Analyst Conference Summary

biotechnology

conference date: August 2, 2022 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2022 (second quarter, Q2 2022)

Forward-looking statements

Overview: Flat y/y revenue is good, given the (expected) decline in remdesivir (Veklury) sales. HIV and cell therapy revenues up y/y.

Basic data (GAAP):

Revenue was $6.26 billion, down 5% sequentially from $6.59 billion and flat from $6.22 billion in the year-earlier quarter.

Net income was $1.14 billion, up sequentially from $19 million and down 25% from $1.52 billion year-earlier.

Earnings per share (EPS, diluted) were $0.91, up sequentially from $0.02 and down 25% from $1.21 in the year-earlier quarter.

Guidance:

Updated full-year 2022: sales up to $24.5 to $25.0 billion, including $2.5 billion for Veklury. Non-GAAP EPS up to $6.35 to $6.75; GAAP EPS dhown to $2.90 to $3.40. Includes $300 million upfront payment for Dragonfly, which was not in prior guidance.

Conference Highlights:

Daniel O'Day, CEO, said "Excluding Veklury, product sales grew 7% year-over-year. There was continued strong demand for our HIV portfolio with further share growth for Biktarvy, and oncology revenues reached an all-time high, driven by cell therapy and Trodelvy." Grew revenue in both HIV treatment and PreP.

In Q2 2022 signed an agreement with the EU allowing nations to buy Veklury for 18 months. CHMP recommended full approval.

In Q2 received EMA approval for Yescarta for 3L+ R/R Follicular Lymphoma. Tecartus received a positive CHMP opinion for R/R ALL.

The dividend will be $0.73 per share, to be paid on September 29, 2022 to shareholders of record as of September 15, 2022.

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

In Q2 2022 the clinical hold on lenacapavir was resolved with PDUFA end of December. Hold had been about the glass vials used.

Non-GAAP numbers: Net income was $ billion, up sequentially from $2.77 billion and up % from $ billion year-earlier. Non-GAAP EPS was $, up sequentially from $2.12 and up % from $ year-earlier.

Product sales were $6.14 billion, down 6% sequentially from $6.53 billion and near flat from $6.15 billion in the year-earlier quarter.

Royalty, contract and other revenue was $122 million, up sequentially from $56 million, and up from $65 million year-earlier.

Cash and equivalents ended at $7.0 billion, up sequentially from $6.75 billion. $1.8 billion cash flow from operations. $ billion free cash flow. $72 million was used to repurchase shares. $920 million paid in dividends. Long term liabilities were $33.4 billion.

In Q2 Trodelvy reported positive Phase 3 data in breast cancer and Phase 2 data in bladder (urothelial) cancer.

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

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 $4.23 billion, consisting of $1.44 billion for cost of goods sold; $1.10 billion for R&D; $330 million acquired in-pross R&D; $1.36 billion SG&A. Leaving income from operations of $2.03 million. Interest and other expense $526 million. Income tax $368 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 key data? Focus is on OS evolution. Will use that in regulatory discussion. Subpopulations analyzed will include prior therapies and lines of therapies.

Cell therapy demand going forward? Reimbursement is really good, 98% access, even with the 2nd line launch. Uptake increase is mainly from 2nd line patients. Believe it is a bolus, so expects rate to normalize for rest of year.

Drug pricing reform potential impact? Fundamental issue is reducing patient out of pocket cost. Negotiation part does not help with that, could discourage innovation. Impact in any case is several years away. Part D reform could have an impact on our business. We need to see what legislation is actually passed. We support patient oriented benefits.

Monkeypox impact? HIV specialists have seen rising monkeypox concern, but that is leading to more screening and diagnosis, so a positive for business.

Oral nuc for Covid, Phase 1 is just a safety study, PK. Will now move into proof of concept and clinical stage.

Trodelvy demand growth in U.S.? Global growth was strong, from ex-US national launches. In US we strong demand growth, 7% sequentially, but impacted by pricing decline. The opportunity for Trodelvy is still tremendous, given the survival data.

Medicare Part B % of Biktarvy revenue? Government business is around 40% to 50%. But Medicaid is less than 20% of total business.

HIV screening and diagnosis levels? We are about 8% below prepandemic levels. But diagnosis is 30% down. But it had been declining at 10% a year. But market is growing due to expansion in Prep.

Yescarta 2nd line opportunity? Future label expansions? We see momentum accelerating. We are trying to get to the outpatient setting and frontline high risk patients. But in second line itself we believe we are in a bolus, which will normalize later.

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