Good morning, everyone. My name is Dina Almondsched. I'm one of the biotech analysts here at UBS, and joining me on the stage is Andy Dickinson, CFO of Gilead Sciences. Welcome. It's nice to have you here with us today.
Thank you. It's great to be here at your first fireside chat. It's very exciting.
It is.
Thank you. We appreciate the invitation.
Of course. Maybe just starting off, obviously there's a lot going on on the policy front with the recent MFN news. Can you just give us maybe your latest thoughts on the topic, given Gilead's US Medicaid exposure?
Sure. Yeah, of course. This is a big topic, as you might imagine. What we said on our Q3 earnings call is that we're having ongoing, regular, and constructive discussions with the administration. We've always had a close relationship with the administration, regular dialogue, and with both members of the Senate and the members of the House. Our senior team spends a lot of time in DC meeting with these important stakeholders. In addition to just highlighting the fact that there's ongoing discussions and that they're constructive, we can say we're watching closely what other companies have done in the sector, which I think is important. Not all of these deals are the same, which I think recognizes that every company is in a slightly different position.
The administration has been very consistent in saying that they don't want to do anything to harm kind of the sector and innovation, which we think makes sense. I mean, it's an incredibly important sector in terms of the jobs that we provide. In addition to the medicines, we are clearly the leading country in terms of biotech and pharma innovation. We don't want to cede that to other countries. I think we also recognize as an industry in Gilead, like the administration, that the disparity between prices in the US and Europe needs to be addressed. Countries in Europe, in particular, but outside of the US, don't always fully recognize the value of the innovation that we're bringing, and that needs to change over time. Things are moving in the right direction, I think, for the industry.
With respect to Gilead specifically, we do have a higher percentage of our HIV business as Medicaid than some of our peers. On the flip side, we have lower tariff exposure than many of our peers. It is worth highlighting that the vast majority of our IP is in the United States. It is not domiciled offshore. There is less transfer pricing, meaning that for anything that is manufactured outside of the United States, the rate of tariffs would be applied to a lower value than many of our peers. We also have about more than 90% of our taxes are paid in the United States, which is important. All of our R&D, for the most part, is done in the United States. Finally, we recently highlighted a $32 billion commitment to the US in terms of R&D manufacturing investments that we are going to make over the next five years.
When you put it all together, we're having constructive discussions. We're comfortable with where we are, and we'll provide more of an update over time.
Okay. That sounds great. Talking through maybe the commercial business first, obviously HIV is a strong-based business, and you have the new launch of Yeztugo for PrEP. Where everyone is kind of closely watching this launch, maybe let's talk about how that launch is going versus expectations that you guys have maybe set for yourself internally. What were or maybe are the initial barriers to the adoption so far?
Sure. Yeah. Maybe if you just back up, for those of you that don't know Gilead as well, we have the largest HIV business, both for HIV treatment and prevention. We also have a large oncology business and a large liver disease business. The company is doing really well. When many of us joined in the last decade, the company had declining sales and a very small portfolio. We've systematically rebuilt the portfolio both internally and externally. We now have what we believe is one of the broader, deeper, and higher quality portfolios across the sector. You're seeing that with the launches that are underway. Over the last number of years, you've seen really strong growth in our base business, which is all of our business, excluding our COVID antiviral.
To put it in context, the HIV business, which is the lion's share of our revenues today, is now projected to grow 5% this year. That is with the Part D Medicare reform, which is about a $900 million headwind for the HIV business, a $1.2 billion headwind for our business overall. If you account for that, the HIV business would be growing year over year approximately 10%. It is really remarkable for that size of a business to be growing that much. A lot of that growth in HIV is driven by the HIV prevention business that you mentioned.
We just launched what we believe is a game changer for HIV prevention in Yeztugo, which is an every six-month subcutaneous injection that had incredible clinical data last year, has won numerous awards, and really elevated the awareness of HIV prevention broadly, not only in the U.S. and outside of the U.S. When you look at, and I'll get to the Yeztugo launch specifically, when you look at the PrEP business, we have an existing two-drug combination called Descovy that is the gold standard for HIV prevention prior to the Yeztugo launch. It's a daily pill. About 75% of Descovy sales are in prevention. Descovy grew 20% year over year in the third quarter. When you look at it, almost all of that growth came from the prevention side of the business.
Descovy, when you look at that, the Descovy business for prevention grew 32% year over year. You add in the Yeztugo launch, which is just underway, where we had $39 million of sales in the third quarter. The HIV prevention business grew 42% year over year. Extraordinary growth. Yeztugo is a huge piece of that, and it's the future. The long-acting prevention is the future. Yeztugo is going to be a big piece of that. What's interesting in the quarter is that you saw significant growth in Descovy overall. When you kind of look at the HIV prevention franchise, it's in a great spot. Yeztugo, back to your question, is off on a really good launch trajectory. We're very pleased with the results that we're seeing so far.
We tried to give specific guidance for the fourth quarter, as you know, highlighting that we expect roughly $150 million of sales for the year. We had already booked through the end of the third quarter $54 million of sales. Just to try to, and there is such a wide variability in terms of street expectations of what to expect from the launch, that the IMS data that's available is directionally helpful, but not great. We wanted to give the street a little more guidance in terms of what we're expecting. Launch is off to a great start. Really pleased with our progress. The most important thing, the last, that's a long time.
No, no worries.
Sorry. The most important thing is measuring a launch like this is access, right? It usually takes a long time to kind of get access broadly, especially in the commercial markets. With Yeztugo, we're already at over 75% access of all covered lives in the United States. If I remember correctly, I think 20 or it's either 20 or 22 of the largest Medicaid plans have already put Yeztugo on formulary. We're off to a great start in terms of access. We have our J code for reimbursement in the US for the drug. It came months earlier than expected. It was effective as of October 1. You should see the launch continue to ramp from here.
That's great. I mean, I think in that answer, you've answered a couple of my questions. You've hit a, no, that's okay. You've hit the nail on the head on a bunch of these. I guess just trying to fine-tune a couple of things. When you think about the access of, I think you said 75% has already been hit, which I think is about three months ahead of schedule.
Correct. Yeah. Thank you.
90% is the goal, which was, I think, initially within 12 months. That should be expected this year.
Middle of next year would be the 12 months. So we're well on track to getting to that 90% access. I mean, the other color we provided on the third quarter call, if you look at a couple of the largest payers, UnitedHealthcare and Express Scripts in particular have already put it on formulary in addition to the state Medicaid, the largest state Medicaid organization. So the team has done an incredible job of really moving forward access for this game-changing prevention therapy.
Yeah. I mean, I would also like to mention that to your point, that for Gilead, you guys actually were guiding HIV to be flat due to a lot of impacts with Medicare Part D. Now you guys, I think, I believe as of Q3, you're now guiding down to about 5%.
5%. Yeah, exactly.
That speaks to a lot of the growth that's happening with the PrEP market as well.
Yeah, exactly. I mean, and the HIV treatment market's doing really well too. I mean, that market tends to grow 2%-3% year over year. Biktarvy, which is our flagship HIV treatment medicine, now has 52% plus market share in the United States, which is incredible. But it's a combination of both the treatment business continuing to do really well and the prevention business growing much, much faster and expanding rapidly with the increased awareness.
Great. On the J code, so that started October 1. What is that impact to the buy-and-bill? And do you sort of have or guide it to split between buy-and-bill versus the specialty pharmacy aspect of the Yeztugo launch?
Yes. Yeah. In the United States, again, it's a unique launch in that you're moving from an oral market to a long-term subcutaneous injection. It is a kind of a process change for physicians' offices that administer this. This is not an at-home subcutaneous injection. This is something that needs to be done in a physician's office, either by a nurse or a physician or someone else in the office that's trained to do this. The J code was an important piece of opening up buy-and-bill. What we always said is a year ago when we had our HIV Day, we expect the market to be, a majority of the market to be white bagging, which is people ordering this through the pharmacy, having it delivered from the pharmacy to the physician's office and coming back in for an injection.
Certain physicians' offices that have enough volume can do buy-and-bill, where they actually buy the product and dispense it. They're not going to hold a lot of stock typically for something like this. Out of the gate, we're about 80% prescription benefit or white bagging and 20% buy-and-bill, which frankly is a little bit higher than we probably would have expected out of the gate. Overall, I think we probably get to more of a 75-25 split is our expectation over time. The buy-and-bill should grow. You really will see that in the clinics, especially the HIV-focused clinics that have the greatest volume in large cities. The buy-and-bill model can make financial sense for them.
Okay. That's great. I guess maybe now moving on to the HIV long-acting and treatment business or pipeline, I should say. Obviously, Biktarvy continues to be the standard of care with 52% market share. You guys have a number of different assets that are reading out over the medium to long term with very different options, whether it's a new daily pill, weekly pills, every three months, every six months injectables. I think you actually will have one of the updates on these new molecules with the Bictegravir, Lenacapavir combo pill for ARTISTRY-1 and ARTISTRY-2 actually coming up in Q4.
Yeah, that's right.
Maybe just talk through what is that market opportunity and what is the differentiation there given Biktarvy really is a standard of care and it's quite effective and it is also a daily pill?
Yeah. Biktarvy is definitely the gold standard. I mean, it's an incredible drug. The reason why it's used in the vast majority of HIV patients, most patients start on it. It really doesn't have any compromises or limitations. The same thing we think can be true for our pipeline. As you said, we have a broad pipeline. More than 10 programs in development, either in development or coming into development. We will have a slew of data over the next 24 months, everything from kind of Phase I data for many of our long-acting drugs as well as the Phase III data for a number of programs. The next set of Phase III data that comes later this year is for Bictegravir, which is the integrase inhibitor in Biktarvy. It's an incredible integrase inhibitor.
Lenacapavir, which is the same active ingredient that is in Yeztugo, the six-month injection, can be formulated in both pills for almost any duration given how potent it is, or subcutaneous or intramuscular injections. The next set of data that'll come out, ARTISTRY- 1 and ARTISTRY-2, is studying Biktarvy and Lenacapavir as a two-drug combination, a daily pill in two different patient segments. The first is in people that have on complex regimens. It's a bigger part of the market than you'd expect. Anywhere from 6%-8% of the HIV market are patients that have developed resistance to many of the existing therapies, typically not an integrase inhibitor. Because the capsid inhibitors, Llenacapavir is a capsid inhibitor, are new, there's almost no resistance to capsid inhibitors today either.
They're taking multiple pills oftentimes at different times, some with food effects, some without. It's kind of like the old days of HIV treatment. What Biklin brings for that 6%-8% of patients is the ability potentially to be on a single daily doublet. That's really exciting. Again, the HIV market is sizable in the United States. The 6%-8% opportunity is a significant growth opportunity for us. The second market, the second study, Artistry, I believe it's two, is being studied as a switch therapy. That's for anyone that starts on typically Biktarvy or any other therapy and for any reason wants to switch, this would be another alternative. We think it has the potential to be one of the best switch therapies. It's a two-drug combination.
There are some patients that for whatever reason, even though the clinical data does not suggest there is a difference between two drugs and three drugs, as you know, many there are patients, especially in Europe, but in the United States as well, that would prefer to have a two-drug pill versus a three-drug pill. This gives them another alternative that we think could be a really sizable alternative in the market. It is worth mentioning that the second largest HIV treatment regimen today and pill is a daily doublet. This has the potential then to compete head-to-head against that in the switch market. I think both of the studies could open sizable opportunities for Biklen. It is not really at the expense of Biktarvy. I think of it as on top of Biktarvy and ability to continue to grow our HIV franchise overall.
Interesting. What percent would you say is patients switching onto a different regimen from Biktarvy?
I don't, I mean, the switch percentage overall, I don't remember off the top of my head. But it is a sizable market of opportunity that for whatever reason patients want to switch. So I don't remember specifically, Dina, what percentage of the market switches every year. And there are some switches off of Biktarvy. It's not terribly common, but it does happen.
Yeah, I was going to say.
We'd love to give then patients another therapy. Kind of zooming out more broadly, we have an every six-month treatment that includes two broadly neutralizing antibodies and Lenacapavir that's in late-stage clinical studies. We have all of these other, we have a two-drug combination. It's a once-weekly pill with Merck. It's a partnership with Merck coming and a number of Holyomb programs. All of these added together, together with what we're doing in prevention, should lead to continued meaningful growth in our HIV business over time.
Awesome. I believe that Merck combination is coming next year for your guidance.
Correct. That's right.
Great. I guess maybe then moving on to the liver franchise. Livdelzi had such great performance this year or this quarter, I should say, Q3. You did $105 million in sales. Obviously, this has been a huge growth product in the liver business, 35% quarter over quarter. How are you thinking about that product? And what was really driving that? What is driving that performance? And could that be because of the Ocaliva market withdrawal? Or how do you consider that? Or do you consider that withdrawal actually being a tailwind for the growth of Livdelzi in the liver business?
Yeah. I think it's a tailwind, but let me just back up. Livdelzi is a drug that we acquired from a company called CymaBay last year. The drug was launched about a year ago now. As Dina said, we had about $105 million in sales, significant 35% growth in the quarter. The launch is going incredibly well this early on. What we said when we bought CymaBay is that primary biliary cholangitis or PBC, we believe, is a bigger market than the street and many understood or believed when you look at it. It's not that dissimilar from other orphan diseases that have become much bigger opportunities over time than people expected. The best example is pulmonary hypertension. We launched right after another competitor launched. We were already the number one prescribed regimen in the United States.
We have the leading market share, which I think is fantastic. As you said, $105 million in sales in the quarter. It is still early in the launch. We think this market has a long way to go to continue to build. Part of it is taking people that were already on treatment with other regimens that we do not think probably provide the same benefit or safety and moving them. In the third quarter specifically, the third competitor in the market, the third branded competitor, was pulled off the market in the US. This is a drug that a company called Intercept had developed. They sold it to another company, Ocaliva or Ocaliva.
I don't know.
Pronounced it differently. It was withdrawn from the market. That may have been a bit of a tailwind in the third quarter, but a lot of that really kind of happened at the very last couple of weeks of the quarter. There is probably still more of that to come for us and the competitor in terms of people moving off of that therapy onto Livdelzi potentially. The other thing that's worth mentioning there is that patients tend to go see their physician every six months. That is the opportunity for switching. Over the next half of year, the next year as patients that were on that therapy come in, you'll see most of them then moving to these other therapies. The launch is great. The market is growing.
I think the other thing that Johanna highlighted is that a lot of the growth is in new patients coming into the market. The vast majority of the growth has been in new patients, which is really an encouraging sign for the growth and expansion of that market.
Interesting. Okay. Let's maybe then talk about Hep D, I believe. You did a deal a while ago, and I believe that Hepcludex is?
Hepflutex.
Hepcludex, yeah. I know you guys are refiling that in the US, and that was a new announcement on the Q3. How do you think about that market and expansion there into your liver portfolio overall as you get that filed into the US and launched?
Yeah. Yeah. The background here is we bought a small company in Germany. I think it was like five or six years ago now. The drug Hepcludex is launched in Europe. It's done incredibly well. This is for hepatitis D or hepatitis Delta, which is a co-infection with hepatitis B. The hepatitis D virus requires some of the machinery of hepatitis B in order to continue to kind of reproduce and expand in the body. For a long time, people believed that there really wasn't a lot of focus on hepatitis D, which is the most severe form of viral hepatitis. It causes the most liver damage in the shortest period of time, requires transplant. It's quite severe. As I said, you have a co-infection with hepatitis B.
For a long time, the scientific community was just focused on curing hepatitis B, and the belief was if we cure hepatitis B, we'll take care of hepatitis D. Then the realization was that hepatitis B is going to be much harder to cure. Hepatitis C was incredibly hard to cure. We did it, but hepatitis B is going to be hard. We really started focusing on hepatitis D. Hepcludex is a peptide. It's approved in Europe, as I said. The launch there has gone really well. It's a small product, but it's another source of growth for us. The FDA had, we had a complete response letter years ago based not on the drug or the clinical data, but on the manufacturing. They wanted us to switch kind of to a different manufacturer that would not manufacture multiple products on a single line.
They also were looking at kind of how patients would inject this. It's a daily injection. We worked through all of those questions and issues over the last couple of years. We've either refiled or are about to refile and have the potential for another launch next year. Again, it's a small opportunity, but maybe this is a good opportunity to just kind of step back. Again, when you look at Gilead and where we are today and the significant growth you've seen in our base business over the last couple of years, there are many sources of growth. The biggest one, obviously, is the HIV prevention business that we talked about and continued growth in HIV treatment. Then you look at Livdelzi, which we just talked about in liver disease, Hepcludex, Biklen launch coming in HIV, as you mentioned.
Trodelvy is going to be expanding into earlier lines, we believe, of triple-negative breast cancer with the data that we had earlier this year. Then, of course, anito-cel and cell therapy, which we think has the potential to be a game-changing cell therapy launch in multiple myeloma. All of those are significant sources of growth for the business. Hepcludex is a piece of it. It is a small piece, but it is meaningful when you look at it kind of over time.
Right. Moving then to cell therapy and the oncology business, you mentioned Trodelvy and anito-cel. Anito-cel will have a data update at ASH, I think just incrementally longer follow-up. Just thinking about that launch and that potential launch in 2026, I know that you've generally guided that the cell therapy business is expected to decline slightly because of competition to the Yescarta. How are you thinking going into 2026 about that cell therapy, the base business and cell therapy, and the anito-cel coming in in 2026? How do you think about that growth in 2026 and beyond?
Yeah. Anito-cel, as I said, it's a partner product. We work with the company Arcellx on the West Coast. This is a BCMA cell therapy for multiple myeloma. The data so far suggest that it has the potential to be best in class. Certainly on the safety side, if not on the efficacy side, there will be additional data, as you said, at ASH that we're excited to share. More to come on that. We expect what we said is we expect to launch in the fourth line plus by the end of next year. That is a significant growth opportunity for us. We're already doing the studies in second line, I believe in first line as well for high-risk patients. When you look at the growth of cell therapy, the largest growth has come from a competitor, BCMA in multiple myeloma.
We think we have the opportunity to take a significant portion of that market share over time. For our cell therapy business, we do expect it to decline this year 10% from last year as we see more and more competition against our two approved cell therapies. We also highlighted in the third quarter that that is likely to decline more next year. We'll provide specific guidance on what that means as we go into the beginning of next year. We see significant growth in the business beyond that, especially with anito-cel. We are absolutely committed to cell therapy. We think anito-cel has the potential to be a blockbuster and drive growth in that business.
We have a deep pipeline of additional cell therapies that we'll be bringing to market over the coming years, including next-generation CD19, CD20 products that could replace Yescarta and Tecartus, as well as an incredibly exciting cell therapy for glioblastoma and other conditions. We've also started exploring our CD19, CD20 cell therapies in immunology and neurology. There is a lot of room for growth in cell therapy. We've talked about some of the recent in vivo deals that we've done that we also think are exciting when you look further down the road. We're committed to cell therapy. We very much see it as a growth business. In the short run, there are some headwinds that we're navigating.
Okay. That's good to know. Great. I guess on Trodelvy, so you guys had really great data in first line TNBC. It's already approved in second and third line. Now moving on to the first line opportunity, what does that look like? I know that you guys have filed in the US already, and so that should be getting launched probably next year. How do you think about the Trodelvy growth in 2026?
Yeah. I mean, Trodelvy is growing. I think it's about roughly on a $1.4 billion run rate. It has a long way to kind of continue to grow, we believe, mostly in triple negative breast cancer. We also have an approval in later line hormone receptor positive HER2 negative with some exciting overall survival data that came in a couple of years ago. The most, the really astounding data with Trodelvy is in triple negative breast cancer. From the early studies that were done, we had incredibly strong hazard ratios and overall survival benefit. We reported two studies, one in PD1 high, one in PDL1 low earlier this year in first line triple negative breast cancer. Again, very strong data. We filed for approval, as you said, and that should drive additional growth.
Directionally, I think what we said is that the first line, as you move more into treating in the first line, there are two things. One, it is about double the number of patients that you have the opportunity to serve, and you tend to see a longer treatment duration on therapy, both of which should lift the Trodelvy market from where it is today. Of course, we have studies underway in other tumor types, including portions of lung cancer that provide some additional optionality as well. It is very much in growth mode. Now the question is just how big of an opportunity and how big of a therapy is Trodelvy at the end of the day?
Yeah. Correct me if I'm wrong. I think you guys are starting a study for small cells.
We are.
I think if I'm not mistaken, you've got breakthrough designation on that.
I think that's right. I would have to confirm that.
Okay. Great. I mean, I guess moving on to sort of the growth of the business, what are you thinking about Gilead's capital allocation right now and where you guys stand? What is the BD strategy from here? You've done a number of deals with CymaBay recently, but where is Gilead's BD sort of headed as you sort of look on to the next 6 to 12 months?
Yeah. We are going to continue to be active in BD, both in licensing and acquisitions, but probably not at the same level as many of our peers. We have seen an acceleration in BD in the market. You have seen lots of competition. You have seen people trying to top other people's bids recently. It just gives you a sense of kind of the level of interest and need in the market. The good news is when I joined Gilead nine years ago, we had a significant need. We had a very thin pipeline, to say the least. We had not been investing a lot in R&D. We needed to rebuild it. In order to kind of help jumpstart that process, the good news is we had a lot of capital to deploy.
We could be more aggressive in BD and do larger deals and invest in internal research and development at the same timeline. You are seeing all of that now. Our new CEO joined not quite seven years ago and really also leaned into that. When you look at it now, we have a much broader, deeper portfolio. We have all the launches that are underway or coming that are driving growth. We have no major patent cliffs until April of 2036 at the early, which is very different than most of our peers. We can be selective in the same way that we had to be more aggressive to build out and diversify starting nine years ago and seven years ago when Dan joined. We have the luxury, so to speak, of being selective.
You need to keep doing things to add to our internal pipeline, and we will do that. We do not have the same level of need as others. A lot of the things that we have been looking at in the market over the last year, people are willing to be more aggressive and pay more than we are or the value that we see. We generate a lot of cash flow, as you know. We have the ability. We do about $1 billion a year of ordinary course licensing deals. Every two to three years on average, we would love to do a CymaBay type deal, which that was a $4 billion deal for us roughly to bring in a late-stage de-risked asset.
Obviously, we have the ability to do bigger deals if we see something that really fits, but we think that's less likely in terms of what we do. Really comfortable with our portfolio. It's continued to develop beautifully. You see that in the financial performance. You see it in the launches. We will add to it, but we don't have the same need as companies that are facing some of these really large patent cliffs or other challenges with their business.
That makes sense. Is there any sort of therapeutic areas that you guys are more interested in versus other? Obviously, you have an oncology business, a virology business. Is that something that you want to continue doing BD in, or do you want to expand into new therapeutic areas?
I think we're going to stay focused in our existing areas. It really is, to your point, virology, liver disease. Part of that is virology, but liver disease and inflammation. The PBC drug that we talked about, Livdelzi, is more of an inflammation drug, but it's in our liver disease commercial group. Inflammation and then oncology, and not in any particular order. I think we look at all of those. Cell therapy also, both for oncology, inflammation, and neuro. We're looking at opportunities just given where cell therapy is going. All of those areas. We just look at what are the best opportunities with the best data, the greatest commercial potential to serve patients. I think you'll see us be active. In terms of moving into new therapeutic areas, that's not part of the plan today.
Of course, that could change over time, but we are very comfortable focused on the areas that we're already building out.
No, that makes sense. You mentioned neuro a couple of times, so that's why I asked.
Yeah. Sorry. Yeah. No, I only mean that in the context of the cell therapies have shown some promise in what people would consider CNS indications. As I said, we are starting to explore a CD19, CD20 bicistronic construct in some of the autoimmune and neuro conditions that are amenable to cell therapy where you have really severe refractory disease. That is what I am referring to, not beyond that at this point.
Okay. Great. I think that's all the questions I have for today. Thank you so much again for taking the time, and thank you for being with us.
Thank you. Thanks for having us. Appreciate it.