Gilead Sciences' CEO Discusses Q3 2013 Results - Earnings Call Transcript
Gilead Sciences, Inc. (GILD) Q3 2013 Earnings Call October 29, 2013 4:30 PM ET
Executives
Patrick O'Brien – Vice President, Investor Relations
John Martin – Chairman and CEO
John Milligan - President and COO
Norbert Bischofberger – EVP, Research and Development and Chief Scientific Officer
Kevin Young – EVP, Commercial Operations
Robin Washington – SVP and CFO
Analysts
Geoff Meacham - J.P. Morgan
Mark Schoenebaum – ISI Group
Geoffrey Porges – Sanford Bernstein
Rachel McMinn - Bank of America Merrill Lynch
Yaron Werber - Citi
Brian Abrahams – Wells Fargo Securities
Matthew Roden – UBS Securities
Michael Yee - RBC Capital Markets
Phil Nadeau - Cowen & Company
Brian Skorney - Robert W. Baird
Howard Liang - Leerink Swann
Nick Abbott - BMO Capital Markets
Terence Flynn - Goldman Sachs
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences Third Quarter 2013 Earnings Conference Call. My name is Erika and I'll be your conference operator today. At this time, all participants are in a listen-only mode. And as a reminder, this conference call is being recorded.
I would now like to turn the call over to Patrick O'Brien, Vice President of Investor Relations. Please go ahead.
Patrick O'Brien
Thank you, Erika, and good afternoon, everyone. We issued a press release this afternoon providing earnings results for the third quarter, which is available on our website where you can also find detailed slides that support today's call.
For our prepared remarks and Q&A, I'm joined by our Chairman and Chief Executive Officer, John Martin; our President and Chief Operating Officer, John Milligan; our Executive Vice President of Research and Development, Norbert Bischofberger; our Executive Vice President of Commercial Operations, Kevin Young; and our Chief Financial Officer, Robin Washington.
Before we begin with our formal remarks, we want to remind you that we will be making forward-looking statements, including plans and expectations with respect to our product candidates, financial projections, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause our actual results to differ materially from these statements. A description of these risks can be found in our latest SEC disclosure documents and recent press releases. In addition, Gilead does not undertake any obligation to update any forward-looking statements made during this call.
We will also be using non-GAAP financial measures to help you understand our underlying business performance. The GAAP to non-GAAP reconciliations are provided in our press release as well as on our website.
I would now like to turn the call over to Robin Washington.
Robin Washington
Thanks Patrick and thank you all for joining us. Earlier today, we reported solid third quarter 2013 results. Our non-GAAP EPS was $0.52 per share compared to $0.50 per share of the same period last year. Worldwide product sales exceeded $2.7 billion, up 15% over the same quarter last year and 2% sequentially, driven largely by the continued uptick of our single tablet regimen in both the U.S. and EU.
Turning to operating expenses, year-over-year non-GAAP R&D expenses were up $105 million, which is mainly attributable to the increased investments in phase 2 and 3 programs in oncology and phase 3 program in HIV. Non-GAAP SG&A spending was up about $90 million as we continued to expand our infrastructure to support the anticipated launch of Sofosbuvir.
Finally, I would like to update you on our full year 2013 financial guidance, which is summarized on Slide 10 in the earnings presentation available on our corporate website. We are increasing our non-GAAP net product revenue guidance for full year 2013 to $10.3 billion to $10.4 billion, which represents a $200 million increase from the top end of our previous guidance range.
Our operating expense and tax rate guidance are also changing as follows: R&D expense guidance will increase to $1.95 billion to $2 billion; SG&A expense guidance will decrease to $1.5 billion to $1.55 billion. Tax guidance is now 26% to 27%. All other aspects of our guidance for 2013 remain unchanged.
In closing, our year-to-date 2013 financial performance is on track and we look forward to a strong fiscal year close.
I’ll now hand the call over Kevin.
Kevin Young
Thank you, Robin. Breaking down the third quarter results, I would first like to concentrate on United States. Total U.S. sales for the quarter were an impressive $1.7 billion, a growth of 20% over the third quarter of 2012. Both antiviral and cardiopulmonary franchises posted robust year-over-year increases of 19% and 27%, respectively.
Looking in more detail at HIV, it is important to first report that there was little effect of either inventory or ADAP purchase. Inventory for our big three wholesalers increased slightly, but stayed around the mid-point of our contractual range. ADAP purchasing was solid during the third quarter but lighter in the second quarter of 2013.
It is difficult to predict the picture for the remaining quarters of federal fiscal year, but we do know now that the base and emergency funds for 2013 have been fully delivered to each state program.
The third quarter of 2013 marks two years since the launch of Complera and one year since the launch of Stribild. The adoption of both these new single tablet regimens continues to be very encouraging.
Stribild is now the number one regimen in naïve HIV patients. The number one regimen in patients who are switched and more prescriptions have been written for Stribild during its first year of launch than for any other HIV product since Atripla was introduced in 2006.
The performance of Complera is no less impressive. Complera is the number two regimen in naïve HIV patients and number two regimen in patients who are switched and the number two regimen in all HIV treated patients.
What is especially interesting is to see how the third agent landscape is rapidly changing as a result of inscription of Gilead’s new STRs. The NNRTI class has significantly reduced in share but it’s the leading third agent category.
Integrate inhibitor class has grown sharply and is now the second largest third agent category. Finally, the protease inhibitors have dropped both in share and position being the smallest of the third agents.
Turning to Europe, we were also very pleased with the third quarter year-over-year sales growth of 7% excluding foreign exchange. The continued strength of Eviplera is reassuring and the very early signs from Stribild are encouraging.
Eviplera sales rose by over 400% year-on-year driven by the fact that it was the first full quarter for all big five markets. We are particularly encouraged by the rapid uptick of Eviplera in Spain, a traditionally strong NNRTI market. In just two quarters since launch, Eviplera is the most prescribed regimen in naïve HIV patients.
Stribild is now commercially available in seven European countries but only two major markets, the U.K. and Germany. In the U.K., Stribild is the first ever prescription product to gain pricing approval to the new NHS England system and we now look forward to healthy uptick in the coming months.
Stribild performance in Germany has got off to a very fast start with prescriptions running at double the pace of Eviplera at a similar time point in launch. 70% of naïve HIV patients in Germany are already treated with Stribild.
In summary, today’s business performed exceptionally well in the third quarter. I’d now like to focus my remaining comments on our new opportunities hepatitis C and oncology.
On our quarterly costs I have kept abreast of the commercial build outs for HCV in the U.S. and Europe. I am pleased to report that for both regions we are now putting the finishing touches in place for Sofosbuvir launch. In the U.S. we have a dedicated sales team of approximately 150 HCV therapeutic specialists who are in territory and going through the final phases of training. On the approval of Sofosbuvir this team will discuss our FDA approved label with hepatologists, gastroenterologists and a proportion of infectious disease specialists. Our HIV team will play no part in the launch of Sofosbuvir and will concentrate solely on supporting our important HIV single tablet regimens. Wrapped around our HCV sales team will be a complete supporting infrastructure of medical scientists, national account managers and nurse educators. We feel confident that subject to FDA approval we have the right resources and the right people to provide strong educational support for Sofosbuvir.
Our product distribution model will essentially be similar to that of HIV yet with a bigger network of specialty pharmacists. We anticipate that Sofosbuvir purchases in December will be largely for opening and entry of our wholesaler level. And that prescribing pull through will only really start in the new year especially for the GT-1 patient requiring pegylated Interferon.
In Europe we anticipate Sofosbuvir European Commission approval in the first quarter 2014. We will then roll out our launches according to pricing and reimbursement timelines. Like the U.S. by the end of 2013 we will have finished hiring and training our field sales teams in Germany, the UK, Austria, Nordics and France. France is an especially important market to highlight because of its history of HCV infection and subsequent high diagnosis rate. We have already put in place a so-called French ATU early access program in order to provide Sofosbuvir to high need pre and post HCV liver transplant patients.
Overall we feel that our commercial launch plans are where they should be to bring Sofosbuvir responsibly to specialists and their patients upon regulatory approval.
Finally, a very brief mention of oncology. We will gear up our sales and marketing efforts for Idelalisib commensurate with projected regulatory timelines. In the U.S. we will build the stand alone sales team by mid 2014. Our approach in Europe will be slightly different where we will look to involve the Ambezon [ph] sales team. A team that already has an excellent reputation with the hospital hematologist.
In closing as I hope you sense it is a very busy yet exciting time at Gilead as we roll out the next stages of commercial growth. I will now turn the call over to Norbert.
Norbert Bischofberger
Thank you, Kevin. I am pleased with the rapid progress across all our R&D programs and the high level of productivity. A large number of development programs are mounting advance from IND through Phase 1, 2 and 3 clinical development.
First an update on oncology. In September an NDA was submitted to ACA for Idelalisib for the treatment of double-refractory INHL. This application was supported by data from Study-10109, a single arm open label Phase 2 study of 125 patients who were refractory to both rituximab and alkylating agent chemotherapy. In this study Idelalisib achieved an overall response rate of 54% with a median duration of response of 11.9 months. The most common adverse event was diarrhea, transaminase elevations and neutropenia. The final analysis of this study will be presented at an upcoming conference.
In October Study-116 of Ielealisib was stopped early following a recommendation by an independent data and safety monitoring board. Study-116 is a randomized double drawing placebo controlled study in patients with previously treated recurrent CLL who require treatment but were not fit to receive cytotoxic therapy based on clinically important cormobidities. 80% of the patients were greater than 65 years of age and 44% had the 17p deletion or TP53 mutation.
220 patients were randomized one to one to rituximab plus idelalisib versus rituximab plus placebo. After reviewing data from a predefined interim analysis and independent data and safety monitoring board recommend that stopping to study early due to overwhelming evidence of efficacy together with appropriate considerations of safety.
Data from study 116 will be submitted for presentation at an upcoming scientific conference also. The data from this interim analysis of study 116 in CLL together with the data from study 119 in iNHL is included in the European market revitalization application which was filed just yesterday.
In the U.S., we have initiated discussions with FDA regarding a regulatory filing in CLL, either as a separate NDA or as a submission to the existing NDA. An extended access program of idelalisib for patient with the current CLL requiring treatment but who are not fit for chemotherapy as planned.
In addition, full Phase 3 studies in relapsed refractory iNHL and CLL patients are currently involving. The Phase 3 program evaluating momelotinib, our JAK1/2 inhibitor myelofibrosis will be initiated into fourth quarter of 2013.
We are planning two randomized studies of momelotinib for registration. The first is an active control head-to-head study versus ruxolitinib in newly diagnosed patients requiring therapy. The second study is in patients who have failed ruxolitinib therapy because of its bone marrow suppression effects and will compare momelotinib with best available therapy. This study will start in the first quarter of 2014.
In addition to the rapid progress with idelalisib, Phase 2 studies are underway for GS-9820, a backup PI3K delta inhibitor and for GS-9973, our Syk inhibitor both along and in combination with Idelalisib in various piece of malignancies. A Phase 2 study of simtuzumab in pancreatic cancer was fully enrolled and studies in colorectal cancer and myelofibrosis are continuing to enroll. GS-5745, an entire MMP9 antibody is under evaluation on Phase 1/2 studies in pancreatic and gastric cancers. We are looking forward to sharing the emerging data of all oncology studies as they become available.
Now turning to HIV. In October, Tybost which is also known as cobicistat received European Commission approval and elvitegravir received a positive CHMP opinion and we expect the European Commission accrual by the end of this year. In the U.S., a complete response letter was issued by FDA on cobicistat and elvitegravir in April and the resubmission is planned for the first half of 2014.
The two Phase 3 studies evaluating TAF, Gilead’s novel prodrug of tenofovir are expected to be fully enrolled this month. These studies are identically designed evaluating Stribild to a single tablet regimen of elvitegravir, COBI, FTC and TAF abbreviated as ECF TAF in over 800 patients in each study in treating naïve HIV infected patients. The primary endpoint in this study is at 48 weeks and we would expect that data available in the fourth quarter of 2014.
ECF TAF will also be evaluated in two additional Phase 3 studies. We’ll study 117 in patients who are failing on their current regimen and who has not previously been treated with an integrase inhibitor and in study 119 in fully suppressed patients who are taking a multitablet b.i.d. regimen and who have previously failed at PI or NNRTI regimen. Both of these studies are currently ongoing. Along with E/C/F/TAF, we plan to also submit a marketing authorization application for F TAF, which will be supported by a single bioequivalence study. The two phase 3 studies evaluating TAF has a single agent for the treatment of chronic hepatitis [indiscernible] negative patients are currently ongoing.
And finally, as all of you are aware, we had a successful FDA advisory committee last week. The panel [ph] voted unanimously in favor of approval of sofosbuvir with ribavirin for the treatment of genotype 2 and 3 hepatitis C infected patients and approval of [indiscernible] course of sofosbuvir pegylated interferon with ribavirin for the treatment of genotype 1 and 4 hepatitis C infected patients.
In addition, the majority of panel members were in favor of broadening the indication to improve genotype 1 treatment experienced patient in the label. [indiscernible] the use of sofosbuvir plus ribavirin in the pre-transplant setting quotations with ACC. At the advisory committee meeting, new data were presented from the VALENCE study which indicated that treatment-naïve and treatment experience genotype 3 hepatitis C infected patient was so faster by providing with 24 weeks with SVR rate of 84%.
We are naturally excited about bringing sofosbuvir to the market and we feel like panel members commented that this is a historic moment, for which every employee at Gilead is proud of. We look forward to working with FDA to complete the review of the sofosbuvir NDA and ultimately launch the product.
Meanwhile the clinical development program of the sofosbuvir [indiscernible] dose combination is also proceeding rapidly. Three phase 3 studies IN-1, IN-2 and IN-3 explore the utility of the fixed dose combination both treatment, naïve treatment experience genotype 1 hepatitis C infected patients, with and without ribavirin, therefore treatment durations of eight, 12 and 24 weeks, we anticipate having data from these studies that we have about towards the end of this year and into early next year as we are on track for NDA, MAA filings in the second quarter of 2014.
The development of sofosbuvir in combination with ribavirin for genotype 2 infected patients in Japan is progressing. The single-arm phase 3 study with 12 weeks treatment duration was fully enrolled in September and we are on track to submit the marketing application in Japan towards the middle of 2014. This is a significant opportunity as genotype 2 infected patients in Japan constitute over 25% of the total and sofosbuvir and ribavirin will be the first on oral interferon free option for these patients.
In addition, the phase 3 program after fixed dose combination of sofosbuvir/ledipasvir with and without ribavirin genotype 1 hepatitis C infected patients was initiated in September 2013 that we anticipate this study to be fully enrolled by the end of this year. This two-arm study in three [indiscernible] genotype 1 infected both treatment, naïve treatment experienced patients, randomized to a 12-week course of the fixed dose combination with and without ribavirin.
Finally, the potentially pan-genotypic interferon and ribavirin free regimen, the combination of sofosbuvir [indiscernible] GS-5816 is advancing to phase 2 development, two studies in treatment naïve and treatment experienced patients in various genotypes are fully enrolled, and depending on the emerging data, we should be in a position to initiate phase 3 studies in the second half of 2014.
More information on our programs will be presented at the annual AASLD meeting which will commence this week in Washington DC. Over 50 abstracts were submitted on Gilead's various liver disease programs and importantly, new data will be presented on the safety and efficacy of sofosbuvir,
Ribavirin in HIV core affected patient and in the post liver transplant setting.
In summary, very rapid progress has been made across all our therapeutic areas in all other programs. Our pipeline provides us with numerous opportunities with continued growth, both short-term and longer-term. We want to take this opportunity to thank all of our employees for their continued hard work and dedication.
So with that, we will now open the call for questions. Operator?
Earnings Call Part 2:
