To the morning session of the BofA Healthcare Conference. My name is Geoff Meacham. I'm the Senior BioPharma Analyst. We're thrilled today to have Gilead Sciences. Up on stage with me is Andy Dickinson. Andy, welcome.
Thank you. Great to be here. Thanks for having us.
Andy, let's kick off with, you know, just following the Q1 . Give us some perspective on kind of the guidance changes that you guys have made, with respect to R&D and kind of what implications, you know, that has as kind of, the expenses over the course of the year?
Sure. Maybe I'll start actually just by hitting kind of on the top line first and then going to our chances. I mean, again, it was an incredible quarter. Again, this is the fifth or sixth at least, very strong quarter in a row for the business. You saw very strong performance from the base business. Revenue, I think we are largely in line with the Street, despite the fact that our COVID antiviral sales were lower than we, the Street expected, which means, you know, the base business did incredibly well. We saw 15% growth year-over-year in the, in the base business. Part of that is that we changed the way that we manage inventory at the end of the year.
Historically, we saw this big buildup, in Q4, in anticipation of potential price increases and then a bleed in inventory in the Q1 . We're doing a better job of utilizing inventory management agreements with the sub-wholesalers below the big three, so you saw less of an impact. The 15% growth year-over-year is very strong. Part of that is a result of that. Again, we had guided the 4%-6% growth for the base business-
Yep.
For the year and saw really strong performance in the Q1 , which is exciting. On the expense side, the R&D expenses did come in a little bit higher than we were expecting. I think we were clear. We took our guidance from high single-digit growth year-over-year to low double-digit growth year-over-year. Just to put it in perspective, for those of you who don't know Gilead that well, historically, we, at least in my view, significantly underinvested in R&D, and even today, by many standards, are underinvesting relative to competitors. I think we're finally getting kind of to a healthier level of R&D spend. You've seen significant growth over the last couple of years as we built out our portfolio.
You know, it's a, it's a good news problem in that we've been pushing the clinical team very hard over the last couple of years to accelerate some of our studies, including our studies in HIV prevention and our TRODELVY studies. TRODELVY is our antibody-drug conjugate targeting Trop-2 that we're studying in a variety of solid tumors, including lung cancer studies. It's a very competitive space, we wanna move forward aggressively.
Yeah.
We saw a lot of progress. In particular, in March, we saw a significant increase in enrollment in our PrEP studies, our prevention studies for lenacapavir. We'll manage it throughout the rest of the year. I think we also highlighted, Geoff, that we expect our R&D expense as a percentage of revenue to be in the low 20s%, which again is on par with the other companies in the sector. I think it's a healthy spend, but it is gonna require us to, you know, carefully watch expenses as we always do across the entire business, not just R&D, but SG&A, in order to really make sure that we're freeing up each incremental $ for R&D investment.
Yep. That's helpful. Well, part of, you know, being able to invest in a higher R&D number is the health of your core HIV-
Right.
-business, right? You know, over the course of COVID, there was some fits and starts and a lot of volatility. Q3, Q4, Q1, you're starting to see a rebasing, a back to normal, you know.
Yeah.
trajectory of the business, right?
Yeah.
Walk us through kind of how you think the balance of this year and then what are the, you know, the drivers that you would expect, you know, from a pricing and a share perspective looking out, you know, beyond that?
Sure. Yeah. I mean, the HIV business is doing incredibly well. I mean, we did see, to Geoff's point, again, just to step back, during COVID, we saw a slowdown in HIV treatment that was frankly, a little bit unexpected. Typically, you'd expect patients who have HIV will continue to get their medicine. You know, we've seen a significant rebound over the last 4 or 5 quarters, and we're now seeing, you know, the market growth that we expected. What that means in HIV treatment in the United States, we grew 2% year-over-year in the Q1 . This is treatment. It's a very big market. In Europe, the treatment market grew about 4% year-over-year in the Q1 .
In HIV prevention, which is just the very beginning of this market being defined, even though therapeutics, including our TRUVADA, was approved almost 10 years ago for prevention, this market is still really being defined and built out. Prevention grew, you know, the prevention market overall, I think, grew 19% year-over-year in the Q1 . DESCOVY, which is our two-drug combination for prevention and treatment, but used mostly in prevention, grew 14% year-over-year. It's a very big growth market. We don't expect that to change. When you step back, the HIV market is very stable. It's growing. Within that, starting with treatment, we have the absolute standard of care, which is a three-drug combination called BIKTARVY that includes bictegravir, we think is the best integrase inhibitor in the market.
This is a once daily pill, you know, that is now 43% of the, of HIV patients in the US., I believe, up from 40% a year ago, take BIKTARVY in the US. You know, Gilead still, across all of our treatment options, has greater than 70% market share in the US. We expect to launch a number of new treatment products for patients over the coming 4 or 5 years, notably once-weekly oral combinations, and then every 3 months and every 6 month injectable combinations, hopefully subcutaneous injectable combinations that will drive additional growth in terms of our share of the market. On prevention, as I said, the prevention market's growing substantially. We have the gold standard in DESCOVY, which again is a 2-drug combination used.
It's an oral pill that can be used every day. Some patients or people at risk of getting HIV use it intermittently. That has been growing substantially. We still have greater than 40% of the market, despite the fact that TRUVADA, our original drug in prevention, is generic. There's one long-acting competitor in the prevention market that has a long-acting intramuscular injection that has a very small percentage of the market. We don't expect that to change. The next step function change in prevention is our new novel capsid inhibitor called lenacapavir, that is a single drug that is exquisitely potent. It is injected once every six months as a subcutaneous injection. This is a molecule that's already approved in the most difficult to treat HIV patients.
It was approved last year in Europe and the United States, in highly treatment- experienced patients where physicians can use it for patients that have their virus has broken through to other treatment options, and they pick the other therapies they wanna use it with. Again, this is not, you know, a lot of people think of a 6-month subcutaneous prevention drug as something that is more theory than practice. It's already approved. It's real. We've proven that you can do it in the most difficult to treat patients, and we have these large phase 3 studies underway for prevention that should read out later next year or the following year. It's really is the beginning of another growth cycle for us in HIV from our perspective. That was a long answer. Sorry.
No, no worries. Let's talk about that. You know, we look at long-acting injectables, lenacapavir for prevention. You do have, you're right, you have, you know, you have a generic in TRUVADA, and the DESCOVY is sort of the next gen in PrEP. You know, would you expect, you know, there to be, you know, a difficult, you know, sort of payer conversations about, you know, risk benefit, cost benefit? Obviously, convenience factor is pretty dramatic.
Yeah.
with 2, you know, 2 injections a year.
Yeah.
Do we have more work to do beyond the phase IIIs for lenacapavir and PrEP to help kind of sell the profile, if you will?
Yeah. I don't think so, I mean, there's always work to do with payers, right? I don't think so. The reason is that if you look at the studies that one of the other companies in the space did, again, this is ViiV, who has a product called Apretude that's every- month or every- 2- month subcutaneous injection. Their studies demonstrated clearly, even though we think that the product is more challenging for patients given it that it's a painful injection given every 1 or 2 months. What they showed clearly is that for patients that don't take the pill every day, which unfortunately is a lot.
If you take the pill every day, our studies showed, you know, and other studies that you prevent 99% or 99.9% prevention of transmission of HIV. If you don't take it every day, you don't see that. So what ViiV showed, you know, and I think we will show in our PrEP studies with lenacapavir is that for the patients, which is a lot of people at risk of getting HIV that don't take the pill every day, you see a substantial benefit for ensuring compliance by having the long-acting, which means that you see much better outcomes in terms of better prevention of the transmission of the virus at the end of the day, which is worth a lot. As you know, a lifetime of HIV therapy is incredibly expensive.
We'll always have the discussions with payers, and I think it's manageable if we see what we expect to see in the PrEP studies.
Gotcha. lenacapavir in the treatment setting, walk us through kind of where we are today, you know, with your offerings. I mean, it's such a good drug that it's difficult to find a drug that kinda can match it.
Yeah.
Right?
In terms of its potency, right?
Yes. Right.
It's an incredible molecule. First of all, it's the first HIV capsid inhibitor ever approved. As I said earlier, it is already approved for treatment. It can be used in combination with the physician's choice of other antivirals for these patients that have developed resistance to most of the standard treatment options. The data, the phase III data was incredible. The challenge is some people have described it as a unicorn because it's so incredibly potent, that you can have a very small amount of the drug that's injected, and you still have therapeutical levels after six months. That said, you know, and the other beauty of lenacapavir is it can be formulated as an oral, a once a day oral, a once weekly oral, a once monthly potentially, or a sub-Q injection. That is all very clear.
The hard part for treatment, not prevention, but for treatment, is to find other molecules that have similar qualities, and that's what Jeff is alluding to. We have nine programs in phase I studies or soon to be in phase I studies. I think of partner agents that could be paired with lenacapavir in a combination for treatment. Eight of those nine programs are wholly owned to Gilead. One of them is Merck's islatravir, which is moving forward at a lower dose in a once weekly oral combination. We'll know a lot in the next 6 to, you know, 9-12 months.
Yeah.
In terms of what the phase I studies look like for this suite of molecules that we're moving forward. Half of those molecules that are in phase I or moving into phase I are integrase inhibitors, which is currently the standard of care, including our bictegravir, which is part of BIKTARVY that I mentioned earlier. We'll have a lot of data. My expectation would be that we likely, within a year, have a once weekly pill, long-acting formulation of an integrase inhibitor, most likely together with lenacapavir in an oral formulation. I would expect that at some point, you know, if not this year or next year or beyond, we have a doublet that's every three or every six months subcutaneous.
We'll know a lot more in terms of which specific assets out of those nine are gonna be moving forward at the end of this year.
Just following up on that, from your market research, when you look kind of US. versus Europe. If you had an every 3 month or 6- month doublet regimen and treatment, you know, what type of share do you think that? Is that a 50%? Is it a 75%? Is it, you know...?
Yeah.
Is it dramatic, you know, in terms of I mean, the evolution of the paradigm?
Great question. It is dramatic, and it all depends on what the doublet looks like at the end of the day. If you truly have an every 6- month doublet where the efficacy is on par with BIKTARVY, the standard of care, the gold standard, and you don't have significant injection site reactions or safety issues, Our market research today suggests that in treatment, 50% of patients would want that every 6-month subcutaneous injection. For those of you that follow, like Humira in the I&I space, think of a very simple, painless injection, but instead of every 2 weeks, it's once every 6 months. A big portion of the HIV market would move to the every 6 month doublet. If it's every 3 months, it's probably less than 50%, but it's still a lot.
The once weekly pill, there's a big portion of patients that... So let's say 50% of patients today say, "Look, I like to take a pill every day 'cause I know I'm doing something to treat my infection." You know, a big portion of those may go to the once weekly pill. The other thing I say is this is all kind of in a vacuum today. When you really have an every 6 month, 2- drug regimen, if it's as good as BIKTARVY, at the end of the day, you could see even, you know, substantially more people moving to it over time as that becomes entrenched as the absolute standard of care.
Maybe the other point that's important, Geoff, that we talk about is in prevention, outside of treatment, you should see the entire market or a very big...
Right.
I'm overstating it, but you know, a very big portion of the market move to the every 6 month subcutaneous. With our phase 3 studies, if that's positive, the vast majority of people that are at risk of getting HIV would likely prefer or their physicians would prefer that they just have an every 6 month subcutaneous injection that ensures compliance and reduces even further the risk of them getting HIV. The PrEP market and the treatment market will be different in terms of the uptake of the long-actings.
Right. When you look outside the US., though, is the cost- benefit on either one, PrEP or treatment, you know, how is that different? You have to, you know, talk to, you know.
The payers.
...single payers across-
Yeah
...Europe and, you know, there are lots of considerations.
It shouldn't be that different in the long run. I think in what Jeff's alluding to in PrEP today, you know, there's more challenges in Europe, even though we've demonstrated, and others have demonstrated this incredible benefit to people at risk of getting HIV, especially given that TRUVADA is now generic. You know, there's less of a push for prevention. Again, I think the every 6 month subcutaneous where you ensure compliance and you show that added benefit will justify uptake in Europe as well as the United States. Most of the PrEP market today is in the United States, and that is gonna continue to be a very strong market. You should also see substantial uptake in Asia as well. Japan is a great example of a market that we would expect to see substantial uptake.
I think from a payer perspective, both for treatment and PrEP, we think we are gonna build a very strong record in Europe, US., and Asia. you know, we'll have a lot of data over the next couple years that will underpin those arguments, as you know.
Right. And with your success in hep C, you know, with curative regimens, how much of a priority would you say HIV cure is? There's been a lot of science that has, you know, brought forth a couple different mechanisms, but it hasn't really been, you know, I would say, by any stretch.
Yeah
...signals there, right?
Yeah. It's really hard. I mean.
Yeah
...incredibly hard, right? I mean, even when we talk about cure for hepatitis B and HIV, they are orders of magnitude more difficult than what our team did in hepatitis C, which is incredible. You know, we have a large HIV cure research program, probably the largest in the world. That's not gonna change. We are completely committed to ending the HIV epidemic. We're confident that if we get there, we can figure out a business model that works. Unfortunately, I think we are a long way away from getting there for HIV cure. There's a lot of things that we and others are looking at, but there's nothing that we see today that is, you know, a pragmatic or realistic approach in the next decade or beyond. A lot of work to do.
We will continue to invest, but for now, we're thankful that we have these incredible options for patients that are either at risk of getting HIV or actually have HIV.
Yeah. Let's switch gears to the oncology portfolio. You mentioned TRODELVY upfront. You guys have had a lot of commercial success, you know, in HER2 patients. Let's talk about the competitive dynamics within HER2. That's been a topic of a lot of investor, you know, kind of anxiety, but it doesn't look like, you know, your growth has really moderated.
Yeah. No, TRODELVY is doing incredibly well, right? Commercially, we're really excited to roll out additional data over the next year or 2. Look, I think what's really happening is the people are starting to get a sense, not just from our data, but from the Daiichi Sankyo DESTINY data within HER2. You're gonna see a slew of Trop-2 targeting ADC data from us and competitors this year. It's becoming clear that the ADCs are outstanding therapeutic options for patients. As, you know, as an alternative to traditional chemotherapies. They are more targeted, more effective, safer, easier to tolerate. There are gonna be differences in terms of the side effect profile. The Enhertu data, just like the TRODELVY data in breast cancer, is fantastic. There's room for both of them. You know, we are seeing...
You know, we're the only ADC approved in breast cancer, if I remember correctly, that is not limited by IHC status, so HER2 expression. We are seeing use in IHC zero and IHC one, kind of low HER2 expressers. The launch has gone great in the United States so far. We're excited to launch in Europe as well, hopefully later this year. It's going really well, and we think this is just the beginning. I think that's the key. Whether you're talking about lung cancer, where there's also gonna be competition, or breast cancer with Enhertu, there's room for multiple agents, I think the ADCs across the board are gonna redefine oncology therapy across many solid tumors.
Right. Yeah. What does the science tell you about, you know, Trop-2 and lung cancer that kind of gives you confidence and, you know, success for, you know, TRODELVY? I agree, I mean, it's not like it's not a zero-sum game. There are plenty of assets in lung that are all commercially successful.
Yeah. Exactly. I think the most important thing with Trop-2 and why not only we, but AstraZeneca and Merck and others are so excited about Trop-2 antibody ADCs, is that Trop-2 as a target is broadly expressed across most solid tumors. It is the rare antigen that has broad expression, and that's why you see the incredible data from TRODELVY in triple-negative breast cancer, game-changing data, incredible data in hormone receptor positive, HER2 negative, which again, very different than triple negative, and in bladder cancer. You also see, you know, proof of concept. We have small datasets from Immunomedics in lung cancer that we are excited about when we did the acquisition. We're gonna roll out a lot of data over the next 12 months that we'll be excited to share, and then others will do the same thing.
I'll come back to lung cancer in a second. You know, we also have a small dataset in endometrial cancer that I'd highlight that's gonna be shared at ASCO that I think will, you know, further help people understand that Trop-2 antibodies have very broad potential. The other thing that's exciting is that these antibodies are likely to move up in lines of therapy. We started in very late stage, very severe patients, but many chemotherapy agents, as many of you know, are used in first line, either in combination with PD-1 or other agents. There's no reason to believe that the Trop-2-directed ADCs or other ADCs won't move up in lines in therapy if they're tolerable.
That's where we think TRODELVY really stands out, is that at least so far, the side effect profile of TRODELVY is very different than some of the other ADCs, and it looks more like a traditional chemotherapy in terms of the neutropenias and diarrhea that oncologists know how to manage. Some of the other ADCs have shown higher rates of interstitial lung disease. We'll have to see kind of how that all plays out in the clinical data, especially as you move up into earlier lines of lung cancer. That could be really important for physicians in terms of the risk-benefit profile. You know, a lot of data to come in the next 12-24 months, but it's a pretty exciting time for us.
In your oncology portfolio, so not yet talking about, you know, Yescarta and the cell therapy business, but you know, TIGIT. You know, in solid tumors, talk a little bit about that as a mechanism. You guys have a lot of confidence, you know, in the mechanism and, you know, it's, you know, there's some promising attributes, but you guys have had some pretty good data.
We have. So TIGIT, we have an anti-TIGIT antibody, actually 2 of them, but one that's further advanced, that are partnered with a company called Arcus that many of you are familiar with. We had phase two data, a number of interim data cuts that we've shared together with Arcus. The last one was shared at the end of last year at an ASCO virtual plenary, and we'll have updated data for this phase two. It's a large phase two study. For those of you that followed the Roche data a couple years ago that got everyone so excited about TIGIT as an add-on to PD-1 in lung cancer, this is a much bigger dataset of 150 patients with a PD-1 versus a doublet PD-1 plus TIGIT.
We also have a triplet arm of 50 patients that is PD-1 TIGIT antibody and an adenosine inhibitor, an adenosine receptor antagonist, that we'll see what that looks like. The early data is encouraging, and what we believe it shows, and I think Merck feels the same way about their dataset and Roche from theirs, is that TIGIT is additive to PD-1, and it doesn't add additional toxicity. The question that hasn't been answered yet is, how additive is it, and what does it mean for the future treatment landscape? I think you'll get more data this year from us and Roche, obviously. The early and encouraging PFS data that we saw, the other question is, does that convert to an OS benefit in the long run?
That'll all be established, we believe, in the next 12 to, you know, 18, 24 months with the slew of datasets. Yeah, we are encouraged, and it's still early days, so more to come. That's another way that we believe we have a real potential to win, in terms of building out our oncology business.
Right. When you, when you focus on now on the, on the Kite business, so you guys have had a number of, you know, wins with respect to establishing the technology, you know, very consistent growth. Now you're looking at, you know, sort of moving up the treatment paradigm as the driver. Where do you think, Andy, we are, you know, sort of on a global basis with infrastructure to be able to, you know, to infuse the access, you know, the whole commercial-?
To meet demand.
... backdrop? Yeah.
Yeah.
To meet demand.
Yeah. I think we're in the first innings, is the answer. I mean, I think it is a really promising and encouraging time. If you just step back in CAR T, I mean, we have data in DLBCL, including second-line data head-to-head against stem cell transplant, which is the standard of care, showing an incredible overall survival benefit. That data, the full overall survival data, will be shared at ASCO this year. You know, there was data from another company that has a BCMA antibody partnered with a company in China that was leaked last week that seems to show similar incredible benefit to patients in second-line in multiple myeloma.
You know, this is, in our, in our view, the, you know, we believed five years ago, or five and a half years ago when we acquired Kite, that CAR T was in the very beginning of changing treatment, especially in the hematological cancers, maybe in solid tumors and some I&I diseases, and it was gonna take decades to kind of evolve. So we're still in the early stages. What the Kite team has done really well for us is they were thinking ahead and building out both viral vector manufacturing capacity internally and externally and manufacturing centers globally, where a lot of the 2 or 3 other companies that are in CAR T, many of them have one manufacturing center.
We have three that are approved, two in the United States, one in Los Angeles, one in Maryland, and then one in Amsterdam or outside of Amsterdam. They're all fully staffed. They're all really running. We're already starting to implement some automation in the center in Maryland, which will really help over time. To your question, we can meet demand. We have no issues with viral vector. We can meet the demand that's there. This is gonna be a slow, steady, continuous build as you see continued clinical data, improvements in manufacturing. I think over time, our expectation is that the cell therapies will become absolutely established as the absolute standard of care, and whether it's second-line DLBCL, maybe even in first line in some high-risk patients, even though our CHOP works pretty well for most patients, second-line multiple myeloma.
You know, it's early days. You know, the other thing to your question on infrastructure, hospitals are still, you know, adjusting to and opening up additional space in their transplant centers for this. It's all coming together, and it'll be slow and steady. You know, we still I think we had $1.4 billion in sales last year. We've made significant progress on improving our gross margins over time and becoming more efficient. I see that again, it's just the beginning, but it's a really, really exciting time to be in cell therapy from our perspective.
With the successes that you've had in liquid tumors, if you look, a lot of companies in the cell therapy space talk about, you know, cell therapy for solid tumors or even, you know, autoimmune indications. How much of a priority is that for Gilead versus just, you know, continuing to add value to the...
Yeah.
existing, franchising?
Well, I think it's both. I mean, they are priorities. The here and now is hematological cancers with the incredible data-
Right.
The competition. You can build a thriving business, and we have, and we'll continue to do that.
Yeah.
-with the hematological cancer focus. I think the Kite team, again, deserves a lot of credit for really stepping back after the acquisition. We did a lot of deals to add different things in solid tumor and saying, "You know what? Actually, we just need to focus here now.
Right.
We are investing in solid tumor programs. We have one program in the clinic. We've done a number of partnerships. We like the data Geoff's alluding to. There are some data out of Germany in lupus, if I remember correctly.
Yep.
severe lupus using a CD19 CAR T, where they appeared to cure a number of very severe lupus patients. I think it was eight patients, but exciting. We will explore those areas. We'll look at moving into different areas. Just in hematological cancer, which is the here and now and can be a huge business. what Celgene did in defining-
Right.
the multiple myeloma market. I mean, that's what Kite has as an opportunity, just in hemonc. Yes, I do think people will crack the nut in solid tumors and I&I. In solid tumors, the one caveat is we think that it probably involves combinations of cell therapies and more traditional agents that maybe open the tumor microenvironment to the T cells, or if you're using macrophages or whatever cell type you're using, that can open it up. It's just gonna take longer to get there, and it probably requires some combinations would be our guess.
There's likely still a lot of science that has yet to be, you know, sort of written or disclosed.
Oh, absolutely. I mean, it's early days, and the other really exciting thing from our perspective is there's an incredible amount of research and innovation happening globally, in China in particular. I mean, China was really a leader in cell therapy. It's not surprising to us that you see the Legend construct came out of China. There's another recent deal that another company partnered with a company in China. There's a lot happening in China, a lot in the United States and Europe. Globally, there's a lot happening here that's really gonna move this sector forward over the coming years. We think that Kite is positioned to be kind of the partner of choice for many of those companies, similar to the Arcellx deal that we did with the BCMA candidate that we're excited about.
Right. Last question here at a bigger picture, when you think about, you know, BD historically, you've built, you know, the hemonc business with a number of deals, and now you're seeing the benefit of expanding that even more. Where does this rank kind of in your capital priorities at Gilead?
I think it's really important. I mean, again, I, you know, we've gone from having a pretty thin pipeline to, I think, one of the best pipelines and most diverse pipelines in the industry. We're not gonna rest. We announced another exciting deal this morning where we are acquiring a small company called XinThera in San Diego, with a PARP1 inhibitor in particular that we're excited about in terms of combining it. You're gonna continue to see deals like that. We're gonna continue to do BD, but we have a much stronger internal research and development arm as well. You should see greater balance going forward in terms of what we pull forward from our internal research and what we're pulling in from external. When we think about capital allocation, you know, it is focusing first and foremost on R&D and innovation, both internal and external.
Right.
With the BD. You won't see the same level of BD activity that you've seen over the last four years, I'd expect, because we were incredibly busy, but, you know, rebuilding and building out the pipeline. That doesn't mean that we're not gonna be active. We are, and you saw that today. You know, we're focused on the dividend. We're committed to the dividend and growing the dividend over time. Investors have seen that. We've got great cash flow profile that we can keep investing in the dividend. Finally, we'll look at things like paying down debt. We're very comfortable with our gross debt level today. Finally, share repurchases. BD will continue to be a big, big piece of capital allocation for sure.
Great. Well, thank you very much, Andy.
Thank you.
Okay.