吉利德科學 (GILD) 2009 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences first quarter 2009 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, April 21st, 2009.

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

Good afternoon, everyone, and welcome to Gilead's first quarter 2009 earnings conference call. We're pleased you could join us today. We issued a press release this afternoon providing results for the first quarter ended March 31st, 2009. This press release is available on our website at www.gilead.com. We've also posted slides that outline the topics discussed on today's call. Joining me today 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. We will keep prepared comments brief to allow more time for Q&A.

I would like to note that since the CV Therapeutics acquisition was not yet complete in the first quarter, the results we will be reporting today do not include any impact of their business on Gileads'. I would also like to remind you that we will 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 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, 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 will also be making certain references to financial measures that are on a nonGAAP basis. We provide a reconciliation between GAAP and nonGAAP numbers on our website. I will now turn the call over to John Martin.

Thank you, Susan. Good afternoon, everyone, and thank you for joining us today. The first quarter of 2009 was another very strong and productive quarter for Gilead, one in which we continued to deliver on our financial goals across geographies, achieved multiple key R&D milestones and significantly augmented Gilead's cardiovascular efforts through the acquisition of CV Therapeutics. For the quarter, product revenues were $1.45 billion, up 27% over the same period in 2008 with nonGAAP earnings per share of $0.66, up 25% over the first quarter of 2008. As Kevin will describe later in the call, our HIV franchise continued its momentum and gained share across all our commercial markets, reaching a new revenue high of $1.34 billion. During the first quarter, three important data sets were presented at the conference on Retroviruses and Opportunistic Infections in Montreal that we believe will augment the growth of our HIV franchise into the foreseeable future.

First, expanding on a presentation at (inaudible) last year, new data were presented from the Accord study which is a retrospective analysis of more than 17,000 patients designed to determine the optimal time for initiation of antiretroviral therapy for HIV infected individuals. The results will be published and featured in an editorial in the April 30th edition of the New England Journal of Medicine and the conclusion is that those who deferred therapy to when their CD4 counts fell below 500 had a 94% increases risk of death compared to those who started antiretroviral therapy when their CD4 cell counts were above 500. These results seem to be already affecting prescribing patterns with HIV opinion leaders, but if and when current guidelines change, remains to be seen.

Second, the results from the DAD study were presented at the (inaudible) conference and these data confirmed or reconfirmed that the use of abacavir is associated with a 90%, almost two fold increase in the risk of myocardial infarction or MI. Importantly, tenofovir, the active molecule in Viread, Truvada and Atripla, is not associated with increased risk for MI. The DAD or the data collection on adverse effects of anti-HIV drugs study is one that includes 11 cohorts of more than 33,000 HIV infected patients in 21 countries including many in Europe, Australia and the United States. It was established to follow HIV patients over the long-term and assess cardiovascular related morbidity and mortality outcomes. In addition two other studies presented at [Croux],including a French hospital database study of 115,000 patients using a different methodology also confirmed the increased risk of cardiovascular events associated with abacavir use.

And third, the first human clinical results from our novel boosting agent GS 9350 were presented. These data demonstrated that GS 9350 has significant and selective pharmaco enhancing abilities. No antiviral activity against HIV and differentiated biological properties in vitro compared to ritonavir, the drug that is currently commonly used to boost protease inhibitors. Study results show that GS 9350 effectively boost elvitegravir when both drugs are dosed as part of a single-tablet complete fixed dose regimen with Truvada. Norbert will provide a more in depth update on these promising product candidates later in the call.

As you know, last Friday we announced that we completed the acquisition of CV Therapeutics. We believe the merger of CV Therapeutics and Gilead represents a strong strategic fit, scientifically and commercially, that will broaden and strengthen our growing cardiovascular portfolio, provide us with a proven organization capable of advancing an extensive pipeline and accomplished and experienced Management team under the leadership of Lou Lange. Lou will be responsible for overseeing the collective R&D efforts of both our Colorado and Palo Alto teams. This acquisition immediately delivers two marketed products, Ranexa and Lexiscan to our franchise as well as a pipeline that includes several interesting candidates in clinical development. Ranexa's revised labeling achieved last November provides an important opportunity to accelerate the adoption of this product and we believe the knowledge of the Ranexa cardiology sales force paired with our commercial operations resources, discipline and expertise will allow us to have a significant impact on expanding the usage of Ranexa for patients in need.

We are now at the point that we can begin to integrate the CVT organization into ours and we will be doing so in a thoughtful manner but as quickly and efficiently as possible. The addition of the talented pool of employees from CVT comes at a very important time as we have recently unblind the positive data from the first of two pivotal Phase III studies of darusentan in resistant hypertension. Norbert will discuss these strong results in more detail later in the call.

In closing, it was a very busy but rewarding quarter. I'm very pleased with the progress we are making in research and in clinical development and look forward to updating you on developments over the course of this year. Next, Robin will review the financial results for the quarter.

Thank you, John. As you have all seen in the press release we just issued, the first quarter of 2009 was another very successful quarter for Gilead. Total revenues, which include product sales and royalty contract and other revenues, for the first quarter of 2009 were $1.53 billion, a 22% increase year-over-year. Our first quarter net income was $589 million, or $0.63 per share on a fully diluted basis. Our nonGAAP net income for the first quarter of 2009, which excludes the impact of after tax stock-based compensation expense, was $619 million or $0.66 per share on a fully diluted basis, which represents a year-over-year increase in net income and EPS of 20% and 24% respectively. In the first quarter of 2009, we generated $641 million in operating cash flow. Our first quarter 2009 product sales were $1.45 billion, marking our sixth consecutive quarter of surpassing $1 billion in total product sales and more than five consecutive quarters of quarterly product sales growth.

Antiviral product sales grew to $1.34 billion for the first quarter of 2009 from $1.05 billion in the first quarter of 2008 up 28% year-over-year and 5% sequentially. Truvada sales contributed $590 million or 44% to our first quarter 2009 antiviral product sales, up 23% year-over-year and 5% sequentially, due primarily to sales volume growth in both the US and Europe. Atripla contributed $510 million or 38% to our first quarter 2009 antiviral product sales. Atripla sales increased 57% year-over-year and increased 10% sequentially resulting from the continued uptake of this product in the US and Europe. The (inaudible) portion of Atripla which is purchased from BMS at it's estimated market price and reflected in cost of goods sold was approximately $187 million. Viread sales were $161 million for the first quarter of 2009, representing a year-over-year increase of 5% and a sequential decrease of 1%. Hepsera generated sales of $73 million in the first quarter of 2009, a decrease of 12% on a year-over-year basis and 5% sequentially. Finally, Letairis sales were $40 million for the first quarter of 2009, an almost two-fold increase year-over-year and an increase of 9% on a sequential basis, driven primarily by sales volume growth in the US.

Foreign currency exchange had a net unfavorable impact of $22 million on our first quarter of 2009 revenues when compared to the same period last year. On a sequential basis, the foreign currency exchange impact from our first quarter 2009 revenues was an unfavorable $7 million. Our royalty contract and other revenues for the first quarter of 2009 were $83 million, a decrease of 29% year-over-year and a two-fold increase sequentially. The decrease year-over-year was due primarily to the decrease in royalty revenues recognized from Tamiflu sales. The sequential increase in royalty contract and other revenues was primarily driven by seasonality in Tamiflu sales as well as the recognition of $24 million of previously deferred collaboration payments from a corporate partner with which we will no longer have substantive ongoing performance obligations.

Royalties received from Roche and recognized in our revenues in the first quarter of 2009 were $33 million. These royalties which are paid one quarter in arears, reflect a royalty rate of approximately 22% as applied to Roche's net sales of Tamiflu during its fourth quarter of 2008. As you may have seen, Roche reported their first quarter 2009 earnings on Thursday of last week, with 401 million Swiss Franks or approximately $350 million reported in Tamiflu sales. We therefore expect that the Tamiflu royalty revenue that we will report in the second quarter of 2009 will be approximately $50 million.

Turning to product gross margin. As a reminder, my discussions of all margin and expense related items are on a nonGAAP basis which excludes the effect of stock-based compensation expense. NonGAAP product gross margin was 77.6%, compared to nonGAAP product gross margin of 79.1% for the same quarter of last year and 77.4% for the fourth quarter of 2008. The slight year-over-year decrease was due primarily to the higher proportion of Atripla sales in the first quarter of 2009 which includes a [favous] component at zero gross margin. NonGAAP operating margin was 55.5% for the first quarter of 2009 compared to 56% for the same quarter last year and 52.5% for the fourth quarter of 2008. On a year-over-year basis, a net decrease in royalty contract and other revenues driven by lower Tamiflu royalties, was largely offset by strong product sales growth as well as tempered growth in SG&A expenses. Sequentially, the increase in nonGAAP operating margin compared to the fourth quarter of 2008, was due primarily to lower R&D expenses and a net increase in royalty contract and other revenues.

As you are aware, our nonGAAP operating margin is impacted by the (inaudible) component of a growing Atripla revenue stream and trends in Tamiflu royalties. Excluding these factors, our core nonGAAP operating margins continue to improve as we focus on profitably managing the growth of our business.

NonGAAP R&D expenses were $172 million for the first quarter of 2009, an increase of 24% on a year-over-year basis, due primarily to increased compensation and benefits from higher headcount and increased clinical study activity driven by the growth in our business. On a sequential basis, nonGAAP R&D expenses decreased 7%, primarily due to a net decrease in payments incurred for or related to our collaborations, partially offset by increased compensation and benefits from higher headcount.

NonGAAP SG&A expenses were $183 million for the first quarter of 2009, an increase of 3% year-over-year and an increase of 5% sequentially, due primarily to increased compensation and benefits from higher headcount. Other income and expense reflected a net expense of $13 million for the first quarter of 2009, a decrease of $19 million from the first quarter of 2008 and a decrease of $15 million sequentially. The year-over-year and sequential decreases were due primarily to higher hedging expenses and a reduction in the average yield in our investment portfolio as a result of lower interest rates. The timing of expensing of our hedging costs is driven by the change in interest rate spreads between the foreign currencies that we hedge and the US dollar. As the spreads change, the level of hedging cost expense during a particular period increase or decrease. The significant reductions in global interest rates and increased volatility in the foreign currency exchange environment resulted in an increase of $15 million in hedging expenses compared to the first quarter of 2008, and an increase of $14 million in hedging expenses sequentially.

As we discussed on our last earnings call, effective January 1st of this year, we adopted FSP APB 14-1 which impacts the accounting for convertible debt instruments such as our 2011 and 2013 convertible senior notes. This accounting pronouncement requires us to bifurcate the conversion option embedded in our convertible note and to record this conversion option in equity. The bifurcation of the conversion option creates a debt discount on the convertible notes which are now amortizing to interest expense over the terms of the convertible note. Since FSP APB 14-1 requires retrospective application, prior periods now also reflect additional interest expense. This retrospective application caused both our historical GAAP and nonGAAP net income and EPS to be adjusted from that which was previously reported. Our website includes a slide summarizing the impact of FSP APB 14-1 posted along with our 2009 guidance.

Both GAAP and nonGAAP net income for the first quarter of 2009 and 2008 had been adjusted to reflect additional after tax interest expense of $8 million for each period. Our effective tax rate for the first quarter of 2009 was 26.3% compared to 27.9% for the same quarter last year and 21.9% for the fourth quarter of 2008. The year-over-year decrease was primarily due to the extension of the Federal R&D tax credit and increased earnings in lower tax jurisdictions. The sequential increase was primarily driven by various fourth quarter 2008 items including the resolution of certain tax audits with taxing authorities and the extension of the Federal R&D tax credit.

Next I would like to turn to our cash position and our operating cash flow performance for the quarter. Our balance sheet continues to be strong with cash, cash equivalents and marketable securities of $3.6 billion as of March 31st, 2009, an increase of $369 million when compared to our $3.2 billion balance at December 31st, 2008. In the first quarter of 2009, we generated $641 million in operating cash flow. This compares to $606 million for the first quarter of 2008, which has been adjusted for a retrospective application of FAS 160 on January 1st, 2009 and the resulting reclassification of the change in non-controlling interest from operating cash flows to financing cash flows.

We repurchased approximately 5 million shares of our common stock at a total cost of $230 million under our $3 billion share repurchase program which our Board of Directors authorized in October of 2007. In addition, the $750 million accelerated share repurchase program that we entered into in October 2008 was completed during the quarter when we received an additional 1.4 million shares of our common stock, bringing the total shares retired under this program to 16.2 million shares at an average purchase price of $46.21 per share. As of March 31st, 2009, we had approximately $768 million remaining for share repurchases under the $3 billion share repurchase program which expires at the end of 2010. We continue with our commitment to review opportunities to leverage our cash position to expand our business as well as to return value to shareholders as appropriate.

As John mentioned earlier, the CV Therapeutics acquisition was completed on April 17th, 2009. Given the historically low short-term interest rates in April, we borrowed $400 million under our $1.25 billion revolving credit facility to fund a portion of the acquisition instead of liquidating a greater portion of our short-term or long-term marketable securities. We expect to repay the borrowing through cash flow generated from operations by the end of 2009. Given that we closed the CV Therapeutics transaction last Friday, we are not yet in a position to revise our guidance to reflect the impact of their business, either from a revenue or expense perspective, on Gilead's current business. Therefore, all guidance metrics we will discuss today are for Gilead as a stand-alone Company prior to the CV Therapeutics' acquisition. We expect to provide guidance on the combined Company during our second quarter 2009 earnings call.

As a reminder, you can locate all of our guidance for 2009 on our corporate website. At this time, we are reiterating our previously provided guidance for the full year 2009. Our net product revenue guidance for the full year 2009 is a range of $5.9 billion to $6 billion which reflects a 16% to 18% increase over 2008 product revenues. As we stated on the fourth quarter 2008 earnings call, there are many factors outside of our control that may have an impact on our business. These include, but are not limited to, the potential for continued volatility in foreign currency exchange rates, US and international government pricing pressures and changes in the financial health and our practices of our business partners and customers. As a reminder, our nonGAAP product gross margin and operating expense guidance excludes the impact of stock-based compensation expense.

NonGAAP product gross margin guidance for 2009 is a range of 76% to 78%. For expenses, we expect nonGAAP R&D expenses to be in the range of $800 million to $820 million. We expect nonGAAP SG&A expenses to be in the range of $720 million to $740 million. Our effective tax rate guidance for the full year 2009 is expected to be in the range of 26% to 27%. Regarding after tax stock-based compensation expense, we anticipate the 2009 fully diluted EPS impact to be in the range of $0.14 to $0.16 per share.

In conclusion, our solid operating performance continues to be a validation of the significant efforts made by Gilead's employees 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. The first quarter of 2009 was a successful quarter for Gilead's commercial operations with multiple milestones and achievements across therapeutic areas and geographic regions. Before turning to our performance for the quarter, I would like to remind you that the analysis of market share in the US and Europe we rely on the most up to date third party data available to us in each market. I would like to begin by discussing the performance of our antiviral franchise. And to set that stage, it is important to address the economic dynamics that have impacted other companies across our industry and how those factors have affected our overall operating performance during the first quarter. For Gilead's HIV business, I would like concentrate first on inventory, second on non-retail ADAD purchases, and third on patient's ability to retain their prescription coverage.

Turning to inventory, our total wholesale inventory levels during the first quarter of 2009 remained relatively flat in absolute terms from the fourth quarter 2008. Moreover, demand from retail chains was consistent with prescription demand during the quarter. Thus, we saw relatively stable supply chain in the first quarter of this year. Second, non-retail ADAD purchases. As a reminder, there are several AIDS drug assistance programs that have inventory management capabilities, most notably Florida and Texas. This capability along with normal budgetary cycles has in the past added to sales fluctuations in non-retail supply chains for our HIV products. In the first quarter of 2009, we did not see the large surge in purchasing that we experienced in the first quarter of 2008 relative to the prior year's four quarters. Essentially, it was a much smoother quarter-on-quarter pattern for this year's ADAD buying.

Finally, I would like to say that we have not seen a pronounced increase in patients seeking and receiving assistance. We believe this respects-- reflects the extensive [par] support that HIV patients have available as well as Gilead's innovative pricing and patient support programs, both of which recognize the clinical importance of keeping HIV patients on therapy.

Turning now to our performance. During the first quarter US HIV revenues performed strongly led Atripla at $374 million up 22% year-over-year and Truvada up $281 million up 18% year-over-year. Sequentially, US sales of Truvada were up an impressive 10% and Atripla were up 6% quarter-over-quarter. In the fourth quarter of 2008, the number of patients being treated with antiretroviral therapy grew 7% on a moving annual total basis to approximately 565,000 patients. Truvada maintained its position as the backbone of choice for antiretroviral therapy in the US with 195,000 patients on therapy or approximately 34% of all treated patients. Importantly, as new antivirals such as [Darilavir] begin to gain third agent market share, Truvada is the most frequently prescribed combination partner for the delivery of heart therapy.

Atripla remained the most prescribed regimen in HIV with 31% of patients. Atripla together with Truvada continued to account for greater than four out of five treatment-naive HIV patients. Atripla was once again was used in approximately 50% of treatment-naive patients. Additionally in the treatment-naive setting we continued to see changes in prescriber behavior based on the changes in the DHHS treatment guidelines. Epzicom share continued to decline, falling from 12% in the first quarter of 2008 to 6% in the fourth quarter 2008. The solid performance we saw in our US HIV market in the first quarter should continue throughout 2009 driven by testing and screening initiatives, and as John Martin alluded to earlier in the call, recent publications on when to start antiretroviral therapy.

Turning now to our HIV performance in Europe. Comparable to the US, the big five countries in Europe continued to demonstrate robust growth. At the end of the fourth quarter 2008, 273,000 patients were being treated with antiretroviral-- antiretrovirals, representing a growth rate of 7% on a moving annual total basis. We are very pleased with the performance of all our HIV products in Europe where Atripla contributed $125 million in European product sales, up 21% sequentially. Of the patients receiving Atripla in the first quarter 2009, approximately 26% converted from Truvada to Sustiva, whilst 29% were switches from other regimens. 45% of patients starting Atripla were treatment-naive patients. Truvada continued to build on its solid base throughout the EU and remained the number one brand in all big five markets. During the first quarter of 2009, Truvada contributed $278 million in revenues, up 28% from the same period in 2008.

Atripla together with Truvada, or total Truvada increased its share to approximately 73% to treatment-naive patients, while Kivexa share dropped to 13% at the end of the first quarter 2009, down from approximately 20% in the first quarter of 2008. Total Truvada achieved new highs in the NRTI market outperforming Kivexa with a prescription ratio of 3 to 1 in January 2009, up from 2.3 to 1 in January 2008.

And finally, some very exciting breaking news. I'm delighted to report that at the end of last week, Gilead finalized the national reimbursement of Atripla in France and we are currently gearing up to begin selling the product as of June. As a reminder, France is the largest HIV market outside the US, comprising approximately 28% of the treated patients within the big five and this launch will complete the major market availability of the only one tablet, once-a-day complete HIV regimen. Sales representatives from Gilead and Bristol-Myers Squibb are now sharing news of the Atripla price approval with the French HIV community.

Now turning to Viread and our hepatitis franchise. Since the US launch of Viread in August of 2008, our hepatitis sales and medical affairs teams have concentrated solely on Viread. That effort is now being seen as we make significant inroads into the HBV market. Using the most up to date third party data available, as of April 2009 or eight months post launch, Viread had achieved 26% share of new prescriptions in the HBV market, just seven percentage points behind the current market leader, [Antecaber]. Importantly, new prescription share for Gilead's HBV products, Viread and Hepsera, has increased from 43% to 51% since the launch of Viread. In an effort to continue to build awareness and bring patients into therapy we will continue to support Viread with a broad platform of educational activities concentrated in Asian/American communities, highlighting the need to screen, diagnose and link patients to care.

In Europe, we now have Viread launched for HBV in 16 countries. In Germany, just nine months after market launch, Viread has already achieved approximately 21% market share and is very close to surpassing [Antecaber]. In Turkey, in just seven months post launch, Viread has achieved 15% market share. In the UK, we anticipate receiving a positive recommendation for Viread from the National Institute for Health and Clinical Excellence or NICE. NICE is the independent organization responsible for providing national guidance on the promotion of good health and the prevention and treatment of ill health. At the European level, the 2008 easel guidelines have endorsed Viread as the only preferred antiviral drug for both treatment-naive and lamivudine-resistant HBV patients.

Now, turning to our cardiovascular franchise and Letairis for the treatment of PAH. Consistent with prior quarters we conducted our proprietary PAH survey. According to our latest data, as we exited the first quarter, approximately one in three patients receiving any ERA were taking Letairis and they are doubling over the last 12 months. Of all patients taking Letairis, just over 30% have switched from [Plucentan]. The Letairis prescribing base has significantly grown over the past 12 months and now more than 2,500 physicians have prescribed Letairis, up by 85% from the first quarter of 2008. With the addition of Ranexa to our product portfolio, we will strengthen our Company presence in cardiovascular and cardiopulmonary medicine. Approximately 1/3 of PAH specialists are from a cardiology background. Thus, we are very committed to the growth of Letairis. In this respect, we anticipate a strong showing at the up and coming ATS conference in San Diego with five abstracts accepted including the first presentation of the Letairis ARIES-3 study.

And finally, I would like to take a minute to talk about our acquisition of CV Therapeutics. As John Martin stated earlier in the call, we have just completed the transaction as of last Friday. On the commercial front, we can now turn our focus towards a successful integration of CVT and execution upon the opportunity before us to grow Ranexa for angina in the US and determine our EU strategy for Lexiscan. In the days prior to the close of the transaction, CVT provided us with the sales figure they would have reported for Ranexa the first quarter, which is approximately $26 million. Please note that this number has not been prepared by Gilead or analyzed in the same fashion as our own product portfolio revenues. Over the coming quarter, and in line with the presentation of our Q2 earnings, we will be working diligently to fill out the complete picture of the Q1 Ranexa performance including a vigorous analysis of the dynamics of prescription demand, inventory and pricing.

In closing, the first quarter of 2009 was a very solid quarter and lays the foundation for another good year of commercial results. I will now turn the call over to Norbert who will discuss our research and development progress.

Thank you, Kevin. I am very pleased to share with you the solid progress made in our pipeline programs during the first quarter of this year. First, on the HIV front, as John Martin discussed at the conference on Retroviruses and Opportunistic Infections in February of this year, we presented positive data from both the GS 9350 and Integrase fixed dose regiment PK studies in healthy volunteers. We also obtained FDA's agreement on our proposed plan for simultaneous development of elvitegravir, our once-daily Integrase inhibitor, for GS 9350 our PK enhancer, and for our fixed dose regiment of Truvada elvitegravir and 9350 which would allow us to support three separate marketing applications with four Phase III studies. We have also recently received agreement from select European regulatory authorities on our development plan as well. So pending positive clinical data, we will target simultaneous filings for all three drugs in both the US and the European Union.

Just last Friday, we announced a key milestone that the first patient was dosed in a Phase II study, study 104, comparing the Integrase fixed dose regiment to Atripla. This study is a randomized, double-blind, 48 week clinical trial that will evaluate the safety and efficacy of the Integrase fixed dose regimen versus Atripla in treatment-naive patients. The study will enroll 75 patients in total with 50 randomized to receive the Integrase fixed dose tablet and 25 randomized to the Atripla arm. The primary endpoint is the proportion of patients with viral node less than 50 copies/mL at week 24 of treatment. Secondary end points will include the proportion of patients with viral load less than 50 copies/mL as well as the safety and tolerability of the two treatment regimens through 48 weeks. Based on the significant interest from physicians to participate in this study, we're pleased to report that we have already stopped screening patients and would anticipate the study to be fully involved by the end of May. This would allow us to complete 24 weeks of dosing by year end.

The second Phase II study, study 105, which will evaluate the boosting effects and safety of the two once-daily regimens of 9350-boosted atazanavir compared to ritonavir-boosted atazanavir each in combination with Truvada in treatment-naive patients, has received sign off from FDA and is expected to begin before the end of this quarter. This study is similar in design to the previous described Phase II study.

The (inaudible) Phase III study, 145, which is a pivotal non-inferiority study evaluating elvitegravir versus Merck's Raltegravir in treatment experienced patients is approximately 50% enrolled. We expect to complete enrollment in that study in the fourth quarter of this year.

On the HCV front ,which as you know represents our most focused research effort here at Gilead, we have completed enrollment of 200 patients in the GS 9190 Phase IIB study. This is a randomized, double-blind, placebo-controlled study comparing 24 or 48 weeks of 9190 dosed at 400 milligrams BID in combination with peg-interferon ribavirin to standard of care of 48 weeks peg-interferon ribavirin in patients with genotype 1 chronic HCV infection. The co-primary objectives of this study are to compare the early and sustained virological response rates of GS 9190 versus placebo. We hope to be able to share data from this study with you before the end of this year.

With regards to 9450, the caspase inhibitors in license from LG Life Sciences in late 2007, we have recently completed a Phase IIA study in HCV infected individuals, evaluating the drug's ability to reduce serum markers of liver inflammation. Based on the positive results we are preparing to initiate the Phase IIB study later this quarter to evaluate the longer term safety and ability of GS 9450 to improve liver inflammation and or fibrosis as it says by histology. With regard to our Phase IIA study of 9450 in patients with NASH or non-alcoholic steatohepatitis, we're currently more than 60% enrolled. We believe it can complete enrollment and have data available from this study before the end of the year. In addition to the aforementioned development programs, other HCV research efforts either in-house or through our collaborations with companies such as Achileon are focused on seven different approaches including viral and cellular targets and we hope to be able to share more information on these programs as they advance through clinical development.

On the respiratory front, starting with aztreonam for inhalation solution for cystic fibrosis, we were disappointed that the FDA did not agree with our position put forth in our dispute resolution and further that the committee for medicinal products for human use, the scientific committee of DOP and medicines agency, adopted a negative opinion on our European marketing application. We're continuing our discussions with regulatory agencies to obtain agreement on requirements for approval. In the interim we will continue making aztreonam for inhalation available to patients with CF in need through our expanded access program which has currently more than 400 patients enrolled. We have now completed enrollment in the [mile] study and are more than 40% enrolled in the head-to-head versus TOBI study in Europe. We still can't confirm if either of these studies will meet requirements of regulators to support approval and will you update when we know more.

In addition to cystic fibrosis, we're continuing to enroll patients with non-CF bronchiectasis in a Phase II study evaluating the safety and the efficacy of aztreonam lysine for this indication. We're targeting completing enrollment in the third quarter and presenting data from this study before the end of this year. The Phase III study for Letairis for idiopathic pulmonary fibrosis called ARTEMIS which opens cleanly at the end of last year is now enrolling patients, we're early in the process and look forward to providing further updates on time lines during the year.

And as our partner Parion announced in December of last year, a Phase I study was initiated evaluating the safety and tolerability of GS 9411, an epithelial sodium channel blocker in healthy volunteers. GS 9411 is designed to increase airway hydration for the treatment of various pulmonary diseases. We anticipate data from this study could be available later this year. In the interim, preclinical data on this compound will be the subject of a poster presentation at the upcoming American Thoracic Society conference taking place in San Diego in May.

And finally, on the cardiovascular front, earlier this month we released top line data from the first Phase III study, DAR 311 or darusentan in resistant hypertension. This to our knowledge is the only Phase III study in resistant hypertension where new agent is added on top of three anti-hypertensive medications, one of which is a diuretic. The study met its co-primary efficacy endpoints of change from baseline to week 14 in trough, sitting, systolic and diastolic blood pressure with a P value for all darusentan groups of less than 0.001. The placebo-adjusted reduction of systolic blood pressure was an impressive 9 millimeters of mercury and the percent of subjects achieving goal systolic blood pressure doubled in the darusentan arms compared to placebo. The most common treatment adverse events is (inaudible) peripheral edema or fluid retention. Most cases was mild to moderate in severity and led to a small and dose related rate of discontinuation across treatment arms. Decreases in hemoglobin and hematocrit were also observed. Importantly, liver function test results were comparable between treatment groups. We're very pleased with both the efficacy and safety from this study and look forward to presentation of these data at the late breaker session on Friday, May 8th at the American Society of Hypertension conference taking place in San Francisco.

The DAR 312 study which is the larger of the two studies targeting -- targeted at enrolling 770 patients is now more than 90% enrolled. We believe we're on track to complete this study before the end of 2009 with data available likely in the early part of next year. We're also preparing to initiate a Phase III study of Letairis in patients with pulmonary hypertension in IPF during this quarter. And lastly, we have also begun enrolling in patients in a Phase II study of cicletanine in 160 patients with PAH. Patients will be randomized across three doses of cicletanine or placebo. The primary end point will be change in six minute walk distance followed 12-- following 12 weeks of treatment.

In summary, we have made significant progress with our R&D pipeline during the first quarter of 2009 and we look forward to keeping you posted on the many pipeline milestones we anticipate over the course of this year. I will now turn the call over to John Milligan for closing remarks.

Thank you, Norbert. I'm very pleased with our continued high level of productivity and consistent financial performance in the first quarter of 2009. We have multiple catalysts over the remainder of the year including presentation of important data at medical conferences and an expanding pipeline of promising compounds in the clinic. We are looking forward to the upcoming European Association for the Study of the Liver, or EASL conference, which will be taking place in Copenhagen later this week. We anticipate the presentation of numerous important data sets including the presentation of the 96 week data from both of the pivotal studies of Viread for APV and a poster presentation of the Phase I data of GS 9450, our caspase inhibitor, in healthy volunteers. In addition, we have the American Society for Hypertension conference coming up in San Francisco, where as Norbert mentioned, we will have the presentation of the darusentan data from study 311, our first Phase III study in a late breaker session on Friday, May 8th. This will be an important conference for Gilead as we build relationships with the physicians whose practices treat patients with resistant hypertension.

And finally, on the conference front, the American Thoracic Society conference will be taking place in San Diego May 15th through the 20th where we will have five presentations on Letairis including the first presentation of the data from the ARIES-3 study which is evaluating Letairis therapy in a diverse population of patients with PAH. Also, the data from [Dr. Aaron Waxton] compassionate use study of [cyclutony] in patients with PAH will be presented at this meeting.

I'd like to use this time as an opportunity to welcome the CV Therapeutics organization to Gilead. I firmly believe that we now have the products, pipeline and talent to ensure the continued growth of our cardiovascular franchise returning value to shareholders into the next decade and beyond. With regard to Ranexa, we look forward to our second quarter earnings call to provide you with a thorough update on the product's performance, and more importantly, the commercial strategy we will be putting in place in the near future to fully realize the potential of this innovative product. We will also provide you with updated guidance for the combined organization at that time. We appreciate your patience on this front and would ask that you keep this in mind as we head into the question-and-answer portion of the call.

I'd like to close by thanking our employees for their focus and dedication during an unusually busy and challenging quarter . In each of our franchisees, HIV, liver disease, respiratory and cardiovascular disease, we now have the teams and the infrastructure to be successful from discovery to commercialization. We'll focus our attention on executing on the plans we have in place and I look forward to updating you over the course of 2009. I will now turn the call over to the operator.

(Operator Instructions). And our first question comes from the line of Mark Schoenebaum with Deutsche Bank. Go ahead.

Oh, great. This makes it tough. I get the first question. I have to pick out of all these. Maybe I could just ask, ask you guys, please, was the French reimbursement approval embedded into your prior product sales guidance and can you repeat what percent of EU that is?

Yes, Mark. It's Kevin speaking. Yes, it was embedded into our guidance. We did hope to have it planned for the middle of the year. It looks like we're going to get the publication in June. We can't fully sell until we get the publication in the official Government Gazette. And of the big five, so this is of the big five European countries, the French market is about 28% of the HIV business of those markets. So obviously it's incredibly important, it's the number two market outside the US. It is somewhat biased towards the protease inhibitors, but bearing in mind how cost conscious Europe has become and it did take us a long time to get there with this pricing in France. We think Atripla will be very appealing as a single-dose, as a single-tablet regiment in that marketplace because of its cost efficiencies. So we're really fired up for this. We've been waiting for this and already representatives are able to actually communicate that we've got the price approval. So in actual fact, they are preparing for that June availability of the product.

And should we assume pricing is the same and there's no material use now in France on a named patient basis? Then I'll jump back in the queue.

No, there's no named patient, no named patient availability of Atripla at this time.

Thank you.

Our next question comes from the line of [Megan Hull] with Goldman Sachs. Go ahead.

Hello, can you hear me?

Yes, we can hear you, Megan.

Thank you. I know that you discussed the ADAD programs a little bit, but in view of a lot of concerns of investors about the potential impact of the economy on usage of drugs in general, can you talk a little bit more about the percentage of people who might be under various reimbursement and also in some states they are facing some problems with Medicaid. How do you think that might affect the usage of Atripla and related products?

I'll try to cover as much as I can, Megan and maybe John can chip in with what I miss. Basically of our US business, about 35% go through federal payors. 23% is through the ADAD program and approximately 12% is the FSS, so that's the Federal Supply Schedule like VA and the public health systems. As a reminder, we have frozen our pricing to that 35% of our US business. We felt that was the right thing do to ensure that patients are able to receive their HIV therapies. We've always been very leading in our efforts with the HIV community.

In terms of non-retail purchases, a reminder that the financial year for ADAD is basically April 1 through April 1. We didn't see the big bonus in the first quarter of this year that we saw in last year. It was a much smoother fourth quarter to first quarter. That's because their supplemental funds in addition to the federal largely they receive their money at a federal level but in certain states they get a top up from the state. They came much earlier last year, they actually came in April and so I think that encouraged the ADAD programs to be purchasing more in the third and fourth quarter than in the first quarter of this year. And as a reminder, in 2007, those supplementals came very late, in September, which made them do the large orders. So right now we see I think a fairly consistent situation. There was no difference in the ADAD total ordering for the year of 2008 versus 2007. And our intelligence says that the ADAD programs are continuing to support putting patients on therapy, both using the federal as well as the state funds. I think the key question will be of course for us will be the reauthorization of the Ryan White Act which comes along in September of this year.

So approximately how much of the bonus that you expected in the first quarter actually shifted to the end of last year?

Well, basically if you put the full year through to April for both years together, it's almost the same in total quantity of products. So in general terms, if you put fourth quarter and first quarter together, they kind of even each other out. So in totality that six month period was about the same in the two financial years.

Thank you.

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

Good afternoon. I was hoping that you could comment, if the DAR 312 trial performed similarly to DAR 311 with regard to safety, what would be your current expectations with regard to M-- [RIMS] and monitoring requirements and maybe warning language for edema and hemoglobin and liver enzymes?

Yes so, Tom, of course we have to have a conversation with the agency about this, but if I look at the current data that we have from 311, clearly there is no evidence that darusentan is associated with any LFT elevations. And by the way, that same evidence also exists for ambrisentan. And there's, of course, evidence that there is dose-related incident of edema and other hematocrit and hemoglobin decreases, those would certainly be mentioned in the label but those will certainly not lead to a [RIMS]. The only thing we're really left with is the teratogenicity and that clearly will have some implications on the label. We nevertheless hope that a range in itself, as long as it's operationally simple, is really not an impediment in any way. It only becomes an impediment if it becomes-- if it inhibits the prescribing and this current is the prescribing. So we-- again looking at the current data, I do not think that there's justification for doing that and we can have discussions with the agency about that and I'm fairly hopeful we will be able to come up with a pretty clean label.

And then if you're able to say, were there any cases in DAR 311 or that you've heard from DAR 312 of elevated bilirubin or higher [sloths] in either arms?

No, there were no cases of high [sloth]. And by the way know they did some supplementary analysis, there were no -- so if you look at the mean decrease in hemoglobin was something of the order of 0.8 grams/mL, which is very little, and there were also no big outliers. So if you look at people that had greater toxicity there were very few and they were not different between placebo and active. You can see more of those analyses when we present the data at Hypertension meeting in San Francisco in two weeks.

Okay. Thanks very much.

Our next question comes from the line of Geoff Meacham with JPMorgan. Go ahead.

Hey, guys, congrats on a good quarter. A question for Kevin. Lots of anxiety about IMS data for this quarter. Can you talk directionally about inventories at the wholesaler and the retail level, which did impact you last quarter? Just wondering what that read-through was for this quarter and then I have a follow-up on France?

Hi, Geoff. Well, first of all, I'm not able to comment on the IMS data. We take Walter's Claw of Health and Walter's Claw did show growth in the first quarter over the fourth quarter and the weekly data-- their weekly data aligned very nicely with their monthly data, so everything seemed to square away from the point of view of the database that we took. I did state that our absolute inventory levels at the wholesaler level remained consistent from the fourth quarter. It is important to say that in terms of days on hand, our inventory did come down several days. And that's possible in terms of maintaining your absolute inventory level because of course we have a large high growth product. So clearly there was some changes affected by the three major wholesalers. From the point of view of the retail level, the sort of -- the Walgreens and the CVSs of this world, we didn't see any hold back on their ordering patterns and it did square away very nicely with the prescription demand data.

Geoff forgive me for breaking in, but I'm just going to remind you all if you'd please just ask one question. We're obviously running long on the call and we want to allow as many of you to get a question in before we need to wrap.

It's a quick one though. Just with respect to France, other companies are offering discounts at launch right now. What can you tell us about the pricing in France at launch and how has pricing held up in OUS countries? Thanks.

Well, the additional time really in France was that we had to go through both this thing called the transparency committee, which basically grade your drug from a health technology point of view, and then you move on to sets, the French pricing committee. We have achieved a one plus one price with France and that's what we have got largely across our whole European markets.

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

Thanks. Pfizer, GSK there recently announced an HIV alliance. I'm wondering what your thoughts are there? Is it a real threat or an admission of defeat?

Well, (inaudible) Joel. I don't know the motivation for putting those two organizations together the way that they did. I view it as an opportunity for more products from those two pipelines, especially the early products to have a chance to be developed more fully. So I think that's a good thing for patients in need here. If you look at the portfolio, though, I don't think there's anything really competitive with what we have over the coming years. So it would be something for the longer term investment as I see it.

Thank you.

Our next question comes from the line of Yaron Werber with Citi. Go ahead.

Yes, hi, congrats on a nice quarter, we honestly all needed this. Let me actually ask you guys maybe a tough question on Ranexa. The sales for the quarter were $26 million which were about $11 million light of where I was for Ranexa based on the coverage and CV and the sales are actually lower than they were pre the label expansion. So I don't know if you can help us out, understand this a little bit, but was it an inventory destocking or what's your sense as to what happened?

Yaron, we said that we're not going to comment on any of those numbers because we frankly don't have insight into why that number this quarter is lower than it was previously. So your observation is correct, we don't know the metrics behind that yet so we just can't comment.

Our next question comes from the line of Thomas Wei with Piper. Go ahead.

Hi, thanks. A question on the revenue guidance, especially given the quarter that was just reported on the HIV front, it looks pretty conservative. If you were just to continue at that pace of growth which Kevin, I think you mentioned you expected that to be the case through 2009, you'd already be above the high end of the guidance range. So I just wanted to-- at least the product sales guidance range. I just wanted to understand a little bit better about some of these other factors that you had mentioned give you uncertainty on that business outlook going forward. I was confused about the statements on the business environment in light of what you said on the HIV dynamics and also a little bit confused about pricing pressure and what the potential -- how that might really manifest itself in the market. Are there fights that you're having on pricing especially internationally? Thanks.

Thomas, it's John. But I think it's just sort of two simple principals that came down to the reason why we didn't change guidance especially on the revenue side. One it's just very early in the year and we're very reluctant to do so until we have a couple of quarters under our belt and really understand what's going on especially with foreign currency fluctuations, that's one of the areas that I'm-- we're obviously watching very closely. And then second of course is that the acquisition of CV Therapeutics, at the next conference call we'll issue new guidance across most of the different areas where we're going to be of course because we'll have additional revenues and additional expenses, and it didn't feel like it was a good time to change guidance only to reconfigure things later on. And that was really the two principles that drove to what we're guiding you to today.

I think too the factors that we mentioned are the same factors that we mentioned on the call, so continue to monitor it.

Yes, if you couldn't hear that, Thomas it's just these are just general business factors that we put in because you never know what's going to happen in this world. But as Kevin said, through the first quarter the strength was exactly the way we would expect it to be for the business.

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

Hi, great. Thanks. I wonder if I could go to the pipeline and 9450, can you give us an idea of what you meant by positive and when we're going to see the data for hepatitis C? And also I know we're not supposed to have two questions, but did you also see fewer selling days this quarter over fourth quarter and might that reverse in second quarter? Thanks.

Yes, Michael, quickly the answer to your first question, so 9450, the study was a 14 day dose ranging study on HCV infected individuals and the two efficacy end points that we looked at was ALT normalizations and changes in CK18. Based on those data, we have initiated a Phase IIB study and obviously the data were positive. We wouldn't have initiated the Phase IIB study would that be negative. We're now looking at whether the compound also works in -- whether we also can see efficacy as defined by histology. We will probably present the data sometime later this year.

Yes, so likely scenario would obviously be ASLD.

Yes, ASLD would be good case. And just quickly, Michael, on selling days. We actually used the term shipping days here. We did have two less shipping days for Gilead products in the US in the first quarter.

Thanks.

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

Thanks for ascertaining the questions. Kevin, I wonder if you could talk a little about recommendations. I know you said that who knows about recommendations but could you give us a sense of what the penetration according to your data of HIV therapy is in the 200 to 350 then 350 to 500 and then greater than 500 range, and then what you think that might get to if we saw recommendations change?

So you're really talking, Geoff, about guidelines, so for example European guidelines, (inaudible) guidelines or perhaps the American DHHS guidelines.

Exactly.

Yes, we've had a although lot of discussion with our advisors about that. It remains to be seen whether the publications that have now come out on any accord and the other supporting cohorts to these will convince a guidelines committee to make that change. The one thing that's been pointed out to us is that if you look at the guidelines today, there are a significant group of patients who should be treated according to the guidelines of both 350 and below 500. Those are patients for example with high viral loads, with co-infection, HCV, et cetera. So I think certainly the opinion leader level, and John Martin pointed this out, I think the opinion leaders are already there with treating patients up to that 500 CD4 count because it's in the best interest of longevity of life, as well as potential to infect others.

We think in that 350 to 500, there's something in the order of about 100,000 patients in the US that are at that level but of course they would have to be followed up, they would have to be recalled. And typically HIV physicians bring those patients back on their routine -- on their routine follow-ups when they're doing their monitoring. Often that's every six months. So we'll have to see if the guidelines change. I do feel that there already are a good number of physicians who are already treating the majority of their HIV positive patients and it often comes down to whether the patient is ready for or prepared to take antiviral therapy.

Okay. Thanks very much.

Our next question comes from the line of Maged Shenouda with UBS. Go ahead. Maged, please check your mute button.

Yes, hello?

Hi, Maged.

Can you hear me?

Hi. Yes.

Thanks. Can you comment on how the DAR 311 study data are helping you handicap the 312 study given that there's an active control and how you're thinking about that?

I guess I'm trying to understand the question that you're asking. So the 311 study is actually two comparisons. It compares darusentan to placebo and the other compares darusentan to guanfacine. The only thing I can tell you, if you look at the number of other add-on studies, it is very clear that if you add on the second agent or a third agent or a fourth agent, you get less and less effect on blood pressure. And so my own suspicion about the guanfacine arm in 312 is that it's not going to perform much different from placebo, but that's something which we'll have to see. But we would-- I want to point out, we would -- the real -- so the one comparison that is versus placebo and so I think in that respect the study will be very similar to 311.

Great. Thank you very much.

Our next question comes from the line of Phil Nadeau with Cowen and Company. Go ahead.

Good afternoon. Thanks for taking my question. My question's also on a potential change to treatment recommendations. I think Paul Saxton in his editorial in the New England Journal suggested that there's some shortfalls to the Accord study and that it was more of an observational study than a randomized prospectively designed trial. Are you aware of any data that could come out in the near future from a prospectively defined randomized study that could help swing the recommendations committee?

Phil, it's John Milligan. No, there aren't any data that are going to come out any time soon that I'm aware of. I know there are-- again and you're right, this was a retrospective cohort analysis because to do a prospective randomized trial would take thousands of patients and perhaps five to seven years, so that is an active ongoing debate about whether that's a useful thing to do or not within the HIV community, with pretty strong feelings on either side of that. But we don't -- there may be additional cohorts that are being gathered but I'm not aware of any at the moment.

Okay and do you have any intelligence from the recommendations committees themselves, whether they've even met to take up this issue?

No, we're not aware of that. And again, this all happens external to Gilead so we don't know much more than you guys know in this area.

Okay. Thank you.

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

Thanks. Congratulations on a great quarter. Hopefully you can carry it through the background noise. Just a question on the -- I guess the implications of the darusentan Phase III trial data on the characteristics of the makeup of the CV sales organization. What impact will it have in terms of (inaudible) breadth or the type of individuals of focus of that sales organization?

Hi, Ian, it's Kevin. I'll only talk in general terms because as we said earlier, we're in the midst of and in high gear of integrating the CVT organization. It's certainly going very well as I speak. We are taking on 170 sales representatives. They are cardiology focused. They do both general cardiologists as well as some very major centers in the US. So we're taking them in totality into our organization and we will be looking very closely, whether we need to push and pull that field force. We know the company, the vendor that supplied all of the sizing data, we've worked with them in the past. In fact, we've already over the last couple weeks done some sizing analysis. So around the 2Q earnings we'll be able to give you more insights into what that might look like, first and foremost, for Ranexa.

We-- our sense at the moment is that that would provide us with the lion's share of a launch for resistant hypertension for specialists. It wouldn't certainly cover physician groups like the renal physicians and the endocrinologists who do get heavily involved in resistant hypertension by virtue of renal failure and diabetes and we'll have to think about the additional specialist audience. But I think the way that we're all thinking here at Gilead right now is that we're going to concentrate on darusentan for a specialist audience launch.

Okay. Thank you.

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

Thanks for taking my question. The one question I just have is on increase in prices, do you think with the current economic environment you can continue to take price increases for your drugs, we just thought maybe there was an 8% price increase in Viread. Do you think you can take further price increases for Truvada and Atripla this year?

Well, obviously we have seen that there are number of pharmaceutical companies that are taking rather large price increases earlier this year. We did take a Viread and Hepsera price increase on April the 1st, but of course that's our hepatitis market. We think very carefully about taking HIV price increases, we always have a significant debate here. I think we are aided in our ability to have price flexibility in our normal retail market by the fact that we've taken the significant step of having the price freeze through 2010 with our sort of our federal payors. So I think that puts us in a somewhat stronger position. But as we move through the year, I think we're going to try and sense the economic environment and of course weigh that against the value that our drugs provide.

Thank you.

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

Obviously most of my questions have been answered. Could you quantify that price increase on April 1st? And also on the ADAD purchasing, if you're typically seeing a lot of extra purchasing in Q1, you would then be seeing inventory draw downs in Q2. So would the anticipation be that you'd have a little more strength in Q2 relative to prior years?

On the second one first, Jason, I think we just don't know. It's very, very difficult to predict these ADAD purchases. We might have thought that we were going to get a very strong Q1 like we did in 2008 and that didn't materialize. So I think it's a very difficult -- it's a very difficult prospect actually making predictions about these state program purchases. In terms of the price increases, both Viread and Hepsera were increased by 7.9% on April the 1st.

Thank you.

Ladies and gentlemen, we have run out of time for additional questions. Ms. Hubbard I'd like to turn it over to you for any closing remarks.

Okay. Thank you, operator, and thank you, all, for joining us today. We apologize that the call ran a little bit long but we appreciate your attention, your continued interest in Gilead and look forward to providing you with updates on our future progress.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.