Analyst Conference Summary

biotechnology

conference date: July 29, 2021 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2021 (second quarter, Q2 2021)

Forward-looking statements

Overview: Strong y/y revenue growth, and not just from Veklury.

Basic data (GAAP):

Revenue was $6.22 billion, down 3% sequentially from $6.42 billion and up 21% from $5.14 billion in the year-earlier quarter.

Net income was $1.52 billion, down 12% sequentially from $1.73 billion and up from negative $3.34 billion year-earlier.

Earnings per share (EPS, diluted) were $1.21, down 12% sequentially from $1.37 and up from negative $2.66 in the year-earlier quarter.

Guidance:

Full year 2021 guidance range for product sales tightened to $24.4 billion to $25.0 billion. GAAP EPS lowered to $4.70 to $5.05, non GAAP tightened to $6.90 to $7.25.

Conference Highlights:

Daniel O'Day, CEO, said "Our flagship HIV therapy, Biktarvy, saw continued growth and gains in market share, despite the ongoing impact of the pandemic. The series of promising pipeline updates included the data from the landmark ZUMA-7 study for the treatment of second-line large B-cell lymphoma. In virology, recent results from our lenacapavir study reinforce its potential as a long-acting therapy for people living with HIV, and positive interim results from our Hepcludex studies in HDV moved us closer to a U.S. filing." Even excluding Veklury product sales grew y/y.

Revenue growth was led by Veklury and Biktarvy. Also benefitted from the ramps of Trodelvy and Tecartus. Generic entrents led to major declines in Truvada and Atripla revenue. But HIV prep share remained steady even with generic entries.

All key first-half 2021 development targets were hit. Gilead now has over 50 clinical stage programs.

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 Q2 Kite announced a purchase agreement with BioNTech to acquire Kite's solid tumor neoantigen T cell receptor platform and clinical manufacturing facility in Gaithersburg, Maryland..

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

In Q2 a new drug application was filed for lenacapavir and initiated a Phase 3 trial for PrEP.

In Q2 MYR301 (buleviertide) reported strong data for HDV. A BLA is planned for 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 $2.35 billion, down 11% sequentially from $2.63 billion and up 68% from $1.40 billion year-earlier. Non-GAAP EPS was $1.87, down 10% sequentially from $2.08 and up 68% from $1.11 year-earlier.

Product sales were $6.15 billion, down 3% sequentially from $6.34 billion and up 21% from $5.07 billion in the year-earlier quarter. $4.21 billion U.S. product sales. $1.15 billion European sales. Rest of world $792 million.

Royalty, contract and other revenue was $65 million, down sequentially from $83 million, and down from $76 million year-earlier.

Cash and equivalents ended at $7.4 billion, up sequentially from $6.2 billion. $2.3 billion cash flow from operations. $43 million was used to repurchase shares. $0.89 billion paid in dividends. Long term liabilities were $ billion.

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

In Q2 2021 Yescarta showed 60% efficacy in second line LBCL in the ZUMA-7 trial. If approved the second line setting would expand the US covered population from 8k to 14k per year.

ARC-7 Domvanalimab trial in NSCLC had a good Phase 2 interim data readout in Q2 2021.

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

Cost of goods sold was $1.39 billion. Research and development expense was $1.13 billion. Acquired in-process R&D expense was $96 million. Selling, general and administrative expense was $1.35 billion. Total expenses $3.97 billion. Income from operations was $2.25 billion. Interest expense $256 million. Other expense was $173 million. Income tax provision was $300 million.

Q&A summary:

US HIV normalization? We are doing well with market share and Biktarvy growth. HIV is taking some time to bounce back. Most patients are continuing patients, just a small percentage new, switches and restarts. In EU the difference is just the pandemic dynamics. HIV screening and diagnosis is still about 13% below pre-pandemic levels in the US.

Trudelvy launch? Pleased with 24% q/q growth, helped by second line approval. We are promoting the incredible overall survival data. Most, 90%, is breast cancer, the rest is bladder.

We are thinking about how we are going to combine lenacapavir with other long acting agents.

Galapagos? Currently we do not have any opt-in milestones with them, but are working on the preclinical and clinical science.

Arcus? We are waiting for more mature data before deciding on opt-ins. We have not included the financials of potential opt-ins in our current guidance.

For now we see Veklury continuing to be important in hospital setting, despite the effectiveness of vaccines. We are testing it against the variants, and so far it is effective against them.

Our HIV program provides free therapies to patients, it is not to help organizations. Its goal is to help end the epidemic by minimize the bariers to use.

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