Patrick O'Brien - Senior Director-Investor Relations John C. Martin - Chairman & Chief Executive Officer Paul R. Carter - Executive Vice President-Commercial Operations Robin L. Washington - Chief Financial Officer & Executive Vice President Norbert W.

Bischofberger, PhD - Executive Vice President, Research and Development & Chief Scientific Officer John F. Milligan, PhD - President & Chief Operating Officer.

Mark Schoenebaum - Evercore ISI Geoffrey Meacham - Barclays Capital, Inc. Matt M. Roden - UBS Securities LLC Michael J. Yee - RBC Capital Markets LLC Brian Abrahams - Jefferies LLC Cory W. Kasimov - JPMorgan Chase & Co. Phil M. Nadeau - Cowen & Co. LLC Wendy Lam - Oppenheimer & Co., Inc. (Broker) Ying Huang - Bank of America Merrill Lynch Matthew K.

Harrison - Morgan Stanley & Co. LLC Brian P. Skorney - Robert W. Baird & Co., Inc. (Broker) Alan Carr - Needham & Co. LLC.

Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences third quarter 2015 earnings conference call. My name is Candice, and I'll 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, sir..

John Martin, our 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 with us for the Q&A session are John Milligan, President and Chief Operating Officer, and Norbert Bischofberger, Executive Vice President of Research and Development and Chief Scientific Officer.

Before we begin our formal remarks, let me remind you that we will be making forward-looking statements, including plans and expectations with respect to our products, 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 with found in our latest SEC disclosure documents and recent press releases. In addition, Gilead does not undertake any obligation to update any forward-looking statements made during this call. We will also be using non-GAAP financial measures to help you understand our underlying business performance.

The GAAP to non-GAAP reconciliations are provided in our press release as well as on our website. I would now like to turn the call over to John Martin..

TAF emtricitabine, and GS-9883, Gilead's proprietary integrase inhibitor, for which we'll initiate Phase 3 studies this quarter; and TAF emtricitabine/cobicistat and Janssen's darunavir D/C/F/TAF, which is being developed and will be commercialized by Janssen.

HIV patients are living longer, thus facing additional health challenges to those experienced by newly diagnosed patients a decade ago. Our teams at Gilead and the healthcare community overall are motivated to continue improving on existing treatment options.

The need for efficacy together with improved long-term safety has driven Gilead's development programs and the design of the studies we have completed and those that are planned. We look forward to introducing this new generation of F/TAF single-tablet regimens that we have created to address the evolving needs of people living with HIV.

TAF is also being evaluated for the treatment of chronic hepatitis B. Data from two Phase 3 trials may be available before the end of the year, with regulatory submissions expected in the first quarter of 2016. Moving to prevention of HIV infection, there is a clear and growing enthusiasm for PrEP.

WHO issued new guidelines that will significantly increase the number of people who are eligible to receive TRUVADA for PrEP. We continue to work across multiple fronts to help ensure that TRUVADA for PrEP is used safely and appropriately as part of a comprehensive strategy to prevent HIV transmission and preserve health.

Turning to HCV, one of the biggest achievements we have made as a company relates to the manufacturing of our NS5A inhibitors, ledipasvir and velpatasvir. API production is complex and involves multiple novel steps. Both molecules are high molecular weight compounds that need to be spray-dried in order to improve their oral absorption.

We have increased production capacity around the world to meet the unprecedented demand for our HCV therapies, and this continues to be a focus as we bring forward the next generation of pan-genotypic fixed-dose combinations to patients around the world.

Last month we announced positive top line results from four international Phase 3 ASTRAL studies evaluating our fixed-dose combination of sofosbuvir and velpatasvir, or GS-5816, for the treatment of chronic hepatitis C across genotype 1 through genotype 6.

The ASTRAL study results demonstrate that a 12-week course of therapy with the first fixed-dose combination of two pan-genotypic compounds can provide high cure rates for patients across HCV genotype 1 through genotype 6.

Sofosbuvir and velpatasvir has been granted accelerated assessment in the EU, potentially shorten the review period by four months. We expect to file for regulatory approval in the United States in the coming weeks.

The detailed results from these Phase 3 ASTRAL studies and other data will be presented at the annual AASLD [American Association for the Study of Liver Diseases] meeting, which will commence on November 13 in San Francisco.

More than 70 Gilead program-related abstracts have been accepted, highlighting the scientific progress across our liver disease pipeline, including HCV, HBV, NASH, and PSC.

Finally, we received European approval on several supplemental new drug applications for HARVONI that expand the indicated use to include HCV/HIV co-infected patients, advanced liver disease and post-liver transplant recipients, and patients who have previously failed treatment on a sofosbuvir-based regimen.

In the U.S., we are awaiting FDA action on our application to expand the indicated use of HARVONI to include HCV/HIV co-infected patients, patients with genotype 4, genotype 5, or genotype 6, and treatment-experienced and cirrhotic patients. A decision from FDA for each of these sNDAs is expected by November 13.

Another sNDA was filed on August 28 to expand the indicated use of HARVONI in the U.S. to include advanced liver disease and post-liver transplant patients.

In the area of cardiovascular disease, on October 2 FDA approved the use of LETAIRIS in combination with tadalafil for the treatment of pulmonary arterial hypertension [PAH] to reduce the risk of disease progression and hospitalization for worsening PAH and to improve exercisability. The new labeling is supported by data from the AMBITION study.

In this clinical trial, first-line treatment of pulmonary arterial hypertension with the combination of LETAIRIS and tadalafil reduced the risk of disease progression by nearly 50% compared to either therapy individually. This combination represents a new treatment strategy for patients living with this debilitating and life-threatening disease.

Our partner GlaxoSmithKline, which commercializes LETAIRIS outside the United States, announced on Friday that the CHMP granted a positive opinion to expand the indication for Volibris, as ambrisentan is known in Europe in combination treatment for PAH. Lastly, I wanted to mention our work on Ebola.

In the summer of 2014, news of an Ebola outbreak consumed the world, with the virus infecting approximately 30,000 and killing almost half of those individuals. Commerce, travel, and healthcare systems around the world were impacted. At that time, our scientists had engaged in an extensive evaluation of nucleotides with activity against RNA viruses.

We were able to quickly select GS-5734 as a candidate for development. All necessary IND-enabling studies were completed, and we initiated a clinical trial in healthy volunteers in August of this year to assess the safety and pharmacokinetics of the drug.

In parallel, convincing efficacy data obtained from studies in Ebola-infected animals were presented at the IDWeek meeting earlier this month in San Diego, showing full protection of animals treated up to three days after infection with a lethal dose of the Ebola virus.

As you may know, Royal Free Hospital in the UK announced last week that they dosed a relapsing Ebola-infected patient with GS-5734 following a request to Gilead for compassionate access. This is another example of how individuals at Gilead take initiative to address unmet medical needs.

I will now turn the call over to Paul Carter to provide a commercial update..

Thank you, John. I'm very pleased to provide an update on our commercial performance, which in the third quarter generated $8.2 billion in worldwide net product sales. U.S. product revenue reached $5.6 billion, which was in line with the prior quarter and up 33% compared to $4.2 billion for the same period in 2014.

European product revenue reached $1.7 billion, which is down 15% sequentially from the second quarter, mainly reflecting expected summer seasonality, but up 17% on a year-over-year basis despite absorbing a negative 11% foreign exchange movement. For the rest of the world, which includes Japan, product revenues were $958 million.

Beginning with hepatitis C, we continue to be pleased with the number of patients we are reaching with SOVALDI and HARVONI, which are now approved in 57 and 44 countries respectively. Total HCV revenue for the third quarter was $4.8 billion, a 2% decrease over the second quarter and a 70% increase year over year. In the U.S.

HCV product revenue totaled $3.2 billion, with HARVONI representing more than $2.5 billion of that amount. We saw a gradual downward trend in demand for the retail market during the third quarter but less so in the non-retail sector, largely due to increased spending by the VA. Since the beginning of the year approximately 190,000 U.S.

HCV patients started on treatment on a Gilead product. This represents a Gilead market share of more than 90% of HCV patients, reflecting the positively differentiated profile of HARVONI in particular.

In fact, HARVONI and SOVALDI continue to perform well in real-world settings, with safety, tolerability, and cure rates comparing favorably to those observed in our clinical studies. Several of these real-world data sets will be presented at the upcoming AASLD conference in San Francisco.

That being said, payer restrictions, including eligibility criteria based on fibrosis score or other patient characteristics, still remain to varying degrees.

We expect those restrictions could lessen over time as patient volumes become more predictable and payers recognize the benefits of treating less sick patients earlier and further benefiting from the value of just eight weeks treatment for many GT-1 patients. As I commented last quarter, we saw an unusually large number of patient starts in the U.S.

in the first quarter of this year, which reflected the rapid access to treatment for many warehouse patients. It is clear that the number of warehouse patients has now diminished. We anticipate that the rate at which new patients start treatment at the end of this year may be more indicative of the pace of new patient starts in 2016.

Turning to Europe, HCV revenue was approximately $870 million this quarter, with around 80,000 patients beginning treatment with HARVONI or SOVALDI since the start of the year. We saw strong demand for HARVONI, particularly in recently launched markets like Spain and Italy. In early launch markets like Germany, which as in the U.S.

saw an initial large spike in warehouse treatments in the first few months after launch, we are now seeing a lower but more predictable and consistent level of patient starts. In the UK, we're delighted that NICE, the government's health technology assessment agency, issued its final appraisal determination for HARVONI.

NICE has found HARVONI to be cost effective and recommends that the National Health Service fund HARVONI to treat the majority of adult patients with HCV genotype 1 and genotype 4 in England and Wales. On the reimbursement front, we have recently received expanded approvals in Austria and Sweden.

We also received broad approval in the Netherlands and Poland during the quarter and will launch SOVALDI and HARVONI in both countries next month. Looking ahead in Europe, we anticipate that our HCV revenues will be constrained by country-specific budgets rather than the number of patients in need of treatment.

We will continue to work hard to educate governments and other groups about the benefit of diagnosing and treating HCV-infected people as early as possible. Turning to Japan, we are very pleased with the execution of the launches of our two HCV products. HCV revenues for the third quarter were $454 million.

Since the launches of SOVALDI in May and HARVONI in September, through the end of the quarter we have generated sales of approximately $515 million in Japan.

The Japanese Society of Hepatology has recently updated HCV treatment guidelines to reflect HARVONI as well as SOVALDI in combination with ribavirin as first choice in treatment for patients with genotype 1 and genotype 2 respectively.

To conclude my comments on HCV, we recognize that there remains a huge unmet medical need around the world and that just a small fraction of diagnosed patients have been treated so far, even in the early launch markets. A key objective for Gilead moving forward is to bring diagnosed and undiagnosed patients into care.

It's clear that governments, healthcare systems, policy makers, payers, patients, and healthcare advocacy groups recognize the opportunity to treat many more people now that we have simple, safe, and highly effective medicines for HCV.

We're working together with them on a number of fronts, with the aim of bringing all diagnosed yet untreated patients into care over time while recognizing capacity and budget constraints. We're also working on programs to encourage more screening and increase the level of diagnosis and subsequent linkage to care.

This is akin to the work we have done over the years with HIV in both the most developed and the poorest countries, where step by step we have seen great progress.

Today we have Gilead teams around the world focused on collaborating with these diverse groups and supporting their efforts towards a long-term ambitious goal of controlling and possibly eliminating HCV.

Indeed, we have several collaborations in different countries and different settings that aim to demonstrate that upscaled HCV intervention and treatment can be highly impactful to individuals and public healthcare systems.

In conclusion, we see progress, encouraging trends, and remain highly confident in the long-term sustainability of the HCV market in the United States, Europe, Japan, and many other countries around the world.

Now turning to HIV, this quarter revenues increased 7% year on year to $2.9 billion, as our TRUVADA-based franchise continues to hold its market leadership position. In the U.S., revenues were more than $1.9 billion for the third quarter, a 16% increase from a year ago.

Underlying prescription demand remains strong for both STRIBILD and COMPLERA, with year-on-year growth of 44% and 14% respectively. During the quarter, seven out of 10 patients initiated treatment with a Gilead regimen. HIV revenue growth also benefited from renewed purchasing from the VA and a slight increase in wholesaler inventory.

In Europe, HIV revenues were $715 million for the quarter, down 4% from Q2 and 12% year over year, due to foreign exchange impacts and mandatory price cuts. However, prescription volume growth remains strong.

EVIPLERA and STRIBILD are the number one and number two treatments respectively for treatment-naive patients in the five largest markets in Europe. These single-tablet regimens are maintaining strong franchise share in the face of competition.

Looking to the future of HIV, John already gave a detailed account of where we stand on the regulatory front in bringing our TAF-based treatments to market. And I can say that the Gilead commercial organization is focused on ensuring a successful launch. We're excited about and prepared for the launch of GENVOYA, or E/C/F/TAF, as early as next week.

In closing, we are very pleased with the commercial results for the third quarter, and I'll now turn the call over to Robin..

Thanks, Paul, and good afternoon, everyone. We are pleased to report third quarter results, with non-GAAP diluted EPS of $3.22 per share for the third quarter, up 75% year over year. Total revenues were $8.3 billion, up 37% year over year.

Net product sales for the third quarter were $8.2 billion, up 38% year over year, driven by the launch of HARVONI across various geographies, continued growth of SOVALDI outside the U.S., driven primarily by Japan, and increased sales of our newer HIV single-tablet regimen. U.S.

net product revenues during the quarter have benefited from strong VA purchases following allocation by Congress of $500 million in additional funds for HCV treatment. Non-GAAP product gross margin was 90% for the third quarter of 2015 compared to 87% for the same quarter of 2014.

Gross margin benefited from changes in product mix, including a year-over-year decline in ATRIPLA sales, which have a lower margin, and an increase in HCV product sales.

Turning to expenses, non-GAAP R&D expenses were $713 million for the third quarter, up 22% compared to the prior year due to the continued progression of our clinical studies, particularly our HIV TAF-based programs.

Non-GAAP SG&A expenses were $850 million for the third quarter, down 4% compared to the prior year, primarily due to a cumulative catch-up of the branded prescription drug fee in the same quarter last year, partially offset by higher expenses associated with the growth of our business, including our commercial expansion to support our HCV products.

Turning to our balance sheet, we ended the third quarter with $25.1 billion in cash and investments, a sequential increase of $10.4 billion. During the third quarter we issued $10 billion of senior unsecured notes and generated cash flow from operations of $4.1 billion.

The approximately $1.6 billion sequential decline in operating cash flow is due to the timing of cash payments related to current liabilities, which include rebates associated with HARVONI sales.

Recall that during our Q1 earnings call, I mentioned that unpaid rebates associated with the launch of HARVONI may impact future cash flows as they are paid out. We continue returning capital to our shareholders through share repurchases and dividends. During the quarter we repurchased 28 million shares for $3.1 billion.

As of September 30, we had $11.1 billion remaining under our current share repurchase plan and remain active in purchasing shares. Through our repurchase program, we have reduced our diluted shares outstanding to 1.5 billion.

Shareholders received a cash dividend of $626 million in September, and this afternoon we announced our Q4 2015 quarterly cash dividend of $0.43 per share. In total, in the first nine months of 2015, we have returned more than $8 billion in cash to shareholders in the forms of dividends and share repurchases.

Including our Q2 2015 warrant settlement of $3.9 billion, total cash returns to shareholders have exceeded $12 billion year to date.

Finally, in regard to full-year 2015 guidance, which is outlined on slide 45 of the earnings deck, we are increasing our net product revenue guidance, and now expect product sales to be in the range of $30 billion to $31 billion. All other components of our 2015 guidance remain unchanged. In summary, Gilead had another successful quarter.

We believe our strong financial position and our future cash flows provide us with financial flexibility and support our pipeline growth and take advantage of external opportunities as they may arise. Thank you, and we look forward to updating you on our progress during our next call. We would now like to open the call for questions.

Operator?.

Thank you. And our first question comes from Mark Schoenebaum of Evercore ISI. Your line is now open..

Hi, guys. Thanks for letting me have the first question. I really appreciate it. And, John Martin, it was nice to see you a couple weeks ago in California. I wanted to ask about GS-9883. Maybe you talked a little bit about this in the prepared. I had to hop on and off. But it looks like that has been accelerated. This is the unboosted integrase inhibitor.

It looks like that's been accelerated. I looked back at your slide deck from last quarter and you were just talking about viewing the Phase 2 data around the end of the year. So I was wondering if you could talk about that product.

What gave you the confidence to move into Phase 3 because this is obviously transformative to the HIV business once you combine it with TAF? And what is the IP on GS-9883? When should we model a loss of exclusivity for GS-9883? Thank you..

So, Mark, I'll answer the first question. So we have Phase 2 data. We had discussions with FDA. They have accepted our plan, so it will be two studies. One will be, as we call it, a single variable experiment, so we compare GS-9883 to dolutegravir in the background of F/TAF. And the other one will be a double variable experiment.

We'll compare the two single-tablet regimens, so TRIUMEQ versus GS-9883 F/TAF single-tablet regimen. And so we hope to enroll the study by the end of this year, so it's all....

Start enrollment..

Start enrollment, so it's all fast forward..

And the IP?.

Mark, it's a good question. We're scrambling right now because I don't have that one in front of me. So it's a fairly recent invention from Gilead..

Okay..

So I think it's pretty far out there, but we'll get that number out for you as soon as we can..

And the plan is to combine this with TAF and whatever, and you would have a single-tablet regimen unboosted, with the most desirable new TAF through presumably 3030 or so?.

Correct..

2030..

Not 3030, yes..

Okay, I'll let everybody else ask about HCV..

But you're correct. It's going to be an STR. And because of the amount of API, the active pharmaceutical ingredient in that tablet, it's in fact going to be one of the smaller STRs available, and we're quite excited about it..

It's smaller than a single-tablet regimen, yes..

Yes..

And does this compound have any known advantages over the current unboosted integrase out there that you're willing to talk about? And then I'll stop..

Mark, I'm not sure clinically if it will have any advantages. It has some slight advantages over in vitro if systems proved out..

Thank you, Norbert. Okay, thank you..

Thank you, and the next question comes from Geoff Meacham of Barclays. Your line is now open..

Good afternoon, guys, good quarter and thanks for taking the question. I've asked this before on hep C, but is there anything you guys can do to further incentivize payers to cure more F0-F1? I look at the fibrosis data on slide 25, and it looks to be going the wrong way when you compare that to Q1 or Q2.

And a related question, just from last week, given label changes from your competitor, do you guys anticipate going back to payers if formulary status for HARVONI or SOVALDI wasn't as favorable? Thanks..

Hi, Geoff. So on the first question, we still see, as you recognize in the chart, very high levels of restrictions still through F0 and F1 patients, and we see this in a formal way in the contracts that we're working with.

But we also see it qualitatively when we talk to doctors where, dependent on insurance company, doctors I think in some cases don't even bother to write prescriptions because they know they're going to be rejected. And we do see the rejection rates, and some of them are quite high.

But I think we just need to keep encouraging our partners to try and treat earlier and consider treating less sick patients.

And I think as we see these patient flows – and this is pretty much the same answer I gave last time as well, I'm afraid – but as we see patient flows begin to stabilize and become more predictable, that does work better with the payers and the PBMs' models. So again, I hope that will encourage them to consider treating people earlier.

And of course finally, they do get much better value, especially for the less sick GT-1 patients if they treat for eight weeks. So we hope all of that will continue to encourage them, but it is a bit frustrating, I agree with you..

Geoff, the second part of your question is will the label update from our competitor allow us to go back in the contracts, and I would say that's really not the philosophy here. I think people who are choosing between us and the competitor have to make decisions on behalf of the plans, their ability to pay, and the patients that they want to treat.

And it would really be up to them to look at the level of access that they want to give, because frankly, the 2016 contracts are all in place.

Those have been negotiated, and the payer – it's really – we've left it up to them to determine the level of access that they would want to give to us versus them, and as Paul pointed out, also the level of access they're willing to give to patients with lower fibrosis scores.

So I'm sure every new data set that comes out allows them to rethink a position. But from where we are right now, I don't see any major changes occurring..

Maybe I can just add to on that. We are very happy, as I mentioned in the script, that plenty of real-world data sets are coming out and really do I think hopefully give payers the confidence that investing in relatively expensive medicines is worthwhile because of the cure rates and the tolerability and safety profile.

So the more real-world data sets that come out, we hope that will be encouraging. And finally, yet again I'd take the opportunity to say that Gilead believes in making sure that prescriptions are in the hands of physicians and their patients and not forced upon them by exclusive contracts. So all of that we hope will encourage perhaps a rethink..

Got you. Thanks, guys..

Thank you. And our next question comes from Matt Roden of UBS. Your line is now open..

Great, thanks very much for taking the question; congrats on a nice quarter here. Paul, you mentioned bringing the undiagnosed into care. We've seen some data that's showing pilot screening projects by various public and private parties that has increased the identification of undiagnosed patients and the linkage to care.

So I guess the question is how is the screening effort going to be handled going forward? How is it going to be scaled up? And do you see any tangible evidence that the screening has brought more patients into care over the past year? And then lastly, I think the Department of Health and Human Services wants to get to 66% of the U.S.

hep C population diagnosed by 2020. Do you think that's achievable? Thanks..

We are very, very busy behind the scenes. In fact, we just had a conference here locally last week with a number of partners that we're working with. We have a program called FOCUS. We have partners with about 100 different external organizations across I think 18 cities so far across the U.S.

And the objective here is increasing diagnosis with various programs around screening and then importantly linkage to care. And there's a whole list of programs that we've been hearing about their initial work.

One of the things that is quite surprising I think to everyone is that the levels of prevalence, albeit in fairly high targeted areas, have been way higher than people anticipated, so roughly double in fact the numbers that people have expected. As for the DHHS question, I can't really comment on that.

But there is a lot of work going on out there and because I think of the simplicity of the treatments and the very high levels of SVRs we're seeing, people are getting more and more encouraged to address the problem..

Okay. Thanks very much..

Thank you. Our next question comes from Michael Yee of RBC Capital Markets. Your line is now open..

Hi, thanks.

Following up on some hep C, on slide 25 where you nicely break out the scripts which I think are written, can you take that a little bit further and maybe quantify what you think are the breakdown of fibrosis for scripts filled? Is that primarily all F3/F4? And I guess to further move beyond that, what are the one or two or three things you're trying to work with the payers and trying to understand? I guess John said that he didn't really expect it to change anytime soon.

So should we expect to continue the current trends that we're seeing with U.S. scripts as they are, and where do you think that bottoms out to? Thanks..

So the slides you're looking at, the top right-hand corner is the fibrosis scores. And I just want to emphasize the title on the top here. This is intent to treat. So essentially, this is prescriptions that are written but not necessarily filled.

And what we do know is that although it suggests that half the scripts are F0 through F2, we know that a lot, probably the majority of those F0 through F1 at least are not being filled, certainly by some of the payers who are easy to identify. In the F2 area, it's a borderline situation. We know this quantitatively.

But again, we also know it qualitatively through our sales force and their interactions with physicians, where it's still quite hard work to get F2 patients through the prior authorization process and time consuming and bureaucratic. So it's a situation that's frustrating for everyone.

As I said in my comments just a couple of minutes ago, I think that as we see treatment flows becoming more predictable, as we see more real-world data with the products building a higher level of confidence, that SVR rates and safety profiles are good, that we hope that payers will start to relax criteria around fibrosis scores and other patient characteristics that we've seen acting as barriers to treatment.

And we will continue, as we have done and will do, to talk closely with our payer partners and try and encourage them to treat more people and reduce these barriers to treatment..

Thank you. And our next question comes from Brian Abrahams of Jefferies. Your line is now open..

Hi, thanks for taking my question and congrats on a nice quarter. You recently reported some promising data for the SOF/VEL regimen, including in genotype 2 and genotype 3. I'm wondering.

How should we be viewing this as a potential revenue expander in those genotypes? Should we think about that regimen as potentially increasing market share because of its better convenience, you guys potentially having better pricing power because you're eliminating the ribavirin component, or is it more likely to be positioned as really a defense against competitive entrants going forward? Thanks..

Thanks, Brian, it's John Milligan.

So just to be clear, so when we thought about this product, we thought about it being a better alternative medically for patients with genotype 2 through genotype 6, and that includes some patients in the United States, but the vast majority of patients who fall in that category are of course outside the United States.

With HARVONI maintaining its place in genotype 1 particularly because, as Paul was alluding to, we have such a very strong safety data set now on HARVONI, including over 600,000 patients who have been treated with SOVALDI now in various forms; the fact that we have the eight-week option for patients, which provides quite a savings for the appropriate patient, and as you've seen, very high cure rates in real-world settings at that eight-week regimen.

So I do think there are going to be some patients who would benefit from the shortening of duration, not having to go to 24 weeks in some cases, not having to have ribavirin in other cases, and allowing us to then have a very good option for those patients genotype 2 through genotype 6.

I don't think there's a big warehouse effect of patients waiting for that, but I do think this provides a very important option for patients who would want a pan-genotypic option and for doctors who may not be able to genotype as effectively.

And so I think it's a very important breakthrough for us and will allow us to continue the longevity of the franchise more so than provide any sort of bolus effect up front..

That very helpful, thanks..

Thank you. And our next question comes from Cory Kasimov with JPMorgan. Your line is now open..

Hey, good afternoon, guys. Thanks for taking the question. Obviously, M&A has been and continues to be a big topic of conversation.

However, given the volatility in the markets since your last quarterly call, I'm wondering if you've detected a shift in the receptivity from other companies with the valuation resets many have seen, basically curious whether or not you think this kind of market makes it harder to get a deal done. Thanks..

I guess there's an implication that we've been out making offers. So I'd say I don't think the market really changes all that much dynamically in terms of M&A activity. And so I can't tell you people's expectations have changed based on valuation changes, but I've seen these cycles go up and down over the years.

And when there's a deal to be put together and it's timely, it can be done. And so I don't think it changes the overall outlook for M&A at all. I just think from my perspective, it's about the same as it was at the beginning of the year..

Okay, thank you..

Thank you. And your next question comes from Phil Nadeau of Cowen & Company. Your line is now open..

Good afternoon, thanks for taking my question. Paul, in your prepared remarks, you suggested that the volumes that we see at the end of this year will be more indicative of what to expect in the U.S. in 2016. That suggests that we probably will see a stabilization of script trends. I'm curious why you think that.

What data points do you have that suggest that's likely to happen? And also, what makes you think that what we see the end of this year is going to be extrapolatable through the end of next year?.

Hi, Phil. Thanks. First of all, I'd say you see the same data that I see with the weekly scripts. What you don't see is the non-retail sector perhaps, and you may not see what we call NBRx, which is the new-to-brand, which is essentially the new starts data. I think that we're fairly confident.

We've now seen a flattening out of the trends of patient new starts in the U.S. As I said earlier, I've said a couple times now that we saw a very strong first quarter, which really was reflecting the warehousing of patients waiting for HARVONI in the U.S., and HARVONI was such a step-change for GT-1 patients.

But we've had a fairly flat two quarters in terms of patients starting on sofosbuvir products. In quarter four last year, just to put it in perspective – and HARVONI was already launched then, by the way, we saw about 45,000 patients being treated. Then we had this big bolus in quarter one, about 70,000 patients.

In quarter two we saw about 62,000, and in quarter three we've estimated about just around 60,000. So it's flattening when you add the retail and the non-retail together. And as I said, as we go into quarter four, I think we can expect that to be fairly stable as we go into next year.

Having said that, and again, from my prepared remarks, I emphasized that we are doing a lot of work across the country and around the world to work with governments and other stakeholders to really try and encourage earlier treatment, more screening, and so on, so that we can extend this hepatitis C business for many, many years.

And we think that's going to be the case because even now we've treated just a tiny, tiny fraction of the diagnosed patients and hardly touched the undiagnosed area in terms of volume and potential. So we're very confident of the future, but 2016 I think will be a more stable year in the U.S..

And just so I'm clear, does your comments about 2016 rely in any way on an opening of restrictions in who gets reimbursed in the U.S., or is this simply restrictions stay the same and patients start working through the system?.

I think it's going to be patients working through the system, but I think we're fairly optimistic that over time, and it may take a little bit longer time than shorter time based on what we've seen so far, there are fibrosis scores and other patient characteristics which would represent barriers to start treatment will be relaxed somewhat.

And it's self-fulfilling in a sense that predictable and stable patient flow works with the business models of the payers. And I think they will start to feel more comfortable about relaxing constraints. So gradually, we should start to see more patients coming through..

And just one last follow-up. In Europe, you said that the volumes are more dependent upon the reimbursement levels of governments.

Can you give us some sense of where we are bumping up, where we are in comparison to the reimbursement limits that have been set by governments? Are we now bumping up against those constraints, or is there still more room to come?.

We have to be fairly specific by country, and looking at Europe in aggregate doesn't necessarily paint the full picture. So let me just talk you through quarter three and what's being happening I think in Europe. So we've seen early launch markets like Germany begin to stabilize at lower levels but more consistent levels.

And that's a parallel somewhat to what we saw in the U.S. So that would be Germany and France being the early launch markets. We've then seen markets that have high prevalence and ambition to treat a lot of patients like Spain and Italy really starting to address their warehouse patients in quarter two and starting to go into quarter three.

And we've seen, I would say, I would suggest somewhat of a spike in those countries, and we would expect those going forward to come down to lower levels but more consistent levels. And then we started to see new markets like the UK coming onstream during quarter three.

A confusing aspect in quarter three in Europe is because there's a very high level of vacations in July and August, not just for patients but for treaters and wholesalers and so on, so there are a few moving parts there. Going forward, I would expect Europe to start to flatten out and stabilize somewhat.

But of course, as I said, there are different dynamics country by country. And I mentioned in the script a couple of the smaller countries who haven't even launched yet but we will be launching in the next quarter..

That's very helpful, thank you..

Thank you. And our next question comes from Wendy Lam of Oppenheimer. Your line is now open..

Hi, guys. Thanks for taking my question. I may have missed this earlier in the call, but I was wondering what percentage of patients on HARVONI were on the eight- week regimen versus the 12-week regimen. I believe last quarter you said it was around 40%, and I was wondering if that has changed that much this quarter.

And just one quick question on simtuzumab, for the 48-week interim futility analysis this quarter, will there be any announcement of the results, whether they're negative or positive, or do we have to wait for the 96-week results? Thanks..

Okay, I'll answer the first question, which is the eight weeks regimen. So our estimate is about 40% of GT-1 patients in the U.S., which is similar to last quarter, have been on the eight weeks regimen. That hasn't changed too much.

If you look at just the epidemiology and look at the GT-1 patients who would qualify for eight weeks, that's more like 70% of those. So I hope that answers that part. And I'll hand you over to Norbert..

Wendy, I would say the answer to the 48-week is that there won't be an announcement. We have an agreement with FDA. The endpoint in that study is HVPG, Hepatic Venous Pressure Gradient, and the FDA felt that the 48-week data would really not suffice for an approval, that we needed 96-week data.

Of course, there could be the possibility of some spectacular results like prevention of SMEs or something like that, or the opposite also. There could be a surprise about harm, in which case the DSMB could make a recommendation to either stop the study or unblind it, but I think that's unlikely..

Okay, thanks, guys..

Thank you. And our next question comes from Ying Huang of Bank of America Merrill Lynch. Your line is now open..

Hi, thanks for taking my questions as well. First of all, I think John was saying that the 2016 contracts with the payers are pretty much in place and there's no major change in access. I was wondering what would prompt the payers to actually provide wider access.

Would lower pricing give you guys more access? And in relation to that, there's a third player coming into the market for HCV in January.

What's your view of the pricing trend in marketing 2016?.

So as I said earlier – this is John Milligan. As I said earlier, the contracts have been finalized for 2016. That always happens earlier in the year. In fact, we're already starting to talk a little bit about 2017 with the payers. And they have a range of options, much like they had in the past.

They can choose what level of rebate they would want to have based on their ability to open up access. And I think 2015 was a bit of a shock to the system with the warehouse patients. And as Paul implied, next year we think will be a much smoother base from which we can then try to impact the growth of the overall market.

And so they will have options based on how they negotiate with their clients to open up access or not for next year. So that will be an ongoing discussion with them and within their internal groups as well as the data emerge on this. So we feel very positive about this in the long term.

And it sometimes just takes data and time for these things to work themselves out. And with regards to – yes, go ahead..

Just quickly, I know you guys made a 46% gross-to-net announcement.

Probably you cannot give us a quantitative answer, but qualitatively speaking, can you talk about the gross-to-net adjustment trend in Q3 versus Q2 and Q1?.

No, we're not putting that number out there for the gross-to-net. I think one thing to focus on is what Paul had said earlier. What we are seeing is a trend towards shorter therapy, so a lot fewer use of the 24-week option for patients and then a lot of the eight-week option for those patients.

So that is a real benefit of driving the cost down by bringing in shorter care to the patients as well. And so that's what you would expect as the more sick patients in those categories work themselves through. You also had a question about competitors coming to market. I think we feel very strongly about our position in the market.

We feel very strongly about the value that we've been able to bring, and importantly, the safety database that we have that will give us a very strong position in the market regardless of who comes in, in the future..

Thank you..

Thank you. And our next question comes from Matthew Harrison of Morgan Stanley. Your line is now open..

Great, thanks for taking the question. So I wanted to ask – I saw on your milestone chart you're going to start a Phase 3 study for the triple HCV regimen you said in the fourth quarter of this year. So I'm wondering what you hope to achieve there.

I know you've looked at six weeks, eight weeks, and 12 weeks and what duration you think you're going to be going forward with and what impact you think that could have on the market. And then separately, if you're willing, could you quantify for us how big the VA tailwind was to you? Thanks..

Matthew, so our thoughts for the triple combination HCV regimen is twofold. First of all, we're going to do one study, and we still have to talk about all the details that will show – that will explore the utility of the triple combination regimen to be a universal salvage regimen.

So whatever you have failed before, whether it's non-nukes, PIs, or NS5As, this triple combination regimen will provide a universal salvage possibility. And the second thing we're exploring is eight weeks duration of therapy in various patient populations. And again, we're working with the FDA through all the details of that. We haven't decided.

The final decision has not been made, but those are our two-pronged approach.

And then the other question?.

Matt, you asked about the VA tailwind. And unfortunately, we're not able to share any details about prescribing habits or business in the VA, so I can't help you..

Okay, thanks very much..

Thank you. And our next question comes from Brian Skorney of Robert Baird. Your line is now open..

Hey. Good afternoon, guys. Thanks for taking the questions. I guess just on the hep C triple combo data, I know you said you have top line data out. The AASLD abstract only has data for six-week duration for the genotype 3 patients.

Can you just remind us if you're still exploring a six-week duration of treatment with this triple combo in other genotypes? And if so, in what context we should think about a shorter duration when we might see some data? And then just on the safety data that we heard about with Viekira this week, if Express Scripts' national formulary committee makes a determination to add SOVALDI and HARVONI due to these issues, will you insist that they pay gross price?.

Brian, I'll answer the first question. We are not exploring a six-week duration regimen anymore. And the reason is simply that our experience has been that it works for a subset of patients but not for a broader patient population.

If you look at cirrhotics or treatment-experienced patients, then the response rates, the SVR rates are not as high as they should be. And I want to remind you, you'll notice that the response rate – if you just get 90%, people won't accept that anymore.

It really has to be 95% or more, and we're not seeing that across a broad patient population with six weeks of therapy..

Does that mean that you're no longer pursuing the pan-genotypic protease inhibitor anymore too?.

That was the previous question, Brian. The pan-genotypic PI together with velpatasvir together with sofosbuvir, the triple is going to be a universal salvage regimen and potential universal eight-week duration therapy. That's what we're thinking, but not six weeks..

Brian, I think your second question was about what Express Scripts might do. Obviously, it's up to Express Scripts to figure out what they want to do given where they are. The national formulary, where there is exclusivity for the Viekira Pak, of course is about 15% of the covered lives of Express Scripts.

Obviously, we're open to discussions anytime they want to call us, but I have no idea what their thoughts would be. I have no idea how the label update would impact their business at all. That's up for them to decide medically what's the right thing to do for their patients, of course..

Brian, I would like to add something. If you looked at the six-week duration treatment would still be two prescriptions. It's not possible to package 42 tablets into a bottle and have that be one prescription. So that's another reason why six weeks is not as appealing. Eight weeks is the result of two prescriptions..

Great. Thanks, guys..

Thank you. And, Mr. O'Brien, we have time for one more question. And our final question comes from Alan Carr of Needham & Company. Your line is now open..

Hi, thanks very much. I wanted to come back to HIV and talk a bit about your thoughts on how well the HIV franchise is doing relative to V-regimens, better or worse than you expected? And then also to come back to GS-9883, what are your timelines there for wrapping up the Phase 3 and submitting the NDA? Thanks..

Okay, so let me just talk a little bit about the HIV franchise. So actually one of the encouraging pieces of news in the U.S. is that eight out of ten patients now are receiving a single-tablet regimen, which I think demonstrates that the concept of single tablet regimens is really very well established now.

TRIUMEQ has been doing well on its launch, and it has been taking some market share from Gilead, although seven out of ten patients new to treatment are receiving a Gilead product and six out of ten roughly are receiving a Gilead single-tablet regimen.

So the conversation in HIV having been focused somewhat on third agents over the last few years, we feel now is going to come strongly back to the backbone of these HIV single-tablet regimens. And really up until next week, TRUVADA has been well established as the standard of care backbone in these single tablet regimens.

But as of November 5, our PDUFA for TAF or F/TAF-based regimens, that changes, and F/TAF will be the standard of care backbone for single-tablet regimens going forward. So with the launch of GENVOYA next week, we are very confident that we will see a major milestone in the upgrading of HIV treatment.

And as John said earlier, because patients are living longer with HIV, have a lifetime of therapy, this is a major improvement for patients and a compelling data set that we're launching with, both for patients naive to treatment and for switch patients. And with switch patients, it takes time to get patients to switch.

It won't happen by itself but the commercial organization and the medical affairs organization in Gilead are very well prepared and very motivated and very excited about the launch. So we're very confident..

All right, thanks.

And then around GS-9883 timing?.

The timeline, so if we start enrollment at the end of this year, assume six-month enrollment, 48-week endpoint, that's middle of 2017, two months to write it up and submit and then another 10 months for review, so that gets us roughly into mid-2018 timeframe..

Great, thanks very much..

Great. Thank you, Candice, and thank you all for joining us today. We appreciate your continued interest in Gilead, and the team here looks forward to providing you with updates on future progress in future earnings calls. Thanks..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may now disconnect. Have a great day, everyone..