Operator: Our next question comes from the line of Geoff Meacham with Bank of America. Your line is now open.
Geoff Meacham: Great, thank you. We have another one on Cell Therapy but more on the profitability. This is a franchise that’s almost $2 billion in sales. You guys have improved the turnaround time. You’ve reached scale. You’ve treated a ton of patients. What can you tell us about the progress that you’ve made to making this a profitable franchise? I’m just thinking not for the current products, but also looking out five years plus. Thank you.
Andrew Dickinson: Hey, Geoff, it’s Andy. Thanks for the question. It’s a great question. You’re absolutely right. The Cell Therapy business has made tremendous progress over the last five or six years and evidenced most recently by the faster turnaround time in manufacturing that we talked about on our prepared remarks, going from 16 days to 14 days. And again, it’s just the beginning from our perspective of what we can continue to do with this business. So while we don’t provide specific guidance, we have said when we announced the Kite transaction that we expected to be profitable, breakeven or profitable and accretive by the end of year four. We got there shortly after that. All of the metrics that we look at on the business have improved over time.
We’ve continued to make significant progress on our manufacturing efficiency, manufacturing costs, despite the fact that we’ve opened three global manufacturing centers. And each time you do that, when you move to commercial manufacturing, it impacts your gross margin. So I’m really proud of what the team has done. And same thing on the operating costs. You see in the fourth quarter, we announced some restructuring charges, Geoff, that hit our GAAP results. Part of that was a restructuring at Kite. Cindy and her team looked at the structure and made changes to the structure that we think will continue to drive growth and efficiency in the business over the long run. So maybe the last thing I’d say is that when we look at the business, this is a business that we have line of sight to biologics margins and profitability.
We’re really growing the business, Geoff, as you know, for long-term sustainability and growth and less near-term profitability, but it’s certainly exciting that the business is doing as well as it is.
Cindy Perettie: I think the only thing I would add to Andy’s comment is beyond the three manufacturing facilities, we also have our own viral vector facility. So given the fact that viral vector has had some supply challenges, That’s something that we are not suffering from. So we own these sort of end-to-end cost of goods for our products.
Jacquie Ross: Can we have our next question please, Victoria?
Operator: Of course. Our next question comes from the line of Michael Yee with Jefferies. Your line is now open.
Michael Yee: Hey, guys. Thank you for the question. We have a HIV question. There were some comments around the dynamics of the channel mix as it relates to HIV pricing. And I was wondering if you could just remind us about what the driver of the benefit was in ‘22 and ‘23 and how that changed as we go into ‘24 and why the difficulty comps? Is that a change in mix between commercial and Medicaid [indiscernible] just explain that that would help us understand what’s going on there for 2024? Thank you.
Johanna Mercier: Sure, Michael. Hi, it’s Johanna. Let me take that one. So what you’re referring to is actually we saw some pricing favorability in Q4 of ‘22 and the first half of 2023. That pricing favorability was namely driven by actually just the inflation being so high and therefore some of our rebates are actually based on that inflation rate. And so therefore there was actually upside during those quarters. We knew that that was not going to repeat itself. So we had kind of shared with you, I think, from Q3 on that this was going to normalize. And so that was kind of what happened in the first half of 2023. As we think about the second half of 2023, and mainly the fourth quarter, what we did see there is very strong demand, and that continued throughout the whole year, but we had some fluctuations, some quarterly variabilities, mainly due to channel mix and more government channels resulting in lower average realized price because of higher rebates.
And so you really have to look at it on a full year basis. And so that’s why it’s so important to know that HIV performance on it will always have some quarterly variabilities. And we always need to look at the full year to really get the full picture of what’s going on. HIV for the full year of 2023 grew 6% with nearly $1 billion in revenue growth driven by Biktarvy obviously growing at 14% and at 48% share with 3% share growth in that year outpacing all competitors. And so we’re really proud of the demand driven results that we’ve seen in 2023. And as we think about 2024 and our predictions for ‘24, we believe that our expectations is going to be in line with HIV treatment, which is still about 2 to 3 points. Layer on top of that, the demand growth from Biktarvy and Descovy for PrEP, and that’s why we’re expecting about a 4% growth in HIV.
So that gives you the full picture of what’s going on and what happened in the past. So we don’t expect that on a yearly basis, but on a quarterly basis we do expect that variability and I would expect that that will continue as we move forward.
Operator: Our next question comes from a line of Chris Schott with JPMorgan. Your line is now open.
Chris Schott: Great. Thanks so much for the question. Can you just talk about the TIGIT program and what drove the decision to step up your investments here? And maybe as part of that, can you elaborate a little bit more on the decision to de-emphasize the PD-L1 high population in favor of the [indiscernible]. So any color there would be appreciated. Thank you.
Andrew Dickinson: Hey, Chris, it’s Andy. Maybe I’ll start on the TIGIT program and the revised agreement with Arcus that we announced last week, and then Merdad can answer the second part of your question. It’s relatively simple. If you step back, you’ve heard us say this before, but I’d reiterate that we value the partnership that we have with Arcus and the programs that their team has developed. And the recent updates to your question to the partnership really allow both companies to more efficiently deploy our teams and capital. We also focused on streamlining decision-making and the additional capital allows us to expand the overall clinical study footprint. So there are a number of things that both companies accomplish through the amendment. It does reinforce our support and belief in their programs broadly, not just TIGIT. There’s a lot to be excited about there that you’ll see play out over the coming years.
Merdad Parsey: And excuse me, this is Merdad. I think you’re referring to the ARC-10 study. And as you may recall, we started that study together with Arcus back in 2021 outside the US with a chemo comparator arm. And at the time, there was really limited access to PD-1 — PD-L1 inhibitors outside the US. And so, we subsequently updated that study march of last year to include PD-L1 inhibitors as the standard of care was evolving. It took us time to get this all going. And while that was happening, we had a number of competitors launch similar trials in the space with their TIGIT antibodies. So as a result of all that, the enrollment for the ARC-10 trial wasn’t as robust as we had hoped for and as it had been. And STAR-121, which is the all-comer study, was recruiting very well.
And so we decided to really prioritize our efforts for that all-comers population where we think we could be first or second in class. And it was really a prioritization to ensure that we could stay ahead and keep moving the molecules forward as quickly as possible.
Operator: Our next question comes from a line of Brian Abrahams with RBC Capital Markets. Your line is now open.
Brian Abrahams: Hi, good afternoon. Thanks so much for taking my question. I realize this is pending KOL and regulatory discussions, but I was wondering if you could frame the potential next steps for the PD-L1 poor responders. Do you think this is a fileable population for Trodelvy in second-line lung, or might you also consider running another study in that population? And along those lines, I’m curious what you’re expecting to see from the updated EVOKE-02 data this year and how that might shape your overall plans for Trodelvy in lung? Thanks.
Merdad Parsey: Sure. This is Merdad again, Brian. So maybe I’ll take the second part first. On EVOKE-02, as you can imagine, we showed last year ORR data and [Technical Difficulty]
