Maintaining Our Gilead FVE and Our 60% Probability Weighting On Trodelvy in HR+/HER2- Breast Cancer

Gilead reported top-line data from a key phase 3 study of cancer drug Trodelvy in patients with a common form of breast cancer (HR+/HER2-, which accounts for 70% of breast cancer cases) that appears mixed, but we're not making any changes to our probability-adjusted estimates for future Trodelvy sales. The drug led to a statistically significant improvement in progression-free survival as compared with chemotherapy. However, Gilead was hesitant to declare the results clinically significant, so uncertainty remains around the magnitude of the benefit and the receptivity of the Food and Drug Administration to a filing based on this data. In addition, there was only a trend toward an improvement in overall survival at this first interim analysis, which means that Gilead may have to wait to see if this improvement becomes significant at a second interim analysis, or at a final analysis in 2024. Gilead had previously guided to filing in this indication in the second half of 2022. We think it's likely that the improvement in PFS is at the low end of the 1.5-2-month benefit that the trial was designed to be able to detect, although the trial tested later-stage patients and results may be difficult to extrapolate to earlier-stage patients. We still assume a 60% probability of launch in this indication in 2023 and potential sales in HR+/HER2- breast cancer of roughly $2 billion, if approved, by 2031 (overall, we assume potential for more than $7 billion in total Trodelvy sales by 2031, with $4.8 billion included in our valuation). While the TROPiCS-02 study seeks to extend Trodelvy's use beyond approved indications in triple-negative breast cancer and bladder cancer, Gilead is also working to expand approval to earlier lines of therapy (first-line triple negative breast cancer) and other solid tumors (lung cancer) with multiple phase 3 studies starting in 2022. We think Gilead's dominance in virology and growing portfolio in oncology continue to support a wide moat.