Analyst Conference Summary

biotechnology

conference date: October 27, 2022 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2022 (third quarter, Q3 2022)

Forward-looking statements

Overview: Revenue was down as Veklury for Covid sales shrank, otherwise a strong quarter.

Basic data (GAAP):

Revenue was $7.04 billion, up 12% sequentially from $6.26 billion and down 5% from $7.42 billion in the year-earlier quarter.

Net income was $1.79 billion, up 57% sequentially from $1.14 million and down 31% from $2.59 billion year-earlier.

Earnings per share (EPS, diluted) were $1.42, up 56% sequentially from $0.91 and down 31% from $2.05 in the year-earlier quarter.

Guidance:

Updated full 2022 to product sales up to $25.9 to $26.2 billion. Veklury sales $3.4 billion. GAAP EPS $3.35 to $3.55; non-GAAP EPS $6.95 to 47.15.

Conference Highlights:

Daniel O'Day, CEO, said "This was another very strong quarter across the business. In HIV, treatment and prevention markets continue to grow with further share gains for Biktarvy in treatment, and we received our first approval for our long-acting HIV agent, lenacapavir, in Europe. In oncology, there is increasing demand for cell therapies and Trodelvy. Yescarta and Tecartus received two approvals in Europe and Trodelvy was granted FDA Priority Review for HR+/HER2- metastatic breast cancer. Overall, we are seeing terrific progress from a commercial and clinical perspective and look forward to building on this momentum." Excluding Veklury product sales grew 11% y/y. Biktarvy continues to gain market share.

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

In Q2 2022 signed an agreement with the EU allowing nations to buy Veklury for 18 months. CHMP recommended full approval. On October 17, 2022 announced approval of Yescarta for second-line DLBCL. In Q2 received EMA approval for Yescarta for 3L+ R/R Follicular Lymphoma.

In Q3 2022 Sunlenca (lenacapavir) was granted EU approval for HIV, in combination with other drugs, for patients not otherwise able to suppress the virus. The FDA decision is expected on December 27, 2022. Merck and Gilead plan to resume their Phase 2 study under an amended protocol. The study will evaluate an investigational once-weekly oral combination treatment regimen of Merck's islatravir at a lower weekly dose and Gilead's lenacapavir.

In Q3 EMA CHMP issues a positive opinion for Veklury for patients under 12 years old.

In Q3 2022 Gilead completed the acquisition of MiroBio for $414 million in cash. MiroBio is focused on restoring immune balance with agonists targeting immune inhibitory receptors.

In Q3 Trodelvy met endpoints in heavily pre-treated HR+/HER2- patients. The FDA accepted an sBLA, PDUFA in Q1 2023.

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 $2.39 billion, up sequentially from $na billion and down 28% from $3.34 billion year-earlier. Non-GAAP EPS was $1.90, up sequentially from $na and down 28% from $2.65 year-earlier.

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

Royalty, contract and other revenue was $64 million, down sequentially from $122 million, and down slightly from $65 million year-earlier.

Cash and equivalents ended at $6.94 billion, down sequentially from $7.0 billion. $2.86 billion cash flow from operations. $2.71 billion free cash flow. $180 million was used to repurchase shares. $928 million paid in dividends. $1 billion debt repayemnt. Long term liabilities were $31.1 billion.

In Q2 Trodelvy reported positive Phase 3 data in breast cancer and Phase 2 data in bladder (urothelial) cancer. Trodelvy Tropics-02 study for HR+/HER2 readout was positive in Q1 2022.

In Q2 Tecartus received a positive CHMP opinion for R/R ALL.

In Q3 2022 the FDA granted Orphan Drug Designation for KITE-222, an investigational CAR T-cell therapy targeting C-type lectin-like molecule-1 (CLL-1), for the treatment of acute myeloid leukemia.

In Q3 2022 Gilead announced a strategic collaboration with MacroGenics) to develop bispecific antibodies to treat various cancers. The agreement includes an upfront payment of $60 million to MacroGenics and an exclusive option on MGD024, an investigational CD123 and CD3 bispecific antibody.

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

Expenses were $4.21 billion, consisting of $1.40 billion for cost of goods sold; $1.15 billion for R&D; $448 million acquired in-pross R&D; $1.21 billion SG&A. Leaving income from operations of $2.84 million. Interest and other expense $405 million. Income tax $646 million.

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

Q&A summary:

Lenacapavir direction? Excited by the approval. Combined with islatrivir, it provides a near-term opportunity for a long-acting option. We also have internal programs to combine for weekly oral doses. We think there will be a lenacapavir partner in oral, perhaps a different one in sub-q, and we will try to get to a long acting agent.

Tigit program timeline? Heading to 4th interim analysis for Phase 2 study, enrollment was completed over the summer. Data seen to date supports combining with Dom. PFS data will be preliminary.

Trodelvy competitive landscape, HR+/HER2- pop? Commercial sales have been strong, including ex-US. OS data for HR+/HER2- will help. Well-positioned for late line patients. Believe it can be extended into a broad set of tumor types.

Trodelvy for lung cancer? Looking at 1st, 2nd, 3rd line settings. No timeline yet.

GS-5245? In case the pandemic picks up again, or a resistant virus emerges.

Tenofovir (Viread) litigation? Completely confident in our defense, this is a life-saving product, the side effects were in the label. We have not taken an accounting charge for it.

Long acting HIV, any other mechanism available? We are looking at various mechanisms for combining for a long-acting therapy.

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