Analyst Conference Summary

biotechnology

conference date: April 28, 2022 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2022 (first quarter, Q1 2022)

Forward-looking statements

Overview: Good revenue, GAAP results hit by a big impairment charge.

Basic data (GAAP):

Revenue was $6.59 billion, down % sequentially from $7.24 billion and up 3% from $6.42 billion in the year-earlier quarter.

Net income was $19 million, down sequentially from $382 billion and down % from $1.73 billion year-earlier.

Earnings per share (EPS, diluted) were $0.02, down sequentially from $0.30 and down from $1.38 in the year-earlier quarter.

Guidance:

Updated GAAP EPS to $3.00 to $3.50 to reflect the $2.7 billion impairment charge. No change in non-GAAP EPS range.

Conference Highlights:

Daniel O'Day, CEO, said "Biktarvy delivered strong 18% year-over-year revenue growth, and oncology sales increased by 60% year-over-year, driven by increased demand for Trodelvy and our cell therapy products. As we continue to advance our broad oncology portfolio, we look forward to providing more new options for people living with cancer." Biktarvy sales of $2.2 billion, with a 43% market share, were a big help. Saw the usual Q1 negative seasonality and expects sequential HIV revenue growth for the remaining quarters.

There was an in-process R&D impairment charge of $2.7 billion included in GAAP, but not non-GAAP, results, for Immunomedics deal, specifically for Trodelvy. It's complicated.

HIV therapy revenue was up 2% y/y. HIV Prep market up 30% y/y. Cell therapy for cancers was up 43% y/y. HCV sales volume was steady y/y, but revenue was down due to pricing pressure.

Veklury sales were up y/y to $1.53 billion, but are volatile along with the Covid pandemic.

The dividend will be $0.73 per share, to be paid on June 30, 2022 to shareholders of record as of June 15, 2022.

Gilead now has over 50 clinical stage programs. Expects cancer program to generate one-third of revenue by 2030.

Repaid more debt on February 1, 2022.

Non-GAAP numbers: Net income was $2.77 billion, up sequentially from $866 million and up 7% from $2.58 billion year-earlier. Non-GAAP EPS was $2.12, up sequentially from $0.69 and up 4% from $2.04 year-earlier.

Product sales were $6.53 billion, down 9% sequentially from $7.16 billion and up 2% from $6.42 billion in the year-earlier quarter.

Royalty, contract and other revenue was $56 million, down sequentially from $84 million, and down from $83 million year-earlier.

Cash and equivalents ended at $6.75 billion, down sequentially from $7.8 billion. $1.8 billion cash flow from operations, which included the $1.25 billion outflow for a legal settlement. $1.59 billion free cash flow. $725 million was used to opt in to the Arcus collaboration. $352 million was used to repurchase shares. $945 million paid in dividends. Long term liabilities were $34.6 billion. Made $500 million in debt repayments in Q1 2022.

Lenacapavir capsid inhibitor (GS-6207) for HIV: FDA granted PDUFA for 2/28/2022. But on March 1, 2022 received a Complete Response Letter due to the composition of the glass vials Gilead had intended to use. A Phase 2 trial was initiated in Q3 2021 for lenacapavir plus islatravir, for longer action.

In January 2022 the FDA approved a label update for Yescarta showing better management of cytokine release syndrome. In April 2022 FDA approved in second line r/r LBCL. Also new data showed strength in frontline LCBL in December 2021.

In January 2022 a partial clinical hold was issued for magrolimab plus azacitidine, but other magrolimab trials continued.

Trodelvy Tropics-02 study for HR+/HER2 readout was positive in Q1 2022. Magrilomab in MDS BLA submission has been moved back to 2H 2022.

Expenses were $6.49 billion, consisting of $1.42 billion for cost of goods sold; $1.19 billion for R and D; $2.7 billion in-process impairment; $1.08 billion SG&A. Leaving income from operations of $197 million. Interest and other expense $349 million. Income tax benefit $164 million.

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

Capital allocation priorities are to grow the dividend and pay down debt.

Q&A summary:

Trodelvy filing plan? More data will be released at ASCO in early June. The primary endpoint was statistically signigicant. We plan to advance to earlier lines of therapy.

China Veklury? 11 million patients worldwide so far. Since trend is to less severe disease, we are seeing less use. We are not approved in China.

HIV diagnosis rates, competition? Screening is still below pre-pandemic, but is now catching up. In Q1 diagnosis was up 3% y/y. Prevention market was up 33% y/y. New entrants are having a very limited impact on our market share.

Discussed possible lenacapavir combinations for long-acting therapy.

Trodelvy lung cancer study? Biomarker TROP2 expression does not seem to have a big impact on responses, slow far. Looking for combinations that provide synergies, will need large clinical trials.

Could acquisitions be used to drive near-term growth, while waiting for readouts? We can extend the potential for the organizations we already acquired. We continue to look to complement that, but now the bar is higher. We are doing a lot of collaborations. We think the market undervalues our growth prospects.

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