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Gilead Sciences' Management presents at Baird's 2013 Healthcare Conference (Transcript)

Gilead Sciences Inc. (GILD) Baird’s 2013 Healthcare Conference (Transcript) September 10, 2013 10:15 AM ET


John Milligan - President and COO


Brian Skorney - Robert W. Baird

Brian Skorney - Robert W. Baird

We will get started with the next fireside chat. Good afternoon. I am Robert Baird, Senior Biotech Analyst, Brian Skorney. Our next fireside chat, we are really happy to have with us President and Chief Operating Officer, Gilead Sciences, John Milligan. Now, Gilead has been one of the best performing large cap bio stocks over the last several years actually, and while there is numerous things going on at the company, it's hard to argue that most of the valuation and inflection hasn’t been at least driven to some extent by the Pharmasset acquisition. But rather than go through a very long overview, there will be a long overview given everything that Gilead’s in. John may be you can give a start by given us kind of what the key vertical areas that investors are focused on right now?

John Milligan

Yeah. That’s a good question, by the way Brian thanks for having us here today. I really appreciate it. The three topics that come up most frequently with investors these days are give us an update on what's going to happen with HCV, with all the various questions that of course go along with that; tell us about your strategy on oncology. What is Idelalisib mean and what is your new biological assets mean for the next franchise for Gilead? The third question is always what are you going to do with all the cash flow in the future of course? And then occasionally, but only occasionally people remember that we’re an HIV company and ask us about the HIV franchise. So those are really the four topics that we’ve had over the last couple of days.

Brian Skorney - Robert W. Baird

All right, well I mean as I said, I mean this past year program has really come along and been a big value inflection driver. I guess starting with that and given that we are so close to hopefully the first regulatory approvals of Sofosbuvir. Can you give us a kind of your current thinking on what the Hep C market opportunity is? What the current size of the market and various geography as where you hope to be in the next couple of years, and how do you anticipate this paradigm shift or circling from a pegylated interferon backbone to an all oral therapy driving the market in the U.S., in the EU and even when we start thinking a little bit outside of the [nature] markets?

John Milligan

Yeah. It’s one of those common questions, thanks for bringing up first, because I know that a lot of investors want to get more color about this. So when we think about the HCV market, its fairly large compared to HIV market, even worldwide there’s about a 116 million people infected with HCV compared with less than 40 million who have HIV. So its at least four times a size. And within the major markets, we think there is over 12 million people who are infected and that includes the U.S., Europe and other jurisdictions like Japan, Australia, New Zealand and Brazil and what not.

So it’s a very large segment of the market, we got a high number of people are infected and it’s a high unmet medical need. And then what we really have to dig into is who are the patients, how they have been identified, have they have been diagnosed and we think in for example in either United States there is over a million people who have been diagnosed. Most of those were not treated and most of those are not under care. We think about 350,000 people are currently in some form care with herpetologist that is a frequent enough contact to be considered in care.

So it’s still a fairly large segment of the market and then of course the question is how quickly will those patients seek treatment. And in the past many of those who have been treated or declined to be treated did so because of current standard of care, protease inhibitor plus pegylated interferon or ribavirin for 40 weeks. It’s just very, very difficult for a patient to undertake. You can imagine how difficult it is. If you felt like you had the flu three days out of every seven for a year, it’s a difficult thing to go through, and so most people either decline hoping for new things to come along or take the therapy but discontinue. And so that’s why from all those numbers I described the actual number of patient who are cured each year is very, very small and the number treated is also very small.

So we do think that with our first interferon-sparing regimen in genotype 1, our interferon free regimen in genotype 2 and our future regimen in genotype 1 which will be interferon 3 that this will dramatically alter the way doctors and patient view the risk benefit going on to therapy where the therapy is going to be easier more well tolerated. Frankly if you just have 12 weeks that’s 84 pills you have to take for a cure, that’s a pretty good deal if we can get to that in the not too distant future.

So we think it’s a very large opportunity and we know we have a lot of work to do help increase the rate of diagnosis, increase awareness of the new disease, of the new options for the disease and to let people know that the earlier you treat the better off you are going to be.

Brian Skorney - Robert W. Baird

Great, so think about the regulatory approval process, you have an application currently under review for Sofosbuvir where I believe we have the advisory committee that’s scheduled later this year. So I guess can you just give us an overview of what the initial regulatory approval you are seeking is in, what you think can possibly be the conversation had at the advisory committee, what you think the FDA is interested in learning from the advisors and are [point] on?

John Milligan

Yeah, sure also, I don’t actually know that the FDA is going to ask, so I can probably makes specific but again on opinion. So we have applications under review throughout the world not only in the U.S. but we have European application that’s been submitted and of course we’ve submitted in other jurisdiction like Switzerland and Canada and Australia and New Zealand. So we are starting to roll out the worldwide regulatory strategy, and then our initial application there were four phase 3 studies infusion FISSION, FUSION, POSITRON and NEUTRINO that we submitted.

And in those initial application; I think these are different things. For genotype 2 and 3 patients we are asking for approval to sell Sofosbuvir in combination with ribavirin for an all oral treatment for genotype 2 and 3 between 12 and 16 weeks duration. So that will be the combination used in those areas and based onto the studies that we have, where we’ve looked at treatment naive, now treatment experience and patients who are ineligible or intolerant to interferon with very high SVR12 which is similar to what would be a cure of HCV, so the virus doesn’t come back when you stop therapy. So those studies support that application.

The other thing we are asking for is the use of Sofosbuvir plus ribavirin plus pegylated interferon for 12 week duration in genotype 1, 4, 5, 6 patients, based on the study which largely enrolls genotype 1 patients, and again we had a very high SVR 12 rate in that study of treatment-naive patients. So it’s the only patient population that we have in there. So we've submitted those data to the FDA, we will have discussions with the panel, I think largely around labeling and that is the questions that I think might be important for the panel to ask is what is the right duration of therapy for genotype 3 patients where we saw that, genotype 3 patients were tougher to cure than genotype 2 patients and really at 16 weeks we had a very significant increase in the SVR12 rate as then we did a 12 weeks. So what is the proper duration and labeling for genotype 3 patients, I think that's a pretty legitimate discussion to have.

And I think that could be the discussion of what is the overall labeling? Should it be more specific to the studies that we're done or should it be less specific and more broadly inclusive, so that it would be allowable to use other combinations, even those which have not been studied this rigorously. And that's somewhat similar to the kinds of labels that were given to HIV drugs in the early years. So that it allowed doctors to formulate their own opinions about various combinations and how they might be appropriate for their different population. But I kind of think those are two main things, two main topics that would come up at the panel meeting.

Brian Skorney - Robert W. Baird

Got you. And I think those topics sort of lead into a little bit of my next question and it's probably the question I get most frequently at this point. But it's on pricing of Sofosbuvir and I know that sort of last decision that made when you have a label in hand. But Gileads moving forward under a dynamic where you going to have these initial approvals in Q3 with ribavirin in genotype 1 with pegylated interferon and ribavirin, but hopefully towards the end of next year, we'll be having this discussion about a regulatory review of fix this combination in genotype 1. And certainly I would think the initial pricing could have some longer-term impact on what that regimen is priced. So how should we think about the dynamic and the different outcomes that you are dealing with right now in terms of how we should think about the appropriate price of 7977?

John Milligan

Yeah probably its a good question. We have to take in to consideration not only the launch that’s coming up for Sofosbuvir but we have to take in to consideration to fix those combination that will be putting together with Ledipasvir or what was known as GS-5885 previously and so that combination is interesting because there are going studies already, Phase 3 studies, ION-1, ION-2, and ION-3 looking at 24/12 and eight week duration for this product, and so we have to take in to consideration the fact that there is a high probability that eight weeks will be successful certainly in patients who are new to therapy.

So that does impact the pricing dynamic and it does impact the model that we're putting together on the price. The price is the last thing we decide on. It's actually the last thing we can communicate, because we can’t talk about it until it's actually approved by the FDA and so that’s when we had announced a price. And there is quite a bit of discussion ongoing now about where is the price point that makes the most sense for the launch sofosbuvir, and for the launch of the fixed dose combination, approximately a year later.

So we've learnt quite a bit in going out and talking to payors. We know certain things about this class of drugs, the protease inhibitors for example today, all require prior authorization. So it's something that doctors will be selling to or used to. So that won't be any additional barrier prescription. We haven't gotten some idea of the range of the prices about where that won't change. So how far and low you would have to go to make it a non-prior (inaudible) and how high you would have to go in order to put it in to another category or more higher barrier to prescribing it which we don’t want to do.

So we have a pretty good idea of the dynamic range now within different institutions about where we can go on pricing, and that will help inform us as to when we think about what the final right prices is for this combination. And so for this initial product and for the future combinations, so I feel like we got a pretty good model, and where they will be stress tested over the next month or so and then probably come to a conclusion, just before launch what we wanted to.

Brian Skorney - Robert W. Baird

Got you and then the next question, I think stems from pricing that investors really have and I don’t know, I certainly when I talk investors as I say I actually have a model, but I have no idea about (inaudible) and I think we are sort of going into this situation where there is clearly a paradigm shift in this space. But as opposed to HIV it is an acute indication [cured] of. You know how do you think particularly without the potentially launching at least a oral regimen although not fixed dose combination around the same time you’ll have your fixed dose combination and then the eventuality that there will probably be other players with at least oral regimens/ I mean how should we think of the various gain theories like it work out here in terms of the, is there a risk of a price war or do you think this market will really be able to sustain the best-in-class, best asset at a premium price for the duration of?

John Milligan

Yeah a lot of people ask me what competitors going to do, and I can just say I have no idea what their thoughts are and it’s certainly not something I want to know. I think about it differently, you look at different areas its rare that pricing becomes a competitive differentiating feature in all but a few segments of the market. Even HIV today that hasn’t become true. So I think the likelihood of people taking a substandard regimen pricing it low in order to gain market share probably won't work in this area.

It still is more likely than not that the doctors and patient and the payors want to think that’s right for the patient that that’s for the patient. And so we don’t have the data to differentiate ourselves from any other competitors yet, because we are both ongoing with the clinical studies. As I look at the profile emerging for a fixed dose combination from Phase 2, it’s pretty darn hard to beat. We had very high SVR12 rate in a wide variety of patients with and without ribavirin and if we can get that significantly high SVR12 rate with a single pill without ribavirin you have a side effect benefit you have a compliance benefit and we haven’t seen resistant so far these clinical studies that’s really important as well.

So that means that the physician has very little room for - has little risk of making error in treating this patient and leaving that patient without options. And so I think that’s the most important consideration. If you start to get resistant and there have been some combinations where there is not only single but multi drug resistance, then you have real issues. And this is not something that hepatologists are used to dealing with, this is some of the HIV doctors are used to dealing with. And so I think they are going to shy away from anything that leaves the patient in a worse situation that when they came in the room. So I just think it’s going to - the best product will continue to win at the end of the day.

Earnings Call Part 2: