Gilead Sciences, Inc. (GILD) Q1 2025 Earnings Call Transcript

Good afternoon, everyone, and welcome to Gilead's First Quarter 2025 Earnings Conference Call. My name is Rebecca, and I'll be today's host. In a moment, we'll begin our prepared remarks, followed by our Q&A session. To ask a question, please press star 1, and to withdraw your question, press star 2. I'll now hand the call over to Jackie Ross, Senior Vice President of Treasury and Investor Relations.

Thank you, Rebecca. Just after market closed today, we issued a press release with earnings results for the first quarter of 2025. The press release, slides, and supplementary data are available on the Investors section of our website at gilead.com. The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day, our Chief Commercial Officer, Joanna Mercier, our Chief Medical Officer, Dietmar Berger, 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 Peretti, the Executive Vice President of KITE. Let me remind you that we will be making forward-looking statements. Please refer to slide two 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.

Dan Peretti Thank you, Jackie, and good afternoon, I'm pleased to share our first quarter results, which reflect strong commercial and clinical execution across the business. Our base business, excluding VicLurie, grew 4% from the first quarter of 2024, primarily driven by growth in our HIV business. HIV sales were up 6% year-over-year, with VicTarvi up 7%, highlighting our demand-led volume growth that was offset in part by the expected headwinds associated with the Part D redesign. LiveDelty continues its strong launch momentum with $40 million in sales in its second full quarter since launch. Year-over-year growth in our HIV and liver disease businesses was partially offset by softer-than-expected Trudelby sales due to inventory dynamics that masked increase in demand, as well as headwinds in cell therapy. Total product sales, including Vicluri, were down by 1% from last year, reflecting fewer COVID-19-related hospitalizations. Beyond our commercial results, we also saw impressive operational execution with strong operating margin and earnings per share results that highlight our continued focus on expense management and leverage in our business model. Our diverse pipeline continues to deliver across HIV, oncology, and inflammation. In HIV, we are now only weeks away from the anticipated FDA decision on twice-yearly lenocaprivir for PrEP. We remain on track for the June 19th PDUFA date and the potential launch in the U.S. immediately following. As a reminder, this is one of up to nine potential HIV product launches we are targeting before the end of 2033, building on Gilead's decades of leadership in HIV innovation. In oncology, earlier this week, we announced the positive results from the Phase III Ascent 04 study of Trodelvi in combination with Pembrolizumab for first-line PD-L1-positive metastatic triple-negative breast cancer. The results showed a clinically meaningful and statistically significant improvement in progression-free survival over the standard of care. This news represents an important potential benefit for patients. Metastatic TNBC is one of the most aggressive forms of breast cancer and has historically been very difficult to treat. We expect to share the Ascent 04 data at a medical congress in the near future and to file with global regulatory authorities as quickly as possible. We continue to expect an update later this quarter on the Phase III Ascent O3 study evaluating Trodelvi monotherapy in first-line metastatic triple-negative breast cancer patients who are not candidates for PD-1 inhibitors. Moving to cell therapy, we plan to provide an update on our registrational Phase II Imagine 1 trial later this year and remain on track to potentially launch Aneedocel and late-line relapsed refractory multiple myeloma in 2026. We believe that Aneedocel's clinical profile, combined with Kite's exceptional manufacturing capabilities and industry-leading turnaround time, puts us in a strong position to address the unmet need for patients with multiple myeloma. In inflammation, we are launching Livdelzi in additional markets following approval from the European Commission in February. We look forward to continued momentum as we bring Livdelzi to more people seeking to manage their primary biliary cholangitis with a differentiated option. As we wrap up a strong first quarter performance, we can look forward to continuing positive momentum. We have multiple potential launches ahead, including Lenacapavir, Anidocell, and now Trodelby. As a reminder, we have no major LOEs until the end of 2033 and expect to drive top-line growth over time across all three of our therapeutic focus areas of virology, oncology, and inflammation. The overall strength of our business means we are well positioned to adapt to a range of potential policy outcomes in the United States. It is worth noting that Gilead's average corporate tax rate of approximately 20% reflects the fact that the substantial majority of our intellectual property is already registered in the United States. The 2017 tax reform was instrumental in its bolstering our U.S. investment, and Gilead is differentiated in that almost 100% of our R&D capital infrastructure is in the U.S. In addition, we have been increasing our investment in U.S. manufacturing over the last several years with two large-scale cell therapy sites, and we have additional investment projects underway that are expected to run through 2028. Our focus is on delivering on our multiple upcoming launches and advancing our diverse pipeline. And in the meantime, we continue to engage with the administration to encourage a balanced policy agenda that prioritizes innovation and the needs of patients. With that, I'll hand it over to Joanna.

Thanks, Dan, and good afternoon, everyone. We've had a solid start to the year with our commercial execution delivering strong year-over-year sales growth in our base business. Product sales, excluding Vicluri, of $6.3 billion were up 4% year-over-year, primarily driven by HIV and liver disease sales, partially offset by lower oncology sales. Sequentially, sales were down 12% as expected, mainly due to inventory dynamics, partially offset by higher sales in liver disease. Total product sales of $6.6 billion were down 1% year-over-year and 12% sequentially, reflecting lower vocabulary sales. Moving to slide 8, our HIV business delivered sales of $4.6 billion, up 6% year-over-year, driven by higher average realized price and higher demand. Sequentially, sales were down 16% consistent with our guidance, reflecting normal first quarter seasonality, including lower average realized price and volume following a particularly strong fourth quarter, as well as the impact of Medicare Part D redesign. As a reminder, quarterly HIV growth is generally more variable and less indicative of overall trends than full year results, with normal first quarter impacts including inventory drawdown following a build in the fourth quarter, and channel dynamics including the resetting of patient copays and deductibles, which result in lower average realized price. Beyond these typical first quarter dynamics, HIV revenues were also impacted by Medicare Part D redesign in the first quarter of 2025. This increased the manufacturer contribution, and includes individuals on low-income subsidy for the first time. While we are still in the early stages of this implementation, our assumptions remain unchanged. In the meantime, we continue to expect robust demand-led volume growth for the full year, though, as shared back in February, this will be obscured this year due to Part D headwinds, resulting in flat reported HIV sales overall for 2025, with a return to growth in 2026. On slide 9, in HIV treatment, Victarby sales of $3.1 billion were up 7% year-over-year, primarily driven by higher demand. Sequentially, sales were down 17%, as we expected, reflecting first-quarter seasonality, including lower average-realized price and volume. Victarby once again increased U.S. market share in the first quarter to 51%, outpacing the growth of alternative regimens and remains the regimen of choice across G9 markets. Overall, the HIV treatment market continues to grow in line with our expectations of 2-3% annually. Dyscovy sales of $586 million increased 38% year-over-year, primarily driven by higher average realized price and higher demand. HIV prevention continues to represent the significant majority of Discovy sales, and growth this quarter was driven by broader awareness, growing unrestricted access and associated pricing favorability, as well as focused commercial execution that contributed to approximately 16% U.S. PrEP market growth year-over-year. Additionally, Discovy maintains over 40% market share and grew more than 2% year-over-year. Sequentially, sales were down 5% reflecting typical seasonal inventory dynamics, partially offset by higher average realized price and higher demand. Growing awareness and adoption of HIV prevention is encouraging ahead of our upcoming potential U.S. launch of Lena Capivir for PrEP. I'm excited to have our field teams across market access, commercial, medical, community, and our nurse educators mobilized to ensure we're ready for launch. Building on our deep expertise and success of HIV launches and with strong engagement across the ecosystem from community leaders to healthcare providers, our teams are ready to build awareness, drive adoption, and overall deliver a seamless customer experience. Additionally, we're working with health authorities, policymakers, and other organizations outside of the U.S. as we look to bring lenacapivir for PrEP to more people globally once approved. Moving to liver disease on slide 10, sales of $758 million were up 3% year-over-year, reflecting increased demand across PBC, HBV, and HDV, partially offset by lower average realized price for HCV products in the U.S. Sequentially, liver disease sales were up 5%, primarily driven by increased demand and inventory dynamics, partially offset by lower average realized price. For Libdelzi, first quarter sales of $40 million reflect continued early momentum in the launch of PPC, and we're proud of the market share we've achieved so far. We're also pleased that in February, the European Commission granted conditional marketing authorization for Libdelzi. We have just launched in Germany a few weeks ago, and we expect to expand into other major European markets in the coming months. Moving to slide 11, Viclary's sales of $302 million were down 45% year-over-year and 10% quarter-over-quarter, reflecting lower rates of COVID-19-related hospitalizations due to a milder winter season. Viclary's consistently high share of over 60% of treated hospitalized patients in the U.S. reinforces its clinical benefit and position as the standard of care, particularly among patients with renal and hepatic impairment. Despite the variability of the path of the pandemic, we expect Vicluri's important role to continue. On slide 12, Tudelvi's sales of $293 million were down 5% year-over-year, reflecting inventory dynamics and lower average realized price, partially offset by higher demand. Sequentially, sales were down 17%, primarily driven by inventory dynamics and lower demand. Tredelvi remains the leading regimen in second-line metastatic triple-negative breast cancer in both the United States and Europe, with stable share in pretreated HR-positive HER2-negative metastatic breast cancer. We also look forward to potentially bringing the benefits of Tredelvi to triple-negative breast cancer patients in earlier lines of treatment, given the clinically meaningful progression-free survival benefits seen in Ascento 4 and with data from Ascento 3 expected later this quarter. These studies could further strengthen our position in triple negative breast cancer, with almost double the addressable population compared to the second-line setting. Moving to cell therapy on slide 13, sales of $464 million were down 3% year-over-year and 5% sequentially, reflecting accelerating competitive headwinds, notably outside the U.S., and more specifically for Ticardas. Yaskarta sales of $386 million were up 2% year-over-year, driven by higher average realized price and increased rest-of-world demand, partially offset by lower demand in the U.S. Sequentially, sales were down 1%, reflecting European pricing favorability in the prior quarter that did not repeat, partially offset by higher demand outside the U.S. Tecarta's sales of $78 million were down 22% year-over-year and 20% sequentially, reflecting increased in-and-out-of-class competition. Our work to increase CAR-T cost penetration is ongoing, and we continue to make progress in breaking down barriers to adoption in the community setting, including in accreditation and commercial reimbursement. More broadly, we continue to raise awareness of the strength of our data, the advantages of a one-time treatment, and the potential benefits of earlier CAR-T. Notwithstanding the ongoing competitive headwinds that we continue to expect to extend through 2025, we remain very excited about the overall opportunity and future for cell therapy, with the potential launch of an EO cell in multiple myeloma in 2026, and exciting early-stage data in our next-generation products across lymphoma and solid tumors at ASCO. Before I hand over to Dietmar, I'd like to thank the commercialization teams for delivering a great start to the year. We remain focused on expanding the reach of our current portfolio, but are also very excited about the rich pipeline of near-term launches over the next 12 to 18 months. In addition to the ongoing launch of LibDelzy and the potential launch of Lenicap Fear for PrEP in 2025, we're also looking forward to the potential launch of an Edocell in multiple myeloma and Tredelvi in first-line metastatic triple-negative breast cancer in 2026. And with that, I'll hand the call over to Dietmar.

Thank you, Johanna, and good afternoon, everyone. We have made a lot of progress in the first quarter with some exciting Lenacapivir updates at CROI and our first pivotal phase 3 top-line readout for Trodelby in breast cancer since 2022. The quality of these readouts highlights the breadth and depth of clinical expertise across Gilead with the potential to support growth in our target therapeutic areas with new commercial launches in the years ahead. Starting with HIV on slide 15, we shared 20 abstracts at CROI, including data that showcased lanacapavir's potential even beyond the remarkable results we saw in Purpose 1 and Purpose 2 last year. For example, we shared our Phase 1 data that showed once-yearly intramuscular injections maintained lanacapavir blood concentrations above those shown with twice-yearly subcutaneous injections for more than 12 months. The injections were generally well-tolerated. These data were published in the Lancet, and we look forward to initiating a Phase III study for once-yearly lanacapavir for HIV prevention in the second half of this year. As a reminder, for our twice-yearly subcutaneous injection of lanacapavir for HIV prevention, we have already submitted NDA, MAA, and EU medicines for all applications with FDA and EMA. Further, we've submitted filings with regulatory bodies in South Africa and Brazil and continue to make good progress in all our discussions with the global regulatory bodies. In particular, we have not experienced any disruptions in our interactions with FDA, and we continue to expect a regulatory decision by June 19. In HIV treatment, we shared Phase II data at CROI evaluating twice-yearly lanacapivir plus two broadly neutralizing antibodies or BNABs in biologically suppressed people with HIV genotypes that are highly susceptible to both BNABs. At week 26, the combination regimen maintained biologic suppression with high efficacy similar to the stable baseline regimen comparator. There were no infusion-related reactions to the BNABs and no discontinuations due to injection site reactions. Lanacapavir plus BNAPS has already received breakthrough therapy designation from FDA, and these phase 2 data further underscore the potential for this combination to be the first complete twice-yearly treatment regimen for virologically suppressed people with HIV. Phase 3 planning is in progress. Touching upon liver disease on slide 16, we announced the the European Commission granted conditional marketing authorization for Livdelzi for the treatment of primary biliary cholangitis, or PBC. The decision reflects Livdelzi's clinical benefit across key biomarkers of PBC and related pruritus in the Phase 3 response trial. In addition, we continue to make progress on our Phase 3 IDEAL trial, which is evaluating the efficacy of Livedelzi in PBC patients who are partial responders to UDCA, potentially doubling the addressable patient population. Overall, we are excited by the opportunities to bring this differentiated treatment to more patients across the world. Moving to oncology on slide 17, I'm very pleased to share Tridelvi plus Pembro demonstrated highly statistically significant and clinically meaningful progression-free survival benefit over standard of care in the Phase III ASCENT-04 trial in first-line PD-L1-positive metastatic triple-negative breast cancer. Triple-negative breast cancer is the most aggressive type of breast cancer that disproportionately impacts younger and premenopausal women. We look forward to being able to potentially bring the benefits of Trodelby to these metastatic triple negative breast cancer patients in the first line. We will be submitting these data for a presentation at a future medical congress and will engage with global regulators as quickly as possible. Further, we expect to provide an update from the phase 3 ASCENT-03 trial evaluating Trodelby monotherapy in first-line metastatic triple negative breast cancer patients who are not candidates for PD-1 inhibitors later this quarter. We also remain focused on clinical execution of our seven other ongoing phase 3 programs for Trodelvi and Domvenalimab across six tumor types. Moving to slide 18, and on behalf of Cindy and the KITES team, we are pleased to be sharing new data from our next generation products at the upcoming ASCO meeting in June, including phase 1 data from KITE363, our bisistronic CD19-CD20 CAR-T for relapsed or refractory large B-cell lymphoma, and phase 1 data from the bisistronic EGFR IL-13RA2 CAR-T for glioblastoma in collaboration with the University of Pennsylvania Perelman School of Medicine. We believe KITE363 could offer deeper, more sustained responses with the potential to overcome certain resistance mechanisms given its ability to target both CD19 and CD20. Additionally, we believe its dual co-stimulatory domains balance effects such as rapid tumor cell killing and CAR T-cell proliferation and persistence in an optimal way. This could result in a potentially improved overall efficacy and safety profile in B-cell malignancies. Further, we believe many of these potential benefits could translate to B-cell-driven autoimmune diseases and have filed an IND to evaluate KITE-363 in this area as well. For anidocell, our pivotal Imagine 1 study in 4th-line-plus relapsed or refractory multiple myeloma is ongoing, and we look forward to providing an update in 2025. 5. In the second line plus setting, we are pleased to announce the phase 3 Imagine 3 protocol has been amended to include minimal residual disease negativity as a dual primary endpoint in addition to progression-free survival. We're excited for this positive step to potentially bring a needle cell to patients in early line settings and remain confident in a needle cell's profile across efficacy and safety, combined with Kite's leading manufacturing capabilities. Finally, on slide 19, we achieved several important milestones this year, including European Commission conditional approval of Lipdelzi, positive phase 3 top-line readout from ASCENT 04, and initiation of the phase 3 EVOKE small cell lung cancer study. We anticipate an update from the Phase 3 Ascent 03 trial later this quarter. Additionally, in virology, we remain on track to provide an update on the data from our Phase 2 Wonders 1 trial, our wholly owned, once-weekly INSTI-containing oral treatment for HIV, at an upcoming medical meeting. And now, I'll hand the call over to Andy.

Thank you, Dietmar, and good afternoon, everyone. 2021. Our first quarter results reflect both strong operating and commercial execution. As shown on slide 21, our base business was up 4% year-over-year to $6.3 billion, largely driven by growth in our HIV and liver disease business, partially offset by lower oncology sales. Veclurie sales were down 45% year-over-year, resulting in a 1% decline in our total product sales to $6.6 billion. Moving to our non-GAAP results on slide 22. For the first quarter, product gross margin was flat year-over-year at 85%, in line with our full-year guidance expectation of 85% to 86%. R&D expenses were down 5% year-over-year, primarily due to lower clinical manufacturing activities. Acquired IPR&D expenses were $253 million, primarily driven by the Leo Pharma STAT6 collaboration we announced in January. SG&A expenses were down 6% year over year, reflecting lower corporate expenses, partially offset by incremental selling and marketing spend in the United States. First quarter operating margin was 43%, highlighting our ongoing commitment to continue to operating expense discipline and delivering top quartile margins once again. The non-GAAP effective tax rate was 16% this quarter, below our historic average, largely driven by tax benefits from stock-based compensation. And finally, non-GAAP diluted EPS was $1.81. Moving to our full year guidance on slide 23, we are not making any changes to our revenue expectations or non-GAAP P&L guidance at this time. As we reflect on the tariffs that have been enacted to date. These could increase some of our indirect costs but are expected to be manageable in 2025, in part due to potentially lighter FX headwinds than previously expected. For 2025, therefore, we continue to expect total product sales of approximately $28.2 to $28.6 billion, product sales excluding Vecluri of approximately $26.8 billion to $27.2 billion. 2025 HIV sales to be approximately flat compared to 2024 with demand driven growth offset by the impact of the Medicare Part D redesign. And Bec-Lurie sales of approximately $1.4 billion. While the first quarter was lighter than expected, we know this can be a highly variable business. With that in mind and consistent with our approach last year, we do not expect to update our bakery guidance until our third quarter earnings call. Moving to other parts of the P&L for full year 2025, on a non-GAAP basis, we continue to expect product gross margin to range between 85 to 86 percent, R&D expenses to be roughly flat from 2024, acquired IPR&D to be approximately $400 million, including the $253 million of expenses in the first quarter, as well as known commitments and expected milestone payments. SG&A expenses to decline by a high single-digit percentage compared to 2024. Operating income to be between $12.7 billion to $13.2 billion. Effective tax rate to be approximately 19%. And finally, diluted EPS to be between $7.70 to $8.10 for the full year. Looking ahead, we will continue to monitor the macro landscape carefully, and we expect that our disciplined approach to operating expense management positions us well to adapt as needed in the months ahead. Finally, on slide 24, our capital priorities remain unchanged. We have already returned $1.7 billion to shareholders in the first quarter of 2025 through dividends and share repurchases, and we will continue to pursue disciplined expense management and careful investment in the most promising pipeline opportunities, both internally and externally. I'm also pleased to note that S&P recently upgraded Gilead's long-term debt rating from BBB+, with a positive outlook, to A- with a stable outlook, recognizing the outlook for our HIV franchise and other products, combined with steady revenue growth and strong cash flow generation. Overall, Gilead is on track to continue delivering demand-led volume growth, a disciplined operating model, and strong cash flow that positions us well for the rest of 2025 and beyond. With that, I'll invite Rebecca to begin the Q&A.

Thank you, Andy. At this time, we'll invite your questions. Please be courteous and limit yourself to one question so we can get to as many analysts as possible during today's call. Again, to ask your question, press star 1. And to withdraw your question, press star 2. Question comes from Michael Yee at Jefferies. Go ahead. Your line is open.

Hey, great. Thanks. Congrats on the quarter and progress. We wanted to ask about your expectations for the prep launch and assuming approval on time, how you think about the dynamics in the second half related to commercial reimbursement and Medicaid reimbursement, and whether guideline changes and other factors also need to play a role.

Hi, Michael. Thanks for the question. Yeah, so we're excited about the opportunity with the Pidufa date around the corner. We are counting, I think Dan referred to weeks, the team is counting days, and we are absolutely ready for the launch. From an access standpoint, what we've said is we believe that around, it's going to take a couple of months, right, as it builds access. We think about 75% or so access within the first six months to a peak covered lives at about 90% at a 12-month mark. And that's going to happen month after month. It doesn't all happen in a bolus. We also believe at the beginning that they're going to go through medical exceptions, right? And they'll go through the process just like they do, for example, with Livdelzi as we're building access there as well. And we believe that just takes a little bit more time but still could get through the process for those people that want lenacapivir. And so, we'll work through that, and we're excited about that opportunity as we build out through 2025 and, of course, into 2026 with much stronger access.

Our next question comes from Carter Gould at Council Fitzgerald. Carter, go ahead. Your line is open.

Thank you. Good afternoon. I guess sort of following on the prior question, there have been, you know, a number of cuts across HHS CDC to start the year, across various teams, divisions, raising uncertainty around potential disruptions to messaging, education, awareness. Can you help maybe frame some of these and specifically as they might impact the launch? And are these sort of either roles or activities that Gilead can maybe step into to do some of the heavy lifting? And I guess really your confidence that we won't be pointing to these aspects as impacting the launch later in 25 or into 26. Thank you.

Thanks, Carter. I'll start, and then Joanna can add, or others. But I just want to be clear that, to date, we haven't heard or seen anything that would cause us to alter our plans or expectations for the Lent for PrEP launch or adversely affect our HIV business. Obviously, we're staying very closely attuned to this. And importantly, we're having discussions with policymakers to emphasize the importance of Lentacalpivir for PrEP, and in particular, in relation to their stated goals of addressing chronic diseases in this country and the value of prevention. We think that Lent for PrEP is really well positioned there. So specifically, relative to the government support, and in particular, you mentioned CDC, Carter. Obviously, their responsibilities include They include, you know, research and surveillance of HIV. They include supporting efforts around diagnosis and linkage to care. We're also involved in those activities. But again, nothing we've seen so far suggests that those core services, you know, are in a position to change our approach to the launch. And maybe with that, I'll hand it over to Joanna if she has any other questions, or Dietmar, do you want to comment on FTA, too?

Sure. Again, maybe just add a point, Carter, around PrEP market growth and kind of what you asked what Gilead can do. I think that Gilead's been incredibly focused on making sure we continue to have market development initiatives to ensure screening, diagnosis for treatment, but also to ensure awareness and within the PrEP market and make sure there's education there as well. And I think you've seen that as you think about the prep market growth, we had a lot of activities in Q4 of last year, and that's kind of playing out. We saw a nice uplift of the growth of the prep market in Q4, and you kind of see that come through again in Q1 at about 16% year over year. So really well positioned as you think about lenacapivir around the corner.

Yeah, and on the FDA side, at this time, you know, all our interactions with the FDA have been on track, have been as expected without any surprises. So we've not experienced any impact to our LEN for PrEP filing or any of our clinical trials actually to date, right? And we continue to expect the LEN and Kapivir decision by June 19th.

Our next question comes from James Shin at Deutsche Bank. James, go ahead. Your line is open.

Thank you. I have a question for Joanna. Joanna, the strength in the SCOBY for this quarter, is there any read-through or implications on, you know, it looks like there was some price benefit to the SCOBY, but is there any read-through or implications to lens launch?

Yeah, there is. Thanks for the question. So yeah, we saw a really nice growth year on year, about 38% growth for Descovy. That was driven by higher average realized price, as you mentioned, as well as higher demand. Those are the two big drivers. And there's a couple of reasons behind that. One is definitely the prep market growth that I was referring to earlier, around 16% year on year, driven really by the market development that we've done, that we've been leading and second was around focused commercial execution we've actually grown the share of discovi year on year by about just over three percentage point which is really amazing and that's driven by the commercial team which have been doing an amazing job but also supported by growing unrestricted access that we've seen even just in the last quarter to be honest as well as associated lower co-pays which also helps our pricing so all those pieces together get you to that 38% year-on-year. And I do believe, actually, because of that market growth, because of this setup from an access standpoint, really supports the opportunity with Lanikapavir hopefully in June.

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

Good afternoon. Thanks for taking my question. You touched on this a little earlier, but, you know, while Gilead seems fairly unexposed to tariff risk here, can you just share any details on how much of the U.S. market is supplied by ex-U.S. manufacturing, either API or finished product, and to what degree you can shift this to the U.S.? And is it fair to say limited risk to the business from a tax transfer pricing perspective? And if I could also just get a clarification with regard to earnings earlier on the redesign with regard to whether your assumptions are unchanged here and whether you could just comment on how this is taking shape relative to your 2025 guide, given the dynamics to date.

Thanks, Selvyn. Let me just start at the high level, and then I'll hand it over to Andy or Joanna to comment a little more deeply. Just to emphasize what you said around the tariffs, I think at the highest level, of course, we separate them into two different categories. One is kind of indirect tariffs, which are related to, you know, all businesses. And for us, there are things like steel, lab supplies, chemicals, reagents. And obviously there we have some known understanding of what those tariffs will be. And what we see so far today, we've absorbed into our guidance without changing our guidance for the rest of the year. And Andy can comment a little further on that. And then the other category of tariffs are obviously the pharmaceutical-specific tariffs, which are not enacted today. They've only been discussed and chatted about. We obviously haven't speculated on those nor included those. But to your point, I think that there is a difference relative to Gilead's makeup and setup that is important when you consider those tariffs. And that is that the vast majority of Gilead's IP is in the U.S. And what that suggests is lower value for its pharmaceutical imports at the end of the day, which is the value in which tariffs would be placed. In fact, more than 80% of Gilead's profits are recognized in the U.S. To your question around the supply chain, it's quite a complicated answer. We do have the strongest footprint we have is in the United States. Like most companies, we leverage both internal and external manufacturing on a global basis. And we're always looking to adapt that to make sure that we have good continuity of supply across, you know, across the world so that we can do that accordingly. I'd also say that we've invested significantly in our manufacturing infrastructure in the United States over the past many years and our R&D infrastructure, including, you know, opening cell therapy manufacturing sites. and we have four large-scale U.S. investment projects in progress that are expected to run through 2028. So it's difficult to get into the detail of every product and every supply chain, but I think we're well-positioned overall. I would ask Andy to comment and maybe Andy or Joanna on the Medicare part. Sure.

Hi, Salveen. It's Andy. Just to confirm what Dan said, our updated guidance does reflect the expected impact of the increase in indirect costs that we've seen from both announced tariffs and reciprocal tariffs, as well as our general expectations for the inflationary environment that we may be moving into. And as you can expect, there are a number of puts and takes in the P&L, but as you look again at another very strong quarter of disciplined expense management, that helps us absorb some of those additional costs. There's also a bit of a tailwind, as you've heard from our peers, in terms of as the U.S. dollar is weakened for those of us that are based in the United States. There's a tailwind relative to our budgeted FX amounts that will help offset some of those as well. So we're very confident today that with the strong growth you saw in the base business in the first quarter, despite the Part D impact, which Joanna can speak to, even with the tariffs, we're happy to reconfirm our guidance for the year and we feel like we're in a good spot.

Great. And maybe just specific to your Part D redesign question, although still quite early in the stages of implementation. Just important to note that Medicare claims will lag by a quarter, so still kind of looking for that data, and we'll get that sometime late Q2 for the first quarter of this year. Our assumptions haven't changed. We continue to expect about that $1.1 billion that we shared for total impact, of which about 900 million or so is specific to HIV. And in terms of phasing, we do expect some linear progression over the quarter, that's in part driven by the cost of our medicines. And then last but not least, we're really quite pleased with our Q1 results. If you think about our HIV business growing six points year over year, if you were to take out Part D redesign, you'd be looking at a 9% growth year over year. So we're really pleased with how HIV is playing out and being able to navigate those seasonal dynamics of inventory that we always see in Q1, but also the Part D redesign dynamics.

As a reminder, we ask that you please limit yourself to one question so we can get to as many analysts as possible during today's call. Our next question comes from Tyler Van Duren at TD Cowens. Tyler, go ahead.

Hey, guys. Thanks very much. Fortro Delby, is the lower demand quarter-over-quarter due to platter coming out, or lower demand in breasts? It'd be helpful if you could elaborate on that.

Joanna, I'll take that one. Yeah, so quarter over quarter has to do with inventory and a little bit of lower demand, just because Q4 was really strong performance. But if you look at our year-on-year at about minus 5%, that's really just inventory dynamic and lower average realized price due to channel mix and higher demand. So we are trending nicely with Tridelvy and holding a really nice position both in second line metastatic triple negative breast cancer and as well as HR positive HER2 negative. So feel confident with what's to come in 2025, let alone with the great positive news on Ascent 04 that just reinforces the confidence for physicians in the second-line setting with the data that we had originally showed with Ascent.

Our next question comes from Dana Graybosch at Liebring Partners. Dana, go ahead. Your line is open.

Hi, thanks for the question. I wonder if we can talk about the process to add lenacapivir to the USPSTS mandate for coverage about cost sharing? I'm assuming SCOTUS upholds the constitutionality in June. So what's the timing of that being added and how much impact or uplift do you expect in revenue and growth in the U.S. when it's added to the mandate? Thank you.

Thanks, Dana, for your question, Joanna, again. I think what's important is that we are assuming that it's going to take a little bit of time for USPSTF to add lenacaphyvera as the process. Obviously from a guideline standpoint we've already kind of seen those guidelines play out when you think about IAS guidelines. We already have lenacaphyvera there prior to even approval but usually they wait for approval and then we kind of go forward with trying to get medical updates through including USPSTF. We do believe though that despite this, we feel we're incredibly well positioned because of the transformative nature of lenacapivir to build access across the different channels and we're prepared to do that. And that's again going to take a little bit of time over the next six to 12 months, but we feel that that would be in line with what we've seen in the past with other agents, including DISCOVI, and we're going to be leveraging all the guidelines possible to make sure that there's a real value that's displayed for access to go as quickly as possible. USPSTF would be nice to have, to be honest with you, but in the first six to 12 months, we're assuming that that's not going to be in play, and our plans are really based on our value proposition of Lenacapadir.

Our next question comes from Jeff Meacham at Citigroup. Jeff, go ahead. Your line is open.

Oh, great. Afternoon, guys. Thanks so much for the question. I have one for Dietmar. So on the HIV treatment opportunity and looking to your long-acting orals, I guess the question is, what's the gating factor for selecting the best phase three combo?

And related to that, you know, while you haven't seen resistance with land, it hasn't really been an issue. would it still make sense to have you know in the in the treatment setting a three drug versus a two drug combo just to uh to mitigate the lower risk of resistance thank you you know thank you jeff for the question right that's really early in our development program here i think the important piece is that we're looking for optionality we're really looking for the breadth and depth of the portfolio to deliver for people basically with monthly and weekly and in the prep setting obviously once every six months and potentially also once every year options in the immediate future obviously we're really looking forward as discussed right to the land for prep launch but then we also had data at croy right we were talking about the potential of Lern and Capivir for once every year prep, and that, of course, are some of our focus areas. Obviously, we will look at the overall portfolio and see, you know, with the options that we want to develop, which ones we can take forward.

Our next question comes from Chris Schott at JPMorgan. Chris, go ahead. Your line is open.

Great. Thanks so much. I just was hoping to get a little bit more color on the Livedelsea launch so far. I mean, just elaborate a bit more on what you're seeing from a competitive standpoint and how...

Thanks, Chris. Joanna, yeah, we're really pleased with the progression of Livedelsea, right? In our full second quarter, $40 million, but most importantly, it actually has to do with the share uptake that we've seen. We are looking at about a third of the market today out of the second line products that that are currently indicated and growing incredibly rapidly. We grew about 10 points share in one quarter. So we are really building that momentum with a lot of positive feedback that we're getting from our healthcare providers around the efficacy, both the ALP, the biochemical response, and the pruritus. And coverage right now is in line with our expectations. So we're at about just over 80% or so coverage with commercial plans. and we think that's going to keep growing probably within the next couple of months to just well above 90. So, I think right now we're well on our way to continue to drive Lydell Z and really differentiate it in PBC.

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

Great. Thanks for taking the question. I noticed and you mentioned that you added MRD negativity as a co-primary endpoint in the ANITA-CIL Phase III trial. I'm just wondering if you could comment on what the regulators would want to see there to approve that on an MRD negativity endpoint in terms of kind of like what delta you would need or if you'd also have to have other supportive data to justify an approval. Thank you.

Cindy Peretti, we don't comment on the delta that they're looking for, but what I would share is that this is a dual primary endpoint, and so being able to use MRD, we know today that that correlates to PFS, and it also allows us to assess, you know, within months of the treatment if the patient is having a response. So our goal is to use the MRD negativity endpoint first, and then follow that up with progression-free survival, but the correlation between the two is what we're talking to regulators about.

Our next question comes from Tim Anderson at B of A. Tim, go ahead. Your line is open.

Oh, thank you. On Discovy, how much will Lenacapavir for PrEP cannibalize? Could U.S. Discovy sales go X growth as soon as 2026? And then can you just give us any sort of ballpark estimate for how many patients could be on Lenacapavir for PrEP by the end of the year?

Thanks for the question, Tim. Yeah, we don't give product-specific guidance, But here's what I can say. I do think that as you think about Lennacapivir and its offering of twice a year, there really is an opportunity when you think about a switch strategy, right? When you think about 95% of the market today are daily orals, which obviously that includes Discovy and generic Truvada. And so that will definitely be where I think the first patients come through. in addition to naïve patients, naïve folks as well that have been waiting for lenacapivir because there is definitely a lot of noise in the system from the communities that people are kind of hanging in there until the approval of lenacapivir. So those two pieces are what's exciting as we think about the launch and as I think about the growth of this market, right, we basically said that we're just over about 400, 450,000 folks or so on PrEP today in the U.S. We think that number will definitely continue to grow quite rapidly, especially with the acceleration. I think it will accelerate with the launch of lenacapivir. And I think that number could be quite exponential as you think about the next 10 years or so. So we're looking forward to seeing a little bit more in growth as we're 16% year on year today. I think you're going to see a bit of an acceleration as you think about the lenacapivir launch around the corner.

Our next question comes from Evan Singerman at BMO. Evan, go ahead. Your line is open.

Kyle, thank you so much for taking my question. I wanted to drill down a little bit on some of the dynamics we're seeing in cell therapy. You know, are you seeing more share or competitive share capture from, you know, competitive cell therapy products or by specifics? And the flip side, you know, once folks, you know, once a center might use a different cell therapy product, do you tend to see them switch over? What are the dynamics behind that? thank you so much.

Betty, thank you for the question. I think that we have shared probably in the previous quarter and this quarter, we're seeing the dynamics from both by specifics as well as in-class competition, and I think it depends as you look at Yaskarta and Takardis on those dynamics. We have a number of new approved indications in class, within class competition outside of the U.S., and that's some of the dynamics you're observing outside of the U.S., within the U.S. in some of the more smaller markets that Takardis is competing in. We're seeing new indications as well with in-class competitors. But we're also seeing new indications in the U.S. and Europe with the bispecifics. So it's both that we're observing right now. So hopefully that answers your question.

Our next question comes from Matt Beigler. Matt, go ahead. Your line is open.

Great. Thanks so much. I had another question on Tridelby and the decreased demand QOQ. Are you seeing any headwind from Datraway's recent approval in HR positive? And I guess that kind of leads to a broader question of, could you just comment on the patient mix you're treating in terms of triple negative versus HR positive? Thanks.

Sure. Basically, with competitive impact, We haven't seen any impact thus far really as we think about new entrants in the marketplace. And we continue to really see a really strong dynamic in triple negative breast cancer to HR positive. Remember the indications are a little bit different. In triple negative, we're looking at a second line metastatic indication. In HR positive HER2 negative, the later lines of therapy are a fourth line. So you're definitely the trope 2 ADC of choice in HR positive HER2 negative. the trope versus other ADCs that are used much earlier in line and in first and second line, for example. And then in triple negative breast cancer, we are absolutely the ADC of choice in that setting.

Our next question comes from Courtney Breen at Bernstein. Courtney, go ahead. Your line is open.

Hi, all. Thanks so much for taking the question. I just wanted to ask a little bit about the once-yearly Lena Kapavir. We obviously saw the early data presented at CROI. It seems with the timeline associated with that press release that there could be a different trial design than what we've seen in Purpose 1 and Purpose 2. Can you just talk about whether there is any potential for an expedited PK or PD package relative to an efficacy trial or what might be needed to get once-yearly to market for PrEP?

Thanks, Courtney, for the question. And that's very insightful, right? We are currently looking into the different study designs, right? We have not commented exactly on what we're planning on doing at this point in time, but you're absolutely right. There are different study designs that you can utilize, and potentially a PK-based approach is a possibility that we're discussing.

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

Hi there, thanks so much for taking my question. A question for Joanna around the potential on the ground dynamics for lenacaprivir and PrEP. Can you give us a sense of the awareness across the target physician practices of the drug, the number of sites or maybe proportion of your target practices that are going to be ready to order to administer the drug at launch and where provider stands with regards to capacity and bandwidth to administer it? Thanks.

So I think from an awareness standpoint, The awareness is actually quite high, both at the healthcare provider level, but also within the community. And I think we're leveraging both of those pieces as we think about how do we prepare for our launch. We're also very targeted, right? We know that about 75% of HIV prescribers are the ones prescribing PrEP today. So at launch, that's really our target, is really around differentiating lenocaphyver versus current options, making sure that we are setting them up for success and creating a very smooth customer experience. To your point about number of sites, we've been very targeted in our approach in the first 30 days. We have a 30-day plan, 90-day plan. And we're also very clear, as some clinics are set up to do buy and build today and they currently do it, those are clinics that might be a little bit more open to do by and bill with lanacapavir, so we know those, and we're making sure that they have all the training necessary to be able to do so as of post-launch. And, but then you also have a lot of clinics that do not have that set up, and we'll need to go through more of a white bagging process through specialty pharmacy. And the optionality here is going to be really important, and that's what we want to make sure we offer, and that we train folks, not just the healthcare providers, to be honest with you, but actually anybody in the clinic that's managing this. And so we have a team of folks ready to go, not just our medical and sales teams, but we also have nurse educators making sure people know how to inject, making sure they can help any, with any questions they might have. But we also have field reimbursement managers that are going to be in the field basically making sure that we can track and follow to make sure they get reimbursed. Especially as you think about the first six months or so So, as plans are just coming online, it's going to take a little bit of time. And so, most prescriptions will get a medical exception, and we just want to make sure that we're tracking those to make sure we can help clinics and healthcare providers follow through on that so that they can get started on lenticapivir as quickly as possible.

Our next question comes from Mohit Bansal. Mohit, go ahead. Your line is open.

Great. Thank you for taking my question. I would love for you to comment on a couple of macro themes that we hear a lot as they pertain to Gilead. One is, of course, about the NIH funding cuts and potential for funding cuts regarding something which could help with the HIV awareness and PrEP awareness thing. And then number two is potential for Medicaid cuts and how it pertains to Gilead and if can actually operate in an environment like that. Thank you.

Thanks, Mohit. Let me start this exam and then Joanna can turn me out as well. I just want to repeat that we haven't seen or heard anything to date that would cause us to alter our plans or expectations in the HIV field, including the lens for PrEP launch. I mean, I think it's just too early to speculate on anything related to Medicaid at this stage. There's no confirmed cuts at this time. I believe the administration understands the importance of particularly chronic diseases and prevention as they approach that. I'd also say at the CDC side, you know, we're obviously strong supporters of the CDC and also the role that NIH plays in creating a scientific community. But specifically relative to CDC, it's still too early to understand any impact on particularly CDC programs. They're generally focused on, you know, supporting prep utilization with community outreach, provider training, education. Those are also things that we do as well. And maybe I'll turn it over to Joanna to say, you know, how she sees it in terms of how some of our programs may be able to make sure that services are delivered to the people that need these medicines.

Thanks, Dan. Yeah, we've been tracking this very closely and obviously making sure that the work that we do continues and in some areas gets accelerated or elevated where necessary, where there might be some gaps where necessary and where HIV incidence is maybe higher as well, right, where there's a greater need. So we're very targeted in our approach. And then just going back to, you know, obviously there's nothing in play and we wouldn't speculate about anything around Medicaid, But I just want to remind everybody, we're talking about HIV. These are individuals that if they need access to HIV medicines, they will find other channels for coverage because if they don't, unfortunately, HIV will turn into AIDS and they will die. And so there, in the past, what we have seen is if they, if one channel is closed, they go to another. And there are many different channels where they can go to today, including some federal, but some state-funded approaches as well as Gilead programs that they can just make sure that they get over these access barriers. So I just want to pause on that.

Our next question comes from Alex Hammond at Wolf. Alex, go ahead. Your line is open.

Thanks for taking the question. How should we think about the potential impact of the 340B channel mix on HIV pricing for 25, and how do you expect utilization to compare to what was seen in 2024? Thank you.

So again, at this time, there is nothing new that we are seeing for 340B. We've seen a growth, actually, of 340B over 20, you know, in every quarter from 24 into 2025. We hope that stabilizes. We believe in the 340B channel, absolutely, for what it was designed originally to do. We just want a little bit more transparency because that would really help cut out some of the duplicates that we're currently seeing as well across some of our different therapeutic areas.

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

Thanks for taking my question. Going back to the Part D redesign, we've talked about the impact. I just wanted to give us some some thoughts on when you are expecting to see a potential benefit as the lower cost of patients increases starts and increases stay time. I'm guessing it's too early now, but as the year goes on, when should we start to see an offsetting positive impact from the changes that have been made? Thanks so much.

Yeah, thanks for the question. In terms of volume, given the number of safety nets that I was just referring to earlier, there's so many programs that are available today that exist for HIV. We're not expecting to see a material uptick from the Part D reform. We're obviously going to track it super closely. If we were to see it, it would be later in the year. And just to remind people, when you look at Big Tarby, for example, the level of abandonment of Big Tarby is incredibly low today. And so very different maybe than other therapeutic areas that you might see in chronic diseases, just because of the consequences of not being on an HIV treatment. And so that's why we're monitoring the situation. We haven't included in our numbers like we've shared in the past. And we'll obviously, if we do see something, we'll share with you as soon as we do. But if it was to happen, it would be later in the year.

That completes the time that we have for questions today. I'll now invite Dan to share any closing remarks.

Terrific, everybody. Let me wrap up by thanking the Gilead teams that are responsible for this great start to the year. I'll just say that, you know, on behalf of all of us, the strong-based business growth of 4% year-over-year and 6% growth in our HIV business, combined with the continued success of the Delsey launch and growing demand for Tridelby, alongside the impressive operating margin and earnings per share, all demonstrate that we have a strong and efficient business today, which I think is extremely important given the current environment that we're all operating in. Now, moving forward, we're also excited about what's next, you know, our diverse pipeline and generating multiple upcoming potential launches, including Lenacapavir for PrEP, which is, you know, weeks away, Libdelzi and further markets, Anidocell, and now Trudelby based on the positive phase three results from the AscentO4 study, all fill us with great promise as we continue on a diversification approach and confidence in our business overall. So this is an exciting time for Gilead, the ongoing work that we all do for patients in the communities we serve. And I just want to close by thanking you all for joining us today. We look forward to keeping you up to date on our progress as the year continues.