All right. Welcome and good afternoon, everyone. Welcome again to TD Cowen's forty-fourth Annual Healthcare Conference, day two. My name is Tyler Van Buren, Senior Biotech Analyst here. For our next session, very pleased to have a fireside chat with Gilead, and from Gilead, it's my pleasure to introduce Andy Dickinson, Chief Financial Officer. Andy, thank you very much for being here.
Thank you. We're thrilled to be here again. Thanks for having us.
Of course. Before we get started, if you guys have questions, chime in or raise your hand, and we'll do our best to get them asked. To open, Andy, I wanted to start with Gilead's 2024 guidance and a high-level overview of the business, and perhaps you could elaborate on some of the assumptions behind the 5% year-over-year product sales growth, excluding Veklury, at the midpoint, and how you think this will evolve over the next few years.
Sure, yeah, I'd be happy to. So maybe just a little bit of background for the audience. Our guidance for the year for our base business, and again, we and most of our shareholders look at our base business. We have the world's leading COVID antiviral for hospitalized patients, where the sales are still very strong, but they fluctuate, as you'd expect from time to time. It's important for patients, it's important for us. But we tend to focus on our base business and base business growth.
The last two years, you've seen an acceleration, a re-acceleration in base business growth from Gilead, where we grew 7% and 8% respectively for the year, driven both by our market-leading, world-leading HIV business and virology business more broadly, as well as our emerging oncology business, which includes cell therapy and Trodelvy, an antibody drug conjugate for various forms of solid tumors. We've guided to 4%-6% growth this year. That reflects a normalization of growth in the HIV space. So if you kinda break the four to six percent growth in the base business, or 5% at the midpoint, as you highlight, into its pieces, the HIV business is still growing in all major markets. So if you look at HIV, first and foremost, it's HIV treatment.
In most major markets, the HIV treatment market and business is growing 2%-3% a year in terms of volume. You still see an increasing incidence, unfortunately, of HIV across the globe. Obviously, in other territories, the growth is much higher than that, and then in HIV prevention, you see much higher growth. That market is still in its infancy. We've seen high-teens growth prior to that, 20% growth year-over-year. That market has been developing over the last 10 years, and as we'll talk about later, we believe is poised for a, a, you know, complete evolution over the next decade with the launch of an every-six-month subcutaneous product called lenacapavir by the end of next year.
So when you look at the growth, you know, a lot of it is driven by the HIV business, but, you know, almost half of it these days is driven by our oncology business. We have a $2 billion cell therapy business. We are clearly the global leader in cell therapy in hematological cancers today, but more broadly in the long run. And Trodelvy, our antibody-drug conjugate that targets Trop-2, is a billion-dollar product and also growing double digits. Both of the cell therapy franchise and Trodelvy, just like our HIV business, are unique in that they have a very long product life cycle.
So we don't have any major patent cliffs for a decade, which is an important point, especially relative to a lot of our peers, as many of you know, and our cell therapy business and our ADC product have very long product lives ahead of them. So it's an exciting new chapter for Gilead from our perspective.
It's a very helpful overview. During Q4, you guys experienced some weakness in HIV, so can you discuss some of those pressures that you experienced and when you expect them to reverse?
Sure. I would describe... We didn't experience weakness in HIV. What we saw was actually sales and it's a little bit- HIV market's a little more complicated. Our sales exceeded what we expected, so market demand was very strong, both in the U.S. and other markets. In the U.S., we saw some very large bulk purchases from some of the state ADAP plans. So these are AIDS Drug Assistance Programs funded by the federal government, run at all the states. Many of them do very large bulk purchases, and the price that they get is a very heavily discounted price relative to the price paid in either other government channels or the commercial segment.
So when we take the sales in the quarter and you apply the net price across all of the sales, it resulted in a lower realized net price for the quarter. This is not unusual in our HIV business. This has happened for, you know, the last 10 years, the last 15 years. It's unpredictable when these large bulk orders will come in. If you look at the HIV business on a rolling 12-month basis, or if you look at it on an annual basis, you see very clearly the growth year over year and the consistent growth and durable growth that we're both guiding for in 2024, but I highlighted earlier that we saw in twenty twenty-three and twenty twenty-two. So the business remains strong.
From time to time, we will have quarters where we have these large ADAP purchases. It will impact net price, but the fundamentals of the business appear to be very strong from our perspective.
Okay. I've gotten asked by investors lately about the HIV business and if we could see an inflection from it, despite the fact that it obviously is a large business. You spoke about some of the notable growth drivers, so why don't we just go ahead and get into it with prevention or PrEP? I guess with the PURPOSE 1 phase three study of every 6-month lenacapavir reading out in the second half, what do we need to see from that study for it to be successful and for you guys to be able to file for approval?
Sure. Maybe just to answer your first question, Can you expect to see an inflection in the HIV business? The answer is yes. I mean, in the second part of this decade, we expect not only lenacapavir approval for prevention, which is an enormous untapped opportunity, and I can talk about kind of framing that for investors. But, you know, at least three or four ofther treatment regimens should be approved between now and the end of the decade, including a daily doublet of lenacapavir plus bictegravir, our leading integrase inhibitor. Two once-weekly oral pills, one that's wholly owned, one that's partnered with Merck. And then, potentially the broadly neutralizing antibodies together with the lenacapavir, and there are other programs that may catch up as well.
In terms of the PURPOSE study for prevention, it's a unique trial design. So we're, we have two different ways of winning. So the primary endpoint is comparing the incidence of HIV over a one-year period from patients coming into the study versus the incidence at screening, and there's a very complicated mathematical formula. So this is called a counterfactual design. It's been used in birth control studies. This is what the FDA required, I think, appropriately. It's probably a good thing for us and for patients. But you monitor its screening for each of the two phase three trials, the background rate of HIV infection, and then there's a mathematical formula that converts that based on...
There's an antibody test that gives you a very with a high degree of precision, a sense of how long any of those individuals have been infected with HIV. You then plug all of that data into the mathematical equation, and it gives you an incidence rate for 100 every 100 patient years. And we will get the same thing with the treatment on lenacapavir for one year. So the primary endpoint is the incidence at screening, you know, with the formula calculated for 100 patient years of exposure versus the 100 patient years of exposure for people that are on the every six months subcutaneous lenacapavir. But we also have two very large arms in one of the studies, PURPOSE 1 , of Descovy, which is one of our two approved therapies for prevention, and Truvada, the other approved therapy.
The second primary endpoint is just comparing lenacapavir to Truvada. And again, for people in the room, it's important to understand that the oral pills that are approved for PrEP are incredibly effective. The data historically has shown that for people at risk of getting HIV, if they take the pills every day, they are 99%+ effective at preventing the transmission of HIV. The challenge is that people at risk of getting HIV don't tend to take the pills every day. In fact, many people on PrEP today take the pills intermittently or on demand. It differs obviously by individual, but also in different regions. So with the every six-month subcutaneous injection, you would expect to see a significant improvement in the real world over patients who are on the oral pills, just not because the medicine is more effective.
They're both gonna be incredibly effective, is our expectation. It's just that patients are not adherent to the therapy.
So, Descovy, which you touched on, is a $2 billion product, or almost $2 billion. Majority of that is PrEP, and you talked about potentially framing the PrEP opportunity. So maybe, you know, with compliance, extended treatment, you could kind of frame that all for us. How you think the PrEP opportunity could grow from the current, maybe $1.5 billion through the end of the decade?
Sure, yeah. The HIV prevention market, as I said, I mean, our first therapy was approved almost a decade ago, but it's, you know, it's been a market that awareness is growing, not only in the U.S. and globally. So, today, Truvada went generic three years ago. When Truvada went generic, and we had both Descovy and Truvada on the market for HIV prevention, our branded sales were about $2 billion in prevention. If the entire prevention market today, which is those two drugs, plus one long-acting entrant from another company, we would guess that the branded market today is about $2.5 billion-$3 billion. All of the market research that we and other companies in the field or the government does suggest that at most, the HIV prevention market is about a third penetrated.
The important thing to understand there is that when we talk about it being a third penetrated, that's based on a very rigid definition from the CDC, which describes the PrEP market as men who have sex with men and IV drug users. Just to put it in context, there's about 1.3 million people in the United States that fall into that definition. If, however, you think of the PrEP market as, and I'll use an example, all of the people in the United States that contracted a sexually transmitted disease last year, that's 13 million people versus the 1.3 million people. So, you know, the future of PrEP HIV prevention is probably much larger in our minds than the rigid definition from the CDC.
And again, we have the first phase 3 data reading out later this year for the every six month. We could have both studies this year. The second one will read out early next year, if not this year. We expect to be on the market by the end of 2025. And to put it in context, we see it as a very large growth opportunity. You know, if you look at Biktarvy for treatment, Biktarvy is a $12 billion drug per year and growing. It's not unreasonable to think that if you have a therapy that's like Biktarvy for prevention, which we think lenacapavir is, that it is an enormous opportunity on the magnitude of Biktarvy over the longer run as the market opens up. There are two other things in the prevention market that are worth thinking about.
One, the $3 billion of branded sales today, roughly, the entire market, commercial market, is basically in the U.S. today. The Europe and Asia are starting to open up the market, and we believe that the longer-acting therapies have a much higher probability of not only getting approved, but getting appropriate reimbursement in Europe and Asia. So the market, as it grows outside of the United States, is going to expand significantly from where it is today. And then secondly, you highlighted the compliance. The point I made earlier about most people at risk of getting HIV that take HIV prevention pills, they don't take it every day. Even the people that are being treated for HIV don't take their pills every day. They take it, you know, eight out of every 10 days on average, or something to that effect.
For prevention, it's much less than that. So you can imagine that just the market, if it's a $3 billion branded market today, and you quickly move everyone over to the long-acting therapy, the market will increase significantly in size, whether that's 30%, 40%, 50%, something within that range is not unreasonable based just on compliance, because you're getting paid for ensuring compliance over six months. So when you model it out, first of all, the benefit to people at risk of getting HIV is incredible, and the commercial opportunity for us and our shareholders is really exciting.
I guarantee no one has PrEP in their model the size of Biktarvy, so-
Right
-that'll be incredible.
Long-term vision.
Yeah, exactly. So, lenacapavir combinations for treatment. Obviously, that's coming behind PrEP, but still potentially just as interesting, could obviously be kind of the second half of your portfolio with Biktarvy in the future. So, you have multiple ongoing studies and combinations. What are you prioritizing? What would you highlight?
Well, I think what I'd highlight, first and foremost, is that we have nine different partner agents for lenacapavir. So again, lenacapavir, the molecule that I was describing that's being studied in prevention, is a novel oral capsid HIV capsid inhibitor. It's already approved for treatment in highly treatment-experienced patients. It's such a potent molecule. Again, we've already formulated as a once-daily pill, a once-weekly pill. We could do a once-monthly pill, every three-month subcutaneous injection, every six-month subcutaneous injection. The challenge is finding. For treatment, you need at least two different molecules that are attacking the virus with different mechanisms of action. The challenge is finding a partner agent for it. We have nine different partner agents in either late preclinical or clinical studies. I think of the six are in clinical studies, three are in late preclinical studies.
8 of them are wholly owned. One of them is a, a partnership with Merck that is also exciting. So what do we expect? I mean, I, I would expect that, from the long-acting portfolio, you see at least three approvals between now and the end of the decade. If you get to the every six-month subcutaneous injection for treatment as a combination, that's the Holy Grail in terms of really fundamentally shifting a very large portion of the HIV treatment market to that. Even the once-weekly pill, though, is something that a very significant number of patients would be interested in moving to, assuming that the efficacy and safety is as good as Biktarvy, which is not unreasonable. So I think at every step, and a, and a once-monthly pill is a much bigger opportunity than a once-weekly pill.
I would say right now we have very clear line of sight to the once-weekly pills with both the wholly owned program. With GS-1720, we just presented some data at CROI, if I remember correctly, on Saturday, on that program, our phase I. This is a wholly owned integrase inhibitor, which is the, the backbone that most KOLs are looking for. We're moving into phase II with lenacapavir, and we'll quickly then, we expect, move into phase III. The data with islatravir gets presented either today or tomorrow. I think it's later today. No, it's tomorrow. Sorry.
And then we have, you know, a line of sight on the once-monthly pill and integrase inhibitor that should be coming in as well as, we'll have some data later this year on some of the long-term, long-acting injectable programs as well, and I think two of those are integrase inhibitors, if I remember correctly. One other thing I should mention that people kind of lose sight of in HIV treatment is we have a new daily doublet, which is lenacapavir and bictegravir. I mentioned it earlier. So again, bictegravir is our world-leading HIV integrase inhibitor that is one of the centerpieces of Biktarvy. You know, that daily doublet is we have our phase II data, which is being presented, moving into phase III.
That's a big opportunity, potentially as well, especially for that 7%-9% of HIV treatment patients that have resistance to other known mechanisms of action. So, we don't see a lot of people thinking about that or including it in their model, but when you think about the growth of the HIV business and the inflection in the HIV business through the end of the decade and beyond, that's another piece of it that we think is important.
Okay, great. Let's move to oncology. Is the plan still for a third of revenues through the end of the decade to be oncology?
Yeah, that's still the plan.
Okay.
Again, we're in the middle of doing our long-range plan, so we'll have a sense of where we are. I think the reason Tyler's asking the question is we had some Trodelvy data in second-line lung that we presented a couple of weeks ago that didn't turn out the way that we expected. Trodelvy still looked really good in the study relative to the standard of care. It looked better on every measure, and we look forward to sharing the clinical data in the coming months. But in fairness, it didn't hit the primary endpoint of overall survival, and the difference was not clinically meaningful. So there was a set of patients, about a little over 60% of the patients in the study, that didn't...
That progressed rapidly on PD-1 and didn't have an adequate response to PD-1 that did really well on Trodelvy. And again, we haven't, we've said it, greater than three months survival benefit, I think, is what we said, and we'll share the data again as soon as we can. That actually kinda matches some of the emerging scientific literature on Trop-2 correlation to patients. That Trop-2 expression is highly correlated. The higher Trop-2 expression is correlated to patients not doing well on PD-1 therapy. So many of you have probably been following that, and over the last year, there have been a wealth of scientific papers talking about that. So again, it's very clear to us that Trop-2 is an incredibly important antigen. We think we have a really unique Trop-2 product. We're already approved in three indications, two breast cancer indications and bladder cancer.
We have a broad set of studies underway, and it's also fair to say that in lung cancer, in the second line, the opportunity in front of us is less than we were, we believed it was, you know, certainly, over the last couple of years. But we're excited nonetheless.
Yeah. 60% is still not too bad.
Yeah.
But the correlation is interesting with PD-L1 and Trop-2. But, with the EVOKE-01, when might we be able to see the data from that supporting potential next steps?
I think it's, I mean, we're trying to get it out as quickly as we can, as you can imagine. We're also meeting with the agency to determine whether there's a path forward without doing another study. I would say, you know, the data at no later than ASCO would be my expectation. So the question is, can we get it done before ASCO? But we'll see.
Got it. And then, EVOKE-02, we're gonna see an update there that could potentially give us more confidence around frontline plans. So what should we expect from that?
Well, I think it's just more patients and longer data. I mean, we, you know, we have a lot of confidence in, in Trodelvy overall. So EVOKE-02 is also giving us the data on, that maybe helps with the frontline, in particular, non-small cell lung opportunity. We already have EVOKE-03 running, which is a Phase III study in PD-L1 high, first-line, non-small cell lung. So that's a longer-term opportunity. Again, every which way, if I just step back and we look at Trodelvy, as I mentioned, it's a billion-dollar drug. It's growing rapidly. Trop-2 is an incredibly important target. We believe there's lots of different ways to win. You know, we spent, as you know, it's a, a big investment in, in Immunomedics, three and a half years ago. We still believe that we're gonna get an attractive return for investors.
The best analogy I'd use is when we bought Kite 6.5 years ago, 3 years ago, people were still questioning the Kite investment. Today, the vast majority of investors, like us, love cell therapy, both for what it's doing now and the potential over the next 20 and 30 years. We're clearly the world's leader in cell therapy. It's an incredible growth business, and we're just scratching the surface in where we can go, let alone in hematological cancers, let alone, sorry, outside in immunology and neurology, potentially, and other areas, maybe virology. We think the same thing. I...
You know, my expectation is that two or three years from now, you and I are sitting here talking about Trodelvy, and people will have a greater appreciation for Trodelvy in terms of the total revenue, you know, relative to the purchase price for Immunomedics. Remember, again, as I said earlier, both Trodelvy and cell therapy have very long durability in our models in terms of the difficulty of biosimilars, the IP protection that we have around them. These can drive value and growth for many, many years to come.
Yeah. I mean, as far as I'm aware, there's no pathway anytime soon for cell therapy biosimilars, right?
Mm-hmm.
It's as long... Unless you start giving away your secrets, no one's gonna be able to copy it. But cell therapy, Q4 did experience some weakness. Can you talk about that and when you expect it to reverse?
Sure. I mean, I think you have to frame it with the cell therapy business overall is really healthy and growing. In the United States, there are some temporary headwinds that we've highlighted, that are very different than Europe. So maybe start with Europe and outside of the United States to frame kind of where we see the United States going in the long run. Remember, the cell therapies, we have data that shows an incredible overall survival benefit for patients, both at later lines, but also in second-line DLBCL, if you look at the ZUMA-7 study. I mean, this is like groundbreaking data in terms of the benefit for patients. In Europe, that data has led to pretty significant uptake of the cell therapies as a class.
So in second line plus DLBCL, in Europe, you see approximately 30% in growing class share for cell therapies. And again, it's early days. We always believed, even when we did the Kite acquisition, that cell therapy would grow over a very long period of time as people get used to both using them, managing them, manufacturing them. In the United States, it's approximately 15%, so half of that or even less. And so, you know, and what are the reasons for that in the United States? There's really two things. One, if you look at the academic centers and the large hospitals, that's where 20% of the patients are today, and that's where basically all the cell therapies are being used.
So to put it in context, our $2 billion in revenue in 2023 was really only for patients that are in the academic centers and the large hospitals, and only 15% of the patients in those academic centers and large hospitals that should get the life-saving therapy are getting a life-saving therapy. The question is why it's different in every hospital. Some of them are experimenting with bispecifics, even though, as I understand it, they don't have overall survival data yet. Some of them are actually using clinical trials. It's, it's hard to understand why you'd do that in the face of the overall survival data that we and others have. And then the other issue is that with the BCMA cell therapies coming on, some of the hospitals don't have enough transplant beds. That will resolve itself.
All of these things will, in our minds, take care of themselves over the rest, you know, certainly, we should start seeing a re-acceleration in the U.S. in the back half of this year, and our long-term vision for where we're going in the United States hasn't changed. Then, if you kinda shift your focus over to the 80% of the patients in the United States that are in the community, there's very little cell therapy being brought to the community. So we've started a new initiative in the last six months, last year, to really bring cell therapy to the community.
It's gonna take a while, but we're partnering with some of the larger community oncology groups, including one in Tennessee, that I think has 30 or 40 offices and 2 hospitals that they work with, where we're pioneering kind of how we bring cell therapy to the community. I think we're working with a group in Florida and another one in Texas, if I remember correctly. It's gonna take a while to get there, and when you look at the incredible data from cell therapy, we're, we're comfortable and, and confident that you're going to see penetration of cell therapy, and that second-line plus use of 15% is going to increase significantly over time.
Okay, that's helpful. To round out cell therapy, I want to talk about anito-cel or Arcellx. A great deal, in my opinion. The data at ASH looked really good. They've got iMMagine-1 pivotal data by the end of the year. How prepared are you guys to launch that product? Where are you on the manufacturing front as we think about a potential launch by the end of next year?
Yeah. No, we're prepared. I mean, as you can imagine, we have the world's largest cell therapy business. We have an incredible commercial organization. We have, you know, 420 treatment centers that we work with globally. You know, we have Kite Connect, which is this unique proprietary platform that connects the patients to the hospital, to the... There's a care coordinator that coordinates the apheresis and the delivery of the cells. You know, the Kite team has done an incredible job on kind of the both the commercial model and the commercial logistics, as well as manufacturing. But we're ready to work with our partner to bring this to market as soon as it's approved. So you're right.
The current study, which is kind of similar to ZUMA-1 for Yescarta, it's, you know, a large phase 2 study that could be registrational. We'll have the larger dataset later this year. As you know, the earlier data that's been shared is really exciting, both in terms of the efficacy profile as well as the safety profile, both of which appear to be differentiated relative to Carvykti, which is the currently leading BCMA cell therapy. And this is a really big opportunity, right? Everyone understands how big the BCMA market is. You just have to look at Revlimid or Darzalex in terms of their uptake. And you look at the efficacy of the cell therapies, they're astounding, to be used kind of after some of the existing therapies. So we're really excited.
On the manufacturing side, the same thing is true. I mean, we have over 1 million sq ft of manufacturing space at 3 different manufacturing centers globally. So we made these investments after we acquired Kite, and we had the vision of where cell therapy was going. Kite had built out a beautiful manufacturing facility just south of the airport in Los Angeles. We built another one in the Netherlands, and then we built one on the East Coast in Maryland. All of them are up and running, and all of them have additional space to build out additional manufacturing suites. So the interesting thing with manufacturing is we're getting better and more efficient at it every year. This year, we just made the announcement that our turnaround time in the United States, in agreement with the FDA, has been reduced from 16 days to 14 days.
And remember, when we bought Kite, it was well over 20 days, and many of our competitors still have 40+ day turnaround time. So, you know, if we apheresis your cells, you know, we treat the cells with the viral vector, we grow the cells, we reinfuse them within 14 days, ±, with 97+% reliability. It's completely differentiated, at least today, versus the other competitors in the space, and all of that is available and ready to plug in Arc ellx and anito cel product. For right now, we're still- they're still manufacturing with Lonza. They have an agreement with Lonza. We can also use the Lonza technology. They have an encapsulated manufacturing system. We can also move it to our system over time.
We're making progress and absolutely confident that both on the manufacturing side and the commercial side, we're well, well prepared for early approval.
Sure. Now, CymaBay, we have to get to that recent acquisition or acquisition announcement. Why are you so excited about that acquisition?
Well, it's a perfect strategic fit for us. So I have to say that the deal's not closed yet, so it should close in the coming weeks. We've filed the tender offer documents. But, you know, just at a high level, it's a perfect strategic fit for us. This is a novel therapy for PBC, which is a cholestatic liver disease that affects about 1 in every 1,000 women. So there's, by our estimates, 130,000 patients in the United States, similar kind in Europe. This is a large orphan disease. I came from a company that was in the PAH space at one point in time, and I remember people thought about PAH a long time ago.
It's roughly the same size, and this is a big opportunity, and the clinical data is incredibly strong. So, you know, you look at the ALP level of, as a, as a proxy for kind of what, what you're doing to heal the liver, for lack of a better description as a CFO. The, and, and we also look at... One of the main, you know, symptoms of, of PBC is this incredible itch or pruritus that is maddening for, for patients. And, it causes patients, they can't stop itching, they can't sleep at night. I mean, it really is a huge problem. There was one drug that was approved a handful of years ago that actually makes itch much worse. It also had other issues, related to it from our perspective.
You know, this our drug not only clearly normalizes the ALP in the liver and the liver enzymes generally in the liver. It also significantly reduces itch in a statistically significant manner. So, you know, the drug is on file with the FDA. We expect approval no later... I think the PDUFA date is August, if I remember correctly. Approval should come at that time, if not earlier, and we're really excited about it. I think it's probably an opportunity that the world, we believe, will grow to appreciate. And there's plenty of case studies, if you look at again these other orphan diseases that people probably didn't understand or understand the size of the opportunity. We're really excited about it.
I should also say that our commercial organization, we're the world's largest liver disease company. As many of you know, we have three, or actually many more therapies, but, therapies for three areas: hepatitis C, hepatitis B, hepatitis delta. And 80% of the physicians that we cover with that existing commercial organization treat PBC. You know, so this slots perfectly into our commercial group. This is a disease that we followed and a company that we followed for years, so there's a lot to be excited about with the CymaBay acquisition.
Great. We're up on time, but, briefly to wrap up, maybe just, what do you think is the most underappreciated aspect of the Gilead story by investors?
I think it's the totality of the portfolio, but in particular, the opportunity in HIV prevention is large and underappreciated. So, more to come.
Fair enough. Thank you.