Q3 2024 Gilead Sciences Inc Earnings Call
Good afternoon everyone and welcome to Gillia's third quarter, 2024 earnings conference call. My name is Rebecca and I'll be your host for today.
In a moment we'll begin with our prepared remarks followed by our Q&A session. At that time, if you'd like to ask a question, please press star 1 on your telephone keypad. If you'd like to withdraw your question, please press star 2.
I'll now hand the call over to Jackie Ross by President of Investual Relations in Corporate Strategic Finance
Jackie Ross: Thank you Rebecca. Just after Market Close Today, we issued a press release with earnings results for the third quarter of 2024. The press release slides and supplemented data are available on the investor section of our website at gilyad.com
The speakers on today's call will be our Chairman and Chief Executive Officer Daniel O'Day, our Chief Commercial Officer, Joanna Mercyer, our Chief Medical Officer, Murdae Parsey, 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 Perettie, the executive vice president of PITE.
Before we get started, let me remind you that we will be making forward-looking statements. Please refer to slide two regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially.
With that, I'll turn the color over to Dan.
Dan: Thank you Jackie and good afternoon everyone.
Dan: The team and I are pleased to share Gillia's third quarter results, highlighting another very strong quarter of commercial and operational execution with robust year-over-year revenue performance across HIV oncology and liver disease, including 9% growth in HIV.
Dan: We also delivered strong bottom line results that highlight the leverage in our business model and reflect our ongoing commitment to discipline expense management
Based on our financial results here today, we are increasing our 2024 guidance across almost every metric, including revenue and non-gap growth margin, operating income and EPS.
Dan: We continue to make excellent progress in our Verology and Implamation Programs in the third quarter
The results from the purpose 2 study which builds on the 100% efficacy shown in purpose 1. Demonstrate Lennocapovier's unmatched clinical profile observed for HIV prevention.
Dan: If approved, Lenakapovir as the first twice yearly subcutaneous injection for HIV prevention, could make a major impact on global public health and significantly catalyzed the prevention market.
I'm pleased to share that the FDA recently granted breakthrough therapy designation to Lenna Capovier and we are on track to file before the end of this year.
Dan: We look forward to sharing information on our plans for Lenta Capovier and the rest of our leading HIV portfolio at our HIV analyst event on December 10th
Dan: We are very encouraged by the initial launch of Lendelty for primary billiardy Colin Gitis, or PVC, which was granted accelerated approval by the FDA and August.
Dan: Livedelsy is a highly differentiated option for people with BBC who do not respond well to first line therapy.
Demand in the third quarter was ahead of our internal expectation.
and we expect to see growing momentum into 2025 and beyond.
Dan: Livedelsi brings the number of innovative therapies launched by Gilliad since 2019 to 6, representing another step towards our goal of delivering at least 10 transformative therapies by 2030.
Moving to oncology, we are excited to share preliminary data from the registration of phase 2 Imagine One Study of Anita Sel, for the treatment of relapse or refractory multiple myeloma at Ashnex Month, in addition to updated data from the phase One study, together with our partner, our colleagues.
Dan: We're also pleased to have begun the phase 3 Imagine 3 study in earlier line patients
Dan: The combination of Anita Cells' potential best in class clinical profile with tight leading self-therapy manufacturing has the ability to transform care for a large number of multiple myeloma patients.
Dan: We continue to evolve our oncology program in response to clinical data, regulatory feedback and the competitive environment
Dan: We are carefully prioritizing our resources for the most promising programs.
Dan: For example, we are advancing Trudelevi in first line PDO1 High, Metastatic Nossball Cell Uncensor, where we have seen supportive data in combination with Tembro, while discontinuing development in second line plus.
Dan: We are also starting a new program for small cell lung cancer based on promising efficacy data from the Phase 2 Tropics O3 Basket trial
Dan: Touching Briefly on Slide 6, we have completed all of the clinical milestones and updates, we targeted for 2024, and look forward to a strong end to the year with key presentations coming up at Ash and our HIV analysts have entered December.
Dan: Those are the main points I wanted to share for now, and what has been a very strong third quarter thanks to the tremendous efforts of the Glee at teens
Dan: I look forward to our Q&A session at the end and now I will pass it on to Johanna.
Johanna: Thanks Dan and good afternoon everyone. It was another strong quarter of commercial execution across the business and I'm proud of the work the teams continue to do to expand the reach of our medicines to many more people in patients around the world.
Johanna: I shown on slide 8, total product sales excluding the query were $6.8 billion in third quarter, up 7% year over year, reflecting strong growth across HIV, oncology and liver disease.
Dan: including Vicklery, Total Product Sales were $7.5 billion up to 7% year every year.
Dan: Starting with HIV on slide 9, sales of $5.1 billion were up 9% year over year and 7% sequentially. Primarily driven by higher average realized price due to shifts in channel mix and higher demand across treatment and prep.
Dan: The third quarter, once again demonstrated the quarterly pricing variability we see in HIV.
Dan: Specifically, we saw adjustments to government channels where there is a multi-quarter lag for certain claims data. As a result, the quarter-respected more favorable average realized pricing.
Dan: Your date HIV sales have grown 5%. Well above our prior full year growth target of 4%.
Dan: With that out performance in mind, we're increasing our full year HIV growth expectation to 5% and we remind you to focus on full year versus quarterly trends.
Dan: To that end, for the fourth quarter in particular, we expect HIV sales to be roughly flat, quarter of a quarter, with continued demand growth and modest seasonal inventory bills. Offset by the third quarter pricing dynamics discussed earlier that are not expected to repeat.
Dan: Turning to Flaid 10, Bitarvik 3rd Quarter Sales of $3.5 billion, increased 13% year over year, driven by higher demand, as well as higher average realized price due to shifts in channel mix, partially offset by inventory dynamics.
Dan: sequentially, sales were up 7% primarily driven by channel mix and higher demand.
Dan: In the US, and across major markets, the Tarby continues to be the Regiment of Choice for those starting treatment and switching therapies and has grown for 25 consecutive quarters.
Dan: In the US, Victoria Sherr grew to over 49% at more than 2% year over year and remains the leading regimen for HIV treatment.
Dan: Yeliaz is well positioned to maintain its leadership in the HIV treatment market with four new regimens by the end of 2030.
Dan: Overall, the HIV treatment market continues to grow in line with our expectations of 2-3% annually.
Dan: Moving to Discovery, third quarter sales were $586 million at 15% year of a year, reflecting higher demand and average realized price due to channel mix, partially offset by inventory dynamics.
Dan: sequentially, Delver up 21% primarily driven by Channel Mix and Higher demand.
Dan: The US Prep Market continues to demonstrate robust growth of the 13% year over year and discovery for prep remains the leading branded option, capturing over 40% market share despite the availability of generics and other regiments.
Dan: Overall, Discovery for perhaps sales make up an increasing portion of total of Discovery sales, representing roughly 80% in the third quarter
Dan: This is a strong foundation as we prepare for the first anticipated commercial launch of Lenin Catzavir for Prep Next year
Dan: Lenin Tapvier's remarkable clinical profile, an unmatched twice-year-old administration, offer the potential to redefine the HIV prevention market, and we look forward to sharing more details on our commercialization plans and treatment programs at our HIV Analyst Event in December.
Dan: In the meantime, we look to file for approval in the U.S. before the end of the year and are well underway with our preparations for the first commercial launch in 2025.
Dan: In addition to our commercial plans, we're particularly proud of our commitment to make Lenacapavir available in 120 high-incidence, resource-limited countries as quickly as possible, ensuring access for Lenacapavir for PrEP is made as broadly available upon approval.
Dan: Moving to the liver disease portfolio on slide 11.
Dan: Sales of $733 million in the third quarter were up 4% year-over-year, driven by increased demand across our viral hepatitis portfolio, partially offset by pricing dynamics, including shifts in channel mix in the U.S.
Dan: Sequentially, after an incredibly strong second quarter, sales declined 12%, primarily driven by inventory dynamics and fewer patient starts in HCV.
Dan: Turning to slide 12, in mid-August, we launched LiveDelphi in the U.S. for PBC, with the first prescription written within a few hours of the accelerated approval.
Dan: Furthermore, with 100 percent of our U.S. commercial organization trained by the time of launch, we quickly reached more than 1,000 of our target prescribers within the first several weeks.
Dan: Overall, we're very encouraged with the patient demand we're seeing so far, which is ahead of our internal expectations.
Dan: We believe this reflects the differentiated profile of libdelsi as the only approved therapy with statistically significant improvements in both ALP and pruritus, as well as an established safety profile.
Dan: Sales in the third quarter were modest, as we expected, in the low single-digit millions, and reflective of the ramp-up time required to onboard patients and providers, and to work through step edits and prior authorizations that are normal for a rare disease launch.
Dan: We expect to start building momentum as we enter 2025 when we look to a more meaningful sales contribution.
Dan: Outside the U.S., launch preparations are ongoing, and we look forward to the European regulatory decision in early 2025.
Dan: Moving to slide 13, Vicklery has continued to remain the antiviral standard of care for hospitalized patients treated for COVID-19, including in the U.S. with more than 60% share in this setting.
Dan: Altogether, with higher than expected hospitalizations in the summer months, sales in the third quarter were up 9% year-over-year to $692 million.
Dan: Year-to-date sales of $1.5 billion are now well ahead of our initial full-year guidance of $1.3 billion. As a result, we are raising our full-year guidance for Vic Lurie to approximately $1.8 billion.
Dan: Now, turning to oncology on slide 14, Gilead and CHITE therapies have treated more than 65,000 patients globally, highlighting our continued growing reach.
Dan: Sales for the quarter were $816 million, up 6% year-over-year, primarily driven by Tredelby growth. Sequentially, oncology sales were down 3%, with growth in Tredelby offset by a decline in cell therapy.
Dan: Beginning with Tridelvia on slide 15, sales of $332 million were up 17% year-over-year and 4% quarter-over-quarter, reflecting higher demand in all regions.
Dan: In breast cancer, TUDAVI remains well-positioned as the only approved and commercially available TROP2-directed ADC to demonstrate clinically meaningful survival benefits across two types of metastatic breast cancers.
Dan: Notably, TRDEL-V is the standard of care for second-line metastatic triple-negative breast cancer, with ongoing adoption in the pre-treated HR-positive HER2-negative metastatic breast cancer setting.
Dan: We're pleased to see both indications contribute to Tridelby's growth year-over-year despite an evolving competitive landscape.
Dan: Turning to slide 16, and on behalf of Cindy and the KITE team, cell therapy sales of $485 million in the third quarter were flat year-over-year, with strong 23% growth outside the U.S., offset by the U.S.
Dan: Sequentially, total cell therapy sales were down 7% due to competitive headwinds both in and out of class in the U.S., which we expect to continue into 2025.
Dan: As a pioneer in cell therapy, KITE's focus is to expand overall utilization and increase class share. As part of this work, we're partnering with government agencies and health care associations to amplify education of the benefits of CAR T and remove barriers to access.
Dan: To date, only 2 of every 10 eligible patients receive CAR-T in second-line plus large B-cell lymphoma in the U.S., and we are committed to removing these barriers so we can deliver potentially curative therapies like Yaskarta to more patients.
Dan: In the community setting, KITE is leading the way in identifying and lowering barriers and building the right ecosystem to enable more people to receive CAR-T beyond the reach of an academic medical institution.
Dan: Today, CAR T sites often need to be accredited, typically by the Foundation for the Accreditation of Cellular Therapy, or FACT, and this requirement has been highlighted as a hurdle for our community partners to achieve national payer reimbursement.
Dan: In the meantime, we're pleased to share that we have treated our first few patients as part of our community strategy, demonstrating that we can deliver Yaskarta in this setting.
Dan: Outside the U.S., we saw year-over-year demand growth as we continue to expand into the second-line relapsed or refractory large B-cell lymphoma setting in Europe and launch in new markets.
Dan: In particular, we're encouraged by our progress in Japan, where we have onboarded more than 50 authorized treatment centers in little over a year, with more to come in the near future.
Dan: Overall, I would like to thank the commercialization teams for their hard work to deliver another strong quarter and first nine months of the year.
Dan: with launch activities underway in PBC.
Dan: and for HIV prevention launch next year. Our teams are excited to bring our transformative medicines to many more people and patients globally.
Speaker Change: And with that, I'll hand the call over to Merdad.
Merdad: Thank you, Johanna. We're very pleased to wrap up the third quarter with another exciting update from our PURPOSE program, evaluating Lenacapavir for HIV prevention.
Dan: As shown on slide 18, we shared two oral presentations on our Purpose 2 HIV Prevention Trial at the HIV Research for Prevention Conference in October.
Dan: Following the remarkable 100% efficacy reported from an interim analysis of the PURPOSE-1 trial in cisgender women in June, PURPOSE-2 was also stopped at the interim in September.
Dan: Notably, twice-yearly subcutaneous linocapavir significantly reduced incidence of HIV infections compared to both background HIV incidents and Truvada in the exceptionally diverse population of cisgender men and gender-diverse people in a Phase III prevention trial.
Dan: These Purpose 1 and 2 results demonstrated Lenacapivir's unprecedented results for HIV prevention.
Dan: We look forward to sharing additional insights at the HIV Glasgow meeting next week, including persistence data from Purpose 1 and a deeper look into the efficacy data from Purpose 2.
Dan: Based on these data, FDA has now granted breakthrough therapy designation for Lenacapivir for HIV prevention.
Dan: We continue to target regulatory submission before the end of the year in the U.S., while at the same time preparing for filings with other global regulatory authorities.
Dan: Beyond our Registrational Purpose I and II programs, we continue to generate additional data from the Phase II, Purpose III, IV, and V trials in key populations across the U.S., U.K., and France.
Dan: These studies are intended to contribute additional data in communities where the use of, or access to, prevention options have historically been challenging.
Dan: Turning to our HIV treatment pipeline on slide 19, we continue to make strong progress in developing novel regimens, including a once-daily oral regimen with two backbone therapies, Lenacapavir and Victegravir.
Dan: This novel combination has the potential to provide another effective daily oral option for people living with HIV, including the 6-8% of people currently on complex regimens.
Dan: Recently, we completed enrollment of the Phase 3 Artistry 1 trial within nine months of FPI and are on track to complete enrollment in Artistry 2 by early 2025.
Dan: Further, we've made strong progress for our two once-weekly oral programs.
Dan: The Phase II study of our wholly owned combination of GS-4182, a prodrug of Lenacapavir with enhanced oral bioavailability.
Dan: and GS1720, a long-acting integrase inhibitor, has now completed enrollment within two months of FPI.
Dan: And, we've enrolled our first participants into the Phase 3 ISLN1 and ISLN2 trials, evaluating the oral combination of lenacapavir with Merck's NRTTI islatravir for biologically suppressed people with HIV.
Dan: We presented Week 48 data from the Phase 2 trial, evaluating this once-weekly combination in a similar population at ID Week.
Dan: Participants in both the lenacabavir plus izlatrovir and biktarvy treatment arms maintain high rates of virologic suppression and no participants discontinued due to lymphocyte count decreases.
Dan: Moving to our liver disease portfolio on slide 20, FDA granted LivDAL-Z an accelerated approval for the treatment of PBC in combination with UDCA in certain adults who have an inadequate response to the UDCA or as monotherapy in certain patients unable to tolerate UDCA.
Dan: We have already filed with EMA and expect a decision early next year.
Dan: As part of the accelerated approval process, we continue to recruit for our confirmatory phase 3 affirmed trial, evaluating cell delpar for improvement in event-free survival.
Dan: Further, our Phase III IDEAL trial is ongoing and offers us an opportunity to understand the effect of celadelpar in normalizing alkaline phosphatase in a broader set of PBC patients who had an incomplete response to UDCA.
Dan: Switching now to oncology, on slide 21, we continue to evolve our late-stage clinical programs in lung cancer in response to clinical data and the changing landscape.
Dan: Reflective of our commitment to prioritizing the most significant opportunities across all our therapeutic areas, we have decided to discontinue further evaluation of Tredelby and second line plus metastatic non-small cell lung cancer based on discussions with regulators following the EVOCA-1 readout earlier this year.
Dan: In the front line, based on the totality of the data from the Phase 2 Evoco2 trial, we believe Tredelvi, in combination with the PD-1 inhibitor, without the addition of chemotherapy, may have the greatest potential in this setting.
Dan: To that end, our Phase 3 Evoco 3 study of Tredelvi plus Pembro is ongoing in first-line patients with PD-L1 high metastatic non-small cell lung cancer.
Dan: Separately, we shared promising data for tridelvian extensive stage small cell lung cancer from our Phase II Tropix-O3 basket trial and plan to advance development of tridelvian in this population to a Phase III trial.
Dan: We also look forward to sharing the results from Part 1 of the Phase 2 Arc-10 trial at the CITSE meeting later this week, further adding to the body of data on Dom Vanilla Mab, our FC silent anti-TIJIT.
Dan: As a reminder, we discontinued enrollment of ARC-10 earlier this year to prioritize the ongoing first-line Phase III DOM studies, STAR-121 in metastatic non-small-cell lung cancer and STAR-221 in upper GI cancers.
Dan: Moving to slide 22, and on behalf of Cindy and the CITE team, we are excited to share updates at the upcoming ASH Congress, including our Phase 2 Imagine 1 results for a NETO cell in fourth-line or later relapsed or refractory multiple myeloma.
Dan: The ASH abstract shared yesterday reflects 58 patients who received a NITO cell with a median follow-up of 10.3 months as of the June 2024 cutoff.
Dan: Treatment with the NETO cell demonstrated deep and durable efficacy with an objective response rate of 95% and a complete response rate of 62%.
Dan: Of those available for MRD testing, 92% achieved MRD negativity.
Dan: The median progression pre-survival and overall survival had not yet been reached.
Speaker Change: Additionally, our CELICs announced yesterday that updated data from the Phase I study will be presented at ASH.
Speaker Change: In the meantime, Arcelyx has already shared that an even later data cut from Phase 1 has shown that Inito cell achieved a 30.2-month median progression-free survival, and median overall survival was not yet reached.
Speaker Change: In summary, we are encouraged by the compelling results so far, and with over 140 patients dosed across both the Phase I and Phase II Imagine 1 studies, we have not yet seen any cases of delayed neurotoxicities.
Speaker Change: This includes no Parkinsonism, no cranial nerve palsies, and no Guillain-Barré syndrome. We'll be sharing updated data at the ASH conference and look forward to potentially offering NidoCell's best-in-class profile to these late-stage multiple myeloma patients.
Speaker Change: Separately, we're pleased FDA has granted KITE the Regenerative Medicine Advanced Therapy Designation, or RMAT, for the evaluation of Yescarta for newly diagnosed high-risk large B-cell lymphoma who have a positive PET scan after two cycles of first-line chemotherapy.
Dan: Under the RMAT designation, the Yaskarta Development Program for First-Line Treatment of High-Risk Large B-Cell Lymphoma will be able to access the benefits of the FDA's accelerated pathways, including Fast-Track and Breakthrough designations.
Dan: Our Phase III ZUMA 23 study in this setting is ongoing, and we look forward to sharing updates in due course.
Speaker Change: Moving to our milestones on slide 23, a brief update on Ascendo 3.
Speaker Change: As a reminder, this is an event-driven trial, and I can share that we are continuing to accrue events at this time.
Speaker Change: With that in mind, it is possible we will not reach data cutoff this year, and we look forward to updating you in due course.
Speaker Change: Other updates this quarter included the readout of Purpose 2 data ahead of schedule.
Speaker Change: The review of our Phase II data for lenicapavir plus our broadly neutralizing antibodies with plans to share the data at an upcoming scientific conference in 2025.
Speaker Change: the initiation of several key HIV, Tredelvi, and cell therapy trials, including enrollment for ISLN 1, ISLN 2, ASCENT GYN 01, and IMAGINE 3.
Speaker Change: In closing, I'd like to thank the KITE and Gilead Research and Development teams for a stellar quarter of execution.
Speaker Change: And with that, I'll hand the call over to Andy.
Andy: Thank you Merdad and good afternoon everyone. Our third quarter results represent a strong quarter for Gilead as shown on slide 25 with our base business up 7% year-over-year to 6.8 billion dollars driven by growth in each of our core businesses.
Andy: McLurie also delivered substantial growth resulting in total product sales up 7% year-over-year to 7.5 billion dollars.
Speaker Change: Before moving to non-GAAP, I'll highlight the impairment charge that impacted our third quarter financial results on a GAAP basis, as noted on slide 26.
Speaker Change: As a reminder, this relates to the carrying value of the IPR&D Indefinite Live Intangible Assets acquired from Immunomatics in 2020.
Speaker Change: During the third quarter, we decreased the fair value by $1.8 billion, or $1.04 per share net of tax impact, reflecting the removal of the second line non-small cell lung cancer indication.
Speaker Change: The remaining $1.8 billion carrying value reflects Tredelby's opportunity in the first-line setting.
Speaker Change: Note that the potential indications that we've begun to explore since the acquisition are not reflected in the carrying value such as endometrial or small cell lung cancer.
Speaker Change: Moving to our non-GAAP results for the third quarter on slide 27.
Speaker Change: Product gross margin was 87% up 84 basis points from last year primarily due to product mix.
Speaker Change: R&D expenses were down 5% year-over-year, primarily driven by timing of clinical activities, such as the wind-down of the Macrolimab program and the Obaldesivir oral COVID studies, and supported by our broader expense management initiatives.
Speaker Change: Acquired IPR&D was $505 million, which reflects the $320 million buyout of global Libdelsi royalties from Janssen announced in August.
Speaker Change: and the $35 million upfront expense to initiate a new AI partnership with Genesys in addition to ongoing collaboration expenses.
Speaker Change: SG&A was up 8% year-over-year, primarily due to timing of commercial and corporate activities, including the launch of LiveDelhi in the United States, and other initiatives including pre-launch preparations for Lenacapivir for PrEP.
Speaker Change: Operating margin for the third quarter was 43 percent.
Speaker Change: Excluding the impact of the royalty buyout charge from Janssen, operating margin would have been 47 percent.
Speaker Change: While there will always be some quarterly variability, recent results demonstrate a consistent trend of our operating margin firmly in the 40 percent plus range, and we remain focused on being an industry leader in terms of operating margin.
Speaker Change: Our effective tax rate was approximately 18% as compared to 7% in the same period last year.
Speaker Change: As a reminder, the tax rate in the third quarter of 2023 benefited from decreased tax reserves as a result of reaching an agreement with a tax authority on certain tax positions.
Speaker Change: In total, non-GAP diluted EPS was $2.02 per share as compared to $2.29 per share in the same period last year.
Speaker Change: primarily reflecting higher acquired IPR&E and tax expense, partially offset by higher product sales.
Speaker Change: As mentioned earlier, the $320 million expense related to buyout of Global Libdelsi royalties from Janssen impacted our EPS by $0.20 per share.
Speaker Change: As highlighted on slide 28,
Speaker Change: We had a strong first nine months of the year, with solid performance in each of our core franchises across HIV, oncology, and liver disease, driving base business growth of 7% year-over-year, with Veclory already exceeding our initial full-year guidance of $1.3 billion.
Speaker Change: Altogether, total product sales for the first nine months of 2024 were up 6% year over year.
Speaker Change: Moving to guidance on slide 29.
Speaker Change: We are updating much of our guidance to reflect the very strong performance in our business so far this year.
Speaker Change: We are increasing our guidance for product sales, excluding Veclori, by $150 million at the midpoint from the prior range to a new range of $26 to $26.3 billion.
Speaker Change: In addition to our strong year-to-date performance, this guidance accounts for evolving competition in our cell therapy business.
Speaker Change: The increased revenue guidance also reflects higher full-year expectations for HIV, now expected to grow approximately 5% from 2023, compared to our prior expectations of 4%.
Speaker Change: This guidance implies that fourth quarter HIV could be roughly flat, which we believe is prudent given the strength in the third quarter and the normal variability we can see with HIV pricing.
Speaker Change: We expect full-year Vecluri revenue to be approximately $1.8 billion.
Speaker Change: We therefore expect full year 2024 total product sales in the range of 27.8 to $28.1 billion, an increase of $650 million at the midpoint compared to the prior range.
Speaker Change: Turning to the rest of the P&L on a non-GAP basis.
Speaker Change: We expect product gross margin to be approximately 86 percent, narrowed from our prior 85 to 86 percent range, and reflecting year-to-date results, as well as our expectations for a more favorable product mix in the fourth quarter.
Speaker Change: We now expect R&D expense to decline a low single-digit percentage as compared to our prior outlook of low to mid single-digit growth.
Speaker Change: reflecting the discontinuation of certain programs and careful expense management. And there is no change to our prior expectations for both acquired IPR&D and SG&A.
Speaker Change: Reflecting these updates, we now expect operating income in the range of $8 to $8.3 billion, up from $7.2 to $7.6 billion previously.
Speaker Change: Full year tax is expected to be approximately 27%, slightly lower than our prior 30% guidance and reflecting the higher operating income for the full year, as well as the negative impact from the one-time charge for the acquisition of Sima Bay in the first quarter.
Speaker Change: As a reminder, this compares to our initial guidance in February of approximately 19% prior to the Sima Bay impact.
Speaker Change: Altogether, we've raised our earnings per share guidance to a range of $4.25 and $4.45. This compares to our prior guidance of $3.60 to $3.90 and reflects both revenue outperformance and continued operating expense discipline.
Speaker Change: At the midpoints, our updated guidance represents an increase of $750 million in non-GAAP operating income and an increase of $0.60 in non-GAAP earnings per share.
Speaker Change: On a gap basis, EPS is expected to be 5 cents to 25 cents.
Speaker Change: Moving to slide 30, we returned 1.3 billion dollars to shareholders in the third quarter and a total of 3.7 billion in the first nine months of the year.
Speaker Change: Our capital allocation priorities remain unchanged with significant balance sheet flexibility.
Speaker Change: Overall, Gilead is on track to deliver an extremely strong 2024 and we're particularly pleased with our progress on operating expense management which we believe sets us up well as we enter 2025.
Jackie Ross: And now I'll invite Rebecca to begin the Q&A.
Rebecca: Thank you, Andy. At this time, we'll invite your questions.
Rebecca: We ask you to be courteous and limit yourself to one question so that we can get to as many analysts as possible during today's call. As a reminder, to ask a question, please press star 1. If you'd like to withdraw your question, please press star 2.
Speaker Change: Our first question comes from Courtney Breen.
Speaker Change: Bernstein. Go ahead, your line is open.
Courtney Breen: Hi there, thank you so much for taking my question today. I'm interested in talking a little bit about the CAR T space.
Courtney Breen: Specifically, can you help to dimensionalize the in-class versus out-of-class impacts on your SCADA this quarter, particularly as we think about Brianzi, and whether these results establish any need to kind of pivot the focus of the commercial strategy that you outlined in the presentation today?
Speaker Change: Thanks, Courtney. So we have Cindy Perettie here. I'll turn it over to her to respond.
Cindy Perettie: Thanks, Courtney, for your question. So if I look at the in-class competition that we face this quarter, it boils down to two things. One is two new indications, both in follicular lymphoma and mantle cell lymphoma. And the second is an increase in capacity within manufacturing. So that's the in-class competition.
Speaker Change: that we're facing. Out of class, we continue to face...
Speaker Change: competition through by specifics, and I would put them probably at about 50-50 on what we're seeing today. From our strategy standpoint, we do not believe we have to pivot. I think in the oncology space, when new therapies get approved and new indications, it's very common for physicians to try out the new therapies and we expect to see that.
Speaker Change: And we've seen that both within-class and out-of-class competitors. We're continuing to focus on driving both our class share and our brand share and feel very confident in the plans that we have to date to continue our expansion into the community and elsewhere.
Speaker Change: I feel confident that we're going to build on our leadership, both for Yizkarta and Dakartas, but also recognizing, as we look ahead, that NIDASEL will be coming in 2026.
Speaker Change: Our next question comes from Mike Yee at
Mike Yee: Great, thanks. Congrats on a great quarter. Thinking about Lenacap Revere for PrEP, based on feedback from docs, we're hearing that there could be a good market and good adoption for swapping.
Speaker Change: From a current to SCOBY, can you just talk a little bit about how you're thinking about the launch of Lenokapivir for PrEP next year? Could that be a fast launch and think about the dynamics there and is it buy and build? So can you talk a little bit about how well you think that could launch and where the opportunity is? Thanks.
Speaker Change: Thanks Mike. We've got Johanna here, so we'll let her take that question. Thanks for the question. Yeah, I think we're very excited about the potential launch for Lenacapivir for PrEP.
Johanna: The growth opportunities are clear for us, right? It's around market size growth when you think about more consumers using PrEP.
Speaker Change: More prescribers prescribing it, so more physician-based.
Speaker Change: And then, of course, more countries, because thus far, it's really been very U.S.-focused.
Speaker Change: We do think there's a real expansion just in the consumers when you think about...
Speaker Change: Right now, the market is primarily white MSMs.
Speaker Change: expand that to include Black, Latino individuals, young adults, cisgender women, transgender. So there's a lot there, let alone prescribers. Right now, the prescribers we have are currently the ones that prescribe, generally speaking, for HIV treatment.
Speaker Change: And we think the market can be expanded much more broadly than that.
Speaker Change: And then, of course, countries, and as I was mentioning, I do think there's real opportunities when you think about Atlanta Capital Bureau for PrEP and the profile that it offers is quite differentiated.
Speaker Change: From a market share growth, I think it'll be mixed. I think you're right. I think Lena Capaver, twice yearly sub-Q profile offers a lot.
Speaker Change: for people looking for HIV prevention who may want or need it.
Speaker Change: And I do think it will have some impact on both DSCOBY from a daily oral standpoint, but also 55% of the market is actually generic oral. And I do think it's going to have a big impact across the whole daily oral market.
Speaker Change: to see Lena Capovira come in.
Speaker Change: As to your question about how quickly we can do that, I mean the plans for commercialization are well underway. We are thinking through how do we make sure we make this a seamless experience for all of our customers. So that includes providers when they prescribe Lenacapavir, but also for consumers to make sure they have access to Lenacapavir.
Speaker Change: And that's looking at our distribution system, our reimbursement.
Speaker Change: and making sure that...
Speaker Change: We just provide that seamless experience for all. So, more to come on that. We have the HIV Analyst event coming up in December, and we'll be able to share a little bit more data there, but definitely an opportunity for us to grow overall Gilead's share in the prevention market, both with Dyscovide for those who prefer daily oral, but obviously the growth is really going to come from Lenacapavir for prevention.
Speaker Change: Our next question comes from Umar Rafat at Evercore. Go ahead, your line is open.
Umar Rafat: Hi guys, thanks for taking my question. I wanted to focus on
Umar Rafat: Anita Sell, and Delayed Neurotox for a quick second, and it's a two-part question. First,
Umar Rafat: I'm just curious, do you think, is it the construct or the trial design or any other reason which explains the lack of delayed neurotoxin, GBS, et cetera? And secondly, do you think we now have sufficient data from the existing data sets in Phase 1 to rule out any delayed neurotoxin when the sample size expands to 500 to 1,000 patients in Phase 3 trials? Thank you very much.
Umar Rafat: Thank you. Thank you.
Speaker Change: We believe it's the construct. As a reminder, we have a very compact DD domain and we think that
Speaker Change: That is a big piece of why we aren't seeing the delayed neurotoxin or continuing to look
Speaker Change: with our translational medicine group to uncover sort of pieces of that, but we're having increasing confidence that it's the construct.
Speaker Change: I think the second piece that you asked is, do we have sufficient data? Look, we're at 100 patients' worth of data between the phase one of 38 patients and what we just shared.
Speaker Change: in the in the Ash Abstract.
Speaker Change: You know, coming forward to ASH, we're going to have a larger data set. We've done another data cut that we're cleaning now that we'll be presenting at ASH. So, having that confidence of over 100 patients to date and not observing the neurotoxicity makes us recognize that we have a best-in-class construct, and we're really looking forward to sharing that data at ASH.
Speaker Change: Our next question comes from Tyler Van Buren at TD Cowen. Go ahead, your line is open.
Speaker Change: Hey guys, good afternoon. Congratulations on the results. Just had another one on Anita Sells since the data reported yesterday were very exciting. So with the expectation to be on the market in 2026,
Speaker Change: So we have taken all of our learnings from Ysgarda and Tacardus and applied that to the Anita cell production. And as we
Speaker Change: Last quarter, we have done the full tech transfer into our Maryland facility, and we're producing a need-to-sell for Imagine 3 study where we have
Speaker Change: successfully dosed two patients now, and our turnaround times are looking very similar to our commercial products that we have today, again having applied all those learnings. So we don't have any concerns about our ability to scale. We've also not had
Speaker Change: feedback from the FDA that we would have to use the same approach as other competitors in this space.
Speaker Change: It comes from Mohit at Wells Fargo. Mohit, go ahead, your line is open.
Saadiyan: Hi, this is Saadiyan from MOHIT. Thanks for taking our question.
Speaker Change: Maybe one on Saladal Par. Could you share any early insights, especially regarding pear coverage, into this launch?
Speaker Change: Given that the other PPAR agonist is priced at a slight discount to solid L-PAR, do you see this impacting care preferences between these two options? Thank you.
Speaker Change: Sure, I'll take that one, Johanna. So we're really quite pleased with our initial launch. So it's only been a few months, we launched mid-August. But so far, we've exceeded
Speaker Change: Our internal expectations for patient demand, and I just want to take a moment and then I'll address your payer coverage question specifically.
Speaker Change: I'm just really pleased and proud of the cross-functional team that's come together so quickly. They were fully trained and mobilized within 24 hours of our approval, and we had our first script within hours of the approval from the FDA.
Speaker Change: We've reached over a thousand of our key targets in the first two and a half weeks post-launch.
Speaker Change: And obviously you can appreciate that our history in liver disease and our credibility here really opens the doors for the access to these key stakeholders for PBC, which really obviously is critical as you think about early launch dynamics.
Speaker Change: And so we're very excited about that.
Speaker Change: We also took a very clear strategy when it came to what we were looking for for reimbursement, but also distribution. And so from day one, we enabled direct purchasing with a specialty distributor, which was actually quite pivotal when you think about key academic centers. And if you think about the business, it's probably a mix about 50-50 or so between the academic centers and in the community.
Speaker Change: The coverage so far with payers is very much in line with their expectations for rare disease, and we're really quite encouraged to see that no major barriers are happening to actually get access to libidality outside of, you know,
Speaker Change: The typical ones that happen, but really for appropriate patients.
Speaker Change: It takes a little bit more time because we have to get through the step edits and the prior off.
Speaker Change: but we are getting through and patients are having access to cell adult power, lived LZ. So we're excited and more to come as we think about 2024, but more importantly, as we ramp up into 2025, right? We've always said it was a bit modest contribution in 24 with more meaningful contribution to sales in 2025. So stay tuned.
Speaker Change: Next, we have Daina Graybosch from Lee Wing Partners. Go ahead, your line is open.
Daina Graybosch: Hi, another one on InitoCell for me. I wonder what's gating the regulatory filing and also what will be required to build the market for InitoCell and myeloma beyond the stubborn sort of 20% penetration you're hitting your heads against in NHL second-line settings.
Speaker Change: Thanks a lot, Daina, for the question. So I think the the components around the regulatory filing, as you're aware of what we've seen with others in the space, is that the FDA would be looking at 12 months worth of data where
Speaker Change: You know, this will be a filing discussion that we have with FDA. We do believe we have a very differentiated safety profile and we'll be talking to the agency about that review cycle based on that.
Daina Graybosch: The second question that you asked was around the today only two out of ten patients.
Daina Graybosch: receiving CAR-T. We know in multiple myeloma, it's one out of ten, so we have our work to do. The work that we're putting towards the community practices
Daina Graybosch: and ungating some of the reimbursement access challenges are the same challenges we will face, whether it's lymphoma or multiple myeloma. So all of the applications we're putting forward in our plan today will apply to AnitaCell, and that's why it's really critical as we execute over the next 12 to 18 months, because we're really excited to bring AnitaCell to more patients.
Speaker Change: Our next question comes from Carter Gould at Barclays. Carter, go ahead, your line is open.
Carter Gould: Thank you. Good afternoon. Thanks for taking the question. Love all the Anita Soh questions, but I'm going to bring it back to HIV. I'm not sure who wants to take the question, but how should investors maybe gauge expectations of what we're going to hear at the analyst event? Should we expect an explicit...
Carter Gould: peak sales target for linacapavir and PrEP? Or how do you think about the long, maybe a long-term treatment market objective? Or should we expect more of the qualitative market color that maybe Johanna referenced earlier? Thank you.
Carter Gould: Thanks, Carter. This is Dan. So, first of all, we really look forward to hosting as many of you as possible at our HIV Analysts event in December.
Daina Graybosch: And our intention, you know, is to start sharing some more of our plans on the commercialization for Lenacap River Prep.
Daina Graybosch: You know, Johanna has started to outline that on our quarterly calls, but we really need some more time to dimensionalize that market.
Daina Graybosch: to begin to discuss how we will approach
Daina Graybosch: different aspects of the Lenicaf Prepare for Prep market. I think you can expect them to be
Daina Graybosch: qualitative but also quantitative from the opportunity I think to your point about peak sales and things that would come more into our guidance that would be that would come more at the at the beginning of next year in terms of how we might see 2025 and beyond
Daina Graybosch: But in addition to the commercialization, we're going to spend a lot of time on highlighting the progress of our long-acting treatment combinations.
Speaker Change: Merdad covered this in some of the prepared remarks.
Speaker Change: But we intend to bring you into even more detail about the progress of our lung vaccine treatment combinations in addition to what we've already disclosed.
Daina Graybosch: So we will have some new disclosures there. We'll also be able to share our perspective on how we see the treatment market evolving in the coming years.
Daina Graybosch: And I think that's an area of tremendous strength in terms of our overall program. As you know, we're processing a variety of long-acting treatment programs in parallel to make sure that we have multiple options for patients from longer-acting orals to longer-acting injectables. And you can expect to get an update.
Daina Graybosch: on the R&D progress of those.
Daina Graybosch: and some further update on timelines as we move forward.
Daina Graybosch: Just to remind you, of course, the totality of our HIV business is such that, uh...
Daina Graybosch: We really don't have any significant patent expertise.
Daina Graybosch: until Vic Tarvey in 2033, and really by that time, we will not only have the LEND4PREP unfolding over that period of time, but significant progress with potentially four new modalities for lung angiogenic treatment even before 2033. So the intention is to really pull through and to show you the durability of our HIV business well into the late 2030s.
Speaker Change: Our next question comes from Terence Flynn, Morgan Stanley. Terence, go ahead. Your line is open.
Speaker Change: Good evening. Thanks for taking our questions. This is Chris on for Terence. Just one question for Andy. Are you confident that you can drive operating margin expansion in 2025 on an ex-IPR&D basis? Thank you.
Speaker Change: Hey Chris, it's Andy. Thanks for the question. We'll provide more specific guidance on 2025, of course, on our year-end call.
Speaker Change: What we've said, though, consistently, and you've seen the last two quarters, is real progress in terms of letting the operating margin expand again as we now kind of enter a new phase.
Speaker Change: of having now built the portfolio, executing both clinically and commercially, and really focusing on expense management. You see the strong operating margin both in the second quarter and the third quarter. Again, you heard in my prepared remarks.
Speaker Change: that the operating margin would have been 47% this quarter, if you back out.
Speaker Change: the impact of the royalty purchase from Janssen on Saldelphar. So we're off to a great start. Our ambition and expectation is that we will have an industry-leading operating margin over time. So again, it's too early to give any specific guidance on 2025.
Speaker Change: More to come, but we're really pleased with where we are and the progress that you've seen in the last couple quarters, and we're already in a very strong spot, and we'll continue to work to improve it over time.
Speaker Change: Our next question comes from Chris Schott at J.P. Morgan. Chris, go ahead, your line is open.
Chris Schott: Great, thanks so much. Just another HIV question on combos. I think we've got a number of one-of-a-kind Cabaret beer combos in development. I guess I'm just trying to get my hands around, when you think about the portfolio,
Speaker Change: Where do you see sub-Q injectables playing in the treatment market relative to some of your weekly oral options? I looked at that chart. It seemed like a lot of the programs by 2030, other than the BNABs, were on the oral side. So I'm just trying to get a sense of like...
Speaker Change: How important is Sub-Q injectable there, or do you see this mostly a longer-acting oral opportunity for the company? Thank you.
Speaker Change: Merdad is here, Chris, we'll let him answer that.
Merdad: Hi, Chris.
Merdad: The way we're approaching this is really to take a very broad approach. With the success with Lenacapavir so far and what we've seen, we think that really forms a great foundation for us, and we believe that there is enough demand in both the oral and the injectable areas for us to be developing in both.
Merdad: So, to your point, we really do see an opportunity for PrEP on the oral side for us to provide either weekly or monthly options, potentially also then going into the treatment market farther down the road.
Speaker Change: and in subcutaneous and the key differentiator being the durability of the treatment so
Speaker Change: On the oral side, weekly to monthly, on the injectable side, we think we can get to every three months and hopefully even up to every six months and beyond. So I think that's the key differentiator for us in terms of how we think about
Speaker Change: the opportunity and of course different people will be looking for different approaches and our goal, our aim, is to provide those options for them.
Speaker Change: Yeah, maybe just to add to Merdad's comments, our approach is truly patient-centric. The opportunity is just to make sure that we answer and address the needs, and the needs have been met.
Speaker Change: I think there are some that really do prefer to be reminded and can take an oral pill only and don't want an injectable, and others don't really want to think about HIV if they don't have to and if they can take...
Speaker Change: for injections a year, that could do it as well, or two even, as to Merdad's comments as well. So, more to come on that as to what we're doing, but the intent is truly, as we're leaders today in HIV, both across treatment and prevention, the intent is to continue to remain leaders for the future. And that's really with the pipeline that we have in our portfolio and the combinations that we have. So, we're excited about the future and what it holds.
Speaker Change: Hi Chris, it's Andy. Maybe I'll just add one thing. The slide references the products that we expect to have approved by 2030. You should not read into that that we don't expect.
Andy: these long-acting subcutaneous products to come to market even shortly after that. So we'll provide more guidance over time. Again, we'll talk more about the portfolio at our HIV day, as Dan mentioned, but we were just focusing purely on that slide to the end of the decade. It doesn't mean that we don't see a series of potential product launches.
Speaker Change: Beyond that as well. So more to come. Thanks for the question
Speaker Change: Next, Salveen Richter from Goldman Sachs. Salveen, go ahead, your line is open.
Salveen Richter: Hi, can you hear me? Salveen?
Salveen Richter: Yeah, thank you. Sorry about that.
Salveen Richter: Good afternoon. So you've noted
Salveen Richter: with regard to your long-acting HIV PrEP market.
Salveen Richter: Thank you.
Speaker Change: Yeah, so Salveen, I'll try to address that one, and you'll hear more about that actually as we go into the HIV Analyst event as well in early December.
Speaker Change: So, we do believe that it's at least $600,000 by 2030. Now, this is a market in the past that we've really worked at through social media, direct-to-consumer.
Speaker Change: etc. to really make sure we activate it. And that's how it's grown thus far to the about 350 to 400,000 consumers today.
Speaker Change: We think there's a real opportunity, and most of the growth is going to come from different consumers, to be honest.
Speaker Change: Thus far, the vast majority of consumers of HIV PrEP are white MSMs.
Speaker Change: And so we think with Purpose 1, Purpose 2, and actually other purpose studies to follow, this is the broadest.
Speaker Change: clinical trial program that we've ever done in prevention, or that's ever been done in prevention. And it includes many other consumers that I think really may need or even want prevention. And that includes Latino, Black individuals, women, cisgender women, transgender, and then even young adults, right? And so a lot of that growth is going to come from there. So could it be beyond the 600? Absolutely, 600,000.
Speaker Change: And we do think that most of that is going to be driven by a new option on the market, and that is Lenacapivir for prevention. To have something that you don't need to think about when you're not ill, to take every single day versus twice a year.
Speaker Change: It is a big differentiation, let alone with the data and efficacy that we've shown in both Purpose 1 and Purpose 2. So, more to come on that. I do think we have a lot of opportunities here, and the intent is to truly work on expanding this market.
Speaker Change: for the future. I think it's not about thinking about what's currently in play today but actually what it could be by 2030 with a little bit investment and education and awareness.
Speaker Change: Our next question comes from Matt Bigler at Oppenheimer. Matt, go ahead, your line is open.
Matt Bigler: Great. Thanks so much for the question. I had a question on Ascent03 with that coming up. Can you just comment on how much larger you think that frontline opportunity is in triple negative breast cancer? Thanks.
Speaker Change: Yeah, so as you move up earlier lines of therapy, obviously, as TMBC progresses, unfortunately, quite rapidly, the market is actually quite larger. It's probably just about double more. And then, of course, the split between PD-L1 negative and PD-L1 positive, and that's Acento 3, Acento 4, that's a bit of a split as well, a little bit more on the negative than the positive in TMBC. And so we do think with Acento 3, and then the future with Acento 4, moving up in earlier lines of therapy can really make a difference for these women. If we can show overall survival in this setting as well, I think that can be incredibly powerful for us. As we've really established our place in Second Line Plus, as the standard of care, really the opportunity…
Speaker Change: would be to move up with those women to really make a difference earlier on in their metastatic disease.
Speaker Change: Next we have Astika Gunawardian from Truist. Go ahead, your line is open.
Speaker Change: Hi, this is Karina Barastica. I had a couple of questions. You mentioned that you had three patients, those on IMAGINE Free Study. Just wondering how many of the 130 clinical trial sites are recruiting patients?
Speaker Change: And another one is, also, you expect the needle cell to be used in outpatient settings since the time to onset of CRS was only two days. And Legend had previously mentioned that 45% of their patients are being used in outpatient settings. So your thoughts on that as well. Thank you.
Speaker Change: Yeah, we don't usually share the number of clinical sites that we have recruiting, but trust that the team is working hard to get all 130 up and going.
Speaker Change: You were asking a little bit about the outpatient profile. We believe that this therapy has an outpatient profile. You can tell just looking at the ICANs and CRS rates that we're seeing. And we've actually designed that into our phase.
Speaker Change: Imagine 3 phase 3 programs that will have data generated in that outpatient setting. As you talked about the onset, I think that's the component that we've designed into the trial.
Speaker Change: Our last question comes from Brian Abrams at RBC Capital Markets. Brian, go ahead, your line is open.
Brian Abrams: Hi, thanks so much for taking my question. Given the potential for Medicaid cutbacks under a new administration, can you remind us around the degree of Medicaid exposure across your HIV franchise and the mechanics of how access and reimbursement work for these patients with respect to a federal budget, and also how such cuts might impact your outlook, if at all? Thanks.
Speaker Change: Sure, so let me try to address that one, although I think there's still more to come, right? So we need a little bit more.
Speaker Change: to see how this plays out for Medicaid specifically. At this point in time, patients that are in HIV always have a...
Speaker Change: It's all back positions. So if Medicaid is where we go, that's probably about mid to...
Speaker Change: high 20% of our total HIV business and and that is a percentage of our business that we watch very closely. There's also ADAPT that supports through through the same system so there are different ways to get access for patients.
Speaker Change: in this setting, and honestly, what we're tracking more closely in the overall channel mix that we think about HIV is more the growth that we've seen in 340B settings, which also can impact the Medicaid patient population.
Speaker Change: From an access standpoint, it's never an issue to get HIV.
Speaker Change: parachutes that are available for all of these patients and we're going to watch very closely any Medicaid cutbacks at this point in time but nothing's yet been announced.
Speaker Change: That completes the time that we have for questions. I'll invite Dan to share any closing remarks.
Dan: First of all, thank you all for joining. This has really been the strongest quarter for us of the year.
Dan: The key highlights you've heard over the course of the discussion, both commercially but also clinically, the promise of our portfolio, the remarkable Phase II purpose, excuse me, the Purpose II data on Lenacapavir, you know, the very encouraging initial launch of Celadelpar.
Dan: and the data on Anita's cell. I just want you to know we're firmly focused as a team on strong commercial and clinical execution. We'll continue to prioritize resources.
Speaker Change: and we have a commitment to ongoing OPEX management. I just flag two things between now and the end of the year. That's obviously what we've spoken about the HIV analyst event in December, and also the upcoming presentation of Anita Sell at ASH. And with that, I thank you for joining. I'll turn it over to Jackie to close the call.
Jackie Ross: Thank you, Dan, and thank you all for joining us today.
Jackie Ross: One final housekeeping item, I can share that we are tentatively planning to release our fourth quarter and full year 2024 earnings results.
Jackie Ross: on February 11th 2025. Please note that this date is provisional and could be changed to accommodate scheduling conflicts that arise between now and then. As always, we will announce our confirmed date following the close of the quarter.
Jackie Ross: [music]