Gilead Sciences, Inc. (NASDAQ:GILD) 2022 5th Annual Evercore ISI HealthCONx Conference Call November 29, 2022 1:00 PM ET
Company Participants
Andrew Dickinson – Executive Vice President & Chief Financial Officer
William Grossman – Senior Vice President of Oncology Clinical Research
Conference Call Participants
Umer Raffat – Evercore ISI Institutional Equities, Research Division
Umer Raffat
Excellent. Thank you guys for joining us. We have tons to review today. Thank you Andy and Bill for joining us. And it’s not Bill Anderson, it’s Bill Grossman but I’m clearly not getting enough sleep. But let me turn it over to you first Andy and Bill to kick things off and we’ll jump right in.
Andrew Dickinson
I’ll start on our side. Thanks for having us, Umer. It’s always good to catch up and I appreciate the opportunity to join the conference. Maybe and really, would it be helpful just to start with kind of setting the stage for 2022 and where we are and where we see the business going, or do you want to jump right into some of the questions [ph]?
Umer Raffat
No, no, no, why don’t you kick it off and I’ll jump right in then.
Andrew Dickinson
Look, at a high level, as most of you have heard from us and know, it’s been a fantastic year for Gilead. I mean we feel that we’re really starting to see the culmination of all the hard work for the last many years and the changes in our organization, the build-out of the pipeline, the investments that we’ve been making in both our virology business and oncology in particular, as well as Kite. So when we look at where we are, what really is the first kind of tangible evidence of the strategy and action playing out. In particular, I’d highlight the strength in the HIV business which has really recovered. We’ve had 5 straight quarters of growth where, as you know, in the HIV business coming out of the pandemic.
Obviously, there’s a lot of news this year in the HIV business when you think back to kind of our guidance at the beginning of the year for the HIV business to be at a minimum flat, if not growing in the second part of the decade. That didn’t assume that we would have the TAF patent settlement that we announced earlier this year and also it assumed that there would be greater competition from some other agents in the market, in particular, islatravir, than it’s probably likely now.
So when we look at the HIV setup here for the HIV business going forward, it’s a great setup for us in terms of the strength of the business and the performance and the long runway that we believe that we have, growth ahead of us. And then the oncology business is really performing. You saw that in the first 3 quarters of the year, the third quarter was fantastic. The number of shareholders have commented on the fact that the oncology business is now a bigger business than the HCV business and it’s growing substantially.
Obviously, Kite has really performed this year and is a clear leader in cell therapy and Trodelvy is clearly moving in the right direction, both with the clinical data and commercially. So we’re pretty excited about where we’re going. Maybe I’ll pause there. And Umer, you can take us wherever you’d like to go.
Umer Raffat
Sounds great. So maybe at a high level Andy, I feel like there are several sort of high-level issues. Maybe just starting with — so obviously, the TAF settlement was very important. It actually cleaned up the numbers and more importantly, the visibility through 2030.
And I guess one of the questions that comes up is when I look at the numbers and the way Gilead has modeled, effectively modeled flat on top line through 2030. And when I think about that and compare that with the script trends on Biktarvy, when I compare that with sort of the improved manufacturing and Yescarta coming through, Trodelvy has got more indications to come. Like — I wonder, how do you think about some of the pushes and pulls? And do you think there is some top line growth potential? Maybe not 5% plus on an annualized basis but some?
Andrew Dickinson
No, absolutely. Actually, in fact, I think we expect — maybe I’ll just step back to what we’re guiding to this year and start from there. So for this year for the base business, we’re guiding 5% to 6% growth for the year. And what we’ve said is that the growth we think that the pipeline is going to deliver, improved growth profile over time and that you should really see an inflection in the mid-part of the decade and that the growth should improve from that point on as well. So we like where we are and we think we have the pipeline that’s going to deliver improved growth. So Umer, what you’re highlighting is disconnect between the market view and our view, so whether it’s just for the HIV business, you can focus on that or whether it’s for the business overall.
I would say that there aren’t that many analysts that have a long-term model and it seems to us that many of them are in the process of updating their models as a result of some of the recent announcements, including the TAF patent settlement as well as the progress that we’ve made this year on the commercial side. So I expect the disconnect between kind of our view and what we expressed at the beginning of the year at JPMorgan and with all those subsequent events that have like further strengthen the outlook, I expect that disconnect to kind of close over time as people update their models.
Umer Raffat
Got it. So maybe — and let me just stick to this high-level picture for a second Andy. Do you anticipate or you guys in this sort of forecast between now and 2030 anticipate Biktarvy and perhaps some other products like Yescarta to be in the IRA basket? Well, I guess kind of maybe not because it’s cell therapy but…
Andrew Dickinson
Yes, exactly. Yescarta is unlikely because it’s cell therapy. Conceivably, part of it could be Part B [ph] in the future but it’s unlikely. Biktarvy is possible, yes. I mean it’s too early to say definitively that Biktarvy would be one of the products that’s impacted. If it was, the earliest it would be impacted is 2028 and we think that the impact is manageable. So when we look at the IRA overall, obviously, there’s a lot that’s going to be worked out and to determine over the coming years. But yes, I mean, the answer is Biktarvy could be one of the products that’s impacted. I think when we look at the pipeline overall, whether it’s the oncology pipeline or lenacapavir and the other products that are coming in HIV, we don’t expect it to change kind of the overall course of the growth profile of the business in being a top-tier growth company through the end of the decade.
Umer Raffat
Got it. And perhaps extending that same logic over to EPS line item then. Consensus is obviously sort of in the mid-7s or so. If the growth trajectory really is what you’re talking about Andy, it sounds like it’s going to be well north of 10,000 earnings power here. Is that a scenario you’ve seen in internal modelling? And I’m not necessarily asking for a guidance.
Andrew Dickinson
Yes. We don’t provide long-term guidance. I do think what we’ve said and will continue to say is that we have a very efficient capital structure. And we’re a small — a much smaller company than other companies of our size in terms of revenue. And as we grow the top line and the way that we expect to grow the top line over the coming years and through the end of the decade, we’ll have a lot of leverage in our model and a lot of that will fall to the bottom line. So we’re kind of in the final period Umer, as you know, of the build-out of the company in terms of especially the oncology piece of the business, whether it’s on the R&D side that Bill and others are leading or on the commercial side.
And you’ve seen that in our — both our R&D expenses and our SG&A expenses, we’re in the final couple of years of that. And as we continue to grow the top line, assuming that the pipeline continues to deliver in the way that we expect, you should see a lot of leverage in the model and increasing EPS growth over time.
Umer Raffat
Makes sense. What about BD? And I know you’re talking about build out several times but presumably, that doesn’t mean BD is going to stop completely. Some baseline level should continue, especially given your background Andy, when I first saw you.
Andrew Dickinson
Yes. No, absolutely. You’re absolutely right. It’s going to continue but it will be very different, Umer, than it has been over the last 5 years, right? We had a very different need 5 years ago than we have today. So you’re going to continue to see us do what I’d call ordinary course business development deals where we’ll do small acquisitions similar to the MiroBio acquisition that we announced earlier this year, or partnerships similar to the Dragonfly partnership.
Remember, we reacquired rights to Trodelvy in Asia from Everest. That gives you a good sense of kind of where we’re focused and what we’re doing. Obviously, we’ll continue to look at Kite and building out the Kite business as well given the strength in our cell therapy business. But I don’t expect that we’re going to do medium or large M&A deals in the way that we did historically as we are building out kind of our late-stage pipeline. I mean, we really believe that we have everything we need to be a top growth company in the sector in our pipeline today.
And anything that we do, we will continue to supplement that over time in a healthy fashion but it’s a very different kind of progression on the BD side from here than it was over the last 5 years.
Umer Raffat
So it’s sub-$1 billion checks Andy, is that right?
Andrew Dickinson
Yes. I mean, again, I would never draw a line. I mean most of the deals will be even well below $1 billion in terms of ordinary course business development upfront on licensing deals. So again, if you look at the 3 deals that I highlighted, collectively, I think they were probably $1 billion or maybe even less than $1 billion in upfronts. So that — could we do a small acquisition of that size? Sure. I’m not sure that we need to and it’s really not where the focus is. So it all depends on kind of what comes with it.
Umer Raffat
Okay. Okay, got it. Got it. So you’re not saying no. And the other one, just to maybe round that out also is one of the questions that’s come up is, as you’re continuing to build out Kite further, obviously, Kite doesn’t hit all the popular targets in the cell therapy space, would you be open to cell therapy BD? And I asked that because some of those might actually require outlays more in the $2 billion to $5 billion type range, not necessarily sub $1 billion.
Andrew Dickinson
Yes. I mean we’re absolutely open to building out the Kite business. And we’ve done a lot of corporate development deals for Kite since we acquired the company 5 years ago and that’s not going to stop. I still think it fits more in the kind of ordinary course licensing and small acquisition bucket versus larger deals like the ones that you mentioned. But we’ll look at everything in the space. I mean, it’s always been a space, Umer, that we assumed would consolidate over time and that we have a very clear leadership position today that we expect to maintain. Part of that will come through our internal R&D and part of that will come through continued business development. So more to come. But yes, we’re absolutely going to continue to look at building out the Kite business.
Umer Raffat
Got it. Okay. And then just before we get a little more product specific Andy, tenofovir litigation, this has been a topic that’s sort of been on the back burner ever since the hearing got stayed. But presumably, you’ll start seeing more buzz around this again and as we go into the first half next year. How are you guys thinking about that broadly as a framework? And I’m not necessarily asking for legal arguments but more just wondering, is this something you guys want to settle at some point and move on? Or is this something you guys want to litigate all the way to the appeals level?
Andrew Dickinson
Well, I mean, I think it’s like a lot of the other litigation that Gilead has faced over the years. I mean we have a lot of confidence in our case. And we believe that we have the right arguments here and the winning arguments. So we are not afraid to litigate as we need to going forward. So I mean, again, there’s not much that I can say beyond what we’ve said previously and what you can see in the public pleadings. There will be a number of additional developments in the cases next year. We have a great legal team. We have great internal and external counsel and feel really strongly that we have — we’re on the right side of this argument. So there’s not much more than I can say at this point in time, Umer.
Umer Raffat
Got it. And Andy, from an accounting perspective, what has to happen for you to take a legal charge? Because — and I asked because the number of plaintiffs in this case is so unusually large versus even many of the multi-district litigation.
Andrew Dickinson
Yes. Well, we have to think that there’s the probability of a negative outcome and that it’s readily determinable in terms of potential amount. And neither of those is true at this point in time from our perspective. So as I mentioned on our quarterly call, we have not taken any reserve for this litigation.
Umer Raffat
Got it. Okay. Makes sense. Excellent. So maybe as we turn to some marketed products and this ties into this discussion we’re having on growth products through 2030 and maybe to loop in Bill on this first one, perhaps. Bill, one of the questions that comes up is, you have Trodelvy. It’s a real product now. It’s a sizable part of the portfolio. But now with Enhertu out in the market, presumably even within the triple-negative breast, at least half of that is exposed to Trodelvy competition. Do you guys anticipate some shrinkage in the triple-negative side before we open up the additional future indications?
William Grossman
Well, I think — again Trodelvy is definitely a cornerstone for our oncology pipeline. It’s going to be — and it’s already turning into that pipeline in our product where we’re continuing to expand across multiple indications, including obviously, breast cancer and moving that up in the lines of therapy. For us, it’s too early to say how Enhertu is going to really impact Trodelvy. We’re the only one that has a positive large Phase III trial in TNBC and 65% of the TNBC patients really don’t — are the IFC 0 [ph] patients that was not studied in the HER2 population for addressing a breast cell 4 [ph]. So we think we have a lot of growth opportunity to happen there. Right now, we’re only about 1 in 4 patients and that’s largely in third line. So we think the growth in TNBC is still a great opportunity for us in the marketplace. And now that we have tripled our field forces, including our commercial field force, we think that we’re in the right trajectory for Trodelvy to continue to be a cornerstone in breast cancer as well across TNBC and now hopefully HR-positive breast cancer as well.
Umer Raffat
Got it. So is it fair to assume then and maybe Andy to loop you in too, that Enhertu is a growth product from your perspective next year?
Andrew Dickinson
You mean Trodelvy or Enhertu?
Umer Raffat
Oh, sorry. I’m sorry.
Andrew Dickinson
Enhertu is a growth product as well but we see…
Umer Raffat
You know what I’m getting at.
Andrew Dickinson
Yes. I mean we expect that Trodelvy is a growth product, not only next year but for years to come. I mean we have even more confidence today in Trodelvy than we did when we acquired the product and we had a lot of confidence at that time. So we like the clinical data, we like this setup. We’ve recognized that Enhertu is a really important product for breast cancer patients as well but so is Trodelvy. They’re both fantastic options, as Bill said. So it’s a pretty exciting time but absolutely for years to come, we expect Trodelvy to grow.
Umer Raffat
Got it. And Bill, it sounds like from the clinician feedback you’re hearing, you’re not necessarily hearing a segmentation of Enhertu ahead of Trodelvy and going down that sort of HR, the way they define the Enhertu positivities on the lows?
William Grossman
Yes. I mean maybe first just kind of contextualizing the marketplace itself, that HR-positive breast cancer is the largest segment, 70% of patients are in that segment and very different patient populations that were studied between addressing breast cell 4 [ph]. So I think that the physicians, KOLs really view this as different lines — different studies in different patient populations. And Enhertu again, as a reminder only had to be in 1 prior chemotherapy versus a median of 3, 4 topics with the requirement for CDK4/6. So there will be a question around sequencing, especially as the patents do progress. We think that we’re well situated for, again, the IHC-0 population in the TNBC population. But again, from a TNBC population, we believe that we’re the only ones so far has shown clear clinically and a significant study for PFS and OS.
Umer Raffat
What’s the market share for Gilead in triple-negative breast right now for Trodelvy?
William Grossman
It’s estimated to be around 25,000 for that second line plus currently in the U.S. and EU5.
Umer Raffat
Sorry, sorry, I meant market share. Like how many — I don’t know if you guys would have that off top or we can save that for Johanna for another time. Okay. No problem. Okay. So perhaps one more then while we’re on Trodelvy. One the other question that comes up, obviously, is on the comparisons versus — into lung cancer. And one of the things I’ve always been somewhat scratching my head on is as much as TROPiCS-02 ADC data for Trodelvy, for Enhertu is very, very good in lung as well. But I find that Daiichi’s HER3, the asset has been stronger, at least on a reported response rate. Now granted, they’ve had some dosing step down, et cetera, as well. How do you think about that and the competitive positioning versus the HER3 ADC construct in lung?
William Grossman
Yes. I mean, right now, the HER3-ADC is really, again, in a different patient population, primarily for both studies that EVOKE-01 and 02 are really targeting those eGFR mutant patients. And that’s very different than the patient population that we’ve been targeting which is the non-driver mutations. So that will be another potential differentiation that we’re looking at. They did — as you — I think you were referring to, they did have a very small study, population that reported out at ASCO this year, looking at patients with second line plus without eGFR mutant and that was a decent response rate. We think we’re very comparable. Obviously, we’re going very fast and furious into the lung space with Trodelvy. We have the second line readout. We have EVOKE-01, 02 and 03. Two of which are Phase III study is already underway. So we’re pretty confident in what we’re seeing already in the lung space.
Umer Raffat
Got it. And maybe just to touch up briefly then on EVOKE-01 and I was having this e-mail exchange with Jackie and she corrected me on something I was confusing myself on. So in EVOKE-01 trial, the comp would be — on OS at least, the comp would be the 9.5 months we saw on ITT basis and I think it was 14.6 months in patients with prior IO. Would that be the comp from prior data?
William Grossman
Just — I think you’re referring to our Phase I data. That was a very different patient population. Again, that had — around 60% of the patients had 3 or more prior therapies and it was kind of performed in an era pre and post checkpoint inhibitors. So the vast majority of those patients actually were heavily pretreated patients as well and versus EVOKE-01 is coming in right after chemo checkpoint requirement. So that’s a pure kind of second line patient population.
Umer Raffat
So OS is a little better for that reason.
William Grossman
We would believe that [indiscernible] of what we’ve seen which is, again, pretty encouraging in that third line plus patient population in that early Phase I trial that would perform better.
Umer Raffat
So Bill, the base case should be maybe a mid-teens OS for the active arm and maybe closer to 10 on Docetaxel.
William Grossman
It’s hard to give any clear estimates or guidelines for our experimental population. But Docetaxel has been performing historically, very consistent pre-checkpoint now in a post-checkpoint era. I think that what you look for, for meeting PFS, there has been an OS of around 11 months is what you’d want to target for a comparison.
Umer Raffat
Yes. Got it. Got it. Okay. Makes sense. Which then is a nice segue into another update that came out yesterday and that’s on the TIGIT program. But just before we do Andy, one of the questions that comes up often and this is a question I get often is when you ask Gilead, what are the top 3 pipeline programs, what does Gilead say? Before I go in to my next topic.
Andrew Dickinson
Well, I think, I mean, it’s relatively clear. I mean it’s — on the Gilead side, setting aside Kite, it’s Trodelvy, it’s lenacapavir and it’s TIGIT from my perspective. Bill, what would you say?
William Grossman
I think that’s right. Yes.
Umer Raffat
Okay. Got it. Okay. Okay. Well, I was going to ask on TIGIT. So okay, that’s helpful to know. So maybe then let’s jump right in. And we saw the update yesterday. And one of the points and I’ve discussed this, Bill, with your prior company’s management team, too. I feel like one of the challenges heading into this ARC-7 update has been — it was kind of like a no-win situation of sorts because of how much Roche fluctuated between their Phase II and Phase III. So going from 0.25 to, I don’t know, 0.8 or whatever they’re landing in Phase III. So wherever you land between that range, so expectation is it will only phase into Phase III. So in your mind, do you think you have to get to a Roche’s Phase II like 0.25, 0.3 hazard ratio for it to be taken Roche like. Because I’m just very confused on what’s the number that actually makes it Roche like because Roche numbers are all over the place.
William Grossman
Yes. I mean I think the exciting thing for us is that we’ll be presenting this data — kind of full data set from the last interim analysis, number 4 for very soon. So as was noted in the press release, we’re having a full live presentation by Melissa Johnson of our data set for this last interim analysis where we’re going to have a very good patient population, almost double the size of CITYSCAPE. And I think what we’ll want to again look at and highlight is how well the dom-containing arms are compared to the monotherapies. And from a historical perspective, some of the studies that we always refer back to is KEYNOTE-042 and CheckMate-026. These were performed quite a while ago but those are still kind of the PFS standards that we would put out there as typical ones for this patient population.
Umer Raffat
What was the other one? KEYNOTE-042 and which one?
William Grossman
CheckMate-026.
Umer Raffat
Yes. Okay. Okay. But Bill, back to whether — like do you need to be at a 0.3 or 0.4 hazard ratio for it to be considered Roche like or not? Or does that not have to be the case? Because I don’t know if we can really comp to Phase II only because Phase III is so different.
William Grossman
Yes. I’d say it’s really hard to compare it across the 2 trials. Again, we’re going to have a bigger data set. And I think the consistency between the 2 arms and how they’re performing against monotherapy will be key to the people’s evaluation. I think most KOLs will hopefully see it in the same light that our KOLs and ourselves are seeing for the data set. So we just reemphasize that what we’re seeing we believe is really clinically meaningful for both dom-containing arms and what we’ll be presenting is actually quicker and a little bit more full data set than we had anticipated by the end of the year which is, again, looking at the landmark 6-month PFS as well as median PFS even though it’s a little bit more immature at this time. But I think all that data that we’ll be presenting is going to be hopefully a very [indiscernible] for TIGIT itself.
Umer Raffat
Bill, the other thing is I always felt like this Phase III is progressing much lower than people anticipated. And I felt like part of the reason was there was no KEYTRUDA in the trial and a lot of patients want that. So now that you’ve added that in, it should presumably help with recruitment. I think you’ve opened up more sites, too. But there’s one change that was not made on the active arm, I thought you might change from the internal PD-1 plus TIGIT to KEYTRUDA plus TIGIT instead. Like is that still a consideration or not?
William Grossman
Yes. I think maybe your first reference is to ARC-10 which is in the PD-1 high population. That was a recent change to the protocol. It was a 3-arm design. Just to recall that, that was also designed to get a mono label for Zim against chemotherapy. That restricted where we can actually enroll patients globally because of standard of care, of course, being checkpoints but not accessible in many countries throughout the globe. So — and then with the recent change now down to a slimmer 2-arm design and going against pembro standard of care that opens up the ability now to go into other markets, including in the U.S. and Western Europe, where we can have more enrolment where we wouldn’t be able to go before.
For STAR-121, I think part of your second — part of the question there, that is against pembro standard of care. So we are taking in the all-comer situation with chemotherapy with TIGIT and Zim will be taking nonstandard of care with pembro chemo. So I think that’s one to look for. I think it’s a little bit early for us to give estimates on our time lines and enrollments but we’re excited about the STAR-121.
Umer Raffat
Okay, excellent. And then any specific expectation you would put out on some of the adenosine readouts coming up or the HIF-2? I know there are some trials that are getting posted on that as well.
William Grossman
Yes. Maybe I’ll start with HIF-2. HIF-2 has been advancing really nicely with Arcus. We haven’t opted in on HIF-2 yet but we’re watching it…
Umer Raffat
I didn’t realize. Okay.
William Grossman
Yes, we’re watching very closely with Arcus and have obviously a lot of close collaboration with Arcus across all the programs. But for HIF-2, we’re pretty excited about what they recently presented at a conference where at least the clinical and pharmacodynamic characteristics of their HIF-2 alpha was very — potentially favorable to what’s currently out there with [indiscernible]. And so that could put us in a potential best-in-class situation with that molecule. And now they’ve advanced that into oncology patients as well. So we’re excited about the progress they’ve made with that in a very short time period. And we continue to watch that really closely as a potential opt-in program for us.
And then for the adenosine programs, as we’ve stated before, for both etruma and quemli, the A2a, A2b receptor antagonist and the CD73 small molecule inhibitor. We have multiple proof-of-concept studies that are underway, including ARC-7, that you’ll see the data soon but I kind of want to emphasize that we have this spread across multiple different tumor types, including prostate cancer, in combinations as well. We think the combination across the portfolio that we have that Gilead is going to be really important as well to continue to show benefit through the adenosine pathway.
Umer Raffat
Got it. Bill, remind me when as soon as we can get ARC-10 data for Phase III TIGIT?
William Grossman
I’d have to look — I’m not sure we’ve given guidance on that since we’ve changed that design.
Umer Raffat
Is it the ’24, ’25 time frame thing or more like a — is there a ’23 possibility?
William Grossman
No, it will be more ‘24, ‘25, if I’m correct.
Umer Raffat
So in that case, Bill, like — and maybe this is thinking more from a devil’s advocate perspective, if Merck is out there, Roche’s out there and they have an established PD-1 or PD-L1 component as well, like how do you guys see yourselves positioning competitively, especially given the scale of KEYTRUDA, Merck will be looking to transition patients on a fixed dose formulation. Like isn’t there more commercial question marks than not?
William Grossman
For the lung space, I think we’re really well positioned. I mean that is an indication in space that we are very much going after, as you can see from our clinical trials across the board for [indiscernible]. We have multiple employs just kind of maybe in review. We have PACIFIC-8 that’s in conjunction being executed by AZ [ph] in stage III lung cancer with dom, TIGIT.
We have there are [indiscernible] which is in the PD-L1 high population with TIGIT and Zim, that is again a chemo-free option that would bring benefit, they’re still high unmet need in that high population. And then we’re looking at the full boat, so to speak, the all-comers in frontline metastatic non-small cell with STAR-121. And that builds on our confidence that the TIGIT pathway is clearly an active pathway. And I think with the ARC-7 data set will be presented in a few weeks, we’re excited to show that our continued confidence in the TIGIT pathway.
Umer Raffat
Okay. Andy, is it your perception from the sort of biz dev and from the CFO perspective that on a return on investment, perhaps Arcus is tracking at the highest end of all the deals you guys have done in the last 5 years?
Andrew Dickinson
And I think — well, it’s hard to say. I mean, first of all, we think we’re making progress with most of the deals that we’ve done. So Kite obviously is starting to show what we think it can do in the long run. Umer, we’re pleased with where the Kite business is and expect that again to be a really important franchise for decades to come for us as we grow of it. The Arcus collaboration is certainly going really well. And as Bill mentioned earlier, we’re really excited about not just the TIGIT program but in a number of the programs that they’re developing. And we really like the deal structure with Arcus as well. It’s the best of both worlds. You have a great team, great people, great scientists, close collaboration, there’s incentives for them to continue to evolve other programs so that we have the option to opt into and to share with them going forward. And so the setup for that collaboration in terms of creating value for both sets of our shareholders is really great from this point forward. And then the other one on Trodelvy, again, to be clear, we think the return on investment for Trodelvy is going to be fantastic for our investors over time. Part of that is what Trodelvy does as a product in and of itself.
The other part that’s harder to quantify is what it does for us in terms of becoming a leader in oncology and building the infrastructure around it that allows us to more efficiently and effectively take programs forward like the TIGIT programs or the CCR8 antibody or any of the other multiple programs that we’re bringing forward. So to answer your question, I think the Arcus collaboration is great. We expect a significant return on investment for both sets of our shareholders. But it’s not just that deal. I think whether it’s the Trodelvy deal or the Kite deal in particular, they’re all tracking in a way that gives us a lot of confidence.
Umer Raffat
Makes sense. So — and maybe just to sort of go through a couple of the things you mentioned, a, on Trodelvy. So some of that confidence is presumably because of future indications like lung but then there’s also the muc [ph] indication. Is there an interim or anything like that possible on that trial in 2023?
William Grossman
Yes. We haven’t given any updates on the time lines yet for TROPiCS-04 which is a conversion study for accelerated approval for bladder cancer. But just as a reminder, that is — the primary end point there for TROPiCS-04 is OS. That’s gold standard, of course, in oncology for most indications.
Umer Raffat
So that would bias it later than earlier because of that alone.
William Grossman
And PFS is just secondary.
Umer Raffat
Right, right. Okay. Okay. That’s a good — it’s a good point. And then also then on cell therapy. Andy, can you remind us what was the manufacturing capacity when you guys bought it? And how has that changed over the last — because it looks like it was still like working its way through a bottleneck on manufacturing, not so much as demand was limited.
Andrew Dickinson
No. I mean we’ve never really had any significant bottlenecks in manufacturing at all. So I kind of break manufacturing and we’re into 2 pieces on the viral vector where we had a single source viral vector, recognizing, again, there are viral vectors, a gamma retroviral vector instead of a non-antiviral vector. There’s less competition in the market for that. But we have always had a good partnership with the supplier there. We’ve recently opened our own internal supply in our Oceanside biologics facility. So we’ve never had any issues on viral vector supply which some of the other companies in the cell therapy space and the gene therapy space are struggling with today.
And then in terms of like manufacturing when the cells are harvested and shipped, we started out at — the Kite team had done a great job of really focusing on manufacturing as a core and differentiating competency. They had the manufacturing facility in El Segundo right by LA exit they had developed and built out. They did it in a really thoughtful way where you could keep adding suites and building that out over time as the demand grew which is what we’ve done. And we then — the team had the foresight to develop and build out 2 additional manufacturing sites, 1 in Holland that opened 2 years ago, if I remember correctly, 1.5 years ago and then 1 that opened this year in Maryland. So we now have 3 separate manufacturing facilities, 1 on the West Coast, 1 on the East Coast, 1 in Europe that can more than adequately supply the market, not only today but for the foreseeable years.
The biggest issue for us and others Umer, is adding people because it is still a very labor-intensive process. And Christi and the team have just done a great job of thoughtfully hiring in advance and kind of anticipating where supply is going — where demand is going, I’m sorry, including with the ZUMA-7 and second line approval in DLBCL. And so we have never had a supply issue to speak of. The only — and what we’ve said publicly is the only scenario when we look forward and we expect the business to continue to grow, the only potential scenario that you see is if the second line approval really increased usage beyond our current expectations. So we expect it to be kind of from here consistent, slow, impressive growth. We didn’t expect it to kind of be parabolic growth. And that’s what we’re seeing.
You saw the big uptick in the second quarter with the approval in second line which led to increased usage in both the third line as well as usage in the second line. And now we expect that cell therapy market will continue to lift over time from there. But we feel great about our supply. There’s not been an issue.
Umer Raffat
So that wasn’t like a onetime. I don’t know for whatever reason I thought that ZUMA-7 immediately after approval, it was a bolus, they came in and that was that and it’s kind of not been growing since in ZUMA-7 indication but that doesn’t sound like what you’re seeing.
Andrew Dickinson
No. I think what we guided to and maybe what you’re referring is we guided both in the third quarter and now in the fourth quarter for people to be cautious because of the fact that you saw such a significant uplift in cell therapy in the second quarter as a result of that approval. And with our cell therapy business, we expect that you’ll — as we continue to expand in new indications and larger indications over time, you’ll see that from time to time. And then the business will continue to grow nicely and steadily from there. So the business still grew in the third quarter. We had a great third quarter actually that exceeded our expectations and guidance.
We’ve guided because of 2 things: one, other competitors are working through some of their supply issues. So we want to see what that means for the fourth quarter and there is a shortage of one of the agents that’s used to condition patients for cell therapy and we wanted to get a sense of where that plays out in the fourth quarter. So we provided some appropriately cautious guidance for the fourth quarter. We still expect the business to minimum be flat or to grow as you see for the year. But we — long term, we expect the business to continue to grow nicely.
Umer Raffat
I see. Okay. So it’s growing but it wasn’t quite a one timer. Okay. And then maybe my last one Andy, before we start to bring it towards a conclusion would be — so Biktarvy is doing $9 billion run rate right now by my math already. And consensus peak is below $10 billion. And I almost wonder this looks to me like this is ripe for meaningful consensus estimate revisions. And as you think about sort of modelling this franchise, there’s volume and price both that’s helping. Do you envision between volume and price, why it shouldn’t continue to grow mid- to high-single digits in volume alone plus some price which sounds like if it’s 10% plus growth, this could easily be a product that could be $14 billion, $15 billion in sales in the next 5, 6 years.
Andrew Dickinson
Yes. I mean we haven’t provided specific guidance but to your comment, yes, we — I mean it’s a great franchise. It’s an incredible product. It’s the clear gold standard for treatment, both for new patients and switch patients and we expect it to continue to grow over time. The same thing is true for Descovy in the prep space where we expect significant growth going forward. So — and it goes back to maybe one of your earlier questions, Umer. I mean I think that as people are — as the market overall, including the analysts are appreciating kind of Gilead today versus Gilead historically and are revisiting their models, we’re getting a lot of thoughtful questions. People are asking the same questions that you’re asking here and kind of relooking at their models and expect those to evolve over time. So we have a lot of confidence in Biktarvy both in the short run, continued growth and in the long run.
And then coming behind that, as you know, we have lenacapavir, both in prep and we expect in treatment, at least one, if not multiple different products that should be coming through that are really exciting as well.
Umer Raffat
Got it. Okay. Makes a lot of sense. It makes a lot of sense. Excellent. Well, thank you guys so much for joining. Let me just make sure there’s no outstanding one-offs in my e-mail. Otherwise, we’re — you know what? Oh, there’s one question. Let me just ask this before we wrap it up. Investor question. Can you ask why they’re mentioning CheckMate-026? The trial was not done in PD-L1 above 50%. I think you were referring to the cut-off, the subgroup within that, right, Bill?
William Grossman
That’s correct. Yes, the cut-off.
Umer Raffat
I remember living through that trial.
William Grossman
Each of them had sort of cut-offs.
Umer Raffat
Exactly. Yes. No, no, that’s exactly right. Okay. Sounds good. Okay. Excellent. That’s what we got. Thank you guys again for joining and looking forward to being in touch. And sorry, I missed you at New York Andy.
Andrew Dickinson
No problem.
Umer Raffat
We’ll do that another time. Absolutely.
Question-and-Answer Session
End of Q&A
Be the first to comment