Gilead Sciences, Inc. ($GILD)

Good afternoon, everyone. Thank you so much for joining us. It's my pleasure to introduce the Gilead team. We have Dan O'Day, Chairman and Chief Executive Officer; and Andy Dickinson, Chief Financial Officer.

To start here, Dan and Andy, perhaps give us an overview of where the company stands today, including your core franchises, and how you're thinking about priorities, outlook and strategy as we head into second half of the -- or the year and beyond?

Sure. I'll start, and Andy and I can tag team on it. But first of all, thanks for having us here. and we've been talking at this conference for a while now. I would say this is a really important time for Gilead. It's really just watching our strategy play out over the past 7 years. And what that means is kind of consistent commercial clinical execution. And where we have the most robust pipeline that we've ever had in Gilead's history. And I say that with a lot of admiration for the people that were at Gilead before I was. But -- and what that means is we've got 3 really strong therapeutic areas. Urology, have never been stronger. In terms of HIV, we just launched Hepcludex now for hepatitis D. But HIV, the long-acting programs. I know we'll talk about that in both treatment and prep including kind of near-term issues that are occurring, we expect big land to be launched soon, which is a terrific opportunity to take advantage of the switch market that occurs in HIV treatment with really novel integrate and capsid inhibitor. We just got the news yesterday that the once weekly ISLEND program that we have with Merck was successful from a clinical trial perspective. So we look forward to also providing the first kind of long-acting treatment regimen. And we have just countless other programs within the long-acting treatment and long-acting prevention that I know we'll talk about. But combine that with the momentum we have right now with oncology, Trodelvy growing 37% in the first quarter of this year. a needle cell expectation towards the end of this year, the recent acquisition with tubules in ovarian cancer. The oncology portfolio is a meaningful part of our business today and growing significantly. So I know we'll talk more about that. And then finally, inflammation in autoimmune. I mean, what we have today is Livdelzi. We just had a recent trial readout that showed efficacy in earlier lines of therapy that can more than double the patient population. But then we have a variety of other Phase II assets that we'll report on later this year like alpha 4 data and Rock 4. Put all that together, a very strong portfolio, both in the short, medium and long term. We're making good decisions within the company on what to pursue and what not to pursue. We're being disciplined about our operating expenditures. And I'll just remind you, we have no patent expiries of significance until Biktarvy in 2036. So we've got a long runway of growth and diversification ahead of us, and we're going to be financially prudent about how we approach that.

Great. And broadly here, maybe on the drug pricing side, post the recent agreements with the administration, where do you see the industry outstanding with regard to drug pricing policy?

I think the MSN agreements that we signed at the end of last year, we intend to do 2 things. Number one, begin to address the patient affordability issue here for some medicines within the country, but make sure that the essence of the innovation ecosystem that works here in the United States was preserved. That certainly was the case with our agreement. It was a voluntary agreement and it allows us to make sure that we can continue to invest appropriately in medicines moving into the future. I think there's a lot of momentum in Washington to begin to address some of the fundamental issues that go into patients' out-of-pocket costs. Certainly, MFN was one aspect of that. The PBM reform additional attention on 340B. The conversation in Washington is much broader than just innovator drug pricing now. And I think that's a result of really educating people, frankly, for the past 5 to 7 years. So we have to be alert on the policy front. Anything that happens in Washington. We want to happen that helps people afford their medicines more but make sure that the type of innovation we're seeing across Gilead and other companies continues to be preserved. I'm feeling good when I talked to the lawmakers about where we're headed, and we always have to be astute to that. But I think there's a lot of reform that we can drive that will secure innovation, but really help people pay less for their medicines here in the United States.

Great. And how is Gilead thinking about China here from a strategic standpoint in terms of innovation? And more broadly, how do you plan to interface with the comp only twice the here.

Yes. We spend a lot of time in China like our peers. So -- and the amount of time that we spend in China has increased over the last 5 or 6 years, the quality and depth of assets that we're seeing has improved dramatically even over the last couple of years. I think we said a couple of years ago that coming out of the at the beginning of the year, as we set our priorities in the last couple of years, roughly 50% of the things that we prioritize on the corporate development front either are coming from China or originally came from China into the United States. It doesn't mean that we're not spending a lot of time in Boston and across the United States and in Europe, we're seeing incredibly strong innovation across the entire ecosystem, which is really exciting. But like others, with the additional investment that you've seen in China over the last couple of decades, we're seeing a number of programs that we can add. Most of that is late preclinical, early clinical assets that we can plug in and what we call ordinary course corporate development transactions. But it's been -- it has been a noticeable change in something that's exciting for us in terms of the ability to continue to add to our portfolio.

And the thing I'd add to that because I think that's so accurate about sourcing new innovation. The other way to look at China is doing early-stage studies improved probability of success. I mean we've done that cell therapy. So on the one hand, we've acquired a company called Interiors in Pennsylvania that is about the construct, but then we also did a deal with a company in China called. And the combination of those 2, in addition to having the world-leading cell therapy platform that we can plug and play on to the in vivo platform is to be able to do trials in China at a sophisticated level that allow you to kind of determine what may be successful to take in the later-stage trials. So I think both sourcing innovation in kind of early innovation tests are the 2 things we think about strategically when we think about China.

Okay. Maybe pivoting over to the HIV franchise here. So a question for both of you. The to launch continues to be the primary focus from a commercial perspective right now. and you reported sales of about $166 million in the first quarter of the year and raised full year guidance from $800 million to $1 billion. As we think about 2026, what are the key assumptions built into that updated guidance in terms of both new user growth and user persistency and in particular, where are you seeing persistency stabilized versus that 70% best case scenario that you pointed to?

Yes, I'm happy to start. The -- look, all of the launch metrics, not just persistency, so your first question of increasing the guidance, I mean, it's really driven by every one of the launch metrics that we're looking at, we're either tracking with our expectation or ahead of expectations. So that includes coverage, unrestricted coverage, awareness and the training, bringing different practices online in terms of the progress of buy and bill versus the pharmacy, we're seeing higher buy-and-bill percentage of the market than we expected at this point, which is great for the long-term launch. On persistent specifically, we regimen in HIV, long-acting HIV prevention Persistence based on their statements, our expectation is that we will do better than that. And the early data is on is on par. But maybe back to the first part of your question is where is most of the business coming from? It's coming from patients moving off of other preventative therapies, typically the orals because that's by far the biggest share of the market, roughly 94% of the market what are the daily orals when we launched Yeztugo. So you're still seeing most of the people moving from existing prep patients moving to the long-acting injectable. So it's driven by the new to long-acting patients for the most part. And the good news for us, again, other launch metrics, is a share of that -- roughly 1/3 of that is coming from the generic orals, a share -- 1/3 of it is coming from Descovy, which is our other branded daily pill for prevention and then 1/3 from -- I'm sorry, 1/3 of them are naive patients to prevention and then 1/3 from the daily oral and 1/3 from the long-acting injectables. So that's -- all of that together gave us confidence that we're well on track to the $1 billion of revenue this year given the strong start in the first quarter.

And I think to Andy's point, we're playing a multi-tiered long approach to prevention. The earliest to go is really around, to Andy's point, capturing those patients that are switching or naive to care, but are currently kind of in the concept of care. There's a whole another percentage of patients in this country that are probably still a couple of years away from us truly being able to access, but where long-acting is really the solution for them. And that's where we largely see HIV incidents increasing in those countries around 700 new cases a week in this country largely in the rural south amongst underserved communities that where oral prep is just not an option due to stigma discrimination and other factors. So we have very targeted programs. It's not a -- it's a nationwide program but targeted to those communities literally down to the ZIP code where we need to educate new providers and obviously, new people that could benefit from PrEP. So we think about it in a multitiered way. I know people are focused on the launch rightfully so, and they should be, we are too. But I think we have to think about prep in the short, medium and long term, including other options for prep like are once yearly, which is almost now fully recruited and could be launched as early as 2028. So that's -- the PET market, we think has long durable growth in it.

In the context of the data that was announced yesterday for your Merck partnered weekly treatment here for HIV. Maybe help us understand, I know we'll see data shortly, but help us understand the commercial outlook for this asset in terms of capture. When you think about where Biktarvy is positioned and where you could have additional growth and then how to think about maybe pricing dynamics, it may be too early to provide that. But how to think about that commercial strategy.

Let me start on that one and then Andy can add. This is -- it's important to put this readout from yesterday, the pending FDA approval of Big Len into context. So when we think about HIV treatment, we think about providing people with novel options for their therapy. Obviously, Biktarvy is currently the standard of care. In this country alone, it's got a market share globally around 52% overall, but around -- a little bit -- 72% of naive patients started on Biktarvy. So that continues to be kind of without a doubt, the premier medicine within HIV treatment today. And it's hard to improve upon Biktarvy on a daily basis because of the level of efficacy and the resistance profile. But when you can offer people is when they do decide to switch an option to switch to. And some of that is going to be true long-acting like once a month, they're once every 6-month treatment -- some of it is going to be just the opportunity for people to try something different or try something new. Actually, around 20% on average of people on treatment switch on an annual basis. Largely, they switched because Gilead has such a prominent position, they switched today overwhelmingly to non-Gilead regimens, what -- the news from yesterday and our big land approval provides is an opportunity to capture some of that switch that is currently going out of Gilead with more novel options that meet people where they are. In the case of big land. It's a novel capsid inhibitor combined with the #1 integrase inhibitor. It's very attractive to some people, even if they're doing well on their current regimen. With the platelet cafevir data from yesterday, which Bob, you're right, we'll show you a little bit later this year, but did show non-inferiority to Biktarvy, it allows people to go on a less frequent dosing once a week. We will also have other options for longer acting, including our own wholly owned once weekly, which we expect to take into the clinic later this year. We're still working on once monthly and once every 6-month injectables. So there is a lot to come in our treatment landscape, and we just want to provide people with options that allow them to stay adherent to their therapy and reduced the likelihood of spreading it to others and living long healthy lives. I mean, remember, in this country alone, there's still around 30% of people that have HIV that are not virologically suppressed in this day and age in the United States. So there is opportunity both to transition people that are well maintained, but also an opportunity to address those people that aren't biologics expressed today, maybe they struggle with a daily or a pill. That's where once weekly may help once monthly, once every 6 months may help. That's a broader context of what we're achieving here.

Great. could you put it in the context, just with regard to the overall move here for the long-acting treatments across both PrEP and treatment and the competitive dynamics that are playing out as well. And so how do you think of where you feel confident with leadership into the next decade? And which segments of the market do you see the most risk as you think about expansion versus cannibalization.

I'm happy to start. I mean, we'll maybe start with the treatment market. I mean, picking up on what Dan said, we are developing long-acting treatments at kind of every reasonable treatment interval that patients may want. So that includes, in addition to the daily orals that are available today and Biglin that we're launching later this year, than the weekly orals, including the Merck partnered combination that you were just discussing as well as monthly oral combinations every 3 months or every 4-month injections and then probably every 6-month injections. We'll have Phase II data on our long-acting injectable integrase inhibitor later this year that we believe should demonstrate that we can get to 6 months and pair that with lenacapavir. So the biggest opportunities in the market for treatment when you do the market research suggest as you'd expect, the every 6 months or longer injections and the monthly orals are the largest opportunities beyond the daily orals. And so when you kind of look down the road based on where we are today, and we've developed, I should say, multiple programs for each of those areas of opportunities. So if one of our programs for any reason doesn't move forward, we have another, for instance, integrase inhibitor that we can slot into ending those programs. So we have a high degree of confidence that we're going to get there across the board in terms of delivering these long-acting therapies for patients that currently have HIV. And you should see that over the next 5 or 6 years. There are some programs that are more advanced, including the Phase II data that I just discussed with every 6-month injectable and there are others, including our wholly owned weekly oral that we should be moving into Phase II later this year. And of course, you'd see them launches early in the 2030s. So in terms of treatment, given where we are today, we feel great about the breadth and depth of the program and expect that we'll continue to be a market leader over time. In prevention, we're already there today, as you know, with every 6-month approved the Yeztugo approval a year ago for every 6-month subcutaneous injection. We also have a yearly intramuscular formulation of lenacapavir that builds on the purpose data from Yeztugo. So we're just doing a simple PK bridging study that's underway. We expect to report out that data later this year or next year and launch the yearly intramuscular HIV prevention therapy in 2028. And then finally, in terms of oral long-acting therapies for prevention, that's another area of active exploration on our end. And you can imagine that any oral small molecule that we develop for treatment could also then be developed for HIV prevention. So happy to provide updates on the totality of the programs over time, but we feel great in terms of where we are.

I'll just say one thing about cannibalizing to add to Andy's comments. Let's just take prevention, for instance, when we cannibalize Descovy with Yeztugo, there's obviously a net benefit for the person because the compliance rate of daily Descovy and Truvada is quite low. So you actually -- it's not just a one-for-one cannibalization. You're assuring 6 months of compliance with to. Eventually, it could be 1 year of compliance. That's a very big difference for people, but it's also a big difference for our business and how we account for that. And the same thing, as I mentioned before, even in the treatment market, whereas people are largely compliant because if they're not, they obviously develop disease again and they fall then into that 34% biologic suppressed. But as we develop long-acting, of course, we will cannibalize, if you like, Biktarvy over time, which is part of our strategy, of course, is to give people an even better option than Biktarvy prior to its patent expiry in 2036. But you also then get to people that are in an unaddressable market with daily oral today. So it's a combination of both cannibalizing, but then getting to portions of the market that don't exist today. So that's how we think about the totality of HIV care as we introduce these new options.

On the oncology front, you have a December 23 PDUFA for anito-cel here. Walk us through how you're thinking about the launch in multiple myeloma. And including the initial sales trajectory next year and the ultimate size of the fourth line plus opportunity.

So we're very enthusiastic about anito-cel. Obviously, we've doubled down on the acquisition of Arcellx because we know that therapy better than anybody. And the reason we're so enthusiastic about it is that it kind of strikes the best in disease profile category that we see as needed in multiple myeloma today, multiple myeloma, a lot of products and a lot of competition. But if you just kind of boil down the guidelines at the end of the day and what I've heard also as I go and visit our customers, is that what people really want is the opportunity to have a one-and-done therapy early in the course of the disease that will allow them not to go through constant therapy. I mean to forget about their disease for a little while. Now anito-cel, we believe, has that profile over time. We'll start in the fourth line plus scenario, a very late line scenario. But even there, it's about a $3.5 billion market of the $20 billion multiple myloma market. We are very well prepared to go into that disease with a differentiated product profile in anito-cel being a cell therapy that has strong durability and a better side effect profile in terms of not having neurotoxis and low cans, which allows us to both be used perhaps more so in the community setting than the current offering, but also to avoid having that dilemma in a physician's mind. And do I give somebody a long, durable response, but is there a percentage chance that somebody develops another disease, Parkinsonism or others. In the fourth line plus, that's important, but you can imagine how much more important that becomes when you're talking about second line or potentially first line. So we want to have a strong start. We're going to be -- this anito-cel goes upon our world-leading cell therapy backbone and what I mean by backbone, fast turnaround time in manufacturing about 14 days. It's the same platform as YESCARTA. We're supplying that for the clinical trials today. So we know we can do that. We've got capacity to meet demand. We have a very sophisticated system of high touch with the customer base out there. we're going to be launching with 5x the number of ATC centers that others have launched with in the past just because we have a very broad ATC coverage and then eventually move into the community. So we feel really well positioned for this launch. And over time, to move up in lines of therapy. Our second line trial is essentially almost completely enrolled now, and we could be filing that as early as 2027 for a 2028 launch. So it won't be too long to we move that up in the lines of therapy. The last thing I'll say is because we feel this medicine, this therapy is so differentiated, the domain aspect of anito-cel is something that we can also use in our in vivo platforms for the future as well. So it gives us a lot of optionality and functionality. I don't know if there's anything else keep on -- maybe to follow I get excited to everything, but also I need so.

When you think about a return to growth strategy here for the cell therapy vertical, how much of that do you think will play out from a medical and then really this effort you're making now in vivo.

Yes. I think certainly for the next decade, it's largely driven by a need cell. I mean there -- as Dan highlighted, the multiple myeloma market is really large, by far the largest market for CAR-T today. And we think a net cell is positioned to be the best-in-class, best-in-disease assets. So we see very significant growth for netocell as an autologous cell therapy over the next decade. I think if you -- as you look down the road, whether it's 8 years from now, 12, 15 years from now, you likely will see in vivo CAR T treatments. This is an area that we started focusing on well over 5 years ago. We made one of the early investments in a company -- a private company that was sold recently. But we've actually made some additional selective investments. We bought a company called Interiors in Philadelphia that has in vivo CAR T, both data in humans as well as technology. We did a partnership with a company in China called pre-gene Back to your earlier question that has both a technology angle, but more the ability to do early proof-of-concept clinical studies that Dan alluded to. And then we've been developing our own nonintegrating in vivo cell therapy programs as well. So we're taking kind of a dual approach in developing in vivo cell therapies. And like many people believe, based on the early data, where there's good proof of concept, not only with our programs, but with others that eventually we're likely to see cell therapies that have similar efficacy and durability to the autologous. But that's years and years down the road. Between now and then, the Neocell will be the biggest growth driver. We also have our own CD19/CD20 bicistronic CAR-Ts that we're developing as follow-ons Think of them as better versions, next-generation versions of Yescarta and Tecartus that are in late-stage clinical studies that could add growth. And then finally, we acquired from another company in Philadelphia that had been spun out of pin called Community glioblastoma CAR-T that has some encouraging early clinical data that also could drive additional growth. So we really like where the CAR T business is going with the net cell launch and all the other from there. Obviously, we have a very solid foundation to build upon. Dan highlighted the manufacturing. And then we will be making the investments needed in vivo to stay at the forefront of cell therapy.

You've announced several notable acquisitions this year from Arcellx tubules and Oro Medicines. Walk us through the strategic rationale really underlying these deals and what key assets apart from Marcellus we discussed that we should be paying closest attention to in the near term?

Yes. Well, first of all, we're really excited about all 3 of them. And that comes on top of my comments in the beginning, which is -- this is the strongest portfolio we've had across all 3 therapeutic areas in Gilead's history. So the bar was high for these acquisitions to come into our space. And we've been looking at everything like most companies, but the last large transaction we did was actually -- was LedeLtiand was about 2 years ago. So although we've been looking, we haven't really found anything that kind of met our bar being proactive, but also disciplined. Remember, we don't have any large patent cliffs until the end of 2036. So our sense of urgency is different than other companies or the calculus we have. So all 3 of these hit our sweet spot. We've already talked about our Celg. The other 2 -- and they fit into really all 3 of our therapeutic areas, of course, -- so with Tubulus, and maybe I'll cover that one, and then I'll hand it over to Andy to talk a little bit about oral because I think it's equally interesting and exciting when we talk about our I&I approach and B cell depletion. But untubulous, maybe just to frame that one. We -- ever since we acquired Immunomedics, we've been looking and scanning the world for kind of what's the next generation really change, if you like, in ADC technology. And we feel we found it in tubules in that it has a proprietary linker that is very different than anything we which we've seen and the capability to have all different types of payloads. I mean, beyond just cytotoxics, -- it could be antivirals, it could be greater as it could be a variety of different payloads. So it gives us a lot of optionality. So while the lead program, 040 is targeting NaPi2b ovarian cancer, potentially both platinum-resistant and platinum-sensitive First of all, NaPi2b is expressed in multiple different cancer types. So we could take that into other tumor types. The second program that's in a Phase I basket trial now is targeting 5 for which is, again, overexpressed in different cancers, but we can really look at this as a broad platform to kind of build from moving forward. So we're maintaining Tubulus, the innovation center in Munich, where it's at, and they're going to work really closely with our scientists in California. But I think there's just a tremendous amount of optionality that, that provides us and fits into our portfolio context. And maybe I'll ask Andy because..

Yes, the Oro acquisition like the Tubulus acquisition really bolsters our mid-stage pipeline. So part of the Gilead story this year, as Dan talked about the 3 therapeutic areas we have developed internally a number of really exciting, albeit relatively early kind of mid-stage I&I programs. The Oro acquisition is a great complement to that. So it brings a CD3 BCMA bispecific that depletes B cells. So it's 1 of the many programs out there that are focused on deep B-cell depletion in I&I conditions. And this is an asset that came from China, a company called Teamed that was partnered with the venture capital firms in the United States. And they did a really nice job over the last year of developing some really compelling clinical data in large orphan I&I indications, where B cell depletion can be beneficial. And like tubulus, the efficacy that you're seeing in these early Phase I/II studies is really impressive. And you'll see it like tubulus again at scientific conferences later this year and we can talk about it in greater detail. So it's a great addition to kind of what we were already developing internally. The other thing that we like is as we think about over time, thoughtfully and selectively building an inflammation commercial organization beyond what we have today for PBC and Live else. These large orphan indications offer a really nice strategic entry point for us to build and then gives us the ability to build on that over time when we launch presumably other therapies, including hopefully some that we have in mid-stage development, including our oral F4 beta 7, small molecule that was developed internally. We have a couple of stat the greater programs and in the IRAK4 small molecule amongst others. So it's an emerging area for NII, and this acquisition just fit really quality of the early data and then strategically what it would allow us.

See some combined 3 transactions accounted for about $13 billion in deal value. Where does your appetite stand from here with regard to sizable M&A?

Yes. I think the primary focus in the short run is on integrating and really making sure that we don't miss a beat in terms of moving forward these programs in clinical development. These are competitive areas, as you highlighted. -- and we have a lot going on. I mean, they were all rightsized for us. So we're really happy with the progress that we're making and all 3 of the deals are closed now. The integrations are growing really well. We've always said that we want to add programs on a somewhat regular basis, every 2 to 3 years kind of more sizable deals, which to us typically means kind of the small to medium size. M&A deals similar to these. So we will continue to add to the portfolio over time. But maybe just circling back to where Dan started, the company has never been in a better position in terms of both the launches that are underway. We've talked about levels in the Yeztugo launch. -- the growth in the HIV prevention business. You have a net cell coming, Trodelvy in first-line triple-negative breast cancer. So there's all sorts of existing late-stage assets that are going to drive growth, [indiscernible], lenacapavir. And then we are really developing nicely this mid-stage pipeline that can drive longer-term growth that we talked about. So we don't have the same need today, certainly that we had 7 years ago when Dan joined the company to add to the portfolio or when I joined, but we will selectively add over time. And we have the financial flexibility to do it. Even after doing $13 billion in deals, we just took our debt levels back up to our historic debt levels. our net debt and total debt-to-EBITDA ratios are very attractive for a company of our size. So we really like where we are in terms of kind of financial flexibility, but the primary focus is on making sure that we do the integrations right. .

And you reported about 47% in operating margins in 1Q. As you absorb these deals here, how are you thinking about the trajectory there for '27.

There's a modest increase in operating expenses in '26 and '27 on most of that in the existing portfolio. And then the other thing that's important to highlight is we are building out our mid-stage pipeline is that -- as we looked at our long-range planning, we were going to have room in our R&D budget in 27, 28 and beyond as we roll off a lot of the large Phase III programs that we've run over the last many years. So these programs fit perfectly both scientifically with the quality of data and the room that we're going to have in our R&D budget. So when we did the deal, we said it's modest, manageable increase in '26 and '27. We'll do everything we can to cover that in our existing portfolio -- you've also seen the outperformance in the first quarter of the commercial portfolio that allows us to increase slightly the investment but not impact our EPS growth and kind of the EPS we can deliver for shareholders. So I think we're very comfortable that these fit nicely -- and maybe to your question, allow us to maintain top quartile or industry-leading operating margins. We don't expect that to change. We are very focused on disciplined expense management and maintaining those strong margins throughout the cycle.

Great. Dan, anything to add?

Well, I would just add. I just want everybody to know that all -- what does all this mean? It means we can do more for patients out there across the world in this country. And it also means we have a good, consistent ability to deliver top quartile growth. On the revenue side, we're very committed to ninth top quartile operating margins. We feel we still have a lot of leverage in the business to get there. And then obviously, EPS accretion that's faster than sales over time is exactly our goal. And our capital allocation priorities will remain investing in the business, appropriate M&A, a growing dividend opportunistic share buybacks in that order. But we're firmly committed to what we can do for patients, but also the attractiveness for shareholders as well.

Great. With that, thank you so much.

Thank you. Thank you for having us.