Gilead Sciences, Inc.

Thank you for standing by, and welcome to the Gilead Scientist First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's call is being recorded. If you require any further assistance, please press star 0. I would now like to hand the call over to your host for today's program, Jackie Ross, Vice President, Investor Relations. Please go ahead.

Thank you, Jonathan, and good afternoon, everyone. Just after market closed today, we issued a press release with earnings results for the first quarter of 2022. 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 Farsi, 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, plans and expectations with respect to products, product candidates, corporate strategy, business and operations, financial projections and the use of capital, and 2022 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 to non-GAAP reconciliations are provided in the earnings press release, in our supplementary data sheet, as well as on the Gilead website. Now, I'll turn the call over to Dan.

Thank you, Jackie, and good afternoon, everybody. We appreciate you taking the time with Gilead today, and I also want to thank those of you who joined our virology and oncology deep dives over the last few months. These two events provided a more in-depth view of our portfolio, our strategy, and the teams behind them. We shared a much broader view of our growing clinical pipeline than we had in the past, highlighting its potential to deliver a number of new therapies to address unmet needs for patients across a diverse range of conditions. For those of you who joined, I hope you got a deeper sense of why we're confident of sustaining our leadership in virology and growing our oncology revenues so that it becomes more than one-third of our total revenue in 2030. I'll turn now to our performance this quarter, and I'm pleased to share that the year is off to a strong start in line with guidance as shown on slide four. Total product revenue is up 3% from last year to $6.5 billion U.S., with cell therapy, Bicluri, Tredelvi, and HIV driving growth. HIV grew 2% year-over-year, primarily driven by Bictarvi, which grew 18%, and reported more than 4% market share growth compared to the first quarter of 2021. This is notable given the impact of our Truvada LOE. Sequentially, HIV was down 18%, primarily as a result of first-quarter seasonality. Our growing oncology portfolio performed well, with Tredelvi revenue doubling compared to the first quarter of 2021, and cell therapy delivering another strong quarter of growth. We recently expanded our portfolio of marketed cancer therapies following the FDA approval of Yaskarta for second-line relapsed and refractory LBCL. I'm also pleased to highlight the FDA approval of our new cell therapy facility in Maryland, which is part of the expected 50% increase in our manufacturing capacity by the end of 2022. The new facility will support our cell therapy growth expectations over the next several years. Moving to the pipeline, we shared the Phase III top-line readout from Tropics II in March, showing that the study met its primary endpoint with a statistically significant improvement in progression-free survival versus physician's choice in chemotherapy. Additionally, the first interim analysis of the key secondary endpoint of overall survival demonstrated a trend in improvement. As you know, we are exploring potential pathways for approval with regulatory authorities to bring Tredelvi to these later stage patients. The details of the study results will be shared at ASCO in June. At the Oncology Deep Dive earlier this month, we highlighted the broad potential for Tredelvi across multiple tumor types and lines of therapy. with plans to initiate 13 more Tredelvi trials through 2023, including four more in 2022. Turning to slide five, as you know, the timing for Tropix-2 and the NDA decision for Capella are subject to change. In the case of Capella, this is due to the biocompatibility issue that we're working to resolve, and we're fully confident in Lenacapivir itself. Other than that, we are on track with the remaining targeted milestones we shared with you in January. We've added some of the newly-disclosed trials from our oncology deep dive as well on this slide. Additionally, we're pleased to note that the partial clinical holds for the pivotal migrolamib trials, including Enhance-3 for first-line unfit AMLs shown on this slide, have been lifted. I'm also pleased to share that despite the hold, there's no change to the timing of the first interim readout for Enhance for first-line high-risk MDS, which we expect in the first half of 2023. My dad will share more pipeline details later in the call. Before I pass it over to Joanna, I just want to take a moment to thank the Gilead and Kite teams who are putting the full weight of their expertise, passion, and commitment behind all of this work that you're seeing. It's thanks to our 14,000 employees across the world that we're delivering for patients with diverse conditions and diseases today and advancing a pipeline of innovative new therapies for the future. We have some bold ambitions for the coming years, and we're confident of achieving them given the level of innovation and capabilities that we have in place today. Now I'll invite Joanna to share an update on our first quarter commercial performance. Over to you, Joanna.

Thanks, Dan, and good afternoon, everyone. So turning to slide seven, we had a solid start to the year with total product sales, excluding Vicklery, of $5 billion for the quarter, up 2% year-over-year, driven by cell therapy, Tordelvi, and HIV, and offset in part by HCV pricing dynamics. Quarter-over-quarter, total product sales, excluding the glory, were down 14% as a result of the seasonality we typically see in the first quarter of the year, primarily in our HIV business. On slide eight, you can see that HIV sales were down 18% quarter-over-quarter to 3.7 billion, consistent with our guidance, given the seasonality we customarily experience in the first quarter of every year. First, the channels build their inventories over the fourth quarter and then draw them down during Q1. On a dollar basis, the majority of the sequential decline was associated with inventory drawdown. Second, we realized lower net prices in part due to increased copay support, Part D discounts, and other efforts to maintain access and affordability of our HIV medicines as patients' insurance plans reset. This is a customary Q1 dynamic that we expect to normalize throughout the rest of this year. Year over year, HIV sales were up 2%, driven by market growth for both treatment and PrEP, offset in part by the impact of the loss of exclusivity for Truvada in 2020. The year-over-year impact of this LOE is expected to be minimal starting in this quarter, second quarter of this year, and excluding the LOE impact, HIV sales increased 5%. Overall, we're encouraged by the signs of recovery seen in the HIV treatment market. Despite screening and diagnosis rates still below pre-pandemic levels, and the continued impact on market growth due to the Omicron surge in Q1. As a result, both the U.S. and European HIV treatment markets were down slightly on a sequential basis. On a year-over-year basis, the European market was roughly flat, and the U.S. market grew a little over 3%. The PrEP market grew 33% year-over-year and 3% sequentially. Notably, DSCOVI continues to hold approximately 45% market share, and will continue to engage with payers to ensure those who benefit from PrEP have access to their preferred regimen. We believe Gilead remains well-positioned in PrEP, and, as highlighted during our virology deep dive in February, we expect the market to double by 2030, catalyzed by the launch of long-acting regimens such as Lenacapavir. Discovery sales in the first quarter were $374 million, up 4% year-over-year, driven by continued PrEP market growth, and partially offset by generic competition in switches to newer treatment medicines such as Bictarvy. Turning to slide 9, Bictarvy sales of $2.2 billion in the first quarter were up 18% year-over-year, driven by U.S. market growth and notably continued share gains in both the U.S. and in Europe. Bictarvy remains the leading regimen for new starts and switches in the U.S. and new starts in Europe. In fact, Victarbi's share is up 4.5% year-over-year to 43% share in the U.S., almost eight times larger than the next leading promoted medicine, and representing the highest share of any complete regimen for the treatment of HIV. Moving to slide 10, in HCV, we maintain steady market share, and the 22% decline year-over-year was primarily driven by unfavorable pricing dynamics. Sequentially, HCV was up 2%, while the overall market and new patient starts continue to be impacted by the pandemic. HBV and HDV on slide 11 were up 7% year-over-year due to higher demand for Vemlidi, namely in Asia. Sequentially, HBV and HDV declined 11%, driven by the same HBV seasonal inventory and pricing dynamics impacting HIV. Hepcludic sales were $11 million for the quarter, primarily reflecting sales in Germany and France, where full reimbursement has been established. Our discussions with regulatory bodies and other countries across Europe are ongoing, and of course, we look forward to potential approval in the U.S. in the second half of this year. Vicluri revenues in the first quarter were $1.5 billion, as shown on slide 12. Vicluri utilization tracks hospitalization rates, and therefore, due to the timing of Omicron surges, was lower in the U.S. after January, but higher in Europe and Asia later in the quarter. We're optimistic that there will not be another surge this year in the U.S. And overall, we will maintain our readiness to support hospitalized and non-hospitalized patients. There's no change to our commitment to COVID-19 patients globally, and in that regard, we were very pleased to receive the World Health Organization's revised COVID-19 guidelines. These guidelines now conditionally recommend Viclory for the treatment of patients with non-severe COVID-19 at highest risk of hospitalization. And earlier this week, Viclory received FDA approval for the treatment of certain pediatric patients for at least 28 days old, highlighting our ongoing commitment to extend the reach of Viclory where we can. Now turning to oncology. Tredelvi's sales were up 103% year-over-year and 24% sequentially, as shown on slide 13. We're encouraged by adoption, not just in the US, but notably in Germany and France, and continue to work with health authorities and reimbursement bodies to extend Tredelvi's reach to patients globally. We've completed the expansion of our field force to support the US and Europe and believe we are now at right scale to support physicians and make Tridelvy available across all approved indications to patients who could benefit from it. We're extremely excited by the feedback from physicians about Tridelvy's impact on patients, both those who are prescribing Tridelvy today and those who expect to have access to it soon. With strong physician uptake and our expanded field footprint starting in April, we believe Tridelvy will benefit more than the one-in-four second-line metastatic TNBC patients we're reaching in the U.S. today. We look forward to sharing more updates as we progress throughout the year. Turning to slide 14, and on behalf of Christy and the KITE team, cell therapy sales for the first quarter of 2022 were $274 million, up 43% year-over-year and 15% sequentially. For the quarter, the Ascarta sales of $211 million were up 32% year-over-year and 16% sequentially, driven by continued global demand in relapsed or refractory large B-cell lymphoma, as well as in follicular lymphoma. This highlights the growing recognition of the durable, long-term survival benefit showcased at last December's American Society of Hematology meeting. For Ticardis, sales of 63 million were up 103% year-over-year due to strong demand in relapsed or refractory mantle cell lymphoma. We're pleased with the strong early uptake for adult acute lymphoblastic leukemia in the U.S. following approval last October, which contributed to the 11% sequential growth in Ticardis. The strong momentum we've seen across our cell therapy portfolio continue with the approval of Yaskarta and Second Line relapsed or refractory LBCL earlier this month, as well as FDA's approval for our new Maryland manufacturing facility announced just last week. Through capacity improvements across our existing in-house CAR T manufacturing site, in addition to the new Maryland site, we expect our manufacturing capacity to increase by up to 50% and support our aspiration to serve a cumulative 25,000-plus patients by the end of 2025. Second-line orders started coming in the day after the FDA approval and have been steady ever since. It is truly heartening to see the immediate help we can provide for patients. Given the ASCARTA second-line inclusion in the NCCN guidelines and robust clinical data, we expect ASCARTA to shift the paradigm in the standard of care for LBCL patients. Christy is here with the team and is available to take any questions on cell therapy during our Q&A. And so with that, I will hand over the call to Murdad for an update on our clinical pipelines.

Thank you, Joanna, and hi, everyone. 2022 is full of clinical activity here at Gilead, and I hope that virology and oncology deep dives were helpful in highlighting the breadth and depth of our portfolio. By the end of 2022, we expect to have more than 90 clinical trials underway across oncology, virology, and inflammation. With such a broad portfolio, our focus is firmly on innovation and execution to ensure that we fully leverage its potential. Moving to HIV on slide 16, we shared exciting one-year data from the Capella trials at CROI in February, reporting 83% virologic suppression in heavily treatment-experienced people living with multidrug-resistant HIV. Given the significant unmet need of this patient population, the Lenacapivir NDA was designated priority review by the FDA, and we're planning to resubmit the NDA as soon as we've resolved the clinical hold and complete response left. As you know, the basis of these FDA actions was the compatibility of Lenacapavir with the vials in use at that time, not Lenacapavir itself. We're in ongoing dialogue with the agency to consider an alternative vial and look forward to updating you of our progress in due course. Separately, we're on track for the HTE-MAA approval in Europe in the second half of the year. At a virology deep dive in February, we shared details of the eight internal candidates that could partner with Lenacapavir for treatment. and highlighted the additional early development or discovery assets shown on slide 17. In addition to our PrEP programs, these assets give us a high degree of confidence that Gilead will sustain its leadership in HIV through the 2020s and beyond. In the immediate term, we continue to generate very strong data for Bictarvy. At CROI, we showed biologic suppression at or above 98% in the ME analysis, and zero cases of treatment failure due to resistance to any components of the single tablet regimen in two five-year phase three trials. Of note, this five-year duration is unprecedented for an HIV regimen. Moving to slide 18, VicLurie is playing an important role in the fight against COVID-19 and is the only antiviral approved for use in both hospitalized and non-hospitalized patients. Just in the past few days, the FDA approved an SNDA for VicLurie for the treatment of pediatric patients who are at least 28 days old and either hospitalized with COVID-19 or with mild to moderate COVID-19, and considered high risk for progression to severe COVID-19. In addition to Vecluri, we have an ongoing Phase I trial of GS5245, our investigational oral COVID-19 nucleoside that, once metabolized, works in the same way as remdesivir. Results from this study could lead to a registrational trial. So, even while we hope the worst of this pandemic is behind us, we will continue to work to ensure that COVID-19 therapies are available to as many patients as possible. Moving to oncology, and specifically Tredelvi on slide 19, we'll share more detailed data from the TROPHICS-02 study at ASCO in June. As a reminder, we announced that the study met its primary endpoint with statistically significant PFS versus physician's choice of chemotherapy in late-line patients, and that results are consistent with the Tredelvi arm in the Immunomedics 132-01 Phase 1-2 trial OS showed a trend in improvement at the first interim analysis, and we're now targeting a final OS analysis in 2024, depending on the timing of events. In the meantime, we're engaging with regulatory authorities to explore potential pathways given the high unmet need. As a reminder, Tropics 02 targeted a more advanced patient population than Destiny Breast 04. The encouraging clinical data we've seen in this more challenging patient group has strengthened our excitement in exploring earlier-stage patients. As we shared two weeks ago, we're planning a pivotal study for frontline HR-positive HER2-negative patients, and we'll share more information in due course. In addition to Tropics O2, we're targeting first-patient N, or FPI, for a number of new Tredelvi trials this year. In the first half of 2022, this includes frontline studies for non-small-cell lung cancer and PD-L1 positive and PD-L1 negative metastatic TMBC. In the second half of the year, we're targeting FPI for the Evoque 3 Phase 3 trial for first-line non-small cell lung cancer. Tropic-04 for metastatic urothelial carcinoma is ongoing, and we anticipate a readout in the 2023-2024 timeframe. As you can see on this slide, shared for the first time in our oncology deep dive earlier this month, we are in the earliest stages of evaluating how Tredelvi, either alone or in combination, could bring new options to people with cancer. In total, we're studying more than 25 combinations, including seven phase three combination studies. On behalf of my KITE colleagues and on slide 20, I'm pleased to highlight the FDA approval of Yaskarta for the second-line treatment of relapsed or refractory large B-cell lymphoma earlier this month. The approval is based on the Zuma 7 trial data that showed that two and a half times more patients receiving Yescarta were alive at two years without disease progression or need for additional cancer treatment versus the standard of care. This was the first cell therapy approved by FDA for initial treatment of refractory or relapsed LBCL and within 12 months of initial treatment. Yescarta was also added to the NCCN's B-cell lymphoma treatment guidelines for these patients. Moving to Megrolimab on slide 21, We're very pleased that the FDA lifted the partial clinical holds for our MDS and AML trials, and we've resumed enrollment in our three pivotal studies. I'll note that the remaining partial clinical holds on DLBCL and multiple myeloma are being reviewed by a different division of the FDA, and we're actively working to resolve them as quickly as possible. In the meantime, the impact of these remaining partial holds is limited, since the DLBCL trial was already fully enrolled at the time of the partial clinical hold, and the multiple myeloma trial had just initiated. Overall, we're excited by Megrolimab's potential to be the first new treatment for first-line high-risk MDS patients in 15 years and have completed patient enrollment for the first interim analysis that we expect to share in early 2023. In the meantime, we look forward to sharing data from our Phase 1b trial for high-risk MDS and first-line TP53 AML with more patients and longer follow-up at ASCO in June. Finally, on slide 22, and noting that the timing for the potential submission of Tropix-02 and the NDA decision for Capella are subject to change, there are no updates to the targeted milestones shared with you in January. With our partner, ARCIS, we're targeting a number of data readouts in the second half of the year and have added some new trials, including STAR-121, evaluating Zimborelumab and Domonilumab in combination with chemotherapy for frontline non-small cell lung cancer, and ARC-21 to evaluate the same combination in upper GI malignancies. With that, I'll hand the call over to Andy.

Thank you, Murdad, and good afternoon, everyone. Before I get into the Q1 P&L review and the guidance update, I wanted to touch on the $2.7 billion partial in-process R&D impairment related to assets acquired from Immunomedics in 2020. This had a $1.63 per share impact on our Q1 gap results, and on our full-year GAAP EPS guidance. There is no impact to our non-GAAP EPS in Q1 or to our non-GAAP EPS guidance for the full year. With the Tropics O2 data readout in March, we have reassessed the value of the assets acquired. While no final decisions have been made pending discussions with regulatory authorities, as a result of the data, we have taken a $2.7 billion impairment to reflect the likelihood of a delayed launch of Tredelvi for third-line plus HR positive HER2 negative breast cancer in the United States as well as Europe, and the possibility of a reduced market share in late-line patients given the emerging competitive landscape. Prior to today's update, Gilead was carrying $14.7 billion for the IPR&D indefinite lived intangible assets acquired with Immunomedics. This now values these assets at $12 billion. Recall that the carrying value of Tredelvi reflected four potential indications in progress at the time of the acquisition. triple negative breast cancer, and hormone receptor positive HER2 negative breast cancer, bladder cancer, and non-small cell lung cancer. At that time, we knew that Tredelvi's potential extended beyond these indications, but for accounting purposes did not assign value for the incremental opportunities that we are exploring in prostate, endometrial, and other solid tumors, as well as potential combinations such as with megrolumab, domvanilumab, and PD-1s like pembrolizumab. As you saw at our oncology deep dive earlier this month, there are 13 Tredelvi programs targeted for initiation through 2023, including a number of incremental opportunities. As a result, we remain confident Tredelvi will deliver an attractive return to our shareholders over time. Moving to slide 24, the first quarter was a strong start to the year, despite the expected seasonality observed in our HIV business and was stronger than expected vectory sales. Total product sales were $6.5 billion, up 3% year-over-year, with growth in cell therapy, Vecluri, Tredelvi, and HIV, offset in part by lower HCV revenue. Of note, FX negatively impacted first quarter revenue by almost $100 million, net of hedges representing approximately 160 basis points of growth. Total product sales, excluding Vecluri, were up 2% from the first quarter of 2021 to $5 billion. In HIV, on a sequential basis, we were impacted, as expected, by the normal seasonality associated with Q1 inventory burn following a build in Q4, in addition to the typical first quarter pricing headwinds that improve throughout the rest of the year. With Q1 now behind us, we expect sequential growth in HIV throughout the rest of the year. Non-GAAP product gross margin was 87.4% for Q1, up 90 basis points year over year, primarily due to lower inventory reserve adjustments. First quarter non-GAAP operating expenses were largely consistent with our expectations as we support the expansion of our oncology business. Non-GAAP R&D was $1.2 billion, up 10% year over year, and non-GAAP SG&A was $1.1 billion, up 5% year over year, both primarily due to higher costs associated with Tredelvi. Moving to tax, our non-GAAP effective tax rate in the first quarter was 18.4%. Overall, our non-GAAP diluted earnings per share were $2.12 in the first quarter of 2022, compared to $2.04 for the same period last year, reflecting the higher revenue and higher gross margin offset in part by higher operating expenses. On a GAAP basis, our effective tax rate and earnings per share were impacted by the $2.7 billion impairment. We are excited about the strong start to the year, and as you can see on slide 25, the only revision to our outlook is to our GAAP EPS, primarily to reflect the $1.63 share impact of the impairment discussed earlier. We now expect gap EPS in the range of $3 to $3.50 per share from $4.70 to $5.20. On VEC LURIE, we note the strong revenue start to the year, but also, fortunately, the significant drop-off in U.S. hospitalizations during the first quarter and into the second quarter so far. With that in mind, we will monitor demand through the second quarter and evaluate our full-year guidance in the middle of the year. One housekeeping item before we wrap up. Following recent guidance from the SEC, beginning in the first quarter and similar to many of our peers, Gilead will no longer exclude acquired in-process R&D expenses from non-GAAP financial measures. Prior period results have been updated to reflect this new methodology and are shared in our supplementary data posted on the Investor Relations website. As a reminder, our full-year guidance does not include the impact of any future upfront payments related to the normal course of business partnerships or licensing deals. Going forward, we plan to update our guidance on a quarterly basis to reflect the impact of any new corporate development transactions closed in the prior quarter. Moving to slide 26, you can see there is no change to our capital allocation priorities. In the first quarter, we repaid $500 million in debt. Additionally, we returned $1.3 billion to shareholders through our dividend and repurchase of shares. Finally, on M&A, there is no change to our philosophy here either. We are very comfortable with the breadth and the quality of the pipeline that we have built, acquired, or partnered, and the growth that it will enable in the coming years. With that in mind, you can expect us to continue to opportunistically access high-quality assets through partnerships or make smaller acquisitions in the normal course of business. With that, I'll invite the operator to open the Q&A.

Michael Yee Certainly. If you have a question at this time, please press star then one. We ask that you please limit yourself to one question each, and then you may get back in the queue as time allows. Our first question comes from the line of Michael Yee from Jefferies. Your question, please.

Michael Yee Hey, guys. Thank you. Good afternoon. Maybe I could ask about the planned or potential Tredelli filing. You note that it's subject to change. Maybe you could just describe what you think the conversation is with FDA. Is it a combination of a modest PFS and an OS trend, and is there a magnitude of OS trend that you think will be attractive and allow a green light to a filing? Maybe just talk a little bit about that and what would drive a filing. Thank you.

Thanks, Michael. I'll turn it over to Murdad in just a second, but I just remind folks that we will be discussing the data more at ASCO coming up there in early June. We look forward to engaging with regulatory authorities in the coming months to further discuss the data and the path forward. I'll see if Murdad has anything to add on that at this stage.

Yeah, Michael, I think as normal course of business, we'll always discuss the data, the totality of the data with the agency prior to a filing process. and have that conversation with them. As we've said, the primary endpoint was statistically significant, and so we will have that conversation with them, looking at all the data, and come to a conclusion based on the feedback we get.

Right, and we continue to look at earlier lines of therapy and plan those trials to move up in lines of therapy, given the results we saw in tropics, too, as well, in hormone receptor positive. So thanks a lot, Michael, for that. Can we have the next question?

Certainly. Our next question comes to the line of Matthew Harrison from Morgan Stanley. Your question, please.

Hi, this is Charlie Young from Matthew. So I guess my question is, you know, is Macquarie currently being used in China and then could they actually benefit from the COVID outbreak there? And maybe if that's the case, can you talk about what the economics look like over there? Thank you.

Thanks for the question. We'll go right to Joanna.

Hi, Charlie. Thanks for your question. So VicLurie has been used now with over 11 million patients worldwide, which I think is really impressive, and it's still one out of two hospitalized patients in the U.S. What we are seeing, though, is trends of less severe disease and therefore less hospitalizations but also less treatments. Specific to your question to China, we don't have approval in China at this point in time, and we're continuing those discussions with health authorities in light of the fact that what's going on in China with the pandemic, obviously. I do think the WHO guidelines being updated just most recently is also going to help those discussions as well. So more to come on that, but not currently in play at this point in time in China. Thank you.

Thanks. And the next question, please. Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Your question, please.

Hey, there. Thanks so much for taking my question. Sticking with the COVID theme, anything new that you're seeing that increases your level of confidence in 5245's potential for success? And are there any ways to potentially expedite future development of that asset? Thanks.

Thanks, Brian. I'll hand over to you, Murdad.

Yeah, nothing new to report, Brian. It's a great question. We continue to move along really well in our Phase 1 study that's moving forward expeditiously, and we are working with the agency to design the Phase 2-3 program and really moving as fast as possible. We've got great partnership with the agency and others and are really ready to pounce. So right now, so far, so good. Thanks, Brian. Can we have the next question, please?

Our next question comes to the line. That was Simon Baker from Redburn. Your question, please.

Thank you for taking my question. On HIV, Johnny, you alluded to the market dynamics. I just wondered if you could give us a little bit more color and update us on how diagnosis rates are now compared to the beginning of the year, and also if you are seeing any initial impact from Glaxo's launch of Cabinuva. Thanks so much.

Sure. So both market and Cabinuva. Thanks, Simon, for your question. So let me start with the market. So if you look at the screening and diagnosis levels, they're still somewhat below pre-pandemic, but they're definitely catching up. I think what we saw in the first half of 21 was a really depressed market and started picking back up in Q3 and Q4 of last year. What we saw in Q1 of this year, despite the Omicron surge that obviously impacts, what we saw quarter over quarter pretty much flat in the U.S. and overall Europe as well. Year on year change, though, we have 3.6% growth. And I think that's the signal that we need to watch for and continue to to focus on. And since Gilead has close to 75% market share of the total HIV market, I think it's really, it's part of our responsibility to ensure that we get screening and diagnosis up and make sure we end this epidemic. So more to come on that, but there's a lot of activities the team is taking on to ensure that we get people back in and screened so that we don't have full-fledged cases of AIDS, which unfortunately we've seen in the recent past, and you've seen that anecdotally. On the prevention market, it's a little bit different. Prevention market bounces back a lot faster post this pandemic, and we've seen that time and time again after every single surge. So what we've seen quarter over quarter was about a 3% growth in the U.S. for prevention, so slightly modest growth, which declined a little bit, but that's because of the Omicron surge in January. Year over year, the growth was 33%. And so I think that's really telling in the sense of how it bounces back much faster post these surges. And that's been kind of consistent year on year as we've seen the different, I guess, variants. On your question around Cabinuva, specific to Cabinuva, treatment share in Cabinuva is 0.6%. So no, we haven't seen an impact. What we see is new entrants coming into the market. You always see a little bit of switching going on, which is normal. I do think that there's an ask from a patient standpoint. This is the first long acting, so it is exciting. What we're also seeing is a higher than usual drop-off rate with CABINUVA as well. And a lot of that share is going to BIC-TARBI back. So I do think it's interesting to watch. And I think the more agents on the market, the better. But definitely one that at this point in time, very limited impact to the HIV market share for Gilead. Thanks for your questions.

Thank you. Our next question comes from the line of Jeff Meacham from Bank of America. Your question, please.

Hey, guys. Afternoon, and thanks for the question. I had an HIV question for Murdad or maybe even Dan. So you've got an increasingly broad pipeline around the catheter barrier, and I know getting long-acting right is strategically very important to Gilead. So the question is, what's been the main bottleneck so far? Is it a matter of matching up the PK-PD for Lena? And would you wait to go into a larger-scale trial if there was a candidate that may make an optimal doublet with Lena capybara? Thank you.

Yeah, thanks, Jeff. Appreciate it. I'm going to turn it over to my dad in a second here. But, you know, just remind, for those of you that didn't have the chance to look at the virology deep dive, Dave, we really did spend a lot of time on the entirety of of the portfolio and the many shots on goal we have along with Lenacapavir. Lenacapavir is a truly unique molecule and, you know, presents opportunities and challenges to find exactly the right partner. But we certainly have many that will be progressing to the clinic. But, Murdad, maybe you want to give a little more meat to the conversation.

Sure, yeah. I mean, maybe I'll start by saying, you know, on the PrEP side, we obviously don't need to wait for a partner molecule and really, at this point, it's about resolving the issues with the clinical hold. Once that gets resolved, we'll be back in business with the trials and we'll move as fast as possible to get the PrEP studies completed and get our filing done. In treatment, you're absolutely right, and again, I think you're right, we've built the portfolio to provide us numerous options to then combine with lenacapivir for treatment in a long-acting mode. And that's a mix of oral approaches, where we could have an oral long-acting molecule or a parenteral long-acting agent. And for parenteral, we're trying to go for longer than two months, and for oral, we are looking at hopefully getting to weekly or thereabouts. So we have a number of candidates that are progressing to show us, essentially, you said it right, which is, you know, do they have the right properties from PKPD's standpoint for an oral agent, and do they have the right properties parenterally, including things like injection site reactions and tolerability? So It's less about the ability to inhibit HIV replication. It's more about the molecule and the formulation characteristics that allow us to get to long-acting therapy. And I'll just say again that lenacaprovir is a very unique and special molecule that enables us to do that. Finding another molecule that has those sorts of characteristics is the challenge that we're undertaking.

Thanks. Quip, the next question, please.

Certainly. Our next question comes in the line of Doug Kent from Piper Sandler. Your question, please.

Hi. Thanks for taking my question. I wanted to ask about, yes, CARTA and the launch in second line LBCL. I was hoping you could provide some first impressions of the launch and whether your sense of the demand out there is matching with your expectations.

Yeah, thanks, Joe. We're delighted to have Christy here with us, so we'll hear it from the source here. Yeah, thanks.

Thanks, Joe. You know, we're very encouraged. First, before the approval, the NCCN guidelines that changed and now put Yaskarta for LBCL second line as a Category 1, which, as you may know, physicians and providers use to identify a standard of care. So that happened a month before approval, which is unusual in these times. And then with the approval, right after the approval, our manufacturing site was approved in Maryland. So we really feel like we're hitting on all cylinders in terms of really bringing this important therapy to patients. And so the second line launch was approved on a Friday at about 3 p.m., and on Saturday orders started to come in. So we're already manufacturing commercial product in our site in the Maryland facility. So definitely it's really early days, obviously, but... The demand was building up, I think, when the data came out at ASH in December, and we're starting to see the orders come in as soon as we got approval.

Thanks, Kristen, for that color. Greg, can we have the next question, please?

Our next question comes to the line of Corey Casimo from J.P. Morgan. Your question, please.

This is Gavin on for Corey. Thanks for taking our questions. Just on Trodelvi label expansion opportunities and lung cancer in particular with the EVOKE-02 study, It looks like there's multiple cohorts in the study, and we're just curious if, one, is there evidence of synergy with PD-1 inhibitors, and do you plan on sharing any of that this year? And then, two, are you going to utilize a TRIP2 biomarker in any of these cohorts? Thank you.

Hey, thanks for the question. Murdad, why don't you cover this? Yeah.

Sure, yeah. On the biomarker side, we continue to evaluate the role of TROP2 expression in responses. And as we discussed actually for the breast cancer study in our experience so far, we are not seeing a big impact of TROP2 expression on responsiveness. But we'll keep looking because lung cancer may behave differently than what we're seeing, and we do expect expression patterns to be different. So maybe there'll be a different cutoff in a different tumor type. So that remains to be seen. In terms of synergy, I think that's the nature of where we're going with the studies in that in order to see additive benefit, we need to conduct the larger clinical trials. We do think that coming at the tumors with the two different approaches will add. I'm always careful about using the term synergy. I think that implies a different mechanistic approach. So I do think we expect additivity of the two components. And yeah, we do feel that we will have additivity that Tredelvi should bring additional benefit to patients over and above what the immuno-oncology agents, PD-1, PD-L1 inhibitors bring to the treatment of those patients.

Great. Thanks a lot, Rene.

So let's have the next question, please. Our next question comes from the line of Robin Karnaskas from Truist Securities. Your question, please.

Hi, guys. Thanks for taking my question. And congrats on the SCARTA data, by the way. So I just want to maybe play devil's advocate a little bit on your comments around M&A. I think some investors believe that You have all these great programs, but we're not going to see them read out. And I think you did a good job highlighting that in the oncology day. So for near-term growth, you know, are you thinking about would you be open to acquiring something that would provide some near-term growth to gap you before a lot of your Traveldi trials and your MAGRA trials, like, start reading out? How are you thinking about that as a company?

Thanks, Robin. I'll start, and then maybe Andy can add. But, yeah, I appreciate you bringing that up. I think it's been a really purposeful, strategic approach that we've taken over the last three years to build our oncology portfolio beyond cell therapy, which is obviously now has a history with us for almost five years. And I just remind the folks on the phone that in addition to whatever is acquired at the time of the acquisition in terms of trials and potential and capability of that size organization, naturally when a large organization acquires, particularly these pan-tumor potential molecules, you begin really the process of extending the potential for that medicine alone in late lines, earlier lines, and in combinations, in thoughtful combinations. I think actually Kite is a terrific example of that, going back now five years post the acquisition. And I appreciate, Robin, that you started out with congratulations on your SCARTA. But to see the potential for a technology like cell therapy and the leadership that Kite took by bringing this up in the earlier lines of therapy and the number of patients, of course, then that you can impact on with a potentially curative therapy is exactly kind of the playbook that we are pursuing right now with Trodelvi, with Megrolimab, and obviously with the combination of Arcus assets, which albeit are a bit earlier in the process. So I think we always have to remember the timeframe and which one evaluates the success of M&A. The other thing I would just say is that, of course, we constantly are looking to complement that. I mean, the bar is much higher now for Gilead than it was several years ago because the number of possibilities and opportunities we have and the bandwidth that any one company can do. But you see on the bandwidth side, we're also doing a lot of collaborations with other companies, including folks like Merck who are operationalizing, in fact, a study of ours with Trodelvi. So there's different ways, I think, to work on the bandwidth. But we will constantly be looking at different types of opportunities out there that complement our virology, our oncology, and our early inflammation program to add those to the growth story that we are creating here at Gilead. I'll just – I know Andy spends a lot of time thinking about this. I'd love Andy's additional thoughts on this as well.

Thanks, Dan. And thank you, Robin, for the question. Look, I would just go back to start with, you know, fundamentally we have a lot of confidence in where we are in our growth profile today, and I think it's – it's fair to say that the market maybe underappreciates the growth. Even, Robin, if you look at our first quarter results, especially when you adjust for the impact of the LOE and FX, there's really reasonably strong growth in our business, and this is just the beginning from our perspective. So there are always things that we can do to work on our growth profile, but when you look at the strength of the HIV business, what we're seeing in our oncology business, hopefully that gives you a sense of why we as a management team have so much confidence about not only where we are today but but where we're going. And we recognize, to your question, that the growth profile should get meaningfully better in the next couple of years as the portfolio matures in the way that Dan was describing. So while we will look at things, including commercial assets, as you know, those are far and few between. Many of them are expensive, and that's not really where our focus is. We really genuinely believe we have everything that we need today to be a leading growth company in the sector and and it's just going to take a little more time. But we're definitely seeing all of the right signs that we are looking for as a management team. So you should not expect that we're going to go out chasing commercial assets or large deals. The guidance is very clear. It's ordinary course partnerships, maybe smaller commercial acquisitions. Again, we'll be opportunistic, but that's not where our focus is today.

Thank you. Thanks, Dan. And the last thing I'd say in addition to the molecules and the medicines, The expertise that we're bringing in to Gilead is second to none, and hopefully you saw some of that, and it's just really some representation of that at both the virology and oncology deep dive stage, because that's really critical in any company that we've all, as a leadership team, worked in, is really getting the right teams together, at the right time to make sure we're making the right choices and decisions on the portfolios as we move forward. So that's a really big focus for us, and we're really pleased with the progress we're making there. So with that, let's have the next question, please, Jonathan.

Certainly. It comes from the line of Omar Rafat from Evercore. Your question, please.

Hi, guys. Thanks for taking my question. I just wanted to expand on a prior question on oil from Desivir. And, Dan, Miridad, it feels like the pace at which this program is moving forward and sort of the timeline to the pivotal trial start and the amount of time it will take, it feels materially slower than how Paxlovid and Molnupiravir moved. So I guess my question is, what are the expedited pathways you guys are thinking about when talking to FDA? Because presumably a 505B2 path is not unreasonable given the public health emergency and or the maybe even an active compared to trial versus Paxlovid established non-inferiority relatively fast, given the pace at which infections are happening right now. So there's a path where this could all wrap up this summer. Is that too accelerated in your view?

Yeah, Umar, I'll start and then I'll hand over to Murdad. So first of all, I mean, just to reinforce this message for everybody on the phone, I mean, we are absolutely moving with tremendous focus and speed. And of course, we have great lessons within our organization. Remdesivir was arguably the fastest development of an antiviral that's ever occurred from standing still essentially to an approval in the United States. And as you know, we've got a lot of experience from that in terms of working both with cooperative groups around accelerating trials with the FDA around pursuing unique regulatory paths. And those learnings and those lessons, I just want to say, are certainly being put to use now for 5245. Having said that, we're, of course, at a very different stage of the pandemic at this stage. And therefore, both from a regulatory perspective and also ability to recruit clinical trials, particularly with a somewhat waning pandemic in the developed world, you know, has implications on the paths we'll take. And with that, maybe I'll turn it over to Matt Murdad on any other details he wants to add.

Yeah, I mean, not much to add other than I think our Phase I study is moving very quickly. It's moving very nicely without any issues. I know, Umar, you've asked about the 505B2 approach in the past. As you can imagine, those are all the avenues you've mentioned are all avenues that we've thought about and explored, and so we will move with the fastest pathway available to us, and that's the nature of the discussions we're having with the agency.

Thanks for the encouragement, Umar. Let's take the next question.

Our next question comes from the line of Evan Sigerman from BMO Capital Markets. Your question, please.

Hi, guys. Thank you so much for taking the question. It might be a combo one for Andy and Murdad. So can you walk me through some of the math behind the $2.7 billion write-down? Maybe how some of the data you've seen inform the magnitude of the impairment? I'm just trying to square how your assumptions may have changed from August of 2020 to now based on data updates that we've had?

Hey, Evan, it's Andy. Thanks for the question. It's a great question. Look, it's relatively simple. And just to back up, remember, this is an accounting construct that we are required to reassess the value even before we have the discussions with the regulatory authorities. I just want to back up and reiterate what we said when the data came out. The study was positive. This is strong data. There was a range of outcomes that we expected when we did the deal. This was within the range of outcomes, but it wasn't at the point that we had modeled specifically because we were required to when we put together the intangible indefinite lived asset schedule after the acquisition. So, you know, it's a very simple model, too. So the key, by the way, is our valuation, and we have discussions in the coming months with the FDA, could change again, of course. And we'll have to continue to look at the valuation of the assets that are still sitting on the balance sheet, which is the valuation attributed to hormone receptor-positive HER2-negative breast cancer and non-small cell lung cancer over the coming years, as you'd expect, consistent with any business combination transaction. But it's relatively simple. It's your standard probability-weighted discounted cash flow analysis where you look at the probability of approval. We are assuming, Evan, I think this is the key for you, we took a conservative approach when we were looking at this and assumed that there is not a path forward based on the PFS data and that we need to wait for overall survival, even though we're not certain that that's the case and we will know more in the coming months. So for purposes... For the accounting treatment, we had to make a call, and that's the call that we made, and that leads to the 2.7. The other things I would add is we had Tredelvi-related IPR&D of $14.7 billion at the end of 2021. A little over half of that, or $8.8 billion of it, related to hormone receptor-positive HER2-negative breast cancer. The remainder was non-small-cell lung cancer. And again, we're already, in the other indications that are approved, we're already amortizing that. Those are now finite-lived assets. So now we have $6.1 billion relating to the cash flows expected from third-line plus, as well as the earlier line hormone receptor positive breast cancer indication. So hopefully that gives you a little bit of color. And, again, I'd reiterate what we said on the call, which is when we did this originally, when we did the acquisition, we highlighted explicitly that we were going to explore other tumor types and combinations that were not part of our deal model. There was no need to build them into the deal model from bottoms up. So when you step back, more importantly, outside of the accounting construct, we continue to believe that there are many, many paths forward to create a lot of value in for patients and for our shareholders with this. So I'm happy to take it offline if it's helpful to give you more color.

Yeah, thanks a lot, Andy. I mean, Evan, I think the bottom line is that, again, we took a somewhat conservative approach in the absence of having, you know, regulatory discussions so far. We thought it was a prudent thing to do. And to Andy's point, I mean, this is an evaluation of value at the time of the transaction, which, of course, several years later in terms of the indications, the combinations, the potential for trade LV, It's never, as you know, reflected in the initial accounting treatment of it. So hopefully there's plenty of information there in our press release, and more than happy to take it up with you as well. So thanks, Evan, for that. Let's have the next question, please.

Our next question comes to the line of Tyler Van Buren from Cowan. Your question, please.

Hey there. Good afternoon, and thanks for taking the question. can you please give us your latest thoughts regarding a successful outcome for the DOM Mark VII trial when we get the Phase II PFS data later in the year? And related to the readout for the upcoming Roche results, what are you most interested in seeing other than the primary endpoint?

Thanks a lot, Tyler. So, Tidget, over to Murda, please. Sure. Excuse me.

Hi, Tyler. Yeah, you know, I think our – thinking has been that dominilumab as a TIGIT agent will add to the ORR. But to your point, it's not only that that we would be looking for. And what we would be hoping for, in addition to the overall response rate, is going to be the depth of the responses and the durability of responses, right? So those are the factors that we'll be looking for. We will also be looking to see what the Roche data looks like when it comes out at ASCO to see what they've seen as sort of a benchmark, if you will. But those are the various factors we'll be looking for. Obviously, tolerability is going to be in there as well and the overall profile.

Thanks, Bernard. Thanks, Tyler. Let's have the next question, please, Jonathan.

Our next question comes in line of Mohit Bansal from Wells Fargo. Your question, please.

Great. Thanks for taking my question. And maybe a question for Andy regarding Apex. So, Andy, you mentioned that in one queue there was a $100 million impact. And then since you provided the guidance, I mean, U.S. dollar has been strong, about 7% U.S. dollar to European euro decline. So just briefly, What I'm trying to understand is how much of the FX impact you are absorbing in this guidance which you are maintaining right now. From my map, it could be $300 million plus. But if that means that this base business is really stronger than you anticipated, if you could help us understand where this strength is coming from.

Thank you. Sure. That's a great question, Mohit. I'm happy to take it. Look, it's relatively simple in that you're absolutely right. And even in April, we've seen a continued deterioration. of exchange rates or strengthening of the dollar, which impacts the revenues coming from our European business. So to be clear, the $100 million impact was a year-over-year comparison Q1 to Q1. Joanna and I are watching the budget impact of the exchange rates very carefully, and part of the confidence in maintaining the guidance is that, yes, there are FX headwinds, There are also, for instance, related to your question, there's also this change in the accounting treatment of in-process R&D, which will lead to additional expenses from upfront payments that weren't previously part of how we reported non-GAAP earnings. On the flip side, there are parts of our business that are outperforming. Again, you think of the strength of VEC Lurie that we've seen so far. So Joanna and I and the rest of the management team will look at the puts and takes of this in the middle of the year and we'll provide a more thoughtful update. But I think the key for you is recognizing the couple of things that have changed that could impact negatively our EPS, our gap and non-gap EPS. There are also things that will have additional strength we expect over the course of the year that will offset that to some extent. And so we'll give you additional color later in the year, but we're very comfortable maintaining our guidance where we are today. Hopefully that helps.

Thank you very much, Andy. Let's have the next question, please.

Our next question comes from the line of Colin Bristow from UBS. Your question, please.

Hey, good afternoon, and thanks for squeezing me in. Just a quick one, just following on on the TIGIT and Zenosine asset. I just wanted to really understand what is it you're most enthused about and how you're just thinking about this strategically. Is it the TIGIT and PG-1 doublet that you really see the value, but there's some concern about market timing, or are you absolutely excited about the triplet data? If you could just help me through that, thanks. Thanks, Colin.

Sure. Look, I think we obviously are going to be looking across all the data, across all the assets. Maybe the way I would say it is that we're seeing the TIGIT PD-1 combination as likely to be sort of the benchmark or the basis for treatment, at least in lung cancer and potentially more broadly. And as such, our hope is to have a great combination there to make sure that we then have something to which we can add other potential agents that could bring us to even better responsiveness. whether that's adenosine or Tredelvi or, you know, something else in our pipeline. I think those are all options for us to consider, but we're seeing, I would say the floor is being raised is our belief, and that TIGIT PD-1 combination becomes sort of the baseline that we need to aim for.

Thanks. Very nice conceptual there. So out of respect for everybody's time, we'll take one last question. Jonathan, can we have the last question, please?

Certainly. Our final question for today comes from the line of Salveen Richter from Goldman Sachs. Your question, please.

Hey, thanks. This is Matt Alper, Salveen. Thanks for squeezing us in. Just to go back to Tidget real quick, you and Arcus have previously noted that you'd want to see an ORR greater than 50%. but what would you like to see on PFS and, most importantly, OS? It seems like 30-plus months might be sufficient on OS given Keytruda Monodata and maybe a year-plus for PFS. Just would be great to hear your thoughts on this. Thank you.

Well, what I would say is those milestones, I would agree with the milestones that you've got there, and it's important to remember that those milestones will take time to play out. And we are going to make our bets without being able to look at, you know, OS for 30 months, right? We're going to have a less mature data set from which to make that decision. So you're absolutely right that we will be looking at all of those things. The driver will be to see that, again, tolerability and a benefit as far as the overall response rate is concerned and look for benefits in the depth and duration of response that we can garner from the data set at the maturity that we will have when we look at it. And there I would just say, you know, we'll be, in a sense, watch our actions because you'll be seeing the studies will be getting underway, and that should give you a sense of our confidence in those assets.

With that, I just want to thank everybody. I really appreciate the attention today for the couple of deep dives we've had. We look forward to chatting with you at ASCO and beyond to keep you updated on our progress for the year. And with that, I'll turn it over to Jackie for some final comments.

Thank you all for joining us today. We do appreciate your continued interest in Gilead and look forward to updating you throughout the year, as Dan said. Have a great rest of your day.

Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.