Gilead Sciences, Inc. (GILD) Earnings Call Transcript & Summary

Welcome, once again, to the Cowen and Company's 40th Annual Health Care Conference. I'm Phil Nadeau, one of the biotech analysts here at Cowen, and it's my pleasure to introduce the next presenting company. That's Gilead, truly one of the bellwethers of the biotech industry. We're really happy to have them with us today, particularly on a very busy day and very busy time. So we're really thankful that they made the trip all the way out to the East Coast to participate. We have with us Merdad Parsey, who is the CMO; and Johanna Mercier, who is the CCO. I thought maybe if the 2 of you could just take a minute to introduce yourselves. You may be new to some of the people in the audience.

So good morning, good afternoon, everyone. I'm Johanna Mercier. Been at Gilead now since last July and it's been super exciting. As you can appreciate, there's been a lot going on. But more importantly, my background is in pharma, 25-year plus. I was at Bristol-Myers Squibb prior to this and with different experiences from both in oncology, virology information standpoint, which really fits nicely into the Gilead portfolio. The -- I think what you're seeing and what we're going to talk about a little bit more today is, really, how we're putting the JPMorgan strategy into action.

Hi. Merdad Parsey. I've also been around the industry for a while and most recently at Genentech, and have joined now for all of 4 months. I think today is my 4-month anniversary. So excited to be here and chat with you about what we're trying to do.

Maybe we could start with Forty Seven. The news of the day is that you have bought Forty Seven for $4.9 billion. Can you first talk about the technology? What attracted you to Forty Seven? Why this particular asset?

Sure. I think it hits a lot of the sweet spots for us in terms of what we were aiming to do, and I think as we've been talking about at JPMorgan around what we -- what our objectives are for deals right now. And that, one, it's a transformative therapy. We're really excited about the potential benefit it brings to patients. Two, it's a relatively near-term opportunity in that we're looking at potential for accelerator approval in late 2022, 2023 kind of time frame. And three, it really gets us into oncology much more broadly than where we've been and I think, hopefully, telegraphed some of our intent around building our oncology group up. So I think that those are the main drivers for us.

And maybe you can talk a little bit more about that last point? How does this contribute to your overall oncology strategy? What does this add that you didn't have before?

Well, I think, as you know, we -- with Kite being there, I think that's been -- that's a huge part of our approach and larger in oncology. In particular though, in our group, we've not had as many molecules. We have a number of internal programs that are earlier. And this one really helps add to our later-stage pipeline to enable us to build a more robust, larger pipeline over the next few years, where we can add molecules really later. I wouldn't over-read into whether it's heme or solid tumors. I think we're interested in both. This is just the first of what we hope will be similar deals that we do with a similar profile in terms of the size of the deal, what else is the type of molecules we're looking for.

I would just add to that, if I may. It's also the fact that with Forty Seven, there's an opportunity to bring capabilities and expertise in oncology to really accelerate our build-out in oncology as well. So we're excited about that.

Can you talk about magrolimab a bit more? What gives you confidence in the data you've seen? What excites you about what was presented at ASH in December?

Yes. I think if you look at, in this space, in MDS, in particular, this is a space where there haven't been great therapies, right? And the treatments that are around are -- the response rates are relatively low, the CR rates are relatively low. And it's an area of a lot of unmet need. These patients have a relatively high mortality rate. So from that standpoint, I think having the opportunity to go in and the data you've seen at ASH, and we're looking forward to showing more data at ASCO this year, where we can show more of what the clinical experience has been, the response rates and the CR rates are dramatically better than what had been seen with the standard of care. And I think that's, from our standpoint, that's that transformative part of what we want to do. So it's really the clinical profile, added to the fact that the tolerability profile looks to be quite good. And I think that's been a question mark for the CD47 molecules, but the dosing regimen that the team has developed has really shown a great tolerability profile. So it was really that balance of efficacy and tolerability that was very interesting to us.

Johanna, could you help us size that patient population, the patient population with the unmet need? How big is that patient population? What are the characteristics there?

Sure. So what we're looking at, so if you think about the primary value driver of this acquisition, it was really around MDS. And so if you think about that size of the patient population, you're looking at about anywhere around 14,000 newly diagnosed patients for MDS in the U.S. and about 20,000 or so in Europe. So -- and about 40% of those are high risk, so the intent is to go out in high-risk first, assuming the results continue to show what we've seen thus far and then kind of potentially get into the lower risk and relapse in refractory. So we do think the patient pool is -- and the unmet medical need is a really important piece of this puzzle, plus the fact that we do believe also that there might be opportunities to increase that market size. Because of that high unmet medical need, we think a lot of patients actually are not on treatment at all. And so therefore, there might be an additional opportunity in the future.

Merdad, you mentioned approval maybe late '22, early '23. I believe Forty Seven's route to approval was two-pronged: one was the Phase Ib data; second was using a pivotal study that's just, I believe, getting underway.

That's right.

When you talk about late '22, early '23, which of those trials will be...

That's the former, right? That's the Ib accelerated approval single-arm trial. So I think, of course, these are all -- it's really hard to speculate right now. But I would say that would be the earliest that we could see approval. Of course, that has to do -- that will depend on the data, interactions with the regulators, all those sorts of things. But that would be the earliest. And then if the accelerated approval doesn't happen, then it would be the Phase II study that we would take for registration.

Strategically, can you talk how Forty Seven is going to be operated? Is it going to be integrated into Gilead? Or will it be run like a Kite-like subsidiary?

I think, as Johanna mentioned, I think one of the things we're excited about is the quality of the scientists that are at Forty Seven, and we're really excited to bring them into Gilead and have them be part of the team. So we're really -- I think that will be -- it will be a very different approach than the one we took with Kite.

And Gilead's been active on the acquisition front as well as the partnering front. What does this deal mean for the rest of 2020? Should we expect more acquisitions, more partnerships? Or is this of a sufficient size that it will take management's time for the rest of the year?

So I think a good question, but I do think what we discussed at JPMorgan and what we shared about our strategic focus and where we're going, this is actually the first step towards it. So I do think, assuming, of course, the right opportunities come about, we talked about small- to medium-size acquisition. I think this is in line with that as well as potential partnerships just like the one we have with Galapagos to bring in the research and the science in. So those are things we will continue to look at, always with the mindset though that we want to make sure we can execute against them.

Great. I thought next, we'd move on to remdesivir. This seems to be a popular topic of conversation. There's been much focus on COVID-19 and remdesivir. I guess could you just summarize, what is the data that's out there that is giving people so much optimism that remdesivir could be the most effective agent for COVID-19?

What's remdesivir? Just kidding. So remdesivir is a molecule we've had at Gilead for a while. It was discovered and developed as an antiviral with a relatively broad antiviral activity in vitro. It's shown efficacy in vitro against Ebola, which is a different class of virus, but also against SARS and MERS, which are both coronaviruses in vitro. The homology of the polymerase that remdesivir inhibits is very high between SARS, MERS and this new coronavirus. So I think that's probably one of the biggest drivers of why we are interested and others are interested in it. More recently, we've gotten data from the Chinese CDC, where they've evaluated in vitro efficacy and have demonstrated in vitro efficacy of remdesivir against this particular isolate. We are awaiting data from our CDC here in the States to confirm that. There's a slight difference between the 2 in that the Chinese CDC use Vero cells or monkey cells and the U.S. CDC will use human cells. So we think that will be a little bit closer to what actual efficacy, at least a potency against the virus will be. That's in vitro data. I think, really, it's really important to emphasize there's an investigational drug and we are in clinical trials right now, and those fall into several categories. We do have compassionate use work going on. You've seen the New England Journal article on that one patient. There have been other patients who've been treated with compassionate use. Those are all anecdotal. There are 2 trials going on in China. They're sponsored by and run by the investigator in China. We supply drug to them. There's one in severe patients, one in more moderately ill patients, and those studies are active and ongoing. And hopefully, we'll see data from those in April, depending on enrollment. And then the NIAID, we've been working with them to get another trial up and running. That study is now up and running in Nebraska and we're looking to expand sites there. The NIAID will be doing that but we're trying to support as best we can. And then finally, we'll be running sort of a simple trial that we've also been discussing with the FDA around making that trial available more broadly. So we're taking all of those approaches right now and the data generation approach to try to get as much data as we can to demonstrate activity of the molecule.

In your opinion, how much safety data would be necessary to use something like remdesivir in an outbreak situation? How many patients were and how much of a long duration follow-up?

Yes. So the treatment course is 10 days right now. One of the things we'll be looking at is whether 5 days is sufficient. We'll be comparing 5 to 10 days. That will be one of the things we'll be looking at. In general, I would say that if this were a normal situation, we would be looking for sort of the usual large number of patients that would be exposed for safety as well as efficacy. Given the extraordinary circumstances, it's a little bit more fluid a situation. We're talking to the regulators about that. Our expectation varies based on sort of what the data will look like. I think that will be a major player in terms of how the data roll out. We have done patient exposure in the past. We've had healthy volunteer trials. We have an Ebola study that has been done in the past. Those are relatively modest patient numbers in terms of exposure. I believe what will happen is this will be sort of based on where we are in the pandemic, based on the efficacy profile and the safety profile of the existing trials and the experience we get. I think that those will all lead -- will inform the regulators in terms of what kind of approval, if any, they'll be giving. And it may be a conditional approval that will be pending additional safety data, for example, that may be an option. So I'd say in these circumstances that there aren't -- there's not a very clear road map. It's not a well-trodden area. And what I would say is that the regulators have been great in working with us and partnering with us. So I think we have a great dialogue going on with all the major regulators right now.

Johanna, can you talk a bit about what the commercial strategy for remdesivir could be? How will it be distributed? How will it be priced? Kind of what's giving its overall thinking in creating a business out of remdesivir?

Yes. So I have to be honest, as we started this out, it's really not about creating a business around remdesivir. Really, the intent has always been, can Gilead be part of the solution of this incredible pandemic? And that's why we've been donating all the product to anybody who's been asking, obviously, through the government settings as well as manufacturing at risk and increasing our capacity and capabilities for manufacturing. And all of that risk, not knowing if the drug actually works or not. So -- and that's really not with an eye to commercial. The -- as you think about price, your question, it's very tough in that -- if you think about our environment in pharmaceutical innovation, it's all about value-based approach, right? That's how you would actually understand the value of remdesivir. You can't actually do that without any clinical data points. And so we need the clinical data, so that is days in ICU, mortality, et cetera. Those are the kind of things that will drive towards being able to pull together value for remdesivir. Having said that, in light of what's going on right now around the world, we're also thinking patient access, government access and affordability and making sure all those things come together. So I have to be honest, commercial opportunity might become if this becomes a seasonal disease or stockpiling comes into play, but that's much later down the line.

Great. Now that we're half over, maybe a little time to some of your businesses that are generating revenue. Can we start with the HIV business? How would you characterize your current competitive position? And maybe, even more importantly, how sustainable is the HIV business? Where will you be competitively in 5 years or 10 years?

Yes. So thank you for asking about our current portfolio. Listen, let me say, the HIV business has never been stronger. It is one that if you break it down between treatment and prevention, it's both those spaces in very different marketplaces. But in the treatment space, Biktarvy is really the leader here, and what we're seeing is the market consolidate around Biktarvy, not just in the U.S. but actually, every single market where we've launched, we're seeing the same market reaction from physicians and patients. And I think that's very telling to where we're going. And that has a lot to do with the profile that Biktarvy has to offer. And so right now, 1 out of every 2 patients in the U.S., whether naive or switch, is actually being initiated on Biktarvy. And so I think those are the kind of things that make us feel very confident in the future of this business with Biktarvy in the treatment setting. In prevention, we just launched Descovy in prevention just last October. We are actively working through a little bit of a switch scenario for appropriate patients from Truvada to Descovy in light of the better safety for bone and renal standpoint, and with an eye on the fact that Truvada also goes generic towards the end of the year. And so just making sure that that is happening. I think we talked about in the last -- the Q4 earnings call how at the end of the year, we were already at 27%. That number has since risen quite nicely, and so we are absolutely tracking towards what we've been saying, which is anywhere between 40% and 45% share within the prevention marketplace by the end of this year, by the time Truvada goes LOE. And so those 2 pieces are what's going to drive the future. Biktarvy, longer term, the patent expires towards 2033 or potentially even later than that. If you think about Descovy, Descovy is really a prevention play all the way up to patent expiry around 2025, 2026, and that's where the capsid inhibitor comes in. So you've heard a lot about the capsid, probably more so in treatment than in prevention, but this is where -- and maybe I'll pass it over to Merdad to speak...

You're doing fine.

So the capsid, which I do think if it can show proof-of-concept in monotherapy, could be the future of Descovy switch to the capsid inhibitor and prevention and own the marketplace then and there. So a real nice extension from a life cycle management standpoint, from a franchise standpoint and prevention.

Speaking of prevention, how will the market evolve once Truvada generics are on the market? You've mentioned 40%, 45% share for Descovy at the time of the generic launch. How do we think about it over the next year to 2 after that? Do you think that you can increase that share in the face of generics? Or is there a chance that that share could erode as payers maybe push patients onto a generic Truvada instead of Descovy?

Yes. I think the payer landscape is the one that we obviously are tracking very closely and working closely with that group -- or the different groups, I should say. Having said that, where we do see an opportunity is still the safety profile of Descovy over Truvada, whether generics are out or not. And if you think about the prevention patient, the prevention patients, generally speaking, can be much younger. And so therefore, you're thinking bone and renal. I mean there's bone development until late 20s. And so you just want to make sure that you're thinking through that they might be on this drug for also a very long time. And so all those things come into play. So we still think there's an opportunity for Descovy post-Truvada LOE. And the other piece I would add to it is, if you think about the market itself, the market right now, we had a -- I think it's just north of 235,000 patients on a prevention treatment today -- or prevention prescription, I should say, not to create confusion. Having said that, the market total, it had been estimated over 1 million. So we've only hit about 25% of that market, so we also think there's a huge market growth opportunity.

In HIV treatment, what are the biggest risks to give it its franchise? What could change the treatment paradigm over the next 5 years? Is it nucleotide sparing regimens? Longer duration regimens? A cure? Like, where do you internally focus your attention into warding off competition and maintaining your share?

Yes. I think the long-actings are probably where we've had a little bit more attention. I think long-actings will absolutely play a role in treatment. I think some patients are really looking for something that will help them not remind them that they have this disease. And so I do think there will be a percentage, not the whole market though, because I do think the bar is pretty high for Biktarvy. But a right long-acting, which really offers those types of benefits and doesn't add unnecessary pain or unnecessary number of visits, et cetera, I think, will be something that might be more appealing. In prevention, I think the long-actings will play a much more important role, to be honest with you, because I think it's a different landscape. So I do think the long-actings are in play, but it has to be the right long-actings. But I don't think it will take over the whole market. I really think Biktarvy from a -- as we see it, as we think about our assumptions for the next 10 to 13 years, we don't really see anything coming in unless there is a cure. And obviously, we're part of that journey and working through, but that is a very challenging area. And I'm sure we're not the only one saying this, but it is one that's probably not for the near term.

Merdad, can you remind us where your capsid program is and when your first long-acting regimen could make it out to the market?

Sure. Yes. Right now, the capsid program is in a study with highly treatment-experienced patients who needs something so that they're going to get randomized to standard of care or standard of care plus the capsid. And we'll be looking at those data once those trials are completely enrolled. We're also looking at getting into a PrEP scenario with the capsid as well, so we'll be looking at that as an initial foray into PrEP and looking at leveraging the fact that the molecule can be dosed very infrequently. We're hoping we can do subcu every 6 months with that molecule, which would be pretty, I think, dramatic and great for patients if we can get there. So I think we'll be looking at those sorts of things on the PrEP side with the capsid.

Maybe one more commercial question before going to the pipeline. On HCV, what are your expectations for trends in that business? As Cowen projects, revenue's going to fall from $2.9 billion in 2019 to $1.8 billion in 2020. Does that seem reasonable? Is there anything that we're missing as we make those projections?

I think what we've been seeing is actually a little bit of a steadier predictable decline. And really, it has to do with the patient pool, right? The patient pool is diminishing. There's still a lot of patients, unfortunately, with HCV, but that patient pool is a little tougher to get to, and that obviously has to do with the fact that a lot of these patients, low income, there's a lot of drug addiction. There's a prisoner setting, the corrections area, which is also an opportunity to make sure that we can end the epidemic. So we do believe that a little bit more effort towards finding those patients, number one. Number two is what we can truly control is the share. And so we have been extremely competitive in this field and not only in the U.S. but in other markets. We have actually regained share, and now EPCLUSA is the market leader again by far. And so those are the things we can control. So that's why we think the decline will continue, but at a much more softer predictable rate.

Moving on to the pipeline. Filgotinib is arguably your latest -- or most mature candidate. Can you discuss how you think that will fit into the JAK landscape in RA, but then also in ulcerative colitis and IBD?

Yes. I think the -- we're really excited about the profile in filgotinib. It's really demonstrated a great balance of efficacy and tolerability. And so of course, how the label is going to turn out is -- would be speculation, but we're really excited about the profile we have in terms of what we can do in RA. As we -- where we were struck by when we showed the data to KOLs and they look at the data, and they all see how it's differentiated from the competition and provides a new opportunity in this class, where I think there are a lot of patients who would prefer to be on oral agents if they can, especially if we bring some of the tolerability and efficacy that we've seen so far. In terms of ulcerative colitis, the data will read out midyear this year and we're excited about that. We certainly think there's a big opportunity there for patients with UC to be treated with JAK inhibitors, and we think we can be first or maybe second, depending on how things develop there in that market as well. So I think that provides a really good opportunity for filgotinib along there. It's important. We have multiple indications ongoing for filgotinib. Besides RA and UC, there is ankylosing spondylitis, psoriatic arthritis and a uveitis trial we have ongoing. So there are a number of indications that we're working on. So we do anticipate a number of approvals for filgotinib over the next couple of years.

Any of those other indications that we should pay particular attention to?

I think ulcerative colitis is probably the one that I would pay the most attention to. They're all important. I don't want to minimize any of them, but I think the ones that will have the most impact will probably be the ulcerative colitis.

Yes, UC. That's right.

On your R&D portfolio more generally, can you maybe spend a minute discussing your strategy for constructing an R&D portfolio? What elements do you think are important to include?

Yes, for -- I think the approach of the portfolio for me has really been around balancing both therapeutic areas and risk. So I think Gilead, my hope is that we can really build on the legacy, obviously, continue to invest in virology as we've been discussing and clearly invest in immunology around filgotinib. And I think those are both key areas, and the Galapagos deal and the other deals we're doing in both of those therapeutic areas are really important, I think, in terms of our long-term strategy. Now we have Forty Seven as well as Kite. We are really looking to expand our oncology footprint as well and make that an important contributor to our portfolio. So we want to make sure we're in all of those therapeutic areas and able to compete aggressively in all those. And then when you look at the portfolio, I would love to see a good mix of near-term, longer-term balance of low-risk and high-risk programs in that portfolio. We want to make sure that, as you know, when you try to innovate, you're taking on a little bit more risk than going into unprecedented areas or a disease where the unmet need is really high. So those are going to necessarily bring some additional risks. So we want to balance that portfolio with some things that will pay off in the near term, hopefully, with less risk and some things that will pay off in the longer term with a little additional risk going on. So we're thinking about a portfolio that's very rich in the earlier stages and narrows down as it gets up to Phase II and Phase III.

And how much of that do you think you already have internally versus how much do you have to go externally for?

I think it's a mix. I think we have certainly already with our Galapagos deal. And I think a lot of the work you've seen us doing in virology, a great portfolio internally. Of course, we'll be looking for assets internally and externally in both of those. And then for oncology, I think right now, we do have, I would say, the sort of the starting matter, internally, especially with the Forty Seven deal coming in, but I believe we're going to need to do more there and continue to build that portfolio in that pipeline.

One place where Gilead has historically invested is in NASH. How committed is Gilead today to NASH and your current portfolio of NASH candidates?

Yes. I think NASH is a really interesting use case or risk case, if you will. It's one of those areas where being early is particularly challenging as we understand the regulatory landscape as well as unknowns, like the payer landscape and patient uptake. Our focus right now in NASH is on the outcome of the ATLAS trial and seeing how the AdCom for the competition goes in April, and then we have an FDA interaction coming up, where we'll talk about our program with the agency. I think putting all those things together will sort of help determine what the road map will look like. So I anticipate sort of second half of the year, we'll be able to be a lot more clear about where we're going based on the feedback and the data.

And on your inflammatory pipeline, specifically, again, how -- do you think you have those capabilities internally? Are there still capabilities or assets you'd seek to bring in-house?

We have a great set of assets internally. I think between us and Galapagos, I think we have a really rich pipeline. As I said, we're -- we never stop looking. I mean we're always looking and trying to be opportunistic. But I'm pretty comfortable with the pipeline we have today internally between us, ourselves and Galapagos.

Looks like we just have about one more minute left. I've asked you a lot of questions. Anything that I haven't asked you that you'd like to address or say?

I think you hit all the highlights.

I think that's it. I think we're just really excited about executing against our strategy, and hopefully, we'll have other opportunities to share some of the future work that we do as well.

Yes.

Well, great. Again, thanks for making the trip, and congratulations on this morning's announcement.

Thanks for the opportunity. I really appreciate it.