吉利德科學 (GILD) 2008 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences second quarter 2008 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder this conference call is being recorded today, July 17th, 2008.

I would now like to turn the call over to Susan Hubbard, Vice President of Investor Relations. Please proceed.

Good afternoon, and welcome to Gilead's second quarter 2008 earnings conference call. We're pleased you could join us today. We issued a press release this afternoon providing results for the second quarter ended June 30, 2008. This press release is also available on our website at www.Gilead.com.

Joining me on today's call to discuss our results are John Martin, Chairman and Chief Executive Officer; John Milligan, President and Chief Operating Officer; Kevin Young, Executive Vice President of Commercial Operations; Norbert Bischofberger, Executive Vice President of Research and Development and Chief Scientific Officer; and Robin Washington, Senior Vice President and Chief Financial Officer. John Milligan will take you through the corporate highlights for the quarter, Robin Washington will review the second quarter 2008 financial results, and Kevin Young will summarize our commercial milestones and provide more color on the market dynamics surrounding our various franchises. We'll then allow time at the end of the call to answer your questions.

Before I turn the call over to John Milligan for the corporate update, I would first like to remind you that we will make statements relating to future events, expectations, trends, objectives and financial results that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on certain assumptions, and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from those expressed in any forward-looking statement. I refer you to our Form 10-K for the year ended December 31st, 2007, Form 10-Q for the first quarter of 2008, 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 that we undertake no obligation to update or revise these forward-looking statements.

We also will making certain references to financial measures that are on a non-GAAP basis. We provide reconciliations between GAAP and non-GAAP numbers on our website.

I will now turn the call over to John Milligan.

Thank you, Susan. Good afternoon, everyone, and thank you for joining us today. We're pleased to summarize for you Gilead's accomplishments during the second quarter of 2008. I'll start by reviewing our corporate milestones for the quarter, and provide you a brief update on our pipeline progress.

First, I want to acknowledge John Martin's new role as Chairman of Gilead's Board of Directors, in addition to his continued role as Chief Executive Officer. John has assumed the role of Chairman of the Board from Jim Denny, who is remaining as a member of Gilead's Board of Directors, serving as Lead Independent Director. As you know, Jim joined Gilead's board in 1996, the same year that John Martin was appointed President and CEO. Since that time, Gilead has brought eight new products to market, all of which address serious unmet medical conditions. We look forward to the continued leadership of John and Jim, as Gilead works to discover, develop and commercialize new products for patients in need.

Second, I'd like to welcome Robin Washington to Gilead. As you know, Robin joined Gilead in May, taking on the position of Senior Vice President and Chief Financial Officer. Robin brings to Gilead a deep financial and systems expertise and we look forward to her guidance and contributions as Gilead's business continues to expand and grow in complexity.

Third, I'd like to briefly comment on the quarter. Gilead had another excellent quarter, with record product revenues. I'm very pleased with the outcome, particularly in light of the U.S. inventory stocking of our HIV products at a few [ADAP] accounts, as we described at the end of the first quarter. I'm also pleased with our increased productivity in R&D. We now have more products moving ahead than we have ever had in the past. While this has led to an increase in R&D expenses, I feel that we are properly moving towards a more suitable level of reinvestment in the business, helping to ensure the long-term future of the company.

On the product milestone front, we've continued the triple rollout across Europe along with our partner, Bristol-Myers Squibb. Early indications are that Atripla adoption in Europe is similar to what we observed in the U.S. Also, we were extremely pleased to receive European approval of Viread for chronic Hepatitis B in late April, concurrent with EASL, the largest European conference focused on liver diseases. I believe that the treatment paradigm for chronic Hepatitis B is shifting, and I also believe that Viread has the best combination of activity, safety and price of any product available for HBV treatment. Kevin will provide launch updates on both products shortly.

Our partner for Ambrisentan in Europe, GlaxoSmithKline, announced in April that they received European Commission approval of the product, which will be marketed under the trade name Volibris in Europe. Since then, the product has been launched in the UK, Germany and Ireland, with further rollouts across the major markets of Europe expected through the remainder of this year and into next. We will receive royalties from the sale of Volibris on a one-quarter lag.

During the second quarter, we continued to be active on the business development front. In late May, we announced that we acquired all the [access] related to the Cicletanine business of Navitas. This is a compound that we plan to evaluate as a potential treatment for pulmonary arterial hypertension, based on clinical data from three small studies previously conducted in Europe. We have recently been notified that Cicletanine has been granted orphan drug status for PH in the U.S., which as you know provides market exclusivity for 7 years following marketing approval. Cicletanine is currently being evaluated for the potential treatment of PH by Dr. Aaron Waxman at Massachusetts General Hospital under an investigator-held compassionate use IND. Cicletanine is available in a number of European countries as a generic product for the treatment of hypertension, and has been used in over 10,000 patients. We are currently reviewing the existing Cicletanine database, and we will soon discuss with the FDA the path forward for the evaluation of the drug in PH patients in advanced clinical studies in the U.S.

In May and June we announced that the U.S. Patent and Trademark Office completed the first and second of four reexamination proceedings, and confirmed the patentability of a method-of-use patent and composition of matter patent for Viread. Since then, I'm very pleased to inform you that the two remaining patents that are challenged have been confirmed as patentable by the PTO. This now completely resolves the PUBPAT challenge, and we believe we have emerged from this reexamination with an even stronger patent for Viread than we had entered with.

FInally on the corporate front, we were very pleased to hear last Friday that Japan's Ministry of Health, Labor and Welfare announced positive results from two large surveillance studies, which together included greater than 10,000 patients. Both studies confirm that neuropsychiatric events occur in patients with influenza, and that Tamiflu does not increase the incidence of such events, confirming no causal link between Tamiflu and abnormal behavior. These results are consistent with the results obtained from other in-depth analyses of safety reports, previously completed clinical studies, epidemiological databases, health claims databases, and new non-clinical pharmacokinetic and clinical investigations. In light of these results, the Japanese regulatory body's Safety Subcommittee will reassess the appropriateness of the current restriction that is in place on the use of Tamiflu in adolescents aged 10 to 19 years of age. Roche and Gilead believe that these data fully support a lifting of the restriction in advance of the next influenza season.

Turning now to our pipeline programs. In the second quarter of this year, Gilead achieved several significant research and development milestones, further advancing our pipeline programs. As you may know, we now find ourselves with a more robust pipeline of product candidates than ever before. So I will provide a summarized overview of the advancements during the quarter, and we are happy to go into more detail on the programs during the Q&A portion of the call.

Starting with HIV, I'd like to give you update on our PK enhancer, GS 9350, which is being developed as a boosting agent for Elvitegravir, our Integrase inhibitor. As you know, our strategy has been to develop a proprietary boosting agent, one that is devoid of HIV activity, does not require refrigeration, and can be given at a relatively low dose so that co-formulation with Elvitegravir and also Truvada is a possibility. As we stated on our last call, a pilot formulation study demonstrated that we can co-formulate GS 9350, Elvitegravir and Truvada into one single pill. The Phase I study to evaluate the safety, tolerability and metabolic profile of several doses of GS 9350 in healthy volunteers is nearing completion. Initial data show that 9350 does increase the blood levels of [Adasalan], a standard test compound used to assess boosting. We're preparing to evaluate the compound as a booster for Elvitegravir and [Adasanavir] in additional Phase I studies in healthy volunteers. If the results were positive from the study of Elvitegravir, we could then proceed with a Phase I study assessing our co-formulated single tablet of Elvitegravir, GS 9350 and Truvada, which could get under way prior to the end of his year.

I'm also pleased to provide an update on our Elvitegravir program. First, we have completed the protocols for the Phase III registrational program for Elvitegravir, which will consist of two pivotal non-inferiority studies evaluating Elvitegravir versus Merck's Raltegravir in treatment-experienced patients. The first study, Study 144, has begun screening patients in the U.S., and we anticipate dosing the first patient any day now. The second study, Study 145, is targeted to begin enrolling patients in the EU, Canada and Australia later this quarter. The studies each will enroll 700 patients, with a primary endpoint of a proportion of patients that achieve and maintain HIV RNA less than 50 copies per milliliter at week 48.

FInally on the HIV front, I'm also pleased to say that we have completed enrollment in the two pivotal trials of the Viread pediatric program. Data from these two studies could support a U.S. supplemental NDA filing before the end of 2009.

On the HCV front, which as you know is our largest preclinical research effort here at Gilead, we are continuing to screen patients in the continuation of the Phase Ib study for GS 9190, our novel HCV polymerase inhibitor. This study is continuing in order to establish the safety and efficacy of the 40 milligram dose in a sufficient number of patients to allow us to go forward into Phase II studies. We expect dosing of the Phase 1b study to be completed by the end of this month, which could allow us to begin the Phase II in HCV-infected patients before end of this year.

With regards to GS 9450, our caspase inhibitor, in license last year, the compound is currently being evaluated as a heparo protectant in an ongoing Phase Ia study in HCV-infected individuals. We've increased the number of study sites to accelerate enrollment, and we anticipate data from this trial by the end of the year. Based on our belief that this molecule may also have utility in other diseases such as fatty liver disease, we will soon be initiating a Phase II study in patients with NASH, or non-alcoholic steatohepatitis. The primary endpoint in the study will be safety and tolerability of multiple oral doses of GS 9450. Secondary endpoints include pharmacokinetics and activity as defined by changes in baselines of certain liver enzymes and metabolic markers.

By way of background, NASH is a growing area of unmet medical need affecting 2 to 5% of Americans. It resembles alcoholic liver disease but occurs in people who drink little or no alcohol. NASH is becoming more common, possibly because of the greater number of Americans with obesity. The past 10 years, for instance, the rate of obesity has doubled in adults and tripled in children. The major feature of NASH is fat in the liver, along with inflammation and fibrosis. NASH can be severe and can lead to cirrhosis. There are currently no approved therapies that directly treat NASH.

Other HCV research efforts are focused on compounds targeted at both viral and cellular enzymes. Our research effort has led to the discovery of some very interesting lead compounds, and we look forward to sharing more information on our HCV pipeline as these compounds progress into the clinic.

On the respiratory front, Aztreonam Lysine for Inhalation is Gilead's unique drug formulation specifically designed to achieve high lung antibiotic concentrations with a short duration of administration. We have due date of September 16th of this year in order to make the product available to CF patients in need prior to its commercial availability, we opened up an expanded access program and now have approximately 200 patients enrolled in the program across 29 sites. Kevin will discuss our launch plans later in the call.

Our EU marketing application filed on March 7 is under review, as is our application in Canada, which received a priority review. In June, we announced positive interim 12-month Phase III results of [Air] CF III, an ongoing study evaluating the safety of Aztreonam Lysine for Inhalation in CF patients with pseudomonas infections. These data were presented last month at the 31st Annual European Cystic Fibrosis Conference in Prague.

To further establish and extend the therapeutic profile of Aztreonam Lysine in CF, we have recently initiated two new studies. The first, called the mild study, is evaluating Aztreonam Lysine in CF patients with baseline function greater than 75% of predicted. The second is an EU-based head-to-head study of Aztreonam versus inhaled Tobramycin in CF patients with moderate to severe lung function. We will also be evaluating Aztreonam Lysine in a Phase II study in patients with non-CF bronchiectasis, which is projected to begin prior to the end of this year. Bronchiectasis is a lung disease that usually results from recurrent severe lung infection such as pneumonia and tuberculosis, or other conditions that injure the walls of the airways in the lungs. We estimate that there are more than 100,000 people diagnosed with non-CF bronchiectasis in the United States.

We're also preparing to evaluate Letairis in patients with idiopathic pulmonary fibrosis, and are targeting the initiation of this Phase III study before the end of the year. This will be a placebo control study looking at the delay of disease progression or death in patients with IPF. IPF is a debilitating disease characterized by progressive scarring of the lungs. This scarring gradually interferes with a person's ability to breathe. Current treatments are intended to improve symptoms and slow disease progression. According to the Coalition for Pulmonary Fibrosis, an estimated 128,000 people in the United States have IPF, and prevalence is on the rise with an estimated 48,000 new cases developing each year. We'll target enrolling approximately 600 patients at over 190 investigational sites worldwide, and we will provide additional details closer to the study's initiation.

With regard to cardiovascular franchise, the Phase III studies for Darusentan in Resistant Hypertension saw significant progress in terms of the enrollment in both the DAR 311 and DAR 312 studies, which are 83 and 39% enrolled respectively. We believe we're on track to complete enrollment and receive data from these studies in 2009.

I'm very pleased with the progress Gilead made in the second quarter, and we look forward to informing you of further corporate milestones as we continue the advancement of our pipeline candidates throughout the remainder of the year. I would like to acknowledge the dedication and hard work of over 3,200 Gilead employees who individually and collectively strive to achieve our aggressive goals, delivering therapies that address life-threatening diseases worldwide.

Next, Robin Washington will review our financial performance for the quarter. Robin?

Thank you, John.

The second quarter of 2008 was another very successful quarter for Gilead. Total revenues, which include product sales and royalty contract and other revenues, for the second quarter of 2008 were $1.3 billion. Second quarter product sales were $1.2 billion, a 34% increase on a year-over-year basis, and our third consecutive quarter of surpassing $1 billion in product sales. Total product sales for the second quarter of 2008 were driven primarily by the strong growth of Atripla sales, due primarily to the continued uptick in the U.S. and the recent launches in Europe, as well as continued growth of Truvada in the U.S. and Europe.

Our second quarter 2008 net income was $443 million or $0.46 per share on a fully diluted basis. Non-GAAP operating expenses, excluding impact of stock-based compensation and IP R&D expenses were $362 million, a 31% increase on a year-over-year basis. This reflects our continued commitment to invest in our pipeline across all therapeutic areas and our geographic expansion, while maintaining focus on overall expense management. Non-GAAP net income per share for the second quarter of 2008 was $0.49 per share on a fully diluted basis, an 8% increase over the second quarter 2007 non-GAAP diluted net income per share of $0.46, which excluded the impact of after-tax stock-based compensation expense. During the second quarter of 2008 we generated $426 million in operating cash flow and repurchased $150 million of our common stock.

Now turning to the specific results of the second quarter. Total revenues for the second quarter of 2008 were $1.3 billion, an increase of 22% from total revenues of $1 billion in the second quarter of 2007. This performance was driven by the year-over-year increase of $312 million in our product sales, partially offset by an $82 million decrease in our royalty, contract and other revenues. Product sales were a record $1.2 billion for the second quarter of 2008, making 5 consecutive years of quarterly product sales growth. Product sales from the second quarter increased sequentially by 7%, as our antiviral product sales continued to grow. Our antiviral franchise is comprised of our portfolio of HIV and Hepatitis B products. $45 million of our product sales increased in the second quarter of 2008 was due to a favorable foreign currency exchange impact when compared to the same period last year, and a $17 million increase when compared to the first quarter of 2008. Royalty, contract and other revenues decreased year-over-year by 57% and decreased sequentially by 48%, due primarily to the decrease in Tamiflu royalties.

Now turning to more specifics on product sales. Antiviral product sales grew to $1.1 billion for the second quarter of 2008 from $837 million in the second quarter of 2007, up 34% year-over-year and up 7% sequentially. Atripla contributed $355 million to our second quarter antiviral product sales, resulting from the continued uptake of this product in the U.S. and recent launches in Europe. Atripla sales accounted for 32% of our total antiviral product sales in the second quarter of 2008. The Efavirenz portion of Atripla, which is distributed back to BMS and reflected in the cost of goods sold line, was approximately $130 million or 37% of Atripla sales in the second quarter of 2008.

As noted during our first quarter 2008 earnings call, we observed large non-retail purchases in the first quarter of 2008 by a small number of state ADAP accounts, which we believe were driven by the grant cycle for Federal ADAP funds rather than being completely demand-driven. These higher purchases in the first quarter tempered our second quarter sales in the U.S. for both Atripla and Truvada, as those inventories were drawn down. In the U.S., Atripla sales were $312 million for the second quarter of 2008, up 48% year-over-year, due primarily to the continued uptake of Atripla. Sequentially, Atripla sales in the U.S. were up 2%, due primarily to the continued uptake of Atripla, partially offset by the ADAP purchasing in the first quarter which was previously discussed. In Europe, Atripla sales for the second quarter of 2008 were $38 million, more than double the Atripla sales in the first quarter of 2008, due to the additional launches in Europe.

Truvada sales were $516 million for the second quarter of 2008, up 34% year-over-year and up 8% sequentially. Truvada sales accounted for 46% of our total antiviral product sales in the second quarter of 2008. In the U.S., Truvada sales were $236 million for the second quarter of 2008, up 27% on a year-over-year basis, due primarily to sales volume growth. Truvada sales growth demonstrates Truvada's continued uptake as the NRTI backbone of choice when used in combination with protease inhibitors. Sequentially, Truvada sales in the U.S. were down 1%, again due primarily to the ADAP purchasing in the first quarter.

In Europe, Truvada sales for the second quarter of 2008 were $241 million, a year-over-year increase of 39% and a sequential increase of 10%, driven primarily by sales volume growth and a favorable foreign currency exchange impact. As we previously discussed in our first quarter earnings call, the supply management system in France appears to be operating effectively in managing orders of Truvada and Viread, and ensuring adequate and appropriate supply of those products commensurate with the market demand in France. We continue to monitor parallel trade activity in France and in certain other markets to ensure continued effectiveness of our supply management system. In Latin America, Truvada sales for the second quarter of 2008 increased by $6 million on a year-over-year basis, and increased by $13 million sequentially, due primarily to higher sales volume in Mexico.

Viread sales were $151 million for the second quarter of 2008, a year-over-year decrease of 3% and a sequential decrease of 1%. The decreases from both comparative periods were due primarily to lower sales volumes in the U.S. and Europe, partially offset by a favorable foreign currency exchange impact. Hepsera, for the treatment of chronic Hepatitis B, generated sales of $90 million in the second quarter of 2008, up 20% on a year-over-year basis and up 9% sequentially, driven by a favorable foreign currency exchange impact and sales volume growth.

Sales of AmBisome for severe fungal infections were $70 million for the second quarter of 2008, a year-over-year increase of 8%, primarily driven by a favorable foreign currency exchange impact. AmBisome sales decreased by 2% sequentially, due primarily to decreased sales volumes, offset by favorable foreign currency exchange impacts. Finally, Letairis sales were $25 million for the second quarter of 2008, an increase of 21% on a sequential basis.

Our royalty, contract and other revenues decreased by 57% year-over-year and decreased by 48% sequentially, due primarily to the decrease in royalty revenue recognized from Tamiflu sales made by Roche. The year-over-year decrease in Tamiflu sales was due primarily to the decreased sales related to pandemic planning initiatives worldwide. The sequential decrease in Tamiflu sales was due primarily to the seasonality of the incidence of influenza and resulting Tamiflu sales, as well as the annual reset to the lowest royalty tier at the beginning of Roche's fiscal year. Royalties received from Roche and recognized in our revenues in the second quarter of 2008 were $38 million. These royalties, which are paid one quarter in arrears, reflect a royalty rate of approximately 15% as applies to Roche's net sales of Tamiflu during the first quarter of 2008. As you may be aware, Roche is scheduled to report second quarter 2008 earnings on July 24th, 2008.

Turning to gross - product gross margin. Non-GAAP product gross margin for the second quarter of 2008, which excludes stock-based compensation expense, was approximately 78.4%, compared to non-GAAP product gross margin of approximately 80.1% for the same quarter last year, and of 79.1% for the first quarter of 2008. The decreases from both comparative periods were due primarily to the higher proportion of Atripla sales, which includes the Efavirenz portion at a zero gross margin.

Turning to expenses. In the second quarter of 2008, we recorded IP R&D expense of $11 million as a result of our recent acquisition of the Cicletanine assets from Navitas, which we announced in May and which John Milligan described earlier. The impact of this IP R&D expense, as well as impact of stock-based compensation expense, are excluded from our non-GAAP operating expenses for the second quarter of 2008. Non-GAAP R&D expenses for the second quarter of 2008 were $161 million, a year-over-year increase of 35% and an increase of 16% sequentially, primarily as a result of increased clinical study and related expenses, as well as higher head count driven by the growth in our business.

Non-GAAP SG&A expenses for the second quarter of 2008 were $201 million, an increase of 27% year-over-year and an increase of 13% on a sequential basis, due primarily to increased marketing and promotional expenses, including those related to the launch of Atripla in certain European countries, higher head count driven by the growth in our business, as well as costs associated with certain termination-related disputes in our international operations. The stronger Euro also contributed to higher expenses in U.S. dollar terms for our Euro-denominated operations.

Foreign currency exchange had a net favorable impact of $45 million and $21 million on our second quarter 2008 revenues and pretax earnings respectively, when compared to the same period last year. When compared to the first quarter of 2008, the foreign currency exchange impact on our second quarter 2008 revenues and our pretax earnings was a favorable $17 million and $12 million respectively. Our effective tax rate for the second quarter of 2008 was 28.4%. Our effective tax rate for the full year of 2007 was 28.9%. The lower effective tax rate in the second quarter of 2008 compared to the full year of 2007 was driven primarily by increased earnings in favorable tax jurisdictions.

Next, I would like to turn to our net cash position and our operating cash flow performance for the quarter. Our balance sheet at June 30th, 2008, shows cash, cash equivalents and marketable securities of $2.9 billion, an increase of $186 million when compared to the balance of $2.7 billion at December 31st, 2007. As of June 30th, 2008, we reclassified our 1.3 billion convertible senior notes into current liabilities, due to the exercisability of their conversion feature beginning on July 1st. The convertible senior notes become convertible for a particular calendar quarter when Gilead's common stock trades at a certain sustained level for a specified period of time during the preceding quarter. While Gilead's stock prices recently met these conditions, we do not believe the conversion of these notes will happen until the respective expiration dates of 2011 and 2013. With that said, we cannot predict our stock price and whether our notes will continue to be convertible and when or if holders will convert the notes.

In the second quarter of 2008, we generated $426 million in operating cash flow. We repurchased 2.8 million shares of our common stock at a total cost of $150 million this quarter under our 3 billion share repurchase program. In addition, we received 240,000 additional shares of our common stock upon the completion of the accelerated repurchase program that we entered into in March 2008. As of June 30th, 2008, we had approximately 2 billion remaining under the 3 billion share repurchase program, which will expire at the end of 2010. To date we have spent $998 million to repurchase approximately 20.2 million shares of our common stock under this program. We continue to actively evaluate strategic ways to use our cash and investments, including continuing our efforts to pursue opportunities to end license or acquire products to complement our own internal efforts. We're also committed to returning cash to our shareholders, as is evidenced by our ongoing share repurchase program.

Now, I would like to turn to our financial guidance for the full year 2008. You can locate all of our guidance for 2008 on Gilead's corporate website. We are very pleased with the sequential quarter-over-quarter growth in our product revenues, particularly our antiviral franchise. As a result, we are increasing our net product revenue guidance from our initial range of 4.7 to $4.8 billion to a range of 4.9 to $5 billion. Of note, this guidance now includes anticipated revenues from Viread for HPV sales, both in the U.S. and the EU, but does not include any potential revenues from the U.S. launch of Aztreonam Lysine for Cystic Fibrosis, for which we anticipate approval in September of this year. This guidance also assumes that the impact or foreign currency exchange fluctuations will remain consistent. Changes from this assumption could affect both our revenues and expenses for the remainder of the year.

As a reminder, the expense guidance we are reiterating today will be non-GAAP, which excludes the impact of stock-based compensation expense. We are reiterating our initial 2008 non-GAAP gross margin guidance range of 77 to 79%. For non-GAAP R&D expenses, we are increasing our 2008 expense guidance of $610 million to $630 million, to a range of $650 million to $670 million. This increase in guidance is a reflection of the increased expenses for the continued ramp and advancement of our multiple clinical pipeline programs, and from a more rapid hiring of research staff at our various R&D sites than previously forecasted.

For non-GAAP SG&A expenses we are increasing our 2008 guidance of $710 million to $730 million to a range of $720 million to $740 million. This increase primarily reflects the impact of costs associated with certain termination-related disputes in our international operations that were incurred in the second quarter of this year, as previously mentioned. Our full year tax rate guidance of 28% to 29% remains unchanged. And, finally, regarding after-tax stock-based compensation expense, we are reiterating the 2008 fully diluted EPS impact to be in the range of $0.12 to $0.14 per share.

In conclusion, our solid operating performance continues to be a validation of the significant efforts made by the more than 3,200 Gilead employees. We remain committed to driving performance for our shareholders by working to improve the lives of patients around the world.

At this point I would like to turn the call over to Kevin, who will discuss our commercial highlights for the quarter.

Thank you, Robin, and good afternoon, everyone.

In completing the first half of 2008, we have a lot to be satisfied with regarding our commercial progress, namely the strength of our core HIV business, our HPV launches currently under way in Europe, and the anticipated approval in the U.S. later this year, the solid start to our cardiovascular franchise, and the prospect of launching the first new inhaled antibiotic for Cystic Fibrosis in more than a decade. Before turning to our commercial performance for the quarter, I would like to remind you that for the analysis of 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. Since the dates of these data points can fluctuate, we will identify the referenced time periods as appropriate.

I would like to begin by discussing the performance of our antiviral franchise, which is comprised of our HIV and HPV marketed products. Our U.S. HIV franchise performance remained the best in the industry in Q1 in 2008, and the gap between Gilead and our closest competitors continued to widen. In the first quarter of 2008, the number of patients being treated with antiretroviral therapy grew by 8% over the first quarter of 2007 to approximately 539,000 patients. During the first quarter we achieved all-time highs for the total number of patients receiving Truvada, as well as Truvada patient share, as it continued to be the backbone of choice for antiretroviral therapy in the U.S., with an impressive 175,000 patients on therapy, or over 30% of all treated patients. Importantly, this recent performance underscores that we continue to have two HIV growth products, namely, Truvada and Atripla. This is particularly important as more third agents enter the market, most of which were paired with Truvada in their pivotal clinical studies.

Atripla remained the most prescribed regimen in HIV, with 27% of patients receiving Atripla across all lines of therapy. Atripla, together with Truvada, continue to account for approximately 8 out of 10 treatment-naive patients. In patients switching to Atripla from other therapies, 60% were from non-Gilead-based regimens. Patients previously on Combivere continued to dominate switched patients, comprising approximately 40% of those that switched to Atripla, with Epzicom comprising approximately 10%. Patients receiving the tenofovir molecule in one of its three forms, namely Atripla, Truvada or Viread, during the first quarter represented approximately 364,000 patients, or 68% of all treated patients.

In June we added 3-year efficacy and safety data from study 934 to the labels of Atripla and Truvada. With the inclusion of these data, together with the recent ATCG 5142 96-week data demonstrating the benefit of an Efavirenz-based regimen over a Kaletra regimen, Gilead and BMS will be able to reinforce the preferred role of Atripla in treatment-naive patients.

On the testing front, positive steps to remove written informed consent and pre-test counseling continued to be made, with laws the previously passed by Virginia and Maryland becoming effective this month. In total, 10 states now have active legislation in place that remove or reduce HIV screening barriers. Most recently in late June, the New York City Health Department announced plans over the next 3 years to conduct HIV screening in every adult in the Bronx. As a reminder, The Bronx has the highest death rate from AIDS of the five New York boroughs. This campaign has been called the most aggressive testing effort ever undertaken in the U.S., and is designed to help identify HIV-infected patients and move them into treatment earlier while their disease is still manageable. Efforts such as these will add to the number of patients receiving antiretroviral therapy and surely will save lives.

Also in June, Gilead agreed to maintain the current prices of our HIV products that are sold through certain government channels through 2010. These channels, which are predominantly comprised of state ADAPs and the public health clinics, represented approximately 35% of our U.S. HIV business in 2007. The decision to maintain our current pricing was primarily driven by Gilead's global commitment to help provide access to our HIV medicines commensurate with patients' ability to pay. We anticipate this decision will have a minimal impact on our future business, due to the supplemental rebates that are already required through these channels.

Now turning to our HIV performance in Europe. The market opportunity in the big five countries in Europe continue to show a robust growth and it is estimated that at the end of the first quarter 2008, 259,000 patients were being treated with antiretrovirals within these five markets. This represents a 7% year-over-year growth rate, and is comparable to the rate of growth achieved in the U.S. We continue to make excellent progress with our HIV products, and are very pleased with the initial launch of Atripla. As a reminder, we and our partner Bristol-Myers Squibb received European approval for Atripla in late December 2007. Atripla is now available in 13 countries throughout the EU, including 4 of the big 5 countries. We are still in reimbursement discussions with France, and at this point do not believe that those negotiations will be completed before the end of this year.

Of the patients receiving Atripla in the second quarter, representing the launches in the UK and Germany, approximately 50% converted from Truvada with Sustiva, while 29% were switches from other regimens. Combivir-containing regimens comprised 35% of switched patients and Kivexa plus Sustiva comprised 19% of switched patients. Truvada has continued to build on the solid base throughout Europe, and remained the number one brand in all big 5 markets. Patients new to therapy continue to be the primary source of those initiating on therapy with Truvada during the second quarter of 2008, comprising 64% of all new patients while 36% had switched from other products. The tenofovir molecule has now become the leading molecule in all of the big 5 countries, having recently achieved that status in Italy. Of all patients that initiated therapy during second quarter, approximately 68% were initiating therapy on a tenofovir molecule. By contrast, the number of patients initiating therapy on Kivexa has declined 8 percentage points to 16% since the fourth quarter of 2007.

In the NRTI market, total Truvada continued to outperform Kivexa, with a total Truvada versus Kivexa market share ratio of 2.5 to 1, up from 2.3 to 1 in January. This will continue to be an important metric for us as we monitor the impact of the Atripla launch and any prescribing response to future DAD, ACTG 5202 or associated data presentations or publications.

As we noted on our first quarter earnings call, the British HIV Association circulated revised UK HIV treatment guidelines for consultation in reaction to the initial data releases from the DAD and ACTG 5202 studies. While the preliminary draft guidelines circulated in April listed only Truvada as the preferred backbone of choice for front-line therapy, the recently revised pre-press guidelines recommended Truvada or Kivexa as appropriate backbones. They state, however, that Kivexa should only be used in patients that are HLA-B5701 negative, and used with caution in patients with baseline viral loads of over 100,000 copies per milliliter, and in those where there is a significant risk of cardiovascular disease. Additionally, in reaction to the DAD publication, in the April 26th issue of The Lancet, Health Canada issued a Dear Doctor letter stating it is recommended that physicians discuss the potential benefits and risks of abacavir with their patients.

The titles of accepted [late-breaker] abstracts for the International AIDS Conference taking place in Mexico August the 3rd through the 8th have now been posted on the ISA website. Of note, the data from the ACTG 5202 study will be presented for the first time. We believe this is an opportunity for increased discussion about the importance and impact of these data.

Turning to our Hepatitis franchise. On April 25th, the European Commission granted marketing authorization for Viread for the treatment of Hepatitis B in all 27 Member States of the European Union. The timing of this approval came the same morning as we were preparing for five Viread presentations at the European Association for the Study of the Liver conference. Since EASL, we have launched Viread for HPV in nine countries, including 4 of the big 5, with Italy anticipated before year end. While it is too early to provide concrete information on our Viread launch, we recently held a scientific meeting with over 350 HPV physicians, and we're very pleased with the feedback we received on the clinical, safety and cost benefit profile of Viread.

In regards to our commercial readiness to support a successful launch of Viread for HPV in the U.S. later this year, we are far along in our prelaunch preparations. Our sales team is trained and ready to launch the product immediately following its anticipated approval. As you know, the [due] date for Viread for HPV in the U.S. is August 11th. Since we believe Viread has the attributes to impact the HPV market in a similar way it has impacted the HIV market, Gilead is supporting many screening initiatives within the U.S. Asian-American communities, where the HPV-infected patient population is largely unaware of their status.

Until the FDA grants approval for the use of Viread in HPV, our sole promotional product remains Hepsera. During the second quarter of 2008, Hepsera continued to be the leading antiviral agent for the treatment of chronic Hepatitis B. As of the end of May 2008 Hepsera remained the market leader, with a total prescription market share of approximately 43%. In the Gilead territories outside of the U.S., Hepsera's market share has remained relatively stable at 36% despite strong competition.

Now turning to our cardiovascular franchise, and Letairis for the treatment for pulmonoarterial hypertension, or PAH, during the second quarter, Gilead recorded $25 million in Letairis sales. We now have approximately 4,000 physicians enrolled in our Letairis Education and Access Program, otherwise known as LEAP. Additionally during the quarter, we expanded the Letairis prescribing base by over 30% to 1,200 physicians. We are confident with continued use the efficacy and safety profile of Letairis will distinguish it from other ERA treatment options.

Consistent with last quarter, and in an effort to share additional details on the PAH market, we conducted our proprietary PAH survey again this quarter. The survey involved over 130 prescribing physicians that are responsible for more than 10,000 PAH patients, and included approximately 80% of the same physicians as last quarter. According to our survey data, Letairis has achieved a 22% share of ERA-treated PAH patients, up from 17% in the previous quarter. Importantly, in the PAH centers, which accounted for 60% of all Letairis patient, our share was approximately 26%. Letairis captured approximately 28% of newly-diagnosed patients treated within ERA. Letairis is used in 52% of patients as monotherapy, versus 48% as combination therapy. In terms of the sorts of patients taking Letairis as monotherapy, over 80% are from either patients new to therapy or switches from [Pacenta].

On the reimbursement front, access barriers have been minimal and manageable since the launch of Letairis, with comparable coverage to [Pacenta] on most formulas. Letairis is covered on virtually all of the managed care and state Medicare plans. We remain encouraged by the physician feedback we have been receiving, and as that experience grows, physicians are getting additional comfort in expanding the number of patients for whom they prescribe Letairis. We believe we are well positioned to continue to build upon our first year of Letairis use, and our commitment to this space has never been stronger. And to further define the profile of the product, we are now conducting the first of several planned Phase IV programs. The ATHENA-1 Phase IV program is evaluating Letairis in patients who are poor responders to Sildenafil monotherapy. We have begun enrolling patients in the 80 patient study. In addition, there are 14 Letairis investigator sponsored like studies underway or in the planning stages.

Turning briefly to Aztreonam Lysine for the treatment of Cystic Fibrosis, a significant amount of planning has already been put into our launch preparations as we anticipate our September 16th [due] date with the FDA. Supplying both a drug and device will present certain new challenges to the commercial organization, but the focused nature of CF will offset some of those challenges.

As we speak, the newly formed Gilead respiratory sales force is being trained, many of whom bring with them a deep depth of CF sales and marketing experience. The team will be focusing their selling efforts on the 115 major CF centers of excellence in the U.S.

Finally, AmBisome turned in another solid quarter, continuing to occupy its strong position as the agent of choice for serious fungal infections.

In closing, I am very pleased to say that across franchises and geographies, the commercial operations organization has made significant progress in the second quarter, and we are carrying forward strong momentum into the second half of 2008.

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

Thank you.

[OPERATOR INSTRUCTIONS]

And our first question comes from the line of Thomas Wei with Piper Jaffray. Go ahead.

Hi, thanks very much. I wanted to ask about the market share trends in the HIV franchise. It is very tough to see that there's been any movement in the back of your share in the U.S. so far. When do you think is the right time to see those market shares shifting? What is the catalyst that is going to get that going?

It is Kevin. I will talk about, you know, I'll focus on the U.S., although I think it is important that we also talk about Europe because I think we've seen a different pattern over in Europe, especially in the UK, but focusing on the U.S., I think it is a little early to see an impact. In all honesty, we haven't seen the full publication and we won't do until [World AIDS] of 5202. It seems in the U.S. 5202 has more interest than the DAD, DAD being a European cohort study. So I think there is more interest in the ACTG 5202, so I think we'll see a reaction to that post-Mexico, and I think that's going to start to sort of raise the discussion and debate again about the use of abacavir. So I think it will take that as a pivotal point in this debate.

Our next question comes from the line of Meg Malloy with Goldman-\ Sachs. Go ahead.

Thanks very much. I am wondering if you have any better handle on what the actual purchasing levels were for the ADAP programs in Q1?

Meg, it's John. We don't know the actual number. I can tell you that the two largest systems that we saw purchasing of the ADAPs were Florida and Texas. Florida started to order really only very late in the quarter, and Texas only at the very, very end of the quarter, so we were almost completely devoid of sales of those two systems during the course of the quarter. We don't know what the demand is there and we certainly don't how much was on hand. It was, I would say, a little bit more than we had even forecasted, so it was significant.

Just to add to that, Meg, I think we feel now that Q3 is back on track and essentially about buying, which is difficult as John said to calculate, has bled off and we're back to a sort of a normal purchase to demand.

Can I follow up with a question on what the inventory level are currently, and how that compares to where you would normally be?

The inventory levels are flat quarter-over-quarter, so there would be no changes in the overall wholesale inventory. But we will ask again if everybody can just ask one question.

Thanks a lot. Sorry.

Our next question comes from the line of Michael Aberman with Credit Suisse. Go ahead.

Thanks for taking the question. Can you update us, you mentioned the starting of the Integrase inhibitor. Can you just go over what your expectation is in terms of timing of enrollment of that trial, and also maybe a little more clarity within the Integrase inhibitor field around the single pill that you described, and what needs to get done to move that into pivotal trials?

Michael, so we are initiating the two Phase III studies, both are 700-patient studies carried out one primarily in the U.S., one primarily in Europe, but we're also utilizing sites in South American and possibly Asia as well, we haven't quite decided. The enrollment is always somewhat difficult to predict, and I don't want to do that here really, but you can get a look at our old studies and see how long it has taken us to enroll those. With regards to the Integrase, so as John said in his part of the talk, so what we - where we want to go with the Integrase is first of all the existing studies will give us approval in treatment-experienced patients. In order to go into treatment-naive patients, we believe we need a booster that can't be (inaudible), in other words it can't be an HIV protease inhibitor. We we developed our own booster. We are currently doing metabolic profiling studies, and the only thing that we would need to do is we need to show that the booster also boosts the a booster that can't be in other words it can't be an HIV protease inhibitor. to boost the he will invite, we co-formulated 4 components into a, we need to do PK study or equivalent study to see the levels of Elvitegravir and Entricitabine are equivalent or in the same ballpark as they would be without - as they are in the individual components, and then we would do a study on treatment-naive patients, and that would give us approval of the single pill Elvitegravir containing the complete regimen for naive patients.

Great. Thanks.

Our next question comes from the line of Mark Schoenebaum with Deutsche Bank. Go ahead.

Thanks for taking the question. Maybe I can drill on the R&D line. Maybe you can help us understand, this is a fairly substantial increase in your R&D guidance, $40 million to $60 million from your other guidance of - on a base of 600, so, you know, a decent percentage. Clearly internally at the company, and please correct me if I'm wrong, it appears that something has changed. Can you help us understand what really, maybe John, has changed from when you gave the annual guidance?

Yes, Mark, that is a good question. So two main drivers to this. Number one, we have been hiring at a faster pace than we've ever been able to hire before. We had pretty ambitious plans to fulfill a number of areas, including new clinical researchers, also quite a number of chemists associated particularly with process development. We've talked about this in the past because it is so important to be able to scale up early to make these clinical studies go more effectively, so you can get to the toxicology and into the clinic as soon as possible. And we are working on some fairly complex molecules, especially on our ATV portfolio right now. So we have hired - and I have to say I think it must be because of the economy, we are hiring at a much better rate and seeing much better candidates than we have typically. So that is good news for us. It does mean that we'll spend more money because we brought these people in more quickly than anticipated, and we'll also bear the full-year burden of that. On the hiring front that all has been good news for us.

Secondarily, we are recruiting quite well in a number of areas including the 311 and 312 studies, which are going much, much faster than last year. So the modifications we put into the protocols have really had a dramatic positive effect in that. Of course, the more patients you enroll the more money you spend, and you spend it sooner. So that has had that effect.

But I have to say the other thing, as I was trying to communicate in the early part of my prepared words were that we have more programs going faster than we ever had before, so across all our R&D efforts things are enrolling very fast, protocols are getting through very quickly so that we can move on to new studies, so it is all really humming right now. So that's the good news.

The other thing I said in the past is that we have been spending about 12% of revenues in our R&D line, which I think is not a sustainable level, and we have sought to increase that without compromising the quality of the programs that we're working on, and I think that we've done that here, through the productivity gains in R&D this year.

What do you think the peak target is?

We're far below the industry average of about 17%, but I don't think we want to be that high but we do want to increase what we're spending. I don't know the perfect number in this area.

Okay. Thanks for letting me slip that in.

Our next question comes from the line of Philip Nadeau with Cowen. Go ahead.

Thanks for taking my question. My question is on the price freeze at state ADAPs, could you give us a bit more idea of how much of any future price increases between now and 2010 you'll actually be able to realize? So if you announce a price increase of Truvada of 8%, taking into account all the discounts and the ADAP price freeze, what would that actually result in the increase in price to go in?

Hi, Phil, it is Kevin. The first thing, just to reiterate, is that this is a price hold that we think is the right thing to do for patients, and it affects essentially about 35% of our HIV business, and the price freeze is on Truvada, Viread and Emtriva. Now, this does not have a big impact on our U.S. HIV sales going forward because, as you probably know, with the Federal payers, you are only able to take on a quarterly basis a rate that's commensurate with CPIU. So those increases obviously are, you know, pegged to consumer price increase, whatever that might be, and that is the maximum amount that you can take. It won't affect our ability to take price increases in our normal retail markets, essentially the other 65% of our U.S. Gilead HIV business. We don't make statements regarding our forward pricing, but certainly we have our normal flexibility in that piece of our HIV business.

So would it be fair if we see a price increase in the future just - if you announce an 8% price increase, you would simply take take about two-thirds of that and assume that is actually what Gilead will realize throughout the U.S.?

I think that is a reasonable ballpark, Phil.

That is in fact what we've seen in the past. Again, let us stick to one question if we can, please.

And our next question comes from the line of Yaron Werber with Citigroup. Go ahead.

I have a question on Truvada in Europe. We saw pretty strength outside the U.S. Can you give us a sense, is that sustainable or do you think there is some kind of an anomaly there?

I think as Atripla rolls out across Europe, we'll see some flattening like we did in the U.S. here, but I think again my expectation it will mirror the U.S. type of profile and start to come through again, as you switch across the Truvada plus Sustiva patients to Atripla, but then the Atripla finds its own place together with the protease inhibitor. I mean, there are some markets in Europe, France is one of them, that have quite large shares of protease inhibitors. So Truvada will definitely, you know, have a very solid position in markets like that. So my expectation is that we will see the conversion. Right now there has been of our initial markets, Germany and the UK, about 50% of Atripla came from Truvada plus Sustiva, but as that converts, you know, over the coming quarters, I think we'll certainly see Truvada come back and have its very strong place alongside Atripla.

But there is no inventory stocking or anything like that going on now?

No.

Great. Thank you.

Our neck question comes from the line of Geoffrey Meacham with JPMorgan. Go ahead.

Hi, guys, a question for you on the PH market. You know, a lot of companies in the space have reported flatter sales over the past few quarters, I'm just wondering if you're seeing any increases in new patients into the PH paradigm? If growth is a share game, what are your strategies to capture more [NRX] share from [Bosintin]?

Hi, Jeff, Kevin. I still think there is a steady but discernible increase in the size of this market. I think that's because, you know, companies are very active, ourselves, [Itilian], United, and to a smaller extent Pfizer, so I still think it's a very active market. People are investing in both promotion on the educational aspects. So I think we are seeing a flow of patients. Primarily they are referred into the major centers, and they come from the more general cardiologists, pulmonologists and quite a lot from the rheumatologists because of the scleroderma patients. So I think it's kind of what we expected, which is it's going to keep increasing but at a steady rate. So we don't sense any flattening out there.

Certainly in terms of market share, we're very, very committed, as I said in my script to this market, with the acquisition of Cicletanine we have signalled our longer-term portfolio. I think that has been very well received. We have both our general PH sales representatives, as well as our Center of Excellence therapeutic specialists focused on our promotion. We have the Phase IV program, together with the investigative-led studies, and we recently have hired two more pulmonologists into Gilead. So, you know, our expectation is that our investment in both people and dollars and just level of activity is going to be - is going to be continued in a very significant fashion.

Okay. Thanks.

Our next question comes from the line of Bret Holley with Oppenheimer Fund. Go ahead.

Hi, thanks for taking the question. I was wondering if there is any evolution in your thinking on the [Doriasin] commercial plans, now that we're a little bit closer to the data, would you consider a partnership, would you go it alone? Has that thinking changed at all?

A little bit early for us to really make a comment on that. We are doing a lot of analytical work in the background as you can imagine and, you know, just still a little bit early for us I think to start sharing our thoughts on that. I think we have to take into account what specialists and what part of the primary care market is involved in Resistant Hypertension. We also have to take into account aspects such as the adoption of a product that has a risk -some form of risk map associated with it. So we're - we're considering a number of aspects, not just the - not just the number of physicians and target audience.

Okay. Thanks.

And Bret, it is important that we understand what the data looks like, so the outcome of the clinical trial will really be telling as well.

Fair enough.

Our next question comes from the line of Geoff Porges with Sanford Bernstein. Go ahead.

Thanks for taking the question. A question for Robin, perhaps, and also for John. A number of moving parts in your margin, but it looks as though your operating margin is sort of down substantially both sequentially and year-over-year, and you commented about R&D, John, but can you give us a sense, is this a sort of operating margin overall that you think is a sustainable or do you think that you could see some recovery going forward? Where do you think it goes from here?

You know, we did have - Jeff, it is John, we had a number of one-time items that did depress our margin a little bit, including the reserves that we took for some disputes on our terminations in Europe. We did have some milestones paid out which are a one-timer. We also of course have the Atripla, which is - sales which are increasing, which is not only gross but operating margin as well. So I think there are some one-time events that drove things down a little bit. I also think that there are longer-term trends for Atripla which will continue to put some pressure on that margin.

You know, we are trying very hard to keep our expenses in line. I'm pleased with what we saw in R&D, but I did want to point out I was thinking about - the sales and marketing guidance also went up this quarter. Had it not been for those reserves we would not have taken that guidance up. It was almost all attributable to those reserves. So we are trying to hold the line as best we can in this area as well, and keep that operating margin as high as possible.

And I would just add in terms of the sales and marketing, with the launch of Viread HPV that is out of our field force and we also believe we can be very efficient with our Aztreonam Lysine launch and utilize certain components of our existing PAH team.

Thanks very much.

Our next question comes from the line of William Ho with Banc of America Securities. Go ahead.

Hey, guys. Thanks for taking my question. Just a quick question about the Viread in HPV launch, about your assumptions, how quickly do you think that will ramp, and do you think it will will be significant or do you notice any proportion of your current Viread sales are actually off-label sales in HPV, so that you may not have such - a strong launch in that?

William, I think it is very difficult, actually. I'm sure you find it difficult to actually make calculations on how much Viread today is being used in HPV. Obviously that is off-label. That constrains our analysis. Also, there is no form of coding in the prescription to give you any lead on that. Our sense is that it is really quite low at the moment. There may be certain opinion leaders, certain specialists who have - who have been very enthusiastic about Viread for some time, but I think generally it is very low both here in the U.S. and in Europe.

In terms of the ramp, I think it will be - I think it will be steady. I think it will be mainly from new patients, our expectation is that maybe some Hepsera patients will switch across, but I think if a patient is stabilized and doing well, as we found out in the HIV market, there will be a slower sort of stream of patients than the new patients. So certainly in terms of our promotion in our first European markets, we've been very much concentrating on newly-diagnosed HPV patients.

Great. Thank you.

Our next question comes from the line of Sapna Srivastava with Morgan Stanley. Go ahead.

Thanks for taking my question. Not mentioned in today's call but you recently put out on the trial examining HPV with [Pharmacet], could you just give a little bit of color on that please, what led you to that? The HPV, [thredanine] and tenofivir.

Just to be clear, that was their press release.

This is a study that is being carried out by the ANRA, so Gilead is only involved to the extent that we provide tenofivir for conduct of the study. Other than that, it is a French government-sponsored study. And the press release was done by [Pharmacet].

So if I can have one quick question, just on your PK booster, too. Is it possible - is it specifically for the Integrase inhibitors, or is it possible that you could use it even for the PIs?

No, sure, from the early metabolic profiling studies that we have done we are seeing that - we're seeing a very similar effect to Ratelgravir. So of course in principle use it the same way that Ratelgravir is currently being used. Ratelgravir, as you know, is available in a 100 milligram capsule, gel-filled capsule, and it is mostly or entirely used as a booster for other protease inhibitors. That is what could be done with our booster as well. But we have not made the definitive decision yet as to whether to develop it and how to develop it as a stand-alone booster.

Definitely we are going to do a study with [Adasanavir] to show the principle - if it works in principle.

Okay, thank you.

Our next question from the line of Joel Sendek with Lazard. Go ahead.

I have a darusentan question. So you said that 311 was 83% enrolled, and if I remember correctly that is a 14-week study. So is it possible that we might see that data by the end of the year or very early next year?

It is certainly possible, so we - we made - we are going to close the enrollment certainly this year, and 14 weeks later in principle we would have the primary - the last patient primary endpoint last visit. But keep in mind, since this is a pivotal study there has to be a lot of data query and data cleanup. That typically takes a few months. So it will stretch into first, second quarter of next year until we have the data in hand, and then we would probably submit them to a major conference.

Okay. Thank you.

Our next question comes from the line of Bill Tanner with Leerink Swann.

Thanks. Kevin a question for you on 5202, I guess we understand that when you see the data it is going to be fairly evident that it is not related to patients trying to manage the tolerance for abacavir, such as the hypersensitivity, that it is will really be a real effect in terms of the failure, and I guess it has been suggested that it might really begin to narrow the use of Epzicom only to patients that Truvada is contraindicated in, such as renal failure or low bone mineral density. So if that could be the case, what is sort of the upside in terms of market share, or conversely what would be the percentage of patients that Truvada would be contraindicated in?

Just to give you broadly the numbers, Bill. In the U.S., on all abacavir, there is just over 100,000 patients today. In terms of Epzicom, there is just over 50,000, about 58,000. So that is the type of scale, if you like. And I think, you know, in terms of rate of switch, it is difficult to kind of see that at the moment until we've actually seen, I think, you know, just how powerful - how powerful this data is. Certainly if the UK is anything to go by, and that's been a reaction to DAD, I must stress, as opposed to 5202, we are certainly seeing early signs of patients being taken off Kivexa, Epzicom. So, you know, so I think there is anywhere between, you know, a potential of certainly 50,000 patients anywhere up to, in terms of the total molecule, 100,000 patients here in the U.S.

Just a quick comment on what you said about the notion that the absent of and HLA-B5701 test, and the fact that HSR had been - might have influenced the results, keep in mind that this was a virological failure analysis that treated missing data, that censored missing data. So it was a [kaplameyer] analysis, and basically only existing data were considered. So if this had been a missing equal failure analysis, then I would see the logic of saying HSR could have influenced the results. But since this is a pure biological failure analysis, I do not see the logic of making this argument. But I hope that in two weeks we will have complete clarity on this and we can lay this issue to rest.

All right. Thank you.

Our next question comes from the line of Maged Shenouda with UBS. Go ahead.

Hi, I have a question about BD activities. Other companies in the space have said that they will be more aggressive due to depressed values in the space. I just want to get your take on that, now that you've fully integrated [Myogen] and [Ralo]?

So you're talking about other biotech companies?

No, no, your take on it. Specifically what is your take on M&A right now?

What is our take on M&A right now? I think we have a pretty full pipeline right now. So anything that we would do in this area would not be one based on depressed values but perceived need that we would have out there. From an R&D perspective, I don't think we need a lot because we have so many things working. That is not to say that we're not active and that we don't get the calls on all of the different activities that are going on, but I think we have the luxury of being very selective on anything that we would do in the future.

Thank you.

Our next question comes from the line of Jason Kantor with RBC Capital Markets. Go ahead.

Great, thanks for taking my question. Just wanted to get some clarity on the numbers you gave for Letairis, and you say you have 28% of new patient share, what other drugs are you throwing in that share mix, and what kind of share do they have? And are you seeing any switching from one class to another in the market?

Hi, Jason. Basically, my numbers were 22% of all ERA-treated patients. That goes up to 26% when you just look at all ERA-treated patients in the PAH centers, and the PAH centers we think make up about 60% of the market. And if you're talking about naive patients or patients new to therapy, with just an ERA, that percentage goes up to 28%. So we're nearing about 30% level for our market share of specifically ERA-treated patients.

So the other 72% is on - are on other ERAs? Is that starting -

Correct. Correct. And in terms of where patients are coming from, I gave out the figure for the Letairis monotherapy, and that is over 80% are either completely new to therapy or have come off [Placentan], and that is a roughly equal split between those two. So you have just over 40% of monotherapy patients either is a new patient or is a [Placentan] switch.

It just seems that if your percentage of new patients is so similar to your percentage of total patients, patients must not be staying on therapy for very long. What is the average length on therapy?

Jason, please bear in mind these are relatively small numbers, so I think these percentage are directional. What I like is that the lead indicator, which is naive patients, is heading in the right direction. I think after a year of launch, approaching nearly a third of patients is a very solid performance.

Thank you.

Our next question comes from the line of Ian Somaiya with Thomas Weisel Partners. Go ahead.

Just a question on darusentan. I was hoping Norbert could just help us handicap the Phase III results? Just share with us what the net differences are in the Phase III trial design relative to the Phase II, and if there are any other variables we should be aware of when thinking about positive outcome for that trial?

Yes, the design and also the background of the patients that are enrolled in the 311 study is very similar to the Phase II study in Darusentan, and that is what makes us confident that at least on the efficacy side we'll see a similar - highly clinically meaningful statically significant result. On the 312 study, remember we have - in addition to a placebo group, we also have a control arm, guanfacine, and that is an experiment that has never been done and I really don't know what the outcome of that is. But my feeling is that guanfacine will show very little if any efficacy, and that we will be - that darusentan will be at the very least equivalent to guanfacine, but my own prediction will be it will be better.

Thank you.

Our next question comes from the line of Jason Zhang with BMP Capital Markets. Go ahead.

Thanks. I have a question on Letairis, you just mentioned that you almost got to one-third of the market share, yet your revenue for - in the quarter is in the $20 million, $25 million range. Even if you double your market share, you are only going to grab $50 million. I'm wondering from an investment point of view, how much more investment you think you are going to put into this area, and when do you think you are going to break even for this product, and if the current sales or the future sales are what you have expected when you acquired Myogen?

Hi, Jason. I think we are satisfied with where we are today after a year on the market of Letairis. We have made a company commitment to the cardiovascular space, and, you know, I think we are going to continue to invest in this product. So where we are today we feel that, you know, it's the right level of investment. I see that continuing for the foreseeable future. I think clinicians are getting very comfortable with Letairis, particularly in terms of the LFT. I just want to point out, you know, the experience recently that came out of the so-called early study of [Placentan] at 13% level of LFTs clearly shows a difference between ourselves and our competitors. So I think our expectation is that we are going to continue to take market share and this is going to be the right choice. It is playing out as the best in class product, and when we hopefully start to work on Cicletanine and build out our cardiovascular franchise, we will have a large and profitable franchise.

And, Jason, I would like to add that we are actively looking at other areas and other applications of ERAs, and, you know, we will communicate that as we make the decision to pursue them, but something that John Milligan mentioned today is that we have made the decision to go into Phase III evaluating for Ambrisentan for IPF, and that potential is a very big area. So we are looking. We are committed to PAH but we are looking outside that area, as well, for applications of the ERAs.

Can I just have a follow-up? I know that in the long-term certainly this might become a very attractive drug franchise but in the near term is anything that you could do to see to accelerate the drug sales a little bit?

Jason, we really are trying to keep it to one question but we'll address your thoughts.

No, I think again we expected this to be a very progressive launch and it is turning out exactly that way. These are very seriously ill patients and we have, you know, a very focused audience who are very selective with the way they approach the patients, and I think we're certainly winning brand loyalty and really building the presence of Gilead with these - with these opinion leaders and with this audience. So I think it's - I think it is on the track we expected.

Thanks.

Our next question comes from the line of Tom Russo with Baird, go ahead.

Thanks for taking the question. I actually had a little different question on Letairis, actually on IPF, which you just mentioned again. I was wondering if the one large study could in theory support a filing, or would you then do a second study if the first is successful? Secondly, is this independently and of itself a high-interest therapeutic area for the company?

Yes, one study could support the indication, the endpoint is for progression-free survival or death as John mentioned. By the way, we would never do two consecutive studies. If we decide to do IPF, if it needs two studies we will do them concurrently, because one big thing we're trying to save here is time, which is money. And secondly, yes, absolutely, I think it is a great opportunity for us. It belongs to our pulmonary franchise. We have expertise in Seattle. We have physicians who know the pulmonary area, et cetera, so I think it is something that fits very nicely into our franchise.

Thank you very much.

Ms. Hubbard, at this point we have run out of time for additional questions.

Thank you, Operator. And we would like to thank you all very much for joining us today. We appreciate your continued interest in Gilead and look forward to providing you with updates on our future progress.

Ladies and gentlemen, that does conclude today's presentation. You may now disconnect. Have a wonderful day.