Analyst Conference Summary

biotechnology

conference date: April 30, 2020 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2020 (first quarter, Q1 2020)

Forward-looking statements

Overview:

Basic data (GAAP):

Revenue was $5.55 billion, down 6% sequentially from $5.88 billion and up 5% from $5.28 billion in the year-earlier quarter.

Net income was $1.55 billion, down 43% sequentially from $2.70 billion and down 22% from $1.98 billion year-earlier.

Earnings per share (EPS, diluted) were $1.22, down 42% sequentially from $2.12 and down 21% from $1.54 in the year-earlier quarter.

Guidance:

No update.

Conference Highlights:

Daniel O'Day, CEO, said "Gilead's performance during the first quarter demonstrates our continued progress and highlights the strength of our underlying business. While we are prepared to navigate the uncertainty and short-term impact from the pandemic, we are confident in our ability to deliver on our long-term goals."

Remdesivir, an investigational agent, could help patients with the new coronaviris. A variety of studies were performed or are underway. Initial results of NIAID and SIMPLE trials showed patient improvements, possibly with some patients only need 5 days. We are donating our existing supply while ramping up production. Hopes to have supply to treat 1 million patients by year-end. When approved will make it affordable.

Saw some negative effect on sales towards the end of Q1, but so far effects have been minor. Prepared if they get worse. Pausing enrollment in most trials.

Generic versions of Letairis were introduced in the 2nd quarter 2019, so sales continue to decline. Ranexa sales are also declining.

The dividend will be $0.68 per share will be paid on June 29, 2020 to shareholders of record as of June 12, 2020.

Filgotinib monotherapy for rheumatoid arthritis has had positive data and submissions were made to regulators. Making global launch preparations for 2020. Could have 5 new indication launches over next few years.

Biktarvy continues to grow revenue in Europe, helping to drive up y/y HIV product sales. Market is consolidating around Biktarvy for new and switched patients.

Kite achieved two regulatory milestones for KTE-X19, a cell therapy for the treatment of relapsed or refractory mantle cell lymphoma. The EU marketing authorization application for KTE-X19 was fully validated and is now under review and in the United States, the FDA accepted the Biologics License Application and granted Priority Review designation.

Non-GAAP numbers: Net income was $2.14 billion, up 30% sequentially from $1.65 billion and flat from $2.14 billion year-earlier. Non-GAAP EPS was $1.68, up 29% sequentially from $1.30 and up 0.6% from $1.67 year-earlier.

Product sales were $5.47 billion, down 6% sequentially from $5.80 billion and up 5% from $5.20 billion in the year-earlier quarter. $4.0 billion U.S. product sales. $0.93 billion European sales. Rest of world $551 million.

Royalty, contract and other revenue was $81 million, down sequentially from $83 million, and flat from $81 million year-earlier.

Cash and equivalents ended at $24.3 billion, down sequentially from $25.8 billion. $1.4 billion cash flow from operations. $1.3 billion was used to repurchase shares. $874 million paid in dividends. $0.5 billion was used to repay debt. Long term liabilities were $28.7 billion. In Q2 2020 paid $4.9 billion in cash for Forty Seven.

Numerous other studies are underway or planned; see Gilead pipeline.

Cost of goods sold was $969 million. Research and development expense was $1.10 billion. Selling, general and administrative expense was $1.08 billion. Income from operations was $2.40 billion. Interest expense $241 million. Other expense was $158 million. Income tax provision was $465 million.

Q&A summary:

Remdesivir possible revenue and expenses? It is premature to estimate revenue, we want it to be accessible and affordable around the globe. Expenses could be up towards one billion, including cost of goods sold, research, and administrative expenses.

We are working on multiple delivery types for remdesivir. It is heavily metabolized in the liver, so it won't be oral. But it could be subcutaneous or inhaled.

NIAID study more? We have not seen the baseline demography for the study. We have to wait for data publications. The population treated tends to be those requiring supplementary oxygen. We have not been given subgroup analysis.

We have not found other molecules with better potency than remdesivir.

COVID special case of non-profit? It is unique and different. There has been no other pandemic like this in recent history, or such an effect on the global economy. It does need to be sustainable for shareholders.

Filgotinib update? We have hired sales leadership. We expect launch sometime in the second half of 2020. Depends on the pandemic. We are already doing virtual education and pre-sales.

HIV business? Solid growth this year, both treatment and PreP grew, moving patients to Descovy, but not as fast as hoped as patients are not going to doctors' offices.

Remdesivir results make it the new standard for trials of other drugs. Next step is most likely combinations with Remdesivir.

There are other remdesivir trials underway, including on less severly affected and earlier patients.

Our goal is to get full approval for remdesivir. But we also want to get the medicine to patients quickly. We are looking for a sustainable economic model longer term.

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