Patrick O'Brien - Vice President, Investor Relations John Martin – Chairman and CEO Paul Carter – EVP, Commercial Operations Robin Washington – EVP and CFO John Milligan – President and COO Norbert Bischofberger – EVP, Research & Development and CSO.

Geoffrey Porges – Bernstein Brian Abrahams – Wells Fargo Mark Schoenebaum – ISI Group Matt Roden – UBS Securities Michael Yee – RBC Capital Markets Phil Nadeau – Cowen & Company Yaron Werber – Citi Ian Somaiya – Nomura Securities Robyn Karnauskas – Deutsche Bank Ying Huang – Bank of America Howard Liang – Leerink Partners Ravi Mehrotra – Credit Suisse Brian Skorney – Robert W.

Baird Matthew Harrison – Morgan Stanley Thomas Wei – Jefferies & Company Jason Kolbert – Maxim Group.

Ladies and gentlemen, thank you for standing-by and welcome to the Gilead Sciences' Third Quarter 2014 Earnings Conference Call. My name is Kate, and I will be your conference operator today. At this time, all participants are in a listen-only-mode and as a reminder this conference call is being recorded.

I would now like to turn the call over to Patrick O'Brien, Vice President of Investor Relations. Please go ahead..

Thank you, Kate and good afternoon, everyone. We issued a press release this afternoon and our earnings results for the third quarter. The press release along with the detailed slide is available on the Investor Relations section of our web site.

Speaking on the call today are John Martin, Chairman and Chief Executive Officer; Paul Carter, Executive Vice President of Commercial Operations; and Robin Washington, Executive Vice President and Chief Financial Officer.

Also in the room for Q&A, are John Milligan, President and Chief Operating Officer; and Norbert Bischofberger, Executive Vice President of Research & Development.

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

A description of these risks can be found in our latest SEC disclosure documents and recent press releases. In addition, Gilead does not undertake any obligation [audio gap] any forward-looking statements made during this call. We will also be using non-GAAP financial measures to help you understand our underlying business performance.

The GAAP to non-GAAP reconciliation is provided in our press release as well as on our website. I will now turn the call over to John Martin..

Thank you, Patrick and thank you all for joining us today. The third quarter was highlighted by continued strong financial performance as well as scientific, clinical and regulatory progress that we believe will benefit the patients and communities Gilead serves over the near and longer term. During the quarter, we generated a total of $6.0 billion.

This performed - revenue of $6.0 billion this performance coincided with advancing numerous clinical programs across core therapeutic areas. I will touch on the most significant milestones that occurred in the last few months.

In the HIV therapeutic area, the first TAF based single tablet regimen of elvitegravir, cobicistat, FTC and TAF or E/C/F/TAF met its primary efficacy and safety endpoints in two Phase 3 studies in treatment naïve patients.

The results show that E/C/F/TAF was non-inferior to Stribild with regard to the proportion of HIV infected patients with viral load of less than 50 copies/mL and demonstrated statistically significant fewer renal abnormalities and also lower decreases in bone marrow density.

Additional Phase 3 studies evaluating E/C/F/TAF in multiple HIV patient populations are ongoing including patients who switched to E/C/F/TAF from TRUVADA containing regimens. Patients with mild-to-moderate renal impairment and treatment naïve HIV positive adolescents.

Submissions for regulatory approval of the E/C/F/TAF regimen will occur in both the United States and Europe by the end of the year. In addition, TAF as a single agent is being studied for the treatment of HPV infection. Two Phase 3 studies with 48 week primary endpoints should complete enrollment by the end of the year.

Moving to HCV, Harvoni which was approved by the US FDA on October 10, is the first single tablet regimen for patients infected with genotype 1 HCV, the most prevalent genotype worldwide.

We also received approval in Canada earlier this month, a positive recommendation for approval in Europe in late September, and we filed up for approval in Japan, also in September. Harvoni is a major medical advance in the treatment of HCV.

It's simple, one tablet taken once a day, it eliminates the need for both interferon and ribavirin which cause difficult side effects and it results in high cure rates, with treatment durations as few as 8 weeks.

Harvoni builds on the progress of the past year during which time approximately 100,000 patients have been treated with Sovaldi in the United States and approximately 17,000 in Europe. This represents a fraction of the estimated 185 million people in the world suffering from HCV, who have the potential to benefit from sofosbuvir-based regimens.

The rampant adoption of Sovaldi continues to reflect recognition within the medical community of the substantial benefits the drug offers patients, particularly when compared to prior treatment options. The goal of Gilead's development program is a pan-genotypic single tablet regimen.

To this end enrollment of four Phase 3 studies has begun for the pan-genotypic combination of GS-5816 and sofosbuvir. We anticipate being in position to share data in the second half of 2015. In two weeks, the annual AASLD meeting will take place from November 7 to 11 in Boston.

Over 90 abstracts by Gilead or by Gilead collaborators will highlight our various disease programs in hepatitis B, hepatitis C and liver fibrosis. 65 abstracts deal with the use of sofosbuvir containing regimens in various populations across various genotypes.

In particular, an oral abstract will describe the use of Harvoni in genotype 6 and Harvoni in combination with ribavirin in genotype 3 hepatitis C infected individuals.

Another presentation will describe a real world experience of Harvoni in combination with ribavirin in cirrhotic patients, who have previously failed a PI, peg-interferon ribavirin containing regimens.

And three other abstracts will provide safety and efficacy of Harvoni in 500 patients with compensated cirrhosis and in a combination with ribavirin in 300 pre and post liver transplant patients.

These existing and accumulating data continue to demonstrate that sofosbuvir-based regimens provide savings to payors, providers, patients and our entire healthcare system over the long-term given high cure rates and subsequent reduction of cost associated with managing HCV over patients' lifetime. Now let me touch briefly on Zydelig and Letairis.

Zydelig is a first in class, oral PI3K delta inhibitor. It was approved both in the US and Europe in combination with Rituximab for the treatment of certain patients with CLL and certain patients with NHL. Zydelig is the first to what we hope will be many therapies Gilead develops to improve treatment for a range of cancers.

The Letairis AMBITION study has demonstrated the potential for a new standard of care in Pulmonary Arterial Hypertension called PAH.

Data from this study were presented at the annual meeting of the European Respiratory Society in September with an additional analysis from AMBITION presented during a late breaker session at a CHEST meeting, earlier today.

The study was conducted in collaboration with GlaxoSmithKline and Eli Lilly and was a randomized double blind multi-center study comparing first-line combination therapy with Ambrisentan and Tadalafil to monotherapy with either Ambrisentan or Tadalafil alone in patients with PAH.

The study showed that the combination of these therapies reduced the risk of clinical failure by [15%] [Ph] compared to the pooled Ambrisentan and Tadalafil monotherapy arms. The combination was also statistically significant versus the two individual Ambrisentan and Tadalafil monotherpay arms were the primary endpoint.

Based on these data submission of a supplemental NDA for Letairis to FDA is planned before [Inaudible]. As we continue to advance treatment options across a range of therapeutic areas, we are working to enable access of our drugs for people who need them across the world.

During the quarter, we signed non-exclusive licensing agreements with seven India based generic companies to manufacture Sovaldi and Harvoni for distribution in 91 developing countries.

In those countries, more than 100 million people are estimated to be infected with HCV, which translates to 54% of the total number of people affected by HCV worldwide.

We also announced agreement with the Medicines Patent Pool, MPP, under which MPP can sub-license TAF to generic companies in India and China for manufacturing and distribution in 112 developing countries.

Many initiatives are in place to expand access for patients in both the US and around the world and represent a continuing effort that our entire organization is committed to and of which we are very proud. I will now turn the call over to Paul Carter to provide a commercial update..

Thanks, John and good afternoon, everyone. Gilead's total net product revenue in the third quarter increased to $6 billion representing growth of 120% over the same period last year. US sales grew to $4.2 billion and we had $1.4 billion of sales in Europe. There were a number of factors underlying our sales growth during the quarter.

The primary driver was Sovaldi and we've also experienced healthy demand in our HIV business. Beginning with hepatitis C, we generated Sovaldi sales of $2.8 billion during the quarter including $2.2 billion in US sales with most of the remainder coming from farms in Germany. Sovaldi is now available in 40 countries around the world.

The 20% reduction in Sovaldi revenues compared with the second quarter is related to physicians delaying the initiation of treatments in the US, in anticipation of Harvoni's approval.

As we expected the third quarter also saw a reduction of our Sovaldi inventory across the channel, consistent with demands and in line with our normal contractual ranges. Since launch, nearly a 100,000 patients in the US have been treated with Sovaldi.

According to data available, as at the end of the second quarter approximately two-thirds are genotype 1, 20% are genotype 2, 10% are genotype 3 and the rest are genotype 4, 5 and 6 combined. Approximately, 95% of US patients starting therapy in 2014 receive Sovaldi.

We estimate that 80% of these patients were treatment naïve and 20% were treatment experienced. In the third quarter, we saw an increase in non-retail use as a percentage of the US total sales. At this point only two state Medicaid programs have yet to allow access to Sovaldi. In Europe, approximately 17,000 patients have been treated with Sovaldi.

In the UK, the National Institute for Health and Care Excellence or NICE, issued further draft guidance recommended Sovaldi as a treatment option for certain patient sub-groups.

We were very pleased to have NICE's endorsement of Sovaldi as a clinically and cost-effective treatment and look forward working with officials in the UK to ensure maximum patient access to this drug. We've now reached agreements on reimbursement in many countries of Western Europe.

The fact that many of these agreements are progressing faster than would typically be the case following standard timelines, is a testament to the unmet medical need that Sovaldi addresses and the value it brings. Let me now turn to Harvoni. As John mentioned earlier in the month, we received FDA approval for Harvoni.

A simple, safe and highly effective oral single tablet regimen for hepatitis C. the 12-week regimen price for Harvoni is $94,500 which is in line with the regimen cost of the previous standard of care as in 12 weeks of Sovaldi plus pegylated interferon and ribavirin.

We expect over time that up to half of genotype 1 patients may benefit from just eight weeks of therapy meaning the cost will be reduced by one-third for many patients.

We are supporting the launch through a targeted promotional effort designed to build awareness amongst the specialist communities who are already familiar with Sovaldi including hepathologist, gastroenterologist and infectious disease physicians.

Moving now to HIV, prescription growth continue to grow for us, for all of our products in the US as nine out of 10 HIV patients new to treatment were prescribed the Gilead medicine. Seven out of 10 received one of Gilead's TRUVADA based single tablet regimens.

Stribild continues to be the leading HIV regimen for patients who are beginning therapy, capturing three out of 10 starts. And Stribild has also become the number two regimen across all treated patients in the US behind Atripla. Gilead's TRUVADA based single tablet regimens including Stribild, Complera and Atripla grew 29% year-over-year.

The new single tablet regimens remained on a strong growth trend with Stribild up 22% sequentially to $279 million and Complera up 19% sequentially to $183 million in the quarter. During the quarter, we saw inventory levels for our HIV products finish at the upper end of the contractual range.

Moving to Europe, revenues for TRUVADA based single tablet regimens have grown 17% year-over-year.

TRUVADA based single tablet regimens continue to lead the market with Eviplera remaining the most prescribed regimen in both naïve and switch patients, and Stribild strengthening its position as the second most prescribed regimen for switch and it's the fourth most prescribed regimen for treatment naïve patients.

By the end of the third quarter, we have [Inaudible] Stribild in 20 countries across Europe. This includes all EU big five markets with notably the biggest HIV market in Europe being France where Stribild was launched in late March.

We are engaged with public and private payors around the world to help them understand the significant unmet medical needs we are working to address and the positive impact we believe our products can have on healthcare systems over the long-term.

In the US, our comprehensive patient assistance program continuous to help make Gilead therapies accessible for patients who need financial assistance. We are always looking at how we can partner with countries in need to enable access to our therapies. This has been and will continue to be a top priority.

In closing we are extremely pleased to have taken so many important steps forward with our business during the quarter, and with that I will now turn it over to Robin..

Net product revenue guidance is now $22 billion to $23 billion. Gross margin guidance is now 86% to 88%. Tax rate guidance is now 17.5% to 19.5%. We are raising SG&A expense guidance to $2.7 billion to $2.8 billion.

This increase is fully attributable to the impact of the IRS regulations related to the change in accounting of the branded prescription drug fee, which represents approximately 21% of SG&A expense in 2014. All other components of our 2014 guidance remain unchanged.

Overall, we are very pleased with our third quarter performance as well as our outlook for the remainder of the year. We look forward to updating you on our continued progress. At this point, we would like to open the call for questions.

Operator?.

Today's question-and-answer session will be conducted electronically. (Operator Instructions) our first question comes from the line of Geoffrey Porges with Bernstein. Your line is open..

Congratulations on all the progress in the results.

Could I just ask a related questions on HCV, could you give us a sense of how Harvoni is going? I mean you have more visibility than we do in terms of comparing it to the Sovaldi launch, do you get the sense that it's tapping into that warehouse group of patients and just related to that could you give us some color pull on what proportion of patients that are being treated are F3, F4 in the US? And whether you expect that to become a more or less de-facto reimbursement standard as we get into 2015 for HCV reimbursement? Thanks..

Yes, Geoff, I think there is two questions there actually, but I can give you a little bit feedback on Harvoni's launch, as you pointed out we only have one data point like you do, but I can tell you a little bit more what we are hearing, but first of all the data point is prescriptions last week was for prescriptions that are actually filled.

We are hearing that many more prescriptions are being written during these first, two or three weeks of launch.

We have to be careful, I think comparing apples-to-apples though with the Sovaldi launch, if any of you remember, Sovaldi was approved at the beginning of December and there was a reticence I think at that point for many physicians to write prescriptions starting patients off from interferon regimen just prior to the Christmas and holiday period.

So there is a slight apples-to-apples comparison, I think we need to take into account. However, we are seeing a few things. We are seeing a broader group of physicians writing scripts.

I think than with Sovaldi, several physicians we know have written scripts that never wrote one for Sovaldi before and I think this reflects the simplicity of the Harvoni regimen. We are also seeing the rate of adoption, I think a little bit faster this time.

So some physicians who took many months to write their first prescription of Sovaldi seem to appreciate again the simplicity of the Harvoni regimen and are writing scripts earlier. With regard to payors, we are feeling reasonably confident with their reaction.

I think they're very pleased to see that in GT 1 patients, up to half we estimate of those patients will be eligible for eight weeks of therapy in due course because they're either treatment naïve non-cirrhotic and with a low baseline viral load, and I think also when they compare the cost of the treatments of Sovaldi plus Olysio, which we saw ramping up during the course of the year and in fact I think in the second quarter or possibly in the third quarter or even maybe 50% of patients, were on that very expensive regimen costing around $150,000 there is a sense of relief now that a large number of patients will be able to access the eight-week regimen at substantially reduced cost.

So that's very positive I believe. It's very early really to characterize access through the state payer systems and really too early to say that. I do think it's worth pointing out that Sovaldi will continue to co-exist with Harvoni.

So I think in the month going forward, we should look at the overall Gilead position in hepatitis C as Harvoni plus the Sovaldi prescription, but we're going to continue to see because Sovaldi remains the best on label options for genotype 2, 3, 6 and for various other patient sub-groups. So pretty early days, but I think good signs.

We also just had a satellite symposium hosted last week by several hepatitis C thought leaders and we had 1,900 healthcare providers join that symposium. So I think it's a very high level of interest and so we are quietly confident in the success of this launch.

I think the second question was about fibrosis score, we've seen a surprisingly large number of patients actually treated with low fibrosis scores. I think our estimate, so far in the year-to-date is that, zero through two is about 60% of the patients treated. So the balance would be F3s and F4s, Geoff, I hope that answer the question..

Great. Thank you very much for that color..

Our next question comes from the line of Brian Abrahams with Wells Fargo. Your line is open. .

Congrats on all the progress as well. Just following up on Geoff's question. I was wondering, if you could talk more specifically about this potential backlog of prescriptions for Harvoni.

Do you have any sense for patient throughput on the drug relative to prescriptions written? How quickly you might expect to see these patients get insurance authorization to start treatment.

I guess, I'm just trying to understand both the initial insurance hurdles as well as how best to reconcile the prescriptions, we're going to see in the launch relative to actual patient demand? Thanks..

Yes, so it's a really hard question to answer.

We really don't know, I mean I think the apples-to-apples comparisons with Sovaldi again, we need to take into consideration that I think insurance companies were somewhat unprepared for the volume of patients when Sovaldi was initially launched and certainly in the first few weeks, a lot of prescriptions I think went through very quickly.

This time insurance companies are more organized and prepared around the Harvoni launch, so there may be a slightly more -there may be some more constraints initially. But as I said Harvoni is an incredible step forward.

You know the single tablet once a day, interferon free, ribavirin free regimen, many patients able to be prescribed for just eight weeks. So I would hope that the economic benefits, even at the eight-week potential might expedite proceedings, but is a bit difficult to tell, there are some swings round about on this..

Thanks very much. .

Our next question comes from the line of Mark Schoenebaum with ISI Group. Your line is open. .

I noticed in your slide deck this quarter, you didn't provide us the waterfall plot that you often provide for the hepatitis C market starting with infected patients, then going to diagnosed patients, then going to patients under the active care of a treating specialist.

I was wondering, if you could update us on those numbers if possible especially now that we're all trying to model the Harvoni launch. And then just related, you said that the two state Medicaids have allowed access only to Sovaldi.

What's your expectation for how that's going to roll out, how the state Medicaid situation will roll out in '15? Thanks, so much..

Mark, it's John Milligan, I'll start with the waterfall question.

We were taking a look at that plot and recognized that the data we have on the patients under care are at least a quarter old if not older, and so we no longer felt that we had an accurate picture of where are those patients are coming from, so we don't know exactly how many patients were under care anymore and how many of the patients that went through care would have been characterized as part of that bucket prior to this.

So we felt it was misleading to put a number out there that you would then rely on for understanding how the dynamic is going.

We are trying to figure out where those patients are going to come from and we will take some time of course to understand how many patients came directly into care from nowhere, which was common in this field, patients who typically had better care suddenly seeking care and how many of those patients are still on that bucket.

So this very dynamic process may not lend itself to a typical waterfall that we've used in the past for HIV and we are trying to figure out a better way to convey what those numbers might look like as those patients come into care and as those patients are driven into care by increased knowledge of the product and of course many of you have seen awareness ads on TV already from various companies, which will of course help drive awareness and patients into care as well.

So it’s a very dynamic process and we'll try to do the best we can, but I don't have a good handle on what that number is today. Paul, the second was about Medicaid..

Yes, I think we should anticipate, certainly for modeling, I would anticipate the same sort of timelines for Harvoni through the state Medicaid systems. Although, I would emphasize again, the eight-week regimen, you would hope the economic benefits of the shorter treatment might expedite that process somewhat..

Thanks a lot. .

Our next question comes from the line of Matt Roden with UBS. Your line is open. .

So there's been a lot of debate about the importance of short duration therapy and I noticed for your GS-5816 program in Phase 3 that you're really, really looking at 12 weeks treatment duration.

So, I realized the Phase 2 data, next on eight weeks there, but should we just think about this combination for June type 2 and 3 and then I guess related, can you update us where you are, with your next gen PI and what the plans are and timelines for additional combos to get to shorter durations?.

Yes, Matt. Hi, it's Norbert. Matt with regards to 5816.

The way, we are thinking about this, is it would be one pill, simple regimen 12 weeks for everybody, now you can make the argument in the US, it's probably genotype 2 and 3, but you know for instance, if you look at the UK, they have 30% genotype 3 and another part of the world is the most prominent genotypes are not genotype 1.

So we are looking at this really as a global solution so to speak for all genotype for hepatitis C. With regards to shorter treatment durations, Matt we are still pursuing shorter treatment duration.

You may remember, we have presented data actually, NIID presented data on six weeks treatment naïve non-cirrhotic 100% response rates with ledipasvir sofosbuvir 9451, can't remember the numbers. Sorry. We are now looking at, what happens in with eight weeks and six weeks in treatment experience cirrhotic.

There is a presentation by [indiscernible] at AASLD that looks at eight weeks in treatment experienced cirrhotic and you can see, while the response rate are still reasonably high, almost 90% not as high as we would like them to be and we are looking four weeks right now, within treatment naïve non-cirrhotic.

With regards to the [indiscernible] that has just entered Phase 2, so we are doing those ranging in or combination studies, again looking at shorter treatment duration.

So I don't have any specific data to tell you about hopefully [indiscernible] we will be able to say something about, before treatment duration and the six weeks in cirrhotic patients. .

Thanks very much.

Our next question comes from the line of Michael Yee with RBC Capital Markets. Your line is open..

My question is in regards to, some reimbursement criteria for different payors suggesting the need for high risk, hepatitis C disease in order to get treated.

Anecdotally or once you think, only do you think that is going to be any impact or do you think that's basically going to be similar to what we saw in Q2, I think a lot of that criteria, was trying to be implemented and then I guess similarly to US, how do you see that being played out cirrhotic versus non-cirrhotic.

In other words, high-risk versus low- risk..

Hi Michael, it's John Milligan.

Your first question is just going to be segmented into higher risk HCV patients for treatment only, I think that's the way you phrased it and I would say, it's very difficult to characterize across the very different payor groups, who respond differently to the people, who of course are paying the premiums and so there is a wide range of behaviors that we are seeing out there.

There are certainly some groups, are trying to segment more for the high risk nations, but of course some groups are more open ended as to what kind of patient can come on board. So you could be higher risk by a number of criteria including our physician judgment based on co-morbidities, you can get therapy based on other criteria.

Interesting, if you look at for example Metacare [ph] patients, there have quite a range of patients, who were able to be treated under Medicare and CMS is sort of dictated currently that all patient should be allowed therapy.

I think what you'll see overtime is, rather than a restriction more of a loosening of the guidelines over time much like we saw with HIV.

I should think, guidelines that are loosening of the criteria for reimbursing which was just typically what happens overtime as more patients get treated, who are the worse end of this spectrum, there will be more capacity and more money that will be freed up to treat people, who are earlier on in their disease.

We also think the eight week, the cheaper option is going to be very favorably looked up the payors as well.

We think also that treating earlier is you best chance to save the most money for the healthcare system overtime and so we would encourage people to think about that way as well, so you will see some restrictions currently and I think for example in the Medicaid, which have fixed budget, so be greater restrictions than anywhere else, but I can't give you one answer, I just think it's an evolving feel, which will eventually allow most patients to be treated but I do think, they'll be a triage system set up over the coming years to the get to the right number of patients.

.

How is that different that US? For example, that's why with the pie charts, you don't have that for US?.

Thanks, Michael. I'm going to turn it over to Paul Carter for the answer about the ex-US piece of this..

So we are making very good progress in terms of reimbursement agreements with most of the major European countries, what we have in Europe is somewhat why the state Medicaid assumes fairly inflexible budget to healthcare generally and specifically in the hepatitis C area, having said that, I think there is very clear recognition of the unmet medical need and particularly in some countries, the very large number of patients that really need to be treated as soon as possible.

We would expect, as government to prioritize the patients just because of the inflexible nature of the budget and therefore, I think at the stage, the sicker patients clearer would be the first ones to be treated.

Having said that, ironically John pointed out, the best way to save money per patient is to treat early and in fact treat these, less cirrhotic patients on the eight weeks, type of therapy that will be available shortly in Europe..

Thank you..

Our next question comes from the line of Phil Nadeau with Cowen & Company. Your line is open..

Good afternoon and thanks for taking my question, I had a follow-up actually on the ex-US launch.

We recently saw in the web, it looks like you've reached agreement with Italy and Italy expects to, I think treat more patients than any of the other big five nations, is that correct is Italy to inline and what are you expectations for the launch there? Similarly in Egypt, where there is a huge patient population, what are you expectations for revenue out of Egypt and how did that ramp?.

So I'll take the Italy question first of all, Italy does have the highest prevalence of any of major EU countries for sure and they do recognize the healthcare issue staring them in the face now.

So we have been in close negotiations with the Italian Government, we have signed an agreement with them and that agreement is now working through the Italian system. We expect the first patients in Italy, hopefully to get treated next month as part of this agreement. So Italy is moving forward and we are very pleased about that.

Do you want to talk about Egypt, John?.

So with regard to Egypt, obviously we've announced that we have a program to have, a specific program for Egyptian citizens to get access to Sovaldi for genotype 4. There are some pretty high expectations within the Egyptian Government about the number of patients, who can be treated.

We have yet to actually see those orders materialized, we are working with them and with a proper forecast and supply because it look like, so this time, I can't give you anything to other than to say, we are very, very small for 2014 and as you get into 2015 and approach talking about the year, guidance than perhaps the deficit [indiscernible] good component, we would call it out at that point in time, but given this is a public health initiative.

Obviously the revenue number is small per patient, though with the large our patients could be an important part of ex-US, ex-European revenue line..

Just in places like Egypt and Italy and other places with high prevalence, to basically set up an annual budget beforehand and did they tell you, what that is or is there more demand base order for those countries?.

So specifically to Italy and to Egypt there is a specific amount of money that they're setting aside to try to treat the disease to my knowledge, those numbers aren't public, but if we have been, they have for the size, special public funds because of the important health need for each of those countries, yes..

And I can just add, certainly speaking for Italy the budget will be a significant step up from previous hepatitis C budgets, with the ambition of treating a lot of patients, over the next few years and with a recognition that they can't possibly treat all patients you know the first year or two, this will be spread out over many years..

Great thanks for taking my questions..

Our next question comes from the line of Yaron Werber with Citi. Your line is open..

I've a question, of inventory and then a question on 5816.

Inventory wise for Sovaldi, it looks like about 30% of sales sort of are out there, to genotype 1 that's going to be obviously the strong suit kind of going forward to Sovaldi, but you mentioned that, within the IMA sort of the contractual, usually I think you guys have been two to three weeks.

So I'm trying to get a sense, kind of where do you think inventory will go and how much is it going to get compensated by Harvoni next quarter? And then just in terms of 5816, is there any discussion internally about also doing an eight week regimen before you actually file for approval? Thank you..

Yaron, its Robin. I'll take the first part of your question, as we kind of outlined on the call we know Sovaldi inventory stayed overall for the quarter within the ranges, but it did go down to mention with the decline and demand that we saw in anticipation of Harvoni.

This quarter, Q4 we'd expect the Harvoni inventory to ramp up and Sovaldi to continue to ramp down. I can't say exactly, how that's all going to play out. I mean, overall, when we bring on a new product, you do have a few quarters to ramp up inventory overall. So that is something we will have to see, how it plays over the rest of the quarter..

Yaron, currently we don't have any plans for the filing for the first NDA filing of 5816 to include shorter than 12-week treatment duration arms, but we are as I said exploring shorter treatment duration arms with adding a third agent in, and in this particular case the pain treatment for these enabler 9857, those studies are currently ongoing.

We would like, we attempt for the shorter treatment duration to be applicable to all patients, not limited to a certain non-cirrhotic treatment naïve low viral load segment, but it should work for everybody, that's what we are attempting to do..

Robin, I don't know if I can maybe ask a different way, in Q4.

Are you guys expecting sales in hep C in the US to be higher than Q2, I guess that's sort of I'm trying to get to?.

I understand your question, I can't necessarily project that. we've given kind of overall guidance for the full period, as we talk about, we do expect to see somewhere housing and we'd expect to see that ramp up a bit. Are lot of uncertainties, you still got to go through the reimbursement process, there is a potential for our competitive lines etc.

year around. So I can't necessarily say this early, whether it's going to go up or down, but we do feel comfortable with our guidance..

Okay, great. Figured I'll try. Thank you..

(Operator Instructions) our next question comes from the line of Ian Somaiya with Nomura Securities. Your line is open..

Thank you, just one question on sort of sustainability of pricing in Hep C, as you and your competitors all start to shorten their treatment duration, as wondering if we should assume pricing is maintained at the current eight-week mark or should we assume the savings are passed on whoever?.

Until we see the product profiles, I think if the shorter week durations, I think it's actually impossible to answer that question. I think, that what we do have there with Harvoni is a really, really strong clinical profile and high efficacy, low side effect, one pill once a day, no interferon or no ribavirin. A great profile, so that's what.

Norbert, wants to say something..

Ian, the other thing I would like to add, as far as I know nobody has yet shown any shorten of treatment duration with the exception of Gilead. The other thing, I would like to point out, the regulatory hurdle to get anything approved is very, very high.

You actually want to look at the Harvoni label, how the eight-week the IM-3 study was labeled, you know we had overall 96% response rate with the treatment arm versus 98% in the 12-week treatment arm and yet, while showed up in the label was.

It should be used for 12 weeks with the footnotes saying that, it can be considered for certain patients with an eight-week treatment duration. I'm just telling you, this is our regulatory authorities think about this. They do not trade two-week treatment duration, if you have to pay 2% penalty in relapse rates. .

But really the question was more your effort, as you're looking at potential three drug combo and that could support shorter treatment durations, does the price naturally come down or should we assume it kind of stays regular?.

I think, first to, John Milligan, Ian.

So you have to think about the overall patient population that we're looking at right now and it will depend heavily on we were able to drive the different treatment durations, there are patients now who are considered for 24-weeks and so as we drive those patients down to lesser duration, we will have to take a look at the totality of the day, that they figure out, which patient population is appropriate for three drug combinations at which durations and at which price and so we may have to make some choices in there as to what we intend to do.

So we have, the next thing, the most of the drug combinations we have, as we have flexibility across the regimen to do the best thing as that we can for the company and for the patient simultaneously..

Our next question comes from the line of Robyn Karnauskas with Deutsche Bank. Your line is open..

First for Robin, I know you've deployed less dividend and thinking about capital allocation, what are the next things that have to happen to make a decision on whether that's a choice, you would make or not and then regarding patient flow.

I know initially you said that, with Sovaldi launch that you're seeing doctors prescribe much quicker than you thought, day one what are you seeing with Harvoni that might surprise you, what are your thoughts on patient flow? Thanks. .

Hi, Robin, just answer the first part. You know we continue to peak our consistent capital structure focus in place and that's focusing on the reinvestment of our pipeline, M&A and returning excess value and we think, right now given our current valuations, share repurchases, is a more optimal way for us to return value to shareholders.

You know, we continue to look at our future cash flows, to your point. How do we think about it going forward.

This is something that, we're discussing with management and the board as to whether there are other vehicles that we might want to consider, at the most importantly, we're trying to looking at our return relative to free cash flow, going forward.

So there are various vehicles that we might choose to optimize in the future, but right now share repurchase is our area of focus..

Robyn, I couldn't actually hear very clearly the second part of the question, would you mind repeating it?.

Sure, you're mentioning when Sovaldi launch, that you saw doctor prescribed neatly all at once, so I was asking more about patient flows for Harvoni, with what are you thinking about? Do you still expect even patient flow is anything that surprising you at heart, how many patients are coming in for treatment? How many doctors are prescribing?.

Well again, very, very early days on Harvoni specifically. We are not seeing anything sort of really unexpected. We knew there was a quite a lot of patients warehouse. We saw the prescription, new prescription let's say to Sovaldi reduce between quarter two and quarter three by about 20% and you can assume, those are the warehouse patients.

Other than that, I think we are assuming that there are still plenty of patients under care, there are plenty of diagnosed patients and it will take years to work through those..

Thank you..

Our next question comes from the line of Ying Huang with Bank of America. Your line is open..

First of all, I guess you know you guys are still very much in process of securing reimbursement and pricing in Europe that, when shall we expect a significant pick up in European revenues beyond just France and Germany? And then secondly, Sovaldi is being in the market for three, four quarters now.

Do you think have you reached the study growth from that adjustment and what is it right now in 3Q? And then lastly I guess, Norbert you mentioned that regulators such as FDA will not sacrifice even 2%, FCR for a shorter duration, so it sounds like, we could assume that maybe a forward duration is not critical commercially? Thank you..

Well, there are three questions in there. Let me just quickly, deal with the first one, which is, we have made good progress with reimbursement in Europe.

Several of those countries, notably Spain, Italy, Netherlands, Belgium we have signed agreements with, but those patients haven't really started yet, we're expecting those over the next month or two or three. France, we are still working with the pricing committee there.

We are close, we believe to having an agreement and as I mentioned earlier about nice in the UK, where we have their endorsement, but we still don't have full access from NHS in England, but that we hope is close. So we can anticipate over the next month, to European sales of Sovaldi beginning to ramp up.

Having said that, the European sales of Sovaldi to-date I think are pretty impressive given the limited access that we've had so far, I'll hand over to Robin, for the next part..

Hi, Ying in regards to your second question about steady state for growth in that. As we've been saying, we've had four non-retail customers and payers come onboard, state Medicaid, MD&A as of Q2 and Q3. I'm a little hesitant to give a steady state because just as we start to get there with Sovaldi and we've now launched Harvoni.

So I think it's going to take us a couple more quarters to get to the right, mix between Sovaldi and Harvoni and what that grows to that, to be particularly since we may have more patients on different periods of treatment overtime.

So I'd say probably Q2 or Q3 of next year, we will have a better idea of what steady state is, as we get through the second product launch and get Harvoni, on the docket relative to reimbursement..

And Ying, your last question on my comment, had to do with that hurdle bar is really high for short treatment durations and as I said you know regulatory authorities do not consider price, when they think about this and they want you know with Harvoni, a drug that is so safe and well tolerated with no identifiable side effects, there is not much of a willingness to save four weeks of treatment duration, if you have to increase or decrease the response rates by a few percentages and again I will urge you to look at our IM-3 study and how it is labeled.

I mean, I agree, what this by the way from a scientific point of view, of course the payors, may have a slightly different opinion on this shorter treatment duration. .

Well Norbert, whether the question was it, is it commercially competitive, you know these things if somebody else has a shorter duration than you do, with all the activity, than that becomes a competitive advantage, so that's why we are continuing to innovate across our portfolio to try to drive things to the simplest, safest, shortest, duration and that's why you'll continue to see Norbert and his crew try to innovate with other three drug combinations in the future.

.

Thank you for that profile answer, you all..

Our next question comes from the line of Howard Liang with Leerink Partners. Your lines is open. .

Question on, what's your treatment duration in the real world with Harvoni probably for Paul, as Norbert mentioned earlier the label, recommends 12 weeks for actually for all treatment naïve, not cirrhotic patients, but recommends eight weeks for those with low viral load. I'm sorry, saying the low viral can be considered for eight weeks.

Some of the physicians we talk to say that, they intend to give 12-week to everyone, with treatment naïve with non-cirrhotic, with no cirrhosis. In absence repair, requiring a further duration.

But my question is, how live spread is this approach among physicians and how are pairs, [indiscernible] mandating eight weeks for those people to get eight weeks..

So, Howard the latter question, I don't know how widespread it is, but the few folks I've talked to, they told me the same thing.

These are obviously the well-known academic thought leaders, they said you know why do you want to treat for eight weeks, if there is a slight change, you might have more relapse, so just treatment 12 weeks, there is no medical or adverse event price to be paid, but those same people then said, in the next symptoms that they're probably not the ones, making this decision anyway, but it's probably the payors..

It's far too early for us to know, what kind of patients have been treated. I think it's instructive to look further into the third quarter, where we did see very high usage of Interferon-Free, Sovaldi plus Olysio is very high premium price about $150,000.

I think that will end with the arrival of Harvoni, but it will be interesting to see how long it takes to kind of to get to steady state when the usage of the eight-week regimen reflects the Epidemiology of the GG1 patients US and indeed European due course..

Howard, I would just add we are going to make sure our sales reps are on label with this, the eight weeks is the right duration for patients, who are below 6 million international units of baseline, there is no evidence that more is better in any of these patients and that's the data that will emphasize as we go out and educate about the value of eight weeks and so I think, at the end of the day, it's very clear cut that eight weeks is a better thing for patients and over prescribing is not a good thing in this world..

(Operator Instructions) Our next question comes from the line of Ravi Mehrotra with Credit Suisse. Your line is open. .

A little bit of left field question on Ambrisentan and given that John flagged, the AMBITION study results in his opening remarks, how do you see those results changing your marketing message in the PAH market, given the changing message for competitors which themselves have moved to [indiscernible] morbidity message.

I guess, I'm asking whether you see PAH franchise as a legacy line or an opportunity for growth, which gives you an opportunity to talk about 4997? Thank you..

Ravi, it's John Milligan. I just, when you look at the timeline for the AMBITION data that we put in the label. We'll file this before the end of year, but that means it won't be until the latter part of next year, that we'll be allowed talk about this with physicians.

So we are anxious to be able to do so, it is clear that it has had an impact with the top KOLs, with regard to how they think about what the best thing is to do.

I can't tell you to change prescribing habits, I don't know that, but I do know that it's becoming clear in their mind that this is the new standard or care and what we hope is, there will be further discussions and potentially guideline changes that were to allow, people to have access to this very important combination and the data, we are very crystal clear because we were better than either the individual treatment arms, not just placebo.

So this was an important different that haven't been see in pulmonary arterial hypertension before. We think, this will be an important part of the armamentarium for doctors. I think your last part of the question is, does this do it for our franchise.

Certainly, we are very interested in PAH, we are continuing through our own portfolio to see if other products, that we have, could be also be useful in the field of PAH and so. We'll see how things progressed, but there are some options for us to do things organically and that can be quite interesting..

Thank you..

Our next question comes from the line of Brian Skorney with Robert W Baird. Your line is open..

I guess, I'm not a little more in the Harvoni label, could you kind of walk us through in your conversations with the FDA, how they segregated the label, I here I point that they have a very high hurdle at this point, but looking at how they evaluate it, is there a point estimate in their mind that they think is necessary at this point or is it just based on looking at sub-groups that there is a specific delta at which point, they're uncomfortable with a specific duration, one over the other.

.

You know, Brian this was a long process and it was a collaborative process, we did analysis and they did analysis, the one thing you might notice in the label, the ribavirin arms aren't even in there and that was a decision that was made early because consistently across all three Phase 3 studies addition of ribavirin didn't make any difference to non-ribavirin arms and then you know, to proceeded then you look at relapse, so what are the relapse rate in the eight-week arms compared to the 12-week arms, there were 5% to 1%.

Even though the numbers are fairly small and you know things evolved from there, sometimes there was a statistically significant difference, when arms were pooled.

Sometimes that wasn't, but you know we ended up in this mutually acceptable situation that we are conservative, we here on the longer treatment duration arm, if there is a chance that you jeopardize response rates, that's going to, was the summary of it. And the similar thing is, by the way the case in Europe. .

Great and just real quick, any idea on the mix between CLL and NHL for Zydelig?.

[Indiscernible] in prescriptions?.

Yes, in terms of do you have any idea in terms of the patients, you're seeing or they primarily refractory, NHL patients or CLL patients. .

Too early to tell you that, but I don't know. .

Okay, thanks..

Very early days..

Our next question comes from the line of Matthew Harrison with Morgan Stanley. Your line is open..

Two parts, you mentioned something on HIV being near the high end of the range. Are you expecting some inventory to come out of the channel in the next quarter? And then just separately on patient share, I think in HCV you said that 80% of the patients you treated are naïve.

I'm just wondering if you can walk through that versus I think, you've talked about sort of 45%, potentially using the eight-week duration with Harvoni, so maybe you could just help us think about what percentage of those naïves were cirrhotic? Thanks..

I was going to mention the inventory, I think one of the features of the HIV inventory build slightly, this quarter was because the quarter ended on Tuesday, which is a day typically where we get our sort of three main orders in the week, whereas the previous quarter ended on day, I can't – which day it was, but it was at the lowest end.

So we did have a slight build, I think specifically at the quarter four, we should anticipate neither a build nor a flattening out of inventory probably. .

The second question was on the naïve patients and the..

8% of those patients, so I guess a best way to think about this in the way, we've been talking about is, of the patients we've looked across, who are treatment naïve and non-cirrhotic that comes to about 45% of patients, so in looking at that 80% of patients slightly more than half of those, who would come onboard, should be eligible for that eight-week of therapy based on just a map that we've seen across large data set.

We are not 100% certain, if those patients are represented. So those that were describing in this pie chart, Slide 24 are representative of the overall datasets, when we looked at large sets of patients out there. So I don't really know that we can compare with apples-to-apples but overtime, we would expect it to be about 45% of patients.

We don't know if there will be buyers early on, towards longer duration in more cirrhotic patients or not, but it seems to us, that it should even overtime at 45%..

Our next question comes from the line of Thomas Wei with Jefferies. Your line is open..

Just a question on, how you think about long-term HIV sales. Now that you have the TAF data in hand, when we look beyond 2017 and in the 2020's.

Do you think your HIV sales will be lower than similar to higher relative to the [indiscernible] patent expiration year?.

Well, we started with the great data on TAF and we anticipate more data coming through in the next month. So that's a very good place for us to being, the process now of thinking through our HIV portfolio. The big bucket of patients of course is a patients that already are on the treatment and will switch.

What we think historically is, that kind of, when you have conversion situation, which is really the way the way that we are thinking about this from [indiscernible] to single tablet regimens to TAF based single tablet regimens. We intend to ensure, that happens and it won't happen by itself, but that's our clear intention. .

And O'Brien, we have time for one more question, from the line of Jason Kolbert with Maxim. Your line is open..

Given the success of Sovaldi and given what's happening in the dynamic with the combination product Harvoni, how does that influence the decision to launch Sovaldi particularly in country like Japan, where you're you know haven't really launched yet, so can you just help us understand also where is the Japanese infrastructure at this date?.

Yes, so I'll quickly talk about the launch, so as you know, we filed Sovaldi for genotype 2 only, which is about the quarter of the Japanese population and that's in combination with ribavirin, we got very high response rates and we filed Harvoni up for the remainder mostly genotype 1B patients, again we are [indiscernible] high response rate.

So Japan is very bifurcated, Sovaldi with ribavirin for genotype 2, Harvoni is for genotype 1B..

Yes and the second part is about our infrastructure build out in Japan, which we are very, very happy about. We got over 200 Gilead employees now in Japan and getting ready for launches as in when we get approved, which we hope will be in the first half of next year for both products..

That's awesome, thank you so much guys. Congratulations..

Thank you, Kate 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 and 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 good day..