吉利德科學 (GILD) 2012 Q3 法說會逐字稿

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

My name is Ann and I will be your 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, Vice President of Investor relations.

Please go ahead.

Thank you, Ann.

Good afternoon, everyone.

We issued a press release this afternoon providing earnings results for the third quarter which are available on our website.

You can also find a detailed earnings slide deck that will support some of the topics we will cover on today's call.

For our prepared remarks and Q&A, I'm joined by our Chairman and CEO, John Martin; our President and Chief Operating Officer, John Milligan; our Executive Vice President of Research and Development, Norbert Bischofberger; our Executive Vice President of Commercial Operations, Kevin Young; and our Chief Financial Officer, Robin Washington.

Before we begin with our formal remarks, we want to remind you that we will be making forward-looking statements including plans and expectations with respect to our product candidates and financial projections, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause our actual results to differ materially from these statements.

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

In addition, Gilead does not undertake any obligation to update any forward-looking statement 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 a press release as well as our website.

I will now turn the call over to Robin Washington.

Thank you, Patrick, and thank you all for joining us this afternoon.

Gilead continues to deliver solid year-to-date and third-quarter financial results.

Product sales for the third quarter were $2.36 billion, an increase of 14% year-over-year.

The US contributed $1.4 billion to product sales, up 20% year over year, driven by strong retail demand and the expansion of our HIV franchise.

Europe contributed $781 million to product sales, up 5% year-over-year and flat sequentially due to purchasing patterns related to the summer holidays.

From an expense standpoint, non-GAAP R&D expenses increased to $384 million, up 42% year-over-year, primarily due to the continued advancement of our product pipeline and in particular the progression and expansion of our Phase III studies in both liver disease and oncology.

Additionally, non-GAAP SG&A expenses increased to $287 million, up 8% year-over-year due to the ongoing growth of our business and an increase in the US pharmaceutical excise tax, partially offset by lower bad debt expense.

Sequentially, SG&A expenses decreased 4% due to lower spending as a result of the European summer holidays, partially offset by investments in the launch of Stribild.

Operating cash flows were $745 million.

Recall the last quarter's operating cash flows of $1.29 billion included the receipt of approximately $460 million from collection of accounts receivable in Spain.

Turning to financial guidance, given the strong year-to-date commercial performance, we are increasing product sales guidance for full-year 2012 to $9.1 billion to $9.2 billion, which represents a $200 million increase from the top end of our previous guidance range.

The full-year 2012 diluted EPS impact of the acquisition-related and structuring and stock-based compensation expenses is now expected to be in the range of $0.62 to $0.65 per share primarily due to changes in anticipated payments associated with the successful progression of our oncology and non-HCV liver pipeline.

All other aspects of our non-GAAP guidance for 2012 remain unchanged.

In closing, we are pleased with our financial performance during the quarter and are looking forward to closing out a strong fiscal year 2012.

I will now turn the call over to Kevin Young.

Thank you, Robin.

I've been very pleased over the course of 2012 with the execution of the commercial organization.

The third quarter was the strongest in Gilead's history with solid performances across all therapeutic areas.

The antiviral franchise grew by 13% year-over-year and delivered over $2 billion in product sales while cardiovascular products delivered quarterly sales of over $200 million for the first time.

HIV sales in the US were particularly robust and grew by 19% year-over-year.

As we anticipated, following record non-retail purchases in quarter one and quarter two of 2012, quarter three non-retail sales were down sequentially.

At this point, midway through the federal fiscal year, it would seem the budgets will allow for continued healthy ordering assuming little or no rollover is allowed beyond March 2013.

The latest update from [Nasapp] shows a total weight list of approximately 100 individuals across all states, down from a high of nearly 9300 in September 2011.

We were very pleased to be in a position to launch Stribild immediately after receiving US FDA approval on August 27.

Upon its launch, Stribild became our first priority detail.

Uptick of the product in the first few weeks of launch have been extremely encouraging.

Prescriptions are almost 2 times that of Complera at a similar point in launch.

New to brand patient starts on Stribild have surpassed Reyataz and are already approaching the level of Atripla and Prezista.

Access to Stribild far exceeds that of where Complera was two months after launch.

Most managed-care organizations now list Stribild without restrictions.

47 state Medicaid plans and 37 AIDS drug assistance programs now have Stribild on formulary.

Importantly, four of the big five ADAPs have full access to Stribild.

We also continue to be pleased with the US uptake of Complera, which saw $82 million in the third quarter.

Complera is the second-most prescribed HIV regimen in naive patients and the fifth most prescribed HIV regimen in all patients.

Turning briefly to Europe, even though the third quarter is traditionally affected every year by summer holidays especially in Southern Europe, we posted a very solid set of results.

Eviplera is now on the market in 14 countries across Europe, with France and Belgium being the latest to launch.

We anticipated availability in the two major HIV markets of Spain and Italy in the fourth quarter of 2012 and the first quarter of 2013 respectively.

For the first time, total naive share of Gilead products in the big five European markets exceeded 80% during quarter three.

Total utilization of single-tablet regimens for naive patients was boosted by Eviplera to a new high of nearly 30%.

Eviplera is now the number two regimen in HIV-naive patients in the UK and Germany.

To conclude, Gilead delivered another good quarter.

As we enter the final months of 2012, and plan for 2013, we can have confidence in an array of growth drivers across our products and across our geographies.

I will now turn the call over to John Martin.

Thank you, Kevin.

During the third quarter, significant progress was made in our development programs.

As Kevin mentioned, Stribild is the first integration ever containing single-tablet regimen to receive US FDA approval.

FDA has accepted the NDAs for two of the components, cobicistat and elvitegravir and confirmed PDUFA dates of 28th and 27th of April 2013 respectively.

For Complera, results from an 841-patient head-to-head study versus Atripla will be presented at the 11th International Congress on Drug Therapy and HIV Infection meeting in Glasgow next month.

This is the first head-to-head study of Complera versus Atripla as the previous Phase III studies supporting approval of Complera compared with rilpvirine plus Truvada to efavirenz plus Truvada.

Also at the Glasgow meeting, 48-week data will be reported from a 482-patient study in which patients on a stable Ritonavir boosted PI regimen were randomized to either switch to Complera or stay on the boosted Pi regimen.

Both these large studies were initiated with the intent to be included in the Complera label.

The latter is particularly important because 40% of US patients currently initiating Complera have switched from a PI-containing regimen.

GS-7340, a novel pro-drug of Tonofovir, dosed at 1/10 the dose of Viread, was co-formulated with emtriciabine, cobicistat, and elvitegravir into a single pill.

This 7340 containing single tablet regimen is being directly compared to Stribild in a Phase II study.

24-week data from this study will become available in November.

If the results are positive, we anticipate moving this 7340 containing single tablet regimen into Phase III in the first half of 2013.

In HCV, there will be a number of presentations at the AASLD meeting in Boston next month highlighting the safety, efficacy, and resistance profile of GS-7977 in a variety of combinations in HCV-infected individuals.

Noteworthy, 7977 will be the subject of two oral late breaker presentations.

One presentation will also show safety and efficacy data from a collaborative study with BMS of 7977 and daclatasvir with and without ribavirin for 12 weeks in genotype 1 infected patients.

The second presentation is on a collaborative study with NIH and will show data on the safety and efficacy of 7977 with once-daily versus twice-daily ribavirin for 24 weeks in genotype 1 HCV-infected individuals.

In addition, an oral presentation will provide an update on the ELECTRON study and improved results of the 7977 plus 5885 plus ribavirin 12-week arm in genotype 1 treatment-naive patients.

Both the late breaker and the oral presentations will include data at the time of the AASLD conference -- current tests done by the AASLD conference.

All four 7977 Phase III studies are fully enrolled.

The results of the first study, POSITRON, which evaluates 12 weeks of 7977 plus ribavirin in genotype 2/3 interferon ineligible intolerant patients should be available in early December with results of the other studies to follow in this first quarter of next year.

This will enable regulatory filings for 7977 in the second quarter of 2013.

A single-tablet regimen of 7977 and 5885 for genotype 1 infected patients has advanced to Phase III with the first patient dosed last week.

This is a four-arm study evaluating the FDC in 800 patients with or without ribavirin for 12 and 24 weeks.

Initially 200 of the 800 patients will be enrolled.

Following an interim analysis of the SVR-4 results of the 12-week arms, the remaining 600 patients will be enrolled.

In oncology, a Phase II study evaluating GS-1101 in double refractory iNHL patients closed for screening on October 10 with 120 patients enrolled.

Depending on results and FDA concurrence, this iNHL study could form the basis for accelerated approval more likely however approval will be based on data from ongoing Phase III studies.

Five Phase III studies of GS-1101 in CLL and iNHL are progressing.

Two studies which are currently enrolling patients evaluating 1101 with rituximab or with rituximab and bendamustine in CLL.

A third study evaluating 1101 with ofatumumab in CLL and two Phase III studies evaluating 1101 in combination with rituximab and with rituximab in bendamustine in iNHL will initiate later this year.

In summary, the last few months of the year promise to be as busy and productive as the first three quarters have been.

We are poised to continue making terrific progress for Gilead, for employees, and importantly for the patients we serve.

We would now like to turn the call over to Q&A.

Operator?

(Operator Instructions).

Geoff Meacham, JPMorgan.

Thanks for taking the question and congrats on the quarter.

I've just got a couple for Kevin and one for Norbert.

For Kevin, I know it's early on Stribild, but are you guys seeing uptake at the expense of PIs?

And how much of a driver do you think the switching studies will be with respect to share?

Then for Norbert, you guys have talked about the 7977-5885 combo study on the last call.

I wanted just to know if anything has changed and how you are thinking about the second pivotal study, what types of patients, what types of designs you think you will employ and things like that.

Thanks.

Hi, Geoff, it is Kevin.

Thanks for the question.

We are pleased with the progress so far on Stribild.

It is early days, almost two months of launch.

The sales you saw in Q3 were very much the inventory fill for the wholesalers and that's a very similar amount to the amount we put out a year ago when we launched Complera.

I think we are particularly pleased with the access that we have got.

It's very much quicker than we have for Complera.

The ADAP programs particularly have taken up Stribild and we almost have five of five.

We're just waiting for a signature to have the fifth of the big five ADAP programs have coverage of Stribild.

Twice as many prescriptions prescribed as Complera so it's running ahead of Complera.

It's running ahead of the uptake of Prezista.

It's more looking like kind of the uptake of Isentress.

So I think overall we would consider I think the launch of Stribild more Atripla-like and less Complera-like.

Obviously you don't have the bolus of conversions that Atripla had but our sense is there's probably a little bit more being used in the naive setting than in the switch setting.

But our other sense, and again it's early, is that the uptake is probably coming at the expense of the protease inhibitors, as per your comment earlier.

So it seems to be more being use in the naive setting than switch.

The switch data will help and having in the label will help but the team, our expanded team is very much positioning this as the preferred regimen for upfront use in new patients as an alternative to Atripla, as an alternative to the boosted protease inhibitors.

Geoff, with regards to your question about the Phase III program, the big answer is no, nothing has changed.

As John mentioned, the first Phase III study, the first patient was dosed last week and just to underscore the rapidity of enrollment, we actually had to close the study for screening last week as well because we had enough patients in screening so that we can enroll the first 200.

So we are going to take a look at this at two 12-week arm sometime in the first quarter next year, probably March, and then we will make a decision as to what to -- whether we are going to continue to randomize patients in this study.

And then with regards to the other study, keep in mind we have other data coming in.

The two data sets will be presented at ASO.

One of them is the 12-week arms of the Bristol-Myers daclatasvir 7977 combination.

Another one is the 7977-5885 ribavirin in genotype 1-naive patients by -- in the ELECTRON study.

Then we have a third arm in ELECTRON ongoing 7977-5885 ribavirin in genotype 1 null responders.

We will take all these data into consideration and based on that design to second Phase III study which should start pretty much at the latest around the same time as we are going to reopen this current study for re-randomization and re-enrollment.

But just briefly this could be a very simple potentially one-arm study with a 12-week arm depending on the outcome.

It could also include treatment-experienced patients depending on what the data looks like of the combination in the null responders with (inaudible).

So I hope that answers the question.

It will all become clearer over the next two to three months what the nature and the design of that second Phase III study is going to be.

That's really helpful.

Just a quick follow-up, Norbert, is there any --?

Geoff, that's three questions already.

We are going to have to move on to somebody else.

Okay, okay.

Matt Roden, UBS.

Thanks for taking the question and congrats on the quarter.

A question for Norbert on GS-7340.

Is it reasonable for us to think about the potential to lower the incidence of renal adverse events with 7340 versus the standard of care?

How many patients do you think would need to be treated and for how long to really start to tease out whether or not there's a difference here?

Matt, that is exactly what we're hoping to be able to show, so essentially 7340 is the same active ingredient as is in Viread but it's dosed at 1/10 the dose and they always said unless you believe in homeopathy, it's reasonable to assume that this compound has better safe tolerability and safety and the two things in particular are BMD and creatinine clearance changes.

Now I think, I personally think that BMD changes are easier to show because simply we saw about a 2% net BMD loss with Viread across a whole number of studies and if this compound is better, then it should be easier to show statistically.

With regards to creatinine clearance, you know, it really depends on the effect size of the variability, but we think in a Phase III study you should actually be able to show that.

And this will become clearer by the way as John Martin said in his script.

We should actually get the Phase II, the final 24-week Phase II data from the first study in a month or so and then it should become clearer what the powering will be for the Phase III study.

Thanks very much.

Michael Yee, RBC Capital Markets.

Thanks, my question is I guess for Norbert.

Obviously we've seen a lot of the data come out recently from late breakers, 12 and 24 weeks with and without ribavirin from some other oral compounds.

Maybe since that has always been a question as to whether duration and with or without ribavirin matter, maybe you could hypothesize or speculate how you are thinking about that data and whether that changes your thinking since you've gotten some answers from other drugs recently?

Michael, I don't think it is a good answer for you, so as you may have seen also from our abstracts, one of them on the resistance of 7977 that's going to be at AASLD, we have never seen a breakthrough on 7977 and with the one single exception we've never seen resistance and the one single exception was when 7977 was used by itself without anything else.

So given that then I would -- you would expect that treatment duration should matter.

If you don't develop resistance, you don't have breakthrough, and you don't achieve 100%n response with 12 weeks, if you think about it going to 24 weeks should increase that response rate.

Now, that is theoretical.

In the few instances where we have actually tested that, we didn't see that.

So that unfortunately is the only thing I can tell you.

I don't -- I can't quite make sense of the treatment duration yet.

I think it should become clearer once we see the Bristol-Myers data and also our Phase III results where we are directly comparing in a large sample size 12 versus 24 weeks.

And on ribavirin?

You know what, Michael, what overall it looks like is that 7977 is a very potent compound but by itself it's not quite enough.

You have to add something else.

Now if you add ribavirin, it will bring the response rates up to very respectable 80% to 90% to 100% but not in all populations.

Particularly you may remember in genotype 1, it's not 100% and in null responders, it's not 100%.

But you know ribavirin from a virological point of view has actually very minimal efficacy, so I think by adding something a little bit more potent to it like for instance an NS5A, as has been shown by the Bristol-Myers data, you get 100% response rate, so that's how I look at 7977.

It is a very potent compound not quite enough by itself, so you have to add at least one other at least semi-potent antiviral to it like a PI or NS5A or NS5B.

Okay, thanks.

Rachel McMinn, Bank of America.

Thanks very much.

So I just wanted to better understand strategy in HCV.

When we think about dual therapy versus triple therapy, Norbert, I did listen to your comment on ribavirin but I was curious how you are thinking about 9669?

So you've talked about that as being a third agent but you don't seem to be aggressively developing a safety database around that.

And then just separate from all that, curious on when you might consider starting an eight-week study with 7977 in either genotype 1 or genotype 2/3.

Thanks.

So Rachel, with regards to 9669, it's one of the most potent non-nucleoside NS5B inhibitors that has been described, very well-behaved compound, once daily seems to be safe.

The reason why we are not as aggressively pursuing it is simple, because we're not quite sure what the place is in hep C therapy.

We have 5885 with a PI.

We have in preclinical in the works a pan-genotype NS5B inhibitor so we are just not sure what the role of 9669 is, so we are doing as I'm sure you know two cohorts in ELECTRON that look at 9669 with 7977 and ribavirin both in genotype 1-naive and null responders and I am sure those data will look very good.

But again, we are struggling with this issue where 9669 fit.

I want to mention something.

One role that I think triple combination therapy could have if you shortened the treatment, so let's say you get really good results with two agents and you shorten the treatment duration and at one point reach a duration where there the response is suboptimal, then it's conceivable by adding a third agent then you would get -- again get good responses.

So that is a line of experiments that we are pursuing.

And with regards to 7977 for shorter treatment duration than 12 weeks, there is actually one presentation at AASLD, it's going to be a [net gains] oral where he is looking at 7977 ribavirin for eight weeks in genotype 2/3, so that will give you some indication that we are thinking about depending on the outcome of the other cohorts in ELECTRON about looking at 5885- 7977 ribavirin combination with a shorter than 12-week treatment duration.

But there's nothing definitive yet.

Great, thank you very much.

Mark Schoenebaum, ISI Group.

First of all, I want to say congrats to Patrick on landing Susan's job.

Thanks, Mark.

I didn't put that eloquently, but you know what I mean.

Congratulations.

Since it's one question, I will respect that.

I just want to clarify are you guys going to give us the interim data from the Phase III in the 1Q?

Because it just seems to me like that is of monumental importance.

Obviously everyone's going to go to AASLD and look at your 5885-7977 ribavirin 12-week data but the real really important data sets, that 200 patient interim, are you committed to giving that SVR for data to Wall Street in the 1Q when you have it?

Thanks.

Mark, this is something we're still debating internally.

On the one hand we've realized the importance of the data for the financial community.

On the other hand, we also -- you have to be cognizant of the fact that this is an ongoing randomized study and we can't really -- we would be influencing the conduct of the study potentially if we announced to the world the interim analysis.

So something we are thinking about I think there might be other cohorts available at that time that would answer the question, so we would make those available publicly and not make available the actual interim analysis.

Sorry, what are the other cohorts, Norbert?

I just --

It's still in the planning stage but we are thinking about initiating one or two other cohorts that would answer that same question that you asked.

Cohorts in the Phase III or in the Phase II?

And then I will stop.

Oh, this will be Phase II.

I see.

Okay, thank you.

Brian Abrahams, Wells Fargo Securities.

Thanks for taking my question.

Continuing on hep C front, what do you guys see as the bar for SVRs for both naives and nulls that would optimize the commercial opportunity just given some of the competitive data we've seen unfold?

And how much weight should we place on sort of the predictive value of what we see come out of ELECTRON?

Then just lastly, do you have any updates on the disclosure plan for the ELECTRON nulls arm?

Thanks.

Hi, Brian, it's Kevin.

I wouldn't give you a pinpoint target of kind of a threshold for SVR and let's not forget I think it should be SVR-12 because those are the endpoints of the study.

But clearly you've got to be very high these days.

I think there are going to be a number of regimens from a number of companies that are going to have high SVRs and I think that also includes Gilead in that comment.

My personal feeling is that as we get towards launch that other parameters in addition to SVR will come to play.

The simplicity and the convenience of the regimens and the tolerability, and that's why approaches like 5885 plus 7977 plus ribavirin or no ribavirin becomes very attractive 12 weeks, well tolerated.

It almost becomes sort of a Complera or Stribild approach but over a three-month period.

So I think we are going to see high SVRs from a number of different approaches, different molecules, but I actually think the addition of the other parameters are going to be important in the real world particularly beyond the specialist hepatology clinic when you start to go into the general gastro treater in the community and potentially other physicians beyond where the PIs are used today.

And our expectation would be that the new regimens can go much further afield than the current prescribing of telaprevir and boceprevir.

Brian, you asked two other sub questions.

You said what's the predictability of ELECTRON cohorts?

I think it's entirely protectable.

Just keep in mind you have to take it with a grain of salt because of the sample size.

You know, some of the cohorts are 10, and N of 10.

Others are an N of 25.

Neither one is particularly large, so just keep in mind there is always variability.

Secondly, you asked about a null responder disclosure.

So when I talked to [Ed Kane], he let me know that probably what would be available at the time of the AASLD presentation would be a total of three patient SVR-4.

That is three out of 10 and we're a little bit debating internally is that worth showing?

Because you know, we don't want to mislead anybody one way or another if the result is a certain way but it's a N of 3. That is a really small sample size.

Thanks very much and my congrats to Pat as well.

Geoffrey Porges, Bernstein.

Thanks very much for taking the question.

Norbert, three patients has been enough to build whole companies in hep C.

I just wanted to follow-up with some of the questions about disclosure.

Will you tell us about the results for 7340 in Q4 or will we just learn from the decision to start the pivotal trials?

That seems important.

Just wondering, John, if you can give us an update on the prosecution of the patents for the combination product, whether there's any news there?

Thanks.

We are actually planning on letting the financial community know about the results from the Phase II study because, Geoff, as you correctly pointed out, it has a direct consequence if the results look promising, then we would of course move into Phase III.

That's something that will become public one way or another at one point.

Geoff, the second part of your question is we don't have any update on the prosecution of the combination patents, but if that proceeds or change, of course we will update you.

Thanks very much, guys.

Yaron Werber, Citigroup.

Thanks for taking my question.

So question, Norbert, just for you.

I just want to follow-up to really understand a little bit, you are going to have data it sounds like imminently from the Bristol combo which is going to give you a sense of whether you need ribavirin or not and whether 12 weeks is enough and it sounds like from what you're saying it sounds like you guys are feeling pretty optimistic 12 weeks is enough.

And if I'm reading correctly, maybe even ribavirin is not adding much.

So I'm trying to understanding, then you are going to have data for the triple for 12 weeks from ELECTRON but that's not a huge sample.

Where I'm going with this is is this enough for you?

And then have -- by March, you are going to have preliminary it sounds like SVR-4 at least from your current Phase III.

Is that enough at that point to make a determination that the Phase III is only going to be 12 weeks?

And if so, when do you think you can file for an oral off a genotype 1?

Absolutely that will be enough, so the argument that we always made and that we firmly believe in that daclatasvir and 5885 are very similar compounds at least in genotype 1. They're very potent, similar potents against 1a, 1b, behave similarly against polymorphs with maybe one exception, but in that polymorph, the Y93 agent is still way above -- the IQ is still a factor of 6, so very potent.

The only thing we are missing right now is a clinical proof of that and that will come from ELECTRON.

So what ELECTRON would do for us if the data looked promising that would absolutely prove that it would establish the link between daclatasvir and 5885.

That together with -- I said with the null responder data from ELECTRON and the Bristol Myers data will give us enough confidence to design the second Phase III study.

And then if we get the interim analysis -- by the way the sample size is again not huge.

It's 100 -- after two 12-week arm so 50 per arm, and again it would -- this all has to hang together and be confirmed of each other, but each study ideally confirms the other and we would have then enough pieces of evidence that we would feel very comfortable designing the second Phase III study.

Essentially ELECTRON Bristol-Myers and our own Phase III study, those are three studies if you add up the number of patients about 130 total, that's enough to give you confidence to go into Phase III.

At that point when do you think you can file for an all-oral if you start the study let's say early Q2?

I think you can do your own calculation.

Assume fairly rapid enrollment, 12-week of treatment if that's what the treatment duration is, 12 weeks of SVR, 12 follow-up and add to that three to four months for filing, then another eight months for approval if it's priority review or 12 months if it's not.

Great.

Thank you.

Robyn Karnauskas, Deutsche Bank.

Thanks for taking my question.

I guess first, you showed that Atripla trends are sort of flat.

I wonder if you can comment a little bit about what you were seeing in Atripla and with Atripla use?

Second just a follow-up to Mark's question on the arms that you might be adding or in Phase II that might give us a hint about Phase III.

Are you talking about maybe adding 24-week arms or maybe non-ribavirin arms to the ELECTRON trial?

Is that what you are sort of implying sort of additional arms in perhaps ELECTRON that would give us a read by March as far as how the Phase III might be shaping up?

Robyn, I'll answer your second question quickly before Kevin answers the first.

I don't want to get into that because it would give away.

It would preempt some of the data that you're going to see at AASLD.

I think once you see the data at AASLD, you will more -- it will be more evident what we're thinking about.

Thanks for the question.

Atripla is coming down.

Let me try and give you just a couple of benchmarks.

The Q2 Ipsos or Synovate data has Atripla at 34% of the naive market.

Truvada is 31% and Complera is at 25%, so that gives you kind of a total of about 90% for Gilead but you have seen before but clearly the mix is changing.

So Atripla has progressively over the last sort of five quarters come off its high.

Another marker in terms of change is that Complera gets 25% of its prescriptions from Atripla switch, so you can see that there is Atripla switching more than likely because of tolerability, the CNS side effects of efavirenz coming across to Complera.

The only other thing I would add, Robin, is that the shift that you saw in the actual product sales in Q3 versus Q2, that was largely because of the non-retail.

That was largely because of ADAP ordering.

ADAP ordered quite large quantities in Q1 and Q2 of this year of Atripla.

They were relatively quiet on Atripla in Q3 so the actual product sale changes that you saw there were largely the result of the phasing of ADAP purchase.

Great.

Thank you.

Marshall Urist, Morgan Stanley.

Thanks for taking the questions, so just one, Kevin.

If you could give us a sense of how you think the dynamics between Complera and Stribild will play out.

You're seeing as Complera has obviously outperformed I think a lot of people's expectations, so what's the impact between those two?

And, Norbert, maybe just a slightly different question, which is has the data that we have seen from Abbott and others sort of changed your perspective or your thinking or at least what is your current thinking on the importance of getting rid of ribavirin and dual therapy from the initial -- for the initial Phase III regimen or given the competitors, is it -- is there a little bit less pressure you think competitively to drop ribavirin at this point?

Thanks.

Complera we are very pleased with.

I think we've proven that if you've rilpivirine with a good backbone in a single tablet, it can do very well.

We particularly hear anecdotal feedback from physicians on the tolerability, how well patients like Complera.

So it has done very nicely in real sort of clinical practice.

However, Stribild is our first detail.

We are positioning Stribild as first-line therapy in the vast majority of patients, so you would expect that Stribild would quickly become the lead product in the naive setting.

Our label is naive, so you wouldn't -- you would expect it to take over.

One just small piece of information that wasn't included in the script that I think is nice to add for Stribild is that we have had a late breaker accepted at the Glasgow HIV meeting on our 96-week data so that will be presented there and then hopefully we will get that into publication quite quickly for Stribild and then we hope going into 2013, that that will be helpful eventually for moving Stribild into a preferred setting in guideline.

So the profile of Stribild is likely to become stronger, so I think we've got a very good number one product in Stribild.

We're getting the data on switching for Complera -- and that could well become I think a very strong second switch product.

The good news in all of this is that I think we've got two options in Stribild and Complera that are superior to Atripla, so it is a very good position that we are in.

Marshall, with regards to the competition, that's an important question that I would like to comment on it.

So first of all, Abbott has a viable regimen.

They obviously came to the conclusion that they needed all five agents differing only in terms of treatment duration 12 or 24 weeks.

But I want to mention that what we do and the urgency that we feel is not really determined by what the competition does but rather by where we ultimately want to go with the therapy and our goal has always been to have one pill once daily without ribavirin and I think that's entirely possible and that's what we are pursuing.

So we at one point ribavirin will disappear.

People won't use it anymore because of the obvious issues.

It's BID, causes anemia and you don't have to use it.

You wouldn't use it and that I think we are going to achieve the question is when and with what regimen.

Ian Somaiya, Piper Jaffray.

Thanks, just wanted to follow-up with Norbert on -- your longer-term vision in hep C. I think you mentioned the goal of moving to a once daily one pill regimen.

Just can you help us think about is the next step an addition of a third pill, a third drug that you would coformulate into a single pill?

Or would it be a different combination, different let's say switching out your NS5A with something else?

Ian, again I think it's clear if you just look at the Bristol-Myers data that were presented at EASL that you can have two drugs in that case daclatasvir and 7977 dosed for 24 weeks gives you 100% response rates in genotype 1. It didn't give you that number in genotype 2/3 for obvious reasons because daclatasvir and also our own NS5A inhibitor is really not optimized for genotype 2/3.

We have very early in development a pan-genotypic NS5A that at least virologically looks just absolutely wonderful.

It's a compound that works against all genotypes, against most polymorphs and we think that will be a simple answer to a one-pill once daily for all genotypes.

You know, the only thing I would like to say, Ian, you said about three drugs.

It's the only role I can foresee for three drugs is if you wanted to further shorten the treatment duration, so it's possible even though the concept hasn't been shown that you could for instance get away with 10 weeks of treatment with three drugs versus if you had two drugs that needed 12 or 16 weeks.

That's where I am seeing a role of a third drug.

But if you have two good drugs, you can actually -- that's enough.

That will suffice to cure most hep C genotypes.

Do you have a sense of timelines for the NS5A that you have in preclinical development, when that could move into clinic and when ultimately we could see that in the marketplace?

It's too early, really, for me to speculate on that.

We are thinking about disclosing that sometime at the future conference.

We haven't really decided when yet.

Okay, thank you.

Brikan Skorney, Brean Murray.

Good afternoon, guys.

Thanks for taking the question.

I'll jump a little off page and actually ask a question on GS-1101 and just the potential plans for filable single-arm study.

I just think the response rate as I recall in Phase I in indolent NHL was about 57% but I think that included a number of higher than 150 mg BID doses.

I just wonder, have you guys broken out the responses to 150 milligrams specifically for these patients and what should we think of as a potentially filable hurdle for this study?

Is it reasonable to think of relapsed, refractory, indolent NHL as equivalent to other relapsed refractory hematological malignancies or given that it's indolent, should it -- will you anticipate a closer look at kind of a PFS?

Brian, I don't think we have broken it up by dose but as you noted, the current 120-patient Phase II study that John talked about in iNHL is fully enrolled.

We will look at response rates very soon and the only thing that what we don't know yet and what is equally important is the duration of response and the reason is we just haven't followed enough patients out for enough -- a long period of time.

That will sometime happen next spring.

But I also would like to caution you we think it's unlikely that we will get approval or we will even file under a single arm study.

It's more likely that we will get approval based on the Phase III studies that are ongoing.

One last comment about response rates and what's required.

You may want to look at carfilzomib that got approved on the single-arm study.

It was a different disease in myeloma but the response rate overall was 22% and the duration of response was eight months and I think it's probably an exception but if we have something north of that, then we would definitely approach the FDA and see what they think.

So that kind of goes back to my question.

Do you -- and I was thinking about carfilzomib specifically but do you think that the relapsed refractory indolent NHL population sort of meets the same hurdles as the relapsed refractory myeloma population in terms of not really having exhausting all resources out there especially with maybe increased use of bendamustine and rituximab now than previous years?

Yes, Brian.

They do with one caveat.

They do in the sense that they have relapsed refractory to anti-CD20s and cytotoxics, so bendamustine rituximab.

One potential item that you could use to say they are not unmet need is because these people have not been treated with radioimmunotherapy and of course the counterargument is nobody uses that.

That was something that was brought up at the advisory committee meeting by [Anderson].

So again, this is something we don't know what the FDA would think.

What they say these people have not exhausted all their options yet because radioimmunotherapy hasn't been used or what they accept the previous relapsed response to cytotoxics and anti-CD20s?

That's kind of the question.

Great.

Thanks, Norbert.

Thomas Wei, Jefferies.

Thanks, I wanted to ask a hep C question.

Just an update on how you are thinking about the genotype 1 cirrhotic population, how competitive do you think you are going to be there relative to some of the other companies that seem to be expediting development in that population?

How much more work do you need to define the right duration and regimen for cirrhotics?

Thanks, Thomas, for your question.

Thomas, we're actually pursuing that in all our Phase III studies, so all our studies mandate at least 20% cirrhotics and actually in one study, the POSITRON study that you will hear about in this year the results, that study about 30% cirrhotics.

So we are actively addressing that question.

And we always had as a goal to have a representative sample of patients in our Phase III study that represents the patients that are actually going to be treated and a lot of those are cirrhotic, so those are included in all our studies in our Phase IV, Phase III studies that are currently ending or coming to an end, and they are to be included in the 7977-5885 fixed dose combination.

Tony Butler, Barclays Capital.

Thanks for taking the question.

I'll be brief, Norbert, just again on cirrhotics.

You did make reference to the notion that the only way you would think or you would hypothesize that a three-drug regimen would be necessary would be due to duration.

Does that imply that you think that a fixed dose two-drug combination would be sufficient for cirrhotics or you are still leaving that door open?

And the very quickly to Kevin, I am respectful of the Stribild label for another naive setting, but why would it not erode or dampen the Complera demand, especially when Stribild is in first-line on at least on those Atripla switches?

Thanks very much.

Tony, you are right.

In terms of special populations, we may now realize that certain population you can -- two drugs are not sufficient.

You may need three drugs but again, I want to point back to our observation that we have to this date never seen a virological breakthrough on 7977, not one.

All our patients that were nonresponders are rebounders.

Again that makes me -- convinces me that it's a function of duration of therapy rather than the number of drugs that are needed.

Yes, it's a very good point you make around sort of dampening the uptake of Complera, Eviplera.

I think that's certainly the case in the naive setting.

It might have an effect in the switch setting of course if people are on Atripla, then they've already been taking NNRTI and if it's a tolerability issue, it's a simple switch from one NNRTI to another simply based on the CNS.

One area that we haven't talked about and we will be waiting for data and of course again it's a label situation is that we have done the switching study from Truvada plus Isentress so Raltegravir and there are over 50,000 patients on that regimen today.

So I think that's more likely a potential switch in the situation that the doctor takes that decision individually to do that, so I think for Stribild, it's more likely a PE or a Truvada/Isentress switch.

Thanks, Kevin.

Thank you, Norbert.

Alan Carr, Needham & Co.

Thanks for taking my question.

Just a quick one.

Could you comment on the share buyback activity and strategy as well as managing the debt as well?

Thanks.

Sure, Alan.

We did repurchase shares.

It's actually outlined in the deck that we provided.

Our focus in terms of our share repurchase program is secondary to paying down the debt.

So we actually slightly underachieved offsetting dilution this quarter.

I think it was slightly under $200 million or so that we repurchased.

In terms of Pharmasset debt pay down, we are focused on paying down the short-term debt and we paid about $350 million down this quarter to bring our debt to EBITDA down to about 2.2.

Our goal is by mid-2013 to get it to 1.5.

That's our target.

Thanks.

Joel Sendek, Stifel Nicolaus.

Thanks a lot, so HIV question.

I'm wondering on the Stribild launch, whether you encountered any pushback on reimbursement given the price?

And then also regarding Europe, I'm wondering why the franchise is growing a little bit slower.

I understand this particular quarter's issue but if you look at each of the last couple of quarters, it's not been growing that much.

I'm wondering if there are any other reasons why?

Thanks.

Joel, it's Kevin.

I couldn't be happier with actually the access to Stribild.

To have 37 ADAP programs and four of the big five already in a little under two months is where we were really with Atripla.

It's very much quicker than what we had with Complera, so we are really having very, very good acceptance.

Just as a reminder, the pricing of Stribild is lower than a boosted protease inhibitor, so that's quite appealing to managed care.

Not by a large amount but it is lower, so managed care like that, so we priced it very competitively from a regimen cost point of view.

You know, when it comes to Europe, Joel, it isn't easy out there.

I think we do well because we've got specialist products, HIV, requires treatment.

We have a great deal of support from physicians.

We have good payer support and we've got good advocacy, but some of the markets are tough.

Any pharmaceutical company will tell you that, particularly some in Europe.

But our business in the likes of Spain and Portugal and the Italy are holding up I think pretty well.

So it might look a little bit quieter in terms of growth in the US, but on a relatively -- on a relative basis, I actually think we are doing remarkably well.

So Europe, there are still some stresses and there are still some challenges there.

Thanks.

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

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

We appreciate your continued interest in Gilead.

The team here looks forward to providing you with updates on future progress.

Thanks again.

Ladies and gentlemen, we thank you for your participation in today's conference.

This concludes the presentation and you may now disconnect.

Have a good day.