Gilead Sciences Inc (GILD) — Q4 2024 Earnings Call Transcript

Thank you, Rebecca. Just after market closed today, we issued a press release with earnings results for the fourth quarter and full year of 2024. 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, Dietmar Berger; 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 Kite. Let me remind you that we will be making forward-looking statements. Please refer to Slide 2 regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially. With that, I'll turn the call over to Dan.

Thank you, Jacquie, and good afternoon, everyone. I'm pleased to share Gilead's very strong fourth quarter and full year results, which highlight growing revenues and exceptional bottom line growth. Starting with our full year performance, total product sales, excluding Veklury, increased 8% year-over-year to $26.8 billion, and fourth quarter 2024 total product sales, excluding Veklury, increased 13% year-over-year to $7.2 billion. Full year HIV sales grew 8% in 2024 to $19.6 billion, significantly ahead of our expectation to grow HIV 5% in 2024. Full year sales for Biktarvy, the standard of care for HIV treatment, grew 13%. In recent years, our HIV business has established a track record of consistently strong growth with 5% growth in 2022, 6% in 2023, and now 8% in 2024. This is driven by the strength of our innovation and by the consistently strong execution of our team. In 2025, while volume and demand growth will continue, we can expect to see a temporary masking of the trend with the anticipated impact of Medicare Part D reform on revenue growth. This will effectively reset the base from which our HIV business will continue to grow from 2025. We fully expect to see our leadership in HIV continue and extend beyond the 2030s based on our long-acting portfolio of which lenacapavir is the foundation. In December, we filed for approval of lenacapavir for twice yearly HIV prevention in the U.S., where it has breakthrough therapy designation, and we continue to make progress on our global filings. At the end of January, we filed for approval with the European Medicines Agency and our submission will be assessed under an accelerated review timeline. Given the unprecedented efficacy in the Phase 3 PURPOSE 1 and PURPOSE 2 trials, and the significant potential that exists in HIV prevention, we are looking forward to delivering on this global opportunity in 2025 and beyond. As we shared at our HIV Analyst Day in December, we have a broad and unmatched clinical program for both HIV treatment and prevention that builds on what we currently offer with Biktarvy and Descovy. We expect to deliver up to seven potential new HIV treatment options and two prevention options before the end of 2033, including new daily, weekly, and monthly orals, as well as quarterly and twice yearly injectables. We look forward to sharing a number of HIV clinical updates this year, including updates from ARTISTRY-1 in people with HIV on complex regimens and the Phase 2 portion of our WONDERS-1 trial, evaluating a potential once-weekly HIV treatment option. Moving to inflammation, the fourth quarter of 2024 was the first full quarter since commercial launch for Livdelzi in the United States, and we are extremely pleased with the results. The strong sales of approximately $30 million for the quarter underscore the important differentiation that Livdelzi brings to people with primary biliary cholangitis and we expect a European Commission decision later this month following the CHMP recommendation for Livdelzi in December. Our liver portfolio, which amounts to a $3 billion business today, is a steady contributor for Gilead and we look forward to seeing it evolve with the new impetus of Livdelzi. We also continue to make progress across our early and promising inflammation pipeline. This includes the recent addition of our STAT6 program from LEO Pharma and the advancement of our bicistronic CAR-T targeting CD19 and CD20 for autoimmune diseases. In Oncology, we continue to make progress on expanding the reach of our cell therapies to the many additional patients who could benefit from a one-time therapy in these challenging hematological malignancies. And at the same time, our collaboration with Arcellx on anito-cel continues to yield promising results. Data from the registrational Phase 2 iMMagine-1 trial were shared at the ASH meeting in December, where anito-cel demonstrated its potential to be a best-in-class BCMA CAR-T therapy. We continue to target commercial launch in 2026 and have separately dosed our first patient in the Phase 3 iMMagine-3 trial in the second to fourth line setting. Trodelvy, meanwhile, remains the only approved TROP2 ADC to demonstrate overall survival benefit in pre-treated HR positive HER2 negative metastatic breast cancer and in second-line metastatic triple negative breast cancer. Additionally, Trodelvy has six ongoing Phase 3 trials with updates from the ASCENT-03 and ASCENT-04 trials in first-line metastatic triple negative breast cancer expected this year. We also anticipate initiating another Phase 3 trial for Trodelvy in extensive stage small-cell lung cancer patients later this year. Our many near-term opportunities across HIV, oncology, and inflammation will help to drive the next wave of growth for Gilead. We have no major loss of exclusivity until late 2033, and we have significant potential across the entire portfolio. With that in mind, I'm delighted to introduce our new Chief Medical Officer, Dietmar Berger, who joined us in early January. Dietmar's exceptional leadership in global drug development, his track record in delivering transformational therapies, and the breadth and depth of his experience make him an ideal leader for taking us through the next chapter for Gilead, and I know you will all enjoy getting to know him in the months ahead. I would also like to thank Merdad Parsey for his contributions to Gilead over the last five years and wish him the very best for his retirement. Among his many achievements, Merdad developed a world-class team that has helped to build the most robust and diversified pipeline in Gilead's history, now with 54 ongoing clinical programs, up from just 32 clinical programs in 2019.

Thanks, Dan, and good afternoon, everyone. 2024 was another exceptional year of commercial execution for Gilead, marking the third consecutive year of high-single digit percentage growth in our base business with sales up 8% year-over-year. Gilead's commercial success underscores the dedication of so many teams across the company, and I'd like to recognize them all for contributing to another outstanding quarter and closing out a very successful year. Beginning on Slide 7, with our fourth quarter results, total product sales excluding Veklury were $7.2 billion, an increase of 13% year-over-year, driven by higher HIV product sales as well as growth in our oncology and liver disease portfolios. Including Veklury, total product sales grew 7% year-over-year, reflecting the impact of lower COVID-related hospitalizations on Veklury sales. Turning to the full year on Slide 8. Total product sales, excluding Veklury were $26.8 billion, well above the high end of our 5% to 6% gross guidance range, reflecting strong performance in each of our core therapeutic areas. Including Veklury, total product sales were $28.6 billion, a 6% growth rate compared to 2023. Moving to Slide 9. Our HIV business once again delivered very strong results for the fourth quarter with sales of $5.5 billion, up 16% year-over-year, primarily driven by demand as well as higher average realized price and favorable inventory dynamics. Sequentially, HIV sales were up 7%, reflecting typical seasonal inventory dynamics and higher demand, partially offset by lower average realized price. In treatment, Biktarvy continues to go from strength to strength with 21% year-over-year sales growth. Biktarvy now commands over 50% share in the U.S. market and maintains its position as the regimen of choice across other major G9 markets. Descovy also delivered 21% year-over-year growth and maintained over 40% U.S. market share in PrEP despite the availability of other regimens, including generics. As a reminder, PrEP accounts for the majority of Descovy revenues. We're pleased to see payers continue to recognize the benefits of PrEP as barriers to Descovy coverage are removed with over 85% of lives now covered without the need for step edits or prior authorizations. On Slide 10, full year sales of $19.6 billion were up 8% year-over-year with the majority of the growth driven by higher demand as well as higher average realized price. More broadly, the HIV treatment market grew around 3% in 2024, consistent with our expectations of 2% to 3% market growth annually. In Prevention, market growth accelerated and increased over 16% year-over-year in the fourth quarter, highlighting growing demand for HIV prevention options, which is particularly exciting to see ahead of our potential launch of lenacapavir for prevention in the summer. Preparation activities for the U.S. launch are well underway, and we have also recently submitted marketing authorization applications to the European Medicines Agency for lenacapavir for PrEP across the EU. We can't wait to make this unique prevention option available as we look to redefine the PrEP market in the years ahead. On Slide 11, we highlight the impact of the 2025 transition to the new Medicare Part D model. As a reminder, the changes include, first, the requirement that manufacturers provide discounts towards the cost of the drug for Medicare patients during the initial coverage and catastrophic phases. And second, the introduction of manufacturer discounts for people who qualify for the low-income subsidy program or LIS. This population is disproportionately impacted by HIV, hence, this impact on our business due to the larger cost-sharing obligations. As these changes are implemented, our 2025 revenue will be impacted by approximately $1.1 billion, of which almost $900 million is in HIV. As a result and consistent with prior updates, we expect HIV revenue to be roughly flat in 2025, masking the robust demand-led volume growth that we've seen consistently over the last several years in HIV and expect to continue through 2025 and into 2026 and beyond. Excluding this Medicare transition and FX headwinds, our expected HIV revenue growth in 2025 would have been at least 5%, reflecting our continued expectations for strong demand-led volume growth, but offset in part by less favorable pricing assumptions due to channel mix. With regards to the first quarter of 2025 specifically, we'll remind you to expect the normal HIV seasonal inventory drawdown, as well as the impact of the reset of patient co-pays and deductibles on average realized price and market growth. Combined with the projected IRA impact, we expect HIV revenue to decline in the mid-teen percentage range quarter-over-quarter compared to the very strong revenue delivered in the fourth quarter. Overall, performance of both Biktarvy and Descovy for both the quarter and full year highlights Gilead's unparalleled position in the HIV market, both in terms of the clinical profile of our therapies as well as our best-in-class HIV commercialization team. Moving to liver disease on Slide 12. Fourth quarter sales of $719 million were up 4% year-over-year, reflecting our strong launch of Livdelzi in PBC and increased demand for HBV and HDV products, partially offset by lower HCV sales due to fewer patient starts. Sequentially, sales were down 2%, primarily driven by lower HCV sales due to lower average realized price and the timing of purchases, partially offset by higher sales in PBC and HBV. Full-year sales of $3 billion were up 9% year-over-year, primarily driven by higher demand across our liver disease portfolio.

Thank you, Johanna, and good afternoon, everyone. I'm now in my sixth week as Gilead's Chief Medical Officer, and I have been impressed with the outstanding talent we have across therapeutic areas here at Gilead and the depth of innovation across our 54 clinical programs. I'm deeply committed to working alongside my colleagues to continue executing on these potentially life-changing medicines. Let me start on Slide 19 by recognizing our research and development teams for their incredible work on lenacapavir, a first-in-class capsid inhibitor that was recently recognized by Science as 2024's breakthrough of the year. This achievement highlights the transformative potential of lenacapavir and Gilead's commitment to help end the HIV epidemic for everyone everywhere. Lenacapavir for prevention was granted the FDA's breakthrough therapy designation in October, and we subsequently completed our new drug application on December 19, suggesting a possible regulatory decision in the summer. As part of our commitment to Global Health Equity, we have filed with the EMA and are taking part in the EU Medicines for all initiative. This collaboration combines EMA's scientific review capabilities and local expertise from regulatory agencies in low and lower-middle-income countries to bring medicines critical to public health to communities around the world. This process could accelerate the review process for lenacapavir in up to 138 countries worldwide. The marketing authorization and EUM for all applications with the EMA will undergo parallel assessments under an accelerated review timeline, and we anticipate a European Commission regulatory decision in the second half of this year. Lenacapavir's unique profile could similarly transform HIV treatment. On Slide 20, I highlight that we are developing seven potential new treatments using lenacapavir or lenacapavir prodrug-based combinations for new daily, weekly, monthly, quarterly, and twice-yearly treatment options.

Thank you, Dietmar, and good afternoon, everyone. Starting on Slide 27, we closed the year with total product sales of $28.6 billion, up 6% from 2023 and well above our $27.8 billion to $28.1 billion guidance range due to stronger-than-expected contributions from HIV. For the full year, total product sales excluding Veklury grew more than $2 billion or 8% from 2023, exceeding our 5% to 6% guidance range and driven by growth in HIV, oncology, and liver. HIV increased 8% or $1.4 billion to $19.6 billion, driven by Biktarvy, which grew 13% from 2023. Oncology increased 12% to $3.3 billion, primarily driven by growth in Trodelvy and with a more modest growth contribution from cell therapy. And liver increased 9% to $3 billion with growth across our portfolio of liver treatments. Full year Veklury revenue of $1.8 billion was right in line with our expectations and declined 18% from 2023, consistent with pandemic and hospitalization trends.

Great. Thank you. Afternoon, guys. In HIV, I know you guys are looking at Len and PReP to be a big growth driver over time, but I wanted to ask about the HIV treatment setting. I guess the question is, do you guys view all the different Len treatment options that you detailed on Slide 20 as eventually replacing Biktarvy? I wasn't sure how you're thinking about what the best approach is for lifecycle management and even prior to the Biktarvy LOE. Thank you.

Geoff, let me just welcome everybody to the call again. I'll just turn it over to Johanna and I'll just ask the speakers as they respond to questions to just introduce themselves. So, Johanna, over to you.

Hi, Geoff. Thanks for the question. Listen, absolutely, our strategy is definitely an opportunity to just make sure that we meet the patient needs. And that is really now that Biktarvy set the standard of care for HIV treatment, we believe that the only thing that's left is looking at long-acting orals or long-acting injectables. And so we will have an opportunity as we think about the bic/len daily oral to a weekly, actually two weekly orals, and then potentially even a little bit longer term with the six-month layers or whatnot, have an opportunity to look at the marketplace and it automatically will erode some of the Biktarvy shares, right. As you think about a share of over 50% as the market leader, there will be opportunities for us to think about as a total Gilead portfolio, well prior to the LOE in late 2033 of Biktarvy. So there's a lot of optionality here as we think about what's to come.

Great. Thanks so much for taking the question. Just a two-part on guidance. I just wanted to understand what is included, if anything at all for len for PReP in the '25 revenue guide? And then it's great to see the margin expansion coming through again in '25 here.

Thanks for the question, Terence. Regarding lenacapavir, we are planning for a launch in the middle of the year. Johanna has consistently mentioned that we expect to have significant access, which will grow over time. At the launch, our goal will be to expand access as quickly as possible. However, that's about all we can discuss at this moment. Concerning expenses, you are correct. We exhibited strong control over expenses in 2024. I should point out that there were a few unforeseen items at the start of the year that increased our expenses. Nevertheless, despite those issues, we maintained exceptional control over expenses throughout the year.

Thank you for the question. Lenacapavir and PReP, so as we approach launch concerns sometimes start to build whether consensus could be too high relative to what the product could actually deliver in their initial few quarters after launch. So in as much as you've looked at consensus, any comment on what you see or perhaps you can just refresh us on the ramp dynamics we need to consider?

Sure. It's Johanna. I'll take that question, Tim. We are very excited about the potential launch of lenacapavir this summer. We don't provide product-specific guidance, so I can't assist with that. However, in line with what Andy mentioned about access, we believe access will increase over time, but that doesn't mean there won't be any access in the first six months. Access will develop over the first few months after launch. We anticipate around 75% access by six months and approximately 90% by 12 months. Given that this is an injectable, administration will need to go through specialty pharmacy or a buy-and-bill model, which may take some time in the early months to properly establish. Nevertheless, we are very confident that lenacapavir will have a significant impact in our communities by 2025.

Hi, guys. Thanks for taking my question and huge congratulations to Dietmar on joining. I wanted to focus very briefly on some of the anito-cel data you guys have shared. Obviously, a ton of very good color on the non-ICANS side. I thought I would focus for a quick second on ICANS more specifically the nine cases of ICANS that happened in the iMMagine-1 trial. Thank you.

Thanks, Umer. This is Cindy Perettie for the question. I'm not going to be able to answer probably at the level of detail you're looking for each one of those ICANS that I know we can come back with you, but we did not see cases of tremors in those patients, and I can come back on the other two.

Great. Thanks. Looking ahead to the approval of len for PReP, can you just comment about your recent interactions with the FDA and the perspective of the FDA? Thank you.

I'll just start and hand it over to either Johanna or Dietmar. Thanks, Michael, for the question. Everything is on track for the lenacapavir for PReP interactions with the agency and HHS. So we're continuing all preparation accordingly and getting ready for the approval this summer as we discussed before.

Hi. Thank you for the question. This is for Dietmar. I wonder as you've come in new to the organization, if you could give us your reflections on the competitiveness of the late-stage oncology portfolio? Thank you.

Yeah. Thanks, Daina for the question, right. As I join Gilead, right, Gilead is in a unique situation at this point with a very well-diversified clinical pipeline, no major LOEs before 2033, really upcoming key launches, and strong news flow that I'm looking forward to and an exciting research portfolio and really deep scientific expertise that I consider critical.

Great. Thank you very much for taking my question and welcome Dietmar to Gilead. So my question is regarding the sales growth for HIV quarter-over-quarter. It seems like you're calling out favorable inventory dynamics year-over-year as well. So just wanted to understand, did you see a more than normal inventory buildup in fourth quarter because you're calling out year-over-year as well? Thank you.

Thanks, Mohit. It's Johanna. So what we did see is obviously really strong demand in both the quarter-over-quarter as well as the full year-on-year Q4 over Q4 of the prior year. We also did see seasonal inventory dynamics and we see that on a quarter-on-quarter basis. But really, the number one driver across the board for HIV, first and foremost has been that demand that has come through namely on Biktarvy, but also Descovy.

Hey, guys. Congratulations on the quarter. Thanks for taking my question. Maybe shifting gears to Livdelzi. Curious if you could elaborate a little bit more on what you're observing in terms of just use pattern prescriber base, the types of patients where this early uptake is coming from? Thank you.

Sure. Thanks for the question, Brian. It's Johanna. Yes, we are really excited about Livdelzi. Not only are we seeing progress, but it is definitely exceeding our internal expectations. We have received some really positive feedback regarding its effectiveness and safety, including the ALP normalization and overall biochemical response, as well as the management of pruritus and safety aspects.

Thanks very much. Nice quarterly results. Johanna, I have another one for you. Just what led to the 16% year-over-year PrEP market growth and acceleration for 2024 that you highlighted? Specifically, can you elaborate on some of those factors?

Thank you for the question, Tyler. We were pleased to see that we closed out the quarter with approximately 16% market growth. This reflects a few factors. First, the attention and value surrounding PURPOSE 1 and PURPOSE 2 are generating momentum in the prevention market and what lies ahead. Additionally, we have focused heavily on market development, with our team making significant efforts across various functions within our organization to ensure the success of the prevention market.

Hey, guys. So for Livdelzi, how is the enrollment in the IDEAL study in the partial UDCA responders going? And I guess, how are you thinking about how this study in the context of a potential label expansion?

Yeah. Thank you, Ellie for the question. This is Dietmar. For the IDEAL study, it's on track at this point. So no further comments on that. It does assess a separate second-line population to those patients partially responsive to UDCA, basically the ALP 1 to 1.67, which then would clearly extend Livdelzi's reach to an additional patient population, especially in the U.S. here. So we're really looking forward to seeing those data.

Thank you, Dan, and thank you all for joining us today. One final housekeeping item, I can share that we are tentatively planning to release our first quarter 2025 earnings results on April 24, 2025. Please note that this date is provisional and could be changed to accommodate scheduling conflicts that arise between now and then.

Thank you, Rebecca. I appreciate all of you joining today. Let me close by thanking the Gilead teams for another exceptionally strong quarter and for driving the momentum that we are carrying into 2025. The consistent revenue we've seen quarter-after-quarter and the strong demand across all three of our therapeutic areas is the foundation we are building from as we deliver on our potential in the months and years ahead.