Q2 2023 Gilead Sciences Inc Earnings Call
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Hello, everyone.
Thank you for attending Gilead Sciences' second quarter 2023 earnings conference call.
My name is Sierra and I'll be your moderator today.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question press star one on your telephone keypad.
I would now like to pass the conference over to our host Jackie Roth VP of Investor Relations. Please proceed.
Thank you operator, and good afternoon, everyone.
Just after market closed today, we issued a press release with earnings results for the second quarter of 2023.
The press release slides and supplementary data are available on the investors section of our website at Gilead Dot com.
The speakers on today's call will be our chairman and Chief Executive Officer, Daniel O'day, Our Chief Commercial Officer, Joanna Mercy, a our chief Medical Officer, Murdock, Percy and our Chief Financial Officer, Andrew Dickinson.
After that we'll open the call to Q&A, where the team will be joined by Cindy Pressey, The executive Vice President of kite.
Before we get started let me remind you that we will be making forward looking statements, including those related to gilead business financial condition and results of operations plans and expectations with respect to products product candidates corporate strategy business and operation financial projections and the use of capital and 2020.
Three financial guidance.
All of which involve certain assumptions risks and uncertainties that are beyond our control and could cause actual results to differ materially from these statements.
A description of these risks can be found in the earnings press release, and our latest SEC disclosure documents. All forward looking statements are based on information currently available to Gilead and Gilead assumes no obligation to update any such forward looking statements.
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 in our supplementary data sheet as well as on the Gilead website.
With that I'll turn the call over to Dan.
Thank you Jackie and good afternoon, everyone as always we appreciate your taking the time to catch up with Gilead in the midst of a busy earnings period.
This was another very strong quarter for Gilead in terms of both business performance and clinical execution.
Thank you to the Gilead teams that drove this progress with our dedication to improving the health of individuals and communities worldwide.
Total product sales, excluding burglary grew 11% year over year and closed a very strong first half performance and the base business.
As we look to the full year, we are increasing guidance for total product sales.
We now expect even stronger growth in our base business of six 5% to 8%, which is expected to more than offset our revised expectations corporate glory.
As a result, our guidance for base business product sales has increased $550 million at the midpoint.
In the second quarter HIV contributed about two thirds of the $615 million growth in our core business growing 9% year over year.
Oncology grew 38% year over year and with product sales of 728 million in the second quarter now has an annual run rate of approximately $3 billion.
Moving to clinical progress the second quarter was very active on the regulatory front with approvals positive opinions or recommendations for six of our therapies <unk> scanner to Carlos Sun Linker <unk> Macquarie.
This regulatory progress highlights the strength of our increasingly diverse portfolio. It also reflects the ability of our teams to successfully navigate regulatory processes across the therapeutic areas and key geographies with speed and efficiency.
In addition to this progress we shared positive pipeline updates at <unk>, which included overall survival data for <unk>. The only large b cell lymphoma cell therapy to demonstrate significant overall survival benefit versus standard of care in the second line setting.
Promising <unk> data in endometrial cancer reinforcing our belief in toward Lv is a cornerstone asset with pan tumor potential.
And updated tissue data from the full study population of arc seven establishing Dom vanilla <unk> proof of concept in lung cancer.
We have also shared long term data for <unk> for hepatitis Delta virus, showing improved response rates at week 96 compared to week 48.
These data support new guidelines recommending have crude X for people living with chronic HCV in the EU.
With our broad portfolio of novel mechanisms and a commitment to pursuing areas of high unmet need we know that some pipeline setbacks are to be expected.
As we announced last month, we have discontinued the phase III enhance study in higher risk Mds due to futility and a second interim analysis.
As you know MBS as one of the most intractable forms of blood cancer and we are disappointed that the study was not able to deliver new hope for patients with the disease.
We will take a thorough data driven approach regarding next steps as we carry out the ongoing analysis of Mcgraw a mab.
Overall, we were executing well on our clinical commitments and our current performance speaks to the strength of our combined oncology portfolio.
We have a rich pipeline of activity in the second half, including an initial look at a subset of a vocal two data on <unk> plus <unk> in first line metastatic non small cell lung cancer.
Before I hand over to Joanna I'd like to welcome Cindy Peretti, our head of cell therapy through our first Gilead earnings conference call.
Cindy has now been with Gilead for two months and brings a wealth of oncology and leadership experience from Roche Foundation Medicine, and the Sarah Cannon Research Institute.
We're delighted to have Cindy join our Gilead leadership team and it's great to have her with us on the call today.
With that I'll hand, the call over to Joana for a discussion of our commercial results Joanna.
Thanks, Dan and good afternoon, everyone.
The second quarter was another strong quarter for Gilead with solid performance across our commercial portfolio, leading to an increase in our full year expectations for both the base and overall business.
For the second quarter of 2023 as shown on slide seven total product sales, excluding declaration grew 11% year over year to $6 3 billion with year over year growth in each of our core franchises.
This represents the seventh consecutive quarter of year over year growth for our base business lean, forcing the strength of our virology and oncology portfolios.
This strong growth more than offset the decline in declaring sales, which were as expected given the lower hospitalizations.
Altogether total product sales, including back Larry with $6 $6 billion up 7% year over year.
Starting with HIV on slide eight second quarter sales of $4 $6 billion were up 9% year over year, driven by higher average realized price in part due to channel mix and higher demand, partially offset by lower channel inventory.
Quarter over quarter sales were up 10% driven by favorable pricing and inventory build following the typical first quarter dynamics.
Overall, the global HIV treatment market continues to grow in line with our expectations of 2% to 3% annually.
Specifically in the U S. The market overall grew more than 2% in the first half of the year compared to the first half of 2022, reflecting growth in the non retail channels more than offsetting a roughly flat retail market.
HIV product sales grew 11% in the first half of 2023 compared to the first half of 2022 helped by favorable pricing dynamics, including the phasing of certain government purchases and channel mix.
Looking forward, we expect HIV product sales growth to more closely mirror market growth in the second half.
Therefore, we are increasing our full year expectations for HIV and now expect full year HIV product growth for 2023 to be modestly higher than the 5% we reported in 2022.
Turning to slide nine.
It's Harvey stay off of $3 billion were up 17% year over year, driven by higher demand and favorable pricing dynamics, partially offset by lower channel inventory.
With a market share up almost 3% year over year in the U S. B Carvey remains the treatment of choice for HIV with more than 46% market share.
This represents the 20th consecutive quarter of share gains in the U S with a year over year growth rate that has once again outpaced new and existing regimen.
Similarly, we continue to see solid share gains across other major markets as <expletive> Harvey maintains its leading position for new starts as well as for those switching therapies.
<unk> sales were $560 million up 12% year over year.
With awareness and utilization of HIV prevention higher than ever the U S market grew once again.
And amidst this growth we're pleased to see strong demand for <unk> for prep.
14% year over year in the U S with a strong market share that has remained over 40%.
With this strong foundation, we look forward to potentially adding Atlantic half of air as a six monthly subcutaneous option for prevention as early as 2025.
Moving to the liver disease portfolio on slide 10 sales were up 4% year over year, and 5% quarter over quarter to $711 million.
We remain committed to eliminating HCV globally with our market leading portfolio of medicines.
And our efforts to increase awareness contributed to higher patient starts in the U S Europe and Asia in the second quarter.
HBV and H D. D also contributed to growth in the liver disease portfolio driven by higher demand.
Liver disease remains an important part of our portfolio benefiting hundreds of thousands of patients we're.
We're pleased to have received full marketing authorization for <unk> in H D. D. In Europe , a further recognition of the benefit this medicine brings to patients who have very limited therapeutic options.
Across our portfolio of HCV, HBV and H D V products, the liver disease contribution to our commercial performance continues to stabilize overall to a run rate of more than $2 $5 billion in sales a year.
Onto slide 11.
<unk> sales declined in the second quarter as expected, reflecting lower hospitalization rates with sales of 256 million down 43% year over year.
For those patients hospitalized and treated for COVID-19, a majority continue to receive victory.
A testament to <unk> robust clinical profile.
Most recently this has included decisions by the U S FDA and the European Commission to expand declaration indication to reach patients with renal impairment, including those on dialysis.
Moving to oncology on slide 12, it is remarkable to observe that in less than five years, our oncology business has grown from less than $300 million and is now approaching an annualized run rate of $3 billion with tens of thousands of patients treated with gilead and kite oncology therapies to date.
Beyond our well established leadership in cell therapy, we have the only choke to directed ADC on the market with <unk> and combined our oncology portfolio extends the options for patients in eight indications.
Looking in more detail at <unk> on slide 13 sales were up 63% year over year, and 17% sequentially to $260 million, representing an annual run rate that exceeds $1 billion.
We continue to be very pleased with the launch in pretreated HR positive <unk> negative metastatic breast cancer with strong awareness of our approval in the U S.
We look forward to reaching even more patients in Europe . Following last week's marketing authorization from the European Commission.
Additionally were beginning discussions with health authorities in Japan with plans to file for approval in metastatic triple negative breast cancer later this year.
With a strong sales force in place and robust datasets across multiple tumor types to Delphi remains well positioned to maintain and expand its reach and gilead continues to build on our experience in breast and bladder cancers with a view to other indications over time as the development program evolves.
Yeah.
Turning to cell therapy on slide 14 sales in the second quarter were $469 million up 27% year over year and 5% quarter over quarter.
Yes, Garda showed continued growth with sales up 29% year over year to 380 million, primarily driven by strong underlying demand in the second and third line setting for relapsed or refractory large b cell lymphoma, both in existing as well as new markets.
Hey, Carter sales were $88 million up 21% year over year, reflecting increased demand for relapsed or refractory adult acute lymphoblastic leukemia, as well as mantle cell lymphoma, primarily outside of the U S.
We are excited about the opportunity ahead as the body of evidence supporting broader adoption of cell therapies continues to grow.
The work that kite has been leading to raise awareness and adoption of cell therapy will be accelerated by other providers as they ramp up their manufacturing capabilities.
This overall expansion in supply will predictably impact our market share in the near term, but overall cost share is the most important driver of our business overtime.
Our cell therapy is offered and delivered to more patients. We are confident that kite cell therapies will remain differentiated in terms of our manufacturing reliability and efficacy.
Wrapping up the second quarter I'd like to acknowledge the commercial teams and our partners across Gilead and kite that once again delivered an extremely strong performance, reflecting both solid execution and a compelling portfolio of gilead products that positively impact millions of people around the world.
And with that I'll hand, the call over to Mehrdad for an update on our pipeline.
Mehrdad.
Thank you Joanna I'm pleased to highlight the ongoing progress our teams have made with 64 ongoing clinical programs in 'twenty, one phase III trials, notably we presented multiple positive data readouts at medical conferences in the second quarter, such as updated overall survival data for <unk> in pretreated HR positive <unk> negative metastatic breast cancer.
<unk> OS data for <unk> in second line relapsed or refractory large b cell lymphoma, and long term data from <unk> and H D D.
As we move into the second half of 2023, we remain focused on execution investing in capabilities to increase our productivity and portfolio prioritization.
We also look forward to sharing an update on <unk> in non small cell lung cancer, including <unk> data at World Conference on lung cancer in September .
Turning first to Barology on slide 16, we're proud of the role Gilead has played in transforming HIV cure.
We continue to innovate based on our commitment to both the HIV community and to those who could benefit from a prevention regimen with our ongoing work to bring over new effective and convenient options.
The unique profile of <unk>, our first in class capsid inhibitor enables the eight prevention and treatment clinical programs we're focused on.
In HIV treatment the artistry, one trial evaluating an oral once daily Big Tegra <unk> and <unk> combination regimen is progressing well, we expect to provide an update on the phase II portion of the study later this year.
This novel regimen aims to provide an effective and simpler regimen for the 6% to 8% a biologically suppressed individuals who are currently on complex multi tablet regimens to manage their HIV.
We continue to advance in our goal of providing longer acting HIV treatment options through the development of Atlantic cap of your combination regimens with integrates inhibitors, and <unk> and an RTI as well as the phase II study of our two broadly neutralizing antibodies.
In HIV prevention recruitment for our phase III purpose, one and two clinical trials evaluating every six months single agent subcutaneous lending cap of beer continues to exceed our expectations in the second quarter.
We look forward to potentially providing a data update in late 2024 to early 2025 time frame as we target approval in late 2025.
Moving on to Slide 17, I am pleased to note that the European Association for the study of the liver or easel has updated its H D V guidelines to recommend that all patients in the EU with chronic HBV infection should be considered for antiviral treatments.
Recently <unk> was granted full approval by the European Commission and remains the only approved therapy for chronic HCV infection in the EU.
The updated guidelines were supported by <unk> 48 week data, which were published in the New England Journal of Medicine in June .
Gilead also presented data demonstrating the 96 week treatment with Delever tide improved biologic in biochemical responses with no evidence of treatment emergent resistance, including and those who were previously non or partial responders.
These data reinforce our confidence and delever tied in as potentially longer term benefit for patients with HBV. As a reminder, delever tide is not yet approved in the U S.
Turning to oncology on slide 18, <unk> remains the first and only approved <unk> two directed ADC with indications across three tumor types.
It's also the only true two directed ADC to show overall survival benefit versus chemotherapy in two tumor types.
We have now treated over 20000 patients and evaluated more than 2300 patients in our clinical trials.
<unk> robust dataset informs a well characterized safety profile with low discontinuation rates observed across multiple indications and no required increasing monitoring for severe interstitial lung disease.
At <unk>, we presented additional data demonstrating <unk> potential, including and pretreated HR positive <unk> negative metastatic breast cancer, we presented the final analysis from our phase III tropics, Oh, two trials supporting the marketing authorization. We just received from the European Commission last week.
In bladder cancer with Sheraton analysis of Trophy you owe one supporting Trudeau these efficacy and post platinum post Io metastatic <unk> cancer across a range of trop two expression.
With our accelerated approval in bladder cancer, we hope to provide a data update from the ongoing confirmatory phase III tropics of four trial and initiate global filings for <unk> in metastatic urothelium cancer by the end of next year.
In heavily pretreated endometrial cancer, we presented promising efficacy data from our phase III tropics, <unk> III basket trial, demonstrating the expanding pan tumor potential of <unk>.
Moving to slide 19, our comprehensive clinical development program in non small cell lung cancer includes several signal seeking an ongoing phase III clinical trials.
We know non small cell lung cancer is not only an area of significant unmet need as the number one cause of cancer related deaths, but also an area. We believe <unk> has the potential to transform standard of care is a combination partner to an I O backbone and the first line setting as well as a single agent in the post Io says.
<unk>.
On slide 20, we highlight the growing number of lung related catalysts.
I am, particularly excited to highlight that we've added a new milestone with a preliminary readout from our phase II <unk> two trial at the World Conference on lung cancer.
This study is evaluating <unk>, plus <unk> with or without chemo in first line non small cell lung cancer.
We will be sharing data from the first two cohorts evaluating <unk> in combination with <unk> in PD Lone high and PD lone low patients.
The abstract expected to be released later in August will be an initial subset of a small number of patients.
Our presentation is scheduled for Sunday September 10th at World Lung will include data at a later cutoff date with more patients.
Turning to Domino Mab, where them on slide 21, we presented data from the last interim analysis of the full 150 patients enrolled in the phase two arc seven study at <unk> in June .
The data continue to show consistent and clinically meaningful improvement in progression free survival in first line PD Lone high non small cell lung cancer when Dom R. F. C silent anti <unk> is combined with an investigational anti PD, one agent as compared to the PD one inhibitor alone.
These data form the basis for our Dom program encompassing phase III trials in first line non small cell lung cancer and upper Gi cancers.
Moving to cell therapy on slide 22 <unk>.
Yes, Garner continues to strengthen its position as a cell therapy of choice for large b cell lymphoma.
At <unk> in June we presented overall survival data from our landmark phase III Zuma seven trial of <unk> in second line relapsed or refractory large b cell lymphoma.
At a median follow up of four years, a onetime treatment with <unk> demonstrated a statistically significant longer overall survival compared to standard of care with a 27% reduction in risk of death, representing a 38% relative improvement.
Moreover, the majority of the patients in the standard of care arm eventually received cell therapy off protocol.
And of those 77% received yes Garda.
Overall <unk> is the first treatment in nearly 30 years to demonstrated significant improvement in survival for this patient population and these data add to the growing body of evidence that position cell therapy is potentially curative and some populations.
With a strong pipeline of six ongoing phase II and III trials across lines of therapy, new tumor types and earlier stage assets kite continues to innovate and execute on expanding the potential benefit of cell therapies to new patients both through internal or acquired innovation and through collaborations.
We're working closely with one of these partners are silex to support their efforts regarding the imagine one clinical hold we remain confident in the therapeutic profile for car T. D D B CMA Andy.
And imagine one trial based on the data demonstrated to date and Sharon ourselves as commitment to delivering this novel therapy to multiple myeloma patients.
Turning to slide 23, we highlight our progress against key clinical milestones for 2023, so far.
We are of course disappointed by the outcome of the interim analysis of the enhance trial evaluating <unk> in higher risk Mds, given the need for treatment options.
We will continue to monitor and report on the other Mcgraw and lab trials.
Importantly, while not every trial will be positive our efforts at building a well diversified portfolio gives us multiple opportunities to improve the lives of patients.
We're excited about our momentum and making oncology and inflammation important contributors to our future and continue to make strong progress on delivering our key clinical catalysts for this year.
Beyond our near term milestones I'd also like to highlight our growing pipeline of early stage inflammation assets, including our oral alpha four beta seven and the progression of our Iraq for inhibitor that asserted into phase III as well as the advancement of the <unk> agonist program from the <unk> acquisition.
Phase one.
We're excited by this differentiated inflammation pipeline and the potential to impact important gaps in the treatment of inflammatory diseases.
Overall, we believe we have a very ambitious clinical portfolio that is well diversified across indication and stage.
Look forward to updating you as we progress through 2023.
With that I'll hand, the call over to Andy Andy.
Thank you Marta and good afternoon, everyone.
Turning to slide 25, and as you heard from Dan and Joanna our base business continue to perform very well in the second quarter with total product sales, excluding VAT glory up 11% year over year, driven by growth across all of our product families.
The FX was still a headwind, albeit more modest impacting growth by approximately one percentage point.
Total product sales were $6 $6 million up 7% year over year as strong execution in our base business more than offset the lower back Larry sales as well as FX impact of $82 million.
Moving to the rest of the P&L on a non-GAAP basis on slide 26.
Product gross margin was 86, 9% up 131 basis points from last year.
R&D was $1 $4 billion up 25% year over year due to higher expenses associated with our broad clinical pipeline, including the acceleration of certain late stage clinical studies.
As a reminder, we have 21 ongoing phase III trials, highlighting the investment we continue to make in Gilead near and long term growth profile.
As mentioned earlier this year, we will continue to manage expenses carefully.
And in R&D with a number of significant mid to late stage trials ongoing will continue to follow the science pivoting investment if and when the data warrants.
The acquired IP R&D was $236 million, reflecting this in their acquisition and expansion of the ARCUS collaboration into inflammation. In addition to milestone payments associated with ongoing partnerships.
SG&A was $1 $8 billion up 45% year over year, including the $525 million legal accrual for settlement with certain plaintiffs in the HIV antitrust litigation as well as increased commercial activities in oncology and HIV.
Excluding the legal settlement accrual non-GAAP SG&A expense was $1 $3 billion up 4% year over year.
Moving to tax our effective tax rate in the second quarter was 21%.
Our non-GAAP diluted earnings per share was $1.34 in the second quarter of 2023, including approximately 32 cents of expense associated with the legal settlement accrual, partially offset by higher product sales.
This compared to $1.58 of earnings for the same period last year.
Overall, we had a very strong first half as highlighted on slide 27 with solid performance in each of our core franchises across barology in oncology driving 13% year over year growth excluding that glory.
Given the strong first half results, we have updated our full year sales guidance.
Moving to slide 28.
We now expect total product sales in the range of 26, 3% to $26 7 billion up from 26 to $26 5 billion previously.
We expect total product sales, excluding VAT glory in the range of $24 625 billion up from 24 to $24 5 billion previously.
This new range represents growth of six 5% to 8% for our base business year over year compared to 4% to 6% previously.
On Dec, Larry in the second quarter and first half were below our internal expectations.
Based on COVID-19 infections and hospitalizations to date, we have lowered our guidance for the full year to approximately $1 $7 billion to bring second half expectations more in line with our first half experience.
As a reminder, like Lori is highly correlated with COVID-19 related hospitalizations.
And as such its utilization remains variable.
We will share another update with you on our third quarter call.
Moving to the rest of the P&L.
We continue to expect non-GAAP gross margin to be approximately 86%.
There is also no change to our non-GAAP R&D guidance, where we expect expenses to increase by a low double digit percent compared to 2022.
Reflecting the one time legal settlement accrual of $525 million in the second quarter. We now expect non-GAAP SG&A expense to increase a high single digit percent compared to 2022.
Excluding this legal settlement accrual non-GAAP SG&A expense for 2023 is expected to be down a low single digit percent compared to 2022 consistent with our prior guidance.
non-GAAP acquired IP R&D has been updated to reflect the Zimbra acquisition and expanded ARCUS collaboration, adding about $200 million or <unk> 17 per share.
For 2023, we now expect acquired IP R&D to be approximately $900 million, reflecting previously committed acquired IP R&D amounts as well as known milestone payments from existing collaborations.
Similar to prior quarters. We will continue to include expected acquired IP R&D expenses, if we announce additional transactions over the course of the year.
We now expect non-GAAP operating income in the range of $10 four to $10 $9 billion or roughly $650 million lower at the midpoint.
Due to the 525 million onetime legal settlement accrual and $200 million in additional acquired IP R&D expense, neither of which were reflected in our previous full year guidance.
Moving to tax we now expect our non-GAAP effective tax rate to be approximately 17%, reflecting an expected decrease in our tax reserves for the second half of the year.
Altogether, we now expect non-GAAP diluted EPS in the range of $6 45, and $6 80 per share down from $6 60, and $7 previously as shown on slide 29.
The chart illustrates the underlying strength of our business with the higher product sales guidance flowing through to the bottom line. In addition to lower expected tax rate.
This is however, offset by both acquired IP R&D at <unk> 17 per share and the legal settlement accrual at 32 per share a nonrecurring cost.
On a GAAP basis, we expect diluted EPS to be in the range of $4 50, and $4 85.
Moving to slide 30, you can see that there is no change to our capital allocation priorities. We returned $1 1 billion to shareholders in the second quarter through our dividend and repurchase of shares.
We believe we have built a strong pipeline that will enable gilead to deliver near and long term growth.
And of course, we will continue to remain opportunistic as we look to access high quality assets through partnerships or make smaller acquisitions in the normal course of business.
We remain committed to growing our dividend and to using share repurchases primarily to offset equity dilution. Although we will also be opportunistic from time to time.
With that I'll invite the operator to open the Q&A.
If you'd like to ask a question. Please press star followed by one on your telephone keypad.
To remove your question press Star followed by two.
In addition, it will only be allowed one question from each analyst today and if you are using a speakerphone. Please remember to pick up your handset before asking a question.
Our first question comes from Geoff Meacham with Bank of America.
Please proceed.
Hey, guys. Thanks, so much for the question.
Just maybe a quick one for for Dan or for Andy you guys have had an aspiration to have about a third of total revenue.
For hematology oncology I wasn't sure how big of a role Mcgraw might've played in those assumptions.
And if it was a small amount where do you see opportunities in the pipeline that you think the street, perhaps underappreciated. Thank you very much.
Yeah, Hey, Jeff I'll start and then turn it over to Andy but thank you very much for the question I wanted to be clear that we continue to be on track to meet our goal of oncology, representing one third of our 2030 revenues and that's on top of a growing HIV.
Overall, I'll just remind the team here that.
Our portfolio is very broad it's more than doubled since a few years ago and quantity.
There are many fold on a quality risk adjusted basis as well, we have novel mechanisms in technologies and approaches across many indications.
Precisely to allow for the fact that not every clinical card is going to turnover favorably and antibody.
Let you add onto that in terms of what we what our initial assumptions were around a third sure Jeff.
Yes, good to hear from you and thank you for the question.
You may recall that historically when we've talked about this we highlighted that that assumption is really tied to the cell therapy business and to trigger Lv and that we can.
We believe that we're going to get there based on those two franchises alone will grow in that.
And the rest of the oncology pipeline provide additional upside so I'm just reiterating what Dan said, we continue to be on track to meet the goal of our oncology business, representing a third of our total revenue by 2030, and we remain excited about the breadth of our oncology portfolio and the exceptional progress that you see in cell therapy.
Trigger Lv, which combined as you heard in the prepared remarks are on track to produce $3 billion of revenue roughly this year.
See I mean, we have our next question.
Our next question comes from Chris Schott with J P. Morgan. Please proceed.
So on <unk> and the evoke O two data here's helps us set some expectations for the profile that we'll see from that at world lung I guess, specifically would just be interested in your thoughts on what we should anticipate in terms of the ILD profile in this setting as well as your thoughts on a potential trop.
Two expression biomarker driven approach that I think your competitor has alluded to post their data. Thanks, so much.
Thanks, Chris over to them or to add please yeah.
We're looking forward to sharing those data and as you can imagine were under embargo. So I can't share too many details.
Until the presentation comes out then.
The abstract itself.
<unk> come out.
I think in mid August so very shortly and that initial abstract will represent a.
Relatively small dataset from VAALCO too and then there'll be more data at the time of the presentation in September so.
In terms of.
What what's coming.
In terms of ILD across our programs, including all of the clinical trials.
Not seeing the ILD to date.
We don't screen for ILD in our clinical trials.
<unk>.
The clinical practice so.
At this time.
We have not seen anything from Iowa, and then the ILD standpoint, and then in terms of trop two expression.
As a matter of course.
We are measuring trop two expression.
And all of our trials as we go forward and looking to see if we see.
Correlations between trop, two expression and efficacy and to date.
Not seen.
Correlation we've seen great efficacy across trop two expression levels in the tumors that we studied today now that may change with different tumor types.
But to date, we have not seen a correlation with trip two expression level. So we're optimistic for that to.
To continue.
Would not expect to see trip to data in this upcoming dataset.
This is an early data set and those data is usually trail.
The trop two expression data and used a trail of the clinical trials.
Thank you maybe had our next question please.
Our next question comes from Tyler Van Buren with TD Cowen. Please proceed.
Hey, guys. Good afternoon. Thanks for taking the question. Another one on showed there'll be it looks like we're seeing a bit of a quarter over quarter inflection, but would you say this is attributed primarily to the HR positive <unk>.
Hershey negative watch and you believe business at the beginning of a new sustainable trend.
Great failure over to Joana. Please.
Tyler, Yes, we're very pleased with the results and the early signs that we've seen from the recent launch of HR positive <unk> negative in the U S.
And we've definitely seen.
As you say and in fact, <unk> seen a really strong uptake in <unk> in this setting. We've also kind of building on the foundation of Triple negative breast cancer, where we are the standard of care here as well and we're excited about the fact that in Europe . The ECB.
Just gave approval for HR positive <unk> negative in Europe . So building on the success of TBC and we've seen strong uptake in Europe that can be fee. So there's also a piece of that for the <unk> business performance.
And we're excited to see what we can do with HR positive <unk> negative in Europe as well. So we do think this is definitely.
Definitely on the right path from a growth standpoint, and a very exciting times for two Dolby and breast cancer patients.
Thank you Sir and then we have our next question. Please.
Our next question comes from Terence Flynn with Morgan Stanley . Please proceed.
Hi, Thanks, so much for taking the question this one's for Joanna.
I read that there is CMS could propose to have Medicare cover prep just wondering.
If you have any insight into likelihood here in timing and then could you help us think about the size of that population. Thank you.
Yeah. So thanks for the question.
You are referring to the national coverage determination, the MTBE right or prevention for prep.
Yes, I'm assuming.
And and that's really just because the right now like currently only supports oral drugs and there is an opportunity for us to add injectable drugs and I think that was a request to CNS and so we're very supportive of course, and we believe <unk> is actually quite central to ending HIV epidemic and fully.
Totally support the CMS proposal as from a timing standpoint.
That probably hopefully.
The coming quarters that we should see something come out, but I don't have details on that but I do think it can only help but we're trying to do in HIV prevention, let alone support as we think of launching the potential launch for <unk> in 2025.
Thank you Lee we have our next question please.
Our next question comes from Robyn Carnival cruise.
With truest. Please proceed.
Hi, This is bilal John Gerry on for Robyn.
Thanks for taking our.
The question and congrats on all progress.
A question about.
T J.
Since you began to arc studies have you learned anything by way of expression of pigeon, CD 155, or any other potential prognostic biomarkers in tumor microenvironment that would warrant further development of Dom and the upright Gi indications, even if sky one were to fail.
Yes.
Thanks for the question, but as I understand it I think the question is around predictors of response as it relates to the upper Gi setting.
What I would say is we of course are following biomarkers.
As I mentioned with truck to who we are looking for biomarkers of responsiveness to various markers that could predict responsiveness.
Our our interest in the upper Gi.
Of course based on.
Tissue expression levels in tumor samples and things like that outside of the clinical trials, but more based on clinical data that debt.
We've seen that others have seen for the efficacy of tissue and upper Gi tumors, and so well of course across the programs to be looking for.
Any potential markers for predictive response.
Thank you we have our next question please.
Our next question comes from Brian Abrams with RBC capital markets. Please proceed.
Hi, there thanks for taking my question and congrats on the quarter.
Maybe a question on <unk> do you have any preliminary thoughts on why the trial.
High risk Mds was not successful just given the encouraging early data and I guess, what indications are you most optimistic the drug because there'll be successful in going forward. Thanks.
Okay.
Thanks, Brian .
Well I mean, I think you can.
We are we are looking thoroughly at the data.
And the.
The trigger for this was a futility analysis.
Centered on overall survival.
We will of course update.
As we generate data and look at all of those will make.
The make of that.
Formation publicly available.
To your point.
We're fairly far along in our AML trials and as you know we have some studies going on in solid tumors and we believe that.
There are a number of factors that could that determines success or failure in these various settings.
And each of these settings represented slightly different biological.
Experiment so.
We're going to continue to look broadly at.
At what what we've learned from the initial data we're going to continue to talk with the regulators and the IRB is in the near term and then we'll update you as <unk>.
As we proceed down that path with with where we're going to go.
But we continue our efforts right now, hoping that the girl and that could have.
In effect and other diseases outside of Mds Mds is a uniquely challenging.
<unk> indication and we feel.
We were hoping we could bring benefit to those patients and we're disappointed that we can't do that.
I mean, we have our next question please.
Our next question comes from Carter Gould with Barclays. Please proceed.
Great. Good afternoon. Thank you for taking the question as you talked about sort of the hematology portfolio. One thing you guys didn't talk on much today is sort of a GDP CMA and and it being a clinical hold your partner has talked about.
Investigator conduct and bridging therapy being issues are you sort of an agreement with that characterization and to what extent is sort of.
Timely addressing of the clinical hold critical to your underlying thesis behind the product. Thank you.
Thanks Carter this gives us a chance for all a chance to hear from Cindy for the first time with Gilead Sydney over to you. Please. Thanks, a lot Carter for the question I think first it might be helpful. If I can provide a little context associated with the clinical hold.
On June 16th the FDA did note if I felt like I said it was placing the car T. GDP CMA IMD on clinical hold that was following a patient death, the patient was treated with.
The BBB CMA.
And despite becoming eligible for treatment under the trial protocol.
Due to the fact that they developed a secondary malignancy.
Before the time of infusion so they would have not.
Been allowed technically to be on protocol.
Oster and choosing that patient they subsequently.
Mismanaged I would say the manner in which the protocol specified treatment adverse events and so we are continuing to partner with our silex on this we are very confident in the molecule. We're confident in the imagine one study design and we're looking at ways in which we can partner with our silex to enhance.
So to call adherence all of the clinical sites to date have been retrained. So that we can again ensure that protocol adherence and additionally, the FDA has allowed our satellites to dose patients who had gone through lymphoid depletion while on clinical hold so again, we remain confident that the therapeutic profile of D. D D C.
I'm a car T and the imagine one trial.
<unk>.
Is going to be successful I think based on the data demonstrated to do so.
Our commitment in delivering that therapy to patients globally is still there for multiple myeloma.
Thank you Sarah and then we have our next question. Please.
Our next question comes from <unk> Richter with Goldman Sachs. Please proceed.
A question.
Yeah.
They are expected to shrink.
Okay.
Wow.
So sylvain we're not we're not hearing you very well.
Maybe just try one more time.
Okay.
After all you can try and dial in on a different line.
Hey, Matt.
Matt on for <unk>.
Hey, Jackie can you hear me this is Matt on for solving.
Yes, we can hear you.
Perfectly.
Okay, great. So daiichi inspection to share full data on the phase III <unk> one study.
Later this year could you guys just share what you're focused on from a competitive standpoint, and then in terms of read through to <unk>. Thank you.
Sure.
This is Mike Thanks for the question. So as you know our program is.
Relatively broad and pushing forward in lung cancer as well as I mentioned earlier will be presenting our frontline data.
And as I'll go to preliminary frontline data from <unk> two study.
And I think that that will help.
Provide.
Everyone's sort of benchmarking in terms of in terms of how travel is doing in that setting and then what we'll be looking for I think is consistent with what our belief is for.
For <unk> in the second line, which is like the patients in second line.
Our thicker they tend to have.
There are more difficult to manage and.
They are more challenging in terms of outcomes. So.
We are hopeful that we will see.
Benefit in those patients in terms of outcomes, particularly PFS and OS. So.
We will keep ourselves keep you updated on the progress of the <unk> One study in the second line as well.
And we're pretty confident that we'll be in.
Where we want to be our underlying hypothesis remains that we will have comparable efficacy and that we will have a better tolerability profile with <unk>.
<unk>.
So we're very confident with where we're headed.
Thank you Sarah and then we have our next question. Please.
Our next question comes from Colin Bristow with UBS. Please proceed.
Hey, good afternoon, congrats on the quarter.
The treasury in breast and waterfall is expected to read out in the mid <unk>.
I'm just curious to get your thoughts on how you view the competitive.
Standpoint, thank you.
Okay.
I think it may just have answered that question.
Brett.
Okay.
<unk>.
So maybe I'll.
So thanks for the question Colin.
We are we have been expecting that data we're also.
Very pleased with what we've seen thus far with Qdoba and I think that's the piece that's important here I think <unk> positioning in the marketplace. Both in metastatic triple negative breast cancer and second line as the standard of care in that setting.
<unk> is very well established with an opportunity to continue to make sure people move up lines of therapy, because they still use it in the third and fourth line setting when theres still an opportunity to displace chemotherapy I think as we've seen with other adcs in the breast cancer market I think it does it has really helped the awareness of the benefits of ADC.
And with <unk> overall survival, both in triple negative breast cancer as well as in.
HR positive <unk> negative I do think it sets up to Adobe incredibly well and we've seen also ADC sequencing.
Either from <unk>.
I think as a third ADC customer market I think it might be a little bit more challenging in light of some of the positioning that's already there, but I do think for patients is a great thing.
I also think the safety profile that Mehrdad mentioned, just a little bit earlier is also something to consider when you think about the safety profile with <unk>.
Youre looking at.
The neutropenia and diarrhea, which are very much in line with other chemotherapy already on the market places so physicians are very.
Constant and how to treat diversity, bringing in something like ILD is going to be a little bit more concerning so.
And more to comment I guess, we wait to see the data that Josh and today in the field today I think to Dolby is definitely making a difference for these patients that did you want to add anything.
Thank you Joanna.
Yeah, well, maybe we have our next question. Please.
Yes.
Our next question comes from Evan <unk> with BMO capital markets. Please proceed.
Thanks. Thank you so much for taking my question with I believe it's the third anniversary of the Immunomedics deal nearing US can you walk us through how you look and I look forward to BD.
Digested at that but are you looking at oncology inflammation elsewhere. Thank you.
Yeah.
Andy do you want to sure.
Question.
We continue to be very active in BD as you would expect across both gilead and kite.
And that's across all of our areas of focus so again oncology inflammation and virology as we've said before there are fewer barology opportunities externally, we have an incredibly robust pipeline an extraordinary research group, we're building out our research groups at kite and Gilead in oncology and inflammation. We're excited about the progress that we're making there were some.
They're all going to be active in the outside.
That being said what you should expect over the next five years is different than what you saw over the last five years, so using immunomedics as an example.
That's a deal that we continue to be very excited about you've heard all the excitement about for Dolby and where we are today with the franchise, where we see it going.
That was a unique point in time, where we really needed in the anchor molecule to build our oncology business around we will continue to look at commercial assets, but you should expect consistent with what you saw last year that our focus is predominantly on ordinary course partnerships and smaller acquisitions again, we will be opportunistic we will look for ways to build our franchise and to create.
Value for shareholders, but that's the base case expectation.
May we have our next question.
Our next question comes from Joe Catanzaro with Piper Sandler. Please proceed.
Hi, everybody. Thanks, so much for taking my question I actually had a question on this <unk> acquisition and just wondering if you could share your thoughts around the plans and timelines for their pump one selective inhibitor and whether in the future there is opportunity to potentially combine it with <unk> given some preclinical data that supports that that approach.
Yeah.
Yes.
I think you hit the nail on the head, where we're moving forward aggressively not sure it's disclosed the timelines yet, but we're moving forward aggressively.
With our efforts to move that program into the clinic and as you say I think okay.
So far the PARP inhibitor is in combination with <unk> and combining those two agents too.
Hopefully, bringing better outcomes to patients so.
We will update as we go along I think things are things are progressing very nicely there.
Yeah.
Sure and our next question.
Our next question comes from Mohit Bansal with Wells Fargo. Please proceed.
Great. Thank you very much for taking my question and welcome and congrats Cindy on your new role.
Maybe if I can ask a question to Andy regarding so you have clinical trials going on.
Allergy, especially.
How should we think about the operating margin evolution from here.
If I take out the onetime items as well as IP R&D. It seems like about 45% in the first half the year is that a good.
Good number good proxy to go with it or how should we think about it in the next few years.
Hi, Mommy. Thanks. Thanks for the question. This is an important an important point.
What we said and we continue to believe as we have an exceptionally strong business with a lot of leverage a highly efficient structure a lot of leverage in our model. We've historically had industry, leading operating margins and we certainly expect to have that in the future. We're also have said and acknowledged that we're at a unique point in time as we built out both are.
R&D portfolio, and our sales and marketing team with the move into oncology.
Where our expenses have increased in the short run and we expect over the coming years for the expense the expense increases to moderate and we expect that youll continue to see the strong growth that you've seen in our base business. The last couple of years. So again this is kind of.
Our strategy playing out where you see the extraordinary progress in the base business growth.
Last year certainly through this year, you'll see that with the raised guidance for the base business. We expect to carry that momentum going forward of course, we don't provide long term guidance.
And we as we've highlighted have 'twenty one late stage phase III clinical studies underway, we will get to a point over the coming quarters and years, where our expense growth moderates and you should see a lot of that carry to the bottom line. So.
And I think the way that you've characterized the operating margin in the in the second quarter as it is entirely consistent with the way that I see it.
And we don't provide long term guidance beyond saying that we expect to have a top tier operating margin.
Going forward and we think we're in a great place to achieve that goal.
<unk>.
Thank you I think we have time for one last question Sarah.
Our last question today comes from Simon Baker with Redburn. Please proceed.
Thanks for taking my question.
Recent developments within the car T space and non oncology indications such as Lucas I was just interested to know more.
Actives on the strategic clinical and commercial opportunities for cell therapy outside oncology. Thanks, so much.
Thank you very much for the question Simon.
We are very intrigued by the data that we're seeing in basins like autoimmune disease.
They have great interest to us.
We have established ourselves in oncology certainly expanded into multiple myeloma with airtel in collaboration and we are also looking at.
I think it's going forward.
Terrific. So this is Dan I just wanted to close this call by thanking you all for joining and maybe just related to some of the enthusiasm of both the team here in the room and the colleagues.
Throughout Gilead and kite, we're really seeing continued positive momentum in this specific another quarter of that related to our strategy that we set out several years ago.
First thing is the business is performing well and on a consistent basis. This is our seventh consecutive quarter of year on year growth for our business excluding the quarry.
Secondly, we're much further ahead than we expect it to be with our pipeline delivery now we add Ah 64 ongoing clinical programs 21 in phase three.
You saw that in the news flow for the second quarter and then finally, we have a lot to look forward to in the second half of the year and beyond we're particularly excited about the potential to transform.
On the diseases that we're helping patients with today in lung cancer and continuing to help the epidemic for HIV and the epidemic for HIV. So I just wanted to take this opportunity on behalf of all of US to thank you for joining as usual. If you have questions that we haven't been able to handle here today. Please get in touch with Jackie and the IR team and we're more than <unk>.
Happy to support you. Thank you everybody and thanks for joining today.
That will conclude today's conference call. Thank you all for your participation you may now disconnect your line.
Goodbye.
Okay.
Yes.