Gilead Sciences' (GILD) Management Presents at William Blair Growth Stock Conference (Transcript)

| About: Gilead Sciences, (GILD)

Gilead Sciences, Inc. (NASDAQ:GILD)

William Blair Growth Stock Brokers Conference

June 14, 2016 9:10 a.m. ET

Executives

Robin Washington - CFO

Sung Lee - IR

Analysts

John Sonnier - William Blair

John Sonnier

All right. All right, would you mind closing the doors? Thanks. Good morning, I'm John Sonnier, one of the biotechnology analysts at William Blair. And before I introduce our next company, Gilead, I have a regulatory responsibility to tell you that a full list of research disclosures and conflicts can be found on our Web site. I'm pleased to have presenting today for Gilead, the Chief Financial Officer, Robin Washington; and Sung Lee from Investor Relations. The presentation and the breakout is in [indiscernible]. Robin?

Robin Washington

Thank you, John, and good morning everyone. Always a pleasure and a privilege to come and present on behalf of Gilead Sciences here at this conference, being a fellow Midwesterner as well.

So before I begin, of course, I also need to make a caveat regarding the forward-looking statements that you may hear throughout this presentation. Our business carries risk and uncertainties, so I'd encourage you to take a look at our latest SEC filings to further understand those risks if you so choose.

And so to begin with, for those of you in the audience that are somewhat new to Gilead, we are a science-focused company that develops medicines for unmet medical needs. And our efforts are concentrated in five therapeutic areas, HIV, liver disease, oncology, inflammation/respiratory, and cardiovascular. We are a global company with offices in more than 30 countries around the world, and we have more than 8,000 total employees as of March of this year. In the last few years we've expanded into new countries, such as Japan and Brazil. Our R&D efforts are primarily concentrated here in the U.S., while our commercial operations span all of our key markets. Our manufacturing network ensures redundant supply, which is critical given the life-saving nature of our products.

Throughout the years Gilead has had a very positive impact on global health through our HIV program with the help from our partners around the world. Nearly 10 million patients take a Gilead drug or a generic version every day in more than 150 countries worldwide. Gilead is very proud to play a leading role in the treatment of and prevention of HIV. We continue to help countries around the world in various ways with programs that may not be as well-known as the HIV program. For example and on the slide there you'll see we have AMBISOME, and it's a single dose cure for severe fungal infection. And we've had a very long collaboration with the WHO to provide this medicine to parts of the world where this disease has a great impact.

We also have ongoing efforts for Ebola, and we announced some data for GS-5734, it's a novel, innovative nucleotide for the potential treatment of Ebola. And so we've been participating in limited distribution to patients under a compassionate use protocol. There have been two patients that have been treated with GS-5734 for Ebola, and both of those patients have recovered, and were cured.

So here, we outline our current commercial portfolio. We have today 22 marketed products, 11 of which, there you see all the way on the left, include are for HIV, Odefsey and Descovy are our most recently approved products in HIV, having been approved in the last three months. We currently have four marketed products for liver disease, including Sovaldi and Harvoni for hepatitis C. We offer important drugs in the field of cardiovascular. Two of our lead products there, Letairis and Ranexa sold over 1.3 billion in sales in 2015.

So here you can see the contribution of our commercial portfolio as it relates to total net product revenue for 2014 and 2015. As you can see, we've grown fairly extensively. In the last couple of years, our hepatitis C product revenues which are captured under liver disease in these pie charts have grown significantly and counted for the majority of our total net product revenues. This is also reflective of the huge unmet medical need in hepatitis C that existed prior to the launch of our products.

Here is a snapshot of our Q1 2016 results. As you can see, net product revenues were approximated $7.7 billion, and that translated into earnings per share of $3.03 per share. You can see nice growth year-over-year for both net product sales as well as diluted EPS. We also ended the quarter with $21.3 billion in cash and cash equivalents. And that gives us a lot of flexibility in terms of capital allocation. When we think about capital allocation we've kind of divided into three critical components. One relates to dividends and share repurchases, which as you know we've been very active in. We also continue to invest heavily in our organic pipeline. And we augment our pipeline with business development activities. Just since January of 2015, we have announced four transactions that potentially are valued at $4 billion, including milestone payments. And looking forward, we will continue to evaluate ways to increase shareholder value, and build on our track record of success.

So turning here to our pipelines, which as you can see, we've got in Warriors' colors since we were based on the West Coast. We have a pipeline with 26 different programs currently under development in Phase 1 through Phase 3, and we've grouped them here by the various disease areas that I mentioned earlier that we've covered. I'll go into a little bit depth on several of the programs in a moment, but overall our research and development pipeline has never been as robust at any time in the company than it is today.

So now we'll turn and talk a little bit about HIV AIDS. According to the WHO data there are approximately 35 million people living with HIV around the world. This slide shows the prevalence of HIV in the U.S., and as you can see there are approximately 1.2 million individuals in the U.S. that are infected. The diagnosis rate in the U.S. is very high, and you could see that approximately 1.1 million patients are diagnosed. Of that amount, nearly 800,000 are on HIV medication. And of those 800,000, approximately 627,000 are on a Gilead regimen. With 11 Gilead HIV drugs approved since 2001, Gilead is the leading manufacturer of HIV medicine.

So Gilead was the first to create a single tablet regimen to treat HIV. Single-tablet regimens, or STRs as we refer to them, contain all the medicines a patient needs to-date to control the daily HIV. Prior to the STR, patients needed to take multiple pills a day, multiple times a day, with or without food. So they had very, very complex regimens, and that contributed to overall lower adherence, and led to very negative outcomes. At the bottom of the slide here, we show the first of our single-tablet regimens, Atripla, which was introduced in 2006. Since that time we have launched, as you can see, four additional STRs.

Complera is our second STR, and it is the number two prescribed regimen for all patients in the European Union. Our third STR, Stribild, is the number one prescribed regimen for patients new to treatment in the U.S. And on the top row of this slide we show the TAF-containing STRs. Genvoya, which was launched in the U.S. in November of last year, is the first STR to contain tenofovir alafenamide or TAF. And TAF is an important component of future HIV regimens due to its safety advantages. Odefsey is our second TAF-based regimen, and was approved on March 1, here in 2016, in the U.S., and this is an alternative to Complera, and was developed in conjunction with our partner, Janssen Pharmaceuticals.

Not on this slide is a third TAF-containing drug, Descovy, which was recently approved in the U.S., and represents the first new backbone innovation since Truvada. So here you can see the uptake of Genvoya, this slide really shows the trends for the first 18 weeks of launch. And as you can see, compared to Stribild, Complera, and our competitors' product Triumeq, Genvoya is far outpacing those products. And it is the most successful launch in HIV therapy since Atripla, back in 2006. While Genvoya has done very well, typical of Gilead fashion, we continue to innovate and develop new products in HIV. We have another regimen in Phase 3. This is a combination of GS-9883, which is a once-daily unboosted integrase inhibitor dose at 50 milligrams, in combination with F/TAF.

We have initiated five Phase 3 studies last year, two of which are in patients new to therapy, often referred to as treatment-naive patients. One of these studies compares our combination to Triumeq, our competitor's product and the other study compares our product to the combination of F/TAF and dolutegravir. These studies are anticipated to be completed sometime in the first half of next year.

I will now turn to liver disease and we'll discuss these three various areas here. According to the CDC there are estimated to be 170 million patients around the world living with hepatitis C globally. This slide shows that there were approximately 3.2 million people with hepatitis C in the U.S. and about half of those patients estimated to be diagnosed -- are estimated to be diagnosed and that's depicted there in the blue. The green figures down there below show people that have been treated today and from this illustration you can see clearly that only a fraction of the population in the U.S. is currently been treated. So we have a long way to go not only here in the U.S. but also abroad. Here we depict the patients treated since we launched Sovaldi and Harvoni starting in December of 2013 through March of last year and as you can see close to 1 million patients around the world have currently been treated with our hepatitis C products.

The success we have had in hepatitis C has been clearly been because of Sovaldi and Harvoni which provides a very strong and safe option for patients with various hepatitis C genotypes which there are six possibilities. Sovaldi continues to be a very important product to us and it is mostly used now in genotypes 2 and genotypes 3. Since the launch of Harvoni, we have learned that it is a drug that is even better than we had originally thought, its label in the United States has been expanded twice since approval and Harvoni is now approved for use in a broader range of patient population. There is tremendous experience now with Sovaldi and Harvoni around the world and what we have seen thus far is that the real-world results for the cure and safety support or improve up on the results demonstrated in the clinic.

So similar to HIV, even though we have had significant success with Sovaldi and Harvoni we continue to innovate here as well. Last year we unveiled a series of studies called the ASTRAL studies where we looked at the next generation NS5A inhibitor called ledipasvir in combination with sofosbuvir. We currently call this combination SOF/VEL and it provides a very robust pan-genotypic option for patients. Pan-genotypic means it works across all hepatitis C genotypes. In the ASTRAL studies, SOF/VEL achieved very high cure rates as high as 99%. And even in the most difficult genotype to treat which is genotype 3 SOF/VEL achieved a cure of 95%, which is the highest rate we have seen of a drug without using ribavirin.

SOF/VEL is currently under priority review by the FDA in the U.S. and discussions, sorry, decision is anticipated later this month; June 28th is the current PDUFA date. In the European Union, we filed an MAA and we're given an accelerated assessment based on unmet medical needs. Following SOF/VEL is a triple combination that we call SOF/VEL/VOX, VOX or formally GS-9857 is pan-genotypic protease inhibitor and we're exploring this regimen for eight week duration for treatment naive patients and a 12-week duration for patients that have failed therapy. And if the data supports it, we would view SOF/VEL/VOX as a triple combination that can be used as a universal salvage regimen.

Now we'll turn to NASH, which is a big problem here in the U.S. It's estimated that 15 million individuals have NASH in the U.S. And by the year 2020, NASH could be the leading cause of liver transplantation replacing hepatitis C. The major feature in NASH is fat in the liver along with inflammation and damage. NASH is a biologically complex disease and consists of three components, there is a metabolic component, there is an inflammatory component and then there is the extracellular matrix or the fibrotic component. And we have programs in clinical develop that cover all these various three components of the disease.

So we currently have four clinical programs for NASH consisting of simtuzumab, GS-4997, GS-9674, GS-0976 which is an ACC inhibitor that we have recently acquired from Nimbus Therapeutics. And as I previously mentioned each of these compounds alone or in combination have the potential to address the different components of NASH. Lastly in liver disease, I wanted to briefly talk about our hepatitis B cure program. Hepatitis B is currently the largest area of focus for us in research and here you can see that we have two programs in clinical development, one is GS-9620 and then also GS-4774. We anticipate completing Phase 2 studies for these programs this year and we hope to advance a few more programs from research to clinical development later this year.

So now we're going to quickly cover oncology. So Zydelig here is our first oncology product and it has generated nearly 50 million in sales worldwide. Q1 sales were 132 million. It is approved in the relapse setting for two NHL disease and CLL, and these are forms of blood cancer. We realized recently that the risk benefit profile for this drug in frontline therapy is not positive so those studies were stopped. However the benefit is clearly demonstrated in relapsed refractory patients.

Our pipeline for oncology consist of a number of intracellular kinase inhibitors and we are looking at combinations of these agents to get deeper and more adorable responses and apply them in the frontline setting. And hopefully a year from now, we will be able to advance some of these combinations. In the meantime, we have two programs that are in Phase 3, the first is momelotinib for myelofibrosis, which we should be in a positive position to file an NDA in the U.S. in Q1. In 2016, we have data that supports it. And then the second is GS-5745 and MMP9 antibody for gastric cancer. And this study will go on for the next two years.

So lastly, I would like to talk about our programs in inflammation. Gilead has been building a portfolio in inflammatory diseases as well as respiratory diseases and the principal agents that are progressing are filgotinib and GS-5745. These compounds are being explored in rheumatoid arthritis as well as ulcerative colitis and Crohn's disease. Filgotinib is a very specific JAK1 inhibitor and it is highly selective. We acquired the worldwide rights to this compound from Galapagos. There have been over 900 years of patient experience contributing to a very advanced and evolving safety database. It is an oral treatment that is once-daily which can be very important for the treatment of RA. And it has activity in RA and a very pronounced activity in Crohn's disease, which is highly differentiating feature for this program.

We expect to initiate Phase 3 studies for RA and Crohn's disease in Q3 of this year. In addition, we expect to initiate a Phase 2 program in ulcerative colitis. GS-5745 which I mentioned for oncology is also being explored in inflammatory diseases including RA, ulcerative colitis, Crohn's disease as well as COPD. We also have an ASK-1 inhibitor which is known as GS-4997 and it is currently in Phase 2 for diabetic kidney disease. And so with this it rounds out a portfolio that has a potential to knockdown different inflammatory diseases either alone or in combination.

So this brings me to the end of our prepared comments, but I hope that you take away from this presentation that we have 22 very successful commercial products, we have very strong cash flow, we have great opportunities in hepatitis C and that we have 26 programs in various stages of development for our therapeutic areas. So I thank all of you for your interest in Gilead Sciences.

Unidentified Company Representative

[Indiscernible] the breakout is going to [indiscernible].

Robin Washington

Okay, sounds good. Thank you everyone.

Question-and-Answer Session

End of Q&A

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