Executive Summary / Key Takeaways

• Gilead Sciences, a long-standing leader in HIV and viral hepatitis, is strategically diversifying its portfolio into oncology and inflammation through targeted acquisitions and a robust pipeline of innovative therapies.
• Despite a relatively flat top-line performance in Q1 2025 driven by expected headwinds like the Medicare Part D redesign and lower Veklury sales, the underlying base business shows demand-led volume growth, particularly in HIV and the newly launched Livdelzi for PBC.
• The company's differentiated technology platforms, including first-in-class capsid inhibitors (lenacapavir), TROP2 ADCs (Trodelvy), and leading CAR T-cell therapies (Yescarta, Tecartus, Anito-cel), form the core of its competitive moat and future growth potential.
• Disciplined operating expense management and strong cash flow generation underpin financial strength, enabling strategic investments in the pipeline and business development while consistently returning capital to shareholders.
• Upcoming pipeline milestones, particularly the potential U.S. approval of twice-yearly lenacapavir for HIV prevention and further data readouts for Trodelvy and Anito-cel, are critical catalysts expected to drive the next wave of growth beyond the current period of patent stability.

A Legacy of Innovation, Forging a Diversified Future

For over three decades, Gilead Sciences has stood at the forefront of biopharmaceutical innovation, initially carving out a dominant position in the fight against HIV and viral hepatitis. This foundational strength, built on pioneering antiviral therapies, has provided the bedrock for the company's strategic evolution. Recognizing the need to diversify and address broader areas of unmet medical need, Gilead has embarked on a deliberate expansion, notably into oncology and inflammation. This pivot has been fueled by significant business development activities, including the acquisition of Immunomedics, bringing the TROP2 antibody-drug conjugate (ADC) Trodelvy into the fold, and the more recent acquisition of CymaBay Therapeutics, adding seladelpar (Livdelzi) and establishing a foothold in primary biliary cholangitis (PBC). Collaborations, such as the recent partnerships with LEO Pharma in inflammation and Kymera Therapeutics (KYMR) in oncology, further underscore this strategic push to build a multi-franchise powerhouse.

This strategic diversification is underpinned by a commitment to technological differentiation, which forms a critical component of Gilead's competitive positioning. In HIV, while maintaining leadership with therapies like Biktarvy, the company is pioneering long-acting options centered around lenacapavir, a first-in-class capsid inhibitor. Lenacapavir's twice-yearly subcutaneous dosing offers a significant convenience advantage over daily oral PrEP and even other injectable alternatives, potentially redefining the prevention market and expanding access to underserved populations where adherence to daily pills is challenging. Clinical data, such as the 100% efficacy observed in the PURPOSE 1 trial, highlight its transformative potential.

In oncology, Gilead is leveraging distinct modalities. Trodelvy, a TROP2 ADC, has demonstrated clinically meaningful survival benefits in metastatic breast cancers, establishing itself as a standard of care in second-line metastatic triple-negative breast cancer. The company is actively exploring its potential in earlier lines and other tumor types, including small cell lung cancer. In cell therapy, through its Kite Pharma subsidiary, Gilead has established leadership with Yescarta and Tecartus. The focus here is not only on clinical efficacy but also on operational excellence in manufacturing, aiming for rapid turnaround times and high success rates (96% for Yescarta in certain settings). The pipeline candidate Anito-cel, a BCMA CAR T, shows promising efficacy and a safety profile notable for the absence of observed delayed neurotoxicities, positioning it as a potential best-in-class therapy. These technological platforms, from novel mechanisms of action to complex manufacturing processes, provide Gilead with distinct advantages in efficacy, safety, convenience, and operational execution, contributing to its competitive moat against rivals.

Performance Amidst Transition and Headwinds

Gilead's recent financial performance reflects a business in a period of strategic transition, balancing the strength of its core franchises with investments in new growth drivers and navigating external headwinds. In the first quarter of 2025, total revenues remained relatively flat year-over-year at $6.67 billion, primarily impacted by lower sales of Veklury and a decline in Oncology sales, which offset growth in HIV and Liver Disease. This performance was also influenced by the initial impact of the U.S. Medicare Part D redesign, which introduced increased manufacturer contributions.

Despite the flat top-line, the underlying base business, excluding Veklury, demonstrated growth. The HIV franchise, the historical engine of Gilead's growth, saw sales increase 6% year-over-year to $4.59 billion in Q1 2025. This growth was driven by higher demand and average realized price, even while absorbing the initial effects of the Part D redesign. Biktarvy continued its strong trajectory, with sales rising 7% to $3.15 billion, benefiting from demand and patient switches. Descovy sales saw a notable 38% increase to $586 million, fueled by higher average realized price and demand, reflecting the expanding U.S. PrEP market, which has shown robust double-digit year-over-year growth.

The Liver Disease portfolio contributed $758 million in Q1 2025 sales, up 3% year-over-year. This growth was primarily driven by the early momentum of Livdelzi, which generated $40 million in its second full quarter since its U.S. accelerated approval in August 2024, and increased demand for HBV and HDV products in Europe. Veklury sales, inherently tied to COVID-19 hospitalization rates, saw a significant 45% year-over-year decline to $302 million in Q1 2025 due to decreased hospitalizations.

The Oncology segment experienced a 4% year-over-year decline in Q1 2025 sales to $757 million. This was primarily due to a 3% decrease in Cell Therapy sales ($464 million) and a 5% decrease in Trodelvy sales ($293 million). Cell Therapy faced accelerating competitive headwinds, particularly for Tecartus outside the U.S., while Trodelvy sales were impacted by inventory dynamics and lower average realized price, despite underlying demand growth.

Financially, the first quarter of 2025 demonstrated strong bottom-line performance. Net income attributable to Gilead was $1.32 billion, a significant improvement compared to a net loss of $4.17 billion in Q1 2024. This turnaround was largely due to the absence of substantial one-time charges incurred in the prior year, including a $3.9 billion acquired IPR&D expense related to the CymaBay acquisition and a $2.4 billion IPR&D impairment charge related to Trodelvy's NSCLC program. Operating expenses reflected disciplined management, with R&D decreasing 9% and SG&A decreasing 8% year-over-year, contributing to operating leverage.

Gilead maintains a strong liquidity position, with $7.9 billion in cash and cash equivalents as of March 31, 2025. While net cash provided by operating activities decreased in Q1 2025 due to higher tax payments and inventory purchases, net cash used in investing activities saw a substantial decrease due to the absence of large prior-year acquisitions. Financing activities included significant debt repayments ($1.76 billion) and share repurchases ($730 million), reflecting the company's capital allocation priorities of investing in the business, pursuing strategic transactions, growing the dividend (recently increased to $0.79 per share), and managing share count.

Competitive Landscape and Strategic Positioning

Gilead operates within a highly competitive biopharmaceutical landscape, facing off against large, diversified players like Pfizer (PFE), Merck & Co. (MRK), AbbVie (ABBV), and Johnson & Johnson (JNJ), as well as specialized biotech firms and generic manufacturers. While some larger peers boast greater overall revenue scale and broader portfolios, Gilead's strategic focus and technological strengths provide distinct competitive advantages in its core areas.

In HIV, Gilead holds a dominant position, particularly with Biktarvy, which commands over 50% of the U.S. treatment market and continues to gain share against alternative regimens. This leadership is supported by a deep understanding of the disease and a robust pipeline aimed at extending its franchise well into the future with long-acting options. While competitors like Merck and GSK (GSK) also have HIV treatments and prevention candidates, Gilead's comprehensive portfolio and pipeline, anchored by lenacapavir's unique profile, position it strongly to maintain its market leadership. The growing U.S. PrEP market presents a significant opportunity, and Gilead's efforts to expand access and awareness, coupled with the potential launch of lenacapavir, aim to capture a larger share of this evolving market, including populations historically underserved by daily oral options.

In Oncology, Gilead is a growing force, competing with established players like Merck (Keytruda), AstraZeneca (AZN)/Daiichi Sankyo (Enhertu), and others with ADCs and immunotherapies. Trodelvy competes directly with other TROP2 ADCs and standard chemotherapy regimens. Its demonstrated overall survival benefit in key metastatic breast cancer settings provides a crucial differentiator. In cell therapy, Kite is a pioneer, competing with other CAR T developers and emerging bispecific antibodies. While facing competitive headwinds from new product launches and indications, Kite's focus on manufacturing excellence, clinical data highlighting durable responses and manageable safety profiles (including the promising Anito-cel data), and efforts to expand treatment into community settings are key strategic responses. Compared to some peers, Gilead's oncology portfolio is less diversified, but its focus on high-potential modalities like ADCs and CAR T-cell therapy allows for targeted investment and potential leadership in specific niches.

Financially, Gilead demonstrates strong profitability metrics compared to many larger, more diversified peers. Its TTM Gross Profit Margin of 78.29% and Operating Profit Margin of 28.61% are competitive within the industry, reflecting efficient operations and high-margin products. While its overall revenue growth rate (5-7% annually in the base business) may lag some faster-growing peers like AbbVie, its strong cash flow generation (TTM Free Cash Flow of $10.30 billion) and lower debt-to-equity ratio (1.30) provide significant financial flexibility for strategic investments and shareholder returns. The recent S&P debt rating upgrade from BBB+ to A- further underscores this financial strength and positive outlook.

Outlook and Risks

Gilead's outlook for 2025 reflects a year of transition, marked by significant external factors masking underlying business strength, but with clear catalysts for future growth. The company maintains its full-year 2025 guidance, expecting total product sales between $28.2 billion and $28.6 billion. Excluding Veklury, sales are projected to be $26.8 billion to $27.2 billion. HIV sales are expected to be approximately flat year-over-year, a direct consequence of the estimated $900 million headwind from the Medicare Part D redesign, which will obscure the anticipated robust demand-led volume growth. Veklury sales are projected at around $1.4 billion, representing a $400 million headwind compared to 2024, reflecting lower expected COVID-19 hospitalizations. Foreign exchange is also anticipated to be a $250 million headwind.

Despite these top-line pressures, management expects continued operating expense discipline to drive bottom-line performance. Non-GAAP diluted EPS is guided between $7.70 and $8.10. Non-GAAP product gross margin is expected to remain strong at 85% to 86%. R&D expenses are projected to be roughly flat compared to 2024, reflecting an appropriate scale of investment for the diverse pipeline. Acquired IPR&D is guided at approximately $400 million, including the $250 million upfront payment for the LEO Pharma collaboration. SG&A expenses are expected to decline by a high single-digit percentage, highlighting ongoing cost management efforts. Operating income is projected between $12.7 billion and $13.2 billion, with an effective tax rate of approximately 19%. Management anticipates a return to HIV growth in 2026, following the 2025 Part D reset.

The key catalysts for future growth are centered on pipeline execution and new product launches. The potential U.S. approval of twice-yearly lenacapavir for HIV prevention (PDUFA June 19, 2025) is a major near-term event expected to redefine the PrEP market. The European launch of Livdelzi for PBC is underway, with expected momentum building in 2025. Positive data readouts for Trodelvy in first-line metastatic triple-negative breast cancer (ASCENT-03 and ASCENT-04) could expand its addressable market significantly, with potential launches in 2026. Further data from the Anito-cel program and the initiation of its Phase 3 trial are critical steps towards a potential launch in multiple myeloma in 2026. The advancement of the long-acting HIV treatment pipeline, including weekly and longer-duration options, is crucial for maintaining leadership beyond 2033.

However, several risks could impact this outlook. Competition remains intense across all therapeutic areas, particularly in cell therapy and ADCs, potentially impacting market share and pricing. Regulatory hurdles and clinical trial setbacks are inherent risks; recent examples include the discontinuation of the Trodelvy NSCLC second-line program following EVOKE-1 failure and the voluntary withdrawal of its accelerated approval in bladder cancer following TROPiCS-04, as well as the recent clinical hold on trials for a weekly oral HIV combination. Pricing and reimbursement pressures, exacerbated by the IRA and scrutiny on programs like 340B, pose ongoing challenges to revenue and profitability. Litigation and government investigations, while some have been settled, continue to present potential liabilities. Operational risks related to manufacturing, supply chain, cybersecurity, and global operations also warrant attention.

Conclusion

Gilead Sciences stands as a financially robust biopharmaceutical company leveraging its historical dominance in HIV to fuel strategic diversification into high-growth areas like oncology and inflammation. While facing a transitional year in 2025 marked by external revenue headwinds, the underlying demand-led growth in its core business and the promising trajectory of its pipeline, particularly in long-acting HIV prevention and treatment, Trodelvy's potential expansions, and the Anito-cel program, position the company for renewed growth beyond the near term. Gilead's differentiated technology platforms provide a competitive edge, and its disciplined operating model ensures strong profitability and cash flow, enabling continued investment in innovation and consistent shareholder returns. Despite navigating competitive pressures and inherent industry risks, Gilead's strategic focus, pipeline catalysts, and financial strength underpin a compelling investment thesis centered on long-term growth and durability well into the next decade.