吉利德科學 (GILD) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Gilead Sciences First Quarter 2018 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 closed today, we issued a press release with earnings results for the first quarter 2018.

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; John McHutchison, Chief Scientific Officer and Head of Research and Development; and Robin Washington, Executive Vice President and Chief Financial Officer.

Also in the room with us for the Q&A session is Andrew Cheng, Chief Medical Officer and Executive Vice President.

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 John Milligan.

Thank you, Sung, and thank you, everyone, for joining us today.

I would like to start by introducing John McHutchison and Andrew Cheng in their new roles.

As you know, Norbert made the decision earlier this year to step down from his position as Chief Scientific Officer.

I've worked along Norbert for 27 years, and on behalf of the entire Gilead organization, I would like to express my profound thanks to him for his many, many contributions.

In terms of succession, Gilead is fortunate to have strong leaders across our R&D organization who will build on the tremendous success that we have had for over 3 decades.

I look forward to the leadership of John in his new role as Chief Scientific Officer and Head of R&D and Andrew in his new role as Chief Medical Officer as we continue our work to invent and develop new products for patients in need.

Turning to the business and results for the quarter.

We continue to see strong growth in our HIV business, driven by broad acceptance and uptake of our Descovy-based regimens.

We are confident that this franchise will remain a key growth driver for the company moving forward.

One of the products contributing to the growth is our latest Descovy-based single-tablet regimen, Biktarvy, formerly referred to as BIC/F/TAF, which was approved in February by the U.S. Food and Drug Administration for the treatment of HIV.

In March, Biktarvy was added to the U.S. DHHS guidelines for the use of antiretroviral agents in adults and adolescents living with HIV as one of the recommended initial regimens.

Last week, we announced that the CHMP has adopted a positive opinion on the Marketing Authorization Application for Biktarvy in the EU.

We expect approval in the third quarter of this year.

Biktarvy represents Gilead's sixth single-tablet regimen, and with the approval of SYMTUZA in the EU by our partner, Janssen, the fourth containing Descovy backbone.

SYMTUZA is currently under FDA review in the U.S. Biktarvy is a combination of an unboosted integrase inhibitor and a well-established backbone Descovy.

Its small-size, mineral drug interactions and established renal and bone safety profile make Biktarvy an important treatment option for most HIV patients.

This is particularly true for an aging HIV population, which is at increased risk for age-related morbidities.

In February, at CROI, the conference on retroviruses and opportunistic infections, one of the most important meetings for HIV research, we had the opportunity to share our progress on the work we are doing to bring innovative therapies to people living with HIV.

Gilead's compounds were featured in 21 abstracts and data presentations, including promising preclinical results from our HIV cure research program.

These data show that the combination of 2 investigational agents, GS-9620, a toll-like receptor 7 agonist; and PGT121, a broadly neutralizing antibody that binds to the HIV envelope, induce viral remission in the absence of antiviral therapy in SIV-infected monkeys and support clinical investigation of such combination strategies.

Investigators also presented Phase III data in patients switching from a regimen containing abacavir, dolutegravir and lamivudine to Biktarvy and data from a multinational Phase III study of Biktarvy in women, a group that is often underrepresented in clinical trials.

Data for these studies further demonstrate that Biktarvy may be appropriate for a wide range of people living with HIV.

The data presented at CROI represented encouraging progress and demonstrates our continued leadership in driving innovation in HIV therapy.

Moving to liver disease.

Our team recently attended the International Liver Congress in Paris, where there's a lot of emerging data around NASH and hepatitis B. The particular focus on NASH was very much like what we saw with the early breakthroughs in hepatitis C before the disease took center stage at the conference.

John will share more specifics about EASL and the data presented there in a few minutes.

In oncology, we're encouraged by the response from the health care provider and patient communities to the lifesaving potential for Yescarta in people with aggressive large B cell lymphoma who have run out of options.

We're seeing an increase in patient enrollment as clinical experience with Yescarta steadily grows and additional authorized cancer centers with expanded geographic reach come online.

We have now completed the authorization of 40 cancer centers and are on track to have enough centers certified to treat 80% of Yescarta-eligible patients in the United States by the middle of the year.

The future is incredibly bright for cellular therapy, and we're excited to be at the forefront of the field pursuing a variety of approaches to develop the next-generation of cellular therapies in blood cancers and solid tumors.

As I look ahead to the remainder of 2018, we will continue to advance scientific innovation, including progressing a robust pipeline, which has the potential to transform the treatment of NASH, inflammatory diseases and certain cancers.

In addition, we will look for business development opportunities that add to our pipeline and capabilities across our therapeutic areas, diversify our portfolio and increase future opportunities for growth.

For example, earlier in the quarter, we announced an agreement with Sangamo on gene editing to create next-generation cellular therapies.

And just yesterday, we announced another with Verily to better understand the immune system of patients in our clinical studies with filgotinib.

John McHutchison will provide more details on these collaborations.

I'm confident that our innovation and hard work will deliver on our goal, developing new treatment for people living with some of the world's most serious diseases.

And finally, tomorrow, we will publish our 2017 year in review that highlights our scientific advancements, sustainability initiatives, community support programs and our continued efforts to improve public health globally.

I'm proud of the work that's being led by our employees and extend my many thanks to them for all the ways they are making a difference around the world.

I will now turn the call over to John, who will provide additional updates on our R&D efforts.

John?

Thank you, John.

I'm honored to have the opportunity to lead our R&D organization, which has been at the forefront of scientific innovations for more than 30 years.

Under Norbert's leadership, Gilead has brought forward 25 innovative treatments that have improved the lives of millions of people with serious diseases around the world.

I'm confident that our team will build on these remarkable accomplishments.

I'd like to spend the next few minutes detailing our recent progress in liver diseases, inflammation and cell therapy.

Beginning with liver disease.

We continue to make excellent progress in NASH, where our efforts are focused on treating patients with the most serious forms of the disease, those with advanced fibrosis who are at the highest risk to progress to end-stage liver disease, liver cancer and ultimately the need for liver transplantation.

As we recently announced, STELLAR 3 and STELLAR 4, our 2 ongoing Phase III trials, completed enrollment ahead of schedule.

Both studies are evaluating selonsertib, our ASK1 inhibitor, in patients with F3 and F4 stages of fibrosis.

We now expect data from both Phase III studies in the first half of 2019.

If the data support the safety and have a statistically significant and clinically meaningful effect on fibrosis, we could file for regulatory approval towards the end of 2019.

In addition, we are exploring combination therapy approaches with compounds with distinctly different mechanisms of action.

In animal models of NASH, combination approaches have proven safe and have led to greater anti-fibrotic responses compared to monotherapy.

As John mentioned, at the International Liver Congress in Paris last month, there was a growing interest and focus on NASH.

We had the opportunity to present promising early results from a proof-of-concept study exploring both single agent and combinations of selonsertib with Gilead's ACC inhibitor, GS-0976; or our FXR agonists, GS-9674, in patients with NASH.

Now the primary objective of this study was to determine the safety of the combination therapy.

Based on the 12-week study, our combination therapies were well-tolerated, and they offered additional benefits for improving NASH by reducing liver fat content, liver cell injury and other markers of fibrosis.

This is also the first study to show that GS-9674 alone had activity in patients with NASH.

Based on these encouraging data and supported by the preclinical results, Gilead has initiated a larger 350-patient Phase IIb study of combinations of selonsertib, GS-0976 and GS-9674 in patients with advanced fibrosis due to NASH.

The treatment duration will be 48 weeks, with liver biopsies before and at the end of the treatment period.

Another goal of our NASH program is to identify accurate noninvasive tests that will hopefully allow health care providers to identify those in need of treatment.

At the recent Liver Congress, we presented data using 2 different machine-learning methods on our earlier NASH study.

The results indicate that noninvasive tests can predict with a high degree of specificity and sensitivity the risk of clinical disease progression and, separately, improvement in liver histology.

We will continue to investigate noninvasive tests with the goal of replacing liver biopsies for the diagnosis of NASH and for patient management.

Moving to inflammation.

I'm pleased to share that our 3 Phase III studies of filgotinib, a JAK1 specific inhibitor in patients with rheumatoid arthritis, FINCH 1, FINCH 2 and FINCH 3, are now fully enrolled.

These studies are evaluating the efficacy and safety of filgotinib in biologics-inadequate responder patients, methotrexate-inadequate responder patients and treatment-naïve patients, respectively.

We expect the FINCH 2 data will be available in the second half of this year, and FINCH 1 and FINCH 3 data will be available in the first half of 2019.

Filgotinib is also being investigated in 2 other Phase III studies in Crohn's disease and ulcerative colitis that will enroll more than 2,500 patients and also in a number of smaller Phase II studies in psoriatic arthritis, ankylosing spondylitis, cutaneous lupus, Sjogren's syndrome and uveitis.

We expect to have data available from some of those Phase II studies during this year.

Also yesterday, as John said, we announced an important scientific collaboration with Verily, the life sciences unit owned by Google's parent company, Alphabet, to accelerate our understanding of 3 common and serious inflammatory diseases: rheumatoid arthritis, inflammatory bowel disease and lupus-related diseases.

Most patients with these immunologically-driven diseases don't experience deep or long-lasting remissions with currently available therapies.

There's clearly a need.

Through this partnership, we will use Verily's Immunoscape platform to interrogate the molecular characteristics of these immune-related diseases.

By segmenting each patient's individual leukocytes into more than 2-dozen [compound,] immune cell subsets and utilizing epigenetic and transcriptomic assays, we believe this technology could allow us to identify particular groups of patients that respond to specific therapies and also to potentially identify new drug discovery targets.

Moving to cell therapy.

We anticipate that the CHMP will adopt an opinion for Yescarta in the second quarter, and if positive, approval would follow likely in the third quarter of this year.

Given the innovative nature of CAR T therapies, the European Medicines Agency is evaluating the application under standard review to allow them sufficient time to review that data that we submitted with the application.

Also in cell therapy, we continue to enroll patients in ZUMA-7, a Phase III randomized study comparing Yescarta to the standard of care, which is salvage chemotherapy followed by autologous stem cell transplantation in the second line treatment of patients with diffused large B-cell lymphoma.

ZUMA-7 is also the first global randomized Phase III study of a CAR T therapy and will enroll 350 patients across 50 sites in North America and Europe.

There remains a significant unmet medical need for patients with relapsed or refractory DLBCL after first-line therapy.

Salvage chemotherapy, followed by transplantation, cures only approximately 10% to 20% of these patients.

If the ZUMA-7 trial provides positive data in this setting, Yescarta has the potential to become an alternative option earlier in the course of the disease, thereby expanding the therapeutic potential of cell therapy for patients living with diffuse large B-cell lymphoma.

We are also excited about our partnership with Sangamo Therapeutics, which was announced in February.

This agreement will allow our researchers access to Sangamo's zinc finger nuclease gene-editing technology, which we believe will lead to the development of allogeneic T-cell therapies that can be manufactured using the cells of healthy donors.

The gene-editing approach would reduce or eliminate some of the complications currently seen in allogeneic stem cell transplants such as rejection and graft-versus-host disease.

Allogeneic therapies would also enable us to manufacture CAR T therapies that could be used universally, providing people, particularly those who are very, very ill, to access treatment much more quickly.

Combining gene editing with the synthetic biology tools we acquired with Cell Design Laboratories last year will also help us to develop treatment that can more precisely target hematological malignancies and solid tumors and make it safer more effective and easier to manufacture.

We have achieved a great deal across our R&D organization this quarter, and I am confident we will continue to make significant progress throughout the remainder of the year.

In closing, I am excited to lead the talented Gilead R&D team going forward.

I am also looking forward to partnering with Andrew Cheng in his new role and, of course, with all my R&D colleagues.

There has never been a more interesting time in science and medicine with extraordinary new discoveries on an almost weekly basis.

It will be our job here to leverage those advances and develop more effective and targeted therapies for patients with serious medical needs.

I'll now turn the call over to Robin.

Thank you, John, and good afternoon, everyone.

We are pleased to share our financial results for the first quarter of 2018.

Total revenues for the first quarter were $5.1 billion with non-GAAP diluted earnings per share of $1.48.

This compares to revenues of $6.5 billion and non-GAAP earnings per share of $2.23 for the same period last year.

Starting with HIV and HBV.

Product sales for the first quarter were $3.3 billion, up 2% year-over-year and down 10% sequentially.

The year-over-year increase was driven by the continued uptake of our Descovy-based regimens, partially offset by the entry of generics and greater U.S. inventory draw-down than in the prior year period.

Sequentially, the decline was due to U.S. sub-wholesaler inventory, reflective of the seasonal pattern from the fourth quarter to the first quarter and the availability of generic versions of TDF in the U.S., which impacted our HBV revenue.

Our U.S. HIV business remains robust, led by the continued uptake of Descovy-based regimens.

On a year-over-year basis, U.S. HIV product sales grew 8%, and total prescriptions for Descovy-based and Truvada-containing regimens grew 12%, consistent with growth seen in each of the preceding 4 quarters.

As John mentioned, Biktarvy, our newest single-tablet regimen for HIV, was approved in the U.S. in February, and we are encouraged by the initial uptake among prescribers.

It's very early days, but launch to date, Biktarvy is tracking very well against our expectations.

With this trajectory, we anticipate, over time, Biktarvy will become the #1 single-tablet regimen for treatment-naïve and switch patients, a distinction currently held by Genvoya.

Approximately 80% of Biktarvy's prescription came from switches of which approximately 1/3 came from Genvoya and 2/3 from other regimens, including approximately 20% from regimens that contain dolutegravir, confirming Biktarvy's broad utility across patient types.

Similar to the launch of Genvoya, access to Biktarvy has been strong, with the vast majority of state ADAPs and Medicaid programs now covering Biktarvy with coverage in additional state program expected this quarter.

Truvada for PrEP continued to grow with approximately 167,000 individuals taking Truvada for this indication in Q1.

In Europe, sales of Descovy-based regimens comprise more than half of our HIV product revenues and continue to grow, primarily driven by strong uptake in important markets such as France and Italy.

Genvoya remained the #1 regimen for naïve and switch patients across the EU 5 collectively for the fourth consecutive quarter, reflective of the strong physician and patient preference for Descovy-based regimens.

Turning to HCV.

Product sales for the first quarter were $1 billion, down 59% year-over-year and down 30% sequentially.

Consistent with our expectations, in Q1, we observed a downward pricing and market share trend across the major geographies as a result of a more competitive environment.

Price has now largely stabilized, and we expect market share to stabilize by mid-year.

In addition, patient starts have become more predictable, and we expect a slow and steady decline moving forward.

We continue to see the HCV market as durable, and albeit a smaller component of our revenues going forward, there are still many patients that remain to be treated.

Our cardiovascular products, Ranexa and Letairis, generated $399 million in the first quarter.

As a reminder, the patent for ambrisentan in the U.S. will expire in July this year.

And finally, sales of Yescarta were $40 million in the first full quarter since approval in October.

As John mentioned earlier, we are making great progress in training and certifying additional centers.

In terms of access in the U.S., we are seeing the payer mix play out as expected, with approximately 2/3 of Yescarta patients covered by commercial and fee-for-service plan and approximately 1/4 of patients covered by Medicare.

There is broad coverage of Yescarta-eligible patients with commercial insurance.

It's encouraging to see the strong execution by our commercial, medical affairs and manufacturing teams, the positive feedback from centers and the growing awareness of Yescarta in the hematology and patient community.

Now turning to expenses.

Non-GAAP R&D expenses were $814 million for the first quarter, down 8% compared to the same period last year, primarily due to our purchase of a priority review voucher in the prior year.

Non-GAAP SG&A expenses were $884 million for the first full quarter, up 10% compared to the same period last year, primarily due to costs associated with our newest product launches, including Biktarvy and Yescarta, geographic expansion and increased expenses to support the growth of our business following the acquisition of Kite.

Moving to the balance sheet.

During the first quarter, we generated cash flow from operations of $2.3 billion and ended the quarter with $32.1 billion in cash and investments.

We repaid $4.5 billion of term loan filed in connection with our acquisition of Kite, paid cash dividends of $753 million and repurchased 13 million shares of stock for $1 billion.

The amount of shares repurchased was aligned to our stock compensation awards, which are largely granted in the first quarter and reflects a onetime impact to repurchases related to unvested equity assumed from the Kite transaction.

While our cash flows will remain strong for the remainder of the year, we anticipate a sequential decrease in Q2 2018 due to anticipated tax-related payments.

The year is progressing consistent with our expectations, and we are reiterating our full year guidance, which can be found on Slide 47 in the earnings results presentation.

Our confidence in the future is supported by a strong and growing HIV business, led by the launch of Biktarvy in the U.S., increasing momentum in our cell therapy business and potential opportunities in emerging R&D areas of NASH and inflammation.

I would like to conclude by thanking our nearly 10,000 employees for their commitment to excellence and hard work that is well represented in the results this quarter.

Let's now open the call for questions.

Operator?

(Operator Instructions)

And our first question comes from Geoffrey Porges of Leerink.

John McHutchison, congratulations on all the responsibilities.

Maybe we can start off with a commercial question but more seriously on the R&D side, could you give us the latest disclosure on the PE and DVT events you've seen so far in the RA program for filgotinib?

And then perhaps, you could talk a little bit more generally about what areas you're particularly excited about in your new position that you think the company has the opportunity to invest in more aggressively.

Thank you, Geoff, for the kind words and for the question.

So regarding the first part of your question, the thromboembolic event rates with baricitinib, the most recent data that we have shown was a presentation at ACR late last year by Mark Genovese, which was an oral presentation.

Now this is just from the DARWIN 1, 2 and 3 extension studies.

We have about 700, 800 patient years of exposure but that rate was very low.

Only 1 patient in that presentation who had both a DVT and a PE.

So the rate actually in that presentation was 0.06 per 100 patient years.

But Geoff, so far, we've got thousands of patients in Phase III.

We've got a relatively small data set in terms of exposure but that's what we have said so far.

We continue to collect all of that information.

The other point to raise about this was the discussion recently at the Advisory Committee and whether this is slightly or partly related to JAK2.

As you know, filgotinib is very selective for JAK1.

And in terms of JAK2 specificity, we don't have that at all.

So we don't see any changes in hemoglobin.

We see positive changes in hemoglobin.

We don't see any increase in platelets.

In fact, we see a small decrease in platelets.

Whether or not that's related to thromboembolic phenomena, we don't know.

In terms of what we're excited about or excited about in R&D, well, I mean, Geoff, I'm always excited about everything.

But I mean, the opportunity to make a huge progress in cell therapy, not just with Yescarta, which has enormous potential, but the future of cell therapy going forward, investing in researchers we have to come forward with next-generation products is really exciting for the organization to lead that entire field, and we will continue to lead that and I will ensure that, as will Andrew and others in the organization as well.

Additionally, I think we have a lot of opportunities in NASH.

The ability to have a drug approved for an anti-fibrotic endpoint in liver disease is -- it's never been done before, and we clearly want to do that and there's a lot of patients out there with NASH.

And then I believe, our fledgling programs that are now developing in full force in inflammation with filgotinib in multiple diseases are becoming differentiated, exciting and heading in the right direction, particularly with things such as the Verily collaboration.

So that's a long answer.

I'm sorry, Geoff.

And our next question comes from Geoff Meacham of Barclays.

So HIV franchise is really key to Gilead getting back to a growth company.

So I was hoping you guys could give a bit more detail on the underlying demand trends in the U.S. and Europe, just independent of inventory fluctuations.

I'm just -- I guess I'm trying to reconcile the 2% growth with maintaining guidance and the positive commentary.

So I'm going to let Andrew start with just giving you really underlying details around the Biktarvy launch, and then I'll kind of jump in with some of the revenue areas.

Yes.

Geoff, it's Andrew.

So I just want to touch on and reiterate some of the things that Robin's mentioned during the call in her prepared remarks, primarily that when we look up Biktarvy, we see 80% of Biktarvy comes -- scripts comes from switches.

Those switches, 1/3 from Genvoya and about 20% come from dolutegravir-based regimens, both Tivicay and Triumeq.

When we see the switches and as well as naïve patients trajectory overall, they're right on target for what we predicted prior to the launch.

And really are in line for where we think Biktarvy will ultimately end up as the top switch as well as naïve drug in HIV and a position that's currently occupied by Genvoya.

Right.

And Geoff, I'd add to that, but keep in mind that the launch for Biktarvy, we basically got 6 weeks of revenue currently in the quarter.

So while a partial quarter, we also had about half of it was related to inventory.

But underlying to your point, we're really excited with the overall launch of Biktarvy and the success to date.

The launch trajectory is looking very close to Genvoya.

And over time, we expect it to overtake Genvoya, as I mentioned, as the #1 STR for naïve and switch patients over time.

I think if you've been trying to think about just Europe beyond Biktarvy, we're also seeing, as I mentioned, over 50% of our HIV sales came from Descovy-based products in Europe, and that's exceeding in advance of the fact that generics are widely available.

So to the point I made on the call and John made, we're really excited with the opportunity for HIV to be a growth business.

That's inclusive of PrEP as well, but we're excited where we are for the year and for the opportunity to have this business be a growth trajectory for us beyond 2018.

And our next question comes from Michael Yee of Jefferies.

Two-part question.

On HIV, can you just, perhaps, quantify how much inventory impacted the results?

I think people are quite concerned on the HIV numbers.

So maybe just help us out there relative to consensus, 100 million, 200 million more of inventory.

And on hep C, there was a miss there, and I guess, concerned about that relative to competition.

So maybe just talk to that because you're reiterating the guidance.

Sure.

So Michael, let me start with HIV inventory.

The draw-down in inventory was primarily from our HIV products.

But as I mentioned, if you look at underlying U.S. prescription growth overall, it was 12% year-over-year, and as I mentioned, 50% of our HIV revenues in Europe were comprised of Descovy-containing regimens.

So while we haven't quantified the dollar magnitude, the draw-down was larger than what we have seen in past quarters.

Typically, if you go back the last 8 quarters, we've had that Q4 to Q1 dynamic relative to inventory, so it is seasonal.

There were 2 key events this quarter that made that inventory decline greater than expected.

One was availability of generic versions of TDF.

So therefore, wholesales weren't carrying Viread anymore.

And then two, the anticipation of Biktarvy approval from lower stocking of both TAF and TDF-containing regimens.

Keep in mind, if you look at year-on-year and quarter-on-quarter growth, the availability of generic versus the TDF in the U.S. impacted our HBV business.

Overall, if we think about our big 3 wholesalers, we were in line relative to our inventory agreement.

I'll remind you that we don't have agreements in place for the sub-wholesalers.

But again, just emphasizing that overall, our underlying HIV growth remains strong but we have the typical seasonal inventory, driven by the 2 events that I just mentioned.

Yes, so return to your second question on HCV, which the question...

Competitive environment?

Yes, the competitive environment.

I mean, I would say, if you step back and think about where we are relative to our guidance and our expectations, we reiterated guidance, it is pretty much paying out -- playing out in line with our expectations.

We talked about the fact that my comments that the U.S. pricing has largely stabilized, and we expect market share to stabilize by mid-year.

I would say, Michael, that the ex U.S. competition has intensified, but I'd also say that the competition was more intense environment prior to the launch of a competitor and remains [to be.] So we do believe that overall, hep C is a long and durable market.

We'll continue to compete very aggressively with our competitor.

But in summary, our expectations for 2018 are intact, and we believe our revenue reflects the guidance that we provided at the beginning of the year.

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

My congrats to Norbert about your accomplishments and to Andrew and John around your new roles and responsibilities.

A question on Yescarta.

As we try to gauge avenues of continued growth there this year and beyond, it would be helpful to understand the proportion of centers that are operating at high throughput and perhaps how far along in infrastructure establishment those additional centers that you expect will be authorized are going to be relative to those already online.

And then I guess, I'm also just curious on revenue recognition there related to -- relative to reimbursement, how we should be thinking about that.

So I'll start, Brian.

I would say, you're right.

It's early days, so we're not going to get into throughput discussions or specifically what we're seeing at every center.

We're really pleased with our full first quarter revenue.

We talked about this being a very measured at launch with our focus being this year on getting centers authorized and being sure that their experience with Yescarta meets the expectation of the centers and the patients.

So I mentioned we have 40 centers authorized, and we expect by mid-year that we'll have coverage for 80% of the eligible Yescarta patients as we continue to ramp up centers.

Relative to revenue recognition, no overall concerns there.

We're seeing good reimbursement overall from -- for both commercial as well as Medicare patients.

So we're really comfortable where we are with the launch to date.

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

I guess, one, with HCV price stabilizing, I wonder if you'd just give us some idea of where that's stabilized relative to some of the prior comments you've made around what the average price was across the regimens.

And then if I can ask a separate question for John McHutchison related to the UC program for filgotinib, I believe there's a -- you had a futility analysis to move from Phase II to Phase III.

Could you just talk a little bit about what the bar is and what the hurdle is to move into the Phase III program and how you're thinking about that?

So I'll start, Matthew.

I think the main change that you saw in Q1 in that step-down, was we talked about on our February call, was related to Medicare in the U.S. So as I -- as we mentioned this call and the prior, we expected that step-down with a price adjustment as we move to the new contractual arrangements at the beginning of the year.

And Matthew, the second part of the -- it's John McHutchison.

The second part of the question was about the futility interim analysis for the selection of filgotinib ulcerative colitis Phase III study.

Just to remind you, the reason we did this futility analysis is we hadn't studied filgotinib in ulcerative colitis in Phase II.

We had in Crohn's disease in the FITZROY study.

And we have obviously had data in rheumatoid arthritis but we had to have an interim analysis in the ulcerative colitis study to make sure that we were on track.

And that analysis is planned, without getting into all the details, coming up this -- shortly this year.

It's based on the week 10 induction time point and the endoscopic response and improvement in endoscopic response in the 2 groups of patients that are enrolled in the trial, those that are naïve and those that are biologic nonresponders.

So I'll leave it at that, I think, to answer the question, and we'll see how it goes.

And our next question comes from Robyn Karnauskas with Citi.

So just one quick question on HCV.

You did not reiterate HCV guidance, so I was just curious whether or not that's reiterated as well.

And then on Yescarta, just trying to understand a little bit about what you're seeing in the real world on safety, given that it will be -- you'll be facing some competition.

Are you seeing safety in line with your clinical trial work or side effects that are not as common?

So Robyn, I'll take the first question regarding guidance.

We didn't give specific HCV guidance but again, if you take a look at our revenues and you look at the components that we provided in our guidance overview last quarter, we're pretty much in line, and it's the high end of that guidance overall with $1 billion-plus in global HCV revenues.

And we did reiterate our total guidance, which is how we guided this year on total net product revenue.

Relative to safety on Yescarta?

Robyn, it's John McHutchison.

So yes, I've been talking to some of the team in Santa Monica over the last couple of days, and in general, there's nothing untoward that's been observed to my knowledge as well outside of the clinical trial.

And our next question comes from Umer Raffat of Evercore.

This is Regina Grebla on for Umer.

So first, many investors think that you're in an earnings trough this year.

Do you think that you're in an earnings trough?

And NASH is emerging as an important catalyst in your pipeline.

We saw some data from Allergan at EASL where patients in their placebo arm seesawed between fibrosis stages.

We do recognize that the Allergan study enrolled earlier fibrosis stage patients in F3s.

But how much of a risk do you think this could be in your Phase III program?

Regina, so I'll start off.

As I mentioned on the call, I think we're off to a great start.

We've reiterated guidance in mid-year is progressing in line with our expectations.

We do believe that 2018 is a trough year for us on which we can grow.

We'll have seasonality fluctuations from quarter-to-quarter, but we're very confident since we reiterated our overall guidance for the year and expect to be able to grow off of our 2018 base going forward.

Regina, it's John McHutchison.

In terms of the second part of your question relating to variability in placebo response rates, it is an issue with liver biopsy where we know there's a 30% variability if you have 2 pathologists read the same liver biopsy.

And I think some of the presentations you referred to at AASLD may be partly reflecting that.

So it's an imperfect tool at best that -- what we have in terms of drug approvals for NASH patients.

We have had the fortunate opportunity of being able to address this.

Our previous simtuzumab trial enrolled many hundreds of patients.

Now the drug didn't work, unfortunately but we have a lot of patients with 2 liver biopsies a long time apart.

So we are very, very confident of what we expect to see in F3 and F4 patients in terms of the placebo response rate in terms of a fibrosis improvement score of 1 point with no worsening of NASH.

So we have that number, and that is what we've used to calculate our power and our sample size in our STELLAR 3 and STELLAR 4 programs.

And our next question comes from Phil Nadeau of Cowen.

Two follow-up questions in -- on the commercial side.

So first, on HCV.

Just to maybe ask Robyn's question in a different way.

On Slide 35 of the slide deck you handed out on the last call, you did give a range for 2018 expected HCV sales of $3.5 billion to $4 billion even if it was informal guidance.

And you said that the decrease versus the $9.1 billion from 2017 would be due to about $1 billion hit from total market patient starts and 43 to -- $4.3 billion to $4.6 billion hit from the competitive environment.

So if you're going to redo that slide today, given what you've seen in Q1, would those numbers still hold?

Would you still expect the same hit from market starts, competitive environment leading to the same 2018 range?

And then just briefly on Biktarvy.

I know you said that the access was good.

We've heard from physician consultants that insurers are requiring prior auths and other methods early in the launch of HIV products.

What are you seeing in terms of prior auths from insurance plans for Biktarvy?

Phil, I'll think the first part and then turn it over to Andrew for Biktarvy.

We are looking at page -- at the slide that you referred to, and again, I'll reiterate our HCV revenues for the quarter were $1 billion.

So if I think about what we talked about, the reason for the step-down, one being price, right, because we did the new contracting in Q1.

That would fall under competitive environment as well as thinking about share.

I mean, the combination of those 2 make our competitive environment.

Starts, we've talked about them being a slow and steady decline.

So yes, I believe this slide is intact, and it's included in our overall reiteration of our guidance for the full year of $20 billion to $21 billion.

So Phil, it's Andrew.

So we'll switch gears, and you were asking about prior authorizations with Biktarvy.

I think as you're well aware of that within any new product launches that there's some degree of prior authorization as they start to review the product.

However, as John mentioned on his initial remarks on the call, March 27, the DHHS guidelines place the Biktarvy top-tier of its recommended initial regimens list.

Since that time, we've had -- received some feedback that amount of prior authorizations has really decreased and become less of an impediment.

Not -- taken together, that helps put us to, and reiterate what Robin said earlier on the call, that we have every expectation that Biktarvy will match and then exceed Genvoya when it comes to #1 position for both naïve and switch patients.

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

I was just wondering, maybe, John McHutchison, if you can discuss the importance of first mover advantage for Yescarta and DLBCL versus any potential modest benefit that a future competitor might have on CRS.

Just wondering how you think about that.

And then maybe one for Robin.

Just HIV pricing in Europe.

Have you guys seen any change in the pricing dynamics from the branded side, given the entry of generics?

Terence, it's John McHutchison.

Thank you for the question.

I think the first mover advantage is important.

We have the relationships.

We have the experience now in the community, particularly in the U.S., which will obviously extend elsewhere.

I think it's an important advantage as it has been for us in other diseases, including HIV and hepatitis C, where we were fortunate to be first as well.

So that's a brief and general answer but I think it is important.

Terence, it's Andrew.

So I'll touch on the impact in Europe and what we've seen.

Generics for Viread TDF are available in Europe, and we have seen some impact on certain prices in certain countries.

However, I think it's important to recognize that over 50% of our European revenues come from TAF-based products, and you can see, as we mentioned on our last call that in certain countries, the conversion rate from TDF to TAF products like Germany exceeds 70%.

So I think when one thinks about the impact, we've already made that switchover for a large -- for a number of countries, and that impact is somewhat muted.

And Terence, to follow on to that.

We priced Genvoya at parity with STRIBILD.

So our ability to get early access in those markets where we've launched, it helps, and it helps that overall transition that Andrew just referred to as greater than 50% being Descovy regimens overall.

And our next question comes from Cory Kasimov with JPMorgan.

Thanks for taking my question.

It's on Yescarta, and I'm wondering, is the $40 million in sales in Q1 pretty evenly distributed across your 40 authorized centers?

Or is it more concentrated in a handful of them?

And then just in general terms, should we be thinking about patient capacity per center as something that also gradually evolves over time?

Cory, it's Robin.

I'd say, again, it's early days relative to our centers being certified and getting launched to get really get at a throughput per center, any of those type of metrics.

And I'll also say that because this is such a specialized treatment, we've selected centers that we think can be successful, we're helping them through that.

Yes, some of the earlier centers we're seeing higher volumes as you would anticipate but I think the volume is not just determined by saying, "You're now certified." It's just determined by the hospital and their resources and looking at the other various treatments, et cetera, and other capacity [centers] that any hospital has to manage.

So it's going to be harder, particularly in this therapeutic area, to provide the level of detail and granularity or, at this stage, details by center.

The $40 million was very robust growth.

We're happy with the results today.

And as I mentioned, it's going to be a controlled, measured launch for us, and we're going to continue in that process and provide you updates on that as much as we can.

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

Congrats to John and Andrews.

This is more on the commercial standpoint, just kind of big picture.

So Biktarvy has taken like roughly 80% switch from Genvoya.

I just kind of wanted to think about broadly.

Should we think Genvoya kind of continues to grow or does it kind of inflect and then Biktarvy kind of picks up where Genvoya lets -- left off?

Or is it just the case that the 80% Biktarvy switch most likely may moderate a little bit, so that trend may not be as pronounced?

So Alethia, let me just clarify something in your call just to recognize that.

When we think about Biktarvy scripts, 80% come from switches.

About 1/3 of those come from Genvoya.

So I think when we think about 1/3 from Genvoya, that about 20% for dolutegravir-based regimen either Tivicay or Triumeq, and then the remainder of the switches come from a mix of different regimens.

So when we think about it overall, I think we're very happy with the mix.

And given our robust development plan where 2 of the 4 studies were based on the switch, one from Triumeq and one from protease inhibitor regimen, we expect that, that mix to actually to be the same going forward, about an 80-20 switch given the overall dynamics.

Now there's certainly going to be some degree of variability from quarter-to-quarter to the proportion of Genvoya versus dolutegravir-based regimens.

But certainly, we're very comfortable where we are and expect that the overall growth in Biktarvy to continue, as we mentioned earlier.

And our next question comes from Salim Syed of Mizuho.

Just one on Yescarta.

Could you just maybe comment on what sort of education you guys are doing with the medical community for the non-CAR T oncology docs?

And if these docs are actually referring patient to the CAR T centers, after which line of therapy in general?

Salim, it's John Milligan.

I just wanted to -- it's actually a very timely question.

So as you know, we've been out in the community detailing Zydelig, and we've just recently taken those representatives, our therapeutic specialists and put them through a specific CAR T training so that they can start to have a conversation with doctors in the communities about what CAR T is, what kinds of patients are eligible for CAR T and can help them with referral.

[I don't know about the procedurals] but I think certainly, encouraging doctors to refer those patients who would be eligible to specialists who then can handle those cases.

So we are starting an educational campaign in the community that really kicked off this week.

And our next question comes from Ying Huang of Bank of America Merrill Lynch.

First one I have related to the data you presented at EASL.

So if you look at the MRI PDFF data, it seems that the ASK1 inhibitor does not appear to be very potent compared to the ACC inhibitor or even FXR.

So I was wondering, based on that, how much confidence do you have on the ultimate success of the Phase III trial for ASK1 in STELLAR 3 and 4 trials?

And then maybe, Robin, can you elaborate a little bit on the ex U.S. dynamics for HCV?

Because it appears that AbbVie has enjoyed very much success in launching Mavyret in ex U.S. based on the numbers reported.

I was wondering if you see that evolving in the next few quarters, whether you can gain back shares from AbbVie or not.

Ying, it's John McHutchison to answer the first part of your question.

The observation you made and noted in our EASL presentation that selonsertib has less of an effect on steatosis in the liver than our ACC inhibitor that inhibits de novo lipogenesis is exactly what we wanted to see and expected to see because of the mechanism of action.

Selonsertib doesn't have a primary anti lipotoxicity effect.

It's an [anti-ASK] and it works on hepatic steatosis as well.

So that's what we expected to see.

In terms of the second part of your question, does it give us more or less confidence in terms of our Phase III STELLAR programs.

I think you need to take the context of what we presented at EASL in a 12-week study and think about it in the overall context.

What we did in all of these programs is we did single-agent small studies for us to show that each drug was effective, which was done for all of our 3 drugs.

Then we did a small combination study to see if there was combination safety.

That's what we presented at EASL.

We did, however, also present some of the parameters that you've been talking about.

But our goal was always, once we had combination safety, to then be able to kick off a definitive, larger study for the longer duration of therapy to determine which of those drugs is safer, which is what we're doing.

To get back to the selonsertib question.

We decided to do a Phase III STELLAR selonsertib study based on a previous study that we presented last year that was 24 weeks in duration, that had 2 liver biopsies.

It showed a dose-dependent effect on the regression of fibrosis, and an inverse relationship to the development of cirrhosis.

We also showed that the target (inaudible) P38 is up regulated in NASH those patients, and it's also blocked or inhibited or down regulated the drug.

So everything is heading in the right direction.

And I think what's happening here is people are taking this small 12-week experiment that was due and looking at combination safety out of context.

When we started our STELLAR 3 Phase III program, it was based on a larger Phase II study, 2 biopsies 6 months apart that showed a definitive effect on fibrosis.

So we are in good shape.

I'm excited about the results.

We have enrolled them ahead of schedule, and we look forward to getting the results early next year.

Thanks, John.

And I think, Ying, your other question related to ex U.S. HCV sales.

So let me start by saying I think that's always been a much more competitive environment compared to the U.S. The OUS sales, as we compare what we did relative to our competitor, includes a wide variety of geographies, including Europe, Japan and Asia.

And I would say the market share is very -- they're very different from country to country.

I think it is fair to say that we've seen our competitors do very well in Japan, for example, with some of the prior [CAA] failures and some warehousing there.

But there are other countries where we're doing well.

And we're going to pick our opportunities to focus on.

While we know this is a competitive market, we feel we have the sales force and necessary folks in place to be competitive.

And as mentioned, I think we're on track.

And relative to where we expected to be, we see things playing out very close to that.

So as I also said, we expect our share to stabilize by mid-year.

So I think we'll be able to provide more insight around share going forward during the next call.

And our final question comes from the line of Carter Gould of UBS.

I was looking to get some clarity on the regulatory strategy for filgotinib and if investors should expect you to file, I guess, following that the FINCH 1 and FINCH 3 data become available.

Or will you look to wait for maybe one of the GI-focused indications to have Phase III data in hand as well?

Yes.

So Carter, it's John McHutchison.

Thank you for the question.

So as I said today in my prepared notes that we now are in the fortunate position to have all FINCH 3 trials enrolled of both methotrexate naïve and inadequate responders and our virologic [non-] responders.

So we can file if the data supports that of course, we can file for RA with all of those 3 studies.

And they are in a different timeline from the inflammatory bowel disease studies.

So we would not wait for the inflammatory bowel disease studies.

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.

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.