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

Yes, it's interesting. I mean there's no -- the HIV treatment business is doing really well, to your point. So to just kind of step back, we had expected with the Part D reform this year that kicked in for the HIV business to be flat year-over-year. The Part D headwind was about a $1.1 billion headwind for us overall in terms of revenue, $900 million specific to the HIV business. And in the middle of the year, we updated our guidance to say that we expect, as you said, the business to grow -- the HIV business to grow 3%. And if you exclude the Part D impact, that would be 7% growth. The important thing is that the vast majority of that is demand-led growth, right? So we are seeing strong demand-led growth. The HIV market is still growing 2% to 3% in the U.S. and Biktarvy continues to take market share. And all of that kind of leads to the strong demand-led volume growth. There has been a tailwind in pricing to your point. It's not -- it's been a smaller piece of the equation, but one that's important. And that's driven largely by as the Medicare redetermination process kicked in more recently at the end of the national emergency related to the pandemic where you could reevaluate Medicare coverage. Many of the patients that lost Medicare coverage moved to commercial plans, whether it's -- and you've also seen a strong unemployment rate, more people returning to work with more commercial coverage. Some of that is the government health care exchange plans, but it's all driven more favorable pricing mix for us in HIV, where you have more commercial coverage than expected and less Medicare coverage -- less Medicare claims than expected leading to a positive mix. But I would highlight, again, most of the growth is demand led. The vast majority of it is demand led. There has been a pricing tailwind, which has also helped. But the business, to your point, the HIV treatment business is probably underappreciated and is doing really, really well. The growth in the HIV prevention business has been so extraordinary in particular, the last 2 quarters, but certainly over the -- even over the last kind of 9 to 10 years that it overshadows it a little bit, but the HIV treatment business and Biktarvy in particular, is doing really well.

Got it. So this is very, very helpful. We get a lot of questions around the -- like, I mean, obviously, the macro headwinds out there are -- I mean, the chatter is there. So there are 2 -- it comes in 2 flavors. So like before we get to macro, like the one topic I want to discuss is that there are some questions around as we get into late 2030 -- 2020s, Biktarvy has a longer patent life, but your competitor is losing patent. So do you see that as a risk at all? Or is manageable?

It's manageable. I mean, there's -- so the answer is largely no. I mean I think the Biktarvy is the gold standard for a whole -- for many, many reasons. I mean, that is by far, when you look at kind of efficacy, safety, the ability to put patients on therapy immediately without genotyping, the lack of resistance. I mean it's absolutely the gold standard in HIV treatment, and we don't expect that to change. So the -- and again, you highlighted earlier, I know it's HIV prevention, not HIV treatment, but you see what we were able to do with Descovy in HIV prevention relative to Truvada. When Truvada went generic, it just reinforces that in the HIV market, patients and physicians tend to want to be on the best therapy, the safest, the most efficacious therapy and we don't think that's going to change. There will always be discussions with payers there are every year in terms of kind of the payer dynamics. We have very modest rebates on our HIV products generally given the strength of the data and the strength of the portfolio, and we'll continue to focus on that to make sure that we're receiving kind of fair value for what we're bringing to the market. But no, I don't think it's all included in our in the markets assumptions, but it should not have a significant impact on the business.

Got it. And this market is on like [ fifth ] class of agents at this point, right? Some a lot of...

Yes. And the other thing to remember there, I should highlight is there are a number of new launches coming, right? I mean there's not only -- in the coming years, we'll have a new -- we would expect switch option in a daily oral doublet of lenacapavir and bictegravir, which we think is a really exciting additional treatment option for certain patients. And then we have the broadly neutralizing antibodies with lenacapavir as well as all of our long-acting therapies that should be coming to market. All of those should help us take additional market share and blunt the impact of any kind of generic launches. Maybe the last thing that I just -- you saw this in prevention, and we've highlighted this historically, even in treatment, the long-acting therapies should provide an efficacy advantage because with the daily orals, patients that have HIV, even though these are life-saving therapies that are incredible, they don't always take their pills every day. And sometimes people will go off therapy. The long-acting just like you see in the data for prevention should lead to better efficacy in HIV treatment. It won't be the same degree of benefit in terms of the magnitude relative to each other that you see in prevention where people are really not adherent to the daily orals, but you could and should see an uplift in terms of efficacy from the long-acting HIV treatment therapies as well that will go into kind of how people think about the therapies that they're prescribed and that they take in the future.

Got it. No, that's very helpful. And I'll talk about the pipeline. I do want to talk about the pipeline here. So I mean, you -- you hosted a massive presentation last December, which was very helpful. How are you thinking about time lines of the HIV treatment, longer-acting HIV treatments here? And I think your own markets research suggested that injectables are probably going to be very good if they are quarterly or every 6 months. So how far are we from getting to those?

Yes. Well, I think we've said we have 7 programs in clinical development, others coming. The relatively high degree of probability that many of those will hit the market between now and the Biktarvy loss of exclusivity in the middle of the 2030s. So I think we're in a great spot. I do think, to your point, the 2 therapies in the future that are likely to have the greatest impact and the greatest adoption would be a monthly oral and an every 6-month injectable for treatment again. And we think both of those are possible, and we have multiple programs that are exploring those. So it's too early to specifically give any specific guidance on kind of approval time lines beyond the therapies that are already in late-stage studies in Phase II and Phase III. But we're -- we have an incredible team that's bringing those forward, quickly number of programs, multiple shots on goals that give us a lot of confidence that we will get there. So and again, to step back, I mean, I think it's likely that at some point, we have multiple weekly orals available, a monthly oral available for treatment and then in every 3-month or every 6-month or both injectable option. But the ones that have the potential to be the biggest are every 6-month injectable and the monthly oral.

In some ways, it reminds me of the era between Atripla and Biktarvy. You had like multiple drugs launched, and then they all sold a lot. So could it be that kind of situation before you get to this every 6-month?

Yes. I think that's -- you're spot on. I think that's likely -- they were -- I would expect that you'll see multiple launches. It's hard to say today which therapies would be the biggest, the most attractive. We have to see the clinical data at the end of the day. Different patients and different physicians have different needs or desires that you'll see. But you could see a number of launches with drugs like the Genvoya equivalents or the [indiscernible] equivalent that are important for a period of time and that as you launch additional therapies, they may be cannibalized, and that's okay. I mean, our goal is to give physicians and people with HIV as many different treatment options as possible that really work best for them. The other thing that we don't always talk about that's important, if you look at the HIV market, the percentage of people in the United States that have HIV that are, one, not -- that are not aware that they have HIV is much higher than you'd expect. The percentage of people that are diagnosed with HIV but are not drug-treated is shockingly high. And then of the people that are drug treated, those that are not under control or undetectable is high. When you kind of put it all together, I think roughly 50% of the people in the United States that have HIV are either not diagnosed, diagnosed but not drug treated or not undetectable levels, meaning that they can still transmit HIV to others, which all of which means there really is a need for additional treatment options that help us reach all of those people and reduce that number significantly. So even though it's a really well-developed market overall, there's still a lot of potential and need for new treatment options in HIV treatment in the U.S. and globally.

So let's just touch up on the topic of macro headwinds from -- one from the MFN to Medicaid side and also Medicaid potential funding cuts, which could come. So I mean, how as a company you are thinking about these? And do you see them as a manageable risk? Or like how do you prepare for all that?

Well, like all companies, we're looking at a lot of scenarios and preparing. We spend a lot of time in D.C. having discussions, not only with the administration, but with the representatives and senators helping them understand kind of the drug pricing in the U.S. and why the system is the way that it is, the value of the innovation that we're bringing. I'm not going to speculate in terms of what's going to happen with any potential MFN or Medicaid changes. We do think it's manageable if there are changes, and we think that the clinical profile of our drugs across our entire portfolio is so strong that it gives us a really strong position to help people understand the benefit that we're bringing to patients. So there's a lot going on, but at the end of the day, we're having positive discussions. It's hard to say exactly where it's going to go, but we do think that there's a growing recognition of the importance of both the health care sector, the drugs that we're developing. They're also been some comments from the administration recently in terms of the focus and importance of really focusing on infectious disease, which I think is encouraging, and as you know, is a huge piece of our business. So when we kind of put it all together, we think it's manageable and we'll look at -- we'll continue to monitor a number of different scenarios.

Awesome. So let's just talk about the oncology pipeline where we are seeing also like kind of like people were excited, then they are not excited and now like you are seeing some interesting data here as well. So Arcellx, first of all, I mean you have some interesting data coming up and filling coming up next year at this point, right? So your partner has talked about big numbers that it could be a big opportunity in fourth line. How Gilead is thinking about it internally in terms of opportunity? And you have a differentiated safety profile. So how do you see that?

Yes. So referencing anido-cel, which is a BCMA cell therapy for multiple myeloma that's in late-stage clinical development. You'll see the full kind of Phase III data set, fileable data set later this year. We haven't said where, but it will be later this year. The filing, I think you said this time next year, you meant the approval directionally, not the filing. And we haven't guided specifically to kind of specific filing or approval dates. Our partners has said that they expect to file by the end of the year, which is a reasonable assumption. And then the other thing that you highlighted is our partner has said that they think it's a really large commercial opportunity, and they've given kind of specific guidance on the size of fourth line plus opportunity. We won't give specific guidance, but what we will say is that we share their view that it's a very large opportunity that's underserved. There is another CART available in multiple -- actually 2 CARTs available in the multiple myeloma today, one, though, that is the significant kind of market leader. We believe, based on the data that we've seen historically and shared publicly that we have a CART that is likely to provide better efficacy and safety advantages and so it's a big opportunity. I mean overall, we absolutely share their enthusiasm for having what we believe is likely to be a best-in-class CART in this area. It's a really big opportunity. As you know, multiple myeloma is significantly larger than the other hematological conditions that our existing cell therapies are approved for. And even the fourth line, to your point, is a really big opportunity. And then, of course, we're also underway with the studies that would allow us, hopefully, to move into earlier lines of treatment, both second line plus and then ultimately, first-line for certain patients.

Got it. Very helpful. And similarly, for seladelpar, the initial launch uptake has been pretty good, actually. And -- so your expect -- I mean, I think Street was below your expectations in the beginning. So your internal expectations for this product? Has it changed? Or is it still -- it has always been high?

Yes. We've always had a lot of -- and by the way, I want to come back to oncology to make sure I answer your question on Trodelvy and talk about the full oncology. But on seladelpar, this is a drug that we acquired from a company called CymaBay, last year was approved and launched. The launch has gone incredibly well. Second quarter sales almost doubled Wall Street expectations. So the launch is off to a really strong start. It's a competitive market. There's another therapy that was launched just before this by another company. We think we have the best-in-class therapy. I think you see that in the commercial progress so far. So to your point, we've always been bullish on it. I mean we think that the CymaBay acquisition is one that in the long run is going to provide a really nice return to our shareholders. And it's just one of the many pieces that we put together over the last 6 to 8 years to diversify our business and to grow our base business. And so we're encouraged by it. I mean there are 4 launches that are either in progress or underway, and anido-cel will be the next one, but you have the seladelpar launch, you have additional launches with label expansions on Trodelvy, which I'll talk about in a second in breast cancer. And then, of course, the HIV prevention launch with Yeztugo, all of which are significant growth drivers for us. It's a pretty unique position in the industry today in terms of having 4 very exciting launches. I think there are 4 of the 5 or 6 most watched launches in pharma that are either underway or soon underway at Gilead that will drive growth. And then circling back to your question on oncology more broadly, anido-cel is really exciting. Cell therapy is incredibly exciting overall in terms of the progress that we've made in the last decade and the benefit that cell therapies are bringing to patients. I mean our Trodelvy data we released earlier this year, data in earlier lines of triple-negative breast cancer for both PD-1 positive and PD-1 negative, really incredible data with Trodelvy, which is poised to become the clear standard of care in triple-negative breast cancer. It is now in later lines, but this brings us into kind of the first-line setting. And that's going to be, we believe, a significant inflection point for Trodelvy, which is a $1 billion-plus drug today, but should grow substantially. So the market in first-line triple-negative breast cancer is twice as big as the later lines that we're in today. But the most important thing is the treatment duration for patients is much, much longer in the first line as you'd expect. And you see that in our clinical data, you see that with other therapy. So when you put it all together, we expect just in triple-negative breast cancer alone, significant growth from Trodelvy. And then you have other opportunities with Trodelvy in hormone receptor positive breast cancer, lung cancer, et cetera. So I think that that's another one that we're really excited about the potential growth for Trodelvy over time and the totality of what we're doing in oncology.

Awesome. Thank you for that. So this is very helpful. And then like one last question before we conclude. I mean, so now you have a lot going on, you have new launches, pipeline progression as well. But at the same time, like I have to ask about the BD as well. So when you -- like how are you thinking about BD at this point? If you do something, would it be more like CymaBay or I mean -- or maybe even earlier at this stage?

Yes. Well, we -- I mean, first of all, there's going to be a steady state of what I call ordinary course business development. We -- in the last 6 to 8 years, we've done hundreds of deals to really build out our portfolio. So I'll talk about BD and then we should just talk about kind of the build-out of our internal research development and the strength of our portfolio overall. But on the BD side, will continue to do late-stage deals. We love the CymaBay deal. We've said that's kind of the template for late-stage derisked assets that fit in our existing commercial infrastructure, where you have significant synergies. Now that we've built that out in oncology, both at Kite and at Gilead, we can think about acquisitions there differently. So you should expect that we will add to our late-stage portfolio on a regular basis over time. And we generate an extraordinary amount of free cash flow that allows us to reinvest in our internal portfolio, our external portfolio and then return a lot of that to shareholders as well. So I think the CymaBay deal is a good one. I mean we're never -- we're kind of focused on what we call smaller M&A, but we always say that we could do kind of a medium-sized deal. So -- but deals in that CymaBay was a $4 billion deal are very comfortable for us. We can do larger deals than that, given our cash position but we will focus on diversifying the portfolio. And then the final piece is, we've made substantial investments in internal research and development since I joined the company 9 years ago. And in particular, when our CEO, Dan O'Day joined the company 6 years ago, we were underinvesting in internal R&D. We've made the investments that are required. We're now investing in what I believe is a much healthier level in our portfolio in terms of the quality, breadth and depth has never been stronger. You hear that from our new CMO, Dietmar Berger, who's been a great addition to the team. And I think you'll see more of that over the coming year. So it's a pretty exciting time, both in terms of the launches that are underway, the size and quality of the portfolio and where we are and then what we can add to it in the future, to your point.

On that high note, thank you very much, Andy.

Thank you. Thanks for having us. Cheers.