Good day, and welcome to the Bristol-Myers Squibb 2019 First Quarter Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Elicker, Senior Vice President, Public Affairs and Investor Relations. Please go ahead sir..

Thank you Sandy, and good morning everybody, and thanks for joining the call to discuss our first quarter earnings. With me this morning is Giovanni Caforio, our Chairman and Chief Executive Officer; Charlie Bancroft, our Chief Financial Officer; Chris Boerner, our Chief Commercial Officer; and Tom Lynch, our Chief Scientific Officer.

Giovanni and Charlie will have prepared remarks and Chris and Tom are available for Q&A. First, the Safe Harbor language. During the call, we'll 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 our 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. Today, we'll also focus our comments on our non-GAAP financial metrics, which are adjusted to exclude certain specified items. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are available at our website.

Giovanni?.

Thank you John, and good morning everyone. I'm pleased to speak with you today about our strong performance in the first quarter and the progress we have made on our pending acquisition of Celgene. I am very proud of our team's focus and execution in the quarter to drive our business forward.

Let me start with some highlights from the quarter and a brief discussion of our key growth franchises Opdivo and Eliquis. Our results this quarter were driven by strong commercial execution across the portfolio. Opdivo delivered a solid quarter and continues to perform well.

As we look into the future, we recognize we are working in a very competitive space. However, we continue to see Opdivo as a growth franchise given the breadth and depth of our clinical program. Given the rapid update of new indications in I-O the growth of Opdivo going forward will be driven by new indications over time.

Specifically, I think about our growth opportunities in three areas. First is the opportunity in adjuvant where we have a robust program beginning to read out in 2020. We've already seen the potential in adjuvant melanoma where treatment rates have gone from 20% to nearly 80%.

The second area of opportunity is in the metastatic setting across a range of tumors, including upcoming readouts in renal and gastric cancers. And importantly, the third area is the near-term readouts in non-small cell lung cancer beginning this summer and into next year with 9LA..

Thanks Giovanni. Good morning everyone. As Giovanni said, this is another strong quarter for the company highlighted by continued growth across our portfolio of prioritized brands. Let's start with Opdivo. During the quarter, we saw good growth up 19% compared to last year.

Let me take a few minutes to discuss what we're seeing in the business today and the dynamics in play going forward. Firstly, with respect to lung cancer. With our commercial team continuing to execute well, Opdivo remains the leading I-O agent in second-line lung in the U.S.

Within this segment, as we've been describing, the size of the I-O-eligible population is declining and continues to erode in line with our expectations..

Thanks Charlie. And Sandy I think we're ready to go to questions..

Thank you. We'll take the first question from Geoff Meacham at Barclays..

Thanks so much for the question. Charlie just on the integration what you just mentioned there there's a lot to work on. There's a cadence of cost synergies from a facility perspective, but I also wanted to ask you just about the investments and the launches Luspatercept and Ozanimod coming from the Celgene side.

And perhaps take two, maybe just give us some comfort in the level of investments that you need to make on the -- as an offset to the synergy.

And then I wanted to also kind of dig into a little bit of the first-line lung commentary with respect to what you guys view as maybe a reimbursement maybe a shift in reimbursement or the comments I think that you guys made were that you're not seeing as much of a rollout due to first-line reimbursement access hurdles.

Maybe just give us a little bit more color on that and what it means to second-line Opdivo adoption. Thank you..

Yes. So, Geoff maybe I can start just on your comments regarding synergy and value protection. As I mentioned in my comments, we're very focused on making sure that we ring-fence and protect the value drivers of both companies, BMS and Celgene, and we're very focused on the upcoming potential launches of both brands.

And we've done I think a really good job of focusing on where we can drive value and not distract the organization from those launches. But from an investment standpoint, I don't think you would see much different anything than what Celgene would have done on a stand-alone basis..

So this is Chris, and Geoff I'll try to take the second part of your question regarding the first-line dynamics and the implications on second-line. So as expected we continue to see the launch of I-O agents in the first-line setting continuing to have an impact on the size of the I-O-eligible pull in the second-line. In the U.S.

as we expected that's been a bit of a quicker decline in the second-line than what you will have seen outside of the U.S. So, for example, in the U.S. the use of I-O therapies in first-line is about 57%.

Today we see that having an impact on the size of the eligible pull and second-line continuing pretty much in line with what our expectations have been. About one-third of patients in second-line today are chemo-experienced patients and thus would be eligible for I-O therapy. And again that's in line with the U.S. expectations. Outside of the U.S.

because of the timing of first-line approvals for I-O agents and importantly how quickly those I-O agents then get access in reimbursement and thus drive utilization that's going to be a bit slower and we've seen that translate into continued fairly large pool of second-line patients who are eligible for I-O therapy outside of the U.S..

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

Next question comes from Chris Schott at JPMorgan..

Great. Thanks very much. Just a couple of Opdivo questions here. Maybe the first set of questions just on the RCC market and a bit more color about how you're thinking about the competitive landscape shaping up here as we consider Opdivo, Yervoy versus the PD-1/TKI combinations.

And the second part to that RCC question is on 9ER, did the time lines push out there? And are there any interims that we should be thinking about that could allow for an earlier stoppage? Final question was on Opdivo. Was -- just Giovanni maybe come back to some of those initial growth comments.

At this point is adjuvant the larger of the opportunities relative to the remaining metastatic readouts? And in those adjuvants what are the ones you're most focused on or excited about? Thanks very much..

Chris why don't you start?.

So let me start, Chris. So we continue to see a very strong business in first-line renal cell both in the U.S. And while still early days, the early feedback ex U.S. has been very good. In the U.S. we grew Opdivo, Yervoy share in the first quarter to just over 40%. That's mainly as a result of growth in the PD-L1 negative.

As I mentioned its early days outside of the U.S. but the feedback from early launch markets like Germany and France has been very good. We've actually obtained access in the U.K., Australia in Canada and we expect other key European markets to come on later this year. And interestingly we've seen very rapid uptake in Japan where share is over 30%.

With respect to competition, look we've been preparing for the launch of I-O/TKI since last year. As we said repeatedly, we believe that the I-O/TKI combination is going to have an important role. There's certainly interest in this combination in the first-line setting and that's why we have our 9ER study.

And undoubtedly that will put some pressure on Opdivo+Yervoy.

However, we also believe and what we are hearing from customers is that Opdivo+Yervoy is going to continue to be a standard of care in the first-line setting and renal cell as a result of the depth of responses that we see, the durability of those responses and importantly the quality of life and safety profile that we've seen with Opdivo + low-dose Yervoy.

The other thing that we're hearing as more of the data about Keytruda and Inlyta has come out from customers is that we really do need to unpack this data. We're talking about very different populations, so you can't really compare directly. About one-third of the patients in the Keytruda and Inlyta study were favorable patients.

If you compare that to the extent of -- the extended follow-up that we've seen with CheckMate-214 Opdivo+Yervoy has about twice the number of the percentage of complete responses relative to Keytruda plus Inlyta and those responses are very durable.

About 88% of the patients getting a CR in CheckMate-214 continue to benefit and we simply don't know the durability of the data yet for Keytruda plus Inlyta.

So from a commercial standpoint, our focus very much is continuing to emphasize the value and long-term benefit of Opdivo+Yervoy to appropriately put the data in the space in context, and I have complete confidence in our team's ability to continue to compete in that space..

And Chris -- thank you. And Chris to address your two questions one on 9ER and then one on adjuvant. So with 9ER a couple of things about this study. This is our randomized trial looking at cabo plus nivo versus sunitinib setting and we expect that data to read out in early 2020.

The reasons for the slight push out of the time lines are the fact that we -- I felt it was important to accrue patients in Asia and we had some Japan accrual. We've actually increased the accrual in that study to -- from about 500 to about 700.

This gives us a little bit more optionality in terms of looking at overall survival as a potential secondary endpoint. But remember PFS remains the primary endpoint of that study. So we look forward to seeing that data in the early part of 2020.

I think you've put in a really important point with adjuvant and I think one of the points that we have made consistently is the fact that we believe that the opportunity for I-O and adjuvant is extremely important.

When you're thinking cancer in general, you think that while many drugs have made impact in metastatic disease real breakthroughs occur when you can prevent disease from coming back. And I think that's true with Herceptin. I think that's true with adjuvant chemotherapy.

And I think it's clearly demonstrated in the melanoma space with Opdivo in that setting. So as you know we have nine adjuvant trials that will be reading out over the next three years in six important tumor types; melanoma, bladder, esophageal, renal, hepatoma, and the neoadjuvant study in lung.

I'm always hesitant to say, which trials are you most excited about. I will say a couple of things about one or two of them. The first is in melanoma, we've seen that Opdivo and Yervoy has improved outcome compared to Opdivo alone.

And so I personally am interested in seeing, does this translate into a difference in the adjuvant setting? So the melanoma trial, which we believe will read out in 2020, I think will be important to look at in that setting. I think the second place, obviously, is in renal cell. Opdivo, Yervoy has made a big difference in renal cell carcinoma.

There really is no proven adjuvant therapy in renal cell carcinoma. This remains an important unmet medical need. Looking forward to see that. And then the final one I'll call out will be bladder non-muscle invasive -- muscle-invasive bladder cancer. Again an important area of unmet medical need an area where I think I-O is going to make a difference..

Thanks, Chris.

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

The next question comes from Alex Arfaei at BMO Capital Markets..

Great, thank you. And congratulations for winning your shareholder support for the merger. A couple -- a little -- first one on the I-O franchise and specifically CheckMate-227 Part II.

Can you give us your latest thinking there please? Frankly you have sounded someone cautious about this trial, which is puzzling for investors given the amount of information you have both from your trials and your competitors.

Is there any reason we should tamper our expectations for this trial such as higher expected crossover or any other variable? Next on the merger. Celgene have provided their expectations for their big five assets by product. You have provided your estimates for an aggregate of six products including your TYK2.

Can you please comment on whether you agree with Celgene's expectations for their big five assets as they have made them out by product? And if I could just speak one more in, could you give us the latest estimated sales of Opdivo by indication? Thank you..

Thank you, Alex. This is Giovanni. So let me just ask -- answer the first two questions and then I'll ask Chris to give you an update on Opdivo sales by indication. So with respect to -227 readouts, as we mentioned in our remarks, we expect Ia and II in the summer. There is really no update there and no news there from our perspective.

Obviously as you said very important data readouts and we look forward to seeing that data. With respect to the Celgene, five launches as we've communicated extensively in the last few months, we provided an estimate of what we believe the peak sales for the six launches are in aggregate.

Obviously as you know, we've included risk adjusted assumptions in our financials, but we wanted to provide that incremental disclosure as we were really discussing the value of the pipeline. As it relates to future guidance, we may provide for the combined company or individual assets we'll talk about that after we close the transaction..

Let me just hit on the allocation of business. In the U.S. lung is about 25%; melanoma is about 30%; renal is just over 20%; and all other indications are about 20% as well. The only comment I'd make outside of the U.S.

is lung is about 45% and that just reflects the dynamics of lung being a bigger percentage in second-line just given the timing of indications..

Thanks, Alex. Sandy can we go to next question please..

The next question comes from Tim Anderson at Wolfe Research..

Thank you. A couple of questions. First one is kind of a higher level. So your stock has been in free fall for the last few weeks at least.

In your opinion and based on your conversations with investors and analysts, why do you think this is happening? What are the biggest areas of concern that you hear about that you think are misplaced? That's the first question. Second question is Part 1 of -227 it actually has a monotherapy OPDIVO arm tucked within it. That tends to get overlooked.

It's fairly large several hundred patients. I think it's around 400. It's not registrational, but it seems like there could still be a chance for the product to redeem itself in front-line lung as monotherapy following the spectacular failure of -026 back in August.

So I'm guessing you'd say the odds are fairly high that we see good competitive results from this often-forgotten-about arm and recognizing it's not registrational.

Can you comment?.

Yes, Tim. Let me ask -- let me address your first question and I'll ask Tom to give you his perspective on the second one. So with respect to interaction with shareholders, obviously as you can imagine, we are continuing to interact with all of our shareholders.

We are strong believers in the value of the company that we are creating and the opportunity to deliver significant value for shareholders in the long term. So our focus right now is really on making sure that the integration is successful and that we deliver the full value of the combination.

I think that's where we can make a big difference as a team and that's where our focus is right now. And as we've discussed in remarks I think we're making great progress already..

And Tim thank you for your question on lung cancer. I just want to sort of put in perspective the totality of what we're doing in lung cancer and we've said all along that we have multiple different approaches to non-small cell lung cancer.

And you'll be seeing the results this summer of -227 Part 1 which will be coming out; Part 1a which will be reading out in terms of overall survival and a group of patients selected by PD-L1 status. And I think that data is going to be important for some reasons.

You're correct in saying it will give us a look at the monotherapy arm, but it will also be able to allow us to understand better the overall data from TMB as well to get a sense of the interaction of the interplay of the biomarkers in trying to understand what's driving response in I-O, because I still think this remains a very important question.

Now we'll also -- also this summer, we expect to see the results of Part 2 which is our chemo combo and then I want to also draw your attention to 9LA, which will be reading out in 2020.

Again, two cycles of upfront chemotherapy followed by OPDIVO/YERVOY, which we think has the potential to establish a durability of response that we're looking for in that setting. So I think a number of very important readouts at lung cancer. And you absolutely point out that it'll be interesting to see how the monotherapy performs in that setting.

We look forward to seeing all of this data..

The only other thing I would comment is that the use of monotherapy right now in the first-line setting tends to be dominated in the greater than 50% PD-L1 expression. That's almost entirely catered to monotherapy and the vast majority of the business outside of that setting has begun to evolve to a chemo combo..

Thanks, Tim. Sandy, can we go to next question please..

The next question comes from Seamus Fernandez at Guggenheim..

Great. Thanks for the question. So just a couple here. Tom, you mentioned that the -9ER study the primary endpoint is progression-free survival, but the study has been pushed out to 2020 because of recruiting in some Asian markets. I'm just trying to kind of triangulate that and understand that better.

It would seem like PFS would likely have the study finished sooner or at least at/or around the same time.

So I'm just trying to get an understanding of did you guys alter the statistical analysis plan at all to ensure that you have overall survival as kind of part of the stopping rule? I'm just trying to get a better understanding of why this study would get pushed out if PFS is the primary endpoint as most of us understood it and then you're adding the Asian patients so -- in an event-driven study.

And then the second question can you just maybe update us on your thoughts on what we might learn about the competitive landscape and how Bristol is positioned at ASCO this year. Obviously, we have the approval of Merck's label heading into ASCO.

I'm just trying to get a better sense of the areas of focus that you're going to be bringing in your discussions with physicians from the data that you present there? Thanks..

Seamus, thank you. So let me just reiterate on -9ER and there's been no change to the statistical plan. And it's not a dramatic push-out of the readout data. It's just a slight push out of the day.

One we increased the sample size to give us more optionality around a key secondary endpoint, which is overall survival in this setting and we think that that's going to be important.

And then second is, it's important for our study to have global impact and global reach and we felt it was important to accrue sufficient number of patients in Japan to be able to address the needs of the Japanese market as well.

So there's been no change in the statistical plan and we do believe that we will be well positioned to answer the important question to help us determine the role of OPDIVO and Cabo in that setting.

Now regarding ASCO this year, as we've said a couple of times on this call, a number of our important readouts are actually happening this summer and it won't really be available in time for ASCO such as Part 1 and Part 2.

Now we hope that many of those will be available including potentially even an update of our head and neck data at ESMO this year.

I think we are very proud of some of the data we presented at ASCO, GU this year, which showed that OPDIVO/YERVOY had activity in patients with hormone refractory prostate cancer, particularly in a group of patients that had high TMB.

Again, I think this is a good example of the productivity of our translational medicine group the fact that we're able to look at a group of patients with TMB defined by a different cut-off actually than the TMB that was used for lung cancer and find a really important group of patients who benefited from OPDIVO/YERVOY in that setting and that was at ASCO GU.

Also at AACR, we reported data this year on some of the long-term benefit that we're seeing in patients with previously treated lung cancer. If you're a PD-L1 positive, a 19% four-year survival in second-line lung cancer, which is truly remarkable in that setting.

So there'll be a lot of important data readouts and I think ESMO will be a good place to see some of the larger study again depending upon timing of data..

Thanks, Seamus. Sandy, can we go to next question please..

The next question comes from Matt Phipps at William Blair..

Hi, thanks for taking my question. So on OPDIVO, it looks like this is the second quarter in a row with a slight quarter-over-quarter decrease in U.S. sales I guess not -- unexpected with the second-line lung dynamics. But given that Keytruda approval in first-line RCC ahead of schedule, do you think that slight decrease in U.S.

sales will continue? Or is there a chance for acceleration in the second half of the year? And then secondly, you mentioned 40% market share right now in first-line RCC I believe.

Is that in the per label patient population of intermediate poor risk? Or is that across all first-line patients?.

Thanks for the question. So let me just address OPDIVO growth. First, if you just put the OPDIVO story for the quarter in context it was a very good quarter. We saw strength really across all of our tumors outside of lung cancer.

In fact, we estimate that sales in all tumors outside of non-small cell lung cancer grew quarter-over-quarter and that's really a function of the base business continuing to be strong. We still have leading shares in all of our promoted tumors. And as I mentioned, we're seeing growth as expected in first-line renal cell as well as adjuvant melanoma.

So overall, you continue to see very good strength across the majority of our businesses. The headwinds that we saw in the first quarter really were very much focused on lung cancer. As expected, we continue to see pressure in the second-line setting due to the decrease in the eligible pool of patients I referenced previously.

That's very much in line with the expectations, but does impact quarter-over-quarter growth. The second thing that we saw this quarter was we saw a decrease in OPDIVO monotherapy nonpromoted sales in the first-line setting. That had been running about 4% to 5% in the latter half of 2018.

We saw that come down in the first quarter to about 1% and I would expect, it's going to stay in that range for the remainder of the year.

And as we flash forward to the remainder of the year, I think that first and foremost we continue to see Opdivo growing globally year-over-year, but I think the dynamics that you saw in the first quarter are likely going to continue as we move forward through the remainder of the year.

Just addressing the question in renal cell the 40% share the vast majority of that is in the intermediate and poor population. That is consistent with our label. We do see about 5% share in the favorable risk population, but that's relatively small in the grand scheme of things..

Thanks, Matt. Sandy, can we go to the next question please..

The next question comes from Vamil Divan at Credit Suisse..

Great. Thanks so much for taking my question. So one just around sort of dynamics around drug pricing reform and a specific question really just to this concept of international reference pricing for Part B.

I think when that was first proposed I don't think investors and maybe analysts wouldn't get too much credit for that actually becoming a reality, but if it feels like in our conversation that there's maybe a growing sense that that may actually become a reality.

So I'm just wondering, if you can share your expectations on some degree of international reference pricing being implemented for Part B and how that might impact Opdivo and Yervoy specifically and just I guess Bristol overall. And then my second question is just on the following-up on the Part 1a and Part 2 comments you had made.

I know you can't control the timing of these event-driven trials.

But given that the data is coming a little bit later than expected does that in any way sort of raise the bar in terms of what you need to show given the uptake Merck is already seeing with – through the mono-therapy and combination therapies in frontline non-small cell? So just wondering, if you have to show even stronger data displaces at that point? Thanks..

Thanks, Vamil. This is Giovanni. Let me just start with the question about pricing. So first of all, let me say as I've said many times, I think that from my perspective we are entering a period in, which we have to expect that the discussion about pricing and reimbursement will continue.

I personally feel that, it will be an evolution over time, and I do believe that the pressure to demonstrate value and the focus of payers on pricing and access will continue in the U.S.

And in fact, as you may remember, I really believe that one of the important things for us to be doing is to continue to accelerate strengthening and broadening the pipeline adding more growth drivers for the company diversifying the portfolio with a larger number of assets and having a presence at the company that spans across multiple payer segments.

I think these are all things that in an increasingly competitive market from a payer perspective, which is what we should be expecting, will position BMS much better as a broader innovation company after the transaction with Celgene is completed.

With – now with respect to the IPI international referencing as you know we don't think that's a really good idea and we are really not supportive of that proposal.

Because I think when you look at what is happening in many of the countries where they are included in that reference basket is that patients are not having access to new therapies, when you look at the approval of Opdivo and Yervoy in metastatic melanoma that's a transformational regimen as a standard of care in the U.S.

It was approved in Europe in 2016, if I remember correctly. And I think in almost half of the markets included in the basket, it's not being reimbursed yet. I think the same is true for the adjuvant melanoma indication approved last year that are many of the markets that are included in the reference basket where that's not reimbursed yet.

And almost half of the oncology products approved in the last few years are not reimbursed in those markets. So we are proponents of policies that enable stakeholders to continue to work together to address the issues of out-of-pocket exposure for patients and affordability and access, but in a way that continues to reinforce and reward innovation.

And clearly, that's not what that proposal does. It's difficult for me to handicap the probability that a radical proposal like IPI has in truly moving forward.

What I can tell you is that as an industry we are in discussions with the administration and we are supportive of policies that achieve some of the goals of out-of-pocket exposures for patients, but in a way that rewards innovation..

Let me just quickly comment on the first-line opportunity. Undoubtedly, the timing of Merck entering first-line vis-à-vis data readout from us is an important consideration. It does frame the competitive context into which we would be launching. What I would say though is that, front-line lung cancer is a very large opportunity.

There is still room to play, as I mentioned earlier, only about just over half of different line opportunities currently being addressed through I-O therapy. I don't think we think about this in terms of needing to hit a particular hazard ratio. Physicians are still looking for multiple options to treat patients in this space.

They're looking for chemo sparing options, which is obviously relevant potentially to Part 1a. And what I would say is that from a competitive standpoint we know this space well and we know how to compete and we're looking forward to seeing this data readout..

Thanks, Vamil.

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

The next question comes from Steve Scala at Cowen..

Thank you. It was said a couple of times that the CheckMate -227 readouts are due this summer. Previously the Opdivo plus Yervoy OS data was expected in the second quarter. And that was a push out from prior expectations, which at one point were late 2018. There appears to be obviously ongoing delays.

Can you provide a range of possible reasons for the delays, which are now approaching over a year? There could be good reasons of course so maybe you can paint both sides. And then secondly not all KOLs are fans of the KEYNOTE-426 data in the first-line arena. Dr.

Lynch, I'm wondering if you can point out some of the lingering uncertainties and questions on the data beyond what Chris already identified. Or in your eyes is KEYNOTE-426 a clear win? Thank you..

Steve, thank you. First on the first point, regarding the lung readouts. Just a couple of things. One is these are event-driven studies, and they're large trials. And the events happen when the events happen and I think it's really important not to read too much into event rates.

Because event rates can slow down because things are going really well, or they can slow down just because of the way people were accrued to the different arms. So I don't read anything into the event rates, and I think the event rates are what they are. We'll see the data this summertime in that respect.

I think the thing about renal cell carcinoma that I want to say, again, that I think is really important is that what you're looking at when you're comparing or looking at a regimen like Opdivo and Yervoy is looking at a regimen that's provided that we have excellence follow-up on now and we have a sense of what the duration of response and duration of benefit is, and that's something that's still a bit unknown with the TKI combination with Keytruda in that setting.

And again, maybe fine, but it's unknown at this point. So you're comparing unknown very strong duration of benefit with one that we'll have to see how that data evolves. But although, as we pointed out we still also believe that the TKI plus PD-1 could be important. That's obviously why we have studied 9ER..

Thanks, Steve. Sandy, can we go to the next question, please..

The next question comes from Jason Gerberry at Bank of America Merrill Lynch..

Good morning and thanks so much for taking my questions. I guess I just wanted to follow up on the comment about Opdivo remaining standard of care in renal.

Is your thought that this would remain the dominant treatment option in poor to intermediate? Or do you think that it's more of a shared market between I-O/TKI and I-O/I-O? And then as we think about the evolving second-line market in renal do you think the field will evolve to either I-O/I-O followed by I-O/TKI or vice versa given the lack of second – approving second-line options behind an I-O therapy? Thanks..

Yeah. Both very good questions and I think that to a certain extent the answer is going to be these dynamics are going to have to play out in the marketplace over the coming months.

What I would say with respect to OPDIVO plus YERVOY continuing to be a standard of care in the front-line setting is I very much think that it will be one of multiple modalities that are an option for first-line patients. I would suspect that, the initial use of I-O plus TKI will likely be in the favorable patients, where we are not indicated.

But I think you're going to likely see physicians make choices about, which option is best for their patients. That then in turn will impact the second-line dynamics. You're correct in pointing out that you might continue to see the increasing use of combination therapy in the second-line space.

We've begun to see an uptake in the use of OPDIVO plus YERVOY, for example, in second-line renal cell. It's about 20% now in the second-line setting.

And so, I think, you're going to continue to see physicians start to think through if they use OPDIVO plus YERVOY in first-line, thinking about a combination with TKI in second-line and potentially vice versa. Those dynamics are going to play out in the coming months and we'll obviously need to stay connected on those as the data continue to evolve..

Thanks Jason.

Can we go to next question please, Sandy?.

The next question comes from Navin Jacob at UBS..

Hi. Thanks for taking the question. Maybe two for -- two -- one for Charlie.

Charlie, can you remind us about your dividend policy post the deal close? How do you think about the dividend from perspective of a payout ratio will be? Will you be maintaining the ratio that you had for Bristol stand-alone, which I think was roughly 50%? Maybe a little bit above that for 2018.

Is that how we think about it over the next few years? And then, a commercial question, if I may, for an upcoming trial that you have CheckMate 459 first-line HCC trial, which is interesting. How do we think about the size of HCC? Is that mostly ex-U.S. market, U.S.

market? And are we talking about a $1 billion to $2 billion opportunity, or $3 billion to $5 billion? Any kind of color will be appreciated..

Hey, Navin, this is Charlie. So thanks for your question. On the dividend, as we discussed, and we said that we will continue to increase the dividend. We haven't said a specific payout ratio, as we haven't said with Bristol. Our payout ratio at one point was over 90%.

And as we continue to grow our earnings, we were more in line, I would say, with our peers. So I think on a go-forward basis, it will be the nature of the business, where is our business at that moment in time, how are we going against the -- a number of fundamental factors.

So we have -- like, we have in the past, we give our dividend policy once a year for the next immediate year..

Yes. And with respect to HCC, HCC is obviously a particularly attractive market. We see considerable use of OPDIVO today in the second-line space with about 53% share. We also have good use in the third-line setting with upwards of 45% share. In terms of the opportunity, I think, we're going to have to wait and see how the data pan out.

And once we get that data we'll be able to provide a bit more clarity. But it's an attractive opportunity and we've seen I-O be very effective in the space..

Thanks Navin for the questions. Sandy, can we go to next question please? I think we have time for two more..

The next question comes from Umer Raffat at Evercore..

Hi. Thanks so much for taking our questions. First, we saw the Celgene settlement with Dr. Reddy's for the Canadian territory, not for the U.S. My question was, do you know if Reddy filed an amorphous form of Revlimid in Canada? That was the first.

And the second is, on the TYK2 program, I feel like Street focus will inevitably shift to this next key trial coming up, the lupus trial next year. And I have noticed there's a very specific forced steroid taper being implemented in that trial.

Can you give us a little more details on exactly how that taper works on steroid? I'm just trying to understand, how to think about the placebo arm in that trial. Thank you..

Yes. So let me speak first about Revlimid. There're different patent regimes in Canada and the U.S., so you can't really read across from one jurisdiction to the other. I don't know offhand, quite frankly, if Dr. Reddy's had filed the amorphous claim or not, so we'll have to get back to you on that..

And, Umer, regarding TYK2, I think you pointed out, this is a compound that we're extremely excited about. As you know, it's a drug which looks like it has activity both through the Type I interferons as well as the IL-12/IL-23 pathways.

We were delighted to see the data that we saw in psoriasis and we look forward to seeing those Phase 3 trials continue to mature. We also think this is an agent that could have benefit in inflammatory bowel disease and we're beginning studies in inflammatory bowel disease in that setting. We do have a Phase 2 study in lupus, which is appearing.

I think one thing to keep in mind with lupus is, how challenging of a disease lupus has been. And I think we saw that this year, with some notable shortcomings in other trials. It's a very difficult disease to treat. It's also a very heterogeneous disease in terms of what defines the disease and what drives the disease.

And so the purpose of the steroid taper is to be able to have a more objective look at the potential for the benefit of TYK2 versus the potential for the benefit of the steroid interaction. So it's really trying to reduce the number of variables that are present in an inherently variable disease..

Thanks, Umer.

Sandy, can we go to our last question please?.

The last question comes from David Risinger at Morgan Stanley..

Great. Thanks very much. I have two questions for Tom please.

First, could you guys talk a little bit about similarities and differences between Part 2 of 227 and 189 and talk about your placebo expectations? And then second, with respect to adjuvant trial readouts could you just go through a little bit more specifics on the potential for the timing of some of the other trials that you highlighted as most important? Thanks very much..

David, thank you and a couple of things to start off with Part 2. So Part 2 is -- I guess, the biggest difference is the histology. Part 2 is an all-commerce histology. 189 is a histology that's driven by nonsquamous cell.

The interesting issue on the placebo arms we have noted for some time that the performance of the placebo arm at 189 was particularly poor, which I think led to a very extremely positive hazard ratio in that setting. I don't know what our placebo arm will -- how our placebo arm will perform in Part 2.

Obviously, we look forward to seeing what that is and to seeing what benefit we can provide to patients in that setting. I do think it causes some caution then in looking at hazard ratios as a way of comparing across trials.

One of the things I always like to think about when I think about what makes a trial effective or what makes a treatment effective is, really to look at landmark analysis, how many of the people you treated.

And this is really the way that doctors think, how many of the patients you treated are -- have not progressed a year later or still alive, three and four years later. That's much more relevant. Patients never ask doctors what a hazard ratio is and what the hazard ratio will be with this given treatment.

So I think that's something important to keep in mind when we look at the data from Part 2 and again when we look at the data from 9LA. Regarding the timing of readouts, I can give you some estimates at this point. Remember, we're pretty far away.

These are event-driven, so I think you have to be a little bit cautious about putting too much into the specific time line. I mentioned the melanoma trial earlier that I was very excited about. We think that's going to read out second half of 2020. And -- but remember, that's a 2,000-person trial. So the readout could be quicker. It could be later.

Again, event-driven trials. And in the adjuvant setting, the events obviously take longer to develop. In our Muscle Invasive Bladder Cancer, that's also second half of 2020. In our renal cell trial that I mentioned, that's the second half of 2022, at that point.

And I mentioned our hepatoma, we have -- in hepatoma we have a 500-person randomized adjuvant trial, which reads out in the first half of 2022. So that gives you the scale of what we're thinking about in terms of when these read out.

But again, I ask you to exercise caution, because of the size of the trials and because of the variability in readouts in those settings..

Thank you. Thank you, Tom. Thanks, everyone. In closing, this is a remarkable time for us at Bristol-Myers Squibb. We've had a strong quarter and importantly we've made progress with respect to the acquisition of Celgene.

We've maintained a strong focus on executing our strategy and driving the business forward and I'm really confident in the company we are building and the opportunities that we have ahead. Thanks everyone for participating in the call. Thank you..

This concludes today's call. Thank you for your participation. You may now disconnect..