Gilead Sciences, Inc. ($GILD)

Good morning, everyone. This is Daina Graybosch. I'm a senior equity research analyst here at Leerink Partners. And I'm excited to be hosting management from Gilead this morning. We have Dietmar and Andy. We have 30 minutes, which isn't sufficient time to get through that much, but I think we'll focus on some meaningful programs and strategy for the company. So thank you both for joining us.

Thanks for having us.

Thank you. We're thrilled to be here again.

We're going to start with HIV. We had a dinner last night, and we had a lot of great discussion on HIV, and I think a lot of interest there. And so -- and starting with HIV treatment because you've had some strategic decisions recently, and I think it would be great to understand that. So maybe the first question is, one, just give us an overview of how you're thinking about developing the next generation of HIV treatments. And then based on some of the data at CROI and other data, why you've prioritized for the 6-month regimens, your long-acting INSTI, GS-3242 and the bNAbs in combination with lenacapavir over the other combinations that you did also have in the pipeline?

Yes. Thanks for the question. In HIV, it's really important to focus on these 2 big areas, right? There's HIV treatment, obviously, HIV prevention, we can talk about both. In HIV treatment, we put the strategy together roughly 3 to 4 years ago. And a lot of it is about new principles in treatment, like, for example, the capsid inhibitors playing a bigger role, the integrase inhibitors playing a key role, but then also really going from daily therapies to more long-acting options, right, going from daily orals to like weekly, monthly, but then also going to injectables, for example, on a monthly or every 6-month basis, and talking about these really long acting, we have 2 approaches right now that we think will get us to once every 6-month therapy. One is the combination of lenacapavir plus broadly neutralizing antibodies. The antibodies would be given by infusion. So people would come to the office of the physician once every 6 months, get the lenacapavir, get their infusion. And that's the len plus bNAbs. And what we presented at CROI at this really important retroviral and infection, but also HIV meeting, we presented patient-reported outcomes data on that combination. We also have Phase II data already demonstrating efficacy, but the patient-reported outcomes data really supported how important this option is for people. And remember, a lot of this is about having the right options for the right patient group, right? At this point in time, we just spoke about that. About 40% of patients in the U.S. are still either undiagnosed or are not virologically suppressed. And that's because we don't have the right options for them. Either we don't diagnose them, that's 13% of patients or we don't have the right options for them that are patients that, for example, don't want to carry a daily pill or have stigma or don't have the right level of access and having for them a possibility to come to the physician's office once every 6 months could be a game changer. That's also why we're developing an injectable option, again, based on lenacapavir but then an integrase inhibitor with that and so-called INSTI, and that's where we had communicated actually at our HIV Day more than a year ago, we had communicated we are looking at different integrase inhibitors as a combination partner for lenacapavir in that once every 4- to 6-month injectable option. And we had 3 options there. They all have different numbers. We had always said we pick the best one. And now we have data, and it's largely really pharmacokinetic data that led us to then pick 3242 as our option to move forward for once every 4 to 6-month treatment together with lenacapavir. And I'm saying once every 4 to 6 months because we're currently in dose escalation for that combination of 3242 plus lenacapavir. At this point, we absolutely know looking at the PK that we can do once every 4 months. We're going to higher doses. So we're also confident that we will get to once every 6 months with that combination.

Can you talk more about these 40% of patients that are undiagnosed or not virologically suppressed? I think the worry, maybe just a bias worry is those patients might not have access to pay for an every 6-month injection plus infusion. So what gives you confidence that not only will you match them compliantly and where they need it, but that you'll match their financial situation?

Yes. Maybe I'll start. I mean there's a mix of patients in that pool, but it's an enormous number of people that are infected with HIV that are not adequately drug treated today. Many of them are coming in and out of care depending on their circumstances. And then you have others that just, for whatever reason, they have access to medicines, but they're not taking them on a regular basis. So it's hard to say definitively today what percentage of that roughly 40% of patients that have HIV infection in the U.S. can be well treated with the long-acting, but it's a meaningful amount of that population and significant market for us to work on and address over time with all these long-acting therapies.

And I think it's important to note that when we speak about access, it's not that you wouldn't be able to find funding or you wouldn't find access for these people. It's more they're coming in and out of care, right? So you're speaking about people who are either unhoused or who are marginalized and who don't have the right level of care at this point in time. If they come into the system, of course, they can be treated, and there's also possibilities for funding for that.

Got it. On PrEP, you're developing Q12-month PrEP. And I thought it was very helpful last night to talk about what that regulatory path is. And so I wonder if you could summarize us for that and why that path gives you so much confidence that we could have the Q12-month Yeztugo?

Yes, yes, absolutely. And the -- so Yeztugo every 6 months, of course, is a real benefit for people, and there's a lot of excitement, and we see that the launch is going well. Based on our studies for Yeztugo once every 6 months, we understand the PK really well. And we understand what kind of target coverage do you need in order to have protection, right? So we can easily model out if we go in with a higher dose, if we go in with the right formulation, can we get that same target coverage for 12 months, right? And we've done that, and we now have a formulation that we can give once every 12 months as an intramuscular injection. And we know that target coverage at the end of that 12-month period is actually higher than what we've seen with lenacapavir with Yeztugo once every 6 months. So the FDA has agreed to do a model-based study, really a pharmacokinetic endpoint around that study. So it's a smaller study. We don't have to do the large PURPOSE 1, PURPOSE 2 type program, several thousand patients anymore. This is a program with a couple of hundred patients where we basically show pharmacological comparability with that 12-month period. So that study is ongoing. It's recruiting well. We're expecting to have data readout in '27, and we're expecting to be able to bring that to patients in the '28 time frame.

Let's move on to Livdelzi. There's a trial, the Phase III IDEAL study. And I wonder if you could talk about how that could expand the currently treated population and what gives you confidence in that trial and the outlook?

Yes, I can start with the trial. Obviously, Livdelzi has shown really good efficacy in the PBC population, both when you look at the biomarker, right, the ALP, but then also when you look at itch, when you look at pruritus. The initial study was kind of the standard study that you do in that population, which is you look at the -- what is called the inadequate responders, right? Those are patients, and we had the RESPONSE study for that. Those are patients with an ALP value above 1.67. And that's where we saw the good outcomes. That's where we launched. That's where we see really the growth with Livdelzi right now. There's a population that is called the incomplete responders, which when you look at the biomarkers, ALP is kind of 1 to 1.67x the upper limit of normal. The biology is the same biology. It's just like the response is not complete to the earlier lines of therapy, to the UDCA. And that's, again, where we think with Livdelzi, we can make a real difference, both when it comes to response, then also when it comes to itch, but then also when it comes to long-term outcomes. And that's the ideal study. That's a Phase III study that's currently ongoing. And if that study is positive, it would basically double the addressable patient population.

Have other compounds moved from the slate to earlier successfully?

Yes. It's not been a standard approach so far. But now as we have Livdelzi as a really active treatment option, that is a really natural path, both from a patient benefit perspective, moving it earlier or moving it to these incomplete responders, but also from a commercial perspective. You see that some other competitors are following our lead. They're trying to do the same thing. But of course, you need to have the right efficacy in that space.

And do you feel like you have sufficient understanding of the efficacy in those patients to have powered that study?

Yes, absolutely. And the biology is not different. And of course, we had some early data that also helped us to design the study.

Got it. I'd like to talk about business development for a moment. One, to the Arcellx acquisition, I think that -- is it fair to conclude that it was financially attractive. It was accretive to EPS by 2028. I think our model would agree with what you announced. But does it signal that there was a lack of other attractive acquisition opportunities because you already owned it and you're just buying the -- you're buying not having to give the gross profit to another company.

Yes. No, that's not the signal, I think. I mean, first of all, -- we think it's an outstanding acquisition for us, for our shareholders. It has a lot of benefits to the company. But first and foremost, we see a much larger commercial opportunity for anito-cel than the market saw. So there was a natural -- it was a perfect situation from a buy-side perspective. And you're right, we had a large partnership that we entered into over 3 years ago. It's been a very successful partnership. The clinical data is outstanding. For those of you that don't follow anito-cel, this is a BCMA cell therapy that's being studied in multiple myeloma. The first approval will likely come in fourth line plus later this year with then subsequent approvals in relatively near term in second line plus. We will also do first-line studies. And the data so far is just spectacular in terms of the benefit like most cell therapies for patients, but it has a highly differentiated based on the data that we have in-house, which is not just the fourth line plus study, but the second-line plus study, a very differentiated safety profile that Dietmar can speak to. So when we looked at it, it was relatively straightforward. We're nearing approval in the United States. There was a unique window where the company's stock price had traded to a level where we could actually pay a premium and still make a deal that -- agree to a deal that really works well for our shareholders. We're nearing launch. So we actually have the ability to control the launch. But at its core, this is really about an opportunity where we saw a significant difference in our view of peak sales opportunities and the market's view. And the easiest way to think about this is there's a competitor BCMA cell therapy that is currently on the market. Analysts project $6.5 billion in peak sales. They were projecting $2 billion to $2.5 billion of peak sales for anito-cel, and we think that we have the best-in-class BCMA cell therapy. So the analogy, we've just talked about Livdelzi. When acquired CymaBay 2 years ago, it was a very similar situation. We knew the company incredibly well. We knew the liver disease space better than anyone. And the same thing is true here. We know an anito-cel as well as anyone. We're managing together with our partner, the regulatory discussions with the FDA. We had the file acceptance for fourth line plus, which was a significant derisking event for us. And we had a completely different view of the peak sales opportunity. The other part of your question, then Dietmar can speak to the clinical differences was we have the flexibility with our position to continue to do corporate development. We're going to be disciplined, proactive. We love the position that we're in. As we've reset the company, you've seen very strong growth the last 3 years in our base business. We're at the beginning of what we believe is kind of a 10-plus year cycle of numerous launches. We have 2 drugs that we've launched recently, Livdelzi and then Yeztugo for HIV prevention that you highlighted. We have up to 8 additional launches this year and next year, which is really extraordinary. All of that will drive continued top line growth. You see expanding bottom line growth. And then this deal adds beautifully to that in '28 and beyond, which happens to correspond with the period where we could potentially see the impact of drug price negotiation with the U.S. on Biktarvy. So every which way we look at this deal, we really liked it, but it really fundamentally was about the difference that we saw in terms of the peak sales opportunity to really make a huge difference for patients in multiple myeloma, and then the last thing I'll offer is that cell therapies are unique in that it's very hard to see a biosimilar cell therapy in the future. It's incredibly difficult to manufacture. It's difficult to show comparability. So these are franchises, whether it's our lymphoma cell therapy franchise or anito-cel, similar to our antibody drug conjugate for solid tumors that we think have decades of durable growth potentially ahead of us.

You've been -- this was one of your strategic partnerships. And for many years, Gilead has been a fan of strategic partnerships with smaller companies where you take seats on board, you invest in them, make sure they have enough cash to pursue what they're pursuing, but also have freedom to innovate and you have opt-in rights on those programs as they come to certain milestones. And now you've bought one of them. So I wonder looking across that one and the rest of them, how do you view that strategy? Do you expect to do more of that type of strategy? Or as you're moving into this new period, do more direct deals like CymaBay?

Sure. I'll start. I think the answer is both, but we love that strategy. We love partnering with really smart companies that have differentiated products or technologies. We like having multiple opportunities to win with those partnerships. You saw that in a number of our partnerships. We recently, for instance, in-licensed a couple of compounds from a company called Assembly. It's a small company focused in viral hepatitis and other virology indications. That was kind of an all-in partnership that we think people will grow to appreciate that deal over time. And you highlighted the Arcellx deal. But yes, we love those structures, and we will also supplement it, I think, with other deals that -- like the CymaBay deal where we just identify companies that have a lead asset that's really interesting strategically and that we acquire it. But any time that we can enter into partnerships and use our balance sheet to push forward innovation and have options on either a product or a series of products, we think that can create a lot of value for our shareholders. And the Arcellx partnership is a great example of that. We think it's going to drive tremendous value for our shareholders over a very long period of time. And when you look at kind of our average cost of capital of acquiring that asset from the partnership and then the acquisition that we're doing, it really provides a really attractive return for our shareholders from our perspective. Anything you'd add?

No, I think the only thing different types of compounds require different types of deals, right? Sometimes you want to own it outright, you want to be able to launch it, you have all the data, you want to basically own the path forward. And that's, for example, the CymaBay, deal, right? The Arcellx is really a good example of -- there was so much more to be learned about the cell therapy approach, about anito-cel specifically. And we saw there's really good science behind it, not only with regard to anito-cel, also with regards, for example, the D-Domain binders that they have with regards for example D-Domain binders that they have with regards to the platform. And then the data was also really maturing, right? So that was really reassuring for us. And just coincidentally, at the time when we did execute on the deal, we also had way more clinical data, and we had the FDA acceptance, right? So it was a largely derisked perspective also when it comes to the scientific data and the clarity of the path forward.

Another approach where you've actually done some acquisition already and then some partnering is an in vivo CAR-T. And I wonder what do you believe in vivo CAR-T will achieve that's not possible with auto CAR-T? And why go there in that potential disruption rather than allo CAR-T or T-cell engagers?

I'll start, maybe...

You can start.

Yes. When we acquired Kite 8 or 9 years ago, we always had the vision that, that was the beginning of cell therapy and that the cell therapy field would evolve dramatically over time, ultimately ending with kind of the in vivo CAR-T. And the 2 deals that we've done recently around in vivo CAR-T are important aspects of building our integrating in vivo CAR-T. We have separate non-integrating in vivo CAR-T programs that we're developing internally at Kite and across Gilead that are also really exciting. Why now and why have you seen a run of in vivo CAR-T deals is that we've all seen data from a number of these companies, including the company that we acquired, Interius that really show the promise, proof of concept that you can do this. You can insert the viral vector, it gets selectively to the T cells. It's integrated into the host genome, transcribed and you create CAR-T cells in the body and the human body becomes the bioreactor. So as long as -- and now it's going to take years, right? I mean so in the next decade, people will continue to refine this. But you have clear proof of concept across many companies that this is scientifically possible. And now you have to get it to the same level of efficacy and safety that you see with autologous CAR-T. And we believe it's possible. It will dramatically change the cost of goods and delivery of CAR-T therapy over time, and we think open up CAR-T to a much broader audience. And CAR-T continues to grow really nicely, but that's what's behind it. And as the world's leader in CAR-T, we want to stay at the forefront. We look at this as a multi-decade investment. I always use the analogy of watching the antibody space develop or the protein therapy space develop. Cell therapy over the coming decades is likely to continue to grow significantly and become a major treatment modality across a number of not only oncology indications, but also indications potentially in neurology and autoimmune.

Yes. I mean the addition here would be that Kite is really getting to a much more integrated strategy, right? You've got the ongoing business with Tecartus and Yescarta. You've got the next generation going from a CD19 to CD19/CD20 bispecific bicistronic, also getting to molecules that balance or treatment approaches, CAR-T approaches that balance much better the efficacy and safety so that you can get into the outpatient setting so that you can actually apply it in inflammatory and neuroinflammatory conditions. So we're really excited about this next generation that's coming along. And then expanding into new indications, which is the anito-cel aspect going to myeloma, which is the biggest hematology market right now, and we feel there is real opportunity, taking it from fourth line to then earlier lines all the way into first-line and smoldering. And then there's this aspect of in vivo CAR-T, which when you talk about the differentiation, there are 2 really important things. One is the off-the-shelf characteristic. So you don't have to harvest cells, you don't have to modify them. You can literally pull this off the shelf and give it to a patient. So the turnaround time, the COGS, all of that gets much better. And then the requirement, and that's the big differentiation versus allogeneic, the requirement for immunosuppression, right? And all the associated side effects. And I think that's also what [indiscernible] does so much as a community around the allogeneic also versus the autologous, right? So there are various benefits that we see. And just as a leader in cell therapy with the early signals that we've seen, we feel we also will need a leadership position in the in vivo CAR-T approach.

Let's talk about Trodelvy. It's been a real workhorse, and you have a very highly competitive environment in TNBC that you're launching into. How are you thinking about maintaining your position and building on it? Are you going to do novel combos? Should we expect more Phase III development from that program TNBC and beyond, really?

I'll start with the program, right? So from a perspective of the clinical program, we have a really comprehensive program. There are several ongoing really pivotal trials right now. Of course, we're building on the success we recently had with the ASCENT-03 and ASCENT-04 studies, which are taking Trodelvy into the breadth of first-line triple-negative breast cancer, both PD-L1 high and low. We have those 2 studies, which really are the basis of a new standard of care. That's why we have a broader program than some of the competitors have at this point in time, and that's going to be a real benefit together with the experience that people have with Trodelvy and the trust that they have into Trodelvy. And then we will read out this year 2 studies. One is the EVOKE-03 study, which is in first-line PD-L1 high non-small cell lung cancer, very straightforward study design, adding Trodelvy to pembrolizumab, which I think has a decent probability of success, and then going into second-line endometrial cancer, which is the ASCENT-GYN study. And beyond that, we have a study in small cell lung cancer, which is EVOKE-04, and we also have a study in the adjuvant setting in triple-negative breast cancer, which will read out in a couple of years. So that's a comprehensive program, and we're obviously looking at other additional combinations and other additional tumor types potentially that we can take Trodelvy into. We also have a really large program when it comes to investigator-led studies or cooperative group studies, which just adds to the body of experience with Trodelvy. So we feel we are really well positioned with Trodelvy as a standard of care.

Got it. Maybe the last 5 minutes, we can talk about your early-stage pipeline, which is beyond HIV. You have a lot of programs actually in oncology and immunology. Maybe we could start with inflammation. I think you talk a lot about your alpha-4-beta-7 inhibitor. You have an oral TPL2 and you have a BTLA agonist. And I wonder if you could -- any of those we're going to see clinical data soon? And anyone you want to highlight that you're more excited about?

Yes. The inflammation portfolio is, of course, earlier, right? When we took this decision, when Gilead took this decision to really think about diversification, I'm always saying it's diversification within HIV and hepatitis, but it's also then going into oncology and inflammation. Inflammation is really the earliest when you look at these different TAs, but we do have 3 programs currently in Phase II and then really exciting portfolio behind that, not only a clinical portfolio, also a research portfolio. We built really strong research capabilities in inflam also over recent years. The 3 that are currently in Phase II, one is the alpha-4-beta-7, which is an oral validated target, obviously, and we'll see Phase II data later this year. So that will tell us really what we have. I see the -- I'm excited about it because I see the opportunity with an oral twofold. One, you get different pharmacokinetics, and we'll need to see what that does from an efficacy perspective. Also, you can take an oral, if it's a safe oral into earlier lines of therapy and potentially more into the mild and moderate stages versus the moderate and severe that you can usually address with the injectables. So that's where we will have data later this year, and the data will tell us the path forward. We also have an IRAK-4 inhibitor, edecesertib, which is in Phase II in cutaneous lupus. IRAK-4 is another one of those key nodes in inflammation that we're trying to address, and we will have data from that Phase II study in cutaneous lupus also later this year, and I'm excited about this just from a mechanistic perspective and some early data that we've seen. We also have an IRAK-4 degrader. So we're doubling down on that pathway. Obviously, that's earlier, but I'm also excited about that. And then the TPL2 is another target that we're pursuing in inflammatory bowel disease. It's positioned a little differently. It's in the more treatment-experienced patient population. So we're using it in the harder to treat -- we're evaluating it in the harder-to-treat population. And again, we should have Phase II data upcoming, not this year, but the year after that. And then there's an earlier portfolio with the STAT6 degrader and other types of molecules that we're also really excited about. And Andy already mentioned before that when we think about inflammatory disease, obviously, the Kite program, the cell therapies also play a role so that we're really coming to a more integrated strategy in inflammatory diseases.

And maybe the last one on Oncology. You're one of the last remaining companies that had and maybe still is investing in some novel immuno-oncology approaches. And that's close to my heart, so I'm getting into the question. I wonder if any of those is rising to the top of your oncology portfolio if we see some data that will inform that in the near term.

Yes. So I've been also really interested in immuno-oncology. So we share that. I've obviously worked on some of the PD-L1 inhibitors in my background. So we were always really excited about immuno-oncology and then somewhat sobered about the opportunities. I do think we understand much more now about the underlying mechanisms. We have a few additional approaches in our portfolio. For example, there's an IL-18 binding protein approach. There's also some other checkpoints we're looking at. I think the most interesting one scientifically that I can speak about is a CCR8 antibody that we have now that is addressing regulatory T cells and is actually eliminating regulatory T cells. And for the first time, with that approach, we actually see monotherapy activity with a target on regulatory T cells. So we think that's another area that we would like to explore further. But it's early days. And I do want to point out that, yes, immuno-oncology plays a role, but we're also really interested in additional ADCs, in additional direct tumor targeting and cytotoxic approaches. So we'll see -- you'll see a broader and more balanced oncology portfolio in Gilead.

That's great. And that's perfect timing. So thank you very much. I appreciate it and appreciate everybody's attention.