Gilead Sciences, Inc. (NASDAQ:GILD) Piper Sandler 35th Annual Healthcare Conference November 29, 2023 9:00 AM ET
Company Participants
Andrew Dickinson – Chief Financial Officer
Conference Call Participants
Joseph Catanzaro – Piper Sandler
Joseph Catanzaro
Perfect. Great. Well, appreciate everybody joining us here on the second day of Piper Sandler’s Annual Healthcare Conference. I am Joe Catanzaro, one of Piper’s biotech analysts. My real pleasure to kick off this session here with Gilead. Joining us is their CFO, Andy Dickinson. Obviously, 25 minutes on a lot of time to run through things. But maybe, Andy, I could give you a minute or 2 to just give a quick rundown of Gilead, what you guys have been up to and what we have to look forward to in 2024.
Andrew Dickinson
Great. Yes. No, thanks. Thanks for having us. It’s great to be here. Always fun to be here this time of the year. We’ve been up to a lot. I mean it’s been an exciting 2023, and we have a lot teed up for 2024. So in a snapshot, for those of you that don’t know Gilead, we’re the world’s largest virology company. We have a thriving virology business that’s growing, led by our market-leading globally HIV business, both HIV treatment and HIV prevention. We have one of the COVID therapies, remdesivir, which is used for severe hospitalized patients. And we have the world’s largest viral hepatitis business, both HBV and HCV which has stabilized. So a very solid and growing virology business, no major patent cliffs until 2033 at the earliest.
And then on top of that, we built a thriving oncology business that’s really growing. It’s now a $3 billion business. I joined the company 7 years ago. It didn’t exist. When our CEO joined 5 years ago, it was maybe a couple of hundred million dollars in sales. And that’s led by the world’s leading CAR-T business or cell therapy business. And an antibody-drug conjugate called Trodelvy that’s approved for 3 solid tumors, and we have a wealth of data coming out this year in the oncology business across cell therapy and Trodelvy as well as some important HIV data as well. So it’s a really exciting year of data and continued strong commercial performance from our perspective.
Question-and-Answer Session
Q – Joseph Catanzaro
Great. That’s perfect. So maybe with that, we could kick into some Q&A here and maybe split the conversation to virology in oncology and start with virology. So on the 3Q call, I think you guys spoke a little bit, but maybe you could elaborate a little bit more on some of the tailwinds the HIV business saw in 2023 and we should expect to see heading into ’24?
Andrew Dickinson
Sure. Yes. It’s a little bit about the tailwinds in 2023, probably more about the tailwinds in the second half of 2022 when you look at the comparison. But again, just to set the context for the HIV business, the HIV treatment market is still growing in all major markets, including the U.S. and Europe, 2% to 3% a year. So the volume treatment with additional infections, growth of the population is growing 2% to 3%. That’s despite the incredible impact of the HIV prevention treatments, 2 of which, the first 2 were launched by Gilead. So we are making progress, but the HIV treatment market, despite the progress in awareness, education and prevention, is still growing 2% to 3% in all major markets. It’s growing much faster than that in the developing world, unfortunately.
The prevention market is in early stage of the development. It’s predominantly in the United States today. That market is growing high teens. Recently, it was growing north of 20% for years. So that is a market that is really just starting to develop, and we expect there will be a whole another leg of significant increased growth as we launch approximately 2 years from now in every 6-month injectable option for prevention with our market, the first HIV capsid inhibitor called lenacapavir.
So in terms of the tailwinds, coming out of the pandemic and kind of the initial recession, there’s been a shift in the government paid channels, in particular, a little bit in the commercial channels so that the net price received has been a little bit higher. So our HIV business grew over 5%, I believe, last year. We’re projecting that it’s going to grow north of 5% this year. Most of that is driven by the 2% to 3% growth, market growth, demand growth in treatment and then the higher growth in prep. When you combine the 2, a piece of that was driven by this higher realized net price. That dynamic has now normalized over the last 6 months. And so you’re still going to see growth in our HIV business going forward. You just won’t have that net pricing tailwind, but we saw really again in the back half of ’22 and then playing out a little bit in the first half of this year.
Joseph Catanzaro
So you just mentioned it a couple of times, and I think you guys have mentioned a number of times previously, how the PrEP market is growing considerably faster than the treatment market. What are some of the key drivers that’s driving that dynamic? And what’s key for Gilead to be able to participate in that growth in the PrEP market?
Andrew Dickinson
Sure. It really starts with awareness and education. So again, a lot of people, even physicians aren’t aware of the HIV prevention options that are available. So the 2 products that we’ve had that are approved, one of which is now generic, Descovy is our approved branded product that’s the market-leading product — branded product for HIV prevention. About 40% of people at risk of getting HIV in the United States that take PrEP or prevention medicine, take Descovy, it’s all about raising awareness. So to put this in context, I think we launched our first HIV prevention medicine, not quite a decade ago.
The market has grown, awareness has grown. You’ve seen a significant growth in awareness during the pandemic. Again, and awareness is growing not only in the United States, outside of the United States. Today, the reimbursement is primarily in the United States. The generic option, our generic Truvada is used globally now. Again, it’s — so part of it is awareness. The second piece is having something that actually fits what people are looking for when they’re at risk of getting HIV. And that is a long-acting injectable that provides protection for an extended period of time. And it’s exactly what we’re bringing to the market with lenacapavir. So again, I mentioned lenacapavir is the world’s first HIV capsid inhibitor, been approved. It’s already approved for treatment as a 6-month subcutaneous injection.
So this is not theory, the drug works. It’s incredibly potent. It really is, as many experts refer to. It is a unicorn. It’s such a special molecule. We are in the end of our prevention Phase 3 trials. The first one should read out, if not both, should read out at the end of ’24, early ’25. And we expect to expect to launch the product by the end of ’25. That should open up the prevention market, not only in the U.S. to grow substantially, but also in Europe and Asia. So I think that it really is not only raising awareness, but then giving patients or people at risk of getting HIV something that they can take that ensures that they’re protected against getting HIV for 6 months.
Joseph Catanzaro
So you mentioned there that some lenacapavir sort of Phase 3 trials are coming to a sort of a tail end. I think you guys have guided towards some readouts sort of the later half of ’24 into ’25. Can you just speak a little bit to those readouts, what they will tell us sort of the opportunities they open up the populations they’re studying there?
Andrew Dickinson
Sure. Yes. And again, there’s readouts across our entire portfolio. So if you just step back and look at the clinical data that’s coming, as we’ve invested in our pipeline. So when you look back with the new management team at Gilead, we’ve substantially increased as we needed to our R&D investment, the size and quality and breadth of our pipeline. We now have what we’ve been, I think many observers believe is one of the strongest pipelines in the industry across both oncology and virology. And now we’re getting to the point where you’re going to have multiple Phase 3 data readouts in the next 12 months. So we’ll spend a lot of time talking about that beginning of the year, but we’ll have at least 5 Phase 3 data readouts across the — both businesses next year, potentially 6.
And in HIV, the biggest is the prevention data at the end of next year with lenacapavir. Again, those are Phase 3 studies. They take a long time to do the studies. But we will also have a lot of data on Trodelvy, which is, as I said, our market-leading antibody drug conjugate targeting TROP2, which is approved in 2 breast cancers, triple-negative breast cancer, it’s the standard of care in second line plus, hormone receptor positive breast cancer, again, off to a very strong launch. And then later-stage bladder cancer. And we’ll have a lot of data, in particular, in the first half of next year, we’re going to have data in second-line non-small cell lung cancer. It’s a Phase 3 study called EVOKE-01 that is very exciting and could position Trodelvy as the very clear ADC of choice for very significant indications across lung cancer, breast cancer and bladder cancer.
Joseph Catanzaro
I, of course, want to obviously speak a little bit more to Trodelvy and the rest of the oncology business, but maybe just one more on HIV. You mentioned lenacapavir. Obviously, within the context of PrEP, you mentioned sort of approved for a sort of later-stage treatment setting. Where are the opportunities to leverage lenacapavir within the treatment tinge further? What are some of the benefits it could potentially offer relative to other treatment offering?
Andrew Dickinson
Sure. Yes, great question. Thank you. So lenacapavir is such a unique molecule that we’ve been able to formulate it for a once-daily pill, once weekly pills, every 3 months subcutaneous injections in every 6-month subcutaneous injection. That’s almost unheard of. The reason you’re able to do that is because it’s one of the most potent molecules ever approved in the pharmaceutical industry. It’s really remarkable.
So what’s coming? I mentioned that lenacapavir for prevention. That’s just a single agent every 6-month injection, which as I said, should completely transform the prevention of HIV. It’s almost vaccine-like. We hear this from physicians and people at risk in HIV, they refer to it as some of the patients in the trial or people at risk of getting HIV in the trial, referred to it as a vaccine. The — but then treatment, lenacapavir is expected to become the backbone of the next generation of our combination therapies. So there are 3 examples I can give you today, but there are 9 — I’m sorry, 10 different partnered agents that are being developed either in late preclinical or early clinical development today. I think of the internal ones, 9 of the 10 are internal one is a partnership with Merck on one of their molecules. But of the 9 internal programs, 3 are in Phase 2, 3 are in Phase 1, 3 are in late stage. A lot of them are integrase inhibitors similar to our bictegravir, which is the market-leading integrase inhibitor.
But to your question then, the way I kind of paint the picture is in the coming years, so by the end of the decade, you should have at least 4 approvals of new options in treatment with lenacapavir as the backbone. One of them is a once-daily pill that combines lenacapavir with bictegravir. We’ll have some data that we’re sharing from a Phase 2 study early next year. That is now moving into Phase 3 studies. Think of it as something that if patients want to switch from Biktarvy, which is the market-leading HIV treatment, our drug to another therapy for any reason, this gives them a great option and it will compete head to head against Dovato, which is a competitor product. We will have a once-weekly oral, so we have a once-weekly oral integrase inhibitor that being paired with lenacapavir. This is a really interesting big opportunity. A lot of patients living with HIV have mentioned that they would love to have a once-weekly pill instead of a once-daily bill. This is that we’re going to share that data from a Phase I study early next year, and then that’s moving into Phase 2 development, and these studies move very quickly in HIV.
And then we have 2 broadly neutralizing antibodies where we demonstrated last year that you can infuse these antibodies together with lenacapavir for an every 6-month treatment that actually worked reasonably very well in most patients. And interestingly, the feedback, Joe, from the — from KOLs and physicians has been that they see a much bigger opportunity there than maybe we did. And the reason being that it’s surprising, but many patients that have HIV do not take the pills on a regular basis. The adherence or compliance is actually much lower than you’d expect. And in certain patients that just aren’t good at taking it, physicians, they’re saying, I really could use an option that, that were I can infuse it for 6 months and know that they will ensure adherence over that period.
Joseph Catanzaro
Perfect. So maybe I want to switch to the Kite business and first ask you about sort of the news yesterday from the FDA and they’re sort of warning around CAR positive T cell lymphomas for CD19 and BCMA CAR products sort of your response to that, were you surprised by that, and maybe your experience with Yescarta and Tecartus around that warning?
Andrew Dickinson
Sure. Yes. I mean I think we were surprised like the rest of the market only because we don’t really see this. I mean we’ve treated over 17,000 patients. I think it’s almost 18,000 patients now in clinical studies in the real world, there’s always been a known theoretical risk of secondary malignancies. You’re inserting a viral vector into these T cells that is inserted into the genome and the T cells in kind of a random — in random places. There’s always been a theoretical but very remote risk that you could cause secondary malignancies. If you look at the FDA’s adverse event database, it suggests that if this happens, it happens at a very, very low rate. And of course, the risk benefit in our minds at least, in all of the approved indications, very clearly is in the favor of the CAR T therapy. So again, for those of you that aren’t following the cell therapy space, for instance, we have — patients that have late-line lymphomas, DLBCL, for instance, from our ZUMA-1 study, which was the first kind of one of the key studies in CAR-T, show that more than 40% of the patients appear to be cured 5, 6 years out, and the response rates are just remarkable. These are patients that have weaker months left to live.
The same thing is true in the second-line DLBCL. We did a study called ZUMA-7, of Yescarta, which is the market-leading CAR-T against stem cell transplant. As you know, stem cell transplant has an incredible amount of side effects. It was really tough for patients. The mortality rate is high. We showed a 27% reduction in — or actually a 30-plus percent reduction in mortality in that study. I think it was a 27 — 0.27 hazard ratio, if I remember correctly. But really remarkable data in that study.
So when we look at the risk benefit, clearly, cell therapies, we think, are going to become a much, much bigger market over the coming decades, both in oncology and probably outside oncology, but you’re always going to have to look at this. So we don’t see it. We don’t see any causal link between our vectors and our cell therapies and secondary malignancies. Of course, we’ll look at it, we’ll reach out to the FDA to try to get more information. But it doesn’t appear to be a risk that we think is either there or substantial at this point in time.
Joseph Catanzaro
So I think you guys have mentioned one of the keys to growing the cell therapy business is trying to move some cell therapy delivery into the community setting. And we had a cell therapy panel yesterday I brought up that idea and sort of KOL who comes from an academic tertiary care center sort of raise questions around whether that’s possible, whether the economics could work for some of these more profit community oncology centers. So what are the some of the efforts you guys are working on that are going to be able to allow you to deliver Yescarta and Tecartus and the future offerings into the community setting?
Andrew Dickinson
Yes. Again, this is really a U.S. dynamic as many of you know. So if we just step back and you look at cell therapy, again, I talked about the extraordinary efficacy and life-saving potential of these therapies relative to other existing therapies. In the U.S. today, only 12% — in DLBCL, 12% of second line plus patients are getting cell therapy. In Europe, it’s over 40%. In the — I think we have almost 400 approved treatment centers globally, about 140 in the United States are just less than 140. The key in the U.S. is that the academic centers and the large hospitals and large cities are using cell therapies. The community physicians that treat 80% of the patients are slowly moving this towards cell therapy. And so it’s become clear to us and others that we really need to work with the community physicians in the United States to open access, help them understand the extraordinary benefit of these therapy for their patients and then allow them to have access there.
I don’t — there’s no barriers from our perspective in terms of opening treatment centers with the community physicians. It’s going to take a lot of work with them over time. And there’s a lot of excitement, I think, in the large community oncology centers that we’ve been talking to about doing this. So it’s going to be a point of focus for us over the coming years to work with the community physicians to open up broader treatment center access together with them to make sure that all the patients that could benefit from these therapies are getting it in the United States in addition to Europe and other major markets.
Joseph Catanzaro
So the other question I had on sort of the cell therapy side of things, again, relates maybe to something we spoke about yesterday on our panel was the commercial BCMA products and there still seems to be a lot of supply constraints, consistency and reliability of the manufacturing silliest a lot of questions around it. So maybe that’s a sort of a good segue to collaboration and where you see ddBCMA sort of fitting into this landscape where it sort of takes market share and how it takes market share?
Andrew Dickinson
Sure. Yes. So again, just to step back, it’s becoming clear that in second line plus multiple myeloma, CAR-Ts are likely to become the standard of care, they are already becoming the standard of care. There are two approved BCMA CAR-Ts from 2 different companies. But they still — it’s very early days and they can’t serve the market. So a number of companies in CAR-T have significant manufacturing challenges. Kite, our CAR-T business on the other hand is the market leader in terms of manufacturing and manufacturing reliability. And again, just to put it in the context, 90-plus percent of the bags of cells that we get are manufactured and delivered on time, typically in 16 days or less. Most of the competitors are struggling to get manufacturing reliability above 50% or above 60%, and their town time is opted north of 30 days, which creates a lot of frustrations with the treatment centers and physicians given that these patients oftentimes have very rapidly advancing disease.
So there is a substantial opportunity in the multiple myeloma market to bring additional BCMA CAR-Ts to market. As a result, we did a partnership with a company called Arcellx in the Bay Area that has a very promising BCMA CAR-T construct called ddBCMA. We are working with them. We’re in the middle of our Phase 1/2 studies — study. There will be additional data presented at ASH in the coming weeks that we’re excited to share with the world. And that product could be to market in 2 or 3 years.
And when you look forward kind of the 3 years out, our expectation is that the existing approved therapies will still not be able to satisfy much of the market demand. So there is a big opportunity to satisfy the market demand and benefit patients even as a late comer to this market, and that assumes that your product is on par. The data that we’ve seen so far with the Arcellx product suggests that it has the potential to be better than the approved therapies, both in terms of efficacy as well as safety. The approved therapies are showing some severe neurological side effects in 7% to 8% of patients, including the development of Parkinson’s. And again, the risk benefit suggests this is clearly in the benefit of patients to take the therapies, but it provides a significant opportunity for us and others. So we’re excited about it. It’s a great partnership.
And then to your question on why did we expand the partnership. Again, I think we think that the science and the team at Arcellx is fantastic. They had another second-generation program that’s interesting to us. We wanted to provide capital to allow them to take that forward. We then have options to partner on that program. And it also gives us the opportunity to look at the BCMA CAR-T beyond just multiple myeloma. It’s not clear what we’ll do there today. There are some rare B-cell malignancies that we don’t treat today with Tecartus and Yescarta that we could consider treating. So we’ll work with Arcellx to figure out where we go with that. But it was an exciting expansion and it reflects the confidence that we have in the Arcellx team and their program.
Joseph Catanzaro
I’ll just make one comment. One thing that was said yesterday talking about the BCMA commercial products and some of the challenges there, the KOLs said, well, maybe a little unfair because Kite set a really high bar, and that’s what we’re comping to. I want to shift to Trodelvy in these last few minutes. I remember sort of in my days covering Immunomedics and when Dato-DXd data was first coming along, there was a big concern that ultimately, Dato would sort of eat away at Trodelvy’s opportunities. Where do you think that stands today? How do you think competitively within the established markets where Trodelvy is in breast cancer? How do we think that stacks up today relative to what we now know about Dato-DXd?
Andrew Dickinson
Yes. Well, we think it stacks up incredibly well. And I think the market is coming to the realization that the — when you look at the competitor TROP2 construct, there was an assumption that it would be as good as in HER2 in some forms of breast cancer, which has demonstrated really strong data. And that doesn’t appear to be the case based on the data that was shared at ESMO both in breast cancer and lung cancer. So we’ve always had a thesis since we acquired Immunomedics, we believe that the Trodelvy construct was unique and differentiated in all 4 pieces of the antibody drug conjugate.
So for those of you that follow this, the antibody-drug conjugate is an antibody with toxic warheads attached to it. And when you look at our antibody has a higher binding affinity. We have a different linker that releases more of a toxin in the tumor microenvironment. We use a different, very potent toxin and we have more of the toxin on each antibody than the competitor, all of which leads to very clear differences based on the clinical data and the commercial data so far in the safety profile and now you’re starting to see some potential differences in the efficacy profile as well.
And again, it just — we believe is validating our thesis that Trodelvy is really an extraordinary product. Again, as I said earlier, it’s already approved with incredible overall survival data in 2 forms of breast cancer, very strong early approval in bladder cancer. We have the confirmatory Phase 3 trial underway that may allow us to move up in bladder cancer as well and is expected to show overall survival. And then as I mentioned, the really big opportunity, of course, is in lung cancer, both in the second line and the first line and all those studies are underway. The first big set of data will read out in the first half of next year. So it’s very exciting.
And I think we — our sense is the market underappreciates the competitor program that you’re referencing. Many analysts expected that to be a $15 billion or $18 billion a year drug, we think Trodelvy has extraordinary potential. And the data over the next 12 to 18 months is going to give all of us a much better sense of how these 2 really stack up next to each other.
Joseph Catanzaro
Maybe one last quick question on Trodelvy and relates to the sort of goal of 1/3 of 2030 revenues coming from oncology. How big of a factor of — in that sort of projection comes from Trodelvy within lung cancer?
Andrew Dickinson
It’s certainly part of it. I think that when we acquired Immunomedics, what we said and we still believe is it’s an incredible opportunity because it really is a pipeline and a product. I mean, again, as I said, you have 3 existing approvals in breast and bladder, we’re expecting to move up in lines of therapy. Those areas in and of themselves are very, very large commercial opportunities that are not fully reflected in how the market thinks about Trodelvy today. Lung certainly is a huge opportunity. So what I would say is in terms of getting to 1/3 of our total revenue by the end of the decade from oncology, there’s lots of different ways for us to win.
If you have success in either first-line or second-line lung cancer, obviously, that significantly inflects our growth and the growth of Trodelvy and makes it even easier to get there. But there’s lots of different ways for us to achieve that goal. And when we look at the totality of our pipeline today, we’re absolutely confident that we’re going to get there.
Joseph Catanzaro
I know we’re out of time, I want to use in one last question sort of around business development and your goal of sort of diversifying away from virology. Where do you think you stand in that process? Do you think you’re where you need to be? Or is there a little bit more work to do there?
Andrew Dickinson
There’s always a little bit — I mean, first of all, we’re doing it, I think it’s going incredibly well. And I want to highlight that the virology business is incredibly important. It’s growing. It’s a very large business. When you look at our $27 billion of revenue, the vast majority of it still comes from the virology franchise. And we need to diversify. We now have a much broader, much deeper pipeline, including in virology, but also in oncology and immunology. But we need to do more, and we’re going to continue to do business development in the ordinary course.
So as you know, Gilead didn’t do that much business development between — before 2017 and after 2017 and after our new CEO arrived 5 years ago, we really used to do more business development. And now we’re getting to the point where we have the size of portfolio and the investment that we’re looking for in R&D, more should be coming internally. We have an increased investment in our internal research, including in oncology that looks really promising. And then we’ll continue to supplement it with outside business development activities. But over time, again, that’s the goal is to get by the end of the decade to get kind of 1/3, and we think we’re well on track to doing
Joseph Catanzaro
Perfect. With that, out of time, I want to thank Andy for his time. Thank everybody for tuning in, and enjoy the rest of your day. Take care.
Andrew Dickinson
Thank you.
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