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    Gilead Sciences Inc (GILD)

    Q4 2023 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$77.72Last close (Feb 6, 2024)
    Post-Earnings Price$76.21Open (Feb 7, 2024)
    Price Change
    $-1.51(-1.94%)

    What went well

    • Gilead's cell therapy business is poised for growth in 2024 and beyond, as they have expanded the number of Authorized Treatment Centers (ATCs) to over 400 globally, including moving into community practices, which is expected to drive growth in the second half of the year.
    • The cell therapy franchise is improving profitability and efficiency, with significant progress in manufacturing, including reducing turnaround time from 16 to 14 days, leading to better margins and a line of sight to biologics margins.
    • Strong demand-driven growth in the HIV portfolio, led by Biktarvy, which grew 14% to $11.8 billion with a 48% market share in the U.S.; Gilead expects approximately 4% HIV sales growth in 2024.

    What went wrong

    • Failures in Key Clinical Trials: Gilead's Trodelvy did not meet its primary endpoint in the Phase III EVOKE-01 trial for second-line metastatic non-small cell lung cancer, and their antiviral obeldesivir failed to show significant benefit in the Phase III Oaktree trial for COVID-19. These setbacks raise concerns about Gilead's pipeline and future growth prospects.
    • Challenges in Cell Therapy Business: The cell therapy franchise, including Yescarta, experienced a sequential sales decline in Q4 due to capacity constraints and increased competition. Gilead expects flat to slightly up performance in Q1 and a return to growth only in the second half of the year, indicating near-term pressures on revenues.
    • Potential Limitations in HIV Revenue Growth: Previous pricing favorabilities due to high inflation and favorable channel mix are not expected to repeat in 2024. Increased sales through government channels with higher rebates are resulting in lower average realized prices, which may limit future revenue growth in Gilead's largest business segment.

    Q&A Summary

    1. 2024 Product Sales Growth
      Q: What are the levers for upside in 2024 ex-Veklury product sales?
      A: Management expects 4% to 6% growth in product sales excluding Veklury. Key growth drivers include strong performance in the HIV business, with at least 4% growth expected , and continued growth from the cell therapy business and Trodelvy.

    2. HIV Pricing Dynamics
      Q: How are channel mix dynamics affecting HIV pricing and 2024 expectations?
      A: In 2023, pricing favorability was driven by high inflation affecting rebates, which is not expected to repeat in 2024. Management expects about 4% growth in HIV sales for 2024, driven by demand growth from Biktarvy and Descovy for PrEP.

    3. Trodelvy in Lung Cancer
      Q: What's the confidence level in Trodelvy for frontline non-small cell lung cancer given EVOKE-01 data?
      A: Management maintains confidence in Trodelvy, noting no difference in response rates between squamous and non-squamous carcinoma. They plan to continue the EVOKE-03 trial without changes and expect data from other studies like TROPiCS-04 and ASCEND-03 to further support Trodelvy's potential.

    4. Cell Therapy Profitability and Growth
      Q: How is the cell therapy franchise progressing towards profitability?
      A: The cell therapy business is nearing biologics margins, with continuous improvements in manufacturing efficiency and cost reductions. Despite capacity constraints affecting Yescarta in Q4, management expects flat to slight growth in Q1 and a return to growth in the second half of the year.

    5. TIGIT Program Investments
      Q: Why did Gilead step up investments in the TIGIT program and adjust trial focus?
      A: The revised agreement with Arcus allows for efficient deployment of resources and streamlines decision-making. They are prioritizing the all-comers STAR-121 study due to robust enrollment and competitive landscape, deemphasizing the PD-L1 high population in ARC-10.

    6. TAF Litigation Impact
      Q: What are the implications if the Supreme Court takes up the TAF litigation petition?
      A: Management is confident in presenting their case, noting over 5,300 cases have been dismissed so far. The first bellwether trial in federal court has been moved to November, but there's no change in their perspective.

    7. Business Development Opportunities
      Q: Where are the greatest opportunities for a $5-6 billion deal in oncology or I&I?
      A: Gilead remains opportunistic in pursuing business development in virology, oncology, and inflammation, focusing on science-driven opportunities. With leverage ratios back to pre-Immunomedics levels, they are comfortable deploying capital but see nothing imminent.

    8. Anito-cel Differentiation
      Q: Will anito-cel differentiate on neurotoxicity versus competitors?
      A: To date, no neurotoxicity has been observed with anito-cel. A differentiated safety profile would be a significant market advantage , and the potential for efficacy differentiation exists due to using half the dose compared to competitors.

    9. Yescarta Dynamics and Growth
      Q: What were the dynamics with Yescarta this quarter, and expectations for 2024 growth?
      A: Capacity constraints within existing treatment centers affected Yescarta in Q4. Expansion into community centers is ongoing but takes longer than academic centers. Management expects flat to slightly up growth in Q1 and a return to growth in the second half of the year.

    10. PD-L1 Poor Responders Strategy
      Q: What are the next steps for PD-L1 poor responders in Trodelvy trials?
      A: Management is evaluating data and may discuss options with regulators. A second trial may be necessary, and updates will be provided as the situation evolves.

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