Gilead Sciences, Inc.

Good day and thank you for standing by. Welcome to the Gilead Sciences first quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the presentation, there will be a question and answer session. To ask a question during this session, you will need to press star then one on your telephone keypad. Please be advised that today's conference may be recorded. If you require any further assistance, please press star then zero to reach an operator. I'd now like to hand the conference over to your speaker today, Jackie Ross, Vice President, Investor Relations.

Please go ahead. Thank you, Liz, and good afternoon, everyone. Just after market closed today, we issued a press release with earnings results for the first quarter of 2021. 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, Joanna Mercier, our Chief Medical Officer, Murdad Parsi, and our Chief Financial Officer, Andrew Dickinson. After that, we'll open up the call to Q&A, where the team will be joined by Christy Shaw, the Chief Executive Officer of KITE. Before we get started, let me remind you that we will be making forward-looking statements, including those related to the impact of the COVID-19 pandemic on Gilead's business, financial condition, and results of operations, our plans and expectations with respect to products, product candidates, corporate strategy, financial projections, and the use of capital, and our 2021 financial guidance, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ materially from these statements. A description of these risks can be found in the earnings press release and our latest SEC disclosure documents. All forward-looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward-looking statement. Non-GAAP financial measures will be used to help you understand the company's underlying business performance. The GAAP and non-GAAP reconciliations are provided in the earnings press release, in our supplementary data sheet, as well as on the Gilead website. I will now turn the call over to Dan.

Thank you, Jackie, and good afternoon, everyone. We appreciate you taking the time to join us today. Before I hand over to the team to go into the details of our commercial pipeline and financial results, I wanted to share our overall assessment of Gilead's first quarter. 2021 is a pivotal year for Gilead, and as you can see on slide four, we're off to a solid start. Our first quarter total product sales were in line with our internal expectations. While our core business was more impacted by COVID-19 than we anticipated, This was offset by higher VicGlory sales. In the United States, one in two hospitalized patients are receiving VicGlory, and worldwide, VicGlory continues to play a key role as a standard of care treatment for patients who are hospitalized with COVID-19. Given the desperate situation in India, Gilead has been working with the Indian government, health authorities, and our voluntary licensees to increase supply of remdesivir and provide donated medicines. As the trajectory of the pandemic evolves globally, we will continue to invest in multiple clinical studies of Vicluri, including alternative formulations. Earlier this month, we received two FDA approvals for Tredelvi. The full approval for metastatic triple negative breast cancer extended the label to second-line plus patients. This means Tredelvi could help many more patients. as there are more than double the number of patients in this category, as there are in the third-line setting. We also received accelerated approval in second-line plus metastatic urothelial cancer. In March, we announced a new partnership to combine investigational lenacapivir with Merck's investigational islatravir for long-acting HIV treatment, accelerating the path to the next wave of therapies. While many people living with HIV may prefer a daily regimen like Bictarvy, we believe that broadening their options to include weekly oral therapies and infrequent injections every three months or longer addresses a significant patient need and sets up strong, sustainable HIV leadership into the late 2030s. Long-acting formulations such as lenacapivir as monotherapy are also likely to unlock further PrEP usage and reach many more people at risk of HIV. We are also pleased with our progress in advancing lenacapivir in both treatment and prevention settings as part of our internal clinical development. This past quarter, we reported compelling long-acting efficacy data for lenacapivir in heavily treatment-experienced people with multidrug-resistant HIVs. We are fully confident that Lenacapivir will be the foundation for our long-acting HIV treatment and prevention portfolio. And while we advance Lenacapivir, Bigtarvy usage continues to grow, with one in two people living with HIV starting their treatment on Bigtarvy in the U.S. In addition, Bigtarvy is capturing one in two switches, and approximately half of those are switching from a regimen that includes a non-Gilead agent. In addition to securing regulatory approvals in oncology, we have already achieved several other pipeline milestones, including EMA validation of the Tredelby MAA for metastatic triple negative breast cancer and submission of the supplemental biologics license application to FDA for Tocardis in relapse or refractory ALL. Building on the work we did last year, we continue with the disciplined prioritization of our pipeline across Gilead. To share one example, Kite completed an optimization exercise this past quarter to ensure that resources are focused on the most promising opportunities to make a difference for patients. Finally, we're looking forward to a full year of clinical news flow for Gilead. Our pipeline list for 2021 includes over 20 milestones across therapeutic areas. While they are all important steps in Gilead's journey to serve more patients and diversify our business, slide five lists the most significant items so you can track our progress more clearly. These include the Phase III Tropics II PFS readout for Tredelvi in hormone receptor-positive HER2-negative metastatic breast cancer, Yaskarta's Phase III ZUMA-7 readout for second-line DLBCL, which could result in an S-BLA submission later this year. The Phase III readout for Hapcludix that could lead to BLA filing. Arcus' Domvanilamab Phase II ARC-7 interim readout in non-small cell lung cancer, which could inform an opt-in decision. McGrolamab's Phase 1b data readout in MDS, which could lead to a submission for accelerated approval later this year, and potential Phase 2 initiation of lenacapivir and islatravir as a long-acting oral HIV treatment in the second half of 2021. Our aspirations for patients are bold, and our pipeline offers diversity across indications and risk profiles. While execution will continue to be a focus, these milestones give us a great deal of optimism about the future and our ability to deliver therapies that make a meaningful difference for patients. Before I hand off, I want to take a moment to thank Dr. Bill Lee, who is retiring from his role as Executive Vice President of Research after 30 years at Gilead. On behalf of all of us, I want to offer my sincere gratitude to Bill for his outstanding contributions that have helped to benefit millions of patients around the world. I would also like to welcome Dr. Flavius Martin, who joined Gilead as the new EVP of Research on April 12th. Flavius has an impressive track record in overseeing industry-leading research and advancing new therapeutic candidates. With that, I'll invite Joanna to update you on our commercial operations in the first quarter.

Thanks, Dan, and good afternoon, everyone. Starting on slide seven, it was a solid quarter of execution for the commercial team, with total product revenue of $6.3 billion, up 16% from the first quarter of last year. This was in line with our internal expectations as VicLurie sales offset a more substantial pandemic-related impact on our core business than we had anticipated. Excluding VicLurie, total product revenue was $4.9 billion, reflecting inventory and pricing seasonality, the anticipated HIV loss of exclusivity in the U.S., and ongoing pandemic-related dynamics in HIV and HCV. Moving to HIV on slide 8, revenue is down sequentially, as expected, primarily due to seasonal trends. As a reminder, two things happen every year to our HIV business that contribute to a sequential decline from Q4 to Q1. First, The channel builds inventory in the fourth quarter, then draws it down in Q1. In the first quarter of 2021, this inventory impact contributed an estimated $410 million to the sequential decline. Second, we realized lower net HIV prices in the first quarter due to items such as increased copay support and Part D discounts, which tend to normalize throughout the rest of the year. This quarter, we had two additional impacts. a year-over-year decline of $335 million in Trujada and Achipla revenue associated with the LOEs in the U.S., and a difficult comparison in the first quarter of 2020 given the pandemic-related HIV stocking we saw in March of 2020, as well as the impact of the pandemic on HIV market demand. Our focus is on share driven by demand. Overall, three in four people living with HIV initiate or switch to Gilead products, highlighting the strength and demand for our life-changing medicines. While the pandemic dampened market size and switch volumes, we maintained share in line with prior quarters across our total HIV portfolio despite generic erosion. In terms of product lines, Biktarby was up 8% year-over-year but down sequentially as expected, driven by seasonal inventory and pricing dynamics. Despite the pandemic impacting the new starts and switch volume in HIV, demand fundamentals for Biktarvy remain strong, with five SharePoint growth compared to the same time last year and two SharePoint growth just in the last quarter in the United States. As Dan mentioned earlier, one out of two people living with HIV initiating or switching therapy is prescribed Biktarvy. Further, nearly half of Biktarvy switches come from incremental sources. Viscovi revenue was down sequentially and year-over-year, largely driven by seasonal inventory and pricing dynamics. Although prep volume continues to be impacted by the pandemic, Viscovi's share remains stable and strong at around 45% and positions as well as the prep market recovers post-pandemic. Moving to slide 9, HCV's first quarter revenue was $510 million. It continues to maintain a leading share of about 60% in the U.S. and 50% in Europe. Despite COVID continuing to impact patient start, we did see a very modest sequential improvement overall in patient volume, although it remains depressed versus pre-COVID level. HCV also benefited from a pricing adjustment in France. As shown on slide 10, in Q1, HPV and HDV sales totaled 220 million, with HPV sales of 214 million, growing 15% year over year, driven by strong demand, most notably in China and in the U.S. We continue to expect the HBV franchise sales to reach $1 billion by full year 2022. With the completion of the mirror acquisition during the first quarter, our portfolio now includes Hepcludex. There are currently no available treatments for HDV, making Hepcludex, which has received conditional approval by the EMA, a first-in-class treatment. This innovative drug blocks viral entry into liver cells, and we're targeting a BLA submission later this year and are excited by the opportunity to make HEPCLUDEC more broadly available and address the unmet need for people who are infected with HGV. Moving to slide 11, Tudelvi delivered $72 million in its first full quarter as part of the Gilead portfolio. In a span of just three weeks this month, Tredelby received FDA full approval for second-line plus metastatic triple negative breast cancer, received accelerated approval on second-line plus metastatic urothelial cancer, and had it to send phase three data published in the New England Journal of Medicine just a week ago. We can now leverage treatment efficacy data from the full trial population in our discussions with physicians and build even greater confidence to consider this potentially transformative therapy. This more than doubles the patient population, extending our reach to 6,000 second-line metastatic TMBC patients in the U.S., in addition to over 4,000 patients in the third-line plus population. Given the poor prognosis and difficulty in treating both second- and third-line metastatic TMBC patients, Sjodeli could extend medium overall survival by almost a year, while also nearly tripling the medium progression-free survival compared to chemotherapies. Outside the U.S., we submitted the TMBC marketing authorization application based on the Ascent Phase III clinical study for an accelerated review process. We look forward to continuing discussions with the European Medicines Agency and anticipate approval as early as December of this year. Additionally, Tudelvi TMBC is under review with the U.K., Canada, Switzerland, and Australia as part of Project Orbis. On slide 12, Christy, who's on the call to answer your question shortly, you can see that our cell therapy business had a strong quarter, with revenue of $191 million, up 36% from the same quarter last year. Driven by growing adoption of Yaskarta in Europe, with our industry-leading four-year 44% overall survival. The recent approval for Yaskarta in follicular lymphoma broadened our addressable patient population and support our ongoing growth. Ticardis continues to see strong launch demand as physicians and patients adopt the first and only cell therapy approved for relapsed or refractory mantle cell lymphoma. Moving to the query on slide 13. First quarter revenue was $1.5 billion with demand tracking to hospitalization rates. Although we saw lower hospitalization rates and increasing vaccination rates in certain parts of the world, Overall progress was more gradual than expected over the first quarter, and as such, we are now assuming a slower pandemic recovery for the second quarter. As the pace of recovery builds momentum in the second half of the year, this should contribute to the modest recovery in patient starts for HCV as well as HIV franchises. We will continue to play our part to support broader access for eligible patients in need of remdesivir. We are working with our voluntary licensees to accelerate production capacity for India, while also donating over 450,000 vials to help patients as the supply of license generics increases. Our thoughts are with those who continue to tackle the worst of this pandemic. And so with that, I will hand over the call to Murdad.

Thank you, Joanna. As both Dan and Joanna mentioned, We're off to a solid start and a catalyst heavy 2021. And my comments today will focus on near-term events and changes to our pipeline. A comprehensive update on our broader pipeline is included in the appendix of the slide deck available on our IR website. I'll start with our virology pipeline. We remain as focused as ever on driving innovation in HIV therapies, and there are no changes to the expected timelines associated with our Lenacapavir programs. In HIV prevention, we're activating sites for our first phase three study of Lenacapavir as monotherapy for the prevention of HIV. And we'll begin screening patients later this quarter. This study will focus on preventing infection in cisgender men, transgender women and men, and gender non-binary people who have sex with men. In the second half of 2021, we plan to initiate a study looking at Lenacapavir for the prevention of HIV infections in adolescent girls and young women. In treatment, We presented additional data from our Phase 2-3 Capella trial for linacapivir at CROI, and we continue to expect our first linacapivir filing for use with other antiretrovirals in heavily treatment-experienced individuals in the second half of this year. We anticipate data later this year from the Phase 2 Calibrate study in the treatment-naive population to support virologically suppressed indications. And we plan to launch a Phase II trial for a long-acting oral treatment combination of Gilead's Lenacapivir and Merck's Islatravir in the second half of this year. Both medicines have shown long half-lives and high potency at low doses. As such, we believe that the Lenacapivir plus Islatravir combination is promising, and we're excited by our new partnership and working with our colleagues at Merck to bring the maximum benefit possible to people living with HIV. Based on our commitment to HIV, we continue to work towards a potential cure. We have several early stage programs evaluating combinations to understand the biology and identify a path for this important mission, leveraging our internal expertise as well as external partnerships, including ELIX and Gritstone. On slide 16, moving on to the oncology pipeline, which has over 20 internal clinical stage programs, including many built around Tredelvi, We're excited to have received full FDA approval of Tredelphi in second-line plus metastatic triple negative breast cancer based on the confirmatory phase 3 assent trial data. In the U.S. alone, this indication expands upon the accelerated approval for third-line metastatic triple negative breast cancer to now include second-line patients who have had at least one prior treatment for metastatic disease. Tredelphi has the potential to significantly improve overall survival and progression-free survival outcomes for patients. In the U.S., there's a population of 10,000 patients who may benefit from Tredelvi. We also received FDA-accelerated approval for second-line metastatic urothelial carcinoma based on positive data from the Phase II Trophy Study. With almost one-third of patients responding to treatment in the 7.2-month median duration of response, Tredelvi offers a much-needed new treatment option for the many patients with metastatic urothelial cancer whose disease continues to progress despite receiving available first- and second-line treatments. In the U.S. alone, we estimate there are roughly 8,000 addressable patients. 2021 will continue to be an exciting year for Tredelvi, and there have been no changes to the 2021 timelines we shared previously. We submitted the MAA to the EMA for Tredelvi and Second Line Plus metastatic TMBC in March, and it's now under accelerated review. We continue to target EU approval in the second half of this year. Later this year, we anticipate a Phase III tropics to progression-free survival readout for hormone receptor-positive HER2-negative metastatic breast cancer. Pending data will evaluate and determine the appropriate next steps from a regulatory standpoint. We estimate there are roughly 17,000 patients in the U.S. who could benefit from Tredelvi in this setting. We're now actively recruiting additional patients for the Phase II Tropics III basket study in solid tumors to expand eligibility to patients regardless of Trope II expression. We've already decided to initiate a Phase III trial in non-small cell lung cancer in the second half of this year, and we'll share updates on additional planned studies later this year. Moving on to cell therapy on slide 17, with FDA's accelerated approval of the ASCARTA for patients with third-line plus follicular lymphoma in March, we now have added a third indication for the KITE portfolio. The Zuma 5 study data showed that 91% of patients responded to a single infusion, with an estimated 74% of patients in continued remission at 18 months. We're working towards making this option available to patients outside the U.S. and continue to target an MAA filing in the next several months. There are no changes to the expected timelines for the Zuma 7 study, assessing Yescarta for the second-line diffuse large B-cell lymphoma, or DLBCL patients. We expect to announce the top-line Phase III outcome later this quarter, followed by SBLA and MAA submissions in the second half of the year. Additionally, the FDA has approved the inclusion of the ZUMA-1 Cohort 4's updated safety data into Yaskarta's label for third-line DLBCL. Cohort 4 demonstrated that early use of corticosteroids and or tocilizumab led to reductions in cytokine release syndrome or neurological events. Moving on to Tocardis, we submitted our SBLA for relapse or refractory adult B-cell precursor acute lymphocytic leukemia, or ALL, just after the end of the first quarter. If approved, Tocardis would add a much-needed treatment option for patients 18 and older. We plan to share the Zuma 3 data at ASCO this summer, and we continue to enroll patients for Zuma 4 to evaluate Tocardis for ALL in the pediatric population. Consistent with our ongoing diligence across both Gilead and KITE, we will continue to focus and streamline the KITE portfolio to align with our key strategic priorities and expertise in hemologic malignancies, specifically lymphoma and leukemia. Moving on to slide 18, in addition to the previously mentioned milestones for virology, Tredelvi, and KITE, we have several other notable upcoming events. First, I want to take a moment to highlight migrolimab's progress and outlook in myeloid dysplastic syndrome and acute myeloid leukemia. In MDS, we expect to see Phase 1b data in the second half of this year. Pending results, those data could lead to a BLA submission before the end of the year. If approved, migrolimab will be the first-in-class macrophage checkpoint inhibitor targeting CD47 and Gilead's first frontline oncology indication. There's a significant unmet need for MDS, with no new treatments approved in 14 years, despite 15,000 new patients diagnosed each year in the U.S. alone. We're also exploring pivotal studies in frontline AML. Additionally, we continue to evaluate multiple solid tumor indications for migrolimab, most recently initiating a Phase Ib2 second-line plus solid tumor basket study and a randomized Phase II study for head and neck cancer in combination with chemotherapy and MERS-K-TRUDA. Second, in virology, we're thrilled to officially add HIPCLUDIX into our portfolio and look forward to Phase III data readout later this quarter, with the potential for a BLA filing in the second half of the year. As for potential opt-in programs, ARCIS's ARC-7 non-small cell lung cancer study is expected to evaluate interim data in the second quarter. We and the ARCIS team have indicated that the interim analysis is targeting an ORR of 50% or greater, and a clear separation in OR from the zimborellumab monotherapy arm when compared to the donvanylumab plus zimborellumab combination arm. Last, on slide 19, you can see our robust and diversified pipeline across oncology, virology, and inflammation. In addition to the readouts on the previous slide, we have multiple collaboration programs that we're monitoring closely, including ARC-8 study in pancreatic ductal adenocarcinoma, An ARC-6 study for castration-resistant prostate cancer, both of which expect initial readouts later this year. And the Galapagos-623 Toledo proof-of-concept trials across psoriasis, ulcerative colitis, and RA are expected to have readouts later this year. In closing, we're pleased to see how our portfolio has grown from about 30 clinical stage programs two years ago to 47 today, while maintaining our focus on discipline management of R&D expenses. We've also gone from six molecules approved, filed, or in registrational studies to 15. Our teams have worked tirelessly to continuously evaluate and accelerate priority programs. We're thrilled to see how our portfolio is developing, and we look forward to accelerating innovation to help transform patient care. With that, I'd like to hand the call over to Andy.

Thank you, Murdad, and good afternoon, everyone. As you can see, we are building momentum in our clinical pipeline, and we expect to have plenty of data to share as we move through the rest of 2021. Moving to slide 21, the first quarter was a good start to the year, with total product sales in line with our internal expectations overall, as modestly higher vectory sales offset a slower pandemic-related recovery than we had anticipated. In addition to pandemic impacts, our HIV business reflected the inventory seasonality we typically see in the first quarter. Total product sales were 6.3 billion, up 16% year-over-year, driven primarily by VecLurie. The first quarter reflects continued growth from Victarvy, our first full quarter of Tredelvi sales, and strong growth in HBV as well as cell therapy. This growth was offset by ongoing COVID-related softness across our business, in addition to the Truvada and A-Tripla LOEs. As also indicated by Joanna, There is a difficult comparison to the first quarter of 2020, given the pandemic-related HIV stocking observed last year. As a result, total product sales excluding Veclury were $4.9 billion, down 11% year-over-year. Non-GAAP product gross margin was 86.5%, 60 basis points lower year-over-year, primarily associated with product mix, and a small inventory charge, partially offset by favorable royalty adjustments. Non-GAAP R&D was $1 billion, up 4% year-over-year, primarily driven by investment in new pipeline products, including Tredelvi and Megrolamab, offset by timing of certain clinical studies and lower vectory-related expenses. Non-GAAP SG&A was also $1 billion, down 4% from Q1 2020, due to timing of grants and sales and marketing activities. This was partially offset by higher commercialization investments associated with Veclury, Fridelvi, Cell Therapy, and HBV and HIV in China. Moving to tax, we realized a lower rate of 18% for the quarter due to recognition of favorable settlements with tax authorities. Overall, our non-GAAP diluted earnings per share were $2.08 in the first quarter of 2021 compared to $1.68 for the same period last year. The year-over-year improvement was primarily due to VEC Lurie revenues, flat operating expenses, and a lower tax rate, offset in part by lower interest income. You can see on slide 22 that there is no change to our full-year non-GAAP guidance. While the pandemic remains unpredictable, and as we realized a more substantial impact to our core business in the first quarter than we had anticipated, we are nonetheless encouraged by the lower hospitalization rates and increased vaccinations. We have modified our assumptions on the timing of pandemic recovery to allow a more gradual improvement starting in the second quarter. We continue to expect total product sales, excluding VECLURY, of $21.7 to $22.1 billion. We continue to expect full-year non-GAAP R&D and SG&A expenses, each to be flat to down low single-digit percentages year over year. Given our first quarter results, You can see our R&D expenses are somewhat back-end loaded in 2021 based on the timing of clinical activities, which include the anticipated initiation of the solid tumor study with migrolimab, advancing internal long-acting combinations with lenacapavir for the treatment of HIV, and other pipeline activities. Our work with Merck on a long-acting treatment regimen for people living with HIV is also underway and will ramp up during 2021. although we are able to absorb this program into our current R&D expense guidance. In SG&A, we are ramping up sales and marketing to support efforts such as the ongoing and expected launches of Tredelvi in the U.S. for bladder cancer and in Europe for triple negative breast cancer. Additionally, we expect to start seeing higher travel and other costs scale up in the second half of the year as social distancing restrictions lighten up in some geographies. Despite the lighter expenses in the first quarter, we're leaving our operating expense guidance unchanged as we expect to catch up on this to some extent later in the year, and for now, retain the flexibility to manage the timing of clinical and commercial investments. We continue to expect our non-GAAP tax rate to be 21% for the year. While we are carefully monitoring the discussions on a higher corporate tax rate here in the United States, we believe any impact is more likely in 2022 and beyond. although, of course, a more immediate change could alter our current tax guidance. Finally, with no changes to our revenue or operating expense guidance, we continue to expect non-GAAP diluted EPS of $6.75 to $7.45 for the year. We have updated our GAAP diluted EPS guidance and now expect to be in the range of $4.75 to $5.45, down from $5.25 to $5.95, reflecting fair value losses for our equity holdings in the first quarter, donation expenses, and other pre-tax charges, including upfront payments related to collaboration. On slide 23, you can see that we remain diligent in our capital allocation priorities. Already this year, we have repaid $1.25 billion in debt and we're on track to pay down at least $4 billion in total by the end of the year. We have also returned $1.2 billion to shareholders through dividends and repurchase of shares. To close, we remain committed to delivering for patients and for shareholders as we look to invest in our business and R&D pipeline while paying close attention to our expenses. With that, I'll hand the call back to Dan for a few closing comments. Dan.

Thanks, Andy. Before we open up for questions, I'd like to thank the broader Gilead team who accomplished a great deal in the first quarter. setting the stage, I think, for quite an exciting year, rich in catalysts across our clinical portfolio. Of course, Gilead would not be the company it is today without the vision of John Martin, Gilead's chief executive officer for 20 years, who passed away in March. Under his leadership, Gilead transformed the treatment of HIV and viral hepatitis and became a global organization firmly rooted in its commitment to science and to patients. That commitment will be a constant as we work to take John's legacy forward in Gilead's next chapter. With that, I'll invite the operator to begin the Q&A.

As a reminder, to ask a question, you will need to press star, then 1 on your telephone keypad. To withdraw your question, press the pound key. In the interest of time, we ask that you limit yourself to one question and rejoin the queue for any follow-ups. Our first question comes from Brian Abrams with RBC Capital Markets.

Hi. Thanks so much for taking my question. It looks like you're seeing steady growth in adoption of Tredelvi. So I'm just wondering, how should we think about the potential for a near-term inflection and update now that you have full approval and triple negative, the publication out, and label expansion into your Othelial? And I'm curious, are you starting to see some pull through? And where do you stand with respect to community physician awareness? How important is that as well for adoption? Thanks.

Thanks, Brian. Joanna, please.

Sure. Thanks, Brian, for the question. And we're really excited with the recent news that we got with Shijavi. It's really going to help us gain momentum, exactly what you said. We have strong awareness in academic centers, above 80%. We haven't been able to break through. We're only at about 50% or so in the community. And as you well know, if three-quarters of the patients sit in the community, this is an incredible opportunity for us to make sure that we We make sure the messages come across. We haven't been in a position in the past to promote overall survival in light of the fact that we just had that conditional approval. And so now with this full approval, not only do we get to double the patient population that Tredelvi can actually help, but actually we also get to promote the overall survival, which is the only agent with overall survival in this setting. So I think it's really going to help us ramp up. And the focus is still going to be, despite the urothelial, In bladder indication, the focus is really going to be more like a 90-10, 90% on second-line plus triple negative breast cancer and then 10% from a promotional standpoint on urothelial cancer. We believe that that's going to work well because there's a high overlap. There's about 70% of physicians that overlap from bladder cancer and also treat TNBC. So we're going to be in good shape to ramp this up. This is really the opportunity for Tridelby right now for this year.

Our next question comes from Phil Nadeau with Cowan & Company.

Murdad, a two-part question for you. You highlighted a couple of oncology events happening in the second half of the year, namely the Mogrelumab Phase 1b data and Tredelvi data in the ER-positive HER2-negative breast cancer. On Mogrelumab, can you give us some sense of what data needs to be produced to support a filing? And on Tredelvi, there's been a fair amount of breast cancer data recently. Has anything that you've seen questioned the powering assumptions behind the revised design of the tropics O2 trail?

Thanks. Thanks, Phil. Great questions. In terms of MAGRO, in terms of what we think we need to see, look, I think the challenge there is obviously that we're looking at external comparisons. So we believe that it's really around the strength of the data and its consistency with what we've seen already in that setting with migrolimab. I think our assumption is as long as we're consistent with the data that has emerged, that will give us really good grounds to go and approach regulators to discuss a potential filing. So we're, I would say, reasonably confident there, and our expectation is as long as things continue to go the way they have been, we'll be fine. In terms of the breast cancer data for Tredelvi, yeah, I think in terms of our confidence, I think we remain confident that we're really well-powered in that study to show benefit in particular in PFS as well as OS in that trial. So I don't think we've seen anything emerge that shakes our confidence around that.

Our next question comes from Louise Pearson with Redburn.

Hi, thanks for taking my question. I'm Jess Carter. I was just wondering, could you frame the incremental effort that would be required on your side to access the second line DLBCL population should Zuma 7 read out positively? Just thinking in terms of any overlap that might be in the sorts of centers where these patients are treated. And kind of on a related note, has there been much COVID impact on the cell therapy franchise generally? It seems to have performed pretty robustly. Thank you.

Thanks, Louise. Over to you, Christy.

Thank you. So I'll take the last one first maybe, which is the COVID impact. We did see COVID impact and slowing of our ramp up that we started doing well Q1 of last year, and there was a slowdown in Q3, Q4. We've seen that rebound in Q1. We do believe that that has to do with less COVID impact, especially in the U.S. Europe, in spite of the COVID impact, continued to grow over those quarters. Germany and Italy being the exceptions where the COVID impact has been greater on our business there. Overall, though, we're very pleased with what we're seeing from quarter four to quarter one of this year, significant growth and coming off a couple of down quarters for Yaskarta, both the U.S. and Europe up quarter over quarter now with Yaskarta. And on the second line, VLBCL question. So the good news is, you know, the ATCs are already set up. Just like with Ticardis, we're able to launch quickly. So moving up to the second line doubles the market opportunity, doubles the number of patients that we can serve. We also have community reps in the field already, both in Europe and in the U.S. So this referral pattern will continue to be something that we work on. But the belief or my belief is that as we look at patients in the third line plus, those are typically patients that are going for palliative care and quality of life and short-term quantity of life is being managed. Whereas with Zuma 7 in the second line versus stem cell transplant, physicians and patients are still looking for a cure. So if the study is positive, we're looking at replacing stem cell transplant as a standard of care in second line for curative potential. Remember, stem cell only cures 20% of the patients that are sent there.

Thanks, Christy.

Our next question comes from Jeff Meacham with Bank of America.

Afternoon, guys. Thanks so much for the question. I wanted to ask one on Vic Tarvey. The adoption has been hugely successful and really for quite some time. So the question is, where do you see share maximizing in the U.S., and what are the bigger growth opportunities, and in the EU, what has been the primary headwind to greater share? Thank you.

Thanks, Jeff. Over to you, Joanna, please.

Yeah, thanks, Jeff, for the question. Yeah, we're really quite pleased with Biktarby's performance. It just continues. And obviously, there's been some ins and outs because of dynamics around us from a market standpoint because of COVID and inventory. But, you know, the share growth, 8% year over year, as well as the fact that we continue to grow share and even two points in the last quarter. We also grew two points, not only in the US, but we also grew just under two points in Europe and about five points year over year as well. So we are seeing solid growth in Europe and we are seeing in other markets as well, like Japan and Canada, we're number one with big tarvies. So I think that as the data continues to show the benefits of the profile that Victarvy offers for patients, I think there's no stopping us, Jeff. I think we need to continue to grow this business. And we are well poised to get out of this COVID-19 pandemic and hopefully the market's reset. The market already has reset in the naive patient populations. We're almost back to pre-COVID levels, which is great. And that's where Victarvy truly differentiates itself. And in the switch business, we're not there yet. We're about 30%. under pre-COVID levels, but again, with a share of close to 50%, also well poised for that to come back on track. So I think we continue to expand and continue to gain share over older agents because of the benefits that Biktarby offers, not just in the U.S., but really around the world.

Thank you. Our next question comes from Michael Yee with Jefferies.

Hi, thank you, and I appreciate the question. Going back to Tredelvi and the Tropics 2 study, I think it's fantastic you guys upsized that and overpowered it. I guess I had two questions. One was, can you describe sort of what inputs went into your power and assumptions for that? And then also, do you guys have a view that prior CDK4-6 matters, given that that's a pretty much a standard of care nowadays, and that's certainly evolved over the last few years as you think about the study. Thank you.

Thanks, Michael. I'll take that. So two, yeah, great questions. In terms of assumptions, I think what's safe to say is we've been fairly conservative on our inputs to the assumptions in terms of looking at what the standard of care PFS looks like and using sort of that as our approach. I'd say actually that's fairly our general approach. I think we try to take a fairly conservative approach in terms of designing our trials and balance what I would, you know, sort of a statistically significant benefit with a clinically meaningful benefit. And I think that we keep both of those in mind when we're powering our studies to make sure that we're hitting not only statistical significance, but looking for clinical significance. In terms of prior CDK4-6, I mean, it's obviously something that's come up a fair bit appropriately. I think people are looking at some data There are a number of hypotheses that are going around what could be there. We're trying to take a very data-driven approach on this, and I guess I would say a couple of things. One is that in our hands, in what we've seen so far from the prior studies where we looked at those people who had gotten prior CDK4-6 compared with standard of care, Tridel V continues to bring benefit to those patients. As a big caveat, there's a fairly small number of people in that from us when we look at it, but I think we're comfortable that that continues to be the case. And secondly, you know, we are going to look at the data from the upcoming trial, and we will look at that group of patients as a subgroup analysis. to see if there is a difference in terms of how they respond compared to the overall population of patients that are going to be enrolled in that. So we'll make sure that we segregate those patients out to make sure we learn from that.

Our next question comes from Terence Flynn with Goldman Sachs.

Hi. Thanks for taking the question. I guess maybe two-part for me. You mentioned a more gradual recovery now in the second quarter, but you maintained your guidance component. So I just wanted to understand that a little bit more. You baked in more of a cushion there when you initially gave the guidance. And then on the prep side, how are you thinking about the recovery there in the second half of the year? Thank you.

Thanks, Terrence. So, Andy, why don't you start, and, Joe, anyone want to add to the prep?

Yeah. Hi, Terrence. Thanks for the question. You're right. At the beginning of the year, we recognized that 2021 was likely to be more dynamic than prior years, and when we put together our guidance for the year, we looked at a range of scenarios. We're well within the range of scenarios in the first quarter. We're off to a good start. The mix was a little bit different than we expected with the additional pandemic-related headwinds that you heard about, but To be clear, when we think both about our total product revenues including VECLURY, but also our base price revenues or base product revenues excluding VECLURY, we're very comfortable with where we are and we're on target for the year. We'll provide another update, of course, in the middle of the year, but that's how you should think about it at a high level, Terrence.

And on the PEP market, yeah, Joanna.

Yeah, thanks, Dan. So on the prep market, as I mentioned, DiscoV share is holding at about 45%, 46% in the first quarter. So we're quite pleased with that. We've obviously been working closely with payers to make sure that patients and providers had choice in their prevention approach. The market is still dampened because of this pandemic, as you can appreciate with the social dynamics that we are all living with. Although we have seen some uptake in the last month or so, we'll see how that plays out. But again, I think it's going to be in line with what Andy said, which is going to be a bit of a gradual recovery for the prep market. But I think we're very well poised to make sure that once that market gets back to pre-COVID levels, I think we'll be in very good shape in light of holding our share at this level.

Thanks, Joanna.

Our next question. Our next question comes from Robin Karnaskis with Truist. Hi, guys.

Thanks for taking my question. And my kids, if they're screaming in the background, they're excited about your earnings call.

We love it.

Very excited. They're very, very excited. I just want to thank you for your outreach for India. I have a question about your guidance of $2 to $3 billion for the clergy. How do we think about this? I mean, it does feel like this is going to go on longer outside the United States than we expected. but obviously some places are cheaper than others. Can you give us some estimates on how do we think of general trends on pricing and a thanks for what you're doing over there? And then this is a very simple question. You talked a lot up front about self-therapy. You know, there's tills. There is also off-the-shelf IPSCs. We talk about that a lot. Can you give us any sense if you're interested in augmenting our portfolio with one of those? Because those are different technologies. And, again, my kids say thanks.

I appreciate you kids, Robin. That's terrific.

And thank you for acknowledging the efforts of the company for so many countries out there that are stricken with this. Can I ask Joanna to cover the Vic Lurie question and then Christy to cover the cell therapy? Okay.

Absolutely. Thanks, Robin, for your question and comment. I think, you know, what we've seen with Vicklery is a really directly proportional effect with hospitalization rates. And it's kind of what we've been saying for the last couple of quarters, and we're seeing it. I mean, you could literally draw the line with the hospitalizations, both in the U.S. as well as outside of the U.S. where we've seen sales in the first quarter, and I think that's going to continue, although to a lesser degree, we've seen hospitalizations really come down in the month of March and kind of hold steady, unfortunately. And hopefully they'll keep coming down as months go by and vaccination rates increase. But what we have seen is sales are really coming out in the U.S., of course, also within our European region. as well as Asia. There's a lot of markets in Asia that are also taking full advantage of the benefits of BigQuery for their patients, their appropriate patients. And so we believe, we've always said that we think the tail is longer. I know nobody wants to hear that, but I think we think the tail is longer than anybody thought originally, and I think that's what we're seeing. as we go into Q2 and it'll be a gradual recovery. So we do believe that VicClery still will have an important role to play within the next couple of quarters and potentially beyond into 2022. As for some of these, for example, India or other countries that are served by our voluntary licenses, obviously those are royalty free during the pandemic. And that is something at a much lower price level. So our price, for Vicklery hasn't moved. It's well below the value of Vicklery for the developed countries. For the developing world, it's obviously quite different. With that, Christy.

Yes, thanks, Robin. Thanks for the question. So you heard a little bit in the beginning from both Murdad and Joanna, maybe Dan, that we recently took a really hard look and did a portfolio review. A few things are evolving or transforming, if you will, You know, Kite had such a success story bringing the first potential cure for lymphoma. We've transformed now to a company that has multiple brands, a franchise basically, three indications now, and with a couple more to come in the next year. As we look at that, we know a lot more now about how to affect leukemia and lymphoma in this area. So really taking a focus on making sure that we double down on our lifecycle management, improving the risk-benefit profile of what we have, trying to get patients with combination therapies, et cetera, to ensure we increase the efficacy. That's really our main focus on our core. We're also looking at disrupting what we have today, whether it's iPSC, Allo. We do believe eventually the market will be, and we'll be trying to drive that way too, towards a lower cost, off the shelf, more convenient for patients treatments. But today, unfortunately, from what we've seen at the recent congresses and publications and study results, It's a bit further out than we had anticipated just 12 to 18 months ago. So we really need to focus on improving autologous where we have it today, disrupting ourselves in the future. And lastly, to your question beyond IPSC, your question was IPSC, but even beyond that, as we look at solid tumor, we really are the partner of choice with our successful manufacturing process, our ability to deliver reliably in a short period of time. We are looking at transformations, really good transformations where we have proof of concept and solid tumors, where the market will be the largest in the long term.

Our next question comes from Matthew Harrison with Morgan Stanley.

Great. Good afternoon. Thanks for taking the question. Question on Galapagos, and I guess there are two parts here. First part is, you know, you've got these upcoming Toledo readouts, Murdad. Maybe you could just comment on what you're potentially looking to see from those readouts, given that the duration of those trials is fairly short. So maybe what you would view as sort of a positive outcome. And then I guess second question is a more sort of broader strategic question here. But if you don't see something that's positive out of those, you know, how do you think about the longer term relationship there? And given that you're the largest shareholder, you know, what might you consider in terms of that relationship? Thanks very much.

Great. Do you want to start, Mirdad, and then I'll follow?

Yeah, sure. It's a great question, and I think, Matthew, you mentioned, I think, look, where we are now with the Toledo programs is looking for evidence of tolerability and proof of concept, proof of principle for that pathway in multiple indications. And I would describe these early small studies as a place to demonstrate that and look to see where the biggest impact could be. I think it's an early part of the longer journey, ranging from, you know, is there a particular indication that we want to pursue further to confirm and expand on this signal? do we have the right molecule for that? So I think we view these, together with Galapagos, I believe, we view these as sort of very early in the story of the Toledo program. So we'll be looking to see what those data look like in the near term.

Yeah, thank you for that. Sure. Sure. So maybe just to you, Matthew, to give a little bit of context to people that may not be completely familiar with our relationship with Galapagos. So, of course, there was the Filgotinib relationship, but then there was a separate relationship that we went into, as you know, a couple of years ago now. And that was really based on their research platform. And I would say that – nothing has really changed in relation to that. I mean, one of the reasons to do that was to diversify our approaches from a discovery research perspective across, if you like, the Gilead group. I listened hard to the scientists at that time. I continue to listen hard to the scientists today. I think they have a very discriminated platform for for screening compounds for first in class. And I'll remind you that's really their approach first in class, which, of course, comes with some risks, some of which we've seen in the later stage programs. And, of course, Toledo is the most advanced now of those programs. But having said that, there are many others within their discovery platform that we continue to be intrigued about. I think it's an important part. of our overall inflammation strategy, albeit at an earlier stage for Gilead. But when we think about our strategic approach that really focuses on immunology and virology as our core scientific skills, we have now obviously leaders in virology built up a really significant presence in oncology. with inflammatory disorders really kind of the next step and the next stage of our platform, where Galapagos presents, I think, one aspect of that, but a very important aspect in terms of first-in-class approach. So we continue to be working very closely with our partners at Galapagos to determine what the next screens are and what the next targets are in the concept of the entirety of our inflammation strategy. So thanks, Matthew.

Our next question comes from Rana Gow with Bernstein.

Just a question on the SCOBY, the 22% down of the year of the year. I was wondering if you can unpack those for us, for how much of that was inventory, COVID impact, and price. When it comes to price, do you think this is like a one-year giveaway, or should we expect a kind of pricing decline every year going forward, at least when it comes to that class of compounds? Ronnie, just at the very end, what did you say?

Yeah, please.

Are we expecting the price declines this year to be a repeating event every year, or is this essentially expected to be a one-time decline as true about a genetic center?

Got you. Okay, Joanna, you got it?

Yeah, thank you. Sorry, thanks for that. I didn't hear the last part of that question originally. Yeah, so for DSCOVI, the year-over-year, obviously, it does have to do with higher pay or discounts. And that was to ensure that patients and providers had choice and made sure that we didn't have any step edits. And now we do have some step edits for some plans, but for most plans, access is very open to make sure that our patients and providers choose which therapeutics is best for them for prevention. And so I think that we will continue to be smart And we will continue to be disciplined in the way that we look at those discussions with our payers. But we're also looking at data that's been pretty clear that shows that if you basically put a step at it, you don't actually get the patient on a Truvada generic. You actually just lose your patient. And I think, you know, as we think about ending the epidemic, prevention is a big piece of that. And so that's why choice is so important and that we keep people at risk of HIV, making sure that we keep those folks on the medicines that they're on without creating any access restrictions. And so if that's what we need to do moving forward to ensure that that might impact the price as we go, our intent is obviously to keep the balance between what we do from a payer standpoint, but also what we do from a share standpoint. And that's why we're proud of the fact that we've been able to manage the payer dynamic and actually hold and even grow share in the last quarter.

Our last question comes from Hartaj Singh with Oppenheimer.

Great. Thank you for the question. And I just want to also echo what Robin said. I think people forget we donated almost a million vials of Remdesivir last year around this time, which very few companies have done. Just a quick question on your partnership with Merck. You know, what's the logic behind Gilead, I guess, leading, you know, the U.S. development for the oral and then Merck on the injectable? What was the thinking that went into sort of the parameters of that and then also the cost sharing and the revenue sharing assumptions? Any column that would really help. Thank you for the question.

Thanks for your attention. And believe me, it means a lot for you to comment on that for all the colleagues at Gilead who I think feel strongly very strongly about the intrinsic work we do for patients, and donations is just one piece of that. It's part of our DNA. Andy, I think you're going to answer the question.

Sure. Hi, Hartaj. Thank you for the question. Look, it was relatively simple. You have two outstanding organizations that are deeply experienced in formulation and drug development. Gilead, obviously, is one of the leading companies globally in terms of co-formulating orals. for a single tablet regimen, especially in the HIV arena. And it made sense, I think, to both companies to have us take the lead there. And at the same time, we recognize that to keep both programs moving forward quickly, it probably made the most sense to have Merck also lead a program. And the injectable formulation program is one that was in their sweet spot. So this is a win-win. Both companies will be involved in both programs. and we think by doing that we're going to be able to advance these programs more quickly than we could individually. As far as the cost sharing, we took on more of the cost sharing because we have more of the upside, right? So it was relatively simple. I think we are both bringing great molecules to the collaboration. We're both very excited about what we think these combinations can do in the treatment market, both in oral and the sub-Q injectable formulations. And we recognize that when you looked at the patent life of the two products, for instance, was different. The franchise that we have in HIV, the impact of these on our existing franchise, when we put it all into the mix, I think there was a clear alignment between the two companies that it made sense at certain revenue levels for Gilead to share disproportionately and more of the revenue. or the profits, I should say. But in exchange for that, fairly, we had to agree to take a little bit more of the R&D expense, which we were happy to do. So I think, Hartaj, that should answer your question.

And, Hartaj, I just want to end by thanking our colleagues at Merck. You know, it's terrific when you get two companies to come together to put patients first to accelerate treatment options for patients in need. And we have a lot of respect for our Merck colleagues and happy to say that already the collaboration is getting off to a very strong and rapid start. So we look forward to moving fast to make a difference for patients with different treatment options.

That concludes today's question and answer session. I'd like to turn the call back to Jackie Ross for closing remarks.

Thank you, Liz, and thank you all for joining us today. We appreciate your continued interest in Gilead and look forward to updating you on our continued progress.

This concludes today's conference call. Thank you for participating. You may now disconnect.