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Gilead Sciences Inc GILD
Q4 2009 Earnings Call Transcript

Transcript Call Date 01/26/2010

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences Fourth Quarter and Full Year 2009 Earnings Conference Call. My name is Katina and I will be your conference operator today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session. As a reminder, this conference call is being recorded today, January 26, 2010.

I would now like to turn the call over to Susan Hubbard, Vice President of Investor Relations. Please go ahead.

Susan Hubbard - IR: Thank you, Katina. Good afternoon, everyone and welcome to Gilead’s fourth quarter and full year 2009 earnings conference call. Very pleased you could join us today.

We issued a press release this afternoon providing results for the fourth quarter and full year of 2009. This press release is available on our Web site at www.gilead.com. We have also posted slides that outline the topics discussed on this call.

Joining me today are John Martin, Chairman and Chief Executive Officer; John Milligan, President and Chief Operating Officer; Kevin Young, Executive Vice President of Commercial Operations; Norbert Bischofberger, Executive Vice President of Research and Development and Chief Scientific Officer and Robin Washington, Senior Vice President and Chief Financial Officer.

We will be prepared to keep comments brief to allow more time for Q&A. I’d first like to remind you that we will be making forward-looking statements relating to future events, expectations, trends, objectives and financial results that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are based on certain assumptions and are subject to a number of risks and uncertainties that would cause our actual results to differ materially from those expressed in any forward-looking statements. I refer you to our Form 10-K for the year-ended December 31, 2008, Form 10-Qs for the first, second and third quarters of 2009, subsequent press releases and other publicly filed SEC disclosure documents for a detailed description of risk factors and other matters related to our business.

In addition, please note that we undertake no obligation to update or revise these forward-looking statements. We will be making certain references to financial measures that are on a non-GAAP basis. We provided a reconciliation between GAAP and non-GAAP numbers in the press release we just issued this afternoon and on our corporate website at www.gilead.com.

I will now turn the call over to John Martin.

John C. Martin - Chairman and CEO: Good afternoon, everyone and thank you for joining us today. With the completion of the fourth quarter, Gilead has closed out another year of exceptional commercial execution and financial growth. Total revenues for the fourth quarter crossed the $2 billion mark for the first time in our history and we completed the year having generated over $7 billion in total revenue. This growth was chiefly driven by the continued momentum of our antiviral franchise with record revenues of $1.6 billion and $5.8 billion for the quarter and year respectively.

Importantly, we generated operating cash flow of $955 million for the quarter and $3 billion for the year. I am also very pleased with the momentum of our pipeline programs during the past quarter. Norbert will speak about these programs in greater depth, but I wanted to highlight a couple of things.

As you know, Cayston, our product for the treatment of infections due to Pseudomonas aeruginosa in patients with cystic fibrosis was reviewed by the FDA’s Anti-Infective Drugs Advisory Committee back in December. The panel recommended 15 to 2 that the safety and efficacy data generated from the two pivotal trials support approval of the drug and unanimously voted that we have determined a right dose 75 milligrams given three times daily for this indication.

We await the PDUFA date of February 13th and are hopeful that the FDA will follow the recommendation of Advisory Committee. Cayston was approved last year in the European Union and Canada, and we have and will continue to make this product available to patients in the United States through our expanded access program while we work toward approval and commercialization.

In preparation for 2010, we completed our thorough review of our pipeline portfolio, which now includes the cardiovascular metabolic programs brought to us through the acquisition of CV Therapeutics in April of 2009. We are very enthusiastic about the early states work that is being done by our R&D team and now feel that we have both the commercial presence and R&D capabilities that will establish us as an important Company in this specialty cardiovascular space.

While we were disappointed that the second Phase III study of darusentan did not meet its primary endpoint, we quickly decisively came to the conclusion that this program should be discontinued, allowing us to redeploy our efforts and the funds that were earmarked to support this program to other more promising albeit earlier programs underway. I’m confident that we have in place the people and capabilities necessary to continue to grow across each of our therapeutic categories.

As you may know, a significant progress was made over the course of 2009 to increase HIV screening initiatives in the United States. First, in August 2009, the Veterans’ Administration adopted routine HIV screening. The VA is the single biggest provider of HIV care in the U.S.

In December, CMS announced that Medicare will now cover annual voluntary screening of those at risk for HIV infection as well as women who are pregnant. And California law now requires that private insurers must cover routine HIV testing, the first state in the nation to do so.

Since 2006 when the CDC issued the recommendation that all individuals between the ages of 13 and 64 should be screened for HIV as part of the routine healthcare; 16 states modified their laws in furtherance of the recommendations. Only six states still require specific written informed consent for HIV testing and we expect further progress on this front over the course of 2010.

In addition, the extension of the Ryan White Treatment Act adopted at the end of October will provide $2.3 billion in funding in fiscal 2010 with annual increases through fiscal 2013, and will help to ensure that patients in the U.S. who are diagnosed, brought into care and prescribed a therapy, do not face any financial barriers in obtaining access to treatment.

The Treatment Act also establishes for the first time a national goal administering 5 million HIV tests each year. On December 1st, World Aids Day, the U.S. Department of Health and Human Services released the revised treatment guidelines that now recommend all patients whose CD4 cell count fall below 500 copies per milliliter should start antiretroviral therapy.

As Gilead’s products, mainly Atripla and Truvada, are the cornerstones of first-line therapy capturing more than 85% of new starts. We see this as an important opportunity along with the drive to screen more individuals to continue to grow the number of patients on a Gilead-based regimen. In fact, treatment guidelines in all our major markets favorably position Gilead’s products and are moving towards starting patients on treatment earlier in their disease.

And finally, we continue to make progress in our efforts to remove barriers to access to all patients around the world who could benefit from our therapies. We announced in November an agreement with GSK to commercialize Viread for the treatment of HBV in adults in five countries in Asia. This is a part of the world where HBV has taken the greatest toll with prevalence greater than 8% in most countries.

Under the agreement, Gilead will retain exclusive rights for commercialization of Viread for HBV in Hong Kong, Singapore, South Korea, and Taiwan. In China, Glaxo will have the exclusive commercialization rights and registration responsibilities for Viread for Hepatitis B Virus. Each company will pay royalties to the other on sales of the product in their respective Asian territories.

I will now turn the call over to Robin to review our financial results.

Robin L. Washington - SVP and CFO: As John mentioned, the fourth quarter of 2009 was another very successful quarter and completes another record year for Gilead. Total revenues, which include product sales and royalty, contract and other revenues were $2 billion, a 42% increase year-over-year. For the full year, total revenues were $7 billion, up 31% over 2008, driven primarily by the continued strong growth in our antiviral franchise.

Our net income for the fourth quarter was $802 million or $0.87 per share. For the full year, our net income was $2.6 billion or $2.82 per share. Our non-GAAP net income for the fourth quarter was $864 million or $0.93 per share, representing a year-over-year increase in net income and EPS of 46% and 49% respectively.

For the full year, our non-GAAP EPS was $3.06 per share, a 40% increase over our 2008 non-GAAP EPS of $2.19 per share. As a reminder, our non-GAAP income and net income per share exclude the impact of acquisition-related expenses, restructuring expenses and stock-based compensation expenses net of tax.

Product sales for the quarter were $1.8 billion. Antiviral product sales grew to $1.6 billion, up 27% year-over-year and 10% sequentially. Atripla contributed $698 million to our antiviral product sales, representing the first quarter that Atripla sales were higher than Truvada sales. Atripla sales increased 50% year-over-year and 15% sequentially, resulting from the continued uptick of the products in the U.S. and Europe.

The efavirenz portion of Atripla, which was purchased from BMS at its estimated market price and reflected in cost of goods sold, was approximately $264 million. Truvada sales contributed $671 million to our antiviral product sales, up 19% year-over-year and 8% sequentially due primarily to sales volume growth in both the U.S. and Europe.

Viread sales were $178 million, representing an increase of 10% year-over-year and 5% sequentially, driven primarily by sales volume growth of Viread in the treatment of patients with HBV infection in the U.S. and Europe.

Letairis sales were $52 million, an increase of 44% year-over-year and 9% sequentially, driven primarily by sales volume growth in the U.S. Ranexa sales were $46 million, representing a decrease of 6% sequentially.

Finally, sales of other products were $159 million, representing a decrease of 2% year-over-year and an increase of 2% sequentially.

Foreign currency exchange had a net favorable impact of $14 million on revenues when compared to the same period last year. On a sequential basis, foreign currency exchange had a favorable impact of $5 million.

Our royalty contracts and other revenues for the fourth quarter were $228 million, an increase of $188 million year-over-year and an increase of $76 million sequentially. Both the year-over-year and sequential increases were primarily driven by increased Tamiflu sales related to pandemic planning initiatives worldwide.

Royalties received from Roche for Tamiflu sales and recognized in our revenues in the fourth quarter were $194 million. These royalties, which are paid one quarter in arrears, reflect a royalty rate of approximately 16% as applied to Roche’s net sales of Tamiflu during the third quarter of 2009. Roche is scheduled to report their full year 2009 earnings on February 3rd.

The following discussion of our margin and accentuated items are on a non-GAAP basis and exclude the impact of acquisition, restructuring and stock-based compensation related expenses as applicable.

Product gross margin was 75% for the fourth quarter compared to 77.4% for the same quarter of last year and 76.5% for the third quarter of 2009. The year-over-year and sequential decreases were due primarily to the higher proportion of Atripla sales, which include the efavirenz component at zero gross margin.

Operating margin was 56.4% for the fourth quarter compared to 52.5% for the same quarter last year and 53.9% for third quarter 2009. Our year-over-year and sequential operating margins were favorably impacted by the increase in Tamiflu royalties as I discussed earlier. We continue to see improvements relative to 2008 in our core operating margin, which excludes Tamiflu and efavirenz.

R&D expenses were $211 million for the quarter, an increase of 14% on a year-over-year basis and a decrease of 13% sequentially. The year-over-year increase was due primarily to additional hiring and increased clinical study activities to support the growth of our business. The sequential decrease was primarily due to the fact that the Tibotec R&D expense reimbursement during the third quarter.

SG&A expenses were $223 million for the quarter, an increase of 28% on a year-over-year basis and an increase of 12% sequentially. The year-over-year and sequential increases were due primarily to higher headcount and expenses associated with expanded sales, promotional and infrastructure expenses in our cardiovascular franchise.

In addition, the sequential increase was also due to promotional spend seasonality in our international operations. Other income and expenses reflect a net expense of $6 million for the fourth quarter compared to a net income of $3 million for the same quarter last year, due primarily to lower year-over-year investment yields.

Sequentially, other income expenses were $3 million unfavorable due primarily to unfavorable foreign exchange translation gains and losses and increased cost of hedging. Our effective tax rate for the full year of 2009 was 25%, which was lower than our 2008 effective tax rate of 26.3%.

Our effective tax rate for the fourth quarter of 2009 was 24.6%. The year-over-year and sequential decreases were driven primarily by increased earnings in lower tax jurisdictions as well as the fourth quarter 2009 resolution of certain tax audits with tax authorities, partially offset by the revaluation of certain state tax assets related to the integration of CV Therapeutics.

Next, I wanted to update you on our restructuring activities. As we discussed during our third quarter call, we completed a restructuring plan to realign the cardiovascular operations of Gilead and CV Therapeutics. We incurred approximately $52 million expenses in pre-tax restructuring expenses in 2009 with $19 million incurred during the fourth quarter. We expect to incur additional restructuring expenses of approximately $20 million through 2010.

We generated $955 million in operating cash flow during the quarter and paid off the remaining $200 million of the credit facility that we accessed in the second quarter. We also repurchased 5.3 million shares of our common stock at a cost of $242 million, fully utilizing the remaining funds under the $3 billion share repurchase program authorized by our Board in October 2007. In aggregate, we purchased 63 million shares under this program.

We entered 2010 with a strong balance sheet position. Our cash and marketable securities portfolio of $3.9 billion allows us the continued flexibility to pursue opportunities to expand our business and return value to shareholders.

Now, I would like to turn to our financial guidance for the full year 2010. You can locate all of our guidance for 2010 on Gilead’s corporate website. Our product sales guidance for the full year 2010 is a range of $7.6 billion to $7.7 billion, which reflects a 17% to 19% increase over 2009 product sales.

Factors that may have an impact on our business include, but are not limited to, U.S. healthcare reform, international government pricing pressures and the potential for continued volatility in foreign currency exchange rates. Please note that the non-GAAP product gross margin and operating expense guidance provided to you excludes the impact of acquisition, restructuring and stock-based compensation-related expenses where applicable.

Our non-GAAP product gross margin guidance for the full year 2010 is a range of 75% to 77%. For expenses, we expect non-GAAP R&D expense for the full year 2010 to be in the range of $850 million to $870 million. We expect non-GAAP SG&A expenses for the full year 2010 to be in the range of $900 million to $920 million. As always, Gilead remains committed to conscientious expense management to sustain the continued profitable growth of our Company.

Our effective tax rate guidance for the full year 2010 is expected to be in the range of 25% to 26%, assuming the federal research tax credit is extended. And finally, we are anticipating the full year 2010 diluted EPS impact of acquisition, restructuring and stock-based compensation-related expenses to be at a range of $0.27 to $0.30 per share. Additional details can be found on our corporate website.

At this point, I would like to turn the call over to Kevin, who will discuss our commercial highlights for the quarter.

Kevin Young - EVP, Commercial Operations: Thank you, Robin. I am very pleased to discuss with you our outstanding commercial performance for the fourth quarter. I’m particularly proud to highlight the U.S. sales and marketing organization reaching approximately $1 billion in sales during the quarter.

Fourth quarter total U.S. antiviral product sales were a healthy $889 million. This result was led by our HIV products with Atripla contributing $466 million, up 32% year-over-year and Truvada with $318 million, up 25% year-over-year. I am pleased to report that in the fourth quarter for both Atripla and Truvada prescription growth remained extremely robust.

This is reflective of our market share position and the flow of new patients coming onto HIV therapy. It is also important to point out that these trends do not represent the impact of new DHHS guidelines that occurred in December.

Non-retail sales, large components of which are direct purchases by State AIDS Drug Assistance Programs, were in line with prescription trends, albeit at a higher pace. We currently have no waiting lists in the large HIV states and the 2009 extension to the Ryan White Treatment Act provides federal dollars to help fund ADAP for the next four years.

Absolute inventory levels for the fourth quarter stayed relatively flat compared to the third quarter across our three major U.S. wholesalers, which account for over 80% of our U.S. product sales. During the fourth quarter, we signed revised inventory management agreements with these three U.S. wholesalers.

New IMAs establish (abundant) days on hand and removes the buying option around price increases. While this provides a certain level of inventory consistency at the wholesaler level, we cannot account for any downstream purchase variability that may occur, particularly in the non-retail segment of the market.

As a reminder, patient data for the U.S. (lags) our financial results by one quarter. In the third quarter of 2009, the numbers of patients treated with antiretroviral therapy grew by 4% on a moving annual total basis to approximately 578,000 patients.

Atripla, the most prescribed regimen in HIV, had 189,000 patients on therapy or one-third of all treated patients and captured approximately 53% of treatment na�ve patients. Importantly, safety and efficacy data from study 073 were recently added to the Atripla label, which will allow us to actively promote the switching of patients to Atripla. This remains an important contributor to future growth as there are over 100,000 patients in the U.S. still on either Combivir or Epzicom at the end of the third quarter 2009.

Truvada continued to add patients with 212,000 on therapy or 37% of all treated patients, clearly maintaining its position as the backbone of choice for antiretroviral therapy in the U.S. Total Truvada or Atripla together with Truvada continued to account for approximately 85% of patients new to therapy, and were the components of all of the top six prescribed regimens in HIV.

It is also encouraging to see the growth of the (indiscernible) agents in the na�ve setting is coming in tandem with Truvada. Approximately 81% of Raltegravir patients and 91% of Darunavir patients were co-prescribed with Truvada.

Our HIV products in Europe continued to perform well, led by Truvada, which contributed 311 million of revenue in the fourth quarter, up 15% from the same period in 2008. Atripla contributed revenues of $216 million during the fourth quarter, up over 100% from the same period in 2008.

Despite the popularity of the protease inhibitor class in France in its first six months, the uptake of Atripla has matched that of the U.S. And in November, Atripla market share in France overtook that of Combivir and is quickly closing the gap on Kivexa.

We now have the number one and number two HIV brands in Truvada and Atripla in Germany, Spain, the U.K. and Italy. And early indicators suggest that we will soon reach this status in France as well.

During the fourth quarter of 2009, we launched Atripla in Belgium and at the beginning of this year, Australia. We anticipate obtaining reimbursements approval for Atripla in Switzerland during the second quarter of 2010.

At the end of the third quarter, the big five countries of Europe had approximately 287,000 patients treated with antiretrovirals, representing a growth rate of 6% on a moving annual total basis. Approximately 23% of patients receiving Atripla converted from Truvada plus Sustiva in the third quarter 2009, whilst 33% were switches from other regimens and 44% were na�ve to therapy.

Total Truvada increased its share to approximately 76% of treatment na�ve patients, up from approximately 71% in the fourth quarter of 2008, while Kivexa’s share dropped to 10% in the fourth quarter of 2009, down from 14% in the fourth quarter of 2008.

Now, turning to our U.S. hepatitis franchise, during the fourth quarter, we began executing a significant modification to our HBV promotional efforts centered around the addition of a new group of sales representatives focused on the largest Asian communities, namely Los Angeles, New York and San Francisco. By the end of this quarter, we will have a field team 50% larger than in 2009. We believe these additional resources will be the catalysts for driving growth in the diagnosis and treatment of hepatitis B.

Viread continued its strong uptake during the fourth quarter where HBV prescriptions grew by 17% quarter-on-quarter, more than offsetting any decline in Viread HIV total prescriptions and generating a 4% quarter-on-quarter increase in total Viread prescription volume across both indications.

The latest December monthly data point for total HBV prescriptions have Viread at an estimated market share of approximately 33% and Hepsera at 20%. As of the most recent data point in October 2009, Viread had achieved a 41% na�ve patient share in the HBV market, whilst Entecavir’s na�ve patient share continued to decline to 36% versus a peak of 49% in April 2008. Later this year, we anticipate having the 144-week data from our 102 and 103 studies added to our label. As a reminder, those data were presented at the American Association for Study of Liver Disease in October last year.

In Europe, Viread for HBV is now reimbursed in 18 countries with late fourth quarter 2009 launches in Belgium and Australia. Poland and Switzerland launches are anticipated in the first quarter of 2010. Viread has continued to build on its lead over Entecavir in Germany, Spain, and the U.K., our first countries of launch.

As of October 2009, Viread’s HBV market share in Europe was estimated to be 19% versus 7% in October 2008. In Turkey, where the Ministry of Health has given Viread a priority position ahead of Entecavir for patients who fail lamivudine, as of December 2009, we have achieved a 22% market share, up from 10% in December 2008.

And finally, in the interest of time, I will concentrate my cardiovascular comments on Ranexa. Total U.S. sales for Ranexa during the fourth quarter were $46 million. This figure does not include any booked tablet sales to Menarini, our licensee for Ranexa in Europe. It is also important to highlight the comments made in the third quarter earnings call when we stated we have seen a modest increase in inventories and a one-time sales benefit as we incorporated Ranexa into our Gilead inventory management agreements.

During the fourth quarter, we saw strong prescription demand for Ranexa and following our formal relaunch in October we have begun to see early signs of increased usage as we look to continue to build awareness with our targeted physicians.

The latest weekly data points has Ranexa at an all-time high of over 16,000 total prescriptions compared to just over 11,000 at the time we closed the CVT acquisition. We have also seen a 9% increase in the base of prescribing physicians for Ranexa in the fourth quarter over the third quarter of 2009. Beginning this week, we will commence our Ranexa plan of action for 2010. The sales and marketing and medical affairs area have a comprehensive array of activities to execute on. We believe this significant potential for Ranexa in angina warrants this level of commitments.

I will now turn the call over to Norbert to discuss our R&D efforts.

Norbert W. Bischofberger - EVP, Research and Development and CSO: Thank you, Kevin. On the research and development front, as we enter 2010, we have a number of exciting opportunities across our therapeutic areas and between now and the end of the year, we expect numerous and important data sets to emerge from these efforts.

First, on the cardiovascular metabolic front. As we have previously discussed, we’re evaluating the potential for Ranexa and follow on late sodium channel inhibitors in a number of additional indications and settings. Based on desired product profiles, we will pursue some of these opportunities with Ranexa itself and some of them with new chemical entities that will be emerging from our ongoing research efforts.

The first such effort would be to evaluate the use of Ranolazine for the treatment of patients with diastolic heart failure. We are on target to begin enrollment – enrolling a Phase II proof-of-concept study in patients with heart failure with preserved ejection/fraction early next quarter and will in parallel initiate discussions with FDA regarding the potential design for a Phase III program.

We’re also progressing GS 9667, a partial A1 adenosine agonist towards a Phase Ib proof-of-concept study, which we expect to begin in the first half of this year. This compound has been previously shown in a single-ascending dose study to lower plasma free fatty acids. The Phase Ib study will assess the effect of GS 9667 on plasma glucose and insulin sensitivity as well as its effect on plasma triglycerides. The study will help determine its potential use in patients with type 2 diabetes or with hypertriglyceridemia.

In addition, we are exploring the utility of Letairis for the treatment of non-WHO Group 1 PH patients. We have recently dosed the first patient in a Phase III study, exploring the utility of Letairis for the treatment of pulmonary hypertension secondary to IPF. The safety and efficacy of Letairis will be determined in this placebo-controlled study, which is targeted to enroll 255 patients at over 80 investigational sites with six minute walk distance as the primary efficacy endpoint.

We also continue in our efforts to support Phase IV studies of Letairis in PAH and announced in November our planned collaboration with GSK for an international event-driven clinical trial to study combination therapy versus monotherapy in a first line treatment setting for PAH. The study, called Ambition, will evaluate first line combination use with Letairis and Tadalafil, a PD5 inhibitor, versus monotherapy with each in approximately 300 patients with PAH.

The question of first line combination therapy versus monotherapy is an important outstanding clinical question in PAH and Ambition will be the first large randomized clinical trial designed to provide some answers. We expect the study will be underway in the third quarter of this year.

On the respiratory front, as John Martin discussed, we’re very pleased with the outcome of FDA’s Advisory Committee meeting for Cayston and we continue to work with FDA towards approval for the product in the U.S. Our head-to-head study of Cayston versus TOBI, which would support full approval in the EU and Canada, and be helpful in marketing Cayston, completed enrollment at the end of 2009 with data anticipated from that study towards the middle part of this year.

With regards to GS 9411, our epithelial sodium channel blocker or ENaC inhibitor, we have recently initiated a multiple dose study in healthy volunteers, which we expect to complete this quarter. We will also initiate a single-ascending dose study in patients with cystic fibrosis shortly. This compound is designed to increase airway hydration and therefore could have applications beyond use in cystic fibrosis. As one such opportunity we’re preparing to initiate a proof-of-concept study in patients with COPD.

In addition, the Phase III study of Letairis for the treatment of IPF is approximately 25% enrolled with about 200 study sites in 17 countries, and we’re targeting to complete enrollment of 600 patients in this study by the end of this year. This is an event-driven study with time to progression or death as the primary endpoint.

With regards to our efforts in HCV, as we have discussed in our last call, we initiated a study to evaluate the potential of drug interactions between our novel HCV protease inhibitor, GS 9256, and our polymerase inhibitor GS 9190. The data from this study confirmed an interaction between the two compounds and we will be working to determine the appropriate dose of GS 9190 to move into combination therapy in HCV infected patients.

We believe we will be in a position to do so by the second quarter of this year. And in parallel, we’re continuing our 9190 Phase II study in 250 HCV infected patients, looking at 12 and 24-week SVR data, which we will have later this year to see if GS 9190 has the profile that would allow it to be further developed in combination with pegylated interferon and ribavirin.

Our caspase inhibitor, 9450, continues to make progress as hepatoprotectant both in HCV and NASH. The Phase IIb study in patients with HCV is ongoing and is assessing two doses of GS 9450 or placebo in adults with chronic HCV infection. With enrollment nearly complete, the study will evaluate the 24-week efficacy histology endpoint. The data from this study will help us inform us about GS 9450’s further potential in HCV as well as NASH. We hope to be able to present data from both the Phase IIa studies in HCV and NASH at a major medical meeting in the spring of this year.

And finally, on HIV, as you know, we issued a press release the first week of January announcing that both the Phase II clinical trials of the Quad and of GS 9350 met their primary objectives. The first study in 71 HIV infected treatment na�ve adults is comparing the Quad with Atripla. Based on 24-week data, efficacy of the Quad met the statistical criteria of non-inferiority as compare to Atripla based on the proportion of subject with HIV RNA levels less than 50 copies per ml. This continuation rates due to adverse events were comparable in both arms of the study.

The second Phase II study in 79 HIV infected treatment na�ve adults is evaluating the safety and efficacy of GS 9350 boosted atazanavir compared to Ritonavir boosted atazanavir, each in combination with Truvada. The study met its primary objective of achieving viral load of less than 50 copies per ml at 24 weeks of treatment. These continuation rates due to adverse events were comparable in both arms of the study.

We’re very pleased with these outcomes and have submitted the data from both these studies for a presentation at the scientific meeting in early 2010. We will soon be reviewing these data with the FDA and our goal would be to initiate three full Phase III studies before the midpoint of this year.

I am also pleased to share with you that we have completed the drug interaction study of GS 9350 with proton pump inhibitors and H2 antagonists. As you may recall, this topic was brought up during the Q&A on last quarter’s earnings call. We initiated this study to assess whether the PH dependent solubility of GS 9350 could lead to a variable exposure depending on the PH of the stomach, particularly when used concurrently with PPIs or H2 antagonists.

In short, neither the PPI nor the H2 antagonist alter the exposure of Elvitegravir or 9350, so there will not be corresponding dosing restrictions as we head into the Phase III program.

The Phase III study of Elvitegravir head-to-head versus Raltegravir treatment experienced HIV patients completed enrollment in December and puts us on track for obtaining 48-week data from that study by early 2011.

We continue our evaluation of fixed-dose formulations of Truvada with Tibotec’s NNRTI drug candidate TMC278. The clinical data sets that would allow support – that would support the filing of the fixed-dose in addition to bioequivalence data are the Phase III results from the TMC278 head-to-head program versus efavirenz in treatment na�ve patients. Tibotec has stated they expect to have data from these two studies before the middle of this year, which would allow them to file for the single agent of TMC278 in the second half of 2010.

Our intent is to submit marketing applications for the fixed dose of Truvada and TMC278 shortly after Tibotec’s filing for TMC278 is accepted for review in the U.S. and in the EU respectively.

In summary, we have a number of exciting opportunities both for label extensions of our commercial products and for new chemical entities in development or arising from our research efforts.

I will now turn the call over to John Milligan.

John F. Milligan - President and COO: Thank you, Norbert. I am very pleased with our continued high level of productivity and consistent financial performance in 2009. As we enter 2010, it’s clear that we have the opportunity to continue to expand our commercial business, to introduce new data sets on our products in clinical development and to expand our pipeline in all areas of our therapeutic – on all of our therapeutic areas.

Over the course of this year, we will be working to leverage all the important catalysts occurred in 2009, namely the extension of the Ryan White Care Act and changes in treatment guidelines to facilitate more patients with HIV (indiscernible) therapy. We will also be supporting targeted initiatives in major U.S. cities including New York, Los Angeles, Washington D.C., where the prevalence of HIV is the highest to increase HIV screening settings such as emergency rooms, pharmacies, correctional facilities and clinics.

We’ll be taking the lessons learned and the success from these programs to help establish best practices and support efforts in other settings and geographies. We’re looking at similar efforts in Europe to reach those living with HIV but who are not yet diagnosed. We will continue to make strides in increasing access to patients in resource-constrained parts of the world through our Gilead Access Program, which covers 130 resource-limited countries.

Today, over 1.3 million individuals around the world are receiving one or more Gilead’s HIV medications and more than 50% of these patients are in the developing world. We’re proud of our success at helping to expand access. With the recent changes in WHO guidelines, now recommending treatment for less severely ill patients including those whose CD4 count is high as 350, we now have even more work ahead of us.

I believe that this will be a very exciting year as we chart the progress of our HIV pipeline candidates, particularly as we initiate the comprehensive Phase III program for the Quad and GS 9250 in the second quarter of this year. We also anticipate the release of the TMC278 pivotal studies by our partner Tibotec and look forward to the subsequent filings for fixed-dose regimen of that compound (coupon) related with Truvada by year’s end. And approval of this new potential regimen would mark the introduction of only the second single pill complete regimen since the introduction of Atripla in 2006.

We very much looking forward to the upcoming conference on Retroviruses and Opportunistic Infections or CROI Conference, which would be taking place in San Francisco the third week in February. This meeting is considered to be the preeminent conference focused solely on HIV and AIDS and brings together both domestic and international thought leaders, guideline committee members, researchers and caregivers whose practices are dedicated to treating patients (living) with HIV. We anticipate the presentation of numerous important data sets, both from Gilead’s internal programs as well as from external groups.

Beyond HIV, we have a broad and deep pipeline of product candidates in liver, respiratory and cardiovascular metabolic diseases that will support our growth into the future. We look forward to sharing with you our progress on various product candidates.

In summary, as we enter 2010, the hard work and diligent focus that we have maintained at our core for so many years has positioned us extremely well for the future growth of the Company. We concluded 2009 with nearly $6.5 billion of product sales, including two products with sales of approximately $2.4 billion each and a very healthy cash position of about $3.9 billion.

Having now completed a three-year $3 billion share repurchase program in only two years as well as the cost savings we will recognize from winding down the darusentan studies, we are actively and thoughtfully evaluating the potential future uses of cash including further investments to augment our pipeline, all with a focus on bringing forth new medicines for patients in need ensuring the long-term growth of our Company.

I would like to close by recognizing the dedication and contributions of our nearly 4,000 employees whose focus on delivering on our promise to make a difference in lives of many patients around the world benefiting from our therapies.

I will now turn the call over to the operator for the question-and-answer session. Operator?

Read our Earnings Call Transcript disclaimer.
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