Analyst Conference Summary

biotechnology

conference date: April 27, 2023 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2023 (first quarter, Q1 2023)

Forward-looking statements

Overview: Lower Veklury revenue dampened overall product revenue.

Basic data (GAAP):

Revenue was $6.35 billion, down 14% sequentially from $7.39 billion and down 4% from $6.59 billion in the year-earlier quarter.

Net income was $1.01 billion, down 38% sequentially from $1.64 billion but greatly up from $19 million year-earlier.

Earnings per share (EPS, diluted) were $0.80, down 38% sequentially from $1.30 and up greatly from $0.02 in the year-earlier quarter.

Guidance:

2023 product sales between $26.0 and $26.5 million. Decreased GAAP EPS estimate to $4.75 to $5.15.

Conference Highlights:

Daniel O'Day, CEO, said "A 15% year-over-year revenue increase [excluding Veklury] reflects growth in each of our core areas. Biktarvy outperformed once again, and Oncology revenue increased 59% year-over-year, driven by Trodelvy and Cell Therapy. We look forward to helping even more people with Trodelvy following the approval for pre-treated HR+/HER2- metastatic breast cancer, making this the third U.S. approval for Trodelvy in three years." Veklury sales declined as the pandemic wound down.

The dividend was of $0.75 per share, to be paid on June 29, 2023 to shareholders of record as of June 15, 2023.

In Q1 2023 Gilead presented positive Phase 1b proof-of-concept data for an investigational combination regimen of lenacapavir with broadly neutralizing antibodies teropavimab and zinlirvimab as a potential long-acting treatment regimen for HIV with twice-yearly dosing. Also announced results from multiple collaborative studies evaluating novel investigational combinations and strategies as part of the HIV cure research program. Lencapavir is in a proof-of-concept Phase 3 trial.

Four Phase 3 studies have been ititiated in 2023, and 6 earlier-phase.

In February 2023 the FDA approved Trodelvy for heavily pre-treated HR+/HER2- breast cancer patients.

Gilead now has 61 clinical stage programs. Expects cancer program to generate one-third of revenue by 2030.

Community Therapeutics acquisition was completed in February 2023.

Non-GAAP numbers: Net income was $1.73 billion, down 18% sequentially from $2.11 billion and down 35% from $2.68 billion year-earlier. Non-GAAP EPS was $1.37, down 18% sequentially from $1.67 and down 35% from $2.12 year-earlier.

Product sales were $6.31 billion, down 14% sequentially from $7.3 billion and down 3% from $6.53 billion in the year-earlier quarter.

Royalty, contract and other revenue was $46 million, down sequentially from $56 million, and down from $56 million year-earlier.

Cash and equivalents ended at $7.2 billion, down sequentially from $7.63 billion. $1.7 billion cash flow from operations. $1.64 billion free cash flow. $400 million was used to repurchase shares. $969 million paid in dividends. $ billion debt repayment. Long term liabilities were $30.4 billion.

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

Expenses were $4.65 billion, consisting of $1.40 billion for cost of goods sold; $1.45 billion for R&D; $481 million acquired in-process R&D; $1.32 billion SG&A. Leaving income from operations of $1.71 billion. Interest and other expense $4-4 million. Income tax $316 million.

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

Q&A selective summary:

Trop2 data expectations? Too early to compare with competitor data. We are comfortable with our own data. Trodelvy uptake has been good.

HIV long-acting oral inhibitors? We have several programs in the clinic, both oral and injectable. Will share data as available, excited about this long-acting portfolio.

Trodelvy in earlier lines? HR+HER2- launch is going well so far. We are looking at the chemo-naive population, study should start second half of year. Still working on trial design.

Our portolio has positioned us for both short and long-run growth. We are already showing strength across the base business. Our R&D target is low 20s percentage. We believe margins can improve as revenue grows.

We see a lot of growth opportunity in 2nd line therapy to Yescarta. Manufacturing is an area of competitive strength for Gilead. We have not been capacity constrained. We manufacture our own viral vector.

IRA impact on Biktarvy pricing? We do believe it will have an impact, but not until 2028. It would only be on the Medicare business. Biktarvy has IP protection until 2033.

CAR T immunology indications, pricing? Pricing would be based on benefit, would likely be just for a segment of patients.

We believe that by the end of this decade about 50% of the market will be long-acting, but Biktarvy will be the standard of care for daily dosing. The PreP market is very different, will be more like 70% wanting long-acting.

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