The moderator, Victoria, welcomes everyone to the Four Quarter and Full Year 2023 Gilead Sciences Earning Conference Call and introduces the host, Jacquie Ross. The speakers for the call include the Chairman and CEO, Chief Commercial Officer, Chief Medical Officer, and Chief Financial Officer of Gilead. They will discuss the company's earnings results and plans for the future. The call will also include a Q&A session with the addition of the Executive Vice President of Kite. The speakers remind listeners that they will be making forward-looking statements and refer them to the earnings press release and SEC disclosure documents for more information.

The company, Gilead, will use non-GAAP financial measures to help understand their business performance. The reconciliations between GAAP and non-GAAP will be provided in the earnings press release and on their website. The CEO, Dan O'Day, discusses the company's strong performance in 2023, with 7% growth in product sales driven by HIV and Oncology. The company's base business has consistently grown, offsetting the decline in Veklury revenues. Gilead has a catalyst-rich phase ahead with over 20 updates expected this year and 12 in Oncology by the end of 2024. These updates include Phase 3 updates for Trodelvy and results from a pivotal Phase 2 study for anito-cel.

The company has made progress in shortening the manufacturing time for Yescarta and has seen encouraging data in their Phase 3 trial for Trodelvy in lung cancer. They are evaluating next steps and have confidence in Trodelvy's potential. In their Virology department, they are expecting important updates for their HIV portfolio. However, their Phase 3 trial for obeldesivir in COVID-19 did not meet its primary endpoint.

The fourth quarter of 2023 was successful for Gilead, meeting all targeted goals and achieving high product sales. However, the decline in Veklury sales offset the growth of the base business. The company is looking towards 2024 with multiple opportunities in Virology and Oncology and a goal of delivering at least 10 transformative therapies by 2030. The team is thanked for their work and the presentation will continue with updates for 2024. Total product sales for the full year were at the high-end of the guidance range, with solid base business growth and a decline in Veklury sales.

In the fourth quarter, total product sales were down 4% year-over-year, with flat base business sales due to higher Oncology sales and lower HIV sales. The HIV business had a strong year, with 6% growth driven by demand and higher average realized price. Biktarvy, the leading HIV treatment, saw solid double-digit growth and continued to gain market share. Fourth quarter HIV sales were in line with expectations, with strong demand and favorable inventory dynamics offset by lower average realized price due to channel mix.

The company expects more challenging year-over-year comparisons in the immediate term due to the lack of pricing tailwinds seen in the second half of 2022 and first half of 2023. Quarterly HIV growth is less indicative of overall trends due to factors such as gross-to-net adjustments, timing of bulk government purchases, and inventory build by subchannel wholesalers and customers. However, overall demand trends remain strong and unchanged, with Gilead's market share in HIV treatment and prevention remaining high. For 2024, the company expects 4% growth in HIV sales, driven by treatment demand growth, market share gains, and continued growth in demand for HIV prevention. The first quarter is typically impacted by the reset of patient copays and deductibles.

In the fourth quarter, there was a decline in HIV sales due to inventory build-up and a similar decline is expected in the first quarter of 2024. Gilead's leadership in HIV is strong with a diverse portfolio and promising pipeline. The Liver Disease portfolio had consistent sales of $2.8 billion for the full year, with HCV market share remaining high. Veklury sales were variable, with a 28% decline year-over-year but a 13% increase sequentially, and exceeded expectations for the full year at $2.2 billion.

The Oncology business of the company has achieved a run-rate of over $3 billion, with strong sales of $765 million in the fourth quarter, a 24% increase from the previous year. Trodelvy, the company's leading product, has generated over $1 billion in revenue and continues to see strong growth. In addition, the company's Cell Therapy sector has also seen significant sales, approaching $2 billion in 2023. Trodelvy's demand trends and clinical profile have reinforced its position as the only approved TROP2-directed antibody-drug conjugate for multiple tumor types, with over 30,000 patients treated to date. The company is also looking to expand Trodelvy's potential reach by potentially making it available for metastatic bladder cancer patients, pending data from a Phase 3 study.

In 2023, Cell Therapy sales for Kite grew by 28%, driven by international expansion and reimbursement approvals. In the fourth quarter, sales were up 11% year-over-year but down 4% sequentially due to competition in the US market. Despite slower-than-anticipated growth in the US, CAR T class share remains strong in Europe and other markets. Kite has established partnerships with community networks to expand the reach of cell therapies and expects to see the impact in mid-2024. In the first quarter of 2024, Cell Therapy sales are expected to be flat to slightly up compared to the fourth quarter of 2023.

The company has achieved a 96% reliability rate and has shortened its manufacturing time for Yescarta by two days, setting a new industry standard. They will be hosting an event for analysts and investors to visit their manufacturing facilities. The company is grateful for their strong performance in 2023 and is looking forward to continued growth in 2024. They have had a busy start to the year, with results from their EVOKE-01 study in second-line plus metastatic non-small cell lung cancer and Phase 3 OAKTREE study of obeldesivir in COVID-19 patients. While the studies did not meet their primary endpoints, the company is encouraged by the data and will use it to inform their clinical programs. They plan to share the detailed data as soon as possible.

The author highlights observations from the EVOKE-01 trial that give confidence in Trodelvy as a potential treatment for lung cancer. These observations include numerical improvement in both squamous and non-squamous patients, a differentiated safety profile, and improved overall survival in a subgroup of patients non-responsive to prior immunotherapy. The data will be discussed with regulators and KOLs to determine the best path forward. The ongoing EVOKE-02 study also supports Trodelvy's potential in lung cancer patients. Based on these findings, there are currently no planned changes to the Phase 3 EVOKE-03 study.

The Phase 3 OAKTREE trial for our novel antiviral obeldesivir did not show significant symptom relief in non-hospitalized COVID-19 patients. However, the results reflect the decreasing severity and duration of symptoms in this patient population. We will continue to assess obeldesivir's potential for other viral infections. Our Phase 3 ENHANCE-3 trial for magrolimab in AML has been discontinued due to futility and safety concerns. We do not plan to further develop magrolimab for hematologic cancers. We expect the Phase 3 readout of lenacapavir for HIV prevention later this year and potential regulatory filing in late 2024 or early 2025.

Gilead is targeting approval for lenacapavir in prevention by late 2025, which would make it the first twice-yearly dosing regimen available for PrEP. They have several updates planned for their HIV program this year, including data from their Phase 2 ARTISTRY-1 trial for lenacapavir and bictegravir once-daily oral combination. They also have Phase 1 data on their once-weekly oral integrase inhibitor, GS-1720, and Phase 2 data on the once-weekly oral combination of lenacapavir and islatravir. In the second half of the year, they will provide an update on the Phase 2 trial for lenacapavir and bNAbs as a twice-yearly regimen. In terms of cell therapy, Gilead's confidence in the benefit-risk profile of Yescarta and Tecartus remains unchanged, despite recent proposed safety label changes by the FDA. Their Global Safety Database has not established a causal link between Yescarta and reported cases on the FDA public safety dashboard, and no cases of T-cell malignancies have been reported with Tecartus.

The company presented 26 abstracts at a recent meeting, showcasing the long-term success of their cell therapies Yescarta and Tecartus. Their partner Arcellx also presented positive data for their multiple myeloma treatment anito-cel. The company's manufacturing process for Yescarta has been approved by the FDA, reducing the turnaround time. They have eight ongoing cell therapy trials, including four exploring new indications and four in earlier lines of therapy. The company has also advanced eight new assets into the clinic, delivered 15 presentations at major conferences, and initiated three new Phase 3 programs in the past year.

In 2024, the company has set several milestones including updates on clinical trials for various diseases such as breast cancer, bladder cancer, and HIV prevention and treatment. They are committed to developing innovative therapies and are confident in making progress towards this goal. In 2023, the company's total product sales, excluding Veklury, grew 7% with strong contributions from HIV and Oncology. Veklury revenue exceeded expectations due to higher hospitalization rates, but declined compared to 2022.

The company's total product sales for the year were flat, with growth from their base business offsetting a decline in Veklury sales. Non-GAAP results were in line with expectations, with EPS of $6.72. GAAP results were impacted by restructuring expenses, resulting in EPS of $4.40. In the fourth quarter, product sales were down 4%, with Veklury sales decreasing due to lower COVID-19 hospitalizations. Non-GAAP product gross margin was 86%, R&D expenses were down 6%, and SG&A was down 21% due to a charge in 2022 that did not repeat in 2023.

The operating margin increased in the fourth quarter of 2022, while the effective tax rate remained flat. Non-GAAP diluted earnings per share also increased compared to the previous year. The company's guidance for 2024 assumes a stable macro environment and includes estimated sales for HIV and Veklury. Product gross margin is expected to be slightly lower due to the growing contribution from the oncology portfolio. R&D expenses will see a moderate increase, while SG&A expenses are expected to decline compared to 2023. Acquired IPR&D expenses will also be highlighted as new transactions are announced.

The company expects SG&A to grow in the low-to-mid single digit percentage range, resulting in an operating income between $11.2 billion and $11.7 billion for 2024. They also anticipate a 19% effective tax rate and non-GAAP diluted EPS between $6.85 and $7.25. The company plans to return value to shareholders through dividend payments and share repurchases, and will continue to invest in the business and utilize share repurchases to offset equity dilution.

The speaker is discussing the product sales guidance for 2024 and the potential for growth in products excluding Veklury. They mention a 5% year-over-year growth at the midpoint, with a focus on strong growth in the HIV business and the Cell Therapy business. They also mention the expectation for a substantial moderation of operating expense growth. They look forward to updating on the progress throughout the year. A question is then posed by Salveen Richter from Goldman Sachs.

During a Q&A session, an analyst asked Gilead CEO Daniel O'Day about potential business development opportunities in the company's Virology, Oncology, and Inflammation areas. O'Day reiterated the company's M&A strategy and its focus on building a strong late research and early development pipeline. He also noted that the company's leverage ratios are back to pre-pandemic levels, giving them the ability to put capital to work. Another analyst asked about the potential for Gilead's anito-cel drug to differentiate in the treatment of neurotoxicity and parkinsonism compared to competitors.

During a Q&A session, a question was asked about the potential de-risking of the company's neurotox data later in the year. Daniel O'Day deferred the question to Cindy Perettie, who stated that they expect to complete enrollment in their IMAGINE-1 study this year and have not observed any safety signals related to neurotoxicity so far. She also mentioned the possibility of a differentiated safety and efficacy profile for their treatment. The next question was about the company's confidence in their Trodelvy treatment in the front line, non-small cell lung trial, and whether the recent EVOKE-01 data may lead to changes in the trial. Merdad Parsey responded to this question.

The speaker is discussing the data from the EVOKE-01 study, which confirms that there is no difference in response rates between squamous cell carcinoma and non-squamous cell carcinoma. This was a concern in the past but has been alleviated by the results of the study. The speaker also mentions other analyses that need to be done to determine other predictors of response. They have high confidence in Trodelvy and have multiple trials ongoing in different indications. The speaker also mentions upcoming updates on other trials, including ASCENT-03 in breast cancer. Overall, the results from EVOKE-01 have not changed their enthusiasm for Trodelvy's potential in terms of efficacy and safety.

The speaker thanks the questioner for their question and acknowledges that the safety profile of a new drug cannot be fully understood based on Phase 1 data. They also discuss the implications of this fact on their TAF litigation and explain that if the Supreme Court takes up their petition, they will have the opportunity to present their arguments and evidence. They also provide an update on the TAF litigation, stating that the first trial in the federal court has been dismissed and that over 5,300 cases have been dismissed in total. The first bellwether trial in the federal courts is now scheduled for November.

During a conference call, an operator introduces a question from Olivia Brayer of Cantor Fitzgerald about the dynamics of Yescarta and growth expectations for the Cell Therapy franchise in 2024. Cindy Perettie, a representative from the company, responds that they are leaders in Cell Therapy and have observed capacity constraints and competition within the existing ATCs. They are also working on expanding their ATCs in the community, which will take longer but is an important part of their future strategy. The next question, from Geoff Meacham of Bank of America, is about the profitability of the Cell Therapy franchise. Andy Dickinson, another representative, responds that they have made progress in improving turnaround time, reaching scale, and treating many patients, and are working towards making the franchise profitable in the future.

The Cell Therapy business has made significant progress in the past few years and is expected to be profitable and accretive by the end of year four. The company has seen improvements in manufacturing efficiency and costs, despite opening three global manufacturing centers. Restructuring at Kite has also been implemented to drive growth and efficiency in the long run. The business is focused on long-term sustainability and growth, with the addition of a viral vector facility.

The speaker explains that there were some pricing benefits in the first half of 2023 due to high inflation rates, but this was not expected to continue. In the second half of 2023, demand remained strong, but there were fluctuations in quarterly results due to changes in channel mix, resulting in lower average realized prices. Overall, the situation should be looked at on a full year basis.

Gilead Sciences' HIV performance may vary quarterly, but overall, it grew 6% in 2023, driven by the success of Biktarvy and Descovy for PrEP. The company expects a 4% growth in HIV in 2024. In regards to the TIGIT program, the company has decided to increase investments and de-emphasize the PD-L1 high population in favor of other populations. Gilead values its partnership with Arcus and their developed programs.

The recent updates to the partnership between the two companies have allowed for more efficient deployment of teams and capital. The decision-making process has been streamlined and additional capital will expand the clinical study footprint. This shows support and belief in the programs, not just TIGIT. The ARC-10 study, which started in 2021, was updated last year to include PD-L1 inhibitors as standard of care was evolving. However, enrollment was not as robust as expected and the decision was made to prioritize the all-comers population in the STAR-121 study. The potential next steps for PD-L1 poor responders are pending KOL and regulatory discussions.

The question asks if the population in the second-line lung study for Trodelvy is sufficient, and if another study may be considered. The speaker, Merdad Parsey, responds by discussing the upcoming updated data from the EVOKE-02 study and how it may impact their plans for Trodelvy in lung cancer.

This summary was generated with AI and may contain some inaccuracies.