Gilead Sciences, Inc. (GILD) Q4 2010 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Gilead Sciences Fourth Quarter 2010 Earnings Conference Call. My name is Stacy and I'll be your conference operator today. [Operator Instructions] I would now like to turn the call over to Susan Hubbard, Vice President of Investor Relations. Please go ahead.

Thank you, Stacy, and good afternoon, everyone. Welcome to Gilead's Fourth Quarter 2010 Earnings Conference Call. We issued a press release this afternoon providing earnings results for the quarter. This press release is available on our website at www.gilead.com, as are the slides that provide much more detail around the topics discussed today on this call. Based on the feedback we've received from many of you that you prefer the approach we introduced last year with more abbreviated prepared comments, we will again keep them brief to allow more time for your questions. Our first speaker today will be Norbert Bischofberger, Executive Vice President of R&D and Chief Scientific Officer, who will discuss the additional announcement we issued this afternoon, concerning our receipt of FDA's Refuse to File letter associated with our New Drug Application for the Truvada/TMC278 single tablet regimen. Following Norbert will be Robin Washington, Senior Vice President and Chief Financial Officer, who will provide financial highlights from the fourth quarter and full year 2010, and provide our 2011 financial guidance; and finally, John Martin, Chairman and Chief Executive Officer, who will discuss our view about the future and opportunities for the company. John Milligan, President and Chief Operating Officer; and Kevin Young, Executive Vice President of Commercial Operations are also here to answer your questions later in the call. I'd first like to remind you that we will be making statements relating to future events, expectations, trends and 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 could cause our actual results to differ materially from those expressed in any forward-looking statement. I refer you to our latest SEC disclosure documents and recent press releases 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 any of these forward-looking statements. We will be making certain references to financial measures that are on a non-GAAP basis, and provide a reconciliation between GAAP and non-GAAP numbers in the press release we just issued and on our corporate website. I will now first turn the call over to Norbert to discuss the recent FDA action.

Thank you, Susan. As you saw in the press release we issued this afternoon, Gilead received a Refuse to File notification from the FDA for our New Drug Application for the Truvada/TMC278 single tablet regimen for the treatment of HIV, which we submitted on November 23 of last year. As many of you already know, once an NDA is submitted, the FDA has up to 60 days to conduct their preliminary review to assess whether the NDA is sufficiently complete to permit a substantive review. If FDA determines the NDA is not sufficiently complete, the FDA will issue a Refuse to File letter. With the Refuse to File communication we received, FDA refers only to insufficient information in one portion of the chemistry, manufacturing and control section included in our initial submission. Specifically, FDA stated that our application does not contain sufficient information on the analytical methodology used to establish acceptable levels of recently-identified degradants related to emtricitabine. Our NDA submission referenced the TMC278 single agent NDA submitted by Tibotec on July 23, 2010, which is supported by two pivotal Phase III studies evaluating the safety and efficacy of TMC278 in treatment-naïve HIV-infected patients. Our NDA filing for the Truvada/TMC278 single tablet regimen is supported by a bioequivalence study conducted by Gilead, as well as a section on Chemistry, Manufacturing and Controls or CMC, which includes information on assuring identity, strength, quality and purity of the new drug product in evaluation of the manufacturing process and data from the stability program. Since our submission and subsequent identification of these degradants, we've been working to validate the analytical methodology that it allows us to accurately quantify these degradants and assure that they are at an acceptable level. We believe that we have accomplished that process, and we will include this information in the refiling of the NDA. We've had a very positive dialogue with FDA through the review period to date, and we believe this is a minor delay in the potential approvability of this drug. We expect to be in a position to refile the application before the end of the first quarter of this year. A need to refile the NDA does not impede or delay our progress in initiating studies to evaluate the single tablet regimen versus other well-established regimens that are on the market today, so we will add three key supportive studies ongoing shortly: One, which is a head-to-head study of the 278 single tablet regimen versus Atripla; as well as two studies in which patients would switch from Atripla or a boosted protease inhibitor regimen to the Truvada/TMC278 single tablet. While we had planned for a U.S. launch in the second quarter of this year, even with this delay, we believe we will be in a position to introduce this important new option for HIV patients in the second half of 2011. I will now turn over the call to Robin to review our earnings.

Thanks, Norbert. The completion of our fourth quarter marks another year of exceptional commercial execution and financial growth for Gilead. We ended the year with non-GAAP EPS of $3.69 per share, an increase of 21% compared to the full year of 2009. We generated over $7.9 billion in total revenues for the year, with net product revenues of $7.4 billion, up 14% over the prior year. Our net product revenues for the fourth quarter were $1.9 billion, up 7% year-over-year. The momentum of our Antiviral franchise continues to drive our product sales growth, with revenues of $1.7 billion for the fourth quarter and $6.5 billion for the year. The U.S. contributed $935 million to our Antiviral product sales, increasing 5% year-over-year, resulting from the continued strong growth in patients and market share in the U.S. According to the latest estimates, there are approximately 605,000 HIV-infected patients in the U.S. taking antiretroviral therapy, which represents 4% growth on a moving annual total basis. This growth was driven primarily by the December 2009 change to DHHS guidelines endorsing earlier treatment, as evidenced by an increase in the median CD4 cell counts in patients initiating therapy. Europe contributed $654 million to our Antiviral product sales, increasing 3% year-over-year and 7% sequentially. This revenue increase is also reflected in the growth of patients taking antiretroviral therapy within the big five EU markets. This is very encouraging as certain countries, such as France, are implementing increased screening initiatives that could expand the diagnosed population. Our Cardiovascular franchise also delivered strong results for the year. Letairis grew 23% in the fourth quarter year-over-year and 6% sequentially, while Ranexa grew 47% in the fourth quarter year-over-year and 12% sequentially. We believe we are well positioned to continue the growth of these products as we enter 2011. Finally, our newest product, Cayston, which is now available in North America and certain countries of Europe, contributed over $19 million to product sales in the fourth quarter and $48 million since its initial launch in February of last year. We are very pleased with the rapid and favorable uptake of this product and look forward to the continued rollout across Europe over the course of this year. This growth in revenues, coupled with vigilant expense management, has enabled us to achieve a very healthy non-GAAP operating margin of more than 55% for the year. Our core margin, which excludes Tamiflu and efavirenz, remained robust for 2010 and in excess of 60%. Turning to cash flow from operations, we generated $725 million for the quarter and over $2.8 billion for the year. Since the announcement of our current program in May of last year, we have aggressively executed on our share repurchases. During the fourth quarter alone, we repurchased and retired $615 million in stock or more than 16 million shares. Our share repurchase activity in 2010 has reduced our total shares outstanding by approximately 12%. We remain committed to returning value to shareholders and are pleased to announce today that our Board of Directors has approved another three-year $5 billion plan for future share repurchases once the current program is completed. This share repurchase program, along with investments to develop and expand our pipeline, allows us to continue to return value to our shareholders in a disciplined manner. The last financial highlight that I will speak to is our full year 2011 guidance, which is detailed in Slide 39 in the earnings call deck and is available on our corporate website. Our product sales guidance for the full year 2011 is a range of $7.9 billion to $8.1 billion, which reflects a 7% to 10% increase over 2010 product sales. This range includes the full-year impact of U.S. healthcare reform, which we estimate to be 5% to 6% of U.S. net product sales. It also includes the full-year impact of mandatory price decreases in several countries of the European Union, as a result of austerity measures. As is always the case, there are other factors that may have an impact on our business, such as the potential for continued volatility in foreign currency exchange rates. For example, a 10% fluctuation in rates for our hedged currencies could have a $100 million to $150 million impact on our product sales. Please note that the non-GAAP product gross margin and operating expenses 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 2011 is a range of 74% to 76%. For expenses, we expect non-GAAP R&D expenses for the full year 2011 to be in a range of $950 million to $1 billion. We expect non-GAAP SG&A expenses for the full year 2011 to be in a range of $1 billion to $1.05 billion. Please note that this includes the impact of the Pharma Excise Tax, now mandated under U.S. healthcare reform, which we estimate to be in a range of $30 million to $50 million. Our effective tax rate guidance for the full year 2011 is expected to be in the range of 25% to 27%, which includes the extension of the federal research tax credit through 2011. And finally, we are anticipating the full year 2011 diluted EPS impact of acquisition, restructuring and stock-based compensation-related expenses to be at a range of $0.25 to $0.28 per share. Additional details can be found on our corporate website. In summary, 2010 was a challenging year for the healthcare industry. However, Gilead's financial and business fundamentals remain strong. We entered 2011 with significant opportunities to continue to grow our business and deliver shareholder value. We look forward to sharing our progress with you throughout the course of the year. I'll now turn the call over to John Martin to discuss our pipeline and upcoming milestones.

Thank you, Robin. I am very pleased with our operational execution and financial performance over the course of 2010, and believe there remains significant opportunity for continued growth of the products spanning our therapeutic areas in the years to come. For HIV specifically, which as you know represents a majority of our product revenues, we will continue the momentum provided by U.S., European and international guidelines that support earlier diagnosis and treatment, and favorable positioning to further the growth of our existing products through market expansion and share gain. Ultimately, our success over the long term is dependent upon continued innovation and pipeline advancement. In 2010, we made significant strides on this front, particularly in the areas of HIV and HCV, putting us on course for very important clinical program progress and data points this year. First for our HIV efforts. As demonstrated by the uptake of Atripla since its first approval in 2006, single tablet regimens are a key innovation in the treatment of individuals living with HIV. Compliance is the cornerstone to durability of a regimen, and studies have shown that reducing pill burden from two or three pills a day to one leads to better compliance, fewer hospitalizations and lower cost and ultimately, to better long-term outcome for patients. Our vision in HIV is to develop and bring to market new single tablet regimens, with differentiated profiles that provide patients with more options than they have today. As Norbert covered, Truvada/TMC278 would be the second single tablet regimen in this effort. We also made significant progress with our third potential single tablet regimen. We very rapidly enrolled the Phase III studies for elvitegravir, our integrase inhibitor; cobicistat, our booster; and the combination of those products with Truvada, which we call the Quad. Based on our current timelines, we will have data from these programs by the end of the year, which would support regulatory filings for these potential products in the early part of 2012. We have also added to our HIV pipeline another novel pro drug of tenofovir, GS 7340. This compound allows for more specific targeting of lymphocytes where the virus replicates. Results from a 14-day Phase Ib viral dynamic study indicate that both the 50-milligram and the 150-milligram doses of GS 7340 are more potent than Viread at 300 milligrams. We are pleased to report that these data have been accepted as a late breaker presentation at the 18th Conference on Retroviruses and Opportunistic Infections, taking place in Boston at the end of February. Based on these data, we have initiated another Phase Ib study to ascertain whether it's the 50-milligram or a lower dose that should be further pursued. Using a lower dose from that of Viread 300 milligrams will increase the safety margin, make the compound more amenable for use in special populations like the elderly and in renally-impaired patients, and it will allow us the opportunity to create smaller fixed dose pills or other combinations, for which Viread 300 milligrams is too large to formulate into a single tablet. I also want to mention the November publication of the results from the NIH-sponsored iPrEx study. This head-to-head study of Truvada versus placebo in over 2,000 individuals demonstrated that Truvada is efficacious in reducing the rate of HIV infection in men who have sex with men. This is the first time since the 1994 publication of the breakthrough 076 study showing that ACT reduces mother-to-child transmission that an oral regimen has been proven to prevent HIV infection. As an HIV vaccine is currently not available or on the horizon, these results have generated a lot of excitement and interest. We intend to submit a New Drug Application to the U.S. FDA in the first half of this year for the use of Truvada in the prevention of HIV infection. While we don't view a potential prophylaxis indication as a significant commercial opportunity, we do see it as an important contribution to the management of the HIV epidemic worldwide. Now turning to liver disease. As you know, the current standard of care for HIV infection is ribavirin plus interferon, which are poorly tolerated. This is reflected in the fact that there are 700,000 individuals in the U.S. eligible for treatment, out of a prevalence of about 3 million, but only 57,000 are actually treated per year in spite of the fact that this regimen is curative. Thus, there is a great need for better tolerated regimens. Our vision is that hepatitis C drug development will mirror that of HIV, where combinations of oral drugs that fully suppress the virus are used to avoid resistance development. This will result in exploring combinations of new chemical entities that will be approved as regimens, as opposed to each of them as individual agents, thus avoiding the consequences of sequential development and approval as suboptimal regimens. Ultimately, our goal is to commercialize products as a combination or as a regimen with broad activity against multiple genotypes of this disease. This has led us to simultaneously pursue multiple mechanisms and advance multiple development programs in parallel. We have five compounds currently in clinical development, with one compound where the IND is filed but not yet dosed in humans and one more to enter the clinic by the midpoint of this year. As an interim step, we also have multiple Phase II studies either currently underway or planned for this year, aimed at determining if we can shorten the standard duration of interferon therapy and thereby, eliminate its toxicity. Then as these compounds pass certain development hurdles for safety, antiviral activity and pharmacokinetics, we will move them into studies of all oral regimens in treatment-naïve patients. A few key milestones I'd like to point out for 2011. First, just last week, we began screening HIV-infected patients for a first-in-man five-day multiple-dose Phase Ib study, evaluating our lead nucleotide polymerase inhibitor GS 6620 [ph]. We were able to move this nucleotide analog directly into HCV-infected individuals based on its preclinical characteristics of the compound and favorable discussions with the FDA. Thus, this program has been accelerated, and we anticipate having data in the second half of this year. Next, we aim to have a significant presence at the European Association for the Study of the Liver Conference in Berlin at the end of March, where we have submitted over 20 abstracts for consideration. At this meeting, we hope to provide additional clinical data on our molecules, including the NS5A inhibitor, GS 5885. We are also continuing research for the treatment of HPV infection, and later this year, we'll begin to explore the use of Viread plus pegylated interferon, as well as our TLR-7 agonist to see if we can significantly increase zero conversions and potentially change the treatment paradigm from chronic to finite therapy. Turning briefly to our efforts in respiratory diseases. As you know, we are pursuing label expansions of Cayston in additional areas of unmet medical need. We plan to complete our Phase III trial evaluating Cayston in CF patients with Burkholderia cepacia infection shortly and submit these data to a scientific conference later this year. And following promising Phase II results and conversations with FDA on trial design, we also plan to initiate Phase III studies in patients with bronchiectasis before the midpoint of this year. Finally, in addition to our existing therapeutic areas of focus, we augmented our R&D capabilities in 2010 with the CGI and Arresto acquisitions and will now pursue novel therapies in the areas of inflammation and oncology. We are excited about the science, early-stage lead compounds and expertise these two teams bring to Gilead's efforts to advance novel therapies to address unmet medical needs. In summary, 2011 will be an exciting and important year for us as we continue to drive Gilead forward on three strategic fronts. I am confident in our ability to continue our operational performance, which will enable the further growth of our commercial business. I am also confident we will execute on our pipeline with a particular focus on innovative HIV single tablet regimens for patients and progress HCV molecules in the clinic. While FDA's Refuse to File action for Truvada/TMC278 single tablet regimen NDA was a surprise to us, I am confident that this will result in only a minor delay in the timing of bringing this important new treatment option to the market. And finally, as we have outlined on many occasions, we remain committed to effectively leveraging our strong cash flow to enable a disciplined balance of continued investment in our growing pipeline, selective licensing and M&A and returning value to shareholders via share repurchases. On behalf of the more than 4,000 employees of Gilead around the world, we appreciate your interest and support. I will now turn it over to the operator for the Q&A portion of the call. Operator?

[Operator Instructions] Your first question comes from the line of Ravi Mehrotra with Credit Suisse. Ravi Mehrotra - Crédit Suisse AG: Probably for Norbert, regarding the FDA issuance [ph] on 278/Truvada, can you give us some more color on why you received a Refuse to File letter rather than be able to solve the issues with regards to your ongoing discussions with the FDA? And concomitantly, can you outline why you're so confident of a six-month review upon refiling?

So just briefly, as laid out in ICH guidelines and as is common practice, any impurity, which is present in a drug product at a level of 0.2% or higher at the end of the shelf life has to be characterized. You have to have analytical methods for quantification that have to be validated, and the impurities have to be qualified to assure that they don't pose a risk. Now the qualification is typically done by a rodent toxicology study that uses a product sample that has been exposed to accelerated degradation. This sample contains the impurities much in excess of what one expects to see under common storage conditions. So we have followed and will continue to follow this path with all our products. We have done this with emtricitabine, and we have done it with all the emtricitabine-containing products, including the 278 single tablet regimen. Now recently, we became aware of degradation products which were not dictated by the existing analytical techniques. And by the way, this is not unusual at all. This happens all the time in the lifecycle of a product. And consequently, we started to develop and validate a new analytical method that could detect and quantify these degradants. It was unfortunate that at the time of the Truvada/278 NDA filing, this work was still ongoing. But we were hoping that we could submit the information to the FDA during the review. The FDA, however, decided that because of the short review time, and remember, they granted us priority review on this program, that they really needed all this information included in the original NDA. And so with this RTF, with the Refuse to File letter, they have formally asked us to include this information in an NDA and re-file. So we are now very close to completing the validation work, and as I pointed out before, we will file the NDA the first quarter of this year, and this is also the reason why we're very confident that this is what we're going to do. So while we're disappointed with this RTF letter, it constitutes only a three to four month delay, and I can assure you, we're going to work very closely with the FDA to obtain approval for this product in a timely manner. So I hope I've answered this question, Ravi.

Your next question comes from the line of Geoff Meacham with JPMorgan. Geoffrey Meacham - JP Morgan Chase & Co: Question for you on the CD4 counts, the guidelines, the trends that you guys have in Slides 17 and 19 look positive but my question is, is this a lagging indicator of new patient starts? I guess where I'm going with this is if you look at the new starts in the U.S. and EU for this quarter, it's a little bit lower, in fact, a lot lower than last quarter. I'm wondering how we should think about the real impact of the CD4 count trends on the market growth?

Hi, Geoff, it's Kevin. Actually, I think Slides 17 and 19 are beautiful, actually, really show the impact that guidelines are having both in Europe as well as the U.S., so I'm delighted with the change. Obviously, there are always a one quarter lag so you're always a little bit out of date. I'd just be careful to kind of extrapolate one set of information to another. As you know, Synovate comes off 4,000 patient records. And one or two patients sometimes can make a big difference when they're extrapolating up to patient universes. So as I've said on previous quarters, everything we've heard from physicians is that they're enthusiastic to start patients earlier. We haven't seen a lot of resistance. They've wanted to do this. They've accepted the guidelines, not only a DHHS change, but we're seeing that the French guidelines changed in the second half of last year. So I think this is very positive movement, and the physicians welcome the whole concept of beginning patients when they've got a healthier immune system and a better longer-term prognosis so I wouldn't split hairs here.

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

Norbert, if I stare at the Phase II Quad data versus Atripla, at 48 weeks, there's a 7% separation between the two arms that favors the Quad. And I understand there are low numbers, et cetera. But why couldn't the Phase III potentially show superiority for the Quad over Atripla at 48 weeks? And what separation is the trial powered to detect for superiority?

The short answer is, of course, we could show superiority. As you know, the superiority is defined statistically in the sense that the 95% -- the lower bound of the 95% confidence interval came across zero. So as long as you're on the positive side with the lower bound, you're deemed superior. So clearly, that's something we will be able to show. Mark, I can't readily answer the other part of your question because it all depends on what your assumption is for the point estimate difference. And so of course, the larger the difference is in terms of point estimate, the higher the power becomes that you are actually going to be able to show superiority, and we have tables like that, that we generated that I'm happy to share with you. I don't have them right here.

What if you replicate the Phase II data? Would that be significant?

If we completely replicated the point difference that we saw in the Phase II study, then we would then be superior. But Mark, I want to at the same time, use this opportunity to tell you, to remind you that the patient numbers were really small. As you'll remember in the control arm in one study, there were only 23 patients. So each one event would be 4%, which is a huge number. That's why I'm a little bit reluctant to take the Phase II data and simply say we replicated that. But the short answer is if that's the point estimate that we will replicate in Phase III, we will reach superiority.

Your next question comes from the line of Geoff Porges with Bernstein.

Norbert, a follow-up on hep C; could you tell us a little bit more about the design of your combination study of 9190 and 9451 a little bit about what combinations you’re going to be using? How many sort of doses? But particularly, do you think it's viable to take that combination with either just ribavirin or just interferon? And then related to that, will you still have to do some sort of single drug development for any of the drugs that you take forward in combination, i.e., with interferon and ribavirin?

[Indiscernible] the answer is somewhat short because I could talk about this a long time. So the combinations that we're doing is essentially two small molecule antivirals, so 9190 with 9250, 9190 with 9451, which is another protease inhibitor. And we're also looking at our NS5A inhibitor combined with either 9190 or the protease. And the purpose of those studies is actually twofold. First of all, we want to explore whether two antivirals, whether we can shorten significantly the treatment with interferon to a shorter time. So we're looking at 12 or 16 weeks when we use it with two antivirals. The second purpose of all these study is to gain a little bit more experience in terms of safety of the individual agent but also safety of the combination. And then ultimately, of course, what we want to do and we hope we will be in a position to do that end of this year, to move three antivirals with ribavirin into a study where we can actually assess whether that will suffice to cure HCV infection. Now you had another question, you asked is actually two antivirals enough. You may remember or may have seen or not have seen the presentation that Stefan Zeuzem gave at the AASLD meeting last fall. And we actually clearly showed, and that's convincing that two antivirals is probably not enough. Even two antivirals with ribavirin, while that's a little bit better, it will still not suffice. So we think actually three antivirals with ribavirin has a very good chance of doing, of being enough to cure HCV infection. And as I said, we'll hope to be in a position to test that clinically in the later half of this year.

Your next question comes from the line of Jason Kantor with RBC Capital Markets.

I want to go back to this new impurity that you found. Does this suppose any kind of known safety risk? And is this also something that then could be a potential problem for Truvada and Atripla? Do you need to recharacterize those in any particular way?

I meant actually to say that before. I thought I made it clear. So Jason, we did both with Truvada, Atripla with the 278 single tablet regimen. With any application that we have done, we have always done a tox [toxicology] study with accelerated degradation product. So you take Truvada, expose it to accelerated degradation conditions, which is normally high temperature, high humidity. You generate all these impurities to a very high level. Then you do a tox study. Normally, it's a 14-day rodent tox study and you show that there's no additional safety concern. So we have done all of that. The only thing is at the time when we did the study, because the analytical methodology did not exist, we weren't aware that there was this additional degradation product in there. Now that we have the methodology, we do know it, and so with that study that we did years ago, with all these studies, we have essentially qualified the product and so there would not be any concerns for the existing product. There will not be any additional safety issue. As I said, the thing we have to deal with and the FDA has asked for is a validated methodology where we can say this is the lower limit of quantification. We have to set specifications, of course, and we have to use this new analytical methodology for the release of all emtricitabine-containing products going forward.

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

A question for Kevin on the commercial front. Can you remind us of the timing for potential opt-out of the co-promote with Bristol for Atripla? I'm just wondering now that the launch of the 278 Truvada fixed dose combo's going to be pushed to later in the year, could there be a situation where you have two teams detailing Atripla separately? And if so, might that have any commercial implications?

Our formal partnership with BMS on sales and marketing activities does finish at the end of March; in other words, the end of the first quarter. So we will be independent with regards to our marketing materials and our sales activities. Of course, now in the situation where we have a small delay with Truvada/278, of course, Gilead will continue the promotion of Atripla. Certainly, it's the concentration of our effort and will be until such time that we get the approval and launch as we hope by the end of this year. What exactly BMS do is their own decision in terms of their own promotion of Atripla. We do hope that they continue with their backing of the product. So really to your question, yes, there's likely to be two companies promoting Atripla in 2011, albeit that we won't be quite as synced in our efforts as we have been previously. And I should add that Atripla will be a second detail once Truvada/278 does come to market, and it's the first detail later this year.

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

I have a question about 278. I'm just wondering, and I'm not sure if you can answer it, but any thoughts would be very useful. Just given on 278, the virological failure data, is there any way that, that would compel FDA to call a panel? We've not seen a lot of panels on HIV so there's no particular reason to worry. I'm just trying to get your thoughts there. I'm referring to the activity depending on the viral loads.

Yes. It's John Milligan. So we've been in close contact, obviously, with our partner J&J but the 278 application is entirely their application. So as far as we know, and of course, we were in contact with them over the Refuse to File letter so I've spoken to them recently. As far as we know, there hasn't been any indication that a panel meeting will occur. That's not all said and done at this point, of course, in the review cycle. And our understanding from talking to them is that the review is going quite well with FDA. So that's really all the color that we can give on it because it's not our application, but I appreciate you asking the question.

Your next question comes from the line of Sapna Srivastava with Goldman Sachs.

My question was just on the pace of share buybacks. I mean, it was very aggressive this year. What should we expect going into next year or this year, rather?

So we've communicated that we expect to complete the existing remaining $2 billion of the current outstanding $5 billion program this year.

And do you expect that to be almost at the same pace as we saw last year, or any more color on that?

Yes, we expect it to be at the same pace. I mean, as always, if there are opportunities to be opportunistic, we will do that. And clearly, with the authorization of the new share repurchase, if those exist, we now have the wherewithal to be able to do that. The other thing that we've talked about is getting rated in the first half of 2011. So that's a process that we hope to get complete and be able to continue to update you on our longer-term capital structure.

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

It's on the Phase III Quad versus Atripla. If you look at the Phase II study with the Quad, I think you enrolled about 22%, 23% of those patients had high viral loads at baseline, but if you look at the Merck Phase III with Isentress in treatment-naïve patients, I think that number was north of 50% in terms of the high viral load patients. So I was wondering, Norbert, if you could put a little bit of expectation around what sort of patients you expect to enroll in the 102 study and whether or not that could have any implications on the Phase III clinical profile vis-à-vis the Phase II?

Matt, I actually don't have the data right in front of me, but in all the Phase III studies that we have done previously, there was always about the proportion of patients greater than 100,000 viral load was always about 50%. And by the way, I know that for certain because that was always and is still a stratification factor in all of our studies. So I would expect to see the same thing in these Phase III studies, and I do not believe there is any decreased efficacy on the high viral load. We have absolutely no indication that, that will be the case. Remember, we have actually a fair amount of experience now in the experience study that has been ongoing for almost three years now and from what we know from there. And also if you just look at the blood levels that we get with elvitegravir when it's boosted and to Cmin, it's well in excess of the IC90. This compound has a very high, what is called IQ, the inhibitory quotient. The IC95 adjusted for protein-binding plasma concentration at the Cmin exceed [ph] 24 hours. So I have every confidence that this compound is going to be as potent as Atripla, and I'm also fairly convinced we're going to see better tolerability because there are no CMS side effects.

Your next question comes from the line of Rachel McMinn with Bank of America.

I guess for Norbert, on NS5A, just curious if you have the data at this point. It sounded like, John, maybe you were kind of hinting that you were pretty excited about that, and really what the next steps would be; whether this goes directly into combination or you would just advance it in combination with peg/riba [ribavirin]. And then just on the EU side, if you could quantify, maybe this is better for Robin, if you could quantify the level of mandatory price cuts or what regions, that would be helpful.

Rachel, I'm sorry, I didn't get your -- so the data on what? We have the data on what did you mean?

For NS5A. So I mean, if you're going to have data at EASL [European Association for the Study of the Liver] so presumably, you have your monotherapy proof of principle data at this point?

Yes, we do have the data internally for the viral dynamics study, and we'll present those data at EASL. And we have planned to start a combination study of our NS5A with either the protease inhibitor or GS 9190 with again shortened duration of peg/riba therapy, and that should initiate sometime in the second quarter of this year. And, Kevin?

Rachel, it's Kevin. I'll take the pricing question. So in terms of 2010, from the sort of austerity measures and the national haircuts that we were given, as the whole of the industry, the effect was about 2% on our prices for 2010 versus 2009. If we look into 2011, obviously, you've got the full year effect of countries like Spain and Germany, Greece and Turkey. So we estimate that, that will notch up to about 3% for 2011. And there is likely to be a little more than that because of just general referencing of prices that takes place around countries. So our estimate for 2011 would be in the 3% to 4% reduction in prices across Europe.

Versus 2010 or versus 2009?

Versus 2010. So 2% in 2010 and 3% to 4% in 2011 versus 2010.

Your next question comes from the line of Ian Somaiya with Piper Jaffray.

Just a question on the TMC Truvada combination. I was hoping to just get your perspective on the launch of that combination and its impact on Atripla. Clearly, the goal longer term is to transition the market away from Atripla. I was just wondering what the revenue implications are for Atripla at launch or through year one? And if I could just add on a second question, your 2011 guidance, does it include the TMC Truvada combo revenues?

So Robin will take the second question, and I'll answer the first question in a moment, Ian.

So the first part of it is yes, Ian, it does include 278 revenues based on the expected commercialization of that towards the latter half of the year.

And in terms of the Atripla Truvada/278 mix, and the nice thing is, Ian, you have got one playing up the other here. It's always a challenge to estimate the launch of a new product, particularly when you've got several of your own stable in an area. I think we've got a slightly different launch going here for Truvada/278 than we had for Atripla because the components aren't on the market, and don't have a natural switch taking place. I certainly think in the short-term delay that we've got, obviously, Atripla will take up the slack that we had previously thought would be part of the initial launch of Truvada/278, albeit it's a different margin that we get off of Atripla versus Truvada/278. So we're still optimistic. We still think this second single tablet regimen has some attributes that will benefit patients where Atripla doesn't quite meet the mark. So despite this small delay that we're announcing today, certainly, my organization is still very enthusiastic about the launch.

Your next question comes from the line of Joel Sendek with Lazard Capital Markets.

I wanted to ask about Letairis and Ranexa. In your slides, you talk about the year-over-year growth. I'm more interested in the sequential demand growth that might not be evident in the reported numbers and also your outlook for 2011. Is there acceleration there? How should we look at that going into next year?

Well, I think both products had a nice quarter. Letairis was very solid, growing to $64 million, total $240 million so we've now got nice products on our hands. The demand was very much in line with the purchase. It goes through specialty pharmacies. Typically, they hold fairly lean inventories. Our ERA share, in total right now, is about 35%, but it's nice to see that we have a slightly higher share in the major PH centers, that's over 38%. So there's a sense of optimism around Letairis. We think we can do very well in 2011. And with the studies that we're now doing, I think the PH communities see the commitment that Gilead is making to the area, as well as some of the new hires. We just hired a fantastic person from San Diego, a leading cardiologist with a lot of experience in PH. And I think again, that says that we're investing in this area. In terms of Ranexa, there was a slight mismatch between the prescriptions and the revenues. Prescriptions grew about 6%. Revenues grew at 12%, and that's really due to offtake by chains below the major wholesalers. The major wholesalers were in line with our inventory management agreements. It does seem as though there was a slightly higher offtake below that level to the major retail pharmacies. I think this is just because Ranexa is a smaller product than our HIV products, and it's just more difficult for those chains to judge how much they would purchase. The final thing I would say about Ranexa is we're getting more and more prescribing from the internal medicine physician, which I think is very positive. A lot of you said that there was untapped potential there, and we're starting to see that come through. And just a small market, you'll see that we've shown that we're getting more of the 1,000-mg dose used, we're now up at 18%; whereas, we were only at 12% when we began with Ranexa. And that's important to us because we want physicians to be transitioning to the higher doses because of greater efficacy and patients staying on because they're doing better. So we're pleased with the progress on both fronts with the two products.

Your next question comes from the line of Josh Schimmer with Leerink Swann.

I guess your latest 10-Q indicates that the generic 3TC in Spain put pressure on antiviral pricing there in 2010. What was the magnitude of generic 3TC impact on pricing in Spain? And what incremental effect are you assuming we'll see throughout Europe or even in the U.S. in 2011 and beyond, and is that reflected in your guidance?

Yes. All the major events that we expect to take place are included in our guidance. Just to put some color on that, Josh, we have an expectation that we will see other generic 3TC launches across Europe in the first half of this year. Quite what the order of that will be remains to be seen. Often, a company can get supplementary patent protection on a national basis so it's never easy to see how that will unfold. We don't share the details around what happened to our prices. I have to say that we were ready for this event. We have signed contracts with hospitals in certain regions. We actually had our highest market shares for Truvada and for Atripla recently. So I think those price volume contracts are working. And I should also add that we had a lot of support from the physicians in Spain who don't look to break up the HIV regimens. So I think we've handled that entry well, and we take those learnings to our other countries if and when the generic 3TC comes along. And just to add, we have still not seen an entry of generic 3TC in the U.S.

Your next question comes from the line of Thomas Wei with Jefferies & Company. Thomas Wei - Jefferies & Company, Inc.: Just wanted to clarify on the product sales guidance for the year, it does fall short of the Street consensus, which I think, was about $38.15 billion. Is it as simple as the TMC278 delay? Or are there other factors that you would guide us to reconsider in our models where maybe we've been too aggressive?

Tom, this is Robin. I mean, I think I would say if you look at our guidance, we've just taken an overall prudent view in how we framed it. I mean, with just an awareness of build around microeconomic uncertainties in the U.S. and international. Kevin provided color earlier around pricing in Europe so we've included the full year impact of that, as well as healthcare reform, the full-year impact of that also. And as I mentioned in my script from an FX perspective, a 10% change is $100 million to $150 million, and we did see a significant volatility in 2010 that may continue in 2011. So if all of that happens, we felt it important to be prudent which is why to your point, consistent that we have $8.1 million, it's the $7.9 million which would be all in including a lot of the potential downsides that could occur, uncertainties that we're unaware of.

Your next question comes from the line of Tom Russo with Robert W. Baird. Thomas Russo - Robert W. Baird & Co. Incorporated: On Slide 14, you talk a little bit about wholesaler inventory moves in the Antiviral business. Could you quantify that in dollars? And then maybe also which products were affected and where you exited Q4 and what you would expect in terms of potential reversal?

We don't typically put out a dollar figure. We have very tight bands now. I think, as you remember, just over a year ago, we signed new IMAs with three major wholesalers. That's approximately 90% of our HIV business goes through those three wholesalers. But I can assure you they are very, very tight bands. We did see just an uplift of about a day within the range, but about a day, through our major wholesalers. So that's the best way I would look at it. We did see a little bit of uplift in the U.S. from some of our smaller wholesalers, who are not subject to IMAs. They do tend to speculate a bit on price increases, but that's a relatively small piece of our business. So about an extra day was put into our major wholesalers, but again within the contractual ranges that we have.

Your next question comes from the line of Phil Gross with Adage Capital Management.

One is just on the SG&A guidance, is that net of stock compensation expense so that the $1,044,000,000, that you're not actually guiding toward a reduction in underlying SG&A expenses given the $30 million to $50 million excise tax, which is included in that line?

No. The guidance that we gave, Phil, is non-GAAP so it's exclusive of SOE [stock option expense].

Okay. So what's the underlying SG&A growth then that you're forecasting for 2011 over 2010 in SG&A?

Inclusive of the excise tax?

Yes.

So the underlying growth inclusive of the excise tax is about 8% to 9%.

Just a little bit of color on that. There really are relatively modest expansions in our commercial efforts. We want to roll out Cayston in several more of the larger European markets. We are going to tickle up the size of our Cayston sales force in the U.S. based upon the very successful introduction to date. We've got our Poland affiliates starting, have started from January 1. And we just got some small resources going into Asia as we start our strategy for Viread HPV in Asian markets.

Your next question comes from the line of Phil Nadeau with Cowen.

If memory serves me, in Q4 of 2010, there were two factors that caused a strong quarter. That won't repeat in the first quarter of this year, fourth quarter of 2009, that won't repeat in the first quarter of 2010 that caused some surprise on the Street. So those two factors were, I believe, a large order from Mexico and then healthy ADAP purchasing in the fourth quarter of '09 that went softer in the first quarter of 2010. Could you give us some idea of what the ADAPs look like in the fourth quarter of 2010? And also, were there any large purchases from foreign countries in the quarter?

Hey, Phil, it's Kevin. Our non-retail, which is virtually all ADAP, was very solid in the fourth quarter. There was a healthy purchase from the major direct purchase centers, Texas, Puerto Rico. We even had a good purchase from Florida. Florida is one of the ADAP programs that we're watching very closely right now because their waiting list has grown. But even Florida has federal dollars that they need to spend, so it was a fairly solid in line quarter. Non-retail basically matched the growth in the retail market. Quite what's going to happen in Q1 remains to be seen. We'd expect them to spend all of their federal dollars, and state dollars for that matter. It has been smoother, the whole phasing of that purchase for the fiscal year 2010. Quite how much money they've all got left, we never really know until the quarter's over. Just to add, in terms of 2011, the legislation is in place for the federal dollars to increase by 5%, and we would hope the appropriations are made for that. And so again, we would expect that, that federal funding is solid for the coming year. And in terms of the purchase, no, there was nothing really out of the ordinary. We fulfilled an order in Brazil. The rest of the markets were fairly standard. It is important to add, Phil, that we're not expecting any further purchase from Brazil of Viread because of their desire to source Viread elsewhere as a result of their stance on our intellectual property. So Brazil will be a missing component from our international sales for 2011.

I believe you've quantified that in the past. Can you remind us how much of a headwind that is going to be for 2011?

$50 million, which is included in our guidance.

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

Maybe you can talk a little bit more about your hep C program, if it's becoming more in focus in 2011? So you have timelines for 6620 [ph], you said that those were accelerated. Maybe you can give us some thoughts on how you're thinking about building out your program, like at what point will you look to outside products to bring in and combine with the ones that you have in-house?

Maybe I'll take, at least, part of your question. So the acceleration that John Martin referred to had to do with the fact that we are going directly into a five-day study, in the multiple-dose five-day study in HCV-infected patients. This is unusual. I'm not sure if you follow this in detail, but in the past, the FDA always asked companies, including us, to first do a PK [pharmacokinetic] study in the healthy volunteers. Once you had ascertained certain blood levels, then they would allow you to go into multiple dosage, the single dose probably HCV-infected patients and then multiple dose. This is the first time, the first in human, first-in-man, multiple-dose, five-day directly in HCV patients. With regards to timelines, you asked me, I'm a little bit reluctant to tell you exact timelines because a lot of it depends how things evolve and what kind of data we get. But we are looking towards initiating some triple antiviral therapy study without pegylated interferon, sometime hopefully towards the end of this year. And that could be, for instance, a protease inhibitor, our NS5A, and the nucleoside. That's a good combination that we think would have a very good chance of being able to cure HCV infection, at least in certain patients.

Robyn, the second part of your question, this is John Milligan, was about when we would look for outside collaborators. And I think what we've been contemplating doing, in fact, we've had some discussions with other companies on this, is to set up more informal clinical collaborations so that we can look for the important things like drug-drug interactions and see if we can't possibly get some early data on these programs so that from each company's perspective, if there are needs within the portfolio because of internal failures or problems, then you can quickly turn to an outside collaborator to try to come up with a combination regimen that we all desire. So in a sense, we're all hedging our bets, but right now, we're going forward most quickly and expeditiously with our own internal programs because that's the easiest way to go and certainly for Gilead, the best overall economic outcome for the company.

If I can have a follow-up, the combination study that you talked about starting year-end, how much pre-clinical work or early work to make sure those combinations aren't toxic in man are you going to do it prior to starting that trial?

So Robyn, this is an ongoing debate, as you know, and various regulatory agencies have different opinions on this. But as part of this, we have accelerated our sub-chronic and chronic tox studies. We're doing those a lot sooner than we would ordinarily do in any other therapeutic area. So by the time we initiate those studies, we will have data from the chronic tox studies. So six months of tox studies in two species; that's number one. And number two, of course, we're doing all the usual interaction studies in animals to make sure that there aren't any unusual drug interactions and we're also exploring those in humans. With regards to combination tox studies, it has always been our opinion that those are neither informative nor necessary, and a number of agencies actually agree with us. Because if you have adequately identified the profile of the single drug, then there is no reason to believe that two, the combination of two would have unexpected toxicities that wouldn't have been predicted based on the behavior of the single component.

Your next question comes from the line of Jim Birchenough with Barclays Capital.

Just a question on early treatment. Just wondering if you have any updated data on the number of patients who have benefited from early treatment in the U.S; if there's a typical CD4 range that you're seeing, where you're getting early treatment? And then maybe you could update how many patients are left to benefit? And if you think about where the early treatment's been occurring, what patient group do you think you can reasonably access?

Well, it's not perfect, but we have the Synovate data that you can see on Slide 17 and 19. That's median data. We previously split it below 350 and above 350. So that's about as good that we can get. We have no additional information where it's a particular patient category, patient demographic, that the HIV physicians are singling out. It's my sense from field visits, it's certainly the sense from talking to the sales forces that there's a generalized acceptance that irrespective of background of the patient, as long as the physician feels that the correct patient is in a good place, that they understand that they're beginning HIV therapy and that they're going to be compliant, that whether it's male, female or whatever type of demographic a person has, that they will begin therapy.

Jim, I would like to add, in the handful of studies that have been published on this subject, I think it's very clear, if you look at modeling that, the sooner you initiate treatment with a higher CD4 count, the more benefit you have downstream. But of course, the actual data on a patient that initiated therapy above 500 is relatively scarce. But from modeling, I think it's clear and it's also, as Kevin said, accepted by the medical community, that the sooner you initiate treatment, the more benefit you have medically.

[Operator Instructions] And we have time for one more question. Your next question comes from the line of Jason Zhang with BMO Capital Markets.

Robin, I have a housekeeping question. So the collaboration with BMS ends in March. The way you record Atripla revenue and also the costs won't change, in that, I mean, you still record whatever revenue, and also you take out the portion that you have to pay for the materials. Is that still the same?

Yes, yes, that's still correct, Jason. And we could give you more color if you want to talk after the call as well.

Ms. Hubbard, at this point, we have run out of time for additional questions.

Great. So thank you, Stacy, and thank you all for joining us today. We appreciate your interest in the company and your support. And we'll all be back in our offices shortly and happy to take your follow-on calls.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect, and have a great day.