Analyst Conference Summary

biotechnology

conference date: November 7, 2023 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2023 (third quarter, Q3 2023)

Forward-looking statements

Overview: Revenue flat y/y, EPS up on lower taxes.

Basic data (GAAP):

Revenue was $7.05 billion, up 7% sequentially from $6.60 billion and up 0.1% from $7.04 billion in the year-earlier quarter.

Net income was $2.18 billion, up 108% sequentially from $1.05 billion but up 22% from $1.79 billion year-earlier.

Earnings per share (EPS, diluted) were $1.75, up 111% sequentially from $0.83 and up 22% from $1.43 in the year-earlier quarter.

Guidance:

Increased 2023 guidance to product sales of $26.7 to $26.9 billion. diluted EPS $4.55 to $4.75. Non-GAAP EPS $6.65 to $6.85.

Conference Highlights:

Daniel O'Day, CEO, said "Gilead has now delivered two years of consistent growth in our base business. In the third quarter, this continued growth was driven by both Virology and Oncology. Our clinical momentum also remains strong, and highlights this quarter included new data on Trodelvy with pembrolizumab in first-line metastatic non-small cell lung cancer. In Virology, we completed enrollment for Phase 3 trials of lenacapavir for HIV prevention and oral obeldesivir for COVID-19. We are looking forward to advancing these and other potential new options for patients over the coming months." Higher sales of other therapies were offset by lower Veklury for Covid-19 sales.

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

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.

Lenacapavir for HIV now is in 7 trials, plus 3 INDs, with a variety of combination therapies.

Trodelvy for cancers is now in or planned to over 30 trials. A Phase 2 trial showed T + pembrolizumab had antitumor activity, with 69% ORR. In Q3 2023 it received EC approval for pre-treated HR+/HER- breast cancer. Also positive data from early trials for first line mNSCLC, HNSCC, and GI cancers. A Phase 3 trial in gastric cancer is currently enrolling.

In Q3 the Phase 3 trial of obeldesivir for Covid-19 completed enrollment.

The CART-ddBCMA candidate is in a Phase 2 trial for multiple myeloma. Next generation cell therapy programs are being developed.

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

Non-GAAP numbers: Net income was $2.88 billion, down % sequentially from $na billion and up 21% from $2.39 billion year-earlier. Non-GAAP EPS was $2.29, down % sequentially from $na and up 21% from $1.90 year-earlier.

Product sales were $6.99 billion, down % sequentially from $na billion and up slightly from $6/98 billion in the year-earlier quarter.

Royalty, contract and other revenue was $56 million, down sequentially from $na million, and down from $64 million year-earlier.

Cash and equivalents ended at $8.02 billion, flat sequentially from $8.0 billion. $1.8 billion cash flow from operations. Capital expense $122 million. $1.63 billion free cash flow. $300 million was used to repurchase shares. $953 million paid in dividends. $na billion debt repayment. Long term liabilities were $28.2 billion. In Q3 2023 Gilead repaid $2.3 billion in debt but issued $2.0 billion in new debt.

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

Expenses were $4.43 billion, consisting of $1.57 billion for cost of goods sold; $1.46 billion for R&D; $91 million acquired in-process R&D; $1.32 billion SG&A. Leaving income from operations of $2.62 billion. Interest and other expense $304 million. Income tax $146 million.

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

Q&A selective summary:

Lenacapavir competition issue? Our DDI profile is well characterized and in our label. We don't anticipate changes to our development program, including for PreP.

Trop2 data, competition, different populations? ESMO was interesting for all concerned. Not all Trop2 ADCs are equivalent. Trodelvy has better affinity, a different linker and a different payload. We have shared data on both squamous and non-squamous patients. Should have more data next year.

Limitations on cell therapy in large B cell lymphoma? Barriers are more in the U.S. We are seeing quicker uptake in Europe. In U.S. system is fragmented, harder to treat patients where they are, they have to be sent to large academic hospitals. We are working on opening new treatment centers, should be around 140 in US by end of year. Also working on transplant patients in earlier lines. We also need to expand the number of beds in the academic centers.

Trodelvy competition? We don't expect to see material impact of recent data soon. We are leading in efficacy. We are generating additional data for Trodelvy.

Tigit gastric data? Today's data is promising. ORR and PFS are early, single-arm data, but look good. The Phase 3 study will compare to standard of care in a randomized trial.

Multiple myeloma data? Our ORR is 100% so far. With small numbers of patients. Also we have not observed Parkinson's syndrome in our patients. Looking to generate more data. We believe our Kite division will be ready for manufacturing for launch.

2024? We expect expenses to grow more slowly going forward.

We continue to invest in virology, oncology, and inflammation.

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