吉利德科學 (GILD) 2012 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences second quarter 2012 earnings conference call.

My name is Chanel and I will be are conference operator today.

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

And as a reminder, this conference call is being recorded.

I would now like to turn the call over to Patrick O'Brien, Senior Director of Investor Relations.

Please go ahead.

Thank you, Chanel.

Good afternoon, everyone.

We issued a press release this afternoon providing earnings results for the quarter.

The press release and earnings slides are available on our website.

For our prepared remarks and Q&A I am joined by our Chairman and CEO, John Martin; our President and COO, John Milligan; our EVP of R&D and CSO, Norbert Bischofberger; our EVP of Commercial Operations, Kevin Young; and our CFO, Robin Washington.

Before we begin our formal remarks we want to remind you that we will be making forward-looking statements that contain certain assumptions, risks and uncertainties that are beyond our control.

These risks include the possibility that our actual financial results may differ materially from the revised guidance we are presenting today.

The possibility of unfavorable results from our clinical studies, including those evaluating GS-7977 and GS-5885 in various patient populations, and the possibility that we may be unable to complete our clinical studies and regulatory filings or obtain regulatory approvals in the currently anticipated timelines.

A description of these risks can be found in our latest SEC disclosure documents and in recent press releases.

Gilead does not undertake any obligation to update any forward-looking statements made during this call.

We will also be using non-GAAP financial measures to help you understand our underlying business performance.

The GAAP reconciliations are provided in our press release as well as on our corporate website.

I would now like to turn the call over to Robin Washington.

Thank you, Patrick, and thank you all for joining us today.

We are very pleased with our strong operating results for the second quarter.

Product sales were $2.3 billion, an increase of 14% year over year and 5% sequentially.

The US contributed $1.4 billion of product sales, up 21% year over year driven by strong increased demand across all therapeutic areas.

In the US an early release of Ryan White federal funds and the desire by states to reduce patient wait lists have contributed to strong year to date non-retail performance.

This may impact ADAP purchasing patterns in the second half of 2012.

The state's efforts to reduce ADAP wait lists are encouraging, resulting in a 60% production since the beginning of 2012.

The current wait lists are at a level not seen since mid-2010.

Our US performance also includes a new milestone for Letairis, which exceeded sales of $100 million in the second quarter.

Europe contributed $786 million of product sales, up 3% year over year driven by increased demand.

From an expense standpoint, operating expenses increased to $729 million, up 24% year over year due primarily to the continued advancement of our product development pipeline.

Turning to other financial highlights, operating cash flows continue to be strong.

During the quarter operating cash flows were $1.3 billion, which includes the collection of $460 million of past due accounts receivables in Spain contributing to a 15 day improvement in our DSO highlighted on slide 14.

$350 million of bank debt was repaid this quarter and since January 2012 a total of $700 million has been repaid which further deleveraged the balance sheet and will help achieve a targeted debt to EBITDA ratio of 1.5X by mid-2013.

During the quarter $241 million or 4.8 million shares of common stock were repurchased and retired.

Finally, we are updating certain aspects of the full-year 2012 guidance as outlined on slide 17.

Net product sales are now expected to be $8.8 billion to $9.0 billion, an increase of $200 million from the prior range.

Non-GAAP R&D expenses are expected to be in the range of $1.45 billion to $1.525 billion due to accelerated clinical studies in liver disease and oncology.

All other aspects of our guidance remain unchanged.

I will now turn the call over to John Martin.

Thank you, Robin.

We are very pleased with the continued strong demand for our products and the maturation of the pipeline.

During the quarter two successful FDA advisory committee meetings were held, one on the use of Truvada for prep and one on Quad for the treatment of HIV infection.

Just last week FDA approved Truvada for prevention of sexual transmission of HIV in high-risk individuals.

This is the first approval of an anti-retroviral for pre-exposure prophylaxis, providing another option in the fight against the HIV pandemic.

The US government's commitment to HIV prevention, diagnosis and treatment was also demonstrated by the approval of the first over-the-counter HIV test.

The next US regulatory milestone is the upcoming August 27 PDUFA date for Quad and our scientific and commercial teams are well prepared for the launch.

European Union approval of Quad is anticipated in the first half of 2013.

This past quarter NDAs and MAAs for cobicistat and elvitegravir were submitted, and this week the International AIDS Conference is taking place in Washington DC.

Gilead presented three noteworthy abstracts at this conference.

One was on 96 week data from Study 145 indicating that elvitegravir was non-inferior to raltegravir when added to optimized background therapy in treatment experienced patients.

In addition, 48 week data from the Phase 3 study comparing cobicistat to ritonavir, each in combination with atazanavir and Truvada showed that cobicistat was non-inferior to ritonavir.

And lastly, the SPIRIT study showed that switching completely suppressed patients from a PI containing regimen to the once daily Complera single tablet regimen was not inferior to patients maintaining their PI regimens.

Finally, rapid progress has been made with the HCV research program and we now have a comprehensive Phase 3 development program.

Norbert will cover that in his comments.

Thank you, John.

Before I get to HCV I would like to state that multiple programs have advanced across all therapeutic areas.

In HIV two Phase 2 studies were progressed which evaluate the safety and efficacy of two single tablet regimens containing a novel prodrug of tenofovir GS-7340.

One trial which is now fully enrolled compares a single tablet regimen of elvitegravir cobicistat emtricitabine GS-7340 to Quad and the other study, which should complete enrollment by the end of August, compares a single tablet regimen of darunavir, cobicistat and emtricitabine GS-7340 two the single components of darunavir, cobicistat and Truvada.

In oncology two Phase 3 clinical trials of GS-1101 for the treatment of chronic lymphocytic leukemia have been initiated.

These studies in a placebo-controlled fashion compare GS-1101 added to either rituximab or to rituximab and bendamustine in relapsed refractory CLL patients.

My remaining comments will focus on hepatitis C where progress has been rapid.

At the EASL conference earlier this year data were disclosed from two Phase 2 studies of a 12 week, 12 week course of GS-7977 and ribavirin in genotype 1 infected treatment naive patients.

In the ELECTRON study the SVR4 rate in Genotype 1 naive patients was 88%, or 22 out of 25 patients, and in the QUANTUM study the SVR4 rate in Genotype 1 treatment naive patients was 53%, or 10 out of 19 patients.

I would now like to provide an update on new data from two Phase 2 studies evaluating 24 weeks of treatment with GS-7977 and ribavirin in treatment naive Genotype 1 infected patients.

In the QUANTUM study, 19 Genotype 1 patients were randomized to receive 24 weeks of [GS-977] and ribavirin.

Of those 19 patients, 10, or 53%, achieved an SVR4.

The second trial is conducted by the NIAID in a cohort of Genotype 1 infected predominantly African-American patients, a population which has historically been more difficult to treat.

In that study, of the first nine patients who completed 24 weeks of treatment with GS-7977 and ribavirin, all nine, or 100%, achieved SVR4.

These results from the QUANTUM NIAID studies are included in slides 31 and 32 of our earnings slide deck.

In summary, in the various Phase 2 cohorts, treatment with GS-7977 and ribavirin for 12 or 24 weeks was -- in Genotype 1 infected patients resulted in SVR4 rates between 53% and 100%.

In May and June of this year discussions were held with the US FDA and three European regulatory agencies and agreement has been achieved on a comprehensive Phase 3 development plan for GS-7977 and on a Phase 3 plan for GS-7977 in combination with the NS5A inhibitor, GS-5885.

The initial NDA and MAA filings will be for GS-7977 and will include data from four Phase 3 studies, three conducted in Genotype 2/3 infected patients and one in Genotype 1 infected patients.

The three Genotype 2/3 studies are FISSION, POSITRON and FUSION.

FISSION is the first study in 500 Genotype 2/3 naive patients comparing 12 weeks of treatment with GS-7977 and ribavirin to the current standard of care of 24 weeks of treatment with peg interferon ribavirin.

The second study, POSITRON, is comparing 12 weeks of treatment with GS-7977 and ribavirin in 240 Genotype 2/3 interferon intolerant or ineligible patients to placebo.

And thirdly, FUSION is a study in 200 Genotype 2/3 treatment experienced patients exploring 12 or 16 weeks duration of treatment with GS-7977 and ribavirin.

All three trials -- FISSION, POSITRON and FUSION -- are now fully enrolled and the last patient in these studies has started dosing just today.

A fourth Phase 3 study called NEUTRINO is a single arm study evaluating a 12 week course of GS-7977, PEG interferon and ribavirin in 300 Genotype 1, 4, 5 and 6 infected patients.

Screening in the NEUTRINO study is completed and the last patient should start dosing by mid August.

This same regimen, 12 weeks of GS-7977, PEG interferon and ribavirin, was evaluated previously in Genotype 1 patients in a Phase 2 study called ATOMIC and resulted in an SVR4 rate of 92%.

These four Phase 3 studies are outlined on slides 33 and 34 in our earnings slide deck.

With these four Phase 3 studies underway we anticipate being able to file for regulatory approvals for GS-7977 by the middle of next year.

If successful the initial indication will be for 12 to 16 weeks of treatment with GS-7977 and ribavirin in Genotype 2/3 infected patients and for 12 weeks of treatment with GS-7977 PEG interferon and ribavirin in Genotype 1, 4, 5 and 6 infected patients.

In parallel we are also advancing GS-7977 in combination with GS-5885 for the treatment of Genotype 1 infected patients.

GS-7977 and GS-5885 were successfully co-formulated into a single pill fixed dose combination.

The IND on this fixed dose combination was filed a month ago and a Phase 1 study evaluating the bioavailability was initiated last week.

If the Phase 1 data show that the fixed dose combination results in adequate exposures of GS-7977 and GS-5885 we expect to initiate a Phase 3 study with this fixed dose combination in the fourth quarter of this year.

This Phase 3 study is planned as a four arm randomized trial in 800 patients evaluating a fixed dose combination with or without ribavirin for either 12 or 24 weeks in treatment naive Genotype 1 infected patients.

The study will contain an interim futility analysis after the first 200 patients, or 50 per arm, have been enrolled.

An independent data safety and monitoring board will evaluate the SVR4 rates of the 12 week treatment arms.

If the predefined response rates are met, then the remaining 600 patients will be subsequently enrolled.

At the time of this interim analysis, additional data will be available from the ELECTRON study on 12 weeks of treatment with GS-7977 and GS-5885 and ribavirin in Genotype 1 null responders and genotype 1 naive cohorts, as well as 12 week data from the ongoing BMS study of GS-7977 and daclatasvir with or without ribavirin.

All these data will allow us to decide on the design of the second confirmatory study supporting the filing of GS-7977/5885 fixed dose combination.

If treatment of genotype 1 infected patients with the fixed dose combination, GS-7977/5885 for 12 weeks results in acceptable high SVR4 rates, then the second confirmatory study could be initiated in the first half of 2013.

The fixed dose combination regulatory filings could in that case follow the initial GS-7977 filings a year later by mid 2014.

The development strategy for the GS-7977/GS-5885 fixed dose combination is outlined in slide 36 of our slide deck.

In summary, a number of programs have been advanced across therapeutic areas.

GS-7340, co-formulated in two single tablet regimens, is advancing in Phase 2; GS-1101 is advancing in Phase 3; and notably, four Phase 3 studies evaluating GS-7977 in Genotype 1 through 6 HCV infected patients are fully enrolled and the NDA/MAA are on track to be filed by the middle of next year.

Finally, we plan to advance the fixed dose combination of GS-7977 and 5885, currently in Phase 1 clinical testing, into Phase 3 in the fourth quarter of this year.

In closing, this is a remarkable start to 2012 with strong commercial and financial performance and significant progress with the R&D pipeline.

We would like to thank our employees for their continued dedication in contributing to these efforts.

At this time the call will open to Q&A.

Chanel?

(Operator Instructions).

Geoffrey Porges, Bernstein.

Thank you very much for letting me jump in with a question and congratulations on a remarkable quarter.

Norbert, I have to ask the obvious question which is are there differences between the patients in the two Phase 2 trial arms that you reported, the 7977 ribavirin Genotype 1, that would explain the gap between 53% and 100%?

Anything that you see in either how the studies were conducted, the compliance or anything else that would explain that?

Or should we just split the difference?

Thanks.

No, Geoff, unfortunately I don't have a clear-cut answer for you.

Of course we looked at all the obvious baseline and balances.

There really wasn't anything there.

It seems like at this point really the QUANTUM study seems to be the outlier.

We are seeing better results in ELECTRON and also better results in the NIAID study.

And as I said in my script, that is a population where you actually would have expected lower response rates and yet we did 100%.

So I do not understand that it is a thing of small numbers and, you know, where the ultimate truth lies I don't know.

But either way, I think these numbers are actually a huge improvement with a very simplified, shortened oral regimen over where we are today.

And you know that is also reflected, by the way, when we talk to regulatory authorities that they allowed us to do single-arm studies with no control arm.

That is a reflection that even regulatory authorities think that the standard of care control arms are not really worth including anymore in Phase 3 clinical studies.

So sorry, Geoff, I don't have a really good answer to your question.

It is something we have looked into, but we don't know.

Okay, thanks very much.

I appreciate it.

Geoff Meacham, JPMorgan.

Hi guys, thanks for taking the question.

Another one on the hep C franchise.

So Norbert, when I look at slide 36 with the 7977, 5885 Phase 3 design, with the second confirmatory study it says TBD.

So can we assume that you won't be able to use any 7977 riba studies alone, or do you plan to do that over any duration, 12 or 24 weeks, as part of the regulatory strategy, or is that sort of off the table at this point?

So, Geoff, our current working assumption is that the data that Bristol-Myers generated their study will be replicated in our studies.

We have made this argument before that from a virological point of view, the daclatasvir in GS-5885 are very similar and there is no reason to expect a different result.

So if that is the case, then obviously the second study might be a single arm study that looks at the fixed dose combination either with or without ribavirin for either 12 or 24 weeks depending on how those data come out.

So that is what our current thinking is.

We do not currently think that GS-7977 ribavirin will be included because GS-7977 with 5885 has -- it's virologically more potent, and moreover has the advantage of being much safer and one pill once daily.

So it's the ultimate frontier in HCV therapy.

That is what we want to pursue.

And just as a follow-up to that, when you run the interim analysis or you get that data, could you start the second confirmatory study to save some time?

What sort of shortcuts do you feel like you can make or what sort of amendments can you make to accelerate and all oral filing do you think until maybe to the end of '13, not mid '14?

So Geoff, the interim analysis, as I said, is on the first -- on the 12 week treatment arm.

So if the 12 week treatment arm shows high response rates, then of course we would immediately be in a position to initiate the second confirmatory study as a very simple perhaps single arm [fade] 12 week duration fixed dose combination plus or minus ribavirin.

And keep in mind, as I said in my script, we also have data from two cohorts in the ELECTRON study available at that time that look at 12 weeks of treatment with GS-7977 and 5885 and ribavirin in both null responders and naive patients.

I think with the totality of those data it should be fairly straightforward to design the second Phase 3 study.

Thanks.

Rachel McMinn, Bank of America-Merrill Lynch.

Yes, thanks very much.

I think you have answered a lot of the hep C questions, but I just want to be really clear.

So regulatory agencies still want to see any control versus an interferon arm, so we should expect your competitors as well to have similar designs?

And then also to clarify the population here, this is just treatment naive, there is no category around interferon intolerance?

And then just a totally separate question -- on 7340, can you just give us a sense of what antiviral efficacy -- or excuse me, like what kind of differential you need to see?

Are you looking for primarily around bone mineral density?

What would be a good outcome there?

Thanks.

Yes, Rachel, so the first question you asked was about NEUTRINO.

Of course, I can't speak for our competitors, but I would assume that the same comps that regulators communicated to us is also applicable to them.

So you know whenever in the future Phase 3 studies are going to be done might be much simpler studies that do not include a current standard of care control arm.

That is the clear message we got and that is why they allowed us to do that single arm Phase 3 study that, by the way, is powered against historical controls.

The second question you asked was about 7340.

So Rachel, as you may know, the monotherapy data were presented at the last CROI meeting and we showed that 25 milligrams of 7340 actually has higher potency in terms of HIV RNA reductions compared to tenofovir DF 300 milligrams.

Now in a triple combination regimen higher potency in my mind is almost impossible to show because all these triple combination therapies are very, very potent, they suppress the virus.

So what we are hoping for is to show some benefit in terms of safety.

And you pointed it out already, one thing that should be -- that we should be able to show is less of a BMD effect and the other thing we are exploring is the use of 7340 in advanced -- in renal impairment and maybe we can show some benefit there.

But it is not quite clear.

But you know the big thing I think about 7340 will be that physicians will just feel much more comfortable.

They do not have to worry about whatever potential theoretical or hypothetical or renal side effects there are, don't worry about bone, don't worry about renal.

This is the same or higher potency at 1/10 the dose.

So I think it would be a great addition to what we have today.

Okay, thanks very much.

Brian Abrahams, Wells Fargo Securities.

Hi, thanks for taking my question.

Congrats on the quarter and the progress with 7977 Phase 3 plans.

Related to the 7977/5885 study, I am just wondering if you have any sense from the FDA or EMA in terms of what they're looking for for what would be an approvable SVR12 bar just given the lack of standard of care.

And also any sense of the bar for futility there.

And then related, on NEUTRINO do you have any sense from payors about what kind of flexibility docs may have to prescribe 7977 if it is approved in Genotype 1, but the flexibility they would have to use it in interferon free regimens before you get the approval for the 5885 combo?

Thanks.

So Brian, I am happy to talk about the powering.

By the way, the powering for all our Phase 3 studies is approximately a similar line of thinking.

And so, first of all, keep in mind that we will enroll in our study at least 20% cirrhotic patients.

There has been some criticism by the medical community of previous development programs that have studied relatively healthy patients and then the ultimate experience that physicians made was worse than what was observed in the Phase 3 studies because the more advanced cirrhotic patients were not studied.

We are not to do that.

So we have 20% target and, by the way, in our FUSION study we have actually 30% cirrhotic patients.

So that is number one.

Number two, we calculated historically what would be an expected response rate in Genotype 1 in a population that is 20% cirrhotic.

And the answer to that that is if you looked across a lot of telaprevir boceprevir studies the answer is 65% is the expected response rate.

Now regulators gave us a bonus; they said you don't have to even meet 65%, if you meet 60% that will be perfectly fine because you get the bonus for shorter treatment duration and better safety.

So what we have to beat, in other words, is 60%.

And I want to point out that is a very low hurdle.

If you look at the ATOMIC study we have 93%, a 92% response rate and so that is how the interim analysis is going to be conducted.

If we see in the futility analysis less than 60% response rate, that will be considered futile.

But if we see 60% or higher, that will be acceptable.

And as I said, my expectation based on previous Phase 2 studies and other Bristol-Myers experience that we would see much higher numbers than 60%.

I hope that answers your question.

And Brian, I guess the second question was about the flexibility about using combinations.

And so as you know, when 7977 is approved doctors have the flexibility to prescribe it in the ways that they see fit.

And I guess you could imagine that there may be other antivirals approved that could be useful in combination with 7977 during an interim period before we have a fixed dose combination out.

My own feeling is that certainly in treatment naive patients -- and there is a bunch of things we don't understand here including what the cost of the other therapy would be -- that in the treatment naive patients there would probably be more control over going to a PEG interferon 12 week regimen.

But in patients who can't take interferon for various reasons or have failed interferon I can imagine a scenario where payors would allow those patients to be dosed by combination therapies.

But we really have to see how the data play out in those areas too, if there is anything to support those combinations or not.

Thank you.

That is very helpful.

Matt Roden, UBS.

Great, thanks very much for taking the question.

So your Phase 3 with the combination 7977 and 5885 is contingent on this Phase 1 bioequivalence study.

Norbert, can you give us a sense for whether or not there is any risk or if this is a slam dunk sort of study where you would expect to get adequate exposures a priori?

And then secondly, on duration to therapy it looks like at least in QUANTUM you didn't see any change in the efficacy whether it was dosed at 12 or 24 weeks.

Do you think that there is any read through to other regimens such as nuc NS5A combinations and whether or not you would expect to see any meaningful difference between 12 and 24 weeks with a nuc NS5A's?

Thanks.

Thanks for your question, Matt.

So the first question had to do -- by the way I want to state it is not a bioequivalence study, but a bioavailability study.

Bioequivalence is very strictly defined by being equivalent to a test regimen.

We don't have that here.

We just want to make sure that roughly the levels of 7977 and 5885 are in the ball park of what we have seen in the previous studies.

And while it is always difficult to say what the risk is, I think both compounds, 7977 and 5885, are pharmaceutically well behaved compounds.

So we have the first formulation but, needless to say, if this first formulation doesn't work out of course we have backup formulations that we would then put into development.

That would delay the program by two months or so.

The other question you asked was --?

Duration of therapy.

Oh, duration of therapy.

So you know, again, I don't have an answer.

Honestly I do believe that there should be a difference in duration of therapy.

Why we are not seeing that in QUANTUM I do not know.

And needless to say, we have looked at everything possible that we could look at with -- the compliance was not quite what it should have been in QUANTUM, although that is a difficult thing to measure.

And you know the reason why I am saying there should be a difference with regards to duration of therapy is simply because we have never observed breakthroughs.

All our patients that are non-responders are rebounders.

So after you eliminate, after you take 7977 away or 7977 and ribavirin then the virus comes back.

During treatment we have actually never seen breakthroughs.

That is why I think 7977 by itself or with ribavirin is a very potent, very effective agent.

And if you can't cure somebody with 12 weeks by going longer you should actually get to better outcomes.

But you know unfortunately I only have the data that we have today and I can't really speculate anymore.

Thank you.

(Operator Instructions).

Marshall Urist, Morgan Stanley.

Hey guys, good afternoon.

Thanks for taking the question.

So another -- predictably, another hep C question.

So just to be clear, on the interim analysis for the 5885 combination study for 7977, is the -- Norbert, is the hurdle rate there 60%, number one.

Number two, how will the -- will this passing of the interim analysis be something that will be explicitly communicated to everyone when it happens?

And then maybe finally, just if you could talk a little bit more about your FDA discussions.

And was it principally the Bristol combination data that got the FDA comfortable going forward with this design or are there other data that they saw as part of your discussions that kind of tied it all together?

Thanks.

Yes, so the interim analysis -- let me say it again.

So we want to beat a response rate of 60%.

So 65% is the expected response rate with the current standard of care, telaprevir/boceprevir, we get a 5% bonus, so we want to beat 60%.

That means the lower bound of our 95% confidence interval has to be 60% or higher.

And if we see a point estimate that is less than 60%, so let's say we see 59%, that would mean we only have a 5% chance of achieving our goal.

I hope I was clear in what I said.

So 59% or lower would be futile to show superiority, 60% or higher would allow us to go forward.

Then you had another question about the FDA.

No, so the FDA, they were comfortable with the fact that we initiated a Phase 3 study but do an interim analysis after 200 patients.

And so really the totality of the data post the Bristol Meyers data, our own virology data, and the previous current experience with 7977 even by itself or in combination with ribavirin, that has made the FDA and the three European regulatory agencies comfortable with this approach.

And just to remind everybody, please keep your questions to one question only without three parts or we will just answer the first part of your question and then move on so everybody has an opportunity to speak.

Michael Yee, RBC Capital Markets.

Hey, thanks.

Hopefully you can answer this question.

If you don't I hope I get you to answer another one.

But on the QUANTUM 24 week data that you reported, which had the 53, do you know the IL28B breakdown?

I recall in the 12 week there was a lot of differences.

They are harder to treat patients, so maybe that was the reason.

So generally in the QUANTUM study the CC Genotype was not as high as in the ELECTRON study.

If I remember it correctly it was 25% or 30% and there was no difference between the 12 week and the 24 week and that is still true.

But you know it was a little bit higher in the ELECTRON, but that doesn't account for the whole explanation I would think.

In my mind, if you ask me to speculate, it has to do with study conduct.

And remember, the QUANTUM study was a study where patients actually were blinded on treatment assignment.

They were taking 938 or placebo.

They were informed that there was a liver toxicity issue with 938 that maybe that could have influenced somewhat the study conduct and the compliance.

So if you ask me to speculate that is probably the best I can come up with, although we can't substantiate that currently from our data.

Thanks.

Mark Schoenebaum, ISI Group.

Hey guys, thanks for taking my single question and you may have answered this.

I am sorry, I was sort of on and off.

I really apologize, so I may end up wasting my question, but I am just confused, when do you think you will be able to file for the fixed dose combination file for approval?

Is the single trial enough or are you going to need both trials?

And I guess what kind of time line are you expecting for that first fixed dose combination trial?

I am obviously talking about the NS5A plus 7977.

Thanks.

Yes Mark, since this is a new chemical entity, contains a new product, we need two Phase 3 studies, two confirmatory -- one confirmatory Phase 3 study and one other Phase 3. So the current time lines, if everything works out and if everything goes without a glitch, roughly the filing for the fixed dose combination would follow one year behind the 7977 filing which would then be middle of 2014.

That is our best guess currently.

Thank you.

Yaron Warber, Citi.

Just a quick -- maybe Robin, in case you're still in the room because no one cares about financials anymore (multiple speakers).

The quick question on -- so you beat by roughly about $100 million but you are raising by $200 million, and I am going to try to make it in one sentence this one question.

What is the difference, how much of inventory stocking did you see and was the strength unusually strong in Europe relative to your expectations?

Thanks.

That was one question.

I will answer it.

I mean overall we saw strong non-retail demand in the whole second half.

Remember if you recall Kevin talked last quarter about the fact that we expected some reduction in Q2.

While we saw some of that, it wasn't as much as what we had anticipated.

So we do potentially see some inventory runoff happening in the second half.

All that being said, we are balancing that with the fact that we clearly know that the states are trying to reduce overall wait list.

I will just add to that, Yaron.

Q2 was pretty strong.

It was not as high as Q1, but it was as good as Q4 of last year.

So that was pretty strong and certainly far stronger than Q2 of 2011.

So it quite surprised us.

Puerto Rico, Illinois were particularly big in their purchases.

I think at the moment, Yaron, there is quite a lot of confidence in HIV right now.

The (inaudible) went out early.

You saw just about a week ago that the remaining 75 million was allocated, so pretty much all of the budget bar, $6 million, has gone out now so the states know what they are working with vis-a-vis the federal funds.

It is quite remarkable to see the wait list now down at 1,800, that is over 80% from its peak at 9,200.

So I think there is a sense of -- there is a sense of greater confidence, desire to get the wait list down.

The mantra of test, treat, retain is very strong right now; you saw the comments coming out of the World AIDS Meeting.

So I think people recognize that treatment is the right way to go for the individual and it is the right way to go for prevention.

And there is a sense of momentum there that I don't think was there this time last year.

Robyn Kanauskas, Deutsche Bank.

Hey guys, this is Robin (inaudible) in for Robyn, and congrats on the good quarter.

Just a quick question for you I guess on the HIV since most of the hep C has been covered.

Since all this macro good news coming out with guidelines do you think the new start market will be growing?

I thing before you had said it was around [$50,000] a year.

Would you expect that to go up?

So I think it is going to continue to be on its run rate, Robin.

I think the remarkable thing about HIV is it has been so consistent and that is through guideline changes and it is through more data, single tablet regimens and it is just got this remarkable robustness and consistency about it.

So there might be some small tick up, but I think the reassuring thing is it has just been remarkably -- this has just been remarkably consistent and I think that is the way we see it going forward.

Tom Russo, Baird.

Good afternoon and congrats on another strong quarter.

The 12 week arms in the Bristol 7977 study started enrolling real early this year I think and its status recently updated to no longer recruiting.

And that would suggest a decent chunk of patients might be out some number of weeks post treatment in the 12 week arms.

So I was just wondering if you are comfortable saying -- are you making any inferences from that on relapse or lack thereof and make it worthwhile to include 12 week arms in the Phase 3 study that you're announcing?

In other words is it informed on that at all yet?

No, Tom, we are not using any of those ongoing studies.

That is a study, as you know, conducted by Bristol-Myers.

And if I am not mistaken, they said that they could announce some data by AASLD, but that is entirely up to BMS, it is not our study.

Okay, thanks.

Ian Somaiya, Piper Jaffray.

Thanks and congratulations on a great quarter.

I had a question on the HIV front, specifically 7340.

Given how close you were in the 102 trial to achieving superiority, I am just curious why you are not pursuing a trial of potentially adequate size as part of the Phase 3 program to get a superiority claim.

I guess if we learned anything you guys are close in 102 and maybe another 100 patients and I guess applying the Glaxo strategy could get you over that threshold.

Ian, thanks for the question.

Of course we would of course try and be superior but, as you know, most of these non-inferiority superiority trials -- so the non-responders in HIV studies, a large part of those are either discontinuation due to adverse event or lost to follow-up.

And there aren't that many virological failures.

The few that there are you always wonder they are probably due to noncompliance more than due to inherent limitations of the potency of the regimen.

So I just think the loss to follow-up and discontinuation due to adverse events and noncompliance, those are kind of generic things that haunt you in any study.

And I think by having 7340 in the regimen, I am not sure whether you would -- whether that would address -- would not address those issues and I am not sure that you would see superiority.

But needless to say, of course it's a good idea.

That is what we are of course attempting to do.

Thanks, Norbert.

Ravi Mehrotra, Credit Suisse.

A question for Norbert.

When do you expect to get the results, the SVR12 from arm 13 from the ELECTRON study, 7977 and 5885?

And will you announce those as you get them?

Which study was this now, Ravi?

ELECTRON, the 5885/7977 ELECTRON arm.

You know we may have something at -- I am actually not sure.

I have to look it up honestly.

I don't know where (inaudible) is in the recruitment of the patients.

I can get back to you.

I don't know.

Thank you.

I would appreciate that.

[Jason Holder], Maxim Securities.

Thanks, guys.

I just wanted to ask a quick question.

With approval of the Quad hopefully coming up, how does that patient population differ versus the dynamics associated with Complera?

So I think we have always said that the opportunity that we have with Quad is to go after the majority of new starts.

So we will have data both -- well, we do have data from 102 and 103 versus Atripla and versus the protease inhibitors.

So essentially we are able to position Quad against the current almost nine out of 10 patients who are starting on those two, third agents either with Truvada or as part of Complera, part of Atripla.

So that is a bigger slice of the naive pie that currently Complera operates in.

I think we have seen some very, very high response rates at 88% and 90% with the Quad, two very well controlled studies.

We will have to see, but I think we are hopeful that Quad would go into guidelines, into the US guidelines fairly quickly.

So I think that would give more opportunity for the Quad than we have today with Complera.

Having said that, Complera we are starting to do very well.

So I think our expectation is that the first single tablet regimen becomes the Quad and then the second single tablet regimen becomes Complera.

Got it.

Thank you.

Brian Skorney, Brean Murray.

Hey, good afternoon guys, thanks for taking the question and congrats on a really solid Phase 3 plan for 7977.

I just want to kind of get some color on eventual pan genotypic strategy.

I know you have said in the past that 5885 won't be developed in GT3 [due to] the potency shift.

When I look at slide 36 in the Phase 3 fixed dose combo study, especially in the arms including ribavirin, it just seems to me like you already have a pan genotypic regimen with those three drugs right now and why wouldn't you think about just expanding the study to include all comers and potentially moving ribavirin to a once daily dose?

It would seem like the activity riba has on GT3 would make up for any miss at 5885 and 5885 would make up for any of the weakness in riba in the Genotype 1 population.

Thanks.

Brian, it is a hypothetical possibility.

You may remember the Bristol-Myers data that were presented at EASL where they saw a 100% response rate in Genotype 1. They saw lower response rates in Genotype -- in other Genotypes.

So clearly 7977 daclatasvir is not as good in non-Genotype 1 patients.

That is also, by the way, completely consistent with the virology data.

And our own virology data on 5885 would actually indicate that 5885 would really not be suitable for Genotype 2. We see a lot of polymorphs there where GS-5885 has [very little] activity.

So I know what you are saying.

You are saying you have 7977 and ribavirin for Genotype 2, but then you have a drug in there, 5885, which doesn't really do much in Genotype 2.

So to make a long story short, we have other strategies that will come as kind of the third wave and we are working on other nucleosides and we have some very interesting pan genotypic compounds in two other classes in pre-clinical development that will soon go into the clinic.

That is what we are thinking about, then the ultimate regimen will be two drugs, it could be an NS5A, a PI or a nuc combined with 7977 -- that would truly be a good pan genotypic regimen.

That is our goal and plan.

Great, thanks.

Thomas Wei, Jefferies.

Thanks.

Just a question on the QUANTUM data.

You had mentioned I think in response to a question that you had done some assessments of compliance in QUANTUM and that there were lower rates there maybe relative to the other studies that have been done with 7977 and ribavirin.

Can you give us a sense of how poorly compliant those patients were in QUANTUM and what it looks like in the other studies as well?

Yes, so Tom the other thing you have to remember, in ELECTRON and in the NIAID study, these were single site studies where like [Ed Gain] in the ELECTRON study -- he knows every patient by name, he is in very close contact with them.

The same at NIAID, they are very close contact with their patients, whereas in QUANTUM is more of a large center study.

So we have looked at -- the measure of compliance in QUANTUM was simply a self-reported "did you take your drug".

And as you know, that is somewhat less than reliable.

And we have seen low report rates, it is just a question is how much of that do you believe.

It would be nice to have somewhat more like plasma levels or the ultimate things that don't lie that you can't hide behind and we just don't have those data.

But you know, Tom, we will move forward with the Phase 3 study and in the Phase 3 study we will see what the true response rates are.

So I am not too worried about what is it with QUANTUM that we see lower rates than in the other studies.

And I am convinced in the Phase 3 study we would see higher than what we saw in QUANTUM.

That is my own feeling.

Jim Birchenough, BM Capital.

Yes, Hi guys congrats on the quarter.

I wanted to just push a bit on this concept of confidence intervals because we don't get much data bounded by confidence intervals.

So on QUANTUM and the NIAID study, do you have confidence intervals on those response rates?

And I am trying to understand in the interim when you have got 50 patients per arm what is the difference between a 59% point estimate that is futile and a 61% when you think about the confidence intervals there?

Thanks.

Okay, Jim, we actually have done confidence intervals in QUANTUM and ELECTRON and one thing I can tell you is they are fairly large because the number is so small.

So typically if you have like 10 or 20 patients and you see a 50% response rate, the 95% confidence interval will go from 20 to 80, so plus 30, minus 30.

That is how large the confidence intervals are so it is not very informative.

So with regards to the interim analysis I want to say it again -- so our goal is to be superior to 60.

So in other words the lower bound of the 95% confidence interval at the end of this study has to be 60% or higher.

So if we see 59% in the interim analysis at the point estimate, that means we will have only a 5% chance of ever making that and that would then be a futile attempt.

So 59% or lower we would say this is futile to reach this point, at 60% or higher we would say it is possible.

But, Norbert, can I push on that a bit?

Sure.

And I guess what I'm trying to understand is that if you are trying to hit a lower bound that is above 60%, shouldn't your point estimate be way higher than that?

And I guess where I'm coming from is 59% suggests that less than 5% chance to hit your end point, what is your chance of hitting your end point if the point estimate is 61%?

Because presumably there is still a pretty wide confidence interval that is going to go well below 60%.

That is what I'm trying to understand.

Yes, so Jim, in order to reach the lower bound of 60% or higher, the point estimate calculation is 66%.

So if at the end of the study in 800 patients the point estimate is 66%, then the lower bound of the 95% confidence interval is 60%.

So it goes from 60% to 72%, the 95% confidence interval.

With regards to your second point, I completely agree.

But keep in mind, this is such a low bar that I do not believe this will ever be an issue.

I mean this shows you how low the bar is.

You know like in ATOMIC we had the same power calculation, we want to be at least a 67% point estimate, but we were at 92%.

And I am convinced in this 5885/7977 study we would see a similar result.

Okay, great.

Thanks.

Phil Nadeau, Cowen and Company.

Good afternoon, thanks for taking my question.

You have done a good job identifying a Phase 3 program for Genotype 1 treatment naive patients.

I think the last thing we are waiting for is a Phase 3 program for Genotype 1 treatment experienced patients.

Can you give us some sense where your preliminary thinking is there and when we could get a more definitive Phase 3 program structure for that population?

So I didn't get into this, but we decided with the first filing for GS-7977 by middle of next year we would not include Genotype 1 treatment experienced patients.

And the reason is, as you may remember, we presented ELECTRON data I think it was somewhere before EASL where we saw about a 10% response rate in the null responders.

That is just too low.

We will, however, of course include treatment experienced patients in our GS-5885/7977 program.

I didn't talk about that today, but that will of course be another Phase 3 study that we would do because this compound -- the combination of the two should actually be a great compound to look at experienced patients.

And as I said, in the ELECTRON there is one cohort of Genotype 1 null responders, so that will give us the proof for the confidence that this is worth doing and then we would include that in the Phase 3 program.

There is, by the way, a lot of other studies that I have not talked about that will be included that include special population -- transplant, HIV co-infection.

It goes without saying that this will be a comprehensive program.

I just touched on the main Phase 3 studies today to give you some sense as to what the main body of information is.

Would you be filing for treatment experienced patients in mid-2014?

Yes, it would be in the same filing.

Okay, thank you.

Howard Liang, Leerink Swann.

Thanks very much.

When do we see the data of 7977 in combination with the protease inhibitor, the Tibotec compound?

The study is now enrolling and honestly I am not at liberty to talk about the timelines.

That is a J&J/Tibotec managed study.

We have regular meetings with them and I know their study is enrolling, but I do not currently know what the timelines are for that study.

[Tommy] Butler, Barclays Capital.

Thank you very much, Norbert, for the color on HCV.

But I apologize, one additional question.

Can you think about what you would like to present or what you are anticipating presenting at AASLD in November?

(Inaudible), we have talked internally about that -- a large number of potential presentations and I am really not prepared to mention them right now, we haven't finalized them yet.

But you will get updates on many of the studies -- QUANTUM, ELECTRON.

We will present whatever is available for them to be presented.

Thank you.

Alan Carr, Needham & Company.

Hi, thanks for taking my question.

Can you speak to what will be going on right behind 5885 with some of your other antivirals like 9669 in combination with 7977?

Thanks.

So we are currently doing a number of, again, small cohort within ELECTRON looking at 9669 with 7977.

We are looking at our protease inhibitor with 966 -- 7977.

But as I said, the real goal, something we haven't really disclosed or talked about is pan genotypic classes.

And one of them we have other nucleosides that we're working on that could be combined with 7977.

We have NS5A inhibitors that are potentially pan genotypic and we have protease inhibitors.

And that is just something now that we have -- we are clear on what the first NDA, MDA filing looks like.

We have now decided on the second filing.

Now we can seriously start thinking about or formalizing a plan to move ahead with our third phase and the third phase will clearly be a one pill once daily maybe 12 week course for all genotypes.

That is our goal still and we are very close.

Joel Sendek, Stifel Nicolaus.

Hi, thanks.

Another HIV question actually.

Just to follow up on the earlier comment that you made about dolutegravir.

I am wondering, given what you said about noncompliance and those sorts of things, do you view that drug as a threat?

Obviously it showed superiority, but is that meaningful at all when you look at the market down the road once Quad is on the market?

Yes, so just a quick comment on the superiority.

No, actually if you compare the data response rates on the dolutegravir arm, they were very similar to the Quad.

We actually had 9%, they had 88%.

And interestingly enough, the superiority was entirely driven by fairly high discontinuation rates due to adverse events on the Atripla arm.

Those discontinuation rates are twice as high as we have seen in our own study and they are also twice as high as other competitors like Merck has seen in their study.

So that is just a common -- it is a peculiar result why in their study the discontinuation rates on Atripla were so high.

They were 10%, in our studies they were 5%.

I will let Kevin answer the other part of the question.

Yes, Joel, I think we take all forms of competition very seriously.

You know, one thing to point out is that with an expectation that the agent would be co-formulated with Epzicom, Epzicom only gets right now 4% of naive patients.

So it really is hardly used in the naive treatment setting.

And even though it was elevated in the recent IS guidelines, it is not associated with all the third agents as is Truvada.

So we do think that the preferred regimen for an integrase inhibitor is the Quad; the results are very good.

The results are published.

I will go back to the point I made about hopefully early entry into treatment guidelines.

And we don't exactly know the timelines or the competition, but we probably have about a year head start on the market and with an expanded field force which is trained and ready for the PDUFA date we are going to try and make the most of that.

So we do think we have an excellent opportunity coming out first with a single tablet regimen of an integrase inhibitor.

Thank you.

Mr. O'Brien, at this point we have run out of time for additional questions.

Thank you, Chanel, and thanks for you all joining us today.

We appreciate your continued interest in Gilead and the team and I are here to follow up with any follow-on questions that we can help with.

Thanks.

Ladies and gentlemen, that concludes the presentation.

Thank you for your participation.

You may now disconnect.

Have a good day.