10-K: Gilead Sciences Reports Mixed 2024 Results: HIV, Oncology Growth Offset by Veklury Decline and Impairment Charges

Gilead Sciences' 2024 results show revenue growth driven by HIV and oncology, but net income was significantly impacted by Trodelvy impairment charges and increased R&D expenses.

Summary

• Gilead Sciences reported a 6% increase in total revenues for 2024, reaching $28.754 billion.
• HIV product sales increased by 8% to $19.612 billion, driven by higher demand for Biktarvy and Descovy.
• Liver Disease product sales increased by 9% to $3.021 billion, due to higher demand in products for chronic hepatitis C virus, HBV and, in Europe, chronic hepatitis delta virus, as well as the launch of Livdelzi for treatment of PBC.
• Veklury sales decreased by 18% to $1.799 billion due to decreased rates of COVID-19-related hospitalizations.
• Oncology Cell Therapy product sales increased 6% to $1.973 billion.
• Trodelvy product sales increased 24% to $1.315 billion.
• Net income attributable to Gilead decreased by 92% to $480 million, with diluted earnings per share at $0.38.
• The decrease in net income was primarily due to a $4.2 billion pre-tax impairment charge related to Trodelvy IPR&D assets and higher acquired IPR&D expenses, partially offset by higher product sales and lower income tax expense.
• The company completed the acquisition of CymaBay Therapeutics for $4.3 billion in total equity value.
• Gilead expects continued increases in demand for its products in 2025, particularly in the HIV business.
• The company anticipates that strong volume growth in 2025 will be offset by the effects of the Inflation Reduction Act, an expected decrease in Veklury sales, and the impact of the U.S. dollar strengthening against major foreign currencies.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While revenue growth is positive, the significant decrease in net income due to impairment charges and increased expenses tempers the overall sentiment. The future outlook is cautiously optimistic, but uncertainties remain.

Positives

• HIV product sales increased by 8%, driven by higher demand and higher average realized price.
• Liver Disease product sales increased by 9%, primarily due to higher demand in products for chronic hepatitis C virus, HBV and, in Europe, chronic hepatitis delta virus, as well as the launch of Livdelzi for treatment of PBC.
• Oncology Cell Therapy product sales increased 6% to $2.0 billion in 2024, compared to 2023, primarily due to increased demand outside the U.S. for Yescarta and Tecartus and higher average realized price.
• Trodelvy product sales increased 24% to $1.3 billion in 2024, compared to 2023, primarily due to higher demand across all regions.

Negatives

• Net income attributable to Gilead decreased by 92% to $480 million.
• Diluted earnings per share attributable to Gilead decreased by 92% to $0.38.
• Veklury product sales decreased 18% to $1.8 billion in 2024, compared to 2023, primarily due to decreased rates of COVID-19-related hospitalizations.
• A pre-tax IPR&D partial impairment charge of $4.2 billion related to Trodelvy IPR&D assets.
• Higher acquired IPR&D expenses, primarily $3.8 billion related to the acquisition of CymaBay.

Risks

• The company faces challenges in accurately forecasting sales due to difficulties in predicting demand for its products and fluctuations in purchasing patterns or wholesaler inventories.
• The company faces significant competition from global pharmaceutical and biotechnology companies, specialized pharmaceutical firms and generic drug manufacturers.
• Existing products are subject to reimbursement pressures from government agencies and other third parties, required rebates and discounts, and other pricing pressures.
• The company may experience adverse impacts resulting from the importation of its products from lower price markets or the distribution of illegally diverted or counterfeit versions of its products.
• The company faces risks in its clinical trials, including the potential for unfavorable results, delays in anticipated timelines and disruption.
• The company may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture and sell its products, or it may face manufacturing difficulties, delays or interruptions, including at its third-party manufacturers and corporate partners, which could limit its ability to generate revenues.
• The company's operations depend on compliance with complex FDA and comparable international regulations.
• The company is impacted by evolving laws, regulations and legislative or regulatory actions applicable to the healthcare industry.
• The company's success depends to a significant degree on its ability to obtain and defend its patents and other intellectual property rights both domestically and internationally, and to operate without infringing upon the patents or other proprietary rights of third parties.
• The company faces potentially significant liability and increased expenses from litigation and government investigations relating to its products and operations.
• The company's business has been, and may in the future be, adversely affected by outbreaks of epidemic, pandemic or contagious diseases.
• The company faces risks associated with its global operations.
• Climate change and natural disasters, as well as legal, regulatory, or market measures to address climate change, can negatively affect the company's business and operations.
• The company's aspirations, goals and disclosures related to corporate responsibility matters expose it to numerous risks, including risks to its reputation and stock price.
• The company depends on relationships with third parties for sales and marketing performance, technology, development, logistics and commercialization of products.
• Due to the specialized and technical nature of the company's business, the failure to attract, develop and retain highly qualified personnel could adversely impact it.
• The failure to successfully implement or upgrade enterprise resource planning and other information systems could adversely impact the company's business and results of operations.
• Information system service interruptions or breaches, including significant cybersecurity incidents, could give rise to legal liability and regulatory action under data protection and privacy laws and adversely affect the company's business and operations.
• The company is subject to risks associated with engaging in business acquisitions, licensing arrangements, collaborations, options, equity investments, asset divestitures and other strategic transactions.
• Changes in the company's effective income tax rate could reduce its earnings.

Future Outlook

Gilead expects continued increases in demand for its products overall, bolstered by the growth of its HIV business. Strong, demand-led volume growth in 2025 is expected to be offset by the effects of the Inflation Reduction Act, an expected decrease in Veklury product sales, and the impact of the U.S. dollar strengthening against major foreign currencies.

Industry Context

Gilead's focus on HIV, oncology, and liver diseases aligns with significant unmet medical needs and growing markets. The company's strategic collaborations and acquisitions reflect a broader industry trend of pharmaceutical companies seeking to expand their pipelines and diversify their portfolios.

Comparison to Industry Standards

• Gilead's performance can be compared to other large-cap biopharmaceutical companies such as Johnson & Johnson, Roche, and Merck.
• Johnson & Johnson's pharmaceutical segment reported $54.76 billion in sales in 2023, with key products in oncology, immunology, and infectious diseases.
• Roche's pharmaceuticals division reported CHF 44.6 billion in sales in 2023, with a strong focus on oncology and immunology.
• Merck reported $51.1 billion in pharmaceutical sales in 2023, driven by Keytruda and other key products.
• Gilead's HIV franchise remains a market leader, competing with companies like ViiV Healthcare (a joint venture between GSK, Pfizer, and Shionogi).
• In oncology, Gilead's cell therapy and Trodelvy compete with products from companies like Novartis, Bristol-Myers Squibb, and AstraZeneca.
• The Trodelvy impairment charge reflects the inherent risks in drug development, as seen with other companies facing clinical trial setbacks.
• The Inflation Reduction Act is expected to impact the entire pharmaceutical industry, with companies adjusting their pricing and reimbursement strategies.

Management Changes

Legal Proceedings

• The company is involved in litigation with generic manufacturers regarding patents for Symtuza and Biktarvy.
• The company is involved in antitrust and consumer protection lawsuits related to HIV drugs.
• The company is involved in product liability lawsuits related to Viread, Truvada, Atripla, Complera and Stribild.
• The company is subject to a government investigation by the U.S. Attorneys Office for the Southern District of New York regarding promotional speaker programs for HIV.
• The company is involved in qui tam lawsuits alleging violations of the federal False Claims Act and various state false claims acts.

Related Party Transactions

• Gilead donated certain equity securities at fair value to the Gilead Foundation, a related party, in 2022.

Stakeholder Impact

• Shareholders: Impacted by decreased net income and potential future impacts of the Inflation Reduction Act.
• Employees: Impacted by restructuring charges and workforce reductions.
• Patients: Potential for new therapies and expanded indications, but also potential for withdrawal of certain treatments.
• Suppliers: Potential impacts from supply chain disruptions and climate change.
• Customers: Potential for changes in pricing and reimbursement due to legislative and regulatory actions.

Next Steps

• Continue investing in the R&D pipeline.
• Pursue strategic collaborations, in-licensing and acquisitions.
• Focus on disciplined operating expense management.
• Await regulatory decisions for twice-yearly lenacapavir for HIV prevention in the U.S. and EU.

Key Dates