Umer Raffat: Hi guys. I have a question on the model today. I feel like consensus models have a lot of operating leverage in the long-term estimates for Gilead. And don’t — consensus doesn’t carry more than low single-digit OpEx growth across SG&A and R&D. So with SG&A growing mid-single digits this year after the onetimers and R&D growing high single digits, I guess, should we assume that given all the collaborations and recent acquisitions that you really do need to be growing R&D meaningfully from current levels? I’m just trying to understand where the OpEx is heading longer term.
Andrew Dickinson: Hey Omar, it’s Andy. Thanks for the question. maybe a couple of things. First, I’d highlight that as you’d expect, we are mindful of expenses and don’t expect R&D or SG&A to grow indefinitely. That said, we’re going to continue to invest thoughtfully in the pipeline, and you’re already seeing, I’d highlight the tangible benefits of doing that. So that’s a really important point. We started on the R&D side. As you know, we started 8 Phase III trials this year. We’re going to — as you heard, start at least another 5 in 2023. So we are in an investment cycle. Over the longer run, and maybe one other thing before I kind of talk about the long-run picture to your question, again, when you benchmark us relative to competitors, as you know, historically, for both SG&A and R&D we underspent.
And it’s partly why we didn’t have the pipeline that would drive the top quartile sustainable growth, that we aspire to, and we think we’re on track to achieve today. So we’re going to continue to invest. As you’ve heard and especially in these late Phase III trials that have started, we’ll continue to do BD not at the same pace or level that we have over the last 4 or 5 years as we’ve rebuilt the pipeline. But our percent, our R&D as a percent of revenue this past year was below industry averages, I think, right around 19%. Same thing is true for SG&A as a percent of revenue. And even our guide suggests, I think, reasonable spend levels relative to comps. In the longer run, to your point, so we think about things over a longer cycle, we will not — we do not expect to grow R&D or SG&A above the rate of earnings growth.
And there is a lot of leverage in the model, we expect over the long run. So we’re getting to the point where you’re starting to see that play through, especially at the top line and then over the coming years, we expect that you’ll really see that play through on the bottom line as well. So thanks for the question.
Operator: Thank you. The next question is from Olivia Brayer with Cantor Fitzgerald. Please proceed.
Olivia Brayer: Hey good afternoon guys. Thank you for the question. What’s the latest thinking with respect to the regulatory path forward for magrolimab? I guess the question really is, could we see survival data from that ENHANCE interim later this year that’s actually mature enough to file on? And is there anything beyond OS benefit that FDA has pointed to for a complete submission package? Thank you.
Merdad Parsey: Hi, Olivia, this is Merdad. Yes. I think maybe it’s good to step back and just clarify in the sense of — how we’re approaching interim analysis for our studies. So the pivotal macro study is powered for events at the final analysis. And of course, we run interim analyses, I think, as is norm for the industry to evaluate things like safety, but also we spend a little bit of alpha in case there is a dramatic improvement in the primary endpoint and offer ourselves the opportunity to start early to benefit patients. So the OS data continue to mature. The next interim this year dependent on events, of course, is not the final analysis. So it really depends on how big the magnitude of improvement is in OS, whether that leads to a stop in the study or an unblinding in the study.
Our expectation is that we go to the final OS analysis. Of course, we always hope an upside surprise at one of the earlier interim analysis. And then in terms of approval, I think we really need to have OS. We initially had hoped that we could get, for example, an accelerated approval with CR rates alone. We think we need to do both now to have both a complete response rate, but primarily be driven — not primarily be driven but importantly, have OS data as well in order to support a file.
Operator: Thank you. The next question is from Simon Baker with Redburn. Please proceed.
Simon Baker: Thank you. First on on the NICE recommendation. Clearly, that’s good from a U.K. perspective, but it’s the case that NICE recommendations are closely followed by a much larger range of countries. So I just wondered if this does indeed have a spill over benefit beyond the U.K. for Yescarta. How important is this approval in the U.K.?
Christi Shaw: Hey there Simon, it’s Christi. Thank you for the question. So we think it’s very important because first of all, it’s the number of patients is still very similar at 450, but the process by which patients get approved, obviously should be much smoother and really giving access to — this recommendation really helps patients get access much more quickly. And so to your point, we do think as you see this approval that this hopefully, will have an influence on other countries, just like we saw with reimbursement as we look at the reimbursement of Yescarta in over 20 countries, it was one at a time. And as certain countries starting to improve. We saw the other countries also do the same. So based on the second-line ZUMA-7 trial as well, that will be our next step, too to continue to provide the data that giving a patient a onetime treatment can really help the health care system and improve patient outcomes.
So yes, we’re very hopeful that it could have some influence.
Operator: Thank you. The next question is from Robyn Karnauskas with Truist. Please proceed.
Unidentified Analyst: Good afternoon, and thanks for taking the question. This is Nicole on for Robyn. Are you seeing any safety signals in a sense for NFLSC with Trodelvy and pembro. Like are the safety probes comparable to both populations? And if so, would this hamper uptake in the first line?
Merdad Parsey: Hi, Nicole, this is Merdad. We haven’t really disclosed anything on the safety. Those studies have really just gotten underway. So I don’t think we have anything to share yet. We’ll, of course, be following that to see if anything emerges. Your question is exactly the one that we want to make sure we address as we move forward. But I don’t — we don’t have enough data at this point to make a comment one way or the other.
Operator: Thank you. Our last question will be from Evan Seigerman with BMO. Please proceed.
Evan Seigerman: Hi guys, thanks for taking my question. One for Christi. You’re annualizing well above $1 billion for cell therapy products. Can you talk about the recent work you’ve done to expand manufacturing and how you could think that could support further growth this year and beyond? Thank you.
Christi Shaw: Sure. So that was our focus and has been our focus is really on the supply side and being able to ensure that we have the capacity to provide for patients. I think that’s what you’re seeing is our industry-leading manufacturing piece. And if you look at GCFO3 here in California, adding the new site to TCFO-4 in Amsterdam and in TCFO-5 in Maryland, we’re really able to leverage that footprint to grow not only in the assets that we have today, but in future pipeline, especially as we look at the partnership we have now with our select to multiple myeloma. So we’re very confident about our ability to supply and the capacity that we’ve built and today and for tomorrow. And really the next focus for us is we’ve had some really good gains on our margin improvements.
But as we look at our operational — our optimization of our manufacturing footprint. Yes, we need to continue to ensure the capacity, which we feel like we’ve really done. And now we’re able to put a big focus too on the optimization piece, which we’ve made progress on but we have several levers there to pull as well. So I hope you’re hearing from me a big confidence in our ability to deliver for patients from a capacity standpoint.
