Recently, with the positive progress of Lenacapavir, a newly recognized HIV drug, Gilead's (GILD.US) stock also rose by 10%, and its market capitalization increased by over $6.6 billion (approximately RMB 47.96 billion) in a single day.

Founded in 1987, Gilead Sciences Inc has always focused on the two major areas of HIV and liver disease drugs. The company's Hepatitis C drug SOVALDI, developed previously, brought in $10.3 billion in sales in its initial year, and its stock price has increased by more than 17,500% from 1992 to 2017.

However, in recent years, with the continuous decline of its Hepatitis C business and failures such as Trodelvy, this old pharmaceutical company has also experienced a long period of downturn in the secondary market.

Now, with this heavyweight blockbuster, does Gilead's return to the top represent an opportunity for future market reversal?

HIV drugs still contributed the main revenue in the first quarter.

According to the Q1 2024 financial report recently released, Gilead Sciences had a total product sales of $6.6 billion in the first quarter, a 5% increase YoY; the quarterly net loss was $4.17 billion, compared to a net income of $1.01 billion in the same period last year.

Blended HIV medication Biktarvy is a new and improved next-gen cocktail of antiretroviral drugs developed by Gilead and used for emergency prevention of HIV within the first 72 hours of exposure. It is suitable for treatment of patients in the early, acute, and recovery stages of HIV infection. In 2019, the drug was approved for priority review in China due to its 'significant clinical advantages in preventing and treating HIV/AIDS.'

After more than four years of operation in China, Biktarvy's growth is still strong, leading as the pillar of revenue, with sales reaching $11.8 billion in 2023, accounting for nearly 40% of that year's total revenue of $27 billion; in Q1 2024, it continued to maintain a YoY growth rate of 10%, with sales of $2.9 billion.

The sales prospects for other HIV drugs are far behind Biktarvy, with Descovy and Genvoya generating sales of about $2 billion each, and Odefsey generating close to $1.5 billion in revenue, while sales of other drugs are less than $1 billion.

Looking at the company's future pipeline, Lenacapavir, a HIV prevention drug, is currently the most anticipated. According to the results of a third-phase double-blind study named 'PURPOSE 1,' released in June, Lenacapavir showed 100% effectiveness in preventing HIV.

Unlike most anti-viral drugs that only act at a certain stage of virus replication, Lenacapavir is designed to inhibit HIV at multiple stages of its lifecycle and has no known cross-resistance with other drug classes. Compared with Descovy or Truvada, which are also used to prevent and treat HIV, Lenacapavir does not need to be taken daily, and only needs two injections per year to achieve better preventive effects.

To date, Lenacapavir is the only HIV treatment drug globally that requires only two uses per year. Encouraging experimental data and higher patient compliance both suggest that Lenacapavir may become the next promising blockbuster. Gilead estimates that the drug's maximum annual sales could exceed $4 billion.

However, the disclosed data for the Phase 3 trial only involved over 5,300 16-25-year-old women from South Africa and Uganda, and more experiments are needed for other populations such as males.

In addition to HIV, the tumor and hepatitis businesses contributed $3 billion and $2.8 billion in revenue, respectively, in 2023, which is considerably lower than its $18 billion revenues for HIV-related drugs. In the first quarter of 2024, tumor product sales grew slightly by 18% YoY to reach $789 million, while the sales of the anti-viral COVID-19 drug Veklury (Remdesivir) were affected by increased competition and the expiration of patents, declining by 3% YoY to reach $555 million.

With repeated failures in research and development in the anti-tumor field, is Gilead's anti-tumor business 'having a bad start?'

In fact, Gilead began to expand into the anti-tumor field more than a decade ago. In 2020 alone, the company acquired Immunomedics and Forty Seven for $21 billion and $4.9 billion, respectively, hoping to quickly improve its own shortcomings in the field of anti-tumor drugs.

At present, whether in terms of the proportion of income from the anti-tumor field or the R&D progress of its core drugs, it seems that there are still clouds over the company's prospects in the anti-tumor field.

In 2023, Gilead's total sales of anti-tumor pipeline amounted for $2.932 billion, with an 8% YoY increase in sales; in Q1 of 2024, sales of tumor products grew by 18% YoY to reach $789 million. From the perspective of revenue, it is still far behind HIV-related drugs, which are Gilead's main source of income.

Entering 2024, Gilead's key anti-tumor products acquired through acquisition have suffered consecutive failures in clinical trials, such as the TROPiCS-04 study of Trodelvy for urinary tract epithelial carcinoma failed to reach the primary endpoint, and the phase III clinical trial for non-small cell lung cancer also failed; The phase III study data of CD47 monoclonal antibody Magrolimab did not demonstrate efficacy, and the safety risk remained high. Six clinical trials of tumors and blood tumors related to the drug have been abandoned by Gilead.

Despite repeated failures, Gilead seems to have not given up its ambition in the field of anti-tumor. According to the understanding of the Zhitong Finance and Economics APP, in the first quarter of 2024, Gilead has reached four BD introduction transactions, of which three belong to the field of tumors, involving TIGIT, multi-antibody and IL-12, and the total investment in anti-tumor in the quarter is $2.47 billion.

Previously, Gilead proposed a long-term goal of constructing an anti-tumor pipeline: it is expected that more than 20 transformative indications in the field of tumors will be approved by 2030, benefiting more than 400,000 patients, and the contribution of the tumor business to revenue will exceed 1/3, reaching $12 billion. Judging from the current situation, the company's "ambition" may need more time and a little luck to achieve.

"Cutting pipeline" become a new norm for global pharmaceutical companies?

With the release of the first quarter financial report of 2024, "cutting the R&D pipeline" seems to have become a new keyword in the pharmaceutical industry. According to the "2024 Annual Review White Paper on Pharmaceutical R&D Trends", a total of 3,895 candidate drugs withdrew from the R&D pipeline in 2023; In the first quarter of 2024, according to incomplete statistics, eight multinational pharmaceutical companies including Novartis, Roche, BMS, Sanofi, Astrazeneca, and Gilead cut more than 30 projects, and BMS even cut about 12 research projects at one time.

Generally speaking, pharmaceutical companies cut R&D pipelines mainly in two situations: one is to abandon some pipelines to focus on their own advantages in the core treatment areas to ensure their performance and stock price in the environment of revenue pressure and financing difficulties; the other is that the R&D effect of the pipeline itself is poor, progress is slow, or commercial expectations are insufficient, or considering that the effect of the drug in the competitive hot field is insufficient to break through, it will also face the situation of being abandoned by pharmaceutical companies.

According to the understanding of the Zhitong Finance and Economics APP, Gilead had cut 10 R&D projects in the first quarter of 2024, including the CD47 antibody Magrolimab, which was acquired by the company at a cost of $4.9 billion, mainly due to unsatisfactory clinical safety and efficacy.

In fact, although the CD47 antibody was once a "star" target in the field of tumor immunology, there have been many failures in recent years mainly because the CD47 expression distribution and signaling pathways are extremely complex, and it is also expressed on normal cells, especially on the surface of red blood cells, which not only increases the difficulty of research and development but also make relevant drugs difficult to balance safety and efficacy in clinical treatment, which can easily lead to serious side effects.

After abandoning the CD47 antibody, Gilead seems to be turning its focus on the field of CAR-T therapy and ADC therapy. Among them, CAR-T therapy has achieved significant success in the treatment of leukemia, and recent studies have shown potential in the field of self-immunity.

In 2023, the sales of Yescarta, Gilead's CAR-T therapy, reached $1.5 billion, becoming the only CAR-T therapy with sales exceeding $1 billion. The company also approved another CAR-T therapy Tecartus, which also achieved sales of $370 million last year, indicating that Gilead has occupied a leading market share in the CAR-T therapy market.

Antibody-conjugated drugs (ADC) belong to more advanced therapies, and most ADC drugs worldwide are still in the early stage of development. In recent years, this therapy has also made positive progress, such as the dequzumab monoclonal antibody jointly developed by Daiichi Sankyo and AstraZeneca, which has shown lasting and significant efficacy benefits and good long-term safety in the study, and has become an extremely promising single drug.

Trodelvy is Gilead's important product in the ADC field. It is the world's first ADC approved for the treatment of triple-negative breast cancer and had high expectations for it. Unfortunately, in January 2024, the EVOKE-01 study of Trodelvy did not reach the primary endpoint of overall survival (OS), which dealt a blow to the drug's potential market future.

Summary

Overall, in Gilead's current many layouts, the COVID-19 drug remdesivir has shown a continuous downward trend, and its future proportion will gradually shrink; although there are still highlights in the anti-tumor business and liver disease business, the overall revenue scale is still small, and the company's future performance may mainly rely on the AIDS field.

In addition, as of the end of 2023, the company's total assets were $62 billion, total liabilities were $39.5 billion, and the asset-liability ratio was as high as 63%; goodwill and intangible assets were $35 billion. If more research pipelines are abandoned, it will also cause investors to worry about the "change of face" in performance. In all these circumstances, it seems that Gilead has bet heavily on Lenacapavir, an "AIDS magic drug".