Analyst Conference Summary

biotechnology

conference date: April 25, 2024 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2024 (first quarter, Q1 2024)

Forward-looking statements

Overview: Back to y/y revenue growth as pandemic sales of Veklury less of an issue. But profits impacted by $4.1 billion in IPRD expense.

Basic data (GAAP):

Revenue was $6.69 billion, down 6% sequentially from $7.12 billion and up 5% from $6.31 billion in the year-earlier quarter.

Net income was negative $4.17 billion, down sequentially from $1.43 billion and down from $1.01 billion year-earlier.

Earnings per share (EPS, diluted) were negative $3.34, down sequentially from $1.15 down from $0.80 in the year-earlier quarter.

Guidance:

2024 guidance was reduced due to the IPRD charge. GAAP diluted EPS $0.10 to $0.50; non-GAAP $3.45 to $3.85.

Conference Highlights:

Daniel O'Day, CEO, said "Gilead delivered another strong quarter of revenue growth in the first quarter with 6% year-over-year growth in our base business driven by HIV, Oncology and Liver Disease. The acquisition of CymaBay brings us another potentially transformative therapy for people with liver disease, and a regulatory decision on seladelpar is expected in August. New HIV data demonstrates the continued progress in our long-acting HIV pipeline, and we look forward to providing updates on this and our broad oncology portfolio throughout the rest of 2024." Veklury for Covid sales decline y/y, and also q/q as the pandemic receded.

The dividend of $0.77 per share, to be paid on June 27, 2024 to shareholders of record as of June 14, 2024.

The IPRD charge of $3.9 billion was from current acquisition of CymaBay Therapeutics with a bit more from acquisition of Immunomedics in 2020. It lowered EPS by $3.14 per share. Excluding IPRD non-GAAP EPS was $1.82.

Biktarvy for HIV continues to gain market share. Descovy has over 40% of the PrEP market share.

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. in Q1 2024 got psoitive results in Phase 2 combo trial with ISL and initiated Phase 3 trials with BIC. Could support Lenacapavir for HIV prevention.

Trodelvy for cancers is now in or planned to over 30 trials. A Phase 3 trial in gastric cancer is currently enrolling.

Seladelpar for primary Biliary cholangitis should get an FDA decision in August 2024. Expects a positive decision, modest 2024 revenue contribution. Acquired with CymaBay.

In Q1 2024 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 negative $1.64 billion, sequentially from $na billion and down from $ billion year-earlier. Non-GAAP EPS was negative $1.32, sequentially from $na and down from $1.37 year-earlier.

Product sales were $6.65 billion, down 6% sequentially from $7.07 billion and up 5% from $6.31 billion in the year-earlier quarter.

Royalty, contract and other revenue was $39 million, down sequentially from $45 million, and down from $46 million year-earlier.

Cash and equivalents ended at $4.7 billion, down sequentially from $8.4 billion due to acquisition. $2.2 billion cash flow from operations. Capital expense $105 million. $2.11 billion free cash flow. $400 million was used to repurchase shares. $990 million paid in dividends. Long term liabilities were $25.8 billion. $2.21 billion cash used in investing activities.

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

Expenses were $11.0 billion, consisting of $1.55 billion for cost of goods sold; $1.52 billion for R&D; $4.13 million acquired in-process R&D; $2.43 billion IPRD impairment; $1.38 billion SG&A. Leaving loss from operations of $4.32 billion. Interest and other expense $265 million. Income tax benefit $315 million.

Capital allocation priorities are to grow the dividend and pay down debt. No near term plans for a major acquisition.

Q&A selective summary:

Medicare redesign and HIV impact? We expect some impact from Part D redesign impact. Expect HIV sales flat in 2025, but overall sales continuing to grow.

Kite CAR T multiple myeloma ODAC thoughts? Early line decision is positive for everybody. MRD minimal residual disease endpoint also positive for us. Looking at how that can be used in our programs.

CymaBay NASH diligence? We did not do an independent third party review of pathology, but we are confident in our own review. Will update as filings proceed.

Next gen CAR therapy priorities? Listed again (slide 19), looking in parallel with goal of picking a winner.

Cash use? Execution ahead of us, could do some licensing.

We've doubled the size of our portfolio in the last 4 years. We have robost HIV program and a growing PrEP market. Our oncology portfolio continues to expand. We have close to 20 readouts this year including three Phase 3 readouts. We already have what we need to drive strong growth going forward.

Seladelpar launch competition? Multiple therapies hitting the market is good for patients. Seladelpar is well-differentiated and could be the best therapy for the disease. So being 3 months behind another launch should not be much of a handicap. But moving to frontline would be a challenge, though moving patients to second line is currently relatively quick.

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