Q1 2024 Gilead Sciences Inc Earnings Call

Participants

Andrew D. Dickinson; CFO; Gilead Sciences, Inc.

Cindy Perettie; EVP of Kite; Gilead Sciences, Inc.

Daniel P. O'Day; Chairman & CEO; Gilead Sciences, Inc.

Jacquie Ross; VP of IR; Gilead Sciences, Inc.

Johanna Mercier; Chief Commercial Officer; Gilead Sciences, Inc.

Merdad V. Parsey; Chief Medical Officer; Gilead Sciences, Inc.

Brian Corey Abrahams; Senior Biotechnology Analyst; RBC Capital Markets, Research Division

Carter Lewis Gould; Senior Analyst; Barclays Bank PLC, Research Division

Christopher Thomas Schott; Senior Analyst; JPMorgan Chase & Co, Research Division

Daina Michelle Graybosch; Senior MD of Immuno-Oncology and Senior Research Analyst; Leerink Partners LLC, Research Division

Geoffrey Christopher Meacham; MD; BofA Securities, Research Division

James John Shin; Research Analyst; Deutsche Bank AG, Research Division

Michael Jonathan Yee; MD & Senior Biotechnology Analyst; Jefferies LLC, Research Division

Mohit Bansal; Senior Equity Analyst; Wells Fargo Securities, LLC, Research Division

Salveen Jaswal Richter; VP; Goldman Sachs Group, Inc., Research Division

Simon P. Baker; Head of Pharmaceutical Research; Redburn (Europe) Limited, Research Division

Terence C. Flynn; Former MD; Goldman Sachs Group, Inc., Research Division

Tyler Martin Van Buren; MD & Senior Equity Research Analyst; TD Cowen, Research Division

Umer Raffat; Senior MD & Senior Analyst of Equity Research; Evercore ISI Institutional Equities, Research Division

Unidentified Analyst

Presentation

Operator

Good afternoon, everyone, and welcome to Gilead's First Quarter 2024 Earnings Conference Call. My name is Rebecca, and I'll be your host for today. In a moment, we'll begin our prepared remarks. (Operator Instructions) I'll now hand the call over to Jacquie Ross, VP, Investor Relations and Corporate Strategic Finance.

Jacquie Ross

Thank you, Rebecca. Just after market closed today, we issued a press release with earnings results for the first quarter of 2024. The press release, slides and supplementary data are available on the Investors section of our website at gilead.com.
The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day; our Chief Commercial Officer, Johanna Mercier; our Chief Medical Officer, Merdad Parsey; and our Chief Financial Officer, Andrew Dickinson. After that, we'll open Q&A where the team will be joined by Cindy Perettie, the Executive Vice President of Kite.
Before we get started, let me remind you that we will be making forward-looking statements. Please refer to Slide 2 regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially.
With that, I'll turn the call over to Dan.

Daniel P. O'Day

Thank you, Jacquie, and good afternoon, everyone. I want to start by thanking the Gilead teams for delivering a strong first quarter, which you see in our commercial performance and our clinical execution. Total product sales, excluding Veklury, grew 6% year-over-year to $6.1 billion, driven by higher demand across HIV, oncology and liver disease. Veklury sales continue to track with the rates of hospitalization for COVID-19 and reached a total of $555 million.
Once again, sales growth for the quarter reflected the diversity of our portfolio. HIV product sales grew 4% year-over-year. Oncology product sales were up 18%, driven by Trodelvy, which is well established as the #1 regimen for second-line metastatic triple-negative breast cancer and by our transformative cell therapies. As we outlined at the recent Kite analyst event in Maryland, we have exciting plans to build on our clear market leadership in cell therapy, such as expand into community networks in the U.S., more than double our manufacturing capacity, and move into new indications and disease areas with next-generation products.
From an EPS perspective, first quarter results reflect the close of the CymaBay acquisition with an inquired IP R&D charge of $3.9 billion or an expense of $3.14 per share. Excluding this charge, non-GAAP diluted EPS would have been $1.82 for the first quarter, which is above expectations, driven by higher product sales. The CymaBay acquisition brings us an important registrational medicine, seladelpar, which has the potential to address significant unmet need in liver disease. We have filed for regulatory approval of seladelpar as a treatment for primary biliary cholangitis, or PBC, with both FDA and EMA, and we expect an FDA regulatory decision in August.
If approved, we will leverage our industry-leading commercial infrastructure and long-standing expertise in liver disease to bring seladelpar a potentially transformative therapy to people with PBC who might benefit. Moving to clinical execution. We're very pleased with momentum in our HIV pipeline, which was reflected in our 80 data abstracts at CROI. Based on the strength of the data, we've initiated Phase III trials for bictegravir and lenacapavir, our novel once-daily oral regimen, and plan to advance once weekly oral programs, including lenacapavir plus islatravir into Phase III.
Later this year, we will host an HIV analyst event to share details of how we will further shape the HIV landscape with innovative options for prevention and treatment, including the next wave of long-acting therapies.
Before I pass it to Johanna, I will briefly recap our 2024 milestones on Slide 6. We have already achieved first patient in for the Phase III ARTISTRY-1 and ARTISTRY-2 trials, evaluating once-daily lenacapavir in combination with bictegravir as well as Phase II first patient in for SWIFT evaluating GS-1427, our oral alpha-4-beta-7 inhibitor. We are also on track for our upcoming milestones, including updates from 3 Phase III clinical trials for Trodelvy and lenacapavir.
Looking ahead to the rest of 2024, this is a time of focused execution for Gilead. We will see disciplined and agile in our approach, and we will focus the organization on both near-term execution and longer-term plans. With 54 clinical programs in play, no major patent expiration for the decade and many opportunities for growth, we have a lot of potential and a lot to deliver.
My thanks again to the Gilead teams for their great work this quarter and the ongoing progress across our diverse portfolio of therapies. With that, I'll hand it over to Johanna.

Johanna Mercier

Thanks, Dan, and Good after noon, everyone. With the first quarter marking the ninth consecutive quarter of year-over-year growth for our base business, our teams delivered a strong start to 2024, notably navigating the seasonal first quarter dynamics and establishing a firm base on which we can continue to build this year.
Beginning on Slide 8, total product sales, excluding Veklury, were $6.1 billion for the first quarter, up 6% year-one, reflecting solid growth of our HIV, oncology and liver disease businesses. Including Veklury, total product sales were $6.6 billion, up 5% year-over-year.
Moving to HIV on Slide 9. Sales were up 4% year-over-year to $4.3 billion, primarily driven by higher demand as well as favorable pricing dynamics in Europe that are not expected to repeat. Quarter-over-quarter sales were down 7%, driven by the typical seasonality we experienced in the first quarter of the year, partially offset by higher demand. As a reminder, quarterly HIV growth is, in general, more variable and less indicative of overall trends than the full year. This is evident in the first quarter of every year where inventory drawdown typically occurs following a build that generally happens towards the end of the prior year and patient co-pays and deductibles start of every year, and together with shifts in channel mix lowers average realized price in the first quarter.
As always, we typically see these quarterly pricing and inventory dynamics normalize as we progress throughout the year. We continue to expect approximately 4% HIV sales growth for 2024. Supporting that outlook, the treatment market grew in line with our expectations, as shown on Slide 10. Biktarvy remains the leading regimen for HIV treatment across major markets for new starts as well as for those switching regimens with sales up 10% year-over-year to $2.9 billion, reflecting strong demand.
Quarter-over-quarter, sales were down 5% as the higher demand was offset by the typical seasonal factors discussed earlier. It's notable that 6 years after launch, Biktarvy continues to gain market share in the U.S. up 3 percentage points year-over-year to approximately 49% share and once again, outpacing all other branded regimens for HIV treatment. Moreover, we continue to see Biktarvy's benefit extend into broader populations of people with HIV. Most recently, Biktarvy was granted FDA approval for use in virologically suppressed individuals with known or suspected M184 resistance, a common form of treatment resistance.
Turning to prevention. Descovy sales were down 5% year-over-year to $426 million, driven by lower average realized price due to channel mix, partially offset by higher demand. Sequentially, sales were down 16%, reflecting the seasonal dynamics discussed earlier, partially offset by higher demand. While market volumes in February were temporarily disrupted by the cyberattack on Change Healthcare, volumes readily recovered in March. Overall, the PrEP market continued to demonstrate robust growth, up over 11% in the first quarter, with Descovy maintaining over 40% PrEP market share in the U.S. despite the availability of other regimens, including generics.
This is a solid setup as we look to potentially launch lenacapavir as early as late next year as the first and only twice yearly subcutaneous prevention option. Given Gilead's strong commercial foundation across treatment and prevention, we are well positioned to maintain leadership in HIV as we look to the evolving marketplace of daily orals, long-acting orals and long-acting injectables.
Moving to liver disease on Slide 11. Sales for the first quarter were $737 million, up 9% year-over-year, primarily driven by favorable inventory dynamics and the timing of purchases by the Department of Corrections for our HCV products as well as higher demand across HCV, HBV and HDV. Sequentially, sales were up 7%, primarily reflecting the timing of HCV purchases.
Despite fewer HCV starts globally year-over-year, our viral hepatitis portfolio overall has remained stable and continues to be a meaningful contributor to our commercial performance. This strength is underpinned by our extensive global footprint and expertise in the treatment of liver diseases. To that end, pending approval, Gilead is excited to bring seladelpar to patients for the treatment of certain adults with PBC, impacting approximately 130,000 people in the U.S. and about 125,000 people in Europe. With the sales force that covers almost 80% of the U.S. prescriber base for PBC, we expect to readily make seladelpar available to patients upon approval in the second half of this year.
Seladelpar has demonstrated the potential to be best-in-class with a differentiated clinical profile to existing and emerging therapies, particularly on a key symptom of the disease, pruritus. Following its launch in 2024, we expect seladelpar to contribute modestly to sales and more meaningfully in 2025 and beyond.
Turning to Slide 12. Veklury continues to be the standard of care antiviral for hospitalized patients treated with COVID-19, with market share well over 60% in the United States. COVID-related hospitalizations were lower in the first quarter with the winter wave peaking earlier than expected in the U.S. and Europe as compared to other regions such as Japan. As a result, Veklury sales overall were down 3% year-over-year and down 23% sequentially to $555 million.
Shifting to oncology on Slide 13. Sales were up 18% year-over-year to $789 million and are now firmly above a $3 billion annual run rate. Having treated over 50,000 patients to date, we look forward to bringing our portfolio of medicines and future treatments across lines of therapies and tumor types to many more patients around the world.
Moving to Slide 14. Trodelvy sales for the first quarter exceeded $300 million, up 39% year-over-year, reflecting continued demand. Sequentially, sales were up 3%, primarily driven by demand outside the U.S. as well as unfavorable fourth quarter pricing dynamics in Europe that did not repeat. This was partially offset by inventory dynamics in the U.S. where we saw a drawdown in the first quarter.
Overall, Trodelvy’'s strong market share reflects its awareness amongst providers and patients. In second-line metastatic triple-negative breast cancer, Trodelvy remains the leading regimen with approximately 1/3 in the U.S. And in the pre-treated HR+/HER2- metastatic breast cancer setting, Trodelvy has demonstrated continued adoption, most notably in the IHC0 setting.
We are confident Trodelvy continues to differentiate itself with its safety profile and clinically meaningful survival benefits, with over 30,000 patients across tumor types already treated to date. We look forward to potentially extending Trodelvy’s reach to many more patients in the years ahead particularly in bladder cancer, earlier-line breast cancer settings, and lung cancer.
Turning to Slide 15, and on behalf of Cindy and the Kite team, Cell Therapy sales were $480 million in the first quarter, up 7% year-over-year. Sequentially, sales were up 3%, in-line with our guidance of flat to slightly up. We’'re pleased to see continued demand for Yescarta and Tecartus in both existing and new markets across Europe and other geographies, such as in Japan where we have seen good progress in growing brand share and expanding our network of authorized treatment centers to over 20 to date.
In the U.S., and consistent with our recent updates, we see opportunity for growth through expanding the number of authorized treatment centers and affiliated satellites, while also driving increased referrals from the community setting.
For example, we're proud to have established our flagship community collaboration with Tennessee Oncology in the first quarter. We’'ve identified many critical learnings on how we can partner effectively with community oncology practices for cell therapy, and we will continue to refine this “blueprint” so that we become more efficient at onboarding new centers over time. We expect to start seeing the Impact from this initiative towards the end of 2024.
Wrapping up the first quarter, we had a strong start to the year, primarily driven by higher demand across each of our core businesses year-over-year.
We look forward to carrying this momentum through 2024 and as we bring seladelpar to market later this year following approval. I’d like to thank the commercial teams and cross-functional partners across Gilead and Kite for their strong execution as we diligently expand our therapies to new populations, positively impacting more people all around the world.
And with that, I’'ll hand the call over to Merdad.

Merdad V. Parsey

Thank you, Johanna. We have had a busy first quarter at Gilead, with a cadence of clinical readouts that will continue throughout the rest of the year. Importantly, we anticipate an FDA regulatory decision on seladelpar and 3 Phase III updates across HIV prevention, bladder cancer, and breast cancer.
Starting on Slide 17, we continue to progress our industry-leading Virology pipeline, which is building momentum following a data-rich presence at CROI in March. This included robust virologic suppression data from our once-daily oral combination of bictegravir with Lenacapavir from the Phase III portion of the ARTISTRY-1 trial.
This novel combination has the potential to benefit people with HIV on complex regimens. We have since started 2 Phase III trials of this combination, one in virologically suppressed individuals and another in virologically suppressed treatment-experienced individuals. We expect to complete enrollment in the first half of 2025.
We also have 2 once-weekly oral programs: first, a combination of lenacapavir with Merck’s NRTTI, islatravir, in virologically suppressed people with HIV, expected to advance into Phase III later this year. And second, a combination of a capsid inhibitor with GS-1720, our novel oral integrase inhibitor. We're working to advance this combination into a Phase III study. This second program has the potential to be the first once-weekly oral regimen containing an INSTI agent. INSTIs are the standard-of-care treatment for HIV, and an important treatment option for clinicians who continue to prefer INSTI-based regimens.
Finally, we presented Phase Ib data from our twice-yearly parenteral program of lenacapavir plus our 2 broadly neutralizing antibodies for people with HIV at CROI, and we intend to share data from the Phase III study in the second half of this year.
Moving to PrEP, we plan to share an update from our Phase III PURPOSE-1 trial in the second half of this year. Data from PURPOSE-01, together with data from PURPOSE-2, is expected to support the filing of Lenacapavir for HIV prevention. This PrEP option would not only offer a convenient dosing schedule as the first twice-yearly subcutaneous regimen, but could also be transformative in terms of adherence to HIV prevention regimens.
Turning to Slide 18. Our Trodelvy program continues to be evaluated across a range of solid tumors with 7 Phase 3 trials currently underway across breast, bladder, and metastatic non-small cell lung cancers with plans to start the Phase III trial in endometrial cancer later this year.
Abstract titles were just released yesterday for the upcoming ASCO meeting, and we'’re pleased to have over a dozen Oncology presentations this year. We will be presenting late-breaking Phase III data from our second-line plus metastatic non-small cell lung cancer trial, EVOKE-01. Updated data from first-line, PD-L1 high subjects in Cohort A of the Phase III EVOKE-02 trial will also be shared. We plan on providing updates from Cohorts C and D, evaluating Trodelvy plus pembro and chemotherapy in PD-L1 all-comers at a medical congress in the second half of this year. In addition, presentations for both the Phase III EDGE-Gastric trial and Phase III ARC-9 studies will be highlighted.
Depending on the timing of event accruals, we anticipate 2 more Phase III updates this year for Trodelvy. These include overall survival data from our confirmatory Phase 3 bladder cancer study, TROPiCS-04, that could support Trodelvy’s submission for full regulatory approval in the U.S. and enable ex-U.S. filings.
In TNBC, where Trodelvy is the only ADC to have demonstrated statistically significant improvement in overall survival in the second-line setting, we expect to share an update on the Phase III ASCENT-03 trial in first-line PD-L1 negative patients later this year.
Moving on to Cell Therapy. I’'m pleased to share Kite's approach to the development of novel cell therapies that Cindy and the team presented at last month’'s investor event. As you can see on slide 19 Yescarta and Tecartus established Kite as the leader in Cell Therapy, and we plan to potentially extend this leadership into multiple myeloma, while also paving the way for innovative next-generation constructs.
On anito-cel in later-line multiple myeloma, we expect to provide a Phase III iMMagine-1 trial update in the second half of this year. This update follows the highly encouraging Phase I data presented at ASH last year, where anito-cel demonstrated durable responses with median progression-free survival not yet met at 26.5 months median follow-up –and no cases of parkinsonian symptoms observed in the trial.
For our next generation cell therapy assets, we have bicistronic and optimized manufacturing constructs in Phase I trials, which are aimed at overcoming resistance mechanisms, providing potentially deeper and more sustained responses, and improving product potency. Beyond that, we have early research in allogeneic and in vivo CAR, with plans to expand into a range of other disease areas –such as multiple myeloma with anito-cel, solid tumors, and autoimmune diseases.
Moving to Inflammation on Slide 20. We recently completed our acquisition of CymaBay and added seladelpar, an investigational PPAR-delta agonist to our portfolio. In Phase III clinical trials, seladelpar demonstrated significant improvement in both pruritus and markers of cholestasis related to the risk of progression for PBC. As previously announced, FDA and EMA accepted our regulatory filings for seladelpar for the management of PBC in certain adult patients. We anticipate an FDA regulatory decision by August 14th and a decision from European regulators early next year. We continue to work with global regulatory authorities to expand the reach of seladelpar for PBC patients.
Further, as we look at the rest of our Inflammation pipeline, we have several early phase assets that have progressed into Phase II trials, including our potentially first-in-class oral TPL2 inhibitor, a potentially best-in-class oral alpha-4-beta-7 anti-integrin, and an oral IRAK4 inhibitor.
Wrapping up on Slide 21. We continue to progress on our clinical milestones for the year, and we have had 2 First Patients in and 1 data readout completed in the first quarter and we remain on-track for our remaining milestones.
And now, I’'ll hand the call over to Andy.

Andrew D. Dickinson

Thank you, Merdad, and good afternoon, everyone. Beginning on Slide 23. It was a strong start to the year with our base business up 6% year-overyear. The solid growth achieved across HIV, Oncology, and Liver Disease offset the decline in Veklury, with total product sales up 5% year-over-year to $6.6 billion. As expected, our base business was down quarter-over-quarter, primarily driven by seasonal inventory and pricing dynamics in HIV.
Moving beyond our revenue results, 2 items significantly impacted our EPS performance in the first quarter, as shown on Slide 24. First, our GAAP and non-GAAP results included an acquired IPR&D charge of $3.9 billion or $3.14 per share, associated with the close of the CymaBay acquisition. As an asset acquisition, this transaction was fully expensed in the first quarter. This was a nondeductible expense item, and as a result, impacted our effective tax rate. Excluding this expense, our non-GAAP EPS would have been $1.82 for the first quarter, above expectations primarily driven by higher sales.
The second item shown on the right hand side is an impairment charge that is included in our GAAP results and excluded from our non-GAAP results. As a reminder, this relates to the carrying value of the IPR&D indefinite-lived intangible assets acquired from Immunomedics.
At the end of 2023, the carrying value was $5.9 billion, all associated with non-small cell lung cancer. As a result of the EVOKE-01 readout in late January, we have re-assessed and reduced the remaining value to $3.5 billion. This primarily reflects the smaller addressable market that Trodelvy could serve among 2L+ metastatic non-small cell lung cancer patients, a delay in expected launch timing, and associated competitive activity.
We remain confident that Trodelvy will deliver attractive returns over time, with sales now exceeding $1 billion a year, a strong IP portfolio, and a development program with multiple shots-on-goal in new indications as well as earlier-lines of therapy, including some opportunities not included in the initial deal model. In the meantime, you can see that the impairment impacted our first quarter GAAP EPS by $1.46 per share.
Moving to the rest of our non-GAAP results on Slide 25. For the first quarter, product gross margin was down modestly to 85.4%, primarily due to product mix. R&D and SG&A were each down 2% year-over-year. This is the second consecutive quarter of operating expense declines on a year-over-year basis, reflecting our continued focus on disciplined expense management. Our effective tax rate in the first quarter was a negative 30%, reflecting the nondeductibility of the CymaBay acquired IPR&D charge.
Overall, our diluted earnings per share was a negative $1.32 compared to a positive $1.37 for the same period last year, primarily reflecting the $3.14 per share expense related to the CymaBay acquisition.
Switching to full-year guidance on Slide 26. There is no change to our revenue expectations for 2024 at this time. We continue to expect total product sales in the range of $27.1 to $27.5 billion; and we continue to expect total product sales, excluding Veklury, in the range of $25.8 to $26.2 billion, representing growth of 4% to 6% for our base business year-over-year. Additionally, there is no change to our Veklury guidance of approximately $1.3 billion for the full year. As discussed last quarter, we do not expect to update our Veklury guidance until our third quarter earnings call, absent a very clear trend in COVID-19 infections.
Shifting to the other parts of the P&L for 2024 on a non-GAAP basis. There is no change to our gross margin guidance where we continue to expect product gross margin in the range of 85% to 86%. We now expect R&D to grow at the higher end of our previous low-to-mid single digit growth range, reflecting the incremental expenses associated with the CymaBay acquisition.
We continue to expect SG&A expenses to decline a mid-single digit percentage relative to 2023. On a dollar basis, SG&A is expected to be modestly higher than our previous SG&A expectations as we incorporate CymaBay expenses. However, we can manage this within the window of the previously-issued operating expense guidance. Acquired IPR&D is now expected to be approximately $4.4B, due to the CymaBay transaction as well as milestones anticipated throughout the rest of the year.
Operating income is now expected in the range of $7 billion to $7.5 billion, reflecting the updated acquired IPR&D guidance and the modest increase to operating expenses associated with the CymaBay transaction. Given the non-deductible impact of the CymaBay acquisition, the effective tax rate for 2024 is expected to be approximately 30%. This includes a negative impact of approximately 11% from the one-time charge for the acquisition of CymaBay. We therefore now expect diluted EPS in the range of $3.45 to $3.85. As shown on Slide 27, this has only been updated to reflect the transactions that were closed in the first quarter of 2024. Excluding these charges, you can see that we are comfortably within the range of the EPS guidance we shared back in early February. On a GAAP basis, we expect full year 2024 diluted EPS to be in the range of $0.10 and $0.50.
Moving to Slide 28. Our capital allocation priorities remain unchanged with sufficient flexibility in our balance sheet. Specifically, as demonstrated in the first quarter, we announced a 2.7% increase to our quarterly dividend and returned approximately $1.4 billion to shareholders. In addition, we acquired CymaBay for $4.3 billion, adding seladelpar to our portfolio. Overall, we’'ll continue to be disciplined in our use of capital. And while we will continue to be flexible and opportunistic–, it is unlikely that Gilead will be engaging in any sizeable M&A transactions in the near-term.
Before I wrap it up, on Slide 29, a quick note on our expectations now that the CymaBay transaction has closed. Pending regulatory approval, we expect to launch seladelpar in the U.S. before the end of 2024, as Johanna highlighted earlier, with a modest revenue contribution expected this year.
Additionally, we have shared that the transaction is expected to add to operating expenses this year as we make incremental investments to support the launch as well as other R&D efforts, all of which we are able to manage within the window of the previously-issued operating expense guidance.
And as we look ahead, while the transaction will be dilutive to our EPS this year, we expect the deal to be breakeven to earnings in 2025, and significantly accretive in 2026 onwards.
And now, I’'ll invite Rebecca to begin the Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Our first question comes from Chris Schott at JPMorgan.

Christopher Thomas Schott

Just had a question on the HIV franchise and the impact from the Medicare redesign as we think about 2025, I know this is coming from more and more conversations. Can you just talk a little bit about how you're thinking about that impact to your franchise? And maybe just more broadly, can we directionally still think about top line growth and margin expansion for Gilead next year despite this headwind? So any color you can provide there would be appreciated.

Daniel P. O'Day

Great, Chris. Welcome, everybody. This is Dan. I'm going to have Johanna cover this question. Thank you.

Johanna Mercier

Thanks, Chris, for the question. So we do expect an impact of the Part D redesign to be weighted towards our HIV business and expect our HIV growth in 2025 to be offset by the Part D redesign impact. So as a result, we expect our HIV sales to be roughly flat year-on-year in 2025. Having said that, overall, we expect our total business to grow despite the impact of the Part D we designed in 2025 with the top line, building momentum in 2020 -- beyond 2025, right, '26 and beyond. So we do expect growth in '25, but our HIV business, the demand of HIV will offset the impact of Part D.

Andrew D. Dickinson

Chris, it's Andy. I'll take the question on margin expansion. As you know, we don't provide more specific guidance for 2025 beyond what Johanna just mentioned. What we have said historically, and I've underscored, is that we are very focused on disciplined expense management. That will be true in 2025 as it is today. You've seen that in the last 2 quarters. I think on a non-GAAP basis for this quarter, if you look at our operating margin, if you strip out the CymaBay transaction, you see an improvement in our operating margin and we expect that to continue over time. So we do expect broadly for our operating margin to improve over time as you see the continued top line growth and the disciplined expense management. So thanks for the question. More details, of course, to be provided at early next year when we provide our 2025 guidance specifically.

Operator

Our next question comes from Daina Graybosch at Leerink Partners.

Daina Michelle Graybosch

It's for Kite. FDA's ODAC recently had 2 important meetings of relevance for multiple myeloma and CAR-T there. One, dealt with the early death risk from CARVYKTI and ABECMA. And the second was to recommend MRD as an intermediate endpoint for accelerated approval in multiple myeloma. And I wonder how you're thinking about both of these ODACs in relation to anito-cel in your earlier line trial design.

Daniel P. O'Day

Thanks, Daina. We've got Cindy Perettie here, so we'll go right over to her.

Cindy Perettie

Thanks, Daina. So if I start off with the early line ODAC, I think we believe this is positive for everybody. What it's shown is that people recognize the value of having CAR Ts therapies earlier in their disease. They value the disease-free intervals that they get from that. So we were very happy to see that. I think we were equally as excited to see the second ODAC around MRD, minimal residual disease, as a secondary -- as an additional endpoint. I think the piece around this is that we're really encouraged that the ODAC decision is going to open up the door for us to potentially bring anito-cel to market faster for patients. And we're in the process right now of understanding how the MRD surrogate endpoint can be used with regulatory agencies and the application of our program and so more to come on that front.

Operator

Our next question comes from Umer Raffat of Evercore ISI.

Umer Raffat

I just thought I'll spend a quick second on CymaBay given the recent deal. My question is, did Gilead, during the diligence process, deploy independent pathologists to evaluate the cases of "possible" liver pathology that happened in the NASH trial previously as well as the paired liver biopsy data from the PBC trial at the lower dose where CymaBay didn't think it would need safety adjudication? I'd be very curious how you guys did that and if you would ever publish that.

Daniel P. O'Day

Merdad is here, so I'll let him answer.

Merdad V. Parsey

Thanks, Umer. Let me start by saying we think seladelpar is one of those medicines that will bring a lot of benefit to patients and really some near-term expansion of our liver portfolio and our -- and what we think will synergize with many of the other -- much of the other work that we're doing in liver disease overall.
We obviously did thorough diligence in our approach to seladelpar and CymaBay. We didn't do a third -- I think your question was around whether we did an independent third-party review of the pathology. We did not do that. However, we did a lot of thorough diligence on the data itself and the outcomes. And we are confident around the outcome and what it means for patients over time.
Obviously, we're waiting right now the -- our upcoming PDUFA date and also the file in the EMA, which we are optimistic about. And following the questions and all those sorts of items that we're in. So we're looking forward to providing an update on that as those filings proceed.

Operator

Our next question comes from Tyler Van Buren at TD Cowen.

Tyler Martin Van Buren

I was hoping you could help set expectations for EVOKE-01 and 02 presentations at ASCO. For EVOKE-02, the late breaker tag is interesting. So is that related to the 3-month OS benefit in the PD-1 refractory patients? Or could we -- or should we be expecting something more? And for EVOKE-02, what should we hope to see with the Cohort A data that should leave us confident in the EVOKE-03 readout next year?

Merdad V. Parsey

Thanks, Tyler, it's Merdad again here. So it's a little challenging because I can't share too many details now because we're under embargo for both of those. And obviously, happy to fill in a lot of the blanks once the data are released, and we can talk about it in ASCO. I think for EVOKE-01, we think there are a number of pipeline updates in our ASCO presentations that we have upcoming, which were -- we see as a real change for us and a real evolution of our pipeline overall and our ability to build our oncology pipeline and bring new options for patients.
As part of the late breaker session for EVOKE-01, as you mentioned, we will include data on overall survival, on PFS, ORR and duration of response as well as the safety profile, of course. And I wish I could give you more details, but I can't at this point. As you say, we will also be providing other updates there, including the EVOKE-02 Cohort A data looking at the PD-L1 high non-small cell population. And again, it's -- I can't really talk about the details of those data, but we are looking forward to sharing those results with everyone and talking about the implications of that for our broader lung cancer and especially the frontline lung cancer EVOKE-03 study that we are conducting right now is underway with our partners at Merck.

Operator

Our next question comes from the line of Geoff Meacham at Bank of America.

Geoffrey Christopher Meacham

Merdad, a question for you. On the cell therapy front, you usually have the anito-cel update later this year, which is big. But beyond that, I wasn't sure what the priority was among the next-gen CAR assets that you've got kind of cartooned on Slide 19. There's a lot of competition in this space, but you guys are among the only players that have real scale and you could move the next-gen stuff, I think, pretty fast. But if you had to pick sort of a priority list, will be good to know.

Daniel P. O'Day

Thanks, Geoff. This is Dan. We're going to have Cindy Perettie answer that question, if you don't mind. So Cindy, over to you.

Cindy Perettie

So we have 3 products right now, or 3 constructs that are in Phase Ia and b clinical trials. The first one is a bicistronic CD19, CD20 that has 41BB and CD28. The second one is that same construct with fast manufacturing, 3-day manufacturing. And the other one is a CD19 like Yescarta with 3-day manufacturing. So we're looking at all 3 of those in parallel with the goal of picking the winner to advance that rapidly into our pivotal trials. So that's what's coming up next. Obviously, we've shared a lot around anito-cel as well. With anito-cel, we have the iMMagine-1 readout, and we expect to move quickly into earlier lines as it relates to anito-cel, and you'll hear more about that later this year. Hopefully, that answers your question. We certainly have a number of plays in early research, but we would plan to advance our next-generation lymphoma assets quickly. And obviously, with the scale that we have at Kite as well as the integrated fact that we can create the vector as well as the construct in-house.

Operator

Our next question comes from Michael Yee at Jefferies.

Michael Jonathan Yee

Following up on the Trodelvy data coming at ASCO and your enthusiasm for frontline, can you just remind us, a, do you believe that your data in EVOKE second line that will be at ASCO is at least as competitive or better than Astra, and that is why you're excited about frontline? And b, if you are, do you have a triple therapy on top of chemo combo or is your whole first-line strategy just on top of PD-1?

Merdad V. Parsey

Thanks, Michael. This is Merdad again. As we've noted, I think, and as you talked about, the EVOKE-01 data in second line will be something that we discuss at ASCO and show those data. And the full data set is -- does motivate us to go forward in lung cancer and including with discussions with regulators. The unmet need in this population is great, and the data give us options, including discussions with health authorities and conducting follow-up trials. We'll be able to share more once the data are provided at ASCO, and so we look forward to having those deeper discussions once we can speak directly to the data.
And I'm sorry, and the second part of your question was around the front line. Again, I think once we are able to share the EVOKE-02 data, the update on EVOKE-02 data, we'll be able to talk more. But it does continue to allow us to think about the frontline and our confidence around about EVOKE-03. And then the last part of your question on other combinations. We do think about our intra-portfolio combinations. For example, we have a combination of dambinelumab and Trodelvy in a trial where we're looking to see if we can get additional efficacy from those sorts of combinations. So we do continuously look at our portfolio and look for opportunities for moving the needle with combinations from within our portfolio.

Operator

Our next question comes from Salveen Richter of Goldman Sachs.

Salveen Jaswal Richter

So you currently have about $5 billion in cash and noted leverage is back to pre-Immunomedics deal levels. How are you thinking about meaningful or bolt-on BD post the CymaBay acquisition? And is there any preference now between virology, I&I and oncology?

Andrew D. Dickinson

Salveen, it's Andy. Maybe I'll start with that one. In our prepared remarks, I highlighted that in the near term, we don't expect sizable M&A.
So we have a lot of execution ahead of us. We have a deep portfolio, a lot of growth drivers, including seladelpar. So we're very clearly highlighting that in the short term, we will continue to do ordinary course business development, the standard licensing deals. You saw a couple of those in the first quarter. But it's unlikely that we'd pursue any meaningful M&A in the near term. We've also said historically that deals like CymaBay are exactly what we're looking for and that we should do deals like that on a regular basis over the cycle and whether that's every 2 years on average or more or less, that's a general ballpark. So I think you're appropriately highlighting we have -- we generate a lot of operating cash flow. You saw that again in the first quarter. We will rebuild our cash over time. We're going to continue to invest in the pipeline. But at least in the short run, we don't expect any meaningful M&A in the short run.

Daniel P. O'Day

And Salveen, this is Dan. Just to answer the end of your question. I mean, we're always therapeutic area agnostic when we approach these. I mean, first of all, we've got robust portfolios around both urology and oncology and a building portfolio in inflammation. So we look, frankly, across those spectrums. Seladelpar is a great example of finding an opportunity within our liver disease or -- franchise and be able to use that channel. But equally, we'll look for opportunities and synergies that complement our portfolio across therapeutic areas. And that's our approach. We think that makes sense. We look for the most attractive science. And as Andy said, we have a lot in our hands now to work through and to execute on. And so we'll keep the bar very high.

Operator

Our next question comes from James Shin at Deutsche Bank.

James John Shin

I wanted to ask on Trodelvy's efforts in HR+/HER2-. DESTINY-Breast06 is going to have data pretty soon it seems. And you also have ASCENT-07. Sort of sounds similar to DESTINY-Breast04 versus TROPiCS-02. Can you share like how you think this landscape will play out with these 2 trials?

Merdad V. Parsey

Thanks for the question, James. Well, it's -- I've learned to try to keep away from prognostication. So that's harder to do. We -- look, maybe the way I would put it is we are proud of the fact that Trodelvy is still the only TROP2 ADC that is approved, and that is in large part driven by the important role that Trodelvy plays in breast cancer right now for patients. And we do continue to want to push that, along with the ASCENT-07. We have a number of other trials ongoing to expand our footprint in breast cancer. I think we are right now in TNBC, the leading regimen.
And as we are continuing to advance our HR+/HER2- and in particular, in the IHC-0 population, I think we remain confident around our place there. We've shown a benefit in randomized clinical trials there, and that's been the basis for our regulatory filings and approvals. So I don't think we can assume success. We'll have to see what the data are. But looking forward into the year that's coming with ASCENT-03 coming up, I think that will provide us additional information to further expand our potential in breast cancer. Johanna, do you want to add?

Johanna Mercier

Maybe just to add to that. I would also say that the more options these patients have, these women have, in HR+ in earlier lines of therapy instead of cycling through chemotherapies, the better. So with DB06 results and moving potentially that compound up earlier, it actually allows for Trodelvy to also play a more important and a bigger population than it is today because of the profile of the TROPiCS-02 label. And so we do believe that there's opportunities for this ADC to move up and also differentiate itself versus other ADCs in this marketplace, depends effect profile, the safety profile, not only on the efficacy. And so in light of the IHC-0 setting being really our strong foothold in HR+/HER2-, we believe that will continue, whether that's in later lines of therapy or earlier lines of these studies play out.

Operator

Our Next question comes from Mohit Bansal, Wells Fargo.

Mohit Bansal

Maybe a big picture question, if you think about medium to longer term because, I mean, yes, you do not have an LOE. But I mean, HIV growth is somewhere around low single digits. And oncology, I mean, again, I mean, it dropped too and all. The expansion opportunities seem limited at this point. So just trying to understand how do you turn this low single digit to more like a high single-digit kind of growth for overall company? CymaBay is definitely an addition, but how are you thinking about it from medium to long term, which probably people like us are missing?

Daniel P. O'Day

Mohit, maybe I'll start and then have others add. First of all, I think just stepping back and thinking about the portfolio that we've built over the past 4 years now more than doubling the size of the portfolio and with significant advances in our HIV portfolio and oncology and with outside of cell therapy. So as we think about growth moving forward, I mean, first of all, I would say on the HIV side of the business, we have to constantly remind ourselves and others that in addition to the treatment market and the potential for long-acting treatment that we have a very robust program on, and we'll update you a little bit more on towards the second half of this year with an analyst event, we've got the PrEP market that is just beginning to kind of be dimensionalized.
And that is -- I think that provides significant growth opportunity when you think about your time frame, which you mentioned, which is until the end of the decade. So I think it allows us to think about accelerated HIV total growth prevention and treatment as we head towards the second half of the decade. That -- on top of that, then we have the entirety of the oncology portfolio. So both cell therapy within the large B-cell lymphoma area as well as potentially the multiple myeloma entry with the anito-cel. And then on top of that, a very robust oncology portfolio that has both Trodelvy and other novel agents that we'll read out over the course of this decade. And I'll just remind you, again, we've got close to 20 readouts this year, of which 3 of those are in Phase III, including lenacapavir for prep in the second half of this year, 2 Trodelvy Phase III readouts. And then importantly, we've added seladelpar to the mix with a PDUFA date in August.
And then finally, just the opportunity to update you on the anito-cel at the end of the year as well. So we'll be providing more guidance as we continue to look at the entirety of our portfolio, but we really think we have within the company today, by the way, I'll just mention, in addition to complementing where needed from the outside. But within the company today, we have what it takes to drive a substantial growth in our business over the course of the next decade with focus on expense management as well to produce good returns for investors.

Operator

Our next question comes from Simon Baker at Redburn Atlantic.

Simon P. Baker

One on seladelpar, if I may. And a question really around the competitive dynamics at launch. If all goes according to plan, your launch in August and Ipsen will launch Elafibranor in June. So I was just wondering if that really makes any difference. You've obviously got far greater infrastructure than Ipsen. Is it too early for them to steal in March? Or paradoxically thus having somebody else on the market promoting PBC actually raise disease awareness and help the situation? So any color around the dynamics at launch would be very helpful.

Johanna Mercier

Thanks, Simon. It's Johanna. Let me take that one. And I think you're absolutely right. I think the fact that there is more than one competitor hitting the market is great for patients namely around increasing disease awareness around PDC and the fact that there are 2 options available. Having said that, I also feel incredibly confident that seladelpar is well differentiated to potentially be best in disease when you think about the significant impact and clinically meaningful impact we have with the ALP normalization in the clinical jet Phase III clinical trial we've seen as well as the improvement in pruritus which is a key symptom of the disease. And today, there really is no effective antipruritic options for PBC patients. And so all of that put together, in addition to the fact that we believe our footprint, both commercial and medical is incredibly well established when it comes to liver disease. It already covers about 80% of all U.S. PBC prescribers. And with that strong differentiated profile we were just referring to, I don't think those 3 months make a difference. I think really it's about best-in-class launch and that potential with seladelpar that we look forward for our PDUFA date.

Operator

Our next question comes from Brian Skorney at Baird.

Unidentified Analyst

This is Charlie on for Brian. So again, to ask something about seladelpar. Just wondering if you have any ambitions for potentially looking at a label for first line in the future, considering there's a lot of unmet need with pruritus there. As well as any potential synergies you may be considering with the remainder of your liver portfolio?

Merdad V. Parsey

Thanks, Charlie. This is Merdad. Frontline is a challenge given the -- what is currently the background standard of care. But as you know, we think that seladelpar is going to bring a lot of benefit to a lot of patients, especially given the pruritus and the potential for getting to patients earlier in their course will be really important for us. And so we have to see how the market starts to respond to the presence of seladelpar in the second line. And recall, I think the other thing to recall or think about is the -- how long people actually get frontline therapy before moving on to second-line therapy, given the efficacy profile of the frontline therapies and the fact that there haven't been any options, one could anticipate that patients are moved to second-line therapy relatively early in their treatment course and making -- moving up formally for registrational trials to the frontline potentially superfluous. So I think we'll see how that plays out in the market. And once we see our label and all those sorts of things, so we'll be able to update more after that.

Operator

Our next question comes from Brian Abrahams at RBC Capital Markets.

Brian Corey Abrahams

PURPOSE 1 is obviously an upcoming readout. So I wanted to clarify some elements of its unique design, specifically what's the sensitivity of assessing when HIV infection occurred to accurately project the control infection rate? And then how do you control for potential intrinsic differences in risk behavior that the screened out group serving as the control may have versus individuals who are -- who make it into the trial?

Merdad V. Parsey

Brian, thanks, it's Merdad again. And I could talk about this for a long time. Let me -- I'll try to give a very concise answer. The recency assay that's been developed for HIV, it has been studied very thoroughly, and we can, based on the diagnosis at the time of screening, create a profile for anyone who's potentially HIV infected at that time as to how recently they were infected. And I think that's a key part. And that relates to the second part of your question in that the -- we don't, in a sense, need to compare risk behaviors before and after randomization and that we'll be looking at the overall incidence of HIV at the time of screening and then comparing in this counterfactual design with what happens after people start therapy. So I think between those 2 elements and all the discussions we've had with the regulators and the experts in the field, we're confident in that the design will provide the information necessary to get us to approval and for adoption.

Operator

Our next question comes from Terence Flynn at Morgan Stanley.

Terence C. Flynn

Great. Two parts on the CAR-T franchise. So just was wondering, high level, your comment to a anito-cel if it proves there is parkinsonism, so meaning it's less differentiated. And then the second part is, curious where your progress stands with respect to developing the CAR-T for immunology. Obviously, a lot of focus here amongst a number of other companies in the industry. So just curious on Gilead's thoughts on the [floor].

Cindy Perettie

Thanks, Terence, for the question. So on the commitment to anito-cel, we're -- as it relates to Parkinson's, we absolutely feel that we're differentiated potentially on both safety and efficacy. As we noted earlier, we have not observed the neurotox that some of the other constructs have observed, and we'll continue to monitor it, but we feel great about the profile right now. And then the efficacy profile, early signals are we think we will be equivalent or could be best-in-class. So we're 100% behind anito-cel and we're looking forward to bringing those data soon.
The second question around autoimmune space. So we continue to monitor the autoimmune space. And as you've heard from Andy and others before, we will play in that space. We are taking time to take a look at what's in the space versus what we have in our portfolio, and we'll be -- I don't have any updates further than that today.

Operator

Our last question comes from Carter Gould at Barclays.

Carter Lewis Gould

Maybe just to round things out on cell therapy, you flagged the same dynamics that have been kind of persisting in the U.S. as far as the -- some of the constraints of the ATCs. I also saw the Tennessee oncology reference. But I guess putting that all together, just your level of confidence you sort of hit that return to more meaningful growth in the second half of the year. I didn't hear that mentioned and clearly, that's a point of focus. Any commentary there would be appreciated.

Cindy Perettie

Yes. No, we feel very confident that we're going to return to growth in the second half of the year, as we stated. I think just as a reminder, we had shared in quarter 4 our guidance was that we'd be flat to slightly down in quarter 1. And part of that is due to the restructure. So we are putting our strategy into play. We feel very confident about the approach we're taking in the U.S. And we now are looking at having almost a fully stacked sales team back out and working hard. I think a piece that we need to talk about as well as the market dynamics. So the things we're observing. We're observing out-of-class competition with the bispecifics, the ATC constraints that we've spoken about in the past based on multiple myeloma constructs coming in. But what we're seeing is a lot of the hospitals and ATCs are working through those constraints, and we feel really confident about the second half of this year.

Daniel P. O'Day

Thank you, Cindy. This is Dan again. So I appreciate all of you joining. Maybe just a bit of a summary statement. I want you all to know we at Gilead are very focused on the near-term execution and the long-term plans. We'll continue to stay disciplined and agile in our approach. Just as highlights, we've got 54 active clinical programs, no major patent expiries through the end of the decade, a variety of opportunities for growth and a lot more to deliver. On top of that, we are on track to provide updates from 3 Phase III clinical trials for Trodelvy, lenacapavir. We've got the seladelpar PDUFA date in August. Any update on the anito-cel Phase II update with the management we'll have at the end of the year. So rest assured that we are firmly focused on the many opportunities we have, and we have a lot more potential to deliver. With that, I'll hand over to Jacquie for closing comments.

Jacquie Ross

Thank you, Dan. To close, just one housekeeping item. I can share that we are tentatively planning to release our second quarter 2024 earnings results on Thursday, August 8. Please note that this is day is provisional and could be changed to accommodate scheduling conflicts that arise between now and then. As always, we will announce our confirmed date following the close of the second quarter. We appreciate your continued interest in Gilead and look forward to updating you on our progress throughout the quarter. With that, we'll close our call for today. Thank you.