Q3 2022 Gilead Sciences Inc Earnings Call
non-GAAP financial measures will be used to help you understand the company's underlying business performance. The GAAP to non-GAAP reconciliations are provided in the earnings press release, and our supplemental data sheet as well as on the Gilead website.
Now I'll turn the call over to Dan.
Thank you Jackie and good afternoon, everybody. We're pleased to connect with all of you today to share the details of another very strong quarter.
Thanks to strong commercial and clinical execution by our teams and the positive momentum continues to build.
Total product sales, excluding the clarity were $6 $1 billion growing 6% sequentially and 11% year over year.
The total including victory was $7 billion.
If we exclude the impact of foreign currency fluctuations and the tail end of the loss of exclusivity for Truvada in a triple in HIV.
Total product sales excluding victory grew 15% from the third quarter of last year.
The majority of this growth was driven by HIV and over 40% of the $620 million increase in sales came from oncology.
The team will share more details, but this has been a great quarter for commercial execution, including continued share gains perfect RV growing momentum Pritchard Lv another impressive quarter for cell therapy, and a strong quarter for victory.
We also saw continued clinical momentum this quarter.
Some of the highlights include the FDA priority review granted to tread Lv for late line HR positive <unk> negative metastatic breast cancer.
The EU approvals for <unk> for second line relapsed refractory large b cell lymphoma.
And to Carlos and adult acute lymphoblastic lymphoma.
And Embryology Atlantic <unk> received its first regulatory approval in Europe marketed on linker that is approved for heavily treatment experienced people living with multi drug resistant HIV, making it the first approved <unk> inhibitor and the first therapy with a six month dosing schedule for HIV treatment.
We are taking multiple important steps to advance our ambitious clinical pipeline, including in oncology. We are expanding our loan program with eight trials now active in three more planned to start in the coming months.
We plan to resume our phase II trial investigating a once weekly oral combination of <unk> and our Atlantic catheter here.
This will be one of many ongoing combination studies, we have for long acting HIV treatment. In addition to our extensive program for prevention.
And we continue to further strengthen our early stage portfolio, adding a <unk> agonist for inflammation for Merrell bile and an option for a bispecific antibody for oncology for Macrogenics.
Moving to our clinical goals for 2022 on slide five we're on track to start the two remaining phase III trials, namely a vote three for first line non small cell lung cancer and zoom a 'twenty three for first line high risk <unk>.
We continue to expect another interim readout for the phase II <unk> study in first line non small cell lung cancer before the end of the year.
Overall this has been another very strong quarter and a very strong year for Gilead, we're seeing impressive growth of our base business with continued share gains for big <unk> and excellent performance for cell therapy and growing demand for <unk>.
On the clinical side, we've had the first approval for <unk>, a foundational asset for the future of our HIV franchise <unk>.
<unk> now under priority review for HR positive <unk> negative breast cancer in the U S and we're executing on an extensive development program across Barology oncology and inflammation.
Finally, the recent taps settlement is expected to significantly extend the exclusivity are key components of our HIV franchise in the U S.
I'd like to take this opportunity to thank the Gilead and kite teams for their outstanding clinical and commercial execution.
This consistent execution of our strategy along with a very robust portfolio has led to some terrific progress in 2022, and we look forward to building on that momentum through the rest of the year and beyond.
With that I'll invite Joanna to share an update on our third quarter commercial performance.
Thanks, Dan and good afternoon, everyone.
Before I jump into the commercial results for the third quarter I wanted to begin by acknowledging our team for another exceptional quarter.
We're making important progress in our goals of ensuring the strength and sustainability of our virology franchise Wow.
Also continuing to build our expertise and market presence in oncology.
Turning to slide seven we had a very strong quarter with total product sales, excluding declaration $6 $1 billion up 11% year over year or 15%, excluding FX and the residual impact of the HIV <unk> with growth in each of our core franchise area and notable strength in HIV and oncology.
Sequentially.
Total product sales, excluding declare increased 6% driven by HIV HCV and oncology.
Both excluding FX impact any earnings was 8%.
On slide eight HIV sales of $4 5 billion were up 7% year over year excluding.
The impact of both FX and <unk> HIV revenue grew 10% year over year.
Similar to last quarter. This was primarily channel mix driven by U S government utilization, leading to higher average realized price in addition to higher demand.
Overall, despite the quarter over quarter shifts in average realized price Katherine plans continue to represent approximately 60% of our U S HIV treatment prescriptions, including Medicare intermodal <unk>.
HIV revenue growth was driven by the U S. While Europe was down year over year due to FX and less favorable pricing dynamics offset in part by higher demand.
Quarter over quarter, HIV sales were up 6%, similarly, driven by channel mix and inventory dynamics as well as higher demand.
Turning to the market more broadly we are encouraged that on a year over year basis.
Hubby treatment market across the U S and Europe has grown for five consecutive quarters.
This reflects the work we have been doing with our partners to bring people living with HIV and people at risk of HIV back into care following the pandemic.
The market growth, we are seeing suggest that activity has returned to pre COVID-19 Chinese.
In the third quarter of 2022, the market grew 2% year over year, both in the U S and Europe .
Looking forward, we continue to expect annual treatment market growth in the 2% to 3% range.
<unk> sales were $500 million up 16% year over year, and 9% sequentially and perhaps market share remains stable despite generic and other engine.
For the quarter.
Market continues to demonstrate robust growth largely driven by the growing awareness.
And demand well above pre pandemic levels.
Overall, the market grew 19% year over year and 6% sequentially.
On to slide nine.
Third quarter pick targets that were $2 8 billion.
22% year over year, driven by higher demand in both the U S and Europe and favorable pricing dynamics.
Sequentially sales were up 8% due to higher demand as well as favorable inventory and pricing dynamics.
Once again, the target continues to command a leading position in the treatment of HIV with another record quarter growing to 45% market share in U S up four percentage points year over year.
Moreover, the target remains the leading medicine for those seeking to switch to a new regimen in the U S as well as those starting treatment in both the U S and Europe , most notably capturing 10, you start for every one person prescribed another medicine in the U S.
Looking to the fourth quarter I'd like to call out a few points.
First given the historic trend towards a significant inventory build in the fourth quarter, followed by inventory drawdown in the first quarter. We are renewing our focus on inventory management in effort to better align the timing of product delivery with end user demand.
Second while we continue to see strong market share gains for Vitaros. In addition to solid growth in both the treatment and prevention markets. We will remind you that some of our second and third quarter performance has been driven by shifts in channel mix had a favorable impact on average realized price.
Given the favorable trends we observed over the last two quarters, we do expect the channel mix to be more stable in the fourth quarter.
With these factors in mind and also allowing for further FX impact, we expect fourth quarter HIV sales to be roughly flat on a sequential basis.
That full year 2022, HIV growth is therefore expected to be approximately 4% or 7%, excluding the <unk> and FX.
Headwinds year to date.
In summary, we're extremely proud of the portfolio, we have built in HIV and excited about the way at Gilead is positioned for 2023 and beyond.
Specifically.
The <unk> clinical profile continues to impress.
And by ongoing strong growth rate, even though its annual revenue run rate is now in excess of $10 billion.
<unk> for prep maintained over 40% market share despite competition and generic entrants.
And most recently <unk> approval at some noncash for heavily treatment experienced people living with Multidrug resistant HIV in EU.
This is an important option for a group that has very few treatment options and is a great opportunity for physicians and the HIV community to get more familiar with a six monthly subcutaneous HIV therapy.
We believe this sets the stage well for our other plant Lenny catheter based treatment and prevention regimens.
All of this combined with the treatment and prevention market showing solid recovery.
Impact of the loss of exclusivity of Truvada and <unk> now behind us.
And the recent tax settlement extending projected use <unk> for disco the annual gassy into the early 2030, and Joni <unk> patent to 2029 in the U S.
All of this truly underpins our confidence that gilead is well positioned for growth and continued leadership in the HIV market.
Now onto slide 10 eight.
<unk> sales for the third quarter were $524 million up 22% year over year, and 17% sequentially, primarily due to the favorable resolution of a prior year rebate claim in Europe , and other favorable pricing dynamics in the U S.
Offsetting these benefits.
There were fewer patient starts in both the U S and Europe .
Insistent with our expectations for both the quarter and the general trend that you should expect an HCV going forward.
Despite the trend in patient start we're pleased to maintain HDD market share of more than 50% in both the U S and Europe and third quarter share increased on a year over year basis.
For HBV and HDD on slide 11.
Sales were up 7% year over year, and 13% quarter over quarter, primarily driven by favorable inventory dynamics.
Moving to back Larry on Slide 12, third quarter revenues were $925 million.
As expected sales were down year over year, given lower U S hospitalizations as compared to the same period last year.
Indeed, the hospitalizations are below the peak seen at the start of the year. It is clear with the sequential increase that the path of the pandemic remains difficult to predict.
Nonetheless, we're proud of the role veterinary continues to play in the fight against COVID-19.
In the U S, but clearly views and approximately 60% hospitalized patients who are being treated for COVID-19.
Outside the U S <unk> benefit to patients continues to be recognized by health authorities, including the World Health organization and the European Medicines agency based in part on the Pine tree data, which demonstrated a significant reduction in the risk of hospitalization. After three day IV treatment in the outpatient setting.
These factors continue to support that clear utilization, where it's needed.
Moving to oncology and beginning with <unk> on slide 13.
Sales of $180 million grew 78% year over year, and 13% quarter over quarter, and we continue to work with regulators payers and clinicians around the world to broaden access.
Since its approval in second line metastatic CNBC late last year in Europe . Two <unk> is now reimbursed in 13 countries outside the U S with additional markets in Europe and elsewhere expected to come online shortly.
We've also begun work on establishing the right infrastructure to support a potential launch into pre treated.
<unk> positive <unk> negative metastatic breast cancer.
Reinforcing the significant unmet need in this population and the clinically meaningful overall survival data demonstrated in the phase III tropics <unk> study.
Has accepted our supplemental biologics license application as priority review.
And we look to decision in February of next year.
We're excited by the potential for many more patients to benefit from <unk>.
Now onto slide 14, and on behalf of Christiana Kite team I'm pleased to share that cell therapy sales in the third quarter were $398 million up 79% year over year and up 8% sequentially.
These strong results were driven by continued growth in large b cell lymphoma and capability to reliably meet customer demand.
Together with our recently FDA approved viral vector manufacturing facility in Oceanside tight remains well positioned to ensure clinical and commercial supply availability, while it continues to execute on its geographic expansion.
For the quarter <unk> sales of $317 million were up 81% year over year, and 8% quarter over quarter driven by continued successful launch in second line <unk> in the U S.
And partially offset by FX headwinds in Europe .
Just last week <unk> was approved in the EU for second line <unk> and we look forward to launching there in the months ahead.
<unk> grew 72% year over year to deliver $81 million in sales driven by growth in adult acute lymphoblastic leukemia.
In early September the European marketing authorization for <unk> in relapsed or refractory AML with granted.
We continue to broaden awareness and access to our cell therapies through indication and authorized treatment center expansion in existing markets as well as through geographic expansion as demonstrated by our most recent regulatory applications in Brazil, Singapore and Saudi Arabia.
As always Chris these available for Q&A later on the call.
Overall this was an incredibly strong quarter for gilead oncology with revenue of $578 million up 10% from last quarter and 79% from last year.
This represents an almost $2 4 billion dollar annual run rate as we move into the last few months of 2022 and hint that the possibilities ahead as we continue to execute on our commercial and clinical oncology calls.
And with that I'll hand, the call over to Murdoch for an update on our pipeline.
Thank you Joanna.
Sure I start I'd like to recognize the strong execution of our internal team and external partners across a broad range of activities.
Diversified across therapeutic area and clinical stage with milestone spanning study initiations, yes, BLA submission for <unk>, two easy approvals in cell therapy, and our first approval for <unk> in the EU.
On Slide 16, you can see that we've made a lot of progress so far this year nearly all of our milestones.
Regarding our BLA filing for <unk>, we received a complete response letter from the FDA setting concerns about the manufacture and delivery of crude X.
We will take the time to fully digest the CRO with note that no new safety or efficacy clinical trials were requested by the FDA.
We plan to resubmit as quickly as possible and we'll work with the agency on the path forward.
We remain confident and Delever tide and the potential benefits that can bring to people living with HDD and will share an update on the U S regulatory pathway when we can.
Moving on the HIV on Slide 17, we're thrilled that Linda <unk> received its first marketing authorization from the European Commission as sudden linker for people living with multi drug resistant HIV in combination with other anti retrovirals.
<unk> is a first in class capsid inhibitor, it's the first and only twice yearly subcutaneous HIV treatment and that is a much needed option for those people living with HIV with limited alternatives.
We continue to expect a decision on our NDA for <unk> from FDA in late December of this year.
In the meantime, this first regulatory approval from the AUC is an important validation, while we continue to progress our other lending cap a year based treatment and prevention programs.
For HIV treatment, a new clinical development plan, allowing a lower dose of <unk> Merck's investigational NR TPI is moving forward after FDA review.
As such we're planning to resume the phase II trial investigating oral once weekly lending cap severe and his last year combination.
Our internal combination programs are also ongoing and we expect to share data next year from the phase <unk> proof of concept study for <unk> and two broadly neutralizing antibodies or being ads directed at HIV.
In prevention or clinical development continues to progress with four in process or planned clinical trials.
<unk> every six months subcutaneous when the cap of the year.
Moving to slide 18, the glory continues to be recognized as the standard of care for patients with severe COVID-19 with updated guidelines for victory from the World Health organization.
Additionally, the <unk> issued a positive opinion on the use of <unk> for the treatment of pediatric patients with COVID-19.
Although novel treatments and vaccinations have improved the COVID-19 outlook. There's a continued need for effective and convenient oral treatment options for patients I am pleased to share that the FDA has just granted our novel oral nucleoside <unk> fast track designation, which aims to expedite development of promising new medicines.
We continue to be in active discussions with the FDA and other global regulators on potential clinical pathways, including a phase III study that we expect to start within the next several months either globally or outside the U S.
On slide 19, we show the phase III tropics. So two results in patients with HR positive <unk> negative metastatic breast cancer. There was a late breaking presentation at ESMO in September <unk>.
<unk> demonstrated a statistically significant and clinically meaningful three two months overall survival benefit.
Patients with metastatic HR positive <unk> negative breast cancer, who have progressed on endocrine based therapies and chemotherapy have limited options. As a reminder, the patients enrolled in tropics or two were heavily pretreated with a meeting of three prior chemotherapy regimens. In addition to prior CDK <unk> inhibitors.
Importantly, the FDA recently accepted our SPRI Pritchard, Lv and HR positive <unk> negative metastatic breast cancer and granted a priority review.
The <unk> date is currently set for February 2023.
We continue to work with regulatory agencies outside the U S to potentially make this medicine available to eligible patients.
Additionally, following the acquisition of <unk> Asian, commercialization and development rights from Everest medicines, we expect data from our phase III metastatic <unk>, China bridging trial in the next few months and our phase III Asian, HR positive <unk> negative metastatic breast cancer study in mid 2023.
Moving to lung cancer on slide 20, you can see that we expect to have at least nine active clinical trials in non small cell lung cancer by the end of 2022, including five with <unk> as well as programs was umbrella Mab Domino Nab and tremor Merck's Keytruda Astrazeneca is devalue map and our own <unk>.
Yes.
Trials are already underway, including the phase III of <unk>, One study and second to third line non small cell lung cancer and our phase III <unk> study in first line non small cell lung cancer without actionable mutations.
Our partner Merck also plans to initiate the phase III <unk> III studies later this year to evaluate the combination of <unk> and Keytruda in first line patients with non small cell lung cancer, whose tumors express high levels of PD lone.
Additionally, with our partner ARCUS, we're looking forward to the fourth interim analysis of the phase III <unk> trial, evaluating zim, and Dom and PD Lone high non small cell lung cancer before the end of the year.
Data from our seven are expected to support our ongoing phase III studies for <unk> based combinations in lung cancer, including Star one to one which just achieved first patient in.
Lung cancer is a disease area with high unmet need and we believe we have multiple promising msas and potential combinations that could help bring additional new treatment options to patients.
To explore these opportunities we plan to initiate two phase II signal seeking platform studies velocity and the ARCUS lead edge lung in the coming months.
Overall, we have initiated a comprehensive evaluation of the assets in our portfolio to address the significant unmet need in lung cancer and look forward to sharing updates in the coming years.
Moving to slide 21, and on behalf of Christiana Mackay team, we're highlighting our expanding clinical pipeline as we build on the growing momentum in adoption of cell therapy based on the significant survival benefit scarred into Cardiff are delivering to patients.
We believe there are still opportunities to bring <unk> to more patients by moving into earlier lines as well as new indications as you can see we recently enrolled patients in several studies, including Zumba 24, the phase II study to evaluate <unk> in an outpatient setting for second line <unk>.
And zoom in 'twenty, two a phase III study for <unk> in second line plus high risk Follicular lymphoma.
We also expect to begin screening for patients for the June 23 study of <unk> in Q4.
The decision to initiate a phase III trial in first line HR <unk> was based on the encouraging data from Zuma, 12, where <unk> demonstrated 89% or 78% CR.
Additional studies include an evaluation to Carter's and where B cell malignancies, and <unk> hundred 60, <unk> is evaluating a CD 1920, <unk> car T and post CD 19 third line plus <unk>.
We are committed to continuously improving the safety and efficacy of our cell therapies through both internal pipeline and external partnerships.
On slide 22 returned to hematology and highlight the breadth of our programs across Mds and AML.
Some are growing that we fully enrolled our phase III enhance study in Mds ahead of schedule and our discussions with the FDA and other regulators continue and we expect to share an update in early 2023.
Moreover, enrollment for the two AML trials enhance two and three is well underway and we are targeting top line data in 2024.
A few weeks ago, we announced our oncology collaboration with Macrogenics to develop bi specific antibodies. This includes the exclusive option to license <unk> for the bi specific antibody that binds the CD 123, and <unk> III currently in phase one as well as two additional research programs.
Compliments Monroe, Mab and furthers our work as we explore therapies that could translate into better clinical outcomes for patients with AML and Mds.
Finally, we are pleased FDA granted <unk> orphan drug designation at the end of September . It's the first CLO <unk> targeted car T is currently enrolling patients in a phase one study.
On slide 23, I wanted to take a moment to welcome narrow body to Gilead, we completed the acquisition a few weeks ago I'm pleased to add the neuro bio team to the Gilead research family.
And bring their proprietary discovery platform and immune inhibitory receptor agonist to our portfolio.
This acquisition complements our inflammatory disease, cornerstones, including IBD, RA and systemic lupus and opens opportunities in other indications.
We're excited to continue to explore and develop these antibody agonist, which we believe have the potential to reduce immuno suppressive signaling and restore tolerance and autoimmunity.
Wrapping up I'll note that we now have 60 clinical programs underway here at Gilead spanning a broad range of indications across virology oncology and inflammation.
We've accomplished a lot in 2022 and yet still we're really just getting started and exploring the possibilities offered by our portfolio.
With that Andy.
Thank you Barry and good afternoon, everyone.
We are pleased to share another strong quarter of results with sequential year over year growth in every franchise across our core business.
As shown on slide 25 product sales, excluding <unk> grew 11% year over year, despite a $130 million headwind from FX.
If we exclude this FX impact in addition to the impact of previous HIV low <unk>.
Total underlying sales growth year over year was 15%.
Moving to slide 26, you can see that secondary was down as expected year over year.
So it more than doubled on a sequential basis from the second quarter.
I will note that with the continued strengthening of the U S dollar.
The total FX impact on revenue net of hedges was higher than expected at approximately $200 million compared to the third quarter of last year.
non-GAAP product gross margin was 87% down 320 basis points from last year, primarily due to the third quarter of 2021 reversal of a previously recorded litigation reserve.
Additionally, non-GAAP product gross margin was impacted by higher <unk> related royalty expense and lower <unk> sales.
non-GAAP product gross margin improved sequentially due to higher HIV and <unk> product sales.
non-GAAP R&D, excluding acquired IP R&D expenses was $1 2 billion.
Up 10% year over year, primarily due to investments in oncology.
Sequentially R&D, excluding acquired IP R&D expenses was up 6% driven by investments in oncology and Covid treatments.
Acquired IP, R&D, reflecting acquisitions milestones and upfront payments for the quarter was $448 million and includes $389 million of expense related to the Miro bio acquisition.
non-GAAP SG&A was $1 2 billion.
Up 3% year over year.
non-GAAP operating margin was 47% down year over year, and driven primarily by higher acquired IP R&D expenses and lower <unk> sales.
Sequentially non-GAAP operating margin increased 400 basis points due to higher HIV in February sales, partially offset by higher acquired IP R&D expenses.
non-GAAP effective tax rate in the third quarter was 22, 4% higher than normal due to the non deductibility of the upfront neuro <unk> payments.
Overall, our non-GAAP diluted earnings per share was $1 90 for the third quarter of 2022 compared to $2 65 for the same period last year of note. The Miro bio transaction impacted post tax EPS by 31 cents a share.
And this was not reflected in the full year guidance, we shared back in August .
On slide 27, we take a quick look at our performance year to date, which shows total product sales, excluding regulatory at $16 7 billion up.
Up 7% year over year.
If we exclude the approximately $385 million of FX headwinds year to date as compared to the same period last year. In addition to the impact of the HIV yellow.
The underlying growth year to date is 11%.
Vic Laurie as expected is down year to date, highlighting the lower demand for COVID-19 treatments in this stage of the pandemic.
Moving to slide 28, we are increasing our full year sales guidance to reflect our year to date results and our expectations for Q4, including our latest view of FX.
For revenues, we now expect total product sales of 25, 9% to $26 2 billion up from our previous range of $24 $5 billion to $25 billion.
This reflects the strong performance year to date, notably very strong growth in HIV respiratory and cell therapy and incorporates our expectations for the broader macro environment, including FX, which will once again be a headwind in the fourth quarter.
In HIV as Joanna discussed, we expect HIV revenue in Q4 to be roughly flat on a sequential basis.
In cell therapy, we expect slower growth on a sequential basis, primarily due to stabilizing demand following the second line <unk> launch and FX headwinds.
Additionally, we are taking a cautious view with regards to both the current shortage of Fludarabine, which we expect to be partially mitigated later in the fourth quarter and to the competitive landscape as our peers improve their manufacturing reliability.
Moving to Macquarie and with year to date revenue of $2 9 billion.
We are increasing our expectations to approximately $3 4 billion for the full year.
Note that we expect victory sales to continue to track hospitalization rates and our guidance assumes no significant increase in hospitalization rates from the third quarter levels.
Excluding that glory, we expect our total product sales to be 22, 5% to $22 8 billion.
Representing growth of 5% to 6% year over year compared to our prior range of 22 to $22 5 billion.
As for the rest of the non-GAAP P&L.
Product gross margin is now expected to be in the 86% to 87% range compared to our prior guidance of approximately 85% to 86%.
There is no change to our R&D guidance, where we expect full year R&D expense to increase by a mid single digit percentage compared to the 2021 baseline of $4 5 billion.
Moving to acquired IP R&D, we are not issuing guidance for the full year and similar to what we did with <unk> bio this quarter, we'll update our EPS guidance quarterly as needed to reflect any relevant activity during the quarter.
What we've included here is the year to date acquired IP R&D amount, including approximately <unk> <unk> per share associated with the Macrogenics collaboration that we announced last week.
The guidance shared today does not include any upfront payments related to normal course of business partnerships or licensing deals that we might close in the fourth quarter.
For SG&A with our continued investment across our commercial organization and expectations for higher costs. As a result of inflation. We continue to expect SG&A expenses to grow by a low single digit percentage compared to 2021.
Altogether, we expect operating income to be $11 8 billion to $12 2 billion for the full year up from 11% to $11 6 billion previously.
And finally, we now expect our non-GAAP diluted earnings per share to range between $6 95.
To $7 15 per share up from $6 35 to $6 75 previously.
This EPS guidance range is approaching our 2021 non-GAAP EPS results. Despite an expected $2 $2 billion decline in <unk> revenue and a more than $5 billion in total FX headwinds anticipated through the end of the year as compared to 2021 rates.
This highlights the strength of our core business, which is now expected to grow in the 5% to 6% range in 2022.
On a GAAP basis, we expect our diluted earnings per share to range between $3 35, and $3 55 per share compared to $2 90, and $3 30 per share previously.
Finally on slide 29, you can see that there is no change to our capital allocation priorities.
In the quarter, we returned over $1 $1 billion to shareholders, including $928 million in dividend payments and $180 million in share repurchases.
As we announced previously we repaid $1 billion of debt early in the third quarter and a return to the same debt level, we were at prior to the Immunomedics acquisition.
With that we'll invite the operator to open the Q&A.
Of course, thank you we will now begin the Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad.
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Our.
Question comes from Chris Schott with J P M. Chris Your line is now open.
Alright, great. Thanks, so much for the question.
My question was on <unk> and <unk>.
<unk> I wanted to talk a little bit about maybe first is flat year over year in the lift of the clinical hold how interesting is that as a partnered asset relative to your internal programs.
I missed the second part of that just a bigger picture one in treatment do you see the portfolio with what a cap over year, resulting in a number of different combos that serve different segments of the market or is it more likely going to end up with one of these combos that really separates from the other and becomes an anchor type asset like we see with VIX Harvey. Thanks, So much.
Hi, Chris This is mark.
Let me.
First start by saying that we are really excited about the recent approval for <unk> in this and the highly treatment experienced population, obviously thats a group of people, who have limited options and I think like half of the year as a new class provides a new opportunity for them.
In terms of <unk>.
What we like about it is <unk> is that it is.
Fairly late in its development, we are able to be in phase two with that and I think it provides us the.
A relatively near term opportunity to launch a partner in treatment for lending cap of year that could be.
Can be given in a long acting way.
And I think that's really important in terms of where the market's going and what our goal is in terms of as we said before providing a long acting parenteral option.
Is longer than.
In the three months or longer timeframe, and we're optimistic about our ability to do that.
So for that we have are our internal pipeline assets that are really providing our options there.
For us <unk>, that's part of our oral program and for US. We do think that we have a number of opportunities in terms of oral program to provide.
Weekly oral.
Treatment options for people using <unk> and right now as a potential certainly is <unk> as an option there and we have other options in our pipeline that could potentially get that get to that level. So.
The way I look at it just to answer.
Direct your last question.
We do think that there will be.
A lending cap of your partner and there will be probably one one partner that we will achieve our therapeutic goals.
And oral potentially a different partner and parenteral and as we go forward.
If we can make improvements, whether that's <unk> and being able to provide even longer than six months therapy or to the partners that we could extend the duration of therapy with a different molecule or different formulation, we will always try to get to that longer.
Longer exposure, so over time, I expect us to continue to try to innovate and move forward.
Maybe just to add to that Chris in light of what rate I was just referring to we've done a lot of patient market research to really understand the segments within the oil market, but also with the long acting market specifically in treatment, which is quite different to your point to prevention.
And in the treatment setting and it is clear that you will always have a market for that daily oral.
Which we believe that <unk> has really set the standard there.
And then there are others that.
The weekly oral will be more preferred some people just want to make sure. They are taking something every single day I just don't want to be reminded that they have HIV and then you had obviously the injectable <unk> with Atlantic happened. There combination every three months or potentially even every six months that will be very appealing to some that don't want to be reminded at all and so those are kind of the segments.
I need to play out, but I do think in the long acting there will be more of a split segment than we've seen in the daily oral <unk>.
And are you ready for the next question. Please.
Our next question comes from.
<unk> Richter with Goldman Sachs. Your line is now open.
Good afternoon, Thanks for taking my questions.
The ticket program what is the likelihood that we will see PFS data at this point and if we don't win could that come and then based on the interim updates. It does seem like you already have clear benefit on or at least on the doublet arm versus monotherapy. So would love to see if you could just walk us through the possible scenarios with this data readout.
And if theres any outcome that could impact the recently initiated phase III studies.
Thanks, Tim This is mark again.
Yes, maybe I'll start by saying that really.
Nothing nothing has really changed in terms of the arc seven study and where we're headed and the reminder, I'll make is that this is going to be the fourth interim analysis for the ongoing phase two study and enrollment was only recently completed over the summer.
And so when we look at that.
If you think about it in that context.
To your point.
We continue to look for consistency and the Dom and Zim combination as a doublet in the <unk>.
To bolster our ongoing phase III program right just to just to underline our confidence in the tissue and Dom combination.
Just on the data we've seen already and this should.
Continuing to support that.
In terms of PS.
PFS.
I think PFS is as I as I tried to allude to given the fact that enrollment.
On until fairly recently.
Who is the PFS is going to be.
Fairly immature and may not be informative and certainly when we think about the triplet there as well.
Unlikely that PFS is going to be informative, but it may be and so we'll look at that and our plan is to evaluate the data and then decide with our partners at ARCUS.
What.
The data.
And how we approach it and certainly as we've said before making sure that we are sharing.
Data at a medical conference next year.
And exactly to your point, it's really about confirming the confidence we already have in tissue and moving into phase III with our with our with the.
Our lead programs that were moving with so.
Hope that answers your question.
And our next question.
Our next question comes from.
Brian Abrams with RBC, Brian Your line is now open.
Good afternoon.
Alright, congrats on the quarter and thanks for taking my question.
A question on should Lv with the maturing tropics, two overall survival data and the evolving competitive landscape.
Various on your latest views on where you see today I'll be sitting in the HR positive her two negative population any updates on market research on how it might be used your commercial strategy to align with that.
And just curious also you are expecting latest expectations on how effective it could be post in her two and certain patients who may have received that first.
Hi, Brian It's Joanna thanks, Thanks for the question.
So basically let me start by saying with two <unk> and the performance for the quarter has been really strong we're seeing 78% year on year growth, 13% quarter over quarter, and we're seeing market, adding every every week basically on and reimbursement kind of playing out we have now over 13 countries.
<unk> gotten reimbursement that we're seeing really strong launches, namely, France, Germany, right now and other markets coming in as we're speaking.
Strong foundation, there I think having OS data in both triple negative breast cancer as well as now at risk topics or two in the HR positive <unk> negative patient population really helps the foundation for 2000 and that really helps across breast cancer to your specific question around and kind of where do we position ourselves.
With Capex, though too we're in previously treated heavily treated lines of therapy right. When you think about the patient population fell a little bit different than some of our competitors and so we're excited actually because these patients have very limited options and so now that we have.
<unk>.
Potential for overall survival in these late line patients. So we do think that as we're playing it out if we're doing our market research, we feel very confident that <unk> will be very well positioned in the marketplace and we will build on the success that we've seen thus far in triple negative breast cancer as well.
We are paying that out so we expect continued momentum in our base business and it might've mentioned before in previous calls how we've expanded our footprint specifically in the U S to prepare for both not only the expansion of what we need to do in triple negative breast cancer, but also what we need to do in HR positive and so we're well placed to make sure that we're ready for <unk>.
<unk> date coming up in February and to make sure that we're successful.
Maybe this is more of that and maybe I'll add to that.
Where we're not done right I think we're excited about how much we've been able to achieve with <unk>, so far and you've seen consistent positive data across tumor types and in particular I think as Joanna highlighted the late line therapy.
Certainly those are patients who may now.
There is a potential that some of them will be getting in her two beforehand, we don't have data on sequencing, but.
I do believe that.
There may be those who decide to treat for those patients who.
May not respond adequately to inherited to later lines right. So that's kind of where certainly there is an opportunity there. The other thing I would add is that.
We've got really strong data in triple negative breast, including the her two sorry in HR positive breast cancer, including the her two zero population and I think thats, a very important distinction and.
Important to remember and then finally based on what we've seen so far in the.
The clinical benefit we brought we certainly believe that there is an opportunity for us to move to earlier lines in earlier lines of therapy as well in breast cancer, and triple negative and HR positive and in other tumor types and I think thats, our excitement about <unk> has always been the ability to go into broad tumor types and our strategy has always been to advance into <unk>.
Earlier lines of therapy, as we generate positive data.
And then we have our next question please.
Our next question comes from Michael Yee with Jefferies.
Michael Your line is now open.
Hey, guys. Thanks, Congrats on a great quarter.
I also wanted to ask Scott Murdoch had a question on <unk>.
<unk> lung cancer, I mean, I would think that this is even bigger opportunity in breast cancer on evoke one which is ongoing can you confirm you think you would update on next year and how you think about that opportunity versus <unk>.
Your line Docetaxel I know Theres. Some early response rates based on the basket study when you acquired Immunomedics and I was wondering if you had more data in lung cancer that you've been absorbing to give you more confidence there and then you commented on evoke <unk> three which is the first line I just wanted to understand do you think we would update on evoke to next year.
That's pretty big trying to replace chemo, so maybe comment on Evo quantities okay. Thank.
Thank you.
Yes, Michael Thanks.
Thanks for the question.
I think.
Just to follow on and it's a great follow onto the prior question around our ability to really look across tumor types and in earlier lines and in particular I think.
What you're referencing is our.
Our confidence in going into early line lung cancer and starting those studies.
Your point.
We've seen data as you know very well from our early phase <unk> study.
In lung cancer, and we continue enroll to enroll and we've initiated now studies looking at both.
The second and third line setting.
And then as well as in a frontline setting as you know we're doing a study in combination of <unk> three with the PD, one and PD Lone high population, which I think is.
Really an important trial for us to proceed.
Proceed on.
So.
I think what I would say is that the timing of the data Michael is always difficult to predict we have to see how the study enrollment goes in its early days.
But we're really.
Excited about the opportunity to bring.
A meaningful therapy too.
<unk>.
Group with a very high unmet need.
And then when we have a next question please.
Our next question comes from Brian <unk> with Baird. Brian Your line is now open.
Great. Thank you for taking the question, maybe perhaps for Murdoch just kind of jumping off a mile long acting HIV discussion I noticed in the pipeline slides long acting like Tegra years been removed from the pipeline, obviously would have been nice to have a known entity like that.
Type a and a part of the combo and I was just wondering if you could give us any insight into what happened in the phase one there is a sort of aggregate or.
Michigan, Teekay threshold or is it something that youre seeing with the six to 12 or $5 94.
That gives you more confidence or thanks.
Yes. Thanks for the question happy to happy to expand on that yes look the Tegra <unk> is an amazing molecule and has done a lot for patients and.
One of the opportunities we looked at is in addition to thinking about the integrity.
<unk> long acting oral let's see if we could give it as a long acting subcutaneous and.
Really what happened is we had tolerability issues, just giving that molecule sub Q in terms of injection site reactions. So it's not about the molecule itself one of the challenges of developing long acting subcutaneous therapies is tolerability and so.
I want to make sure that it's clear that.
<unk> is an oral agent continues to be a huge part of where we want to go.
Then maybe just to step back to your point.
The way I think about it maybe the way to think about from a prep standpoint long acting.
We are <unk>.
Prep for long acting and that those studies are underway moving along nicely from a treatment standpoint, as I mentioned earlier <unk> is a huge part of our backbone therapy for us and now we are looking at a number of different opportunities to get to long acting oral and.
Log acting parenteral and.
Molecules like Atlantic heavier don't come along every day, we are looking for a number of at a number of molecules. We think we have.
The World class expertise in chemistry, and preclinical development that gives us a leg up on the competition to get to those molecules that will really get too.
Need that Joanna laid out which is to get to the subcutaneous or.
Every three months dosing or even longer and that's what we're looking for.
And maybe have a next question please.
Okay.
Our next question comes from Matthew Harrison with Morgan Stanley Matthew Your line is now open.
Great. Good evening. Thanks for taking the question I just wanted to ask a question on on $5 to 45 can.
Can you just talk a little bit about the range of possibilities that you might be thinking about in terms of what a phase III might look like and then just sort of where you see commercially what sort of data you might need to compete just given the fact that it may be hard to have the same kind of data set at some of those upsells that were developed earlier in the pandemic.
Hey, Matthew Dennis here. So it will have <unk> take the first part of your question Joanna continued into the second.
Yes, Thanks, Danielle Thanks Matthew.
<unk>.
So by 245 has.
<unk>.
As you know we started those trials in phase one earlier this year.
Things are going well and as you know the pandemic has changed a lot and I think you make an excellent point that.
Looking at high risk patients.
A challenge right now and looking at high risk patients, who may get hospitalized as a challenge right now given vaccination other treatment options.
Yes.
So exactly to your point I think the discussion, we're having internally and with our regulators is what's the best population for us to establish the benefit of $5 to 45.
And how does that.
We anticipate what might come down the road, which has been the unpredictable part and whether that is resistant to other agents the need for combination agents new variance that may increase the.
The hospitalization rates those are all the things that we have to be prepared for and we really see <unk> as a way as we move forward with that and move into clinical trials. Once we demonstrate efficacy as a as an important tool.
Should.
The pandemic start to pick up again, havent forbid but.
How we think about it so both combinations and.
Treating resistance or.
<unk>.
New new Serge, yes, so in line with that Matthew Joanna I would just add to what Mary to everything So I think from a commercial standpoint, what we're thinking is the fact that it doesn't have a boosting agent is a real plus here as well as the fact that we're going to look at rebound effects that we've seen.
With current marketed products right now have that that tissue and so in addition to the antiviral activity. So I think those pieces are kind of what we're thinking about.
As well as you know as you well know, which I've dug interaction has been.
A bit of an issue.
With some of the current agents today. So I think if you without the boosting agent I think those will just open up a little bit more for a broader patient population potentially to really benefit and as we've seen with these this pandemic. It is not over we still hospitalizations go up and down we've seen a little bit of an increase most recently and we're tracking that very closely with hospitals.
<unk> of course because of the clarity that.
But we do believe that there's still opportunity for more options here.
To make sure that the current pandemic.
And Matthew this is Dan and Dan just to add one other thing. In addition to my colleagues wishes on our conversations with the U S government and particularly the recent.
Fast track designation that was was applied to just about 2.5, there's three major things.
We're interested into number one is more oral antivirals number two to the points that both my dad and Joanna made working across the variance as the virus continues.
And then thirdly lack of DDI lack of boosting in this rebound issue. So I think it's a recognition.
The fact that there is a need.
For the ongoing.
Pandemic endemic whenever you want to call it with Covid for additional options and I think thats expressed in the way the U S government want to work closely with US as we continue to develop this program.
And then maybe we have our next question. Please.
Our next question comes from Tyler Van Buren with Cowen Tyler Your line is now open.
Hey, guys. Thanks, congratulations on the results great quarter.
High level question on victory.
So the product continues to see very impressive uptake and it looks like it'll be around 60% of HIV product revenues. This year, So where do you expect the product to peak out as a percentage of HIV sales over the next several years.
Joanna Thanks for the question.
I would say that we're really proud of <unk> performance, but I would say even to increase the momentum that we're seeing and this is not just in the elasticity is really around the globe and so we're just about 45% market share with HIV between 4% share gain year on year and now we're looking at an annual run rate in excess of about 10 billion.
So I do think we're very well poised for the future.
We're looking at both the naive share obviously, just about under 60% of that share.
Right now with the <unk>, so really setting the standard for new patients coming into HIV and obviously the Fitzgerald you can't.
<unk> is obviously, a little bit lower because you can't switch typically if youre already on <unk>.
So therefore, we're tracking that very closely as well and making sure that when there is opportunity either from older.
Jobs or when there has been some issues for patients can't really come on to the <unk> just because it really does have a profile from an efficacy standpoint and safety standpoint, So we do believe that.
<unk> growth.
With the Harvey is on the agenda and I would also add just a little bit of a note around the market as well, which also helps side because where the market goes the target goes and where the economy goes the market goes we've seen market stabilization actually back to pre pandemic levels and growing at about 2% or so year on year, both in the U S as well as in Europe and.
So that also really helps our momentum continue and the caveats driving that as well with quite a lot of our efforts. The teams have worked very closely with community partners and physicians and advocacy groups to make sure that we get patients back into clinics back into care.
Both from a training standpoint, and diagnosis standpoint, now that we're in.
Do you really see those numbers back to pre pandemic. So I think we're in good place moving forward and well placed for the future to continue this leadership.
IV driven by the target.
And I think we'll squeeze in just two more planes maybe go to the next caller.
Our next question comes from Nomura.
<unk> <unk> with Evercore.
Your line is now open.
Hi, guys. Thanks for taking my question I wanted to touch up on a slightly different topic today and I have a two part question for Dan and Andy and this is one of the Tenofovir litigation that's been ongoing and then I guess my question really was.
There is a very unusual amount of plaintiffs aggregated up in this case.
And I'm curious.
Is it something you guys are looking to take the final judgment or would you be open to a settlement and that brings me to the second part Andy how much of a legal charge have you taken on this litigation today, because I know you've been doing that on the targeting other indications and litigation in the past and is there something more significant that has to happen for us.
A more prominent charged to show up I ask because every company handles the accounting differently. So I was just curious thank you.
Thanks humor.
Let me just start before I hand, it over to Andrew to say, obviously with any litigation were.
We don't comment on ongoing litigation in any level of detail I do want to emphasize the confidence we have in.
Our overall patent portfolio in general and maybe with that I'll hand, it over to Andy to answer some more specifics of your question as well, yes, Thanks, Dan Hi, Omar Thanks for the question.
To touch base on this this is the topic as you know that we've been getting a lot of questions on with the Zantac litigation, So a number of things that.
I can provide some background and context. So first of all like most companies anyone operating in the U S. We are routinely managing a lot of different litigation matters as you know.
Many of those are from our perspective meritless baseless.
A matter of practice, we don't typically were usually comment on specific litigation cases.
What I can say stepping back is that.
We have one resolve the three material litigation are three material litigation matters over the past year as you know on terms that were favorable to the company and our shareholders.
The Juno IP litigation, the <unk> IP litigation around <unk> and the third was the tap litigation with generic companies, we have an outstanding legal team both internally and externally and then maybe to your specific question I mean, we have complete confidence in the merits of the defense on the ongoing product liability case. So it is.
Very different than the Zantac litigation case.
To your question on the number of plaintiffs for instance, if I remember correctly in <unk> cases, there were 250000 patients in Marquis I'm, sorry, I'm pleased US there were 25000 in ours, but the key difference is that.
The issues at hand here are our <unk> based products are life saving products that really transformed cure for HIV and they'd be side effects of the products were in the label from day, one the labels in the U S and Europe were slightly different the labels were there these were well known well disclosed potential side effects.
And I think that's an important piece of it.
So it's a very different case zantac as I remember correctly was taken off the market and reformulated. So I'd be careful about drawing too. Many parallels between what you saw was an impact in some of the companies that were affected by that and this litigation that doesn't mean that we don't take it seriously we do take it very seriously and as I said, we have a great team that's working on it the last thing maybe last two things there.
There are a number of amicus briefs that had been filed those are all publicly available. This is in the California State litigation that I would encourage you to read I think there are four or five amicus briefs that really speak to how different. This positive action is relative to what you would typically expect to see.
The case and then finally on the the charge no we have not taken a charge and as I said, we feel very strongly about the merits of our case.
And look forward to proceeding with the litigation over the coming months and years. So good question. Thank you.
And then maybe you go to our last question. Please.
Our last question comes from Geoff Meacham with Bank of America. John Your line is now open.
Great. Good afternoon, guys. Thanks for the questions.
I wanted to follow up on a few questions that <unk> gotten on long acting HIV I know its been tricky to develop a doublet.
Comparable profile, the Atlanta capital there, but is.
Is there a mechanism that you have either in house or that you've seen in HIV that it looks like it's more straightforward to develop a long acting I wasn't sure if integrates would be better than new versus non duke or something of that of that category. Thank you.
Yes.
Thanks, Jeff This is mark.
Yes.
I think are demonstrating a virology team.
Do favor the entities as a class.
Where are we.
Believe that we have a better shot at getting to a long acting partner for the capsid inhibitors.
So I would say.
Fair bit of our effort is going into those but and.
We are open to looking at a variety of mechanisms.
To achieve our goal.
We just think that the indices are are more likely to get there I will remind you. This may have gone under the radar, but we do have the program, where we are looking at the bean ads.
I did mention it in the script.
And that does provide us another option for people from a long acting standpoint, where we're looking at every six months potentially there so.
We are we are pretty open and committed to finding the right partner that will achieve our goals.
Terrific with that this is Dan I just want to thank all of you for joining today.
Just wanted to emphasize how we believe our third quarter performance demonstrates the tangible impact.
Delivering on our strategy.
Putting the right foundation in place over the past three years, we're now seeing the positive momentum continues to build its an exciting time for the company as we realize our potential to do more to reach further to help more patients and the communities. We serve so I just wanted to take this opportunity to thank all the colleagues at Gilead and kite to thank all of you for joining.
Your interest in <unk>.
And as usual if you have any additional questions. Please reach out to our Investor Relations team as you know there are more than happy to help and thank you for joining today.
Okay.
This concludes today's third quarter 2020 to Gilead Sciences earnings Conference call. Thank you for your participation you may now disconnect your line.
Okay.