Gilead Sciences' Management Presents at the 2013 UBS Global Healthcare Conference (Transcript)

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Start Time: 09:30

End Time: 09:51

Gilead Sciences, Inc. (GILD)

2013 UBS Global Healthcare Conference

May 20, 2013, 09:30 AM ET

Executives

Robin L. Washington - SVP and CFO

Analysts

Matthew Roden - UBS

Presentation

Matthew Roden - UBS

Good morning, everyone. My name is Matt Roden. I'm one of the biotech analysts here at UBS and I'd like to thank everyone for attending our new UBS Global Healthcare Conference. I'm pleased and privileged to introduce here Gilead Sciences which is the market leader in the treatment of HIV and is emerging as the global leader in the treatment of hepatitis C as well, not to mention developing products for other therapeutic categories.

Speaking on behalf of Gilead is its Chief Financial Officer, Robin Washington. We also have the Vice President for Investor Relations, Pat O'Brien. Robin joined Gilead as CFO in 2008. She oversees global finance and IT at Gilead. As prior, she served as CFO of Hyperion Solutions, which was acquired by Oracle and also served in a variety of leadership functions at PeopleSoft.

Gilead has created an astonishing amount of value over the last two years and is now the largest biotech company by market capitalization. Before turning it over to Robin, I'd like to remind everyone that we're hosting a breakout session across the way immediately following in the Carnegie West room.

With that, I'm pleased to hand it over to Robin. Robin?

Robin L. Washington

Thanks, Matt, for the introduction and good morning, everyone. It's a pleasure for me to present on behalf of Gilead Sciences this morning. Before I'll start, we'll start with the standard caveat that I'll be making forward-looking statements. For risks associated with those statements, I would direct you to our SEC filings which you can find on our website or at sec.gov.

So as many of you know, Gilead is a highly successful, commercial organization as well as very focused on research development in areas of unmet medical needs. We currently have over – we have 15 marketed products. We're primarily known for our HIV franchise which you see there to the right of your slide, multiple single tablet regimens some of which I'll talk about later in the presentation.

I do want to highlight for you though that in addition to our HIV focus, Matt mentioned our pipeline for hepatitis C, but we currently have the highest market share marketed product Viread for the treatment of hepatitis B. We also have several cardiovascular products which are approaching about 1 billion in revenue for 2013 as well as some respiratory products as well.

Gilead has a strong geographical presence around the world and we're continuing to expand. I'll talk a little bit about Japan specifically as it relates to hepatitis C later in the presentation. But I did want to also highlight that most recently we've looked at expansion in Eastern Europe. We just opened a subsidiary in Russia and in addition to Japan, we've recently opened subsidiaries in Hong Kong as well as South Korea.

I'm very excited about our product pipeline. We've got the most Phase 3 studies ever in the company's history at this point and they expand multiple therapeutic areas. You'll see there relative to HIV AIDS, we currently have a European regulatory submission for Stribild which is our latest single tablet regimen. We also have a U.S. and European regulatory submission for cobicistat and elvitegravir pending and I'll talk a little bit about the rest of our HIV pipeline later.

Liver disease, also a very exciting area generating a lot of interest internally and externally and we'll cover that in detail. In addition to our core antiviral franchise we've also got several products in the clinic in oncology and inflammation that we're very excited about. I'll mention some of those briefly later on in the presentation. And I'll also call out in cardiovascular which I won't talk about in detail, but ranolazine that's currently in a Phase 3 trial for type 2 diabetes.

So really going back and focusing a bit on our core franchise HIV, as you can see, Gilead as well as the market has continued to grow year after year averaging about 6% a year. If you go back to 2007, there were slightly over 0.5 million patients treated for HIV where Gilead had about 68% market share. If you go and compare that to last year, we had about 82% market share and about 679,000 patients being treated. So nice growth and progression for Gilead which shows our continued innovation in supporting patients in this area.

I think equally opportunistic for us as you see the tall green bar to the right, there still remains a significant amount of people that are currently untreated, so currently we're treating at about 60% of HIV infected patients. So there's a lot of opportunity for continued growth in this core franchise.

Our latest single tablet regimen is Stribild formally known as the Quad. We launched this in the U.S. back in August of last year and now I'm proud to say that about six months post launch, we reported a little under 100 million in terms of total product sales. I'd mentioned the fact that the CMHP has adopted a positive opinion for Stribild back in March of this year. So we ultimately anticipate approval for it coming hopefully this quarter and then we plan to launch that across the key European markets going forth beginning this year.

Complera or Eviplera as known in Europe is also one of our key single tablet regimens. The chart down there to the right really depicts the success of the launch. The first 14 months have been pretty incredible relative to overall growth of the franchise. It was also approved in EMEA in November of 2011. And just this past quarter, we announced that we have fully launched in all the major EU countries, most recently Spain and Italy. This drug is primarily used in healthier patients and it's our first single tablet regimen that can be used by women of childbearing age.

So speaking of those two single tablet regimens, one of the things that we like to highlight is the impacts that they're having on the overall naïve market. Clearly, there are benefits which I'll talk about momentarily related to single tablet regimens, but if you go back and look in 2010 which represents the gray bar, Gilead had about a 50% market share of single tablet regimens as it relates for naïve patients as it relates to single tablet regimens. And we've seen that gradually progress with the introduction of Complera and Stribild. Again, Stribild represents just within six months about 3% of treated patients and I think it's about number seven relative to the top treatments and you see are right about a 70% market share relative to naïves in that space.

I mentioned STR is growing. There are clearly pharmacoeconomic benefits to STRs. We kind of highlight a couple here, but as you know HIV is a chronic disease and clearly it's important that the patients stay on their meds. So anything that you can do to make treatment easier, one pill once a day to ensure that that patient is compliant is really important to the ultimate outcomes. So you'll see relative to patient convenience, increased adherence as well as just lower healthcare costs, et cetera. STRs are demonstrated to be better for patients and that's illustrated relative to the statistics we've outlined there on the slide.

So briefly covering our pipeline, we're excited to talk about TAF. This is a novel nucleotide pro drug that's currently advancing in the clinic. We just recently announced that it's moved to Phase 3. The average HIV patient is aging and is approaching the age of 50. And as you age, things like renal or mineral bone density become increasing concerns. Those have been areas that have always been something that doctors using tenofovir have been concerned about.

We think that with the dosing of TAF at 25 mgs or about tenth of the dosage of tenofovir, it has significant advantages relative to safety and efficacy and allows us to continue to co-formulate it. Currently, the Phase 3 trial is now being called the TAF Quad and that really combines other Gilead molecules and it will be the second inhibitor base STR on the market if and when approved.

So now I'll briefly turn to liver disease as Matt mentioned. There's a lot of excitement particularly around hepatitis C. Just as background, the global prevalence of HCV is estimated to be 160 million people. This is across the world, on every continent and some areas more severe than other. I'll note that this is significantly larger than the HIV prevalence globally as well. You'll see there the core markets as well as the emerging markets mentioned and particularly genotype 1 which is very difficult to treat and has the largest prevalence.

Focusing specifically on the major markets which consists of the EU, U.S., Canada, Australia, Japan and Brazil, we estimate that there's a prevalence about 12.6 million patients around the world, only of which about 36% are currently diagnosed and 4% currently in treatment, so under 200,000 patients a year currently being treated. That's primarily driven by the treatment options and the standard of care today which can be very debilitating for patients and for some patients is pegylated interferon we've included is not tolerable. So there are no current treatment options for those patients today.

A lot of people asked us how we are ultimately going to continue to get people into diagnosis and ultimately on treatment? And here we highlight the fact that the CDC has proposed hepatitis C testing for all baby boomers. We ultimately think that that will save lives and ultimately result in an additional 800,000 patients presented for ultimate possibility of treatment for hepatitis C going forward.

When Gilead talked about our landscape for development for hepatitis C, we talk about it in terms of waves and those are really timelines relative to how we ultimately hope to introduce options for patients to market. The first wave I'll talk about momentarily. We've made significant process including a recent filing with the FDA. We're also significantly down the path with wave 2 which is focused on the first all oral fixed dose combination for genotype 1. And wave 3, which I won't spend as much time on, is ultimately focused on a pan-genotypic molecule. We call it 5816. It's currently also in the clinic.

So speaking of wave 1, as I mentioned, we did file just this past month in the U.S. and two weeks later in Europe for the first all oral therapy for genotype 2, 3 as well as the simplified shorter therapy for the harder to treat genotype 1. Looking specifically at the studies that make up the filing, you see we have three studies for genotype 2 and three which represents about 30% of the U.S. population of HCV patients. And then the NEUTRINO study which is also included, incorporated in the filing for genotype 1, 4, 5 and 6.

In terms of overall results, we measure our success and ultimately the cure of hepatitis C by sustained viral response or SVR 12 weeks post treatment. You can see the various SVR rates that we've achieved for our various studies both in naïve patients as well as experienced patients. I'll point out in NEUTRINO study at the top of the slide focused on genotype 1, very overall good results and most importantly, with pegylated interferon we've really transformed the treatment paradigm from 48 weeks down to 12 weeks. So that significantly improved the options for patients in that area and we'll continue to progress as we move to wave 2 for genotype 1, 4, 5 and 6.

The only thing I'll point out here is our fusion trial. You can see there we – particularly as it relates to genotype 3 which are also proving a harder genotype to treat. In the 12-week arm, we saw 50 SVR results and we were able to improve that almost 50% by moving treatment or increasing treatment by about four weeks to 16 weeks.

Gilead had a very successful showing at the EASL which is the International Liver Congress last month in Amsterdam, Netherlands. We had four oral presentation of the various studies that I just outlined and simultaneous to that, we had two publications in the New England Journal of Medicine, one for treatment experience and one for naïve patients that were presented.

And lastly as I mentioned earlier, we announced on our May Q1 call that we are establishing a direct presence in Japan. And we're doing that as a result of good discussions with the regulatory agent PMDA in Japan where we plan to start a Phase 3 study using sofosbuvir or 7977 in genotype 2 HCV infected patients. Clearly we see that as an option for a population that has no treatment options today. They represent about 25% of patients. We estimate there are probably about 1 million or so patients overall in Japan that currently have hepatitis C, and we are currently in ongoing discussions with the Japanese Regulatory Agency for what we think could be available for genotype 1.

So quickly moving to Phase 2, I'll highlight results that we share publicly, probably slightly over a year ago and this relates to two cohorts of genotype 1 studies that we were working on in our ELECTRON arm where you'll see the SVR rates, particularly for no responders that are very difficult to treat, it's only about 1 in 10 where we got an SVR rate or a cure. So we did really focus on what we could do to ultimately improve those results. We added NS5A or another direct antiviral ledipasvir or 5885 for treatment naïve and no responders.

There's a lot of detail on this slide, but I'll direct you to the little red box there and you'll see again the results that we just talked about to the right for sofosbuvir and ribavirin alone. If you compare that to adding ledipasvir, we had very positive results for both treatment naïve as well as no responders. The outcome of those results in discussions with the FDA allowed us to move on to Phase 3. We currently have two Phase 3 trials ongoing, ION-1 as well as ION-2 for experienced patients and you can see they're focused on various levels of disease state including about 20% of cirrhotic patients and we're looking at durations of 12 and 24 weeks for that fixed dose combinations.

Another study that I'd like to highlight is the LONESTAR study. This is a U.S. based study based in Texas, [hence] LONESTAR. And they were focused on shorter treatment duration relative to 12 weeks as well as elimination of ribavirin. This is both in treatment naïve as well as PI failures or cirrhotic. The read out of that that we also provided publicly in early May was very positive, you see, for treatment naïve 12 weeks and 8 weeks using the fixed dose combination with and without ribavirin, very stunning results. We're very, very satisfied with that.

Also, relative to PI failures those with cirrhosis both with and without ribavirin for 12 weeks, we saw very high SVR rates. The readout on that LONESTAR study allowed us to add to our proposed filing in early April or early 2014 an additional Phase 3 study IM3, so we currently have three Phase 3 studies on the way to that we're currently working through for the fixed dose combination in various weeks of durations of treatment for both naïve and treatment experienced patients.

So I'll briefly cover oncology. Over the last three years, Gilead has acquired several companies that has brought us some very unique molecules that we believe can change the treatment paradigm for oncology over time. We're focused in two primary areas; intracellular signaling which is targeted therapies as well as extracellular matrix. We've got several molecules here, GS-1101 and GS-9973, that we think will be very effective in B cell malignancies as well as inflammation. And then rituximab is another (inaudible) antibody that we're focused on for (inaudible) diseases as well as solid tumors.

Several ongoing Phase 3 trials both in CLL and iNHL are the two areas of focus for idelalisib today and we also have various Phase 2 studies ongoing. For rituximab; slightly behind, focused on Phase 2 and various types of cancers.

So I'll quickly cover financials. In early May, we announced our Q1 results. As I mentioned, in addition to all the success and productivity we're seeing in R&D, we continue to deliver solid commercial results in our core franchises. We had year-on-year growth of about 8% relative to our net product revenues or slightly below 2.4 billion.

As you can see from the expense standpoint, we continue to invest in R&D; lots of focus on the progression of the Phase 3 trials as just outlined in liver disease as well as oncology. We delivered $0.48 a share for the quarter which is a 6% growth over prior year.

We were also able to reiterate guidance for the full year. We still anticipate total net product revenues being between 10 billion and 10.2 billion. Gross margin here 74% to 76%, so again continued enhancement, improvement as we move to additional single tablet regimens including all Gilead products. Our RD and SG&A and effective tax rate guidance is also outlined on the slide.

So lastly and before we stop and move to our breakout session, I did want to again highlight the excitement that internally at Gilead as we continue to progress in all of our therapeutic areas, we mentioned the Phase 3 study for genotype 2 in Japan earlier today. You see TAF which is a key milestone we have the in the clinic for the ongoing treatment of HIV, but also opportunity to use that product for HBV as well.

We have Phase 3 studies planned there and for HIV, as I mentioned earlier, Phase 3 studies enrolling. And again, lots of excitement around our oncology franchise, seven upcoming presentations at ASCO later this month and early June as well as a readout in (inaudible) in June relative to ongoing data from the '09 study. Our cardiovascular franchise continues to make progress as well.

So again, very excited and happy again to be presenting on behalf of Gilead this morning. So thank you very much for your attention.

Question-and-Answer Session



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