Gilead Sciences, Inc.

Hello everyone and welcome to the first quarter 2023 Gilead Sciences Earnings Conference call. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. I will now hand over to your host, Jackie Ross, Vice President, Investor Relations to begin. Jackie, please go ahead.

Thank you, Operator, and good afternoon, everyone. Just after market closed today, we issued a press release with earnings results for the first quarter of 2023. The press release, slides, and supplementary data are available on the investor section of our website at gilead.com. The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day, our Chief Commercial Officer, Joanna Mercier, our Chief Medical Officer, Murdad Parsi, and our Chief Financial Officer, Andrew Dickinson. Before we get started, let me remind you that we will be making forward-looking statements, including those related to 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 2023 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 statements. Non-GAAP financial measures will be used to help you understand the company's underlying business performance. The gap to non-gap reconciliation is provided in the earnings press release in our supplementary data sheet, as well as on the Gilead website. With that, I'll turn the call over to Dan.

Thank you, Jackie, and good afternoon, everyone. The Gilead team continued its track record of strong commercial and clinical execution in the first quarter of 2023. Our base business grew at 15%, excluding Vicluri, with total product sales of $6.3 billion reflecting outperformance across the portfolio. On a year-over-year basis, roughly two-thirds of the $735 million increase in our base business sales were driven by HIV, and the other third was driven by oncology. Once again, we're seeing the tangible impact of our transformation and the successful diversification of our business. We saw year-over-year growth in HIV up 13%. Liver disease, which includes therapies for HCV, HBV, and HDV, up 6%, cell therapy up 64%, and Trodelvi up 52%. As expected, Vicluri revenues continue to track lower rates of COVID-19 hospitalizations. As a result, revenue of $573 million was down 63% from the first quarter of last year. On the clinical side, we received another FDA approval for Tredelvi in early February. This latest approval was for a third indication, pretreated HR-positive HER2-negative metastatic breast cancer. It's early days, but this has been a very strong commercial launch for Tredelvi in the U.S. so far. This further highlights the critical patient need that Tredelvi is addressing in this late-stage population, as well as the effectiveness of our commercial oncology team. We continue to prepare for Tredelvi's approval in pretreated HR-positive HER2-negative metastatic breast cancer in Europe in the second half of this year. Another key milestone for the quarter was the announcement of the primary overall survival data from the landmark Phase III Zuma 7 study. Yescarta is now the first and only treatment in nearly 30 years to show a statistically significant improvement in overall survival for initial treatment of relapsed or refractory large B-cell lymphoma patients versus historical standard of care in a curative setting. Full results will be presented at this year's ASCO. Turning to clinical progress in virology, we continue to add to the body of evidence for lenacapivir's effectiveness as part of a six-month subcutaneous therapy. At this year's CROI, the team shared positive Phase 1b data on the investigational lenacapivir and BNAB combination. The BNOD combination is, of course, just one of the eight long-acting combination options that we're exploring for lenacapivir, and we are pleased with our progress so far. In the meantime, following our first approval of lenacapivir as Sunlenca for heavily treatment-experienced people living with HIV, we are seeing strong engagement from KOLs and physicians who are interested in the full potential of lenacapivir for prevention and treatment. As you know, this first approval addresses a significant unmet need for a small number of people living with HIV who have very limited options available to them. And we look forward to making Lenacapavir available to many more people, beginning with the potential approval and prevention in the 2025 timeframe. We see Lenacapavir as having the most promising potential yet in the ongoing efforts to end the HIV epidemic. And we're looking forward to working with others to make it broadly available as soon as possible. With that, I'll hand over to Joanna for a review of our first quarter commercial performance. Joanna?

Thanks, Dan, and good afternoon, everyone. The commercial organization delivered a very strong start to the year and continued to build on the momentum we saw in 2022 to set a firm foundation for continued execution and growth in 2023. As our results show on slide seven, Each of our core franchises delivered year-over-year growth, led by HIV and oncology, and total product sales, excluding Vecluri, totaled 5.7 billion, up 15% year-over-year. Including Vecluri, total product sales were 6.3 billion, down 3%, driven by lower Vecluri sales associated with fewer COVID-19 hospitalizations. On slide eight, HIV sales were up 13% year-over-year to $4.2 billion, driven by favorable pricing dynamics, higher demand, and lower inventory drawdowns. Quarter over quarter, sales were down 12% associated with the normal seasonality we typically experience in the first quarter. As a reminder, at the start of the year, patient copays and deductibles reset, which have an impact on average realized prices and market growth. We expect these pricing impacts to normalize through the remainder of the year. We also see typically a buildup in inventory in the fourth quarter, followed by meaningful inventory drawdowns in the first quarter. Following a focused effort to better manage this dynamic, we're pleased to see less of an impact than we have historically on both a quarter-over-quarter and year-over-year basis, highlighting our goal of better matching product delivery with end user demand. We expect these efforts to contribute to a more stable quarter-over-quarter growth in our HIV business as compared to prior years. Turning to Sunlenka. First quarter sales of $4 million were very much in line with our expectations. Sunlenka is an important option for the small number of people living with HIV who have developed resistance and have few, if any, other options. We're leveraging the launch to engage with providers and the community ahead of Lenacapivir's potential launches in prevention and treatment. Overall, the HIV treatment market grew approximately 2% year-over-year in the U.S. and almost 4% in Europe, tracking in line with our expectations for annual growth of 2% to 3%. And in prevention, awareness continues to grow with the U.S. prep market up over 19% year-over-year. Moving to slide 9, Victorby's sales of $2.7 billion were up 24% year-over-year, driven by higher demand, as well as favorable pricing and inventory dynamics. Victarbi continues to cement itself as a therapy of choice for people living with HIV, now capturing a treatment market share of 46% in the U.S., up 3% year over year, and representing a growth rate that has impressively outpaced new and existing regimens. Moreover, Victarbi has maintained its leading position for new starts across the U.S., Europe, and other major markets, as well as in treatment switches across most major markets, including the U.S. On Descovy, sales were $449 million in the quarter, up 20% year-over-year. Demand for Descovy for PrEP remained strong, up 14% year-over-year. Descovy for PrEP once again maintained its greater than 40% market share. The continued resilience of our PrEP business, despite availability of other prevention options, including generics, provides a solid foundation as we make progress towards the potential approval and launch of Lenacapavir for PrEP. Moving to slide 10, the liver disease portfolio was up 6% year-over-year to 675 million, highlighting the continuing contribution of our viral hepatitis medicines to patients and the Gilead portfolio. In HCV, sales were 445 million, up 12% year-over-year, driven by favorable pricing dynamics and timing of purchases by the Department of Corrections. HBV and HDV sales were 230 million, down 2% year-over-year, primarily due to pricing dynamics outside of the U.S. We continue to expect HCV starts to trend down over time, given the curative nature of therapy, with some offset from HPV and HDV. In the meantime, we're pleased to observe solid and stable market shares across all of our liver portfolio. On to slide 11, and as we expected, and sequentially as COVID-related infections became less severe and hospitalizations remain below peak levels. As a reminder, the winter surge occurred earlier than we had expected, beginning in the fourth quarter and lasting only through the beginning of Q1. As VicLurie's use tracks hospitalizations, its sales are volatile and highly subject to surges and the overall path of the pandemic. Vicluri is backed by clinical data and real-world evidence that reinforces its clinical profile, and despite the lower hospitalization rates in the quarter, Vicluri's share of hospitalized patients treated for COVID-19 grew modestly, maintaining well over 50% share in the United States. Moving to oncology and beginning with Tridelvi on slide 12. Sales of $222 million were up 52% year-over-year and 14% sequentially. driven by strong growth both in the US and Europe. Following US approval in early February, we're off to a strong start with Tredelvi in pre-treated HR-positive HER2-negative metastatic breast cancer, as some clinicians move quickly to make this new option available for patients in this setting. We look forward to extending Tredelvi's reach to these patients in Europe, where a decision is expected later this year. Of course, our efforts here are underpinned by the successes and learnings in metastatic triple negative breast cancer, or TNBC. From our expansion of the field force last year and the strong body of data across a number of tumor types, more physicians are recognizing Tudelvi's clinically meaningful overall survival benefit. This recognition is not just in metastatic TNBC, but also in HR positive, HER2 negative, metastatic breast cancer, regardless of HER2 negative status. Now onto slide 13. Cell therapy sales in the first quarter were $448 million, up 64% year-over-year, and 7% quarter-over-quarter. We're pleased with the continued growth of Yaskarta, with sales up 70% year-over-year to $359 million, primarily driven by growth in the second and third line setting for relapsed or refractory large B-cell lymphoma. Sequentially, sales were up 6%, driven in part by strong demand and favorable pricing dynamics, both primarily in Europe. Turning to Tecardis, sales were $89 million, up 40% year over year and 8% sequentially, driven by growing demand for both relapsed or refractory mantle cell lymphoma and adult acute lymphoblastic leukemia. Looking ahead, we continue to work to raise awareness of cell therapies and increase class share. We believe that compelling data including Zuma 7's recent positive overall survival results, in addition to peer data sets in the cell therapy space, will support broader adoption over time. In summary, it's been a positive start to the year with our current product portfolio of virology and oncology medicines delivering strong performance. We look forward to maintaining this momentum through the rest of the year and beyond. And with that, I'll hand the call over to Murdad for an update on our pipeline. Murdad?

Thank you, Joanna. We're off to a strong start in 2023 with our first regulatory approval of the year for Tredelvi for certain HR positive HER2 negative metastatic breast cancer patients in the US. And an additional 10 trials initiated so far this year, including four phase three studies. This brings our clinical pipeline to 61 ongoing clinical programs. Starting with virology on slide 15, we presented late breaking data among 83 abstracts at CROI in Seattle in February. highlighting Gilead's continued expertise and leadership across HIV, viral hepatitis, and COVID-19. In HIV, we shared several data readouts from our lenacapivir-based development programs in prevention and treatment. In prevention, we presented preclinical in vivo data providing further validation that a subcutaneous injection of lenacapivir can confer long-acting protection in an animal model. We believe lenacapivir as a single agent has the potential to be the first once every six month option for HIV prevention. We're currently testing this in our pivotal phase three purpose trials. In treatment, we shared phase 1B proof of concept data on twice yearly lenacapivir in combination with two investigational broadly neutralizing antibodies. At week 26, 90% of trial participants receiving this combination maintained virologic suppression. Treatment with the investigational regimen was generally well tolerated. Moving to COVID-19 on slide 16, we also shared positive data from three retrospective real-world analyses of veclary at CROI. These analyses showed that initiation of veclary within the first two days of hospital admission reduced death and hospital readmission rates among all patients with COVID-19. The right-hand side of the slide highlights that both of our oral Phase III trials evaluating GS5245 or obaldesivir are investigational oral COVID nucleoside in standard-risk patients and in high-risk patients are now enrolling. Given uncertainties in the global epidemiology of COVID-19, we continue to be cautious with regards to the length of time it could take to fully enroll these trials. Moving on to slide 17, Tredelvi continues to build momentum as a cornerstone of our solid tumor portfolio. As expected, the FDA approved Tredelvi for its third indication. Tredelvi is now approved in adults with HR-positive HER2-negative metastatic breast cancer who previously received endocrine-based therapy and at least two additional systemic therapies for metastatic disease. This FDA approval is based on the overall survival benefit seen in the Phase III Tropics O2 trial. We've already received acceptance of our European filing and continue to expect a regulatory decision from the European Commission in the second half of this year. The Phase III EVOCA-1 trial evaluating the potential for Tredelvi in second-line non-small cell lung cancer is ongoing. Additionally, we recently had FPI for the Phase III EVOCA-3 study, also known as KINA-D46. This trial is being led by Merck to evaluate Tredelvi in combination with pembrolizumab and first-line PD-L1 high non-small cell lung cancer. Additionally, we're excited to announce that over 30 abstracts, including an oral presentation of the updated ARC-7 trial data, have been accepted at ASCO this year. Not only do these data highlight elements of our investigational Tredelvi and Donvonilamab programs in breast, bladder, and lung cancers, the abstracts include new insights on many of our promising targets, including our cell therapy portfolio. Speaking of which, on slide 18, I'm pleased to discuss the clinical progress we've made within cell therapy. Recently, we highlighted new overall survival data from the Phase III ZUMA7 trial, evaluating escharter for the initial treatment of adults with relapsed or refractory large B-cell lymphoma. These data will be presented as an oral late breaker at ASCO. Yesgard is the first and only therapy of any kind to show a statistically significant overall survival benefit versus standard of care in almost 30 years. As we work to extend our leadership in cell therapy within our current portfolio, we're also building out our earlier stage programs. As mentioned in our last earnings call, we closed our agreement to co-develop and co-commercialize Arcelix's CAR-T DD-BCMA, for the treatment of patients with relapse or refractory multiple myeloma. Also, we closed our acquisition of community therapeutics in February, extending our preclinical and clinical pipeline in blood cancers and solid tumors. We're currently working to integrate the community team with their assets into our broader innovation pipeline. Wrapping up on slide 19, we're sharing the updated key pipeline milestones that we expect in 2023. which, as you can see, span FPIs, data readouts, updates, and regulatory approvals across oncology, virology, and inflammation. Overall, this highlights the progress that Gilead has made on its transformation journey. The 61 clinical programs that are well diversified across indication and stage. We have an ambitious clinical program, and I'd like to thank the Gilead team that has worked tirelessly to execute and accelerate the progress of our portfolio. We look forward to updating you as we progress through 2023. And with that, I'll hand the call over to Andy. Andy?

Thank you, Murdad, and good afternoon, everyone. Starting on slide 21, the first quarter was a strong commercial start to the year, with total product sales, excluding Veclury, up 15% year over year, despite continued FX headwinds. Overall, our base business demonstrated growth in each of our product families, including almost 60% growth in oncology and 13% growth in HIV. Total product sales were $6.3 billion, down 3% due to lower vectory sales, partially offset by growth in our base business. FX negatively impacted first quarter total product sales by $106 million, representing approximately 160 basis points of growth. Turning to slide 22, Non-GAAP product gross margin was 86.2%, down 1.2 percentage points from last year due to, among other things, the timing of the Big Tar V royalty initiation in the first quarter of 2022 and product mix partially offset by inventory benefits. Moving to OPEX, expenses were higher than we anticipated in the first quarter due to R&D investments and inflationary pressures. Non-GAAP R&D was $1.4 billion, up 25% year-over-year, due to higher expenses, including the acceleration of certain late-stage clinical studies, as well as about $50 million in one-time items. As Murdad mentioned, we have started 10 new trials so far this year, including four Phase III programs. This brings the total number of ongoing Phase III studies to 22, highlighting the investment we are making in Gilead's future growth. Clinical trial enrollment for a number of new and ongoing Tredelvi and Lenacapivir trials was faster than we expected, with a notable acceleration, for example, in certain Lenacapivir trials in March. Our clinical team has been working hard to rapidly advance our studies and bring new therapeutic options to patients as fast as we can. This includes working to close the gap that some peers have in certain programs, and we believe we are starting to see the impact of these acceleration efforts in our trials. although this did contribute to higher R&D expenses in the first quarter. Consistent with past practice, we will continue to manage expenses carefully, including the ongoing process of prioritizing programs based on potential impact and data. We have taken the last several years to build the most diverse and robust clinical pipeline in Gilead's history, now with well over 100 trials across our three targeted therapeutic areas. We are excited to see so many of these programs in later stage trials with a number of data readouts building momentum over the next several years. Non-GAAP acquired IP R&D was $481 million, primarily driven by expenses related to our acquisition of community, as well as upfront and milestone payments associated with the Arcelix and Nurix collaborations. Non-GAAP SG&A was $1.3 billion, up 22% year over year. primarily due to the commercial expansion and investments in our oncology business, in addition to higher branded prescription drug fee expenses and higher corporate expenses that continue to be impacted by inflation. Moving to tax, our non-GAAP effective tax rate in the first quarter was 18.9%, lower than expected, driven by discrete tax benefits recorded in the first quarter. Overall, our non-GAAP diluted earnings per share was $1.37 in the first quarter of 2023, compared to $2.12 for the same period last year, reflecting higher operating expenses and lower product gross margin. I'll move now to guidance for the full year 2023 on slide 23. There is no change to our revenue guidance. We continue to expect total product sales in the range of $26 billion to $26.5 billion, and we continue to expect total product sales excluding VECLURY in the range of $24 billion to $24.5 billion representing growth of 4 to 6% for our base business year over year. On VEC Lurie, the first quarter was modestly below our internal expectations, and our $2 billion full-year guidance assumes an increase in infections at some point later this year, not dissimilar from what we saw in 2022. We know from experience that COVID-19-related sales are extremely volatile and are leaving our guidance unchanged pending additional data points as we move through the year. Moving to the rest of the P&L. We continue to target non-GAAP product gross margin of approximately 86%. As discussed, we now expect full-year 2023 non-GAAP R&D expenses to increase a low double-digit percentage compared to 2022. This results in an overall R&D investment for the full year in the low 20s as a percentage of total revenue. We believe this is a more appropriate level of investment for a company with a broad late-stage clinical portfolio. that is targeting attractive opportunities and sustainable revenue growth. We continue to expect non-GAAP acquired IPR&D to be approximately $700 million, reflecting previously committed acquired IPR&D amounts. Similar to prior quarters, we will continue to include expected acquired IPR&D expenses as we announce additional transactions over the course of the year. Moving to non-GAAP SG&A, there is no change to our prior guidance, where we expect a full-year decline by a low single-digit percentage compared to 2022. Although we will continue to look for opportunities to partially offset the higher R&D investments we now plan for this year. Overall, there is no change to our expectations for non-GAAP operating income in the range of $11 billion to $11.6 billion. Additionally, there is no change to our tax guidance, and we continue to target a non-GAAP effective tax rate of approximately 20%. And finally, we continue to expect non-GAAP diluted EPS in the range of $6.60 and $7 per share, reflecting, first, that the initial guidance model we shared with you in early February allowed for a broad range of potential revenue and expense scenarios, and second, that we're committed to finding room in our overall P&L to absorb the higher R&D investments that we are choosing to prioritize in 2023. On a GAAP basis, We expect diluted EPS to be in the range of $4.75 to $5.15. Moving to slide 24, you can see there is no change to our capital allocation priorities. We returned $1.4 billion to shareholders in the first quarter through our dividend and repurchase of shares. Finally, on business development, there's no change to our philosophy. We are very comfortable with the breadth and the quality of the pipeline that we've built, acquired, or partnered, and the growth 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 to make smaller acquisitions in the normal course of business. And now I'll hand it over to Dan for some closing remarks.

Thanks, Andy. Before we open for Q&A, I'll just summarize our prepared remarks. by noting that this is another quarter where we demonstrated the continued impact of our transformation. Going forward, we are committed to building on the track record of strong commercial and clinical execution that we've shown in recent quarters, thanks to the dedication of the Gilead and Kite teams around the world. With this positive momentum, we look forward to delivering on our portfolio while maintaining financial discipline. With that, I'll invite the operator to open the Q&A.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you choose to withdraw a question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. We ask you please limit yourselves to one question per person. Our first question today goes to Michael Yee of Jefferies. Michael, please go ahead. Your line is open.

Hi, this is Dennis on for Mike. Thanks for taking the questions. Two from us. Maybe number one, what are your expectations for the competitor TROP2 data that's coming imminently? And, you know, what would you like to see and how would you differentiate? And could you perhaps look at PFS like your competitor? And then number two, can you just talk about the progress of your long-acting oral integration inhibitors for HIV? Are they in the clinic yet?

Thank you. Thanks for those questions.

So, in terms of the competitor trope 2 data, I think it's a little early for us to be doing comparisons across data we haven't seen yet. We're really comfortable with the data we've already shown and have certainly led to approvals in breast cancer with OS benefits. So, you know, you can see from the uptake of Tredelvi in the breast cancer market that being approved and having those OS data have had an impact for patients, and we're very comfortable with where we are. Of course, we'll keep an eye on those emerging data as they become available in every indication. And then in terms of the long-acting orals, as you know, we have a number of programs in the clinic for our long-acting portfolio, both oral and injectable. And we've moved several of them, including an oral program, into the clinic, and we'll be sharing those data as they become available. Very excited about that portfolio. We remain committed to and really excited about our long-acting portfolio to leverage Lenacapavir's unique profile to go into both oral long-acting as well as parenteral long-acting formulations. So, stay tuned as those data develop, we'll gladly share.

Nadia, may we have our next question, please? And can I remind all our callers to please limit themselves to one question so that we can get to as many folks in the queue as possible? Thanks, Nadia.

Thank you. The next question goes to Brian Abrams of RBC. Brian, please go ahead. Your line is open.

Oh, hey. Good afternoon. Thanks so much for taking my question. Regarding Tredelvi, I was wondering if you could talk a little bit about what you're seeing with regards to its use across the different lines of therapy post-HR positive HER2 negative approval. And I guess along those lines, as you think about moving this to earlier lines in this indication, what's your latest thoughts on the potential trial design for ASCENT-07 to optimize, in terms of optimizing the right patient population? to expedite trial enrollment and support a meaningful commercial expansion. Thanks.

Thanks so much, Brian. Dan O'Dea here. I'm going to have Joanna answer the first part of your question, and then we're going to add the second. Thank you.

Thanks, Brian. So, basically, we're really pleased with the early launch results that we've seen so far in HR-positive, HER2-negative. And what we've been seeing is strong initial uptake, basically in fourth line plus, with some share even in third line. And I think that's really important for us as we think about even earlier trials moving up lines of therapy. But I think the data with the overall survival that we've shown, in addition to the work that we've done in metastatic TNBC, also showing overall survival, has really helped because we've had strong awareness, obviously, of Tredelvi in the community as well as in academic centers. And the extended field team work that we did last year has really helped us make sure that we solidified the launch of HR-positive, HER2-negative. So, still early. We only have a couple of months in, but definitely on the right track, and we're really seeing physicians understand the benefits of Tridelvi and what they can bring for their patients in this setting.

Rodad? Yeah, and then in terms of Ascendant 7, as we design and move into earlier lines of therapy, In that study, as you know, we're going to be looking at the chemo naive population, and we do anticipate that study getting started the second half of this year. So things are moving along very nicely, and we are really excited about that program. The final details in terms of design will will be rolled out. I think we're crossing the T's and dotting the I's right now in terms of that final protocol. So you'll see that posted and available in short order.

Nadia, may we have our next question, please?

Thank you. The next question goes to Chris Schott of JP Morgan. Chris, please go ahead. Your line is open.

Great. Thanks so much for the question. I just had one on OpEx. Can you just talk a little bit about how we should be thinking about Gilead's operating costs going forward. It sounds like you're obviously accelerating some R&D programs, and you've got this double-digit step up in R&D this year. But as we think about operating margin dynamics kind of going forward, I guess off of the 2023 levels, can we start to think about margin expansion going forward, or do we need to maybe think about another year or two of investment before we can think about margin expansion for the company? Thank you.

Hey, Chris, it's Andy Dickinson. Thanks for the question. It's a great question. Maybe just stepping back again, highlight and reinforce that we've built a large and diverse portfolio that really positions us for significant growth, both in the short term as well as in the long run. As you heard in our prepared marks, we're really investing and kind of leaning into that. We had accelerated or significant focused efforts to accelerate some of our clinical development, which is starting to pay dividends. You're also seeing the validation of this approach in our commercial results that Joanna highlighted and the strength across our base business. So to your point, we are now, this year, I think we already have 22 phase three trials underway, which is significantly more than we have as a company historically. It's actually, frankly, a healthy level. I highlighted in my comments that this year we're targeting kind of low 20s percentage point of revenue for our R&D investment. And that's a reasonably good place to be. We believe it's online with peers over the long run. There will be years when we have expenses that are greater than that and years lower, but over the cycle, I think that's kind of what we're targeting. So, and then maybe to your question in operating margin, We still have a very healthy operating margin, as you know. Again, there's apples and oranges comparisons with the new IPR&D rules, but we do expect to see our operating margin strengthen again over time as we get through this bolus of phase three trials that we have underway, and that drives, you know, growth above and beyond what you've already seen in the last 18 months, which we think is off to a great start. So, more to come. It's going to take a little more time to get through it, to your point, but we're in a very good spot from our perspective.

Nadia, may we have the next question, please? Thank you. The next question goes to Salveen Richter of Goldman Sachs. Salveen, please go ahead. Your line is open.

Good afternoon. This is Anomi Don for Salveen. Thanks for taking our question. Just on the TIDGET combo data at ASCO, how do you view this update? Is it more incremental and then Just on the Roche OS data, which is now expected in 3Q, how much read-through do you anticipate on that front? Thank you.

Yeah, thanks. What we have said and I think what we're planning is we'll have an updated data set from a more recent cut. So, there'll be additional data compared with what was presented, what we talked about last year at the ASCO plenary. And so, there should be more mature data with a larger patient population. And so, that should help reinforce our confidence. In terms of the Roche data, I think it's a great question. We believe in our own data as well as all the other public data that are out there in terms of TIGIT bringing benefit, certainly in terms of response rates and other parameters, certainly in our data set we've seen those PFS benefits. And our expectation is that the Roche data will continue to demonstrate benefit. of adding TIGITs to PD-1 inhibitors, so PD-L1 inhibitors in their case. So, we will be looking forward to seeing those OS data, and I think that should help to provide additional confidence to all the TIGIT antibodies out there.

Nadia, next question, please.

Thank you. The next question goes to Jeff Meacham of Bank of America. Jeff, please go ahead. Your line is open.

Great afternoon, guys. Thanks so much for the question. Murda, you guys have been very successful commercially with KITE, and it looks like the pipeline, you know, has some logical next steps in terms of liquid tumors. I guess what I wanted to ask you is, you know, what's your appetite for, you know, for leveraging the expertise to look at non-oncology indications like rare diseases or maybe towards solid tumors? And why do you think the field has mostly evaluated the same targets in, you know, myeloma, lymphoma, leukemia, et cetera? Thank you.

Thanks, Jeff. Yeah, it's a very complicated question. I'll try to give a very brief answer. Look, I think that leveraging the engineered T cells so far in hematology has demonstrated really great efficacy. a reasonable tolerability profile for that patient population. I think it's all about therapeutic index. As you start to go into broader indications where treatment options are different and the disease state is different, I think there are different considerations for therapeutic index. So, as we look into different populations, we're going to keep a very close eye on the appropriate therapeutic index for a given patient, whether you're talking about lupus or anything else outside of oncology related to your question. From our perspective, maybe the broader perspective that I would offer is that we do believe that modulating the immune system will lead to better outcomes in patients, whether you're talking about agonizing or antagonizing, And in immunologic disorders, we do believe that getting to better and more targeted immune blockade is going to be better for patients. And so, from our perspective, there is not only cell therapy in play. And I think that's what we like about our portfolio is that we have, we're not modality restricted. And you've seen the deals we've done. We have our BTLA. antibody and the rest of our portfolio in inflammation. So we are going to be pursuing the best outcome for patients regardless modality, and certainly cell therapy will be one of those.

Nadia, next question, please.

Thank you. The next question goes to Terrence Flynn of Morgan Stanley. Terrence, please go ahead. Your line is open.

Hi. Thanks so much for taking the question. Just one for me on Yezkarta. I was wondering if you can give us any more color in terms of the breakdown between second line versus third line right now. Obviously, you're seeing some nice momentum. And then on the manufacturing footprint, maybe just any color there in terms of total number of patients you can supply in a year. Obviously, that's been an issue for some of the other CAR-T therapies out there, but just want to understand kind of longer-term supply dynamics. Thank you.

Sure, so let me start, and then maybe Andy can touch on the manufacturing piece of the puzzle. So thanks for your question, Terrence. I think what we've seen is really strong growth across second line and third line, and obviously a little slower coming into second line, but we're seeing nice momentum into second line as well, and I think the OS data from Zuma 7 coming through that will be presented at ASCO will only help continue that and really differentiate it versus current standard of care. But what we have seen is growth That has really picked up quite nicely and you're seeing it both in the US as well as Europe and really happy to say actually, although we just got recent approval for second line in Europe late last year, we're getting a lot of markets coming in from reimbursement, accelerating reimbursement because of the importance of this data for patients. And actually, one example of that is actually just today. with the nice approval for second line therapy with Yescarta. So we're very excited about where this is going. There's still a lot of growth opportunity in second line. And obviously the team is really working diligently to make sure that physicians are well-educated to make sure that they understand the benefits and the overall survival over long-term for these patients. So more to come on that. And with that, I'll just turn it over to Andy for manufacturing.

Yeah, thanks, Joanna. And hey, Terrence, nice to talk to you again. On manufacturing, what I would say is that it's a real area of competitive strength for Kite and for us. As you know, we have three approved manufacturing centers globally, two in the United States, one on each coast, and then the one in the Netherlands. All of them are fully operational. We're already moving in our Maryland facility to partial automation of our manufacturing process, which is a rough to a great start. And we just have an outstanding team. So we have not had capacity constraints, either on the manufacturing of the cells or on the viral vector. So remember, we have both an outsourced and an internal viral vector supply. We manufacture our own viral vector on our Oceanside California biologics facility. So I don't think, Terrence, we've shared specifically the capacity of our manufacturing footprint, but rest assured, we have adequate capacity to serve the market today. Our team does a great job of forecasting where the market's going. We're always one or two steps ahead, and we don't expect that to change. So, you know, from a manufacturing standpoint, the kite team has just really done an outstanding job.

Nadia, may we have our next question, please?

Thank you. The next question goes to Tim Anderson of Wolf Research. Tim, please go ahead. Your line is open.

Hi. Thanks for taking our question. This is Adam on behalf of Tim. So on VicTarvey, it doesn't lose exclusivity until the next decade, but it's possible it gets targeted by the IRA before then. We know that Medicare only accounts for a limited portion of VicTarvey's volume. Is it possible that the pricing impact extends to commercial patients? Also, are there other aspects of the IRA that you think investors are discounting beyond the negotiation piece? Thanks.

I'll take that one, Adam. So, yes, we do believe that the IRA will have an impact on Big Harvey, although we do believe it will be later this decade and probably the earliest could be 2028 or so. Again, what you said is absolutely true. It is only on our Medicare business, and obviously there's a lot of things that can happen between now and then. It's still early in understanding exactly how it's going to play out, including the pricing negotiations that will happen. As to the spillover effect that you mentioned, we believe that we've had situations obviously in other channels today where we have higher discounts than in our commercial channels. And we've been able to manage that specific to the patient populations within those channels. And so we believe we will be able to do that again and mitigate the risk of spillover. And so, yeah, so I think that that's kind of what we're managing in addition to the fact that our portfolio As much as Vic Harvey is out to 2033, and that will, I think, really continue to be the standard of care for daily orals, we're also expanding our portfolio as you think about where we're going with Lanacapavir, with different combinations and treatment, and obviously with our prevention work. So more to come on that, but I think we're more than prepared to manage the situation and have a couple more years to figure out some of the different dynamics within the IRA.

May we have our next question, please? Thank you. The next question goes to Umar Rafat of Evercore. Umar, please go ahead. Your line is open.

Hi, guys. Thanks for taking my question. I want to touch up on Tredelvia real quick in terms of how the prescription trends are tracking in TNBC in particular, especially in light of your competitor, Daiichi, saying they now have number one patient share and HER2 low and growing. So I'm just curious how that's shaking out because I know you've got a new indication this quarter. And secondly, also, there's a lot of renewed interest in CAR-T, especially as it relates to immunology. But as I think of immunology and the price point, maybe 3x Humira, so that would be $150K, but conversely, I would imagine each cell therapy dose would be at least $100K. So how do you think about economics as you head into potentially immunology indications? Thank you very much.

So, Umar, I'll take the first part of that specific to Tredelvi and what we're seeing in TNBC and metastatic TNBC. So what we've seen is actually continued growth in TNBC for Tredelvi, and really that has a lot to do with the expansion of our field course, but also the continued data that comes through, right? The OS data in TNBC is one piece of the puzzle. The other piece is obviously the OS that we've shown also in HR positive. So really the breast cancer community understanding Tredelvi better in that space. We haven't split the market, and neither have physicians at this point really split the market between HER2 low kind of populations. So what we look at is each indication, TNBC and HR positive, HER2 negative. And what we're seeing in metastatic TNBC in the lines of therapy that is second line plus is really Tredelby established itself as the standard of care in this setting, and it continues to do that. So I do think, you know, just remembering in TNBC the split between IHC0 and IHC1 and 2 is 65-35, so much more represented, so less represented by maybe some of our competitors. Having said that, we work across the spectrum, which I think is really important to remember. So that's the Tredelvi dynamics right now in metastatic TNBC.

Great. This is Dan O'Day, too. I appreciate your question on the second one. I'll dovetail onto what or dad said before about the importance of therapeutic index. But before I do that, let me just articulate, you know, the tremendous benefit that CAR T is providing a large B-cell lymphoma from a pharma economic standpoint. The fact that we now have patients in very late stage disease, 50% of them surviving up to five years and essentially a flatline survival curve. You can imagine the benefit from both mortality perspective and cost to the system of the current price point in large B-cell lymphoma. I think any price point in other therapeutic areas would be based upon the clinical benefits that that brings to those particular patients. Of course, we understand that you know, this wouldn't necessarily be a broad scale use across all different types of patients. So we'll be patient segments where the therapeutic index is more important. And for those patients, you know, we would look at the level of benefit that brings both to the patient and to the healthcare system and then price it accordingly, of course. So I think it's hypothetical at this stage, but given the benefit that we're seeing in cancer, we would take the same approach to other disease states.

As we move to our next question, just another reminder, please, to limit yourself to one question. We do have 10 folks still hoping to ask a question on the call, and we'd like to get to as many as possible. So, with that, Nadia, may we have our next question, please?

Of course. The next question goes to Tyler Van Buren of TD Cohen. Tyler, please go ahead. Your line is open.

Great. Thank you very much for taking the question. I guess, given Legends' tremendous top-line data leak in the second line, I figured I would ask for your latest thoughts on that opportunity and how you plan to differentiate in that setting with the R-CELIX program.

Hey, Tyler. It's Andy Dickinson. I'll take the question on behalf of the KITE team. Obviously, we and others want to see the full data set. We read the same releases that you've read. And we continue to believe that R-CELIX and now KITE have a very interesting program that has the potential you know, to be very competitive in that area to get, you know, on par or better potentially than the J&J Legend product. And as Dan said earlier, it doesn't come as a surprise to us that cell therapy is delivering that magnitude of benefit to patients across different disease areas. And it's exciting to see where cell therapy may go in terms of becoming the standard of care and second line BCMA potentially over time, which, of course, increases besides the potential opportunity for the R-CELIX and KITE team. So, look forward to seeing more on the data. Look forward to carrying our program forward together with the R-CELIX team and updating you over time. But certainly, we look like a fantastic data set and great for patients.

Thanks, Nadia.

Our next question, please.

Our next question goes to Hartaj Singh of Oppenheimer & Co. Hartaj, please go ahead. Your line is open.

Great. Thank you. Thanks for the question. You know, I just had a quick question on Tredelvi in non-small cell lung cancer. I know those trials are still about a year, two years from being out. But Matt, can you just remind us of the scientific rationale behind, you know, Tredelvi in non-small cell lung cancer? And just to opine a little bit on just the ROC-01 and O3 trials. Thank you.

Sure, Hartaj. Yeah, I think there are several things that give us a lot of confidence in terms of moving forward in non-small cell lung cancer. Certainly, the distribution of TROP2 has demonstrated, you know, broad expression in non-small cell lung cancer, not too dissimilar from breast cancer. And so, I think that gives us, you know, a lot of incentive to believe that the expression of TRP2 in those tumors is going to give us efficacy by delivering the payload to those cells. Secondly, we've seen both internal and external data for TRP2-targeted ADCs that support the value of bringing TRP2-directed antibody drug conjugate to non-small cell lung cancer. So our approach, which has been broad and we're very excited about, I think is going really well, is we are, as you know, in EVOCA-1 going into second-line non-small cell lung cancer, and that study is going very well. We are then as well looking in frontline lung cancer in our other trials and looking at combinations of PD-1s with Tredelvi in those tumors in non-small cell, and we think that the potential for Tredelvi in those tumors is very high. We believe that we'll start to see those data start to roll out from our second-line studies first, as you would imagine, and then we'll continue to build on that as we go.

Thank you.

May we have our next question, please? Our next question goes to Brian Scorney of RW Bird. Brian, please go ahead. Your line is open.

Hi. Thanks for taking our question. This is Charlie Moore on for Brian. I had a question about when a cap appears. So with regards to the recent data with the BNABs, it seemed like one case out of 20 experienced a viral rebound. So I was wondering how that might inform which combinations you are thinking about moving forward with regarding overcoming resistance, And kind of along that same line, what kind of expectations do you have for the size of the long-acting market in HIV? Thank you.

Yeah, very important that that breakthrough was not associated with Lenacapavir resistance, right? And I think that's really important to keep in mind. Look, BNABs are relatively, you know, new clinical tools to look for options for people in terms of treating HIV, and it's one of the many approaches we're taking. Our approach has been to move a broader portfolio of small molecules to complement that early foray into long acting with the BNADS, where we believe that the tried and true mechanisms that we have used, again, both orally or parenterally, should provide us with an opportunity to bring treatment options to people living with HIV that will be associated with low resistance rates and high efficacy. So, that's what we're testing out. As we find the ideal partners, and I use the plural intentionally, we will be moving that forward. And so, I would look at those, the BNAP data as early, an early first approach to a long-acting

treatment for people living with hiv and maybe just to cover charlie the second part of your question around the size of the market so i'm going to split it out when you think about the market from a treatment standpoint we do believe that the long-acting market probably by the end of this decade will look about 50 50 or so we think that there are definitely patients out there that are looking for not to be reminded that they have hiv and an opportunity to think about the next generation long-acting to really bring to patients what they're looking for. I think that's the kind of last unmet medical need in this space at this point in time. I also think big target will continue to be the standard of care in the daily oral market where there's still a lot of patients that actually do want to take their medicine every single day to make sure that they know that they're taking something to put at bay their HIV. Just to touch on the expansion from a PrEP standpoint, I just find the prevention market very different in our view. And from some discussions we've had with community partners and people that are at risk of HIV, what we're seeing here is probably the split is different, but the market expansion is also very different. So the split is probably going to go towards 70-30 by the end of this decade is what we assume. It has a lot to do with the fact that these are not patients, these are people at risk. they don't necessarily want to take a pill a day for something they don't have. And so that makes a lot of sense. So something every six months aligned with physician visits could be an ideal scenario in this setting. And then from an expansion standpoint, you know, as you well know, we've talked about this a lot. You know, if you look at the CDC assumptions around the number of people that are at risk in the U.S., we've only kind of captured about 25% of those folks that are currently under medication. unfortunately, there's still 75% that are not and that are at risk. And so there's an incredible opportunity, especially with something every six months, to really expand in this marketplace and make sure that we truly work together to end this epidemic. So very exciting times to come. And within the next two years, hopefully we'll have Lena Capovir as the data reads out and approvals in prevention and then just a bit after that in treatment with different partners that Mernad was mentioning. So very exciting time.

Super. We'll move to our next question, please, Nadia.

Thank you. The next question goes to Steve Seedhouse of Raymond James. Steve, please go ahead. Your line is open.

Hi there. This is Ryan Deshner on for Steve Seedhouse. Thanks for the question. I'm just curious what the current non-hospitalized versus hospitalized usage split for Vicluri is, and do you anticipate a large amount of potential cannibalization in the non-hospitalized usage coming from Oblidesivir if its clinical development is successful? Thanks.

Thanks. So, Ryan, I'll take that question. So, what we have seen in the last year or so is somewhat of a lessening of the severity of infections, and therefore, from a hospitalization standpoint, Obviously, less hospitalizations as well. So, we've seen a couple of different things. So, obviously, much more non-hospitalizations of late, and we've seen that, obviously, in the numbers because, as you well know, Vicklery tracks very closely to hospitalizations. And what we've seen is that despite the fact that hospitalizations have come down versus our expectations in Q1, the actual usage of Vicklery has gone up. And that's super interesting. And a lot of that has to do with the strength of the data that keeps delivering for VECLURY around, you know, the updates of guidelines, the strength of our data, real-world data that's come out continuously showing reduction in mortality and reduction in reinmissions to hospitalization. So very powerful data, but definitely a bit of a play there. This is, you know, our outpatient use with VECLURY is still quite small in the single digit or so. Having said that, it is growing. But it's really the only antiviral that is approved in hospitalized settings for COVID-19. And so that continues to drive. I think as we think about our oral COVID program, I think we are thinking more of the non-hospitalized setting, which I think would then complement what we have in our portfolio that works really nicely both in the non-hospitalized setting and the hospitalized setting to make sure that patients at risk have what they need if they do get infected.

Nadia, may we have our next caller, please?

Yes, the next question goes to Olivia Breyer of Cantor Fitzgerald. Olivia, please go ahead. Your line is open.

Hey, good afternoon, and thank you for the question. Have you guys started to think through a commercial rollout strategy for migrolinab, especially when you look beyond the initial academic centers? And is there anything you can do to help drive initial adoption for, you know, of transfusion guidelines in that community setting specifically?

So I'll take that one, Olivia. As we think about MAGRA, we are excited. Obviously, we're waiting for the data to read out, but we are excited and we have started thinking about our commercial model for sure. I think a couple of pieces to that one. One is the strength of the community and making sure we understand kind of what that looks like, but also the strength that KITE brings in this play as well. So we're not starting from scratch, right? We are going to We partner very closely with our kite colleagues to make sure that there's a lot of learnings there that I think we can apply and a lot of overlap from a physician standpoint that also that we've been working through. So a lot of those pieces are in play. And the last piece I would say, just to add to the commercial model in our thinking, also has to do with the fact that we're also trying to get ahead of the game and better understanding, right? These are diseases that are that sometimes community physicians will not see on a regular basis and how do we make sure that we understand the when and where and making sure that the commercial model supports that timing as well and being a little bit smarter in our approach from an execution standpoint. So all those pieces are coming into play, but obviously we're excited and anxious for the data, but we will be sure that we are ready for not only the data, but the approvals as well.

Nadia, we'll try and squeeze in just a few more here.

Of course, the next question goes to Colin Bristow of UBS. Colin, please go ahead. Your line is open.

Oh, hi. Listening for Colin. Thanks for taking our question. So growing up, can you specify how many interims were planned in total for the enhanced trial and for the interim update in the back half of the year? Will there be actual data disclosure or just a high-level update? And what's your expectation? Also, what's your expectation of the CR and overall survival for the other side of the control arm? There were some chatters around if the other side of the arm outperformed in Takeda's phase three trial, where they used a more intensive dosing regimen. So what's your thought over this? Thank you.

Sure, thanks for the question. So, in terms of the interim analyses, it's a good reminder that the study is powered for the final analysis. And so, our expectation for any study that has interim analyses is that we run to the final analysis, which I think we've got it to occurring next year. When an interim analysis occurs, we generally will not see the data. Generally, what happens is that the DSMB will tell us to either continue or potentially discontinue. If obviously we discontinue, we'd share that, but if it's just continue, we would continue the trial, and there will be nothing other than that to share because we don't have any data to share since we won't have seen it. So, our expectation is that we run to the end of the trial. It would certainly be upside if we saw something earlier than that. And then, I think in terms of the expectations, you're absolutely right. I think everyone has looked at the Takeda data and are wary as to the efficacy of azacitidine in performing. in that patient population, and so we're going to have to wait and see what that looks like at the end of the trial. buttressed by the fact that we have continued, you know, the DSMB has told us to continue the trial. It gives me a little bit of more confidence that we are going to see a treatment effect, but that's a very indirect assessment. So, we're going to have to see, but we are powered for, you know, we've made some assumptions in terms of how we power the trial. So, hopefully, we'll be able to detect a difference between the two.

Nadia, maybe just time for one last question, please.

Thank you. Our final question goes to Mohit Bonzo of Wells Fargo. Mohit, please go ahead. Your line is open.

Great. Thank you for taking my question. And maybe a question on BD at this point. I mean, how are you thinking about BD? I know in the past you talked about there's no urgency there and you could be thinking about tuck-in, but Has anything changed at this point now that you're in a good position with the growth coming back? Is there an updated thought there?

Hi, Mohit. It's Andy. Thank you for the question. Nothing's changed from our recent updates. I mean, we think that BD is an important part of the puzzle for us going forward. It's important to continue to bring new and exciting innovation and products into our portfolio over time. We don't expect that to stop. That said, and to your point, we have made extraordinary progress over the last four years that we're really proud of. And so given the breadth and depth of our pipeline, you should expect that we will do less over the coming years than we did over the last three or four years. But we will still be active. And what we've said recently, and I'd reinforce, is that we will do ordinary course licensing deals. Obviously, you saw the community in our SELEX deals last year. We've talked about the Miro Bio deal, all of which we're very excited about. And then we expect from time to time to do small acquisitions. But, you know, our portfolio, to your point, is in a great spot. We're very excited about what that's going to do to drive growth. And we will always look for opportunities to add to it. if we can in a thoughtful way that we think will benefit patients and our shareholders.

But that's the way I would think about it at this point.

Thank you. That's all the questions we have time for today. I'll now hand back to Dan for any closing comments.

Thank you so much. I just want to thank you all for joining today, for your continued interest in Gilead. You know, look, bottom line is we've had a very strong start to the year, building on the momentum from 2022. And, you know, we collectively at Gilead and Kite believe we have a very strong and firm foundation for continued growth in 2023. As usual, if we didn't get to your questions or you have additional follow-up questions, please reach out to Jackie and the IR team, and we'd be more than happy to support you.

Thank you very much for joining.

Thank you. This now concludes today's call. Thank you so much for joining. You may now disconnect your lines.