On July 29, 2021 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the second quarter 2021 (Press release, Gilead Sciences, JUL 29, 2021, View Source [SID1234585370]).
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"We maintained our positive momentum in the second quarter, with both a solid financial performance and strong progress across our increasingly diverse portfolio. Our flagship HIV therapy, Biktarvy, saw continued growth and gains in market share, despite the ongoing impact of the pandemic," said Daniel O’Day, Chairman and Chief Executive Officer, Gilead Sciences. "The series of promising pipeline updates included the data from the landmark ZUMA-7 study for the treatment of second-line large B-cell lymphoma. In virology, recent results from our lenacapavir study reinforce its potential as a long-acting therapy for people living with HIV, and positive interim results from our Hepcludex studies in HDV moved us closer to a U.S. filing."
Second Quarter 2021 Financial Results
Total second quarter 2021 revenue of $6.2 billion increased 21% compared to the same period in 2020, primarily due to Veklury (remdesivir), higher demand for Biktarvy (bictegravir 50 mg/FTC/tenofovir alafenamide 25 mg ("TAF")) and our hepatitis C virus ("HCV") products, as well as continued uptake in the United States of Trodelvy (sacituzumab govitecan-hziy) and Tecartus (brexucabtagene autoleucel).
Diluted Earnings Per Share ("EPS") increased to $1.21 for the second quarter 2021 compared to net loss per share of $2.66 for the same period in 2020. This was primarily driven by the impact of higher in-process research and development ("IPR&D") expenses in the second quarter 2020 related to the Forty Seven, Inc. acquisition and revenue growth in the second quarter 2021, offset by fair value loss adjustments on Gilead’s equity investment in Galapagos NV.
Non-GAAP diluted EPS increased 68% to $1.87 for the second quarter 2021 compared to the same period in 2020, primarily due to higher operating income partially offset by lower interest income.
As of June 30, 2021, Gilead had $7.4 billion of cash, cash equivalents and marketable debt securities compared to $7.9 billion as of December 31, 2020.
During the second quarter 2021, Gilead generated $2.3 billion in operating cash flow.
During the second quarter 2021, Gilead paid cash dividends of $894 million and utilized $43 million to repurchase common stock.
Product Sales Performance
Total second quarter 2021 product sales increased 21% to $6.2 billion compared to the same period in 2020. Total product sales excluding Veklury increased 5% to $5.3 billion for the second quarter 2021 compared to the same period in 2020, reflecting continued uptake of Trodelvy and Tecartus in the United States as well as improving trends in HIV and HCV, offset, as expected, by loss of exclusivity of Truvada (emtricitabine 200mg ("FTC")/tenofovir disoproxil fumarate 300mg ("TDF")) and Atripla (efavirenz 600mg/FTC/TDF) in the United States.
HIV product sales decreased 2% to $3.9 billion for the second quarter 2021 compared to the same period in 2020, reflecting the expected loss of exclusivity of Truvada and Atripla in the United States, offset in part by increased demand.
Biktarvysales increased 24% year-over-year in the second quarter 2021, reflecting higher demand in all geographies.
Descovy (FTC/TAF) sales increased 4% year-over-year in the second quarter 2021, driven by increased pre-exposure prophylaxis ("PrEP") demand in the United States and the impact in the same period last year of the COVID-related channel inventory drawdown, offset by lower average net selling price.
Truvada and Atripla sales decreased 72% year-over-year to $108 million and 42% year-over-year to $60 million, respectively, in the second quarter 2021 due to generic entrants in the United States following loss of exclusivity in late 2020.
HCV product sales increased 23% to $549 million for the second quarter 2021 compared to the same period in 2020, driven primarily by improved market starts in the United States and Europe as well as an unfavorable change in estimate of government rebates in the second quarter 2020.
Hepatitis B virus ("HBV") and hepatitis delta virus ("HDV") product sales increased 8% to $237 million for the second quarter 2021 compared to the same period in 2020. Vemlidy (tenofovir alafenamide 25 mg) sales increased 32% in the second quarter 2021 compared to the same period in 2020 driven by increased demand primarily in geographies outside the United States and Europe. Hepcludex (bulevirtide) contributed $7 million in the second quarter 2021 reflecting the first full quarter of sales for Gilead.
Cell Therapy product sales increased 39% to $219 million for the second quarter 2021 compared to the same period in 2020.
Yescarta (axicabtagene ciloleucel) sales increased to $178 million in the second quarter 2021, reflecting continued uptake in relapsed or refractory indolent follicular lymphoma ("FL") in the United States following its approval by the U.S. Food and Drug Administration ("FDA") in the first quarter 2021 and expansion in Europe.
Tecartus sales were $41 million for the second quarter 2021, driven by the launch in mantle cell lymphoma in the United States and Europe.
Trodelvy sales for the second quarter 2021 were $89 million. Launch activities continue following the full FDA approval for second-line metastatic triple-negative breast cancer ("mTNBC") and accelerated approval for metastatic urothelial cancer.
Veklury sales were$829 millionfor the second quarter 2021. Sales of Veklury are generally affected by COVID-19 related rates of infections, hospitalizations and vaccinations.
Other product sales increased 20% to $291 million for the second quarter 2021 compared to the same period in 2020.
AmBisome (amphotericin B) sales increased in the second quarter 2021 compared to the same period in 2020 driven by an increase in shipments outside the United States, primarily in India and Europe.
Second Quarter 2021 Product Gross Margin, Operating Expenses and Tax
Product gross margin was 77.4% for the second quarter 2021 compared to 79.0% in the same period in 2020, reflecting additional amortization of intangibles acquired from Immunomedics, Inc. and MYR GmbH. Non-GAAP product gross margin was 86.4% for the second quarter 2021 compared to 84.3% in the same period in 2020, driven by lower royalty expense.
Research and Development ("R&D") expenses for the second quarter 2021 were $1.1 billion compared to $1.3 billion in the same period in 2020. Non-GAAP R&D expenses for the second quarter 2021 were $1.1 billion compared to $1.2 billion in the same period in 2020. Lower R&D expenses reflect completion or wind-down of remdesivir-related programs, partly offset by increases in Trodelvy and magrolimab clinical activities.
Sales, General and Administrative ("SG&A") expenses for the second quarter 2021 were $1.4 billion compared to $1.2 billion in the same period in 2020. The increase in SG&A expenses was driven primarily by a significant donation of equity securities to the Gilead Foundation. Non-GAAP SG&A expenses for the second quarter 2021 were $1.1 billion compared to $1.2 billion in the same period in 2020. The decrease in non-GAAP SG&A expenses was driven by lower legal expenses primarily due to a prior year settlement associated with a Department of Justice investigation, offset by increases in promotional and commercialization activities in geographies outside the United States.
The GAAP effective tax rate ("ETR") and non-GAAP ETR for the second quarter 2021 were 16.5% and 19.6%, respectively, compared to (12.5)% and 22.8%, respectively, for the same periods in 2020.
Key Updates Since Our Last Quarterly Release
Viral Diseases
Gilead presented additional lenacapavir clinical development program data at the International AIDS Society ("IAS") 2021 Conference on HIV Science. Phase 2 data from CALIBRATE, an ongoing, open-label, active-controlled trial in treatment-naïve people with HIV-1 infection showed lenacapavir, given subcutaneously or orally, in combination with oral daily emtricitabine/tenofovir alafenamide ("F/TAF") led to high rates of viral suppression by Week 28. These results support the ongoing evaluation and further development of lenacapavir in combination with other long-acting partner agents for the treatment of HIV-1 infection and will support Gilead’s long-acting oral and injectable development program.
Gilead also announced at IAS 2021 new results from the ongoing Phase 2/3 CAPELLA trial evaluating lenacapavir in heavily treatment-experienced people living with multi-drug resistant HIV. The findings demonstrate that lenacapavir administered subcutaneously every six months in combination with other antiretrovirals achieved high rates of virologic suppression at Week 26.
Gilead filed a New Drug Application to FDA seeking approval of lenacapavir for the treatment of HIV-1 infection in heavily treatment-experienced people with multi-drug resistant infection.
Gilead announced interim results from the Phase 3 study (MYR301) of bulevirtide for the treatment of HDV at the International Liver Congress ("ILC") 2021 annual meeting. After 24 weeks, 36.7% of patients receiving a 2mg dose of bulevirtide and 28% of patients receiving a 10mg dose of bulevirtide showed a combined virological and biological response compared to 0% in the no treatment group.
Gilead also announced at ILC 2021 the interim results from the Phase 2b study (MYR204) of bulevirtide for the treatment of HDV. At week 24, results showed that bulevirtide alone or in combination with peginterferon alfa-2a, is associated with a significant HDV RNA decline and improvements in biochemical disease activity.
Gilead received FDA approval for a new formulation of Epclusa, expanding the pediatric indication for the treatment of HCV to now include children as young as 3 years of age.
Oncology
Kite announced top-line results from the primary analysis of ZUMA-7 trial of Yescarta in second-line relapsed or refractory large B-cell lymphoma ("LBCL"). At a median follow-up of two years, Yescarta improved event free survival by 60% over the standard of care chemotherapy plus stem cell transplant. The study also met the key secondary endpoint of objective response rate. Full data will be presented later this year and discussions are underway with global regulatory authorities.
Kite announced that Fosun Kite Biotechnology Co., Ltd., a joint venture between Kite and Shanghai Fosun Pharmaceutical (Group) Co., Ltd., received approval from the China National Medical Products Administration for axicabtagene ciloleucel (FKC876) for the treatment of adult patients with relapsed or refractory LBCL after two or more lines of systemic therapy. Yescarta is the first and only commercially available chimeric antigen receptor ("CAR") T-cell therapy approved in China.
Kite announced a partnership with Shoreline Biosciences, Inc. to develop allogeneic candidates for a range of hematologic malignancies. The collaboration will focus initially on CAR NK targets, with Kite having an option to expand the collaboration to include an induced pluripotent stem cell CAR Macrophage program.
Kite announced follow-up results from the pivotal ZUMA-5 trial of Yescarta in relapsed or refractory FL at the American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) ("ASCO") 2021 annual meeting. At a minimum follow-up of 18 months, 94% of patients had achieved a response, and secondary endpoints of median progression-free survival and overall survival were not yet reached.
Kite announced at ASCO (Free ASCO Whitepaper) 2021, with a publication in The Lancet, primary analysis of ZUMA-3 evaluating Tecartus in adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia. In the pivotal Phase 2 portion of the trial, 71 patients with relapsed or refractory disease were enrolled and Kite observed a response rate of 71%. Importantly, the majority of these responses were associated with undetectable minimal residual disease. The findings have been designated for Priority Review by FDA with a Prescription Drug User Fee Act ("PDUFA") date of October 1, 2021.
Gilead announced analyses from Phase 3 ASCENT study at ASCO (Free ASCO Whitepaper) 2021 in patients with relapsed or refractory mTNBC. Treatment with Trodelvy demonstrated significantly greater survival benefit over chemotherapy in patients treated in the second-line setting and in patients greater than 65 years old.
Corporate
Kite announced a purchase agreement with BioNTech SE to acquire Kite’s solid tumor neoantigen T cell receptor R&D platform and clinical manufacturing facility in Gaithersburg, Maryland.
Gilead welcomed William Grossman, MD, PhD, as Senior Vice President, Oncology Clinical Research. Dr. Grossman brings extensive experience as a clinician and a veteran biopharmaceutical executive.
Gilead announced that the company’s Board of Directors has declared a quarterly dividend of $0.71 per share of common stock for the third quarter of 2021. The dividend is payable on September 29, 2021, to stockholders of record at the close of business on September 15, 2021. Future dividends will be subject to Board approval.
Guidance and Outlook
Gilead has updated its full-year guidance, and now expects:
Total product sales between $24.4 billion and $25.0 billion, compared to $23.7 billion and $25.1 billion previously, reflecting solid results in the first half of the year and our updated expectations for the second half of 2021.
Total product sales, excluding Veklury, between $21.7 billion and $21.9 billion, compared to $21.7 billion to $22.1 billion previously, primarily reflecting the longer than expected pandemic impact on our HIV business, including the latest increase in COVID-19 cases.
Total Veklury sales between $2.7 billion and $3.1 billion, compared to $2.0 billion to $3.0 billion previously, reflecting the ongoing role of Veklury in the pandemic, in addition to the continued uncertainties around the path of the pandemic since Veklury revenue tends to track hospitalization rates.
GAAP earnings per share between $4.70 and $5.05, compared to $4.75 to $5.45 previously.
Non-GAAP earnings per share between $6.90 and $7.25, compared to $6.75 to $7.45 previously.
A reconciliation between GAAP and non-GAAP financial information for the 2021 guidance is provided in the accompanying tables. Also see the Forward-Looking Statements described below. The financial guidance is subject to a number of risks and uncertainties, including uncertainty around the duration and magnitude of the COVID-19 pandemic. While the pandemic can be expected to continue to impact Gilead’s business and broader market dynamics, the rate and degree of these impacts as well as the corresponding recovery from the pandemic may vary across Gilead’s business.
Non-GAAP Financial Information
The information presented in this document has been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP financial information excludes acquisition-related expenses including amortization of acquired intangible assets and inventory step-up charges in cost of goods sold, acquired IPR&D expenses, and other items that are considered unusual or not representative of underlying trends of Gilead’s business, fair value adjustments of equity securities and discrete and related tax charges or benefits associated with changes in tax related laws and guidelines. Acquired IPR&D expenses reflect IPR&D impairments as well as the initial costs of externally developed IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use, including upfront and other payments related to various collaborations and the initial costs of rights to IPR&D projects. Although Gilead consistently excludes the amortization of acquired intangible assets from the non-GAAP financial information, management believes that it is important for investors to understand that such intangible assets were recorded as part of acquisitions and contribute to ongoing revenue generation.Non-GAAP measures may be defined and calculated differently by other companies in the same industry. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the accompanying tables.
Conference Call
At 1:30 p.m. Pacific Time today, Gilead will host a conference call to discuss Gilead’s results. A live webcast will be available on View Source and will be archived on www.gilead.com for one year.