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

Okay. Good morning, everyone. My name is Daina Graybosch. I am analyst here at Leerink Partners. My team and I cover immuno-oncology and broader. And we -- one of the companies we cover is Gilead, and we're really excited today to host Cindy Perettie from Kite.

Thank you. It's nice to be here.

And so we're going to jump right in, because it's a busy year and busy week for CAR T. And we're going to talk all elements. So actually, let's start with BCMA. So Kite has licensed Arcellx's BCMA CAR T called Anito-Cel. And I wonder if you could talk about of all the potentially differentiating product attributes for Anito-Cel, which do you think will be most impactful in commercialization?

Yes. So maybe just a little background on Anito-Cel. Anito-Cel is a BCMA construct that we are studying today and the iMMagine-1 study. And we just shared data last year at ASH, which was really exciting. We have, within our iMMagine-1 study, 63% of our patients are high risk, 34% of those patients had extramedullary disease, which is a poor prognostic factor in multiple myeloma. If I think about -- to put it in context, the studies for other constructs in this space probably had about 15% extramedullary disease. So we looked at our efficacy, we have a 100% overall response rate. We have not reached our median PFS for the extramedullary disease yet. We shared that we were at 33 months for those patients. And then in all comers, we were at 26.5 months and hadn't reached the median PFS, but we are excited about the response rates and the fact that the efficacy that we're seeing looks on par with some of the competitors in this space, yet we have a poor prognostic patient population. From a safety perspective, we have not observed any of the neurotox that's being seeing today with other constructs in the space so no Parkinsonism, no nerve, the Cranial Bell's palsy, no Guillain-Barre. So early days, we're continuing to watch the patients and enrolling patients, but we have not observed that yet. The construct itself has something called the D-domain, which is its binding domain, and it's very unique relative to other contracts in this space. It's a super simple, elegant binding domains. If you haven't looked at it and your chemist look at it. It's 3 helical structures. It is super stable in temperature or pH changes. And we are experiencing today 70% transduction efficiency. So 70% of the cells are transduced and can be active CARs. And to put that in context, other contracts in the space are about 15%. We're seeing low tonic signaling. And I think coupled with our transduction efficiency, it's allowed us to dose them at half the dose of what we're seeing with other constructs, but have really, really efficacious myeloma cell killing. And so that D-domain is definitely a differentiator and the safety and efficacy we're observing is differentiated. And then finally, in the partnership with Kite, this is a marriage in the sense that we have production facilities around the globe. We are making our own vector, and we will be making the vector -- already started making the vector for Anito-Cel, and then coupled with our footprint of over 420 authorized treatment centers and our manufacturing capacity and our commercial execution, we think this is a real opportunity for us to bring Anito-Cel to more patients around the globe. We're excited about the iMMagine-1 data, we'll be sharing that in the second half of this year, and we're already talking to regulators about going into earlier lines or designing the study for that.

If you had to pick one of all those elements, what's going to be most compelling commercially?

I do think that we will have equivalent or better efficacy and a safety profile that looks differentiated. And I think that's going to be really important in the marketplace. I don't think you can get it to the patients without the footprint that Kite has.

On the delayed neurotox, I think you said in the last earnings call that you haven't observed it in pharmacovigilance of the ongoing study that...

We have not. Yes.

Do you have any sense why?

There's 1 million hypotheses, and I probably don't want to go down the rabbit hole of which one of those make sense. I do think that D-domain is differentiated. I do think it's a simpler. It doesn't have the complex folding that the other domains have so that if you're worried about binding, you're not going to be challenged with it changing shape during changes in temperature of pH. So I do think there's something very unique about the D-domain.

Let's move to your commercial products, Yescarta and Tecartus. And I wonder how much of a threat do you see to revenues from either of those products and BMS increasing their scale for [indiscernible] and then potential launch from [indiscernible].

So today, we're not seeing necessarily high levels of in-class competition. So I can paint the problem statement is that class share is not growing in the United States. It is growing outside the U.S., but we -- we had stagnant class shares. So we've been around 15% to 17%. And so how we grow class shares is going to be really important for all of us for CAR T as an industry. And if I -- can I talk a little bit about how we want to grow class share, but then also talk about what we're seeing on a competitive standpoint. So from a class share perspective, we have 142 authorized treatment centers today in the U.S., making this specifically a U.S. conversation. And those treatment centers are primarily in academic centers and large hospice. With any authorized treatment center today, CAR T is being utilized, but not fully. So 80% patients are seen in the community today and 20% in academic centers. In the community of those 80%, 30% are getting referred into the ATC. So we have 50% not getting any even chance at the opportunity of CAR T. I forgot to say I wear my pin, which is 8. Today, we see only 2 and 10 patients getting CAR T and there's 8 patients who are eligible who are not. So I want to think about that every day. But so of the patients being referred in the academic center, they can get CAR T, but what we're seeing is half of them are getting hung up between either being referred to a stem cell transplant when they're eligible for CAR T, and we've been able to convert most of those patients. We have about 30% less left in the stem cell area that we're looking at converting the CAR T that are eligible, but another percent of patients stay with the lymphoma specialist. So the lymphoma specialist is not referring to CAR T. So we have set up our field-facing teams to really tackle these issues within our existing ATCs and getting conversion of the 50% of patients that are not being referred the CAR T that are eligible. And part of that is having those conversations with lymphoma specialists about the importance of receiving CAR T in second line and then receiving alternative therapies like bispecifics and third line. And that's how we're tackling it at the ATC level. We're also looking at moving into the community. And so we have started to stand up authorized treatment centers in the community, which you can imagine it's not as straightforward as standing it up at an existing academic center that's a transplant unit. So we stood up, authorized treatment centers at Virginia oncology specialists. We are going to be talking in more detail for those of you who are there on Thursday that we have stood up Tennessee Oncology and we are learning through each one of these, how to make it work better within the community and keeping -- sort of putting a playbook together that we'll be using as we roll out to more community practices. It's going to take in the community though, not just a community practice, they have to partner with a hospital system for the safety event and you have to have apheresis capabilities. And so those 3 things are the pieces that you need to bring together in the community and then couple that with education around payment and reimbursement. Instead of having one payment go to one ATC, it would be split by payers across those providing services. So that's a little bit of a lift, but we're feeling confident about it. And I think this is the type of thing Kite loves to take on are these types of challenges. If I look at the competition that we're observing and I just think after quarter 4, much of that competition was out of class. And so I still want to make sure we're growing the class, but the out-of-class competition we're seeing is refold. One is that, there's a lot of clinical trials in this space right now, whether it's with allo or with bispecific products or other products being studied clinically. The second piece that we're seeing is that many of the existing ATCs were starting to reach capacity because of multiple myeloma and other new constructs coming in. And so I just do the tour of the East Coast hospitals over the last 1.5 weeks. And what I'm seeing is in those large centers, I'll use Moffitt as an example, that was my last stop prior to coming here. They're already talking to their hospital system about getting more beds, getting access to more space. And so a lot of the larger institutions now we are looking at those expansions. So I'm hoping that's something that goes away over time. And then the third one is, we started to see a little bit of bispecific use coming in to the second line, today, they're approved in the third line, and we're really spending our time as we educate in both the community and academic centers about CAR T being utilized in second line and then bispecifics and others in third line. And we know that patients who get CAR Ts early in their disease in second line have a better overall survival.

The bispecific competition in second line is sort of surprising to me given [indiscernible] that decision?

I think the pieces that we're hearing is that bispecifics can be used more easily in the community. However, many of you know who are close to this space is the bispecifics, your first 1 or 2 doses are administered in hospitals. So it's a similar situation that we have with CAR T. So it's not a lot, but we have observed them.

Can you talk about the experience with the communities, so the Virginia Oncology and Tennessee Oncology? Are you going to -- is that going to be something that you will easily with scale replicate over time? Or do you think that's like a very unique solution center system by system?

Yes. So I think that piece that we're learning is flexibility matters. But we are developing a playbook and we have -- Tennessee Oncology is one of those practices that always stays on the front edge of innovation. They brought in Genomic testing before any of the community brought in, and they're always sort of on the forefront. So they were a great partner to go with early and really work through this and learn but the playbook we've developed can be applied to other hospital systems and community practices, and we're having those conversations now. So I do think it's replicatable, but I think there's areas where you have to be flexible in the case of Virginia oncology associates, they didn't have [ aph ] capability and had to find it externally in the case of Tennessee Oncology, the hospital partner, they chose St. Thomas had apheresis in their nephrology department, so they were able to use that. So I think when I'm talking about flexibility is seeing, what they have, but knowing that those pieces need to come together.

When we think about where transplants are done today. It seems like you go to the tail of smaller and smaller centers, there's sort of a diminishing return on the investment. Do you think that's going to be the same for cell therapy? Or will we see a difference?

Yes, I think we will see a difference. It's really interesting when you talk to the community practices because they don't want to become transplant centers and they're saying, why are you telling me CAR T -- CAR T isn't a transplant therapy per se, so I don't need to be a transplant center and I can leapfrog this concept of becoming a transplant center and use CAR T. And you will probably hear that I'm going to be doing an interview with one of the large practice CEOs at the Reuters meeting, but I don't think it necessarily -- I think fact accreditation gets you set up in a way to give CAR T, but it still takes 3 to 4 months to stand up a fact accredited institution. And I think the delivery of CAR T is different than stem cells. So I think it will have a different trajectory.

When can -- are there any milestones like time wise or certain institutions we should look to, to give a signal of that difference?

Yes, we will be targeting -- today, we're targeting the large community practices because they're usually set up with infrastructure and they have large pull, if that makes sense, they have practices throughout a state. As an example, you think about Texas oncology and so looking at -- I'll use Texas as an example. That's a very large state and looking at the referral patterns there. You've got some going into academic practices like bailer medicine. And then in that same city in Dallas, you have some being referred to Medical City Dallas. And so we're looking at how do we serve the patients in that community with those larger practices. But they're all the large practices are excited to be able to provide this and they recognize the overall survival benefit for their patients.

Going back to the ATC capacity and you talked about Moffitt and some of these other bigger centers expanding their own capacity. Do you think that right now that's a zero-sum equation. So as the BCMA move earlier, Iovance is launching their TIL. Is that going to have a negative impact on Yescarta and Tecartus near term?

I think near term, we are seeing the impact of multiple myeloma coming into the hospitals but as I just adjusted, I'm glad I'm talking to you this week because I've spent 2 weeks having all of these visits, and I am going to use Nashville as an example, Nashville is a great city because it has Vanderbilt as an academic center. It has HCA hospital systems where they're all in on delivering CAR T and then you have Tennessee Oncology, which is the community practice that's going to stand it up with one of the local hospitals. And so listening to all of them, I would say, Vanderbilt and the HCA hospital systems have been doing this for a while. There are already asking for more capacity as well as outpatients. So both of them are delivering 35% of patients in an outpatient setting, so they can expand their capacity. So it depends on the learning curve of where each of these hospital systems are, but what I have confidence that we are going to continue to evolve together in those hospitals that need more capacity are asking for the beds and we are also seeing an uptick in the amount of patients that are being treated in the outpatient setting to allow for that capacity. I do think we're at a sweet spot right now where there's a little bit of crowding. Does that make sense? But my hope is that we see a lot of that resolved towards the end of the year.

So this will be a big year to see?

A big year to see. And it never occurred to me until I was speaking with Moffitt as an example on what it takes for them to procure another floor or another 12 beds, like they're arguing against everybody else in the hospital to get more space. So each one of these institutions is going through it. But with CAR T, I think there's a great argument and the overall survival is something that they're using as well as the practice changing in the economic.

I think you are -- I'm looking at my next question, I think you already answered it. It feels like there is incremental change in how we deliver CAR T and you're sort of going bottom by bottom. Do we need something even more transformational? Is there a resolution to deliver CAR T for oncology and, let's say, autoimmune diseases, it's going to be more than this change.

Yes. So I actually view getting the community ready as absolutely necessary for multiple myeloma and autoimmune. So autoimmune, if you think about patients who are seeing rheumatologists and neurologists, a lot of them are being seen in the community. And so making sure these hospitals and these community practices are set up for success is really important. I do feel like we're on the front end of it with community practices, but we have got to get that right in order to be successful in each other's bases. And there's a lot of enthusiasm. So if you go to these different centers, Moffitt, which is a cancer center, is asking us, how can we partner together because we see this autoimmune space as being really exciting, and there's hospital systems in the Greater Tampa area that we could partner with together to deliver CAR T in our unit for autoimmune patients. And then you've got hospitals that of HCA hospitals where they already have the rheumatologists and neurologists sitting in there with the oncologist. And so there is an opportunity to bring that together. But I firmly believe we've got to crack the nut of how we can deliver this in the community to be able to tap into actually all of what's possible with CAR T. And what we didn't talk about is part of that means evolving the constructs we have today, how do you get the construct so that their safety profiles look different. Maybe they don't have to be in hospital stays. How do we have conversations with REMS. We're 7 years in. We've learned a lot, and we're having those conversations with FDA right now. We put a REMS in place 7 years ago, what have we learned since then? And ASTCT is joining us in those conversations, the transplant body. So I think there's a lot of evolution that we're going to see in the course of the next couple of years.

Is this an opportunity? And how are you thinking about collaborating? If I talk to BMS, they are doing a lot of the same things. It's like where is their everybody lifts boat?

So it's everybody lift boats on class share. Yes. And I'm glad to hear that others are thinking about it as well, but everybody is going to lift the boat. I think 15% class share for a curative medicine is not acceptable.

And then on [ repping ] for autoimmune, and I guess there's 2 ways I might strategically think about scenarios of what you can do as Kite, I could think about we're building this out correctly for oncology. We do this right, then autoimmune, we'll have this market to go into or I might say, I have to own an autoimmune asset myself, so I can do the trials and be there at the very core when all these -- the patterns are getting imprinted in, like you want to be there from the beginning, imprint in the right pattern so that you can actually scale this in the future or you build it and they will come. And you don't have an autoimmune in the clinic yet, so how thinking about that dynamic?

So I'd say rest assured we will be playing in autoimmune, we're global leaders in cell therapy, and today, we have an opportunity to -- I want to say -- I don't want to take our time like we're sitting around, but we have an opportunity to assess the landscape from an internal perspective, we have a number of assets today that we have 3 assets that are in Phase I clinical trials that are next-generation Yescartas that could be -- could have application, obviously, in the autoimmune space. And then we're also looking at the external landscape as we always do. And really looking at the data over the coming months and making the decision of which direction we want to go in, but we'll be playing there. I think the piece that has been -- I'm coming up on 1 year at Kite and the piece that I really appreciated about being at Kite is because of our global manufacturing in our commercial execution and our footprint for ATCs, a lot of companies do want to work with us. And so we have an opportunity to collaborate, particularly in the autoimmune space with the companies that are working there today and just really understand their data a bit better and understand our own data before we make that decision. But stay tuned.

You answer my next question. So given your successful investment in manufacturing and commercialization, what scale in terms of either products or overall doses maximizes the profitability and the long-term success of Kite?

Yes. SO from a profitability standpoint, when Gilead acquired Kite, it was communicated that Kite would become profitable 4 years. Well, it took 5 years, but we are profitable. And I think last year, we contributed just less than $2 billion in sales to Gilead, and we're going to continue to grow in that front. We have been able to continue to refine within our manufacturing process. Many of you saw we went from 16 days to 14 days, which means we're going to end up having higher throughput within your manufacturing facilities, and you will see additional improvements from us on that later this year. So we're continuing to knock away at the turnaround times and what it takes to get the product through the facility and out. All of that adds to allowing us to increase our capacity. So if you think about -- we were looking at the data in 2017, when we first came out with a product, we had less than 30 ATCs and I think our production capacity, I can't remember the exact amount, but let's say if we could produce hundreds we were thrilled. Today, we have the 420 ATCs. And last year, we were able to produce 6,000 -- serve 6,000 CAR T patients, and we still have capacity. So we're not in a slot constrained world. And by 2026, we'll be able to be 24,000 a year. And we still have -- for those of you who come on Thursday, see the tour, we still have shelf spaces at our production facilities that we can continue to build out. All of that allows us to continue to drive our cost of goods to a place that we're really excited about and our profitability. With that said, we want to knock out multiple myeloma. We want to move into earlier lines with Anito-Cel. We also want to play in the autoimmune space. So we will be making those investments, but profitability is not a question.

Already today, but it could get more profitable as what I'm hearing as you continue to scale...

That's our goal. And I think as we continue to make investments into the autoimmune space, if it requires us building another production capability that we may invest a little bit more. Does that make sense? And so that's how we're looking at it. But the piece I've appreciated Gilead is looks at it for the kind of the long game or the 5- to 10-year game, but know that today we are contributing to the bottom line, and we will continue to do so.

Market structure question, if you will. I think we're quite early in the journey of CAR T in the industry. And I wonder how you're thinking about it? Is this like vaccines where all this infrastructure, both for trials, commercial manufacturing means that we'll have a few CAR T companies, big one that a lot of innovation will happen and that will end up in a big company because of these barriers to entry or you think there is a path for smaller companies?

Yes. Even if you think about vaccines and Moderna partnering with Pfizer, I think the pieces that I see that are important infrastructure builds to be in cell therapy, you're just talking about the manufacturing facilities, right? We have 3 manufacturing facilities globally and we make our own viral vector. And so that allows us to kind of control the end-to-end value chain and not have to -- I think some of our -- some of the other companies in the space have had to rely on other companies for vector, as an example, it's been a challenge. So you've got to invest in all of that. And I think Kite has been lucky that they started that footprint, but Gilead came in and they also saw the value of cell therapy and continue to invest in it. 7 years later, 420 ATCs, this year, we're going to stand up 50 ATCs in Japan alone, but that takes infrastructure to be able to stand up these authorized treatment centers and having that footprint matters. I think the other piece that we don't talk about publicly that, we have underlying systems, it's called Kite Connect, and it does everything we can do from an information and data standpoint from ordering, understanding exactly where that patient's therapy is, returning that patient's therapy. So you have these systems that allow for everything from tracking just the cell therapy itself to almost your supply chain, and it interacts with the physician side, too. So that development has taken place over the last 8 years, and we continue to improve on it. And then the last is talent, right? How do you get these amazing cell therapists and there's not 200 institutions that are spinning out cell therapy experts. And so I think having that requires usually larger company investments. So you're seeing the Novartis and BMS and J&J, now AstraZeneca coming in and Gilead and Kite. And the nice piece that I was saying I experienced is that we have a chance now to work with all these small companies who can leverage some of the things we have. And I think our [ Selex ] is a great example of that. But we've got collaborations with Shoreline. We have collaborations with a number of companies. And so I do think you're going to end up with those 5 companies for a while as those investments take quite a bit.

We talked a little bit about your internal programs on the R&D front. You said you have -- I think you said 3... And I've heard you talk about the CD19, CD20 bispecific. I wonder if you could just maybe talk about that one or any other one you think we should start paying attention to because we could see data soon as well and why you're excited?

So I -- so just to give you a background on our approach, so in looking at ways to improve on Yescarta, but also applications that we could provide to other constructs like Anito-Cel. We began looking at 3-day manufacturing, so you end up with more juvenile cells, and those juvenile cells tend to be more active. So 3-day manufacturing is one of the pieces. The second piece that we've been exploring is dual and try targeting. So do you go after more than just CD19. And the third piece that's earlier is can we get to a place where lymphodepletion is not as frankly, you can get to place where there is no lymphodepletion or that you can remove some of the lymphodepletion and make it not as challenging for the patients. So I'm going to talk about the first 2 areas because that's what we have in the clinic today. So we have 3 constructs in the clinic. One is Yescarta with a 3-day manufacturing process, and it's called 197, and that's in Phase I trials. We have a second, which is a bicistronic, using the same 5-day manufacturing that we have today targeting CD19 and CD20 and it has both CD28 and [ 4-1BB ] costimulatory domains and that one is called 363, it's furthest along, we're in Phase I trials, and we are now in the expansion phase for that study, and you'll see data on that later this year. And then the third one is called 753 and it takes the bicistronic and the 3-day manufacturing, and it combines it, so it has both of those attributes. I don't want to pick -- I like all 3 of our kids. I don't want to have to pick a winner, but my concept is that probably 753 where we can combine the 3-day manufacturing in the bicistronic could have a nice competitive advantage. So again, all of those in Phase I today with 363 for this along. And then we have another construct that's moving forward very rapidly, where we are looking at armoring a CD19 with an IL-18 and an IL-15. And those are concepts that are new not being tested necessarily clinically, and we're pretty excited about this idea of armoring the cells. So that's not in the clinic. Yes but it's coming.

Does that armor achieve your third goal of lowering [indiscernible]?

Possibly.

I guess last question on allo. So you've been -- everything is auto thus far, although you mentioned Shoreline, which is an allo partner you have. What do you believe might -- what unmet need today do think allo therapies are most well positioned to address? Because auto can't get there.

Yes, it's a great question, we do have allo. So for those who come on Thursday, you'll get to see kind of the whole portfolio from our head of research, which will be exciting. So from an allo perspective, having the off-the-shelf opportunity, there's a couple of things. So one is, if you can produce 1,000 doses out of a single donor that's always fantastic from a cost of good standpoint. And if something can sit on the "shelf", so that when the patient comes in, they can receive it pretty rapidly, that's exciting too, particularly for patients with highly aggressive disease. What we're seeing with allo today though is not the efficacy that we're seeing with auto construct. So as we can continue to tweak and improve the efficacy, these become really great valuable options, not just for the rapid projectors or the more frail patients. The piece that we continue to look at is as we keep bringing our manufacturing time lines down. Will you -- would you opt for something that has 54% overall survival or something that might have a little bit less. And so we're always thinking about where would that play in allo be. Ideally, we get to a place where you're not lymphodepleting and you've got an allo product. But I think we're years away from that, but we're seeing the biology continue to develop. And so I'm very cautiously optimistic about the direction that can go in. But again, from an off-the-shelf standpoint for a patient with highly aggressive disease, I think it's really important. The patients still have to be lymphodepleted. So similar to autologous, you're not going to -- it's not going to be a huge benefit for frail patients at this point.

It's interesting to highly aggressive disease point because you say maybe you want a really quick off the shelf but maybe in myeloma you want to give a better bridging therapy, wait a little bit and then...

And that's why as we get down to like the 10 to 12 days, it's sort of...

Like what is the real opportunity. Okay. That was a great 30 minutes. Thank you. Thank you everyone for your attention. I appreciate it.

Thanks, everybody.