Gilead Sciences Inc (GILD) — Q1 2021 Earnings Call Transcript

Thank you, Liz, and good afternoon, everyone. Just after market close today, we issued a press release with earnings results for the first quarter of 2021. The press release, slides, and supplementary data are available on the investors section of our website at gilead.com. The speakers on today’s call will be our Chairman and Chief Executive Officer, Daniel O'Day, our Chief Commercial Officer, Johanna Mercier, our Chief Medical Officer, Merdad Parsey, and our Chief Financial Officer, Andrew Dickinson. After that, we’ll open up the call to Q&A, where the team will be joined by Christi Shaw, the Chief Executive Officer of Kite. Before we get started, let me remind you that we will be making forward‐looking statements, including those related to the impact of the COVID‐19 pandemic on Gilead’s business, financial condition and results of operations; our plans and expectations with respect to products, product candidates, corporate strategy, financial projections and the use of capital; and our 2021 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. I will now turn the call over to Dan.

Thank you, Jacquie, and good afternoon, everyone. We appreciate you taking the time to join us today. Before I hand over to the team to go into the details of our commercial, pipeline and financial results, I wanted to share our overall assessment of Gilead’s first quarter. 2021 is a pivotal year for Gilead, and as you can see on Slide 4, we are off to a solid start. Our first quarter total product sales were in‐line with our internal expectations. While our core business was more impacted by COVID‐19 than we anticipated, this was offset by higher Veklury sales. In the United States, one in two hospitalized patients are receiving Veklury, and worldwide Veklury continues to play a key role as a standard of care treatment for patients who are hospitalized with COVID‐19. Given the desperate situation in India, Gilead has been working with the Indian government, health authorities and our voluntary licensees to increase supply of remdesivir and provide donated medicine. As the trajectory of the pandemic evolves globally, we will continue to invest in multiple clinical studies of Veklury, including alternative formulations. Earlier this month, we received two FDA approvals for Trodelvy. The full approval for metastatic triple negative breast cancer extended the label to second‐line plus patients. This means, Trodelvy could help many more patients, as there are more than double the number of patients in this category as there are in the third line setting. We also received accelerated approval in second‐line plus metastatic urothelial cancer. In March, we announced a new partnership to combine investigational lenacapavir with Merck’s investigational islatravir for long‐acting HIV treatment, accelerating the path to the next wave of therapies. While many people living with HIV may prefer a daily regimen like Biktarvy, we believe that broadening their options to include weekly oral therapies and infrequent injections every three months or longer addresses a significant patient need, and sets up strong, sustainable HIV leadership into the late 2030s. Long‐acting formulations, such as lenacapavir as monotherapy, are also likely to unlock further PrEP usage and reach many more people at risk of HIV. We are also pleased with our progress in advancing lenacapavir in both treatment and prevention settings as part of our internal clinical development. This past quarter, we reported compelling long-acting efficacy data for lenacapavir in heavily treatment‐experienced people with multi‐drug resistant HIV. We are fully confident that lenacapavir will be the foundation for our long-acting HIV treatment and prevention portfolio. And while we advance lenacapavir, Biktarvy usage continues to grow, with one in two people living with HIV starting their treatment on Biktarvy in the U.S. In addition, Biktarvy is capturing one in two switches, and approximately half of those are switching from a regimen that includes a non‐Gilead agent. In addition to securing regulatory approvals in oncology, we have already achieved several other pipeline milestones, including EMA validation of the Trodelvy MAA for metastatic triple‐negative breast cancer and submission of the supplemental biologics license application to FDA for Tecartus in relapse or refractory ALL. Building on the work we did last year, we continue with the disciplined prioritization of our pipeline across Gilead. To share one example, Kite completed an optimization exercise this past quarter, to ensure that resources are focused on the most promising opportunities to make a difference for patients. Finally, we're looking forward to a full-year of clinical news flow for Gilead. Our pipeline list for 2021 includes over 20 milestones across therapeutic areas. While they are all important steps in Gilead's journey to serve more patients and diversify our business, Slide 5 lists the most significant items, so you can track our progress more clearly. These include the Phase 3 TROPiCS-02 PFS readout for Trodelvy in hormone receptor positive HER2-negative metastatic breast cancer; Yescarta's Phase 3 ZUMA-7 readout for second-line DLBCL, which could result in an sBLA submission later this year; the Phase 3 readout for Hepcludex that could lead to BLA filing; ARC-2 Domvanalimab Phase 2 or seven interim readout in non-small cell lung cancer, which could inform an opt-in decision; Magrolimab's Phase 1b data readout in MDS, which could lead to a submission for accelerated approval later this year; and potential Phase 2 initiation of lenacapavir and islatravir as a long-acting oral HIV treatment in the second-half of 2021. Our aspirations for patients are bold and our pipeline offers diversity across indications and risk profiles. While execution will continue to be a focus, these milestones give us a great deal of optimism about the future and our ability to deliver therapies that make a meaningful difference for patients. Before I hand off, I want to take a moment to thank Dr. Bill Lee, who is retiring from his role as Executive Vice President of Research after 30 years at Gilead. On behalf of all of us, I want to offer my sincere gratitude to Bill for his outstanding contributions that have helped to benefit millions of patients around the world. I would also like to welcome Dr. Flavius Martin, who joined Gilead as the new EVP of Research on April 12. Flavius has an impressive track record in overseeing industry-leading research and advancing new therapeutic candidates. With that, I'll invite Johanna to update you on our commercial operations in the first quarter.

Thanks, Dan, and good afternoon, everyone. Starting on Slide 7, it was a solid quarter of execution for the commercial team with total product revenue of $6.3 billion, up 16% from the first quarter of last year. This was in line with our internal expectations as Veklury sales offset a more substantial pandemic-related impact on our core business than we had anticipated. Excluding Veklury, total product revenue was $4.9 billion, reflecting inventory and pricing seasonality the anticipated HIV loss of exclusivity in the U.S., and ongoing pandemic-related dynamics in HIV and HCV. Moving to HIV on Slide 8. Revenue was down sequentially as expected, primarily due to seasonal trends. As a reminder, two things happen every year to our HIV business that contribute to a sequential decline from Q4 to Q1. First, the channel builds inventory in the fourth quarter then draws it down in Q1. In the first quarter of 2021, this inventory impact contributed an estimated $410 million to the sequential decline. Second, we've realized lower net HIV prices in the first quarter due to items such as increased co-pay support and Part D discounts, which tend to normalize throughout the rest of the year. This quarter, we had two additional impacts. A year-over-year decline of $335 million in Truvada NHFR revenue associated with LOEs in the US. And a difficult comparison in the first quarter of 2020 given the pandemic-related HIV stocking we saw in March of 2020, as well as the impact of the pandemic on HIV market demand. Our focus is on market share driven by demand. Overall, three out of four people living with HIV initiate or switch to Gilead products, highlighting the strength in demand for our life-changing medicines. While the pandemic dampened market size and switch volumes, we maintain market share in line with prior quarters across our total HIV portfolio despite generic erosion. In terms of product lines, Biktarvy was up 8% year-over-year, but down sequentially as expected driven by seasonal inventory and pricing dynamics. Despite the pandemic's impact on new starts and switch volume in HIV, fundamental demand for Biktarvy remains strong, with five share points growth compared to the same time last year and two share points growth just in the last quarter in the United States. As Dan mentioned earlier, one out of two people living with HIV initiating or switching therapy is prescribed Biktarvy. Further, nearly half of Biktarvy switches come from incremental sources. Descovy revenue was down sequentially and year-over-year largely driven by seasonal inventory and pricing dynamics. Although PrEP volume continues to be impacted by the pandemic, Descovy's market share remains stable around 45% and positions us well as the PrEP market recovers post‐pandemic. Moving to Slide 9, HCV first quarter revenue was $510 million. We continue to maintain a leading share of about 60% in the US and 50% in Europe. Despite COVID continuing to impact patient starts, we did see modest sequential improvement overall in patient volume, although it remains depressed versus pre‐COVID levels. HCV also benefited from a pricing adjustment in France. As shown on Slide 10, in Q1, HBV and HDV sales totaled $220 million, with HBV sales of $214 million, growing 15% year‐over‐year, driven by strong Vemlidy demand, most notably in China and in the US. We continue to expect the HBV franchise sales to reach $1 billion by full year 2022. With the completion of the MYR acquisition during the first quarter, our portfolio now includes Hepcludex. There are currently no available treatments for HDV, making Hepcludex, which has received conditional approval by the EMA, a first‐in‐class treatment. This innovative drug blocks viral entry into liver cells. We are targeting a BLA submission later this year, and are excited by the opportunity to make Hepcludex more broadly available and address the unmet need for people who are infected with HDV. Moving to Slide 11, Trodelvy delivered $72 million in its first full quarter as part of the Gilead portfolio. In a span of just three weeks this month, Trodelvy received FDA full approval for second‐line plus metastatic triple negative breast cancer, received accelerated approval in second‐line plus metastatic urothelial cancer, and had its ASCENT Phase III data published in The New England Journal of Medicine just a week ago. We can now leverage treatment efficacy data from the full trial population in our discussions with physicians, and build even greater confidence to consider this potentially transformative therapy. This more than doubles the patient population, extending our reach to 6,000 second line metastatic TNBC patients in the US, in addition to over 4,000 patients in the third‐line plus population. Given the poor prognosis and difficulty in treating both second and third line metastatic TNBC patients, Trodelvy could extend median overall survival by almost a year while also nearly tripling the median progression-free survival compared to chemotherapy. Outside the US, we submitted the TNBC Marketing Authorization Application based on the ASCENT Phase III clinical study for an accelerated review process. We look forward to continuing discussions with the European Medicines Agency and anticipate approval as early as December of this year. Additionally, Trodelvy is under review for TNBC in the UK, Canada, Switzerland, and Australia as part of Project Orbis. On Slide 12, Christi is on the call to answer your questions shortly, but you can see that our Cell Therapy business had a strong quarter, with revenue of $191 million, up 36% from the same quarter last year, driven by growing adoption of Yescarta in Europe, with our industry‐leading four‐year 44% overall survival. The recent approval for Yescarta in follicular lymphoma will broaden our addressable patient population and support our ongoing growth. Tecartus continues to see strong launch demand as physicians and patients adopt the first and only cell therapy approved for relapsed or refractory mantle cell lymphoma. Moving to Veklury on Slide 13, first quarter revenue was $1.5 billion, with demand tracking hospitalization rates. Although we saw lower hospitalization rates and increasing vaccination rates in certain parts of the world, overall progress was more gradual than expected over the first quarter and as such, we are now assuming a slower pandemic‐recovery for the second quarter. As the pace of recovery builds momentum in the second half of the year, this should contribute to a modest recovery in patient starts for our HCV and HIV franchises. We will continue to play our part to support broader access for eligible patients in need of remdesivir. We are working with our voluntary licensees to accelerate production capacity for India, while also donating 450,000 vials of Veklury to help patients as the supply of licensed generics increases. Our thoughts are with those who continue to tackle the worst of this pandemic. With that, I’ll hand the call over to Merdad.

Thank you, Johanna. As both Dan and Johanna mentioned, we are off to a solid start in a catalyst-heavy 2021, and my comments today will focus on the nearer-term events and changes to our pipeline. A comprehensive update on our broader pipeline is included in the appendix of the slide deck available on our IR website. I’ll start with our virology pipeline. We remain as focused as ever on driving innovation in HIV therapies, and there are no changes to the expected timelines associated with our lenacapavir programs. In HIV prevention, we are activating sites for our first Phase III study for lenacapavir as monotherapy for the prevention of HIV and will begin screening patients later this quarter. This study will focus on preventing infection in cisgender men, transgender women and men, and gender non-binary people who have sex with men. In the second half of 2021, we plan to initiate a study looking at lenacapavir for the prevention of HIV infections in adolescent girls and young women. In treatment, we presented additional data from the Phase II/III CAPELLA trial for lenacapavir at CROI and we continue to expect our first lenacapavir filing for use with other anti-retrovirals and heavily treatment-experienced individuals in the second half of this year. We anticipate data later this year from the Phase 2 CALIBRATE study in the treatment-naive population to support a virologically suppressed indication. And we plan to launch a Phase 2 trial for a long-acting oral treatment combination of Gilead's lenacapavir and Merck's islatravir in the second half of this year. Both medicines have shown long half-lives and high potency at low doses. As such, we believe that the lenacapavir plus islatravir combination is promising and we're excited by our new partnership and working with our colleagues at Merck to bring the maximum benefit possible to people living with HIV. Based on our commitment to HIV, we continue to work towards a potential cure. We have several early-stage programs evaluating combinations to understand the biology and identify a path for this important mission. Leveraging our internal expertise as well as external partnerships, including Aelix and Gritstone. Moving on to the oncology pipeline, which has over 20 internal clinical-stage programs, including many built around Trodelvy. We're excited to have received full FDA approval of Trodelvy in second-line plus metastatic triple-negative breast cancer based on the confirmatory Phase 3 ASCENT trial data. In the US alone this indication expands upon the accelerated approval for third-line metastatic triple-negative breast cancer to now include second-line patients who have had at least one prior treatment for metastatic disease. Trodelvy has the potential to significantly improve overall survival and progression-free survival outcomes for patients. In the US, there's a population of 10,000 patients who may benefit from Trodelvy. We also received FDA accelerated approval for second-line metastatic urothelial carcinoma based on positive data from the Phase 2 TROPHY study. With almost one-third of patients responding to treatment and a 7.2-month median duration of response, Trodelvy offers a much-needed new treatment option for many patients with metastatic urothelial cancer, whose disease continues to progress despite receiving available first and second-line treatment. In the US alone, we estimate there are roughly 8,000 addressable patients. 2021 will continue to be an exciting year for Trodelvy, and there have been no changes to the 2021 timelines we shared previously. We submitted the MAA to the EMA for Trodelvy in second-line plus metastatic TNBC in March, and it's now under accelerated review. We continue to target EU approval in the second half of this year. Later this year, we anticipate a Phase 3 TROPiCS‐02 progression-free survival readout for hormone receptor positive HER2-negative metastatic breast cancer. Pending data, we'll evaluate and determine the appropriate next steps from a regulatory standpoint. We estimate there are roughly 17,000 patients in the US who could benefit from Trodelvy in this setting. We're now actively recruiting additional patients for the Phase 2 TROPiCS-03 basket study in solid tumors to expand eligibility to patients regardless of TROPiCS-02 expression. We've already decided to initiate a Phase 3 trial in non-small cell lung cancer in the second half of this year, and we'll share updates on additional planned studies later this year. With FDA's accelerated approval of Yescarta for patients with third-line plus follicular lymphoma in March, we now have added a third indication for the Kite portfolio. The ZUMA-5 study data showed that 91% of patients responded to a single infusion with an estimated 74% of patients in continued remission at 18 months. We're working towards making this option available to patients outside the US and continue to target an MAA filing in the next several months. There are no changes to the expected timelines for the ZUMA-7 study assessing Yescarta for second-line diffuse large B-cell lymphoma patients. We expect to announce the top-line Phase 3 outcome later this quarter, followed by sBLA and MAA submissions in the second half of the year. Additionally, the FDA has approved the inclusion of the ZUMA-1 Cohort 4's updated safety data into Yescarta's label for third-line DLBCL. Moving on to Tecartus, we submitted our sBLA for relapsed or refractory adult B-cell precursor acute lymphocytic leukemia just after the end of the first quarter. If approved, Tecartus would add a much-needed treatment option for patients 18 and older. We plan to share the ZUMA-3 data at ASCO this summer and we continue to enroll patients for ZUMA-4 to evaluate Tecartus for ALL in the pediatric population. Consistent with our ongoing efforts across both Gilead and Kite, we will continue to focus and streamline the Kite portfolio to align with our key strategic priorities and expertise in hematologic malignancies, specifically lymphoma and leukemia. In addition to the previously mentioned milestones for virology, Trodelvy, and Kite, we have several other notable upcoming events. First, I want to highlight Magrolimab's progress and outlook in myelodysplastic syndrome and acute myeloid leukemia. In MDS, we expect to see Phase 1b data in the second half of this year, and those data could lead to a BLA submission before the end of the year. If approved, magrolimab will be the first-in-class macrophage checkpoint inhibitor targeting CD47 and Gilead's first frontline oncology indication. There's a significant unmet need for MDS with no new treatments approved in 14 years, despite 15,000 new patients diagnosed each year in the US alone. We're also exploring pivotal studies in frontline AML. Additionally, we continue to evaluate multiple solid tumor indications for Magrolimab, most recently initiating a Phase Ib/II second-line plus solid tumor basket study and a randomized Phase II study for head and neck cancer in combination with chemotherapy and Merck's KEYTRUDA. In virology, we're thrilled to officially add Hepcludex into our portfolio and look forward to Phase III data readout later this quarter with the potential for a BLA filing in the second half of the year. As for potential opt-in programs, the Arcus ARC-7 non-small cell lung cancer study is expected to evaluate interim data in the second quarter. We and the Arcus team have indicated that the interim analysis is targeting an ORR of 50% or greater with a clear separation in ORR from the Zimberelimab monotherapy arm when compared to the Domvanalimab plus Zimberelimab combination arm. Lastly, you can see our robust and diversified pipeline across oncology, virology, and inflammation. In addition to the readouts on the previous slide, we have multiple collaboration programs that we're monitoring closely including Arcus's ARC-8 study in pancreatic ductal adenocarcinoma and ARC-6 study for castration-resistant prostate cancer, both of which expect initial readouts later this year. The Galapagos 623 Toledo proof-of-concept trials across psoriasis, ulcerative colitis, and RA are also expected to have readouts later this year. In closing, we're pleased to see how our portfolio has grown from about 30 clinical-stage programs two years ago to 47 today, while maintaining our focus on disciplined management of R&D expenses. We've also gone from six molecules approved, filed, or in registrational studies to 15. Our teams have worked tirelessly to continuously evaluate and accelerate priority programs. We're thrilled to see how our portfolio is developing. And we look forward to accelerating innovation to help transform patient care. With that, I'd like to hand the call over to Andy.

Thank you Merdad and good afternoon everyone. As you can see we are building momentum in our clinical pipeline and we expect to have plenty of data to share as we move through the rest of 2021. Moving to Slide 21. The first quarter was a good start to the year with total product sales in line with our internal expectations overall as modestly higher Veklury sales offset a slower pandemic-related recovery than we had anticipated. In addition to pandemic impacts, our HIV business reflected the inventory seasonality we typically see in the first quarter. Total product sales were $6.3 billion up 16% year-over-year driven primarily by Veklury. The first quarter reflects continued growth from Biktarvy, our first full quarter of Trodelvy sales and strong growth in HBV as well as cell therapy. This growth was offset by ongoing COVID-related softness across our business in addition to the Truvada and Atripla LOEs. As also indicated by Johanna, there is the difficult comparison to the first quarter of 2020 given the pandemic-related HIV stocking observed last year. As a result total product sales excluding Veklury were $4.9 billion down 11% year-over-year. Non-GAAP product gross margin was 86.5%, 60 basis points lower year-over-year primarily associated with product mix and a small inventory charge partially offset by favorable royalty adjustments. Non-GAAP R&D was $1 billion, up 4% year-over-year primarily driven by investment in new pipeline products including Trodelvy and magrolimab offset by timing of certain clinical studies and lower Veklury-related expenses. Non-GAAP SG&A was also $1 billion, down 4% from Q1 2020 due to timing of grants and sales and marketing activities. This was partially offset by higher commercialization investments associated with Veklury, Trodelvy cell therapy and HBV and HIV in China. Moving to tax. We realized a lower rate of 18% for the quarter due to recognition of favorable settlements with tax authorities. Overall our non-GAAP diluted earnings per share were $2.08 in the first quarter of 2021 compared to $1.68 for the same period last year. The year-over-year improvement was primarily due to Veklury revenues, flat operating expenses and a lower tax rate offset in part by lower interest income. You can see on Slide 22 that there is no change to our full year non-GAAP guidance. While the pandemic remains unpredictable and as we realized a more substantial impact to our core business in the first quarter than we had anticipated, we are nonetheless encouraged by the lower hospitalization rates and increased vaccinations. We have modified our assumptions on the timing of pandemic recovery to allow a more gradual improvement starting in the second quarter. We continue to expect total product sales excluding Veklury of $21.7 billion to $22.1 billion. We continue to expect full year non-GAAP R&D and SG&A expenses each to be flat to down low single-digit percentages year-over-year. Given our first-quarter results, you can see our R&D expenses are somewhat back-end loaded in 2021 based on the timing of clinical activities which include the anticipated initiation of the solid tumor study with magrolimab advancing internal long-acting combinations with lenacapavir for the treatment of HIV and other pipeline activities. Our work with Merck on a long-acting treatment regimen for people living with HIV is also underway and will ramp-up during 2021, although, we are able to absorb this program into our current R&D expense guidance. In SG&A, we are ramping up sales and marketing to support efforts such as the ongoing and expected launches of Trodelvy in the U.S. for bladder cancer and in Europe for triple-negative breast cancer. Additionally, we expect to start seeing higher travel and other costs scale-up in the second half of the year, as social distancing restrictions lighten-up in some geographies. Despite the lighter expenses in the first quarter, we're leaving our operating expense guidance unchanged, as we expect to catch up on this to some extent later in the year. And for now, retain the flexibility to manage the timing of clinical and commercial investments. We continue to expect our non-GAAP tax-rate to be 21% for the year. While we are carefully monitoring the discussions on a higher corporate tax-rate here in the United States, we believe any impact is more likely in 2022 and beyond, although, of course, a more immediate change could alter our current-tax guidance. Finally, with no changes to our revenue or operating expense guidance we continue to expect non-GAAP diluted EPS of $6.75 to $7.45 for the year. We have updated our GAAP diluted EPS guidance and now expect to be in the range of $4.75 to $5.45, down from $5.25 to $5.95, reflecting fair value losses for our equity holdings in the first quarter, donation expenses and other pre-tax charges including upfront payments related to collaboration. On Slide 23, you can see that we remain diligent in our capital allocation priorities. Already this year, we have repaid $1.25 billion in debt. And we're on track to pay down at least $4 billion in total by the end of the year. We have also returned $1.2 billion to shareholders, through dividends and repurchase of shares. To close, we remain committed to delivering for patients and for shareholders, as we look to invest in our business and R&D pipeline, while paying close attention to our expenses. With that, I'll hand the call back to Dan for a few closing comments.

Thanks Andy. And before we open-up for questions, I'd like to thank the broadly Gilead team, who accomplished a great deal in the first quarter, setting the stage I think for quite an exciting year reaching catalysts across our clinical portfolio. Of course, Gilead would not be the company it is today without the vision of John Martin, Gilead's Chief Executive Officer for 20 years, who passed away in March. Under his leadership, Gilead transformed the treatment of HIV and viral hepatitis and became a global organization, firmly rooted in its commitment to science and to patients. That commitment will be a constant, as we work to take John's legacy forward in Gilead's next chapter. With that, I'll invite the operator to begin the Q&A.

Hi. Thanks so much for taking my question. It looks like you're seeing steady growth in adoption of Trodelvy. So I'm just wondering, how should we think about the potential for a near-term inflection and update, now that you'd have full approval in triple-negative, the publication out and label expansion into urothelial? And I'm curious, are you starting to see some pull through. And where do you stand with respect to community physician awareness? How important is that as well for adoption? Thanks.

Thanks, Brian. Johanna, please.

Thank you for the question, Brian. We're very excited about the recent developments with Trodelvy. This will definitely help us gain momentum, as you mentioned. Our awareness in academic centers is over 80%, but we still need to improve our presence in the community, which is currently around 50%. Since a large portion of patients are in community settings, there's a significant opportunity for us to effectively communicate our messages. Previously, we weren't able to promote overall survival due to having only conditional approval. Now, with full approval, we can not only double the patient population that Trodelvy can assist but also promote overall survival, which is unique in this setting. This should help us accelerate our efforts. Our focus will remain predominantly on second-line plus triple-negative breast cancer, with minimal emphasis on urothelial cancer. We believe this focus will work well because there is considerable overlap, with about 70% of physicians treating both bladder cancer and TNBC. We are well-positioned to increase our efforts this year, as this is a crucial opportunity for Trodelvy.

Merdad, I had a two-part question for you. You highlighted a couple of oncology events happening in the second-half of the year, namely the magrolimab Phase Ib data and Trodelvy data in the ER-positive HER2-negative breast cancer. On magrolimab, can you give us some sense of what data needs to be produced to support a filing? And on Trodelvy, there's been a fair amount of breast cancer data recently. Has anything that you've seen questioned the powering assumptions behind the revised design of the TROPiCS-02 trial? Thanks.

Thanks, Phil. Great questions. In terms of magro, in terms of what we think we need to see. Look, I think, the challenge there is, obviously, that we're looking at external comparisons. So we believe that it's really around the strength of the data and its consistency with what we've seen already in that setting with magrolimab. I think our assumption is, as long as we are consistent with the data that has emerged that will give us really good grounds to go and approach regulators to discuss a potential filing. So we're, I would say, reasonably confident there and our expectation is, as long as things continue to go the way they have been, we'll be fine. In terms of the breast cancer data for Trodelvy. Yes, I think, in terms of our confidence, I think we remain confident that we're really well powered in that study to show benefit, in particular, in PFS, as well as OS in that trial. So I don't think we've seen anything emerge that shakes our confidence around that.

Hi. Thanks for taking my question. On Yescarta, I was just wondering, could you find the incremental effort that would be required on your side to access the second-line DLBCL population should see the 7 readout positively? Just thinking in terms of any overlap there might be in the sort of centers where these patients are treated? And kind of, on a related note, has there been much COVID impact on the cell therapy franchise, Germany seems to have performed pretty robustly? Thank you.

Thanks, Louise. Over to you, Christi.

Thank you. So I'll take the last one first maybe, which is the COVID impact. We did see COVID impact and slowing of our ramp-up that we started doing well Q1 of last year and there was a slowdown in Q3, Q4. We've seen that rebound in Q1. We do believe that that has to do with less COVID impact, especially in the U.S., Europe, in spite of the COVID impact, continued to grow over those quarters. Germany and Italy, being the exceptions, where the COVID impact has been greater on our business there. Overall, though, we're very pleased with what we're seeing from quarter four to quarter one of this year, significant growth and coming off a couple of down quarters for Yescarta, both the U.S. and the – and Europe up quarter-over-quarter now with Yescarta. And on the second-line DLBCL question. So the good news is, the APCs are already set up, just like with Yescarta's we're able to launch quickly. So moving up to the second-line doubles the market opportunity, doubles the number of patients that we can serve. We also have community reps in the field already, both in Europe and in the U.S. So this referral pattern will continue to be something that we work on. But the belief, or my belief is, that as we look at patients in the third-line plus, those are typically patients that are going for palliative care and quality of life and short-term quantity of life is being managed whereas with ZUMA-7 in the second-line versus stem cell transplant, physicians and patients are still looking for a cure. So if the study is positive, we're looking at replacing stem cell transplant as a standard of care in second-line for curative potential. Remember, stem cell only cures 20% of the patients that are sent there.

Thanks, Christi.

Afternoon, guys. Thanks so much for the question. I wanted to ask one on Biktarvy. The adoption has been hugely successful and really for quite some time. So the question is, where do you see share maximizing in the U.S.? And what are the bigger growth opportunities? And then in the EU, what has been the primary headwind to greater share? Thank you.

Thanks, Geoff. Over to you, Johanna, please.

Yes. Thanks, Geoff, for the question. Yes, we're really quite pleased with Biktarvy's performance. It just continues. And obviously, there's been some ins and outs because of dynamics around us from a market standpoint, because of COVID and inventory, but the share growth 8% year-over-year, as well as the fact that we continue to grow share and even 2 points in the last quarter. We also grew 2 points not only in the U.S., but we also grew just under 2 points in Europe and about 5 points year-over-year as well. So we are seeing solid growth in Europe and we are seeing, in other markets as well, like, Japan and Canada, we're number one with Biktarvy. So I think that, as the data continues to show the benefits of the profile that Biktarvy offers for patients. I think there's no stopping us, Geoff. I think we need to continue to grow this business and we are well poised to get out of this COVID-19 pandemic and hopefully the markets reset. The market already has reset in the naive patient population. We're almost back to pre-COVID levels, which is great, and that's where Biktarvy truly differentiates itself. And in the switch business, we're not there yet. We're about 30% under pre-COVID levels. But again, with a share of close to 50%, also well poised for that to come back on track. So, I think, we continue to expand and continue to gain share over older agents, because of the benefits that Biktarvy offers, not just in the U.S., but really around the world.

Hi, thank you. And I appreciate the question. Going back to Trodelvy and the TROPiCS-02 study I think it's fantastic. You guys upsized that and overpowered it. I guess I had two questions. One was, can you describe sort of what input went into your powering assumptions for that? And then also, do you guys have a view that higher CDK4/6 matters given that that's pretty much standard of care nowadays and that's certainly evolved over the last few years as you think about the study? Thank you.

Thank you for the question. I'll address both points. Regarding our powering assumptions, we've adopted a conservative stance while evaluating the standard of care progression-free survival. Our general strategy is to ensure a balance between achieving statistically significant results and clinically meaningful benefits. We focus on both aspects when designing our trials to guarantee that we not only reach statistical significance but also identify clinical relevance. As for patients who have previously received CDK4/6 treatment, this topic has been frequently discussed. We are closely analyzing the data and several hypotheses are being considered. Based on prior studies, we have observed that Trodelvy still offers benefits to patients with a history of CDK4/6 treatment, although the sample size is relatively small. Nonetheless, we are confident in this observation. Additionally, we plan to conduct a subgroup analysis in the upcoming trial to assess how these patients respond compared to the overall study population, ensuring that we gather valuable insights from this group.

Hi. Thanks for taking the question. I guess maybe two-part for me. You mentioned a more gradual recovery now in the second quarter, but you maintained your guidance component. So just wanted to understand that a little bit more that you baked in more of a cushion there when you initially gave the guidance? And then on the PrEP side, how are you thinking about the recovery there in the second half of the year? Thank you.

Okay. Thanks. And so, Andy, why don't you start? And Johanna might want to add to the PrEP.

Yes, thank you, Terence, for your question. You're correct that we anticipated 2021 would be more dynamic compared to previous years. When developing our guidance for the year, we considered various scenarios. In the first quarter, we are performing well within those scenarios. We’ve had a solid start, although the mix was slightly different than we had anticipated due to additional pandemic-related challenges. However, we are comfortable with our total product revenues, including Veklury, as well as our base case revenues excluding Veklury. We are on track for the year. We'll provide an update around the middle of the year, but that's the overall perspective, Terence.

And on the PrEP market, yes Johanna.

Yes, thanks, Dan. Regarding the PrEP market, Descovy's share is holding steady at around 45% to 46% in the first quarter, which we are quite pleased about. We have been collaborating closely with payers to ensure that patients and providers have choices in their prevention options. The market remains affected by the pandemic, given the social dynamics we are all experiencing. However, we have observed some growth in the last month, and we will see how that develops. I believe, as Andy mentioned, the recovery of the PrEP market will be gradual. We are well-positioned to ensure that once the market returns to pre-COVID levels, we will be in a strong position, especially maintaining our share at this level.

Hi guys, thanks for taking my question. My kids are just sitting in the background there and excited about your earnings call.

We love it.

Very excited. They are very excited. I want to thank you for your outreach for India. I have a question about your guidance of $2 billion to $3 billion for Veklury. How should we interpret this? It feels like this won't extend longer outside the United States than we anticipate, but obviously some areas have lower costs than others. Can you provide some estimates on your thoughts regarding general pricing trends and thank you for your efforts there? Also, this may be a straightforward question. You discussed cell therapy at length. There are also off-the-shelf iPSCs, which we've covered frequently. Can you provide any insight into whether you're considering adding one of those to our portfolio since they involve different technologies? And once again, my kids are listening in.

I appreciate your kids loving us. That's terrific. And thank you for acknowledging the efforts of the company for so many countries out there that are streaking with this. Can I ask Johanna to cover the Veklury question and then Christi to cover the cell therapy?

Absolutely. Thank you, Robyn, for your question and comment. What we've observed with Veklury is a clear correlation with hospitalization rates, which aligns with what we've been stating for the past few quarters. In both the US and internationally, sales have mirrored the hospitalization trends we experienced in the first quarter, and we expect this trend to continue, albeit to a lesser extent. Hospitalizations have decreased notably in March and seem to be stabilizing, but we hope to see further declines as vaccination rates improve. We've noticed strong sales in the US, as well as across our European and Asian markets, where many countries are effectively utilizing Veklury for appropriate patients. We have always believed that the impact of Veklury will last longer than initially anticipated, and this is evident as we approach Q2. We expect a gradual recovery, and Veklury is likely to remain significant in the upcoming quarters and possibly into 2022. Regarding countries like India or others under our voluntary licenses, these are royalty-free during the pandemic and are offered at a much lower price point. Our pricing for Veklury has remained steady and continues to be significantly lower than the value assigned in developed nations.

Thank you for the question. We recently took a close look at our portfolio. Kite has achieved a significant milestone by introducing the first potential cure for lymphoma. We have evolved into a company with multiple brands and three indications, with a few more expected in the coming year. We have gained valuable insights into treating leukemia and lymphoma. Our primary focus is on enhancing our life cycle management to improve the risk-benefit profile and increase efficacy through combination therapies. While we are exploring innovative approaches like iPSC and Allo therapies for more cost-effective and convenient treatments, we recognize that these advancements may take longer to realize than we initially anticipated. Therefore, we need to prioritize improving our current autologous products while also looking towards future innovations. Additionally, in the area of solid tumors, we stand out as a preferred partner due to our effective manufacturing process and reliable delivery times. We are committed to transformative developments in solid tumors, which are projected to represent the largest market in the long run.

Great. Good afternoon. Thanks for taking the question. A question on Galapagos and I guess there are two parts here. First part is, you've got these upcoming Toledo readouts. Merdad, maybe you could just comment on what you're potentially looking to see from those readouts given that the duration of those trials is fairly short. So maybe what you would view as sort of a positive outcome. And then I guess, second question is a more sort of broader strategic question here. But if you don't see something that's positive out of those how do you think about the longer-term relationship there? And given that you're the largest shareholder what might you consider in terms of that relationship? Thanks very much.

Great. You want to start Merdad and then I'll follow.

Yes, that's a great question. Matthew, you mentioned that we are currently focused on the Toledo programs, seeking evidence of tolerability and proof-of-concept for that pathway across multiple indications. I see these early small studies as opportunities to demonstrate this and identify where we can make the most significant impact. This is an early stage in a longer journey, which could lead us to clarify if there is a specific indication we want to pursue further to confirm and expand on the signal, as well as whether we have the appropriate molecule for that. Together with Galapagos, we consider this just the beginning of the Toledo program. We will be looking closely at the upcoming data. Dan, would you like to add?

Sure, Matthew. I’d like to provide some context about our relationship with Galapagos for those who might not be fully aware. Initially, there was the filgotinib relationship, but we also entered into a separate collaboration a couple of years ago, which was centered around the research platform. So far, nothing has really changed regarding that. One of the motivations for this collaboration was to diversify our discovery research efforts within the Gilead Group. I took the time to listen to the scientists back then, and I still pay close attention to their insights today. They believe they possess a very unique platform for screening compounds for first-in-class therapies. It's important to note that pursuing a first-in-class approach involves certain risks, some of which we have encountered in late-stage programs, with Toledo being the most advanced among those. However, there are many other projects within their discovery platform that remain of great interest to us. This initiative plays a crucial role in our overall inflammation strategy, even though it is at an earlier stage for Gilead. As we assess our strategic focus on immunology and virology, we have established leadership in virology and built a substantial presence in oncology. Inflammatory disorders represent the next step for us, and Galapagos is a significant contributor to this first-in-class approach. We are continuing to collaborate closely with our partners at Galapagos to identify the next screening opportunities and targets as part of our wider inflammation strategy. Thank you, Matt.

Yes. Just a question on Descovy. The 22% down on the year-over-year. I was wondering if you can unpack those for us. So how much of that was inventory COVID impact in price. So when it comes to price do you think this is a like a one-year giveaway? Or should we expect that kind of a pricing decline every year going forward at least when it comes to the back-class compounds?

Ronny, just at the very end what did you say?

Yes, please.

Are we expecting the price declines this year to be a repeating events every year? Or is this essentially expected to be a onetime decline as to Truvada generic center.

Got you. Okay. Joanna, you got it.

Yes. Thank you. So thanks for that. I didn't hear the last part of that question originally. Yes. So for Descovy the year-over-year, obviously, it does have to do with higher payer discounts. And that was to ensure that patients and providers had choice. And make sure that we didn't have any step at it. And now we do have some step at it for some plan. But for most plans access is very open to make sure that our patients and providers choose which therapeutics is best for them for prevention. And so I think that we will continue to be smart and we will continue to be disciplined in the way that we look at those discussions with our payers, but we're also looking at data that's been pretty clear that shows that if you basically put a step at it you don't actually get the patient on a Truvada generic you actually just lose your patient. And I think as we think about ending the epidemic prevention is a big piece of that. And so that's why choice is so important and that we keep people at risk of HIV making sure that we keep those folks on the medicines that they're on without creating any access restrictions. And so if that's what we need to do moving forward to ensure that that might impact the price as we go. Our intent is obviously to keep the balance between what we do from a payer standpoint, but also what we do from a share standpoint. And that's why we're proud of the fact that we've been able to manage the payer dynamics and actually hold and even grow share in the last quarter.

Great. Thank you for the question. And I just want to also echo what Robyn said. I think people forget we donated almost one million vials of Remdesivir last year around this time which very few companies have done. Just a quick question on your partnership with Merck. What's the logic behind Gilead I guess leading the US development for the oral and then Merck on the injectable? What was the thinking that went into sort of the parameters of that and then also the cost-sharing and the revenue sharing assumptions? Any color on that would really help. Thank you.

Thanks, Hartaj and believe me it means a lot for you to comment on that for all the colleagues at Gilead who I think feel very strongly about the intrinsic work we do for patients and donations is just one piece of that it's part of our DNA. Andy, I think you're going to answer the question.

Thank you for the question, Hartaj. It was fairly straightforward. We have two exceptional organizations with extensive experience in formulation and drug development. Gilead is a leading company worldwide in co-formulating oral medications, particularly for single tablet regimens in the HIV sector, and it made sense for both companies to allow us to take the lead in that area. Simultaneously, we acknowledged that to keep both programs moving forward efficiently, it would be best for Merck to also lead the injectable formulation project, which aligns well with their expertise. This collaboration benefits both companies, allowing us to advance these programs faster than we could on our own. Regarding cost-sharing, we shouldered more of the costs because we see a greater potential upside. I believe we are both contributing excellent molecules to this partnership, and we are excited about the impact these combinations could have in the treatment market for both oral and subcutaneous injectable formulations. We also recognized that the patent life of the two products varies, and considered the influence on our existing HIV franchise. Ultimately, there was a clear agreement that at certain revenue levels, it would make sense for Gilead to share a larger portion of the revenue, and in return, we agreed to take on a bit more of the R&D costs, which we are more than willing to do. I hope that answers your question, Hartaj.

And Hartaj, I just want to end by thanking our colleagues at Merck. It's terrific. When you get two companies to come together to put patients first to accelerate treatment options for patients in need. And we have a lot of respect for our Merck colleagues. And happy to say that already the collaboration is getting off to a very strong and rapid start. So we look forward to moving fast to make a difference for patients with different treatment options.

Thank you, Liz, and thank you all for joining us today. We appreciate your continued interest in Gilead and look forward to updating you on our continued progress.