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INTU | 4 | 2,024 | 2024-08-22 20:03:09 | Operator: Good afternoon, ladies and gentlemen. My name is Bo and I will be your conference operator. At this time, I would like to welcome everyone to Intuit’s Fourth Quarter and Fiscal Year 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. [Operator Instructions] With that, I will now turn the call over to Ms. Kim Watkins, Intuit’s Vice President of Investor Relations. Please go ahead, Ms. Watkins.
Kim Watkins: Thanks, Bo. Good afternoon and welcome to Intuit’s fourth quarter fiscal 2024 conference call. I’m here with Intuit's CEO, Sasan Goodarzi, and our CFO, Sandeep Aujla. Before we start, I’d like to remind everyone that our remarks will include forward-looking statements. There are a number of factors that could cause Intuit’s results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10-K for fiscal 2023 and our other SEC filings. All of those documents are available on the Investor Relations page of Intuit’s website at intuit.com. We assume no obligation to update any forward-looking statement. Some of the numbers in these remarks are presented on a non-GAAP basis. We’ve reconciled the comparable GAAP and non-GAAP numbers in today’s press release. Unless otherwise noted, all growth rates refer to the current period versus the comparable prior-year period, and the business metrics and associated growth rates refer to worldwide business metrics. A copy of our prepared remarks and supplemental financial information will be available on our website after this call ends. With that, I’ll turn the call over to Sasan.
Sasan Goodarzi: Thanks Kim, and thanks to all of you for joining us today. We delivered very strong results for the fourth quarter and full-year, and made meaningful progress with our AI-driven expert platform strategy and Big Bets that position the company for durable growth in the future. Our full-year revenue grew 13% and we delivered strong operating margin expansion demonstrating the strength and momentum of our investments and innovation. As we exit the year, we are confident in delivering another year of double-digit revenue growth and margin expansion in fiscal year 2025. Intuit is the global AI-driven expert platform that is powering prosperity for consumers, small and mid-market businesses. Our strategy and five Big Bets position Intuit as a mission critical platform that delivers end-to-end solutions, driving sustained growth. We made an early bet on AI. We have a significant advantage with the scale of our data, investments in AI capabilities such as knowledge engineering, machine learning, and GenAI, and our large network of AI-powered virtual experts. This is enabling us to disrupt the categories in which we operate. We are transforming how we serve our customers by delivering done-for-you experiences, where we do the hard work for them, connecting them with AI-powered human expertise to fuel their success. With the introduction of GenAI, we are now delivering reimagined customer experiences and bolstering businesses' growth potential, while driving efficiencies in how work gets done within Intuit. This has enabled us to build our large AI-driven expert platform to fuel the success of consumers, small and mid-market businesses. The progress we've made has bolstered our confidence, leading us to accelerate investments in five key areas within our Big Bets to deliver greater impact in the future. I’ll spend a moment unpacking the progress we’ve made and our investment plans for the future: First, within Big Bet 1, we are delivering done-for-you experiences with Intuit Assist. In fiscal year 2024, we made strong progress making Intuit Assist, our GenAI-powered financial assistant, available to millions of consumers and approximately 1 million small and mid-market businesses. We are accelerating our investments to rollout Intuit Assist at scale in the coming year. Second, within Big Bet 2, we are accelerating platform and go-to-market investments for TurboTax Live and QuickBooks Live, embedding AI-powered experts across our business offerings. In fiscal year 2024, TurboTax Live revenue grew 17%, and full-service customers doubled while those new to TurboTax tripled. QuickBooks Live customers more than tripled. We expect our accelerated investment in these areas to deepen our penetration in very manual, high-priced, and dis-aggregated assisted categories. By digitizing how services are delivered, an integral part of our done-for-you platform experiences, we will become the AI-powered financial assistant for consumers, small and mid-market businesses. Next, within Big Bet 4, our money solutions, we are making additional investments to accelerate digitizing the experience end-to-end for consumers, small and mid-market businesses, from estimate, to invoicing, to getting paid and paying bills. In fiscal year 2024, the total online payment volume we facilitated on our platform grew 20%. We also helped small businesses access $2.4 billion in financing through QuickBooks Capital, up 28%, and we made significant progress digitizing B2B payments with our bill pay offering, for which monthly payment volume processed quadrupled over the last six months. In fiscal year 2025, we expect these accelerated investments to deliver best-in-class, seamless payments, capital, banking, bill pay, and invoicing solutions. Next, within Big Bet 5, we are doubling down on mid-market with additional investments in the platform and go-to-market motions. In fiscal year 2024, QBO Advanced customers grew 28%. In fiscal year 2025, we are accelerating investments to better serve customers who have more complex needs, such as more sophisticated accounting and reporting requirements, business intelligence, money solutions, human capital management, professional services, and customer acquisition solutions with Mailchimp, all assisted by AI-powered human experts. And finally, accelerating international growth with Mailchimp and QuickBooks. We’ve translated the Mailchimp offering into five different languages for markets where we see a large TAM. Looking ahead, we are bringing QuickBooks and Mailchimp together to create a single growth platform, differentiated in the markets where we have product market fit, including in Canada, U.K., and Australia. In other geographies, we are leading with Mailchimp's strong international footprint to help small businesses get customers as we continue to localize the offering. Wrapping up, with the progress and momentum we are delivering, and the accelerated investment areas I've shared, we are in a great position to win as an end-to-end platform with experiences that fuel the success of customers. Intuit is the AI-driven expert platform that is powering prosperity for consumers, small and mid-market businesses. With that -- now let me hand it over to Sandeep.
Sandeep Aujla: Thanks, Sasan. We delivered very strong results in fiscal 2024 across the company, including total revenue growth of 13%, GAAP and non-GAAP operating margin expansion of 40 and 100 basis points, respectively, and GAAP and non-GAAP EPS growth of 24% and 18%, respectively. Our fourth quarter results include: Revenue of $3.2 billion, up 17%. GAAP operating loss of $151 million, versus GAAP operating income of $17 million last year, reflecting a restructuring charge of $223 million recognized in the quarter related to the organizational changes we announced in July. Non-GAAP operating income of $730 million, versus $627 million last year, up 16%. GAAP diluted loss per share of $0.07, versus diluted earnings per share of $0.32 a year ago, also reflecting the restructuring charge. And non-GAAP diluted earnings per share of $1.99, versus $1.65 last year, up 21%. Turning to the business segments: In the Small Business and Self-Employed Group, the revenue grew 20% during the quarter, and 19% for the full-year. This momentum demonstrates the power of our small and mid-market business platform and the mission-critical nature of our offerings as customers look to grow their business and improve cash flow in any economic environment. Online ecosystem revenue grew 18% during the quarter and 20% for the full-year, driven by our progress serving customers with more complex needs and adoption of our ecosystem of services. As a result, online ecosystem ARPC grew 11% in fiscal 2024. With the goal of being the source of truth for small businesses, our strategic focus within the Small Business and Self-Employed Group is three-fold: grow the core, connect the ecosystem, and expand globally. First, we continue to focus on growing the core. QuickBooks Online accounting revenue grew 17% in Q4 and 19% in fiscal 2024. Growth for the quarter and year was driven by customer growth, higher effective prices, and mix-shift. We delivered growth in our declared strategic areas this year, with our emphasis on serving customers with more complex needs. This focus drove U.S. QBO customers excluding self-employed up 11%, QBO Advanced customers up 28%, while QBO self-employed customers declined 14%, resulting in total online paying customers up 6%. Second, we continue to focus on connecting the ecosystem. Online services revenue grew 19% in Q4, driven by payments, payroll, capital, and Mailchimp. For the full fiscal year 2024, Online services revenue grew 21%, driven by payroll, payments, Mailchimp and capital. Within payments, revenue growth in the quarter reflects higher effective prices, ongoing customer growth as more customers adopt our payments offerings to manage their cash flow, and an increase in total payment volume per customer. Total online payment volume growth in Q4 was 19%, relatively consistent with the range we’ve seen over the last several quarters. Within payroll, revenue growth in the quarter reflects an increase in customers adopting our payroll solutions, higher effective prices, and a mix-shift towards higher end offerings. Mailchimp revenue growth was driven by higher effective prices and paid customer growth. Revenue growth continues to be impacted by the lapping of a larger benefit from price and line-up changes that we made last year in Q2 and Q3. Third, we continue to make progress expanding globally, by executing our refreshed international strategy, which includes leading with both QuickBooks Online and Mailchimp in our established markets and leading with Mailchimp in all other markets as we continue to execute on localized product and line-up. On a constant currency basis, total international online ecosystem revenue grew 11% in Q4 and 13% in fiscal 2024. Turning to desktop. We successfully concluded the three-year transition to a subscription model, which contributed to 25% desktop ecosystem revenue growth in Q4 and 16% revenue growth in fiscal 2024. QuickBooks Desktop Enterprise revenue grew in the low-30s in Q4, and in the high-teens for fiscal year 2024. Our Q4 desktop ecosystem revenue growth also reflects the offering changes we made in early fiscal 2024 to complete the transition to a recurring subscription model. These changes resulted in approximately $60 million of desktop revenue recognized in Q4 and approximately $50 million recognized in the first three quarters of fiscal 2024, all of which would have otherwise been recognized in Q1 of fiscal 2025. We also expect approximately $50 million of desktop revenue that would have otherwise been recognized in Q1 fiscal 2025 to shift to later quarters in fiscal 2025. In total, these changes lower Q1 fiscal 2025 revenue by approximately $160 million and are largely related to more frequent product updates, beginning in Q4 of fiscal 2024, to align the customer delivery experience to our subscription model. Accordingly, we expect Q1 desktop ecosystem revenue to decline approximately 20% for Q1, but for desktop ecosystem revenue to return to growth in Q2. Overall, we expect desktop ecosystem revenue to grow in the low-single-digits in fiscal 2025. Turning to Credit Karme. Credit Karma revenue growth improved each quarter during fiscal 2024, from a 5%, decline in Q1 to 14% growth in Q4. On a product basis in Q4, auto insurance accounted for 6 points of growth, personal loans accounted for 5 points, credit cards accounted for 2 points, and Credit Karma Money accounted for 1 point. Full-year revenue was $1.7 billion, up 5%. We are pleased with the momentum driven by our relentless focus on what matters most to our members and partners. We made strong progress this year redesigning the Credit Karma app to enable members to see much more of their financial life and find the products right for them. We also introduced Intuit Assist to deliver personalized financial insights using data and AI, increased monetization in the underpenetrated Prime segment, and made it easier than ever for consumers to benefit from the Credit Karma and TurboTax product integration. I’m proud of the progress the team made innovating on behalf of our members and partners. Consumer and ProTax Groups. Consumer Group revenue of $4.4 billion grew 7% in fiscal 2024 as we continue to revolutionize how taxes get done for consumers and small businesses. TurboTax Live revenue grew 17%, and customers grew 11%. Full-service customers doubled, while those new to TurboTax tripled. We are pleased with the momentum we saw with TurboTax Live again this season. Turning to the ProTax Group, revenue was $599 million in fiscal 2024, up 7%. In summary, I’m pleased with our continued momentum this fiscal year and our opportunities ahead. Shifting to our balance sheet and capital allocation. Our financial principles guide our decisions, they remain our long-term commitment, and are unchanged. We finished the quarter with approximately $4.1 billion in cash and investments and $6 billion in debt on our balance sheet. We repurchased $255 million of stock during the fourth quarter and $2.0 billion during fiscal 2024. Depending on market conditions and other factors, our aim is to be in the market each quarter. The Board approved a quarterly dividend of $1.04 per share, payable on October 18, 2024. This represents a 16% increase versus last year. Moving on to guidance, our fiscal 2025 guidance includes: Total company revenue of $18.16 billion to $18.347 billion, growth of 12% to 13%. Our guidance includes revenue growth of 16% to 17% for the Small Business and Self-Employed Group, including online ecosystem revenue growth of approximately 20% and desktop ecosystem revenue growth in the low-single-digits. Our guidance also includes revenue growth of 7% to 8% for the Consumer Group, and 5% to 8% for Credit Karma. GAAP diluted earnings per share of $12.34 to $12.54, growth of 18% to 20%; and non-GAAP diluted earnings per share of $19.16 to $19.36, growth of 13% to 14%. We expect a GAAP tax rate of approximately 23% in fiscal 2025. GAAP guidance reflects an expected $24 million restructuring charge related to the reorganization we announced in July. Our guidance for the first quarter of fiscal 2025 includes: Total company revenue growth of 5% to 6%, including: Small Business and Self-Employed group revenue growth of 6% to 7%, reflecting the revenue shift in Q1 resulting from the desktop offering changes that I noted earlier. We expect desktop ecosystem revenue to decline approximately 20% in Q1, and the online ecosystem, which is our growth catalyst, to accelerate to approximately 19% growth in Q1. For Credit Karma, we expect revenue to grow in Q1. And for Consumer Group and ProTax revenue to decline in Q1, as we are lapping the period a year ago that included the extended California tax filing deadline. GAAP earnings per share of $0.61 to $0.66, and non-GAAP earnings per share of $2.33 to $2.38. GAAP guidance reflects an expected $19 million restructuring charge that we expect to incur in Q1 related to the reorganization we announced in July. You can find our full fiscal 2025 and Q1 guidance details in our press release and on our fact sheet. I will now shift to our long-term growth expectations for each of our business segments. First, small business. With the momentum we see in online ecosystem growth, we are reiterating our long-term revenue growth expectations for the Small Business and Self-Employed Group of 15% to 20%. As part of this, we continue to expect online paying ARPC growth of 10% to 20%, and we now expect online paying customer growth of 5% to 10%. This reflects our shift in emphasis towards ARPC as we scale mid-market, drive growth in services, and reshape how we go-to-market as one business platform to significantly increase adoption of all our offerings. While there are relatively fewer mid-market customers, the ARPC of mid-market QuickBooks Online customers is nearly 3 times higher than other QuickBooks Online customers. Turning to Credit Karma, we are excited about the opportunity ahead as we execute our strategy to more deeply penetrate our core verticals, scale in growth verticals and execute our consumer ecosystem strategy. With the learnings from operating in the current business cycle, we are updating our long-term revenue growth expectations to 10% to 15%, reflecting the current size and scale of the business, and as we focus on creating seamless, end-to-end experiences with TurboTax that benefit consumers from year-round. Finally, the Consumer Group. Based on the momentum we saw this season, and the significant runway we have ahead to penetrate our TAM, we expect assisted penetration to be the key driver of future growth. TurboTax Live revenue accounted for approximately 30% of Consumer Group revenue in fiscal 2024, and we expect it to become the majority of Consumer Group revenue in the coming years. With that context, while we are scaling assisted, we are adjusting the Consumer Group long-term revenue growth rate to 6% to 10% in this interim period, with TurboTax Live revenue expected to grow 15% to 20%. One final note before I wrap up. Starting in Q1, we will be changing the name of our Small Business and Self-Employed Group to Global Business Solutions Group. This new name better aligns with the global reach of the Mailchimp and QuickBooks platform, and our focus on serving both small and mid-market businesses, and our vision to become the end-to-end platform that customers use to grow and run their business. With that, I’ll turn it back over to Sasan.
Sasan Goodarzi: Thanks Sandeep. We are confident in our long term growth strategy, including double-digit revenue growth and operating income growing faster than revenue. We have the strategy to win given the green shoots we're observing, and with less than 5% penetration of our $300 billion in TAM, with a massive runway ahead. We look forward to seeing all of you at our Investor Day next month, where we’ll unpack all of this and more. Let’s now open it up to your questions.
Operator: Thank you, Mr. Goodarzi. [Operator Instructions] We'll go first this afternoon to Siti Panigrahi at Mizuho.
Siti Panigrahi: Great. Thank you. If one question, then Sasan, I will focus on small business segment, 19% growth is pretty good in this environment, where we are hearing about SMB weakness. But I want to focus on your growth in ‘25 -- fiscal '25 and beyond. Now it looks like your focus is now driving growth through targeting mid-market. You talked about that and renamed that. So help us understand how big is that opportunity to expand into mid-market? And why is this the right time for Intuit to increase focus on mid-market? And is it mostly targeting this, your QuickBooks customer base? Or are you planning to gain share from other vendors?
Sasan Goodarzi: Yes, Siti, thank you for your question. First of all, I want to start with our focus will continue to be Small Businesses that are formed and because we want to fundamentally continue to grow with them. With that as context, we've just simply doubled down on our focus on mid-market. And as you know, it's not new. This has been five years in the making. It's one of the five Bets that we declared more than five years ago. But I would just say, five years later, Siti, we are just building an incredible amount of momentum. With that as context, let me just now answer your question. One, the way to think about it is we now have a business suite. And our business suite provides all the capabilities to -- for our business to be able to grow their customers, manage their customers, be able to manage their cash flow, get their accounting done, all in 1 place. And with our really AI-powered innovation and AI-powered experts, we really have tilted the professional grade help and services to all of our businesses. And we are now at a place where we are really accelerating on two fronts. One, we are going to go to market as one platform versus pieces and parts to really accelerate services penetration because of the one thing we continue to hear from businesses is that they want to do everything in one place and now we have the business suite for them to do everything in one place. Secondarily is our acceleration in mid-market. We're actually excited to announce at Investor Day a platform that will take us even further up market, and that really positions us to not only grow with our customers but to really acquire new customers. I would just remind us that the majority of mid-market customers are nonconsumption. And they pay a lot of money to use multiple different apps, discrete apps that don't talk to each other. Excel spreadsheets, Google Sheets, shoe boxes, and paying for multiple different bookkeepers, marketing agents and ultimately, accountants. And now we have packaged all of that as one enterprise suite to be able to pursue and accelerate pursuing mid-market customers. And our ultimate goal is to go far beyond 10 to 100 employees. And so I think this is five years in the making. And to round out the answer to your question, this is both focusing on the smaller customers, but we're really doubling down on the larger customers and really being able to penetrate services. And that's really what gives us confidence in the 20% online ecosystem revenue growth at a far bigger scale that you heard from Sandeep, along with our acceleration in Q1.
Siti Panigrahi: Thank you. I look forward to hearing more at the investors' day.
Sasan Goodarzi: Thank you for your question.
Operator: Thank you. We go next now to Alex Zukin at Wolfe Research.
Alex Zukin: Hey, guys. Thanks for taking the question. I wanted to ask about Consumer, the guide for the coming year, the updated mid-term guide. If you can just walk through a little bit of the puts and takes where -- why was that the right place to start the annual guide, what could drive upside surprise as the tax season progresses? And maybe, Sasan, just your view on kind of the macroeconomic backdrop that, that Consumer guide is set against?
Sasan Goodarzi: Yes, absolutely, Alex. Thank you for your question. Let me start with the last part of your question, which is around the macro environment. We have not assumed anything other than the current environment. We're not assuming any tailwinds coming from the macro environment. So that's really been one of the elements that's informed our guidance. It's really about our current trends that we're seeing our current momentum that we're seeing and really all focused on our own execution. So that's really the first part of your question. I would say the second part is just as a refresher, the total tax market is about $35 billion in TAM, $5 billion of that is do-it-yourself and about $30 billion is both -- is all assisted, but consumer and on the business side. We've got great momentum. As you know, TurboTax Live grew 17% this past year, but the number of full-service customers that we got double, new to the franchise tripled. And so we have a lot of momentum as we look ahead, and that's why we have a lot of confidence in really providing an expectation that we expect TurboTax Live to grow between 15% to 20%. And that really leads to -- we wanted to just adjust our long-term expectations to be really prudent because until TurboTax Live, which today is 30% of our franchise, growing high-double-digits, until that becomes a larger part of our franchise, we wanted to be prudent with our long-term expectation. I will just end with saying that DIY is actually very important, and I would parse it into two. One, we're actually growing quite rapidly, and I would say, high-single-digits with complex customers with higher income, and we're actually accelerating taking share. And based on our learnings this year and based on our trade-offs that we made this year and our focus this year, we're going to be quite assertive in continuing to pursue lower income customers this year because we have a lot of green shoots from this past year with our experiments of how to deliver benefits and monetize beyond tax with our Credit Karma platform. And so we're going to be leaning into that. And I'll just end with the final aspect of the question that you asked, really are upside to our guide, which is, I think, a question you asked around TurboTax comes from really two dimensions. One, accelerating in assisted tax beyond the 15% to 20%; and two, actually accelerating where we've seen a lot of green shoots, which is the more complex, higher income customers that are DIY. We have positioned ourselves for the innovation and the lineup that's required to win on both fronts in the coming years. So that's where our confidence comes from.
Alex Zukin: Okay. Thank you, guys.
Sasan Goodarzi: Yes. Thank you, Alex.
Operator: Thank you. We go next now to Brad Zelnick with Deutsche Bank.
Brad Zelnick: Great. Thanks so much for taking the question. Sasan, I wanted to ask about the restructuring, which I know you take very seriously. We appreciate it wasn't motivated by cost savings, but rather to better position the company ahead. How are you thinking about reinvesting any savings as it takes time to staff back up to prior levels? Are there specific initiatives that dollars get allocated to? Any additional color would be great. Thanks.
Sasan Goodarzi: Yes, sure, Brad. First of all, I just want to start with acknowledging we are a culture about talent and people and compassion and care. And this is a very, very tough decision. And we took great care of our teams internally, both those that are staying and getting them excited about why we're doing this and what's in the future and they remain extremely energized. But secondarily, taking great care of those that were impacted. And I just wanted to start there because these things are hard for us. We take it very seriously. We also believe that it's critically important to position the company for the future. And as we communicated, which is really the plan that we're executing against and a lot of what my upfront comments were, we are really taking all of the dollars and reinvesting it in five areas, which I articulated earlier in my prepared remarks. And really, our intent is to put all of those dollars back in the five areas that we've seen a lot of green shoots in this past several years. They accelerated towards really the latter part of last fiscal year, which is hence the decision to really double down in those five areas. So our intent is to allocate all of those dollars to those five areas. And of course, it's spread across marketing, customer success and additional headcount, engineering headcount in the areas that I mentioned. And we expect -- by the way, there's no expectation of any of these paying off in the coming year. None of our guidance that we provided resides on the added headcount back in. This is really positioning us for the next two, three years plus. That's an important note for all of you know because there's really no risk to our execution plan as we think about the coming year, but really this is about positioning us in the future. I'll just end with the following: we have a lot of confidence with the margin expansion that Sandeep articulated, and not only from the platform leverage that we're getting, but from all of our AI investments internally to drive a lot of efficiency and productivity.
Sandeep Aujla: Brad, the only thing I would add is we didn't have a standing start as we made that announcement. We were already contemplating as you probably saw from our open job listings, those had increased over the last quarter. We started building out our mid-market go-to-market function as well as scaling our marketing activities, particularly as we go after the assisted tax category, which has a different marketing timing than the DIY category.
Brad Zelnick: Thanks, Sandeep. Look forward to seeing you guys at Investor Day.
Sandeep Aujla: Thank you. We do this. We look forward to it as well.
Operator: Thank you. We'll go next now to Brent Thill at Jefferies.
Brent Thill: Thanks. Sasan, when you think about the Mailchimp reacceleration, what do you need to put in place to enable that to get to the level you'd like to see?
Sasan Goodarzi: Yes. There are really three areas that we've been executing that are worth calling out that we're excited about. One is the integration with the QuickBooks platform. As I mentioned earlier, one of the biggest areas why we're able to accelerate our customer growth with U.S. QBO, customer growth of 11%, the QBO advanced to 28% is really creating a suite where our platform is all in one place. So that's one area that we are aggressively focused on data and tech integration. And of course, workflow integration, and we're making great progress on that front. That's number one. Number two is mid-market. That is an area where it was critical when we declared the acquisition of Mailchimp, we're building momentum. Both, by the way, what we're doing to integrate the offering, but also our go-to-market capabilities. As we announced, I think, last quarter, Greg Johnson is now back with Intuit. He runs all of our go-to-market for all of small business, and we've brought together our sales and marketing and customer success across Mailchimp and QuickBooks to be able to be better positioned for mid-market. And then last is international. Those are the three areas that we're very focused on. And when we look at our KPIs, we're making solid progress against those three areas, and that's one of the reasons why it leaves us excited about the coming year and the future.
Operator: Thank you. We go next now to Keith Weiss at Morgan Stanley.
Keith Weiss: Excellent. Thank you guys for taking the questions and congratulations on a really solid quarter. I wanted to ask about the acceleration in QBO into Q1. We've seen two quarters of deceleration in both QuickBooks online subscriptions and the online services. The confidence in the acceleration, is that based upon like price increases? Or is there something you're seeing in units or other parts of the business that are giving you guys confidence in guiding towards an acceleration for Q1? And then as a follow-up, talked a lot about where the reinvestment of the dollars or the heads from the headcount reduction came from. Can you give us a little bit of visibility of where those heads came out of? Like what are the parts of the business that you guys are paring back investment in?
Sasan Goodarzi: Yes. Great. Thank you for your question, Keith. I'll start with your first question. Really, our acceleration comes from three areas. One, acceleration in services. And this is services across payments, across payroll, across our live platform and what we expect in Mailchimp. So that's one key area. The second key area is mid-market, where as we shared earlier, we've seen very good traction with QBO events, and we really continue to build out our go-to-market efforts on our platform capabilities. And that's informing by the way, what we're seeing in Q1, but also the fact that we shared earlier that we expect our online ecosystem revenue to be 20%, which is what it was this past year. And the third is price. Those three have played a big role in our acceleration. And the thing I would just call out on price, everything that we really learn and hear from our customers is because we have a business suite in one place, they're actually saving time they need less labor. They're able to drive customer growth based on our capabilities and better manage their cash flow because we're digitizing their cash flow. And that plays a very big role in terms of just the pricing power that we have, especially in our higher-end SKUs. But those are the three things that give us confidence into Q1 and beyond. And as you know, the majority of this business is subscription-based. So it's very predictable. In terms of the -- your second question around, well, where did the heads coming from in terms of the restructuring, there was really several key areas. I would say the largest area as we looked across the company and we looked at talent that we felt there was an opportunity for better performance. This was about 8% of our talent. These are, by the way, very talented folks that will lend great opportunities elsewhere. But it was across the company. It was not from any particular area, which, by the way, why there's really no execution risk from the actions that we took because this wasn't from one area. This was from across the company and talent that was we believe we have an opportunity to upgrade talent. So that was really one area. The second is, we really consolidated some of our technology talent across multiple sites, closing down Boise and Edmonton and consolidating technology talent in our key areas, Tel Aviv, Bangalore, Atlanta and Toronto. But those, I would say, were the main drivers of where the restructuring came from. And then, of course, we're allocating all of it to the 5 areas that I mentioned earlier.
Sandeep Aujla: The only thing I would add, Keith, to Sasan's first part of that question. If you recall in my prepared remarks, I talked about QBO U.S. growing 11%, advance growing 28%. These larger customers tend to adopt and use services at a higher rate than the self-employed that decline, so that's an important attribute to keep in mind. And secondly, on pricing, we look at pricing very carefully, our price volume mix and well over half of our growth comes from volume and mix. And at the company level, the contributions for price are relatively consistent year-over-year while they are slightly higher in the Small Business group. So that's the second component to keep into mind as we look at the trajectory heading into Q1.
Keith Weiss: Super helpful. Thank you guys.
Sandeep Aujla: Thank you.
Operator: We'll go next now to Kash Rangan at Goldman Sachs.
Kash Rangan: Thank you very much, team here. A nice finish to the fiscal year and quite positive on the guidance too. One, I couldn't help but notice that your Small Business, the Self-Employed Group is now running at the rate of $10 billion, I think, as of this most recent quarter, 10-ish. Very few companies in software -- in the enterprise software market hit the $10 billion. And congrats, you are there, you've done it with finance accounting for the most part you got payments and payroll. So this puts you on track with ServiceNow, I believe also tendering at a run rate business growing a little bit faster and you're moving upmarket, your SKU mix is decidedly more advanced and less so of lower-value units. So this has been, at least from my perspective, more successful, your tendering dollars and revenue, one of the largest enterprise software companies in the world. So haven't come this far, where else could you go with this business? And I'm glad I'm not asking your tax question. Thank you so much
Sasan Goodarzi: Thank you for the question, Kash. And also, by the way, the setup, as you saw in our guide we're guiding our Global Business Solutions Group to be north of $11 billion, growing 16% to 17% in the coming year, and particularly with online growing at 20%. And I would just tell you all of that has been done without really much, I would say, massive contribution from mid-market. So the best is yet to come because we are going to continue and if you look at where we are today versus three years ago, we truly have a business suite where we have all of the key capabilities for a business to be able to grow and run their business. And we've been investing in the last five years to be positioned to go after mid-market. And our ultimate goal is to have all of the big brand names, be on our mid-market platform, and we will announce something I think you'll find exciting at our Investor Day that really positions us to be able to serve these larger customers. And that's really when you look at the future -- when we look at the future, where we get really excited is that we're actually at where we are with an incredible franchise without really having a significant contribution from mid-market. And that's what excites us about the future because we want to continue to serve smaller businesses, but we now have a real opportunity to win in mid-market. And I would remind us of the following. It's probably the most important point that I'll make. Mid-market, when it comes to financial management platforms is actually not a crowded space. And so we have an incredible right to win. And this is really precisely what we hear from accountants and from mid-market businesses. We're really excited about the next chapter of taking our business group from we're $10 billion today to much larger as we look into the next three to five years.
Kash Rangan: Thank you, Sir. $10 onto $20. Thank you.
Sasan Goodarzi: Yes, indeed. See you at Investor Day.
Operator: Thank you. We'll go next now to Kirk Materne at Evercore ISI.
Kirk Materne: Yes, thanks. I’ll echo my congrats on the quarter and upbeat guidance in the next year. I guess, Sasan, my question comes around sort of the Global Business Solutions Group. How are you thinking about Intuit Assist impact on that in the coming year. Where is that sort of in the integration process? I'd just be curious about how you see that empowering your customers, maybe growing, helping in areas like mid-market or attach rates on some of your other products in that area. So why don't you just answer that, discuss Intuit Assist on the small business side.
Sasan Goodarzi: Yes, Kirk, thank you for the question. First of all, let me just start with we haven't accounted for or assumed anything in our guidance or around Intuit Assist for the coming year. So I just wanted to start there. Now let me get to your question. We actually have an incredible amount of momentum with Intuit Assist, you're going to see it at Investor Day. But let me start with the foundation of what I shared in the prepared remarks, which was we have about 1 million businesses that are engaging with Intuit Assist. And it is going to play a significant role in the future because that is actually the foundation of what we bet the company on six years ago, which was really around data and AI. But really the bet was about delivering experiences where we do the work for our customers. And so a number of areas that our customers are using today as part of the million that I mentioned is along the lines of marketing campaigns with proposed revenue that our customers could garner that we could then execute on the behalf of our customers. Things like taking, by the way, pictures of an estimate that you may have written on the go then you can take a picture of them, we will create a digitized estimate, invoice your payment schedule that you want, all within the platform. Send it to your customer, remind you in the business feed of, in essence, invoices that are overdue, capital that we can give you access to. And that's what I just mentioned are elements of what some of our customers are using today. And so we're really right now focused on sort of money in, money out because those are the most critical areas for our customers. And if I just take a step forward, ultimately, our entire goal because of our advantage, which is data and AI. Our goal is that we do all of the work for our customers. These examples I just illustrated is all on that path. Now what it means for us as a company beyond the -- of course, the benefit of helping drive revenue growth and profitability growth for businesses. What it means for us is, we believe it will have an impact in a couple of areas. One, new customer growth; particularly the smaller customers; but then two, adoption of our services because the examples I just mentioned, take a picture of a scribble note, upload a PDF file will create estimates invoicing progress payments that all turns into revenue for us. And that, by the way, doesn't even touch on the fact that embedded in our platform going forward is going to be AI-powered live expertise, which is a monetizable event ultimately with the goal of we do everything for you and with you. And so it will be an enormous sort of part of our experience and growth in the future. And we're making really good progress. All of which, by the way, will also show all of you at Investor Day. And I'll end with where I started. None of this is contemplated in our guidance, but it's a big part of our future, and we're excited about it.
Kirk Materne: Super. Thank you so much.
Sasan Goodarzi: Thank you.
Operator: Thank you. We'll go next now to Kartik Mehta at Northcoast Research.
Kartik Mehta: Good evening, Sansa and Sandeep. Just a question on tax. Sasan, it seems as though you're executing on the live products, you're starting to execute on the full service. I'm just wondering what was the thought of maybe lowering guidance now, considering the momentum you're building in the business?
Sasan Goodarzi: Yes. Thank you for the question. First of all, I would start with -- it's actually one platform, and that's the power of our scale. Customers, ultimately, can do it themselves, they can do it with assistance or we'll do it for customers. And it's all on TurboTax platform and our experts, our virtual experts all sit on the same platform, except they're on the other side of the platform, which is leveraging the customers' data and AI capabilities to do their taxes for them or with them. So I just wanted to start with that foundational point that it's not a lot of different products. It's actually one platform, which is what gives us the scale that we're looking for. When we make decisions around long-term expectations, we don't make them lightly. In fact, I think it was 5.5 years ago, right when I became CEO, we had updated the long-term expectations of tax. And so we take these decisions very seriously. And really what -- and so it's something we've been thinking about for some time. And really, it comes down to a very a simple math equation. When you look at the TAM, which is $35 billion, $5 billion do it yourself and $30 billion assisted both consumer and business, that's where the largest growth opportunity is. That's where we're really growing high-double-digits, 17% with customers growing 11%. And it's 30% of the franchise today, and we are also being very aggressive with DIY, both complex higher-income customers. But based on some green shoots that we saw this year, we're also going to be very assertive with lower income folks that are in the do-it-yourself category. And in that context, we just felt like the time was right to not only guide prudently for the coming year. But also adjust the long-term expectations. And I want to reiterate what you heard from Sandeep it's an interim adjust. And once we get to sustained, growth double-digit, we'll then rethink the long-term guidance. But until then, that's what informed the decision that we made.
Kartik Mehta: And just one follow-up, Sasan, as you look at the health of the Small Business, any change as you look throughout the quarter? Any changes that may be give you concern or hope what's happening to your customers?
Sasan Goodarzi: The headline I would give you, Kartik, is stable. Across our small businesses, we generally, differs by the way, by sector, by state, by country. But at an Uber level, we see revenue and profitability up in this fiscal year for businesses that we serve. We see cash reserves still down 6% to 7% compared to last year, but it's way up compared to pre-pandemic levels. We also see hours worked higher. So headline is stable. And by the way, we see the same thing on the consumer side, which is stable.
Kartik Mehta: Okay, thank you very much. Appreciate it.
Sasan Goodarzi: Yes, very welcome.
Operator: We'll go next now to Daniel Jester with BMO Capital Markets.
Daniel Jester: Great. Thanks for taking my question. It was great to hear about QBO Live, the number of clients more than tripling. Can you maybe spend a moment talking about what's resonating there? And as you sort of move more into the middle market, what's the opportunity for QBO Live to accelerate that more upmarket push?
Sasan Goodarzi: Yes. Thank you for the question. Let me start with your question of what's resonated with the smaller businesses. For us, we've actually had product market fit, meaning that our experts on our platform can really help our businesses with bookkeeping, accounting, providing advice. Really, the biggest challenge that we've been working through in the last year is how to think about the benefit? How to think about the offering? How do we actually go to market because the great news is every business at some point in their life throughout a year, they're engaging a bookkeeper and an accountant. So we're not trying to create opportunity. The opportunity is there. It's just it's manual, it's disaggregated. It's high price. And so really, the biggest thing has been our focus on how do you really help the customer understand that this is now a part of our platform and that we can help them with all the key problems that they have. And I would say that, that's an area where we really uncovered how to do that, and we're accelerating. And I don't want to make you feel like we've reached the destination. I think we still have a lot of work to do in this area. But we’ve really, I would say, cracked a nut that we're excited about, particularly around our decision to embed AI-powered experts into our offering as we look ahead. And lastly, this is a far bigger opportunity with larger customers because they expected. They expect a CFO for a hire and HR for hire. They expect an assistant to be able to help them with their books, with their accounting, with their employee inventory decisions. And so part of what you'll hear us talk about at Investor Day is as we're accelerating our focus with mid-market, with a business suite that has all the key capabilities that a business needs a big element of it is the expertise that it comes with. I think the differentiator for us is these are AI-powered experts that sit on the platform, can really provide a range of services for customers. But we believe it's a bigger opportunity as we move upmarket. And last thing, by the way, I'll end with, these are small sample sizes still. But the -- those that have live experts, the attach and use of services like payments and payroll actually higher, which really is a great benefit for customers and for us.
Daniel Jester: Great, thank you very much.
Sasan Goodarzi: Yes. Very welcome.
Operator: We'll go next now to Arvind Ramnani at Piper Sandler.
Arvind Ramnani: Hi, this is Arvind. Thanks for taking the questions. Just a couple of questions. In some of the prior calls, you have provided some additional color on some of the kind of benefits you're seeing with AI. And given [Technical Difficulty]
Sasan Goodarzi: In and out. We can now, please go ahead and continue.
Arvind Ramnani: Yes. I'm just trying to get some color on your -- some of the impact of AI that you've seen both from a revenue add but also from a cost perspective across your business, is there any additional information you're able to kind of provide in terms of quantification of those benefits you're starting to see?
Sasan Goodarzi: Yes. Thank you for your question. I think a couple of things I would say. First of all, we're seeing the impact of our usage and innovation across all of our platforms. Across Credit Karma, it's really driving a lot of the automation and do it for our customers within TurboTax, even with TurboTax full service, we're doing a lot of the work for experts so that they can serve more customers and, of course, across our business platform that I articulated the examples earlier. So I want to first be clear, this is broad-based across our entire platform. And we are really focused on how AI reimagines our internal work within Intuit as well. I would say the -- really, the revenue is immaterial this year, and we didn't account for anything in the coming year, but we believe it will be a large driver of growth in the future years. And the growth will be really usage of services, better conversion, better retention, and these are the green shoots that we're seeing with, for instance, our million businesses that are using it today. And in terms of our cost structure, remember, data and AI have been core to our investment thesis and our Bets over the last five, six years. And what we do is not capital intensive. At the same time, we're very intentional about the investments that we've had to make and any investments we need to make to win in this world of AI has been contemplated in the guidance that you heard from Sandeep. I don't know, Sandeep, if you add anything?
Sandeep Aujla: No, I think that covers. 1 thing to keep in mind as we compare us to possibly other companies in your portfolio, one point, AI sort of really been in our run rate. So I wouldn't expect any meaningful change in our cost structure. Secondly, we use AWS for a lot of the processing. So it's not like we're building up our own data centers. So that's also very asset light for us. And the other factor, as Sasan alluded to, we are quite frankly also seeing improvements in our own productivity. We are seeing improvements in our developer productivity. We're seeing improvements in our overall G&A productivity. So just factors to keep in mind that AI should not be not getting in the way of our commitment to continue to find operating leverage and continue to scale our margin over time.
Arvind Ramnani: Perfect. And just one quick follow-up. Just on TurboTax Live, as you're thinking of kind of directing questions or your customers to having kind of AI sort of answer it versus QuickBooks Live or sort of the kind of accountant or CPA. Obviously, the AI is going to be like a lower ARPU versus like directing someone who is basically like more like service-oriented. How do you balance that? Because does come at like a higher ARPU, but lower margin. And of course, AI is lower revenue, lower ARPU but higher margins. How do you balance it out?
Sasan Goodarzi: Yes. I think the premise of what you're articulating is not what we're seeing. We actually believe that based on all of our investments with data and AI, it's actually higher ARPU because it drives better attach of our services. It actually drives more attach of our human-powered expertise. And by the way, when our human-powered experts or AI-powered human experts get involved, they're actually quite effective and productive because they're sitting on our data and AI platform. So we're actually seeing two things. One, higher ARPU over time because of what I articulated, but also more effective and efficiency on our platform because we are as aggressive as we are in applying AI externally we are as aggressive internally based on what you just heard Sandeep talk about. So it's actually the reverse of the premise that you talked about in terms of what we see. I don't know, Sandeep, if you would add anything.
Sandeep Aujla: Yes. The thing to keep in mind is AI is -- the name of the game is confidence and eliminating fear, uncertainty and doubt. And by using AI, by using our AI powered experts, we're actually doing that at scale. And the important thing to keep in mind is it actually helping us open up the aperture of the customers we can serve and really go after penetrating a TAM. That's driving a lot of the success that you've seen in the assisted category. Some of those are fully outsourced to us, some of those that do it with me. So just something to keep in mind as you look at the strategic opportunities that this opens up for us as well.
Arvind Ramnani: That's been really helpful, Thank you very much.
Sasan Goodarzi: Thank you.
Operator: Thank you. We go next now to Brad Sills with Bank of America.
Brad Sills: Okay, wonderful. I wanted to ask a question around the platform for AI, the GenOS and the studio that you've outlined in the past, I know it's a little further out to start thinking about separate SKUs, and it sounds like this is more of a conversion and a retention play in the near term. But what were some of the learnings that you had over the course of the year in building out that platform for AI, harnessing the data and some of the platform components that you've outlined at the Analyst Day last year that are underpinning that.
Sasan Goodarzi: Sure. First of all, let me start with your question around the SKUs. This is a progression, and this is a really important element to call out. What you heard us talk about is that we believe, and we're seeing this in our proof points. And the green shoots that we're seeing is that, one, this will drive new customer growth because we will just make it far easier and simpler for a new customer to use our digital platform that comes with AI-powered experts. Two, we believe that it's an opportunity for the adoption of our services, which also includes Live. Services like payments, payroll, Mailchimp and our live platform, which is our AI-powered human experts. And those are significant customer and growth drivers for us. The progression is as we are focused on the innovation that we articulated earlier, things such as literally a customer being able to take a picture of a scribble note, upload a PDF document for us to be able to put together an estimate all the way to getting them paid following up with their customers, putting marketing campaigns together for them. The progression is we'll get to a place where we'll actually test stand-alone SKUs where the AI agent is doing everything for the customer. And that could be a stand-alone SKU that we could test sometime in the future, but you have to progress your way to that. And that's really what the element of progression talks to. The last thing, which I think was the other element of your question, what we're doing is really hard, which we love because it's hard to replicate. And what's hard about it is, first, you have to have the data. And we have a lot of data. It's our customers' data. But when you look at for every business, we have 500,000 data points. That means we are uniquely positioned to be able to help them with managing their cash flow because it's about their cash flow. It's not about something generic because we see all of their money coming in, money going out, the creditworthiness of their vendors, the employees that they have. And so the investments that we've made in the data has been more than ever crucial because then it allows us to leverage our GenOS platform, which is our GenAI capabilities and train the Intuit LLM on the customer's data to be able to then deliver the experiences that I was just articulating and our LLMS have agency and authority to be able to use other LLMs that could enhance the experience. So the biggest thing that we've learned to sort of punchline answer your question is the combination of the data investments, the investments we've made in knowledge engineering, machine learning and our LLM that really delivers accuracy performance cost effectively is extremely hard to copy because we live in a world of financial management, and that's really our biggest advantage going forward and really our biggest growth opportunity as we look ahead.
Brad Sills: That's exciting. Thanks, Sasan.
Sasan Goodarzi: Yes, thank you.
Operator: Thank you. And ladies and gentlemen, that is all the time we have for questions this afternoon. At this time, Mr. Goodarzi, I'd like to turn things back to you for any closing comments, sir.
Sasan Goodarzi: Well, listen, everybody, thank you for your time. Thank you for all of your questions, and we hope to see all of you at Investor Day. Be safe. We'll see you soon. Bye-bye.
Operator: Thank you. Ladies and gentlemen, that does conclude Intuit's Fourth quarter and fiscal year 2024 conference call. Again, thanks so much for joining us, everyone. We wish you all a great evening. Good-bye. |
GILD | 2 | 2,024 | 2024-08-08 20:47:04 | Operator: Good afternoon, everyone, and welcome to Gilead's Second Quarter 2024 Earnings Conference Call. My name is Rebecca, and I'll be your host for today. In a moment, we'll begin with our prepared remarks followed by a Q&A session. [Operator Instructions] I'll now hand the call over to Jacquie Ross, Vice President of Investor Relations and Corporate Strategic Finance.
Jacquie Ross: Thank you, Rebecca. Just after market closed today, we issued a press release with earnings results for the second quarter 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, Merdad Parsey; and our Chief Financial Officer, Andrew Dickinson. After that, we'll open Q&A where the team will be joined by Cindy Poretti, the Executive Vice President of Kite. Before we get started, 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.
Daniel O'Day: Thank you, Jacquie, and good afternoon, everyone. I’m pleased to share that this was another strong quarter of commercial execution with growth across HIV, Liver Disease, and Oncology. Biktarvy for HIV treatment was up 8% year-over-year, Trodelvy was up 23%, and Cell Therapy was up 11%. In addition, we continued to demonstrate disciplined operating expense management and delivered exceptional bottom-line growth, highlighting the leverage in our business model. Given the results for the first half of the year, we are raising our non-GAAP operating income and EPS guidance for the full year. Moving to clinical updates, this is an important time for our Virology and Inflammation therapeutic areas. A key highlight of the quarter was the readout of our Phase 3 PURPOSE 1 trial evaluating lenacapavir for HIV prevention. The results showed 100% efficacy with zero HIV infections in cisgender women. The presentation of these results at AIDS 2024 in Munich generated considerable excitement, and we’re delighted to have reached this milestone with such a positive outcome. Lenacapavir, with its twice-yearly dosing, could set a new bar for HIV prevention and allow PrEP to reach a much broader population of people who could benefit from a prevention regimen. The PURPOSE program, which is expected to include more than 9,000 participants in over 10 countries, is designed to highlight the efficacy of HIV prevention in a wide range of groups, including cisgender women, transgender men and women, Black and Latino individuals, and young adults. We expect an update for PURPOSE 2 late this year or early next year, with a commercial launch as early as late 2025. The PURPOSE data were part of several updates at AIDS 2024 that highlight the strength of Gilead’s innovation in HIV, for both prevention and treatment. Our pipeline has the promise to extend our HIV leadership well into the late 2030s and beyond. Updates at AIDS 2024 included data from our daily oral combination of bictegravir and lenacapavir, which is now in pivotal Phase 3 trials for people with HIV, including those on complex regimens. We also shared data from our broad long-acting program, including our once-weekly orals GS-4182 and GS-1720. We plan to start the Phase 2 study evaluating these in combination before the end of the year. This is in addition to the once-weekly oral combination of lenacapavir and islatravir in partnership with Merck that will begin Phase 3, also before the end of the year. On the immediate horizon, our PDUFA date for seladelpar is next week. The body of clinical evidence behind seladelpar for the treatment of primary biliary cholangitis, or PBC, continues to grow, most recently with the Phase 3 ASSURE data shared at EASL. The Gilead team is excited by the opportunity to launch seladelpar and bring a promising new treatment to the patients who could benefit. Moving to Oncology, we are ready to manufacture anito-cel for multiple myeloma at our Maryland Kite facility, and we are preparing to support the Phase 3 iMMagine-3 trial from the site starting later this year. The iMMagine-3 trial is expected to reach a broader set of 2nd- to 4th-line multiple myeloma patients with our potentially best-in-class BCMA CAR T. At ASCO, we shared new data from our Phase 2 EVOKE-02 program evaluating Trodelvy in combination with pembro in first-line metastatic non-small cell lung cancer. The results showed meaningful efficacy compared to the historical standard-of-care, supporting the Phase 3 EVOKE-03 trial currently underway. We continue to assess the path for Trodelvy in second-line metastatic non-small cell lung cancer and metastatic bladder cancer following the EVOKE-01 and TROPiCS-04 readouts earlier this year. In the meantime, I’d highlight the strong commercial results this quarter in breast cancer where Trodelvy remains the first and only approved TROP2-directed ADC on the market and is the standard of care for second-line metastatic triple-negative breast cancer. To date, we have served over 40,000 cancer patients, and remain confident that Trodelvy will continue to be an important treatment option. We also shared Phase 2 EDGE-Gastric data at ASCO for domvanalimab plus zimberelimab and chemotherapy in first-line upper GI cancers. These results showed compelling efficacy that supports the Phase 3 STAR-221 program, which has completed enrollment. Moving to our 2024 key milestones on slide 6, we look forward to the upcoming updates from the Phase 3 ASCENT-03 trial and Phase 2 iMMagine-1 trial. ASCENT-03 is an event-driven trial evaluating Trodelvy in first-line PD-L1 negative metastatic triple-negative breast cancer patients. A positive progression-free survival outcome would support global filings, potentially moving Trodelvy into earlier lines of triplenegative breast cancer. Our iMMagine-1 trial could support regulatory filings for anito-cel in later-line relapsed or refractory multiple myeloma. Overall, the second quarter was a strong performance for the Gilead team, with the highlights including some remarkable clinical results in HIV, solid revenue growth across therapeutic areas, tangible impact from our disciplined cost management initiatives, and planning for the imminent launch of seladelpar. With that, I will hand it over to Johanna.
Johanna Mercier: Thanks Dan, and good afternoon, everyone. I’m very pleased to report the continued momentum we saw in the second quarter, and would like to thank the Gilead teams who contributed to another strong quarter of execution. As shown on slide 8, total product sales, excluding Veklury were $6.7 billion in the second quarter, up 6% year-over-year, with growth across HIV, Liver Disease, and Oncology. Including Veklury, total product sales were $6.9 billion, up 5% year-over-year. Starting with HIV on slide 9, sales of $4.7 billion were up 3% year-over-year, driven by strong demand across treatment and prevention, partially offset by lower average realized price due to channel mix. Quarter-over-quarter, sales were up 9%, reflecting favorable pricing and inventory build following the typical first quarter dynamics, as well as higher demand. Looking to the full year, we remain on-track to deliver HIV sales growth of approximately 4%. Turning to slide 10, total second quarter Biktarvy sales of $3.2 billion were up 8% year-over-year, primarily due to higher demand. Sequentially, sales were up 10%, largely reflecting favorable pricing and inventory following the typical first quarter dynamics. Highlighting our leadership position, Biktarvy represents more than 49% share of the treatment market in the U.S. This was up almost 3% year-over-year, our 24th consecutive quarter of year-over-year market share gain. With a meaningful share lead over all other branded regimens for HIV treatment, Biktarvy firmly remains the HIV treatment-of-choice, particularly for those starting or switching regimens in the U.S., as well as across other major markets. Overall, the HIV treatment market continues to grow in-line with our expectations of 2% to 3% annually. Turning to Descovy, we continued to see higher demand with sales of $485 million in the second quarter. Year-over-year, sales were down 6% as demand growth was more than offset by lower average realized price due to channel mix. As a reminder, shifts in channel mix will continue to impact average realized price in addition to our ongoing efforts to ensure people who want or need PrEP have access to the prevention regimen of their choice. Sequentially, sales were up 14%, reflecting favorable inventory and pricing following typical first quarter seasonality, in addition to the higher demand. Descovy for PrEP once again maintained its over 40% PrEP market share in the U.S., despite the availability of other regimens, including generics. We’re particularly excited to note that the HIV PrEP market in the U.S. continues to expand, with total volumes up more than 12% in the second quarter of 2024 compared to the same period last year. With that in mind, we are thrilled with the unprecedented results seen in our pivotal Phase 3 PURPOSE 1 trial, achieving 100% efficacy with zero cases of HIV infections in a broad population of cisgender women, including those who are pregnant or lactating. This is just the beginning of our larger, landmark PURPOSE program which includes multiple populations and communities where PrEP is underutilized or more difficult to access today, such as cisgender women, transgender men and women, Black and Latino individuals, and young adults. Overall, we expect lenacapavir will emerge as the regimen-of-choice for those who want or need prevention as the first and only long-acting option with twice-yearly subcutaneous dosing. We are preparing for potential launch as early as late 2025. Moving to the Liver Disease portfolio on slide 11, sales were up 17% year-over-year and 13% sequentially, driven by higher demand and higher average realized price due to channel mix in the U.S. Our Liver Disease franchise continues to differentiate itself, with leading share in HCV despite fewer HCV starts year-over-year together with growing demand in HBV and HDV. As you know, our PDUFA date for seladelpar is next week, and we stand ready to launch commercially in the U.S. We are able to leverage our existing commercial footprint in liver diseases, and continue building upon these relationships to quickly bring seladelpar to many of the 130,000 people impacted by PBC in the U.S. who progress after initial treatment. Outside the U.S., commercial preparations are well underway, and we look forward to the European regulatory decision in early 2025. Turning to Slide 12, while severity of COVID infections and hospitalization rates remain variable, Veklury continues to be recognized as an important part of the standard of care for hospitalized patients treated for COVID-19. This includes the U.S. where Veklury has maintained well over 60% share in this setting. For the second quarter, Veklury sales were down 16% year-over-year and down 61% sequentially, as expected. Moving to Oncology on slide 13, sales were up 15% year-over-year and up 7% quarter-over-quarter to $841 million. With over 60,000 patients treated with a Gilead or Kite therapy to date, we’re proud of the positive impact our oncology medicines have made across multiple cancer types. Looking in more detail at Trodelvy on slide 14, sales for the second quarter were $320 million, up 23% year-over-year and up 4% sequentially, primarily driven by higher demand in the U.S. and Europe across its metastatic breast cancer indications. Trodelvy is the only approved and available TROP2-directed ADC to demonstrate clinically meaningful survival benefits across two types of metastatic breast cancers. And with increasing awareness amongst physicians, Trodelvy has remained the leading regimen in the U.S. and Europe for second-line metastatic triple-negative breast cancer with growing adoption in the pre-treated HR+/HER2- metastatic breast cancer setting. We are working to expand Trodelvy’s reach beyond the 40,000-plus patients treated to date across multiple tumor types as we look to new and existing markets, as well as new indications. In bladder cancer, we are planning to further discuss the results of TROPiCS-04 and next steps with FDA. At this time, Trodelvy continues to be available under an accelerated approval in the U.S. for second-line plus metastatic or advanced bladder cancer. Turning to Slide 15, and on behalf of Cindy and the Kite team, Cell Therapy sales in the second quarter were $521 million, up 11% year-over-year and up 9% quarter-over-quarter, with solid growth in all regions. In the U.S., sales were up 11% sequentially as we've begun to see momentum from our focused efforts at the authorized treatment centers, including further educating providers and patients on the curative potential of our cell therapies. Despite these efforts, in-class and out-of-class competition remain a near-term headwind in the U.S. As we extend the reach of cell therapy, we are making important in-roads with key community practices, including working with national payers to unlock broader commercial reimbursement, and as a reminder, expect impact from these initiatives towards the end of 2024. We’ll continue to refine this “blueprint” as we work to onboard new centers and patients over time. Outside the U.S., demand for Yescarta and Tecartus across Europe and other international geographies remains strong, and we’re encouraged by the solid progress in our newly launched markets such as Japan and Saudi Arabia. Overall, it was a strong second quarter for our commercial portfolio, and the teams are energized by the potential to bring two more transformational therapies to market – first with seladelpar for PBC next week, and then, lenacapavir for HIV prevention as early as late next year. And with that, I’ll hand the call over to Merdad.
Merdad Parsey: Thank you, Johanna. We were very pleased to wrap up the second quarter with two New England Journal of Medicine publications and a number of important readouts across our portfolio. Most exciting was the readout of our Phase 3 PURPOSE 1 trial evaluating twice-yearly, subcutaneous lenacapavir for the prevention of HIV infection in cisgender women. As you can see on slide 17, this was the first Phase 3 HIV prevention trial to ever achieve 100% efficacy. We have since shared data at the International AIDS Society meeting in July, where our presentation was the highlight of the plenary session. The data were simultaneously published in the New England Journal of Medicine. Our second registrational trial for lenacapavir, PURPOSE 2, has enrolled approximately 3,300 men, transwomen, and non-binary people who have sex with men. This trial completed enrollment globally in December 2023, approximately four months after PURPOSE 1. As a result, we expect to provide an update in late 2024 or early 2025. Assuming positive data from PURPOSE 2, we plan to file based on data from both trials, with the goal of bringing transformative HIV prevention to people at risk of HIV as early as late 2025. Beyond our registrational trials, we are generating Phase 2 data from the PURPOSE 3, 4, and 5 trials in key populations across the U.S., UK, and France, including people who inject drugs. These trials reflect our commitment to evaluate lenacapavir across diverse populations that could benefit. These studies are also intended to drive greater awareness amongst physicians and patients, including geographies where prevention options have not been effective historically. In addition to HIV prevention, we are of course intensely focused on next generation HIV treatment options, and slide 18 highlights our comprehensive HIV treatment pipeline. Our recent updates at the AIDS Society meeting included: Longer-term Phase 2 data from our once-daily oral combination of bictegravir and lenacapavir that showed the regimen was highly effective at maintaining viral suppression. These results further support our ongoing Phase 3 studies in people with HIV, including those on complex regimens. We also reported safety and PK data for both GS-4182, an oral pro-drug of lenacapavir designed to provide 2- to 3-times greater oral bioavailability, and GS-1720, our long-acting oral integrase inhibitor. Initiation of the Phase 2 trial evaluating the combination of these agents as a once-weekly oral regimen is expected later this year. Additionally, we are on-track to initiate our Phase 3 ISLEND-1 and ISLEND-2 trials evaluating once-weekly lenacapavir in combination with Merck's islatravir. This regimen is expected to be the first once-weekly oral treatment option. Looking at our longer-duration treatments, we expect to provide Phase 1 updates from our every 3- month injectable programs and to initiate the Phase 1 studies for our potentially every 6-month integrase inhibitors in the second half of the year. Moving to our Liver Disease portfolio, on slide 19, we presented more than 25 abstracts across both viral and inflammatory liver diseases at the EASL Conference in June, highlighting our continued leadership. Importantly, as shown on the right of the slide, new interim results from the open-label Phase 3 ASSURE study of seladelpar for PBC were consistent with the pivotal RESPONSE study that formed the basis of our global regulatory filings. As you know, we expect an FDA regulatory decision shortly, with a decision from European regulators to follow in early 2025. In viral hepatitis, Gilead shared final, Week 144 results of the Phase 3 MYR301 trial at EASL. These data continue to support monotherapy bulevirtide 2mg as a chronic treatment for HDV. Additionally, we presented promising Phase 2b data evaluating bulevirtide 10mg with interferon alfa-2a as a finite regimen. The post-treatment response rates were the highest ever posted in HDV and were simultaneously published in the New England Journal of Medicine. We’re encouraged by the data, and continue to be engaged with KOLs and health authorities - including FDA - as we work to bring bulevirtide to patients as quickly as possible. Switching to Oncology, on slide 20, we’re pleased with the progress across our mid-to-late stage programs. In the front-line setting we shared mature Cohort A data at ASCO from our Phase 2 EVOKE-02 trial with Trodelvy plus pembro, demonstrating a median progression-free survival of 13.1 months. These data exceeded the historical performance of PD-1 monotherapy in first-line PD-L1 high non-small cell lung cancer and support our ongoing Phase 3 EVOKE-03 trial where enrollment is going well. In an all-comer non-small cell lung cancer population, our Phase 3 STAR-121 study evaluating dom plus zim is ongoing. Our Phase 3 STAR-221 study in upper GI cancers evaluating dom with zim and chemo has completed enrollment. The updated Phase 2 EDGE-Gastric data presented at ASCO supported the use of this combination. If successful, dom plus zim and chemo would be the first TIGIT-based regimen for upper GI cancer patients. In addition, we have several Phase 3 programs underway in earlier settings of breast cancer, including ASCENT-03 evaluating Trodelvy in PD-L1 negative metastatic triple-negative breast cancer. Turning to our second-line programs, we have discussed the results of EVOKE-01 in metastatic non-small cell lung cancer with regulators, and as expected, have confirmed there is no immediate regulatory path based on EVOKE-01 alone. We are currently assessing next steps for Trodelvy in this setting. We will also provide updates on our bladder cancer program, including the full trial results at a future scientific conference, after discussions with FDA and KOLs. Moving to slide 21, and on behalf of Cindy and the Kite team, we shared updates for Yescarta and Tecartus at both ASCO and the European Hematology Association meeting. At ASCO we shared encouraging new efficacy data from a pilot study of Yescarta in 18 patients with relapsed or refractory primary or secondary central nervous system lymphoma in collaboration with the Dana-Farber Cancer Institute. Yescarta demonstrated greater than 26 months median overall survival with no reported treatment-limiting toxicities and no apparent additional risk of adverse events in these patients with high unmet need. Based on these results, we are engaging with regulators to expand the use of Yescarta to include these patients. Additionally, we reported that treatment with Tecartus resulted in a 40% 4-year overall survival rate and median overall survival of almost 26 months in the pivotal ZUMA-3 trial in relapsed or refractory adult B-cell acute lymphoblastic leukemia. At EHA, we shared preliminary analysis from the Phase 2 ZUMA-24 trial further supporting outpatient use of Yescarta in relapsed or refractory large B-cell lymphoma with the use of prophylactic steroids and other early intervention strategies, real-world manufacturing experience of Yescarta for second- and third-line large B-cell lymphoma, reinforces our strong manufacturing success rate of 96%. Further, on slide 22, I will highlight our promising clinical development program for anito-cel, a potential best-in-class BCMA CAR T that we are developing in partnership with Arcellx. Notably, we shared our study design for our Phase 3 iMMagine-3 trial that will include a broader set of earlier-line, relapsed or refractory multiple myeloma patients. We expect to have first patient in for this trial in the second half of this year. We are pleased to note that the tech transfer and transfer of the U.S. IND of anito-cel to Kite are now complete. The Kite manufactured product will be used in the iMMagine-3 trial, and we anticipate the turnaround time for anito-cel to be on par with Kite’s commercially available products. Wrapping up with our key 2024 milestones on slide 23, we completed all of our first half milestones, and are pleased with our program execution overall. We’re off to a good start for the second half with the readout of PURPOSE 1 occurring ahead of our committed timeline. We look forward to the FDA decision next week for seladelpar in PBC, as well as an update from the pivotal Phase 2 iMMagine-1 trial in later-line relapsed or refractory multiple myeloma, in addition to an update on the pivotal Phase 3 ASCENT-03 study in first-line PD-L1 negative metastatic triple-negative breast cancer. Along with these updates, we have a maturing inflammation pipeline that includes several Phase 2 programs, such as a once-daily oral alpha-4-beta-7 integrin inhibitor and an oral TPL2 inhibitor for inflammatory bowel disease. And now, I’ll hand the call over to Andy.
Andrew Dickinson : Thank you, Merdad, and good afternoon, everyone. Starting on slide 25, the team delivered an excellent quarter, with our base business up 6% year-over-year to $6.7 billion. Product sales growth across HIV, Liver Disease and Oncology more than offset the expected decline in Veklury, with total product sales up 5% year-over-year. Moving to our non-GAAP results on slide 26. Product gross margin was 86%, down 84 basis points from last year. R&D expenses were down 3% year-over-year, primarily due to the wind-down of certain magrolimab, obeldesivir and Trodelvy studies following recent data and regulatory updates. Sequentially, R&D was down 5%, primarily due to the timing of clinical and manufacturing activities, partially offset by the initiation of new studies. These savings reflect disciplined management of R&D resources towards the most meaningful opportunities. Acquired IPR&D was $38 million, reflecting new and ongoing collaboration payments in the second quarter. SG&A was down 27% year-over-year, primarily due to the $525 million legal settlement in 2023 that did not repeat in 2024. Excluding this payment, SG&A was up 2% year-over-year, and includes commercial investments ahead of the launch of seladelpar. Operating margin for the second quarter was 47%, our strongest operating margin since the third quarter of 2022, highlighting the leverage we have in our business model. Turning to tax, our effective tax rate was approximately 18%, reflecting settlement with a tax authority in the second quarter. On a reported basis, our non-GAAP diluted EPS grew 50% year-over-year from $1.34 to $2.01 per share. As mentioned earlier, we had a $525 million legal settlement, representing $0.32 per share, in the second quarter of 2023 that did not repeat in the second quarter of 2024. Excluding this settlement, EPS grew 21% year-over-year, reflecting higher product sales and lower expenses including acquired IPR&D expenses. As highlighted on Slide 27, we had a strong first half of the year, with solid performance in each of our core franchises across Virology and Oncology, driving base business growth of 6% year-over-year, which is at the upper-end of our full-year guidance of 4% to 6%. Switching to our expectations for 2024 on Slide 28, we continue to expect total product sales in the range of $27.1 billion to $27.5 billion, and total product sales, excluding Veklury, in the range of $25.8 billion to $26.2 billion. Given the inherent variability experienced historically, and as stated previously - we are not updating our Veklury guidance at this time. As we think about the second half of the year, here are some of the factors that we are continuing to monitor. First, we continue to expect the normal, quarter-to-quarter variability in our HIV business that we have always experienced relative to average realized price associated with channel mix. Second, we expect quarterly variability in cell therapy due to continued in-class and out-of-class competition. Third, there is some uncertainty associated with Trodelvy bladder revenue following TROPiCS-04. As a reminder, bladder represents less than 10% of total Trodelvy sales today; and finally, there is a possibility of incremental FX headwinds in the second half of the year. For the rest of 2024, we continue to expect to deliver strong volume growth across all therapeutic areas, and assuming approval seladelpar as an incremental contributor to revenue growth. Continued HIV volume and revenue growth, consistent with our full year expectation to grow HIV product sales by approximately 4%; and continued focus on disciplined operating expense management. Moving to the non-GAAP guidance, there is no change to our non-GAAP gross margin range of 85% to 86%. For R&D, we now expect total R&D expense to increase by a low to mid-single-digit percentage compared to 2023, reflecting lower than previously expected R&D expenses in 2024, despite absorbing the late-stage seladelpar program. For SG&A, there is no change to our prior guidance pointing to a mid-single digit decline compared to 2023. Consistent with our expectations last quarter, we have been able to absorb the incremental expenses associated with the CymaBay transaction. For acquired IPR&D, we now expect full-year expenses of $4.7 billion, up from $4.4 billion last quarter to reflect a $320 million transaction with Janssen to buy out the global seladelpar royalty. This expense will be included in our third quarter results. Finally, with the strong operational expense control demonstrated in both the first and second quarters, and despite this new $320 million acquired IPR&D expense, we are increasing our operating income guidance to $7.2 billion to $7.6 billion, and increasing our non-GAAP diluted EPS guidance to $3.60 to $3.90. Slide 29 highlights that the increase to our EPS guidance fully absorbs the $320 million, or approximately $0.20 per share, expense associated with the buyout of the seladelpar royalty from Janssen. This transaction removes Gilead’s royalty obligation to pay 8% of seladelpar sales. Excluding this transaction, our EPS guidance increase would have been even more significant today, up $0.30 or 8% at the midpoint, again highlighting the financial discipline that has translated into operating leverage. Moving to slide 30, we continue to have sufficient flexibility in our balance sheet to execute on our capital allocation priorities. In the second quarter, we returned $1.1 billion to shareholders, repaid $1.75 billion of senior notes, and paid $1.2 billion as part of the federal transition tax associated with the Tax Cuts and Jobs Act of 2017. The remaining transition tax payment of $1.3 billion is scheduled for April of 2025. Overall, we believe that Gilead is well-positioned for near and long-term growth and we continue to be focused on commercial execution, expense management discipline, and to delivering on our strategic commitments. And now, I’ll invite Rebecca to begin the Q&A.
Operator: [Operator Instructions] [Audio Gap] Please go ahead your line is open.
Evan Seigerman : Hi there, this is Evan Seigerman from BMO Capital Markets. I wanted to touch on TIGIT. There's been a lot of updates in the TIGIT space in ASCO. We had the Roche update and most recently Merck discontinued their KeyVibe study in small cell lung cancer. So Merdad, you could walk us through how you think about the opportunity for TIGIT? And what looks good, what good would look like for you in terms of safety and efficacy with the STAR-121 program? Thank you so much.
Merdad Parsey : Thanks, Evan for the question. Yeah, I think as you know as you noted, there have been a lot of updates on TIGIT over the past six months or so. And I think that gets to our approach which I think is somewhat differentiated from our competition in that. As we've said along, we have a differentiated molecule first off and that is that we have an Fc-silent molecule relative to an Fch-active molecule that the competition has. And I would note that that is demonstrating a difference in terms of the adverse event profile including the data that we've highlighted today. Additionally, I think we've tried to stay focused in areas where we believe that there is the best chance of activity and so for example, we have not initiated any trials with small cell. We look forward to. Capitalizing on the data, we have seen so far both and non-small cell lung cancer and gastric cancer. As you know, we provided an update on the EDGE-gastric study ASCO. And as I noted in the call we have completed enrollment of that of the Phase 3 trial of that. So we've - we continue to be cautiously optimistic about TIGIT and are doing it in a data-driven way based on the data we've generated in our trials so far.
Operator: Our next question comes from Terence Flynn at Morgan Stanley. Go ahead, your line is open.
Terence Flynn : Great. Thanks for taking that question. A two part for me. Just Merdad, wondering if you can help frame expectations for the Purpose 2 trial, just given this is a slightly different population relative to Purpose 1. So just as we think about level setting their ahead of that data. And then, the second part is for Johanna, so obviously, you guys noted that you've seen growth in the PrEP market recently, which is encouraging. But what other steps can you as a company take to maybe help alleviate some of the payer roadblocks that are really still in the way of branded PrEP use given the still high level of generic truvada use? Thank you.
Merdad Parsey: Thanks, Terrence. I'll start and then I'll hand it off the Johanna as you said. It's a great question and a good thing for us to make sure that everyone remembers. Our Purpose 1 was the trial that was in cisgender women and as I noted Purpose 2 is our ongoing study in the cisgender gay men transgender women and men and gender non-binary people. Now that study is ongoing. It is the second trial that's necessary for filing and like Purpose 1, Purpose 2 is designed to evaluate the superiority of lenacapavir against the background HIV rate. That’s the primary endpoint and the secondary endpoint would be similar to Purpose 1 will be superior to truvada as a secondary endpoint. So, once we – if hopefully we’d demonstrate a positive results in Purpose 2, we will combine this data with Purpose 1 and move as quickly as possible to filing those data to lenacapavir for PrEP.
Johanna Mercier: So maybe just to complete the second part of that question around the growth in PrEP and like the opportunities lies ahead despite some of the payer roadblocks that you are referring to just a couple of points on that, one is, today the market for PrEP is growing at about 12% or so year-on-year, so nice consistent growth that we have seen over the last couple of years. Descovy coverage is over 90% of all lives are covered from an access standpoint. So today the daily orals do not have any concerns from an access standpoint. I think maybe what you're referring to is potentially as we think about medical benefits versus the pharmacy benefits that might create a little bit more access headwinds from a payer standpoint and we've seen that already with some of our competitors. As we think about lenacapavir, in light of not only the data, just most recently with Purpose 1, but also just the profile that it offers with a twice yearly sub cu I think it really allows us to redefine the PrEP market as a whole. And as much as we're seeing today maybe over 400,000 users in the US. We really see three major growth opportunities. One is around market size growth, the other one's around market share growth and the third one is on endurance. So if I just break those down a little bit, the market size growth is around reaching more users. So we'll beyond just white MSMS thinking about cisgender women, transgender men and women Latino black individuals, as well as young adults, reaching more prescribers in different settings than we are today and over time reaching more countries, right? Because right now PrEP revenues are really coming primarily out of the United States. From a market share growth standpoint Descovy is the number one branded daily oral today with over 40% share. And we believe lenacapavir will be number one from a long-acting standpoint and between the two together, we believe the Gilead presence in HIV prevention will also be leading and greater than where we are today. And then last but not least, it’s hired adherent and not just has to do with a domestic - the frequency of administration when you think about a twice the early subcu has much adherence than a daily oral and obviously, better outcomes. So all of those pieces together is what we are focused on as an opportunity for the future of prevention and with not only Descovy but obviously with lenacapavir around the corner potentially. And from an access standpoint we are thinking ahead as we think about even the work that CMS is doing when they think about making it our Part B drug, for a medical benefit in PrEP to ensure greater access, but we're also thinking through how is this going to impact from both from a prescriber standpoint and how do we support that reimbursement, challenges that I think others have been facing and how we basically do a very high touch approach here to make sure everyone who needs or wants PrEP gets access to their drug of choice.
Operator: [Operator Instructions] Our next question comes from [Inaudible] Leerink Partners. Go ahead, your line is open.
Daina Graybosch : Hi, thanks for the question. I want to ask on Anito-cel, a two-part. One is just the process fact. So I wonder if you can confirm whether you have completed enrollment in Imagine 1 and that’s what kind of follow-up time we can expect from the data should it be accepted at ASH? And then a deeper question on Imagine 3. I wonder what your approach is in Imagine 3 to bridging therapy so as to avoid the higher risk of death that was observed in the competitor trials soon after enrollment? Thank you. Thanks, Daina, so we've got Cindy Perettie here. We'll turn it up and heard answer that thank you for the question.
Daniel O'Day: Thanks Daina. We sort of got Cindy Perettie here. We’ll turn over to her to answer that. Thanks for your question.
Cindy Perettie: Thanks, Daina, we continue to be really excited about the potential with Anito-cel with a best-in-class profile and our enrollment target for Imagine 1 has been met. I think the second question you asked is what type of follow-up would we expect to see at ASH, and I think we're in the process of we did an initial cut obviously for the abstracts we'll do the second cut for the final sharing of the data. So I don't have the exact follow-up time. But we can certainly look to follow-up with you once we have that. Your second question was around Imagine 3 and bridging therapy. Right now, we will be moving - so we were able to complete the tech transfer as you heard from Dan into our Maryland production facility. So we will be supplying therapy out of our Maryland facility and we expect to apply a lot of the learnings that we have with our existing products on the market today and be able to get Anito-cell back to those patients in Imagine 3 as it relates to having time upfront to do bridging therapy. However, with the protocol design today, we do have the option to do bridging therapy if necessary for patients.
Operator: Our next question comes from Umer Raffat of Evercore. Go ahead, your line is open.
Umer Raffat: Hi guys. Thanks for taking my question. I'm very intrigued about your lenacapavir plus bictegravir trial heading into Phase 3. And I'm just trying to understand could this regimen possibly replace Biktarvy to a meaningful extent? Or would you rather have some sort of a low-dose nuke in that combination as well as a second alternative? I'm just thinking back to some of the [Indiscernible] experience, as well.
Johanna Mercier: So maybe I'll take that one Umer. So the len-bic combination is a single treatment regimen that really combined a best-in-class integrates inhibitor with the first-in-class capsid. The studies that we are doing both Phase2 and 3 are really first, that we looked at the complex regimen which that was kind of the first step and as we go into Phase 3, we believe we can get a broader label indication to also include all of our allergically suppressed. So as we think about that opportunity, we think it's an opportunity for an FTI that's optimized, simplified for complex regimens but also provides optionality in the viral decree to press the switch segment of the marketplace, So as we think about it as a portfolio perspective, we still believe that today Biktarvy is the standard of care and will remain as the standard of care from a daily oral standpoint. But we also see that's an opportunity in the switch segment. So naïve is a big piece probably the biggest piece for Biktarvy’s growth. And the switch because we have such a large share obviously, right? So from a switch segment that offers us another opportunity for us to play bigger market space in HIV.
Operator: Our next question is from Carter Gould at Barclays. Go ahead Carter. Your line is open.
Carter Gould: Great, thank you. Good afternoon. Thanks for taking the question. Maybe another one on Purpose 1. So again, the efficacy was very impressive. However we could see that north of 20% of patients that have nodules out to week 52. And I guess for Johanna, as you think about that profile in this setting recognizing they were only grade one, but sort of the long-term nature of those nodules, how do you see that influencing or impacting the profile, its demand and the potential for those patients then go back and you get retreated after six months? Thank you.
Johanna Mercier : Sure and Carter, just to explain a little bit, the nodules are because it's a drug depot, right? So the nodule actually gets smaller over time. What we've seen is actually very little discontinuation in Purpose 1 due to that. That's number one. Two is the nodules are sometimes palpable not all? But sometimes palpable but not visible and generally speaking. And so we believe that actually we will have some. flexibility as well as to where those injections play out and where because I think, they've been studied in different places not just in the stomach in the site. And so, I think that'll be an opportunity as well for people to be a little bit more flexible as to where they get their injections. So we're not overly concerned there at all. Actually, and really we're taking it from the data that we're getting from Purpose 1 and hopefully, we'll have similar data to learn from Purpose 2.
Operator: Our next question comes from Michael Yee at Jefferies. Mike, go ahead your line is open.
Michael Yee : Thank you, guys. We have one question on long-acting HIV, specifically. The potential for a Q6 month which I think could be a game changer. I think you have one or two of them on your slide and they are advancing. Can you tell me your confidence level on what you have there? Because if you follow HIV development you know that if it's generally safe and of all taller than significant barrel over reduction. You're in a pretty good spot in Phase 1, 2. Thank you. Let me know.
Merdad Parsey: Hi, Michael, it’s Merdad. Thanks, yeah. I think you raise the right question, which is that whenever we're looking at the long-acting, new long-acting agents, we have to be cautious about the transition from preclinical to clinical. We don't - we're not always able to predict the injection site reactions that you might get from the long-actings in particular. We were just talking about the nodules for lenacapavir but other more severe injection site reactions and then the human pharmacokinetics. So, I think we need those to play out to allow us to move forward and that's why you see multiple agents going into Phase 1. We have generated the number of molecules. We move them forward. We've been pretty aggressive in moving them forward in order to maintain our leadership in long-acting HIV treatment and prophylaxis. And so, once we start to see those data in Phase 1, I think that will help us decide both choosing between those molecules and where we want to go forward. Remember we're also moving our bNAb program forward, which will be our - which is our most advanced long-acting program with lenacapavir plus bNAbs and we should - we expect to get Phase 2 data from that that study, as well. So for those early programs, it's the usual risks and that which is why we take multiple shots and hopefully we'll be able to advance one of them quickly.
Operator: Our next question comes from Brian Abrahams at RBC Capital Markets. Brian, go ahead. Your line is open.
Brian Abrahams: Hi, there. Thanks so much for taking my question. You guys have an oral GLP-1 GS 4751 in your preclinical pipeline. Are you planning to move it forward? And as you've continue to diversify that portfolio, how are you guys thinking about the obesity landscape and potentially participating? Or are there other metabolic areas in adjacencies that you may be more interested in pursuing? Thanks.
Merdad Parsey: Thanks, Brian. Yes, we have shared some preclinical data on 4571. As you know, it is an internally developed oral GLP1 agonist which came out of our initial interest in our NASH program. And based on the data so far both preclinical and the toxicity we are planning a Phase 1 study for that molecule and that'll help us evaluate 4571 for weight management, obesity and other metabolic diseases. Once we generate those data, we will decide in a data-driven way, how best to proceed from there. And we'll just have to see how that plays out. We want to make sure if we dealt something as best-in-class and allows for a best-in-class profile. So we will update more as the data are generated.
Operator: Our next question comes from Chris Schott at JPMorgan. Chris, go ahead, your line is open.
Chris Schott : Great. Thanks, so much. My questions or just my other question was just on the US CAR-T franchise. Just want to get your latest view on how we should be thinking about sequential growth from here and maybe as part of that can we just get an update on kind of your community physician engagement with the CAR-T is any leading indicators that you're seeing there that'll help could move the guide some of the efforts or when we could start seeing the impact from some of these efforts in the US? Thank you.
Johanna Mercier: Thanks, Chris. We are really pleased with our strong cell therapy growth this quarter. And this is really part and parcel to our US refresh strategy. So as a reminder we restructured our sales team at the end of last year and we got our new sales team in place and trained and ready to go. And as part of that strategy we also focused for the next couple of quarters on really within the authorized treatment centers making sure those referrals occur between the lymphoma specialist to the CAR-T specialist. And that's what you're seeing as part of the excellent performance that we had this quarter. And we'll continue to deliver and really focus on the referrals within the AGC. We are also in parallel building up that those community practices and spending time educating both the community practices, I'd say regional hospitals and those institutions about the curative potential of CAR-T and why it's important to bring this into the therapy that they're offering to their patients. And we're making really good progress there including a lot of work with national payers. But despite all this, as you heard earlier from both Dan and Johanna, we are facing, it's a dynamic market. We're remaining cautious for the second half of this year as we continue to see some competitive headwinds both in cost competition. So we have new indications that came out in late May, early June time frame which are capturing physician mind share initially and we're also seeing out of cost competition with the bispecifics. But with all of that said, we are focused on execution and working with our physicians and institutions to raise awareness of the curative potential for CAR-T and will continue to do so in the second half of this year. As it relates to community practices, I shared last quarter that it's taking us a little bit longer than we had expected to get them up and fully operating. But we're making great progress as it relates to that and learning a lot along the way. So we're continuing to refine our blueprint as we onboard new centers.
Operator: Our next question comes from Steven Seedhouse at Raymond James. Steve, go ahead. Your line is open.
Steven Seedhouse: Yes, thank you very much. Just given some of the newer tailwinds out of oncology, so lenacapavir obviously which you indicated could redefine the PrEP market and then seladelpar, of course as well. When you just combine that with the updated view of oncology pipeline, are you still expecting the 2030 revenue mix to be about a third of oncology? Or is that more of a moving target? So when you could comment on the long-term outlook. Thank you.
Merdad Parsey: Yeah, thanks Steven for the question. So one-third of sales remains our target with the portfolio that we have today and what we believe is achievable without additional BD. I'll just remind you - keep in mind that the indications in that target are probability adjusted and many of them around 50% So, you'd expect to see puts and takes in that pipeline evolution. We certainly expected that when we when we set that target. So it allows for some programs to fail or fall short of initial expectations and others obviously succeed to support achieving that goal. I would just note that our oncology sales today are already more than a third of the way there. In quarter two 2024, they're about 12% of the total product sales growing nicely. So it's highlighting the progress we're making on this on this overall goal. I think you're right to point out also the progress and as you put at the tailwinds with a virology business and lenacapavir data as well as seladelpar, obviously, as that grows that that puts even more stretch to our ambition. It's a good problem to have. But I think the ambition we have is very much along the lines of diversifying our business as well as solidifying our base in virology and we're firmly committed to that strategy.
Operator: Our next question comes from Tim Anderson at Wolf Research. Tim, go ahead. Your line is open.
Tim Anderson: Thank you. I have a question on the tro toothpaste, so sometime before or around your end will get your phase 3 first line triple negative readout with trodelvy from the ASCENT-03 trial and we'll also be getting Astra's TROPION-Breast02 and the design of those trials are quite similar, which will allow try for the best side-by-side comparisons thus far of your drug versus Astra’s. And I'm sure you thought about this a lot. What's your prediction for how those results will likely stack up against each other? I'm guessing you'll show less ILD as one benefit, but how do you think efficacy and other safety metrics will compare?
Merdad Parsey: Sure, this is Merdad. Maybe, like I think you hit the highlights. We are – trodelvy has demonstrated great efficacy in the triple negative breast cancer space and we remain I think the only approved Trop-2 ADC and that space in triple negative is definitely where trodelvy is doing very well and has become the standard care for most physicians. So, I think that sets us up nicely and ASCENT-03 as we update the status of that trial as the end of the year rolls around I think will be part of the continuation of that story and our expectation for trodelvy’s success in triple negative breast cancer. We have felt that there are areas where our programs aren't differentiated and for Trodelvy as you mentioned our adverse event profile has remained largely predictable and very manageable on the part of physicians we certainly both the ILD you mentioned as well as stomatitis has been very different in their manifestations and mostly for trodelvy it's been neutropenia and diarrhea, which I think clinicians have gotten very comfortable with managing certainly when we speak to our KOLs. So we'll be looking for those data and we'll look for our data and in particular and I think is a continuation of where we think trodelvy can go and really solidify our position in triple negative breast.
Johanna Mercier : Yeah, I would just re-emphasize what Merdad said, I think just the fact we are the ones on the market today and so well established as the number one standard of care and triple negative breast cancer second line. I do think that that is a big differentiator here as we think about some of these data points.
Operator: Our next question comes from Salveen Richter at Goldman Sachs. Salveen, go ahead. Your line is open.
Salveen Richter : Thank you. Good afternoon, everyone. With regard to the long-acting program, could you speak more about potential read through from Purpose 1 to Purpose 2 and whether they're typically any differences in responses to HIV drugs in these different patient populations? And regarding the strategy to expand the PrEP market, could you speak to specific strategies here? And why you haven't been able to reach these patients already? Thank you.
Daniel O'Day: Thanks, Salveen it’s kind of a two-part. So I'll have Merdad start and maybe have Johanna add, as well.
Merdad Parsey: Yeah, Salveen, you're absolutely right that the patient populations are different is why we did the broad Purpose program to really get a diversity of patients early in our program to ensure that we can bring PrEP to a variety of populations early on in our in our development. And the patient populations are different we're talking really cisgender women relative to the Purpose 2 population, which is a different population. And our expectation is that those populations have different levels of awareness, different levels of compliance and there are use of PrEP otherwise for example with the oral PrEP agents. And despite that, I think the strength of the Purpose 1 data and the fact that you have people who are essentially protected for six months with no infections occurring in the cisgender women so far I think give us a lot of confidence that with I would expect some variability in the background infection rate in the population. If we are able to maintain that degree of protection in Purpose 2 we remain really confident that the outcome will be very powerful.
Johanna Mercier: And maybe to pick up on the second part of that, Salveen. So just to take a step back, I think it’s important to understand how much we have moved the needle actually when you think about the penetration in the prevention market. Just a couple of years ago, you were about 25% penetrating when you if you consider it from a CDC standpoint estimate, we're now over a third of that. So we have really grown this market and expanded it. I think one of the challenges has definitely been this is not a typical market that you it's not HIV treatment. It is a market where these are individuals that are not sick. They have no asymptomatic, obviously they have nothing and so therefore it's very challenging when you think about a daily oral pill, which is today over 95% of the total market where you think about current generics or Descovy share. And taking a pill every single day is incredibly challenging. So many use PrEP on demand. And I do think and in that the biggest population that we see are actually wide MSMs so very much a high commercial market here. And we believe that there is a real opportunity to whip something that has the profile of lenacapavir with a twice yearly subcu that we can truly expand the reach of the people, the individuals that could truly benefit from prevention for the future. And so, so that's kind of the steps. So I think it's an ongoing growth that we've been seeing. I think we have to do a step change here as we think about the future of prevention. I think we have to think completely differently about what lenacapavir could offer all of these people and really make a dent in this HIV epidemic.
Operator: Our last question comes from Olivia Brayer at Cantor Fitzgerald. Olivia, go ahead. Your line is open. Our next question comes from James Shin at Deutsche Bank. James, go ahead. Your line is open.
James Shin : Hey guys, thanks for the question. For PrEP, is the move to PARPI a net positive to access and when Len is eventually proved for PrEP. Do you expect the markets remain mostly by and bill? Thank you.
Johanna Mercier: Sure. I’ll take that one. So the move the entity for PrEPs that CMS is working on, I do think it's positive. I think it's really around providing greater access and potentially providing also the services that go with it. So the D2B could actually be a nice move despite the fact that today Medicare is a very small piece of the total prevention market. As we think about lenacapavir, I think it'll be both. I think there's probably opportunities for it to be both a pharmacy benefit as well as a medical benefit and be a buy and bill and I think we just need to think very differently because buy and bill in the current users of prevention this is not something that they're familiar with. And so this is something we're really thinking about today for tomorrow is to setting up that system to make sure they understand how to do this, if they want to do it, but that they have an option if they don't want to do it. And I think that's what we're kind of planning for us as we think about the future of lenacapavir.
Operator: That concludes the time we have for questions. I’ll invite Dan to share any closing remarks.
Daniel O'Day: Thank you, everybody. In closing, we the team here would like to summarize the quarter as follows: we had a very strong quarter of revenue growth and impressive bottom-line growth that highlights the leverage in our model. Secondly, we made progress that should enable us to build on that growth in the future including really remarkable data from the Purpose 1 one trial and from across the HIV portfolio with the promise to extend our HIV leadership well into the late 2030s and beyond; the imminent launch of seladelpar in the US and continued progress in oncology; and all this leaves us well positioned for the second half of 2024 when we will continue to focus on quarter after quarter of strong clinical commercial and financial execution. My thanks to the Gilead teams and to all of you for joining today. I want to hand it over to Jacquie Ross for some final comments.
Jacquie Ross: 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 third quarter 2024 earnings results on Thursday, November 7th? 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 third quarter. We appreciate your continued interest in Gilead and look forward on updating you on our progress throughout the quarter. |
AMGN | 2 | 2,024 | 2024-08-06 22:18:02 | Operator: My name is Julianne, and I will be your conference facilitator today for Amgen's Second Quarter 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer session at conclusion of the last speaker’s prepared remarks. In order to ensure that everyone has a chance to participate, we will like to request that you limit yourself to asking one question during the Q&A session. [Operator Instructions] I would now like to introduce Justin Claeys, Vice President of Investor Relations. Mr. Claeys, you may now begin.
Justin Claeys: Thank you, Julianne. Good afternoon, everyone, and welcome to our second quarter 2024 earnings call. Bob Bradway will lead the call and be followed by a broader review of our performance by Murdo Gordon, Vikram Karnani, Jay Bradner and Peter Griffith. Through the course of our discussion today, we will use non-GAAP financial measures to describe our performance and have provided appropriate reconciliations within the materials that accompany this call. We will also make some forward-looking statements, which are qualified by our safe harbor statement. And please note that actual results can vary materially. Over to you, Bob.
Bob Bradway: Okay. Well, thank you, Justin, and let me thank all of you for joining the call today. We're especially grateful in light of all of the volatility in the markets that you would carve out the time to be with us. So thank you. Through the first half of the year, our business is performing well, and we remain confident in our ability to deliver attractive long-term growth. We're achieving strong results the same way we always have, which is by providing innovative medicines to address challenging diseases. Starting with the in-market portfolio. Second quarter revenues grew 20% to $8.4 billion with numerous medicines delivering double-digit sales growth, including in general medicine, Repatha and EVENITY, in oncology, of course, BLINCYTO, an inflammation TEZSPIRE, and then turning to rare disease, which delivered more than $1 billion on the quarter. I would highlight that KRYSTEXXA, UPLIZNA and TAVNEOS, each delivered at least double-digit sales growth in the quarter, and TEPEZZA grew 8% year-over-year and 13% quarter-over-quarter. All of these first or best-in-class medicines are still early in their life cycles and have plenty of room to run through geographic expansion, new indications and/or new formulations. You'll hear more about these brands in a moment. Turning to research and development. We believe our pipeline looks very promising as well, not just in obesity, but across all of our therapeutic areas. We told you at the beginning of the year that we were anticipating more than a dozen significant pipeline milestones in 2024. We are, so far, so good. In the second quarter alone, we received accelerated approval for IMDELLTRA, a landmark new medicine for small cell lung cancer. And in fact, the physicians I've spoken to since approval are really excited about this drug as the first meaningful innovation in decades for these patients. We also received approval for BLINCYTO in the frontline treatment for B-cell precursor acute lymphoblastic leukemia, based on significantly improved overall survival rates. The frontline approval meaningfully expands the potential impact of BLINCYTO for all patients with B-ALL. We announced impressive Phase III data for UPLIZNA in IgG4-related disease, which is a grievous illness for which there are no currently approved therapies of any kind. Building on our success with TEZSPIRE in treating severe asthma, we announced exciting data from our Phase II study in patients with chronic obstructive pulmonary disease that earned this molecule breakthrough therapy designation. COPD is the world's third leading cause of death, and new treatment options are very much needed. We look forward to additional data readouts later this year across therapeutic areas, highlighted, of course, by top line data from the ongoing MariTide Phase II study. We're encouraged by the emerging data in this field, particularly in cardiovascular and renal disease areas of long-standing strategic focus for us. We are laser focused on preparing to launch a broad Phase III program for MariTide that includes obesity, obesity-related conditions and type 2 diabetes, and we're further ramping our investment to support MariTide in the rest of the pipeline. You'll hear more about that pipeline shortly on this call. All in all, this is a very exciting time for us at Amgen. And as always, I'm grateful to my Amgen colleagues all around the world for their enduring commitment to patients. And now let me turn things over to Murdo.
Murdo Gordon: Thanks, Bob. Execution was strong in the second quarter, driving 20% year-over-year sales growth and all of our regions delivered attractive growth. Sales of 12 products grew at least double digits, including Repatha, TEZSPIRE, EVENITY, TAVNEOS and BLINCYTO, all brands that are important to our future growth. Starting with our General Medicine portfolio. Sales of Repatha, EVENITY and Prolia collectively grew 20% year-over-year in the second quarter, driven by volume growth. Repatha sales increased 25% year-over-year to $532 million for the second quarter, now well on its way to becoming a multibillion-dollar business. In the quarter, we saw year-over-year volume growth of 46%, partially offset by lower net selling price. In the U.S., we see increased recognition of the importance of lowering LDL cholesterol by health care providers, payers and patients, which has significantly accelerated volume growth for Repatha. Our efforts have broadened insurance coverage and removed prior authorization requirements by several payers. In a recent survey, roughly 95% of cardiologists responded that Repatha is accessible and that access has improved significantly versus two years ago. EVENITY sales increased 39% year-over-year to $391 million for the second quarter. In the U.S., volume growth was supported by both increased prescription volume from existing EVENITY prescribers and an expansion of new prescribers. In Japan, EVENITY has been prescribed to approximately 600,000 patients to date and continues to be the segment leader with 45% of the bone builder segment. There are many women who remain at risk of a fracture due to postmenopausal osteoporosis. We're encouraged by the growth momentum we are driving and have conviction in the potential for EVENITY to help even more patients. Prolia sales increased 13% year-over-year to $1.2 billion for the second quarter. Volume growth continues to be supported by real-world evidence demonstrating Prolia superiority in reducing fracture risk when compared to alendronate in treatment-naive patients with postmenopausal osteoporosis at high risk of fracture. In inflammation, TEZSPIRE continues its strong trajectory with $234 million sales in the second quarter. Sales increased 76% year-over-year, primarily driven by uptake of the prefilled single-use pen. We see strong growth opportunity for TEZSPIRE given its unique differentiated profile and its broad potential to treat the 2.5 million patients worldwide with severe uncontrolled asthma. Otezla sales decreased 9% year-over-year for the second quarter with 2% volume growth offset by lower net selling price and unfavorable changes to estimated sales deductions. In the U.S., we saw a 3% year-over-year growth in new patient prescriptions in the quarter, driven by strong execution by our dermatology sales force and increased Otezla direct-to-consumer media activity. We've seen an increasingly competitive environment in dermatology with the introduction of novel topicals and new biologic treatments. Otezla retains an important role in this landscape given its broad label, safety profile and unique positioning as a first systemic treatment option for patients with cirrhosis. Enbrel sales decreased 15% year-over-year for the second quarter, primarily driven by lower net selling price. Going forward, we expect continued declining net selling price and relatively flat volumes. Enbrel is known for its efficacy and trusted by physicians. Its substantial health benefits and cash flow generation provide a solid foundation for our business. Turning now to biosimilars, where sales of our biosimilar products were relatively stable year-over-year for the second quarter. We're positioned for future growth with upcoming launches, WEZLANA, a biosimilar to Stelara and BEKEMV, a biosimilar to Soliris, are both expected to launch in the U.S. in Q1 of 2025. Our vertically integrated biosimilar business model ensures efficiency and provides attractive cash flows and returns for our shareholders. In oncology, sales of our seven innovative products, BLINCYTO, LUMAKRAS, Vectibix, KYPROLIS, Nplate, XGEVA and IMDELLTRA grew 12% year-over-year for the second quarter, driven by volume growth and higher net selling prices. In total, these products contributed almost $2 billion of sales in the second quarter. BLINCYTO sales grew 28% year-over-year to $264 million for the second quarter, driven by broad prescribing across academic and community segments for patients with B-cell ALL. BLINCYTO was recently granted approval by the U.S. Food and Drug Administration as a frontline consolidation treatment for patients with Philadelphia chromosome-negative B-cell ALL. Our commercial and medical teams are engaging key academic, regional and community customers in establishing BLINCYTO as a standard of care in this setting. LUMAKRAS sales increased 10% year-over-year to $85 million for the second quarter. We see future growth opportunities for LUMAKRAS coming from launches in new markets and additional indications. Back to back sales increased 9% year-over-year to $270 million for the second quarter, now annualizing at over $1 billion. We also drove strong performance of KYPROLIS, which grew 9% year-over-year and Nplate, which grew 12% year-over-year. Since our U.S. launch of IMDELLTRA in mid-May, we generated $12 million of sales in the second quarter. IMDELLTRA was recently approved for the treatment of adult patients with extensive stage small cell lung cancer with disease progression on or after platinum-based chemotherapy. We're seeing strong clinical conviction in IMDELLTRA in both academic and community settings, and while very early in the launch, we're encouraged by the adoption of IMDELLTRA and look forward to its potential to bring new possibilities to patients living with this aggressive disease. I'm pleased with our execution in the quarter, driving accelerated performance for our most important growth brands. And with that, I'll turn it over to Vikram, who will cover our rare disease portfolio.
Vikram Karnani: Thank you, Murdo. I am pleased to provide an update on rare disease, which delivered product sales of over $1.1 billion in Q2. Beginning with TEPEZZA for the treatment of thyroid-eye disease, second quarter sales were $479 million, reflecting growth of 8% year-over-year and 13% quarter-over-quarter, when compared to results from the legacy Horizon business. Recall that there are roughly 100,000 TED patients in the U.S., and penetration is currently only in the single digits. The main growth opportunity is within the roughly 80% of TED patients who have a low clinical activity score or CAS. We are expanding our reach among new prescribers, particularly ophthalmologists and endocrinologists who manage many of the low cash patients who can benefit from TEPEZZA. The impact of thyroid-eye disease on quality of life is often underestimated. So our focus is on educating health care providers about the significant effects on patients, even those with less visible symptoms. In addition, we are increasing our strategic focus in endocrinology with a dedicated sales force to engage in this important space. We are also making significant strides in improving access. Thanks to the recognition of TEPEZZA's efficacy by payers. To date, we have achieved favorable medical policy changes for greater than 55% of U.S. covered lives, compared to 50% last quarter and just 5% roughly one year ago. We expect to continue this momentum throughout 2024. International expansion remains a meaningful long-term growth opportunity for TEPEZZA with regulatory filings complete or underway in multiple geographies. With Japan as the next significant launch expected by early 2025. We also initiated a Phase III subcutaneous study and see this as an opportunity to increase adoption and improve the patient experience with an alternative option to our current IV formulation. KRYSTEXXA for patients with chronic refractory gout, delivered $294 million in sales in Q2, representing 20% year-over-year growth driven by volume growth from strong commercial execution. KRYSTEXXA with immunomodulation continues to redefine the standard of care for uncontrolled gout. UPLIZNA, for patients with neuromyelitis optica spectrum disorder, or NMOSD, delivered $92 million in sales in Q2, representing 35% year-over-year growth. International expansion of UPLIZNA is also underway with launches in multiple ex U.S. markets, including Canada, which launched earlier this year. In addition to NMOSD, we are excited about the impressive Phase III results with UPLIZNA in IgG4-related disease. And the potential it has to address a debilitating condition that impacts more than 20,000 patients in the U.S. We also look forward to the Phase III readout for UPLIZNA in myasthenia gravis later this year. Jay will address these in more detail in a moment. Sales of TAVNEOS were $71 million for the second quarter. Sales increased 137% year-over-year driven by volume growth. In the U.S., more than 3,500 patients with ANCA-associated vasculitis have been treated with TAVNEOS. Over 2,300 health care professionals have now prescribed TAVNEOS, a roughly 35% increase in the prescriber base so far this year. The integration of the legacy Horizon business is progressing nicely as we leverage Amgen's leadership in inflammation, world-class manufacturing and process development and extensive global footprint. Now I will pass it over to Jay for our R&D update.
Jay Bradner: Thank you, Vikram, and good afternoon, everyone. In the second quarter, we rapidly advanced our broad clinical pipeline of potentially first-in-class or best-in-class programs. We received two approvals in the quarter, a breakthrough therapy designation and delivered exciting clinical data for many programs, while eagerly awaiting additional data readouts later this year. Let's begin with general medicine. As previously mentioned, based on the interim analysis, we are seeing a differentiated profile with MariTide and are confident it will address important unmet medical needs in obesity, obesity-related conditions and type 2 diabetes. We remain on track and look forward to top line 52-week data from the ongoing MariTide Phase II study in late 2024. We are actively planning and expect to initiate a broad Phase III program in obesity, obesity-related conditions and diabetes, along with a Phase II trial investigating MariTide for the treatment of diabetes in patients with and without obesity. Beyond MariTide, we continue to progress our early obesity programs that consists of both oral and injectable incretin and non-incretin approaches. We expect one of these programs to enter clinical development later this year. Also in Gen med is olpasiran, our potentially best-in-class Lp(a) targeting small interfering RNA medicine, the fully enrolled Phase III cardiovascular outcomes trial of olpasiran continues to progress. To remind, Lp(a) is a genetically defined cardiovascular risk factor that is elevated in approximately 20% of individuals and for whom no effective or targeted therapies currently exist. In oncology, we continue to deliver on high conviction targets with differentiated therapies capable of delivering transformative clinical benefit for patients. Let's begin with IMDELLTRA, a first-in-class bispecific T-cell engager or BiTE molecule targeting DLL3 for small cell lung cancer. We're very pleased that the FDA granted accelerated approval to IMDELLTRA for the treatment of adult patients with extensive stage small cell lung cancer with disease progression on or after platinum-based chemotherapy. Further, we are pleased that the NCCN guidelines have been updated to include IMDELLTRA as a preferred option for patients with a chemotherapy-free interval less than or equal to six months and as an other recommended treatment option for patients with a chemotherapy-free interval greater than sixmonths. Based on the remarkable activity observed as a single agent in patients receiving second and third-line therapy, we are rapidly advancing IMDELLTRA into frontline therapy with three Phase III studies underway in both extensive and limited stage disease. One of these studies, DeLLphi-304, our confirmatory Phase III study in second-line small cell lung cancer has completed enrollment. Notably, IMDELLTRA is the first bispecific T-cell engager approved to treat a common solid tumor. The present study of tarlatamab in earlier lines and in the context of lower tumor burden, draws from our experience with our first approved bispecific T-cell engager BLINCYTO and B-cell acute lymphoblastic leukemia. Here, we observed a dramatic improvement in overall survival in minimal residual disease negative patients, along with improved tolerability. These BLINCYTO data provide evidence that directing the T cell in this manner is an effective means of finding and eliminating residual cancer cells that are drivers of occurrence. This June, based on the profound survival benefit observed in the treatment of frontline disease, the FDA approved an additional indication for BLINCYTO for the treatment of adult and pediatric patients one month or older with CD19 positive, Philadelphia chromosome negative, B-cell ALL and the consolidation phase of treatment, here regardless of minimal residual disease status. We continue to seek to expand the impact of BLINCYTO in newly diagnosed B-ALL through ongoing studies and with the further investigation of subcutaneous administration. Our first-in-class STEAP1 CD3 bispecific molecule, xaluritamig, has also demonstrated profound clinical activity in metastatic castrate-resistant prostate cancer, importantly, demonstrating our ability to target a second common solid tumor with a bispecific T-cell engager therapy. We are rapidly advancing this program and have now fully enrolled the monotherapy Phase I dose expansion as we continue to enroll patients in reduced monitoring and outpatient cohorts. Further, we are advancing the study of xaluritamig earlier in the prostate cancer treatment paradigm with combinations of xaluritamig and enzalutamide or abiraterone ongoing while we plan additional studies in earlier disease settings. In sum, with regard IMDELLTRA, BLINCYTO, xaluritamig as major advances, further establishing the broad potential of our leading bispecific T cell engager platform. To round out oncology, we have completed enrollment of FORTITUDE-101, a Phase III study of bemarituzumab, a first-in-class fibroblast growth factor receptor IIb directed monoclonal antibody administered in combination with chemotherapy in frontline gastric cancer. We are also rapidly advancing AMG 193, our oral PRMT5 inhibitor developed for MTAP-null solid tumors as both a monotherapy and in combination with other therapies. Additional data from the Phase I dose escalation and initial dose expansion study of AMG 193 in patients with MTAP-null solid tumors will be presented at ESMO in September. Lastly, we are pleased also to share that the FDA has granted an orphan drug designation to AMG 193 for the treatment of pancreatic cancer. Turning to inflammation. We are encouraged by the data arising from our Phase II study of TEZSPIRE in patients with moderate to very severe COPD. Together with AstraZeneca, we are actively planning for Phase III development in COPD. We are also pleased to announce that the FDA recently granted TEZSPIRE, a Breakthrough Therapy Designation as an add-on maintenance treatment of patients with moderate to very severe COPD, characterized by the eosinophilic phenotype. Beyond COPD, we continue to explore TEZSPIRE in separate Phase III studies in eosinophilic esophagitis and in chronic rhinosinusitis with nasal polyps, where top line data are expected later this year. Turning to rocatinlimab, a first-in-class T cell rebalancing monoclonal antibody targeting the OX40 receptor. The comprehensive rocatinlimab Phase III ROCKET program has successfully enrolled over 3,100 patients with moderate to severe atopic dermatitis. Five of the eight studies are now fully enrolled. The Phase III HORIZON study, part of this ROCKET program evaluates rocatinlimab monotherapy versus placebo in adults with moderate to severe atopic dermatitis. And it is ongoing with data readout anticipated in H2. Beyond atopic dermatitis, we continue to explore the potential of rocatinlimab in additional indications and have initiated a Phase II study in moderate to severe asthma as well as a Phase III study in prurigo nodularis. Shifting to rare disease, we are encouraged by the advancements of our rare disease pipeline with several mid- to late-stage opportunities. UPLIZNA, a CD19 B-cell depleting therapy offers a differentiated mechanism of action than other autoimmune therapies, durable efficacy with a convenient every six-month IV dosing schedule. This could be very important for chronic inflammatory diseases. Recently, we were excited to announce positive top line results from a Phase III clinical trial evaluating the efficacy and safety of UPLIZNA for the treatment of immunoglobulin G4-related disease. The trial met its primary endpoint, showing an astonishing 87% reduction in the risk of IgG4-related disease flare, as compared to placebo during the 52-week placebo-controlled window. All key secondary endpoints were also met and no new safety signals were identified. This is the first randomized controlled trial to demonstrate efficacy in the IgG4-related disease patient population. Regulatory filing activities are underway and full data from the trial will be presented at a future medical meeting. We are also studying a UPLIZNA in generalized myasthenia gravis through the ongoing Phase III MINT study. The MINT study is evaluating the efficacy and safety of UPLIZNA in patients with generalized myasthenia gravis, who are of a comparable disease severity and a comparable treatment experience to other recently approved biologic therapies. We are investigating UPLIZNA in the two predominant antibody serotypes that drive this disease, acetylcholine receptor positive and in muscle specific tyrosine kinase positive patients. MINT is the only trial attempting to demonstrate efficacy while removing the treatment benefit of steroids. Patients in the MINT trial who entered on steroids had a protocol specified taper by 24 weeks. We look forward to data readout in the second half of 2024. To expand the impact of our CD19 directed therapeutics to even more patients suffering from serious inflammatory diseases, compelled by both biological inferences and insights from small studies of CD19-directed therapies, we are launching a development program targeting CD19 positive B cell-mediated autoimmune disease with UPLIZNA and blinatumomab. This is an exciting and promising space with Amgen's strong capabilities in inflammatory disease and two well-characterized assets, we are very well positioned to lead in this rapidly advancing field. We will have more to say about these programs in due course. Lastly, in May, the FDA approved BEKEMV as the first interchangeable biosimilar to Soliris or eculizumab. Also in biosimilar development, registration-enabling studies are underway for ABP 234 and a biosimilar candidate to KEYTRUDA and ABP 206, a biosimilar candidate to OPDIVO. In closing, I'd like to thank my Amgen colleagues for their strong sense of service to patients facing serious illness, their intense focus and spirited collaboration during this momentous year and their commitment to growing the impact of both our research and our business through this portfolio of potential first-in-class and best-in-class medicines. I'll now turn it over to Peter.
Peter Griffith: Thank you, Jay. We're pleased with our strong second quarter performance and are on track with our 2024 full year goals and long-term objectives. We have a strong long-term growth outlook across our four therapeutic areas, driven by the breadth and depth of our innovative pipeline and in-market products, serving patients with serious illnesses around the globe. Starting with our second quarter results, as shown on Slide 27 of the slide deck, we delivered $8.4 billion in total revenue, a 20% increase year-over-year. It's the highest quarterly revenue in Amgen history, achieved with 26% volume growth. This means more patients than ever are receiving Amgen medicines. Excluding the addition of Horizon, product sales increased 5% year-over-year, driven by 10% volume growth. In the second quarter, we delivered a non-GAAP operating margin of 48.2% as a percentage of product sales with total non-GAAP operating expenses increasing 30% year-over-year. Non-GAAP cost of sales as a percent of product sales increased 0.4 percentage points on a year-over-year basis, primarily driven by higher royalties and profit share due to changes in sales mix. Non-GAAP R&D spending in the second quarter increased 30% year-over-year as we strategically invested in the late-stage pipeline, including MariTide, rocatinlimab and bemarituzumab as well as Horizon acquired programs. Non-GAAP SG&A expenses increased 36% year-over-year, primarily driven by the addition of Horizon. Excluding the addition of Horizon, non-GAAP SG&A expenses increased 14% year-over-year, driven by investment in Repatha, Otezla and EVENITY. Our non-GAAP OI&E resulted in a $700 million expense, up $400 million year-over-year, almost entirely due to increased interest expenses from the Horizon acquisition. We remain on track to deleverage with line of sight to retiring greater than $10 billion of debt by the end of 2025. This includes $1.4 billion of debt retired in the second quarter and $2.0 billion year-to-date. Our non-GAAP tax rate decreased 1.5 percentage points year-over-year to 14.9%, primarily due to the change in sales mix from the inclusion of our Horizon. In the second quarter of 2024, the Company generated $2.2 billion of free cash flow, a decrease of $3.8 billion -- a decrease from $3.8 billion in the previous year, driven by the timing of tax payments. In 2023, federal tax payments, including our repatriation tax were made in the fourth quarter, whereas in 2024, these payments were made in the second quarter. The Horizon integration is progressing well, and we expect to reach $500 million in pretax synergies by year three post acquisition, with roughly 50% to be realized by the end of this year. We expect accretion to non-GAAP earnings per share in 2024. We continue to execute on our capital allocation priorities. We're investing in the best innovation, both internally and externally to rapidly advance an innovative pipeline, multiple potentially first-in-class and/or best-in-class medicines across the four therapeutic areas. As I said earlier, this is reflected in our second quarter non-GAAP R&D spend of $1.4 billion, an increase of 30% year-over-year. Second, we continue investing in our business for long-term growth. We are expanding capacity in our state-of-the-art manufacturing facilities, including investments to support MariTide. Beyond manufacturing, we are opening a new global technology and innovation center in Hyderabad, India, which will attract talent at scale and accelerate digital capabilities across the organization, including artificial intelligence, data science, life science and medical. And third, we returned capital to shareholders as we paid competitive dividends of $2.25 per share in the second quarter. This represented a 6% increase compared to 2023. Turning to the outlook for the business for 2024 on Slide 29. We expect our 2024 total revenues in the range of $32.8 billion to $33.8 billion in non-GAAP earnings per share between $19.10 and $20.10. I will mention a few considerations as you model the remainder of 2024. On revenues, we expect mid-single-digit growth quarter-over-quarter in the fourth quarter compared to Q3. Our full year non-GAAP R&D expenses are now expected to increase more than 25% year-over-year as we further invest in our late-stage pipeline to support multiple late-stage studies underway across all therapeutic areas. As a result, we now project the full year non-GAAP operating margin as a percentage of product sales to be roughly 47% with Q3 operating margin lower than Q2. Total non-GAAP operating expenses for the third quarter are expected to grow at a similar rate to the first two quarters of this year. We expect OI&E to be approximately $2.5 billion, which includes the interest expense related to the $28 billion of debt raised for the Horizon acquisition. We continue to expect the non-GAAP tax rate to be in the 15% to 16% range, including the full year benefits associated with the inclusion of the Horizon business. As we have previously indicated, we have initiated activities to further expand MariTide manufacturing capacity. To support these initial efforts, we now expect capital expenditures of $1.3 billion in 2024 versus our most recent guidance of $1.1 billion to $1.2 billion. Our long-term outlook remains robust, and I am grateful to our 27,000-plus colleagues worldwide for their dedication to serve patients. This concludes our financial update. We will now begin our Q&A session. Julianne, please remind our participants of the process. Thank you.
Operator: [Operator Instructions] our first question comes from Yaron Werber from TD Cowen.
Yaron Werber: Jay, maybe a question for you, actually. I want to start with the UPLIZNA. And we noticed a few things. The MINT study was supposed to have complete -- completion around mid-May. And Amgen just posted a whole bunch of new job postings for GMJ and you have a slot on October 15 at the MGFA to present the data. As you noted, you're doing steroid tapering. It's a different trial design but you also did steroid tapering and the other two indications, NMO and IgG4. Can you talk a little bit sort of what are you hoping to see and what are you expecting to see from the data?
Jay Bradner: Thank you, Yaron, for the question, and for following the program so closely. we're Very excited about UPLIZNA, the CD19 B-cell depleting monoclonal antibody is showing really remarkable activity, the results in IgG4-related disease is a bellwether and is quite dramatic with a hazard ratio of 0.13, a P value of what, five to the minus seven. This was a stunning result and the first positive Phase III for patients with IgG4-related diseases. As you nicely picked up in your question, one of the opportunities of UPLIZNA is to get patients off steroids, and this is, therefore, a predefined ambition of UPLIZNA in both IgG4-related disease setting in that study as well, as in the generalized myasthenia gravis setting. Now these results won't be available until the second half of this year. And so I have no further update on that timing. But do stay tuned. We're so hopeful that this once every six months CD19 B-cell depleting therapy can differentiate substantially from available treatments like steroids and other B-cell targeting therapies and make a big difference for these patients.
Operator: Our next question comes from Salveen Richter from Goldman Sachs.
Salveen Richter: Just following up here on Yaron, could you speak to the clinical bar for UPLIZNA and myasthenia gravis, both on a placebo-adjusted basis and also on an absolute basis, given the notable steroid taper, which I believe the other therapies did not have included in their design. And with regard to this MGFA scientific session meeting, should we expect top line results before that presentation?
Jay Bradner: Thanks, Salveen. As I just mentioned to Yaron, we won't be providing further guidance on the timing of the results from the UPLIZNA study, the MINT study in myasthenia gravis of that you stay tuned. And as also, as shared knowing that patients with myasthenia gravis are repeatedly and over many, many months of treatment challenge by the requirement for persistent steroids, we built in a taper steroids on to this study. And these results to read out in the second half of this year will bring to light exactly how successful we are at liberating patients from steroids with every six months UPLIZNA.
Operator: Our next question comes from Evan Seigerman from BMO Capital Markets.
Evan Seigerman: Well, not a huge growth driver. I'd love if you could characterize on some of your negotiations with CMS on Enbrel. Many of your peers are pleased with kind of the fair price that they negotiated with CMS. Do you feel the same way? I'd also love to know how you're seeing about the impact of Part D redesign?
Murdo Gordon: Thanks, Evan, for the question. It's Murdo here. Overall, Enbrel continues to do well in the market despite a very competitive market in psoriatic arthritis and in rheumatoid arthritis. We also continue to have relatively stable volume despite all of the conversion that's going on in adalimumab with biosimilars. So we're quite pleased with prescribers adoption and continued value of Enbrel safety and tolerability, which is well established over a long period of time now in many, many years of experience. The process with CMS has concluded. We do have our price. I would just remind you that roughly 25% of Enbrel revenues come from Medicare Part D. So that will, in part, mitigate the impact of the CMS price reduction. And we continue to see that this is not a good mechanism to incentivize and reward innovation and it does not resemble one we've commonly described as a negotiation. So we've concluded that process. And we continue to look to help patients and support them with Enbrel in the market and we will watch the Part D redesign closely. We will look to see how PBMs redesign their formularies, and we will look to see how patients are impacted by the new model. While the cap may help, the out-of-pocket for many patients may actually rise. So we're watching it closely.
Operator: Our next question comes from Mike Yee from Jefferies.
Mike Yee: Pivoting to obesity. I know that you are on track for data later this year for the injectable product, which you claim as differentiated as other competitors have moved quickly both with their programs with injectables but also oral multiple companies are putting off. Can you just comment about how you feel about your positioning in this space, given others have multiple products moving to late stage and how you feel you can position yourself here, given just 133.
Jay Bradner: Thanks, Mike. Why don't I get started and Murdo, perhaps you could add on at the end. We are very pleased with the results that we've seen at the interim with the overall conduct of the Phase II study. Though there's been no further analysis since the interim, as of the interim all the arms were active, dropout had not been an issue. And we saw a differentiated profile with MariTide and remain confident that this medicine can address significant important unmet medical need in obesity, obesity-related conditions and, in particular, type 2 diabetes, as shared earlier in the call. There's no question that there is quite a democratized and broad base of innovation in this space. And potentially oral medicines could serve to address some of that still vast and remaining unmet need, and we follow these programs very closely. Still, the development of MariTide is advancing very briskly, as we now move to rapidly initiate a broad Phase III program. And we remain confident in what MariTide can offer for patients with obesity-related conditions as well as diabetes. Murdo?
Murdo Gordon: Yes. Thanks, Jay. I think the data continue to emerge in the obesity and obesity-related conditions landscape, and show a clear benefit that reducing weight will indeed -- with GLP-1-based mechanisms will indeed improve outcomes in many disease settings. So that continues to expand the market and grow it. I do agree with Jay that there will be patients who may seek oral options but I continue to believe that we have a very good, differentiated product here and that monthly dosing or even less frequently will continue to help patients persist on their weight loss medication and achieve, hopefully, some of those hard endpoint risk reductions that we're seeing in clinical trial presentations. I would say that we would report that we have a really good convenient dosing here with a single-use pen that we're working on. And that weekly injectable products are probably more vulnerable to orals than a convenient monthly dosing.
Operator: Our next question comes from Umer Raffat from Evercore ISI.
Umer Raffat: I wanted to focus on MariTide, if I may. A two-part question. First, it looks like your competitors are moving forward to Phase III on either smaller data sets or lesser further along from a Phase II, Phase III perspective. Just curious why you thought you definitely needed 52-week data? Was that mostly conservatism? Or is that some FDA feedback as well? And then also on CapEx, I feel like the $150 million guidance increase seems relatively trivial but it does imply CapEx being up 80% over first half. Could you please expand on whether it's API related or something else you have in mind?
Jay Bradner: Yes. Thanks. Pete, why don't I start on the overall development plan for MariTide and the value of the Phase II data that we'll have at the end of this year. Umer, as you know, this medicine coming out of Phase I showed a quite remarkable impact on obesity with a dramatic reduction in BMI, actually proved quite durable after just three doses, MariTide in that Phase I study, we saw persistent weight loss really out 150 days or more at some doses. The Phase II study is a much larger concern. This is a 592 patient study. It has 11 arms, it has monthly or as Murdo said, even less frequent dosing. As a part two that allows us to really follow up on this durability signal, and it will allow the precision selection of dose or doses that patients and their practitioners really desire. This also confirms to regulatory requirements entering into Phase III.
Peter Griffith: Umer, it's Peter on CapEx, as we previously indicated, we have initiated activities to further expand MariTide manufacturing capacity. So of course, those efforts, I said we now expect CapEx of $1.3 billion in '24 versus the most recent guidance, which was $1.1 billion to $1.2 billion.
Operator: Our next question comes from Jay Olson from Oppenheimer.
Jay Olson: Congrats on all the progress, especially in your BiTE platform. Can you talk about any feedback you're getting from clinicians on the IMDELLTRA launch and potential lessons learned from BLINCYTO that you can leverage for IMDELLTRA, especially since you're launching BLINCYTO now in B-ALL and developing a subcu formulation?
Bob Bradway: Take it in a couple of parts here. Murdo, do you want to share what we're learning from the launch?
Murdo Gordon: Yes. Thanks for the question, Jay. Obviously, it's very early given that this was a mid-May approval but I have to say we are extremely pleased with how both thought leaders and community oncologists are receiving IMDELLTRA in the market. Their clinical conviction is very high. They are moving quickly to establish care pathways for these patients given the monitoring requirement for IMDELLTRA. And this is -- this disease setting, as you know, is a really difficult disease setting. Patients can progress relatively rapidly after platinum-based chemotherapy in the front line. And so we're obviously moving very quickly with our medical teams, our account management teams and our sales organization to build rapid awareness and to help both academic and community oncology accounts, be able to treat patients easily and safely and have the appropriate settings for care follow-up. So very early, but this product is seen as a major transformation in this disease setting. Jay?
Jay Bradner: Yes. Thanks for the question, Jay. You picked up on something really interesting and that's leveraging the learnings of BLINCYTO. I mean this really is a platform capability that we enjoy with bispecific T-cell engagers. And already in the development of IMDELLTRA after its first approval, we are seeing significant readthrough of the BLINCYTO lessons, moving from later lines of therapy to earlier lines of therapy, to drive efficacy in the setting of reduced tumor burden. The utility of these medicines in combination, which is so much easier to access and assess than other complex modalities, say, like CAR-T and moving these medicines to the point of therapy where they can have the greatest impact, namely frontline, also pathways to reduce monitoring. Jay, we are leveraging all the learnings of BLINCYTO to drive and expedite the development of IMDELLTRA to be a component of frontline small cell lung cancer therapy, both with extensive stage and limited stage disease. And as Murdo shared, we do this work really quite inspired by the impact of the medicine, even so early in its launch, significant demand to learn and access and offer this medicine.
Bob Bradway: And Jay, I'd just add that when it comes to xaluritamig, I think you're question applies well there, too. So stay tuned. We'll talk more about xaluritamig's data emerge but we're optimistic about how we can apply the lessons of BLIN and IMDELLTRA to that as well.
Operator: Our next question comes from Mohit Bansal from Wells Fargo.
Mohit Bansal: I have a question for Jay. Again, on MariTide. Is there any reason to think that MariTide may or may not exhibit a different profile versus [indiscernible] on parameters such as lipid blood pressure or C-reactive protein? And how important is benefit on those parameters while you design your Phase III trial, something like outcomes trial or not?
Jay Bradner: Yes. Thank you, Mohit. I can surely understand the interest. And indeed, we are making all these measurements and more. We won't dimensionalize what we mean when we say differentiated profile at this time. We're so focused on completing this ongoing and well-conducted MariTide Phase II study but do expect to learn and listen more when ultimately we're able to be in a position to share the outcomes of Part A of the Phase II study. We are taking a comprehensive assessment to optimize dose and schedule and impact of this medicine.
Operator: Our next question comes from Gregory Renza from RBC Capital Markets.
Gregory Renza: Congratulations on the quarter. My question is just on the obesity franchise. As you and the team had mentioned to expect one of the early obesity programs to enter clinical development later this year. Just curious if you could elaborate on what lens you're using to nominate that first or that next program? I'd imagine it's rather complex in the assessment and any color you have on determining that choice and how to take that forward, would be great.
Jay Bradner: Gregory. Thank you. This is Jay, and thanks for following the early pipeline in its development. It's developing very nicely. As we've shared our strategy in the development of obesity medicines and medicines for obesity-related conditions. We're interested in really harvesting the insights of the incretin pathway but also moving beyond this pathway to other novel targets, some supported by genetic inferences but all of them supported by strong preclinical development packages. And so it is a multifactorial assessment that leads to the decision to resource the medicine in human clinical investigation. But it's a high degree of conviction that's required as the bars are ever rising within our portfolio for that resource as well as in the field. So more to follow on the mechanism and characteristics of this new medicine that we're intending to advance in the clinical investigation in the second half of this year.
Operator: Our next question comes from Chris Raymond from Piper Sandler.
Chris Raymond: And if I may, another obesity question. Just on MariTide, and I've heard you guys now talk for a long time about planning for a broad Phase III program. But I don't think you guys have ever talked even in generalities, when exactly this will happen. Can you maybe give a range here for when you anticipate kicking off enrollment in that program?
Bob Bradway: Chris, as you can expect, we're focused now on completing the Phase II trial and moving as swiftly as appropriate into Phase III. So we'll have more to say that over the course of the coming year. You can appreciate it's a competitively intense field. So we're not giving dates at this point.
Operator: Our next question comes from Carter Gould from Barclays.
Carter Gould: For Peter, on August 2, the U.S. Tax Court entered a decision against Coke. Their litigation was often referenced as sort of the best benchmark for sort of what you're facing. Appreciating that you took the deposit earlier this year but why shouldn't there be read through from that case? And maybe you could speak to your overall confidence in the outcome.
Peter Griffith: No. Thank you very much for the question, Carter. Nothing has changed in our evaluation of the case. Court dates set for November 4. We're confident in our position, right, where we've always been. We're confident in our reserves are at an appropriate level. And -- what I would say is, first of all, I don't see -- and Coke hasn't been as much a reference and I won't get into making comparisons. We refer once in a while to the Medtronic situation. But in general, what we've seen is that the tax court in the last several years has reinforced the value of manufacturing down in Puerto Rico. And so we look forward to stating our case. We're very confident where we're at. And that's all we've got to say at this time. No change. We're at where we were in terms of confidence, which is in the same place for the last 2.5 or 3 years now.
Operator: Our next question comes from Terence Flynn from Morgan Stanley.
Terence Flynn: Peter, another one for you here. I appreciate the incremental guidance on CapEx, but just was wondering if you could speak directionally about margins in 2025, given the likely scope of the MariTide obesity program.
Peter Griffith: Terence, we don't -- as you know, we don't guide long-term margins but let me just comment on what you're seeing this year. I'm happy to speak to that. And I think it's important. We're -- at Amgen, we're committed to a capital allocation hierarchy, where we first invest in innovation and first internal innovation. And so with that in mind, Terence, we've consistently said that we would flex out margin, which remember, with us, as a percentage of product sales, not revenue, if there were opportunities to achieve strong after-tax cash returns on our investment in excess of our hurdle rate. And then we would communicate that ahead of time. So this year, we shared with you at the beginning of the year, we felt operating margin to be about 48%. We see an opportunity here during the year to make some investments in the research and development activities with an emphasis, I would say, on development. That's up 30% year-over-year in the quarter, non-GAAP R&D. We now see non-GAAP R&D spend up over 25% year-over-year for '24, which we think is great because you've heard about the deep mid- and late-stage pipeline we have, driving MariTide in that deep mid- and late-stage pipeline. We're always focused Terence, whether it's this year or next year on productivity and prioritization, always looking for opportunities to generate capital to allocate the innovation. We've got a new program called technology and workforce strategy that we're moving along at speed and scale. I spoke about opening a new talent and innovation center in Hyderabad, India. So we are doing everything we can to preserve that margin, reallocate capital innovation and be the disciplined spenders of capital that Amgen always has been.
Operator: Your next question comes from Chris Schott from JPMorgan.
Chris Schott: Just had a question on MariTide and your plans in that Phase II diabetes study. Company, obviously, very excited about the broader opportunity for the drug but it does seem like diabetes is a more established market with maybe less of the capacity constraints than we've see in obesity. So can you just talk a little bit about what you think you need to see to be able to compete here in dislodging [compens]. And can you also confirm that the study is not needed to move forward in the Phase III obesity studies, or it's just a completely separate program related to the diabetes piece of things?
Bob Bradway: Can take this in two pieces again. Jay, why don't you address the first piece and then Murdo feel free to jump in.
Jay Bradner: Yes, absolutely. As you nicely identified later this year, we will initiate an additional dedicated Phase II study that will characterize MariTide from the treatment of diabetes in patients with and without obesity. And this new study is not a gating step at all for the Phase III program for patients with obesity, but conforms to regulatory guidance and importantly, allows us to optimize dosing for the diabetic patients, where medically, I can say [indiscernible], your considerable perspective, I'm unaware of a highly efficacious monthly or less frequently administered medicine for the treatment of diabetes. Murdo?
Murdo Gordon: Yes. Thanks, Jay. I would agree with you that the differentiation that we've talked about for chronic weight management would hold in a robust way in type 2 diabetes. And while there are lots of products that can control hyperglycemia and provided HbA1c control, there is a significant benefit if you can improve adherence and persistence. And we do believe that our monthly dosing could do that.
Operator: Our next question comes from Kripa Devarakonda from Truist Securities.
Kripa Devarakonda: Another obesity question but slightly tangential. I'm not sure if you've talked about this before but there's been a conversation about muscle preservation in people who are losing weight on glip. Have you evaluated this aspect with MariTide? Do you see this being the problem broadly in the space? And -- if so, where do you think MariTide would fit into that landscape?
Bob Bradway: Sure. Jay, why don't you jump in there?
Jay Bradner: Sure. No, thank you for your question. We -- as you apparently do as well, are following this class and class of medicines that provoke remarkable weight loss or the impact on healthy tissues, including but not limited to muscle, and the associated muscle loss that has been reported in the literature may relate mechanistically and may also relate to the quite dramatic cadence of weight loss of patients treated with these medicines. And in the fullness of time, we and others will have that answer. As you can imagine, we're making many of these measurements on our own study and don't have any report -- any data to report to you here today but we too are following this. And also the progress of some organizations that are seeking to administer medicine to support muscle loss with obesity medicines that is quite interesting to us given our legacy of muscle biology. But I would say these are early insights from the field. To my knowledge, they have not proven has yet to be debilitating to the patient but we like you follow with interest.
Justin Claeys: Julianne saying we're getting to the top half of the hour here. Maybe we'll just take two more questions.
Operator: Our next question comes from James Shin from Deutsche Bank.
James Shin: For the next obesity asset that's entering clinics later this year, can you specify whether this asset is aimed to fill in for 786, and whether there's no next obesity asset will work in tandem with 133?
Jay Bradner: Thanks, James. We won't today provide any further insight into this medicine. It's just too early. And as Bob shared, this is nicely for patients, a very competitive space. But as I shared earlier, in our deeper pipeline in obesity, we remain interested in the increasing pathway. We remain interested injectable. We're also pursuing oral medicines. And so in the fullness of time, we'll have a chance to share more. We're really playing the long game to drive true differentiation benefits to the patient and to access segments of the market that are not well addressed even by the current medicines.
Operator: Our last question will come from Gary Nachman from Raymond James.
Gary Nachman: So shifting to TEPEZZA. When do you think we'll see more of an acceleration in the low CAS patients? How has reimbursement been improving for those patients? And describe how much the Japanese opportunity could help next year? And then just talk about the overall resources you're putting behind TEPEZZA and the rest of the rare disease portfolio that obviously, a much bigger focus for you now, if that continues to ramp up at what pace and when you might get more operating leverage from that rare disease business?
Bob Bradway: A lot of questions there, Gary, but why don't we take it in a couple of pieces. Go ahead, Vikram.
Vikram Karnani: Yes. So thanks for the question, Gary. Look, we're pretty pleased with how we've been executing on TEPEZZA this year and driving it towards growth. As you rightly observed, there are a significant number of low CAS patients or low clinical activity score patients that are suffering from this disease who are not being appropriately treated. And specifically, that's about 80,000 out of the 100,000 addressable patients in the U.S. What we have been doing is seeing significant momentum on expanding our prescriber base, which now in addition to oculoplastic surgeons also includes ophthalmologists and endocrinologists. And this is a really important element here. The strategic focus in endocrinology is really important so that we can serve those low C-A-S patients, the low CAS patients favorably. You asked about improving access. To date, we have achieved favorable medical policy changes for greater than 65% of U.S. covered lives. And if you compare that to 50% last quarter and just over 5% about a year ago, I think we've made pretty good progress in enabling patient access using our Phase IV data that have become available last year. So we continue to see a significant growth opportunity for TEPEZZA in the U.S. while also recognizing that as we make progress with a lot of our execution efforts, there continues to be a time lag between when we knock down barriers for access, expand our prescriber base and see patients get on therapy.
Bob Bradway: In Japan, Gary, we expect that they'll be, again, an attractive market and this will be well received in that country, and we'll talk about that once we've launched there during the course of next year. With respect to leverage, I think I would just offer that we're on track. With respect to our synergy targets there, and we'll begin to get even more leverage as we're able to take full control of the supply chain for the rare disease products. And then I would just further observe, as we've said many times, that feel fortunate that there's a good overlap between some of our existing capabilities in sales and marketing and the needs of those rare disease products. So all in all, we remain really excited about what we're able to do for rare disease patients, the position we have and the likelihood of that just improving over time. So with that, let me thank all of you. I know we've gone a few minutes over the set time but thank you all for participating in the call, and we look forward to regrouping with you after the third quarter. Thanks.
Operator: This concludes our 2024 Q2 earnings call. You may now disconnect. |
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