Gilead Sciences Q1 2024 Earnings Call Transcript

Participants

Corporate Executives

• Jacquie Ross, Vice President, Investor Relations and Corporate Strategic Finance
• Daniel O'Day, Chairman and Chief Executive Officer
• Johanna Mercier, Chief Commercial Officer
• Merdad Parsey, Chief Medical Officer
• Andrew Dickinson, Chief Financial Officer
• Cindy Perettie, Executive Vice President, Kite

Analysts

• Chris Schott, JPMorgan Chase & Co.
• Daina M. Graybosch, Leerink Partners
• Umer Raffat, Evercore ISI
• Tyler Van Buren, TD Cowen
• Geoff Meacham, Bank of America Co.
• Michael Yee, Jefferies Financial Group Inc.
• Salveen Richter, The Goldman Sachs Group, Inc.
• James Shin, Deutsche Bank Securities
• Mohit Bansal, Wells Fargo & Company
• Simon Baker, Redburn Atlantic
• Charlie Moore, Robert W. Baird
• Brian Abrahams, RBC Capital Markets
• Terrence Flynn, Morgan Stanley
• Carter Gould, Barclays PLC

Presentation

[Operator]

Good afternoon, everyone, and welcome to Gilead's First Quarter 2024 Earnings Conference Call. My name is Rebecca, and I'll be your host for today. [Operator Instructions]

I'll now hand the call over to Jacquie Ross, VP, Investor Relations and Corporate Strategic Finance.

[Jacquie Ross, Vice President, Investor Relations and Corporate Strategic Finance at Gilead Sciences]

Thank you, Rebecca. Just after market closed today, we issued a press release with earnings results for the first quarter of 2024. 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, Johanna Mercier; our Chief Medical Officer, Merdad Parsey; and our Chief Financial Officer, Andrew Dickinson. After that, we'll open the call to Q&A where the team will be joined by Cindy Perettie, the Executive Vice President of Kite.

Before we get started, let me remind you that we will be making forward-looking statements. Please refer to Slide 2 regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially.

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

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Thank you, Jacquie, and good afternoon, everyone. I want to start by thanking the Gilead teams for delivering a strong first quarter, what you see in our commercial performance and our clinical execution. Total product sales excluding Veklury grew 6% year-over-year to $6.1 billion driven by higher demand across HIV, oncology and liver disease. Veklury sales continued to track with the rates of hospitalization for COVID-19 and reached a total of $555 million. Once again, sales growth for the quarter reflected the diversity of our portfolio. HIV product sales grew 4% year-over-year. Oncology product sales were up 18%, driven by Trodelvy, which is well-established as the number one regimen for second line metastatic triple negative breast cancer and by our transformative cell therapies.

As we outlined at the recent Kite analyst event in Maryland, we have exciting plans to build on our clear market leadership in cell therapy, such as expand into community networks in the U.S., more than double our manufacturing capacity and move into new indications and disease areas with next-generation products. From an EPS perspective, first quarter results reflect the close of the CymaBay acquisition with an acquired IPR&D charge of $3.9 billion or an expense of $3.14 per share. Excluding this charge, non-GAAP diluted EPS would have been $1.82 for the first quarter, which is above expectations driven by higher product sales.

The CymaBay acquisition brings us an important registrational medicine, seladelpar, which has the potential to address significant unmet need in liver disease. We have filed for regulatory approval of seladelpar as a treatment for primary biliary cholangitis or PBC with both FDA and EMA and we expect an FDA regulatory decision in August. If approved, we will leverage our industry-leading commercial infrastructure and long-standing expertise in liver disease to bring seladelpar a potentially transformative therapy to people with PBC who might benefit.

Moving to clinical execution. We're very pleased with the momentum in our HIV pipeline, which was reflected in our 80 data abstracts at CROI. Based on the strength of the data, we've initiated Phase 3 trials for bictegravir and lenacapavir, our novel once-daily oral regimen and plan to advance once-weekly oral programs, including lenacapavir plus islatravir into Phase 3. Later this year, we will host an HIV analyst event to share details of how we will further shape the HIV landscape with innovative options for prevention and treatment, including the next wave of long-acting therapies.

Before I pass it to Johanna, I will briefly recap our 2024 milestones on Slide 6. We have already achieved first patient in for the Phase 3 ARTISTRY-1 and ARTISTRY-2 trials evaluating once-daily lenacapavir in combination with bictegravir as well as Phase 2 first patient in for SWIFT evaluating GS-1427, our oral alpha-4 beta-7 inhibitor. We are also on track for our upcoming milestones, including updates from three Phase 3 clinical trials for Trodelvy and lenacapavir. Looking ahead to the rest of 2024, this is a time of focused execution for Gilead. We will stay disciplined and agile in our approach and we will focus the organization on both near-term execution and longer-term plans.

With 54 clinical programs in play, no major patent expiration through the end of the decade and many opportunities for growth, we have a lot of potential and a lot to deliver. My thanks again to the Gilead teams for their great work this quarter and the ongoing progress across our diverse portfolio of therapies.

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

[Johanna Mercier, Chief Commercial Officer at Gilead Sciences]

Thanks, Dan, and good afternoon, everyone. With the first quarter marking the ninth consecutive quarter of year-over-year growth for our base business, our teams delivered a strong start to 2024, notably navigating the seasonal first quarter dynamics and establishing a firm base on which we can continue to build this year.

Beginning on Slide 8. Total product sales excluding Viklury were $6.1 billion for the first quarter, up 6% year-over-year reflecting solid growth across our HIV, oncology and liver disease businesses. Including Veklury, total product sales were $6.6 billion, up 5% year-over-year.

Moving to HIV on Slide 9. Sales were up 4% year-over-year to $4.3 billion, primarily driven by higher demand as well as favorable pricing dynamics in Europe that are not expected to repeat. Quarter-over-quarter sales were down 7% driven by the typical seasonality we experienced in the first quarter of the year, partially offset by higher demand. As a reminder, quarterly HIV growth is in general more variable and less indicative of overall trends than the full year. This is evident in the first quarter of every year where inventory drawdown typically occurs following a build that generally happens towards the end of the prior year and patient co-pays and deductibles reset at the start of every year and together with shifts in channel mix lowers average realized price in the first quarter. As always, we typically see these quarterly pricing and inventory dynamics normalize as we progress throughout the year. We continue to expect approximately 4% HIV sales growth for 2024.

Supporting that outlook, the treatment market grew in line with our expectations as shown on Slide 10. Biktarvy remains the leading regimen for HIV treatment across major markets for new starts as well as for those switching regimens with sales up 10% year-over-year to $2.9 billion reflecting strong demand. Quarter-over-quarter sales were down 5% as the higher demand was offset by the typical seasonal factors discussed earlier. It's notable that six years after launch, Biktarvy continues to gain market-share in the U.S., up 3 percentage points year-over-year to approximately 49% share and once again outpacing all other branded regimens for HIV treatment. Moreover, we continue to see Biktarvy's benefit extend into broader populations of people with HIV. Most recently, Biktarvy was granted FDA approval for use in virologically suppressed individuals with known or suspected M184 resistance, a common form of treatment resistance.

Turning to prevention. Descovy sales were down 5% year-over-year to $426 million, driven by lower average realized price due to channel mix, partially offset by higher demand. Sequentially, sales were down 16% reflecting the seasonal dynamics discussed earlier, partially offset by higher demand. While market volumes in February were temporarily disrupted by the cyber attack on Change Healthcare, volumes readily recovered in March. Overall, the PrEP market continued to demonstrate robust growth, up over 11% in the first quarter with Descovy maintaining over 40% PrEP market share in the U.S. despite the availability of other regimens, including generics. This is a solid setup as we look to potentially launch lenacapavir as early as late next year as the first and only twice yearly subcutaneous prevention option. Given Gilead's strong commercial foundation across treatment and prevention, we are well-positioned to maintain leadership in HIV as we look to the evolving marketplace of daily orals, long-acting orals and long-acting injectables.

Moving to liver disease on Slide 11. Sales for the first quarter were $737 million, up 9% year-over-year, primarily driven by favorable inventory dynamics and the timing of purchases by the Department of Corrections for our HCV products as well as higher demand across HCV, HBV and HDV. Sequentially, sales were up 7%, primarily reflecting the timing of HCV purchases. Despite fewer HCV starts globally year-over-year, our viral hepatitis portfolio overall has remained stable and continues to be a meaningful contributor to our commercial performance. This strength is underpinned by our extensive global footprint and expertise in the treatment of liver diseases.

To that end, pending approval, Gilead is excited to bring seladelpar to patients for the treatment of certain adults with PBC impacting approximately 130,000 people in the U.S. and about 125,000 people in Europe. With a sales force that covers almost 80% of the U.S. prescriber base for PBC, we expect to readily make seladelpar available to patients upon approval in the second half of this year. Seladelpar has demonstrated the potential to be best-in-class with a differentiated clinical profile to existing and emerging therapies, particularly on a key symptom of the disease, pruritus. Following its launch in 2024, we expect seladelpar to contribute modestly to sales and more meaningfully in 2025 and beyond.

Turning to Slide 12. Viklury continues to be the standard-of-care antiviral for hospitalized patients treated with COVID-19 with market share well over 60% in the United States. COVID-related hospitalizations were lower in the first quarter with the winter wave peaking earlier than expected in the U.S. and Europe as compared to other regions such as Japan. As a result, Veklury sales overall were down 3% year-over-year and down 23% sequentially to $555 million.

Shifting to oncology on Slide 13. Sales were up 18% year-over-year to $789 million and are now firmly above a $3 billion annual run rate. Having treated over 50,000 patients to date, we look forward to bringing our portfolio of medicines and future treatments across lines of therapies and tumor types to many more patients around the world.

Moving to Slide 14. Trodelvy sales for the first quarter exceeded $300 million, up 39% year-over-year reflecting continued demand. Sequentially, sales were up 3%, primarily driven by demand outside the U.S. as well as unfavorable fourth quarter pricing dynamics in Europe that did not repeat. This was partially offset by inventory dynamics in the U.S. where we saw a drawdown in the first quarter. Overall, Trodelvy's strong market share reflects its awareness amongst providers and patients. In second line metastatic triple negative breast cancer, Trodelvy remains the leading regimen with approximately one-third share in the U.S.

And in the pre-treated HR-positive HER2 negative metastatic breast cancer setting, Trodelvy has demonstrated continued adoption, most notably in the IHC0 setting. We are confident Trodelvy continues to differentiate itself with its safety profile and clinically meaningful survival benefits with over 30,000 patients across tumor types already treated to date. We look forward to potentially extending Trodelvy's reach to many more patients in the years ahead, particularly in bladder cancer, earlier line breast cancer settings and lung cancer.

Turning to Slide 15 and on behalf of Cindy and the Kite team, cell therapy sales were $480 million in the first quarter, up 7% year-over-year. Sequentially, sales were up 3% in line with our guidance of flat to slightly up. We're pleased to see continued demand for Yescarta and Tecartus in both existing and new markets across Europe and other geographies such as in Japan where we've seen good progress in growing brand share and expanding our network of authorized treatment centers to over 20 to date.

In the U.S. and consistent with our recent updates, we see opportunity for growth through expanding the number of authorized treatment centers and affiliated satellites while also driving increased referrals from the community setting. For example, we're proud to have established our flagship community collaboration with Tennessee Oncology in the first quarter. We've identified many critical learnings on how we can partner effectively with community oncology practices for cell therapy and we will continue to refine this blueprint so that we become more efficient at onboarding new centers over time. We expect to start seeing the impact from this initiative towards the end of 2024.

Wrapping up the first quarter, we had a strong start to the year, primarily driven by higher demand across each of our core businesses year-over-year. We look forward to carrying this momentum through 2024 and as we bring seladelpar to market later this year following approval. I'd like to thank the commercial teams and cross-functional partners across Gilead and Kite for their strong execution as we diligently expand our therapies to new populations positively impacting more people all around the world.

And with that, I'll hand the call over to Merdad.

[Merdad Parsey, Chief Medical Officer at Gilead Sciences]

Thank you, Johanna. We've had a busy first quarter at Gilead with a cadence of clinical readouts that will continue throughout the rest of the year. Importantly, we anticipate an FDA regulatory decision on seladelpar and three Phase 3 updates across HIV prevention, bladder cancer and breast cancer.

Starting on Slide 17, we continue to progress our industry-leading virology pipeline, which is building momentum following a data rich presence at CROI in March. This included robust biologic suppression data from our once-daily oral combination of bictegravir with lenacapavir from the Phase 2 portion of the ARTISTRY-1 trial. This novel combination has the potential to benefit people with HIV on complex regimens. We have since started two Phase 3 trials of this combination, one in virologically suppressed individuals and another in virologically suppressed treatment experienced individuals. We expect to complete enrollment in the first half of 2025.

We also have two once-weekly oral programs. First, a combination of lenacapavir with Merck's NRTTI, islatravir, and virologically suppressed people with HIV expected to advance into Phase 3 later this year. Second, the combination of a capsid inhibitor with GS-1720, our novel oral integrase inhibitor. We are working to advance this combination into a Phase 2 study. The second program has the potential to be the first once-weekly oral regimen containing an NSTA [Phonetic] agent. NSTAs are the standard-of-care treatment for HIV and an important treatment option for clinicians who continue to prefer NSTA based regimens. Finally, we presented Phase 1b data from our twice yearly parenteral program of lenacapavir plus our two broadly neutralizing antibodies for people with HIV at CROI and we intend to share data from the Phase 2 study in the second half of this year.

Moving to PrEP. We plan to share an update from our Phase 3 PURPOSE-1 trial in the second half of this year. Data from PURPOSE-1 together with data from PURPOSE-2 is expected to support the filing of lenacapavir for HIV prevention. This PrEP option would not only offer a convenient dosing schedule as the first twice yearly subcutaneous regimen, but could also be transformative in terms of adherence to HIV prevention regimens.

Turning to Slide 18. Our Trodelvy program continues to be evaluated across a range of solid tumors with seven Phase 3 trials currently underway across breast, bladder and metastatic non-small cell lung cancers with plans to start the Phase 3 trial in endometrial cancer later this year. Abstract titles were just released yesterday for the upcoming ASCO meeting and we're pleased to have over a dozen oncology presentations this year. We will be presenting late-breaking Phase 3 data from our second line plus metastatic non-small cell lung cancer trial, EVOKE-01. Updated data from first line PD-L1 high subjects in cohort A of the Phase 2 EVOKE-02 trial will also be shared. We plan on providing updates from cohort CMD evaluating Trodelvy plus pembro and chemotherapy and PD-L1 all comers at a medical congress in the second half of this year.

In addition, presentations for both the Phase 2 EDGE-Gastric trial and the Phase 2 ARC-9 studies will be highlighted. Depending on the timing of event accruals, we anticipate two more Phase 3 updates this year for Trodelvy. These include overall survival data from our confirmatory Phase 3 bladder cancer study TROPiCS-04 that could support Trodelvy's submission for full regulatory approval in the U.S. and enable ex-U.S. filings. In TNBC, where Trodelvy is the only ADC to have demonstrated statistically significant improvement in overall survival in the second line setting, we expect to share an update on the Phase 3 ASCENT-03 trial in first line PD-L1 negative patients later this year.

Moving on to cell therapy. I'm pleased to share Kite's approach to the development of novel cell therapies that Cindy and the team presented at last month's investor event. As you can see on Slide 19, Yescarta and Tecartus established Kite as a leader in cell therapy and we plan to potentially extend this leadership into multiple myeloma while also paving the way for innovative next-generation constructs. On the nido [Phonetic] cell in later line multiple myeloma, we expect to provide a Phase 2 IMAGINE-1 trial update in the second half of this year.

This update follows the highly encouraging Phase 1 data presented at ASH last year where a nido cell demonstrated durable responses with median progression-free survival not yet met at 26.5 months median follow-up and no cases of Parkinsonian symptoms observed in the trial. For our next-generation cell therapy assets, we have bicistronic and optimized manufacturing constructs in Phase 1 trials, which are aimed at overcoming resistance mechanisms providing potentially deeper and more sustained responses and improving product potency. Beyond that, we have early research in allogeneic and in vivo CAR with plans to expand into a range of other disease areas such as multiple myeloma with a nido cell, solid tumors and autoimmune diseases.

Moving to inflammation on Slide 20. We recently completed our acquisition of CymaBay and added seladelpar, an investigational PPAR delta agonist to our portfolio. In Phase 3 clinical trials, seladelpar demonstrated significant improvement in both pruritus and markers of cholestasis related to the risk of progression for PBC. As previously announced, FDA and EMA accepted our regulatory filings for seladelpar for the management of PBC in certain adult patients. We anticipate an FDA regulatory decision by August 14 and a decision from European regulators early next year. We continue to work with global regulatory authorities to expand the reach of seladelpar for PBC patients. Further, as we look at the rest of our inflammation pipeline, we have several early phase assets that have progressed into Phase 2 trials, including our potentially first-in-class oral tiple 2 inhibitor, a potentially best-in-class oral alpha-4 beta-7 anti-integrant and an oral IRAK4 inhibitor.

Wrapping up on Slide 21. We continue to progress on our clinical milestones for the year and we have had two first patients in and one data readout completed in the first quarter and we remain on track for our remaining milestones.

And now I'll hand the call over to Andy.

[Andrew Dickinson, Chief Financial Officer at Gilead Sciences]

Thank you, Merdad, and good afternoon, everyone. Beginning on Slide 23, it was a strong start to the year with our base business up 6% year-over-year. The solid growth achieved across HIV, oncology and liver disease offset the decline in Veklury with total product sales up 5% year-over-year to $6.6 billion. As expected, our base business was down quarter-over-quarter, primarily driven by seasonal inventory and pricing dynamics in HIV.

Moving beyond our revenue results. Two items significantly impacted our EPS performance in the first quarter as shown on Slide 24. First, our GAAP and non-GAAP results included an acquired IPR&D charge of $3.9 billion or $3.14 per share associated with the close of the CymaBay acquisition. As an asset acquisition, this transaction was fully expensed in the first quarter. This was a non-deductible expense item and as a result impacted our effective tax rate. Excluding this expense, our non-GAAP EPS would have been $1.82 for the first quarter, above expectations, primarily driven by higher sales. The second item shown on the right-hand side is an impairment charge that is included in our GAAP results and excluded from our non-GAAP results. As a reminder, this relates to the carrying value of the IPR&D indefinite lived intangible assets acquired from Immunomedics.

At the end of 2023, the carrying value was $5.9 billion, all associated with non-small cell lung cancer. As a result of the EVOKE-01 readout in late January, we have reassessed and reduced the remaining value to $3.5 billion. This primarily reflects the smaller addressable market that Trodelvy could serve among second line plus metastatic non-small cell lung cancer patients, a delay in expected launch timing and associated competitive activity. We remain confident that Trodelvy will deliver attractive returns over time with sales now exceeding $1 billion a year, a strong IP portfolio and a development program with multiple shots on goal in new indications as well as earlier lines of therapy, including some opportunities not included in our initial deal model. In the meantime, you can see that the impairment impacted first quarter GAAP EPS by $1.46 per share.

Moving to the rest of our non-GAAP results on Slide 25. For the first quarter, product gross margin was down modestly to 85.4%, primarily due to product mix. R&D and SG&A were each down 2% year-over-year. This is the second consecutive quarter of operating expense declines on a year-over-year basis reflecting our continued focus on disciplined expense management. Our effective tax rate in the first quarter was a negative 30% reflecting the non-deductibility of the CymaBay acquired IPR&D charge. Overall, our diluted earnings per share was a negative $1.32 compared to a positive $1.37 for the same period last year, primarily reflecting the $3.14 per share expense related to the CymaBay acquisition.

Switching to full year guidance on Slide 26. There is no change to our revenue expectations for 2024 at this time. We continue to expect total product sales in the range of $27.1 billion to $27.5 billion and we continue to expect total product sales excluding Veklury in the range of $25.8 billion to $26.2 billion, representing growth of 4% to 6% for our base business year-over-year. Additionally, there is no change to our Veklury guidance of approximately $1.3 billion for the full year. As discussed last quarter, we do not expect to update our Veklury guidance until our third quarter earnings call, absent a very clear trend in COVID-19 infections.

Shifting to the other parts of the P&L for 2024 on a non-GAAP basis. There is no change to our gross margin guidance where we continue to expect product gross margin in the range of 85% to 86%. We now expect R&D to grow at the higher end of our previous low to mid single-digit growth range reflecting the incremental expenses associated with the CymaBay acquisition. We continue to expect SG&A expenses to decline a mid single-digit percentage relative to 2023. On a dollar basis, SG&A is expected to be modestly higher than our previous SG&A expectations as we incorporate CymaBay expenses. However, we can manage this within the window of the previously issued operating expense guidance.

Acquired IPR&D is now expected to be approximately $4.4 billion due to the CymaBay transaction as well as milestones anticipated throughout the rest of the year. Operating income is now expected to be in the range of $7 billion to $7.5 billion reflecting the updated acquired IPR&D guidance and the modest increase to operating expenses associated with the CymaBay transaction. Given the non-deductible impact of the CymaBay acquisition, the effective tax rate for 2024 is expected to be approximately 30%. This includes a negative impact of approximately 11% from the onetime charge for the acquisition of CymaBay. We therefore now expect diluted EPS in the range of $3.45 to $3.85.

As shown on Slide 27, this has only been updated to reflect the transactions that were closed in the first quarter of 2024. Excluding these charges, you can see that we are comfortably within the range of the EPS guidance we shared back in early February. On a GAAP basis, we expect full year 2024 diluted EPS to be in the range of $0.10 and $0.50.

Moving to Slide 28. Our capital allocation priorities remain unchanged with sufficient flexibility in our balance sheet. Specifically, as demonstrated in the first quarter, we announced a 2.7% increase to our quarterly dividend and returned approximately $1.4 billion to shareholders. In addition, we acquired CymaBay for $4.3 billion adding seladelpar to our portfolio. Overall, we'll continue to be disciplined in our use of capital and while we will continue to be flexible and opportunistic, it is unlikely that Gilead will be engaging in any sizable M&A transactions in the near-term.

Before I wrap it up, on Slide 29, a quick note on our expectations now that the CymaBay transaction has closed. Pending regulatory approval, we expect to launch seladelpar in the U.S. before the end of 2024 as Johanna highlighted earlier with a modest revenue contribution expected this year. Additionally, we have shared that the transaction is expected to add to operating expenses this year as we make incremental investments to support the launch as well as other R&D efforts, all of which we are able to manage within the window of the previously issued operating expense guidance. And as we look ahead, while the transaction will be dilutive to our EPS this year, we expect the deal to be breakeven to earnings in 2025 and significantly accretive in 2026 onwards.

And now I'll invite Rebecca to begin the Q&A.

Questions and Answers

[Operator]

[Operator Instructions] Our first question comes from Chris Schott at JPMorgan. Chris, go ahead. Your line is open.

[Chris Schott, Analyst at JPMorgan Chase & Co.]

Great. Thanks so much for the question. I just had a question on the HIV franchise and the impact from the Medicare redesign as we think about 2025. I know this is coming from more and more conversations. Can you just talk a little bit about how you're thinking about that impact to your franchise? And maybe just more broadly, can we directionally still think about top line growth and margin expansion for Gilead next year despite this headwind? So any color you can provide there would be appreciated. Thank you.

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Yeah, great, Chris. Welcome, everybody. This is Dan. I'm going to have Johanna cover this question. Thank you.

[Johanna Mercier, Chief Commercial Officer at Gilead Sciences]

Thanks, Chris, for the question. So we do expect an impact of the Part D redesign to be weighted towards our HIV business and expect our HIV growth in 2025 to be offset by the Part D redesign impact. So as a result, we expect our HIV sales to be roughly flat year-on-year in 2025. Having said that, overall, we expect our total business to grow despite the impact of the Part D redesign in 2025 with the top line building momentum in 2020 -- beyond 2025, right, '26 and beyond. So we do expect growth in '25, but our HIV business, the demand of HIV will offset the impact of Part D.

[Andrew Dickinson, Chief Financial Officer at Gilead Sciences]

Chris, it's Andy. I'll take the question on margin expansion. As you know, we don't provide more specific guidance for 2025 beyond what Johanna just mentioned. What we have said historically and I'd underscore is that we are very focused on disciplined expense management that will be true in 2025 as it is today. You've seen that in the last two quarters. I think on a non-GAAP basis for this quarter, if you look at our operating margin, if you strip out the CymaBay transaction, you see an improvement in our operating margin and we expect that to continue over time. So we do expect broadly for our operating margin to improve over time as you see the continued top line growth and the disciplined expense management. So thanks for the question. More details, of course, to be provided at early next year when we provide our 2025 guidance specifically.

[Operator]

Our next question comes from Daina Graybosch at Leerink Partners. Daina, your line is open.

[Daina M. Graybosch, Analyst at Leerink Partners]

Great. Thanks for the question. It's for Kite. FDA's ODAC recently had two important meetings of relevance for multiple myeloma and CAR-T there. One dealt with the early death risk from CARVYKTI and ABECMA. And the second was to recommend MRD as an intermediate endpoint for accelerated approval in multiple myeloma. And I wonder how you're thinking about both of these ODACs in relation to a nido cell in your earlier line trial design? Thank you.

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Thanks, Daina. We've got Cindy Perettie here. So we'll go right over to her.

[Cindy Perettie, Executive Vice President, Kite at Gilead Sciences]

Thanks, Daina. So if I start off with the early line ODAC, I think we believe this is positive for everybody. What it's shown is that people recognize the value of having CAR-T therapies earlier in their disease. They value the disease-free intervals that they get from that. So we were very happy to see that. I think we were equally as excited to see the second ODAC around MRD minimal residual disease as a second -- as an additional endpoint. And I think the piece around this is that we're really encouraged that the ODAC decision is going to open up the door for us to potentially bring a nido cell to market faster for patients. And we're in the process right now of understanding how the MRD surrogate endpoint can be used with regulatory agencies and the application of our program and so more to come on that front.

[Operator]

Our next question comes from Umer Raffat at Evercore ISI. Umer, your line is open.

[Umer Raffat, Analyst at Evercore ISI]

Hi, guys. Thanks for taking my question. I just thought I'll spend a quick second on CymaBay given the recent deal. My question is did Gilead during the diligence process deploy independent pathologists to evaluate the cases of "possible liver pathology" that happened in the NASH trial previously as well as the paired liver biopsy data from the PBC trial at the lower dose where CymaBay didn't think it would need safety adjudication. I'd be very curious how you guys did that and if you would ever publish that. Thank you.

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Thanks, Umer. Merdad is here, so we'll let him answer.

[Merdad Parsey, Chief Medical Officer at Gilead Sciences]

Thanks, Umer. Let me start by saying we think seladelpar is one of those medicines that will bring a lot of benefit to patients and really some near-term expansion of our liver portfolio and what we think will synergize with many of the other -- much of the other work that we're doing in liver disease overall. We obviously did thorough diligence in our approach to seladelpar and CymaBay. We didn't do a third -- I think your question was around whether we did an independent third-party review of the pathology. We did not do that. However, we did a lot of thorough diligence on the data itself and the outcomes and we are confident around the outcome and what it means for patients over time. Obviously, we're awaiting right now our upcoming PDUFA date and also the file in the EMA, which we are optimistic about and following the questions and all those sorts of items that we're in. So we're looking forward to providing an update on that as those filings proceed.

[Operator]

Our next question comes from Tyler Van Buren at TD Cowen. Tyler, your line is open.

[Tyler Van Buren, Analyst at TD Cowen]

Hey, guys, good afternoon. Thanks very much for the question. I was hoping you could help set expectations for the EVOKE-01 and 02 presentations at ASCO. For EVOKE-02, the late breaker tag is interesting. So is that related to the three month OS benefit in the PD-1 refractory patients or could we -- or should we be expecting something more? And for EVOKE-02, what should we hope to see with the cohort A data that should leave us confident in the EVOKE-03 readout next year?

[Merdad Parsey, Chief Medical Officer at Gilead Sciences]

Thanks, Tyler. It's Merdad again here. So it's a little challenging because I can't share too many details now because we're under embargo for both of those and obviously happy to fill in a lot of the blanks once the data are released, then we can talk about them at ASCO. Look, I think for EVOKE-01, we think there are a number of pipeline updates in our ASCO presentations that we have upcoming, which we're -- we see is a real change for us and a real evolution of our pipeline overall and our ability to build our oncology pipeline and bring new options for patients.

And as part of the late breaker session for EVOKE-01, as you mentioned, we will include data on overall survival on PFS, ORR and duration of response as well as the safety profile, of course. And I wish I could give you more details, but I can't at this point. As you say, we will also be providing other updates there, including the EVOKE-02 cohort A data looking at the PD-L1 high non-small cell population and again it's -- I can't really talk about the details of those data, but we are looking forward to sharing those results with everyone and talking about the implications of that for our broader lung cancer and especially the frontline lung cancer EVOKE-03 study that we are conducting right now is underway with our partners at Merck.

[Operator]

Our next question comes from the line of Geoff Meacham at Bank of America. Geoff, your line is open.

[Geoff Meacham, Analyst at Bank of America]

Great. Good afternoon, everyone. Thanks for the question. Merdad, a question for you. On the cell therapy front, you obviously have the nido cell update later this year, which is big. But beyond that, I wasn't sure what the priority was among the next-gen CAR assets that you've got kind of cartooned on Slide 19. There's a lot of competition in this space, but you guys are among the only players that have real scale and you could move the next-gen stuff I think pretty fast. But if you had to pick sort of a priority list, would be good to know. Thank you.

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Thanks, Geoff. This is Dan. We're going to have Cindy Perettie answer that question, if you don't mind. So Cindy over to you.

[Cindy Perettie, Executive Vice President, Kite at Gilead Sciences]

Hi, Geoff. So we have three products right now or three constructs that are in Phase 1a and b clinical trials. The first one is a bicistronic CD19, CD20 that has 41BB and CD28. The second one is that same construct with fast manufacturing, three day manufacturing and the other one is a CD19 like Yescarta with three day manufacturing. So we're looking at all three of those in parallel with the goal of picking the winner to advance that rapidly into our pivotal trials. So that's what's coming up next. Obviously, we've shared a lot around a nido cell as well. With a nido cell, we have the IMAGINE-1 readouts and we expect to move quickly into earlier lines as it relates to a nido cell. And you'll hear more about that later this year. So hopefully that answers your question. We certainly have a number of plays in early research, but we would plan to advance our next-generation lymphoma asset quickly and obviously with the scale that we have at Kite as well as the integrated fact that we can create the vector as well as the construct in-house.

[Operator]

Our next question comes from Michael Yee at Jefferies. Michael, go ahead, your line is open.

[Michael Yee, Analyst at Jefferies Financial Group]

Hi, guys, thanks. Following up on the Trodelvy data coming at ASCO and your enthusiasm for frontline, can you just remind us, A, do you believe that your data in EVOKE second line that will be at ASCO is at least as competitive or better than ASTRA and that is why you're excited about frontline? And B, if you are -- do you have a triple therapy on top of chemo combo or is your whole first line strategy just on top of PD-1? Thank you.

[Merdad Parsey, Chief Medical Officer at Gilead Sciences]

Thanks, Michael. And this is Merdad again. As we've noted, I think as you -- and as you talked about, the EVOKE-01 data in second line will be something that we discuss at ASCO and show those data and the full dataset is -- does motivate us to go forward in lung cancer and including with discussions with regulators. The unmet need in this population is great and the data give us options, including discussions with health authorities and conducting follow-up trials. We'll be able to share more once the data are provided at ASCO. And so we look forward to having those deeper discussions once we can speak directly to the data. And sorry, and the second part of your question was around the frontline. Again, I think once we are able to share the EVOKE-02 data, the update on EVOKE-02 data, we'll be able to talk more, but it does continue to allow us to think about the frontline and our confidence around EVOKE-03. And then the last part of your question on other combinations, we do think about our intra portfolio combinations. For example, we have a combination of domvanalimab and Trodelvy in a trial where we're looking to see if we can get additional efficacy from those sorts of combinations. So we do continuously look at our portfolio and look for opportunities for moving the needle with combinations from within our portfolio.

[Operator]

Our next question comes from Salveen Richter at Goldman Sachs. Salveen, go ahead, your line is open.

[Salveen Richter, Analyst at The Goldman Sachs Group]

Good afternoon. Thanks for taking my question. So you currently have about $5 billion in cash and noted leverage is back to pre-Immunomedics deal levels. How are you thinking about meaningful or bolt-on BD post the CymaBay acquisition? And is there any preference now between virology, I&I and oncology? Thank you.

[Andrew Dickinson, Chief Financial Officer at Gilead Sciences]

Hey, Salveen, it's Andy. Maybe I'll start with that one. In our prepared remarks, I highlighted that in the near-term, we don't expect sizable M&A. So we have a lot of execution ahead of us. We have a deep portfolio, a lot of growth drivers, including seladelpar. So we're very clearly highlighting that in the short-term, we will continue to do ordinary course business development, the standard licensing deals. You saw a couple of those in the first quarter, but it's unlikely that we would pursue any meaningful M&A in the near-term. We've also said historically that deals like CymaBay are exactly what we're looking for and that we should do deals like that on a regular basis over the cycle and whether that's every two years on average or more or less that's a general ballpark.

So I think you're appropriately highlighting we generate a lot of operating cash flow. You saw that again in the first quarter. We will rebuild our cash over time. We're going to continue to invest in the pipeline, but at least in the short run, we don't expect any meaningful M&A in the short run.

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

And Salveen, this is Dan. Just to answer the end of your question. I mean, we're always therapeutic area agnostic when we approach these. I mean, first of all, we've got very robust portfolios around both virology and oncology and a building portfolio in inflammation. So we look frankly across those spectrums. Seladelpar is a great example of finding an opportunity within our liver disease or franchise and being able to use that channel. But equally, we'll look for opportunities and synergies that complement our portfolio across therapeutic areas and that's our approach. We think that makes sense. We look for the most attractive science. And as Andy said, we have a lot in our hands right now to work through and to execute on. And so we'll keep the bar very high.

[Operator]

Our next question comes from James Shin at Deutsche Bank. James, your line is open.

[James Shin, Analyst at Deutsche Bank Securities]

Hi, thanks for my question. I wanted to ask on Trodelvy's efforts in HR positive HER2 negative. DESTINY-Breast06 is going to have data pretty soon it seems and then you also have ASCENT-07, but sort of sounds familiar to DESTINY-Breast04 versus TROPiCS-02. Can you share like how you think this landscape will play-out with these two trials?

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Thanks for the question, James. Well, I've learned to try to keep away from prognostication. So that's harder to do. We -- look, maybe the way I would put it is we are proud of the fact that Trodelvy is the -- still the only TROP2 ADC that is approved and that is in large part driven by the role -- important role that Trodelvy plays in breast cancer right now for patients. And we do continue to want to push on that along with ASCENT-07. We have a number of other trials ongoing to expand our footprint in breast cancer. I think we are right now in TNBC the leading regimen. And as we are continuing to advance our HR positive HER2 negative and in particular in the IHC0 population, I think we remain confident around our place there. We've shown benefit in randomized clinical trials there and that's been the basis for our regulatory filings and approvals. So I don't think we can assume success. We'll have to see what the data are, but looking forward into the year that's coming with ASCENT-03 coming up, I think that will provide us additional information to further expand our potential in breast cancer. And maybe, yeah, Johanna, do you want to add?

[Johanna Mercier, Chief Commercial Officer at Gilead Sciences]

So maybe just to add to that, I would also say that the more options these patients have, these women have in HR positive in earlier lines of therapy instead of cycling through chemotherapies, the better. And so with DB06 results and moving potentially that compound up earlier, it actually allows for Trodelvy to also play a more important role in a bigger population than it is today because of the profile of the TROPiCS-02 label. And so we do believe that there's opportunities for this TROP2 ADC to move up and also differentiate itself versus other ADCs in this marketplace depending on the side effect profile, the safety profile, not only on the efficacy. And so in light of the IHC0 setting being really our strong foothold in HR positive HER2 negative, we believe that will continue, whether that's in later lines of therapy or earlier lines as these studies play out.

[Operator]

Our next question comes from Mohit Bansal at Wells Fargo. Go ahead. Your line is open.

[Mohit Bansal, Analyst at Wells Fargo & Company]

Great. Thank you very much for taking my question. Maybe a big picture question, if you think about medium to longer-term, because I mean, just you do not have an LOE, but I mean HIV growth is somewhere around mid low single-digits and oncology, I mean, again, I mean, with TROP2 and all, all the expansion opportunities seem limited at this point. So just trying to understand how do you turn this low single-digit to more like a high single-digit kind of growth for overall company? CymaBay is definitely an addition, but how are you thinking about it from medium to long-term which probably people like us are missing?

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Yeah, Mohit, maybe I'll start and then have others add. First of all, I think just stepping back and thinking about the portfolio that we've built over the past four years now more than doubling the size of the portfolio and with significant advances in our HIV portfolio and oncology and with outside of cell therapy. So as we think about growth moving forward, I mean, first of all, I would say on the HIV side of the business, we have to constantly remind ourselves and others that in addition to the treatment market and the potential for long-acting treatment that we have a very robust program on and we'll update you a little bit more on towards the second half of this year with an analyst event.

We've got the PrEP market that is just beginning to kind of be a dimensionalized and that is -- I think that provides significant growth opportunity when you think about your time frame, which you mentioned, which is until the end of the decade. So I think it allows us to think about accelerated HIV total growth prevention and treatment as we head towards the second half of the decade. On-top of that, then we have the entirety of the oncology portfolio. So both cell therapy within the large B-cell lymphoma area as well as potentially the multiple myeloma entry with the a nido cell and then on top of that, a very robust oncology portfolio that has both Trodelvy and other novel agents that will read out over the course of this decade.

And I'll just remind you, again, we've got close to 20 readouts this year, of which three of those are in Phase 3, including lenacapavir for PrEP in the second half of this year, two Trodelvy Phase 3 readouts. And then importantly, we've added seladelpar to the mix with a PDUFA date in August. And then finally, just the opportunity to update you on the nido cell at the end of the year as well. So we'll be providing more guidance as we continue to look at the entirety of our portfolio, but we really think we have within the company today by the way I'll just mention in addition to complementing where needed from the outside. But within the company today, we have what it takes to drive a substantial growth in our business over the course of the next decade with focus on expense management as well to produce good returns for investors.

[Operator]

Our next question comes from Simon Baker at Redburn Atlantic. Go ahead, ahead, Simon. Your line is open.

[Simon Baker, Analyst at Redburn Atlantic]

Thank you for taking my question. One on seladelpar, if I may. And a question really around the competitive dynamics at launch. If all goes according to plan, you'll launch in August and Ipsen will launch [Indecipherable] in June. So I was wondering if that really makes any difference, you've obviously got far greater infrastructure than Ipsen. Is it too early for them to steal a march or paradoxically does having somebody else on the market promoting PBC actually raise disease awareness and help the situation? So any color around the dynamics at launch would be very helpful. Thank you.

[Johanna Mercier, Chief Commercial Officer at Gilead Sciences]

Thanks, Simon. It's Johanna. Let me take that one. And I think you're absolutely right. I think the fact that there is one -- more than one competitor hitting the market is great for patients, namely around increasing disease awareness around PBC and the fact that there are true options available. Having said that, I also feel incredibly confident that seladelpar is well-differentiated to potentially be best in disease when you think about the significant impact and clinically meaningful impact we have with the ALP normalization in the Phase-3 clinical trial we've seen as well as the improvement in pruritus, which is a key symptom of the disease. And today, there really is no effective antipruritic options for PBC patients. And so all of that put together in addition to the fact that we believe our footprint both commercial and medical is incredibly well-established when it comes to liver disease. It already covers about 80% of all U.S. PBC prescribers. And with that strong differentiated profile we were just referring to, I don't think those three months make a difference. I think really it's about best-in-class launch and that potential with seladelpar that we look forward to for our PDUFA date.

[Operator]

Our next question comes from Brian Skorney at Baird. Brian, go ahead. Your line is open.

[Charlie Moore, Analyst at Robert W. Baird]

Hi. Thanks for taking the question. This is Charlie on for Brian. So again to ask something about seladelpar. Just wondering if you have any ambitions for potentially looking at a label for first line in the future considering there's a lot of unmet need with pruritus there as well as any potential synergies you may be considering with the remainder of your liver portfolio? Thank you.

[Merdad Parsey, Chief Medical Officer at Gilead Sciences]

Thanks, Charlie. This is Merdad. Frontline is a challenge given the -- what is currently the background standard-of-care. But as you know, we think that seladelpar is going to bring a lot of benefit to a lot of patients, especially given the pruritus and the potential for getting to patients earlier in their course will be really important for us. And so we have to see how the market starts to respond to the presence of seladelpar in the second line. And recall -- I think the other thing to recall or think about is that the rate -- how long people actually get frontline therapy before moving on to second line therapy. Given the efficacy profile of the frontline therapies and the fact that there haven't been any options, one could anticipate that patients are moved to second line therapy relatively early in their treatment course and making moving up formally for registrational trial to the frontline potentially superfluous. So I think we'll see how that plays out in the market and once we see our label and all those sorts of things. So we'll be able to update more after that.

[Operator]

Our next question comes from Brian Abrahams at RBC Capital Markets. Brian, go ahead. Your line is open.

[Brian Abrahams, Analyst at RBC Capital Markets]

Hi, good afternoon. Thanks so much for taking my question. PURPOSE-1 one is obviously an important upcoming readout. So I wanted to clarify some elements of its unique design. Specifically, what's the sensitivity of assessing when HIV infection occurred to accurately project the control infection rate? And then how do you control for potential intrinsic differences in risk behavior that the screened out group serving as the control may have versus individuals who are who making it to the trial? Thanks.

[Merdad Parsey, Chief Medical Officer at Gilead Sciences]

Brian, thanks. This is Merdad again. And I could talk about this for a long time. Let me -- I'll try to give a very concise answer. The recency assay that's been developed for HIV has been studied very thoroughly and we can based on the diagnosis at the time of screening create a profile for anyone who's potentially HIV infected at that time as to how recently they were infected. And I think that's a key part. And that relates to the second part of your question in that the -- we don't in a sense need to compare risk behaviors before and after randomization and that we'll be looking at the overall incidents of HIV at the time of screening and then comparing in this counterfactual design with what happens after people start therapy. So I think between those two elements and all the discussions we've had with the regulators and the experts in the field, we're confident and that the design will provide the information necessary to get us to approval and for adoption.

[Operator]

Our next question comes from Terrence Flynn at Morgan Stanley. Terrence, go ahead. Your line is open.

[Terrence Flynn, Analyst at Morgan Stanley]

Great. Thanks for taking the question. Just a two-part on the CAR-T franchise. So just was wondering high-level on your commitment to a nido cell if it proves there is Parkinsonism, so meaning it's less differentiated. And then the second part is curious where your progress stands with respect to developing the CAR-T for immunology. Obviously, a lot of focus here amongst a number of other companies in the industry. So just curious on Gilead's thoughts on the forward. Thank you.

[Johanna Mercier, Chief Commercial Officer at Gilead Sciences]

Thanks, Terrence, for the question. So on the commitment to nido cell, we are -- as it relates to Parkinson's, we absolutely feel that we're differentiated potentially on both safety and efficacy. As we noted earlier, we have not observed the neurotox that some of the other constructs have observed and we'll continue to monitor it, but we feel great about the profile right now. And then the efficacy profile, early signals are we think we will be equivalent or could be best-in-class. So we're 100% behind nido cell and we're looking-forward to bringing those data soon. The second question around autoimmune space, so we continue to monitor the autoimmune space. And as you've heard from Andy and others before, we will play in that space. We are taking time to take a look at what's in the space versus what we have in our portfolio and we'll be -- I don't have any updates further than that today.

[Operator]

Our last question comes from Carter Gould at Barclays. Carter, go ahead. Your line is open.

[Carter Gould, Analyst at Barclays]

Great. Good afternoon. Thanks for squeezing me in. Maybe just to round things out on cell therapy. You flagged the same dynamics that have been kind of persisting in the U.S. as far as the -- some of the constraints at the ATCs. I also saw the Tennessee Oncology reference, but I guess putting that all together, just your level of confidence you'll sort of hit that return to more meaningful growth in the second half of the year, didn't hear that mentioned and clearly that's a point of focus. Any commentary there would be appreciated.

[Cindy Perettie, Executive Vice President, Kite at Gilead Sciences]

Yeah. No, we feel very confident that we're going to return to growth the second half of the year as we stated. I think just as a reminder, we had shared in quarter four, our guidance was that we would be flat to slightly down in quarter one. And part of that is due to the restructure. So we are putting our strategy into play. We feel very confident about the approach we're taking in the U.S. and we now are looking at having almost a fully staffed sales team back out and working hard. I think a piece that we need to talk about as well is the market dynamics. So the things we're observing, we're observing out of class competition with the bispecifics, the ATC constraints that we've spoken about in the past based on multiple myeloma constructs coming in. But what we're seeing is a lot of the hospitals and HECs are working through those constraints and we feel really confident about the second half of this year.

[Daniel O'Day, Chairman and Chief Executive Officer at Gilead Sciences]

Thank you, Cindy. This is Dan again. So appreciate all of you joining. Maybe just a bit of a summary statement. I want you all to know where we at Gilead are very focused on the near-term execution and the long-term plans. We'll continue to stay disciplined and agile in our approach. And just as highlights, we've got 54 active clinical programs, no major patent expiry through the end of the decade, a variety of opportunities for growth and a lot more to deliver. On top of that, we are on track to provide updates from three Phase 3 clinical trials for Trodelvy and lenacapavir. We've got the seladelpar PDUFA date in August and the update on the nido cell Phase 2 update with IMAGINE-1 at the end of the year. So rest assured that we are firmly focused on the many opportunities we have and we have a lot more potential to deliver. With that, I'll hand over to Jacquie for closing comments.

[Jacquie Ross, Vice President, Investor Relations and Corporate Strategic Finance at Gilead Sciences]

Thank you, Dan. To close, just one housekeeping item. I can share that we are tentatively planning to release our second quarter 2024 earnings results on Thursday, August 8. Please note that this date is provisional and could be changed to accommodate scheduling conflicts that arise between now and then. As always, we will announce our confirmed date following the close of the second quarter. We appreciate your continued interest in Gilead and look forward to updating you on our progress throughout the quarter. With that, we'll close our call for today. Thank you.