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

Good morning, everyone. Thank you for joining us our next fireside chat. I'm really pleased to have with me the Chief Commercial Officer of Gilead Sciences, Johanna Mercier. Gilead is a name, I'm sure, everyone is familiar with. It's one of the bellwethers of the sector, a long-standing biotech company with an increasingly diversified portfolio of commercial and development offerings. So Johanna, thanks so much for joining us today. Really glad to have you here. Maybe to just kind of kick things off, for people who aren't totally familiar with Gilead, you can just give them a very high-level overview of what the company is and is focused on as a biopharma.

Sure. So it's a softball, I like it. Thanks, Brian. It's great to be here. So thank you. Yes, I think Gilead really has been known as an HIV company. And I think you talked about it a little bit about the diversification. I think we have diversification even within our HIV portfolio across prevention and treatment. We can talk a little bit about that because I think we have a nice pipeline for the future. And with recent news about the TAF litigation, I think that's another play that really gives us the next 10 years without any patent issues. The other piece of the puzzle that we've been working through is obviously we're still working in liver and still opportunities there. We're really building out our oncology portfolio. And I think we have some key assets in that portfolio, namely one in the market with Trodelvy. We also have cell therapy, with Yescarta and Tecartus. And then we also have an incredible pipeline in oncology that we've been building over the last couple of years. And the pipeline is interesting because it's a pipeline that not only has foundational products within it but also incredible opportunities from a combination standpoint. So the focus for Gilead right now is really around making sure we execute. We execute around our clinical development programs as well as our commercial plays. And I think that's what we've been showing to the street pretty much quarter after quarter right now.

Great. So maybe we'll start on HIV. I mean this is really what has driven the company from a small cap many years ago to the mega cap it is today. What has resonated so much commercially on the Gilead side to really become the dominant factor and player here?

So I think it has a lot to do with a lot of work that's been going on over the years around development as well as our PDM, our manufacturing organization. And it was really about never assuming that the next product was the best product. And so it's been a constant evolution in HIV to make sure we address the unmet patient need and whether that was getting to one single pill a day with Atripla to then making sure that we were getting to the best side effect profile, the best efficacy profile of resistance. And I think we've really gotten there and kind of peaked on a daily oral standpoint with Biktarvy. And Biktarvy basically set the standard. So Biktarvy now owns about 44% share of the HIV treatment market and continues to grow, right? It grows about 1 point or so per quarter and 4 points in the last year, both in the U.S. as well as in Europe. And so very proud, but it has a lot to do with not only the efficacy and the safety profile. It also has to do with the fact that we've just shown just recently at an AIDS conference in Montreal this summer, where 5 years of data, 0 cases of resistance. And I think that's really quite telling and unprecedented in HIV. So I think that that's how it sets up Biktarvy in the daily oral. I would say that there's more to it now. When you do market research and we do this constantly with our patient pools, it's what do you want next. And 60% of patients are looking for that long-acting opportunity. And I think we need to be clear that the long-acting opportunity has to be better than what the daily orals are today and convenient for those patients. I think lenacapavir can potentially offer that. Lenacapavir is a foundation long-acting compound at Gilead. And why it's so interesting, it's not just because of its potency and its safety, it's actually super interesting because of the flexibility of its dosing. It can be dosed daily oral, all the way up to subcu every 6 months and anywhere in between that as well. And so I think that's the flexibility whereas to find something to combine it with makes it a lot easier. And so you need to still find long-actings, but long-actings could play a weekly oral, for example, which is something we're studying, but also potentially every 3 months and hopefully, 1 day to find a combination for every 6 months to go with lenacapavir. So that's within the treatment setting, and then I would be remiss if I didn't talk about prevention. Prevention is a really big play for us with Descovy, about the mid-40 share and holding. This is one that the prevention market continues to grow. It's been growing year-on-year 25% in the last year. And this is one that has huge opportunities for ending this epidemic. I don't think we're going to get there with daily orals. I think we will potentially get there with long-actings. And that's where, again, lenacapavir subcu every 6 months in monotherapy, and we have trials going on right now in Phase III, that should be able to hopefully successfully prove that in prevention, you could use every 6 months. And think about this. These are not sick patients. These are people at risk. So it's a very different profile. And I think the needs are very different. And I think long-actings will be very important here, but the right long-acting is going to be key. And I think subcu every 6 months can be a real game changer.

Great. So you mentioned there was an IP settlement the other day. I was wondering if you could just kind of talk a little bit about where we are currently in the state of IP for Gilead and where you see sort of the commercial -- the current commercial franchise has exclusivity out to. And how can lenacapavir kind of cycling on top of that to extend the franchise?

Yes, sure. Listen, I don't think I've ever been in a role where I can honestly say, in the next 10 years, there is no patent concerns at Gilead. Thanks to the decision that was taken. I honestly haven't been in an organization where I've been able to say that. And I'm proud to be able to say it today, thanks to resolving the litigation with the TAF patent, maybe I'll deal with that one first. And so this is something that we announced on Monday. Our -- we basically were using as a base case for Descovy, for Vemlidy, for Odefsey, sometime in October 2025. And that's what we've always been saying. We -- the extension -- by resolving this, the extension goes out to October 2031. And so that's huge. When you think about in 2021, those compounds value about $2.8 billion. And so that is actually a really nice, I guess, confirmation of our longer-term play. And it also -- the one thing I want to add specific to Descovy is we're expecting lenacapavir PrEP in 2025. And so the transition of making sure that Descovy transitions from prevention daily oral to subcu 6 months is actually what's going to be really tight in that transition. And I think you need at least 12 months like we've shown with Truvada. This actually then gives us a little bit more space to make sure we do it right and that we ensure that transition happens appropriately to that long-acting and making sure that we don't lose an -- people at risk in that transition. So I think that's another piece of the puzzle. I think those 6 years are really important because the other compounds, Biktarvy is out to late 2033. And lenacapavir is in the late 2030s. So that's my point of it going back to my original statement, whereas I think we're in a very good position to make sure we maximize the opportunity in HIV and, of course, the rest of our portfolio as well with this situation. So I think we're very pleased that Descovy has a much longer life, including Vemlidy as well in hep B in addition to the fact that Hepcludex come around -- coming around the corner is a nice play with hep B as well. So it's a longer play for us.

Great. And then we had a very interesting investor panel yesterday, we were talking about the Inflation Reduction Act and the impact on various companies, and there was a particular concern addressed with regard to small molecules. So kind of given the context of Biktarvy being such a huge success, it also sort of raises the question of it is going to be a needle mover in terms of CMS and coverage. How does Gilead kind of consider -- and obviously, it's very early, how does Gilead consider the impact of the Inflation Reduction Act and the potential to have to negotiate with CMS?

Yes. So maybe if we take a step back, I think Gilead since the beginning has always been about, and I think many of our company -- peer companies are as well, has always been around, number one, scientific innovation; number two, patient access. Those things haven't changed. IRA or no IRA, that is absolutely our focus and our goals. And so start with that as a concept. I think you said it, Brian, around the IRA. It's still early. And I think it is very early to do any assessment. But if you break it down and you look at any type of policy changes, whether it's in the U.S. or the policy changes we've seen in reimbursement across Europe, and I'm sure we'll continue to see in the future, I think the keys to success are all about making sure that you have a innovative portfolio, that you have a young portfolio, right, and that you continue to drive towards that. And I think if you have that, which I believe Gilead has in line with what you've just discussed, and that's in HIV and obviously, there's oncology as well, I think we're well positioned to weather through this. If you break down the IRA, there's like 3 major pieces, right? I think you're referring specifically to negotiation. But as you think about the Part D redesign, I think that's a good thing. I think it's not yet enough in our opinion. I think there's still a lot more to do to reduce out-of-pocket costs for patients, and we'll make sure that we continue to strive for that. I'm not sure, unfortunately, this helps everybody, but it will help a percentage of seniors that get into the catastrophic cliff. And so therefore, it will reduce their out-of-pocket costs in a couple of years' time. That's a good thing. And that will have a modest impact but manageable. The inflation cap on pricing, I also think it's a good thing. And potentially, it is also an opportunity to make sure that there's no more bad actors in play. It will have a very limited impact to Gilead in light of the fact that I think we've been quite diligent about what price increases we've taken over the years. The last piece is the negotiation piece or what they call negotiation. It's -- and that's one that I think is still very early because I think we need to assess that, excuse me, and we're working through stakeholders to do just that and assess it internally and externally and what the impact could be. But I would also say that there's a lot of questions about how it might get executed as well. And so I think more to come on that. The Biktarvy piece is obviously something that we're looking at. But I think you also need to break it down. Our business probably in the Medicare is about 20%. It's not growing. It's pretty stable. And so that's really the piece of the business that we need to be thinking about. That's in treatment. When you think about -- and that's the piece that we'll obviously be focused in assessing the impact on that. The -- in prevention, which is a big mix in our -- a growing mix if you think about lenacapavir in the future in the later '20s, it's mostly a commercial business. It is not a government business. Just think about the age of those people at risk. And so that also balances out a little bit our portfolio as that's probably a very big part of our growth in the later half of this decade. And so that's how we're thinking about it right now. So we feel that it's going to be manageable, obviously, still too early to really put numbers on it. I think it's going to take months, potentially even years to really assess how this plays out and really probably the first year to see how it all kind of trickles out, right? So I think we're going to be talking about this for some time.

Right. Yes, absolutely. So I want to pivot a little bit to oncology. I mean Gilead has been known as a virology story, but I think originally, it was actually an oncology company. And they've dipped their toes in and out of oncology over the years but really moved in a big way the last few years. So maybe you can just kind of talk high level about the oncology franchises that Gilead currently has?

Sure. Sure. I think -- listen, I think the acquisition with Immunomedics was a big piece of that to have a foundational product with Trodelvy, a product that was already marketed and already proven in second line -- well, actually, I got an indication a year later, but in second line metastatic TNBC. It also got, at the same time, bladder indication. So already in 2 tumors. I think just most recently, with the HR-positive data, the OS data that was just presented at ESMO this past weekend, I think also super exciting to see that play out as well. So one more, which is HR positive, there is overlap, but it's very different. So it's another indication that we filed with the FDA. And obviously, we'll work with them to continue that. And we'll look at filings elsewhere around the world. The -- I think the other piece of the puzzle as you think about expansion is not just HR-positive because the patient pool is much greater, but it's also lung cancer. And we have trials playing out there. We have data readouts in '23, '24 in second-line non-small cell and then obviously playing that into first line. That's Trodelvy as a monotherapy, right? I think then the opportunities are endless when you think about combinations. And so we're already studying combinations working with Merck, working with AstraZeneca in both in lung and as well as TNBC, looking at earlier lines of therapy and combinations. But I also think what's important to look at is our portfolio as well. So we have Arcus molecules that are really interesting, including a PD-1 that's not super innovative anymore in this world but really practical if you think about some of the different combinations that you want to do in some clinical trials. And so super pragmatic and more efficient to do it with your own. So the TIGIT is obviously a high-level play with Arcus. The -- but some of the their other molecules are actually quite interesting as well. The -- and then we have magrolimab with the acquisition of 47. Magrolimab data in first-line high-risk MDS is expected as early as early 2023. And so that's the ENHANCE data. And I think that's -- the interim data, it will be interesting to see how that plays out, but potentially a real nice solid play in hematology. And then we're looking at magro as we think about solid tumors, and there's already a trial looking at a combination with Trodelvy. So -- in TNBC. And so those are the kind of things that I think are really exciting as you think about the portfolio. And then we, of course, have earlier oncology. We have over 50 clinical trials playing out in the next year. And so I think that -- again, I talked to earlier around clinical and commercial execution, that's the clinical piece of the puzzle that's super important to us. And that's why we're so focused, and that's why every earnings call, we talk about kind of what have we done this quarter and what are we planning for the next half of the year. And I think all hands are on deck. So a lot going on in oncology within all of these tumors plus the opportunities for combination.

Right. So maybe to focus on Trodelvy, it really seems to be the lead asset in the oncology pool right now. Maybe you can just talk about the TNBC indication. How you're seeing patient receptivity, physician receptivity there? And then I'd love to talk about the most recent data.

Yes. So basically, in TNBC, we basically just a little bit more than 1 in 4 patients are getting access to Trodelvy in second-line metastatic TMBC. You can appreciate, these are patients that, in general, in the past have been using a lot of chemo. And chemo is very entrenched in the marketplace. And so this is something that we really need to educate, and we need to continue to do that. We need to continue to raise awareness. I think the awareness in the academic centers is quite high. I think we still have a lot of work to do in community. We've expanded our footprint by about threefold from the earlier Immunomedics footprint earlier this year. So that's kind of playing out. And I think we should see the results of that probably by the later half of this year because it does take a little about 6 months or so to play out. And I think that will be interesting. I think we've had to build pretty much a full integrated oncology team that wasn't present before. So that's been a heavy lift. But nicely done now and playing all together between not only the commercial team, the medical team, but also nurse educators, your key account management or working with GPOs and it's all things that we didn't have to do in the past at Gilead. And so we've kind of built that from scratch. I think that's all now playing nicely together for Trodelvy and picking up. So we've seen nice growth in Trodelvy. We've seen NCCN support as well in Category 1 recommendation, which I think is super important as well, specifically in the U.S., but it actually has an influence elsewhere as well in reimbursement discussions with other payers. And not only are we learning what's going on in the U.S., but we've also had really strong launches in France and Germany, and we're playing that out in about 35 other countries. So more to come on Trodelvy, but definitely, this is one that -- the play is a global footprint and a really important one. And more recently with the Everest deal, the incoming Trodelvy coming back to Gilead and an opportunity in Asia that is, I think, quite important as well in the future. And we already have approvals in China and Singapore and opportunity to -- the filings are already done for Taiwan and South Korea. So that will happen in 2023.

Great. So TROPiCS-02 is study basis in HR-positive, HER2-negative patients. I think there was maybe some initial doubts on the street at the first analysis about the approvability on that data set, I think with the most recent survival data set, I won’t put words in your mouth, I'll just say it’s a no-brainer that the FDA should approve it now. Walk us through a little bit of the ESMO data and the subgroup data that we saw just this past weekend and how you kind of think about that as you commercially launch with the knowledge that you're launching into a pretty competitive environment, particularly the Enhertu data?

Yes, I think it's important to understand the patient population. And I think that's something that from ASCO to ESMO, we've had a chance to really talk through with KOLs, with physicians across -- but I do think with the OS data, we're in a much better position. I hope you're right around the filings, but the -- I do think with the OS data, it just makes it much more powerful. I think we've said very clearly that it's clinically meaningful. We don't just say that. This is basically -- these are very late lines of patients that metastatic disease. And these are all in the medium in the trial, they've had at least 3 chemotherapies. You talk about the Enhertu or the DESTINY-Breast04 data, totally different. The medium was one chemotherapy. That's a very different patient population. And so these are really patients that have nothing left to go to. And so I do think that's why the data is so impressive in this later line of therapy. I think as you look at the data that we've seen in the sub-analysis is it really works across all, right, HER2-low as well as HER2 negative. And I think that's really import as well. The -- I think as we position it, there's -- it will be third line plus positioning, which is a huge patient pool if you think about it, right? That's about 25,000 patient eligibility and as we move forward. So I think there's great eligibility there, plus the fact that if you think about IHC 0, which I think that's where Trodelvy is quite differentiated versus other competitors, I think that's about 35% of that population. And so that's, again, there really is no other option but Trodelvy assuming we get approval. So I think those are the kind of things that I think will be very competitive. And I think one of the things that there's a halo effect to this, you have basically OS data now in TNBC, right, with the ASCENT data in second line plus. And now you have OS data in HR-positive for HER2-Low. The -- and I think that, that I think not only helps the breast cancer play, but potentially even gives us a little bit more confidence across the board in other indications, including loans, just because from the TROP-2 expression. And so I more to come on that one, but that would obviously expand our population that we can address even greater.

Great. And then you mentioned briefly the numerous assets that you got from Arcus. Maybe you can just kind of talk about that deal and where you think the primary value is going to be derived I think -- the Street looks at the TIGIT antibody is sort of the most important. But how do you kind of think about that relationship and where that can play out commercially in the IO special?

Yes. No, listen, I think it's really interesting. So one is, I think that their medical director is now our medical director, so in oncology, and that's still Grossman. So I think that's telling in itself, right, from a collaboration standpoint and how we've been working together with Arcus. I also think whether it's quemli, whether it's the TIGIT, the -- there's a lot of pieces or even the PD-1, as I was talking about before, right, the CD73, all those pieces are really interesting, the -- to kind of play in not only on their own, but even with Trodelvy. And so I think the deal with Arcus is actually quite brilliant for both sides. I think it's really a win-win for both plays because it's really an opt-in play. And so that, I think, what you've seen in some of this -- the business development that Gilead has done is depending on the situation, we've done different earlier deals that are more, you get to decide as you go. It's small upfront and for bigger payout at the end, right? So it depends on the data and sometimes just too early to know. So I do think readouts for Arcus are coming through in 2023, Arcus 7 specifically. And I think that will play out, hopefully, positively and then now kind of opens up the rest of it. But I think it will be interesting, right? I mean we're obviously looking at the ROCE data really closely with the TIGIT and kind of what they're doing and they're continuing forward in their Phase III. So I think that's also telling in itself. But obviously, we hope for differentiation as we go, but I also think it's going to have to do with not only differentiation of the TIGIT, but I think it's also a differentiation of which combinations you study and which tumors in which therapy. And I think that's where you can make a difference in this setting.

Great. Moving on to cell therapy really quick. Yescarta was one of the first CAR T therapies launched. I'm wondering if you can just kind of talk commercially about how the Zuma-7 data has sort of changed the paradigm. We've sort of seen Kymriah fall off, not a cliff, but fall off quite a bit and maybe Bristol's program has some launched as well. How has that sort of secured Yescarta's position? And where do you think you are in sort of that the addressable market opportunity there?

Yes. So I think we've only scratched the surface, right? I think that in -- by getting the approval in April in second-line setting, I think it's huge. I also think it provides greater confidence in later lines as well because there's still a lot of hesitancy in later lines for cell therapy. You basically have only about 2 out of 10 patients that are eligible in third-line plus, LBCL that are getting cell therapy. That means that there's 8 that aren't. And we're talking cure -- potential for cure. And so I think that's super important to realize. I think as you get data in the second line, people then feel more confident. What we saw in Q2 and good results for Q2 for cell therapy -- what we saw in Q2 is really a bolus of patients post that. It's literally the day after the indication we were getting requests for second line. So I think you're not going to necessarily see that going forward that bolus happened. I don't think you'll see that necessarily going forward into Q3. But you'll see continued growth because I do think there's still major opportunities there. The -- I think it not only has to do with the indication in April. I think it also has to do with the reliability, the manufacturing reliability, we're at 97%. It has to do the vein-to-vein time of 16 days, right? So I think we're continuously improving that and really making a difference there versus our competitors. I will say, however, that some of this is we're competing against ourselves because of that inertia that is happening. And a lot of that has to do about the link between community and academic centers that actually can treat with cell therapy and making sure that patients can come out of a community and then back in. And I think helping them do that community oncologists, I think it's going to be key. I think some of the ZUMA-1 data around prophylaxis of steroids is going to help manage side effects more efficiently and potentially get us to a little bit more of an outpatient setting in the future, and we have trials looking at that, that haven't -- that should start before the end of the year.

Great. And then on the BD front and Sands arrived, there's been a lot of activity on the BD side. Immunomedics was the biggest acquisition Gilead's executed to date. How is the CC kind of currently looking at day you execute additional large-scale acquisitions like Immunomedics? Is it more bolt-ons? What's the strategy?

Yes, I think the strategy -- I don't think we're looking for another Immunomedics. Although I'm not telling you that we wouldn't evaluate it and make sure that we made the right decision. I think that's just good practice. We continuously evaluate different opportunities. But I think we are looking at a little bit more smaller to medium size and are open to it. I think from a cash position, we're in good shape. I think BECLARY has been a big play on that and helped us out to get back to pre-Immunomedics kind of situation. And I also think that we're going to look at opportunities. But I think we're going to -- it needs to be smart and strategic. It has to go in line with kind of where we're at from an organization where our strategic pillars are very clearly defined and we're agnostic to modalities or things like that, but we are clear on our strategies moving forward. And that's specifically around our different portfolios around virology, around oncology and inflammation. And so I think that potentially more to come. But obviously, it will depend on the assets, where they are. I think Phase I is going to be a lot easier to do than anything Phase II, Phase III just because of the breadth of our current portfolio.

Makes sense. And then the question I always end with is, is there anything I sort of missed or you think that investors are generally missing about Gilead that you want to highlight?

I think it really has to do with the fact that now with the potential of within HIV and basically having a free runway for the next 10 years, I think is super important. I think the opportunity with lenacapavir with our HT or heavily treatment experienced indication, we just got it in Europe, we expected in the U.S. by the end of this year. I think it's basically HT is very small. It's just 1% of the total HIV population, huge unmet medical need. But I think it sets us up for the future, right, of what lenacapavir truly be as much as Biktarvy is now our lead in the daily earl and will continue to be for the next decade, I think it's really important to understand the value of lenacapavir for the future, both in treatment but also in prevention. And then, of course, in oncology, I think people understand the assets that we have. And I think the HR positive data is another play to say, okay, there's more confidence now. And I think what we're seeing is confidence play out in other indications as well. I think it's also the combinations that we can offer and that we can do ourselves internally without having to play with others.

Great. Well, thank you so much for the time. This was awesome. Thank you, everyone, in the audience, appreciate it today.

That's fine. Thanks.