Analyst Conference Summary

biotechnology

conference date: February 6, 2024 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2023 (fourth quarter, Q4 2023)

Forward-looking statements

Overview: Revenue fell on lower Veklury sales, but increased 7% y/y excluding that.

Basic data (GAAP):

Revenue was $7.12 billion, up slightly sequentially from $7.05 billion and down 4% from $7.39 billion in the year-earlier quarter.

Net income was $1.43 billion, down 34% sequentially from $2.18 billion and down 13% from $1.64 billion year-earlier.

Earnings per share (EPS, diluted) were $1.15, down 34% sequentially from $1.75 down 12% from $1.31 in the year-earlier quarter.

Guidance:

2024 product sales $27.1 to $27.5 billion, including $1.3 billion for Veklury. Diluted GAAP EPS $5.15 to $5.55. Non-GAAP $6.85 to $7.25.

Conference Highlights:

Daniel O'Day, CEO, said "This was another strong year of revenue growth for Gilead's base business, driven by both HIV and Oncology. The strength of the business provides a solid foundation as we enter a new catalyst-rich phase for the company. We are expecting several milestones in 2024, including updates on long-acting HIV prevention and treatment, Cell Therapy and Trodelvy." Expects at least 12 data updates on cancer therapies in 2024. Expects at least 8 HIV treatment updates in 2024.

The dividend of $0.77 per share, to be paid on March 28, 2024 to shareholders of record as of March 15, 2024.

Obeldesivir for Covid-19 Phase 3 did not meet its primary endpoint.

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. In Q4 2023 it did not meet the endpoint for previously treated non-small cell lung cancer. In Q3 2023 it had 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 Q4 2023 with Arcellx presented positive Phase 1 anito-cel data in R/R multiple myeloma. Expanded collaboration to include an option for the ARC-SparX ACLX-001 to include lymphomas, for $200 million.

Invested $320 million to update domvanalimab collaboration with Arcus Biosciences.

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 $2.88 billion and up % from $ billion year-earlier. Non-GAAP EPS was $, down % sequentially from $2.29 and up % from $ year-earlier.

Product sales were $7.07 billion, up 1% sequentially from $6.99 billion and down 4% from $7.33 billion in the year-earlier quarter.

Royalty, contract and other revenue was $45 million, down sequentially from $56 million, and down from $56 million year-earlier.

Cash and equivalents ended at $8.4 billion, up sequentially from $8.02 billion. $2.2 billion cash flow from operations. Capital expense $214 million. $1.95 billion free cash flow. $150 million was used to repurchase shares. $943 million paid in dividends. Long term liabilities were $28.1 billion.

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

Expenses were $5.50 billion, consisting of $2.09 billion for cost of goods sold; $1.41 billion for R&D; $347 million acquired in-process R&D; $1.61 billion SG&A. Leaving income from operations of $1.61 billion. Interest and other income $41 million. Income tax $236 million.

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

Full year 2023 revenue was $27.12 billion. GAAP net income $5.67 billion. GAAP EPS $4.54. Non-GAAP diluted EPS was $6.72, down y/y.

Q&A selective summary:

Guidance, possible upside? Product ex Veklury guided to 4% y/y. We also expect to moderate operating expense growth. HIV growth may vary by quarter. Cell therapy is a key growth driver.

Business development? Nothing has changed. We have doubled our clinical trials over the past 4 years. We have no significant patent expirations until the next decade. We will be opportunistic in any asset acquisition. We are comfortable with our leverage ratio.

Anito-cel, neuro toxicity data? Enrollment should complete this year. Will look for safety signals, no neuro-tox to date. If that is differentiated from competition, it would help.

Trodelvy frontline non-small cell trial? We have not seen a difference in squamous and non-squamous results. That indicates some confidence in the results, but there are other variables we need to look at. Overall we are very confident in Trodelvy. More data will read out this year in bladder and breast cancer.

Yescarta sales dynamics? Continues to lead in cell therapy. In Q4 there were some capacity constraints, plus in class and out of class competition. We expect to be flat to slightly up in Q1, then a return to growth in the second half of the year.

Profitability of cell therapies? Profitability has improved over the last 5 years. We can still continue to improve efficiency and costs. We have 3 global manufacturing centers now. We believe we can eventually achieve biologic level margins.

HIV payer mix changes? We had some pricing favorability in Q1 2023 due to inflation and rebate levels. In Q4 saw strong demand, but change to higher government % of channel mix. Overall 2023 results were driven by demand. We see demand growth for Prep in 2024, with variability by quarter.

TIGIT program? Updated Arcus partnership is about efficient use of capital. We believe in their programs, not just TIGIT. We have had some difficulty in enrolling in the TIGIT trial due to competition from other companies' potential therapies.

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