吉利德科學 (GILD) 2007 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences third quarter 2007 earnings conference call.

At this time all participants are in listen-only mode.

Later we will conduct a question and answer session.

As a reminder, this conference call is being recorded today, October 18, 2007.

Your speakers for today are John Milligan, Chief Operating Officer and Chief Financial Officer, John Martin, President and Chief Executive Officer, Norbert Bischofberger, Executive Vice President of Research and Development and Chief Scientific Officer and Kevin Young, Executive Vice President of Commercial Operations.

I would like to turn the call over to Dr.

Milligan.

Please go ahead, sir.

Good afternoon, and welcome to Gilead's third quarter 2007 earning conference call.

We issued a press release this afternoon providing results for the third quarter ended September 30, 2007, describing the company's quarterly highlights.

This press release is also available on our website at www.gilead.com.

Also joining us on today's call are Matt Howe, Vice President of Finance and Susan Hubbard, Vice President of Investor Relations.

I'll begin the call by reviewing the third quarter financial results and then I will provide updated financial guidance for 2007.

John Martin, Norbert Bischofberger and Kevin Young will take you through the corporate and product related highlights for the quarter and we'll allow time at end of this call to answer your questions.

First, I would like to remind you that we'll be making statements related to future events, expectations, trends, objectives and financial results that constitute forward-looking statements within the meaning of the Private Securities Act of 1995.

These statements are based on certain assumptions and subject to a number of risks and uncertainties that could cause our actual results to differ materially from those expressed in any forward-looking statements.

I'll refer to you our form 10-Q for the second quarter ended June 30, 2007.

Subsequent press releases and other publicly filed SEC disclosure documents for a detailed description of the risk factors affecting our business.

In addition, please note we undertake no obligation to update or revise these forward-looking statements.

We will be making certain references to financial measures that are on a non-GAAP basis.

We provide a reconciliation between GAAP and non-GAAP on our website.

The third quarter of 2007 was another very successful quarter for Gilead.

Total revenues for the third quarter of 2007 were again over $1 billion, driven by record quarterly product sales of $962 million, a 44% increase compared to product sales from the third quarter of 2006.

HIV product sales totaled $806 million for the third quarter of 2007, driven primarily by the continued strong uptake of Atripla in the United States as well as strong growth of Truvada in Europe.

We generated approximately $251 million of operating cash flow during the third quarter of 2007.

Operating expenses continued to demonstrate controlled growth as we continued to implement and execute strategies to grow revenues and cash flows to progress our research and development programs and to expand our sales and marketing infrastructure.

Now turning to the specific results for the third quarter.

Our third quarter 2007 net income was $398 million, or $0.42 per share on a fully diluted basis.

Our third quarter 2006 net loss was $52 million, which included the $356 million in process R&D charge related to our acquisition of Corus Pharma, Inc.

Non-GAAP net income per share for the third quarter of 2007 excluding the impact of after tax stock based compensation expense was $0.45 per share on a fully diluted basis, a 30% increase over the third quarter 2006 non-GAAP net income per share of $0.34 per share, which excluded both after tax stock-based compensation expenses as well as the Corus in process R&D charge.

Now turning to revenues.

Total revenues for the third quarter of 2007 were $1 billion, an increase of 41% from total revenues of $749 million in the third quarter of 2006.

This performance was driven primarily by a 44% increase in our product sales as well as a 23% increase in our royalties, contracts and other revenues compared to the third quarter of 2006.

Product sales were a record $962 million for the third quarter of 2007 marking four years of consecutive quarterly product sales growth.

Product sales for the third quarter increased sequentially by 6% as our HIV franchise as well as Hepsera and AmBisome product sales continued to grow.

Royalty, contract and other revenues decreased sequentially by 32% due primarily to seasonality of influenza and its resulting impact on Tamiflu sales and royalties which I will discuss later.

Turning to product sales.

HIV product sales grew to $806 million for the third quarter of 2007.

Up 45% from $557 million in the third quarter of 2006, and up 6% sequentially from the second quarter of 2007.

Truvada sales were $409 million for the third quarter of 2007, up 32% compared to the third quarter of 2006 and up 6% sequentially for the second quarter of 2007.

Truvada sales accounted for approximately half of our total HIV franchise sales in the third quarter of 2007.

The U.S.

Truvada sales were $207 million for the third quarter of 2007, up 3% compared to the third quarter of 2006.

Sequentially, U.S.

sales were up 11% as Truvada continued to hold its place as the NRTI backbone of choice in combination with protease inhibitors.

In Europe, Truvada sales for the third quarter of 2007 were $184 million, an increase of 83% compared to the third quarter of 2006 and an increase of 6% compared to the second quarter of 2007.

Strong sales volume growth in Europe was a key driver of the increased Truvada sales.

Additionally, $11 million of the Truvada sales increase was due to the strength of the underlying European currencies when compared to the same period last year.

Based on a review of recently available sales data in France, we have confirmed there's been an increase level of parallel trade activity within this region, where certain wholesalers are purchasing and perhaps holding in their inventory of HIV products with the expectation of reexporting them to other countries at higher products.

We currently do not know if this level of volume is material, however it may result in nominally higher volatility to our sales growth in the next few quarters, especially for Truvada.

We will be implementing a client management system in France to manage the orders of Truvada and Viread, effective December 1st of this year, with the intent of ensuring adequate and appropriate supply into the French domestic market.

Because of the timing of the implementation of this management system, we do not anticipate any material impact to our sales in the European Union in the fourth quarter this year and will continue to monitor and analyze the situation closely as we move into 2008.

In Latin America, Truvada sales for the third quarter of 2007 decreased by $9 million when compared to the second quarter of 2007, primarily due to a large Mexican government tender order in the second quarter of 2007.

Atripla contributed $241 million to our third quarter HIV product sales as demand for this product continued to rise.

Atripla sales accounted for 30% of our total HIV franchise sales in the third quarter of 2007.

The Sustiva portion of the Atripla sales was $89 million in the third quarter of 2007, which, as you know, carries a zero product gross margin since our joint venture purchases Sustiva from Bristol-Meyers Squibb at BMS's net selling price of Sustiva in the United States.

Viread sales were $149 million for the third quarter of 2007, down 13% from the same period last year and down 4% sequentially.

Third quarter 2007 Viread sales in both the United States and Europe decreased by 12% when compared to the same period last year, but were relatively flat sequentially from the second quarter of 2007 as Viread continued to play an important role for patients in later lines of therapy.

Outside of the U.S.

and Europe, third quarter 2007 Viread sales decreased by 60% compared to the same period last year and decreased by 30% sequentially due primarily to cyclical buying patterns in Latin America.

Hepsera, for the treatment of Chronic Hepatitis B generated sales of $79 million in the third quarter of 2007, a 44% increase compared to the third quarter of 2006 and a 5% increase sequentially.

The United States Hepsera sales increased by 38% when compared to the third quarter of 2006 but were sequentially flat.

In the third quarter of 2007 there was a slight reduction in Hepsera inventory held at the wholesalers, but the inventory level remained within our contractual band.

Third quarter 2007 Hepsera sales in the EU increased by 44% when compared with the same period last year and by 7% sequentially, as we continued to experience sales volume growth across the territory.

Finally, sales of AmBisome were $69 million for the third quarter of 2007, an increase of 24% over the same period of 2006 and an increase of 6% sequentially.

The increase in AmBisome sales in the third quarter of 2007 compared to the same quarter in 2006 was driven primarily by sales volume growth in Europe and Australia as well as a weaker U.S.

dollar which contributed to an additional $4 million in revenue when compared to the same period last year.

Compared to the same period last year, our royalties contracts and other revenues for the third quarter of 2007 increased by 23%, but decreased by $46 million or 32% sequentially.

The sequential decrease was primarily driven by the seasonal nature of Tamiflu royalty revenues recognized from Tamiflu sales made by Roche as well as the lower level of pandemic purchases during the quarter.

Royalties received from Roche in the third quarter of 2007 were $77 million.

These royalties, which are paid one quarter in arrears reflected royalty rate of approximately 22% as applied to Roche during the second quarter of 2007.

As you may have seen, Roche reported a third quarter 2007 earnings on Tuesday of this week, with 257 million Swiss francs or approximately $212 million reported in Tamiflu sales.

We therefore expect that the Tamiflu royalty revenue that we will report in the fourth quarter will be at a rate of approximately 22% of that figure.

Turning to product gross margins.

Non-GAAP product gross margins from third quarter of 2007, which excluded stock-based compensation expense is approximately 80% compared to non-GAAP product gross margin of approximately 84% in the same quarter of 2006, and 80% for the second quarter of 2007.

The lower product gross margin when compared to same period last year was primarily due to the higher proportion of Atripla sales, which have a lower product gross margin due to the Sustiva portion and zero gross margin.

Turning to expenses.

Non-GAAP R&D expenses for the third quarter of 2007, which excludes stock-based compensation expense were $122 million.

This is an increase of 52% from $80 million in the same period of last year and a $3 million or 2% increase in the second quarter of 2007.

Primarily as a result of the increased compensation and benefits related to higher head count as well as well as increased clinical study expenses related to our respiratory and cardiovascular franchises which we have acquired in the latter part of 2006.

In the third quarter of 2007, we also paid a $5 million up front license fee to Parion Sciences which was included in R&D expenses.

Non-GAAP SG&A expenses for the third quarter of 2007, which excludes stock-based compensation expense were $148 million, an increase of 27% compared to $117 million for the same period last year, due primarily to increased compensation and benefits related to increased head count, increased marketing and promotional expenses as well as other consulting and support services relating to our cardiovascular franchise.

On a sequential basis, non-GAAP SG&A expenses for the third quarter of 2007 decreased by 6% from $158 million in the second quarter of 2007 due primarily to decreased promotional expenses.

In the second quarter of 2007, we incurred higher promotional expenses related to the launch of Letaris for pulmonary arterial hypertension in June of 2007.

In terms of foreign exchange impact, $25 million of our product sales increased in the -- of our product sales increase in the third quarter of 2007 was due to the strength of the underlying European currencies, when compared to the same period last year, and $3 million when compared to the second quarter this year.

This favorable impact takes into account our hedging activities.

On pretax earnings, foreign exchange had a net favorable impact of $17 million in the third quarter of 2007 when compared to the same period last year and a $1 million net favorable impact when compared to the second quarter of 2007.

This favorable impact takes into account the product sales and expenses generated from outside the United States as well as our hedging activity.

Our tax rate for the third quarter of 2007 was 30.8%, our tax rate for the third quarter of 2006 before the Corus acquisition-related in process R&D expense was 31.8%.

The lower tax rate was primarily driven by increased earrings and lower tax jurisdiction.

Sequentially, our third quarter 2007 tax rate increased from 28.5% the second quarter of 2007, due primarily to the finalization of certain purchase accounting adjustments to the second quarter of 2007.

Finally, I would like to turn to our cash position and operating cash flow to highlight our cash performance for the quarter.

Our balance sheet at September 30, 2007 showed total cash, cash equivalents and marketable securities of $2.2 billion.

This is an increase of $231 million when compared to the balance of $2 billion at June 30, 2007.

The increase during the third quarter of 2007 was primarily attributable to $251 million of operating cash flow generated during the quarter.

We continue to actively evaluate strategic ways to use our cash investment, including potential opportunities to in-license or acquire products to complement our own internal efforts as well as other strategies to enhance stockholder value including a future additional share repurchase program.

Now I would like to turn to our financial guidance for the full year 2007.

You can locate all of our guidance for the 2007 year on Gilead's corporate website.

We're very pleased with the sequential quarter-over-quarter growth in our product revenue, which is in line with our expectations.

Therefore, we now expect our product sales for 2007 to be at the upper end of our guidance range of 3.6 to $3.7 billion, which includes approximately $15 million of estimated U.S.

Letaris sale in 2007 which Kevin will provide more color on later in the call.

This product revenue guidance is for direct product sales only and does not include royalty revenue or contract and other revenue.

This guidance also does not include any revenues generated from Atripla sales in the European Union as we expect the approval to come late enough in the year that it would push any potential country launches in the early part of 2008.

As a reminder, the expense guidance we are updating today will be non-GAAP, which excludes the impact of stock-based compensation expense.

First, we are lowering our non-GAAP R&D expense guidance from range of 500 to $520 million to a range of 490 to $500 million, based in large part to the delay in expenses associated with certain clinical programs, in particular, the Phase III [almitegovir] for HIV study, for which we don't expect to begin enrolling patients until first half of next year, as well as lower than expected hiring.

Regarding non-GAAP SG&A expenses, we are tightening our guidance to a range of 590 to $600 million from a range of 580 to $600 million.

We expect to end 2007 at the upper end of this range due to the impact of the weaker U.S.

dollar on our international foreign currency denominated operating expenses, which we do not hedge, and the acquisition cost associated with the Cork, Ireland manufacturing facility.

Regarding stock-based compensation expense, we are reiterating the 2007 fully diluted EPS impact to be in the range of $0.13 to $0.15 per share on a split adjusted basis.

We're also reiterating our non-GAAP product gross margin guidance range of 78 to 80% for 2007 and finally we're also reiterating our tax rate guidance of 29 to 30% for 2007.

In conclusion, our solid operating performance continues to be a validation of the significant efforts made by the more then 2800 Gilead employees around the world.

Each employee has played an integral part in executing on the strategies implemented by the company for growing revenues and operating cash flows, including making prudent investments in both our research and development efforts as well as our sales and marketing efforts.

At this point, I would like to turn the call over to John Martin, who will review our corporate milestones for the third quarter of 2007.

Thank you, John.

Good afternoon, everyone and thank you for joining us today.

We're pleased to summarize for you Gilead's accomplishments during the third quarter of this year as well as several important recent events.

I will start by reviewing our corporate milestones for the quarter, then Norbert will provide an update on our research and development programs, and then Kevin will review our commercial efforts.

First I'm pleased to welcome Carolyn Dorsa to the Gilead management team as Senior Vice President and Chief Financial Officer.

Caroline brings extensive pharmaceutical industry experience to Gilead.

She spent 20 years at Merck and Company.

Most recently, in the role of Vice President and Treasurer with responsibility for the company's treasury, tax, portfolio management and Investor Relations functions, as well as financial controllership of Merck Research Laboratories and Merck's manufacturing division.

Caroline joins Gilead from Avaya, a global provider of business communication systems, where she was Senior Vice President and Chief Financial Officer.

In her new role at Gilead, Caroline will have responsibility for the company's Finance and Investor Relations functions.

Caroline will officially join Gilead in early November, reporting to John Milligan.

As you know, in March of this year, John was appointed to the role of Chief Operating Officer, continuing to serve as the interim CFO, a role he's held for the past five years.

I would personally like to thank John for his many significant contributions as CFO.

Following Caroline's appointment, John, in his continuing role of Chief Operating Officer will oversee Gilead's commercial organization, manufacturing, finance and business operations.

While Kevin and Norbert will expand on our research and development and commercial milestones later in the call, there are a few key events I would like to take a moment to highlight.

Earlier today, we, along with our partner, Bristol-Myers Squibb and Merck were very pleased to announce that the committee for medicinal products for human use issued a positive opinion on the marketing authorization application of Atripla in Europe.

We anticipate that the European commission approval may occur prior to the end of this year.

In addition, we furthered Atripla commercial registration in additional marketplaces.

We announced yesterday that Health Canada approved Atripla for the treatment of HIV infection in adults.

We anticipate the product to be available within the Canadian pharmacy distribution system by early next week.

With regard to our Hepatitis B franchise, just last week, we completed several regulatory filings for Viread for Chronic Hepatitis B in adults, for the United States and the European Union, as well as Canada, Australia and New Zealand.

We also expect to file in Turkey before year-end.

These filings were supported by data from two pivotal studies.

Study 102 and study 103, comparing Viread to Hepsera in both E-antigen positive and E-antigen negative patients.

We will present detailed data from both of the pivotal studies at the upcoming American Association For the Study of Liver Diseases conference, taking place at Boston from November 2nd through the 6th.

The third quarter also marks the first full quarter after the U.S.

launch of Letaris.

The launch to date is proceeding in line with our expectations, with a very favorable initial response from the treating community both to the label and to the programs we have put in place to ensure access to the product.

Kevin will expand on this topic and to the insights we're gaining into this market a little later in the call.

On the business development front, in early September, we completed the acquisition of a former Nycomed manufacturing plant in Cork, Ireland.

This new facility will be used for solid dose manufacturing of Gilead's current and future products, while our existing team in Dublin will continue to manage customer operations and distribution activities.

This marks Gilead's sixth successful acquisition since the company's conception, and further extends our growing worldwide operations.

I would like to take this moment to welcome the Nycomed employees to Gilead.

To further build upon our respiratory franchise, in July of this year, we announced a partnership with Durham, North Carolina-based Parion Sciences, granting Gilead worldwide commercialization rights to P-680, an epithelial cellular channel, or EMAC inhibitor discovered by Parion.

P-680 is being developed for the treatment of certain pulmonary diseases, including cystic fibrosis, chronic obstructive pulmonary disease, and non-CF bronchiactisis.

Parion will perform the IND-enabling studies for P-680 and will transition development responsibilities to Gilead during the Phase I clinical trial period.

With regards to Tamiflu, as John Milligan mentioned earlier, Roche released their third quarter financial results on Tuesday of this week and reported third quarter Tamiflu sales of 257 million Swiss francs and increased their guidance to close to 1.6 billion Swiss francs for pandemic sales only for the full year 2007.

On their call, Roche stated that they could not provide any guidance at this point for potential 2008 pandemic orders.

Finally, as you know, last year the CDC introduced new guidelines recommending routine HIV testing in the U.S.

for all individuals between the ages of 13 and 64 years of age.

Diagnosing those infected with HIV would ultimately reduce the number of new infections, and give better treatment outcomes.

I would like to give a brief update on the status of the adoption of these recommendations.

Seven states, Illinois, Maine, New Hampshire, Louisiana, New Mexico, Iowa and most recently California have already signed into law legislation designed to remove some of the barriers to HIV testing, such as requirements around informed written consent and pretest counseling.

Several other states have legislation or regulatory actions pending, including North Carolina and Massachusetts.

We're encouraged by this progress and believe that other states will also pursue changes to allow for voluntary opt out routine HIV screening over time, consistent with the CDC's recommendations.

Additionally, in Washington, D.C., Congresswoman Maxine Walters' legislation, which would expand HIV screening in the Federal prison setting has passed the first hurdle of House approval in September of this year, has now moved onto the Senate for its review.

Beyond the testing initiatives, we are closely monitoring the impact of the Ryan White care reauthorization last December, which reallocated some funding for antiretrovirals to those states hit hardest by new incidences of HIV.

The new funding is having a positive impact as it begins to reach those states.

South Carolina recently announced that it no longer has a wait list for its AIDS drug assistance program, and North Carolina was able to raise the income threshold for its eligibility, a move anticipated to bring hundreds of more patients onto treatment.

These actions can be directly measured by the fact that many patients who have been in need of receiving free drugs through our patient assistance program have either transitioned or are transitioning through care through their respective state payback programs.

We're greatly encouraged by the progress being made to get all HIV-infected individuals diagnosed and on treatment, both of which will help stem the spread of this still deadly disease, and we believe that with the profile of Gilead's antiretrovirals, we will be in the key position to continue to help the many patients in this country living with HIV who need treatment.

At this point, I'll turn the call over to Norbert to discuss our research and development milestones for the quarter.

Norbert?

Thank you, John.

In the third quarter of this year, Gilead achieved several significant research and development milestones, further advancing our pipeline programs.

Importantly, on the antiviral front, and as John highlighted earlier, we are very pleased that the CHMP today recommended that Atripla be approved in the European Union.

The recommended indication is for the treatment of HIV infection in adults, with virological suppression on their current combination antiretroviral therapy.

This indication is supported along with other data from earlier studies and patient experience in the U.S.

by positive 24 week data from a study conducted jointly by BMS and Gilead called the O-73 study, in which approximately 300 patients who were virologically suppressed at entry were either switched to Atripla or maintained on their stable-baseline therapy.

Data from this study have been accepted as a late breaker presentation at the upcoming 11th European AIDS conference taking place in Madrid October 24th through 27th.

We're excited about the CHMP positive opinion and we're in discussion with the CHMP regarding the requirement for data leading to an expansion of the indication to treatment-naive patients.

Turning now to Elvitegravir, or GS-9137 as it was called previously.

As we discussed on the last earnings call, due to the availability of novel classes of antiretrovirals with demonstrated antiviral activity in treatment-experienced patients, we will be conducting our phase III studies versus an active comparator.

With Raltegravir's approval in the U.S.

just last week, we're preparing to initiate it the two Phase III pivotal studies, which will be head to head non-inferiority studies versus Raltegravir.

The specifics of the Phase III program are being currently discussed with FDA and European regulatory authorities.

Once agreement has been reached, and following Raltegravir's commercial availability, we will work rapidly to produce the blinded study drug supply necessary and will concurrently work to get study sites up and running.

One Phase III study will be conducted primarily in the United States and one primarily in Europe.

We would anticipate dosing the first patient in this program in the first half of next year.

At the Interscience Conference on antimicrobial agents in chemotherapy in Chicago in September, we presented data on a compound from our internal research efforts GS-9148, the pro drug of which is called GS-9131.

GS-9131 is a novel nucleotide analog designed to deliver high intracellular cancer transportations of the active molecule allowing for lower doses with higher potency.

In addition, the compound provided a differentiator resistance profile with activity against nucleoside resistant strains resistance of HIV harboring the K65R, M184V and multiple tame mutations.

Based on this exciting preclinical profile of GS-9131, we initiated and have now completed the Phase I single dose pharmacokinetic study in healthy volunteers.

This study confirmed the preclinical results of delivery of high intracellular concentrations of the compound at low doses of GS-9131.

As a result, we're now finalizing the details of the Phase I-II protocol.

This study will likely evaluate GS9131 in treatment-experienced patients, HIV infected patients with confirmed NRTI resistance.

We expect this study to begin early next year.

Turning now to HCV.

As we announced previously, our novel non-nucleoside polymerase inhibitor GS-9190 is currently in a Phase I AB study in HCV infected patients.

In the first single dose part of the study, GS-9190 demonstrated encouraging pharmacokinetics exposure and viral activity.

The second multiple dose part of the study is designed to enroll HCV infected patients in total and assess the safety, tolerability, pharmacokinetics, and antiviral activity of ascending doses of GS-9190 both once and twice daily for eight days.

Monitoring for QTC promulgation is standard test for cardiovascular safety was one of the safety assessments included in this study along with other standard safety assessments.

In the second multiple dose cohort, a potential QTC signal was observed though the data are very limited and non conclusive.

Therefore before escalating to the next higher dose, we decided to conduct a pilot QTC study in healthy volunteers.

The study has begun and we should have results prior to the end of the year.

So while this has caused a delay in the program, we are hopeful that we will be able to resume dosing of GS-9190 in HCV-infected patients next year.

Also, we will be able to present data from both the complete single dose and the first two multiple dose cohorts at the ASLD conference in November.

In addition to 9190, which is an HCV-polymerase inhibitor, we're making significant progress with our internal protease inhibitor research efforts with interesting lead compounds progressing into preclinical evaluation.

Also, our research collaboration with both Achillean and Gene lapse continue and we hope development candidates emerge from those efforts in the relatively near future.

Another novel nucleotide program from our research efforts making its way into clinical evaluation is 9191, which has demonstrated activity in the preclinical model of papilloma virus.

Based on these data, we have begun dosing patients with perianal HPV infections in a Phase I safety and efficacy study of GS-9190 ointment.

This will be both a strength and schedule escalation study conducted in the United States.

It is estimated that approximately 1% of the sexually active adults in the United States have HPV-related genital warts, and while a number of options exist for patients including both pharmacologic and ablative therapies there remains significant room for improvement, and an opportunity particularly for a topical ointment that is well-tolerated and enhances the rate of complete clearance of genital warts.

On the respiratory franchise front, as you know, we presented detailed data from the second of two phase studies of two pivotal studies of Aztreonam lysine inhalation AIR CF1 at the NACF meeting, which took place in Anaheim earlier this month.

This study evaluated the safety and efficacy of Aztreonam lysine for inhalation versus placebo over 28 days in patients with cystic fibrosis.

The study met its primary efficacy end point of change from baseline in respiratory symptoms as assessed by CFQR, a patient-reported outcome tool, used to measure health related quality of life for people with CF.

Aztreonam lysine for inhalation-treated patients also experienced significant improvements at day 28 of respiratory function as measured by FEV-1 with a mean treatment related improvement of 10.3% versus placebo.

We believe this is particularly impressive due to the more advanced age of this population as compared to earlier registration of studies conducted for Toby.

In addition, an update from our study AIR CF3 was presented during a plenary presentation at the NACF conference by Dr.

Felix Ratchen who was head of respiratory medicine at the Hospital For Sick Children and Professor of Pediatrics at University of Toronto.

In AIR-CF3, the extension study for patients who participated in our two pivotal Phase III studies, patient received repeated courses of 28 day treatment with Aztreonam lysine for inhalation three times daily followed by 28 days of alternative therapies.

The results from this study demonstrate that following the first three 28 day courses of treatment with Aztreonam lysine, patients continue to have similar responses in FEV1 scores as well as in symptoms measured by CFQR as were seen in the placebo controlled study.

With positive results we now have in hand from both pivotal studies and the growing body of data we have from our extension study, we remain on track to file a new drug application in the U.S.

Aztreonam lysine for inhalation for the treatment of cystic fibrosis patients with Pseudomonas infections before the end of this year.

We plan to have further discussions with European regulators to define the path for filing there as well and will provide you with an update after we have more clarity.

We also presented data at the NACF conference on GS-9310/11, formally known as Corus 1040, which is an propriety formulation of combination tobramycin and fosfomycin for inhalation, demonstrating the compound's activity against pathogens commonly found in cystic fibrosis and bronchiactisis.

Based on these and other pre-clinical study results, we initiated and completed a single Phase I study in healthy volunteers and have begun enrolling patients with either cystic fibrosis or bronchiactisis in two Phase II studies.

Currently there are no approved inhaled antibiotic studies for bronchiactisis.

We're presenting a clear unmet medical need, and due to emerging resistance to existing compounds for the treatment of infections associated with CF, there's a need for new antibacterial therapies to treat cystic respiratory infections in CF.

Ultimately, should the data support the use in cystic fibrosis, we would anticipate this compound could be used as a Toby replacement in those alternating months between treatment with Aztreonam lysine for inhalation.

A brief update on the Phase III program for Darusentan in resistant hypertension.

We're making steady progress and getting additional sites on board for both the 311 and 312 studies which we believe will significantly impact the rate of patient enrollment in both studies.

At this point, our goal is to complete enrollment in both of these studies in the first half of 2009, with data available from these studies later that year.

With regard to 9291, our novel nucleotide analog that has shown evidence of anti-cancer activity in preclinical studies, we're currently screening patients with non-Hodgkin's lymphoma and chronic lymphocytic leukemia for enrollment in a Phase I study of 9219 cancer centers in the United States.

Based on the outcome from Phase I studies, we will make a decision about the development of potential commercialization passed for this compound.

In summary, I'm proud of the many research and development regulatory advancements we've achieved over this quarter.

We have many exciting opportunities to work on over the course of the coming years, and we look forward to keeping you updated on our progress.

With that, I will now turn the call over to Kevin Young to discuss our commercial efforts.

Kevin?

Thank you, Norbert, and good afternoon, everyone.

To begin the commercial update, I would like to start with our antiviral franchise which is comprised of our HIV and HPV marketing products.

For the analysis of our market share data in the U.S.

and Europe we rely on the most up-to-date third party data available to us in each market.

As a reminder, this data lags our financial results by one quarter.

Our U.S.

HIV franchise performance continued to achieve significant milestones in Q3.

I would like to start by highlighting a few of those achievements.

In just one year since its launch, we are approaching one in four antiretroviral treated patients now taking Atripla.

Eight out of every ten new antiviral-treated patients begin therapy on a Truvada-based regimen, either Atripla or Truvada.

Truvada grew quarter-over-quarter, and continued to be the NRTI backbone of choice when proscribed with protease inhibitors.

We anticipate both growth in our HIV franchise to come from both Atripla and Truvada.

Almost two thirds of all treated patients received the tenofovir molecule, and Gilead's HIV franchise continued to have the two most prescribed NRTI brands and two most proscribed molecules widening their respective leads over competitive products.

I would now like to provide more details around those very impressive commercial headlines.

Gilead's HIV business achieved a 50% share of NRTI TRX market share with nearly 40% share coming from total Truvada, Atripla, and Truvada.

The ratio of total Truvada to Exicon in TRX share continued to widen and rose to 4.1 to one in the third quarter of 2007.

Combavir share continued to steadily decline.

Over 120,000 patients received Atripla as of the end of the second quarter of 2007.

This represented 24% of all patients taking antiretrovirals at this time.

The uptick of Atripla continued to be driven predominantly from switches at a level of 60% during the second quarter of 2007.

Importantly, approximately half of these switches came from antiretroviral regimens not containing tenofovir or FTC.

26% of all switches to Atripla in the second quarter of 2007 were from Combavir-containing regimens, mostly from Combavir plus Stevea.

Importantly, approximately 24% of Combavir plus Sustiva patient population has been switched since the launch of Atripla.

At the end of the second quarter, there were approximately 167,000 patients receiving Truvada, which represented 33% of all patients treated with antiretrovirals.

Truvada remained the most prescribed brand in HIV and was the leading NRT backbone with all three leading third agents, Sustiva, Reyataz and Kaletra, and across all patient demographics.

Of the patients being treated with antiretroviral 65% of all treated patients or 332,000 patients received the Tenofovir molecule, in within of its three forms, namely Atripla, Truvada or Viread.

Finally, because of the new CDC guidelines and simplification of therapy brought by our products, the number of patients being treated with antiviral therapy in the U.S.

at the end of the second quarter of this year grew by an impressive 10% over the last 12 months, and is estimated to be just over 510,000 patients.

The news of legislative change to state laws in HIV testing referred to earlier by John Martin, bodes well for the continued flow of new patients, and the opportunity for Gilead to impact both the treatment and transmission of HIV.

Additionally, the approval of Atripla in Canada is exciting news for our young organization based outside of Toronto, Ontario.

In August, Truvada gained reimbursement in Ontario, the last provincial approval needed in Canada and we have seen a significant ramp up in sales.

Equally, we believe Atripla has an important role to play in the treatments of Canadian HIV patients.

Once it follows a similar reimbursement cost into 2008.

We look forward to working with our partner BMS in ensuring rapid access to Atripla.

Turning to our HIV franchise performance in Europe, as John Martin highlighted earlier, we are very pleased with the CHMP's recommendation for the approval of Atripla by the European Commission.

Once approved, we anticipate launching Atripla in the U.K.

and Germany in early January next year with the rest of Europe rolling out upon the completion of pricing and negotiations.

Atripla will be marked by Gilead and BMS in the big five European countries plus island, and by Gilead and Merck in all of the markets.

With regard to the European HIV market dynamics, the total number of patients treated with antiretroviral therapy in the big five European countries increased to approximately 247,000.

Truvada continued to be at leading branded NRTI across all big five European markets with approximately 33% of all treated patients receiving Truvada.

Approximately 81,000 patients were on a Truvada-based therapy.

Combavir switches still represents significant opportunity as approximately 44,000 patients remained on Combavir-based regimens in the big five E.U.

countries.

Use of Truvada accounted for 50% of new starts in treatment-naive patients in the second quarter.

Truvada plus Sustiva continued to extend its lead for patients initiating therapy, growing to 24% of new patient market share, followed by Truvada plus Kaletra, up 13%.

Similar to the U.S., we see opportunities for growth at the European HIV market.

This will require both renewed efforts on changing public policies and national legislation around testing and linkage to care, especially in light of the significant demographic changes taking place across Europe.

In this respect, an important symposium will be taking place in Brussels later this year bringing together all key HIV stakeholders to discuss the importance of testing.

This parallels a similar event that took place in Washington, D.C.

in 2006.

Finally, as you may know, the European AIDS Clinical Society Conference, EACS, will kick off next week in Madrid, Spain.

Various studies highlighting the use of Gilead products will be featured at the conference.

Dr.

Martin Fisher of Brighton and Sussex University Hospital in U.K.

will present the 48 week data from the sleep study.

The one year results confirm that switching from Combavir to Truvada provides an easier regimen that maintains biological control and results in protection from lymph-fat loss.

Turning briefly to our hepatitis franchise.

During the third quarter of 2007, in the United States, Hepsera continued to be the leading antiviral agent for the treatment of Chronic Hepatitis B.

In the third quarter of 2007, Hepsera continued its track record of positive quarter on quarter growth in total prescriptions since its launch in 2002, as well as solid year-over-year growth of 8% of the third quarter of 2006.

As of the end of September, 2007, Hepsera retained his place as market leader with a total prescription market share of just over 46%.

Importantly, of patients new to therapy, Hepsera continued to be the therapy of choice with a 38% market share.

In the territories outside the U.S., Hepsera continued to grow significantly as awareness of Chronic Hepatitis B increased.

In the European continent as a whole, approximately 9 million people are estimated to be infected with HPV, with only 25% of those being diagnosis and less then 15% of the diagnosed population currently receiving treatment.

Hepsera has continued its strong revenue contributions outside the United States, with sales of $47 million in the third quarter, up an impressive 48% over the same period a year ago.

The American Association for Study of Liver Diseases conference will be held from November the 2nd through the 6th in Boston.

We will be presenting data from both pivotal studies for Viread and HPV but in addition the conference will showcase some interesting data supporting the use of antiviral agencies in the treatment of hepatitis.

Commercially, we are in high gear planning for the 2008 launch of Viread and HPV, which is pending regulatory approval in Europe and the U.S.

We believe that we both have the infrastructure and expertise based upon five years of Hepsera promotion to bring a best in class product to market.

Moreover, what is especially exciting for the Gilead organization outside of North America is given that European filing is a type II variation, it is highly unlikely we'll see receive approval in Europe prior to the U.S.

where we're anticipating a standard review.

Now turning to our cardiovascular franchise and Letaris for the treatment of pulmonary arterial hypertension or PAH.

Having completed the first quarter post launch, I'm pleased to say the uptake of Letaris along with the physician and patient interest in the product has been excellent, and has met our pre approval expectations.

As you know, Letaris as an ERA, is in a class of agents known to be teratogenic in animals.

Therefore, every patient is required to be enrolled in a risk minimization action plan or risk-map.

The goal of such a program is to monitor and track patients, ensuring that monthly testing of liver function occurs and that for women of child-bearing capacity, monthly pregnancy testing also takes place.

This requires a very careful process of record keeping and clearance.

All steps of which are designed and approved by the FDA.

We also put in place for the launch of Letaris, the comprehensive Letaris Education and Access Program otherwise known as LEAP to coordinate risk map opportunities and triage patients to specialty pharmacy.

The strong demand we have had for Letaris has challenged the third party resources we initially put in place to administer our LEAP program.

As a result we've recently made a number of structural changes designed to stream line the process and improve the physician and patient experience starting on Letaris.

Our decision to price Letaris applicable to both dosage strengths has accelerated the overall pay and coverage picture.

Currently, 49 of 50 state Medicaid plans are now reimbursing Letaris.

Three of the largest pharmacy benefit managers, CareMark, Medco and Express Scripts representing upwards of 180 million lives are covering Letaris on their respective national formularies after level on par with Trachlea.

Nine of the top 20 managed care plans have given Letaris full approval with an equivalent tiering of Trachlea.

The remaining are listing Letaris on an interim basis pending formal review.

And finally while Medicare Part D plans has six months to review the listing of a new drug, Letaris is already being covered on an interim basis by many plans, again at an equivalent level to that of Trachlea.

At this early stage in the launch of Letaris, we have decide that we will not be sharing patient numbers.

At this point, we do not believe this will be a reliable or accurate predictor for any type of trend analysis for the product.

However, it's important to provide some pointers as to the quality of our launch.

We have over 2500 physicians enrolled in our LEAP program.

This equates to over 60% of our calculated total prescribing potential for Letaris and is a lead indicator of the intent to prescribe.

Almost two thirds of the enrolling physicians are pulmonologists.

Over 450 physicians have proscribed Letaris to date, with over 20% of those have prescribed Letaris for five or more patients.

The top 25 physicians representing the large PAH treatment centers have enrolled in LEAP and have proscribed Letaris for over 17 patients on average.

At the end of the third quarter, our year-to-date sales of Letaris are just over $6 million.

The patients that started on Letaris are predominantly coming from three main buckets.

Treatment-naive or patients new to therapy.

Patients that have experienced elevated liver enzymes that were on Trachlea, as well as a [bulk] of patients that have transitioned from the discontinuation of Incisive stride 3 program.

In summary, even though it is very early in the launch of Letaris, it appears that the promotional platform we have laid down, namely a comprehensive clinical and safety profile together with strong and differentiated product labeling is a step towards reaching our aspiration of Letaris being the first ERA line of choice.

There will be further opportunity to highlight the features of Letaris at the upcoming Chess meeting in Chicago later this month, with data from long-term patients in ARIES E.

The data demonstrates that the efficacy of Letaris was sustained in patients treated for a mean exposure of up to 76 weeks.

Overall, I would like to thank the Gilead worldwide commercial organization for its results in Q3 and its unwavering commitment to help patients.

I will now turn the call over to the operator to begin the question and answer portion of the call.

Operator?

Today's question and answer session will be conducted electronically.

(OPERATOR INSTRUCTIONS) As a reminder, we will be taking a maximum of only two questions per person at one time.

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Meg Malloy with Goldman Sachs.

Please proceed.

Thanks very much and thanks for such a comprehensive overview.

Just a question in terms of Atripla in Europe.

I guess, could you elaborate on your understanding of the protease inhibitor preferences for first line in sort of the big five and I guess particularly in the U.K.

and Germany where you're likely to launch first?

Hi, Meg, it's Kevin speaking.

As you know and I've said this in the past there's sort of a mix of NRTI protease sort of split.

So it is a mix across the European countries.

If you look generally, France and Italy are predominantly PI markets and U.K.

and Spain are more predominantly NNRTI and Germany is in the middle with a fairly equal split between the two, so we certainly think that Atripla is applicable to all of those markets and we think the label is strong in terms of allowing us to switch patients.

So we are as committed to Atripla in all of those big five, but the split of NNR to PI's does varies across the countries.

Just put a little color on that.

It was vague but accurate.

I would say the U.K.

and Spain as Kevin pointed out more than half of the patients are on NNRTI while Germany is just below half are on NNRTI, so just to give you a little bit of quantification there.

Thanks.

Your next question comes from the line of Thomas Wei with Piper Jaffray.

Please proceed.

Thanks a question on the U.S.

HIV sales and one on the international sales.

Can you help us understand how much of the growth in the U.S.

HIV sales on a sequential basis were related to recovery in the non-retail sales ordering pattern, and on the French stockpiling situation, can you help us understand a little better what the impact has been to date?

Should we interpret that that means the demand in Europe so far has been overstated by this effect and by how much?

I'll take the first question in terms of non retail.

I wouldn't call it a recovery but we had a very good non retail quarter.

It was basically exactly in line with the retail or prescription data so there was a very good matching within this quarter.

In terms of sales relative to the first quarter, you know that we did have a large first quarter for non retail and that's primarily because of the buying patterns.

As you know, non retail is basically a sale so it's a sale among a whole distribution of buying points, and primarily the non retail large amount in the first quarter was caused by the Florida ADAPT which is one purchase point which buys for the whole of Florida.

We continue to see Florida order throughout the rest of the year-to-date but that was an especially large order in Q1.

What happens in Q4 and Q1 2008 remains to be seen.

This is John Milligan with regard to your question about the wholesalers in France.

A couple of things to say about that.

What you might have noticed and what we have noticed is that sales in Germany were not growing as much as we had anticipated based on the retail.

Based on our data about where the prescriptions are going and sales in France were exceeding those sales levels based on the prescription data we were getting there as well, which indicated to us that sales from France were going into Germany so we were effectively recording a lower sales price then we would have otherwise based on the product demand of the individual countries.

So we have given notice and are implementing a distribution system to try to ensure adequate supplies for France and make sure the product ends up in the appropriate country.

So in watching the sales and in watching the prescription, it is certainly possible that there is additional inventory that's in place with the different wholesalers to move product from France to Germany.

But it's very difficult for us to know the magnitude of those sales.

-- I'm sorry, those stockpiles, if any.

There must be some inventory, we know that, and also, the impact of the distribution change could also allow for some stockpiling to occur in the future.

These are the things that are unknown to us right now.

It will take place intra-quarter, which hopefully any buy in and sell off would occur mostly within the fourth quarter but we don't know the magnitude nor do we know what the demand would be like and to complicate things further, as we get into next year we will be launching Atripla into Germany which will create a further uncertainty as to where product would end up, if anywhere.

It's an imperfect system much unlike the U.S.

we have a very difficult time getting data.

We do know the trends and are working hard to identify this to the best of our ability under the current situation with the data gaps we have.

Thank you.

Your next question comes from the line of Mark Schoenebaum with Bear Stearns.

Please proceed.

Thank you very much for taking my questions and congratulations on another good quarter.

I was just wondering, John, Norbert there's some confusion about what the indication was for the European label of Atripla.

Is it really indicated for true naives?

Can you explain the label and do you think the wording of the label -- do you think it's going to have any material impact to demand, if, in fact, it's not truly indicative for true naives, can you clarify that for us?

I'll quickly answer the question with how we got to the label because it's fairly straight forward even though it maybe a little bit confusing when you read it and Kevin can talk about the commercial implication.

As you know, we had this issue in the European union about different labeling so Truvada is indicated to be taken with food where [Affavransce] is indicated to be taken at bedtime on an empty stomach.

We recommended Atripla similarly, to be taken on an empty stomach at bedtime like Affavransce.

That led us into regulators a little bit in the search for data that would indicate the fact you don't take Truvada portion with food that it wouldn't lead to an adverse clinical outcome and the data we had, the only controlled study that we had where Atripla was used was this '07, 3 study and then the '07, 3 study basically we took patients at baseline that were suppressed in their current heart regimen and randomized them to continue heart or switched to Atripla.

And really the indication completely reflects the baseline of those patients.

So it's indicated in patients that are suppressed at their current regimen at baseline and those patients then can be switched to Atripla.

That's how we got here and as I said in the portion of my conference call, we're now working with regulators to look for what data would be adequate to really extend the indication to naive patients as well.

Kevin, can you answer the question about impact?

Hi, Mark.

From a commercial point of view, when the promotion does begin early next year very comfortable with the label that we've been given.

The label actually allows us to ask for any patient in terms of a switch situation.

Where they are stabilized on other antivirals.

Just as a reminder, when you look at total patients on antivirals, the vast majority, circa 90% are patients already on antiviral therapy.

About 10% are new patients any point in time.

So we really are playing in the majority of the market with this label.

So, we will be leading out with Atripla, and we think it has all of the potential that we would like.

And secondly, don't forget that we always do a two product detail so we'll lead out with Atripla and then we follow up with Truvada and, of course, Truvada is there to be used in the naive setting whether it be for an NNRTI or a PI patient or indeed to follow on from Atripla.

Where a patient perhaps is resistant ultimately to Atripla and then move onto the PI treatment regimen.

Okay thank you.

May I ask a follow up?

Go ahead.

On the Hepatitis C program 9190, can you provide us any more details about the QT effect that you saw and if not, will those data be presented at the liver meeting and will the QT study basis, will you released the QT study data to the street by the and of the year and thanks very much.

Maybe I should back up.

We, as you know part of the routine preclinical evaluation is evaluation for HERC inhibition.

The potassium channel that plays a role in QTC elongation.

We observed that at very high doses 9190 somewhat inhibits to HERC channel but our calculations pointed out that we have 100 fold or more safety margin, nevertheless, the regulatory authorities felt that we should include QTC monitoring in our Phase I study, which we did.

Unfortunately since these were three sites they used different equipments, et cetera, we ended up with data where there could be a potential signal, but I want to just clearly say we did not see a QTC signal but unfortunately we can't say we didn't see one.

So we were really in a situation where we felt in the interest of patients to be safe and not run any risk, we will do a pilot QTC study which is fairly easy to do in about two to three months period.

We will not have the final data at ASLD, but we hope shortly thereafter in the middle of December we should have the final studies of the QTC study.

If it looks clean, we would move on with the current HCV study next year.

Great, thanks a lot, congrats.

Your next question comes from Geoffrey Porges with Bernstein.

Please proceed.

Thanks very much for taking the question.

A couple of questions.

First on the 10% patient growth that you highlighted in the HIV market in the U.S., Kevin, could you just tell us whether that -- how closely is that correlated with the changes that you've seen in California and Illinois and other states.

What does the trend look like when you look at other patient number data or script number in those states.

Is it really tightly correlated or something is going on and secondly, if you could just talk a little bit more about Letaris.

I think you said it was $6 million year-to-date, and just wondering if you could give us a sense of how much of the sort of initial free goods is included in the cost of goods line that we should be thinking about when think about the evolution of that market.

Thanks.

Your first question about the impact of the different legislation that's occurring.

Effectively that impact is zero, many of the laws that have been signed into place have not taken effect.

For example the California legislation will take effect on January 1st of 2008.

What we do think is helping with the growth of patients, of course, is just the initiatives and the educational awareness of the importance of testing in different populations but we don't yet have any way to quantify that across the United States and really I think the legislative barriers continue to be formidable.

You'll notice with the exception of legislation passed pending in Massachusetts we don't have as much traction in the east coast as we would like.

There's a great opportunity for us there.

The second question was regard to the cost of goods line relating to Letaris and how that would flow through there.

With regard to cost of goods, it doesn't show up in a cost of goods line.

It's an expense associated with the Letaris program, so it doesn't have a COGS impact at this point and time.

How much contributed to the SG&A line then?

Yes, in terms of the program itself, Geoff we are now phasing that out so that will be going away here in the fourth quarter that was basically something we always decided that would be around for the initial uptake of the product, but it will be going away in this quarter.

Could you tell us what SG&A would be if you added that out?

Good question, I don't know that off the top of my head, Geoff.

We'll have to track it down.

I'm not sure we can track that down that easily.

We'll work on that.

Thanks.

Your next question comes from the line of Yaron Werber with Citigroup.

Please proceed.

Hi, good afternoon.

Thanks for taking my question.

I have two questions just to clarify, and if I'm repeating a previous question, I just wanted extra clarification on what specifically you're seeing in terms of the inventory patterns in Europe with regards to Truvada, and specifically, Viread, and even Emtriva was a bit weak, so if I look at my model overall, I'm looking roughly at 450 basis points decline quarter over quarter, so if you just don't mind, help us understand, are you comfortable that Q2 was a good gauge of demand, and if not, should we be looking at Q1 as a trend as the earliest possible beginning of where the real demand and in the follow up question is can you also explain to us what are you seeing in terms of actual patient growth in Europe?

You mentioned it's 10% in U.S.

What are you seeing in Europe and is there a move to treating patients earlier and diagnosing earlier as well, thanks.

That's a good question about the demand in Europe and so what we have been seeing are revenues that's are somewhat lower then demand and reason is because we're selling product into France that's going into Germany.

So as it relates to the total amount of Euros we have received.

It's disproportionate to the patients to the number of patients coming on in Germany, so it's a little bit light compared to that.

That could be offset slightly by any inventory which has been built up.

We don't know what the magnitude of that is.

I frankly think that this quarter is a pretty reasonable quarter for judging demand.

We are monitoring that to make sure that's true and it's going to take at least one more quarter if not more to understand that.

It's Kevin.

I don't have the numbers at my fingertips for the overall growth of patients in Europe, but I do recall it's slightly less then here in the U.S.

because the U.S.

is a little ahead in terms of testing and linkage to care.

But undoubtedly, we think there are growth opportunities there.

There's a lot of movement of infected patients around Europe right now, and we think that's very solid for our underlying business.

Can I just follow up, John, on your earlier points.

Should we assume Q2 the trends in Europe, perhaps had some inventory build if the current quarter is the real demand in Q3?

We started in Q1 so what's happening.

People are buying Truvada in France and Viread to some extent, and reselling it predominantly in Germany but also in eastern Europe as well so we know those two things, and we're trying to figure out also, because we can't track everything and because it doesn't match up entirely with prescriptions in Germany, we don't know how much went into eastern Europe where this are considerable sales and how much is sitting in warehouses.

And also, much like the United States, the script demand is not perfect.

So this is the uncertainty that we're dealing with right now.

So it seems to us that Q2 is a pretty reasonable proxy for the growth but we're monitoring that very closely, and then, as we put these in this new management systems in place, there are contractual obligations to allow people time before we can completely change the distribution model and so that may create an opportunity for somebody to buy in Q4 and that's what I'm largely concerned about.

Great.

Thank you.

Your next question comes from the line of Bret Holley with CIBC World Markets.

Please proceed.

Hi, thanks for taking the question.

Kevin, I'm a little bit intrigued by something you said that you expected a standard review for Viread and HPV and I guess in the back drop of the antivirals for HPV being approved on a six month review.

Have you requested a six month review or is that not something you're even interested in?

Norbert?

We have requested a priority review, yes, as we always do routinely with our antiretrovirals.

Some preliminary unofficial conversations that we had with the agency would lead us to believe that this was probably going to be a standard review and I want to tell you the main argument in that -- in support of that notion is that Viread is essentially available on the market and so there's not an unmet medical need.

Okay.

Thank you.

Your next question comes from the line of Geoffrey Meacham with JP Morgan, please proceed.

Hi guys, congrats on the quarter.

I have one question for you on Letaris, your competitors have been focusing a lot on the FDA review, the documents posted online for Letaris.

My question is how comfortable are you with the data supporting once daily dosing and what's the risk that the peak trough study suggests BID dosing when that prints data maybe 2009?

Yes, so I want to tell you the issue about or the concern about peak trough comes from anti-hypertensive medications where's if you take the drug the effect which is blood pressure lowering is very dependent depending on drug levels and once the drug has disappeared the pharmacological effect may have disappeared.

Our end point was six minute walk.

Now six minute walk takes about 12 weeks to lead up to.

You have to dose for 12 weeks before you can really see the effect and I do not really understand the rationale for why somebody would say that that effect could appear within 12 hours when the drug levels are lower, but nevertheless, this is a post market commitment we have agreed on and we are going to do the study and I am very, very confident that the outcome of that study will be that the trough six minute walk test is exactly the same as the peak.

Having stopped in the field visits I've made and I think my colleagues have made.

I haven't once heard any doubt about this being a once daily drug.

And then one follow up if I may, Kevin, I guess this is for you.

You mentioned that WHO or you mentioned the screening guidelines in EU in your prepared remarks.

Just wondering if you could give us a sense for what the consent procedure is in the screening process for maybe the five European countries and if there is any action near term what timelines could you give for a consensus opinion for broader screening in Europe?

I don't have a country by country.

It's a great question and perhaps I should find that information.

I don't have it country by country but the need for written consent is kind of standard from a patient rights point of view.

I think the challenge in Europe is that you generally need a complete national change, it's not a region by region.

It's basically a country has to change some legislation and certainly change their guidelines.

You have to tackle that.

What we have been, I think professionally facilitating is to get these parties together to start talking about that.

And I think as some of the European countries try to meet the challenges of some of the new populations that they are seeing in that their countries I think HIV care is going up -- back up on their radars.

Okay, thank you.

Your next question comes from the line of Michael Aberman with Credit Suisse.

Please proceed.

Hey, guys a lot of my questions were already answered but perhaps a quick question on the integrase inhibitor.

Have you -- can you talk about your strategy in the naive populations?

Are you going to plan to do studies with a novel boosting agent or are you still planning a naive use of protease inhibitor for boosting.

As I indicated, the first thing, of course what we're going to do is look at treatment experience patients simply to build up a safety database and get more experience and after that absolutely we go into naive patients.

That can be done either with using Retonovir as the booster and of course we have to talk to agencies about their concerns with regard to protease inhibitor resistance development when using Retonovir without any other protease inhibitor, but we are thinking about using other boosters that do not have anti-protease inhibitor activity.

Do you have candidates for that or is that something that's early on?

It's something we are thinking about at this point.

It's early in the thought process in research.

Nothing in development yet.

And from a strategic standpoint for Letaris.

How are you thinking about the potential, what are the advantages of the lack of drug-drug interaction from -- how are you thinking about potential combination therapies?

For Letaris, are you thinking about combination therapies, a la Truvada?

We're thinking about our Phase IV clinical studies something that we are evaluating right now.

Clearly without that interaction makes for the ideal partner with a PDE 5 and PDE 5 is a popular use so we wait to see the news from the Tadalafil first study so we'll see what results they bring so I think we have a good partner opportunity first and foremost, I think that's basically in the clinic.

And we're also in the process of carrying out a whole number of other drug interaction studies that we will include in the label.

As you know, we only had two originally when we filed but we will have many more coming.

Okay.

Great, thanks again.

Your next question comes from the line of William Ho with Banc of America Securities, please proceed.

Thanks for taking my call or my question.

Most of mine have been answered except maybe you can answer one question.

With respect to the foreign exchange and your benefit, you indicated that you had a favorable benefit relative to third quarter of last year, but was there much a difference between the second quarter and the third quarter this year?

No, it's about $1 million difference overall between the differences of revenues and differences in expenses.

So it was fairly small quarter over quarter.

Great, thank you.

Your next question comes from the line of Sapna Srivastava.

Please proceed.

I have two quick questions.

The first one on Letaris.

If you could just comment and I don't know if you will, but if you do not have a feedback program as to what the revenue number could have looked like if you could have the program in the fourth quarter and secondly just on HIV on the CDC recommendations, you said that seven states are moving barriers, could you just also give some color on how many states currently do not have any barriers and how many states need to work on removing the barriers they have?

In terms of the free month -- we aren't stating how many patients receive that and neither are we exactly stating the date at which that program will finish.

What we are saying is broadly in this quarter, in the fourth quarter, that we will no longer be supplying that for the start of patients.

But you will be continuing it into some part of the fourth quarter for existing patients?

Any patient who has started on drug absolutely.

We are committed to giving that one month, of course.

Yes.

Okay.

To your second question, there were initially 37 of the 50 states that had some form of legislation which was a barrier to easy testing of HIV patients, so we now have legislation passed in eight different states.

That means that the remaining 29 still have those laws in place and it is -- the states that have them are the states where HIV patients are.

The states that don't have them, there's very low levels of HIV patients.

It is the most important states that have them.

New York and Florida?

Yes.

Thank you.

At this time, there is -- There is time for one additional question.

Your next question comes from the line of Joel Sendek with Lazard Capital Markets,

Just have a financial question on Atripla.

For clarification, did you say that $89 million is the Sustiva portion of the 241?

That's correct.

$89million.

That comes to 37%.

I was under the impression that the split was 33%.

Will that change quarter to quarter?

It's always been a 37/63 split more or less with minor variations on that.

The aggregate of the pricing for the individual.

All right, great.

That's not a change.

Quickly on Darusentan.

Can you give us any more feel for the number of patients?

You said you had more sites up, but can you give us any feeling for the patients that you have enrolled so far?

I really hate to do that.

It's too early because we are really now in the process of gearing up to enrolling, getting more sites up and running, particularly outside the United States and South America and Europe where enrollment has been higher traditionally per site then in the U.S.

and so I think enrollment will greatly accelerate.

That's why we laid out the 2009 time line for completion of enrollment.

Still pretty early in the process.

Great thank you very much.

Dr.

Milligan, there is no more time for questions.

Thank you, operator and I want to thank everybody for joining us today and I think you'll agree it's been a very exciting third quarter for us where we've had new products filed.

New products moving into the clinics and have and executed on our overall commercial goals.

I think it will be a great deal of excitement over the rest of this year, and we look forward to sharing the results with you on our next quarterly call.

Thank you.

Ladies and gentlemen, this concludes the presentation.

You may now disconnect.

Thank you and have a good day.