Gilead Sciences, Inc.

Good day, and thank you for standing by. Welcome to the third quarter 2021 Gilead Sciences Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jackie Ross, Vice President of Investor Relations. Please go ahead.

Thank you, Catherine, and good afternoon, everyone. Just after market closed today, we issued a press release with earnings results for the third quarter of 2021. The press release, slides, and supplementary data are available on the Investors section of our website at gilead.com. The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day, our Chief Commercial Officer, 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, 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, plans and expectations with respect to products, product candidates, corporate strategy, financial projections, and the use of capital, and 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 document. All forward-looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward-looking statements. Non-GAAP financial measures will be used to help you understand the company's underlying business performance. The GAAP to 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 here today. Starting on slide four, this was a very strong third quarter with significantly higher than expected demand for VicLurie. and positive HIV share gains as the market continues to recover. The high demand for VicLurie was associated with the latest surge in cases of COVID-19. The therapy has now been provided to more than 9 million people worldwide, including 6.5 million people in 127 middle and low-income countries through our voluntary licensing program. All of us at Gilead are proud of the important role that VicLurie continues to play. I wanted to acknowledge the way our teams have navigated the unpredictable path of the pandemic, flexing our own operations and supporting our partners' efforts to ensure VicLurie and Remdesivir are available to meet patient demand. At the same time, we're applying our three decades of expertise in virology to advance new options that can be taken outside the hospital and earlier in the disease. We recently filed an SNDA for IV outpatient use of VicLurie. This is based on data from our Phase III pine tree study that demonstrated a significant reduction in the risk of hospitalizations after a three-day IV treatment of Bechleri in the outpatient setting. In order to meet additional treatment needs, we also continue to advance our oral programs to develop a novel best-in-class therapy. Turning to HIV performance, we saw positive gains in the treatment market for the second quarter in a row and reported record revenue for Biktarvy. While treatment prescription volumes remained below pre-pandemic levels, we maintained total U.S. and EU treatment market share, and we grew Biktarvy share sequentially in both geographies. The PrEP market continues to recover, and our PrEP market share is holding steady despite generic entry. Overall, our third quarter results give us confidence that the HIV market is recovering from the pandemic, and our market share clearly highlights Gilead's strong market position. As a result of the strong quarter, we have increased our full-year revenue and earnings per share guidance. Beclery now looks set to deliver close to twice the revenue we expected at the start of the year. While our base business has clearly been affected by COVID, it has also shown resilience. At the guidance midpoint, we are now expecting full year total revenue to be $1.75 billion higher than we expected at the start of the year. Our confidence in the longevity of our HIV business is in part based on our progress in developing the next generation of HIV therapy and prevention. Lenacapavir is the cornerstone of that work, and we have four clinical trials evaluating Lenacapavir across treatment and prevention. highlighting our efforts to extend the options available to people living with or at risk of HIV. This quarter, Lenacapivir was granted FDA priority review for the heavily treatment-experienced population. As a reminder, Lenacapivir has breakthrough therapy designation, and if approved, would be the first long-acting treatment for people living with HIV who have multidrug-resistance as well as the first available six-month long-acting subcutaneous injection treatment for HIV. Separately, as you know, we signed an agreement with Merck earlier this year to explore combinations of lenacapivir and aslatravir in long-acting treatment. Earlier this week, we announced the start of a Phase II study with Merck evaluating a lenacapivir and aslatravir long-acting oral combination treatment. Our approach to long acting is very much shaped by people living with HIV. We've heard that they would welcome weekly oral or infrequent subcutaneous injections that could coincide with routine office visits or even be taken at home. The advantages of these options include greater convenience, the potential for stronger adherence, and privacy. Lenacapavir has shown promising potential in both oral and subcutaneous injections and and we'll continue to advance both options while updating you on our progress throughout. While extending our leadership in HIV, we are also executing on the significant potential in our broad and diverse oncology portfolio. This is potential that could bring transformational benefits for people with cancer and value for our stakeholders. Third quarter highlights include the initiation of two solid tumor trials for megrolimab, head and neck cancer, and a multi-tumor basket study. We plan to initiate an additional phase three study in first-line unfit acute myeloid leukemia, or AML, in early 2022. The FDA approval of Cercardus for adult relapse and refractory acute lymphoblastic leukemia, or ALL, is our fourth approved indication in cell therapy. Additionally, the KITE team has filed an SBLA for Yaskarta and second-line LBCL, which, if approved, would be the first CAR T therapy in an earlier-line setting. And a positive CHMP opinion for Tredelvi in second-line metastatic triple-negative breast cancer earlier this month. We expect an approval decision from the European Commission later this year, and this could potentially be our sixth approval for Tredelvi in triple-negative breast cancer in 2021. Additionally, we've just announced a new clinical trial collaboration and supply agreement with Merck to evaluate the combination of Gilead's TROP2 antibody drug conjugate Tordelvi with Merck's anti-PD-1 therapy, Catruda, for the treatment of first-line metastatic triple-negative breast cancer. When we acquired Immunomedics last year, we said that we would explore the use of Tordelvi across a wide range of tumor types and that we would pursue combinations with both internal and external molecules. you can see this start to play out now with this Merck partnership as an early example of our approach. Next, on slide five, I'm pleased to note that we delivered on three of our target milestones for the quarter. You will also note that the timelines for Tropic 2 and the Phase 1b McGraw-Lamont have shifted, as we now expect to have the PFS readout for Tropics 2 in late January or early February, and the top-line readout for the Phase 1b Megrolimab in the first quarter of 2022. Mirdad will also touch on this later in the call, but as you know, these modest timeline adjustments are quite normal in oncology, especially event-driven trials like Tropix-2. We look forward to sharing these updates in the first quarter of 2022. Taken as a whole, our oncology portfolio now spans some of the most promising targets in the field today. In addition to Tredelvi for TROP2, CD47, and cell therapy, these include TIGIT, adenosine, and many others. We are very encouraged by the momentum across these programs and look forward to sharing much more in the coming quarters. The positive momentum overall in the third quarter gives us great confidence in the direction we are taking and the pace of our progress. We are well on our way with the plans to sustain our leadership in HIV, and while there is much more to come in oncology, We've already begun to execute on the potential in our highly promising portfolio. But Gloria is making a significant impact as the pandemic continues to evolve, and we are well-placed for when the HIV market bounces back. I want to thank all the Gilead and Kite employees around the world who are making all this possible with their passion for scientific excellence and their commitment to global public health. With that, I'll hand over to Joanna, who will share an update on the commercial performance in the third quarter.

Thanks, Dan, and good afternoon, everyone. As you can see on slide seven, total product sales of 7.4 billion grew 13% year-over-year, primarily driven by Viclarie. Excluding Viclarie, total product sales were 5.4 billion, down 3% year-over-year, primarily due to the impact of the Truvada and Tripla LOEs, offset by continued growth in Victarvie and contributions from our new medicines, such as Tredelvi. On slide eight, Viclarie sales of 1.9 billion were up 132% sequentially, and reflected strong U.S. demand consistent with the recent surge in COVID cases, including the Delta variant. Over 60% of patients hospitalized with COVID-19 in the U.S. received Veclary, and we continue to expect Veclary sales to track hospitalizations, which you can see peaked at the end of August and have been declining ever since. Moving to HIV on slide 9, revenue of $4.2 billion grew 6% sequentially, driven by favorable net pricing and strong demand for Biktarvy, partially offset by continuation of the trends towards the less favorable payer mix. While sequential trends were strong, total HIV revenues were down 8% year-over-year, given the impact of the Truvada triple LOEs and lower channel inventory, primarily driven by pandemic-related stocking in the prior year. Excluding the impact of the LOEs, HIV revenues were up 4% year-over-year. Overall, we're encouraged by the improving trends in HIV treatment, The US HIV treatment market grew about 3% sequentially, suggesting a modest pickup from the recovery that started in Q2. Our share of the overall US HIV treatment market continues to hold steady at approximately 75%. And reflecting the modest pandemic recovery and strong share gains, Victarvy revenues grew 20% year-over-year and 14% sequentially to a record $2.3 billion. The SCOBY revenue of $433 million was flat quarter-over-quarter, driven by increased demand in inventory, offset by lower net price. We continue to see recovery year-to-date, with the prep market growing 12% quarter-over-quarter, and are encouraged to see the SCOBY shareholding steady around 45%, despite the availability of multi-source generic versions of Truvada. Next, on slide 10, Victorby continues to gain market share sequentially and year-over-year, both in the U.S. and the U5. We are particularly pleased to see sequential quarterly growth of 1.5% in the U.S. and 1% in the EU5, especially given Bictarvy's leading market share. We're proud to see continued uptake of Bictarvy, now capturing 41% of the total treatment market in the U.S., with more than 57% of people living with HIV starting treatment on Bictarvy. On slide 11, HCV revenue of $429 million was down 8% year-over-year, primarily driven by a favorable settlement in the third quarter of 2020 that did not repeat, fewer patient starts outside of the U.S., and the timing of Department of Corrections purchases on a relative basis. Sequentially, HCV revenue declined 22% due to inventory dynamics, including a sizable purchase by the Department of Corrections in the prior quarter and fewer patient starts. Although starts improved in some geographies year over year, we saw sequential declines in the U.S. and Europe driven by driven by continued pandemic-related impact on patient visits and lower testing volumes in addition to normal seasonality. However, we continue to be pleased that Gilead HDV market share is holding steady around 60% in the U.S. and just about 50% in the EU5. Moving to slide 12, HDV and HDV revenues of $247 million were up 17% year-over-year, driven by Van Liddy demand in international markets and the addition of Hepcludex to our portfolio. Q3 revenue for HEPCLUDIX was $12 million, reflecting sales now in Germany, France, Austria, and Greece. We are actively working with government authorities to secure full reimbursement in the major European markets in 2022. Moving to Tredelvi on slide 13, third quarter revenue of $101 million grew 13% quarter over quarter, driven by increased share in metastatic TNBC, in part due to the expansion to second line. Tredelvi was approved for second line metastatic TNBC in the U.S. in April, and we already estimate that approximately 15% of second-line patients are receiving Tredelvi. In the third-line or later setting, we estimate that about a third of patients with metastatic TNBC are receiving Tredelvi. In urothelial cancer, at least one in four bladder cancer patients in the third-line or later setting start treatment on Tredelvi. And with adoption in second-line still early, there's continued opportunity for growth across both settings. We're pleased with the uptake so far and remain focused on broadening physician awareness in community settings. Following recent NCCN breast cancer and ASMO clinical guideline updates, Tredelvi is now included as a preferred regimen in second-line metastatic TNBC in both guidelines, and we expect this will drive further adoption. We are preparing the first commercial launches of Tredelvi for metastatic TNBC in Great Britain, Australia, Canada, and Switzerland. And later this year, We are expecting a decision from the European Commission following the recent positive opinion from the CHMP. Next, on slide 14, and on behalf of Christy and the KITE team, our cell therapy products grew 51% year-over-year to $222 million. This was driven by LBCL demand and strong launches in both mantle cell lymphoma and follicular lymphoma, more than offsetting the expected impact of new U.S. entrants in LBCL. With the addition of our new MCL and FL indications, we are particularly proud that we have maintained our best-in-class manufacturing operations with a 97% reliability rate. To support our expected growth, we are working to bring our new Maryland facility online in mid-2022, which will automate many of our manual processes and reduce COCs. We also wanted to highlight the recent FDA approval to CARDIS in adult ALL. This makes Ticardis the first and only CAR T therapy now available to these eligible patients in the U.S. The KITE team has also filed a supplemental BLA for Yaskarta in second-line LBCL, which would bring us one step closer to potentially curing even more patients. Christy is here with the team and available to take questions on cell therapy during the Q&A. And with that, I'll hand it over to Murdad for pipeline updates.

Thank you, Johanna. Thank you, Johanna. As always, I'll focus today on the most important updates and refer you to the appendix of the earnings presentation for a more comprehensive view of our pipeline programs. First, on slide 16 in HIV prevention, we've initiated the 5,000-plus participant Phase 3 Purpose 1 trial studying Lenacapivir for the prevention in adolescent girls and young women who are at risk of HIV infections. We're also in the initial stages of recruiting for Purpose 2 to evaluate Lenacapavir for prevention in over 3,000 cisgender men, transgender, and gender non-binary who have sex with men. We will provide updated timelines once enrollment is further along. In HIV treatment, the FDA granted priority review in August for Lenacapavir for the treatment of people living with HIV who have developed multidrug resistance to other antiretrovirals. This is based on compelling Capella data that demonstrated 81% of heavily treatment-experienced individuals achieved viral suppression when lenacapivir was combined with an optimized background regimen. The BDUFA action date has been set for February 28, 2022, and if approved, lenacapivir would become the first available six-month long-acting subcutaneous injection treatment for HIV. Earlier this week, we announced that enrollment had started for the Phase II trial for the long-acting oral combination of lenacapivir and eslatravir. This is part of our collaborative work with Merck to develop more flexible options for people living with HIV with a once-weekly oral pill. Gilead is leading the development and clinical work for this oral combination, and Merck is leading the clinical work for the injectable combination that is expected to enter Phase I clinical trials next year. Moving to Vicluri on slide 17, We presented the late breaker at the ID Week 2021 conference last month based on the Phase 3 Pine Tree Study evaluating Vicluri as an outpatient intravenous COVID-19 treatment. The results demonstrated that a three-day course of Vicluri significantly reduced the risk of hospitalization for high-risk patients with COVID-19. In particular, Vicluri demonstrated a statistically significant 87% reduction in risk for the composite primary endpoint of COVID-19-related hospitalizations, or all-cause mortality by day 28 compared with placebo. There were no deaths in either arm of the study by day 28. We stopped pine tree enrollment at the halfway mark of 584 patients in April due to the COVID-19 landscape at the time, but the study remained blinded and collected outcome data in the enrolled patients. Upon analysis of those data, the results were highly statistically significant and clinically meaningful, again demonstrating the efficacy of Vicklery. It also emphasizes the importance of early treatment with antiviral therapies. We have submitted these data to the FDA as an SMDA filing and are in discussions with other regulatory agencies to explore approval for IV vocabulary in an outpatient setting. We're also continuing our work to develop novel oral antivirals for the treatment of COVID-19. Moving to slide 18, we continue to view Tredelvi as a pipeline and a product. Tredelvi targets trope 2, which is overexpressed in many solid tumor cells. So we believe that Tredelvi can have a meaningful impact on a wide range of cancers in addition to the second-line metastatic TMBC and second-line bladder indications that are approved today. We're all eagerly anticipating the readout from the Phase 3 Tropics 2 study, our randomized Phase 3 trial in HR-positive HER2-negative metastatic breast cancer. As a reminder, this is an event-driven trial evaluating disease progression and we have not yet achieved the target number of events. As such, we now expect to have the top-line data readout in late January or early February. To be clear, data analysis will only begin once we achieve the required number of events. We remain confident for the potential of Tredelvi to deliver a clinically meaningful benefit to patients with HR-positive HER2-negative metastatic breast cancer. We also continue to advance Tredelvi into registrational studies for other indications. For example, as recently posted on clintrials.gov, we plan to initiate the phase three trial in second to third line non-small cell lung cancer at risk and look forward to sharing updates for other solid tumors as we expand the program. As Dan mentioned, we'll also start to work with Merck on a new clinical study looking at Tridelvi in combination with Merck's Keytruda for first line metastatic TMBC and plan to initiate the trial in the first half of 2022. Moving on to slide 19, We continue to believe that with its synergistic potential and the safety profile observed to date, migrolimab could benefit patients with a variety of hematologic and solid tumors. As you know, our initial focus has been MDS and AML. While our commitment to these patients remains unchanged, we continue to evolve our clinical programs in the context of the recent developments in the MDS therapeutic landscape. The ongoing Phase III enhanced trial evaluating migrolimab in higher-risk MDS is on track and enrolling well. We will discuss our development plans and regulatory path forward with the FDA before the end of the year. Meanwhile, the data from our Phase 1b trial continues to mature, and we now expect to share top-line data in the first quarter of 2022. Looking beyond MDS, our Enhanced 2 trial for migrolimab and first-line TP53 mutant AML is ongoing, targeting a new therapeutic option for nearly 2,000 patients in the U.S. In addition, an estimated 6,000 patients in the U.S. are diagnosed and treated annually with unfit AML. So we're expanding our development efforts to initiate a Phase III trial for one first-line unfit AML by early next year. Over the past few months, we've initiated two solid tumor trials for migrolamab, one in head and neck cancer and a separate solid tumor basket study for patients with non-small cell lung cancer, small cell lung cancer, and urothelial cancer. We also plan to initiate a third study in metastatic TMBC. Based on broad CD47 expression, we're excited by Megrolimab's potential to be an effective therapy for solid tumors and look forward to sharing more updates as they become available. Next, on behalf of Christy and the KITE team, I also wanted to highlight the most recent approval for Tocardis in adults with relapsed or refractory ALL on slide 20. There's an incredibly high unmet need for these patients, with 50% of adult patients relapsing on currently available treatment. The approval was based on data from Zuma 3, which demonstrated 65% of patients achieved complete remission. Additionally, as Joanna mentioned earlier, Kite has filed the SBLA for YesGuarda and second-line LBCL. With a medium follow-up of two years, the study met the primary endpoint of event-free survival with a hazard ratio of 0.398 and a p-value of less than .0001, representing a potential significant advance in the standard of care for LBCL patients. We look forward to reviewing the entire data set at ASH and expect an update next year on approval status. Lastly, moving to slide 21, we remain very excited about our oncology partners, whose work spans many promising new pathways in oncology. For example, our partners at ARCIS has a pipeline that includes not only antitigic candidates, but also CD73 and adenosine receptor inhibitors to promote immune responses and inhibit tumor growth. We continue to expect to trigger the opt-in review period for ARCIS's domino MAV likely later this year or early next year, pending the review of more mature data. Additionally, through our partnerships, we have access to several candidates that could help modulate immunosuppressive and tumor-permissive cell types and pathways, including Tizona's HLA-G checkpoint inhibitor, which recently expanded to a Phase Ib study, and Jounce's CCR8 inhibitor, which received IND clearance last quarter. Other potential opt-in programs from partners include Pioneer's TREM1 and TREM2 antibodies, which are in Phase I trials in actively enrolling patients, and Agenesis CD137 agonist, which is expected to be evaluated in a combination trial that will be initiated later this year. In closing, on slide 22, our teams are focused on executing across our oncology, virology, and inflammation pipeline. And while it's still early days for our inflammation portfolio, remain committed and invested in continuing to advance our pipeline across various mechanisms of action, such as IRAC-4, Alpha-4, Beta-7, and TPL-2. In combination with our opt-in partners, our pipeline portfolio spans many of the most promising targets across our three therapeutic focus areas. We're excited and committed to build out our best-in-class and industry-leading franchises. I'll now hand it over to Andy.

Thank you, Murdad, and good afternoon, everyone. Moving to slide 24, as you've heard from Joanna, our financial performance in the third quarter overall was strong, with total product sales up 13% year-over-year, driven by Vecluri's continued role in the pandemic. Year over year, total product sales excluding Veclury fell 3% due to lower Truvada and A-triple sales following their loss of exclusivity late last year, offset in part by the continued demand for Bictarvy and contributions from our new medicines such as Tridelvi. Sequentially, total product sales excluding Veclury were up 2%, highlighting the ongoing pandemic recovery in HIV treatment and PrEP. This was partially offset by HCV, where news starts in both the U.S. and Europe continue to be impacted by the pandemic. Turning to the rest of the P&L, non-GAAP product gross margin was 90%, 350 basis points higher year over year, reflecting the reversal of a previously recorded $175 million litigation reserve, as well as lower royalty expense and a change in product mix. Non-GAAP R&D was $1.1 billion, down 4% year-over-year, reflecting lower remdesivir and inflammation-related expenses, offset in part by increased clinical investment in Tredelvi and Megrolamab. Non-GAAP SG&A was $1.2 billion, up 8% year-over-year, driven by increased promotional and marketing activities across all of our geographies, primarily for Tredelvi. On tax, we realized a higher effective tax rate of 18.9% for the third quarter. We're up 50 basis points year-over-year, primarily due to a prior year net discrete tax benefit. Overall, our non-GAAP diluted earnings per share was $2.65 for the quarter, compared to $2.11 for the same period last year. The year-over-year increase primarily reflects higher VEC Lurie sales and product gross margin, offset by higher SG&A, lower interest income, and higher effective tax rate. On slide 25, you can see that Vectluri has already exceeded our prior guidance for the year with total revenues of $4.2 billion in the first nine months. As a result, and with modestly updated expectations for the rest of our business, we are increasing our revenue and earnings per share guidance for the full year by 6 and 13 percent at the midpoint respectively as shown on slide 26. After the wave of infections and hospitalizations in recent months, We believe we have moved past the peak of the pandemic for the year. We continue to expect that Vacluri will play an important role in the treatment of patients with COVID-19 globally. However, assuming we do not experience another surge, we expect Vacluri revenue to step down significantly in the fourth quarter. As a result, we are raising our full year total product sales in the range of 26 to 26.3 billion compared to our previous range of 24.4 to 25 billion, reflecting results year-to-date and Vecluri performance. We now expect full-year Vecluri revenues to be in the range of $4.5 to $4.8 billion, up from our prior outlook of $2.7 to $3.1 billion. We continue to expect that sales of Vecluri will track COVID-19-related hospitalizations. We now expect full-year total product sales excluding Vecluri to be approximately $21.5 billion, compared to the prior range of $21.7 to $21.9 billion, reflecting our performance year-to-date and continued pandemic-related impact. As for the rest of our P&L, we expect our non-GAAP product gross margin to be approximately 87% compared to 86% to 87% previously, primarily reflecting the strong gross margin in the third quarter. For non-GAAP operating expenses, we now expect R&D to decline mid-single-digit percentage compared to 2020 levels, as compared to our prior expectations of low to mid single-digit percentage decline. We expect SG&A to be flat on a dollar basis compared to 2020 versus prior expectations of flat to low single-digit percentage decline. Our non-GAAP effective tax rate is still expected to be approximately 21% this year. Finally, with the updates to our revenue, product gross margin, and operating expenses, We now expect our non-GAAP diluted EPS to be between $7.90 and $8.10 for the full year, and GAAP diluted EPS to be between $5.50 and $5.70. On capital allocation, our priorities have not changed. We continue to invest in our business, and at the same time, we've returned over $1 billion in the third quarter and $3.2 billion year-to-date to our shareholders through both dividends and share repurchases. We have also repaid 3.75 billion in debt this year. And earlier today, we notified our three non-Call 1 bondholders that we would exercise our ability to repay 1 billion of the notes early. Taken together, we now expect to pay down $4.75 billion of debt this year, significantly exceeding our prior guidance to pay down at least 4 billion. With that, I'll invite the operator to begin the Q&A.

Thank you. As a reminder, To ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. We ask that you please limit yourself to one question. Then your line will be muted. If you have a follow-up, please re-cue. Our first question comes from Matthew Harrison with Morgan Stanley. Your line is open.

Great. Good afternoon. Thanks for taking the question. Probably unsurprisingly, my question is for Murdad. Murdad, can you just comment maybe in a little bit more detail in terms of the assumptions that you previously made on Tropics 2 and how they were tracking or not tracking that caused you to make this change, and especially around the blinded event rate and anything else you were watching in the trial. Thanks.

Hi, Matthew. Sure, happy to. Yeah, look, I think, as you know, event-driven trials are inherently variable in terms of when the events occur and, importantly, when those events come into the database. We had initially thought we would hit the mark this year, but as time has gone by, our best projections right now is that we'll hit that mark next year. And as we said, I think we'll be able to share those results probably mid-January to mid-February timeframe. So that's kind of how we're tracking to the events at this point.

Catherine, I think we're ready for our next call.

Our next question comes from Tyler Van Buren with Cowan. Your line is open.

Hey, guys. Good afternoon. Thanks for taking the question. I have another one on Tropics 02. Can you just remind us or help set expectations in terms of what you feel is a clinically meaningful benefit on PFS? You know, a lot of people seem to be pegging it at around two months. If you do reach that at a sub-two-month PFS benefit, say 1.6 or 1.7, would you guys still go ahead and file or how would you view the data? Thank you.

Thanks, Tyler. Yeah, we're done. Yeah, Tyler, thanks. Yeah, I do think the consensus that folks have seen, we would agree that, you know, two months is sort of that threshold for clinically meaningful. You know, I think if we were to fall short of that, which is a difficult place to speculate and not our expectations, but if that were to happen, we would look at the totality of the data. We'd want to look and see if there's other areas where we could provide benefit to patients, and we'd look at the totality of the data before deciding what we would do.

Thank you. Our next question comes from Umar Rafat with Evercore. Your line is open.

Hi. Maybe let me focus on the remdesivir for a quick second. Andy, Joanna, I'm just trying to understand the reported number a little better. It's $1.5 billion in U.S. in third quarter, which if you sort of re-express based on the remdesivir price point would imply maybe 750,000 patients on the drug in third quarter in U.S. And we know the total U.S. COVID hospitalizations were right around 750,000 in U.S. as well. Is it just a reporting artifact in HHS estimates? I'm just trying to understand why this was materially different than the 50% to 60% penetration remdesivir has historically had. And I'll spare my tropics question from your dad subsequent to the call.

Thanks, Umar. Go ahead, Joanne, you want to hit that one?

Sure. Hey, Umar. I think what – so the 9 million that Dan referred to earlier is really a mix over the year, right? So that's a little bit different than what you're referring to here. The 1.5 billion in the U.S., most of the sales actually of the total 1.9, obviously coming out of the U.S. and the patient population. So I can't track your math per se, but what I would say is that the U.S. patient population was the greatest. And if you just do the math on about a five-day therapy on an average price for remdesivir, that you would get to less than your 750 just doing it off the top of my head. So I think it's probably a little bit lower than that. and higher in other parts of the world just because of price points.

And, Joanna, maybe also to complement your question, the current market share for patients.

Yeah, it's probably a little bit north of the 60% that you're referring to. Obviously, we're looking at different databases, but we've seen up to close to 66%, 67% of share of Vicklery in early days of hospitalization, obviously often used with dexamethasone and other drugs. anti-inflammatory products but we do see the share increase and we've seen that obviously with the surge in August and September we saw that take up both from a protocol standpoint as well as play out in the usage itself in the US specifically.

Thanks.

Thank you. Our next question comes from Brian Abrahams with RBC Capital Markets. Your line is open.

Hey, guys, thanks for taking my question. Sticking with COVID, I'm curious to learn more about your outlook on how COVID treatment will evolve into next year and beyond. And I'm curious if you can give us a little bit more color around the efforts to develop oral direct acting antivirals for COVID that you spoke about at the beginning of the call. Are these primarily remdesivir derivatives? Are you looking at protease inhibitors, potential combination cocktails? When might we learn more about those? Thanks.

Thanks, Brian. I think, you know, we've all been a little bit shy about predicting how the pandemic will continue to evolve because I think we've proven to be not always right on that. I'm going to let Mirdad comment and also if the other team members have anything to comment. What I will say is back to the previous question from Umar is that there's no doubt that we see a direct connection correlation between remdesivir's use and outbreaks. So that continues. And as Joanna says, we continue to get the market share. And there's also no doubt, Brian, to your point that although injectable remdesivir continues to play a really important role around the world for hospitalized patients, and now the data obviously we have in the outpatient setting, we're not satisfied yet, and we want to continue to put our science to work. And maybe, Murdad, if you want to have any forecasts in the future of pandemic to endemic, you're welcome to.

No, no, thank you. No, I agree with Dan. I think it's incredibly difficult to to predict outside of I think what we're all starting to believe is it'll be a combination of vaccines, therapeutics of various types. Of course, anticipating changes in the virus over time, we'll have to keep an eye on it and see how it goes. Importantly, to date, none of the variants have shown any resistance to remdesivir, so we think that's a positive outcome so far. We haven't disclosed yet what the oral compounds are going to be. We are moving them forward as quickly as possible, and we'll share those data as those molecules begin to mature. But our hope is that they certainly provide an alternative treatment option, in particular in the outpatient setting, with Vicluri remaining really a stalwart in the hospitalized and potentially the outpatient IV setting.

And I would just add, Brian, I think it's fair to say that obviously we continue to work on oral versions of remdesivir, as we've said before in the past. And to your point, I mean, from a scientific standpoint, the opportunity to look at combination therapy and oral medicines for COVID to also anticipate future viral, you know, resistance. So those are all themes. And then to Murdad's point, we will... Of course, be updating you as those medicines continue to move forward. Thanks, Brian.

Thank you. Our next question comes from Jeff Meacham with Bank of America. Your line is open.

Afternoon, guys. Thanks so much for the question. Just had a bigger picture question on HIV. You know, when you look in the pandemic, remdesivir has done quite well. Even this quarter in your oncology pipeline has really grown significantly. But when you look at the core HIV business, you know, long-term growth rate we used to think was high single digits, and it's much lower, you know, last year and this year. And I know you have generics, and I know the pandemic has affected the market. But the question is, do you think you'll go back to a higher long-term growth rate in HIV and maybe just help us with the drivers of that? Thank you very much.

Thank you, Jeff.

So, Joanna.

Sure. Jeff, are you asking specific to the market or just generally?

For you guys, maybe, and for the market.

Okay. So I think what we said in the second quarter was exactly kind of what's playing out today. So we had seen a little bit of a recovery in Q2, and we were seeing that recovery continue, actually, and accelerate a little bit into Q3. So we're at about 3% growth. We were at about 2% in Q2, and we were negative the three quarters before that. What we're assuming at this point is actually – we're going to get back from a market standpoint back to where we were prior to COVID. We're just starting from a much lower base, so it's going to take a little bit of time. So I think the assumption is that as we get to 2022, you'll see that kind of play out, assuming no other major surges come through. So that's from a market standpoint, which obviously will help from a product standpoint. When you think about Big Tar Vee, And you think about our growth year-on-year at about 20%, and then, of course, double-digit growth on a quarterly basis as well. We have different dynamics going on. Obviously, demand is still strong, so we're quite pleased with that. We grew about 1.5% share over the last quarter, over 6% in a full year. So we're on a much larger base because we are a market leader. But we've also had some different pricing dynamics as well going on. that are related to obviously the mix that we're looking at. So that's something that is impacted directly by the pandemic, right, as you think about your government versus commercial mix. And we've seen PHS channels specifically kind of grow a little bit more rapidly than any other segment over the last couple of quarters. So those are kind of the dynamics that we're dealing with. But if you look at the basic demands, very strong in double-digit growth.

Jeff, it's probably, Andy, it's also probably worth highlighting, again, the difference in the PrEP market and the treatment market. So I think as Joanna touched base on the treatment market, that's exactly right. Remember that a lot of the growth that you're referring to a couple years ago was driven by the incredibly strong PrEP market as well. We think you will see that again. It's just going to take the introduction of Lenacapavir in a couple of years to get there. So the dynamic in the treatment market, I think, is relatively constant with what we've seen historically. It's just we're building off a bigger base, as Joanna said, and the market will continue to grow, and then you should see the prep dynamic coming back in in a couple of years in terms of driving additional growth.

Thanks, Jeff.

Thank you. Our next question comes from Michael Yee with Jefferies. Your line is open.

Hey, good afternoon. Thanks for the question. Sorry to go back to tropics, too, but I do think it's important. I wanted to ask Murdat what his view was on the importance of OS,

Obviously, it would be immature, and I think math would suggest you could get OS later in 22, but if you do have a PFS benefit around two months, how confident are you that you'd still be okay and confident around OS hitting, and that crossover and other impacts wouldn't impede that result? Maybe just comment on that a bit. Thank you.

Sure, Michael. Happy to. Yeah, look, I think, as you recall, one of the reasons we modified the study, it's just important to go back to the early part of the year when we modified this trial, we expanded the sample size and we changed the endpoint. And I think the main purpose behind modifying the sample size was to make sure that we could hit OS with the assumptions that we had in the trial. I think if we hit PFS, we feel, you know, reasonably confident with all the caveats that you said, right, around crossover and things like that that are more difficult to control, that we should be able to hit OS. So, you know, I think that's important, and I think that really gets to the other underlying issue around this delay, right? As we moved from investigator control to central overreads of the progression events. Those are the things that sort of have led to the slight delay here that we're talking about. But I think that all means we'll have a stronger outcome when the data are available.

And maybe just at the risk, because I know there's been several questions on O2, just to complement what Mirdad has said. I mean, when we think about trials in the oncology space, which all of us have a lot of experience with, it's certainly not uncommon when you think about event-driven trials to have these slight adjustments to timelines. And I would just point out that, I mean, initially we anticipated that we would have this data, and to Murdad's point, you know, with all the protocol adjustments that we did in the middle of the year in December of this year. And now we're talking about those data coming in mid-January to mid-February. So, you know, the timeline changes is really, you know, very minor. And in terms of the trial conduct and the design, I mean, nothing has changed in regards to our confidence for Tropics 2. So I just wanted to make sure I also had a chance to say that. Thanks, Mike.

Our next question comes from Corey Kasimov with J.P. Morgan. Your line is open.

Good afternoon, guys. Thanks for taking my questions. I just wanted to ask you about the ARCIS TIGIT program. With regard to the added data you expect to get on this asset to make the go, no-go decision, is it just more durability, or are you going to see more patients to basically just looking for your latest thoughts there on what it would take for you to opt in? Thank you. Over to you, Merlin.

Yeah, sure. Thanks, Corey. Yeah, we do anticipate that the data will mature, I think is what we've been saying, and I think that's a combination of things, right? More patients, more patients per arm, as well as longer observation time for the patients that are enrolled in the study. So we remain really interested in that and enthusiastic about that study. And as I said, I think we feel that it's likely that we'll be able to make our opt-in decision this year. So we continue to believe that that's where we're headed with those data. So in total, I think we do expect to see a larger, more robust data set to make a decision on. And as we've said before, what we're looking for is clear separation of the doublet from single agent, and we're looking for an ORR of over 50% in the doublet and hopefully in the triplet as well. That would be upside for us.

Catherine, we're ready for the next caller, please.

Our next question comes from Andrew Gawler with Wolf Research. Your line is open.

Hi, thanks for taking my question. I just have one on the HIV pipeline. So, given you're collaborating with Merck on the lenacapivir and the slaptravir combo, one of your competitors in this space claimed that frontline standard of care needs to include an integrase inhibitor. So, given your experience with the bactegravir, do you agree or not that an integrase inhibitor is always likely to be needed in a first-line setting?

Yeah, thanks for the question. It's an interesting statement to make. We obviously don't believe that. That's why we're pursuing the combination approach that we are. So I think the data will tell the story in the long run. We're pretty confident that we can get there with the combination approach that we're taking right now. Thanks, Andrew.

All right, Catherine, our next caller.

Our next question comes from Jeffrey Porges with SVB Learing. Your line is open.

Thank you very much for taking the question. So I wanted to go back to the COVID impairment question for the core business. Perhaps you could give us a sense of where your starts for HCV and HIV are in Q4 compared to Q4 2019, and then secondarily, do you expect those businesses to grow in 2022? I know it's early for guidance, but you've obviously developed your plan already. So just be helpful to see how you're thinking about COVID impact on those core businesses.

Jeff, can I just clarify, you meant Q3 to Q3?

No, we're in Q4 now. And I'm really trying to get a sense of, you know, you showed pretty clearly the decline in hospitalizations and a number of different therapeutic categories were recovering in Q4. So Really wondering where we are today compared to Q4 2019. Gotcha.

Joanna.

Sure. Let me start, Jeff, with HCV, and then I'll move on to HIV. So from an HCV standpoint, we talked about being about 8% under year-over-year. A lot of that has to do with timing and pricing adjustments, so it's not patient per se. We're actually flat pretty much year-over-year, about 2% positive. What we did see, though, is market starts declined in Q3, and that's directly related to the pandemic because less screening diagnosis, they were down again in Q3. And so we believe that'll pick back up. I wouldn't go so much as say that it will be an increase, right? But I would say that we should be able to hold flat because you typically see HCV patient starts decline over time just because there's less patients that need the cure. but not as quickly as what we're seeing in the quarter. So we do think that'll pick back up. And so we would assume a little bit more tempered decline in 2022. The HIV piece of the puzzle, we still are seeing screenings and diagnosis less than pre-COVID-19. So we're seeing about screenings 10% down versus 2019. and diagnosis are still 20% below 2019 levels. So as much as we're seeing recovery quarter over quarter, and we're excited about that because that's in line with what we had assumed, we're still not back to the levels that we need to be. And so I would say that you're now growing from a lower base, and it's kind of what we talked about in the last quarter where the assumption was it would come right back, but the dynamic market in HIV is very small, and it's going to take a little bit longer, and therefore we're just growing from a lower base, and we do believe we'll get back to typical levels of a couple of single digit growth from a market standpoint in 2022, it's just going to take us a couple of quarters to get there. So hopefully that helps a little bit, give you perspective.

That helps a lot. Thank you.

Thanks, Jeff.

Catherine, who do you have next?

Our next question comes from Robin Karnoskis, which was securities. Your line is open. Hi, guys.

Thanks for taking my question. Just thinking big picture on your growth, your long-term growth, I mean, obviously a lot of questions here are on Traveldi and thinking about the HIV business as two core areas that are very important for your long-term growth. Can you talk about how your expectations of Traveldi market opportunity have changed from your initial acquisition? And if you don't see the data that you want to see from Tropics 2, How are you going to think about your strategy for growing the business? Because it seems like that is core to the long-term future of the company. Thanks.

Right. Thanks, Robin. I'll have Andy start here. Hey, Robin.

Thanks for the question, and Joanna may want to weigh in as well. Look, I think there are a number of growth drivers. So if we just step back, when you think about long-term growth, there's been a number of questions. So just to To paint the picture again, there are a number of growth drivers that we see driving. We don't provide specific long-term guidance. What we've said and will continue to say is that the HIV business, including the long-acting collaboration that you mentioned, Tridelvi, Megrolimab, cell therapy, and a number of the other programs, potentially the ARCIS programs, are expected to drive our long-term growth. In the short run, we see a much more promising growth profile than we did historically. So we think that we've done a lot to turn the company around, and now we're the growth profile is improving significantly from our perspective. When you get to 24 or 25, again, we've said we see an expected inflection in our growth profile as a lot of these programs that are currently in the clinic hopefully reach the commercialization, including a number of the Tredelvi programs. On Tredelvi specifically, I think we continue to be very bullish on the prospects for Tredelvi overall, similar to where we were when we did the transaction. So you'll remember we highlighted there are a number of ways to win with Tredelvi when we acquired Immunomedics. The hormone receptor positive study was just one of those studies. Obviously, we're excited about the work that we're doing in lung cancer and other areas. So there's a much broader clinical development plan for Tredelvi than the market probably fully appreciates today, the announcement with Merck. earlier today is a good example of that, that will give you a sense of where we're going, and we expect to give you a much greater sense of that overall. So I think at a macro level, before I ask Joanna to comment, I'd say our expectations for Tredelvi have not changed. We continue to be very enthusiastic about where we are and where we're going, and there's lots of different ways for us to get there over time.

Yeah, no, thanks, Andy. I would just add, I think we are pleased with where we're going with Tridelvi today in the short term. We still believe that there's a lot of growth opportunities, specifically in the earlier line setting, both across triple negative breast cancer as well as bladder cancer. And so we're seeing those opportunities play out. I think the guidelines are going to help us set up for success, let alone set up for future pipeline studies, such as HR positive coming through, hopefully, next in a positive way, as you mentioned, and that should just then expand our market opportunity even more so. The only thing I would add to what Andy was saying is also on the HIV front, so not looking just at the oncology opportunities, but also from an HIV standpoint, we still believe Victarvy is foundational to our HIV opportunities, in addition to, of course, Lenacapivir that Murdad spoke to earlier. So we're excited about what we have going on there as well.

Thank you, Robyn.

Our next question comes from Ronnie Gall with Bernstein. Your line is open.

Good afternoon, and thank you for taking my questions. I wanted to ask a little bit about the agreement, about a combination of Tridelvi and Keytruda. Does Merck get a piece of the economics of Tridelvi? Can you talk a little bit about the elements of the agreement? And then one of your peers has signed an agreement with Merck on non-small cell lung cancer, and I was wondering, are those types of agreements exclusive, that is, they can have another TRUP2 ADC in triple negative breast cancer, and you may partner with them in lung cancer as well.

Yeah. Hi, Ronnie. It's Andy. Thank you for the question. It's relatively straightforward. This is a straightforward, simple clinical collaboration. Merck is providing Tredelvi. They obviously had input on the study design. Thank you. I'm sorry, Keytruda, TB study. Thank you. They do not have any economics on Tredelvi as a result of the study, but they will enjoy, hopefully, the added benefits to Keytruda on their end. And these studies are not exclusive, so they have the ability to do other studies in the same area with other agents, including other TROP2 antibodies, and we have the ability to do studies with other PD-1 inhibitors as well. And, of course, we started in triple negative breast cancer. You're highlighting that there's another study that they will do with another TROP2 inhibitor in lung cancer. That, of course, is an area that we're going to look at as well. So I expect that there's more to come. But these are relatively straightforward, simple, plain vanilla clinical collaborations.

And it's part of our strategy, right, Ronnie, to scale the opportunity with Tredelvi, because there's many things we can do ourselves. But, frankly, given the multi-tumor opportunity for Tredelby, engaging in partnerships like this allows us to expand much more than we could ourselves. And I think it's the beginning of what you'll see from us as we look to really, you know, expand out the promise and potential of Tredelby.

Catherine, I think maybe we have time for two more questions.

Okay. Our next one comes from Brian Scorney with Baird. Your line is open.

Hey, good afternoon, everyone. Thank you for taking the question. I guess we'll be seeing a bunch of potentially transformative data in large B cell lymphoma in a couple of months, I assume at ASH. I guess in addition to your own data, just kind of thoughts on given the Polarix success, how do you think about the potential for CART19 to move upwards into the frontline setting? And does the success of Polivi actually change the market opportunity in your view for second line as well? Thanks.

Thanks, Brian. Christy, please.

Sure. So, yes, we're very excited about our submission at the end of September for Second Line and expect to hear back on the status from FDA first half of next year. But we will be presenting the data at ASH, as you said. And, you know, CAR-T is really the only potential cure we're seeing right now. So when you look at the out-of-class Second Line agents and moving to Frontline, it typically has been a delay to CAR-T. And now with this new study coming out, you know, we'll have to see what that exact duration will be for those patients. We hope it will be successful, but we don't see a huge impact to our projections in the cell therapy marketplace. Second line actually allows us to basically double the market that we can play in, which is about 14,000 patients in the U.S., That combined with you'll also see our frontline data, Zuma 12, which was completed. We'll be presenting that at ASH as well. So you'll see our frontline, second line, and see how kind of it may stack up, although they're not head-to-head trials. So we're pretty confident in where we are and it doesn't really change our projections for the future of cell therapy or for our specific brands.

So, Catherine, maybe just our last question, please.

Our last question comes from Carter Gould with Barclays. Your line is open.

Great. Good afternoon. Thanks for squeezing me in. Maybe just one on the lung study that's going to get started later this year for Tredelvi. You've characterized starting that study at risk, but presumably you've had some insight from the basket study. Is that a fair assumption, and could we see data from that basket study maybe by the time we see Tropics 2 data? Thank you.

Thanks. Great question. We're looking at the totality of the data we have. It's not just the Tropics 3 data. We're looking at the totality of the data in lung that we have accumulated, and that's really the approach we're taking. So I take your point, and, you know, it's arguably not that big a risk given the data we've seen. I would not expect for us to be sharing those data around the time of the tropics, too. But we will plan on sharing those data over time. So we'll definitely share those data over time. But for now, we're pretty excited by what we've seen in terms of the Tredelli performance in non-small snow.

Thanks, Connor.

That's all the time we have for questions. I'd like to turn the call back to Jackie Ross for closing remarks.

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

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