Gilead Sciences - Earnings Call - Q1 2025

Executive Summary

• Base business sales excluding Veklury rose 4% to $6.3B, while total revenue was flat at $6.67B; non-GAAP diluted EPS was $1.81. Gilead beat Street EPS but missed on revenue: EPS $1.81 vs consensus $1.776*, revenue $6.67B vs $6.82B*.
• HIV strength offset oncology softness and COVID normalization: Biktarvy +7% to $3.1B and Descovy +38% to $586M; Veklury -45% to $302M; Trodelvy -5% to $293M; Cell Therapy -3% to $464M.
• FY25 guidance largely unchanged except GAAP EPS lowered to $5.65–$6.05 (from $5.95–$6.35); product sales $28.2–$28.6B, ex‑Veklury $26.8–$27.2B, Veklury $1.4B, non‑GAAP EPS $7.70–$8.10 unchanged.
• Near-term catalysts: FDA PDUFA June 19 for twice‑yearly lenacapavir PrEP; ASCENT-03 readout later in Q2; S&P upgraded Gilead to A- (stable), highlighting HIV outlook and cash flow.

What Went Well and What Went Wrong

• What Went Well

  • Base business growth and disciplined costs drove strong non‑GAAP margins: product gross margin 85.5% and operating margin 43.4%.
  • HIV leadership continued: “Our base business grew 4% year-over-year, primarily led by Biktarvy’s continued strength,” — CEO Daniel O’Day. Biktarvy U.S. share reached 51% per CCO.
  • Pipeline/regulatory momentum: FDA accepted NDAs for lenacapavir PrEP with June 19 PDUFA; EMA validated MAA and EU‑M4all applications under accelerated review; EC granted conditional approval for seladelpar (Livdelzi) in PBC.

• What Went Wrong

  • COVID normalization: Veklury sales down 45% YoY to $302M on lower hospitalization rates.
  • Oncology softness: Trodelvy -5% YoY on inventory/pricing mix; Cell Therapy -3% (Yescarta +2% offset by Tecartus -22%) amid competitive headwinds.
  • Part D redesign headwind: management expects HIV reported sales to be flat in 2025 despite demand growth, with ~$1.1B total impact (≈$0.9B to HIV) and increased manufacturer contribution.

Transcript

Operator (participant)

Good afternoon, everyone, and welcome to Gilead's Q1 2025 Earnings Conference Call. My name is Rebecca, and I'll be today's host. In a moment, we'll begin our prepared remarks, followed by our Q&A session. To ask a question, please press star one, and to withdraw your question, press star two. I'll now hand the call over to Jacquie Ross, Senior Vice President of Treasury and Investor Relations.

Jacquie Ross (SVP of Treasury and Investor Relations)

Thank you, Rebecca. Just after market close today, we issued a press release with earnings results for Q1 of 2025. The press release, slides, and supplementary data are available on the investor 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, Dietmar Berger, and our Chief Financial Officer, Andrew Dickinson.

After that, we'll open the call to Q&A, where the team will be joined by Cindy Perettie, the Executive Vice President of Kite. Let me remind you that we will be making forward-looking statements. Please refer to slide two 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 O'Day (Chairman and CEO)

Thank you, Jacquie, and good afternoon, everyone. I'm pleased to share our Q1 results, which reflect strong commercial and clinical execution across the business. Our base business, excluding VEKLURY, grew 4% from Q1 of 2024, primarily driven by growth in our HIV business. HIV sales were up 6% year-over-year, with Biktarvy up 7%, highlighting our demand-led volume growth that was offset in part by the expected headwinds associated with the Part D redesign. Livdelzi continues its strong launch momentum, with $40 million in sales in its second full quarter since launch. Year-over-year growth in our HIV and liver disease businesses was partially offset by softer-than-expected Trodelvy sales due to inventory dynamics that masked increase in demand, as well as headwinds in cell therapy. Total product sales, including VEKLURY, were down by 1% from last year, reflecting fewer COVID-19-related hospitalizations.

Beyond our commercial results, we also saw impressive operational execution with strong operating margin and earnings per share results that highlight our continued focus on expense management and leverage in our business model. Our diverse pipeline continues to deliver across HIV, oncology, and inflammation. In HIV, we are now only weeks away from the anticipated FDA decision on twice-yearly lenacapavir for PrEP. We remain on track for the June 19th PDUFA date and the potential launch in the US immediately following. As a reminder, this is one of up to nine potential HIV product launches we are targeting before the end of 2033, building on Gilead's decades of leadership in HIV innovation. In oncology, earlier this week, we announced the positive results from the phase III ASCENT-04 study of Trodelvy in combination with pembrolizumab for first-line PD-L1 positive metastatic triple-negative breast cancer.

The results showed a clinically meaningful and statistically significant improvement in progression-free survival over the standard of care. This news represents an important potential benefit for patients. Metastatic TNBC is one of the most aggressive forms of breast cancer and has historically been very difficult to treat. We expect to share the ASCENT-04 data at a medical congress in the near future and to file with global regulatory authorities as quickly as possible. We continue to expect an update later this quarter on the phase III ASCENT-03 study evaluating Trodelvy monotherapy in first-line metastatic triple-negative breast cancer patients who are not candidates for PD-1 inhibitors. Moving to cell therapy, we plan to provide an update on our registrational phase II iMMagine-1 trial later this year and remain on track to potentially launch anito-cel in late-line relapse to refractory multiple myeloma in 2026.

We believe that anito-cel's clinical profile, combined with Kite's exceptional manufacturing capabilities and industry-leading turnaround time, puts us in a strong position to address the unmet need for patients with multiple myeloma. In inflammation, we are launching Livdelzi in additional markets following approval from the European Commission in February. We look forward to continued momentum as we bring Livdelzi to more people seeking to manage their primary biliary cholangitis with a differentiated option. As we wrap up a strong Q1 performance, we can look forward to continuing positive momentum. We have multiple potential launches ahead, including lenacapavir, anito-cel, and now Trodelvy. As a reminder, we have no major LOEs until the end of 2033 and expect to drive top-line growth over time across all three of our therapeutic focus areas of virology, oncology, and inflammation.

The overall strength of our business means we are well-positioned to adapt to a range of potential policy outcomes in the United States It is worth noting that Gilead's average corporate tax rate of approximately 20% reflects the fact that the substantial majority of our intellectual property is already registered in the United States The 2017 tax reform was instrumental in us bolstering our US investment, and Gilead is differentiated in that almost 100% of our R&D capital infrastructure is in the US. In addition, we have been increasing our investment in US manufacturing over the last several years with two large-scale cell therapy sites, and we have additional investment projects underway that are expected to run through 2028. Our focus is on delivering on our multiple upcoming launches and advancing our diverse pipeline.

In the meantime, we continue to engage with the administration to encourage a balanced policy agenda that prioritizes innovation and the needs of patients. With that, I'll hand it over to Johanna.

Johanna Mercier (Chief Commercial Officer)

Thanks, Dan, and good afternoon, everyone. We've had a solid start to the year with our commercial execution delivering strong year-over-year sales growth in our base business. Product sales, excluding VEKLURY, of $6.3 billion, were up 4% year-over-year, primarily driven by HIV and liver disease sales, partially offset by lower oncology sales. Sequentially, sales were down 12% as expected, mainly due to inventory dynamics, partially offset by higher sales in liver disease. Total product sales of $6.6 billion were down 1% year-over-year and 12% sequentially, reflecting lower VEKLURY sales. Moving to slide eight, our HIV business delivered sales of $4.6 billion, up 6% year-over-year, driven by higher average realized price and higher demand. Sequentially, sales were down 16%, consistent with our guidance, reflecting normal Q1 seasonality, including lower average realized price and volume following a particularly strong Q4, as well as the impact of Medicare Part D redesign.

As a reminder, quarterly HIV growth is generally more variable and less indicative of overall trends than full-year results, with normal Q1 impacts including inventory drawdown following a build in Q4 and channel dynamics, including the resetting of patient copays and deductibles, which result in lower average realized price. Beyond these typical Q1 dynamics, HIV revenues were also impacted by Medicare Part D redesign in Q1 of 2025. This increased the manufacturer contribution and includes individuals on low-income subsidy for the first time. While we are still in the early stages of this implementation, our assumptions remain unchanged.

In the meantime, we continue to expect robust demand-led volume growth for the full year, though, as shared back in February, this will be obscured this year due to Part D headwinds, resulting in flat reported HIV sales overall for 2025, with a return to growth in 2026. On slide nine, in HIV treatment, Biktarvy sales of $3.1 billion were up 7% year-over-year, primarily driven by higher demand. Sequentially, sales were down 17% as we expected, reflecting Q1 seasonality, including lower average realized price and volume. Biktarvy once again increased US market share in Q1 to 51%, outpacing the growth of alternative regimens and remains the regimen of choice across G9 markets. Overall, the HIV treatment market continues to grow in line with our expectations of 2% to 3% annually.

DESCOVY sales of $586 million increased 38% year-over-year, primarily driven by higher average realized price and higher demand. HIV prevention continues to represent the significant majority of DESCOVY sales, and growth this quarter was driven by broader awareness, growing unrestricted access and associated pricing favorability, as well as focused commercial execution that contributed to approximately 16% US PrEP market growth year-over-year. Additionally, DESCOVY maintains over 40% market share and grew more than 2% year-over-year. Sequentially, sales were down 5%, reflecting typical seasonal inventory dynamics, partially offset by higher average realized price and higher demand. Growing awareness and adoption of HIV prevention is encouraging ahead of our upcoming potential US launch of lenacapavir for PrEP. I'm excited to have our field teams across market access, commercial, medical, community, and our nurse educators mobilize to ensure we're ready for launch.

Building on our deep expertise and success of HIV launches and with strong engagement across the ecosystem from community leaders to healthcare providers, our teams are ready to build awareness, drive adoption, and overall deliver a seamless customer experience. Additionally, we're working with health authorities, policymakers, and other organizations outside of the US as we look to bring lenacapavir for PrEP to more people globally once approved. Moving to liver disease on slide 10, sales of $758 million were up 3% year-over-year, reflecting increased demand across PBC, HBV, and HDV, partially offset by lower average realized price for HCV products in the US Sequentially, liver disease sales were up 5%, primarily driven by increased demand and inventory dynamics, partially offset by lower average realized price.

For Livdelzi, Q1 sales of $40 million reflect continued early momentum in the launch of PBC, and we're proud of the market share we've achieved so far. We're also pleased that in February, the European Commission granted conditional marketing authorization for Livdelzi. We have just launched in Germany a few weeks ago, and we expect to expand into other major European markets in the coming months. Moving to slide 11, VEKLURY sales of $302 million were down 45% year-over-year and 10% quarter-over-quarter, reflecting lower rates of COVID-19-related hospitalizations due to a milder winter season. VEKLURY's consistently high share of over 60% of treated hospitalized patients in the US reinforces its clinical benefit and position as the standard of care, particularly among patients with renal and hepatic impairment. Despite the variability of the path of the pandemic, we expect VEKLURY's important role to continue.

On slide 12, Trodelvy sales of $293 million were down 5% year-over-year, reflecting inventory dynamics and lower average realized price, partially offset by higher demand. Sequentially, sales were down 17%, primarily driven by inventory dynamics and lower demand. Trodelvy remains the leading regimen in second-line metastatic triple-negative breast cancer in both the United States and Europe, with stable share in pretreated HR+/HER2- metastatic breast cancer. We also look forward to potentially bringing the benefits of Trodelvy to triple-negative breast cancer patients in earlier lines of treatment, given the clinically meaningful progression-free survival benefit seen in ASCENT-04 and with data from ASCENT-03 expected later this quarter. These studies could further strengthen our position in triple-negative breast cancer with almost double the addressable population compared to the second-line setting.

Moving to cell therapy on slide 13, sales of $464 million were down 3% year-over-year and 5% sequentially, reflecting accelerating competitive headwinds, notably outside the US and more specifically for Tecartus. Yescarta sales of $386 million were up 2% year-over-year, driven by higher average realized price and increased rest of world demand, partially offset by lower demand in the US Sequentially, sales were down 1%, reflecting European pricing favorability in the prior quarter that did not repeat, partially offset by higher demand outside the US Tecartus sales of $78 million were down 22% year-over-year and 20% sequentially, reflecting increased in- and out-of-class competition. Our work to increase CAR-T class penetration is ongoing, and we continue to make progress in breaking down barriers to adoption in the community setting, including in accreditation and commercial reimbursement.

More broadly, we continue to raise awareness of the strength of our data, the advantages of a one-time treatment, and the potential benefits of earlier CAR-T. Notwithstanding the ongoing competitive headwinds that we continue to expect to extend through 2025, we remain very excited about the overall opportunity and future for cell therapy, with the potential launch of anito-cel in multiple myeloma in 2026 and exciting early-stage data in our next-generation products across lymphoma and solid tumors at ASCO. Before I hand over to Dietmar, I'd like to thank the commercialization teams for delivering a great start to the year. We remain focused on expanding the reach of our current portfolio, but are also very excited about the rich pipeline of near-term launches over the next 12 to 18 months.

In addition to the ongoing launch of Livdelzi and the potential launch of lenacapavir for PrEP in 2025, we're also looking forward to the potential launch of anito-cel in multiple myeloma and Trodelvy in first-line metastatic triple-negative breast cancer in 2026. With that, I'll hand the call over to Dietmar.

Dietmar Berger (CMO)

Thank you, Johanna, and good afternoon, everyone. We have made a lot of progress in Q1 with some exciting lenacapavir updates at CROI and our first pivotal phase III top-line readout for Trodelvy in breast cancer since 2022. The quality of these readouts highlights the breadth and depth of clinical expertise across Gilead, with the potential to support growth in our target therapeutic areas with new commercial launches in the years ahead. Starting with HIV on slide 15, we shared 20 abstracts at CROI, including data that showcased lenacapavir's potential even beyond the remarkable results we saw in PURPOSE 1 and PURPOSE 2 last year. For example, we shared our phase I data that showed once-yearly intramuscular injections maintained lenacapavir blood concentrations above those shown with twice-yearly subcutaneous injections for more than 12 months. The injections were generally well tolerated.

These data were published in The Lancet, and we look forward to initiating a phase III study for once-yearly lenacapavir for HIV prevention in the second half of this year. As a reminder, for our twice-yearly subcutaneous injection of lenacapavir for HIV prevention, we have already submitted NDA, MAA, and EU Medicines for All applications with FDA and EMA. Further, we have submitted filings with regulatory bodies in South Africa and Brazil and continue to make good progress in all our discussions with the global regulatory bodies. In particular, we have not experienced any disruptions in our interactions with FDA, and we continue to expect a regulatory decision by June 19. In HIV treatment, we shared phase II data at CROI evaluating twice-yearly lenacapavir plus two broadly neutralizing antibodies or bNAbs in virologically suppressed people with HIV genotypes that are highly susceptible to both bNAbs.

At week 26, the combination regimen maintained virologic suppression with high efficacy similar to the stable baseline regimen comparator. There were no infusion-related reactions to the bNAbs and no discontinuations due to injection site reactions. Lenacapavir plus bNAbs has already received breakthrough therapy designation from FDA, and these phase II data further underscore the potential for this combination to be the first complete twice-yearly treatment regimen for virologically suppressed people with HIV. Phase III planning is in progress. Touching upon liver disease on slide 16, we announced the European Commission granted conditional marketing authorization for Livdelzi for the treatment of primary biliary cholangitis, or PBC. The decision reflects Livdelzi's clinical benefit across key biomarkers of PBC and related pruritus in the phase III response trial.

In addition, we continue to make progress on our phase III IDEAL trial, which is evaluating the efficacy of Livdelzi in PBC patients who are partial responders to UDCA, potentially doubling the addressable patient population. Overall, we are excited by the opportunities to bring this differentiated treatment to more patients across the world. Moving to oncology on slide 17, I'm very pleased to share Trodelvy plus Pembro demonstrated highly statistically significant and clinically meaningful progression-free survival benefit over standard of care in the phase III ASCENT-04 trial in first-line PD-L1 positive metastatic triple-negative breast cancer. Triple-negative breast cancer is the most aggressive type of breast cancer that disproportionately impacts younger and premenopausal women. We look forward to being able to potentially bring the benefits of Trodelvy to these metastatic triple-negative breast cancer patients in the first line.

We will be submitting these data for presentation at a future medical congress and will engage with global regulators as quickly as possible. Further, we expect to provide an update from the phase III ASCENT-03 trial evaluating Trodelvy monotherapy in first-line metastatic triple-negative breast cancer patients who are not candidates for PD-1 inhibitors later this quarter. We also remain focused on clinical execution of our seven other ongoing phase III programs for Trodelvy and domvanalimab across six tumor types.

Moving to slide 18, and on behalf of Cindy and the Kite team, we are pleased to be sharing new data from our next-generation products at the upcoming ASCO meeting in June, including phase I data from KITE-363, our bicistronic CD19/CD20 CAR-T for relapsed or refractory large B-cell lymphoma, and phase I data from the bicistronic EGFR IL13Rα2 CAR-T for glioblastoma in collaboration with the University of Pennsylvania Perelman School of Medicine. We believe KITE-363 could offer deeper, more sustained responses with the potential to overcome certain resistance mechanisms, given its ability to target both CD19 and CD20. Additionally, we believe its dual co-stimulatory domains balance effects such as rapid tumor cell killing and CAR-T cell proliferation and persistence in an optimal way. This could result in a potentially improved overall efficacy and safety profile in B-cell malignancies.

Further, we believe many of these potential benefits could translate to B-cell-driven autoimmune diseases and have filed an IND to evaluate KITE-363 in this area as well. For anito-cel, our pivotal iMMagine-1 study in fourth-line plus relapsed or refractory multiple myeloma is ongoing, and we look forward to providing an update in 2025. In the second-line plus setting, we are pleased to announce the phase III iMMagine-3 protocol has been amended to include minimal residual disease negativity as a dual primary endpoint in addition to progression-free survival. We're excited for this positive step to potentially bring anito-cel to patients in early line settings and remain confident in anito-cel's profile across efficacy and safety combined with KITE's leading manufacturing capabilities.

Finally, on slide 19, we achieved several important milestones this year, including European Commission conditional approval of Livdelzi, positive phase III top-line readout from ASCENT-04, and initiation of the phase III EVOKE small cell lung cancer study. We anticipate an update from the phase III ASCENT-03 trial later this quarter. Additionally, in virology, we remain on track to provide an update on the data from our phase II WONDERS-1 trial, our wholly owned once-weekly INSTI-containing oral treatment for HIV at an upcoming medical meeting. Now, I'll hand the call over to Andy.

Andrew Dickinson (CFO)

Thank you, Dietmar, and good afternoon, everyone. Our Q1 results reflect both strong operating and commercial execution. As shown on slide 21, our base business was up 4% year-over-year to $6.3 billion, largely driven by growth in our HIV and liver disease business, partially offset by lower oncology sales. VEKLURY sales were down 45% year-over-year, resulting in a 1% decline in our total product sales to $6.6 billion. Moving to our non-GAAP results on slide 22. For Q1, product gross margin was flat year-over-year at 85%, in line with our full-year guidance expectation of 85% to 86%. R&D expenses were down 5% year-over-year, primarily due to lower clinical manufacturing activities. Acquired IP R&D expenses were $253 million, primarily driven by the Leo Pharma STAT6 collaboration we announced in January.

SG&A expenses were down 6% year-over-year, reflecting lower corporate expenses, partially offset by incremental selling and marketing spend in the United States. Q1 operating margin was 43%, highlighting our ongoing commitment to continue to operating expense discipline and delivering top quartile margins once again. The non-GAAP effective tax rate was 16% this quarter, below our historic average, largely driven by tax benefits from stock-based compensation. Finally, non-GAAP diluted EPS was $1.81. Moving to our full-year guidance on slide 23, we are not making any changes to our revenue expectations or non-GAAP P&L guidance at this time. As we reflect on the tariffs that have been enacted to date, these could increase some of our indirect costs but are expected to be manageable in 2025, in part due to potentially lighter FX headwinds than previously expected.

For 2025, therefore, we continue to expect total product sales of approximately $28.2 billion to $28.6 billion, product sales excluding VEKLURY of approximately $26.8 billion to $27.2 billion, 2025 HIV sales to be approximately flat compared to 2024, with demand-driven growth offset by the impact of the Medicare Part D redesign, and VEKLURY sales of approximately $1.4 billion. While Q1 was lighter than expected, we know this can be a highly variable business. With that in mind and consistent with our approach last year, we do not expect to update our VEKLURY guidance until our Q3 earnings call.

Moving to other parts of the P&L for full year 2025, on a non-GAAP basis, we continue to expect product gross margin to range between 85% to 86%, R&D expenses to be roughly flat from 2024, acquired IP R&D to be approximately $400 million, including the $253 million of expenses in Q1, as well as known commitments and expected milestone payments. SG&A expenses to decline by a high single-digit percentage compared to 2024, operating income to be between $12.7 billion to $13.2 billion, effective tax rate to be approximately 19%, and finally, diluted EPS to be between $7.70 to $8.10 for the full year. Looking ahead, we will continue to monitor the macro landscape carefully, and we expect that our disciplined approach to operating expense management positions us well to adapt as needed in the months ahead. Finally, on slide 24, our capital priorities remain unchanged.

We have already returned $1.7 billion to shareholders in Q1 of 2025 through dividends and share repurchases, and we will continue to pursue disciplined expense management and careful investment in the most promising pipeline opportunities both internally and externally. I'm also pleased to note that S&P recently upgraded Gilead's long-term debt rating from BBB+ with a positive outlook to A- with a stable outlook, recognizing the outlook for our HIV franchise and other products combined with steady revenue growth and strong cash flow generation. Overall, Gilead is on track to continue delivering demand-led volume growth, a disciplined operating model, and strong cash flow that positions us well for the rest of 2025 and beyond. With that, I'll invite Rebecca to begin the Q&A.

Operator (participant)

Thank you, Andy. At this time, we'll invite your questions. Please be courteous and limit yourself to one question so we can get to as many analysts as possible during today's call. Again, to ask your question, press star one, and to withdraw your question, press star two. Question comes from Michael Yee at Jefferies. Go ahead. Your line is open.

Michael Yee (Managing Director)

Hey, great. Thanks. Congrats on the quarter and progress. We wanted to ask about your expectations for the PrEP launch and, assuming approval on time, how you think about the dynamics in the second half related to commercial reimbursement and Medicaid reimbursement, and whether guideline changes and other factors also need to play a role. Thanks.

Johanna Mercier (Chief Commercial Officer)

Hi, Michael. It's Johanna. Thanks for the question. Yeah, so we're excited about the opportunity with the PDUFA date around the corner. We are counting, I think Dan referred to weeks. The team is counting days, and we are absolutely ready for the launch. From an access standpoint, what we've said is we believe that around it's going to take a couple of months right as it builds access. We think about 75% or so access within the first six months to a peak covered lives at about 90% at a 12-month mark. That's going to happen month after month. It doesn't all happen in a bolus. We also believe at the beginning that they're going to go through medical exceptions, right? They'll go through the process just like they do, for example, with Livdelzi as we're building access there as well.

We believe that just takes a little bit more time, but still could get through the process for those people that want lenacapavir. We will work through that, and we are excited about that opportunity as we build out through 2025 and, of course, into 2026 with much stronger access.

Operator (participant)

Our next question comes from Carter Gould at Cantor Fitzgerald. Carter, go ahead. Your line is open.

Carter Gould (Analyst)

Great. Thank you. Good afternoon. I guess sort of following on the prior question, there have been a number of cuts across HHS CDC to start the year across various teams, divisions, raising uncertainty around potential disruptions to messaging, education, awareness. Can you help maybe frame some of these and specifically as they might impact the launch? Are these sort of either roles or activities that Gilead can maybe step into to do some of the heavy lifting? I guess really your confidence that we will not be pointing to these aspects as impacting the launch later in 2025 or into 2026. Thank you.

Daniel O'Day (Chairman and CEO)

Thanks, Carter. This is Dan. I'll start, and then Johanna can add or others. I just want to be clear that to date, we haven't heard or seen anything that would cause us to alter our plans or expectations for the lenacapavir PrEP launch or adversely affect our HIV business. Obviously, we're staying very closely attuned to this. Importantly, we're having discussions with policymakers to emphasize the importance of lenacapavir for PrEP, and in particular in relation to their stated goals of addressing chronic diseases in this country and the value of prevention. We think that lenacapavir PrEP is really well positioned there. Specifically relative to the government support, and in particular, you mentioned CDC, Carter. Obviously, their responsibilities include research and surveillance of HIV. They include supporting efforts around diagnosis and linkage to care. We're also involved in those activities.

Again, nothing we've seen so far suggests that those core services are in a position to change our approach to the launch. Maybe with that, I'll hand it over to Johanna if she has any other questions or Dietmar, if you want to come in and FDA too.

Johanna Mercier (Chief Commercial Officer)

Sure. Yeah, maybe just to add a point, Carter, around PrEP market growth and kind of what you asked, what Gilead can do. I think that Gilead's been incredibly focused on making sure we continue to have market development initiatives to ensure screening, diagnosis for treatment, but also to ensure awareness within the PrEP market and make sure there's education there as well. I think you've seen that as you think about the PrEP market growth. We had a lot of activities in Q4 of last year, and that's kind of playing out. We saw a nice uplift of the growth of the PrEP market in Q4, and you kind of see that come through again in Q1 at about 16% year-over-year. Really well positioned as you think about lenacapavir around the corner.

Dietmar Berger (CMO)

Yeah, on the FDA side, at this time, all our interactions with the FDA have been on track, have been as expected without any surprises. We've not experienced any impact to our lenacapavir PrEP filing or any of our clinical trials actually to date, right? We continue to expect the lenacapavir decision by June 19th.

Operator (participant)

Our next question comes from James Shin at Deutsche Bank. James, go ahead. Your line is open.

James Shin (Director of Equity Research)

Thank you. I have a question for Johanna. Johanna, the strength in DESCOVY for this quarter, is there any read-through or implications on it looks like there were some price benefits to DESCOVY, but is there any read-through or implications to lenacapavir launch?

Johanna Mercier (Chief Commercial Officer)

Yeah, there is. Thanks for the question. Yeah, we saw really nice growth year-on-year, about 38% growth for DESCOVY. That was driven by higher average realized price, as you mentioned, as well as higher demand. Those are the two big drivers. There are a couple of reasons behind that. One is definitely the PrEP market growth that I was referring to earlier, around 16% year-on-year, driven really by the market development that we've done, that we've been leading. Second was around focused commercial execution. We've actually grown the share of DESCOVY year-on-year by about just over 3 percentage points, which is really amazing. That's driven by the commercial team, which have been doing an amazing job, but also supported by growing unrestricted access that we've seen even just in the last quarter, to be honest, as well as associated lower co-pays, which also helps our pricing.

All of those pieces together get you to that 38% year-on-year. I do believe actually because of that PrEP market growth, because of the setup from an access standpoint, really supports the opportunity with lenacapavir hopefully in June.

Operator (participant)

Our next question comes from Salveen Richter at Goldman Sachs. Salveen, go ahead. Your line is open.

Salveen Richter (Analyst)

Good afternoon. Thanks for taking my question. You touched on this a little earlier, but while Gilead seems fairly unexposed to tariff risk here, can you just share any details on how much of the US market is supplied by ex-US manufacturing, either API or finished product, and to what degree you can shift this to the US? Is it fair to say limited risk to the business from a tax transfer pricing perspective? If I could also just get a clarification with regard to earnings earlier on Part D redesign with regard to whether your assumptions are unchanged here and whether you could just comment on how this is taking shape relative to your 2025 guide given the dynamics to date. Thank you.

Daniel O'Day (Chairman and CEO)

Great. Thanks, Salveen. Let me just start at the high level, and then I'll hand it over to Andy or Johanna to comment a little more deeply just to emphasize what you said around the tariffs. I think at the highest level, of course, we separate them into two different categories. One is kind of indirect tariffs, which are related to all businesses. For us, there are things like steel, lab supplies, chemicals, reagents. Obviously there, we have some known understanding of what those tariffs will be. What we see so far today, we've absorbed into our guidance without changing our guidance for the rest of the year. Andy can comment a little further on that. The other category of tariffs are obviously the pharmaceutical-specific tariffs, which are not enacted today. They've only been discussed and chatted about.

We obviously have not speculated on those nor included those. To your point, I think that there is a difference relative to Gilead's makeup and setup that is important when you consider those tariffs. That is that the vast majority of Gilead's IP is in the US What that suggests is lower value for its pharmaceutical imports at the end of the day, which is the value on which tariffs would be placed. In fact, more than 80% of Gilead's profits are recognized in the US. To your question around the supply chain, it is quite a complicated answer. We do have the strongest footprint we have in the United States. Like most companies, we leverage both internal and external manufacturing on a global basis.

We are always looking to adapt that to make sure that we have good continuity of supply across the world so that we can do that accordingly. I would also say that we have invested significantly in our manufacturing infrastructure in the United States over the past many years and our R&D infrastructure, including opening cell therapy manufacturing sites. We have four large-scale US investment projects in progress that are expected to run through 2028. It is difficult to get into the detail of every product and every supply chain, but I think we are well positioned overall. I would ask Andy to comment and maybe Andy or Johanna on the Medicare Part D redesign.

Andrew Dickinson (CFO)

Sure. Hi, Salveen. It is Andy. Just to confirm what Dan said, our updated guidance does reflect the expected impact of the increase in indirect costs that we've seen from both announced tariffs and reciprocal tariffs, as well as our general expectations for the inflationary environment that we may be moving into. As you can expect, there are a number of puts and takes in the P&L, but as you look again at another very strong quarter of disciplined expense management, that helps us absorb some of those additional costs. There is also a bit of a tailwind, as you've heard from our peers, in terms of as the US dollar has weakened for those of us that are based in the United States. There is a tailwind relative to our budgeted FX amounts that will help offset some of those as well.

We're very confident today that with the strong growth you saw in the base business in Q1, despite the Part D impact, which Johanna can speak to, even with the tariffs, we're happy to reconfirm our guidance for the year, and we feel like we're in a good spot.

Johanna Mercier (Chief Commercial Officer)

Great. Maybe just specific to your Part D redesign question, although still quite early in the stages of implementation, just important to note that Medicare claims will lag by a quarter. Still kind of looking for that data, and we'll get that sometime late Q2 for Q1 of this year. Our assumptions haven't changed. We continue to expect about that $1.1 billion that we shared for total impact, of which about $900 million or so is specific to HIV. In terms of phasing, we do expect some linear progression over the quarters. That is in part driven by the cost of our medicines. Last but not least, we're really quite pleased with our Q1 results. If you think about our HIV business growing 6 points year-over-year, if you were to take out Part D redesign, you'd be looking at a 9% growth year-over-year.

We're really pleased with how HIV is playing out and being able to navigate those seasonal dynamics of inventory that we always see in Q1, but also the Part D redesign dynamics.

Operator (participant)

As a reminder, we ask that you please limit yourself to one question so we can get to as many analysts as possible during today's call. Our next question comes from Tyler Van Buren at TD Cowen. Tyler, go ahead.

Tyler Van Buren (Managing Director and Senior Equity Research Analyst)

Hey, guys. Thanks very much. For Trodelvy, is the lower demand quarter-over-quarter due to bladder coming out or lower demand in breast? It'd be helpful if you could elaborate on that.

Johanna Mercier (Chief Commercial Officer)

Sure. Johanna, I'll take that one. Yeah, quarter-over-quarter has to do with inventory and a little bit of lower demand just because Q4 was really strong performance. If you look at our year-on-year at about -5%, that's really just inventory dynamic and lower average realized price due to channel mix and higher demand. We are trending nicely with Trodelvy and holding a really nice position both in second-line metastatic triple-negative breast cancer as well as HR+/HER2-. I feel confident with what's to come in 2025, let alone with the great positive news on ASCENT-04 that just reinforces the confidence for physicians in the second-line setting with the data that we had originally showed with ASCENT.

Operator (participant)

Our next question comes from Dania Graybosch at Leerink Partners. Daina, go ahead. Your line is open.

Daina Graybosch (Senior Research Analyst)

Hi. Thanks for the question. I wonder if you can talk about the process to add lenacapavir to the USPSTF mandate for coverage about cost sharing, assuming SCOTUS upholds the constitutionality in June. What's the timing of that being added, and how much impact or uplift do you expect in revenue and growth in the US when it's added to the mandate? Thank you.

Johanna Mercier (Chief Commercial Officer)

Thanks, Daina, for your question, Joanna, again. I think what's important is that we are assuming that it's going to take a little bit of time for USPSTF to add lenacapavir as the process. Obviously, from a guideline standpoint, we've already kind of seen those guidelines play out when you think about IAS guidelines. We already have lenacapavir there prior to even approval. Usually, they wait for approval, and then we kind of go forward with trying to get medical updates through including USPSTF. We do believe, though, that despite this, we feel we're incredibly well positioned because of the transformative nature of lenacapavir to build access across the different channels, and we're prepared to do that.

That is, again, going to take a little bit of time over the next 6 to 12 months, but we feel that that would be in line with what we have seen in the past with other agents, including DESCOVY. We are going to be leveraging all the guidelines possible to make sure that there is a real value that is displayed for access to go as quickly as possible. USPSTF would be nice to have, to be honest with you, but in the first 6 to 12 months, we are assuming that that is not going to be in play, and our plans are really based on our value proposition of lenacapavir.

Operator (participant)

Our next question comes from Geoff Meacham at Citi Group. Jeff, go ahead. Your line is open.

Geoff Meacham (Managing Director)

Oh, great. Afternoon, guys. Thanks so much for the question. I have one for Dietmar. On the HIV treatment opportunity and looking to your long-acting orals, I guess the question is, what's the gating factor for selecting the best phase III combo? Related to that, while you haven't seen resistance with LEN, it hasn't really been an issue, would it still make sense to have in the treatment setting a three-drug versus a two-drug combo just to mitigate the lower risk of resistance? Thank you.

Daniel O'Day (Chairman and CEO)

Thank you, Jeff, for the question. Right? That's really early in our development program here. I think the important piece is that we're looking for optionality. We're really looking for the breadth and depth of the portfolio to deliver for people, basically, with monthly and weekly and in the PrEP setting, obviously, once every six months and potentially also once every year options. In the immediate future, obviously, we're really looking forward, as discussed, right, to the LEN for PrEP launch. We also had data at CROI, right? We were talking about the potential of lenacapavir for once every year PrEP. That, of course, is some of our focus areas. Obviously, we will look at the overall portfolio and see with the options that we want to develop, which ones we can take forward.

Operator (participant)

Our next question comes from Chris Schott at JPMorgan. Chris, go ahead. Your line is open.

Chris Schott (Managing Director and Senior Equity Research Analyst)

Great. Thanks so much. Just was hoping to get a little bit more color on the Livdelzi launch so far. Just elaborate a bit more on what you're seeing from a competitive standpoint and how that ramp is progressing relative to your internal expectations. Thank you.

Johanna Mercier (Chief Commercial Officer)

Thanks, Chris. Johanna, yeah, we're really pleased with the progression of Livdelzi, right? In our full Q2, $40 million, but most importantly, it actually has to do with the share uptake that we've seen. We are looking at about a 1/3 of the market today out of the second-line products that are currently indicated and growing incredibly rapidly. We grew about 10 percentage points share in one quarter. We are really building that momentum with a lot of positive feedback that we're getting from our healthcare providers around the efficacy, both the AOP, the biochemical response, and the pruritus.

Coverage right now is in line with our expectations. We're at about just over 80% or so coverage with commercial plans, and we think that's going to keep growing probably within the next couple of months to just well above 90%. I think right now, we're well on our way to continue to drive Livdelzi and really differentiate it in PBC.

Operator (participant)

Our next question comes from Terence Flynn at Morgan Stanley. Terence, go ahead. Your line is open.

Terence Flynn (Equity Research Analyst)

Great. Thanks for taking the question. I noticed and you mentioned that you added MRD negativity as a co-primary endpoint in the anito-cel phase III trial. I'm just wondering if you could comment on what the regulators would want to see there to approve that on an MRD negativity endpoint in terms of kind of like what delta you would need or if you'd also have to have other supportive data to justify an approval. Thank you.

Cindy Perettie (EVP)

Terence, it's Cindy Perettie. We don't comment on the delta that they're looking for, but what I would share is that this is a dual primary endpoint. Being able to use MRD, we know today that that correlates to PFS, and it also allows us to assess within months of the treatment if the patient is having a response. Our goal is to use the MRD negativity endpoint first and then follow that up with progression-free survival. The correlation between the two is what we're talking to regulators about.

Operator (participant)

Our next question comes from Tim Anderson at BofA. Tim, go ahead. Your line is open.

Tim Anderson (Senior Research Analyst)

Thank you. On Biktarvy, how much will lenacapavir for PrEP cannibalize? Could US Biktarvy sales go ex-growth as soon as 2026? Could you just give us any sort of ballpark estimate for how many patients could be on lenacapavir for PrEP by the end of the year?

Johanna Mercier (Chief Commercial Officer)

Thanks for the question, Tim. Yeah, we don't give product-specific guidance, but here's what I can say. I do think that as you think about lenacapavir and its offering of twice a year, there really is an opportunity when you think about a switch strategy, right? When you think about 95% of the market today are daily orals, which obviously that includes Biktarvy and generic Truvada. That will definitely be where I think the first patients come through, in addition to naive folks as well that have been waiting for lenacapavir because there is definitely a lot of noise in the system from the communities that people are kind of hanging in there until the approval of lenacapavir. Those two pieces are what's exciting as we think about the launch.

As I think about the growth of this market, right, we've basically said that we're just over about 400,000, 450,000 folks or so on PrEP today in the US. We think that number will definitely continue to grow quite rapidly, especially with the acceleration. I think it will accelerate with the launch of lenacapavir. I think that number could be quite exponential as you think about the next 10 years or so. We are looking forward to seeing a little bit more in growth as we're 16% year-on-year today. I think you're going to see a bit of an acceleration as you think about the lenacapavir launch around the corner.

Operator (participant)

Our next question comes from Evan Seigerman at BMO. Evan, go ahead. Your line is open.

Evan Seigerman (Managing Director and Head of Healthcare Research)

Hi. Thank you so much for taking my question. I wanted to drill down a little bit on some of the dynamics we're seeing in cell therapy. Are you seeing more competitive share capture from competitive cell therapy products or by specifics? The flip side, once folks, once a center might use a different cell therapy product, do you tend to see them switch over? Kind of what are the dynamics behind that? Thank you so much.

Cindy Perettie (EVP)

Ready. Thank you for the question. I think that we have shared probably in the previous quarter and this quarter, we're seeing the dynamics from both bispecifics as well as in-class competition. I think it depends as you look at Yescarta and Tecartus on those dynamics. We have a number of new approved indications within-class competition outside of the US That is some of the dynamics you're observing outside of the US, within the US, in some of the more smaller markets that Tecartus is competing in. We're seeing new indications as well with in-class competitors. We're also seeing new indications in the US and Europe with the bispecifics. It is both that we're observing right now. Hopefully that answers your question.

Operator (participant)

Our next question comes from Matt Biegler. Matt, go ahead. Your line is open.

Great. Thanks so much. I had another question on Trodelvy and the decreased demand QoQ. Are you seeing any headwind from Datraway's recent approval in HR-positive? I guess that kind of leads to a broader question of, could you just comment on the patient mix you're treating in terms of triple-negative versus HR-positive? Thanks.

Johanna Mercier (Chief Commercial Officer)

Sure. Basically, with competitive impact, we have not seen any impact thus far, really, as we think about new entrants in the marketplace. We continue to really see a really strong dynamic in triple-negative breast cancer to HR-positive. Remember, the indications are a little bit different. In triple-negative, we are looking at a second-line metastatic indication. In HR+/HER2-, your later lines of therapy is fourth line. You are definitely the trope to ADC of choice in HR+/HER2-, the trope versus other ADCs that are used much earlier in line, and in first and second line, for example. In triple-negative breast cancer, we are absolutely the ADC of choice in that setting.

Operator (participant)

Our next question comes from Courtney Breen at Bernstein. Courtney, go ahead. Your line is open.

Courtney Breen (Senior Analyst)

Hi. Thanks so much for taking the question. I just wanted to ask a little bit about the once yearly lenacapavir. We obviously saw the early data presented at CROI. It seems with the timeline that in associated with that press release that there could be a different trial design than what we've seen in PURPOSE 1 and PURPOSE 2. Can you just talk about whether there is any potential for an expedited PK or PD package relative to an efficacy trial or what might be needed to get once yearly to market for PrEP?

Dietmar Berger (CMO)

Thanks, Courtney, for the question. That's very insightful, right? We are currently looking into the different study designs, right? We have not commented exactly on what we're planning on doing at this point in time. You're absolutely right. There are different study designs that you can utilize, and potentially a PK-based approach is a possibility that we're discussing.

Operator (participant)

Our next question comes from Brian Abrams at RBC Capital Markets. Brian, go ahead. Your line is open.

Brian Abrams (Senior Analyst)

Hi, there. Thanks so much for taking my question. A question for Johanna around the potential on-the-ground dynamics for lenacapavir and PrEP. Can you give us a sense of the awareness across the target physician practices of the drug, the number of sites or maybe proportion of your target practices that are going to be ready to order and administer the drug at launch, and where providers stand with regards to capacity and bandwidth to administer it? Thanks.

Johanna Mercier (Chief Commercial Officer)

Okay. I think from an awareness standpoint, the awareness is actually quite high, both at the healthcare provider level, but also within the community. I think we're leveraging both of those pieces as we think about how do we prepare for our launch. We're also very targeted, right? We know that about 75% of HIV prescribers are the ones prescribing PrEP today. At launch, that's really our target, really around differentiating lenacapavir versus current options, making sure that we are setting them up for success and creating a very smooth customer experience. To your point about number of sites, we've been very targeted in our approach in the first 30 days. We have a 30-day plan, 90-day plan. We're also very clear as some clinics are set up to do buy and bill today, and they currently do it.

Those are clinics that might be a little bit more open to do buy and bill with lenacapavir. We know those, and we're making sure that they have all the training necessary to be able to do so as of post-launch. You also have a lot of clinics that do not have that set up and will need to go through more of a white bagging process through specialty pharmacy. The optionality here is going to be really important. That is what we want to make sure we offer and that we train folks, not just the healthcare providers, to be honest with you, but actually anybody in the clinic that's managing this.

We have a team of folks ready to go, not just our medical and sales teams, but we also have nurse educators making sure people know how to inject, making sure they can help with any questions they might have. We also have field reimbursement managers that are going to be in the field basically making sure that we can track and follow to make sure they get reimbursed, especially as you think about the first six months or so as plans are just coming online. It's going to take a little bit of time. Most prescriptions will get a medical exception. We just want to make sure that we're tracking those to make sure we can help clinics and healthcare providers follow through on that so that they can get started on lenacapavir as quickly as possible.

Operator (participant)

Our next question comes from Mohit Bhansal. Mohit, go ahead. Your line is open.

Great. Thank you for taking my question. I would love for you to comment on a couple of macro themes that we hear a lot as they pertain to Gilead. One is, of course, about the NIH funding cards and potential for funding cards regarding something which could help with the HIV awareness and PrEP awareness thing. Number two is potential for Medicaid cards and how it pertains to Gilead and if Gilead can actually operate in an environment like that. Thank you.

Daniel O'Day (Chairman and CEO)

Thanks, Mohit. Let me start. This is Dan. Then Johanna can turn to that as well. I just want to repeat that we haven't seen or heard anything to date that would cause us to alter our plans or expectations in the HIV field, including the lenacapavir for PrEP launch. I mean, I think it's just too early to speculate on anything related to Medicaid at this stage. There's no confirmed cuts at this time. I believe the administration understands the importance of particularly chronic diseases and prevention as they approach that. I'd also say at the CDC side, we're obviously strong supporters of the CDC and also the role that NIH plays in creating a scientific community. Specifically relative to CDC, it's still too early to understand any impact on particularly CDC programs. They're generally focused on supporting PrEP utilization with community outreach, provider training, and education.

Those are also things that we do as well. Maybe I'll turn it over to Johanna to say how she sees it in terms of how some of our programs may be able to make sure that services are delivered to the people that need these medicines.

Johanna Mercier (Chief Commercial Officer)

Thanks, Dan. Yeah, we've been tracking this very closely and obviously making sure that the work that we do continues and in some areas gets accelerated or elevated where necessary, where there might be some gaps where necessary and where HIV incidences may be higher as well, right, where there's a greater need. We are very targeted in our approach. Just going back to, obviously, there's nothing in play. We wouldn't speculate about anything around Medicaid. I just want to remind everybody, we're talking about HIV. These are individuals that if they need access to HIV medicines, they will find other channels for coverage because if they don't, unfortunately, HIV will turn into AIDS and they will die. In the past, what we have seen is if one channel is closed, they go to another.

There are many different channels where they can go to today, including some federal, but some state-funded approaches as well as Gilead programs that they can just make sure that they get over these access barriers. I just want to pause on that.

Operator (participant)

Our next question comes from Alex Hammond at Wolfe. Alex, go ahead. Your line is open.

Alex Hammond (Senior Research Analyst and Head of Therapeutics Research)

Thanks for taking the question. How should we think about the potential impact of the 340B channel mix on HIV pricing for 2025? How do you expect utilization to compare to what was seen in 2024? Thank you.

Johanna Mercier (Chief Commercial Officer)

At this time, there is nothing new that we are seeing for 340B. We've seen a growth actually of 340B in every quarter from 2024 into 2025. We hope that stabilizes. We believe in the 340B channel, absolutely, for what it was designed originally to do. We just want a little bit more transparency because that would really help cut out some of the duplicates that we're currently seeing as well across some of our different therapeutic areas.

Operator (participant)

Our last question comes from Simon Baker at Redburn Atlantic. Simon, go ahead. Your line is open.

Simon Baker (Equity Research Analyst)

Thanks for taking my question. Going back to the Part D redesign, we've talked about the impact. I just wanted you to give us some thoughts on when you are expecting to see a potential benefit as the lower cost of patients increases starts and increases stay time. I'm guessing it's too early now. As the year goes on, when should we start to see an offsetting positive impact from the changes that have been made? Thanks so much.

Johanna Mercier (Chief Commercial Officer)

Yeah, thanks for the question. In terms of volume, given the number of safety nets that I was just referring to earlier, there are so many programs that are available today that exist for HIV. We're not expecting to see a material uptick from the Part D reform. We're obviously going to track it super closely. If we were to see it, it would be later in the year. Just to remind people, when you look at Biktarvy, for example, the level of abandonment of Biktarvy is incredibly low today. Very different maybe than other therapeutic areas that you might see in chronic diseases just because of the consequences of not being on an HIV treatment. That is why we're monitoring the situation. We haven't included it in our numbers like we shared in the past.

Obviously, if we do see something, we'll share with you as soon as we do. If it was to happen, it would be later in the year.

Operator (participant)

That completes the time that we have for questions today. I'll now invite Dan to share any closing remarks.

Daniel O'Day (Chairman and CEO)

Terrific, everybody. Let me wrap up by thanking the Gilead teams that are responsible for this great start to the year. I'll just say that on behalf of all of us, the strong base business growth of 4% year-over-year and 6% growth in our HIV business, combined with the continued success of the Livdelzi launch and growing demand for Trodelvy, alongside the impressive operating margin and earnings per share, all demonstrate that we have a strong and efficient business today, which I think is extremely important given the current environment that we're all operating in. Now, moving forward, we're also excited about what's next.

Our diverse pipeline and generating multiple upcoming potential launches, including lenacapavir for PrEP, which is weeks away, Livdelzi in further markets, anito-cel, and now Trodelvy based on the positive phase three results from theASCENT-04 study, all fill us with great promise as we continue on a diversification approach and confidence in our business overall. This is an exciting time for Gilead Sciences, the ongoing work that we all do for patients in the communities we serve. I just want to close by thanking you all for joining us today. We look forward to keeping you up to date on our progress as the year continues.

Operator (participant)

Goodbye.