John E. Elicker - Senior Vice President, Public Affairs and Investor Relations Lamberto Andreotti - Chief Executive Officer Giovanni Caforio - Chief Operating Officer and CEO-designate Charles A. Bancroft - Executive Vice President and Chief Financial Officer Francis M. Cuss - Executive Vice President and Chief Scientific Officer.

Seamus C. Fernandez - Leerink Partners LLC Gregg Gilbert - Deutsche Bank Securities, Inc. Christopher T. Schott - JPMorgan Securities LLC Jami Rubin - Goldman Sachs & Co. Mark J. Schoenebaum - Evercore ISI Timothy Minton Anderson - Sanford C. Bernstein & Co. LLC Alex Arfaei - BMO Capital Markets (United States) David R. Risinger - Morgan Stanley & Co.

LLC Vamil K. Divan - Credit Suisse Securities (USA) LLC (Broker) Marc Goodman - UBS Securities LLC Andrew S. Baum - Citigroup Global Markets Ltd..

Good morning. My name is Eric, and I will be your conference operator today. At this time I would like to welcome everyone to the Bristol-Myers 2015 first quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. Mr.

John Elicker, Senior Vice President of Public Affairs and Investor Relations, you may begin your conference..

Thanks, Eric, and good morning, everybody. Thanks for joining us. I know it's a busy morning with several companies reporting, so appreciate your time.

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

Before I turn it over to Lamberto, let me take care of the Safe Harbor language. During this call we'll make statements about the company's future plans and prospects that constitute forward-looking statements.

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

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

Lamberto?.

Thank you, John. Good morning, everyone. Well, this is my last earnings call as CEO of Bristol-Myers Squibb, and I'm pleased that my last full quarter was one of our best.

Over the past few years, we have evolved and strengthened our company, we have delivered on our strategy, and we have set a solid foundation for our future, building a robust product portfolio innovative pipeline that positions us well for the future. As a result, Bristol-Myers Squibb is now in a very strong position.

And during the last quarter, we had solid performance across much of our portfolio, as well as important clinical and regulatory developments. I just want to note how excited we are that Opdivo became the first PD-1 inhibitor approved for lung cancer in the U.S., and that a positive opinion was adopted last week in Europe for melanoma.

These were not just important milestones for our company. These are important developments that have potential to improve the lives of thousands of lung cancer patients in the U.S. and melanoma patients in Europe. Giovanni and Charlie will walk you through the highlights of the quarter in just a moment.

But before they do it, I just want to say again that I feel very good about what we have done to transform Bristol-Myers Squibb into a diversified specialty biopharma company. And I also feel very good that Giovanni will be my successor as CEO.

He's a trained physician, a global business leader with broad industry experience, and a senior BMS executive who has been instrumental in driving the execution of our strategy over the past several years.

There is no question that Giovanni is the right person at the right time and will bring to the position the right mix of experience, passion, vision, and energy. And lastly, I'm looking forward to my new role as Chairman of the Board.

Again, it's a bittersweet transition in that I will miss working alongside Jim Cornelius, who has played a transformative role at BMS for the past several years, but I'm glad that I will be able to continue to work with the board and Giovanni and his leadership team. And with that, I will turn the floor over to Giovanni and Charlie. Thank you..

strong commercial performance; important clinical, regulatory, and business development advances. This balanced approach, driving results today while laying the foundation for tomorrow, continues to serve us well. And with that, I will turn the floor over to Charlie, who can provide more specifics around our Q1 results..

Thank you, Giovanni. Good morning, everyone. As Lamberto and Giovanni mentioned, we had a very good quarter, which was driven by strong sales growth of 6%, or 13% excluding the impact of foreign exchange. Overall, FX had a slightly negative impact on EPS of about $0.01.

Despite headwind from FX, we had a strong sales performance from our key growth drivers, including Eliquis, Yervoy, and hep C. In addition, Sprycel and Orencia both had a good quarter, each up 10% compared to Q1 last year. Sales of Opdivo were $40 million for the quarter, which included some inventory stocking.

Overall, while early, we're seeing encouraging trends. With Abilify, our U.S. sales in Q1 were higher than prior quarters due to the way revenues are shared in our agreement with Otsuka. The formula is based on a tiered structure, and as our rights to Abilify in the U.S. expired in April, all of the U.S.

revenues we record this year are at the 50% tier as compared with the blended annual rate of 33% for all of last year. You may have seen that we recently agreed to transfer our North American Erbitux rights to Lilly.

We will continue to commercialize Erbitux and book sales until the transition to Lilly, which we expect will be completed in the fourth quarter. After the transition, Lilly will pay us royalties on net sales, which will be accounted for as other income. The transaction is not expected to have a significant impact on our non-GAAP earnings.

Gross margin was 80% during the quarter, up 410 basis points compared to the same period last year. The favorability was mostly due to the FX impact on international inventories sold. If rates remain constant, we expect this favorability in gross margin to normalize.

Gross margin was also impacted by a one-time benefit from a restructured royalty agreement. A&P and MS&A were both down versus prior year, due in part to FX and lower spending on diabetes and Abilify. This was partially offset by increased investments in key brands, including Eliquis, Yervoy, Opdivo, and our hep C franchise.

R&D expenses were down about 5%, primarily due to timing of R&D spend and FX. Our non-GAAP tax rate was 21% during the quarter, which does not include the R&D tax credit, as it's not been extended yet in 2015.

This was an active quarter for business development, as we continually look for opportunities that can help deliver long-term growth within our core areas of interest.

Within I-O, we recently added two new programs that expand our portfolio with the acquisition of the IDO and TDO program from Flexus, and the in-license of the TGF beta program from Rigel. With these programs, we add compounds that address the tumor microenvironment, which we think can act synergistically with our I-O assets in multiple tumor types.

We are also expanding our specialty portfolio through business development. Our recent agreement with uniQure brings us exclusive access to uniQure's gene therapy technology platform for multiple targets in cardiovascular diseases, including a program for congestive heart failure. The agreement also allows us to collaborate in other therapeutic areas.

Moving to guidance, we are adjusting our non-GAAP EPS guidance range to $1.60 to $1.70. This range assumes current foreign exchange rates and continuation of the R&D tax credit in 2015. When setting guidance in January, we expected a negative impact of $0.12 to $0.14 on full-year EPS due to FX rates at that time.

Our updated guidance range incorporates an additional $0.02 negative impact based on current FX rates. While we are not changing line item guidance, in thinking about operating expenses for the remainder of the year, we are very enthusiastic about our position in I-O and are committed to maximizing our opportunity.

And, as you might expect, we are continuously evaluating new investment opportunities, and we have identified several, both commercially and within R&D, that are in the process of being reviewed. Now we'd be happy to address your questions..

Okay. Eric, I think we're ready to go to the Q&A. And, just as a reminder, in addition to Lamberto, Giovanni, and Charlie, Francis is here to handle any questions you might have. So, Eric, with that, if we can go to the questions..

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

Oh, thanks very much. So just a couple of quick questions.

First off, as we look forward to the launch of Opdivo potentially more broadly in lung cancer, can you just talk a little bit about when you would anticipate potentially filing in non-squamous non-small cell lung cancer? You certainly had your data available to the agency very quickly from CheckMate-017.

Second question, can you talk a little bit about the – what you feel the importance of a biomarker is, and maybe just compare and contrast the PD-L1 biomarker and its relevance to response rate versus overall survival? And then the last question.

Charlie, you had a very interesting comment there about BD and potential additional commercial opportunities. Is this the timeframe within which you think it's time to execute on potentially a more meaningful transaction to really broaden out the product portfolio? Thanks so much..

to learn about the relationship between PD-L1 expression and clinical outcomes, importantly, as you said – or as you asked – overall survival as well as objective response, and also to understand the science underlying PD-L1 expression in tumors and how it's affected by various factors, including Yervoy and Opdivo.

I think you'll have to wait until ASCO to hear more specific information about the relationship between objective response and overall survival, but I will say we're very excited about the fact that we're the only company that really has been able to show that relationship.

Because, as well as the total population, we have done sub-analyses looking at PD-L1 positive and negative in both squamous – in both studies in second line, squamous and non-squamous.

So I just wanted to – let me finish by saying we continue to design studies to include all patients regardless of PD-L1 status, and we will follow the science and the clinical data that we generate regarding the use of this biomarker.

I think it's important, to my final point, to say we have developed a high-quality, validated diagnostic test with data which will be quickly available, should we need it either for approval or labeling. Thank you..

So – Charlie, you will obviously elaborate on BD. But it is clear that our strategy on business development has not changed over the last years. We continue to look at opportunities. We continue to look at opportunities of different size, as long as they make financial sense and they give us the possibility of expanding our pipeline and our portfolio.

Size is not the main element of judgment or the main element of selection. It's more the fit with our portfolio and our pipeline. So the moment is always mature for good business development opportunities..

Yeah, thanks, Seamus. As Lamberto said, nothing's really changed regarding our BD strategy. We've been fairly consistent with that, in that BD remains a top priority for the company as we recognize that innovation must be sourced not just internally but externally as well.

And as Lamberto said, we're agnostic around size, and we're also very good at looking at different structures that suits the – our partners. And also, and very importantly, we're very disciplined around what we think makes strategic sense for us, as well as good science. And of course the financial metrics have to all tie it all together..

Great.

Eric, can we go to the next question, please?.

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

Yeah, hi.

Firstly on Opdivo, I was curious if you're seeing use of Opdivo for squams and non-squams at this point? And as part of that, or as a follow-on to that, is there any evidence that payers will differentiate between I-O agents that have OS data versus those that do not? Obviously, that should matter to physicians and patients, but wondering if there's a payer angle there.

And second line of questioning is around Eliquis. Given that some time has passed and the drug is ramping nicely and there's a change in leadership coming here, I just thought I'd re-ask about whether your efforts in Eliquis are leveragable in the future on products beyond Eliquis, and perhaps whether it's profitable at this point or not. Thank you..

The performance is very strong. We had a really good quarter. We had a good quarter in the U.S., where we continue to see growth in both our TRx share and our new-to-brand prescription share. We were able to grow both TRx and NBRx by approximately 20% in the quarter compared to other brands, which declined during the same period.

And we also saw really good performance internationally with Japan, Germany, and all key markets in Europe. Eliquis is a very important asset for us. It is growing to be a really important product. And obviously, as you know, cardiovascular is one of our priority areas. We have a number of early programs in cardiovascular disease.

We actually, as Charlie mentioned, signed an agreement with uniQure, which has a potential target in heart failure. So Eliquis is one product, but we are committed to the area..

Thanks for the questions, Gregg.

Can we go to the next one, please, Eric?.

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

Great. Thanks very much. Just a couple here.

Just following the data we saw for Yervoy and Opdivo at AACR and what seems to be a really nice bump versus kind of just monotherapy PD-1, can you just elaborate a little bit more where you see the combo fitting into the treatment paradigm? And, just as we think about price for the combo, do you think that's going be any type of rate-limiting factor in terms of adoption ultimately when we think about that market? My second question was on your IDO.

Just – can you elaborate a little bit more in terms of what differentiation you see with the product that you require here versus others in development and just the timelines we should watch in terms of when the product could move forward? Thanks very much..

Chris, good morning. Let me just start with the combo. Obviously the data we presented at AACR was very positive in terms of the high response rate, and I believe what was really exciting is not only the response rate in the range of 60%, but also that over 20% of patients have a complete response.

So we continue to believe that the use of the combination of Yervoy and Opdivo can really transform melanoma, because obviously the difference we are seeing in terms of the response rate translates into the potential for survival for a significant number of patients in a disease that progresses very rapidly.

The other point that I would like to make is that we are reassured by the fact that physicians are able to manage the side effect profile of Yervoy in over 80% of cases with the treatment algorithms that we've used since the launch of Yervoy, and that a significant percentage of even those patients that may stop therapy early, almost 70% actually see responses.

So we think there is a lot of value in the regimen. And obviously as we get ready to present some data from the Phase III study 067 at ASCO, we are very focused on that. From the perspective of price, I think that our experience is that payers and providers are very interested in data that demonstrates significant incremental value for patients.

That clearly was our experience with Yervoy from the very beginning, and obviously we believe it continues to be what makes a difference there.

It's important to remember that obviously the induction phase with Yervoy is something that physicians are very familiar with, and obviously the maintenance phase with Opdivo beyond the first 12 weeks is really something that is only happening for patients that have responders.

And, as you know, there is a very high value in terms of potential survival in the long term toward response that payers traditionally have been very receptive to..

Chris, good morning.

Let me say, based on our experience with Opdivo and Yervoy in combination, the science from our internal program and our external collaborations, we believe that in addition to checkpoint inhibition, of course, which we have a great interest and expertise in, understanding and modulating the tumor micro-environment, which is where IDO plays, is going play an important role in how we continue to expand the benefits of I-O to additional patients.

Specifically around the Flexus asset, we have now had a chance to look at the data following the successful completion of the HSR process, we're very happy with what we've seen. I'm not going go into the specifics at the moment about what differentiates it.

But it's a very – it's an exciting lead compound, but also represents a program in IDO and behind it programs in IDO TDO (31:40). All of which, together with some other areas in the tumor micro-environment, we think is going be very important.

As far as timing, we're moving well towards filling the data we need for an IND, and we're hoping to be in the clinic at the end of the year or at the beginning of next year. Let me just finish by talking generally about the combination to reinforce what Giovanni said.

We feel that the compelling results we saw at the AACR really reinforce our belief in the combinations and an opportunity to really expand the benefits beyond the patients who are treated presently with – treated with monotherapy.

And we are planning to be in a position to have had a submission for the combination to the FDA by the middle of the year. Thank you..

Thanks for the questions, Chris.

Can we go to the next question please, Eric?.

Your next question comes from the line of Jami Rubin with Goldman Sachs. Your line is open..

Thank you. Giovanni, I don't know if you answered a question that was asked of you earlier, but maybe you can just talk about what you see as the commercial significance of Opdivo, having comparative overall survival in all comers in second-line squamous/non-squamous lung.

And the reason I ask is obviously competition is right at your doorstep with Merck and Roche. Merck's made some comments earlier today on their call suggesting a broader label, albeit no overall survival.

So in the commercial environment, what do you see as the significance or relevance of having that broader label? And then a question for you, Francis. Roche has started four chemo combination trials of PD-L1 antibody in Phase III for lung cancer, and Bristol has been less committed to a chemo combination trial.

I think that you've decided not to go ahead in Phase III. Clearly they're making a very large investment in this combination. What do you think they see that you don't? Thanks very much..

Jami, let me start with the commercial perspective. We believe that, first of all, it is very important to have Phase III data. And it is very important to have overall survival data. Oncologists have traditionally really valued the opportunity to look at Kaplan-Meier curves and understand the survival impact of a new treatment for patients.

And what we are very excited about is not only the fact that we have two Phase III trials – obviously you'll see those at ASCO – and that those are in all comers, but also our ability to characterize the response in PD-L1 positive and PD-L1 negative patients.

So our data set is very strong, and clearly survival is important for both physicians and payers. From a commercial perspective, just to conclude, we are obviously aware that this is a very competitive space. We are making all of the right investments to be competitive. We have invested in our commercial infrastructure in the U.S.

early in order to be able and ready to launch. We have leading share of voice in both the melanoma market and the lung market at this point. And we will continue to make the investments that are needed in order to drive very competitive performance for our portfolio..

Good morning, Jami. I'm not going to speculate on Merck's or Roche's strategy or indeed what the FDA may or may not do in terms of the data we've heard about. But what I can say from our experience with regulatory authorities is that we've got the label based on the data we've put in.

And, based on that, I'm confident we are going have a very competitive label in second-line non-small cell lung. I'm very gratified about the progress of our comprehensive program in lung cancer.

And, just to remind you, this has generated strong data in overall survival in second-line lung, both in a broad population, and it also has sub-analyses for both PD-L1 positive and negative patients. And you'll be seeing that data at ASCO. I think as far as the combination with chemotherapy, we set out to go head to head with chemotherapy.

And as I've said, we've shown very impressive data, which you'll have a chance to see. I would remind you as well as our approval in the U.S.

approval, we also have an ongoing registration review in Europe for squamous lung cell cancer, and we have a number of collaborations in chemotherapy where at least we will be able to get some indication in addition to the I-O combination, which we'll be starting very soon in chemotherapy. So overall I'm very confident in our broad program.

You'll have a chance to see the second-line studies at ASCO. We certainly have first-line therapy, again going head to head with chemotherapy, and the first-line combination study will be starting very soon. Thank you..

Thanks for the questions, Jami.

Can we go to the next one, please?.

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

Hello. That would be Schoenebaum, but that's okay. Hey. Thank you very much for taking the question, and congratulations on the success of the lung trials over the last several months. Maybe I can just ask one question. There's been I think some questions kind of around this, so I just wanted to hit it on the head.

I don't know if this is a question for Giovanni or who, but – and I know that you're not going to give long-term guidance.

But I think everybody that watches Bristol-Myers understands that your operating margin right now is sort of artificially suppressed, if you will, by some of the – the nature of your partner products, and that the earnings power in theory of your I-O franchise over the next several years is substantial.

And in theory, the incremental contribution margin of your I-O franchise should be dramatically in excess of the overall company EBIT margin or operating margin today. And I think that is likely a statement of fact at the product level.

But the question is, how is management thinking about structuring running margins over the long term? How much of the I-O sales will you allow to drop down to the bottom line? I realize, we all realize, you're not going to give specific guidance.

Maybe you can just talk philosophically about how, in the realm of exploding revenue perhaps over the next three to five years, how you will manage expenses. And then just a clarification on ex-U.S. lung cancer timelines, if I may. I heard you mention that approval will be by the end of the year I think, Francis, you expected.

Could you just clarify, though, in which histologies and which line? And if it's not second line, when would you expect the second-line data versus docetaxel in both squamous and non-squamous, to make it onto the European label? Thanks..

Okay. Mark, thank you. This is Charlie. As you suggested, we're not going to give long-term guidance, but let me give you the frame I think that we've talked about before, as you think about our business. So just in the very near term, as we've talked about on the call, we lose Eliquis. Or, excuse me, Abilify..

Oof..

I almost gave Lamberto a heart attack. We lose Abilify – actually we lost it as of April 20, and that is a significantly profitable product for us. In our agreement with Otsuka, we book revenue on Abilify and virtually have no cost of goods, and we virtually have eliminated all operating expenses against that product.

In addition, Eliquis, as you mentioned, has – we share with Pfizer on that, and that has an impact on our overall profitability, because that goes through cost of goods sold.

And then we do have a compelling opportunity, as you suggest in I-O, and – but we're also – have to make sure that we're making the right investments to make sure that we secure our leading position, not just now but going out into the future. Having said all that, over time you would expect to see some leverage in our P&L..

Good morning, Mark. So we – as you say, we have a validated submission under review in the EU based on squamous non-small cell lung cancer. And, as you mentioned, we're looking to have approval before year's end.

I'm not going to comment any further on potential submissions or other approvals, but just obviously to point out that the positive data from 057, we'll be working very aggressively to have that ready for submission to regulatory authorities around the world, including the EMA..

Thanks for the questions, Mark.

Can we go to the next one, please, Eric?.

Your next question comes from the line of Tim Anderson with Bernstein. Your line is open..

Thank you. A few questions.

Can you just update us on your perspective of the combo of ipi and nivo in non-small cell lung? Relative to let's say a year ago, are you more confident or less confident in the utility of that combination in lung? And then can you talk about PD-L1 biomarker and how you think this could play out in Europe in lung cancer? Do you think that relative to the U.S., European regulators and payers may take a more pronounced view on the utility of the biomarker as a gating tool for treatment decisions.

And then on elotuzumab, can you repeat what you said when we'd see the data and your level of enthusiasm for that product?.

We've always said that the role of the biomarker may vary based on tumor type, histology, line of therapy, and whether it's monotherapy or combination. And I think I'll add to that, of course the data that you have, that you generate, and the response of the regulators to some extent. But really it all comes down to the data.

And we're very comfortable that we have generated a very comprehensive data set in second-line non-small cell lung cancer, based on the 017 and 057 studies. Finally, about elotuzumab, we have the data from ELOQUENT-2 – that's a Phase III second line study. We look forward to presenting that at ASCO.

But of course it's premature for me to discuss our regulatory plans until after the data is presented. Thank you..

Thanks, Tim.

Can we go to the next question, please, Eric?.

Your next question comes from the line of Alex Arfaei with BMO Capital Markets. Your line is open..

Good morning, and thank you for taking the questions, and congratulations on 057. Charlie, your full-year guidance seems very conservative given the performance in 1Q and gross margin outlook.

Is it a reflection of your Opdivo launch trajectory, or are you expecting other major headwinds somewhere, other than of course Abilify that you just talked about. And then, Francis, similar to the earlier question on IDO, could you comment on the TGF beta data assets from Rigel and when we can expect data from those? Thank you..

Thanks, Alex. This is Charlie. I did mention to some degree how we think about guidance in my comments, but let me just comment a little bit further. So Abilify was very favorable to us in the first quarter, but that essentially goes all away back half of the – or the last three quarters.

I did mention we do have a one-time benefit in our cost of goods sold related to a royalty restructuring. And then OpEx is normally lighter for us in the first quarter than it is in any other quarter.

And when you take that timing difference, as well as my comments earlier about considering additional I-O investments, that's really how we get to the guidance range that I talked about earlier..

And let me just – this is Giovanni. Let me just reiterate that we are really excited with the initial feedback from the launch of Opdivo in both melanoma and lung. As I mentioned earlier, all of the early indicators are very strong, from access to physician interests to the growth in number of trialists across community and academic settings.

And, finally, as I said in terms of our total share, the PD-1 opportunity and how rapidly that is growing..

Good morning, Alex. You're right. We're excited about the Rigel collaboration on TGF beta. Just to be clear, that's a discovery program. And therefore I'm not going to comment on when we might have a clinical candidate.

But I think it's important to remind you that we do have, in the clinic, a collaboration with Eli Lilly on their TGF beta inhibitor with Opdivo, and I think we would expect to see data from that before we could get the Rigel compound into the clinic, which of course will be very helpful for us in deciding where we will go. Thank you..

Thank you.

Can we go to the next question, please, Eric?.

Your next question comes from the line of David Risinger with Morgan Stanley. Your line is open..

Thanks very much. I have three questions, please. The first is, for your updated 2015 guidance, does that reflect an expected U.S.

approval and launch in non-squamous non-small cell lung cancer in 2015? Second, with respect to breaking down study 017 and 057 based upon PD-L1 status, could you just help us understand how you plan to potentially cut the data to demonstrate greater effectiveness in high expressers? And then how you will try to frame the debate at ASCO, since different companies use different cutoffs and biomarkers? And then, third, with respect to ex-U.S.

Opdivo and lung, any suggestion for when we should be modeling lung launches ex-U.S. in 2016? Should we think about major markets launching in the second half of 2016 after price negotiations? Is that sort of the right timing to think about in major markets ex-U.S. for lung? Thank you..

David, this is Giovanni. Let me just answer a couple of your comments. With respect to launch of study 050 of the non-squamous indication, we are not going to comment on that at that point. As Francis said, we are conducting all of analyses on the data.

We look forward to sharing that with regulatory authorities, and it's really premature to make any other comments there. With respect to ex-U.S. Opdivo lung sales, I think that when we are approved, you should be thinking about the same sequence of launches that is typical of ex-U.S.

and particularly European markets, with more rapid access for patients in those markets, like Germany and Northern Europe in general, where there is the opportunity to launch right after approval. And obviously in some other markets we will need to go through negotiations related to reimbursement.

So, there, the only thing I would say is our experience with Yervoy is going be very helpful to us, and with Yervoy we were able to obtain reimbursement broadly in line with label in every one of the key markets, not only in Europe but around the world..

Okay, great.

Can we go to the next question, please, Eric?.

Your next question comes from the line of Vamil Divan with Credit Suisse. Your line is open..

Great, thanks for so much taking the questions. So one just direct one on Eliquis first, and then a couple on the immuno-oncology side.

For Eliquis, are you seeing or are you anticipating any greater pricing pressure in that market given the recent approval from another competitor in that space from Daiichi? And then in I-O, you mentioned the progress you're making with Yervoy in the community.

Can you quantify just what percentage of the use of Yervoy is now in the community versus in academic centers? And then do you think Opdivo's going to have a very different breakdown when we think out a year or two from now, just given the different profiles? And also, for the combination, anything about that being used in the community setting? And is there anything you do to try and mitigate the heavy dropout rates that we saw with the combination? Anything you've learned maybe from what you've done with the combo in lung or in other tumors that could help there? Thanks..

Thank you. Let me take the first part of the questions. With respect to access for Eliquis, first of all, there is really strong momentum for Eliquis in the market. We are seeing very significant growth in TRxes and NBRxes.

And obviously we've established a leadership position in new-to-brand shares across all indications in cardiology and in atrial fibrillation across the total market. That's important in negotiating with payers. The second point that I would say is we are in a very strong position from an access perspective.

We have over 90% access in both the commercial and Medicare space. On the commercial space, our preferred status is approaching 70%, and in Medicare it's above 80%.

So while the category will continue to be managed, and obviously we are very focused on it, the fact that we are emerging as the leading agent in terms of the overall momentum positions us strongly with payers.

With respect to the use of Opdivo and how the uptake is going in the community versus the academic institutions, obviously that's very different in melanoma versus lung, because, as you know, about 50% of melanoma is treated in the hospital and academic setting, and only 50% in the community.

When you look at lung, that's very different, with over 80% of patients treated in the community.

So while at the beginning it is logical that the uptake is fast in the academic and hospital setting, we are actually seeing with Opdivo already a very significant increase of uptake in community, which is clearly very important, and it makes us feel optimistic about the overall opportunity for Opdivo in the community setting..

Vamil, let me just – good morning. Let me just say, of course we are collecting safety across many tumors. It's a lot easier for us, of course, because we have the same dose in all the tumors, so it's much easier for us to compare. I think broadly one would say that the safety is very good across most, if not all, tumors.

And let me just add a little color, actually to David's question about PD-L1 status also in 017 and 057, building on what Giovanni said.

Obviously I'm not going to talk about the data, but I just want to reiterate that there are comprehensive analyses both for the broad population and PD-L1 and -positive and negative patients that will be presented at ASCO. And we have to publish it also comprehensively. Thank you..

Great. Eric, I think we have time for two more questions..

Your next question comes from the line of Marc Goodman with UBS. Your line is open..

Yes. I was hoping you could tell us the one-time impact in the gross margin in the quarter. How much did that impact? And what was your commentary around will it stay for the rest of the year? What is the new gross margin guidance including this? And this goes away this year, and so there'll be no impact next year. Just so we're clear on that.

And then, secondly, on HCV in Japan, can you give us a sense of how many patients you have, like, what market share you have over there? And Baraclude OUS, just wondering if the weakness was just FX or if there was anything else going on. Thanks..

Okay. Hey, Marc. It's Charlie. So the 400 basis point improvement we had in gross margin, I would characterize two-thirds of that was FX and one-third was the one-time royalty restructuring. We expect, assuming current FX rates, that most of the favorability we had in the first quarter due to FX in our margin will dissipate.

So we don't see any further benefit going forward..

From the perspective of HCV Japan, let me say the performance has been really strong. Our dual regimen of Sunvepra/Daklinza we launched in the middle of last year. When we describe the opportunity there, remember there's about 1.2 million patients with hepatitis C in Japan. Of that, 70% are genotype 1b.

And we decided to focus initially on the approximately 150,000 patients that are in the healthcare system actively seeking treatment. We've seen really strong commercial execution in Japan. We've seen rapid uptake. And, as you've mentioned, we had approximately $200 million in sales in Japan in the first quarter.

When we look at our penetration in terms of our share of the more recent oral regimens, we have the vast majority of the patients there. The largest share we have is in the subset of 150 patients I described before. But we've seen some uptake with new patients coming into the treatment in Japan as well..

And, Marc, just concluding on your Baraclude question ex-U.S. The sales were down 5% versus prior year if you exclude the FX impact..

Great.

Eric, can we go to the last question, please?.

Your last question comes from the line of Andrew Baum with Citigroup. Your line is open..

Hi. Three questions, please. Firstly, just looking at your 069 trial at AACR, there's obviously some quite considerable toxicity with the combination.

Just thinking about your ongoing lung program with the combination, what are the learnings in terms of dose modification, scheduling, patient selection, or monitoring and treatment that can put into place to make a more – a better-tolerated regimen within the Phase III lung indication? Second, I'd wonder whether you'd comment on anticipated patent term extension for Eliquis, how long it will take you, and, two, and when you will have confirmation of that? And then finally for Francis, if there is no difference in response rates between the PD-L1 positive and negative subgroups in 017, what would that tell you about your diagnostic?.

Good morning, Andrew. So, first of all, let me just say we believe the combinations do have an added effect. We think that's been shown very nicely in melanoma. And I think they have the potential to meaningfully increase the survival expectations for more patients than monotherapy alone.

So I think, obviously, one can't always extrapolate between tumors, either in terms of efficacy or safety – we've seen differences there – but we do think underlying this is an opportunity with combination of Opdivo and Yervoy to treat more patients.

Clearly, looking at the lung cancer population, we understand that it's a different population, and we think in non-small cell lung cancer, there may be a slightly different tolerability. That being said, we've learned a lot from the ongoing combination studies together with the second-line studies.

And so we really think the first-line combination study that's about to start really does have a good chance of understanding the potential of combination in lung cancer. As far as the 017 study and the assay, let me just say that I think our assay is a good assay. It's validated. It's ready to go in terms of the need for approval or labeling.

And you'll have the opportunity to see the data, which is very strong, I think, across 017 and 057 in terms of documenting the different patient populations..

But we're not going to provide any comment on patent term extensions for Eliquis. And I will close this call by thanking everybody for participating. We had a strong performance in the first quarter across much of our portfolio, and we had important clinical and regulatory development. Bristol-Myers Squibb is stronger than ever. Thank you.

And have a good day..

Okay, everybody. Thank you. As always, Ranya and Bill and I are available for any follow-ups you might have. Thank you..

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..