吉利德科學 (GILD) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Gilead Sciences third-quarter 2013 earnings conference call.

My name is Erica and I will be a 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, Erica and good afternoon everyone.

We issued a press release this afternoon providing earnings results for the third quarter, which is available on our website where you can also find detailed slides that support today's call.

For our prepared remarks and Q&A, I'm joined by our Chairman and Chief Executive Officer, 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 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, 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 statements made during this call.

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

The GAAP to non-GAAP reconciliations are provided in our press release, as well as on our website.

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

Thanks Patrick, and thank you all for joining us.

Earlier today we reported solid third-quarter 2013 results.

Our non-GAAP EPS was $0.52 per share compared to $0.50 per share in the same period last year.

Worldwide product sales exceeded $2.7 billion, up 15% over the same quarter last year and 2% sequentially, driven largely by the continued uptake of our single tablet regimen in both the US and EU.

Turning to operating expenses.

Year-over-year non-GAAP R&D expenses were up $105 million, which is mainly attributable to the increased investment in Phase II and III programs in oncology and Phase III programs in HIV.

Non-GAAP SG&A spending was up about $90 million as we continue to expand our infrastructure to support the anticipated launch of sofosbuvir.

Finally, I would like to update you on our full-year 2013 financial guidance, which is summarized on Slide 10 of the earnings presentation available on our Corporate website.

We are increasing our non-GAAP net product revenue guidance for full-year 2013 to $10.3 billion to $10.4 billion, which represents a $200 million increase from the top end of our previous guidance range.

Our operating expense and tax rate guidance are also changing as follows.

R&D expense guidance will increase $1.95 billion to $2 billion, SG&A expense guidance will decrease to $1.5 billion to $1.55 billion.

Tax guidance is now 26% to 27%.

All other aspects of our guidance for 2013 remain unchanged.

In closing, our year-to-date 2013 financial performance is on track and we look forward to a strong fiscal year close.

I will now hand the call over to Kevin.

Thank you Robin.

Breaking down the third-quarter results I would first like to concentrate on the United States.

Total US sales for the quarter were an impressive $1.7 billion, a growth of 20% over the third quarter of 2012.

Both antiviral and cardiopulmonary franchises posted robust year-over-year increases of 19% and 27% respectively.

Looking in more detail at HIV, it's important to first report that there was little effect of either inventory or ADAP purchase.

Inventory for our big three wholesalers increased slightly but stayed around the midpoint of our contractual range.

ADAP purchasing was solid during the third quarter, but lighter in the second quarter of 2013.

It is difficult to predict the picture for the remaining quarters of the federal fiscal year, but we do know now that the base and emergency funds for 2013 have been fully delivered to each state program.

The third quarter of 2013 marks two years since the launch of Complera and one year since the launch of Stribild.

The adoption of both these new single tablet regimens continues to be very encouraging.

Stribild is now the number one regimen in naive HIV patients, the number one regimen in patients who are switched, and more prescriptions have been written for Stribild during it's first year of launch than for any other HIV product since Atripla was introduced in 2006.

The performance of Complera is no less impressive.

Complera is the number two regimen in naive HIV patients, the number two regimen in patients who were switched, and the number two patients in all HIV treated patients.

What is especially interesting is to see how the third age of landscape is rapidly changing as a result of introduction of Gilead's' new STRs.

The NNRTI class has significantly reduced its share, but is still the leading third agent category.

Integrase inhibitor class has grown sharply and is now the second largest third agent category.

Finally, the protease inhibitors have dropped both in share and position, being the smallest of the third agents.

Turning to Europe.

We were also very pleased with the third-quarter year-over-year sales growth of 7% excluding foreign exchange.

The continued strength of Eviplera is reassuring and the very early signs from Stribild are encouraging.

Eviplera sales rose by over 400% year on year, driven by the fact that it was the first full quarter for all big five markets.

We are particularly encouraged by the rapid uptick of Eviplera in Spain, a traditionally strong NNRTI market.

In just two quarters since launch, Eviplera is the most prescribed regimen in naive HIV patients.

Stribild is now commercially available in seven European countries, but only two major markets, the UK and Germany.

In the UK, Stribild is the first ever prescription product to gain pricing approval through the new NHS England system, and we now look forward to healthy uptick in the coming months.

Stribild performance in Germany has got off to a very fast start with prescriptions running at double the pace of Eviplera at a similar time point in launch.

17% of naive HIV patients in Germany are already treated with Stribild.

In summary, today's business performed exceptionally well in the third quarter.

I now want to focus my remaining comments on our new opportunities in hepatitis C and oncology.

On our quarterly calls, I've kept you abreast of the commercial buildouts for HCV in the US and Europe.

I'm pleased to report that for both regions we are now putting the finishing touches in place for sofosbuvir launch.

In the US, we have a dedicated sales team of approximately 150 HCV therapeutics specialists who are in territory and going through the final phases of training.

At the approval of sofosbuvir, this team will discuss our FDA approved label with hepatologists, gastroenterologists, and a proportion of infectious disease specialists.

Our HIV team will play no part in the launch of sofosbuvir and will concentrate solely on supporting our important HIV single tablet regimens.

Wrapped around our HCV sales team will be a complete supporting infrastructure of medical scientists, national account managers, and nurse educators.

We feel confident that subject to FDA approval, we have the right resources and the right people to provide strong educational support for sofosbuvir.

Our product distribution model will essentially be similar to that of HIV, yet with a bigger network of specialty pharmacists.

We anticipate that sofosbuvir purchases in December will be largely for opening inventory of the wholesaler level, and that prescribing pull through will only really start in the new year, especially for the GT1 patient requiring pegylated interferon.

In Europe we anticipate sofosbuvir European Commission approval in the first quarter of 2014.

We will then roll out our launches according to pricing and reimbursement timelines.

Like the US, by the end of 2013 we will have finished hiring and training our field sales teams in Germany, the UK, Austria, Nordics, and France.

France is an especially important market to highlight because of its history of HCV infection and subsequent high diagnosis rate.

We have are ready put in place a so-called French ATU early access program in order to provide sofosbuvir to high-need pre-and post- HCV liver transplant patients.

Overall, we feel that our commercial launch plans are where they should be to bring sofosbuvir responsibly to specialists and their patients upon regulatory approval.

Finally, a very brief mention of oncology.

We will gear up our sales and marketing efforts for idelalisib commensurate with projected regulatory timelines.

In the US we will build a standalone sales team by mid-2014.

Our approach in Europe will be slightly different where we will look to involve our AmBisome sales team, a team that has already an excellent reputation with the hospital hematologist.

In closing, as I hope you sense it is a very busy yet exciting time at Gilead as we roll out the next stages of commercial growth.

I will now turn the call over to Norbert.

Thank you, Kevin.

I am pleased with the rapid progress across all of our R&D programs and the high level of productivity.

A large number of development programs are now being advanced from IND through Phase I, II, and III clinical development.

First, an update on oncology.

In September an NDA was submitted to FDA for idelalisib for the treatment of double-refractory iNHL.

This application was supported by data from study 101-09, a single-arm open-label Phase II study of 125 patients who were refractory to both rituximab and alkylating agent-containing chemotherapy.

In this study idelalisib achieved an overall response rate of 54% with a median duration of response of 11.9 months.

The most common adverse events were diarrhea, transaminase elevations, and neutropenia.

The final analysis of this study will be presented at an upcoming conference.

In October, study 116 of idelalisib was stopped early following a recommendation by an independent data and safety monitoring board.

Study 116 is a randomized double-blind placebo-controlled study in patients with previously treated recurrent CLL who require treatment, but were not fit to receive cytotoxic therapy based on clinical important comorbidities.

80% of the patients were greater than 65 years of age and 44% had the 17p deletion or TP53 mutation.

220 patients were randomized one-to-one to rituximab plus idelalisib versus rituximab plus placebo.

After reviewing data from a predefine interim analysis, an independent data and safety monitoring board recommended stopping the study early due to overwhelming evidence of efficacy together with appropriate consideration of safety.

Data from study 116 will be submitted for presentation at an upcoming scientific conference also.

The data from this interim analysis of study 116 in CLL, together with the data from study 101-09 in iNHL is included in the European marketing authorization application, which was filed just yesterday.

In the US, we have initiated discussions with FDA regarding a regulatory filing in CLL, either as a separate NDA or as a submission to the existing NDA.

An expanded access program of idelalisib for patients with recurrent CLL requiring treatment, but who are not fit for chemotherapy is planned.

In addition, four Phase III studies in relapsed refractory iNHL and CLL patients are currently enrolling.

The Phase III program evaluating momelotinib, our JAK1/2 inhibitor myelofibrosis will be initiated in the fourth quarter of 2013.

We are planning two randomized studies of momelotinib for registration.

The first is an active control head-to-head study versus ruxolitinib in newly diagnosed patients requiring therapy.

The second study is in patients with who have failed ruxolitinib therapy because of its bone marrow suppression effects and will compare momelotinib with best available therapies.

This study will start in the first quarter of 2014.

In addition to the rapid progress with idelalisib, Phase II studies are underway for GS-9820, a back up PI3K Delta inhibitor, and for GS-9973, our Syk inhibitor, both alone and in combination with idelalisib in various B-cell malignancies.

A Phase II study of simtuzumab in pancreatic cancer is fully enrolled, and studies in colorectal cancer and myelofibrosis are continuing to enroll.

GS-5745, an MMP9 mAb antibody is under evaluation in Phase I, II studies in pancreatic and gastric cancers.

We are looking forward to sharing the emerging data of our ecology studies as they become available.

Now turning to HIV.

In October, Tybost, which is also known as cobicistat, received European Commission approval, and elvitegravir received a positive CHMP opinion, and we expect European Commission approval by the end of this year.

In the US, a complete response letter was issued by the FDA on cobicistat and elvitegravir in April, and the resubmission is planned for the first half of 2014.

The two Phase III studies evaluating TAF, Gilead's novel prodrug of tenofovir, are expected to be fully involved this month.

These studies are identical in design evaluating Stribild to a single tablet regimen of elvitegravir, COBI, FTC, and TAF, abbreviated as ECF-TAF, in over 800 patients in each study in treatment naive HIV infected patients.

The primary endpoint in this study is at 48 weeks and we would expect the data available in the fourth quarter of 2014.

ECF-TAF will also be evaluated in two additional Phase III studies, in study 117, in patients who are failing on the current regimens, and who have not previously been treated with an integrase inhibitor, and in study 119 in fully suppressed patients who are taking a multi-tablet BID regimen and who have previously failed a PI or NNRTI regimen.

Both of these studies are currently enrolling.

Along with ECF-TAF we plan to also submit a marketing authorization application for F-TAF, which would be supported by a single bioequivalence study.

The two Phase III studies evaluating TAF as a single agent for the treatment of chronic hepatitis B infection, one in e-antigen positive, the other one e-antigen negative patients are currently enrolling.

And finally, turning to HCV.

As all of you are aware we had a successful FDA advisory committee meeting last week.

The panel voted unanimously in favor of approval of sofosbuvir plus ribavirin for the treatment of genotype 2 and 3 hepatitis C infected patients, and for approval of a 12-week course of sofosbuvir pegylated interferon ribavirin for the treatment of genotype 1 and 4 hepatitis C infected patients.

In addition, the majority of panel members were in favor of broadening the indication to include genotype 1 treatment experienced patients in the label.

And they also backed the use of sofosbuvir plus ribavirin in the pre-transplant setting for patients with HCC.

At the advisory committee meeting new data were presented from the VALENCE study, which indicated that treatment of both treatment naive and treatment experienced genotype 3 hepatitis C infected patients with sofosbuvir plus ribavirin for 24 weeks resulted in SVR rates of 84%.

We are naturally excited about bringing sofosbuvir to the market, and we feel, like some panel members commented, that this is a historic moment for which every employee at Gilead is proud.

We look forward to working with the FDA to complete the review of the sofosbuvir NDA and ultimately launch the product.

Meanwhile, the clinical development program of the sofosbuvir/ledipasvir fixed-dose combination is also proceeding rapidly.

Three Phase III studies, IM-1, IM-2, and IM-3, explore the utility of the fixed dose combination in both treatment naive and treatment experienced genotype 1 hepatitis C infected patients, with and without ribavirin, and for treatment durations of 8, 12, and 24 weeks.

We anticipate having data from these Phase III studies available towards the end of this year and into early next year, and we are on track for NDA MAA filings in the second quarter of 2014.

The development of sofosbuvir in combination with ribavirin for genotype 2 infected patients in Japan is progressing.

The single-arm Phase III study with 12 weeks treatment duration was fully enrolled in September and we're on track to submit the marketing application in Japan towards the middle of 2014.

This is a significant opportunity, as genotype 2-infected patients in Japan constitute over 25% of the total, and sofosbuvir and ribavirin will be the first all-oral interferon-free option for these patients.

In addition, the Phase III program of the fixed-dose combination of sofosbuvir/ledipasvir with and without ribavirin genotype 1 hepatitis C infected patients was initiated in September 2013, and we anticipate this study to be fully enrolled by the end of this year.

This two-armed study in 300 genotype 1 infected, both treatment and naive treatment experienced patients, randomized to a 12-week course of the fixed dose combination with and without ribavirin.

Finally, the potentially pan-genotypic interferon and ribavirin-free regimen, the combination of sofosbuvir and the pan-genotypic NS5A inhibitor GS-5816 is advancing through Phase II development.

Two studies in treatment naive and treatment experienced patients in various genotypes are fully enrolled, and depending on the emerging data we should be in a position to initiate Phase III studies in the second half of 2014.

More information on our programs will be presented at the annual AASLD meeting, which will commence this week in Washington, DC.

Over 50 abstracts were submitted on Gilead's various liver disease programs, and importantly, new data will be presented on the safety and efficacy of sofosbuvir/ribavirin in HIV co-infected patients and in the post-liver transplant setting.

In summary, very rapid progress is being made across all of our therapeutic areas in all of our programs.

Our pipeline provides us with numerous opportunities for continued growth, both short term and longer term.

We want to take this opportunity to thank all of our employees for their continued hard work and dedication.

So with that, we will now open the call for questions.

Operator?

(Operator Instructions)

Geoff Meacham, JPMorgan.

Thanks for taking the question.

Just on hep C, looking at your market research you guys have obviously done a lot of work ahead of the sofosbuvir launch, so I want to know on the epidemiology side, what would you say are the biggest gaiting factors to convert patients from diagnose to the treated bucket?

And then just a related question, when you think about the filing of sofosbuvir plus ledipasvir, what's the current thinking on which of the IM studies will go into that filing?

And I know time is of the essence here.

Thanks, guys.

Hi, Geoff.

This is Kevin.

Thanks for the question.

The one bucket that we are still working up and I think we are getting close but we're still sort of road testing is what we term as patients under treated care, so those are patients who are diagnosed but are under the management of a hepatologist, a gastroenterologist, or an infectious disease specialist.

That bucket tends to move around a bit a lot more than would do a typical bucket of patients in HIV because patients are treated and obviously are cured.

Some patients are treated and not cured and stay with the specialist, and some are treated and drift, if you like back into that 1.7 of diagnosed but leave the specialist.

One of the reasons that we want to double check that number and wait a little while until we have a few more quarters is just to get that as correct as we can.

We do think there is a good number of patients that are currently under care that we can access fairly quickly with the salesforce that we put in place at the launch of sofosbuvir.

Some of those are treatment experienced and they're probably the most obvious bucket of patients, and it was nice to see the remarks that the FDA advisory panel around the possibility of getting a label for the treatment experienced.

And some of them are treatment naive.

So we do think first and foremost our focus will be with the specialist treater for the patients that they currently have in their practices that they would be recalling to go on sofosbuvir.

To answer the other question, all three studies will go in the NDA, we feel they are all important.

As you may remember IM-1 is treatment naive, IM-2 is treatment experienced, and IM-3 explores an eight-week course of therapy both with and without ribavirin.

We are fairly convinced that we will be able to repeat the Phase II results, which would mean that even the eight-week duration will give you high response rates and that will be important information right on the label.

The rate limiting study by the way to remind you is the 24-week arms of IM-1, and that will become available sometime in early 2014 and that determines the path to the NDA.

Okay.

Thank you.

Mark Schoenbaum, ISI Group

First, I would just like to say congratulations to Kevin, just a phenomenal launch of the next generation HIV drugs.

Some of those slides are really amazing.

Good job, I knew [your attention] Hep C, but pretty cool stuff.

I was just wondering on the slide you guys have that shows the 1.7 million patients in the US that are diagnosed with Hep C, if you could let us know perhaps how many of those you estimate are incarcerated and how many are in the VA, and when you give guidance next year will the sales guidance include Hep C when you give that in January?

Thank you.

Mark, first of all that's very decent of you to thank everybody here for our uptick of single tablet C and HIV.

I'm lucky to work with some great people.

So they are doing a fine job and we've got some nice data behind those products.

In terms of the number of patients, or people should I say, because I think it's more people which HCV, it's quoted that about 4% of the VA population, that's about 225,000 people, veterans, have hepatitis C. And I would say, Mark, that that is probably a higher priority for us, the VA population than corrections.

We have really good relationships with the VA, and we feel that their model of accessing patients at the launch of sofosbuvir as a single agent is probably easier and more straightforward than it is in the correctional setting.

In the correctional setting, I honestly don't know off the top of my head the total number of people, let's go through the correctional setting, but the CDC have quoted that 35% of the prison population, up to 35% has Hepatitis C. We will be addressing the correctional setting.

As you know we do have a team for HIV today that addressed that population, but I have to say I do think it will be the interferon-free regimen that will do better in the correctional setting.

I don't think interferon has ever done particularly well in the correctional setting because the obvious side effects.

So I think it's going to be sofosbuvir/ledipasvir will be a better regimen for corrections.

Mark, this is Robin.

To answer your second question, it's hard at this point in time to give guidance about our guidance.

We are hard at work on preparing for a successful launch.

But I figure we are undecided yet relative to what granularity we give around guidance by product, particularly new product launches at this point.

Okay, thanks.

Geoff Porges, Sanford C Bernstein.

Hello.

Kevin just a follow-up on the HCV question, could you talk us to (inaudible) probably everyone's signal there's a potentially huge demand for particularly the ribavirin/sofosbuvir based regimens that are also obviously single-tablet regimens later.

What are you hearing from payers both in the US and outside the US about how they're going to triage payments and what if any restrictions might be imposed?

Is it going to be enough to just show up to a physician in France and say I've got HCV treat me, or to a physician in the US and say I'd like treatment?

Or are they going to be some triaging of patients depending upon fibrosis or anything else?

That would be helpful for us to understand.

Thanks.

Thank you for the question, Geoff.

That's a really broad question.

Let me try and go through sequence here.

Let me deal with US first.

We have had a lot of discussion with US payers, they certainly have HCV on their radar, but I'm encouraged from our conversations that they will reimburse well for sofosbuvir and of course the broader the label the better.

Again, I was encouraged with the tone of the advisory committee that we could come out after our further discussions with a good broad label and that would help us with US payers.

There will always be a prior authorization that the patient has to go through and the physician in the office have to go through before starting an HCV treatment, but that generally is a check that the drug is being used on label.

So we think that will be a fairly straightforward and most of the hepatologists and gastroenterologists who currently prescribe an HCV are used to that step.

I think we are encouraged that we will have a very good coverage in the United States.

In Europe, of course, it's a country-by-country pricing and reimbursement process.

It depends on the country, the earlier markets are typically the UK and Germany, the later markets are the southern European markets.

We do think that in certain categories, and I really highlight the liver transplant area, that we may get some exceptional coverage between the European Commission approval and their normal timelines of pricing and reimbursement, and that's just because of the absolute unmet need.

We also hope that the pricing, the normal pricing and reimbursement process will go a little bit quicker for a drug as innovative as sofosbuvir, basically early next year we will be submitting our dossiers to bodies like NICE, AMNOG, the Transparency Committee in France, so we are all geared up and we think we have some good data that really shows exceptional cost benefit for sofosbuvir.

So a long answer but I hope that gives you some sort of color.

Okay.

Thanks very much.

Rachel McMinn, BofA Merrill Lynch.

I guess I also had a question for Kevin, but one from Norbert as well.

For genotype 2 and 3 patients in the US, maybe you could just give us a little bit more sense, a lot of genotype 1 patients will wait for the fixed oral dosage pill, but genotype 3 and 2, there's less visibility perhaps that maybe they would be less inclined to wait, but just wanted to get your thoughts on how to think about that population for 2014.

And then Norbert on 5816, do you actually have some on-treatment or SVR results now, and I just wanted to take your temperature on that program.

Thanks.

Hi Rachel, it's Kevin.

We do think that the 2 and 3s will be ticking up pretty quickly.

If you look at the table on Slide 28, you've got about 20% of the US population is -- of HCV population is genotype 2 and 3, so we think that's the most obvious patient category because you haven't got interferon.

I think in terms of how a treating physician will move through those 2 and 3 patients, of course it will be the ones with advanced liver disease or perhaps they have even failed previously on an interferon-based therapy.

But I think it is the obvious group of patients to be getting on and treating right from launch.

Rachel with regards to clinical data we do have some emerging data so that the toughest test for 5816 in genotype 3 that is simply based on the neurology data, we do have some emerging data in the treatment nave genotype 3 population that looks promising.

But what we have to wait for and that is the rate (inaudible) genotype 3 treatment experienced we will get those data sometime in the February, March timeframe of next year.

So only then would we really make the decision to go into a more advanced Phase III program if we take the genotype 3 experience population.

Thanks.

Yaron Werber, Citigroup.

Congratulations.

If you look at where you were two years ago and where you are now, it's absolutely incredible, so congrats on really a terrific job on really everything, Hep C, HIV, and oncology.

So I have two questions and both of them are obviously as you imagined Hep C. The first one, just one of the things that you guys asked for is the sofosbuvir label that is very broad, that covers the treatment of hepatitis C with other oral drugs broadly, and I just wanted to get your sense as to looks like FDA was very supportive overall, but they didn't really necessarily comment on that.

They sort of made some remarks.

What are your thoughts on the ability to get that label?

And then secondly, in 5816 you're actually doing an eight week arm now for genotype 3. So it sounds like you guys have a lot of confidence in genotype 3, so I'm just trying to get a sense, what do you know on the ledipasvir and sofosbuvir, it sounds like you already know something about 5816, but what do you know about ledipasvir and sofosbuvir for eight weeks?

Thank you.

Yaron, the first question you asked about the chance that we get that broad label that was described in the end of our advisory committee meeting at the beginning, and I'm not sure whether you listened to the day before to the sofosbuvir deliberations, Jeff Murry made a comment along the lines, they said they don't want to do that right now, they've been surprised in the past about different regimens having different response rates, and they would like to get some more experience to figure out which specific combination works and which ones should we rather stay away from.

So they indicated they would not favor at this point to give us a broad indication to just say what other agents.

And again, all this still has to be negotiated, we have not had a really in-depth conversation with the FDA about this.

That will happen now that the advisory committee meeting is over.

And the other question you asked, so what we do know about 5816 is that it works in genotype 3 treatment naive patients.

As I say we need genotype 3 treatment experience and then as you very astutely observed we also initiated recently a study to look at eight weeks of therapy.

Again, it would be the same thought process if we initiate the Phase III program, we might actually do the Phase III program 8 weeks treatment in genotype in all genotypes treatment naive and maybe 12 weeks of treatment in treatment experienced.

But again, it all depends on how the Phase II data emerges.

But at least we will be in a position next year to make an informed and intelligent decision as to what the Phase III program is going to look like based on Phase II data.

Brian Abrahams, Wells Fargo Securities, LLC.

My congrats as well on all the progress and on the positive panel.

It sounds like 12 weeks for genotypes 1 and 2, and 24 weeks for genotypes 3 were the durations that the panelists and the FDA are leaning towards based on all the data.

Now that that's a little bit more concrete, I'm just wondering how does that shape your pricing strategy in terms of balancing the three genotypes next year and also anticipating the all-oral combo coming on in 2015.

Thanks.

Hello, Brian it's Kevin.

Thanks again for the nice words.

We're very close now, Brian, it's only six weeks to PDUFA date, so not long to wait until we set our price at launch.

So I can't go into really great detail today.

The one comment I would make is that there is only 9% of the US population, HCV population that are GT 3. So whilst those patients look like they're going to be given the label of for 24 weeks, and you can say it's not going to have a profound effects on your pricing strategy, there's not only a small number patients there.

So I wouldn't say that the advisory committee has had a major influence on our continued thinking and finalization of our pricing.

So I hope that's helpful.

That is, thanks.

Matt Roden, UBS.

Thanks very much for taking my question.

Congrats to John and Bill and the rest of the team on the successful FDA panel.

Kevin these data points on Hep C are great.

I guess I just want to ask a little bit more if you could speak a little bit more about the methodology here.

Is it fair to say that you wouldn't have put these numbers out if there wasn't a fairly high level of conviction in these estimates?

And then just drilling down on that a little bit more, do you have a sense of what the proportion is among the diagnosed who have evidence of advanced liver disease?

It seems to me that those would be the more urgent need to treat patients that might be tackled more in the near term than the long term.

Thanks.

Just to give you a little bit of background of how we are trying to develop this Matt, we are going down the road of the patient database like we have done with sinovid, sinovid became [ipsauce], ipsauce is the people that we are working with once again.

It takes a long time to develop robust samples.

I have to tell you that whilst we're getting more confident with hepatitis C the sampling is far lower, both in terms of the physician universe as well as the number of charts that we get for HIV.

We've had 10 years of developing that database, and we really only in sort of year one of getting us off the ground at Gilead.

So I think we're getting more confidence.

As I said earlier one of the reasons that we are still not sharing fully that bucket that sits with the specialist, so the patients that are diagnosed would sit with specialist treaters, is that we just want one or two more quarters to make sure that it is reproducible.

But I think we're getting more comfortable.

In terms of treatment experienced, I think there is something in the range of about 80,000 to 100,000 patients that are treatment experienced today.

And they sit between that 1.7 million, they sit within the 1.7 million diagnosed, but somewhat lower number, and so the lower end of the spectrum about 80,000 are probably in and around the specialist office.

So that is our directional sense today.

Thanks very much.

Michael Yee, RBC Capital Markets.

Congrats as well.

Question on Slide 31.

I thought that was quite interesting with your break out of the distribution channels.

Do you have any sense of the size, relative size of the buckets there, particularly VA and prisons and how price sensitive those buckets may be.

Do you have to get contracts there, how does that really work, and then the relative size amongst those four?

Thanks.

Hi, Michael it's Kevin.

Great question.

By far the majority of sofosbuvir will go through the first two blocks there, specialty pharmacy, specialty pharmacy playing an important role and have done since the launch of the PIs in supporting the herpetologist and the gastroenterologists.

So the majority will go through specialty pharmacy and through other retail chains like the large retailers, Walgreen's, CVS.

So by far they are bigger, and much smaller will be the VA and prisons.

Typically with someone like the VA, we do go through a contracting process for supply.

We feel we've got a very strong value proposition with sofosbuvir, and we'd be looking to have a very constructive conversation once we bring it for listing on their national formularies.

We think we can maintain close to our retail pricing that will be in the first two buckets.

The one obvious thing that's different with sofosbuvir than HIV is obviously that we don't have the large ADAP buckets that has lower pricing that we have in the HIV world.

So our expectation is that very little if any will move through the ADAP channel for hepatitis C.

Do you think VA is like 5% or 10% or bigger than that?

I think it's in that ballpark, the one you quoted, that 5% to 10%, it's quite small.

Okay, perfect.

Thank you.

Robyn Karnauskas, Deutsche Bank.

Thanks for taking my question.

First just a follow-up.

For IM-3 eight weeks, will you have that data, do you have it in house and will you have that data before you launch, you know how to price the drug?

And how are you thinking about releasing it?

Would you release it with the full IM-3 data set?

And then just to clarify on 5816, you talked about you might think about developing that for genotype 3s, maybe shortening duration of therapies for these other patients, but how do you view it for genotype 1s, is it more of a lifecycle management tool with better safety, without riba -- how are you thinking about it?

Robyn, you asked about availability of data from IM-3, we don't have those data now, but as soon as we will have the SVR-12, so the regulatory endpoint we intend to do a press release on that and we will give you the topline results.

That data will go into the NDA filing unless it's completely negative, which I will find hard to believe because we have done the Phase II study as you know.

And then the second question you asked how are we viewing 5816.

It really I think everything else is -- so if the profile holds up with continued clinical development and in Phase III, the fixed dose combination of sofosbuvir and 5816 would really replace the fixed dose combination of sofosbuvir/ledipasvir.

It would be the pan-genotypic interferon-free, ribavirin-free, single pill for everybody where you don't have to worry about which genotype and what history and what resistance mutation we have.

That's how where we are looking at the 5816 sofosbuvir fixed dose combination.

By the way, that is also the reason why we are testing it specifically in the fairly large Phase III study in genotype 3 treatment experienced patients.

We have absolutely no concerns that it works in genotype 1, that's a given, but the question we have for genotype 3 treatment experienced.

If it passes that test then I think we have a pan-genotypic interferon, ribavirin-free, maybe 8 weeks, but certainly 12 weeks treatment duration regimen for everybody.

Great.

Thanks.

And just to clarify, my question on IM was really more about eight weeks, do you have eight weeks in-house, and will you have the eight weeks data before you launch the product?

No, so Robyn, the way we do this operationally, we don't look at, we don't internally look at data as they become available.

Once everybody has the last patient, last visit which is obviously the 12 week duration visit the 93 that's the time when we would actually clean up the data base, lock it, and then unlock it, and that does not happen yet.

Robyn, it's John Milligan.

I think the confusion here's what you mean by the product.

So I assume you mean will we have the eight weeks data in-house before we launch sofosbuvir.

And the answer is not, so we're going to be extrapolating from the Phase II data as a way to gauge what the pricing will be as we launch sofosbuvir, assuming that we will have a similar outcome from those Phase II.

Got it.

Great.

That's clear thank you very much.

Phil Nadeau, Cowen and Company

Thanks for taking my question.

One, Norbert for you, we obviously are going to see the IM-1, 2, and 3 data over the next several months.

Our sense of expectations for those data are that they're going to largely replicate what we saw in Phase II, so in treatment naive patients SVR rates of at least 90% possibly approaching 100% in treatment experienced patients SVR rates probably 80% or higher.

Do those expectations jive with what you yourself are expecting, or is there anything about the treatment design, trial designs here that the patient populations that we should keep in mind as we await these data sets to kind of modulate what SVR rates we should anticipate?

You are exactly right.

That is our internal expectation that we would replicate the Phase II data.

There is no reason to believe why we wouldn't, it's just larger patient numbers.

You always lose a few more if you have more sites then maybe a few more lost from follow-up, but I'm very convinced we'll see 90% or higher response rates.

And you know what I said before, the eight week study in Lonestar, even though the numbers were not large, about 25 per arm, what they absolutely do is they validate and give you a lot of confidence in the 12 week results.

That's why we are very confident and we saw 95% or 100% response rates with eight weeks of treatment in Phase II, that's why I'm confident we will see 95% to 100% response rate in Phase III with 12 weeks treatment regimen.

Okay.

And then just one last question in treatment duration.

I believe there's going to be a study out of I think it's the NIH that's looking at a six-week regimen where the data were intriguing, can you talk about the data and how you put that in context when you look towards moving even beyond the next generation of regimens?

Is this something that you will begin to push the duration down to six weeks?

Brian, this is our thinking.

As you know we have continuously reduced treatment duration, we were actually surprised ourselves, it went from 24 weeks to 12 weeks to 8 weeks, and there was a presentation at the AASLD the talks about six weeks and what that presentation would indicate that six weeks with two drugs is not enough, so we are now asking the next question is if you add a third drug to a six week sofosbuvir/ledipasvir will the response rates again go up to 90% to 100%?

That's going to be the experiment that you will hear about the AASLD, and if that is indeed the case then we have to make a decision internally if that is how we want to pursue because you always have to challenge another drug, it's always more complicated and always more drug interactions, and there may be more safety issues and what you gain is really two weeks of treatment duration, maybe Kevin want to comment on it too.

Phil, just to chip in with a commercial angle here.

If think if you move from three months to two months that's clearly a step change and an advantage.

I think going from eight weeks to six weeks doesn't really give you that much more, and two months, if it turns out that way, it's a very nice set sort of regimen delivered to a patient.

I don't think carving off an extra two weeks is that big a differentiator when it comes to the commercial profile of the products.

Brian, having that said it's something that we are still debating internally, so we haven't really come to a final conclusion yet.

Okay.

Great.

Thanks for taking my questions.

Brian Skorney, Robert W Baird.

Good afternoon guys and thanks a lot for taking the questions.

Really two quick ones.

First just in terms of the IM-2 dataset, my understanding this is open label, just wondering are you guys blinded to the data as it's coming in because theoretically you probably have at least the SVRs for the 12 weeks at this point, and also when you release the 12 week data when it was in hand or would you wait for the full 12 and 24 weeks.

So Brian, we actually internally do not look at emerging data.

We wait for the whole study to be done, because what you have to be really careful with Phase III and what we would never do is by looking at the data you could always be accused or viewed as influencing the ongoing conduct of the study.

If you were to make available SVR four data from the 12 week arm that would undoubtedly influence the 24 week arms in the studies and you don't want to do that.

So we internally, we wait for the whole study to be done, the last patient at the last visit, then we look at the data.

Got you.

And then just really quick on oncology, I notice you have GS-9820, a next-gen delta PI3 Kinase inhibitor, I was just wondering if you could kind of highlight the differentiation between idelalisib and 9820, in terms of where you think this might be a better version of that.

I know some of the competition are developing PI3K delta inhibitors, and talk about potentially circumventing the DLTs in particular, liver talks, do think that's a target?

That's a really good question.

That's exactly it.

We are looking at 9820 as something that has the same efficacy characteristics as the idelalisib without the liver toxicity, because liver toxicity we believe is compound specific, it is not mechanism or anything else related, and so by making different analogs, we are convinced we can come up with PI3K delta inhibitors that don't have DLT as T-elevations, and early clinical data, we haven't dosed enough patients yet, would indicate just that.

We have to this date seen transaminase elevations with 9820.

Right.

Thanks so much for the questions, guys.

Howard Liang, Leerink Swann & Company.

Regarding the liver transplant opportunity, do you see sofosbuvir used in pre-transplant HCV patients outside HCV and in post-transplant patients?

And related Kevin mentioned there might be exceptional coverage in the EU for liver transplant prior to reimbursement decision.

Can you explain how that works?

Hi, Howard.

Thanks for the question.

I think if your question for the US is do we have expectation of extensive uptake for liver transplant patient with HCV, who is on the wait list and we think there are probably in the US between 5,000 and 6,000 patients on the wait list for transplant.

We think yes, we think those patients are very obvious patients to be treated, ideally to clear their HCV pre-the transplants.

It will be subject to approval, and in our label it will be an obvious patient group for us.

We know the specialists hepatologists who support the transplant program, we know a lot of the transplant surgeons as well, so we would direct some very specialists educational efforts to this group of patients.

Mentioning these schemes that are available in Europe, I did mention a good example in my script, and that's called the French ATU translated, that really means Temporary Authorization for Use, it's something that is granted by the French regulatory authorities and I think it's a very novel thing where they will cover and allow the prescribing of a pharmaceutical pre-European approval where there is profound unmet need.

And so we have started to supply sofosbuvir under that designation in France, it started about a week ago, and that's for the pre-and post-liver transplant setting.

That's a good example.

It varies from country to country, but there our schemes, not quite as extensive as the French ATU, but there are special categories that allow for getting a drug out there.

Typically after the European Commission approval but before pricing and reimbursement, where normally for pharmaceutical there would be no uptick at all.

I would like to add as you saw at the advisory committee meeting that the FDA is currently thinking of limiting the indication to the actual population study, which was HCC patients that fit the Milan criteria, but you might also look at the AASLD abstract.

We have a very exciting presentation on post-liver transplant where we actually saw very respectable SVR rates with sofosbuvir/ribavirin.

So whatever label we end up with we would soon after approval file an SNDA and get those additional data in the label and broaden the indication.

By the way, HCC patients that are on the transplant list that fit these criteria about one in five of the transplants, so it's not insignificant but it could be larger.

Thank you.

Nick Abbott, BMO Capital Markets.

Thanks for taking my question.

I'd like to follow-up on the theme of pricing and genotype, a two-prong question.

First, can you tell me what the breakdown of genotype is with HCC?

And secondly, knowing that fibrosis in HCC is higher for genotype 3 than other genotypes, in your data genotype 3 prevalence in the big five, for four of the big five is 20% to 40%.

Do you have pharma-economic dossiers for AU detail, HCC risk per genotype, which presumably helps you justify higher price for genotype 3 given the longer duration.

Thanks.

So, Nick, you're right we've got some interesting country effects in Europe where a lot more are genotype 3. A good example is the UK where some of the populations that were immigrant populations by the first generation or second-generation, and large populations in and around London have genotype 3.

We've done pharma-economic analysis on all of our patient populations, both in the naive setting and the advanced cirrhotic setting, so they will be all part of the dossiers that we will be supplying to the pricing and reimbursement bodies, particularly NICE and AMNOG/IQWiG in Germany.

We feel that we've just like Norbert has done in treating a broad array of HCV populations, we felt it necessary to do the same from a pharma-economic point of view.

So again hopefully supporting a good broad array of patients.

Again, I would just say Nick, we are quite close to the launch of the product here, and hopefully first quarter in Europe, so I'd just hold back on any further comment on pricing.

We have time for one more question.

Terence Flynn, Goldman Sachs.

Just two for me, I was just wondering in terms of the diagnosis rate, the peak diagnosis rate that we might think about in the US, and I was wondering if France and Japan maybe are suitable proxies as we look at some the data you guys have?

And then Robin, I was wondering on capital allocation if you can give us any update in terms of what you guys are thinking now that you've brought your leverage ratio down and we're approaching end of the year.

That's a lot.

Hi, Terence it's Kevin.

Great question.

I don't think that the US will get to the level of France or the really high level of Japan.

I certainly think it would take quite some years to get there.

I think what really triggered the situation first and foremost in Japan and then fairly similarly in France was of course there was a lot of publicity, there was a lot of I would say, I would goes as far as saying sort of scandal around the infection of individuals through blood transfusions.

It became very political and it forced governments to go on the front foot in terms of proactive measures in terms of screening of patients.

So that's why you see the very, very high levels in Japan and above 50% actually in France.

So they were so politicized, they were so high profile, the population, it was in newspapers, and on television and I think that drove that very high diagnosis rate.

We feel that it certainly can go higher in the US.

I'm not sure whether it will ever get to the level certainly of Japan.

To answer your second question, overall our capital framework remains the same.

We are focused on ensuring that we have the financial flexibility to invest in the business and make the necessary M&A decisions and return value to shareholders.

As you can see we did start our share repurchases back this quarter and expect that to continue to accelerate in Q4 and beyond in 2014.

Great.

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

We appreciate your continued interest in Gilead and the team here looks forward to providing you with updates on future progress and earnings.

We look forward to calling some of you back after the call, and thanks again.

Thank you for your participation in today's conference.

This concludes the presentation.

Everyone may now disconnect and have a great day.