Q3 2019 Earnings Call

At this time all participants are in listen only mode and as a reminder, this conference call is being recorded.

Operator: All events are in a listen-only mode. And as a reminder, this conference call is being recorded. I would now like to turn the call over to Sung Lee, Senior Vice President of Investor Relations. Please go ahead.

I would now like turn the call over to suddenly senior Vice President of Investor Relations. Please go ahead.

Sung Lee: Thank you, Liz, and good afternoon, everyone. Just after the market closed today, we issued a press release with earnings results for the third quarter of 2019. The press release and detailed slides are available on the investor relations section of the Gilead website. The speakers on today's call will be Daniel O'Day, Chairman and Chief Executive Officer, Robin Washington, Executive Vice President and Chief Financial Officer, and Johanna Mercier, Chief Commercial Officer. Also in the room are Diana Brainerd, Senior Vice President and Head of our HIV and Emerging Viruses Therapeutic Area, and John Sundy, Senior Vice President and Head of our Inflammation Therapeutic Area.

Thank you ladies and good afternoon, everyone. Just after market close today, we issued a press release with earnings results for the third quarter 2019.

A press release and detailed slides are available on the Investor Relations section of the go we had website.

The speakers on today's call will be Daniel day, Chairman and Chief Executive Officer, Robin, Washington, Executive Vice President and Chief Financial Officer.

Humana Murphy, a chief commercial officer.

Also in the room or Diana Brainer, Senior Vice President and head of our HIV any emerging viruses therapeutic area and John Sunday, Senior Vice President and head of our inflammation therapeutic area.

Before we begin with our prepared comments, let me remind you that we will be making forward looking statements, including plans and expectations with respect to products product candidate financial projections and the use of capital.

Sung Lee: Before we begin with our prepared comments, let me remind you that we will be making forward-looking statements, including plans and expectations with respect to products, product candidates, financial projections, and the use of capital, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ materially from these statements. A description of these risks can be found in our latest SEC disclosure documents and recent press releases. In addition, Gilead does not undertake any obligation to update any forward-looking statements made during this call. Non-GAAP financial measures will be used to help you understand the company's underlying business performance. The GAAP to non-GAAP reconciliations are provided in the earnings press release as well as on the Gilead website. I will now turn the call over to Dan.

Which involve certain assumptions risks and uncertainties that are beyond our control and could cause actual results to differ materially from these statements.

He description of these risks can be found in our latest FCC disclosure documents and recent press releases.

In addition, yeah, we had does not undertake any obligation to update any forward looking statements made during this call.

non-GAAP financial measures will be used to hope you understand the company's underlying business performance a GAAP to non-GAAP reconciliations are provided in the earnings press release as well is on the go we had website I will now turn to covert to Dan.

Daniel O'Day: Thank you, Sung, and good afternoon, everyone. Thank you for joining us today. I'll share a few opening comments and then turn the call over to Robin, and after that, Johanna will take you through the commercial highlights of the quarter as well. So, let me start by saying I'm very pleased with the progress that we're making on all fronts here at Gilead and the strong third-quarter results. Once again, we saw significant growth in our HIV business, reaching an all-time high in quarterly HIV revenue. As you know, in my time at Gilead, I've focused on three key areas since coming in: the pipeline, commercial delivery, and people. And today, in my brief remarks, I'll focus on the significant progress we've made in two of those areas, the pipeline and the people, and then Johanna will take you and talk to you about the excellent commercial performance later in the call.

Thank you song and good afternoon, everyone. Thank you for joining today I'll share a few opening comments and then turn the call over to Robyn and after that Joanna will take you through the commercial highlights of the corner as well.

So let me start by saying I'm very pleased with the progress that we're making on all fronts here and Gilliat and the strong third quarter results.

Once again, we saw significant growth in our HIV business, reaching an all time high in quarterly HIV revenue.

As you know it my time at Gilliat I focused on three key areas since coming in the pipeline commercial delivery and people and today My brief remarks I'll focus on the significant progress we've made in two of those areas the pipeline and the people.

And then Joanna will take you and talk to you about the excellent commercial performance later in the call.

Daniel O'Day: So let me begin by saying a few words about our pipeline, starting with HIV. As you know, we received FDA approval for the SCOBY for PrEP earlier this month. This is a really important indication for us as it allows us to extend the benefits of SCOVI to people who are at risk of HIV. To remind you, the approval was based on the DISCOVER trial, which demonstrated that DSCOVI is just as effective as Truvada and offers advantages in bone and renal safety parameters. We are excited to build on DSCOVI's status as the most prescribed dual NRTI backbone in the world by advancing its use in PrEP.

So let me begin by saying a few words about our pipeline starting with HIV.

As you're aware, we received FDA approval for the Scobey from prep earlier this month.

This is a really important indication for us as it allows us to extend the benefits of the scobey to people who are at risk of HIV.

To remind you the approval was based on the discovered trial, which demonstrated that scobey is just as effective as truvada and offers advantages in bone and renal safety parameters.

We are excited to build on to scobey status at the most prescribed dual NRT I backbone and the world by advancing its use in prep.

Daniel O'Day: I'm happy to say we've also received endorsement to begin a study of SCOVI for PrEP in cisgender women, which will allow us to eventually bring the medicine to a broader group of people. Rest assured, we continue to remain focused on our HIV pipeline beyond our Dyscovide-based regimens as well, on our long-acting antiviral programs, compounds that will treat highly treatment experienced patients, and, of course, So turning to Fogotinib, we've now filed for approval of Fogotinib in rheumatoid arthritis in the EU and Japan and are on track to complete our filing in the United States by the end of the year.

How did you say we've also received endorsement to begin a study of the scobey for prep Insys gender woman, which will allow us to eventually bring the medicine to a broader group of people.

Rest assured we continue to remain focused on our HIV pipeline beyond our disco be based regimens as well on our long acting anti viral programs.

Compounds will treat highly treatment experienced patients and of course on our cure research as well.

So turning to forgotten that we've now filed for approval of forgotten in rheumatoid arthritis in the EU in Japan are on track to complete our filing in the United States by the end of the year.

Daniel O'Day: Our teams around the world are preparing for launch, and I'm encouraged about the potential of fulgotinib to be best in class among the JAK inhibitors. In addition to rheumatoid arthritis, we're continuing to advance phlegotinib together with our partner, Galapagos. We have a comprehensive program across a number of other inflammatory diseases, including ulcerative colitis, which we expect to have data on next year. And, in addition, we were successful in closing our partnership with Galapagos this past... I'm looking forward to the American College of Rheumatology coming up in Atlanta so that we can share further updates on Fulgotinib. Researchers there will present further analysis of the Finch 2 study, which evaluated Fulgotinib in patients with RA who were previously treated with a biologic.

Our teams around the world are preparing for launch and I'm encouraged about the potential of forgotten them to be best in class among the JAK inhibitors.

In addition to rheumatoid arthritis, we're continuing to advance forgotten them together with our partner Galapagos, We have a comprehensive program across a number of other inflammatory diseases, including alternative quite as much we expect to have data on next year.

And in addition, we were successful in closing our partnership with Galapagos This past quarter.

I'm looking forward to the American College of Rheumatology coming up in Atlanta, So that we can share further updates on forgotten research is there will present further analysis on the Finch to study, which evaluated forgotten them in patients with our previously were previously and reach treated with a biologic and then results of.

Daniel O'Day: And then, results of the pooled safety analysis of Fulgotinib across the Finch program will also be presented and updated. Now, turning to cell therapy. I would like to say a few words about KITE and our work in cell therapy. The teams down at CHITE are busy preparing for the American Society of Hematology meeting, which will happen in early December, where, in addition to exciting data from our ongoing clinical trials, we will share survival data for Yaskarta at three years in large B cell lymphoma, as well as results from the registrational study of CHITE X19 in mant Recently, we also completed enrollment in the Pivotal Zuma 7 study of Yaskarta in second-line large BCL lymphoma, and we're excited about the potential this medicine could help these group of patients.

The pooled safety analysis have forgotten number cross the pitch pinch program will also be presented an updated there.

Turning to cell therapy.

I would like to say a few words about tighten our work in cell therapy. The team started kind are busy preparing for the American society of Hematology meeting, which will happen in early December where in addition to exciting data from our ongoing clinical trials, we will share survival data for yes garner at three years.

And large b cell lymphoma.

As well as results from the Registrational study of COVID-19, and mantle cell lymphoma.

Recently, we also completed enrollment in the pivotal Zuma seven study of U.S. Garda in second line large bcl lymphoma, and we're excited about the potential. This medicine can help for this group of patients.

As we discussed also last quarter, we continue to see quarterly variations in yes guard, our but we're very confident and its future and the long term trajectory of our cell therapy platform.

Daniel O'Day: As we discussed last quarter, we continue to see quarterly variations in Yaskarta, but we're very confident in its future and the long-term trajectory of our cell therapy platform. Finally, a few comments about our leadership team, which is now complete with two new appointments. Merdad Parsey will join us on November 1st as our Chief Medical Officer. He will have responsibility for all of our global development and medical affairs. Bill Lee will continue to lead our research organization, and he'll report directly to me, working closely with Merdad. Merdad is an outstanding scientist and leader with a remarkable track record of success.

Finally, a few comments about our leadership team, which is now complete with two new appointments.

I might add Parsi will join us on November 1st as our Chief Medical Officer.

Our dad, who previously led the early clinical development program at Genentech will have responsibility for all of our global development and medical affairs functions.

Believe we'll continue to lead our research organization and he will report directly to me working closely with Marta.

We're now does an outstanding Sciences and leader with a remarkable track record of success and I believe that would add will be a tremendous asset to gilliat, maintaining a very high bar for innovation. So that we can continue to build on our legacy of transformational medicines.

Daniel O'Day: And I believe that Merdad will be a tremendous asset to Gilead, maintaining a very high bar for innovation so that we can continue to build on our legacy of transformational medicine. I'm also very excited about the appointment of Andy Dickinson to the role of CFO. Andy has been at Gilead since 2016 and currently serves as our Executive Vice President, Corporate Development, and Strategy. He transformed the way that the company approaches corporate development before I came in, expanding the kinds of transactions executed and implemented, a broader, more strategic approach to dealmaking here at Gilead. As of November 1st, Andy will succeed Robin Washington, whose retirement we announced earlier this year.

I'm also very excited about the appointment of Andy Dickinson, So the role of CFO .

Andy has been a gilliat since 2016 and currently serves as our executive Vice President corporate development strategy.

He transformed the way that the company approaches corporate developments before I came in and expanding the kinds of transactions executed an implemented.

A broader more strategic approach to deal, making here I'd gilliat.

As of November 1st Andy will succeed Robyn, Washington, whose retirement, we announced earlier this year.

Daniel O'Day: I'm happy that Robin will remain at Gilead in an advisory capacity through early next year while we complete the reporting of our 2019 results. I'd also like to take this opportunity to thank Robin for her outstanding contributions, dedication, and tremendous commitment to Gilead. We wish her all the best in retirement, and I'm sure she'll continue to stay busy. I look forward to working with this outstanding group of leaders here at Gilead who bring a strong blend of skills and diverse perspectives to the path forward for our future. And in closing, I'm increasingly optimistic about the future and believe we are well positioned as we enter the last part of the year and look ahead to 2020 and beyond. We will continue to build on our success as we replenish the pipeline and bring the next wave of transformational advances to scale. On behalf of the leadership team, I want to thank all of our employees and partners around the world for the dedication and hard work that led to a successful quarter and the results that you see here today and whose commitment will continue to make us successful in the future. With that, I will now turn the call over to Rava.

Happy that Robin will remain at Gilliat in advisory capacity through early next year, while we complete the reporting there are 2019 results.

I'd also like to take this opportunity to thank Robin for her outstanding contributions dedication and tremendous commitment to Gilliat. We were sure all the best in retirements I'm sure. She will continue to stay busy.

I look forward to working with that this outstanding group of leaders here I give the I'd, who bring a strong blend of skills and diverse perspectives to the path forward for our future.

And in closing of increasingly optimistic about the future and believe we are well positioned as we enter the last part of the year and looking ahead to 2020 and beyond.

We will continue to build on our success as we replenished the pipeline and bring the next wave of transformational advances to patients.

On behalf of the leadership team I want to thank all of our employees and partners around the world for the dedication and hard work that led to the successful quarter.

And the results that you see here today, and whose commitment will continue to make a successful in the future.

That I will now turn the call over to Rob.

Robin Washington: Thank you, Dan, for your kind words. It has been a privilege to serve as Gilead's CFO for the past 11 years and to work alongside such extraordinary colleagues to bring medicines to people around the world. I know the focus on this mission will continue, and I look forward to cheering Gilead on in 2020 and beyond. I'm pleased to report the financial results for the third quarter, which were marked by strong execution across our therapeutic areas, led by the continued growth of our HIV franchise and continued predictability of HCV. Total revenues for the third quarter were $5.6 billion, with non-GAAP diluted earnings per share of $1.75. This compares to revenues of $5.6 billion and non-GAAP diluted earnings per share of $1.84 for the same period last year. As noted in the earnings press release, on a gap basis, we recorded a loss of $0.92 per share primarily due to $3.92 billion, or $2.40 per diluted share, of upfront collaboration and licensing expenses associated with our Global Research and Development Collaboration Agreement with Galapagos.

Thank you Dan for your kind words, it has been a privilege to serve as Gilliat CFO for the past 11 years and to work alongside such extra ordinary colleagues to bring medicines to people around the world.

No. The focused on this issue will continue and I look forward to cheering gilliat on in 2020 and beyond.

I'm pleased to report the financial results for the third quarter, which were marked by strong execution across our therapeutic areas led by the continued growth of our HIV franchise and continued predictability of CB.

Total revenues for the third quarter were 5.6 billion with non-GAAP diluted earnings per share of the dollar and 75 cents.

This compares to revenues at 5.6 billion and non-GAAP diluted earnings per share of a dollar and 84 cents for the same period last year.

As noted in the earnings press release on a GAAP basis, we recorded a loss of 92 cents per share primarily due to 3.92 billion or $2.40 per diluted share.

Upfront collaboration and licensing expense associated with our global research and development collaboration agreement with go Africa.

Robin Washington: Turning to product sales, product sales for the third quarter were $5.5 billion, down 2% sequentially and up 1% year over year. In the U.S., product sales for the third quarter were $4.2 billion, up 4% sequentially and up 2% year-over-year. In Europe, product sales for the third quarter were $804 million, down 23% sequentially and down 8% year over year. The sequential performance was primarily impacted by two items. First, recall that the second quarter benefited from a $160 million adjustment for a statutory revenue callback reserve. And second, the third quarter was negatively impacted by a statutory callback reserve adjustment. These two factors, which primarily impacted our HCV and HIV revenues, caused an approximately $200 million decline between quarters. Now, turning to self-therapy.

Turning to product sales product sales for the third quarter were 5.5 billion down 2% sequentially and up 1% year over year.

In the U.S. product sales for the third quarter were 4.2 billion up 4% sequentially and up 2% year over year.

In Europe product sales for the third quarter were 804 million down, 23% sequentially and down 8% year over year.

The sequential performance was primarily impacted by two items.

First recall that the second quarter benefited from 860 million dollar adjustment for a statutory revenue Clawback reserve.

And second the third quarter was negatively impacted by statutory Clawback reserve adjustment.

These two factors, which primarily impacted our HCV and HIV revenues cost in approximately 200 million dollar decline between quarters.

Turning to cell therapy.

Robin Washington: Worldwide, Yes Carter sales for the third quarter were $118 million, up 57% year-over-year and down 2% sequentially. U.S. sales were $86 million for the third quarter, up 15% year over year and down 13% sequentially. In Europe, Yaskarta sales were $32 million, up 52% sequentially as we continue to ramp up in the region. It is clear that cell therapy is a validated platform with hundreds of patients being treated on a quarterly basis in the U.S. Yaskarta has established itself as a differentiated leader in an increasingly competitive environment. We will continue to focus our efforts on CAR T education in the community oncology setting to stimulate referrals of appropriate patients to self-therapy treatment centers. We also observe CAR T-eligible patients being enrolled in clinical trials at a much higher rate relative to commercial patients.

Worldwide, Yes, Carter sales for the third quarter were 118, 18 million up 57% year over year and down 2% sequentially.

You asked sales were 86 million for the third quarter up 15% year over year and down 13% sequentially.

In Europe , Yes, Curtis sales were 32 million up 52% sequentially as we continue to ramp in the region.

It is clear that cell therapy is a validated platform with hundreds of patients being treated on a quarterly basis in the us.

Yes, Carda has established itself as the differentiated leader in an increasingly competitive environment.

We will continue to focus our efforts on car T education in the community oncology study to stimulate referrals of appropriate patients to south therapy treatment centers.

We also observe car T eligible patients being enrolled in clinical trials at a much higher rate relative to commercial patients as such and as Dan outline. We anticipate further quarterly sales variations, but remain very confident in the future trajectory of yes Carter.

Johanna Mercier: As such, and as Dan outlined, we anticipate further quarterly sales variations but remain very confident in the future trajectory of YesCarda. Now, turning to expenses. Non-GAAP R&D expenses were $954 million for the third quarter, up 13% compared to the same period last year, primarily due to increased investment in our oncology programs, HIV programs, and research projects. Non-GAAP ST&A expenses were $967 million for the third quarter, up 14% compared to the same period last year, primarily due to higher promotional expenses in the U.S. and expenses associated with the expansion of Gile Moving to the balance sheet, during the third quarter, we generated $2.6 billion in cash from operations and ended the quarter with $25.1 billion in cash and investments.

Now turning to expenses.

non-GAAP R&D expenses were 954 million for the third quarter.

13% compared to the same period last year.

Primarily due to increased investment in oncology programs HIV programs and research projects.

non-GAAP Sta expenses were 967 million for the third quarter up 14% compared to the same period last year, primarily due to higher promotional expenses in the U.S.

And expenses associated with the expansion of Gilliat business in Japan and China.

Moving to the balance sheet.

During the third quarter, we generated 2.6 billion in cash from operations and ended the quarter with 25.1 billion in cash and investment.

We paid 5 billion five.

Johanna Mercier: We paid $5.5 billion in connection with our global research collaboration and equity investment in Galapagos, which was classified in our cash flow statement as cash from investing activities and included a $1.1 billion equity investment. We also paid $1.5 billion of debt used to finance our acquisition of Kite. We paid cash dividends of $804 million and repurchased 3.4 million shares of stock for $223 million. Now, turning to our guidance. As we move closer to the end of 2019, we are narrowing our guidance ranges as follows. Net product sales are expected to be in the range of $21.8 to $22.1 billion. Non-GAAP R&D expenses are expected to be in the range of $3.7 to $3.8 billion. We expect non-GAAP SG&A expenses to be in the range of $4 to $4.1 billion. All other components of our guidance remain unchanged. Our guidance is subject to a number of uncertainties, which are outlined in slides 22 and 23 in our earnings call presentation. I will now turn the call over to Johanna.

In connection with our global research collaboration and equity investment and Galapagos, which was classified in our cash flow statement as cash from investing activities and includes a 1.1 billion equity investment.

We also paid 1.5 billion of debt used to finance our acquisition of Kate we paid cash dividends of 804 million and repurchased 3.4 million shares of stock for 223 million.

Turning to our guidance as we move closer to the end of 29 team we are narrowing our guidance ranges as follows.

Net product sales are expected to be in the range of 21.8 to 22.1 billion.

non-GAAP R&D expenses are expected to be in the range of 3.7 to 3.8 billion.

We expect non-GAAP X gene expenses to be in the range of four to 4.1 billion.

All other components of our guidance remain unchanged.

Our guidance is subject to a number of uncertainties, which are outlined in slides 22, and 23 and our earnings call presentation I will now turn the call over to China.

Johanna Mercier: Thanks, Robin, and good afternoon, everyone. So as I've had the chance to settle into my role, I've been really impressed with the talent here at Gilead and the potential we have to reach even more patients with our medicine. I want to talk today about a few areas, the continued strength of our HIV business, including our recent launch of DyscoV for PrEP, the durability of HCV, and finally, touch briefly on our cardiopulmonary business, and close by discussing our Philgotinib launch prep. So let's start with HIV. Global HIV sales for Q3 were $4.2 billion, up 4% sequentially and 13% year-over-year. This marks the sixth consecutive quarter of double-digit year-over-year growth.

Thanks, Robin and good afternoon, everyone.

So as I've had the chance to settle into my role I've been really impressed with the talent here at Gilliat and the potential we have to reach even more patients with our medicine.

I want to talk today about a few areas.

The continued strength of our HIV business, including our recent launch of difficulty for Pratt.

Durability of HCV, and finally touch briefly on our cardiopulmonary business and close by discussing our forgotten at launch preparation.

So let's start with HIV.

Global HIV sales for Q3, or 4.2 billion up 4% sequentially and 13% year over year.

This marks the sixth consecutive quarter double digit year over year growth.

Johanna Mercier: As Dan noted, this is an all-time high for quarterly HIV products. U.S. HIV product sales were $3.4 billion in Q3, up 6% sequentially and 14% year-over-year. The year-over-year increase was driven by underlying prescription demand growth of 13%, mainly BicTarbic.

As John noted this an all time high for quarterly HIV product sale.

You asked HIV products sales were 3.4 billion in Q3 at 6% sequentially and 14% year over year.

The year over year increase was driven by underlying prescription demand growth, 13%, mainly big Harvey.

Johanna Mercier: VicTARVI was the number one prescribed regimen in the U.S. in the quarter. In prevention, there are now approximately 224,000 people taking Truvada for PrEP, an increase of approximately 25% year-over-year in activity. Our teams are now in the field with Discobee, thanks to its recent approval in PrEP.

The topic with a number one prescribed regimen in the west in the quarter.

In prevention, there now approximately 224000 people, taking truvada for prep, an increase of approximately 25% year over year back to patients.

Our teams are now in the field with discovery with its recent approval in Pratt.

We initiated efforts educate healthcare providers and people at risk for HIV about disco. The immediately following the approval and are really quite pleased with initial an anecdotal feedback from providers.

Johanna Mercier: We initiated efforts to educate healthcare providers and people at risk for HIV about Dyscovi immediately following the approval and are really quite pleased with initial and anecdotal feedback from providers. Now, turning to Europe. Q3 HIV product sales were $558 million, down 10% sequentially and 4% year-over-year. The year-over-year decline was expected due to the broad availability of generic versions of Truvada. The impact from generics is starting to wane as the launches of our Dyscovi-based products, namely Victarvi, progress. As Robin just mentioned, the sequential performance was impacted by an adjustment for a statutory clawback reserve in Europe, which benefited the second quarter. VicTarvi is now available across the EU5 and continues to grow. It's on track to be the best HIV launch in Europe and is number one for naive and switch across Germany, France, and Spain. It recently launched in Italy and the UK and is off to a strong start in both those countries.

Turning to Europe .

Q3, HIV product sales were 558 million.

10% sequentially and 4% year over year.

The year over year decline was expected due to the broad availability of generic versions of Truvada.

The impact from generics is starting to wane as the launches of our discovery based products, namely bit Tavi progress.

As Robin just mentioned the sequential performance was impacted by an adjustment for statutory Clawback reserve in Europe , which benefited the second quarter.

The topic is now available across the EU five and continues to grow it's on track to be the best HIV launch in Europe , and is number one and naive and switch across Germany, France and Spain.

It recently launched in Italy in the UK and is off to stock strong start in both this country.

Moving onto HCT.

Johanna Mercier: Moving on to HCD, global Q3 HCD sales were $674 million, down 20% sequentially and 25% year-over-year. U.S. product sales for Q3 were $380 million, up 7% sequentially and down 22% year-over-year. The sequential performance was driven by the continued uptake of authorized generics, which has improved our overall competitive position in the U.S. In Europe, HCB product sales for the second quarter were $111 million, down 60% sequentially and 45% year-over-year. As anticipated, the sequential performance was negatively impacted by the adjustments for the statutory callback reserve in Europe, which benefited Q2.

Global Q3, HDD sales were 674 million down, 20% sequentially and 25% year over year.

You asked product sales for Q3 were 380 million up 7% sequentially and down 22% year over year.

The sequential performance was driven by the continued uptake of the authorized generics, which has improved our overall competitive position in the U.S.

In Europe , HCV product sales for the second quarter, where 111 million down 60% sequentially and 45% year over year.

As anticipated the sequential performance was negatively impacted by the adjustments for statutory call back reserve in Europe , which benefited Q2.

Johanna Mercier: Overall, the HCD market continues to see a more predictable decline in patient starts and perform in line with our expectations. Before closing, I wanted to just make a few comments on our cardiopulmonary business, where we have seen generic competition enter the market. As anticipated, significant volume erosion has occurred, and as of September, we have seen an 85% erosion of the Renexa and 60% erosion of the Loteris, a trend that we expect to continue.

Overall, the HDD market continues to see more predictable decline in patient starts and perform in line with our expectation.

Before closing I wanted to just make a few comments on our color cardiopulmonary business, but we have seen generic competition entered the market.

As anticipated significant volume erosion has occurred and as of September we've seen an 85% erosive, everyone Axa and 60% erosion of the terrorists a trend that we expect to continue.

Finally, I spent time recently, both Europe , and Japan, where our teams have completed the regulatory filing for forgotten it in rheumatoid arthritis.

Johanna Mercier: Finally, I've spent time recently in both Europe and Japan, where our teams have completed the regulatory filing for Felgottenib in rheumatoid arthritis. Launch preparations are well underway in both regions, as well as in the United States, where, as Dan noted, we plan to file before the end of the year. I believe that we truly have an opportunity to make a difference in the lives of people with RA and, in the future, other inflammatory diseases. We're actively preparing for a competitive and innovative launch of a differentiated JAK inhibitor across our key markets. I really look forward to working with this great team of people to deliver on the promise of these medicines. So thank you very much for joining today's call, and now we turn it over to questions. Operator?

Launch preparations are well underway in both regions as well as in the United States with Dan noted, we plan to file before the end of the year.

I believe that we truly have an opportunity to make a difference in lots of people with our.

And in the future other inflammatory diseases.

We are actively preparing for a competitive and innovative launch of a differentiated JAK inhibitor across our key market.

I really look forward to working with this great team that people to deliver on the promise of these medicine.

So thank you very much for joining today's call and now that turn it over to question operator.

Operator: Today's question and answer session will be conducted electronically. Anyone wishing to ask a question may signal us by firmly pressing the star key followed by the digit 1 on his or her touchtone telephone. We will call on you in the order that you signal us. If you find that your question has been asked, you may remove yourself from the list by pressing the pound button.

Today's question and answer session will be conducted electronically.

Anyone wishing to ask a question may signal us by firmly pressing the star key followed by the digit one on his or her touchtone telephone.

We will call on you in the order that you signal us.

You find that your question has been asking me remove yourself from the roster by pressing the pound Keith.

Operator: As a reminder, we will be taking a maximum of one question per person at a time. If you have further questions, you are welcome to rejoin the queue. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Michael Yee with Jeffries. Your line is now open.

As a reminder, we will be taking a maximum of one question per person at a time.

If you have further questions you're welcome to rejoin the queue.

<unk> for just a moment to compile the Q and a roster.

[laughter].

Our first question comes from the line of Michael You with Jefferies. Your line is now open.

Daniel O'Day: Hey guys, thanks for the questions. I had a question for Dan. Obviously, Dan, you've spent a lot of time this year putting in the right people, and getting everything all set up.

Hey, guys. Thanks for the questions.

I had a question for Dan obviously, Dan you've spent a lot of Chinese you're putting in the right people getting everything all set up you did it galapagos steel build out the pipeline a bit I guess and thinking about the pipeline and building that out where where are you focusing your priority Sean how should we think about.

Daniel O'Day: You did a Galapagos deal to build out the pipeline a bit. I guess in thinking about the pipeline and building that out, where are you focusing your priorities? How should we think about your next area, whether that's in NASH or oncology? How should we think about that? Maybe just give us a little State of the Union there.

Your next.

Area on whether that's in national oncology, how should we think about that.

Maybe just give us a little shaded union there.

Daniel O'Day: Yeah, thanks, Michael, very much for the question. And I'm delighted that we now have the team coming together for the future. I think it's a really good, diverse team with some strong Gilead legacy colleagues, as well as combined with some talent from outside the organization with different perspectives. And I think it's going to lead to a really strong, good team that will help us drive kind of the future chapters of Gilead moving forward. Also, I am pleased that we had the Galapagos transaction finalized in the quarter.

Yes, Thanks, Michael very much for the question and I'm delighted that we now have.

The team coming together.

For the future I think it's a.

I really good diverse team with some.

Strong Gilead legacy colleagues.

As well as combined with some talent from from the outside the organization with different perspectives and I think it's going to lead to up to a really strong good team that will help us drive and in the future chapters of Gilliat moving forward.

Also please Michael that we had to Galapagos transaction finalized in the quarter. We're obviously you know getting going now and are on our deeper collaboration beyond Filgotinib and as I've said to you in the past and I'll say it again, I mean, I think the team here and I.

I have the pipeline is our number one priority of course and that.

Daniel O'Day: We're obviously, you know, getting going now on our deeper collaboration beyond Philgottonib. And as I've said to you in the past, and I'll say it again, I think the team here and I have the pipeline as our number one priority, of course. So, we'll continue on in that area. I think more to come as the team comes together, as we continue to evaluate. Certainly, the areas that you mentioned are areas that we're looking at carefully to complement our internal expertise. But we're not driven by, you know, any one therapeutic area. We're driven much more by, you know, where the next innovation is going to come from in science and how do we complement that portfolio. With an acknowledgment, by the way, that we understand that we have to accelerate the development of our later stage pipeline as well. And that can happen by both accelerating the development of our early stage pipeline.

We approach that from a variety of different ways. One is the strength of our internal pipeline looking for ways to accelerate differentiated medicines.

Did we can internally.

And with Galapagos now significantly expanding our research base. In addition to other collaborations we have externally.

That allow us to essentially double our research base.

Of.

Medicines coming into the portfolio the development portfolio in terms of therapeutic area I would say you know our.

Approach to external partnerships and M&A will be very much the same of what you saw in the past so.

First and foremost will be driven by science, driven by where we think the most.

Unique opportunity. These are secondarily will be informed by our own expertise.

As you know we play across four therapeutic areas today.

And strong scientific understanding in a base in.

Anti viral and Immunomodulation.

And there is no one size fits all of course, I mean at times. It makes sense to just do a partnership at other times. It makes sense to do a full acquisition and other times. It makes sense to do something like that Galapagos arrangement, where we'd.

Where we have a a deep partnership associated with that so we'll continue on in that area I think more to come as a team comes together as we continue to evaluate.

Certainly the areas that that you mentioned are areas that we're looking at carefully the to compliment our internal expertise.

But we're not driven by anyone therapeutic area were driven much more by Where's the next innovation going to come from in science and how do we complement that from four portfolio with an acknowledgment by the way that we understand that we have to accelerate the development of our later stage pipeline as well and that can happen by both.

Daniel O'Day: Thank you all for joining us today. Michael, more to come, you know, and obviously, you know, some of the conferences coming up and into next year, I can be even more specific and articulate about how some of our strategies are forming.

Accelerating our internal pipeline.

Or having partnerships arrangements with the company's outside of the Gilliat Orbitz today.

So Michael a more to come you know and obviously some of the conferences coming up and into next year I can be even more specifics on articulated about how some of our strategy is performing.

Operator: Perfect. I look forward to that.

Perfect I look forward to that thank you.

Robin Washington: Thank you. Our next question comes from Brian Abrahams with RBC Capital Markets. Your line is now open. Hi there, thanks very much for taking my question. So you have narrowed the R&D and SG&A guidance to the upper end of the previous ranges. And so I guess I'm wondering maybe bigger picture, perhaps longer term, especially as we're getting closer now to the Forgotten of launch, how do you guys balance the importance of margin preservation and earnings growth against the potential to invest as you build out in information? And how might the changes in leadership potentially influence this?

Thanks, Mike.

Our next question comes from Brian Abrahams with RBC capital markets. Your line is now open.

Hi, there thanks very much for taking my question.

So you narrowed the R&D initiating guidance to the upper end of the previous ranges and so I guess I'm wondering maybe bigger picture, perhaps longer term, especially as we're getting closer now to the forgotten of launch how do you guys balance the importance of margin preservation and earnings growth against the potential to invest as you build out in inflammation.

And how my to changes in leadership potentially influences. Thanks.

Robin Washington: Yeah, let's let Robin give her commentary, Brian, and then maybe I'll add my own as well.

Yes, let's let Robin give her commentary, Brian and then maybe I'll add as well. So include hi, Brian . Thanks for the question I'd say, we manage them very carefully as you know we've always been a very highly efficient organization I'm really focused on operational excellence in ensuring.

Robin Washington: Hi Brian. Thanks for the question. I'd say we manage them very carefully. As you know, we've always been a very highly efficient organization, really focused on operational excellence and ensuring that even as we've grown, we've grown profitably as we think about margins. And at the same time, as you've heard me say before, we're always balancing the need to invest for the long term. And, as you know, that can have implications in the short term. You've seen us with previous launches and with acquisitions make the necessary investments up front that may yield shorter operating margins in the short term but ultimately get us to higher revenues and overall margins in the long term. So I think that's how we think about our model. It's not by quarter or by year. It's really ensuring that when we make investments, we take the necessary actions in a short time to ensure the overall ROI on those investments. And I'll turn it over to Dan and talk about the future, but I think we're pretty much aligned going forward.

And even as we've grown we've grown profitably as we think about margins and at the same time as you've heard me say the before we're always balancing the need to invest for the long term and as you know that can have implications in the short term you've seen us with previous launches and with acquisitions make the necessary investments.

Upfront that may yield shorter operating margins in a short term, but ultimately get us to higher revenues in overall margins long term. So I think that's how we think about our model there it's not by quarter by year, it's really ensuring that when we make investments that we make the necessary.

Actions in the short time ensure IB overall ROI on those investments and I I'll turn it over to Dan to talk about the future, but I think we're pretty much a line thats true going forward well said relevant in Brian you may want to your from my vantage point as well, just particularly with the CFO transition to make sure you understand the.

Daniel O'Day: I have really admired Gilead's efficiency, as Robin mentioned, and the careful management of expenses. And I think that's something that we will continue to make sure that we emphasize here as well. I've also been a student of history here at Gilead, and I've looked back in the past and seen, in times of important launches, that investment has increased correspondingly, in the interest of patience, in the interest of shareholders. And I think that type of philosophy, I think, will continue.

Ability from my side as well, so I have really admired julianna.

Mission see as Robin mentioned and the.

The careful management of expenses and I think that's something that we will continue to make sure that we emphasize here as well I've also been a student of the history here again, we had and I look back in the past unseen in times of important launches.

An investment has increased correspondingly.

In the interest in patients in the interest of shareholders and I think thats that type of philosophy I think will continue in certainly we will also be.

Daniel O'Day: And certainly, we will also be You know, as we have generic erosion, of course, coming now this year and next year. We also have the ability to redeploy those resources, as we already have done with cardiopulmonary, to other areas of focus and interest, including the upcoming or the current launch for the scovian prep. And then we will also make sure that we have a competitive launch for Philgotton because we know that it will be essential to have the right share of voice to get that off to a good start. We only have one chance to launch a product in this industry, and therefore, we have to do that accordingly. So as we get into providing you with more guidance in 2020, we can elaborate a little bit further about how we see that expense management for next year. But I hope you get a sense that much of the discipline that Gilead has had in the past, you can expect to have in the future as well, Brian.

As we as we have generic erosion of course coming now this year and next year. We also have the ability to redeploy those resources as we already have them with cardio pulmonary to other areas of focus in interest, including the upcoming or they get the current.

Launch for the Scobey in print.

And then we will also make sure that we have a competitive launch of forgotten and because we know.

It will be essential to have.

The REIT share of voice to get that off to a good starts.

We have one chance to launch a product in this industry is therefore, we have to make that accordingly, so as we get into you know providing you with more guidance and 2020, we can elaborate a little bit further about how we see that expense management for next year, but I hope you get a sense that much of the discipline. The gilligan's. It hasn't been passed you can expect to have in the future as well Brian .

Thanks, so much.

Operator: Thanks so much. Our next question comes from Geoff Meacham with Bank of America Merrill Lynch. Your line is now open. Hey guys, thanks for the question, and congratulations to Andy and Rob, and it's been great to work together. Wish you the best.

Our next question comes from Geoff Meacham with Bank of America Merrill Lynch. Your line is open.

Hey, guys. Thanks for the question and congrats Andean Robin it's been great to work together, we should the best.

Johanna Mercier: I just wanted to ask about HIV market expansion outside of PrEP. And, you know...

Just wanted to ask about HIV market expansion outside of prep.

And with the Harvey the share gains are impressive and what's its profile.

Johanna Mercier: You know, with BicTarvy, the share gains are impressive, and with its profile. Are you seeing an uptick, though, in treated patients on ART overall? I just wanted to ask because HIV market expansion used to be a secondary driver of the market, but I'm not sure.

Are you seeing an uptick though and treated patients on a Archie overall I just I just wanted to ask because HIV market expansion used to be a secondary driver of the market, but I'm not sure about that today and how do you think this differs in Europe .

Johanna Mercier: Thanks so much.

Johanna Mercier: So maybe I'll take that one, Geoff. It's Johanna.

So much.

Maybe I'll take that when Jeff its Joanna.

Johanna Mercier: I think, as you were mentioning, the HIV business overall, and treatment's a huge part of that. About 80% of our total HIV business has never been stronger. And what we're seeing, it's a bit of a mix, what you're saying, but in both U.S. and Europe, you have about 80% of the patients that are switched patients, and 20% are nave. So the naive patients are a smaller play and less of a market expansion per se, to your earlier point, but much more in the switch. And so where the switch comes from is really important And what we're seeing with BICTARVY, and that's been our strategy all along and our expectations, is that about 20 to 25% are coming from dollar check of error-based regimens and about a third coming from Truvada-based regimens, and then the rest, another third, probably from GenVoya.

I think you know as as you're mentioning HIV business overall and treatments a huge part of that that 80% of our total HIV business has never been stronger and and what we're seeing it depends on mix, but you're saying, but in both us and Europe , you had about 80% of the patients or switch patients and 20% or naive patients to the naive patients.

He is a smaller play and left about market expansion per se to your earlier point, but much more in the switching so where are the switch come from a really important to us for big Harvey and what we're seeing with the carving that fit our strategy are all along in our expectation is we're seeing about 20% to 25% or come.

I think from dollar check their based regimens and about a third coming from Nevada based regimen and then the rest and another third probably from Genvoya and so so that's the piece where from a switch standpoint, that's the biggest most important piece of the business.

Johanna Mercier: And so that's the piece where, from a switch standpoint, that's the biggest, most important piece of the business. Both in the U.S. and Europe, it's quite similar, actually. The challenge in Europe is obviously greater; there are more Truvada pieces of the puzzle, just because of genericization in Europe. But overall, what we're seeing is very consistent, both in Naive and Switch, and Victari's number one not just in the U.S. but also in Germany, France, and Spain, and we only just got reimbursement in the last quarter for the U.K. and Italy, so those launches are off to a similar, very consistent way of launching than we've seen in the other markets.

Both in U.S. in Europe , it's quite similar actually the challenge in Europe is obviously more there's more truvada pieces. The puzzle just because of the Genericization in Europe .

But overall, what we're seeing.

It's very consistent both in now even switch and retirees number one not just in the U.S., but also in Germany, France, and Spain, and we owned only just thought reimbursement in the last quarter for UK, Italy, So, but those launches are off to the similar very consistent way of launching demi seen any other market.

Okay.

Johanna Mercier: Thank you, Geoff. So we'll go on to the next question.

Thank you Joe So we're going to the next question.

Our next question comes from lineup, Jeff Corgis with FCB Leerink. Your line is now open.

Operator: Our next question comes from...

Operator: This is the line of Geoff Borges with SDB Learning.

Daniel O'Day: Rewind it if that won't work. Thank you very much. I'm just wondering if you could help me understand a little bit on the research side. You sort of glossed over that a bit. First, Dan, could you break out the $4 billion or so in annual spend that you have now between immunology, oncology, hepatology, and then research? Just give us a sense of those allocations. And then, related to that, Dan, could you talk about if you were to contemplate significant M&A or, for that matter, additional licensing? Do you envisage that that $4 billion run rate will have to go up to accommodate those new programs, or do you have some savings from big trials coming to an end and or other efficiencies that might take the $4 billion down and accommodate incremental programs from outside the company?

Thank you very much I'm just wondering if you could help me understand a little bit.

On the research side, you can sort of glossed over that a bit.

First then.

Could you breakout the $4 billion. So in annual spend that you have now between immunology oncology.

Hepatology, and then research just give us a sensor for those allocations and then related to that Dan could you talk about if you want to contemplate.

Significant M&A on.

For that matter additional licensing.

You envisage that that 4 billion run rate will have to go up to accommodate decent those new programs or do you have.

Some savings from big trials coming to an end.

And or other efficiencies that might take the 4 billion down and accommodate incremental programs from outside the company.

Daniel O'Day: Terrific. Yeah, thanks, Jeff.

Terrific. Thanks, Jeff I'm actually glad you asked the question because it on the previous question I spoke more about you know how we look at allocation of resources on the.

Daniel O'Day: I'm actually glad you asked the question because, in the previous question, I spoke more about, you know, how we look at allocation of resources on the commercial side more so than the research side. So, yeah, let me first of all state that, you know, the first part of your question relative to how we allocate that across therapeutic areas is not something we disclose accordingly. So, I can't help you with that.

On the commercial side more so than the research side. So so yeah. Let me let me first of all state that.

Yeah.

The first part of your question relative to how we allocate that across therapeutic areas is not something we've disclosed.

Accordingly, so I can't help you with them, but I think I can help you with the forward.

Daniel O'Day: But I think I can help you with the forward question, which is, you know, as we think forward to either partnerships or M&A, how is that going to help or what impact will that have, if you like, on the overall R&D spend? Now, I think there's one aspect of that that's very important, which is, you know, and you mentioned it a bit. But A, we're constantly prioritizing our portfolio internally, and that is based upon making sure that we have, you know, the most attractive programs that we're funding. You know, every organization has to draw a line. And I think, you know, we also have to do that as well. And, of course, things change because of the nature of, you know, Data to Thread Out, Competitive Environments, a variety of things that happen. So the portfolio is constantly kind of evolving and moving internally based on that portfolio. And therefore, to your point, there are times when we stop studies; studies come to a national conclusion, and they've been successful.

Question, which is you know as we think forward to either partnerships or M&A.

How is that going to help or what impact will then have if you like on the overall R&D spend now.

I think there you know there there is one aspect to that that's very important which is.

And you mentioned that a bit.

We were constantly prioritizing our portfolio internally and that that is based upon making sure that we have the most attractive programs that were funding.

Every organization has to draw a line and I think you know we also have to do that as well and of course things change because of the you know the nature of.

David This read outs.

Competitive environments.

Variety of things that happened. So the portfolio is constantly kind of evolving and moving internally based on that portfolio and therefore to your point there are times when we stop studies studies come to a national conclusion and they've been successful.

Daniel O'Day: And we have those to then reinvest again accordingly. Many of the structures that we've looked at in our partnerships have also been designed to be, first of all, innovation-focused but also allow for some balanced risk across the portfolio and spend. For instance, with Galapagos, you know, our relationship with them is that they are conducting trials up until phase two, and they make the decisions and they take the risk associated with that and all the diversity and benefit that comes from having another organization look at that differently. And then, post our opt-in, of course, then we would start to incur expenses on our R&D line as well. So many of our partnerships and collaborations have been designed with that in mind as well.

And we have those to to than reinvest again accordingly.

Many of the structures that weve.

The we've looked at in our partnerships have also been designed to be first of all innovation forward, but also.

Allow for some balance risk across the portfolio in spend for instance, with Galapagos.

You know our relationship with them is that they are covering trials up until phase two.

And they take the decisions and they take the risk associated with ads and all the diversity and benefit that comes from having to.

Another organization look at that differently and then poster opt in of course, then we would start to incur expenses on our.

On our R&D line as well so many of our partnerships and collaborations have been designed with that in mind as well.

Daniel O'Day: And, you know, we'll continue to do it that way, to be efficient with risk versus investment. And I think that's what we'll continue to look at moving forward. So more to come on that. I would just say, I mean, the one thing we do disclose, Jeff, on the R&D line is that around 15 to 20% of the 4 billion goes into research. And the remaining is into development human trials accordingly so that I can give it to you. But we don't really break it down further by therapeutic area.

And we'll continue to do it that way to be efficient with risk versus investment and I think thats, who we will continue to look at moving forward. So more to come on that I would just setting the one thing we do disclose Jeff on the on the R&D line is that around 15% to 20% of the 4 billion goes into research and the remaining is into development human trial.

Miles accordingly, so that I can give you, but we don't really break it down further by therapeutic area.

Does that help.

Daniel O'Day: Was that help? Somewhat. Thanks, Dan.

Somewhat.

[laughter] as much as I cannot things, but thanks.

Operator: As much as I can, I think, but thanks, Geoff.

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

Johanna Mercier: Our next question comes from Matthew Harrison with Morgan Stanley. Your line is now open. Great. Good afternoon. Thanks for taking the question. I guess I was hoping you could just talk briefly. I know it's very early in the switch from Trivada to Dyskovi, but maybe you could talk about your expectations for some of the markers we should be looking for there, and then, you know, maybe anecdotal feedback as you've, you know, maybe been in the market for a couple weeks already with that. Thanks.

Great. Good afternoon. Thanks for taking the question I guess I was hoping you could just talk briefly I know, it's very early in the in the switch from Truvada to discovery, but maybe you could talk about your expectations for some of the markers we should be looking for there and then maybe anecdotal feedback as you know maybe band the Mark.

A couple of weeks already with that thanks.

Thank you for the question. So yes, so only a few weeks then right. We got the approval early October .

Johanna Mercier: Thanks, Matthew, for the question. So, yeah, so only a few weeks in, right?

Johanna Mercier: We got the approval in early October, but even within a few weeks, we're off to a strong start. I think the team is very excited about it, but more importantly, the early feedback from physicians is very positive, and we're hearing a lot of enthusiasm from our prescribers. I do want to explain that the PrEP market is a little bit different than the treatment market, and that is that it's much larger in the number of prescribers. So there are over 50,000 prescribers that have actually written at least one script for PrEP with Truvada. So having said that, more than half of the volume that we're seeing in PrEP is actually very concentrated in a couple of thousand specialists who also prescribe treatment.

But even within a few weeks were off to a strong start I think the team I'm very excited about it but more importantly, the early feedback from physicians is very positive and we're hearing a lot of enthusiasm from our prescriber I do want explained at the prep market is a little bit different than the treatment market and that is that a much larger in the number.

Prescribers. So there is over 50000 prescribers that have actually written at least one script prepped for each of which about.

So having said that more than half of the volume that we're seeing in prep is actually very concentrated in a couple of thousand specialists, who also prescribing treatment. So that has been our number one focus and target physicians that we that we have been calling on over the last couple of weeks because these are folks that obviously.

Johanna Mercier: So that has been our number one focus and target, physicians that we have been calling on over the last couple of weeks. Because these are folks that obviously have the largest volume pool, but also folks that have experience converting from TDF to TASC and also understand the value of dyscovian, its clinical profile, specifically around the safety of bone and renal. So we assume a very similar conversion rate than what we've seen in the past. We have a lot of experience here with TDF to TASC conversions, and we assume that the same conversion rate will happen with these top prescribers. For the balance of the volume, obviously, we are assuming a little bit of a slower uptake with those prescribers just because it's so much more diffuse.

Largest volume pool, but also folks that have experience converting from tdf to tap and also understand the value of discovery in its clinical profile, specifically around the safety with Boenning Reno. So we assume a very similar conversion than what we've seen in the past. We've had we have a lot of experience here of TD epitaph conversion.

And we assume that seeing conversion rate will happen with these with these top prescriber.

For the balance of the volume obviously, we are assuming a little bit of a slower uptake with those prescribers just because it's so much more dive view on but having said that we've augmented the fuel team I think Dan mentioned this earlier, how we've we've taken up a lot of our field forces from the cardiopulmonary in light of the generics hitting their Wi Fi.

Johanna Mercier: But having said that, we've augmented the field team. I think Dan mentioned this earlier, how we've taken a lot of our field forces from the cardiopulmonary department in light of the generics hitting there. We've basically trained them and moved them over there to supplement the team, and also augmented our consumer approach to get really rapid awareness of dyscovia, both to physicians, as well as to targeted consumers. So, so far, so good. Very excited about the launch, and probably in the next quarter, we'll have more to talk about with data.

Basically train them and move them over there to supplement the team and also augmented our consumer approach to get really rapid awareness of disco the both to position as well as targeted consumer. So so far so good very excited about the launch and probably in the next quarter, we'll have more to more to talk about with data.

Our next question comes from the line of Alithia Young with Cantor Fitzgerald. Your line is now open.

Operator: Our next question comes from the line of Alethea Young with Cantor Fitzgerald. Your line is now open.

Hey, guys. Thanks for taking my question and I just wanted to talk a little bit about Nash strategy from here I understand you have the Atlas study in the fourth quarter, but also saw you started to Semigloss Iclip. One study combination with doubles and triples. So can you maybe frame for us to how you think about like what might be your backbone asset Nash and impossibly your plans going forward there. Thanks.

Daniel O'Day: Hey guys, thanks for taking my question, and I just wanted to talk a little bit about NASH strategy from here. I understand you have the ATLAS study in the fourth quarter, but I also saw you started some of the Glutide Clip-1 study combination with doubles and triples. So, could you maybe frame for us how you think about, like, what might be your backbone asset in NASH and possibly your plans going forward there? Thanks.

Yes, thank you very much.

Daniel O'Day: Yeah, thank you very much. Alethea, so I think you rightly pointed out an important data point coming up here that will allow us to think about how we pivot our NASH strategy moving forward, and that's the ATLAS study that we will be reading out before the end of the year. For those of you that don't know, I mean, that's a combination trial that will allow us to look at the results of a variety of different combinations on the progression of NASH. But as you also know, we've had a number of other collaborations we've looked at with Novo Nordisk and GLP-1 and some of the other ones that you've already mentioned there, Althea, that are approaching this from different angles as well.

I'll leave here. So I think I think you rightly pointed kind of an important.

Data point coming up here that will allow us to think about how we.

Pivot our NAV strategy moving forward and that's the Atlas study that we will be reading out before the end of year.

For those of you didn't know I mean, thats a combination trial that will allow us to to look at the results of a variety of different combinations on the progression of Nash, but as you also know I mean, we've had a number of other collaborations we've looked at.

With.

Novo Nordisk on GLP one.

And some of the other ones as you that you've already mentioned there LTL that that are approaching this from different angles as well. So I do think though that the most progressed clinical trial is currently the Atlas trial and once we.

Daniel O'Day: So I do think, though, that the most advanced clinical trial is currently the ATLAS trial, and once we can see the results of that and dig into that, then I think it will help us really understand how to move ahead with NASH and in what format and in what way. I would just mention that, as we've always mentioned, we think that NASH is very high on the medical need list but also a challenging disease to develop for given the nature of the disease, given the heterogeneity of the disease, given the endpoints. And yet, we think a company like Gilead with expertise in this area needs to be informed by the science and follow the science to see what our path forward will be. So more on the NASH strategy after the ATLAS trial at the end of this year.

Can see the results of that and dig into that.

Then I think you will help us really understand how to progress ahead with Nash and what format in what way I would just mentioned that as we've always mentioned, we think that Nash is.

Very high unmet medical need.

But also a challenging disease to developing given the nature of the disease, given the heterogeneity of disease, given the endpoints and yet we think a company like gilliat with expertise in this area.

I need to be.

Formed by the science and follow the science to see what our path forward will be some more on the Nash strategy. After the outlets trial this year.

Our next question comes from the line of Nomura with Evercore ISI. Your line is now open.

Johanna Mercier: Our next question comes from the line of Umer Raffat with Evercore ISI. Your line is now open. Hi, thanks so much for taking my question.

Hi, Thanks, so much for taking my question I wanted to focus on a couple of R&D topics. If I may one on Filgotinib I noticed ft called Endo Partisan then review documents ft effectively implied class labeling on Thromboses risk for the class and my question is what's your expectation do you think you'll get a black box was on doses.

Operator: I wanted to focus on a couple of R&D topics, if I may. One, on phylogotinib, I noticed FDA called it endopatacinib review documents. FDA effectively implied class labeling on thrombosis risk for the class. And my question is, what's your expectation? Do you think you'll get a black box or thrombosis? And do you think that impacts commercial uptake

And do you think that impacts commercial uptake and then secondly, there was a program in your pipeline, which I will start to get really excited about perhaps mostly because it was sort of in the exactly the type of thing Gilead has been very good at novel Nukes I'm, just 91, 31, and it could have fallen base of lifecycle management I notice, it's not in the slide deck. This time.

Johanna Mercier: And then secondly, there was a program in your pipeline which I was starting to get really excited about, perhaps mostly because it was sort of exactly the type of thing Gilead has been very good at, novel nukes, GS9131, and it could have formed the basis of life cycle management. I noticed it's not in the slide deck this time around, and I was wondering if you could catch us up on any learnings from that program. Thank you.

Around and I was wondering I was wondering could catches up on any learnings from that program. Thank you.

Olivia Brayer: Terrific, Umer. So we're going to start with Johanna, and she'll go, and then we'll go to Daina for your HIV question.

Terrific numerous we're going to start with John and fill go in and we're going to Diana.

Okay weakness.

Sure over I mean, as you know and we've spoken out before we know that patients with inflammatory diseases are at risk for thrombosis and so it's always a comparison against expected background rates of this event and patients.

Johanna Mercier: Sure, Umer, I mean, as you know, and we've spoken about before, we know that patients with inflammatory diseases are at risk for thrombosis, and so it's always a comparison against expected background rates of this event in patients. And we think it's possible that selected JAK1 inhibition, as we have with phlegotinib, may have some advantages. But certainly, at this point, it would be premature to speculate on what the label outcomes may be. We're going to go through the process. We believe we have a strong story with regard to thrombosis risk and are reassured by the overall efficacy and safety profile. We've seen this across all of our programs, and we are looking forward to having that discussion with the regulators.

We think it's possible that selective jakone inhibition.

As we have with Phil gotten that may or may have some advantages.

But certainly at this point it'd be premature to speculate on what the label outcomes may be.

We're going to go through the process. We believe we have a strong story with regard to thrombosis risk and and at the same time reassured by the overall efficacy and safety profile. So.

We've seen this across all of our programs and we.

We are looking forward to having that discussion with the regulators.

Olivia Brayer: This is Diana Brannon. I'll speak to your question about GS9131, which is a nucleoside reverse transcriptase inhibitor with an improved resistance profile over the currently improved drugs in that class. And this is a compound that we've been excited about, and moving through the clinic and early phase studies, because we do have a commitment to highly treatment-experienced patients who have failed prior regimens and have multidrug resistance. In parallel with the GS9131 program, as you know, our capsid inhibitor program with GS6207 has also progressed very rapidly. And GS6207 is a first-in-class compound. It has a novel mechanism of action. It's got an orthogonal resistance profile, and in fact, its promise was recognized by FDA when they granted us breakthrough designation for this population. And so we're moving ahead with capsid in this population into a registrational trial, and therefore, we won't be bringing GS9131 forward for this population because we prioritized our capsid inhibitor.

This is Diana brain enough because your question around Gs 91, 31, which as a nucleoside reverse transcriptase inhibitor with an improved resistance profile over the currently approved drugs on that path and compounds that we've been excited about and moving through the clinic and earn.

Leasing studies, because we do have a commitment to highly treatment experienced patients who has.

Ill prior regimens and have multi drug resistant.

In parallel with GS 91, 31 program as you know our casket inhibitor program with GE. Six 207 has also progressed very rapidly ngs six to seven is the first in class compound is Scott a novel mechanism of action, it's gotten orthogonal resistance profile.

Ill, we havent seen any pre existing resistance among all of the samples we've tested from treatment naive patients and heavily treatment experienced patients. These data have been published at recent conferences and so because of this novel mechanism of action because of the potency because of the lack of.

The existing resistance, we really feel that the capsid inhibitor is the really fast and lead compound to bring forward and highly treatment experienced patients and and packets promise was recognized by the FDA when they granted US breakthrough designation for this population and so we're moving ahead.

Capsid.

In this population into a registrational trial, and therefore wont be bringing Gs 91, 31 forward for this population because we prioritized our capsid inhibitor.

Operator: Thank you very much. Our next question comes from the line of Mohit Bansal with Citigroup. Your line is now open. Good.

Thank you very much.

Our next question comes from the line of Mohit Bansal with Citigroup. Your line is now open.

Great. Thanks for taking my question.

Olivia Brayer: Thanks for taking my question. Looking at your slides, you have some plans to develop capsid inhibitors in the Phase II trial. Have you discussed internally about what kind of combination agent you will be using with this long-acting treatment at this point? And when can we learn more about your PrEP strategy for capsid inhibitors? Thank you.

Like you have some flat to down enough capital.

In the face to how to fight in phase.

And maybe you guys have you.

Got it entirely about what kind of combination agent you would be using this long acting.

And then can be done more about perhaps strategy before.

Thanks.

Sure so were.

Really envisioning that capsid inhibitor to have a multiple different applications for people living with HIV I just mentioned its use for heavily treatment experienced patients where it could be added on to optimize background therapy as is commonly done for this population, but it also has a huge potential.

Olivia Brayer: Sure, so we're really envisioning the capsid inhibitor to have multiple different applications for people living with HIV. I just mentioned its use for heavily treatment-experienced patients where it could be added on to optimize background therapy as is commonly done for this population. But it also has huge potential for people living with HIV who might want to switch to a long-acting regimen because of its ability to be given at least every three months, every six months, and, potentially, in the future, longer.

For people living with HIV, who might want to switch to a long acting regimen because of its ability to be given at least every three months every six months and potentially in the future longer and there. We are still actively looking for what's the right partner for capsid inhibitor will be.

Olivia Brayer: And there, we are still actively looking for the right partner for our capsid inhibitor, and we have multiple internal programs that are preclinical or in the very earliest stage of assessment in the clinic. And we're looking forward to sharing more details as we have more certainty about what the right combination will be to partner with capsid. What we're prioritizing is ease of administration. So, we're looking at subcutaneously administered drugs that can go the distance in terms of longer, at least monthly, if not longer, and match capsid's potential. And so, as we prioritize those features and bring forward different compounds, we're really excited, actually, to share that data.

And we have multiple internal programs, which are preclinical or in the very early stage of assessments in the clinic and we're looking forward to sharing more details as we have more certainty about.

What's the right combination will be to partner with caps and what we're prioritizing is ease of administration. So we're looking at subcutaneously administered drugs for looking at drugs that can go the Justin I'm in terms of a longer at least monthly if not longer and match capsids potential.

So as we prioritize those features and bring forward different compounds will we're really excited actually tend to share that data.

Awesome. Thank you.

Operator: Our next question comes from Corey Kazimoff with J.P. Morgan. Your line is now open. Hey, good afternoon, guys.

Our next question comes from Cory Kasimov with Jpmorgan. Your line is open.

Hey, good afternoon, guys. Thanks for taking my question I wanted to see if you could talk a little bit more about the quarter over quarter trends for yes card. I know you mentioned there are are there were a higher number of potential patients going into clinical trials in threeq, but how much do you think the sequential drop can also be attributed to the launch as opposed to be are you seeing center slot that in a head of car.

Daniel O'Day: Thanks for taking my question. I wanted to see if you could talk a little bit more about the quarter-over-quarter trends for YesCarta. I know you mentioned there were, or there were, a higher number of potential patients going into clinical trials in 3Q, but how much do you think the sequential drop can also be attributed to the launch of Polivy? Are you seeing centers slot that in ahead of CAR T products, or potentially any other dynamics taking place? Thanks.

Two products or potentially any other dynamics taking place. Thanks.

Daniel O'Day: Yeah, absolutely, Corey. No, thanks for the question.

Yes, absolutely correct no. Thanks to the question and happy to talk about it I mean, I think it is important that I started out with.

Daniel O'Day: I'm happy to talk about it. I think it is important that I start out by letting you know that the team here is really confident in the longer-term opportunity with your SCADA and also, you know, cell therapy. But, as we know, this is a pioneering platform. And, you know, just to point out some of the dynamics that we're seeing in the market. Cell therapy literally changes everything that it touches, from patient identification, to clinical practice, to reimbursement, to safety management.

Let me know that the team here is really confident with the longer term opportunity because SCADA and also cell therapy, but as we know I mean this is a pioneering platform and you know just to point out some of the dynamics that we're seeing in the market.

Cell therapy really.

Literally changes everything fit it touches from patient identification to clinical practice to reimbursement the safety management. So.

Daniel O'Day: So, I would say some of the growing challenges with getting this pioneering technology into patients are what we would expect. But what's kind of unquestionable is in the patient set where it has been studied, so relapsed refractory DL-BCL, so far on the market, the efficacy and durability are unprecedented. I mean, the majority of extremely sick patients are alive at two years.

I would say some of the growing challenges with getting a pioneering technology in our are or what we would expect but what kind of unquestionable is in the patient said, where it has been studied.

Relapsed refractory deal Bcl.

So far on the market I mean, the efficacy and durability or are are unprecedented I mean, the majority of extremely six patients are alive at two years.

Daniel O'Day: And as we know, and many of my colleagues on the team, hematology and oncology is a data-driven space. So, I would say, you know, that, and we also have a very strong and good manufacturing capacity, which is critical for this technology. Now you mentioned some of the challenges; let me, let me talk about some of the drivers and some of the challenges that we're seeing in general in the market. I mean, on the positive side, the NTAP improvement that just went into effect in October 2019 from a reimbursement by CMS of 50% to 65% is a step in the right direction. We, you know, it does take a lag time before that gets, you know, fully absorbed and introduced into the community. I would point out that the ASH data coming up will have, you know, three key events there. The survival data at three years in relapsed refractory DLBCL, early steroid use, and also data on Kydex 19 and MCL.

And as we know and many many of my colleagues and the team hematology oncology is a data driven space. So I would say you know that and we also have a very strong and good manufacturing capacity.

Which is critical for this for this.

Technology that you mentioned some of the challenge is let me let me talk about some of the drivers and some other challenges that we're seeing in general in the market I mean.

On the positive side the end cap improvement.

That's just went into effect in October 2019 from a.

Reimbursement by CMS of 50% to 65% is a step into right direction.

We.

You know that it does take there is a lag time before that gets you know fully absorbed in introduced into the community I would point out the ash data coming up.

We'll have.

Three key events there the survival data at three years in relapsed refractory CLL Bcl.

Early steroid use and also data on the tight ex 19 and mcl.

Daniel O'Day: I would just also point out that Zuma 7 is now fully enrolled, so that's the second line of DLBCL. I look forward to that trial playing through. And hopefully, you know, as we go into next year, we can look towards a DRG for CAR T as well. So those are some of the real positive things we're seeing in the market. And then to your point, I mean, there are still challenges with Medicare reimbursement updates. However, there is a high rate of clinical trial usage in DLBCL, which is good news for patients. It's just there are quite a few clinical trials there. Still getting the patient referral flow down. We do have some new market entrants, but it's early days on those. You mentioned one on the call here today.

We're just also point out the zoom is seven is now fully enrolled so that's the second line VLP ill look forward to that trial, playing through and hopefully as we go into next year, we can look towards a DRG for currency as well so.

Those are some of the real positive things were seen in the market and that to your point I mean, there are still challenges with Medicare reimbursement update there's a high rate a clinical trial usage in deal Bcl, which is good news for patients. It's just the there's quite a few clinical trials there still getting the patient referral slowdowns, we do have some new market entrants early days.

On those you mentioned one on the call here today and this whole concept between inpatient and outpatient reimbursement. So I think the team is kind of systematically working through these and Thats why we cease in quarter on quarter fluctuation in the United States.

Daniel O'Day: And this whole concept of inpatient and outpatient reimbursement. So I think the team is kind of systematically, you know, working through this. And that's why we see some quarter-on-quarter fluctuation in the United States. But I would point out that, you know, we're now getting going in Europe, which is also experiencing terrific and very good growth there. And some of these dynamics are different in Europe as well. So I think as we learn quarter-to-quarter on some of the dynamics, and as the data matures and develops out there, I think that's going to be a real telltale sign for how we continue to see the uptake here. But taking a big step back, the type of data we're seeing, you know, and the duration of response. And the patients that we've studied are second to none. So hopefully, you know, as some of this becomes more, you know, the trends become more clear in future quarters, we'll be able to be more precise about some of these as well. But thanks for the question, Corey. Okay. Thanks, Dan.

I would point out that we're now getting going in Europe , which is which is also terrific and very good growth there and different some of these dynamics are different in Europe as well. So I think as we learn quarter to quarter on some of the dynamics and as the data matures and develops out there I think thats going to be a real tell tale.

We'll sign for how we continue to see the uptake here, but taking a big step back that type of data, we're seeing and the duration of response.

In the patients that Weve study this second to that so so hopefully you know as some of this becomes more.

The trends become more clear in future quarters, we'll be able to be more precise about some of these as well, but thanks for the question Corey.

Thanks, Dan appreciate thoughtful answer.

Operator: All right, thanks Dan, I appreciate it. Our next question comes from Salim Syed with Mizuho. Your line is now open. Hi guys, thanks for taking my question and congratulations to Robin and welcome to Andy.

Bruce.

Our next question comes from someone said with Mizuho. Your line is now open.

Hi, guys. Thanks for taking my question and then congrats to Robyn and welcome to Andy.

Olivia Brayer: Just one for me on Hepatitis B, as in boy if I can. I don't know if you guys can give us an update on the core inhibitor. What's the status there? And I know there have been some safety issues with the core inhibitor class, predominantly coming from HAP and SBA derivatives. So I was wondering if you could just give us a little bit of color on your core inhibitor, whether it is in development or not in development, and whether it is one of those derivatives. Thanks so much.

Just a one from me on hepatitis B and boy if I can.

And then from gets can give us an update on the core inhibitor or what's the status there and I know theres been some safety issues for the core inhibitor class print only coming from happiness. The derivatives. So I was wondering if you could just give us a little bit of color. If your core inhibitor weather isn't development or or not in development and whether it is it is one of those.

Derivatives. Thanks, so much.

Olivia Brayer: Salim, this is Diana Brander. Are you talking about the capsid inhibitor?

Hello. This is Diana front are you talking about the capsid inhibitor.

For for hepatitis B S and boy.

Olivia Brayer: For for hepatitis B, as in boy

Yes.

Olivia Brayer: Yes.

So you're talking about Kevin just recap it yes, correct yes.

Olivia Brayer: You're talking about...

Olivia Brayer: Thank you for your comments. Yeah, that's correct.

Yeah, Yeah. So.

I think that we have seen a competitor Dana regarding capsid and we're looking very closely at our our compounds preclinically as well as clinically because.

Olivia Brayer: Yeah, so, you know, we've seen the competitor data regarding CAPCID, and we're looking very closely at our compounds pre-clinically as well as clinically because, you know, obviously, with hepatitis B, we've got a lot of experience in this space, and we know very well the value of suppressive treatment and the safety of those regimens and the benefit that viral suppression brings in terms of reducing cirrhos So, while we're committed to cure and recognize that we're going to need combination therapies, we're also really cognizant of the safety barrier that really has to be overcome to bring combinations forward. And I think that's really all we can say about that right now.

Obviously with hepatitis B, we've got a lot of experience in this space and we know very well the value of suppressive treatment and the safety of those regimens and benefit that viral suppression brings in terms of reducing cirrhosis, reducing rates of about a cellular carcinoma, so well.

We're committed to cure and recognize that we're going any combination therapies. We are also a really cognizant of the safety a barrier that really has to be exceeded to bring combinations forward and I think that's really all we can say about that right now.

Are you still developing is it still ongoing there's been some speculation that it's been terminated in the marketplace.

Olivia Brayer: Are you still developing it? Is it still ongoing? There's been some speculation that it's been discontinued in the marketplace.

Olivia Brayer: You know, I think that we're in the process of continually evaluating what our best next steps are, and I think in terms of how we prioritize what we bring forward, we've got TLR-8 in Phase 2, and we really want to see the results of those studies before making any final decisions on next steps and future combinations.

Yeah, I think that we where we're in the process of continually evaluating what our best next steps are and I think in terms of how we prioritize what we bring forward we've got the TLR eight and fees to and we really want to see.

The results of those studies before making any final decisions on.

Next steps and future combinations.

Operator: Okay, got it. Thanks so much. Our next question comes from the line of Phil Nadeau with Cowan & Company. Your line is now open. Good afternoon.

Okay got it thanks, so much.

Thanks.

Our next question comes the line of Phil Nadeau with Cowen and company. Your line is now open.

And thanks for taking my question just one question on forgotten it.

Johanna Mercier: Thanks for taking my question. Just one question on Fogotnib. Maybe to ask Umer's question a different way, you've talked a lot about differentiating Fogotnib. How important is a differentiated label to that process commercially?

Maybe to ask numerous question a different way you've talked a lot about differentiating forgotten. It how important is a differentiated label to that process commercially how else.

Johanna Mercier: How else, what other key points will you have in differentiating Fogotnib? And then, secondly, on Fogotnib, we had been expecting data from Fogotnib as well as GS9876 and Sjogren's and CLE in the second half of this year. I noticed in your slides, neither of those programs are mentioned. Is there any update on those two phase two programs? Thanks.

What are the key points will you have in deferred differentiating forgotten. It and then second forgotten. The question, we had been expecting data from forgotten I Miss was TS 97, six in children's and seasonally the second half this year I noticed in your slides. Neither of those programs are mentioned is there any update on those two phase two programs. Thanks.

Yes.

Johanna Mercier: Yeah, Johanna can start on the commercial side, Phil, and then we'll go to John.

Joining a concern in the commercial side film and we'll go to join him.

Okay, so feel more on the competitive.

Johanna Mercier: Okay, so Phil, more on the competitive concept. So, as you know, this environment is super competitive, and many of us know it well, including myself, and so we've really pulled together a team that has considerable experience in this field. The piece that you would say about the differentiated level, I think it's twofold.

Concept. So as you noticed this environment, it's super competitive and many of us know well, including myself and so we've really pulled together a team that has considerable experience in this field.

The the piece that you would say, but the differentiated level I think it's twofold I think from a label standpoint, but we've seen thus far from the FDA.

Johanna Mercier: I think from a label standpoint, what we've seen thus far from the FDA is a little bit of more of a class labeling. And so our expectations, and we'll go through the process, but we're also being conservative in our expectations. One of the things that I would say is the importance of our data, and I think that if you look at the results of the three FinCH3 studies in three different patient groups, those are really exciting for us, both from an efficacy standpoint as well as a safety standpoint. So having said that, that's what we're doing. All hands are on deck to prepare for a competitive launch, but a differentiated one and an innovative one at the same time. So we're excited about that, and obviously we'll know more about the label in the coming months through 2020. Thank you. Thank you.

It is a little bit of add more of a class labeling and so our expectations and we'll go through the process, but but we're also being conservative expectations. One other things that I would say is the importance of our data and I think that if you look at the results of the three Finch three studies.

In three different patient groups those are really exciting for us both from an efficacy standpoint, as well as safety standpoint, so lot of the work that's being done right. Now is sub analysis to ensure that we can better educate physicians about our data so that kind of the plan there and I do think that the opportunity here is to potential.

Really have a best in class JAK inhibitor and that could be also related to the selectivity of the Jack one. So so having said that that's what we're doing all hands are on deck to prepare for a competitive launch that a differentiated wine and an innovative one at the same time. So so we're excited about that and obviously, we'll know more about the labor.

All in the coming coming months through 2020.

So John maybe on the other.

John Chevedden: Sure, let me update you on the status of the cutaneous lupus and Sjogren's studies that we conducted. So, these were proof-of-concept studies. As you probably know, we looked at a couple or even three different drugs in the same trials for these. These studies were exploratory in nature.

Sure look let me update you on the status of the cutaneous lupus and Sjogrens studies that we conducted so these were these are proof of concept studies as you probably know we looked at a couple or even three different drugs in the same trials for these.

These studies were exploratory in nature, we set a high bar for ourselves to proceed and while we did not see or meet the primary endpoints. In these studies thing I would like to point out is that we did see evidence of activity with Phil gotten that.

John Chevedden: We set a high bar for ourselves to proceed, and while we did not see or meet the primary endpoints in these studies, a thing I would like to point out is that we did see evidence of activity with Philgotinib, particularly in patients who had markers or evidence of more active disease. So, you know, we just got the first look at these data. We're looking at the full set of data from all of these studies, and we'll determine the next steps that we take in lupus and Sjogren's disease, and we'll share those results at an upcoming meeting soon. That's very helpful. Thank you. The next question comes from Evan Seigerman with Credit Suisse. Your line is now open.

Particularly in patients who had.

Markers are evidence of more active disease. So we just so big got the first look at these data were looking at the full set of data from all of these studies and we will determine the next steps that we take in lupus and no assurances season, we'll share those results at an upcoming meeting soon.

That's very helpful. Thank you.

Our next question comes from Evan Seigerman with Credit Suisse. Your line is now open.

Hi, there and thank you for taking my questions and I also want to extend my best wishes to Robin on her retirement, just one on the kite franchise. So I'm just wondering if you can help me better understand the rationale for the increased investment name with manufacturing facility, but more broadly how has that expansion into cell therapy on beyond yes card a fit with.

Daniel O'Day: Hi there, and thank you for taking my question, and I also want to extend my best wishes to Robyn on her retirement. Just one on the Kite franchise, so I'm just wondering if you can help me better understand the rationale for the increased investment, namely in the manufacturing facility, but more broadly, how does expansion into cell therapy beyond YesCarter fit within your kind of new strategy for Gilead, Dan? And aside from YesCarter, are there any programs that you think we should be focusing on that could drive near-term value for the franchise?

And youre kind of new strategy for Gilead Dan.

And aside from this card or are there any programs that you think we should be focusing on that could drive near term value for the franchise.

Daniel O'Day: Thanks very much for the question, and yeah, again, I would probably start with the investments that you mentioned. I think it's really important that we acknowledge the fact that, you know, the ability to manufacture in the turnaround time associated with cell therapy is absolutely fundamental to patient benefit and also to the efficacy results that we're seeing. And I think it's a real competitive advantage to be able to now have a network of manufacturing facilities that are state of the art and are able to reduce that turnaround time, including, as you mentioned, we have made a decision to establish a viral vector facility at one of our current manufacturing sites in Oceanside, California, that will allow us to not only support the current products but also future products in the pipeline.

Thanks very much for the question.

And.

Yeah, again, I would probably start with the.

You know the investments that you mentioned I mean I think.

It's really important that we acknowledge the fact that you know.

The ability to manufacture and the turnaround time associated with cell therapy is absolutely fundamental to patient benefits and also to the efficacy results to recede and I think it's a real competitive advantage to be able to have now a network of manufacturing facilities that are state of the art.

And are able to reduce the turnaround time, including as you mentioned.

We have they made a decision to.

Establish a viral vector vector facility.

In one of our current manufacturing sites in Oceanside, California that will allow us to not only supports the current products, but also future products in the pipeline. So look I mentioned some of the near term things on car T. In addition to.

Daniel O'Day: you know, what we currently have out there with the Yaskarta profile today. This data on Yaskarta at ASH I think will be important, looking at the three-year data and the early steroid use. The KITE X-19 is now a second product for MCL, and we look forward to presenting that data as well. Zuma 7 goes back to Yaskarta in an earlier line setting.

You know what we currently have out there with the US go to profile today.

This this data on your scurried at Ash I think it will be important looking at the three year data in the early steroid use.

The.

X 19 is now second product for Mcl, and we look forward to presenting that data as well zoom is seven goes back to your skarda in earlier lines settings. So when you think about the long duration of effect the efficacy and durability that we've seen in the relapsed refractory third line setting I mean, the real question is.

Daniel O'Day: So when you think about the long duration of effect, the efficacy, and durability that we've seen in the relapsed refractory third line setting, I mean, the real question is, and the more natural, you know, obviously oncology development avenue is to say, can you bring that effect into earlier lines of therapy and potentially have this effect with more patients? and potentially for a longer duration because you're treating them earlier. So the strategy is very much, you know, to continue to expand out the hematology indications first and foremost. I think that's where the greatest promise exists for CAR-T's right now, but we do also have mid- to longer-term programs on solid tumors, on allogeneic, and those, although riskier and earlier, are also programs we're fully committed to as we look to round out our leadership in cell therapy accordingly. So more to come on this.

And the more natural.

We see oncology development.

Avenue is to say can you bring that affect up into earlier lines of therapy and potentially have this effect with more patients and potentially for longer duration. Because you are treating them earlier. So the strategy is very much.

To continue to expand out.

The hematology indications first and foremost I think thats, where the greatest promise exists.

For car T is right now, but we do also have mid to longer term programs on solid tumors on allogeneic.

And those although riskier and earlier.

Our also programs were fully committed to as we look to round out our leadership in cell therapy. Accordingly. So.

More to come on this.

I personally to the broader oncology strategy I mean, as I've said before and I'll say it again I think.

Daniel O'Day: Personally, on the broader oncology strategy, I mean, as I've said before and I'll say it again, I think the concept of Gilead getting deeper into oncology by starting with a pioneering technology is a smart thing to do in oncology. I mean, really think about where you can get long durations of responses with a new technology. Having said that, we also have a great deal of expertise in our home-based technologies, such as small molecules and an evolving biologic modality expertise at Gilead. And although I'm not prepared to talk more about that today and look forward to Murdad and others coming into the organization so that we can continue to evolve our oncology strategy, I think there are opportunities that we can look at outside of cell therapy and complementary to cell therapy.

The concept of Gilly add.

Getting deeper into oncology by starting with a pioneering technology I think is a smart thing to do in oncology I mean really to think about where you can get long durations of responses with with the new technology, having said that we also have a great deal of expertise in our.

Home based technologies, such as small molecules and it evolving biologic.

Modality expertise of Gilliat, and although I'm not prepared to talk more about that today and look forward to more dad and others coming into the organization. So that we can continue to evolve our oncology strategy.

There are opportunities certainly we can look at outside of cell therapy and complementary to cell therapy.

So more on that too we're literally in the process of really doing deep dives on this as you know we also have some partnerships with other companies, where we are fully committed to different aspects of oncology and it's been a common question I.

Daniel O'Day: So more on that; we're literally in the process of really doing deep dives into this. As you know, we also have some partnerships with other companies where we are fully committed to different aspects of oncology. And it's been a common question, and I totally accept it, and it's one that, as we go into next year, we'll be laying out more and more our holistic strategy around oncology that will include cell therapy, but not only cell therapy as we move ahead. Great, thanks for the question.

Totally accepted and it's one that as we go into next year will be laying out.

Deeper and deeper our holistic strategy around oncology that will include cell therapy.

But not the only cell therapy as we move ahead, so more to come on that.

Great. Thanks for the question appreciate it.

Daniel O'Day: Thanks for the question. I appreciate it. Our next question comes from the line of Tyler Van Buren with Piper Jaffray. Your line is now open. Thanks, guys. Good afternoon. Earlier in the session, you guys spoke about your strategic areas of focus for business development, and the Galapagos deal makes a lot of sense from a long-term perspective, broadening out the pipeline perspective and acquiring additional scientific talent in Europe, but could you guys just speak a little bit further to your urgency to acquire late-stage or on-market assets, particularly maybe within the next year to add to the top line, which, as it stands,

To them.

Our next question comes from the line of Tyler Van Buren with Piper Jaffray. Your line is now open.

Hey, Thanks, guys. Good afternoon earlier on the session you guys spoke towards your strategic areas of focus for business development and the Galapagos deal makes a lot of sense from a long term broadening out the pipeline perspective, and acquiring additional scientific talent in Europe , but could you guys just speak a little bit further to your urgency to acquire late stage.

Sure on market assets, particularly maybe within the next year to add to the topline, which as it stands is relatively flat.

Daniel O'Day: No, thanks, Tyler. I mean, obviously, you know, we are a company that's firmly focused on differentiated medicines and will be driven, again, by science, both internally and externally. And, you know, obviously, it won't be too long before we start to talk about guidance for 2020 and beyond, and I'm not going to talk about that today, but the bottom line is we're. You know, if I take a big step back and I think about my confidence in the long-term growth potential of Gilead, it is captured within the strength of the HIV business. I mean, that same business that you see offsetting You have a more predictable HIV business at this time, and then we have upside potential in Felgotten, which will launch next year. And I won't repeat, but the Escarda programs and successes accordingly.

No. Thanks, Tyler I mean, obviously, we're a company that firmly focused on differentiated medicines and will be driven again by the science, both internally and externally.

And.

You know obviously it won't be too long before we start to talk about guidance for 2020 and beyond that.

Going to talk about that today, but the bottom line is were.

You know if I, if I take a big step back and I think about my confidence in the long term growth potential gilliat.

It is captured within the strength of the HIV business I mean that same business that you see.

Offsetting some of the patent expiry. This year continues to be we think a very durable business for the foreseeable future you have a more predictable age say PCB business at this time and then we have upside potential in forgotten.

Launching next year, and I won't repeat Bud Bud Skarda.

Programs and successes accordingly, having said that we understand that we wanted to find ways to continue to.

Daniel O'Day: Having said that, we understand that we want to find ways to continue to increase and accelerate our growth in the coming years. And that will happen both through internal strategies associated with the launch products and programs I mentioned, and then also outside partnerships in M&A. So rest assured that we are looking at everything that could help complement our later stage portfolio out there. And yet, and as you've seen, I think our behaviors, we will be disciplined about that. We will make sure that it's something that we feel scientifically is very strong, something that we can add something to and provide strength to. And when and if those opportunities come up, we certainly have the financial capacity and ability to act. paramount on our minds. We're in it for the short, medium, and long term, and we're looking to improve all three of those time periods. But clearly, the portfolio is absolutely a key for me and a key for the leadership team. So thank you, Tyler, for your question.

Look to increase and accelerate our growth in the coming years and that will happen both through internal strategies associated with the launch products and programs I mentioned and then also outside partnerships in M&A. So rest assured that we're lucky that everything.

That could help complement our later stage portfolio out there and yet and as you've seen I think our behaviors.

We will be disciplined about that we will.

Make sure that it's something that we feel scientifically is very strong something that we can add something to and provide strength to.

And when and if those opportunities come up we certainly have the financial capacity and ability to act. So that's.

Paramount on our mind.

We're in it for the short medium and long term and we're looking to to improve all three of those time periods.

Clearly the portfolio is absolutely a key for me and a key for the leadership team. So thank you Tom if your question.

Daniel O'Day: Yeah.

Thanks very much.

Sung Lee: Thanks very much.

Operator: That will conclude today's question and answer session. I'd like to turn the call back to Sung Lee for his closing remarks.

I will conclude today's question and answer session I'd like to turn the call back to sung Lee for closing remarks.

Sung Lee: Thank you, Liz, and thank you all for joining us today. We appreciate your continued interest in Gilead, and the team here looks forward to providing you with updates on our future progress. Ladies and Gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you Liz and thank you all for joining US today. We appreciate your continued interest from Goliat and the team here looks forward to providing you with updates on our future progress.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.