Colin Bristow - Bank of America Merrill Lynch Tim Anderson - Sanford Bernstein Jami Rubin - Goldman Sachs Seamus Fernandez - Leerink Steve Scala - Cowen Mark Schoenebaum - ISI Group Vamil Divan - Credit Suisse Chris Schott - JPMorgan Jeff Holford - Jefferies Marc Goodman - UBS Alex Arfaei - BMO Capital Markets

Good day and welcome to today’s Second Quarter 2014 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the call over to Mr. John Elicker, Senior Vice President Investor Relations and Public Affairs. Please go ahead, sir.

Thanks, Aaron, and good morning everybody. Thanks for joining the call to review our Q2 results. Before we get started, let me take care of the Safe Harbor language. During the 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 on our website. With me this morning, we have Lamberto Andreotti, our Chief Executive Officer and Charlie Bancroft, our Chief Financial Officer. Both Lamberto and Charlie will have prepared remarks, and then joining for Q&A Francis Cuss, our Chief Scientific Officer and Giovanni Caforio, our Chief Commercial Officer. Lamberto?

Thank you, John. Good morning everyone. Well, we just completed another good quarter of Bristol-Myers Squibb, good in terms of financial performance and good in terms of clinical results and regulatory milestone. Overall, revenues were 3.9 billion, a 7% increase over the last period excluding the diabetic business that we still had in the second quarter 2013. We delivered strong growth of our key products in particular of Eliquis and Yervoy. For Eliquis, we continue to execute against our strategy to clearly capitalize on a differentiated and unique profile. And we continue to improve the persistent trend generated by the increased resources, we and Pfizer have been devoting to direct-to-consumer advertising in the U.S. and to sales force expansion and peer-to-peer medical education activities in all countries. We also make good improvement in access, and the level of Eliquis is expanding beyond atrial fibrillation. We just received a positive recommendation for approval in Europe for the treatment of recurrent DVT and pulmonary embolism and subsequent approval the final registration should be formalized in August. The same indication is under regulatory review in the U.S. Yervoy also had a very strong performance this quarter. Best quarter ever with $321 million in sales, a 38% increase over the last period. We continue to see strong demand worldwide. As we advance and expand our immune-oncology leadership position, we continue to view Yervoy as an important component of our strategy both in mono-therapy and in combination regimens. With respect to other regulatory developments, the big news this quarter was our recent Japanese approval of our hepatitis C dual regimen, daclatasvir and asunaprevir. Because of significant development for the 1.2 million hepatitis C patients being in Japan, many of whom currently have no treatment options. It was also significant for our company for Bristol-Myers Squibb.…

Thank you, Lamberto and good morning everyone. Overall, we had a very good second quarter with strong growth across most of our key brands. Let me provide a few highlights. Eliquis sales were 171 million. As Lamberto noted, our continued investments are building momentum for Eliquis around the world. In the U.S. net sales for Eliquis were 94 million up 54% from the first quarter. Our new to brand share among cardiologist has grown nearly eight share points since the start of the year. Outside the U.S. net sales were 77 million up 71% from the first quarter. In addition to Germany where Eliquis used to remain strong we are seeing robust growth elsewhere in Europe, especially Italy and France following recent launches there. We are also seeing very good growth in Japan. We continue to make progress in broadening our label, we launched our Ortho indication for deep vein thrombosis in the U.S. in mid-April and expect regulatory decisions for BTE treatment in the U.S. by late August and in Europe by the end of the year. Yervoy sales grew 38% to 321 million, U.S. sales were 173 million, Yervoy’s best quarter since launch. Sales outside the U.S. totaled 148 million led by market such as Germany, France and just recently the U.K. where we have reimbursement in the first blind study. We also reported strong sales in Australia, Brazil and Canada. Driven by our execution in the markets we are seeing increased awareness about immunotherapy and more community oncologist prescribing Yervoy for the first time. Orencia sales increased 14% to 402 million. Orencia had a solid quarter due to higher demand in the U.S., Canada and South America. Orencia SubQ has growing 60% worldwide since the same quarter last year and 18% sequentially from the first quarter as…

(Operator Instructions) Although, first the Colin Bristow with Bank of America Merrill Lynch.

Just a little more on the business develop priority front, given the increasing competition in the IO space and how leveraged you are to the story, has this changed your appetite or how you’re thinking about doing deals within IO versus diversifying into other therapeutic areas? Number two on Eliquis, congrats on the results this quarter; can you just give us a little more color on what’s going well, whether there is still room for improvement? And then just finally if you could just give me a bit more color on what we should expect from you between now and yearend in terms of data readouts and any color around as international would be helpful? Thanks.

Okay a few questions. Let me start with BD and I don't know Charlie if you want to add something to what I am going to say, but on BD, the criteria that Charlie mentioned in his remarks apply to both immuno-oncology and other areas. So to answer your questions, we’re looking at opportunities in both immuno-oncology and other areas, and the concept is always -- the goal is always to add things that make our overall portfolio stronger which is a selective integration of external R&D and internal R&D.

Anything I would add in regard to IO, we are pioneers in this space. We have a lot of assets. We have deep knowledge and great scientists. So, we tend to be a strong partner of choice within the IO space and we will continue to look for deals in that area that makes sense that meet our criteria. And we continue to at look at ideas across the spectrum outside of IO. As you know, we signed the iPierian deal earlier this year which is one indication of things that we’re looking at.

So let’s move to Eliquis, we always note that the strength of the Eliquis clinical data is really unmatched among the novel anticoagulants, and we are glad that this strength is increasingly understood, and it’s increasingly appreciated by physicians. And the (dataset we have generated in a team) [ph] is clearly being reinforced as we bring additional indications to the market. Do you want -- Giovanni do you want to say a few more things about or few things about [indiscernible]?

Yes, thank you and good morning. So we indeed had a good quarter with Eliquis. In the U.S., we had a very good quarter in key international markets and I’ll make a couple of comments about both areas. In the U.S. we saw good progression and trends with a 40% increase in NBRx volume and a 50% increase in TRx volume versus the previous quarter. Interest in notably in cardiology which is really our area of primary focus, our NBRx share grew to 38% but interestingly we also started seeing really good trends and progression in primary care where our NBRx share grew significantly to 28% versus the previous quarter. What’s driving our performance in the U.S. is really first what Lamberto mentioned the strength of our profile and our clinical data, second, solid execution of our strategy and I'll point to a few things. First, we clearly have set an objective to continue to strengthen our access position and in the second quarter we were able to continue to make progress with formula relisting of Eliquis in now over 90% of our target hospitals. Second, on the access side, we were able to add a preferred status with approximately 20 million incremental license in the U.S. we had good success with Caremark and well point and now we have very strong preferred access to the tune of about 60% on the commercial side and 80% on the Medicare side. And this obviously is a development that will continue to generate growth going forward. We have very competitive investment levels in the U.S. and leading share of voice in cardiology and primary care and we continue to make investments in medical education and in DTC advertising. Thinking about the U.S. as Lamberto mentioned, we had an ongoing file with the…

Good morning Colin. We have an exciting second half of the year in terms of data flow. We have the O-63 results [indiscernible] results coming up with the multidisciplinary symposium in forensic oncology in October. We are very excited about our hematological malignancy data in both non-Hodgkin's and Hodgkin's lymphoma which we would be presenting at ASH in December. We clearly have data coming in house for O-17 and O-57 and during the next few months O-69 and as far as the CheckMate 37 and CheckMate 66 in melanoma, we are talking at the moment to our investigators to determine exactly our presentation and publication strategy but we are very excited about the data and we are looking forward to sharing that with the medical community over the next few months.

Okay, Aron can we go to next question please.

Yes, sure we will go next to Tim Anderson with Sanford Bernstein.

Thank you, couple of questions please. Last quarter when you announced the plans for rolling submission with needle online there were lot of questions about additional data FDA might want to see and that sort of thing and it felt like there wasn’t much that you could say at that point but here we are three months later I’m wondering if you have any new information you can share. And then a separate question is kind of going back to M&A, in terms of target sizes that Bristol is considering, I’m wondering if you can bracket those for us, some companies have said that they will only be pursuing small bolt on targets I don’t think Bristol has ever really used that language and related to this topic is tax conversion, realistic possibility for something that you may be seeking in any potential acquisitions?

Good morning Tim. Let me say that risk rate, we have started the rolling submissions we expect to complete it by the year’s end. The base is all the submission is O-63 data but as you appreciate there is substantial data that will share during the second half of the year that would be available to the FDA but beyond saying that we've had regular and productive discussions with the FDA, I won’t comment further on our regulatory timing or our strategy. So about five M&A to a never made statements about small size being our target and we are not going to make it today, so we continue to use the criteria that Charlie described and looking at different sizes of opportunities. And going back again to the criteria that Charlie described, financial criteria including that criteria is important, but for us technology products are important and therefore tax inversion per se is not an individual target that we are going after.

Yes, I mean, I would just add that while we do understand the rationale for tax inversion strategy including the potential tax rate improvement and increased balance sheet flexibility. There are several things from our perspective that we would consider, and one is our tax rate is already low on a relative basis, two, future legislation is unclear and hard to predict in this area; and three as Lamberto mentioned tax is not the primary driver of our M&A strategy. I mentioned our criteria in my remarks and I would say that only transactions that fit all three we would pursue.

We'll got next to Jami Rubin with Goldman Sachs.

Thanks you. Francis, there is a couple of questions. Your plan to file nivolumab this quarter for previously treated advanced melanoma, is there an opportunity to seek a broader melanoma label and then it seems you have additional from your earlier Phase I trials that could support a broader label. And secondly on CheckMate-069 which I think you briefly mentioned that’s the combination Phase II study, my understanding is that, that trial is expected to end this month and that you’ll have access to that data, is there an opportunity to use that data to supplement your Phase III melanoma trial to include the combination? Thanks.

Okay, you asked the question to Francis and Francis will answer the question. I just want to ask Francis also to speak about European submission because Jami you’re referring to the U.S. submission, but the news of the morning is that we are filing this quarter also in Europe and the CHMP gave us accelerated review status for our submission. Francis?

Thank you, Jami. Good morning. So first of all, let me talk about our submission in previously treated melanoma both in the U.S. and in Europe. In the United States, the basis of our submission is the CheckMate-37 data. And while the 066 data, we believe is very important, as you appreciate, this was a study that was characterized and designed together with the CHMP. It was conducted in Europe and Canada where the comparator was first line therapy. It is very striking that it shows a survival benefit against the comparator. And of course we will be sharing with the regulatory authorities because we do believe it’s important. As far as Europe, the basis of that submission in the third quarter will be the CheckMate-37 and the CheckMate-66. And then you mentioned about CheckMate-069, we don’t have the data. As I said, we’ll be getting the data in-house in the next few months. I think it’s premature for me to speculate what we will do with that data until we have it and we see what it is. Thank you.

We'll go next to Seamus Fernandez with Leerink.

Thanks for the question. Actually I have a couple of quick questions. First off can you update us on trends in the HIV market and what’s happening specifically with Reyataz? We're seeing some fairly precipitous declines in Reyataz sales and just wanted to get an update on what your thoughts are on the market there particularly considering that product runs out to 2018? And then separately, as we think about the -- I just wanted to clarify a couple of things, CheckMate-057 the non-squamous, non-small cell lung cancer study, Francis, I believe you said that 057 could have data in-house towards the end of this year, is that an interim look at 057 and I know that it's event driven, but is that an interim look at 057 or is this actually the final look? And could that be something that actually occurs next year? And then my last question is, we just noticed on ClinicalTrials.gov, you did initiate an expanded access or a program with the combination of Yervoy plus Opdivo in melanoma, just wondering how that expanded access program works into your long-term strategy in melanoma, is this designed to really educate more physicians or is it going to be rolling out with the same clinical trial sites. Thanks so much.

Seamus, this is Giovanni. Let me just take the question on HIV first. Obviously this is a market where we have strong presence, we have over 35% of all the markets through regimens and it is a very competitive market where we've seen the entry of a number of new competitors that are impacting the dynamics and trends there. With respect to Reyataz, we have seen a decrease in our volume and TRxs in the U.S. are down 8% in the quarter versus previous year. That’s driven really by two factors, its driven by the launch of new STRs and the increased penetration of STRs in early lines and the night setting where the share of Reyataz has traditionally has been quite strong and also it’s been driven by an acceleration of the growth of integration inhibitors. We obviously have a number of programs in place to continue to support our program we just point to the U.S. filing for our FDC of Reyataz and Cobicistat we think that’s a meaningful opportunity. It under review of the FDA and obviously we're very focused on that. Outside of the U.S. we see some similar trends in Europe but also I would say that year to year comparison for the international business which is down 16% versus prior year are really impacted by timing of significant tenders in our business in Brazil that are impacting both the Q2 to Q1 comparison and substantially the comparison to previous year.

Thank you, Seamus. Let me just say that the O-57 non-squamous study, it is as you say an event driven study the timing of which is around about the end of the Eliqus does depend a lot on the events and as you appreciate as patients go longer and hopefully get more survival benefits, the exact of that depends a bit on what’s happening in the study but it is an interim analysis. As far as the EAP for the combination is concerned, as you noted that is now open, its CheckMate-218 and it is the combination of Opdivo and Yervoy in untreated melanoma patients and that of course is to try and meet the need of patients following the excitements around the CheckMate four days that was presented at ASCO and the unprecedented prolongation of survival in that exploratory study. I do want to add however that in addition to the last question about O-69 there is also we have O-67 CheckMate O-67, which is a phase III study in combination, there is a big focus for us in the combination because we think it has the potential to offer unprecedented not just duration but increase the number of patients that might have benefit. That is a phase III study comparing Yervoy, Opdivo and the combination primary end point of [indiscernible] like most of our phase III study has the optionality to look at shorter end points. So, EAP program is part of just a broader approach to both monotherapy and we think importantly combination therapy. Thank you.

Yes, so we'll go next to Steve Scala with Cowen.

Thank you, I have three questions. First, Bristol typically announces NDA acceptances and not filings. So, assuming that it is ultimately accepted, you anticipate telling us that the NDA for nivolumab in previously treated advanced melanoma has been accepted in Q3, implying the filing is very near term given the 60 days spread between acceptance and filing? So that’s the first question. Second, sorry if I missed it but is Bristol still on track to initiate the phase III trial of Nivo plus [indiscernible]. And then thirdly, when we think about the O-17 trial and the severity of patients enrolled, how should we think about the survival in the docetaxel arm. Recent trials with [indiscernible] people have shown docetaxel delivering overall survival of nine months yet the label says four to eight, any perspective or color would be appreciated. Thank you.

Hey Steve, it’s John. I'll take the first question. We usually do like you know when we are planning our submissions but our formal communication with the press release you are correct is when we issue a press release just when those filings are accepted so the next you'll hear from us on the U.S. filing is when that filing is accepted.

Good morning Steve. So, first of all let me say that the CheckMate 12 study is ongoing and is informing us with in house data about the design for a potential upcoming study in lung in the combination of Opdivo and Yervoy and I will say it’s informative and we are still on track to initiate that study before the end of the year. As far as the O-17 study, I think you have to be careful, we all have to be careful about comparing different patient populations in different studies because it can often be misleading. So for instance you brought up the example of the REVEAL study. And I think in the REVEAL study the patient population that is normally contraindicated for angiogenesis therapy was actually not included in that study. That was about, we believe about 25% of the lung cancer population has a lower functional ability and might well explain if that's excluded why Docetaxel actually look better in that study. But I think the general message is we are comfortable with the population we have in the 017 study, we think it’s a good population to represent the potential we believe Opdivo has for prolonging survival and showing overall survival in lung cancer. Thank you.

Yes, sure we will go next Mark Schoenebaum with ISI Group

The first one, you really hadn’t had we tend to get all the attention at (CEBIT) [ph] looks like you will be major player in the U.S. market within a year or so. So I was just wondering if you could in some kind of a general sense talk about your philosophy on using price to compete in the hepatitis C market if that’s possible? Second question please if I may is I believe you’ve talked a little bit about publically now about the statistical techniques being used in the squamous second line nivolumab trial that may increase the probability of detecting a signal [indiscernible] that is increasing the probability of success. Perhaps you could explain that to us what that statistical technique is and why it might enhance your ability to detect the late tail. And the third one is just very simple. You mentioned non-Hodgkin's lymphoma at ASH this year. Just wondering if you could tell us without -- obviously without any details in there but if you could tell us whether or not you think you’ve seen a convincing signal in NHO or not, that would be interesting. Thank you.

This is Lamberto. Giovanni will tell you a few things about our plan for FC, but it's one thing for sure that we'll not tell you is about anything about prices, Mark. It is clear that we will not disclose anything about prices until we reach the market and there is a lot of attention we are giving to this subject internally before we reach a final decision.

Yes, Mark, just a couple of comments, and this Giovanni. Just a couple of comments on hep C. So as we’ve discussed before we have clearly a global strategy in hep C that’s centered around daclatasvir as an ideal component of multiple regimens, but we also have in that context specific regional strategies and we’ve made progress across the board during the quarter. So obviously Japan is the number one priority for us because of the approval of the dual and the significant unmet medical need in genotype 1b patients in Japan. We are conducting as we speak pricing negotiations in Japan and we are confident that we will be ready to launch at the beginning of September and that clearly we see as a very significant opportunity for us. We received CHMP positive opinion for the use of daclatasvir in Europe in combination with multiple other agents and we believe that our opportunities in Europe with daclatasvir because of the existence of segments of the population of high unmet medical need that are particularly well suited to the use of daclatasvir in combination with sofosbuvir and potentially other agents and obviously we're getting ready to launch in Europe. And as you know, we do have an ongoing filing with the FDA for our dual regimen and we are -- we see that as an important event as well.

Good morning, Mark. I think there is elements to the analysis question and both of which have been much informed by our long experience with Yervoy. The first one is the timing of the analysis and the other as you say is the analytical model. Let me take the analytical model first of all. Traditionally, median overall survival is being used to measure the effects on the Kaplan-Meier curve. As we've shown with Yervoy, we are beginning to see now is Opdivo much of the benefits if you are looking for (durable) [ph] responses and overall survival is seen in the bottom part of the curve later on in the clinical trial. So we use the proportional hazard ratio to make sure we capture that survival benefit. Now the other issue of course is if you don’t wait long enough for patients in the study, you run the risk of missing that benefit, because you’ve analyzed it too soon. So again our experience here is very important both to understand the model and [indiscernible] the right time to do the study and of course that was why we moved back the indication of the timing because we are able to shift our model and understand how to do that. As far non-Hodgkin's lymphoma at ASH, let me make a general comment that we are getting increasingly excited about our portfolio in hematological malignancies, certainly in terms of Opdivo, you will be seeing data at ASH for non-Hodgkin's and Hodgkin's lymphoma. I think you have to make your own judgment about that, but what I will say is we were interested enough, excited enough by that data to start up mid stage studies, which I will say are recruiting very well. But we also have the combination study ongoing with Sprycel in CML. And of course we have our elotuzumab which again in multiple myeloma that gives us a real opportunity. So we're very excited overall about the expansion of our position in hematological malignancies. Thank you.

We'll go next to Vamil Divan with Credit Suisse.

Yes, thanks for taking the question. So just on the Nivo, you mentioned interim looks for 017 and 057, just my question is, are there futility analyses incorporated into those interim looks or can they only be stopped if there are clear signs of security for the activations? And then second one just one hep C, congrats there again the Japan news you mentioned, just you talked a lot about the near-term opportunity but just longer term, if you can touch on what you see as a longevity of the market. And do you see yourself being a player over the long-term in that space, and if so, do you need to do further investment in terms of maybe acquiring new or some other assets beyond what you’re have in your control right now? Thanks.

So, I do want to start with hep C. We consider virology as one area of focus for us in terms of our presence in HIV, our presence in hepatitis B, and our presence now in hepatitis C. And it is clear that we continue to look at opportunities also in that team that area. And I think I don’t want to repeat again but I will, but we have the [indiscernible] that Charlie mentioned before that if we keep in mind and they apply also to biology. Biology remains an area of focus for us.

All our large studies have data [indiscernible] committees in them who would obviously look at safety of the product and of course in the case of 066, they were looking to adapt and it turned out to be stop because Opdivo was actually superior. What I would say, and I think it’s a very important point is even though this in ClinicalTrial.gov says it’s an open study, we are keeping blind to this, so we do not see what is going on in the study and I think that’s an important point. Thank you.

We’ll go next to Chris Schott with JPMorgan.

The first one is, as we think up to the Opdivo launch next year in melanoma and lung, can you just help us think a little bit and frame this comparing and contrasting how you see this launch and its dynamics relative to we start with Yervoy in melanoma back in 2001, I am just trying to understand how you’re seeing those two launches comparing to another? The second question was maybe just if you can elaborate on some of your earlier comments regarding increased usage of Yervoy with community oncologist. Can you just update us a little bit in terms of the mix of usage you’re seeing here in terms of community versus the center is, maybe also a breakdown of frontline and second line? And then finally just a third quick one, 2015 expenses, is there any factor we should keep in mind as we're thinking about our model here. I guess specifically, should we think about a lot more in the way of SG&A as you prepare for the Opdivo rollout. I'm trying to get my hands around how you're thinking about spending going forward. Thanks very much.

With respect to the use of Yervoy today, I would say that we have approximately 40% share of the market when you look at the totality of the market, our share is significantly higher in the bit of well tight segment of the market where virtually all of our uses in first line and obviously our share is lower in the bit of mutant segment of the market where we see more Yervoy being used in second line. Thinking about the launch of Opdivo next year, in lunch and melanoma, I think there are a number of parallels to the launch of Yervoy because we have developed a really good understanding of how to affectively educate physicians in the community setting and in the academic institutions about the use of immono-oncology agents. We've been very successful in doing that with the Yervoy and clearly have developed the ability to do that when we launch Opdivo as well. There obliviously will be some differences because the prescribing population for lung for example is broader, it’s a larger number of physicians, they tend to be based more in the community versus melanoma and they have not had as much experience with immuno-oncology agents. So, we obviously will do the same thing we did in 2011 when we launched the Yervoy, we will begin to educate physicians on the value of immunotherapy options to long term survival opportunity and we will follow the same model. Within melanoma obviously prescribing physicians are very knowledgeable, they are prescribers of the Yervoy believers in the Yervoy we have a good organization in place that can begin to promote Opdivo when that is approved. I will just mention that obviously we are making all of the right investment, will increase the size of our teams and we are preparing actively for launch for Opdivo.

Just quickly on 2015 expenses as you know we don’t give out forward guidance but I would say though that we are committed to making all the right investments as we think about our business moving forward particularly as you think about IO and hepatitis C both on the R&D side and as Giovanni just mentioned on the commercial side. We also always are looking at where can we find savings across our P&L that really aren't directly focused on the areas that we think are going to drive long term growth.

We will go next to Jeff Holford with Jefferies.

Hi, thanks for taking my questions. So, the first one is just around 2015 earnings, see the consensus is looking for EPS around 171 next year, this is a 178 this year in consensus now. Given the repeated comments you'd be making regarding SG&A what you have already cut from behind Abilify, do you think consensus is fully appreciated these given the sell side models that you see? And secondly I just wanted to also ask because I haven’t really heard you specially talk about what you think Roche might be moving forward quite rapidly in the triple negative breast cancer segment with immuno-oncology with their PBO-1, is this an indication that you've looked at, and anything could be interesting for ipilimumab. Thank you.

2015 is a bit too early to speak about it and we will issue guidance as usual at the right time, so apologies but we'll not address your question 2015.

I think in terms of our ongoing studies Jeff, we have a lot of studies early on, triple negative breast but also in GASTRITIS, in terms of surely pancreatic and so on and so forth. So, we acknowledge there is a lot of medical need and a great opportunity to go through with it. So, we are looking at all of these and obviously we'll move stuff forward as we already have in the last few months if feel as a real opportunity there, thank you.

We'll go next to Marc Goodman with UBS.

Same kind of question a little bit differently, when you think about R&D and investing in R&D over the next couple of years obviously we're going to have the sales line starting to ramp up with IO and FC, so are you going to take advantage of that opportunity and increase R&D more or do you have feel like that mid-single digit growth in the next couple of years is probably appropriate? Second question is, can you just help us on the tax rate and how we should think about third quarter versus fourth quarter and the dramatic difference to kind of get to your 18th guidance?

I don’t know if Francis asked you to ask this question about if R&D budget for the next two years but for sure we will continue to invest in all opportunities we find. We're investing in we have done it for the last few years we continue to do it so, our idea is not to decide on R&D expenses based on the percentage of sales that we can afford but on the value of our programs. You want to speak about that?

Yeah, I will just briefly on Marc, regarding the tax rate. Our tax rate is primarily a function of earnings mix but I would say for 2014 a big component is the R&D tax credit which hasn’t been extended yet by Congress. So, that’s why you will see fluctuation so through the first two quarters it doesn’t reflect the benefit of the R&D tax credit, will only reflect that once that legislation is passed.

We will take our final question from Alex Arfaei with BMO Capital Markets.

Good morning, thanks for taking the questions. Just a couple of quick follow ups, have you picked the dose for the Yervoy Nivo combo in the phase 3 non-small lung cancer you mentioned that, you are following CheckMate 12 but I am just wondering if they are closer to finding the right dose there and could you comment or elaborate a little bit more on the hep C opportunity in Japan with some more specifics, it looks like you have the market to yourself for about a year, if I recall some more advanced cohort of patients with greater unmet needs. So, if you give us more color on how we should think about that opportunity in the near term, it may be great. Thank you.

Alex, thank you very much. Basically as I said the CheckMate 12 is very informative, we are designing the study we are on track and I think you are going to read about the study design and the dose in ClinicalTrials.gov when it’s actually published. Thank you.

And with respect to -- this is Giovanni, with respect to the hep C opportunity in Japan, yes we are very focused on it, it is a meaningful opportunity. We are first in the market. The unmet medical need is very high approximately 1.2 million patients in Japan, 70% of them with genotype 1b. A population that is disproportionately elderly and intolerant to interferon in Japan. We are launching the dual starting from a very strong position because of our leadership position in hepatitis in Japan and the very high market share we have with Baraclude. That’s one of the largest markets around the world for us for that brand and we’ve made the right investments in order to have the right organization in place to launch. We believe that our dual is particularly well suited to address the unmet medical need of patients in Japan. As I said, we are negotiating pricing. Obviously, we will be targeting at the beginning those patients that are already being diagnosed, that are already actively seeking treatment. There is approximately 150,000 patients that are currently seeking physicians and are seeking a treatment option. There is a second segment of the population of approximately the same size which is also diagnosed but not actively being seen by physicians. That’s an opportunity for us as well and obviously in the medium term, the full population represents a significant opportunity for us as well, but we will be rethinking about the different stages of the launching very rapid sequence there.

Thank you, Giovanni. Well, again, we had a good second quarter, good in terms of financial performance as well as clinical results and regulatory milestones. We thank you for participating to this call and wish you a good day. Thank you.

Thanks Lamberto, Giovanni, Francis, and Charlie, and everybody for joining the call. As always, if you have any follow-up questions, please give me a call or (Randy or Ryan) [ph]. Have a good day.

This does conclude today’s conference. We thank you for your participation.