Analyst Conference Summary

biotechnology

conference date: April 29, 2021 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2020 (first quarter, Q1 2021)

Forward-looking statements

Overview: Strong for a Q1.

Basic data (GAAP):

Revenue was $6.42 billion, down 13% sequentially from $7.42 billion and up 16% from $5.55 billion in the year-earlier quarter.

Net income was $1.73 billion, up 12% sequentially from $1.55 billion and up 12% from $1.55 billion year-earlier.

Earnings per share (EPS, diluted) were $1.37, up 11% sequentially from $1.23 and up 16% from $1.22 in the year-earlier quarter.

Guidance:

Reiterated 2021 guidance except lowered EPS non-GAAP to $6.75 to $7.45, GAAP $4.75 to $5.45, to reflect changes in fair value of equity investments.

Conference Highlights:

Daniel O'Day, CEO, said "We have made strong progress in this first quarter, with our new partnership with Merck in long-acting HIV therapies, two newly approved indications in the U.S. for Trodelvy in metastatic triple-negative breast cancer and metastatic urothelial cancer, and the addition of Hepcludex to our portfolio. 2021 is a pivotal year for Gilead, with key milestones across our virology and oncology portfolios. We are looking forward to advancing our pipeline of promising therapies in the coming months."

Gilead has a clear path to growth, beginning in 2021, with a focus on oncology, with 27 pipeline programs. Will retain leadership in anti-virals. Given the broad portfolio, will be more selective about taking candidates forward.

Veklury (remdesivir) for Covid-19 led sales growth, but Biktarvy for HIV generated the most revenue and remains a leader for new prescriptions.

In February 2021 Gilead announced a collaboration with Gritstone Oncology for a potential curative treatment for HIV. In Q1 2021 Gilead completed the acquisition of MYR for up to approximately Euros 1.3 billion (or $1.6 billion) in aggregate consideration. The acquisition provides Gilead with Hepcludex, which is conditionally approved by EMA for the treatment of chronic HDV in adults with compensated liver disease.

In Q1 Gilead announced a collaboration with Merck to develop and commercialize long-acting, investigational treatment combinations of Gilead's lenacapavir and Merck's islatravir in HIV. The first clinical studies of the oral combination are expected to begin in the second half of 2021.

The dividend will be to $0.71 per share, will be paid on June 29, 2021 to shareholders of record as of June 15, 2021.

In Q1 2021 the FDA granted accelerated approval for Trodelvy for locally advanced or metastatic urotherlial cancer, third line. Also the FDA granted full approval of Trodelvy for adult patients with unresectable locally advanced or mTNBC who have received two or more prior systemic therapies, at least one of them for metastatic disease.

Gilead and Vir Biotechnology formed a collaboration for hepatitis B therapy in January 2021.

Gilead will acquire MYR GmbH for 1.2 billion Euros plus future potential milestone payments of up to 300 million Euros. This will gain Hepcludex for chronic hepatitis delta, already approved by the EMA.

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 $2.63 billion, down 5% sequentially from $2.76 billion and up 23% from $2.14 billion year-earlier. Non-GAAP EPS was $2.08, down 5% sequentially from $2.19 and up 24% from $1.68 year-earlier.

Product sales were $6.34 billion, down 14% sequentially from $7.33 billion and up 16% from $5.47 billion in the year-earlier quarter. $ billion U.S. product sales. $ billion European sales. Rest of world $ million.

Royalty, contract and other revenue was $83 million, down sequentially from $93 million, and up from $81 million year-earlier.

Cash and equivalents ended at $6.2 billion, down sequentially from $7.91 billion. $2.6 billion cash flow from operations. $309 million was used to repurchase shares. $0.92 billion paid in dividends. Long term liabilities were $38.8 billion. Paid down $1.3 billion of debt, used $1.3 billion for acquisitions.

Lenacapavir capsid inhibitor (GS-6207) remains on track for HIV filing in 2H 2021.

In Q1 2021 the FDA approved Yescarta for relapsed or refractory follicular lymphoma after two or more lines of systemic therapy. Yescarta is the first CAR T therapy approved for indolent follicular lymphoma.

But also in Q1 2021 Gilead and Galapagos discontinued ISABELA Phase 3 trials in idiopathic pulmonary fibrosis.

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

Cost of goods sold was $1.36 billion. Research and development expense was $1.06 billion. Additional in-process R&D expense was $62 million. Selling, general and administrative expense was $1.06 billion. Total expenses $3.53 billion. Income from operations was $2.89 billion. Interest expense $257 million. Other expense was $369 million. Income tax provision was $542 million.

Q&A summary:

Trodelvy growth? We have strong awareness in accedemic centers, but only about 50% in community centers because did not have full approval. So we should ramp up going forward. Focus will remain on triple-negative breast cancer.

Magrolimab data needed for filing? The challenge is external comparisons, so around strength of data and consistency with earlier data.

Recovery in Prep? Descovy share is holding at about 45%. The pandemic has dampened the market, though we say an uptick in April. So we expect a gradual recovery.

Veklury guidance, pricing, regions? It has been directly proportional to hospitalization rates. Hospitalizations came down in March, we hope they continue to trend lower. We believe the tail will be longer than anyone throught originally, including in Asia. In India we are not charging a royalty. Our pricing in developed nations will be steady.

Business development in cell therapy? Focus is on life cycle management and risk management. We also want to disrupt the current situation, at lower cost, but believe that is further out. We are the partner of choice for solid tumors, which could be the largest market, long term.

Galapagos? With Toledo programs we are looking for proof of concept, in these small studies. We see this as a long journey that is just getting started. Our relationship is based on their research platform, which we still think is well positioned for first-in-class molecules.

Descovy price decline, will it repeat? Y/Y drop was due to higher payer discounts. That kept access open for our patients. We will be disciplined, but do not want to create access restrictions.

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