Gilead Sciences, Inc. (NASDAQ:GILD) Goldman Sachs 45th Annual Global Healthcare Conference June 12, 2024 1:20 PM ET
Company Participants
Daniel O’Day – Chairman and Chief Executive Officer
Conference Call Participants
Salveen Richter – Goldman Sachs
Salveen Richter
Good afternoon, everyone. Thank you so much for joining. We’re really pleased to have the Gilead team who has joined us virtually, unfortunately, due to the weather. It was hard to make it here in person. With us, we have Dan O’Day, Chairman and CEO, and Johanna Mercier, who is the Chief Commercial Officer. Thank you so much for joining us.
Daniel O’Day
Thank you for having us, Salveen. Sorry to [Multiple Speakers]
Question-and-Answer Session
Q – Salveen Richter
So to start here, Dan, can you give us an overview of where the business stands today, including your core Infectious Disease and Oncology franchises, key priorities, and how you’re thinking about the forward strategy for the company?
Daniel O’Day
Yeah, thank you, Salveen, and delighted to have the chance to communicate with all of you along with Johanna. Look, I think we are definitely making continued progress on our transformation journey that we started about five years ago. It’s an arc of many years, and even as we navigate some of the recent Trodelvy Phase 3 readouts that I know we’ll speak about in lung cancer and bladder cancer, we are making steady progress relative to sustainable and diversify our business over time. I mean, I would just point to the most recent quarterly call where our commercial front is very strong and our Virology business continues to be our cornerstone.
Our clinical portfolio is larger than ever, better equipped than ever to withstand different types of readouts in the portfolio. And importantly, I think this is important — we have no major patent expiries until Biktarvy LOE in 2033. Maybe just a little bit more on that, Salveen, on the commercial front, and Joanna’s team and Cindy’s team are just really doing a strong job. Our quarter one base business grew 6% year-on-year, excluding Biktarvy. That’s nine consecutive quarters of year-on-year growth.
Biktarvy continues to be the gold standard in HIV treatment. It’s up 10% with 49% market share. Our oncology sales importantly are exceeding $3 billion now in an annualized rate. That’s more than 13% of our overall revenue. And importantly, we’ve treated more than 50,000 patients across that portfolio, including being the world-leading company with KITE and Cell therapy. Maybe just to talk a little bit about the clinical front, our diverse pipeline now has 54 clinical programs, 16 of those are in Phase 3. Maybe just a couple of highlights from what’s happened even since the quarter. Most recently, we added inflammation with the acquisition of the CymaBay and seladelpar with the PDUFA date coming up in August. We’re very enthusiastic about that being our first kind of major inflammation medicine and also in the sweet spot of our liver customer interactions.
In HIV, we’ve got nine lenacapavir combinations for long-acting treatments and five trials in prep. That’s one of the things we’ll focus on for the second half of the year. One of the first of those trials will be reading out. In oncology, we continue to learn more about the totality of our portfolio, including Trodelvy. We have earlier line programs in tumor types where we believe there might be even greater effect from what we’ve seen in later lines in triple-negative breast cancer and hormone receptor-positive breast cancer, but also the signals we’ve seen in second-line lung and in later-line bladder. So we have programs in first-line metastatic triple-negative breast cancer, chemo-naive, HER positive, HER2 negative, and first-line non-small cell lung cancer as well.
And our Arcus partnership expands modalities in lung cancer and in gastric cancer. And then finally, in cell therapy, we continue to make important headway with a curative class of therapies, both in large B-cell lymphoma and also importantly for our partnership with Arcellx in multiple myeloma, including when we announced recently the Phase 3 design for that compound and we’ll also give an update on the iMMagine-1 study, the later lines of therapy in the second half of this year. So we’ve got a lot going on and we will continue to evolve the company, learn from different readouts, but really I believe we’re in a very strong position relative to our overall transformation that we started many years ago.
Salveen Richter
Great. Let’s start with one of your core franchises, HIV. You’ve guided to about 4% growth in 2024 and no growth in 2025, recognizing the impact of Part D redesign, could you walk us through the key assumptions underlying this guidance? And where do you see potential upside to downside risk? And if you can provide any color beyond that too, that would be helpful.
Johanna Mercier
Sure. Maybe I’ll take that one. So thanks, Salveen. Basically, before we jump into ’25, I think it’s important to talk a little bit about commercial performance for HIV thus far, and if you think about the last couple of years, we’ve been growing at mid-single-digit growth and that’s in line with the guidance that we’ve given in 2024 as well that you referred to about the 4% or so. As you think about what’s driving that, it’s really a couple of things. Number one, the market, obviously, sustainable in HIV treatment, double-digit growth in HIV prevention. And then, of course, as Dan mentioned, Biktarvy continuing to grow at 10 points year-on-year, but also growing share and about 3% or so year-on-year on a very large base. So that’s really the drivers of that growth.
As you think about the Part D redesign in 2025, that obviously will have an impact mostly on our HIV business because of the Part D molecules that we have there, not just Biktarvy, but of course, all the legacy molecules as well. That impacts about 20% or so of our US HIV business. And the way we’re looking at it is that the growth that we would have seen normally with HIV is going to be offset by that Part D redesign. And it’s like a stepping stone after that to growth in 2026. If you look at our overall, total revenue in 2025, we still expect to see growth. That will be driven by lenacapavir potentially as we think about a launch as early as late 2025, so that’s around the corner, as well as seladelpar with the PDUFA date of this August, that will really truly drive growth in 2025 as well.
And of course, our oncology portfolio with Trodelvy and Yescarta, really pulling that through. So that’s what we’re thinking about in 2025, so it’s a little bit of a bump. And as we think about our overall, like the next five years through to 2030, we do believe that it’s still a positive CAGR for HIV despite these IRA bumps, namely the 2025 and potentially 2028 in light of the Part D renegotiation that we believe is probably the earliest that Biktarvy could be set up for that negotiation process. So those are the pieces that we’re looking at within our HIV business, with a very strong portfolio in our HIV pipeline to support it and to support that renewed growth, right, as we think about it, both in prevention as well as in treatment.
Salveen Richter
Let’s dig a little bit deeper into this long-acting portfolio. So you will have long-acting PrEP, which represents the key growth driver for the HIV business in the second half of the decade, how do you risk — do you view this upcoming Phase 3 readout by year-end? And could you sketch your strategy to expand the market beyond current PrEP users and how difficult will it be to then grow this market beyond improved adherence and duration of use? And maybe just to add to that, how you think about then the overall growth for long-acting PrEP in 2026 and beyond, assuming some cannibalization of Descovy sales?
Johanna Mercier
Okay. So a lot of pieces in there. So let me try to break it down and if I miss anything, Dan, please jump in. Basically, if you think about our trials, we have five trials, two of which are really critical from a regulatory standpoint for filing, which is PURPOSE 1 and PURPOSE 2. These are trials with lenacapavir twice yearly injection. You asked about de-risk, how de-risked they are? A couple of things. One is, lenacapavir through Sunlenca is already approved in the marketplace today for heavily treatment experience, very small patient population, high unmet medical need, but currently approved by the FDA in a twice yearly form. So that would be one piece of the puzzle.
So we know that this molecule is safe and effective. The piece that I would also say for the PURPOSE 1 and 2 trials is the way the trials are designed, they’re designed with a counterfactual background and I’m not going to go into great details, but it basically is lenacapavir versus the background of HIV incidents, as well as the — as well as in the secondary endpoint looking at lenacapavir versus Truvada. And either one of those actually are really important for us. So you could either win on the primary endpoint or the secondary or both, and that’s the agreement that we have with the FDA today just because that counterfactual design is so different than what we’ve done in the past and we felt that was the best way forward and most ethical way forward, right? We can’t do a prevention trial with placebo at this point in time.
So it was really important to us to make sure that populations were safe through — all populations were safe through these trials and make sure that we set ourselves up for success. So we feel that we are incredibly well-positioned with both PURPOSE 1 and 2. We need both to file. PURPOSE 1, we expect as within the second half of 2024, and then PURPOSE 2 either late 2024, early 2025. And that’s why we assume a launch in Q4 of next year. As you talk about your strategy and kind of what we’re thinking about the market today, where we’re going and the expansion of it, I think it’s really important to understand where the market is today and where we believe it can be.
And today, the CDC defines the market for prevention at about 1.2 million people. The estimate is actually just congruent with actually the definition of what that looks like. And the definition is anybody who’s sexually active more than 1 sexual partner, anybody who’s been tested for an STD should be having discussions around prevention. And so, if you think about just the STD market in itself, last year alone in the US, there were 13 million prescriptions, not testing, diagnosis of STDs in the US. Now I’m not suggesting that the market is 13 million per se, but I do believe it’s a lot larger than 1.2 million.
In the market that’s been defined today by the CDC, we’ve only penetrated about a third of that market. And that’s because, think about it, these are not patients, these are individuals that are potentially at risk for HIV, and so taking a pill every single day is not the easiest thing to do. And so we believe lenacapavir twice yearly injection is transformational in this marketplace. And that’s not because of what we think, it’s actually what the communities think. It’s the research that’s been done in these communities to truly understand the needs and the wants and this is really answering that need. And so that’s why we believe it’s so transformational.
We don’t think all of this happens overnight, right? We think that as much as a third of that penetration is today, most of that is Descovy or Truvada generics. We believe that actually that market can grow up to 50%, 60% penetration with something like lenacapavir twice yearly in the market. The way we’re going to do that is a step approach. Obviously, today, the use of prevention HIV is mainly used in men having sex with men, [indiscernible] commercial marketplace. We believe there’s a lot more people that have a right to PrEP and need PrEP. And that really is the Latino black communities [Technical Difficulty] that’s where you’re seeing high levels of HIV [Technical Difficulty] populations in different ways.
So we have to think a little differently than maybe what we’ve done in the past with Descovy and we do believe that will be a step approach. So low-hanging fruit is the people that are currently on once-daily pills today and then kind of building that out to other communities that would really benefit from prevention. And so that’s kind of the play with an impact that we believe with lenacapavir that can be really truly transformational. And the growth of this market, you’ve seen it every time there’s a new entrant.
Every time Descovy came into the marketplace or the twice monthly came into the marketplace, a competitor of ours, we were looking at growth in 20%, 30% range. We believe that will happen again, if not more exponential than that with something like lenacapavir. So that’s kind of the plan of how we’re going to approach it and that’s — basically, it’s going to take a little time. It’s not going to happen [indiscernible], but we do believe between 2025 and 2030, we can really reach these communities that truly deserve PrEP.
Salveen Richter
Beyond Phase 3 PrEP data by year end, what do you view as the key value driving long-acting updates on the treatment side in 2024 and 2025?
Johanna Mercier
Sure. We have a lot going on right now, as you can appreciate. So obviously, PrEP being the most transformational from a prevention standpoint, but we’ve also shown just recently in the first half of 2024 at CROI. We’ve shown some great data with bNAb and lenacapavir and that would be twice yearly treatment for HIV. That would be the first-to-market as we believe today. These are infusions, so a little bit different, and I’ll be honest with you, I was the first to kind of push back a little bit. Did we really think that HIV patients would want these infusions? And as talking with investigators, talking with KOLs, they were lining up for these clinical trials because a lot of patients in HIV do not want to be reminded that they have HIV. And so we think this is actually going to be a really important play.
We also had data at CROI showing our oral weekly, so we have two combinations there; one, lenacapavir with islatravir with our Merck collaboration, and then following that one, a lenacapavir integrase inhibitor combination, which also is going to be once weekly. And then last but not least, we also have a once-daily combination of bictegravir and lenacapavir for [Technical Difficulty] treatment experience to optimize patients’ regimen there [Technical Difficulty] let alone data coming in the second half, that is pretty exciting as well. That’s looking at monthly, Q3 monthly, and Q6 monthly, so I do mean test, sorry.
Salveen Richter
We’re shifting over to the oncology vertical, you’ve reiterated the goal of one-third of revenue coming from the oncology business by 2030, how confident are you in this target, including in the context of potentially solid HIV growth if the long-acting strategy is successful? And what assets need to play out for portfolio for you to achieve this?
Daniel O’Day
I’ll take that one, and Johanna, feel free to add. But I think that you’re right and your question to point out that the stronger we do in HIV because it’s a relational goal, it’s a third of our revenue, the more ambitious to our oncology plans have to be. I think that’s good for a company our size to have those types of ambitions. And we do believe, we have a lot to do in HIV still. I mean, back to Johanna’s point about redefining the PrEP market, I’ll just remind you that, I mean, there’s about a third of patients with HIV that don’t have their virus currently under control, and a lot of that has to do with not having the right treatment option for those patients.
So I think there’s real opportunities to continue to grow that HIV, both treatment and prevention, over the course of that. Having said that, we remain convinced that our target of one-third of sales goals from oncology is achievable without the need for additional BD and including potential growth of our HIV business. And that is because that goal was put in place in a probability-adjusted way. And many of our programs in oncology, whether Phase 2 or Phase 3 currently, you don’t have a probability of around 50% or so when you look at that. And so while some things will hit and some things won’t, there are a variety of different ways for that oncology portfolio to develop between now and it’s six years from now, 2030 to achieve that goal.
I would just note that right now, our sales are already more than a third of the way there to that goal. And so in quarter one, they represented about 13% of our business. So we are really making [indiscernible] overall is roughly split between [indiscernible] totality of our growth on our base business. And then finally, I’ll just note that we’re not going to do anything unnatural to hit this goal, right? The goal was always intended as directional to highlight the scale and scope of our oncology ambitions. And again, we see a path forward. We’re going to continue to be pragmatic about how we drive growth in both HIV and oncology and the emerging franchise of inflammation moving forward.
Salveen Richter
A question here on Trodelvy, the KEYTRUDA combo data in frontline metastatic non-small cell lung cancer continues to look encouraging post the ASCO update with PFS. How are you thinking about the differentiation of this combo versus KEYTRUDA monotherapy and KEYTRUDA chemo combo? And when could we see initial data from the ongoing Phase 3 study?
Johanna Mercier
So I’ll start with that one. The Trodelvy data with pembro is very interesting and that’s part of what we showed to your point at ASCO with the EVOKE-02 in the Phase 2 program that further supports kind of what we’re doing in Phase 3 with EVOKE-03 in that first-line setting. This is for PD-L1 positive patients and we do think that it’s about raising the bar, right? The bar both on efficacy as well as safety and that’s where even our EVOKE-01, even though we missed the primary endpoint on that, what we did see there is really strong safety and clearly a very strong activity of Trodelvy.
And so pulling that through, we do believe that in addition to pembro, that might be the best combination to really bring that efficacy play as well as the safety play versus chemotherapy or something like docetaxel, which I think is very hard on these patients. And so that’s the way we’re thinking about it. I think we have a real opportunity with Trodelvy, not just with the combination with pembro, but as you think about other segmentation of this marketplace and other studies that have played out here, we do really believe Trodelvy is differentiated versus others versus other ADCs that are not alike.
We’ve seen that time and time again, and both on the safety profile as well as potentially on efficacy, we’ve seen that with histologies. Trodelvy’s activity is very strong across squamous and non-squamous and consistent, and so that’s a really important piece of the puzzle as you think about non-small cell lung cancer because both of these histologies need to get coverage for us to kind of push that bar. So more to come on that. As for timing, we haven’t shared timing yet, but obviously, looking for more updates [Technical Difficulty].
Salveen Richter
Could you also speak to the strategy in the second-line setting post the ASCO update?
Daniel O’Day
Yes, maybe I’ll give a little bit of an update there. And I think I gets back to also to your question, Salveen, on the overall oncology ambition. As I speak about the second line, it’s important to note to what Joanna just mentioned, that every single Trodelvy trial that we’ve run in difficult-to-treat patients later-line settings in both lung, bladder, and breast, we’ve seen an effect. I mean, we’re obviously disappointed when we don’t hit the primary endpoint. We understand from a regulatory standpoint, the challenges that presents. But specifically on second-line non-small cell lung cancer, we think it’s interesting for patients and this is coming off of ASCO, you’ve all now seen the data in a bit more detail, and we’ll continue to follow that trial, by the way, in those patients in those trials.
But it’s quite interesting, particularly for patients who did not respond to their last anti-PD-1 therapy and that represented around 70% of the patients in the trial. So we’re going to continue to engage and we already did at ASCO and we’ll continue to with KOLs. We’re going to engage with regulatory authorities understanding your eyes wide open without a primary endpoint, it’s an uphill climb. And we’ll be guided by those discussions over the coming months and keep you informed. But I would just note that back to this consistent message of efficacy, and Johanna mentioned also the safety in this population, second-line lung, we saw that numerical improvement in OS across both histologies, so both squamous and non-squamous, which is interesting. And I do believe as we look at the TROP2-ADCs, that we’re seeing a consistent difference between TROP-2 ADCs. In other words, if you’ve seen one TROP-2 ADC, you’ve seen one TROP-2 ADC in terms of both some of the efficacy parameters, but also some of the safety and side effects.
We also saw in the study meaningful OS improvement, granted, we missed the primary endpoint of around 3.5 months in patients who didn’t receive their last PD-L1, and the 12-month OS rate was about 46.6%. So there are signs there and we’ll continue to have dialog. But it also informs importantly we have to do what’s right for patients, obviously, first and foremost, but informs the rest of our strategy and inform how we think about TROP ADCs in later lines chemo experienced patients versus now, as you know, the thrust of our program moving forward is to move up into more chemo-naive or chemo less experienced patients. So I think that presents, I think, a real opportunity to see how these TROP-2 ADCs will behave in those earlier line setting. From both the tolerability standpoint, the ability to think about combinations earlier along, but also thinking about their efficacy being enhanced as we earlier — go earlier into lines of therapy.
Salveen Richter
Could you also level set us on how you’re thinking about the Arcus partnership and key assets that you have under that portfolio and what the strategy is separately for KITE going forward beyond the Arcellx partnership in multiple myeloma from both a commercial and developmental perspective?
Daniel O’Day
Yes, why don’t we split? Do you want to start, Johanna, with Arcus [Multiple Speakers]
Salveen Richter
And you’ll cover KITE.
Daniel O’Day
Give it to KITE, yes, that’d be great.
Johanna Mercier
Perfect. So let me start with that. The Arcus collaboration is a really strong one and we’re excited about these novel mechanisms that they’re investigating and that we’re obviously very involved with. The — a couple of things to highlight is, obviously at ASCO, there was a couple of updates, namely the Phase 2 EDGE-Gastric, showing really strong PFS, which supports the trial that we’re doing in gastric in upper GI with [DOM] (ph) and so that’s something that’s exciting for us because of a couple of things.
One is, we just announced earlier this week that patient enrollment is complete and so now the study is just rolling out. The other piece of the puzzle for me that’s the most exciting as a commercial person is there’s a real opportunity here to be first-to-market, assuming success of this trial is to be first-to-market in this segment of patients that really need more therapies and more efficacy here. So we’re excited about that opportunity. There also was some earlier data in third-line plus setting for colorectal cancer with the tumor, that’s also interesting. We still have to understand the value of each component, the contribution, but that’s something obviously moving forward as well.
And I think that the biggest highlight, I would just say with the ARCUS collaboration is really the opportunity to play in, collaborate with certain assets, but also wait-and-see some of the data as it evolves so that we can make certain decisions and with the right data sets for us to move forward as well. So really great collaboration, great science, and obviously, very exciting moving forward as there’s a lot around the corner.
Daniel O’Day
Yeah, thanks, Johanna. I’ll just add that, I mean, these are novel mechanisms that carry the risk, they carry with it, but as we think about our oncology ambitions, we’re going to stretch ourselves on some of these mechanisms, and we did so, as you know, with magrolimab, and obviously, that didn’t show an effect. But we also have this balance with Cell therapy with the broader Trodelvy program and now some really novel assets within our Arcus partnership that we’re enthusiastic about and being a leader in certain indications there as well.
So — and then to expand your question about KITE, and you specifically asked beyond the Arcellx partnership, yeah, I’ll just remind folks that we clearly have a world-leading position in Cell therapy. We understand the challenges even more so now of changing practice. The practice of medicine is really what we’re changing with CAR-T therapy, particularly when it comes to large B-cell lymphoma. I mean, the data are really — extraordinarily compelling when you think about the curative nature of this in second-line and beyond large B-cell lymphoma. And yet still today, we only have about two out of 10 eligible patients receiving CAR-T therapy.
And those things — those numbers differ outside the US and inside the US and there’s different mechanisms within the US that provide some additional challenge to changing some of this practice of medicine. So in particular, in the United States, we need to get to the community expansion. Today, about 80% of second-line large B-cell lymphoma patients start in community networks, and the ability to get those referred to centers is taking some mind shift and mindset change, and also bringing those centers closer to the community is really important. So we need to expand the use of CAR-T cell therapy in the community with community patients. We need to win the treatment decision at the authorized treatment centers.
And the other thing I think that puts us in a very good position to be able to do that is the manufacturing improvements. We’ve recently received FDA approval for an approved process of 14 days turnaround time. I mean that’s important for so many reasons. First and foremost, for patients, because many of these patients are very ill and time is of the essence. Secondarily, in terms of the referral from the community, having that be as efficient as possible and being able to have the turnaround as efficient as possible is very important. And finally, from the overall business of Cell therapy, having a shorter turnaround time improves our opportunity to get returns on the business over that period of time as well. So we are firmly committed to large B-cell lymphoma.
I would just say, and you asked your questions excluding Arcellx, but we’re also very, very committed and we believe we have a potential differentiated product in Anito-cell with multiple myeloma. We’ll get more data on that later this year. And then finally, we’re not stopping there. We’re developing a deep and broad pipeline on next-gen lymphoma pipelines, dual targeting bicistronic, armored, optimizing manufacturing. As a leader, we take our role seriously in making sure we stay ahead of the innovation curve. And we’re also looking at solid tumors in an exploratory way and looking for ways to think how we might be able to have an effect on solid tumors, and then, of course, in autoimmune conditions as well. So lots more to come on Cell therapy, and over to you.
Salveen Richter
Great. One last question here on business development. You’ve noted that meaningful M&A is unlikely in the near term post the CymaBay deal, what lessons have you learned from the recent deals in terms of how you think about future BD? And help us understand where you would see if you were to look the potential for most value now from both a market perspective and a synergy perspective.
Daniel O’Day
Yes, absolutely. Look, I think we’re always learning lessons. I mean, actually, for the decades I’ve been in this industry, we’re learning lessons. And you have — when you reach hard for changes to medical practice. There are times when you will fall short, and there’s times where you will exceed your expectations. And that’s true both on the internal pipeline and also on M&A.
So what I would say is we always look at our capital deployment and how we’re deploying that capital across the range of opportunities for that and looking back and looking forward at that. But Gilead is a very different company than it was 5 years ago. I mean just to put it into context and with all respect to the legacy of Gilead outside of urology, we had a very thin pipeline, and we are investing kind of in the mid-teens percent of revenue on R&D.
So at that time, we made a decision to both diversify the company and to increase our overall investment. We’ve done that, and now we’re in a period of really being able to optimize that moving forward. But the essence of the strategy was to build that diversification — first of all, not lose our edge in virology. And I think everything that Johanna had mentioned before about the work the team has done in both treatment and prevention and HIV and beyond has been nothing short of impressive, but we now have built up real competencies within the organization around oncology and inflammation.
So we’re in a very different spot today. We have a robust internal portfolio in Phase I and Phase II that we often don’t get a chance to speak about with novel mechanisms in oncology that have come out of our own research lab or out of collaborations and likewise in inflammation. So as we have a lot to do currently within our portfolio and the bar is very high even within the company for things to hurdle into late-stage programs. We’ll continue, of course, scanning environment and look for things that really fit into our portfolio like CymaBay or seladelpar or other things that fit into our early-stage portfolio that enhance that appropriately.
So I believe that we’ll continue to look at smaller deals, I think mid-single-digit billions on average every few years, CymaBay type deals, smaller collaborations that fill our earlier-stage portfolio. But you’re not likely to see us engage in any sizable like Immunomedics size deals in the near term. We’ll be flexible, of course, but that’s not our base case because of the breadth of the portfolio that we have today.
So we’re in a very different position than we were, and we’re learning every day. I mean we’re responding to events and shifting and adapting our organization and we are able to do — if you like — in the next stage of our transformation journey.
Salveen Richter
Great. But with that, Dan and Johanna, thank you so much for joining us. Sorry, we can’t see you in person.
Daniel O’Day
Thank you very much for having us.
Johanna Mercier
Thank you. Take care.
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