吉利德科學 (GILD) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Gilead Sciences Fourth Quarter 2017 Earnings Conference Call.

My name is Candace, and I will be your conference operator today.

(Operator Instructions) And as a reminder, this conference call is being recorded.

I would now like to turn the call over to Sung Lee, Vice President of Investor Relations.

Please go ahead.

Thank you, Candace, and good afternoon, everyone.

Just after market close today, we issued a press release with earnings results for the fourth quarter and full year 2017.

The press release and detailed slides are available on the Investor Relations section of the Gilead website.

The speakers on today's call will be John Milligan, President and Chief Executive Officer; Robin Washington, Executive Vice President and Chief Financial Officer; and Norbert Bischofberger, Executive Vice President of Research and Development and Chief Scientific Officer.

Also in the room with us for the Q&A session is Andrew Cheng, Executive Vice President, Clinical Research and Development Operations.

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

A description of these risks can be found in the 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.

Non-GAAP financial measures will be used to help you understand the company's underlying business performance.

The GAAP to non-GAAP reconciliations are provided in the earnings press release as well as on the Gilead website.

I will now turn the call over to Robin.

Thank you, Sung, and good afternoon, everyone.

We are pleased to share our results for the fourth quarter and full year 2017 and provide 2018 guidance.

I'll first review the financial results and commercial highlights for the quarter, Norbert will discuss progress made in R&D and John will make a few closing comments.

2017 was marked by operational excellence across the business.

During the year, we raised net product revenue guidance as we observed strong performances across our HIV and cardiopulmonary franchises.

We continue to execute on and maximize the opportunity in HCV in a changing competitive landscape.

We made 2 strategic acquisitions, Kite and Cell Design Labs, positioning us as an industry leader in cell therapy.

Furthermore, we launched 2 new products: Yescarta, the first cell therapy approved for the treatment of adult patients with relapsed or refractory large B-cell lymphoma; and Vosevi, an important option for HCV patients who could not be cured with other therapies.

Turning to the financials.

For the fourth quarter 2017, total revenues were $5.9 billion with non-GAAP diluted earnings per share of $1.78.

For the full year 2017, total revenues were $26.1 billion with non-GAAP diluted earnings of $8.84 per share.

Product sales for the fourth quarter were $5.8 billion and $25.7 billion for the full year.

HIV and HBV product sales for the full year 2017 were $14.2 billion compared to $12.9 billion in 2016.

The increase was primarily due to the strong uptake of our TAF-based regimens, which now accounts for 62% of Gilead's total HIV prescription volume in the U.S. At the end of 2017, Genvoya remained the most prescribed HIV therapy for treatment-naïve and switch patients in the U.S. and across the top 5 European markets.

Genvoya represents the most successful HIV launch in the U.S. and is the first HIV product to reach $3 billion in annual sales.

In Europe, sales of our TAF-based regimens continued to grow while generic TDF and TDF/FTC are available in several countries.

Truvada for PrEP has remained a growth driver for Gilead.

At the end of last year, approximately 153,000 people in the U.S. were taking Truvada for this indication, representing a greater than fivefold increase since January 2015.

HCV product sales were $9.1 billion compared to $14.8 billion in 2016.

The arrival of new competition, along with fewer patient starts, contributed to the year-over-year decline.

As we have noted in the past, HCV revenues are driven by 4 variables: patient starts, net pricing, market share, and treatment duration.

Treatment duration has stabilized as a variable, and pricing of all regimens has gravitated towards the 8-week regimen price.

We anticipate both pricing and market share to stabilize by mid-2018 with more predictable but slightly declining patient starts moving forward.

Finally, other product sales were $2.3 billion compared to $2.2 billion in 2016.

This represents the outstanding performance of the cardiovascular franchise.

Ranexa and Letairis together generated $1.6 billion in revenue in 2017.

As a reminder, the patent for ambrisentan in the U.S. will expire in July of 2018.

Turning to expenses for the full year 2017.

Non-GAAP R&D expenses were $3.3 billion, and SGA expenses were $3.4 billion, both of which were in line with expectations.

With the recent enactment of the Tax Cuts and Jobs Act, or tax reform, we reported a provisional estimated GAAP charge of $5.5 billion or $4.16 per share in the fourth quarter of 2017.

This will be payable over the next 8 years and has been excluded from our non-GAAP results for the fourth quarter and full year.

Tax reform will have a positive impact on Gilead's earnings by lowering our global effective tax rate and increasing our financial flexibility as a result of our ability to repatriate our ex U.S. cash over time.

While the Tax Cuts and Jobs Act does not fundamentally change our capital allocation priorities, it does enable Gilead to invest in sustainable, long-term, value-creating opportunities, which include investing in R&D, expanding U.S.-based manufacturing and creating additional jobs in the U.S.

Moving to our balance sheet.

Our business continues to deliver strong operating cash flows.

We generated $11.9 billion in cash from operations for the full year 2017 and ended the year with $36.7 billion in cash and investments.

In conjunction with the Kite acquisition, we issued $3 billion senior unsecured notes and $6 billion term loan facilities, of which we repaid $1.5 billion in the fourth quarter 2017.

For the full year, we paid cash dividends of $2.7 billion and repurchased 13 million shares of stock for $954 million.

Earlier today, we announced a 10% increase in our quarterly dividend from $0.52 to $0.57 per share, which will become effective in the first quarter of 2018.

This increase underscores the confidence of the board and management and the strength of the business and future cash flows.

Our capital allocation priorities going forward include: investment in research and development, along with M&A and partnerships to augment our pipeline; delevering our capital structure; continued growth of our dividend over time; and share repurchases to maintain our current share count.

Finally, I would like to cover our full year 2018 non-GAAP financial guidance, summarized on Slides 33 through 37 in the earnings presentation available on our corporate website.

Net product sales are expected to be in the range of $20 billion to $21 billion.

Further details on our HCV sales and loss of exclusivity of ambrisentan, tenofovir DF and FTC in Europe can be found on Slides 34 through 36.

Our guidance is subject to a number of uncertainties, including: the accuracy of our assumptions about HCV market share; the accuracy of our estimates for HCV patient starts in 2018; unanticipated pricing pressures from payers and competitors in the HCV market; lower-than-expected market share and greater price erosion resulting from the sale of generic versus a TDF, the fixed-dose combination of FTC/TDF and the fixed-dose combination of FTC/TDF/efavirenz outside the U.S.; slower-than-anticipated growth in our HIV franchise; a greater-than-expected adoption of generic versions of ambrisentan for PAH in the U.S.; a larger-than-anticipated shift in payer mix to more highly discounted payer segments such as PHS, FFS, Medicaid and the VA; as well as volatility in foreign currency exchange rates.

Non-GAAP product gross margins are expected to be in the range of 85% to 87%.

We expect our non-GAAP R&D expenses to be in the range of $3.4 billion to $3.6 billion.

We also expect our non-GAAP SG&A expenses to be in the range of $3.4 billion to $3.6 billion.

For the full year, our non-GAAP effective tax rate is expected to be in the range of 21% to 23%, which reflects the effect of the recently enacted U.S. tax reform.

We anticipate the full year diluted EPS impact of acquisition-related stock-based compensation and other expenses to be in the range of $1.41 to $1.51 per share.

As we begin 2018, we remain committed to being an operationally and financially efficient organization that generates high operating margins.

I will now turn the call over to Norbert.

Thank you, Robin.

As I look across our numerous research and development programs, I'm excited about the potential we have to advance treatment for a variety of diseases where significant unmet medical need exists.

I will spend the next few minutes detailing our progress in HIV, liver disease, inflammation and oncology and discuss some of the key milestones we anticipate in 2018.

Beginning with HIV.

We anticipate U.S. FDA approval of BIC/F/TAF, our latest once-daily, single-tablet regimen for the treatment of HIV infection in adults, with a PDUFA date -- with PDUFA action date this coming Monday, February 12.

The new drug application is supported by data from 4 ongoing Phase III studies in a total of 2,400 people, Studies 1489 and 1490 in treatment-naïve HIV infected adults and Studies 1844 and 1878 in virally suppressed adults.

BIC/F/TAF met its primary objective of non-inferiority at 48 weeks across all 4 studies, and no participants failed BIC/F/TAF with treatment emergent biological resistance.

Additional clinical trials of BIC/F/TAF are ongoing, including a dedicated study in women as well as a study in other [lessons] living with HIV.

We plan to present data from these studies at scientific conferences in 2018.

We continue to invest in research for next-generation HIV therapies, including long-acting injectables for prevention and treatment, therapies for treatment-resistant patients, and approaches that could potentially cure HIV.

We have filed an IND for our long-acting capsid inhibitor and plan to initiate clinical testing this quarter.

With regards to HIV prevention research, we expect to have data from the DISCOVER study next year.

This Phase III trial of randomized patients who received Truvada or Descovy to evaluate whether Descovy is safe and effective at reducing the risk of HIV infection when used as pre-exposure prophylaxis.

Moving to NASH.

There are 2 ongoing Phase III trials, STELLAR 3 and STELLAR 4, evaluating selonsertib, our ASK1 inhibitor, in patients with F3-bridging fibrosis and F4 cirrhosis.

Patients with an F4 fibrosis score are at highest risk of clinical adverse events and therefore, represent the group with the greatest unmet medical need.

STELLAR 4 is now fully enrolled, and STELLAR 3 will be fully enrolled in the next few months.

Data will be available in 2019 and, if positive, will form the basis for our regulatory filings.

Additionally, we're conducting small Phase II combination studies of selonsertib with Gilead's ACC inhibitor, GS-0976, and a selective nonsteroidal FXR agonist, GS-09674, in patients with NASH.

Phase II data of GS-0976 in monotherapy presented at The Liver Meeting in October showed significant reduction in measures of liver fat in certain biomarkers of liver fibrosis compared to placebo.

Data from these combination studies will be presented at the European Association for the Study of the Liver Annual Meeting in April, and we are in the process of initiating a larger Phase II combination study this year.

We also made great progress in inflammation.

Five Phase III studies of filgotinib are ongoing in patients with rheumatoid arthritis, ulcerative colitis and Crohn's disease.

Three studies, FINCH 1, 2 and 3, are being conducted in rheumatoid arthritis.

The FINCH 2 study is fully enrolled, and we anticipate data from this study in the second half of 2018.

FINCH 2 compared filgotinib to placebo, each added to conventional disease-modifying antiarrhythmic drugs, or DMODS, in patients who have had inadequate response to biologics.

Other studies in rheumatoid arthritis include FINCH 1, a 52-week randomized study comparing filgotinib plus methotrexate to adalimumab plus methotrexate to methotrexate alone in patients who have had inadequate response to methotrexate; and FINCH 3, a 52-week randomized study comparing filgotinib alone to methotrexate alone to the combination of filgotinib plus methotrexate in methotrexate-naïve patients.

We anticipate the FINCH 1 and FINCH 3 studies to be fully enrolled later this year.

Filgotinib is also being investigated in 5 additional Phase II studies in other inflammatory diseases, mainly psoriatic arthritis, ankylosing spondylitis, lupus, Sjogren's syndrome and uveitis, and we should have data available from some of these studies later this year.

In addition, just last month, we filed an IND on an internally developed small molecule with a novel mechanism of action for inflammatory conditions, and we will initiate clinical development in the coming months.

Moving to oncology.

A randomized controlled Phase III study of andecaliximab, our anti-MMP-9 antibody, in combination with modified FOLFOX 6 in gastric cancer, is ongoing.

An interim futility analysis for this study was conducted by an independent data monitoring committee in the second half of 2017, and the DMC recommended that the study continue.

Additionally, we are conducting a Phase II study in gastric cancer of andecaliximab in combination with nivolumab versus nivolumab alone.

This study will be completed this quarter, and we plan to present the data at a future scientific conference.

In cell therapy, long-term data from our pivotal ZUMA-1 study of Yescarta in patients with refractory large B cell lymphoma were presented at the American Hematology Society Meeting and published concurrently in the New England Journal of Medicine in December.

In this updated analysis, with a median -- minimum follow-up of 1 year and a median follow-up of 15.4 months, after a single infusion of Yescarta, 42% of the patients continued to respond to therapy, with 40% continuing to have a complete response.

We anticipate having 2-year data from the ZUMA-1 study later this year.

Additional studies are underway, including ZUMA-7, a Phase III randomized study comparing Yescarta to the standard of care in second-line treatment of patients with diffuse large B cell lymphoma.

Data are expected in 2020.

Also underway is ZUMA-6, a Phase I/II combination study of Yescarta with atezolizumab, an anti-PD-L1 antibody; and a Phase I study of KITE-585, a CAR-T T-cell therapy engineered to target B cell maturation antigen in patients with relapsed or refractory multiple myeloma.

Phase I results from the ZUMA-3 study of KTE-C19 in 24 adults with relapsed or refractory B cell acute lymphoblastic leukemia were also presented at ASH.

KTE-C19 is the same anti-CD19 CAR-T construct as axi-cel but is manufactured through a slightly different process.

With a minimum of 8 weeks of follow-up, 17 of the 24 participants will receive the single infusion of KTE-C19 that should achieve complete remission and 21 of the 24 participants had no detectable disease.

I hope I've conveyed my excitement about the pipeline programs we have across Gilead's therapeutic areas.

In summary, pending the results of ongoing studies that will read out in 2018 and 2019, we could be in a position to file as many as 4 NDAs or BLAs next year.

I would now like to turn over the call to John.

John?

Thanks, Norbert.

I'd like to make a few comments about the year that has just ended and where we will focus in 2018.

As Robin mentioned, Yescarta was approved by the FDA in October of 2017.

We're greatly encouraged by the initial response we have seen from the health care and patient communities in recognition of the lifesaving potential for people with aggressive large B cell lymphoma who have run out of options.

We have authorized 28 cancer centers to date, and each center is now certified to administer Yescarta to patients.

Given the promise of Yescarta and the significant patient need, we're actively working on training and certifying additional centers on the risk, evaluation and mitigation strategy and the Kite Konnect process.

By mid-2018, we anticipate there'll be enough centers certified to treat 80% of Yescarta-eligible patients.

We're very excited about the present opportunity with Yescarta, and as Norbert mentioned, we're enrolling clinical studies to expand the label to earlier lines of therapy and exploring combination therapy with other immuno-oncology agents.

We are also working to improve CAR-T therapies and are acquiring next-generation technology in the belief that we will be able to develop cellular therapies that can achieve greater responses, lessen side effects and increase the types of malignancies that can be treated.

For example, the acquisition of Cell Design Labs gives us access to proprietary technology platforms that will augment and accelerate these efforts, along with a dedicated research team who, in collaboration with the Kite team, will help us drive next-generation CAR-T therapies into the clinic more quickly.

The future is incredibly bright for cellular therapy, and we're very excited to be at the forefront of the field.

Over the past 3 decades, Gilead's relentless scientific pursuit of better HIV treatments has led to a range of options to help address the diverse needs of people living with HIV.

Once approved, BIC/F/TAF will offer people an important new single-tablet regimen option, both for those newly diagnosed with HIV and those who may desire or need to switch from their current multi-tablet regimen or single-tablet regimen.

BIC/F/TAF represents Gilead's sixth single-tablet regimen, and with the approval of SYMTUZA in the EU by our partner, Janssen, the fourth containing TAF.

With the approval of BIC/F/TAF, there'll be TAF-containing single-tablet regimens available for patients containing each of the major third agents, including unboosted and boosted integration inhibitors, a boosted protease inhibitor and an NNRTI.

We are deeply committed to continuing to innovate in the field of HIV treatment, particularly for the population of people who've been living with HIV for a long time and whose treatment needs have changed as they have aged.

The advancement of clinical trials for selonsertib and filgotinib has positioned Gilead as a leader in NASH and inflammatory diseases.

In NASH, the rapid enrollment of patients has put Gilead in the lead in the development of treatments for patients with the most severe form of the disease.

If selonsertib clinical studies read out positively in early 2019, Gilead will then be in a position to launch the first therapy for NASH in 2020.

We continue to be enthusiastic about filgotinib.

In the ongoing Phase III studies, we are looking to see if the potential safety and efficacy advantages of a selective JAK1 inhibitor seen in preclinical and early clinical studies are borne out in these trials.

In addition, Gilead's exploring 5 additional indications beyond rheumatoid arthritis, ulcerative colitis and Crohn's disease.

As we enter 2018, we see that the market dynamics in HCV are stabilizing.

Since the launch of sofosbuvir in 2013, we've seen multiple competitors come to market, and we've launched 3 of our own new HCV therapies.

With the launch of each new product -- the launch of each new product was disruptive, leading to lower prices and shortened treatment duration, both highly beneficial to patients and payers.

Going forward, we don't see any new HCV product launches disrupting the market.

This leaves 2 remaining variables: the number of patients who start therapy each year and market share versus our competitors.

As Robin mentioned, we expect patient starts to continue to decline, although more slowly than in the past.

Market share versus our competitors is expected to stabilize by the middle of this year.

Given these changes, Gilead's HCV revenues should be a more predictable, albeit smaller piece of our financial story.

By removing most of the overhang of declining HCV revenues going forward, we can focus on the positive financial trends driven by the continued uptake of TAF-containing regimens and short-term and long-term growth via Yescarta, selonsertib and filgotinib.

We have been open about our desire to increase our pipeline through acquisitions and partnerships with other companies as we continue to actively seek new therapeutic advancements and technologies.

We have both the financial strength and internal capability to aggressively pursue opportunities when we see them.

I am more excited than ever about the future of Gilead as we extend our efforts to help new groups of people with difficult diseases.

I would like to take this opportunity to thank our employees for their dedication and service.

It's because of your belief in our mission that we're able to reach millions of people with our lifesaving medicines.

Thank you for your time today, and let's now open the call for questions.

Operator?

(Operator Instructions) And our first question comes from Geoff Meacham of Barclays.

So John, when I look at hep C trends, which could trough this year and they're offset by a positive impact from HIV Yescarta in the pipeline, it looks like you guys could get back to growth exiting this year and maybe even going into 2019.

How important is that to Gilead overall?

Or do you view these franchises and moving parts more independently?

Thanks, Geoff.

Thanks for the question.

So of course, we view all of our franchises independently, but taken as a whole, that makes Gilead.

And so we do think that it's important that we're able to stabilize HCV revenues, and it's important that we be able to talk about the company with the future dynamics that I think will drive us.

We're clearly very excited about TAF-based regimens.

We're very eager to get bictegravir F/TAF launched.

That will be another positive momentum going forward.

As Norbert mentioned, we could file up to 4 NDA and BLAs going forward.

So I think after years of having to be defensive about HCV revenues declining, it's very nice to be on the other side of that and talk about the positive trends going forward, and we hope that, that will dominate the conversation throughout the year, much as it did through -- at the beginning of the year beginning with JPMorgan.

And our next question comes from Michael Yee of Jefferies.

Following along that, I guess, when you think about the slope of your revenues this year and your commentary about stabilization, thinking about the decline of hep C in the first half of the year and revenue growth with the other products, do you think that you would trough out this year and that you do see yourself as a growing product franchise by the end of this year?

Michael, this is Robin.

I mean, yes, as John mentioned and I mentioned, we do see the HCV market dynamic stabilizing.

And removing that overhang, we do think that with our new HIV STR launch of bictegravir -- or BIC/F/TAF as well as our other franchise that we do overall see ourselves as a growth story.

Even if you look at Page 34 in our guidance, you can see overall our HCV franchise is expected to grow, and that's growth along with the LOE ex U.S. as well as to take into account our other franchise with Letairis, we're still showing overall growth in those core franchises over and above hepatitis C.

And our next question comes from Brian Abrahams of RBC Capital Markets.

In the CAR-T space, obviously, we've seen some consolidation lately.

I'm just curious, coming out of the CDL acquisition now, where should we look for your focus of investments going forward in technology enhancements that are going to be the most important for long-term competitive positioning, enhancement of delivery and expansion into additional populations from here?

Brian, it's John.

So just a couple of comments on where we're going to go next.

So without giving you any specifics, we have been fairly open in our conversations that we do think that there are additional technologies we want to use to enhance the capabilities we have, including gene editing technology.

That's something we've talked about previously.

Obviously, there are several areas where we want to try to figure out where we can be more effective.

One is increasing the number of targets so we can go out, so we're looking at additional targets.

We are looking at ways that we can perhaps move from autologous to allogeneic or sort of universal donor CAR-Ts, so that's technology that Kite was working on and that we will continue to work on.

Gene editing plays into that in some areas.

And then, of course, anything that we could use to try to lessen the side effects of CAR-T would be important to us.

So we're looking at technologies, thoughts on how we could have, perhaps, a lower cytokine release syndrome, perhaps decrease the neurotoxicity associated with it.

So all of these things are important to us, and we're very, very actively looking at these technologies right now.

And our next question comes from Robyn Karnauskas of Citi.

So when -- if I remember correctly, back when you used to launch HIV products, it would take a long time to get on the guidelines and this is a guideline-driven market.

And then with Genvoya, that was extremely different.

Do you have any sense with BIC/F/TAF whether or not we could see that hitting the guidelines sooner than expected?

What motivated the guidelines to change so quickly with Genvoya?

Robyn, it's Andrew Cheng speaking.

So I think you're right.

When we look back at the time that Genvoya was put on the DHHS guidelines in less than 2 weeks after approval, I think as it's difficult to surmise what drove them to do that.

But one can take a look at the clinical profile and the differentiation versus TDF-based regimens that we saw in our registrational package, and that may have played a role in that.

In terms of the role of BIC/F/TAF one thinks going forward, I think continue what we've seen already with TAF-based regimens and how they've impacted HIV treatments throughout the United States, it seems reasonable that these will be adopted in the guidelines.

Now, the time lines of which are, as you're driving it, are difficult to say.

I think that we don't want to overcommit in terms of -- they have a process in place, and we look forward to working with them to get the BIC/F/TAF on the guidelines as soon as possible.

Robyn, I would like to reiterate what Andrew said.

It used to take a long time many years ago.

But in the case of Genvoya, it took exactly 2 weeks.

So it's not true anymore that it takes a long time to get on the guidelines.

Yes, it is a more dynamic process, and of course, we also benefit that F/TAFs are viewed very favorably within the guidelines.

And so that is a big help for us as we launch BIC/F/TAF.

And our next question comes from Geoffrey Porges of Leerink.

I'll just ask a couple of related questions below the line, if I may, Robin.

Your tax outlook is significantly better than we expected and that you've had before.

Can you tell us what your view of the sustainability of that tax rate?

And as you move capital onshore and invest in manufacturing, can that come down any further from the range you're indicating for 2018?

And then a similar question just related about operating margins.

Looks like you're guiding to about 50% in 2018.

Is that a stable number?

Or do you think that, that could come under further pressure as you ramp up R&D?

Sure, Geoff.

So to answer your first question, I do believe the range that I provided for you for tax rates are stable.

I don't know if it's -- it's not necessarily the overall mix per se of our revenue.

To some extent, it is that, but I think with that lower U.S. tax rate and the fact that we've already seen a significant mix shift because of our HCV revenue declining, more revenues in the U.S., I do believe that's sustainable longer term.

It's very fortuitous for us from a timeframe standpoint because with that shift, our rate would have creeped up pretty significantly in 2018 compared to 2017.

Relative to operating margins, I'd say we're a little higher than you project overall, but still remaining industry leading.

I do feel that 50% plus is sustainable for us.

We are in investment mode when you think about R&D, et cetera, so -- and we're several large Phase III trials, launching BIC/TAF, but obviously a lot of incremental opportunities going forward.

So I would say, yes, sustainable, and I think we'd aspire to see it even rise higher over time.

And our next question comes from Matthew Harrison of Morgan Stanley.

Norbert, I wanted to ask you a question on NASH.

You highlighted both the STELLAR studies and the ACC, but you didn't talk a lot about the FXR.

In your slides here, it says you had an interim on PBC, and you completed the Phase II NASH study.

Any comments on the profile there, if that's panning out as you had expected with lower rates of itching and some other differentiation versus some of the competitors in the market?

Matt, thanks for the question.

So the reason is simply that the FXR agonists is somewhat behind the ACC inhibitor.

We will present -- so the Phase II result studies are just ramping up.

We're looking at the data, and we intend to submit this to an upcoming conference, Liver Conference.

You will then see the results.

So just to remind you with our FXR agonist, the hypothesis was that we don't want a high oral exposure -- high systemic exposure with the FXR agonist.

So it got restricted or got focused mechanism of action that releases [AGF 19] that then goes into the circulation and does -- provides the efficacy.

So you will see the completed Phase II study at an upcoming conference.

And our next question comes from Phil Nadeau of Cowen & Company.

I had a question on shifting market share in both HIV and HCV.

So in HCV, you talk about a $4.3 billion to $4.6 billion year-over-year decrease because of competitive issues.

Can you give us some idea of what type of share shift you anticipate in that guidance?

And then similarly, in HIV, you talk about a $1.2 billion to $1.5 billion increase.

What type of share do you think you'll be able to take back with the bictegravir combination pill?

And what's assumed in that guidance?

Phil, maybe I'll cover HCV and I'll have John cover HCV.

But as we said, I think we -- if you compare and take a look at our Q4 revenues of $2.3 billion relative to all the other players, our share is -- we've done very well, and in 2018, it's reflective of that continued market share position.

I don't want to get into specific percentages, and I think there will be puts and takes across the various markets, but we are very confident that with our product portfolio that we believe we can maintain market leadership position.

In the U.S., the market has moved towards more parity access, which we'd prefer because it really leaves the prescribing decisions with doctors and patients, and we have been able to maintain parity or preferred access across the majority of accounts overall.

So we believe that, yes, we think our share position bodes very well for 2018.

Phil had a 2-part question, so I'll answer the HIV question.

So you asked about market share for HIV.

I will say that I'm going to not talk about market share specifically, but I can tell you, in the U.S., we expect to maintain our market share.

There are obviously some changes due to generic TDF in the United States.

I don't think that will affect us very much as Truvada is still protected.

We do think that we can gain that growth that you mentioned through switches from protease inhibitors and some multi-tablet regimens and, of course, switches from single-tablet regimens.

So we think there's enough switching business and enough treatment-naïve business in there for bictegravir and additional growth in Genvoya that will do quite well in those areas.

In the United -- or sorry, in the European Union, however, we do think, with the generic -- entry of generics in 2018, both TDF and TDF/FTC and, of course, TDF/FTC/efavirenz, as Robin mentioned, that we will see some temporary decrease in market share.

And then long-term growth getting beyond this year due to the approvals of B/F/TAF, BIC/F/TAF, which will occur later in the year, allowing us to launch in these various countries.

As we mentioned, in some of our sites, we have seen incredible uptake of both Descovy and Genvoya across parts of the European Union.

I think that bodes very well long term for TAF regimens.

And so we're very, very enthusiastic and confident about that franchise there.

And our next question comes from Umer Raffat of Evercore.

Norbert, I wanted to drill down your STELLAR 4 trial in NASH.

And my question is, what do you expect the placebo arm to track at on the percentage of patients that will have a 1-stage improvement?

And I'm also curious what level of visibility do you have on the ongoing STELLAR 3 and STELLAR 4 trials on the pooled event rate on a blinded basis?

So Umer, the only thing I can point to is the Phase II study that we have done.

I think I'm very confident we will repeat those numbers.

Of course, they won't be exactly the same.

As you may remember, the end -- the total end was somewhat small, but we saw a difference between placebo and the high-dose active arm of 20%.

And that would be -- we will be very happy with that because, as you know, the endpoint is fibrosis.

Something that improves fibrosis or prevents fibrosis progression, that will be a tremendous asset and contribution to the health care system.

So the other study I can tell you.

We, of course, are looking in an ongoing blinded way at safety.

And I can tell you, the compound is very safe.

We are not seeing anything that will concern us, either laboratory abnormalities or adverse events or discontinuation rates.

But having that said, I want to make sure that everybody understands.

We're blinded to the study, so it's a placebo-controlled study.

But in the blinded data set, there's nothing that will concern us.

And our next question comes from Terence Flynn of Goldman Sachs.

Maybe just one from me on Yescarta.

Just wondering if you can talk to us about how important being first to market is and your view given potential entry of a third player next year.

And then in your guidance, can you give us any color in terms of what you assume for kind of second half of the year on Yescarta?

Is there an inflection or a step-up?

Or should we just kind of assume a kind of steady-eddy here?

I do think first mover is very important with this area because it allows us to develop this rapport and relationship with the different cancer centers.

And so I think a first mover advantage is important in this area.

I'm not going to say that it's everything, but of course, we have a second entry and then a third entry.

You leaped right to the third, but we're expecting a second entry, of course, in Novartis.

And so I do think that is important so that we have the connectivity, we get through the paperwork, the REMS program.

I mean, this has to be duplicated for each individual agent coming to market.

And so it is more difficult to get the attention of the centers once they have something that works very, very well, which we hope they believe they have in Yescarta.

So I think that is an important thing to consider.

You mentioned an inflection point, and as we mentioned on the call, we are now getting centers up and running.

We have 28 centers currently that are up and now certified to prescribe Yescarta.

We hope to have about 80% of the population by the midpoint in this year.

And so I think what we're seeing with each center is, as they get better at handling both the patients and the payment aspect of this because that is a negotiation between the center and the payers themselves, as they get that down, it gets easier to bring in new patients.

And so we do see a slowly growing momentum in each center as they get up and going.

So obviously, the second half of the year will be a lot better for enrolling patients than the first half of this year, but I don't see a major inflection point but just a growing, building of patients over time.

So that as we exit 2018, we should have a pretty good handle on what the typical flow rate at each center is and what they can handle.

And our next question comes from Alethia Young of Credit Suisse.

Just one on bictegravir switches.

I know Atripla is still the #3 regimen in the United States.

So I guess I'm trying to figure out, like, is it more an education with the doctors?

Or is it finding the patients and bringing them back to therapy to encourage them to move to bictegravir versus Atripla?

So Alethia, it's Andrew.

So I think it's a combination.

When you look at the registrational studies that support the filing package, we've had patients who were switching from protease-based inhibitors or multi-tablet regimens and which are -- and keep in mind that protease inhibitors are no longer a guideline for first-line regimens in the United States.

And we had patients switching from the Triumeq or the components of which.

And so these 2 groups are probably the groups that -- individuals that we'll see a lot of the switches from overall as we launch the product.

And our next question comes from Ian Somaiya of BMO Capital Markets.

Just a question on Yescarta.

I'm just trying to maybe -- just would love to get your help on putting that 80% number into actual patient -- 80% of the actual patient numbers.

How many patients does that represent?

As we think about eligibility, are there differences in eligibility as you think about the 3 different CAR-T offerings?

So Ian, I mean, we think there's about 7,500 patients in the United States, so 80% of that is well over 5,000 patients.

So it's a pretty good number of patients, far more than we would be able to treat this year, for example, given our manufacturing capacity.

So the 80% is also really something that we're thinking about geographically.

You go to a lot of the big centers and there are a lot of people who may have -- who may be eligible for Yescarta but are just in areas of the country where it's impractical or unlikely that a center would be set up, and so they would have to travel.

So in fact, we think geographically, it will be a bigger coverage than that -- sorry, overall, we have bigger coverage, but just sort of geographically, if you look at it, it will cover 80% of lives.

So that's why we're keeping that at that number.

The second part of the question was, I forgot, was about the -- I'm sorry, Ian, I forgot the second part of your question.

Hopefully, I answered it.

And our next question comes from Jim Birchenough of Wells Fargo Securities.

Just a question on the broader solid tumor opportunity for cell therapy and whether you feel like you've got the assets internally from Kite and from Cell Design Labs to have solid tumor success.

What are the time lines for generating some solid tumor cell therapy data?

Jim, I don't think we have everything that we need, and as John said, one thing missing is gene editing.

But we are talking to companies, and we will do more collaborative deals in that space.

I would say it's early with solid tumors.

Then you can -- the problem was solid tumors or the challenge, I would say, is finding a tumor-specific antigen that is not expressed on normal cells.

That is, by the way, a reason why we're excited about CDL, you know, their synNotch technology.

Essentially, it needs 2 antigens in order for the T-cell to get activated.

So it gives you a much broader specificity if you can go after 2. So both have to be present at the same time in the same cell surface.

But on the other hand, it's really it's early days, I would say, but it's exciting.

That's where the real opportunity lies for cell therapy, I mean the real commercial opportunity.

And you could, for instance, go after neo antigens.

You could do shared antigens that we have announced one study that is ongoing with MAGE A3-A6 with the Rosenberg Group at the NCI.

And so that's the opportunity.

So you will see more in that space coming from Gilead in the coming years.

And I would say, Jim, we're going to spread out our bets a little bit, investing in various different technologies because it's hard to predict which of these will have the breadth to be important and also the specificity and depth of response that's going to be important.

So we'll be spreading our bets out there.

We do think there's hopeful signs in the solid tumor area, but we've not yet -- don't have much -- it's not the similar kind of situation as it was with CD19.

And Ian, I remembered the question you asked about the label and how the differences between the different labels.

And clearly, we don't know what the groups have asked for in terms of labeling.

But currently, from what we see in the clinical studies, I don't anticipate the labels will be all that different going forward.

But that could be a differentiating feature as it always is in medicine, and that could lead to better access if the labels were truly differentiated from one another.

Sorry I forgot that at the time.

And our next question comes from Cory Kasimov with JPMorgan.

I wanted to ask about your BCMA program.

Can you talk about how you see potential differentiation here versus others in development?

And will you be using the same manufacturing process as Yescarta?

Or are there any new procedures being implemented as you have new CARs entering the clinic?

Cory, it's really too early to say what the differentiating features will be.

We are currently doing dose escalation, and it's really a Phase I/Phase II study.

And we just have to see what the results are and how they compare to the competitors' products.

And yes, we're using the same construct.

So it's CD-zeta and CD28 costimulatory domain with an extracellular binding domain that's different probably from the competitors.

We don't know that.

Yes.

And in terms of the manufacturing process, it's not exactly the same as Yescarta.

So we are working out unique manufacturing processes for each of these, so it will be different.

We haven't determined exactly how different at the moment.

And our final question comes from the line of Ying Huang of Bank of America.

Maybe a quick one for Norbert.

I didn't see you including the filgotinib male subject safety study in your time line for 2018 to 2019 in the slide deck.

And then secondly, maybe another question on the pricing dynamics in the HIV market.

After you launch B/F/TAF in the U.S., do you expect your competitor, GSK, to use pricing as a potential weapon to keep its share?

Yes, Ying, thanks for the question.

That's very observant of you that you have not seen the study.

Yes, we are performing a safety study.

As you know, there was a safety signal in preclinical studies.

And in order to justify the 200-milligram dose, which is the higher dose that we're using in the study, we were asked by FDA to perform the study.

So the study is enrolling.

And the reason why we don't have any time lines in it is simply we don't know yet.

It's too early.

So we have sites up and running.

It's somewhat slow always at the start, we just simply -- it's impossible to predict what the exact time lines are.

And your second study was do we expect our competitors to lower prices.

That has never happened in the field of HIV, but I don't know what ViiV and GSK are planning.

That's all I can tell you.

And our next question comes from Hartaj Singh of Oppenheimer.

I just had a quick question on PrEP with Truvada.

It's becoming a fairly decent sized portion of your business, and you did indicate that Descovy is now fully enrolled.

Can you just talk a little bit about the dynamics for how you see Truvada playing out?

And then how do you see Descovy kind of rolling into that in the future?

So maybe -- it's Andrew.

So I'll just start with the first thing, which is that the Descovy study is fully enrolled.

It was fully enrolled in Q2 of 2017.

So we expect to have results sometime in '19.

But keep in mind, it's an event-driven study.

So the exact time lines are slightly hard to predict this far out.

It's not like our -- let's say, the bictegravir trials, which are 48-week studies.

So we -- once we have our last patient, we can mark those -- block those out.

Now, in terms of the dynamics of how we see Truvada and Descovy interplay, I think it's difficult to say without the results of the trial to understand the differences, although it wouldn't be unreasonable to think about looking at the dynamics in play that we've seen with HIV treatment, where safety has quite been a very important factor in driving the switch from TDF-based regimens to TAF ones.

And I just want to add one bit of data to that, which is if we look at that typical patient who's taking Truvada today, for PrEP, they take it nearly on the frequency with people who take long-term HIV therapy, so about the same number of pills taken per year.

So the exposure to TDF would be significant and would carry many of the same risks as TDF was for HIV-infected patients.

So TAF may be a better option, particularly given that these patients are not HIV-infected and we think that could be an opportunity as well.

And that concludes our question-and-answer session for today.

I'd like to turn the conference back over to Sung Lee for any closing remarks.

Great.

Thank you, Candace, 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 our future progress.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program, and you may all disconnect.

Everyone, have a great day.