Analyst Conference Summary

biotechnology

conference date: July 25, 2018 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2018 (second quarter, Q2 2018)

Forward-looking statements

Overview: While revenue was down 21% y/y, it was up 11% from Q1, which may represent an upward inflection point.

Basic data (GAAP):

Revenue was $5.65 billion, up 11% sequentially from $5.09 billion and down 21% from $7.14 billion in the year-earlier quarter.

Net income was $1.82 billion, up 18% sequentially from $1.54 billion and down 41% from $3.07 billion year-earlier.

Earnings per share (EPS, diluted) were $1.39, up %19 sequentially from $1.17 and down 40% from $2.33 in the year-earlier quarter.

Guidance:

Full year 2018 revenue kept at $20 to $21 billion, but effective tax rate lowered to 19% to 21%, while negative impact of collaboration, acquisition, and other expense upped to $1.50 to $1.60 per share.

Otherwise the year is progressing as expected, so no change in guidance.

Conference Highlights:

The y/y revenue decline was mainly due to increased competition in the Hepatitis C therapy space.

John Milligan, the current CEO, will step down after the board identifies a successor. he worked at Gilead for 28 years.

"Today, Gilead has the right strategy in place to successfully execute on its mission of improving the lives of people with some of the world's most serious diseases, led by a robust HIV franchise, an industry-leading cell therapy platform and a late-stage pipeline in NASH and inflammation," commented John C. Martin, PhD, Chairman of the Board of Directors.

HCV sales are steadying, but are expected to continue to decline slowly going forward. Yescarta sales continue to build.

Dividend of $0.57 per share announced for Q3, to shareholders of record as of September 14, to be payed on September 27, 2018.

Non-GAAP numbers: Net income was $2.49 billion, up 27% sequentially from $1.96 billion and down 26% from $3.37 billion year-earlier. Non-GAAP EPS was $1.91, up 29% sequentially from $1.48 and down 25% from $2.56 year-earlier. Non-GAAP EPS in the quarter had a $0.15 benefit from a tax settlement.

Product sales were $5.54 billion, up 11% sequentially from $5.00 billion and down 21% from $7.05 billion in the year-earlier quarter. $4.1 billion U.S. product sales. $1.0 billion European sales. Rest of world $466 million.

Royalty, contract and other revenue was $108 million, up sequentially from $87 million, but up from $95 million year-earlier.

Cash and equivalents ended at $31.7 billion, down sequentially from $32.1 billion. $1.6 billion cash flow from operations. $450 million was used for repurchase shares. $740 million paid in dividends. Long term liabilities were $32.7 billion.

Selonsertib for NASH is in 2 slightly different Phase 3 studies, with data available in first half of 2019. GS-9674, and GS-0976 for NASH are in Phase 2 studies in combination with selonsertib. GS-0976 has reported positive Phase 2 results as a monotherapy. Gilead is developing non-invasive tests to find patients needing treatment, to replace liver biopsies. But discontinued selonsertib for severe alcholic hepatitis.

Filgotinib is now in Phase 3 trials for rheumatoid arthritis (now fully enrolled), Crohn's, and ulcerative arthritis, all of which are fully enrolled. Phase 3 data expected in first half of 2019. Six additional Phase 2 study across a range of diseases are planned with partner Galapagos, with more data available later this year. Phase 2 study of psoriatic arthritis achieved is primary endpoint.

More Yescarta data is expected in 2020. KITE 319 results were presented at ASH. 17 of 24 patients had complete remissions. Anticipates regulatory approval of Yescarta in Europe, so building a new facility in Netherlands. An ongoing Phase 3 study, if successful, could expand the label to earlier lines of therapy.

Numerous other studies are underway or planned; see Gilead pipeline. The Kite Pharma pipeline is now also part of Gilead.

Cost of goods sold was $1.20 billion. Research and development expense was $1.20 billion. Selling, general and administrative expense was $0.98 billion. Income from operations was $2.28 billion. Interest expense $266 million. Other income was $72 million. Income tax provision was $267 million.

Q&A:

Do you expect positive growth trends with the current pipeline? We are very confident in our overall strategy. We will be active in transactions that will further our business. You will see many things come to fruition the second half of this year.

What might change under new leadership? I started when Gilead was a private startup. The next leader will bring new expertise, perhaps in the oncology area where I have less experience.

HIV therapy expectations, dual regimens? Q2 performance was demand driven, inventory was stable. We are still interested in the resistance profile of 2-drug regimens, because some data suggests there is resistance development.

Sustainable growth rate for HIV business? We see it as a growing franchis well beyond 2022, with TAF-based regimens as the new backbone for patients. Many U.S. patients are still not under treatment. We are making progress in our long-acting molecules, we think many patients would like that. Right now 250 to 300 thousand Americans know they are infected with HIV but are not on any therapy. Biktarvy has gained doctors and institutions for us, it has such a good profile.

OpenIcon Analyst Conference Summaries Main Page

Gilead Investor Relations page

More Gilead analyst conference summaries

Search

More Analyst Conference Pages: