Analyst Conference Summary

biotechnology

conference date: October 28, 2021 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2021 (third quarter, Q3 2021)

Forward-looking statements

Overview: Excellent revenue and profit growth.

Basic data (GAAP):

Revenue was $7.42 billion, up 19% sequentially from $6.22 billion and up 13% from $6.58 billion in the year-earlier quarter.

Net income was $2.59 billion, up 70% sequentially from $1.52 billion and up from $0.36 billion year-earlier.

Earnings per share (EPS, diluted) were $2.05, up 69% sequentially from $1.21 and up from $0.29 in the year-earlier quarter.

Guidance:

Increased full year 2021 guidance. $26.0 to $26.3 billion product sales. Non-GAAP EPS $7.90 to $8.10. GAAP diluted EPS $5.50 to $5.70.

Conference Highlights:

Daniel O'Day, CEO, said "Veklury is making a significant impact as the COVID-19 pandemic continues to evolve. The dynamics of the HIV treatment market further improved and this contributed to record Biktarvy revenue. In oncology, our marketed portfolio continues to expand with four new country approvals for Trodelvy for metastatic triple-negative breast cancer, the approval of Tecartus in relapsed or refractory acute lymphoblastic leukemia and two new trial starts for magrolimab in solid tumors." Confident the HIV market is recovering from the pandemic; Prep market has resumed sequential growth.

Revenue growth was led by Veklury and Biktarvy. But exluding Veklury sales were down 3% y/y, driven by HIV therapy exclusivity losses. Veklury sales expected to track hospitalizations, which peaked in August.

Gilead now has over 50 clinical stage programs.

Announced an agreement with Merck for combining Trodelvy (sacituzimab govitecan) with Keytruda for triple-negative breast cancer (TNBC).

The dividend will be $0.71 per share, will be paid on December 30, 2021 to shareholders of record as of December 15, 2021.

In Q3 2021 received FDA approval for Tecartus for R/R ALL (acute lymphatic leukemia).

Yescarta for second line LBCL (large B cell lymphoma) has an sBLA filed in Q3 2021.

Non-GAAP numbers: Net income was $3.34 billion, up 42% sequentially from $2.35 billion and up 26% from $2.66 billion year-earlier. Non-GAAP EPS was $2.65, up 42% sequentially from $1.87 and up 26% from $2.11 year-earlier.

Product sales were $7.36 billion, up 20% sequentially from $6.15 billion and up 13% from $6.49 billion in the year-earlier quarter.

Royalty, contract and other revenue was $65 million, flat sequentially from $65 million, and down from $84 million year-earlier.

Cash and equivalents ended at $6.84 billion, down sequentially from $7.4 billion. $3.25 billion cash flow from operations. $3.11 billion free cash flow. $145 million was used to repurchase shares. $0.9 billion paid in dividends. Long term liabilities were $35.4 billion. Made $2.5 billion in debt repayments in Q3 2021.

Lenacapavir capsid inhibitor (GS-6207) for HIV: FDA granted PDUFA for 2/28/2022. A Phase 2 trial was initiated in Q3 2021 for lenacapavir plus islatravir, for longer action.

In Q3 2021 initiated trials for magrolimab for first line AML and first line mTNBC.

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.

Trodelvy Tropics-02 study for HR+/HER2 readout is now expected in Q1 2022, probably by February. Magrilomab in MDS BLA submission also moved back to Q1 2022. Received an EU CMMP positive opinion for second line TNBC in Q3 2021.

In Q2 announced 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.

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

Cost of goods sold was $1.22 billion. Research and development expense was $1.15 billion. Acquired in-process R&D expense was $19 million. Selling, general and administrative expense was $1.19 billion. Total expenses $3.58 billion. Income from operations was $3.84 billion. Interest expense $250 million. Other expense was $154 million. Income tax provision was $852 million.

Q&A summary:

Trodelvy Tropics 02 changes? Event driven trial, took longer to reach events, results in January or February.

Tropics 02 clinically meaningful PFS benefit? 2 months is about the threshold. If we did fall short, which we do not expect, we would look at the totality of the data before deciding next steps.

Remdesivir numbers? Implies 750,000 patients in Q3? $1.5 billion was mostly in the U.S., use a 5 day therapy, using our price we get to a lower number of patients than you. We are probably closer to 66% to 67% use with hospitalization.

Covid-19 new therapies plan? We are shy to predict the pandemic. We want easier to administer, more efficacious products. So far no variant is resistant to Remdesivir. We will share data on our oral molecules as it matures. Including an oral version of Remdesivir.

Tropic 02, overall survival? We modified the study to get a larger sample size to hit OS and changed the endpoint.

Is an integrase inhibitor always needed in a frontline setting? We do not believe that. The data will show what is true.

Screening and diagnoses for HIV are still down from 2019, though they are growing sequentially and should normalize sometime in 2022.

There is a much broader clinical development program for Trodelvy than the market currently expects. It could be a major growth driver.

Merck Trodelvy agreement financial details? Clinical collaboration. They get no economics on Trodelvy. Non-exclusive for both parties. It is part of our strategy to scale Trodelvy opportunities.

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