8-K: Gilead Sciences Reports Mixed Q4 and Full Year 2023 Results, Oncology Sales Surge

Gilead Sciences' fourth quarter revenue declined by 4% year-over-year, while full year product sales excluding Veklury increased by 7%, driven by strong oncology growth.

Summary

• Gilead Sciences announced its financial results for the fourth quarter and full year 2023, with total fourth quarter revenue decreasing by 4% to $7.1 billion compared to the same period in 2022.
• This decrease was primarily due to lower sales of Veklury and HIV products, partially offset by higher Oncology sales.
• Diluted earnings per share (EPS) decreased to $1.14 in the fourth quarter 2023, compared to $1.30 in the same period in 2022, while non-GAAP diluted EPS increased to $1.72 from $1.67.
• For the full year 2023, total revenue decreased by 1% to $27.1 billion, with a significant reduction in Veklury sales largely offset by higher HIV and Oncology sales.
• Full year diluted EPS increased to $4.50, while non-GAAP diluted EPS decreased to $6.72.
• Product sales excluding Veklury increased by 7% for the full year 2023, reaching $24.7 billion.
• Biktarvy sales increased by 14% for the full year, reaching $11.8 billion, and Oncology sales increased by 37% for the full year, reaching $2.9 billion.
• Trodelvy sales increased by 53% in the fourth quarter and 56% for the full year, reflecting strong demand.
• Gilead had $8.4 billion in cash, cash equivalents, and marketable debt securities as of December 31, 2023, compared to $7.6 billion at the end of 2022.
• The company generated $2.2 billion in operating cash flow during the fourth quarter of 2023, paid cash dividends of $943 million, and utilized $150 million to repurchase common stock.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong growth in oncology and key products like Biktarvy and Trodelvy, but tempered by the overall revenue decline and reduced earnings per share. The mixed results and the failure of some clinical trials create some uncertainty.

Positives

• Product sales excluding Veklury increased by 7% for the full year 2023, indicating strength in the core business.
• Biktarvy sales showed strong growth, increasing by 14% for the full year 2023.
• Oncology sales experienced a significant increase of 37% for the full year 2023, demonstrating the success of their oncology portfolio.
• Trodelvy sales increased substantially, by 56% for the full year 2023, reflecting strong demand.
• The company's cash position improved, with $8.4 billion in cash, cash equivalents, and marketable debt securities at the end of 2023.
• Gilead generated $2.2 billion in operating cash flow during the fourth quarter of 2023.
• Cell Therapy product sales increased 28% for the full year 2023.

Negatives

• Total fourth quarter 2023 revenue decreased by 4% compared to the same period in 2022.
• Diluted EPS decreased to $1.14 in the fourth quarter 2023 compared to $1.30 in the same period in 2022.
• Full year 2023 total revenue decreased by 1% compared to 2022.
• Non-GAAP diluted EPS decreased to $6.72 in the full year 2023 compared to $7.26 in 2022.
• Veklury sales decreased significantly, by 44% for the full year 2023, due to lower COVID-19 related hospitalizations.
• HIV product sales decreased 2% in the fourth quarter 2023.
• Product gross margin decreased to 75.9% in the full year 2023 compared to 79.0% in 2022.

Risks

• The company's financial results are subject to the uncertainty of the amount and timing of Veklury revenues, which are dependent on COVID-19 related hospitalizations.
• There are risks associated with the company's ability to make progress on its long-term ambitions and strategic priorities.
• Gilead faces risks related to patent protection and potential loss of exclusivity for its products.
• Clinical trial results may be unfavorable, and regulatory approvals may be delayed or not granted.
• The company is subject to pricing and reimbursement pressures from government agencies and other third parties.
• Market share and price erosion may occur due to the introduction of generic versions of Gilead products.
• Physicians and patients may not see advantages of Gilead's products over other therapies.
• The Phase 3 OAKTREE trial of obeldesivir did not meet its primary endpoint.
• The Phase 3 EVOKE-01 study of Trodelvy did not meet its primary endpoint of overall survival.

Future Outlook

Gilead is providing full-year 2024 guidance with total product sales between $27.1 billion and $27.5 billion, total product sales excluding Veklury between $25.8 billion and $26.2 billion, total Veklury sales of approximately $1.3 billion, diluted EPS between $5.15 and $5.55, and non-GAAP diluted EPS between $6.85 and $7.25.

Management Comments

• Daniel O'Day, Gilead's Chairman and Chief Executive Officer, stated that 2023 was another strong year of revenue growth for Gilead's base business, driven by both HIV and Oncology.
• He also mentioned that the strength of the business provides a solid foundation as they enter a new catalyst-rich phase for the company, with several milestones expected in 2024.

Industry Context

Gilead's results reflect the ongoing shift in the pharmaceutical industry, with a growing emphasis on oncology and cell therapy, while also highlighting the impact of fluctuating COVID-19 related sales. The company's focus on expanding its oncology portfolio and pipeline is consistent with broader industry trends.

Comparison to Industry Standards

• Gilead's 7% growth in product sales excluding Veklury is a solid performance compared to some of its peers in the biopharmaceutical industry, although some companies with strong oncology portfolios have seen higher growth rates.
• The 14% growth in Biktarvy sales is a positive sign, as it is a key product in the HIV market, and this growth rate is competitive with other leading HIV treatments.
• The 37% growth in oncology sales is a strong indicator of Gilead's success in this area, and this growth rate is higher than many of its competitors in the oncology space, such as Bristol Myers Squibb and Merck, although some companies like Eli Lilly have seen higher growth in specific oncology areas.
• The 56% growth in Trodelvy sales is impressive and demonstrates the potential of this drug in the market, and this growth rate is higher than many other antibody-drug conjugates in the market.
• The 44% decline in Veklury sales is a significant drop, but it is in line with the overall decline in COVID-19 related treatments, and this is a common trend across companies that had significant COVID-19 related revenue, such as Pfizer and Moderna.
• Gilead's non-GAAP operating margin of 38.7% for the full year 2023 is competitive with other large biopharmaceutical companies, although some companies with higher-margin products may have higher operating margins, such as AbbVie.

Management Changes

Legal Proceedings

• Gilead had a $525 million litigation settlement with certain plaintiffs in the HIV antitrust litigation.

Stakeholder Impact

• Shareholders may be concerned about the decrease in revenue and earnings per share, but encouraged by the growth in oncology and key products.
• Employees may be affected by the restructuring expenses related to changes in manufacturing strategy.
• Customers and patients may benefit from the continued development and commercialization of new treatments.
• Suppliers may be impacted by changes in manufacturing strategy.
• Creditors may be impacted by the company's financial performance and cash flow.

Next Steps

• Gilead expects several milestones in 2024, including updates on long-acting HIV prevention and treatment, Cell Therapy, and Trodelvy.
• The company will continue to focus on advancing its pipeline and commercializing its products.
• Gilead will host a conference call to discuss the results.

Key Dates

Keywords

Gilead Sciences, Financial Results, Oncology, HIV, Veklury, Biktarvy, Trodelvy, Cell Therapy, Earnings Per Share, Product Sales