Analyst Conference Summary

biotechnology

conference date: August 3, 2023 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2023 (second quarter, Q2 2023)

Forward-looking statements

Overview: Revenue up y/y despite decline in Veklury Covid sales.

Basic data (GAAP):

Revenue was $6.60 billion, up 4% sequentially from $6.35 billion and up 5% from $6.26 billion in the year-earlier quarter.

Net income was $1.05 billion, up 4% sequentially from $1.01 billion but down 8% from $1.14 billion year-earlier.

Earnings per share (EPS, diluted) were $0.83, up 4% sequentially from $0.80 and down 9% from $0.91 in the year-earlier quarter.

Guidance:

Increased 2023 revenue guidance to $26.3 to $26.7 billion. Lowered GAAP EPS to $4.50 to $4.85, and non-GAAP EPS to $6.45 to $6.80

Conference Highlights:

Daniel O'Day, CEO, said "11% year-over-year growth across our base business was driven by our diverse portfolio of therapies for HIV, Oncology, and Liver Disease. We received positive regulatory updates for six of our therapies and presented a large body of data on our pipeline, reinforcing our growing potential to help more patients and communities worldwide." Veklury sales continued decline as the pandemic wound down. Excluding Veklury, product sales grew 11% y/y.

The dividend of $0.75 per share, to be paid on September 28, 2023 to shareholders of record as of September 15, 2023.

In Q2 2023 HIV antitrust litigation, represented an unfavorable $0.32 impact to diluted EPS, both GAAP and non-GAAP.

In July 2023 the Phase 3 ENHANCE trial of magrolimab in combination with azacitidine in higher-risk myelodysplastic syndromes was discontinued due to futility based on a planned analysis. Data from the trial will be presented at an upcoming medical meeting.

In Q2 2023 Gilead announced the acquisition of XinThera, adding additional pipeline assets including rights to a portfolio of small molecule inhibitors targeting PARP1 for oncology and MK2 for inflammatory diseases.

In Q2 Gilead received EC approval for Trodelvy as monotherapy for unresectable or metastatic HR+/HER2- mBC patients who have received endocrine-based therapy and at least two additional systemic therapies, in the advanced setting. More Trodelvy data was presented in the quarter.

In Q2 2023 Gilead presented OS data at ASCO from the Phase 3 ZUMA-7 trial of Yescarta in second-line R/R LBCL, demonstrating significantly longer OS versus standard of care.

In Q2 2023 Gilead received full marketing authorization in the EU for Hepcludex (bulevirtide) for adults with chronic HDV and compensated liver disease. Bulevirtide remains the only approved treatment for HDV in the EU and is not approved in the U.S.

Kite continues to expand labels and therapies. Yescarta is the only LBCL therapy to demonstrate significant OS increase over standard of care, with 48-month OS at 54.6%.

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

Non-GAAP numbers: Net income was $ billion, down % sequentially from $1.73 billion and down % from $ billion year-earlier. Non-GAAP EPS was $, down % sequentially from $1.37 and down % from $ year-earlier.

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

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

Cash and equivalents ended at $8.0 billion, up sequentially from $7.2 billion. $2.34 billion cash flow from operations. $2.20 billion free cash flow. $150 million was used to repurchase shares. $944 million paid in dividends. $na billion debt repayment. Long term liabilities were $27.3 billion.

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

Expenses were $4.93 billion, consisting of $1.44 billion for cost of goods sold; $1.41 billion for R&D; $236 million acquired in-process R&D; $1.85 billion SG&A. Leaving income from operations of $1.67 billion. Interest and other expense $82 million. Income tax $549 million.

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

Q&A selective summary:

Goal of 1/3 revenue from oncology/hematology, effect of magrilomab stop? We are on track on the one-third goal by 2030. We have a broad cancer portfolio, including novel mechanisms. We did not expect every one to work out. Trodelvy + cell therapy will produce $3 billion in revenue this year.

Trodelvy data expectations? Data is embargoed, but abstract comes out in mid-August. For ILD, we have not seen it to date in our trials. Re Trop2, we measure that in all of our trials, but have not seen a correlation with efficacy. That could change with different tumor types.

Trodelvy inflection due to HR+HER2- launch? Yes, seeing positive results in that launch in the US. Still building on triple-negative breast cancer as well.

CMS Medicare coverage of PreP? NCD national coverage determination is because it only currently covers oral drugs, and this would be for an injection. No details yet.

Magrilomab failure thoughts? We are still looking at the data. We are further along in our AML trials and solid tumors, MDS is uniquely challenging.

Clinical hold? June 16, hold was following a patient death in the DBBCMA CART trial. Continue to work with Arcelix. FDA has allowed some further dosing.

Business development thoughts? We continue to be active in BD, across all areas of focus. We continue to build out our research groups. Focus is now on smaller acquisitions.

Move into oncology has increased expenses in the short run, but as business grows we should become more efficient, with a better operating margin.

Yes, we are interested in the CAR-T data we are seeing outside of oncology, particularly for autoimmune disease.

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