year. So a very broad program. I am confident by the end of this next 12 months, we are going to have approval in lung and that we will have increasing submission around the world. Thank you very much..

And Jami this is Giovanni. Thank you. So with respect to launches and expectations for uptick, let me maybe start by saying we are really excited about the approval we have received at the end of December in advanced melanoma for Opdivo. And we started working on the launch and executing the launch immediately after the approval by yearend.

We already have shipments in the market and our teams were actively promoting and while it clearly early we are very pleased that we have already reached about 100% over our work most important target and we have a very high 70% market share of voice in melanoma.

That reflects the fact that we have been successful commercializing Yervoy over the last few years. And we gained a lot of experience in immuno-oncology and in the US marketing particular.

So as we think about the future, obviously, we are ready for potential future launches later this year in lung in the US but we are also ready for launches in melanoma in lung in Europe and other key market. And we've made a lot of the investments needed in order to make sure that teams were properly staffed and ready to go.

And obviously we will follow a very similar strategy of educating physicians on Opdivo immunotherapy and the strength of our data. I think it is important to remember that there is a significant percentage of the lung prescribing community which is different from the melanoma prescribing community.

And as a result of that those physicians are probably at the beginning of their learning curve with respect to immuno-oncology, and I think it would be important for us to do the same education we did four years ago when we launched in melanoma.

When you put all of those things together, we are very optimistic about the future but we obviously realized that there is a significant variability in 2015 because of timing of potential launches, the evolution of the label and speed of uptick in different tumor types. .

And your next question comes from Seamus Fernandez with Leerink Swann LLC. Your line is now open. .

Oh, thanks very much, thanks for the questions. And congratulation Lamberto and Giovanni. And congratulations to the whole team on the success of O-17. As we think about the opportunity for potentially accelerating uptick of Opdivo, the current indication is quite small; the third line indication in lung also is quite small at this point.

But as we speak with payers, their feedback is that the incorporation of any of these products into the NCCN guideline or perhaps into a compendia listing would be -- could be critical to gaining access and allowing physicians to prescribe more broadly.

Can you talk a little bit about how that typically lines up without an FDA label? And if there is an opportunity in your view and perhaps Giovanni can answer this one to see that move forward. And then separately on a bigger picture perspective perhaps Lamberto and Francis could comment on this a bit.

But the focus on immuno-oncology has been extremely successful.

If you -- as you seek to build out in other areas, one of the areas of focus we've seen GDD that the genetic disorders as a focus or drive disease is a focus and also fibrosis, is that really the direction we should see the company focused towards and what types of business development would you anticipate going forward? Thanks a lot..

Thanks, Seamus. This is Giovanni. Just to answer your first question on NCCN guideline and compendia listing. Obviously, we are focused on delivering data from a number of Phase 3 well controlled clinical trial with overall survival as the primary end point.

And we believe that over time as the data evolved, it is very likely that the NCCN and other groups may include that data in their guidelines and recommendations.

From our perspective, obviously in terms of our promotional efforts, we will focus on the label indication, but as we've seen in oncology, the strength of the data that emerges is often reflected in guidelines and pathways. .

And it is also dispensation our specialty portfolio, Seamus. I would let Francis discuss the different alternative but it is clear that our first goal has been that of making I-O presence, our I-O presence strong and deep and wide. And we will continue to go in that direction.

But at the same time, we believe that what we are doing in GDD, in fibrosis and immunology or in virology to a certain extent, are all possible new areas in which we can follow the same strategy. So strong internal R&D, acquisitions of technologies products and inclusion of research groups into our own pipeline and team.

And collaboration with other companies. And we are not at this point choosing one of the areas because it is premature to do so. So we are working on in different directions with the same approach but seem to have worked out well for immuno-oncology.

Francis?.

Good morning, Seamus. So let me say we are over excited about what's going on outside of I-O and so for instance, at the end of last year, we moved an HIV types inhibitor novel compound in Phase 3, and of course this year we are going to be exploring further the imminent stimulation in virology that's our platform allows us to do in immuno science.

In addition, our exploratory portfolio in immuno science is progressing well, that's both biologic and small molecule. As you've seen with expanded portfolio in fibrosis with a couple of year end business development deals when we -- and we collect and during 2014, we moved a number of very novel compounds into the clinic.

And I think it is epitomize really our approach this, what we did in GDD where we brought forward an anti-challenging body acquired from our iPierian high period [ph] but also from our internal programs, myostatin and active [ph] Duchenne's muscular dystrophy.

So we are making progress across the number of these areas and the pipeline really made some good progression during 2014. Thanks. .

And your next question comes from Steve Scala of Cowen and Company, LLC. Your line is now open. .

Thank you so much. I joined the call a bit late so my apologies if these questions have already been asked. But first, in the last 25 years or so R&D at Bristol has only been down in two years. Now Bristol has perhaps its best pipeline ever and you are guiding for R&D to be down in 2015. I find that it a bit surprising.

So can you tell us why that is the case? And if there is a trend that we should look forward to continue? And then secondly in melanoma Opdivo and Kutura [ph] have similar indication, so what do you are finding hospital formularies are doing? Are they stocking both products and they stocking one over the other? And what is the mental process that going through to make the decision? Thank you.

.

Francis, do you want to comment, he expected I can make a comment that it is clear to me and it is clear to my management team and to my Board that we will continue to finance adequately more than adequately everything that make sense.

So our resource is devoted I-O and our resource is devoted to our differentiation out there and we will spend in a productive way.

But, Francis, anything?.

So just to build on that. We certainly have a very full set of such projects going forward into 2015 and we continue to do a number of productivity initiatives to make sure that our investments actually are very, very efficient..

Yes, I would just add one other point, Steve. As I mentioned in my comments that we also have a step down in our diabetes clinical trials vis-à-vis the alliance that we have. So that's also impacting the year-over-year spent. .

And this is Giovanni. From the perspective of formula released to access for Opdivo, these are clearly very early days but we are starting from a position where we have established relationship with hospital and payers in the US., the early signals that we are seeing a quite positive, we have some initial good progress in access.

So we are working and it is a priority but so far the signals are positive. .

And your next question comes from Andrew Baum with Citigroup Inc. Your line is now open. .

Yes, two questions if I could.

Firstly, could you just remind me when we'll see the one plus one data for the arm of Yervoy, Opdivo and number two, if my memory serves me correctly the recent Nature papers included representation from diagnostics of all your competitors, if I remember I think Bristol's contribution was lacking and obviously your diagnostics for PD-L1 has not shown the same predictive benefit as others.

To what extent you -- its rating that diagnostic and I am assuming there is a new diagnostic, when will it be ready for prime time? And then my last question is on bio-specific.

Could you tell me when your first bio-specific I-O agent will be entering the clinic many thanks?.

Thank you, Andrew. So let me go through these quickly. So the one data from the O-12 study continues to mature, it is very informative. We have not made the decision when we might present it and for competitive reasons we may not present it this year. I take issue with you over the fact that our diagnostic is not working.

I think if you look at the data in our label and look at most labels it is very similar. So I think -- and then the platforms the same, so I think we are showing exactly what everyone else is showing.

The differences is we've done a comprehensive program and we are looking much more comprehensive both the negative and the positive patients with the opportunity to get a label in both of those.

And finally, as far as bio-specific, I know we have a very broad preclinical program based in California from-- heads up by Nils Lonberg, who is an acknowledged leader in this field. I am very comfortable with the breadth of that. We will certainly compliment that with additional business developments.

But as far as bio-specifics, I think we will take every opportunity on its merit but we certainly got plenty of monotherapy moving up into the preclinical and for clinic. Thanks, Andrew..

Your next question comes from Vamil Divan with Credit Suisse. Your line is now pen. .

Thanks so much. And thanks for taking my questions. So couple if I could. One just on HEP C, I think what you said is that the filing in the US is going to be based on data you already have and also some ongoing studies.

If it is correct, can you just bit a clear by maybe when those stages will be done and when exactly do you think you will be able to re-file in the US? And then my second question following up on the earlier one on the expense side.

I'm just wondering if you can maybe help breakup some of these moving parts here, you mentioned the diabetes impact this year, also in terms of currency, you are having an impact this year. And then some of those might be more broader structural changes that might be more ongoing impact we are seeing in the expense line.

So is there anyway just sort of quantify that the expense numbers are quite a bit below over your expecting, so how much of it is more of these one time type things for this year and how much might be more of an impact going forward?.

Hey, Vamil, it is Charles. Maybe I'll start on the expense side. So if you look at just the exchange impact on expenses where we guided for example A&P decreasing in the mid to high teen range, if you excluded exchange that would be a decrease in the mid to low teens range.

Similarly with MS&A, that would be a decrease in the mid to low single digit range if you exclude FX. And then in R&D, it also had an impact related to almost 1% on how we think about R&D. As I mentioned in comments, we are doing everything to invest in our opportunities, in our new launches as well as the critical brands within our key portfolio.

We've also with the recent -- following the exit of the diabetes business, we also took the opportunity to reorganize and take expenses out particularly in our matured brand. So the combination of all those things and plus did the last add that I mentioned earlier around the diabetes expenses having a step down in R&D year-over-year. .

Vamil, good morning. Just to remind you that our approach, our strategy with the fact is being to focus on difficult to treat patients around the world and that are the same in United States.

We have a complete response letter, we are talking to the FDA about the answers to that and I am not going to details except to say that no new data will be required to make this submission. Thank you. .

Your next question comes from Chris Schott with JP Morgan. Your line is now open. .

Great, thanks very much. And I first just want to add my congratulations to both Lamberto and Giovanni with the new roles there. A couple of quick ones here. Maybe first can you elaborate on the dynamics between the O-I and the PD-1 in melanoma as we think about 2015, just little bit more about how you think that dynamic plays out.

Second thing on melanoma, any updates on the O-69 study and the ability for Bristol to file off that data? And the final one just broadening out a little bit on the diagnostics.

Do you expect the FDA to recommend testing for PD-L1 status for non-small cell lung cancer patients and with the number of different assays and even definitions of what PD-L1 positive means, how do you see that dynamic playing out in the market place so we think out over the next few years and seeing multiple agents enter the market? Thanks very much.

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So, Chris, good morning. And thank you. This is Giovanni. Let me just start towards the melanoma space. And first of all we are coming out of a very strong year, a very strong quarter for year, right. In the fourth quarter, we grew 41%, over 30% in the US versus prior year.

And that's the reason why the fact that we've established a really strong presence in melanoma with 60% of our sales coming from the community setting and about 70% from our sales coming from first line. So we have a really strong base there. And I would say that we expect the melanoma market to be evolving rapidly over the last next 12 to 24 months.

And obviously as a result of that like I mentioned earlier we see some uncertainty and volatility in the short term. But we actually see a very good, very well about our prospects in melanoma because we have two agents which in monotherapy both have demonstrated survival.

And we have a combination strategy which really has the potential to provide long-term survival very significant percentage of patients. And so some short-term volatility but from a very strong starting point and with very positive prospects in the medium and long term. .

Chris, good morning. So let me just comments on the O-69 study. I am very encouraged by the data I have seen, we have not yet decided where we will present that data. But it will be this year. I am not going to talk about the details of our ratings strategy but let me just zoom out a little bit and just mention our overall melanoma strategy.

I mean I just remind you we have accelerated review [ph] for monotherapy in Europe. We are in the process of filing both second line and or first line around the world. And the combo is the part of that broader structure we are talking to authorities about the potential submission there.

So I am looking forward to the rest of 2015 because I think you can see further submissions, further approvals around the world. And potentially broadening of our label. So it is very exciting for us to know that we are doing 2015..

Your next question comes from John Boris with SunTrust. Your line is now open..

Thanks for taking the questions and would also like to extend my congratulations to both Lamberto and Giovanni. First has to do with your I-O franchise, certainly with you having a clinical development lead one advantage you potentially have is survival data not only in melanoma but potentially in lung, possibly renal in the future.

Can you help me understand how long you might have that benefit because you did run well-controlled Phase 3 clinical trials and having survival versus competitor that doesn't have survival data, how does that play with oncologist in the marketplace? Second question has to do with Eliquis, just on new to brand share with cardiologist, can you articulate a percentage there? You mention that broadening of the label was important in terms of expanding that and if that's surpassing Xaretto now? And last question just has to do with M&A very quickly.

Can you maybe give some additional color especially since you're potentially being viewed as not as diversified as you historically have been? When you're looking at deals, are you looking at smaller or larger scale transactions to either diversify the business or to further position the business in oncology going forward? Thanks. .

Yes, John, this is Giovanni. On I-O, we believe that having overall survival is very meaningful. And in our experience it is obviously very meaningful to payers. It is important for prescribing physicians and it is obviously essential for patients.

So we are very focused on that as Lamberto and Francis mentioned as very, very important part of our strategy. The second comment on Eliquis, we are very pleased with our performance in the US and other parts of the world specifically in the US, we've seen that the expansion of the label to include the treatment has accelerated.

The growth of our prescribers base and also accelerated our trends in primary care. Our focus remains primarily in cardiology and our new two brand share in cardiology including VT and atrophic relation in the quarter in the US has grown from 41% to 47% which is a leading position. .

And as far as VT is concerned, I can say that nothing has changed than from my discussion in July and Charlie has been involved in all these over time, we will not change -- size is not the most important aspect, most important aspect is fit with our portfolio, fit our goals and good science and we continue to look at small and big things.

And they are not medical also, good financial to say..

And your last question comes from Alex Arfaei with BMO Capital Markets. Your line is now open..

Good morning. And I'll add my congratulation as well for the transformation we are seeing with the company. Question on your gross margin guidance at 74% in 2015. It seems low compared to where you are at 78% right now.

Is it mostly Abilify and is this a one time this in 2015 because we expect your overall product mix to basically offset the impact of Eliquis. And a follow up on the earlier questions. Could you give us a little bit more color on your revenue expectations for Opdivo and HEP-C in 2015? Your guidance suggests you have a conservative outlook there.

Thank you..

Okay. I'll start on gross margin and maybe Giovanni can touch on the revenue. Abilify, as I mentioned in my comments is a high margin product for us and we loose almost the entirely of that in April of this year. Eliquis was also which also which is a growing product for us also at very low margin because of our relationship with Pfizer.

So we have lower 50% margin. And as we've said all along, our gross margin percentage is solely a function of product mix. So over time depending upon which products and their margin grow faster vis-à-vis the others that will have an impact on our margin.

So it is hard to say at this point, at this juncture as we are launching Opdivo which has its very decent margin. And how our margin will play out over the longer term..

And from the perspective revenues. As I said before, first of all, we are really very excited about the potential for growth of the franchise. And we are getting ready for potential multiple launches in the US and Europe.

But obviously there is a degree of variability in our forecast because of the timing of launches over the course of the next 12 months..

Okay. So we understand that Pfizer is waiting for you. So we let you go and we -- I want just to conclude by saying that we had a good fourth quarter and a good overall year. Across the organization, we believe we are stronger now and that enables us with the ground running in 2015. I am very happy. I am very proud of what we achieved.

I am very confident in what we will achieve. Thank you and have a good day..

And this concludes today's conference call. You may now disconnect..