Geoffrey C. Meacham - JP Morgan Chase & Co, Research Division
Good morning, and welcome to the morning session of the 30th Annual JPMorgan Healthcare Conference. I'm Geoff Meacham, Senior Biotech Analyst here at JPMorgan. It's my pleasure to have Gilead Sciences presenting. Gilead is one of the leaders in the antiviral space, particularly HIV and hep C. And speaking on behalf of Gilead is its Chairman and CEO, John Martin. John?
John C. Martin
Thanks, Geoff. It's always a pleasure to participate in this conference. We at Gilead had a very exciting year last year, that's for sure. We've accomplished a lot, and I'm proud to have the opportunity to tell you about that and tell you what we expect for the coming year.
So at first, I'll mention that there are forward-looking statements in this presentation, and our GAAP reconciliation is available on our website. So the very significant accomplishments in 2011, these are a few. We received Complera approval. It's the second single-tablet regimen that contains 3 drugs for the treatment of AIDS and launched in the U.S., Canada and the European Union. We presented top line results from 2 pivotal studies on Quad, which will be the third single-tablet regimen. We filed for approval in the U.S. and EU and expect to launch it during this calendar year. We acquired additional assets in oncology and inflammation from -- by acquiring 2 companies, Arresto and Calistoga. And then finally, we entered into an agreement to acquire Pharmasset. It's a company that has a leading candidate for the treatment of hepatitis C. We have some additional candidates in our portfolio, and I'll tell you about those. A key attribute of this is the success we've had in HIV and hepatitis B means we have the scientific, medical and commercial capabilities to do a very good job of commercializing hepatitis C products.
This shows our portfolio of 14 products that are currently marketed, either on our own or through partner promotion. On the left is HIV and the second column is hepatitis B, so those are our virology franchises. Viread is the foundation of both of those. Viread is our first product for the treatment of HIV, approved just over 10 years ago.
HIV disease or AIDS needs to be treated with 3 oral antivirals simultaneously. And in past, taking multiple pills multiple times a day led to failure. What we intended to do at Gilead was to simplify therapy with really well-tolerated drugs, so Viread is once a day. Our second product Emtriva is also once a day. We combined them together into 2 pills in 1 tablet, and that's called Truvada. That was launched in 2004, and really started to transform the treatment of HIV.
We partnered with Bristol-Myers and Merck with their efavirenz to combine it with Truvada to have a single-tablet regimen, ATRIPLA, and more recently with Johnson & Johnson and their Rilpivirine to have Complera. Viread for hepatitis B is the leading product for the treatment of hepatitis B now in the U.S.; and again, very safe, very potent, well-tolerated. We have a variety of other products that we're building out other franchises, and I'll talk about that briefly at the end.
First, going to HIV. In 1996 was -- just 16 years ago, was the first time that a patient could take 3 different drugs and fully suppress the virus. Up until 1996, the disease was fatal. But those patients who were treating their HIV needed to take a handful of medications, taking pills multiple times a day with and without food, with and without certain quantities of water, so it's just a very difficult regimen. And no one could take all those pills, and that's why people would develop resistance and fail. You'd take a partial regimen. So we, in our efforts, were eventually able to come up with a single tablet, ATRIPLA, that has all 3 drugs in 1 tablet. And therefore, a patient takes all or nothing. There's none of this partial regimen stuff which could give rise to resistance. And that took only 10 years from the beginning of the successful treatment of AIDS to have this single tablet. Now 5 years later, we have the second one, Complera. And you can see that Complera is actually slightly smaller than ATRIPLA, making it even more convenient.
So Truvada, we think of as a backbone for the treatment of HIV; 2 nucleoside, nucleotide analogues, Viread and Emtriva. And Truvada is also a part of ATRIPLA, where the efavirenz is added. You can see what percent of patients in the United States are on this Truvada backbone, whether it's Truvada plus a third agent or ATRIPLA directly. It’s become the cornerstone of HIV therapy. The other 2 nucleoside combination, fixed-dose combination products, EPZICOM and COMBIVIR have a smaller market share.
The dynamics of the HIV market. You can see that about 600,000 individuals with HIV are on treatment, that's the yellow bar. And that's out of the 1.2 million who are infected. As we've seen over the last few years with the evolvement of simple, well-tolerated regimens, the number of people being treated has grown pretty dramatically. When we launched Viread, it's in the 340,000 range. And this is due to the better-tolerated treatments. And also with the better-tolerated treatments, a recognition that if you treat people earlier in infection, they had better outcomes.
When we launched Viread, patients were treated when their CD4 count fell from 800 to 200; that's the immune system being severely compromised. And obviously, if you can treat when the immune system is not as compromised, the patient will do better. So we've seen a move to treating healthier and healthier people. It's also been more recently hypothesized that patients who are infected and diagnosed -- or not diagnosed but not being treated, transmit the majority of the new infections. And as you'll see that's become very well established.
The improvement of health is really characterized very nicely in this Bartlett publication from September. This is a Johns Hopkins cohort, where they followed the viral load in patients over time. The green bar is a viral load of low 200, which means the virus is suppressed in the body, it's not causing any illness, it's not mutating. And importantly, it's not infecting other people. You can see that green bar is up to about 80%. If you say below 500, which is the old standard, we're really pushing 90%. And this includes patients who are eligible for treatment but not taking it for whatever reason. So the treatments have become highly efficacious, and AIDS patients now can live a really quite normal life.
Science Magazine just announced a couple weeks ago what they considered the breakthrough of the year. And it was not published in Science; they consider scientific contributions broadly. And Myron Cohen, the lead of HPTN 052, published the fact that if you take patients who are fairly healthy and you enroll them in therapy or defer that therapy, he was able to demonstrate that the people who have therapy have a 96% reduction in transmission of virus so early treatment provides clearly better outcomes to patients. But now we can quantify the benefit it provides to society in terms of reduction of new infections. It's, of course, highly cost-effective. It also means when a physician diagnoses a patient with HIV, that physician will be cognizant of the fact that if he puts that patient on drug, that patient will have the chance of infecting someone else reduced by 96%.
Complera is the product we launched in the fall. It was approved in the U.S. in August, Canada in September and the EU in November. As is typical when a new drug is approved, there are a couple of Phase III studies, but there's a lot more we'd like to know. And so for instance, we're looking at switching patients from a protease inhibitor-containing regimens to Complera directly, so they can reduce their number of pills and see whether or not we maintain good suppression. That's ongoing. And then of course, since Complera is the second single-tablet regimen on the market, it would be of interest and importance to know how Complera compares head-to-head against the first single-tablet, ATRIPLA, and that's ongoing in a nearly 800-patient study.
Our third single-tablet regimen, which is under review by regulatory bodies, takes what we’ve been talking about for a while, Truvada, the backbone, and combines it with an integrase inhibitor, elvitegravir, which is boosted with cobicistat. Cobicistat is a new boosting agent that we are developing in combination with a new integrase inhibitor, elvitegravir plus Truvada. And the FDA and other regulatory bodies have accepted the review of this 4-drug-in-1 pill with 2 new chemical entities without having yet approved the individual components. This is a first, but it's what the FDA has committed to also for hepatitis C, when we bring combination products forward so that people will have the benefit of fixed dose or single-tablet regimens and not take multiple pills where resistance can occur. So it's a very exciting development through regulatory bodies. The PDUFA date for the U.S. is August 27 of this year.
We have some ongoing collaboration agreements in HIV. And I think the theme you can see in this is we've continued to innovate in HIV all these years. So back to Tibotec or Johnson & Johnson, they also have a protease inhibitor which needs boosting. It's currently boosted with Abbott's ritonavir. We're working with Tibotec to develop a fixed-dose combination of cobicistat and their protease inhibitor, darunavir. And we're also working on a new single-tablet regimen, which includes 7340.
We have not advanced Viread with darunavir as a single tablet because the mass of the pill would be too big. You cannot get the size down to be one pill once a day. But we have a new form of the active ingredient in Viread in this new form; it's called 7340. And we're developing that at only 1/10 of the dose of Viread. We've used some targeting technology to target lymphocytes where the virus replicates, so we can give a much lower dose. And that lower dose allows us to conceptualize the first single-tablet regimen container protease inhibitor.
We also announced recently that Bristol-Myers will be working to develop a fixed-dose combination of cobicistat to boost their protease inhibitor, atazanavir. And then in addition, we've taken over an intellectual property portfolio of integrase inhibitors from Boehringer Ingelheim. These molecules target a different side, a noncatalytic side on integrates separate from elvitegravir, and thus would be useful as an agent that would have a different resistance profile.
So we continue to innovate in HIV. It's been a long process. Many of us at Gilead have spent a big part of our careers on HIV. Viread was 2001. As I mentioned, Truvada, '04, ATRIPLA, '06, Complera, last year, Quad, this year. And then we have these additional ongoing projects. And 7340 is not just being developed with Tibotec's darunavir but, of course, the other products we have already on the market with Gilead.
Moving now to hepatitis B, another foundation business for us. Hepatitis B's sales for the first 9 month -- or Viread sales for all indications were $547 million for the first 9 months, pretty much Europe and equal half -- U.S. and Europe have equal levels. We continue to expand the treatment and diagnosis of hepatitis B through targeted programs and expand market share. This is much like we've done with HIV. But we also, over the last few years, have worked very hard to build our global infrastructure.
Hepatitis B is largely a disease of Asia. HIV is largely a global disease, as is hepatitis C, which we'll get to. So for instance in HIV, we now treat over 900,000 people in our upper-income markets, but we have about 2 million people on tenofovir therapy in low, middle income, and low-income markets just a broadly dispersed program that we do on our own and through many distributors. With hepatitis B, with the Asian focus, we've developed our commercial infrastructure and have approval now in Hong Kong, Korea, Taiwan and Singapore. So we're building a broader and broader international foundation to our commercial and medical efforts. We also, with hepatitis B, recognize that to truly get at the hepatitis B problem globally, we need to find therapies of limited duration as is happening now with hepatitis C. Right now, a hepatitis B patient goes on Viread. And maybe at 5 years, 10% of those people may clear the virus, but the vast majority continue to replicate.
We have seen the benefit of 5 years of therapy with Viread. Ishak's score, going from left to right, is increasing fibrosis of the liver, 5 and 6 are called cirrhosis, very significant damage to the liver. And we knew with Viread, we could stop viral replication and perhaps disease progression. What we didn't know until just last fall, when we got the 5-year data, is that we can dramatically improve the fibrosis of the liver. And as you see as the scores -- as the liver scores get worse at baseline, what we see after 5 years is a pretty significant improvement in terms of percentage-wise shown by those green bars on those -- especially on the right, where there's the higher liver disease at baseline. So this is a pretty dramatic improvement of liver scarring and something that does support therapy with Viread.
Now moving to hepatitis C. The global prevalence of hepatitis C is about 5 times as much as HIV. This is a huge worldwide burden. Patients with hepatitis C, as they get older, progress to liver failure and liver cancer. There are a variety of genotypes around the world, typically isolated by different types of geography. So what we need are products that work broadly against genotypes and can be given orally. There is -- out of the 160 million, there's about 12 million hepatitis C patients that are in what we would call our more commercial markets. And only -- well, fewer than 200,000 are treated every year. Think about when you go back to the HIV, where half of people are now being treated; very few people are treated with hepatitis C because of the toxicities and difficulties of an existing therapy. So it's been probably one of the most competitive areas of pharmaceutical research over the last few years to come up with oral agents that can cure hepatitis C with a limited duration of therapy. And really over the last few years, a lot of progress has been made by a lot of organizations.
The current therapy involves interferon and it has a lot of challenges. The once weekly self-administered injection of interferon is difficult for patients and has a lot of toxicities. There's very poor tolerability and a lot of safety issues. It's time-intensive and complexity of protease inhibitor response guided therapy adds to the difficulty now that we're using protease inhibitors from 2 different companies on top of interferon and ribavirin. The protease inhibitors have their own toxicities, and it has not become easier to treat patients. A significant number of patients are, in fact, completely not eligible for interferon therapy for a variety of reasons, so the current therapies are very limiting. And that's why so few people are taking current therapies.
So as part of our ongoing work in hepatitis C, we recognize the progress made by Pharmasset and have a strategic rationale for that acquisition, which we announced in November. It accelerates the time to the first oral regimen, that will be PSI-7977 plus ribavirin for the treatment of hepatitis C. This molecule is the most potent and advanced nucleotide in clinical development. And in fact, we have targeted, as had Pharmasset before us, FDA approval during 2014. This provides for Gilead not only a product that can benefit a large number of patients but for significant revenue growth and diversification in 2014 and beyond. The composition of patent matter for this product is into 2029. And as I've been trying to explain, at least, Pharmasset's strategic fit with Gilead’s scientific and commercial expertise is quite good with the work we've already done in HIV and in hepatitis B. Also, we have a combined portfolio, Pharmasset's product is in Phase III. We have an additional 4 molecules in Phase II, so we have a lot of ways to confront how the research progresses in the coming year to combine products into once daily regimens for the treatment of hepatitis C.
Pharmasset's data on genotype 2/3 are shown on this slide. It's the study ELECTRON. And this was a study that advanced our understanding of the treatment of hepatitis C. In the column on the left is the use of 7977 standard-of-care ribavirin and peg-interferon but lowering the dose of interferon to only 3 months. And you can see 100% of patients at week 12 are undetectable. And that SVR12 is 12 weeks after stopping therapy, still 100% are undetectable. And incidentally, one of the reasons the timeline to approval can be quicker now is the FDA has realized that SVR12 is enough. We do not need SVR24 for approval. So that shortens the timeline that these products for the treatment of hepatitis C will be available to patients.
The next question asked was: What about 12 weeks of therapy without the interferon component, just 7977 plus ribavirin? And you can see it's the same result, SVR12 of 100%. Then the final question was: What about 7977 alone? And you can see there that monotherapy is not optimal, that 4 out of 10 patients failed or had rebounded by 4 weeks, and the 12-week data is not available yet. But this study gave clear guidance to a Phase III program of use in 7977 plus ribavirin. And that has -- is in the process of being initiated. The first study is 7977 plus ribavirin versus standard of care. And the second study is just the 2 arms, 7977 plus ribavirin, the second arm being placebo, a head-to-head comparison with placebo. And all arms will be analyzed at SVR12. We also have a Phase III program that we'll be initiating in other genotypes as planned for this year.
So this is the one slide I have on the other products that were shown on that earlier 14-product slide. And we have growing sales in this business outside of antivirals. During the first 9 months, AmBisome is still our leading product at $249 million. But you can see Ranexa and Letairis are having very good growth and catching up fairly rapidly. And Cayston's growth is quite good too for the treatment of cystic fibrosis. With Ranexa and Cayston -- with Cayston, we have a number of additional studies ongoing for future indications.
We also have expanded our effort in oncology. GS 1101 is a PI3K double-specific inhibitor that's in Phase III for CLL and in Phase II for indolent NHL. So this is a product that's moving forward and that we're investing fairly significantly in. We also are developing a monoclonal antibody, 6624, that's active against LOXL2, a fibrogen cross-linking enzyme. This is in Phase II in myelofibrosis and also moving into Phase II for pancreatic and colorectal cancer, just in combination with standard of care for those 2 diseases. And then we also have initiated a Phase I program in IPF.
The financial highlights for the first 9 months of 2011 are depicted here. We have product sales of $5.9 billion; that's up 9% year-over-year. Cash flow, $2.7 billion, the non-GAAP operating margin is 51%. And since 2010, we've purchased and retired 164 million shares of stock or 18% of the total outstanding.
Looking forward to this year, the significant milestones we anticipate of one and very important to us is complete the Pharmasset acquisition. We'll be providing our financial results and guidance for 2012 on February 2 at our conference call. We'll be releasing hepatitis C data on genotype 1 patients. The data I showed was genotype 2/3, but there's ongoing studies in genotype 1, and also on some collaborative studies that are underway with other organizations. We'll be filing for approval of elvitegravir and cobicistat. Those are the individual components present in Quad. We will receive -- or I should say we expect to receive Quad approval and then begin the launch of the product this year. And we have numerous pipeline programs that time does not allow for talking about today but are advancing in various stages of development.
With that, I thank you very much. The time is up, and I look forward to talking to you in the breakout. Thank you.
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