Gilead Sciences Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 6, 2024

Key Takeaways

  • Product Sales Growth: Full year 2023 product sales excluding Veklury grew 7% to $24.7 B, driven by a 14% increase in Biktarvy HIV revenues to nearly $12 B and a 37% jump in oncology sales to ~$3 B.
  • The Phase 3 EVOQ-one trial of Trodelvi in second-line metastatic NSCLC failed to meet its primary endpoint of overall survival, though numerical OS improvements were observed in IO-nonresponsive subgroups.
  • The Phase 3 Oaktree study of oral antiviral obeldesivir in standard-risk, non-hospitalized COVID-19 patients did not meet its primary endpoint, and Gilead will evaluate obeldesivir’s potential in other viral infections.
  • Gilead reduced Yescarta’s U.S. manufacturing turnaround time by 2 days to an industry-leading median of 14 days and is expanding CAR-T access through partnerships with community networks.
  • For 2024, Gilead projects total product sales of $27.1–27.5 B (4–6% growth ex-Veklury), with HIV revenue growth of ~4%, Veklury sales of ~$1.3 B, and Q1 HIV sales down ~10–12% sequentially.
AI Generated. May Contain Errors.
Earnings Conference Call
Gilead Sciences Q4 2023
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good afternoon. Thank you for attending the 4th Quarter and Full Year 2023 Gilead Sciences Earnings Conference Call. My name is Victoria, and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Jackie Ross.

Operator

Thank you. You may proceed, Jackie.

Speaker 1

Thank you, operator, and good afternoon, everyone. Just after market close today, we issued a press release with earnings results for the Q4 and full year of 2023. 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, Mehrdad Parsi and our Chief Financial Officer, Andrew Dickinson. After that, we'll open the call to Q and A, where the team will be joined by Cindy Peretti, the Executive Vice President of Kite.

Speaker 1

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 2024 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 GAAP to non GAAP reconciliations are provided in the earnings press release, in our supplementary data sheet, as well as on the Gilead website.

Speaker 1

With that, I'll turn the call over to Dan.

Speaker 2

Thank you, Jackie, and good afternoon, everyone. The team and I are pleased you could join us Today, as we share the details of our full year and Q4 performance and the latest on our clinical portfolio. Starting with our full year performance, 2023 was a Strong year for Gilead with 7% growth in product sales excluding VICTORY driven by HIV and oncology. HIV grew by almost $1,000,000,000 with Biktarvy sales growing 14% to almost $12,000,000,000 and increasing its market share in the U. S.

Speaker 2

To 48%. Oncology grew 37% to almost $3,000,000,000 An increase of almost $800,000,000 in just 1 year. This growth was split evenly between our kite cell therapies and Trodelvi. The Glory for COVID-nineteen contributed $2,200,000,000 in 2023, ahead of our expectations, but down year over year as expected given the evolution of the pandemic. In the last 2 years combined, Gilead's base business has grown approximately $3,300,000,000 Or more than 7% annually, largely offsetting the decline in Vigleri revenues over the same period.

Speaker 2

The consistent growth in our base business gives us a Strong foundation as we continue into 2024 and look to deliver on our broad clinical portfolio. This is a catalyst rich phase for Gilead with more than 20 updates this year and many more to come beyond 2024. Starting with oncology, we expect at least 12 further updates by the end of 2024. These include Phase 3 updates for TRODELV in bladder and triple negative breast cancer and results from the pivotal Phase 2 IMAGINE-one study for unidacl in multiple myeloma We are very pleased to have shortened our manufacturing time for Yescarta by another 2 days in the U. S, reinforcing our industry leading median turnaround time, which is now at an anticipated 14 days.

Speaker 2

As you know, we did not reach the primary endpoint for EVOQ-one, Our Phase 3 trial for second line plus metastatic non small cell lung cancer. Mehrdad will go into detail on this later, But while we did not see the outcome we hoped for, the data are encouraging on a number of levels, namely a numerical improvement in overall survival Favoring Trodelvi, including in both squamous and non squamous tumors. A safety profile consistent with our product label that could continue to differentiate Trodelvi versus other TROP-two ABCs. And while not statistically powered, a potential benefit for a pre specified subpopulation that saw more than 3 months median overall improvement. The team is evaluating next steps Given the data and the significant unmet need and we look forward to discussing the data with regulators.

Speaker 2

Based on the totality of the results In both EVOQ-two and EVOQ-one, we are confident in Trodelvi's potential in patients with metastatic non small cell lung cancer, including in earlier lines of therapy. In virology, we are looking forward to a very important year for our HIV portfolio. Among the multiple updates we are expecting are the Phase 3 data for Lenacapavir in HIV prevention and at least 8 updates from our HIV treatment program. These are milestones that could bring us closer to our goal of helping to end the HIV epidemic, building on Gilead's decades of leadership in HIV. In COVID-nineteen, today we are announcing that our Phase 3 trial Oaktree evaluating obeldesivir did not meet its primary endpoint.

Speaker 2

We conducted the study to explore whether obladesavir could address the public health needs that existed with COVID-nineteen for standard risk patients. Again, Mehrdad will share details later, but essentially because of the way things have evolved, the standard risk population is now better able to fight COVID-nineteen without antiviral therapy. This made it more difficult for obludesivir to show a benefit compared to placebo. We know that the world needs to be equipped for other viruses and the broad antiviral activity of oblodezavir shown preclinically means it has potential for other viral infections. The updates we are expecting in 2024 have the potential to unlock multiple opportunities Cross virology and oncology.

Speaker 2

With a broad portfolio where the risk is balanced, we look forward to following the science and continuing to make a positive impact for patients and communities. Gilead has set an ambitious goal of delivering at least 10 transformative therapies by 2,030 and we are driving confidently to that goal. Before I hand over to the team for their updates, I'll move to Slide 6 and recap that we executed well in 2023 and achieved all the remaining targeted goals that we expected to in the Q4. We'll share our 2024 milestones later in the presentation, but it's clear that it's going to be a very busy year for Gilead. I'd like to thank the teams for their work in bringing us to this important catalyst rich phase for the company and for the strong commercial performance that gives us a firm foundation on which to build.

Speaker 2

With that, I'll hand it over to Joanna.

Speaker 3

Thanks, Dan, and good afternoon, everyone. Beginning on Slide 8, total product sales for the full year were at the high end of our guidance range at $26,900,000,000 reflecting solid base business growth with total product sales excluding VICLARI up 7% year over year to $24,700,000,000 This was almost entirely offset by the expected decline in Vyclari sales. For the full year, Vyclari sales were $2,200,000,000 reflecting the uptick in hospitalizations At the end of 2023, though still below levels seen in 2022. Turning to the Q4 on Slide 9, Total product sales were $7,100,000,000 down 4% year over year. Our base business sales were roughly flat year over year at $6,300,000,000 primarily driven by higher oncology sales, offset by lower HIV sales due to changes in channel mix that resulted in lower average In addition to the expected decline of our portfolio of non promoted products.

Speaker 3

Moving to Slide 10, Our HIV business delivered very strong results for the full year, up 6% year over year to $18,200,000,000 and contributing almost $1,000,000,000 in base business growth, primarily driven by demand as well as higher average realized price due to channel mix and inventory dynamics. More specifically, almost half of the full year HIV growth was driven by higher demand, Most notably by Biktarvy, which delivered solid double digit year over year growth of 14% with annualized revenues now more than $12,000,000,000 Already the clear market leader, Biktarvy continues to demonstrate impressive share gains, growing almost 3% year over year in the Q4 of 2023 to approximately 48% share in the U. S. This growth once again outpaced all other branded regimens for HIV treatment and represented the 22nd quarter of consecutive year over year share gain. For the Q4, as highlighted on Slide 11, HID sales of $4,700,000,000 reflected strong demand in line with our expectations.

Speaker 3

On a year over year basis, This was offset by lower average realized price due to channel mix that was notably favorable in the Q4 of 2022 and resulted in a decline of 2%. Sequentially, sales were up 1%, similarly driven by strong demand as well as favorable inventory dynamics, partially offset by lower average realized price due to channel mix. As we have noted previously, the pricing tailwinds we saw in the second half of twenty twenty two and the first half of twenty twenty three are not expected to repeat and will make year over year comparisons more challenging in the immediate term as we saw in the Q4. As a reminder, quarterly HIV growth is in general significantly more variable and less indicative of overall trends in the full year, particularly as certain quarterly pricing and inventory dynamics tend to normalize over the course of the year. Factors include: 1st, Gross to net adjustments, which can be difficult to forecast due to the lag between product sales and claim payments that frequently occur in different quarters.

Speaker 3

2nd, the timing of bulk government purchases, which contribute to overall demand, but can have significant negative impact on pricing in the quarter in which they occur. For example, certain discounted government segments are unpredictable in terms of bulk order timing and this impacts overall average realized price. And then finally, the inventory build by sub channel wholesalers and customers that typically occurs towards the end of the year. Historically, this happens in the Q4. In 2023, we saw the build start in the Q3 and continue, albeit to a lesser extent relative to prior years into the Q4.

Speaker 3

Overall, despite these quarterly variables, we remain confident that overall demand trends are strong and unchanged. With our HIV treatment market share above 70% in the U. S. And above 40% in PrEP, Gilead remains well positioned to continue delivering demand driven growth. For 2024, we expect HIV sales to grow approximately 4%, reflecting annual treatment demand growth of 2% to 3%, Biktarvy market share gains and continued double digit growth in demand for HIV prevention.

Speaker 3

In terms of quarterly HIV revenue, keep in mind that the Q1 is always impacted by the reset of patient co pays and deductibles. Additionally, we've historically seen inventory buildup in the Q4 that has led to notable drawdowns by wholesalers in the Q1. In the Q1 of 2023, this contributed to HIV sales declining 12% sequentially and we expect a similar decline in the 10% to 12% range for the Q1 of 2024. The continued strong performance to both Biktarvy and GISCOVI for PrEP are shown on Slide 12. Overall, Gilead's leadership in HIV is unmatched with a solid commercial portfolio and robust pipeline of potentially best in class regimens to serve the daily oral, long acting oral and long acting injectable markets.

Speaker 3

And I can share we are off to a strong start in terms of HIV demand, which gives us confidence in our full year expectations for 2024. Moving to the liver disease portfolio on Slide 13, sales of $2,800,000,000 for the full year highlight the consistently strong and stable contribution from our liver disease portfolio. In the 4th quarter, sales were $691,000,000 flat year over year and down 2% sequentially, primarily driven by unfavorable pricing dynamics, offset by higher HCD market share and our efforts to increase linkage to care in addition to growing HCV demand in new and existing European geographies. In HCV, we continue to reinforce Gilead's leadership with market share of over 60% in the U. S.

Speaker 3

And over 50% in Europe. While we continue to expect the rate of HCV new starts to trend downwards over time, given the curative nature of our medicines, Demand growth in both HDV and HBV is largely offsetting that headwind. On to Slide 14. The Clari sales continue to be highly variable with the 4th quarter down 28% year over year, though up 13% sequentially due to higher COVID related hospitalizations in the Q4. For the full year, the Clari sales of $2,200,000,000 exceeded the expectations $3,000,000,000 with strong 4th quarter sales of $765,000,000 up 24% year over year.

Speaker 3

In just 3 years, TRODELVIA revenue has grown to more than $1,000,000,000 and we continue to see strong growth across our approved indication. And in cell therapy, sales approached $2,000,000,000 in 2023 and KITE remains firmly established as the leading provider of CAR T cell therapies globally. Looking more closely at Chadelve on Slide 16, sales for the full year were $1,100,000,000 up 56% year over year. For the Q4, sales were $299,000,000 up 53% year over year and 5% sequentially. With over 30,000 patients treated to date, Trodelvi's solid demand trends continue to reinforce its robust clinical profile It's the only TROPE-two directed antibody drug conjugate approved and available in multiple tumor types.

Speaker 3

Awareness and utilization continue to increase driving notable share gains. In second line metastatic triple negative breast cancer, Approximately 1 third of patients are receiving TREDELVI, reinforcing its position as the leading regimen across the U. S. And other major markets. In pretreated HR positive HER2 negative metastatic breast cancer, we're encouraged to see share growth overall, driven by increasing adoption in the IHC-zero setting as well as continued use in HER2LA.

Speaker 3

Additionally, we look forward to potentially making Chudalvii more broadly available in metastatic bladder cancer. Data from the confirmatory Phase 3 TROPICS-four study in the first half of the year could enable global filings and subsequent launches, as well as potentially drive adoption in the U. S. Altogether expanding Trudelfy's potential reach to nearly 25,000 second line plus patients with metastatic bladder cancer. Turning to Slide 17 and on behalf of Cindy and the KITE team, cell therapy sales were $1,900,000,000 2020 3 grew 28% from 2022 driven by impressive growth particularly outside the U.

Speaker 3

S. As we expanded our network of authorized treatment centers and secured reimbursement following recent approvals. In the 4th quarter, cell therapy product sales were 4 $6,000,000 up 11% year over year and down 4% sequentially with strong growth in both Yescarta and TECARTIS in Europe and other international markets, offset in part by near term headwinds for Yescarta in the U. S. Both in class and out of class competition.

Speaker 3

As previously discussed, CAR T class share of eligible second line plus large B cell lymphoma patients remains at roughly 15% in the U. S. As growth continues to be slower than anticipated despite the compelling clinical data that suggests these therapies are potentially transformative for many patients. In Europe and other markets, CAR T class share in the same second line plus setting continues to be stronger at approximately 30%. Following a restructuring in November, the KITE team has been focused on extending the reach of cell therapies from primarily academic medical centers to community practices, especially in the U.

Speaker 3

S. In late 2023, we established partnerships with leading community networks, which include over 17 50 physicians nationally. We are certifying affiliated practices to become authorized treatment centers to provide KITE Cell therapies. So far, we've made notable headway across centers in the Southeast United States, for example, that operate over 40 locations to serve cancer patients. We expect to see the initial impact of these initiatives in mid-twenty 24.

Speaker 3

In the meantime, we expect our cell therapy business to be flat to slightly up in the Q1 of 2024 compared to the Q4 of 2023. Importantly, alongside our 96% reliability rate, we're also thrilled to share that we have shortened our manufacturing time in the U. S. By 2 days for Yescarta, bringing our anticipated median turnaround time to 14 days. This further extends our industry leadership in terms of manufacturing and the KAI team continues to innovate in this critical element of the cell therapy business.

Speaker 3

We look forward to inviting you to visit one of our manufacturing facilities later this quarter during an analyst and investor event. In conclusion, I'd like to thank our teams for a strong 2023 performance and setting up such great momentum for continued growth in 2024. The team is excited to continue to make our medicines accessible to all those who can benefit from them. And with that, I'll hand over the call to Murdaugh.

Speaker 4

Thank you, Joanna. We've had a busy start to 2024. I'll begin by discussing the results of our EVOCO-one study in second line plus metastatic non small cell lung cancer and our Phase 3 OAKTREE study of obodesavir in standard risk non hospitalized patients with COVID-nineteen. While we are disappointed that these studies did not meet their primary endpoints, We're also encouraged by what we are learning from the data to inform our clinical programs and support our commitment to deliver innovative new therapies for patients. Let me cover each of these readouts in turn.

Speaker 4

1st, on Slide 19, our Phase 3 study of TRODALB in second line plus metastatic non Small cell lung cancer, evoca-one, missed its primary endpoint of overall survival in this hard to treat setting. We plan to share the detailed data at the earliest opportunity. In the meantime, we'd like to highlight what we believe to be an important set of observations from EVOCO-one that give us continued confidence in Trodelpi as a pipeline and a product and its potential to benefit some patients with lung cancer. We saw numerical improvement favoring Trudelphi including in patients with both squamous and non squamous histology. This is encouraging for our ongoing Phase 3 EVOCO-three first line trial Evaluating TRUDEBI in PD L1 high patients in combination with pembrolizumab.

Speaker 4

Importantly, TRUDEBI continues to demonstrate a potentially differentiated efficacy and tolerability profile within the adverse event profile that is consistent with our label. Further, Tradelvia achieved more than 3 months of improvement in median overall survival in a pre specified subgroup of patients non responsive to their prior anti PD L1 therapy. This subgroup is defined as those who achieved stable disease or progressive disease as their best outcome to last prior I O therapy And represented more than 60% of the trial population. This analysis was not alpha controlled for formal statistical testing and we are continuing to analyze these data. We will discuss these data with regulators and KOLs to determine the best path forward.

Speaker 4

As a reminder, we required all patients to have received prior IO therapy regardless of driver mutation status and responsiveness to prior IO was a stratification factor. Additional analyses including TROPE-two expression are ongoing We will share these data as quickly as possible. Based on these observations and the data from the ongoing EVOCO-two study, we remain confident in Trodelvi's potential in patients For now, given these findings, we currently do not plan changes to our Phase 3 EVOCO-three study that's enrolling as expected. Moving to Slide 20, our novel twice daily oral antiviral, obeldesivir, did not demonstrate statistically significant symptom relief in standard risk Non hospitalized patients with COVID-nineteen in our Phase 3 OAKTREE trial. Obeldesivir was well tolerated in this large study population We will share the data at a future medical meeting.

Speaker 4

Overall, the Oaktree results reflect the decreasing severity and duration of COVID-nineteen symptoms observed The time to symptom alleviation in untreated standard risk patients is now less than a week as compared to almost 2 weeks at the peak of the pandemic. As a result, it was challenging for obelisavir to show benefit in the standard risk population. We continue to assess whether obelisavir could address other viral infections Given the broad antiviral activity that we have observed in preclinical data. Moving to another clinical update in oncology, The Phase 3 ENHANZE 3 trial evaluating magrolumab in frontline unfit AML has been discontinued based on a futility analysis and a higher observed incidence of Grade 5 serious adverse events. Following the discontinuation of ENHANZE and ENHANZE II last year, We do not plan further development of mongrelimab in hematologic cancers.

Speaker 4

Wrapping up on clinical updates, I want to thank all of those who are involved with EVOCO-one, Oaktree and ENHANZE Every trial adds important advancements in our understanding of the treatment of these diseases and will inform our future development plan. We look forward to sharing more on that in due course. Transitioning to our HIV program on Slide 21, We expect the Phase 3 readout of PRPOSE 1 evaluating lenacapavir for HIV prevention later this year. Along with PRRPIS 2 Expected in late 2024 or early 2025, Purpose 1 forms the basis of our potential regulatory filing. We continue to target our first approval for Lenacapivir in prevention in late 2025, potentially making Lenacapivir the first twice yearly dosing regimen available for PrEP.

Speaker 4

Looking at our HIV program more broadly, you can see we will be sharing at least 9 updates this year across our next generation daily, Weekly, 3 monthly and twice yearly programs, all based on Lenacapavir, our novel first in class long acting capsid inhibitor. We're excited to have over 75 presentations at Croix this year across Gilead led and supported studies. Among them some notable updates from our treatment pipeline include encouraging data from our Phase 2 ARTISTRY 1 trial evaluating our lenicapivir and We're exploring this combination as a potential additional option for biologically suppressed people living with HIV. Phase 1 data on GS-seventeen twenty, our once weekly oral integrase inhibitor and Phase 2 data on lenacapavir plus islatravir, our once weekly oral combination in development with Merck. In the second half of this year, we look forward to providing an update on the Phase 2 trial Evaluating Lenacapavir plus bnAbs as a twice yearly regimen.

Speaker 4

Turning to cell therapy on Slide 22,

Speaker 2

You may have

Speaker 4

seen that the FDA recently proposed safety label changes for all approved CD19 and BCMA CAR T cell therapies, including Yescarta and Tecartis. There is no change to our confidence in the benefit risk profile of Yescarta and Tecartis. Based on analysis of our global safety database with over 16,800 patients treated with Yescarta, there has been no causal link established between Yescarta and those reported to the FDA public safety dashboard. Additionally, no cases of T cell malignancies have been reported with Tecartis. In the Q4 of last year, we presented 26 abstracts at the American Society of Hematology meeting in December, showing that Yescarta and Tecartis continue to generate some of the longest follow-up and most robust data sets for cell therapies with the potential to transform patient lives.

Speaker 4

Also at ASH, our partner Arstellix presented impressive updated data from the Phase 1 trial evaluating a needle cell and 38 patients with relapsed or refractory multiple myeloma. At a median follow-up of 26.5 months, median progression free survival was not yet reached, despite 70% of patients having 1 or more high risk prognosis factors. Given this potentially differentiated safety profile With notably no delayed neurotoxicity to date, including Parkinsonism, Nido Cell has the potential to become the best in class BCMA CAR T. We look forward to sharing an update from the pivotal Phase 2 IMAGINE-one study and initiating an earlier line multiple myeloma trial later this year. In terms of manufacturing, while KITE is already the clear leader, we're pleased to highlight that the FDA approved our updated process that reduces the turnaround time for Yescarta in the U.

Speaker 4

S. From 16 days down to 14 days. This further extends our leadership in cell therapy And we continue to identify additional opportunities to reliably bring these much needed therapies to more patients as quickly as possible. Beyond manufacturing, we have 8 ongoing cell therapy trials of which 4 are evaluating new indications and 4 are exploring earlier lines of therapy. As we formally wrap up 2023, on Slide 23, I would like to acknowledge the work of our clinical teams who executed on our ambitious and broad That extends far beyond the list shown, including the advancement of 8 new assets into the clinic, the delivery of 15 late breaking oral presentations at major clinical congresses and the initiation of 3 new Phase 3 programs.

Speaker 4

For 2024, our target milestones laid out on Slide an update on ASCEND-three in first line PD L1 negative metastatic triple negative breast cancer, an update on TROPICS-four assessing overall survival in second line metastatic or locally advanced bladder cancer and an update on our Phase 3, PROPUS 1 trial assessing Lenacapavir in HIV prevention as previously highlighted. We are also looking forward to the start of Phase 3 trials for TRUdelphi in endometrial cancer and the ARTISTRY trials evaluating lenacapavir and bictegravir oral combination for HIV treatment. Our commitment to develop innovative new therapeutic options is unchanged, and we are confident that we will make progress on that commitment in 2024. And now, I hand the call over to Andy.

Speaker 5

Thank you, Mehrdad, and good afternoon, everyone. Starting on Slide 26, we closed the year with total product sales of $26,900,000,000 At the top end of our guidance range due to a strong contribution from Veklury. For the full year, total product sales excluding Veklury grew 7% driven by growth in both HIV and oncology. HIV increased 6% year over year driven by Biktarvy, which grew 14% from 2022 to $11,800,000,000 and oncology grew to $2,900,000,000 for the full year, an increase of $792,000,000 or 37% from 2022. Altogether, Total product sales excluding Vectlary were $24,700,000,000 modestly below the lower end of our full year guidance range, largely due to quarterly pricing variability in HIV in the 4th quarter.

Speaker 5

Importantly, HIV volumes were in line with our expectations And we are confident in our full year revenue growth expectations for HIV in 2024. VEGLIRI revenue of $2,200,000,000 Exceeded our guidance of approximately $1,900,000,000 and reflected higher hospitalization rates in the latter part of 2023. Compared to 2022, full year Vectlery revenue declined as expected and represented a headwind of more than $1,700,000,000 This was largely offset by almost $1,700,000,000 in growth from our base business, resulting in roughly flat total product sales year over year. On Slide 27, our non GAAP results were largely as expected, including gross margin and operating expenses, notably R and D, which showed disciplined moderation as we progress through 2023. Non GAAP EPS was $6.72 and within our guidance range despite the incremental $0.10 of acquired IPR and D associated with the Arcellx and Compugen partnerships that we announced following our guidance revision in November of 2023.

Speaker 5

A quick note that our GAAP results were impacted by some restructuring expenses, primarily related to our manufacturing strategy and our activities at Kite. As we discussed in the later part of 2023, we have been taking steps to evolve our business model and expense structure to set us up for a strong 2024. As a result, our GAAP results reflect approximately $500,000,000 of associated expenses in 2023 were $0.40 per share and contributed to GAAP EPS of $4.40 for the full year. Moving to our 4th quarter results Starting on Slide 28. Total product sales excluding Vectlury were $6,300,000,000 Including Vectlury, Total product sales of $7,100,000,000 were down 4% from the same quarter in 2022.

Speaker 5

As expected, VACLORI sales decreased year over year due to lower rates of COVID-nineteen related hospitalizations. On Slide 29, you can see that on a non GAAP basis, product gross margin was 86%, down 66 basis points from the prior year. R and D expenses were $1,500,000,000 down 6% year over year. Acquired IP R and D was $347,000,000 Reflecting payments related to our collaborations with Arcellx, Assembly Biosciences and Compugen and our Xynthara acquisition, SG and A was $1,600,000,000 down 21% year over year, primarily related to the 2022 charge for the termination of the Everest collaboration that did not repeat in 2023. Excluding this 2022 charge, non GAAP SG and A was down 1%.

Speaker 5

Operating margin was 39%, up from 37% in the Q4 of 2022 And effective tax rate in the 4th quarter was 17% flat compared to the prior year. Overall, Our non GAAP diluted earnings per share was $1.72 in the 4th quarter compared to $1.67 in the Q4 of 2022. I'll move now to Slide 30 and our guidance, which assumes a generally stable macro environment including FX at current rates. For the full year 2024, we expect total product sales in the range of $27,100,000,000 to $27,500,000,000 We expect total product sales excluding Vectlury in the range of $25,800,000,000 to $26,200,000,000 representing growth of 4% to 6% for our base business year over year. Within total product sales and as Joanna discussed, We expect HIV revenue to grow approximately 4%.

Speaker 5

And we expect Vectlary sales of approximately $1,300,000,000 Although, as always, we caution you that Vectlory sales remain highly variable depending on hospitalization rates. We do not expect to update our Vectlory guidance until our Q3 earnings call, absent a very clear trend in COVID-nineteen infections. Moving to the rest of the P and L and on a non GAAP basis, We expect product gross margin to range between 85% 86%, modestly lower than the 86.1% reported in 2023 due to the growing contribution from our oncology portfolio. We expect R and D to grow by a low to mid single digit percentage compared to 2023, Highlighting the substantial moderation in expense growth as we approach a steadier state of active Phase 3 programs. We expect acquired IPR and D to Approximately $350,000,000 Consistent with our approach in 2023, we will highlight incremental acquired IP R and D expenses as we announce new transactions and update our guidance each quarter.

Speaker 5

And We expect SG and A to decline by a mid single digit percentage compared to 2023. Excluding the $525,000,000 legal settlement in We expect SG and A to grow in the low to mid single digit percentage range compared to SG and A of $5,500,000,000 in 2023, Excluding this settlement, as a result, we expect our operating income for 2024 to be between $11,200,000,000 $11,700,000,000 We expect our effective tax rate to be approximately 19%. And finally, we expect our non GAAP, Non diluted EPS to be between $6.85 $7.25 per share for the full year And GAAP diluted EPS to be between $5.15 $5.55 As a reminder, For the Q1 of 2024, we expect HIV to decline sequentially in the 10% to 12% range from Q4 2023, similar to what we saw in the Q1 of 2023 and cell therapy to be flat to slightly up from Q4 of 2023. Moving to capital allocation on Slide 31, our priorities have not changed. In 2023, we returned $4,800,000,000 to our shareholders.

Speaker 5

This included $3,800,000,000 in dividend payments and $1,000,000,000 in share repurchases. 4th quarter share repurchases were $150,000,000 For 2024, we announced today a 2.7% increase in our Quarterly cash dividend to $0.77 per share and we remain committed to growing our dividend over time in line with our earnings growth. You can also expect to see continued investments in our business both internally and externally through select partnerships and business development transactions. Finally, we will continue to utilize share repurchases to offset equity dilution as well as additional repurchases on an opportunistic basis. With that, I'll invite the operator to begin the Q and A.

Operator

Of course, Andrew. We will now begin the question and answer session. Our first question comes from the line of Tyler Van Buren with TD Cowen. Your line is now open.

Speaker 5

Hey, guys. Good afternoon. Regarding the 2024 product sales guidance, understand you guys are guiding to a near $900,000,000 sales drop off year over year for Vectlory, but the guidance ex Vectlory looks It'd be a 5% year over year growth at the midpoint versus 7% for this year. So what do you view as some of the levers

Speaker 2

Thanks, Tyler. Welcome. Let's have Andy start, please. Thanks.

Speaker 5

Hey, Tyler. It's Andy. Thanks for the question. You're absolutely right. Our Product sales guidance for products excluding Vectluria implied 4% to 6% growth year over year, again continuing the trend of Strong growth that you've seen over the last two years.

Speaker 5

I'd also highlight that it implies a substantial moderation of our operating expense growth, is an important piece of the puzzle that we spent a lot of time talking about. To your question specifically on product growth, the growth drivers for 2024 are the same as the growth drivers last year. You continue to see strong growth in our HIV business. As you see in the quarter, You really need to focus on the full year for HIV to see the growth trends and we saw another year of very strong growth Across our HIV business for the full year in 2023, we expect the same thing in 20 24 and you heard on the call that we're expecting at least 4% growth And then of course the cell therapy business and TRIDELVIA are expected to continue to grow as well. So those are the key growth drivers.

Speaker 5

We look forward to updating you throughout the year, but we're excited about the setup as we move into 2024.

Operator

Victoria, may I have our next question?

Speaker 3

Thank you

Operator

so much. Of course. Thank you so much for your question. Our next question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open.

Speaker 3

On business development, you have noted the potential for a $5,000,000,000 to $6,000,000,000 deal in oncology or I and I. Where are you seeing the greatest opportunity to leverage your current clinical and commercial infrastructure? Thank you.

Speaker 2

Great. Thanks, Salveen. This is Dan. Maybe I'll start and then ask others to add. But appreciate the question.

Speaker 2

I think just to reinforce our M and A strategy, Nothing has changed from a business development perspective. And particularly that's against the context of The background of nearly doubling our clinical trials underway over the past 4 years, multiple late stage results, as you know, we're expecting more than 20 results So it's still this year, and against the backdrop of no significant patent expirations, in our business until early parts of the next decade. So, I think we'll continue to be opportunistic about pursuing business Development in the three areas that we are focused on, which is obviously virology, oncology and inflammation We'll be driven by the science. We continue to articulate that building our late research early development pipeline is Probably one of our biggest focuses and we'll continue to look at later stage deals as they fit into our portfolio and our range. It might also be important to note that we are back to premium unitimetics We're comfortable with our ability to put capital to work, but nothing has changed and we feel we have everything within Gilead right now to achieve our ambitions over the second half of this decade.

Operator

Victoria, may we have our next question please? Of course. The next question comes from the line of Carter Gould with Barclays. Your line is now open.

Speaker 2

Hi, this

Speaker 4

is Leon Wang on for Carter. Thanks for taking my question. So at this point, what conviction do you have a needle cell will differentiate on neurotox or Parkinsonian versus your competitors. And if the lack of neurotox data recapitulate later this year, Would that be derisking in your view and how important would that be in the market? Thank you.

Speaker 2

Thank you, Gilead. So we've got Cindy Peretti here to handle that. Thanks.

Speaker 6

Thank you for the question. I think with the AMITAcell data, We expect to complete the enrollment of our IMAGINE-one study this year where we would have then 100 patient worth of data. And obviously, we're going to continue to look for safety signals, neurotox, as you suggested, but to date, we have not observed any. Your second part of that question was, do we see that as a differentiator? And I would definitely see that as a differentiator in the marketplace if we were to come Forward with a differentiated safety profile, I think the other component to remind you of is we also believe it's possible to have a differentiated efficacy profile.

Speaker 6

And today, based on the D domain and our transaction efficiency, we're able to use half the dose That we're seeing with our competitors and that could play both with safety and efficacy. Thank you.

Speaker 1

Great. Victoria, are you planning

Operator

to take your questions, please? Of course, our next question comes from the line of Terence Flynn with Morgan Stanley. Your line is now open.

Speaker 2

Thanks so much for taking the question. I was just wondering if you could speak to your confidence level in TRIDELV in the frontline non small cell lung Trial setting here given the EVOCO-one data and if you're considering any potential changes to that frontline trial as a result. Thank you.

Speaker 4

Hi, Terence. This is Murda. I think when we have looked at the data so far and we're Looking forward to sharing it with everyone as quickly as we can. Probably one of the most important things in that data set that confirms Where we were before is that we have not seen a difference in response rates between squamous cell carcinoma and non squamous cell carcinoma. That was a bit of an overhang in the fall.

Speaker 4

And as we had mentioned earlier, we had not seen that to date and that has been Bolstered by the results of the Evoqua 1. So we do think that that increases our confidence that we don't need to think about Look at that. Now there are other analyses we need to do to make sure that there are other predictors of response or not and we'll be doing that and we'll be sharing that over time. But right now, our overall confidence in TRIDELV broadly speaking Remains very high. We have 3 approvals, and we have a broad development program, Against which we are executing really well.

Speaker 4

We continue to have additional trials that we'll read out this year in Phase 3, Specifically, the TROPHIO-four study that we'll be looking at the bladder cancer confirmation study With hopefully an OS signal, that study could actually give us beyond confirmatory trial in the U. S. It allows us to open Conversations with regulators outside the U. S. And then, we have promised an update on ASCENO3 in breast And then we now have a number of trials going on in a variety of indications, including ones we've mentioned in, For example, endometrial cancer.

Speaker 4

So overall, what we've seen in Evoqua-one and we're looking forward to sharing with you Really maintains our level of enthusiasm about Tredelvi's long term potential from an efficacy and safety standpoint across the board and we have no

Operator

Yes, ma'am. Our next question comes from the line of Umer Raffat with Evercore. Your line is now open.

Speaker 7

Hi, guys. Thanks for taking Hi, guys. Thanks for taking my question. Look, it's very well understood for folks in biopharma community that no one can And but this point has a lot of implications for your TAF litigation obviously. So my question is, in a scenario where the Supreme Court takes up your petition, would that potentially be a venue where you could prove the level of evidence that's We needed to make a decision on exception to degree and the type of decisions to make.

Speaker 2

Right. I think Gandy is going to take this one.

Speaker 5

Hi, Amrit. Yes, thanks for the question. Yes, of course. I mean, in front of the Supreme Court, just like the appellate court, we'll be able to present The facts in our arguments as you'd expect, if you look at some of the briefing documents in the appellate court, I think they spell that out Very clearly in terms of the what happened over time with the development of TAF and what we knew at different points in time, And that would be available, as you'd expect, not only

Speaker 2

to the appellate court, but

Speaker 5

to the Supreme Court. And of course, Those same facts would be presented at any trial if we ever get to that point. One other update on the TAP litigation. Again, Umer, nothing From our perspective, we continue to have a lot of confidence. The one update I can provide is that the one of the very first trial in the federal court has been dismissed As of yesterday, I believe.

Speaker 5

So it now looks like and again, this is consistent as you know with of other cases, I think it's now over 5,300 cases that have been dismissed by the courts, over 4,300 in the California state courts And over a 1,000 in the federal courts before they get to trial. So the 1st bellwether trial in the federal court's Umer would now be in November instead of April. We'll keep you up to date and thanks for your question.

Operator

Our next question comes from the line of Olivia Breyer with Cantor Fitzgerald. Your line is now open. Hey, good afternoon. Thank you for the question. What were some of the dynamics that happened with Yescarta this quarter?

Operator

And how should we be thinking about growth for 2024 from your cell therapy franchise just in light of the sequentially down quarter in 4Q? Thanks.

Speaker 6

Thanks a lot, Olivia, for the question. This is Cindy. We continue to be the leaders in cell therapy. And I think the piece that Johanna mentioned is that we are looking at how do we And beyond the existing ATCs. So the dynamics that we observed this quarter were capacity constraints within the existing ATCs We saw a little bit of in class and out of class competition.

Speaker 6

And in parallel, we have been Continuing to work on expanding our ATCs. So today, we have over 400 ATCs globally. We are moving out of urban centers and those academic centers into the community to meet patients where they are. As Andy suggested, that bringing up those ATCs in the community is going to be really important Part of our future strategy, but it does take a little bit longer than bringing an academic center up. So we expect to be flat to Slightly up in quarter 1 and you'll start to see that return to growth in the second half of the year.

Operator

Our next question comes from the line of Geoff Meacham with Bank of America. Your line is now open.

Speaker 8

Great. Thank you. You have another one on cell therapy, but more on the profitability. This is a Franchise that's almost $2,000,000,000 in sales. You guys have improved the turnaround time.

Speaker 8

You've reached scale. You've treated a ton of patients. What can you tell us about the progress that you've made to making this a profitable franchise? I'm just thinking not for the current products, but also Looking out 5 years plus. Thank you.

Speaker 5

Hey, Jeff, it's Andy. Thanks for the question. It's a great question. You're absolutely right. Cell therapy business has made tremendous progress over the last 5 or 6 years and evidenced most recently by The faster turnaround time in manufacturing that we talked about on our prepared remarks, going from 16 days to 14 days.

Speaker 5

And again, it's just the beginning from our So while we don't provide specific guidance, we have said when we announced the Kite transaction that we expected to be profitable, breakeven or to be profitable, breakeven are profitable and accretive by the end of year 4. We got there shortly after that. All of the metrics that we look at on the business have We've continued to make significant progress on our manufacturing efficiency, manufacturing costs despite The fact that we've opened 3 global manufacturing centers and each time you do that when you move to commercial manufacturing it impacts your gross margin. So I'm really proud of What the team has done, and same thing on the operating costs. You see in the Q4, we announced some restructuring charges, Jeff, that hit Our GAAP results, part of that was a restructuring at Kite.

Speaker 5

Cindy and her team looked At the structure and made changes to the structure that we think will continue to drive growth and efficiency in the business over the long run. So Maybe the last thing I'd say is that when we look at the business, this is a business that we have line of sight To Biologics margins and profitability. We're really growing the business, Jeff, as you know, for long term sustainability and growth and less Near term profitability, but it's certainly exciting that the business is doing as well as it is.

Speaker 6

I think the only thing I would add to Andy's Comment is beyond the 3 manufacturing facilities, we also have our own viral vector facility. So given the fact that viral vector has had some

Operator

Of course, our next question comes from the line of Michael Yee with Jefferies. Your line is now open.

Speaker 4

Hey, guys. Thank you for the question. We We had an HIV question. There were some comments around the dynamics of the channel mix as it relates to HIV pricing. And I was wondering if you could just remind us about what the driver of the benefit was in 2022 and 2023 and how that changed As we go into 'twenty four and why that's difficult comps, is that a change in mix between commercial and Medicaid, swapping or maybe just explain that, that would help understand what's going on there for 2024.

Speaker 4

Thank you.

Speaker 3

Sure, Michael. Hi, it's Joanna. Let me take that one. So what you're referring to is actually we saw some pricing favorability in Q4 of 'twenty two and the first half of twenty twenty three. That pricing favorability was mainly driven by actually just the inflation being so high and therefore, some of our rebates are actually based on that inflation rate.

Speaker 3

And so therefore, there was The upside during those quarters, we knew that that was not going to repeat itself. So we had kind of shared with you, I think, from Q3 on that this was going to normalize. And so that was kind of what happened in the first half of twenty twenty three. As we think about the second half of 2023 and mainly the Q4, what we did see there is very strong demand and that continued throughout the whole year, But we had some fluctuations, some quarterly variability, mainly due to channel mix and more government resulting in lower average realized price because of higher rebates. And so you really have to look at it on a full year basis.

Speaker 3

And so that's why it's so important. You know that HIV performance will always have some quarterly variability and we always need to look at the full year to really get the full picture of what's going on. HIV for the full year of 2023 grew 6% with nearly $1,000,000,000 in revenue growth driven by Biktarvy, Obviously growing at 14% and at 48% share with 3% share growth in that year outpacing all competitors. And so we're really proud of the demand Driven results that we've seen in 2023 and as we think about 2024 and our predictions for 2024, We believe that our expectations is going to be in line with HIV treatment, which is still about 2 to 3 points. Layer on top of that the demand growth from Biktarvy and Descovy for prep and that's why we're expecting about a 4% growth in HIV.

Speaker 3

So that gives you the full picture of what's going on and what happened in the past. So we don't expect that on a yearly basis, but on a quarterly basis, we do expect That variability and I would expect that that will continue as we move forward.

Operator

Our next question comes from the line of Chris Schott with JPMorgan. Your line is now open.

Speaker 5

Great. Thanks so much for the question. Can you just talk about the TIGIT program and what drove the decision to And maybe as part of that, can you elaborate a little bit more on the decision to deemphasize the PD L1 high population He's in favor of the all comer study. So any color there would be appreciated. Thank you.

Speaker 5

Hey, Chris, it's Andy. Maybe I'll Start on the TIGIT program and the revised agreement with ARCUS that we announced last week, and then Mehrdad can answer the second part of your question. It's relatively simple. If you step back, you've heard us say this before, but I'd reiterate that we value the partnership that we have with Arcus And the programs that their team has developed. And the recent updates to your question to the partnership really allow both companies to more efficiently Employ our teams and capital.

Speaker 5

We also focused on streamlining decision making and the additional capital allows us to expand the overall clinical study footprint. So there are A number of things that both companies accomplished through the amendment. It does reinforce our support and belief in their programs broadly, not just TIGIT, there's a lot to be excited about there that you'll see play out over the coming years.

Speaker 4

And excuse me, this is Murde. I think you're referring to the ARC-ten study. And as you may recall, we started that study Together with Arcus back in 2021 outside the U. S. With a chemo comparator arm.

Speaker 4

And at the time, there was really limited access And so we subsequently updated that study March of last year to include PD L1 inhibitors as the standard It took us time to get this all going. And while that was happening, we had a number of competitors launch similar trials In the space with their TIGIT antibodies. So as a result of all that, the enrollment for the ARK10 trial wasn't as robust as We had hoped for and as it had been. And STAR-one hundred and twenty one, which is the all comers study, was recruiting very well. And so we We decided to really prioritize our efforts for that all comers population, where we think we could be 1st or second in class.

Speaker 4

It was really a prioritization to ensure that we could stay ahead and keep moving the molecule forward as quickly as possible.

Operator

Our next question comes from the line of Brian Abrahams with RBC Capital Markets. Your line is now open.

Speaker 9

Hi, good afternoon. Thanks so much for taking my question. I realize this is pending KOL and regulatory discussions, but I was wondering if you could frame the Potential next steps for the PD L1 poor responders, do you think this is a filable population for tridulvii in second line lung or Might you also consider running another study in that population? And along those lines, I'm curious what you're expecting to see from the updated EVOQ-two data this year and how that might shape

Speaker 4

Sure. This is Mehrdad again, Brian. So maybe I'll take the second part first. On Evoqua 2, as you can imagine, we showed last year ORR data and those data are going to continue to mature We hope continued confidence in the frontline setting for TRIDELVY based on that Study that's running in parallel with EVOCO-three. So, we've gotten a lot of confidence from EVOCO-two to support 3.

Speaker 4

And so we are going to keep updating that to make sure we get that. And it Does actually reflect back on one of the earlier questions around changes to Evoqua 3. And Evoqua 2 really keeps us in the right population Okay. Gathering data so that we can make sure there are no changes that are necessary. In terms of the PD-one Non responders in EVOQ-one, yes, we I think we need more time to I wouldn't rule out the possibility That we could discuss with regulators the possibility of using these data.

Speaker 4

And I want to be realistic and say that a second trial, Another trial may be necessary and something that we would we are thinking about right now and we'll let you know as we update Our situation there. And of course, we'll share the data from a local one, so that we can talk about it in more detail over time.

Operator

Our next question or final question comes from the line of Colin Bristow with UBS.

Speaker 10

Afternoon. Thanks for squeezing me in. Can you hear me?

Operator

Yes, we can hear you.

Speaker 10

Maybe on the back of Brian's question. Maybe on the back of Brian's question with regards to the observation that the OS benefit was greatest in those non responsive To prior IO in the EVOKE-one study, this seems to align with a recent study, which showed that TROP-two expression levels are associated with The primary resistance to checkpoint inhibition in non small cell patients. And so And from that, obviously, raises the question on the potential synergy of TROP-two and anti PD-one. I wondered if you had any thoughts Or do you have any data which kind of gives you comfort? Thanks.

Speaker 4

We've spoken about this before. It's definitely something that we are cognizant of and following. One of the Data readouts that we are continuing to collect right now from EVOQ-one is Trop-two expression, and I think that will help us As we look at those data and share them to formulating hypotheses that may warrant changes. So it's that TROP-two expression is definitely Something that we are focused on and we'll continue to follow and evaluate.

Operator

Thank you. I would now like to pass the conference back to Daniel for any closing remarks.

Speaker 2

Well, thanks everyone for joining. We very much appreciate it. Before we conclude the call, let me just wrap up with a couple of comments and summary from what the team has accomplished over the past year and are set up for 2024. First, our full year performance reinforces the continued growth and strength of the business. Gilead's HIV portfolio is unmatched with the standard of care daily oral treatment and a rapidly advancing pipeline with potentially best in class Long acting regimens.

Speaker 2

And in oncology, we now have a business that is annualizing at over $3,000,000,000 with clear opportunity for future growth. So it's the base business last year, this year. And second, our strong business allows us to take bold bets in innovation And you'll see multiple updates on how those are playing out in 2024 and beyond. We're pursuing science with a high potential impact for patients and that comes with risk. But importantly, we built a resilient business and a robust portfolio that allows for that.

Speaker 2

In 2024, we expect at least 20 key updates across our HIV and oncology portfolios. And finally, I just want to thank the Gilead teams for all the hard work in delivering our strong full year

Operator

That concludes today's call. Thank you for your participation and enjoy the rest of your day.

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