Gilead's Q3 2025: Contradictions Emerge on PrEP Market Growth and Yeztugo Access Strategy

Date of Call: None provided

Financials Results

• Revenue: Total product sales $7.3B (including Veclari), down 2% YOY; product sales excluding Veclari $7.1B, up 4% YOY and up 2% sequentially
• EPS: GAAP diluted EPS $2.47; non‑GAAP diluted EPS $2.22 excluding a $0.25 after‑tax nonrecurring benefit; management reported non‑GAAP EPS up 22% YOY (10% ex the $0.25 accounting benefit)
• Gross Margin: Product gross margin 86%, versus ~87% in 2024
• Operating Margin: Operating margin 50% (no prior‑period comparison provided)

Guidance:

• Total product sales (ex‑Veclari) expected $27.4B–$27.7B; total product sales expected $28.4B–$28.7B
• HIV franchise growth now expected ~5% for 2025 (raised from prior ~3%) with ~$900M Medicare Part D headwind unchanged
• Veclari full‑year revenue expected ~ $1.0B; cell therapy revenue forecast down ~10% for 2025
• Product gross margin ~86%; R&D roughly flat vs 2024; SG&A down mid‑to‑high single digits
• Acquired IPR&D now expected $900M; operating income $13.1B–$13.4B; non‑GAAP EPS $8.25–$8.50; GAAP EPS $6.65–$6.85
• Effective tax rate ~19%

Business Commentary:

* Strong Commercial Performance: - Gilead Sciences reported non GAAP EPS growth of 22% year over year, with total product sales excluding Vecluri at $7,100,000,000, up 4% year over year. - This growth was driven by commercial outperformance in HIV therapies, particularly Descovy with a 20% year over year increase, contributing to 35% sequential growth for Libdelzi.

• Clinical Pipeline Progress:
• Gilead Sciences continues to advance its HIV pipeline, with Yes2Go, a new injectable HIV prevention product, achieving third-quarter sales of $39,000,000.

• The company has achieved 75% payer coverage for Yes2Go nearly three months ahead of schedule, supporting continued growth for 2026.

• Liver Disease and Oncology Advancements:

• Sales of Libdelzi, a treatment for primary biliary cholangitis, exceeded $100,000,000 in quarterly sales for the first time, with 35% sequential growth.

• Gilead submitted supplemental biologics license applications for Trodelvy in metastatic triple-negative breast cancer, moving towards potential commercial launch in 2026.

• Impact of Medicare Part D Redesign:

• Despite a $900,000,000 headwind associated with the Medicare Part D redesign for the 2025 HIV business, Gilead expects full-year HIV revenue growth of approximately 5%.
• This was driven by strong demand for Biktarvy and Descovy, offsetting the negative impact of the Part D redesign.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted strong commercial momentum: Biktarvy +6% YOY, Descovy +20% YOY, Libdelzi +35% sequential and >$100M Q3; Yes2Go achieved 75% payer coverage nearly three months ahead of plan; raised HIV revenue growth guidance to ~5%; non‑GAAP EPS growth of 22% YOY and increased guidance low‑end for product sales.

Q&A:

• Question from Jeff Meacham (Citigroup): On YES TUGO, any color on patients switching from Descovy versus new PrEP patients? Any demand drivers into 2026?
  Response: Uptake is a balanced mix of switches (from long‑acting injectables, Descovy and generics) and new PrEP patients; expect continued balanced growth and expansion into 2026.

• Question from Umer Raffat (firm not provided): The $39M sales in Q3 implies ~3,000 patients initiated—is that consistent with your view?
  Response: No additional Q3 stocking beyond ~$15M launch inventory; $54M YTD includes that stocking; access now ~75% with improved conversion rates and J‑code support—company expects full‑year Yes2Go sales of ~ $150M.

• Question from Mohit Bansal (firm not provided): With guidance for ~5% HIV growth and a $900M Part D headwind, how should we think about underlying HIV growth?
  Response: Underlying HIV growth is demand‑driven from Biktarvy (+6% YOY) and Descovy (+20% YOY); absent the Part D redesign headwind, underlying growth would be roughly in the ~8–9% range.

• Question from Salveen Richter (Goldman Sachs): Inventory impact for Yes2Go in Q3 and progress with CVS pricing discussions?
  Response: Q3 $39M reflects true demand (initial ~$15M early launch stocking only); payer discussions including CVS are ongoing and management remains confident in hitting access targets (90% by end of 2026).

• Question from Evan Seigerman (BMO Capital Markets): Appetite for BD and liver‑focused indications (e.g., NASH) following Libdelzi success?
  Response: Company is actively seeking late‑stage, de‑risked business‑development opportunities across liver and other strategic areas, disciplined to add best‑in‑class assets roughly every 2–3 years.

• Question from Chris Schott (JPMorgan): Shape of Yes2Go ramp into 4Q and 2026—gradual or step‑function?
  Response: Expect a gradual ramp as practices integrate payer coverage and J‑code adoption, which sets the platform for greater acceleration in 2026.

• Question from James Shin (Deutsche Bank): Current buy‑and‑bill versus white‑bagging mix for Yes2Go and does 75% coverage mean more white‑bagging?
  Response: Initial mix is heavier on white‑bagging (~70–80%) with buy‑and‑bill building over time; the mix will evolve as providers adopt J‑code and processes.

• Question from Dana Grubosch (Leerink Partners): Of the 75% covered lives, how much have prior auth or copay restrictions?
  Response: Most plans adding Yes2Go so far have no copays (high‑80s percent) and minimal prior‑auth requirements; quality of access is strong and trending toward Descovy levels.

• Question from Brian Abrams (RBC Capital Markets): Describe the patient journey and biggest barriers to switching to Yes2Go.
  Response: Prescription‑to‑injection times have dropped >50% as approvals speed up; remaining barriers are logistics/scheduling between approval, drug delivery and clinic appointment—buy‑and‑bill reduces steps and will speed uptake.

• Question from Carter Gould (Cantor Fitzgerald): IQVIA scripts have been volatile—are TRx you see consistent and what’s driving volatility?
  Response: IQVIA data can be volatile week‑to‑week; combine specialty pharmacy intakes with buy‑and‑bill to view the full picture—directionally aligned with company tracking and expected to stabilize over quarters.

• Question from Terence Flynn (Morgan Stanley): Is ~14–15% PrEP market growth the right secular assumption into 2026?
  Response: Yes—management expects PrEP market growth to continue around ~14–15%, supported by increased awareness and access.

• Question from Tyler Van Buren (TD Cowen): For a needle cell, could the filing happen soon and what’s left; will efficacy mirror CARVYKTI with improved safety?
  Response: Filing timing not disclosed, but on track for a potential commercial launch in H2 2026; upcoming ASH data expected to show continued promising safety with efficacy comparable to prior results.

• Question from Simon Baker (Rothschild & Co): Patient and physician reactions to Yes2Go and incidence of injection‑site reactions?
  Response: ISRs are expected and manageable; extensive nurse‑educator training (>7,000 HCPs, 1,500 accounts) produced a 98% training satisfaction rate and favorable provider experience.

• Question from Courtney Breen (Bernstein): In context of White House drug‑pricing talks and high Medicaid exposure, what flexibility is Gilead preparing for?
  Response: Management described constructive engagement with the administration focused on preserving US innovation while addressing access; cited PEPFAR partnership as an example but provided no company‑specific deal details.

• Question from Joseph Stringer (Needham): For Hecludex (belapratide) resubmission for HDV—what gives confidence for approval and what is market opportunity?
  Response: Confidence rests on additional injection‑experience data and EU real‑world use; management expects potential US approval in 2026; market is small (~40k US HDV patients) but high unmet need and strategic fit with Gilead's hepatitis footprint.

Contradiction Point 1

PrEP Market Growth Expectations

It involves differing expectations regarding the growth rate of the PrEP market, which is a critical factor for Gilead's revenue projections and strategic planning.

What is the outlook for PrEP market growth in 2026? - Terence Flynn(Morgan Stanley)

2025Q3: We continue to expect PrEP market growth around 14% to 15% driven by increased awareness and marketing efforts. - Joanna Mercier(CMO)

How sustainable is Descovy's growth rate in current market conditions, and can you assess the accuracy of Yeztogo IQVIA data? - Terence C. Flynn(Morgan Stanley)

2025Q2: The PrEP market is growing at 15% year-on-year. - Johanna Mercier(CMO)

Contradiction Point 2

Yeztugo Launch Strategy and Access

It involves differing indications of the launch strategy and access levels for Yeztugo, impacting expectations for patient projections and revenue growth.

Can you describe the trajectory of YES2Go in Q4 and into 2026? - Chris Schott(JPMorgan)

2025Q1: Given market dynamics, we expect PrEP market growth in the U.S. to be in the mid-teens. - Johanna Mercier(CMO)

Can you provide an update on Yeztogo's early adoption and clarify if prescription trends will be linear or exponential? - Tyler Martin Van Buren(TD Cowen)

2024Q4: Market growth was driven by strong demand and market development efforts. The team has focused on growth, setting the stage for the potential launch of lenacapavir, which could further accelerate growth. - Johanna Mercier(CMO)