Q4 2024 Earnings Call Transcript

Good afternoon, everyone, and welcome to Gilead's Fourth Quarter and Full Year 2024 Earnings Conference Call. My name is Rebecca, and I'll be today's host. In a moment, we'll begin our prepared remarks, followed by our Q&A session. [Operator Instructions] Now, I'll hand the call over to Jacquie Ross, Senior Vice President of Treasury and Investor Relations.

Thank you, Rebecca. Just after market closed today, we issued a press release with earnings results for the fourth quarter and full year of 2024. The press release, slides, and supplementary data are available on the Investors section of our website at gilead.com. The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day; our Chief Commercial Officer, Johanna Mercier; our Chief Medical Officer, Dietmar Berger; and our Chief Financial Officer, Andrew Dickinson. After that, we'll open the call to Q&A, where the team will be joined by Cindy Perettie, the Executive Vice President of Kite.

Let me remind you that we will be making forward-looking statements. Please refer to Slide 2 regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially. With that, I'll turn the call over to Dan.

Thank you, Jacquie, and good afternoon, everyone. I'm pleased to share Gilead's very strong fourth quarter and full year results, which highlight growing revenues and exceptional bottom line growth. Starting with our full year performance, total product sales, excluding Veklury increased 8% year-over-year to $26.8 billion, and fourth quarter 2024 total product sales, excluding Veklury increased 13% year-over-year to $7.2 billion. Full year HIV sales grew 8% in 2024 to $19.6 billion, significantly ahead of our expectation to grow HIV 5% in 2024. Full year sales for Biktarvy, the standard of care for HIV treatment grew 13%.

In recent years, our HIV business has established a track record of consistently strong growth with 5% growth in 2022, 6% in 2023, and now 8% in 2024. This is driven by the strength of our innovation and by the consistently strong execution of our team. In 2025, while volume and demand growth will continue, we can expect to see a temporary masking of the trend with the anticipated impact of Medicare Part D reform on revenue growth. This will effectively reset the base from which our HIV business will continue to grow from 2025. We fully expect to see our leadership in HIV continue and extend beyond the 2030s based on our long acting portfolio of which lenacapavir is the foundation.

In December, we filed for approval of lenacapavir for twice yearly HIV prevention in the U.S., where it has breakthrough therapy designation and we continue to make progress on our global filings. At the end of January, we filed for approval with the European Medicines Agency and our submission will be assessed under an accelerated review timeline. Given the unprecedented efficacy in the Phase 3 PURPOSE 1 and PURPOSE 2 trials, and the significant potential that exists in HIV prevention, we are looking forward to delivering on this global opportunity in 2025 and beyond. As we shared at our HIV Analyst Day in December, we have a broad and unmatched clinical program for both HIV treatment and prevention that builds on what we currently offer with Biktarvy and Descovy.

We expect to deliver up to seven potential new HIV treatment options and two prevention options before the end of 2033, including new daily, weekly, and monthly orals, as well as quarterly and twice yearly injectables. We look forward to sharing a number of HIV clinical updates this year, including updates from ARTISTRY-1 in people with HIV on complex regimens and the Phase 2 portion of our WONDERS-1 trial, evaluating a potential once-weekly HIV treatment option. Moving to inflammation. The fourth quarter of 2024 was the first full quarter since commercial launch for Livdelzi in the United States, and we are extremely pleased with the results.

The strong sales of approximately $30 million for the quarter underscore the important differentiation that Livdelzi brings to people with primary biliary cholangitis and we expect a European Commission decision later this month following the CHMP recommendation for Livdelzi in December. Our liver portfolio, which amounts to a $3 billion business today is a steady contributor for Gilead and we look forward to seeing it evolve with the new impetus of Livdelzi. We also continue to make progress across our early and promising inflammation pipeline. This includes the recent addition of our STAT6 program from LEO Pharma and the advancement of our bicistronic CAR-T targeting CD19 and CD20 for autoimmune diseases.

In Oncology, we continue to make progress on expanding the reach of our cell therapies to the many additional patients who could benefit from a one-time therapy in these challenging hematological malignancies. And at the same time, our collaboration with Arcellx on anito-cel continues to yield promising results. Data from the registrational Phase 2 iMMagine-1 trial were shared at the ASH meeting in December, where anito-cel demonstrated its potential to be a best-in-class BCMA CAR-T therapy. We continue to target commercial launch in 2026 and have separately dosed our first patient in the Phase 3 iMMagine-3 trial in the second to fourth line setting.

Trodelvy meanwhile remains the only approved TROP2 ADC to demonstrate overall survival benefit in pre-treated HR positive HER2 negative metastatic breast cancer and in second-line metastatic triple negative breast cancer. Additionally, Trodelvy has six ongoing Phase 3 trials with updates from the ASCENT-03 and ASCENT-04 trials in first-line metastatic triple negative breast cancer expected this year. We also anticipate initiating another Phase 3 trial for Trodelvy in extensive stage small-cell lung cancer patients later this year. Our many near term opportunities across HIV, oncology, and inflammation will help to drive the next wave of growth for Gilead.

We have no major loss of exclusivity until late 2033, and we have significant potential across the entire portfolio. With that in mind, I'm delighted to introduce our new Chief Medical Officer, Dietmar Berger, who joined us in early January. Dietmar's exceptional leadership in global drug development, his track record in delivering transformational therapies, and the breadth and depth of his experience make him an ideal leader for taking us through the next chapter for Gilead, and I know you will all enjoy getting to know him in the months ahead. I would also like to thank Merdad Parsey for his contributions to Gilead over the last five years and wish him the very best for his retirement.

Among his many achievements, Merdad developed a world class team that has helped to build the most robust and diversified pipeline in Gilead's history, now with 54 ongoing clinical programs, up from just 32 clinical programs in 2019. With that, I'll hand it over to Johanna.

Thanks, Dan, and good afternoon, everyone. 2024 was another exceptional year of commercial execution for Gilead, marking the third consecutive year of high-single digit percentage growth in our base business with sales up 8% year-over-year. Gilead's commercial success underscores the dedication of so many teams across the company. And I'd like to recognize them all for contributing to another outstanding quarter and closing out a very successful year. Beginning on Slide 7, with our fourth quarter results, total product sales excluding Veklury were $7.2 billion, an increase of 13% year-over-year, driven by higher HIV product sales as well as growth in our oncology and liver disease portfolios.

Including Veklury, total product sales grew 7% year-over-year, reflecting the impact of lower COVID-related hospitalizations on Veklury sales. Turning to the full year on Slide 8. Total product sales, excluding Veklury were $26.8 billion, well above the high end of our 5% to 6% gross guidance range, reflecting strong performance in each of our core therapeutic areas. Including Veklury, total product sales were $28.6 billion, a 6% growth rate compared to 2023. Moving to Slide 9. Our HIV business once again delivered very strong results for the fourth quarter with sales of $5.5 billion, up 16% year-over-year, primarily driven by demand as well as higher average realized price and favorable inventory dynamics.

Sequentially, HIV sales were up 7%, reflecting typical seasonal inventory dynamics, and higher demand, partially offset by lower average realized price. In treatment, Biktarvy continues to go from strength to strength with 21% year-over-year sales growth. Biktarvy now commands over 50% share in the U.S. market and maintains its position as the regimen of choice across other major G9 markets. Descovy also delivered 21% year-over-year growth and maintained over 40% U.S. market share in PrEP despite the availability of other regimens, including generics.

As a reminder, PrEP accounts for the majority of Descovy revenues. We're pleased to see payers continue to recognize the benefits of PrEP as barriers to Descovy coverage are removed with over 85% of lives now covered without the need for step edits or prior authorizations. On Slide 10, full year sales of $19.6 billion were up 8% year-over-year with the majority of the growth driven by higher demand as well as higher average realized price. More broadly, the HIV treatment market grew around 3% in 2024, consistent with our expectations of 2% to 3% market growth annually.

In Prevention, market growth accelerated and increased over 16% year-over-year in the fourth quarter, highlighting growing demand for HIV prevention options, which is particularly exciting to see ahead of our potential launch of lenacapavir for prevention in the summer. Preparation activities for the U.S. launch are well underway, and we have also recently submitted marketing authorization applications to the European Medicines Agency for lenacapavir for PrEP across the EU. We can't wait to make this unique prevention option available as we look to redefine the PrEP market in the years ahead. On Slide 11, we highlight the impact of the 2025 transition to the new Medicare Part D model.

As a reminder, the changes include, first, the requirement that manufacturers provide discounts towards the cost of drug for Medicare patients during the initial coverage and catastrophic phases. And second, the introduction of manufacturer discounts for people who qualify for the low income subsidy program or LIS. This population is disproportionately impacted by HIV, hence, this impact on our business due to the larger cost sharing obligations. As these changes are implemented, our 2025 revenue will be impacted by approximately $1.1 billion, of which almost $900 million is in HIV.

As a result and consistent with prior updates, we expect HIV revenue to be roughly flat in 2025, masking the robust demand-led volume growth that we've seen consistently over the last several years in HIV, and expect to continue through 2025 and into 2026 and beyond. Excluding this Medicare transition and FX headwinds, our expected HIV revenue growth in 2025 would have been at least 5%, reflecting our continued expectations for strong demand-led volume growth, but offset in part by less favorable pricing assumptions due to channel mix. With regards to the first quarter of 2025 specifically, we'll remind you to expect the normal HIV seasonal inventory drawdown, as well as the impact of the reset of patient co-pays and deductibles on average realized price and market growth.

Combined with the projected IRA impact, we expect HIV revenue to decline in the mid-teen percentage range quarter-over-quarter compared to the very strong revenue delivered in the fourth quarter. Overall, performance of both Biktarvy and Descovy for both the quarter and full year highlights Gilead's unparalleled position in the HIV market, both in terms of the clinical profile of our therapies as well as our best-in-class HIV commercialization team. Moving to liver disease on Slide 12. Fourth quarter sales of $719 million were up 4% year-over-year, reflecting our strong launch of Livdelzi in PBC, and increased demand for HBV and HDV products, partially offset by lower HCV sales due to fewer patient starts.

Sequentially, sales were down 2%, primarily driven by lower HCV sales due to lower average realized price and the timing of purchases, partially offset by higher sales in PBC and HBV. Full year sales of $3 billion were up 9% year-over-year, primarily driven by higher demand across our liver disease portfolio. Viral hepatitis remains an important steady contributor to Gilead's revenue with our products maintaining leading share across major markets. I'm also pleased to provide an update on the early launch progress of Livedelzi on Slide 13, which received accelerated approval in the U.S. in August for the treatment of PBC.

In its first full quarter of commercial availability, Livdelzi sales were $30 million with demand outpacing our expectations and strong early brand share. As the only approved therapy with statistically significant improvements in both ALP and pruritus, as well as a demonstrated safety profile, we are excited to see how this positive launch momentum evolves in 2025. Outside of the U.S., last month, the MHRA in the UK approved Livdelzi for the treatment of PBC, including pruritus. Livdelzi also received a positive CHMP opinion in December, and we expect a final decision from the European Commission later this month.

We're excited for these positive steps in Livdelzi's development to bring this important treatment to patients globally. Moving to Slide 14. Veklury's fourth quarter sales of $337 million were down 53% year-over-year and 51% sequentially, primarily due to lower rates of COVID-19 hospitalizations, and typical of the quarterly variability we've seen with COVID-19. Full year sales were $1.8 billion, down 18% from 2023 and in line with our expectations. Moving to oncology on Slide 15. Full year sales of $3.3 billion increased 12% year-over-year, reflecting our growing presence in this area of high unmet need and we're proud to have treated over 80,000 patients to date across Trodelvy and our cell therapies.

On Slide 16, fourth quarter Trodelvy sales of $355 million increased 19% year-over-year, and 7% sequentially with full year sales increasing 24% year-over-year to $1.3 billion. Year-over-year growth for both periods reflected higher demand in all regions, highlighting the important role of Trodelvy in metastatic breast cancers, including in second line metastatic triple negative breast cancer, where it's a standard-of-care. In particular, Trodelvy continues to maintain market leadership in the metastatic triple negative breast cancer setting across both the U.S. and Europe, and is approved in 55 markets.

Combined with ongoing adoption in the pre-treated HR positive HER2 negative metastatic breast cancer setting, we are pleased to see continued growing demand for Trodelvy. Moving to cell therapy on Slide 17. And on behalf of Cindy and the Kite team, full year sales of $2 billion and over 7,000 patients treated in 2024 demonstrate Kite's continued leadership in CAR-T. As expected, the fourth quarter cell therapy sales of $488 million were flat on a sequential basis and up 5% year-over-year, reflecting the continued challenging competitive dynamics in the U.S. and in Europe. These headwinds include a number of new cell therapy launches across indications both in the U.S. and outside the U.S. in addition to a slower than targeted uptake of cell therapy as a class.

We expect continued competitive headwinds in 2025. We are making progress on our goal to make cell therapies available to large integrated community oncology practices in the U.S. This involves addressing some of the hurdles for these networks to begin CAR-T treatments, including that CAR-T sites often need to be accredited by the foundation for the accreditation of cellular therapy or FACT, often enabling wider commercial reimbursement. We are working with industry groups and other manufacturers to address barriers through policy reform, and exploring accreditation with groups like FACT. We look forward to sharing our progress with you in future quarters.

Wrapping up 2024, I'm proud of the positive impact of Gilead's compelling portfolio of medicines on millions of people around the world. As we look to 2025, the commercialization teams are invigorated to extend the reach of our potentially transformative medicines to even more patients and we remain focused on launch activities, including for the potential launch of lenacapavir for PReP this summer. And with that, I'll hand the call over to Dietmar.

Thank you, Johanna, and good afternoon, everyone. I'm now in my sixth week as Gilead's Chief Medical Officer, and I have been impressed with the outstanding talent we have across therapeutic areas here at Gilead, and the depth of innovation across our 54 clinical programs. I'm deeply committed to working alongside my colleagues to continue executing on these potentially life-changing medicines. Let me start on Slide 19 by recognizing our research and development teams for their incredible work on lenacapavir, a first-in-class capsid inhibitor that was recently recognized by science as 2024's breakthrough of the year.

To put this in context, Science's prior HIV breakthroughs have included the discovery of HAART in 1996 and later the discovery of HIV treatment as prevention in 2011. This achievement highlights the transformative potential of lenacapavir and Gilead's commitment to help end the HIV epidemic for everyone everywhere. Lenacapavir for prevention was granted the FDA's breakthrough therapy designation in October and we subsequently completed our new drug application on December 19, suggesting a possible regulatory decision in the summer. As part of our commitment to Global Health Equity, we have filed with the EMA and are taking part in the EU Medicines for all initiative.

This collaboration combines EMA's scientific review capabilities and local expertise from regulatory agencies in low and lower middle income countries to bring medicines critical to public health to communities around the world. This process could accelerate the review process for lenacapavir in up to 138 countries worldwide. The marketing authorization and EUM for all applications with the EMA will undergo parallel assessments under an accelerated review timeline and we anticipate a European Commission regulatory decision in the second half of this year. Lenacapavir's unique profile could similarly transform HIV treatment.

On Slide 20, I highlight that we are developing seven potential new treatments using lenacapavir or lenacapavir prodrug based combinations for new daily, weekly, monthly, quarterly, and twice yearly treatment options. In 2025, we expect to share an update from the Phase 2 WONDERS-1 trial evaluating the combination of GS-1720 and GS-4182 as a once weekly treatment regimen for virologically suppressed people with HIV, and an update from our Phase 3 ARTISTRY-1 trial evaluating once daily bictegravir in combination with lenacapavir for virologically suppressed treatment experienced people with HIV.

This medicine could serve as the first single tablet regimen for the 6% to 8% of people with HIV on complex regimens or in other words for people whose HIV cannot be adequately suppressed on single tablet regimens available today. Moving to liver disease on Slide 21. The MHRA recently granted Livdelzi marketing authorization in the UK as a treatment for primary biliary cholangitis or PBC, including related pruritus. In December, we received a positive CHMP opinion for seladelpar and we're excited to potentially bring the first and only PBC treatment shown to significantly reduce alkaline phosphatase or ALP and PBC-related itch to the rest of Europe.

With that said, seladelpar's clinical development is far from complete. We continue to make progress on the confirmatory Phase 3/b4 AFFIRM trial designed to support a full FDA approval. Further, many PBC patients on ursodeoxycholic acid have ALP improvement, but do not normalize ALP, which is increasingly appreciated as a treatment goal. Patients with a persistent elevation of ALP, but whose ALP levels are not above the threshold of 1.67 times the upper limit of normal, have historically not been studied in clinical trials of new second line agents.

We are enrolling these patients into our Phase 3 IDEAL trial with the hopes of demonstrating seladelpar's capacity to normalize biochemical markers of disease activity in this previously understudied patient population with incomplete control of ALP levels. Moving to oncology on Slide 22. We remain focused on clinical execution of our eight ongoing Phase 3 programs for Trodelvy and domvanalimab across five tumor types. This year, we anticipate providing updates from the Phase 3 ASCENT-03 trial evaluating Trodelvy in first line metastatic triple negative breast cancer patients who are not candidates for anti-PD-1 therapy in the first half of 2025 and from the Phase 3 ASCENT-04 trial evaluating Trodelvy in combination with Merck's pembrolizumab in first-line PD-L1 positive metastatic triple-negative breast cancer patients in the second half of 2025. These trials could provide Trodelvy the opportunity to advance into the first line setting for metastatic triple negative breast cancer as early as 2026. Additionally, we have the Phase 3 ASCENT-07 trial in chemotherapy naive hormone receptor-positive, HER2 negative metastatic breast cancer that completed enrollment in August of last year.

In lung cancer, Trodelvy continues to be evaluated in combination with pembro in first line PD-L1 high metastatic non-small cell lung cancer in the Phase 3 EVOKE-03 study. Further, FDA has granted Trodelvy breakthrough therapy designation for extensive stage small cell lung cancer patients whose disease progressed on or after platinum based chemotherapy. Unfortunately, most small cell lung cancer cases are diagnosed in extensive stage, given the aggressive nature of the disease, and median overall survival typically is between 8 and 12 months. In the small cell lung cancer cohort of the Phase 2 TROPiCS-03 trial shared at World Lung last year, Trodelvy demonstrated a promising 13.6 month median overall survival.

We plan to initiate the Phase 3 EVOKE-SCLC trial in the first half of 2025. Moving to Slide 23, and on behalf of Cindy and the Kite team, we shared several exciting updates during the ASH Congress in December. In particular, we presented preliminary results from the registrational Phase 2 iMMagine-1 trial evaluating anito-cel in fourth line or later relapsed or refractory multiple myeloma, which we believe demonstrated competitive efficacy and safety data. Notably, in 86 efficacy evaluable patients with a median follow-up of 9.5 months, anito-cel demonstrated an overall response rate of 97% with complete response of 62%, and we expect that the responses will likely deepen over time.

Minimal residual disease negativity was achieved in 93% of evaluable patients. Anito-cel's safety profile was generally manageable and as of the ASH presentation, no delayed neurotoxicities have been observed across the more than 150 patients dosed in anito-cel trials, including no Parkinsonism, no cranial nerve palsies, and no Guillain-Barre syndrome We remain confident in the potential for anito-cel to deliver a best-in-class profile, supported by the efficacy and safety data seen to date, as well as Kite's globally leading manufacturing capabilities, and continue to target 2026 for a commercial launch.

We expect to provide further data from iMMagine-1 during the course of 2025. As we announced in December, the Phase 3 iMMagine-3 trial in second to fourth line relapsed or refractory multiple myeloma has dosed its first patients and we look forward to providing an update on anito-cel's progress in due course. Additionally, we shared updates on Yescarta and Tecartus, which included follow-up from the ZUMA-5 trial evaluating Yascarta in relapsed or refractory non-Hodgkin's lymphoma, demonstrating a 69% overall survival rate at five years of follow-up. Yascarta and Tecartus continue to demonstrate durable responses and long-term overall survival that support their curative potential.

We are also pleased to announce that Kite has now filed an IND application with FDA to evaluate KITE-363 in autoimmune conditions. As a reminder, KITE-363 is a bicistronic CAR-T product that targets both CD19 and CD20, and each CAR has its own distinct co-stimulatory domain. We believe cell therapy has great potential in meeting the substantial unmet needs of this large patient population and we are excited to begin our clinical work. We will share more information when available.

Joining Gilead, I look forward to working with Flavius Martin, our Executive Vice President of Research on some of the most exciting science in the biopharma industry. On Slide 24, you can see some of the early stage targets Gilead is working on amongst an extensive pipeline of over 100 innovative pre-IND and clinical-stage programs. Finally, on Slide 25, we have several interesting milestones this year, including regulatory decisions on lenacapavir and seladelpar, Phase 3 updates for bictegravir and lenacapavir combination, as well as Trodelvy and Phase 2 updates for anito-cel in fourth line plus multiple myeloma, and for our weekly oral HIV treatment.

We are also initiating new Phase 3 trials, including in extensive stage small cell lung cancer and across our long-acting HIV prevention programs that should bring forth new exciting updates in the years to come. And now, I'll hand the call over to Andy.

Thank you, Dietmar, and good afternoon, everyone. Starting on Slide 27, we closed the year with total product sales of $28.6 billion, up 6% from 2023 and well above our $27.8 billion to $28.1 billion guidance range due to stronger-than-expected contributions from HIV. For the full year, total product sales excluding Veklury grew more than $2 billion or 8% from 2023, exceeding our 5% to 6% guidance range and driven by growth in HIV, oncology, and liver. HIV increased 8% or $1.4 billion to $19.6 billion, driven by Biktarvy, which grew 13% from 2023. Oncology increased 12% to $3.3 billion, primarily driven by growth in Trodelvy and with a more modest growth contribution from cell therapy.

And liver increased 9% to $3 billion with growth across our portfolio of liver treatments. Full year Veklury revenue of $1.8 billion was right in line with our expectations and declined 18% from 2023, consistent with pandemic and hospitalization trends. Moving to Slide 28. Our full year non-GAAP results highlight consistent expense discipline in 2024. R&D of $5.7 billion was flat with 2023, IPR&D of $4.7 billion included $3.9 billion associated with the CymaBay acquisition in the first quarter in addition to our normal-course IPR&D expenses, and SG&A of $5.9 billion was down 3% from 2023. Overall, 2024 operating income was $8.5 billion, ahead of our guidance range of $8 billion to $8.3 billion.

Note full year operating margin of 30% reflects the first quarter 2024 acquisition of CymaBay. Excluding this transaction, our operating margin would have been 43% for the full year. Similarly, non-GAAP EPS of $4.62 reflects the $3.14 per share impact of this transaction. Excluding this, our non-GAAP EPS would have been $7.75, up 15% from the $6.72 reported in 2023. Moving to our fourth quarter results, starting on Slide 29. Total product sales, excluding Veklury were $7.2 billion, up 13% from the same quarter in 2023. Including Veklury, total product sales of $7.5 billion were up 7% from 2023 with higher base business growth partially offset by a decline in Veklury sales.

On Slide 30, you can see that on a non-GAAP basis, product gross margin was approximately 87% compared to 86% in the same period in 2023. R&D expenses were $1.6 billion, up from $1.5 billion in the same period in 2023, reflecting incremental investments in clinical activities across our portfolio. Acquired IPR&D was negative $11 million, reflecting expenses related to the Terray and Tubulis collaborations, offset by a favorable adjustment related to the CymaBay acquisition. Note that the acquisition of certain rights from LEO's STAT6 program will be reflected in our first quarter 2025 results. SG&A was $1.9 billion, up 16% from the same period in the prior year, partially driven by a litigation accrual for a potential settlement with the U.S.

Attorney's Office for the Southern District of New York relating to our promotional speaker programs for HIV medicines. Additionally, there was higher sales and marketing spending, including launch preparation activities for lenacapavir for HIV prevention as well as for Livdelzi for PBC. Operating margin was 41%, up from 39% in the fourth quarter of 2023 and the effective tax rate in the fourth quarter was 19.2% compared to 17.1% in the same period in 2023, primarily due to prior year settlements with tax authorities. Overall, our non-GAAP diluted earnings per share was $1.90 in the fourth quarter compared to $1.72 in the fourth quarter of 2023. Moving to Slide 31, and before I get into guidance, I want to remind you of certain factors that are impacting our revenue expectations for 2025 and masking the underlying strength of our business.

As previously discussed, Medicare Part D reform is expected to impact our revenue by approximately $1.1 billion, including $900 million in HIV. For this year only, this transition masks the robust demand-led volume growth that we have seen over the last several years, and that we expect to continue through 2025 and into 2026 and beyond. Across our entire business, this represents about a 4% impact on revenue growth in 2025. Second, you can see that our Veklury expectations are about $400 million lower in 2025 versus 2024, representing an additional growth headwind of roughly 1%. And finally, our guidance reflects a $250 million headwind from FX, given the U.S. dollar has strengthened against major foreign currencies, offsetting another approximately 1% of expected growth.

You can see that excluding the IRA, FX, and Veklury headwinds, our guidance today would have been for total product revenue growth of approximately 5% to 6%. On Slide 32, you can see our guidance for 2025, which assumes a generally stable macro-environment, including FX at current rates. For the full year 2025, we expect total product sales of approximately $28.2 billion to $28.6 billion. We expect total product sales excluding Veklury of approximately $26.8 billion to $27.2 billion.

We expect Veklury sales of approximately $1.4 billion, although, as always, there is greater variability in this estimate. Similar to last year, we do not expect to update our Veklury guidance until our third-quarter earnings call, absent a very clear trend in COVID-19 infections. Moving to the rest of the P&L and on a non-GAAP basis. We expect product gross margin to range between 85% and 86%.

We expect R&D to be roughly flat from 2024, highlighting that we believe we now have the appropriate scale of investment to support our diverse pipeline. We expect acquired IPR&D to be approximately $400 million and includes roughly $250 million associated with the acquisition of LEO pharma's STAT6 program announced in January. The remaining $150 million we are guiding to today reflects known commitments and expected milestone payments. Consistent with our approach over the last two years, we will highlight incremental acquired IPR&D expenses as we announce new transactions and update our guidance each quarter.

And finally, we expect SG&A to decline by a high-single digit percentage compared to 2024. Excluding the litigation accrual in 2024, our SG&A would decline a mid-single digit percentage in 2025, reflecting our ongoing commitment to operating expense discipline. As a result, we expect our operating income for 2025 to be between $12.7 billion and $13.2 billion. We expect our effective tax rate to be approximately 19%. And finally, we expect our non-GAAP diluted EPS to be between $7.70 and $8.10 for the full year, and GAAP diluted EPS to be between $5.95 and $6.35. As a reminder, for the first quarter of 2025, we expect HIV revenue to decline in the mid-teen percentage range compared to the very strong revenue delivered in the fourth quarter due to both normal inventory drawdown in the first quarter, coupled with the IRA headwind.

Moving to capital allocation on Slide 33, our priorities have not changed. In 2024, we returned $5.1 billion to shareholders. This included $3.9 billion in dividend payments and $1.2 billion in share repurchases. For 2025, we announced today a 2.6% increase in our quarterly cash dividend to $0.79 per share, and we remain committed to growing our dividend over time.

You can also expect to see continued investments in our business, both internally and externally through select partnerships and business development transactions. Finally, we will continue to utilize share repurchases to offset equity dilution as well as additional repurchases on an opportunistic basis. With that, I'll invite Rebecca to begin the Q&A.

Thank you, Andy. At this time, we'll invite your questions. [Operator Instructions] Our first question comes from Geoff Meacham at Citigroup. Geoff, go ahead, your line is open.

Great. Thank you. Afternoon, guys. In HIV, I know you guys are looking at Len and PReP to be a big growth driver over time, but I wanted to ask about the HIV treatment setting.

I guess the question is, do you guys view all the different Len treatment options that you detailed on Slide 20 as eventually replacing Biktarvy? I wasn't sure how you're thinking about what the best approach is for lifecycle management and even prior to the Biktarvy LOE? Thank you.

Geoff, let me just welcome everybody to the call again. I'll just turn it over to Johanna and I'll just ask the speakers as they respond to questions to just introduce themselves. So, Johanna, over to you.

Hi. It's Johanna.

Well, you don't have to do it on that.

Okay. Hi, Geoff. Thanks for the question. Listen, absolutely, our strategy is definitely an opportunity to just make sure that we meet the patient needs.

And that is really now that Biktarvy set the standard of care for HIV treatment, we believe that the only thing that's left is looking at long-acting orals or long-acting injectables. And so we will have an opportunity as we think about the bic/len (ph) daily oral to a weekly week -- actually two weekly orals, and then potentially even a little bit longer term with the six month layers or whatnot, have an opportunity to look at the marketplace and it automatically will erode some of the Biktarvy shares, right. As you think about a share of over 50% as the market leader, there will be opportunities for us to think about as a total Gilead portfolio, well prior to the LOE in late 2033 of Biktarvy.

So there's a lot of optionality here as we think about what's to come. And there will be opportunities as long as it -- for us, it hits the standard of care that Biktarvy set plus brings optionality for patients with the long-acting administration.

Our next question comes from Terrence Flynn at Morgan Stanley. Terrence, go ahead. Your line is open.

Great. Thanks so much for taking the question. Just a two-part on guidance. I just wanted to understand what is included, if anything at all for len for PReP in the '25 revenue guide?

And then it's great to see the margin expansion coming through again in '25 here. And based on your comments, Andy, I'm assuming we should assume that this is kind of the steady-state level as we think about the forward into '26 as well, but just wanted to check there, but thanks so much?

Yeah, Terence. It's Andy. Thanks for the question. Look, in terms of lenacapavir, we're assuming a launch mid-year.

As we said, Johanna said consistently that we'll -- we expect to have a meaningful access and access will build over time. Obviously, at launch, you're working on adding to your access as quickly as possible. So I think after six months, we expect to have 75% access in the U.S. and well north of that after nine months and then a year. But we are assuming a launch in the middle of the year.

So that -- but beyond that, I don't think there's much that we can say at this point in time. In terms of the expenses, you're absolutely right. I mean, we saw very strong expense control in 2024. Despite -- I will also highlight, when you look at '24, there were a couple of unexpected items at the beginning of the year that actually increased our expenses. One of them is the litigation reserve that I highlighted in our prepared remarks that you saw in the fourth quarter.

The second, of course, are all the operating expenses for -- that related to the Livdelzi acquisition that we absorbed throughout the year. So even with that, you saw incredibly strong expense control throughout the year. And you see in our guidance that we expect to carry that forward in '25. So the last thing I'll say to your question is that we have said we are targeting -- holding our expenses relatively flat for the foreseeable future and letting the leverage in our model drop to the bottom line and that has not changed. We, of course, will provide more specific guidance on what that means for '26 and '27 when we get there, but it's a great start to the year and look forward to updating you as we progress.

Our next question comes from Tim Anderson at Bank of America. Tim, go ahead. Your line is open.

Thank you for the question. Lenacapavir and PReP, so as we approach launch concerns sometimes start to build whether consensus could be too high relative to what the product could actually deliver in their initial few quarters after launch. So in as much as you've looked at consensus, any comment on what you see or perhaps you can just refresh us on the ramp dynamics we need to consider? I know you just talked about access as one of those, and will this be a fast or slow, a medium-paced launch?

Any benchmarks for similar launches you'd like to point us to?

Sure. It's Johanna. I'll take that question, Tim. So as you know, we're very excited about the potential launch of lenacapavir this summer.

It's -- we don't give product-specific guidance, so I can't help you there. What I can tell you is in line with what Andy was saying about access. We do think access will ramp up, but it doesn't mean there won't be access until six months, right? Access will play out over the next few months of a launch.

We're assuming about 75% or so access by six months, maybe about 90% by 12 months. We also think the administration because this is an injectable, it's going to have to go through specialty pharmacy or a buy-and-bill model. So that might just take a little bit of time in the first early months to make sure we ramp up for that administration. But we feel incredibly confident that lenacapavir is going to have an impact in our communities in 2025 and obviously even more meaningful in '26 and beyond.

Our next question comes from Umer Raffat at Evercore ISI. Go ahead, your line is open.

Hi, guys. Thanks for taking my question and huge congratulations to Dietmar on joining. I wanted to focus very briefly on some of the anito-cel data you guys have shared. Obviously, a ton of very good color on the non-ICANS side.

I thought I would focus for a quick second on ICANS more specifically the nine cases of ICANS that happened in the iMMagine-1 trial. And my question is, how many of those nine cases had -- of ICANS had tremors, bradykinesia, or any other motor dysfunction? And did any of the cases happen more than a couple of weeks after the administration? Thank you.

Thanks, Umer. This is Cindy Perettie for the question. I'm not going to be able to answer probably at the level of detail you're looking for each one of those ICANS that I know we can come back with you, but we did not see -- we did not see cases of tremors in those patients, and I can come back on the other two.

Our next question comes from Michael Yee at Jefferies. Go ahead, your line is open.

Great. Thanks. Looking ahead to the approval of len for PReP, can you just comment about your recent interactions with the FDA and the perspective of the FDA and HHS with the incoming administration with the U.S. and that there should be no issues with a fast approval and simultaneously in Europe, that has never really gained significant revenue. So you highlight that as an approval and do you somehow see that reimbursement is going to be different there?

Thank you.

I'll just start and hand it over to either Johanna or Dietmar. Thanks, Michael, for the question. Everything is on track for the lenacapavir for PReP interactions with the agency and HHS. So we're continuing all preparation accordingly and getting ready for the approval this summer as we discussed before. On Europe, I don't know as market question...

Yeah, more of a commercial question. I would just add, we also got breakthrough designation from the FDA in the U.S. for lenacapavir. And so we're excited about the potential for this launch this summer and everything is on track for that and our plans are obviously -- all the teams are working through to make sure we are ready for that launch. In Europe, two things.

One is the approval for Europe, the potential approval, I should say for Europe is one that we find exciting and one that we realize that prevention in Europe is really specific to certain markets more so than others. We are obviously going to do that in a tiered approach and make sure that we're really targeting both all key stakeholders. That includes government, health ministers, government stakeholders, KOLs, investigators with the PURPOSE 5 trial that we have running right now in the UK and in France, and making sure that we work together really across different stakeholder groups to make sure that there is an opportunity for lenacapavir to have access in these countries and really make a difference for those markets.

So more to come on that. We also think that the UA -- the EU filing is an important one because of EU for all. And that really is around providing access to those over 138 countries for low and lower-middle-income countries as well. And so that's in line with the work that we're doing to ensure access everywhere around the world.

So more to come on that as we as we progress.

Our next question comes from Daina Graybosch at Leerink Partners. Daina, go ahead. Your line is open.

Hi. Thank you for the question. This is for Dietmar. I wonder as you've come in new to the organization, if you could give us your reflections on the competitiveness of the late-stage oncology portfolio? Particularly what you think about TIGIT and dom and Trodelvy as we come down more Phase 3 readouts? Thank you.

Yeah. Thanks, Daina for the question, right. As I join Gilead, right, Gilead is in a unique situation at this point with a -- with a very well-diversified clinical pipeline, no major LOEs before 2033, really upcoming key launches, and strong news flow that I'm looking forward to and an exciting research portfolio and really deep scientific expertise that I consider critical, right, in these areas, whether it's virology, whether it's a longstanding history or whether it's immunology and oncology. Your specific question with regards to the later-stage portfolio, look, Trodelvy, the key studies are set up at this point, and we're looking forward to seeing the ASCENT-03 and ASCENT-04 studies in triple-negative breast cancer coming up during this year basically.

So that question will be answered very soon. We also have the lung cancer studies in the first-line setting really set up at this point. And let me just remind you that Trodelvy is the only TROP2 ADC that has demonstrated overall survival in some of those studies, right? So I think it's a really differentiated molecule and a lot of it will uncover itself in the very near future.

For TIGIT, I've always believed TIGIT is an interesting immuno-oncology target. There is potential for differentiation given the fact that domvanalimab has the FC silent design. There were some encouraging early Phase 2 data like the ARC-7, the ARC-10 study, the EDGAR gastric study. But those were, of course, small early dataset.

So again, we are awaiting the data. There are two ongoing Phase 3 studies, STAR-121 and STAR-221, which really will define our path forward there.

Our next question comes from Mohit at Wells Fargo. Mohit Bansal, your line is open.

Great. Thank you very much for taking my question and welcome Dietmar to Gilead. So my question is regarding the sales growth for HIV quarter-over-quarter. It seems like you're calling out favorable inventory dynamics year-over-year as well.

So just wanted to understand, did you see a more than normal inventory buildup in fourth quarter because you're calling out year-over-year as well? Thank you.

Thanks, Mohit. It's Johanna. So what we did see is obviously really strong demand in both the quarter-over-quarter as well as the full year-on-year Q4 over Q4 of the prior year. We also did see seasonal inventory dynamics and we see that on a quarter-on-quarter basis, but also a little bit year-on-year.

And what we had seen in 2023 is actually that inventory build across Q3 and Q4. In 2024, we saw it heavily in Q4 instead of across two quarters. And so that's probably the biggest difference that we've seen from a year-on-year basis. But really, the number one driver across the board for HIV, first and foremost has been that demand that has come through namely on Biktarvy, but also Descovy.

Our next question comes from Brian Abrahams at RBC Capital Markets. Brian, go ahead, your line is open.

Hey, guys. Congratulations on the quarter. Thanks for taking my question. Maybe shifting gears to Livdelzi.

Curious if you could elaborate a little bit more on what you're observing in terms of just use pattern prescriber base, the types of patients where this early uptake is coming from? And maybe how we should at least qualitatively be thinking about the trajectory this year, just given the high demand you're seeing off of that? Thanks.

Sure. Thanks for the question, Brian. It's Johanna. Yes, so with Livdelzi, we're really excited about how -- not only are we seeing the progression, but it's definitely exceeding our internal expectations.

We've heard some really positive feedback on the differentiation of efficacy, but also safety, not just the ALP, but also just the overall biochemical response, the ALP normalization and, of course, the pruritus and the safety components to this. We are seeing strong continuous week-over-week growth and so that -- that's creating momentum as we go into 2025. So we're very much looking forward to that. And I think it has a lot to do with the experience, the heritage that we have in liver, the credibility that we bring with key stakeholders. So very pleased about that.

The payer access we're seeing is also in line with our expectations. For rare disease, we're not seeing any major barriers to getting access for appropriate patients. To your question about what type of patients? Obviously, these are second-line patients in line with our indication.

Generally speaking, these are naive to second line. And what I mean by that is obviously, they're inadequate responders to UDCA and moving into the second-line setting, but it's not -- we're not seeing much of a shift between second-line setting at this point in time, if that's what you were referring to. So we think Livdelzi's trajectory is incredibly strong and we believe 2025 is going to be where it really comes through from a momentum standpoint. So we're excited to see what the future holds.

Our next question comes from Tyler Van Buren. Tyler, go ahead, your line is open.

Thanks very much. Nice quarterly results. Johanna, I have another one for you. Just what led to the 16% year-over-year PrEP market growth and acceleration for 2024 that you highlighted? Specifically, can you elaborate on some of those factors and whether you think those might serve as lasting tailwinds for the upcoming lenacapavir launch?

Yeah. Thanks for the question, Tyler. Yeah, we were excited to see, right? We closed out the quarter at about 16% market growth.

That reflects a couple of things. Number one, just the value and the noise around PURPOSE 1 and PURPOSE 2, I think is giving some momentum to this market in prevention and what's to come. But I would also say, we doubled down from a market development standpoint. So the team has really focused across many functions in this -- in our organization to really make sure that we were developing the prevention market and making sure it was set up for success, not only with the current agents today in the marketplace, but as a setup as you think about the potential launch for lenacapavir.

So we do think that is something that will carry through for the launch of lenacapavir and could actually accelerate it as well.

Our next question comes from Ellie Merle at UBS. Ellie, go ahead. Your line is open.

Hey, guys. So for Livdelzi, how is the enrolment in the IDEAL study in the partial UDCA responders going? And I guess, how are you thinking about how this study in the context of a potential label expansion and what this could mean for the size of the eligible patient population long-term? Thanks.

Yeah. Thank you, Ellie for the question. This is Dietmar. For the ideal study, it's on track at this point.

So no further comments on that. It does assess a separate second-line population to those -- to those patients partially responsive to UDCA, basically the ALP 1 to 1.67, which then would clearly extend Livdelzi's reach to an additional patient population, especially in the U.S. here. So we're really looking forward to seeing those data.

Yeah. Maybe just to add to Dietmar's comments, a third of the patients today are actually partial responders. So basically in line with what Dietmar was suggesting. And that volume is about 20,000 to 25,000 people in the U.S. and about the same number in Europe. So we are excited about the opportunity to expand our reach beyond second-line.

Our last question comes from Courtney Breen at Bernstein. Courtney, go ahead. Your line is open.

Hi, all. Thank you so much for taking my question today. What I really wanted to focus on was small cell lung cancer. Obviously, you spoke about the Trodelvy study that you're initiating here.

And, Dietmar, I would love your thoughts on kind of how you think kind of TROP2, DLL3, B7-H3 and all the other kind of targets that are being chased after in this space might stack up relative to one another and how you think this market might shake out over the long-term?

And thanks for the question, Courtney. Yeah, I mean, first of all, I'm really glad to see progress in small cell lung cancer. That for more than 30 years, these patients were treated with chemotherapy with less advancements basically. Now, we do have those different tools available.

TROP2, when you look at the Phase 2 data, that's actually been really impressive. There's clear TROP2 expression. We've received breakthrough therapy designation from the FDA and we're planning to start the study during the first half of the year. And I think this will be a really meaningful additional treatment option with the with the ADC with TROP2 targeting.

When you look at some of the other targets, I mean, obviously these are competitive. I hope they will be basically adding more also to the benefit for patients. I think TROP2 has the potential to be foundational in the second-line setting here and then we'll need to see the data there. There have been mixed data on B7-H3 and DLL3 is certainly an interesting target also in this space.

That completes the time that we have for questions. I'll now invite Dan to share any closing remarks.

Thank you, Rebecca. I appreciate all of you joining today. Let me close by thanking the Gilead teams for another exceptionally strong quarter and for driving the momentum that we are carrying into 2025. The consistent revenue we've seen quarter-after-quarter and the strong demand across all three of our therapeutic areas is the foundation, we are building from as we deliver on our potential in the months and years ahead. The potential comes from having the most robust and diverse pipeline in Gilead's history.

And with recent and imminent launches across our therapeutic areas, no major LOEs on the horizon and disciplined expense management, we're set to deepen impact for patients that we serve and deliver compelling returns for our shareholders. We look forward to updating you on our progress in the months ahead. And with that, I'll turn it back over to Jacquie.

Thank you, Dan, and thank you all for joining us today. One final housekeeping item, I can share that we are tentatively planning to release our first quarter 2025 earnings results on April 24, 2025. Please note that this date is provisional and could be changed to accommodate scheduling conflicts that arise between now and then. As always, we will announce our confirmed date following the close of the quarter. We appreciate your continued interest in Gilead and look-forward to updating you on our progress throughout 2025. Thank you.