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Susan Hubbard – VP, IR

John Martin – Chairman and CEO

Robin Washington – SVP and CFO

Kevin Young – EVP, Commercial Operations

Norbert Bischofberger– EVP, R&D and Chief Scientific Officer

John Milligan – President and COO

Analysts

Geoff Meacham – JP Morgan

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Michael Aberman – Credit Suisse

Rachel McMinn – Bank of America/Merrill Lynch

Yaron Werber – Citi

Geoff Porges – Bernstein

Steve Harr – Morgan Stanley

Jason Kantor – RBC Capital Markets

Thomas Wei – Jefferies

Davis Bu – Goldman Sachs

Phil Nadeau – Cowen & Company

Tom Russo – Robert W. Baird

Jim Birchenough – Barclays Capital

Brett Holley – Oppenheimer

Joel Sendek – Lazard

Gilead Sciences, Inc. (GILD) Q4 2009 Earnings Call Transcript January 26, 2010 4:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences fourth quarter and full-year 2009 earnings conference call. My name is Katina and I will be your conference operator today. At this time all participants are in a listen-only mode. We will conduct a question and answer session. As a reminder, this conference call is being recorded today, January 26, 2010.

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

Susan Hubbard

Thank you, Katina. Good afternoon, everyone and welcome to Gilead's fourth quarter and full year 2009 earnings conference call. Very pleased you could join us today.

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

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

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

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

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

I will turn the call over to John Martin.

John Martin

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

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

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

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

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

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

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

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

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

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

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

As Gilead’s products mainly Atripla and Truvada are the cornerstones of first line therapy capturing more than 85% of new starts. We see this as an important opportunity along with the drive to screen more individuals to continue to grow the number of patients on a Gilead-based regimen.

In fact, treatment guidelines in all our major markets favorably position Gilead’s products and are moving towards starting patients on treatment earlier in their disease. And finally we continue to make progress in our efforts to remove barriers to access to all patients around the world who could benefit from our therapies.

We announced in November an agreement with GSK to commercialize Viread for the treatment of HPV in adult in five countries and Asia. This is a part of the world where HPV has taken the greatest toll with a prevalence greater than 8% in most countries.

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

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

Robin Washington

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

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

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

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

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

Viread sales were $178 million, representing an increase of 10% year–over-year and 5% sequentially, driven primarily by sales volume growth of Viread and the treatment of patients with HPV infection in the U.S. and Europe. Letairis sales were 52 million, an increase of 44% year-over-year and 9% sequentially, driven primarily by sales volume growth in the U.S. Ranexa sales were $46 million, representing a decrease of 6% sequentially.

Finally, sales of other products were $159 million, representing a decrease of 2% year-over-year and an increase of 2% sequentially. Foreign currency exchange had a net favorable impact of $14 million on revenues when compared to the same period last year.

On a sequential basis, foreign currency exchange had a favorable impact of $5 million. Our royalty contracts and other revenues for the fourth quarter were $228 million, an increase of $188 million year-over-year and an increase of $76 million sequentially. Both year-over-year and sequential increases were primarily driven by increased Tamiflu sales related to pandemic planning initiatives worldwide.

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

The following discussion of our margin and accentuated items are on a non-GAAP basis and exclude the impact of acquisition, restructuring and stock-based compensation related expenses as applicable. Product gross margin was 75% for the fourth quarter compared to 77.4% for the same quarter of last year and 76.5% for the third quarter of 2009.

The year-over-year and sequential decreases were due primarily to the higher proportion of Atripla sales, which include the efavirenz component at zero gross margin.

Operating margin was 56.4% for the fourth quarter compared to 52.5% for the same quarter last year and 53.9% for third quarter 2009. Our year-over-year and sequential operating margins were favorably impacted by the increase in Tamiflu royalties as I discussed earlier.

We continue to see improvements relative to 2008 in our core operating margin, which excludes Tamiflu and efavirenz. R&D expenses were $211 million for the quarter, an increase of 14% on a year-over-year basis and a decrease of 13% sequentially. The year-over-year increase was due primarily to additional hiring and increased clinical study activities to support the growth of our business. The sequential decrease was primarily due to the fact that the Tibotec R&D expense reimbursement during the third quarter.

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

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

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

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

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

We generated $955 million in operating cash flow during the quarter and paid off the remaining $200 million of the credit facility that we accessed in second quarter.

We also repurchased 5.3 million shares of our common stock at a cost of $242 million, fully utilizing the remaining fund under the 3 billion share repurchase program authorized by our board in October 2007. In aggregate we purchased 63 million shares under this program.

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

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

Factors that may have an impact on our business include, but are not limited to U.S. Healthcare reform, international government pricing pressures, and the potential for continued volatility in foreign currency exchange rates.

Please note that the non-GAAP product gross margins and operating expense guidance provided to you excludes the impact of acquisition restructuring and stock-based compensation-related expenses where applicable.

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

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

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

Kevin Young

Thank you, Robin. I am very pleased to discuss with you our outstanding commercial performance for the fourth quarter. I'm particularly proud to highlight the U.S. sales and market organization reaching approximately $1 billion in sales during the quarter.

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

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

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

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

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

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

Atripla, the most prescribed regimen in HIV had 189,000 patients on therapy or one-third of all treated patients and captured approximately 53% of treatment naïve patients.

Importantly, safety and efficacy data from study 073 were recently added to the Atripla label, which will allow us to actively promote the switching of patients to Atripla. This remains an important contributor to future growth as there are over 100,000 patients in the U.S. still on either Combevea [ph] or Exicom [ph] at the end of third quarter 2009.

Truvada continued to add patients with 212,000 on therapy or 37% of all treated patients, clearly maintaining its position as the backbone of choice for antiretroviral therapy in the U.S.

Total Truvada or Atripla together with Truvada continued to account for approximately 85% of patients new to therapy. And were the components of all of the top six prescribed regimens in HIV.

It is also encouraging to see the growth of a newer third agents in the naïve setting is coming in tandem with Truvada. Approximately, 81% of Raltegravir patients and 91% of Darunavir patients were co-prescribed with Truvada.

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

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

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

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

At the end of the third quarter, the big five countries of Europe had approximately 287,000 patients treated with antiretrovirals, representing a growth rate of 6% on a moving annual total basis.

Approximately 23% of patients receiving Atripla converted from Truvada plus Sustiva in the third quarter 2009 while 33% were switches from other regimens and 44% were naive therapy.

Total Truvada increased its share to approximately 76% of treatment naïve patients, up from approximately 71% in the fourth quarter of 2008. While Kivexa share dropped 10% in the fourth quarter 2009, down from 14% in the fourth quarter of 2008.

Now turning to our U.S. hepatitis franchise, during the fourth quarter, we began executing a significant modification to our HPV promotional efforts centered around the addition of a new group of sales representatives focused on the largest Asian communities, namely Los Angeles, New York, and San Francisco. By the end of this quarter, we will have a field team, 50% larger than in 2009.

We believe these additional results will be the catalysts for driving growth in the diagnosis and treatment of hepatitis B. Viread continued its strong uptake during the fourth quarter where HPV prescriptions grew by 17% quarter-on-quarter, more than offsetting any decline in Viread HIV total prescriptions and generating a 4% quarter-on-quarter increase in total Viread prescription volume across both indications.

The latest December monthly data point for total HPV prescriptions of Viread at an estimated market share of approximately 33% and Hepsera at 20%. As of the most recent data point in 2009, Viread had achieved 41% naïve patient share in the HPV market whilst Entecavir naïve patient share continue to decline to 36% versus a peak of 49% in April 2008.

Later this year, we anticipate having the 144-week data from our 102 and 103 day studies added to our label. As a reminder, those data were presented at the American Association for Study of Liver Disease in October last year.

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

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

And finally in the interest of time, I will concentrate my cardiovascular comments on Ranexa. Total U.S. sales for Ranexa during the fourth quarter were $46 million. This figure does not include any book tablet sales to Menarini, our licensee for Ranexa in Europe.

It is also important to highlight the comments made in the third quarter earnings call when we stated we have seen a modest increase in inventories one-time sales benefits as we incorporated Ranexa into our Gilead inventory management agreements.

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

The latest weekly data points is Ranexa at an all- time high of over 16,000 total prescriptions compared to just over 11,000 of the time we closed the CVT acquisition.

We have also seen a 9% increase in the base of prescribing physicians for Ranexa in the fourth quarter over the third quarter of 2009. Beginning this week, we will commence our Ranexa plan of action for 2010. The sales and marketing and medical affairs area have a comprehensive array of activities to execute all. We believe the significant potential for Ranexa (inaudible) warrants this level of commitment.

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

Norbert Bischofberger

Thank you, Kevin. On the research and development front as we enter 2010 we have a number of exciting opportunities across our therapeutic areas between now and the end of the year we expect numerous and important data sets to emerge from these efforts. First on the cardiovascular metabolic front.

As we have previously discussed we're evaluating the potential for Ranexa and follow on late sodium channel inhibitors and a number of additional indication and studies. Based on desired product profiles, we will pursue some of these opportunities with Ranexa itself and some of them with new chemical entity that will be emerging from our ongoing research efforts.

The first such effort would be to evaluate the use of (inaudible) for the treatment of patients with diastolic heart failure. We are on target to begin involvement enrolling a Phase II proof of concept study in patients with heart failure would preserve the (inaudible) early next quarter and will in parallel initiate discussions with FDA regarding the potential design for a Phase III program.

We're also progressing GS 9667, a partial a1 adenosine agonist towards a Phase Ib proof of concept study, which we expect to begin in the first half of this year. This compound has been previously shown in a single ascending dose study to lower plasma free fatty acids. The Phase Ib study will assess the effect of GS 9667 on plasma glucose and insulin sensitivity as well as its effect on plasma triglycerides. The study will help determine its potential use in patients where type 2 diabetes or with hypertriglyceridemia.

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

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

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

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

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

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

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

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

Our caspase inhibitor 9450 continues to make progress as hepatoprotectant both in HCV and NASH. The Phase IIb study in patients with HCV is ongoing and is assessing two doses of GS 9450 or placebo in adults with chronic HCV infection. With enrollment nearly complete, the study will evaluate the 24-week efficacy histology end point.

The data from this study will help inform us about GS 9450’s further potential in HCV as well as NASH. We hope to be able to present data from both the Phase IIa studies and HCV and NASH at a major medical meeting in the spring of this year.

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

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

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

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

In short, neither the PPI nor the H2 antagonist alter the exposure of elvitegravir or 9350 so there was not be corresponding dosing restrictions as we head into the Phase III program. The Phase III study of elvitegravir head to head versus raltegravir treatment experienced HIV patients completed enrolment in December and puts us on track for obtaining 48-week data from that study by early 2011.

We continue our evaluation of fixed dose formulations of Truvada with Tibotec’s NNRTI drug candidate TMC278. The clinical data sets that would allow support that would support the filing of the fixed dose in addition to buy equivalence data are the Phase III results from the TMC278 head-to-head program versus efavirenz in treatment naïve patients.

Tibotec has stated they expect to have data from these two studies before the middle of this year, which would allow them to file for the single agent of TMC278 in the second half of 2010.

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

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

I will now turn the call over to John Milligan.

John Milligan

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

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

We have taken the lessons and success from these programs to help establish best practices and support efforts in other studies and geography. We're looking at similar effort in Europe to reach those living with HIV who are not yet diagnosed.

We will continue to make strides and increasing access to patients and research constraint parts of the world through our Gilead access program, which covers 130 resource limited countries.

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

I believe that this will be a very exciting year as we chart the progress of our HIV pipeline candidate, particularly, as we initiate the comprehensive Phase III program for the quad and GS 9250 in the second quarter of this year. We also anticipate the release of the TMC 278 pivotal studies by our partner Tibotec and look forward to the subsequent filings of the fixed dose regimen of that compound coupon related with bottom by year's end. And approval of this new potential regimen would mark the introduction of only the second single pill complete regimen since the introduction of Atripla in 2006.

We very much looking forward to the upcoming conference on Retroviruses and Opportunistic Infection for (inaudible) Conference, which will take place in San Francisco the third week in February. This meeting is considered to be the preeminent conference focused solely on HIV and AIDS and brings together both domestic and international thought leaders, guideline committee members, researchers, and caregivers whose practices are dedicated to treating patients with HIV.

We anticipate the presentation of numerous important data set both from Gilead internal program as well as from external groups. Beyond HIV, we have a broad and deep pipeline of product candidate in liver, respiratory, and cardiovascular metabolic diseases that will support our growth into the future. We look forward to sharing with you our progress on various product candidates.

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

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

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

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

Question-and-Answer Session

Operator

(Operator instructions) The first question comes from the line of Geoff Meacham representing JP Morgan. Please proceed.

Geoff Meacham – JP Morgan

Hi, guys, congrats on a great quarter. I want to ask you about the fourth quarter HIV trends. Kevin, you said inventories were basically flat sequentially, but I'm wondering if you can give us some color here about the sequential step-up from 3Q to 4Q is it treatment guidelines? Is it new IMA that may have impacted the channel? Just help us out with a little bit of fourth quarter demand.

Kevin Young

Sure, Geoff. First, I just want to reiterate that it was a very good quarter from the point of view of prescription growth and that's the background to our optimism in our guidance for 2010. Let me specifically talk about Q3 going to Q4. There's really three considerations there, Geoff. The first one is going back to the third quarter. If you remember, there was about a four-day drawdown of inventories in the third quarter, which we talked about in our earnings call so that has the effect of essentially bringing down Q3 and therefore Q4 on Q3, how’s that relative uplift. Specifically around Q4, this too affects to talk about.

First of all is pricing. For Q4 we have the full effect so the full three months of the price increase that we took in July on Truvada, which obviously affected Atripla. With our previous inventory management agreements, it’s allowed one month of buy-in at the previous price of our products, so essentially you only get a two month effect in the following quarter and then the subsequent quarter, in our case, the fourth quarter, you get the full three month effect. So that's the first thing to mention. But the second area is the most important area and that is the non-retail. We did see continued strong demand from our non-retail area. That’s primarily the ADAP programs and that is very much around Florida and Texas.

When we look at the information provided from Florida and Texas and this is a public information we can see quite significant rises in ADAP patients that these two programs are covering. And in addition to that, it's important to point out that for Texas they have the restatements of about $20 million of funding that was held back in 2008 because of hurricane Ike, it's been reinstated in 2009. And they obviously are spending a lot of that money on antiretroviral therapy. So that has given some uplift to that purchasing in the fourth quarter.

Geoff Meacham – JP Morgan

Thanks a lot

Operator

The next question comes from the line of Mark Schoenebaum representing Deutsche Bank. Please proceed.

Mark Schoenebaum – Deutsche Bank

Hey, guys, let me join Geoff. Thanks. Great quarter. I got to ask you about R&D. I was just looking at your R&D guidance that’s obviously way below where most itself at least just modeling it looks to me like it implies something like 10% to 11% of revenue for 2010 versus I think most of us are thinking 12% to 13%. Is this represent, A) why the slower growth we are thinking? And B) is this the way we should think about modeling the company long-term or is it too early to make that call? Thanks a lot for taking questions.

Robin Washington

Hi, Mark, it’s Robin. I'll start off and maybe Norbert can chime in. There’s a couple of things. If you see overall growth in our R&D activity, but if you recall, we talked about the (inaudible) trial being canceled so from a run rate standpoint that was a reduction which was mentioned we hope to find new alternatives to and back going forward. Also, we get a full year's impact of synergies that result from a consolidating CV Therapeutics as well as our own cardiovascular activity. And lastly, if you recall, we had about 52 million related to Tibotec in Q3 of 2009. We have only estimated about $25 million relative to reimbursements to J&J going into 2010 at this point.

Norbert Bischofberger

Mark, just I would like to add another maybe philosophical comment. We look at R&D spending as very disciplined and judicious use of resources both financial and human. And we will allocate it to programs that are very, very successful and are worth the investment in terms of expected return.

Mark Schoenebaum – Deutsche Bank

Thank you very much.

Operator

The next question comes from the line of Michael Aberman representing Credit Suisse. Please proceed.

Michael Aberman – Credit Suisse

Hey, guys, congratulations on a great quarter. Positive news on biotech is always welcome. I have a question, not that you don't have a lot going on but with Phase II data in hand with the booster, how do you think potential applications either in co-formulation or otherwise with other protease inhibitors?

Norbert Bischofberger

Michael, I think you know that we have committed to developing the booster by itself and we still have to have discussions with the FDA about exactly labeling, etc., but the booster will be made available as a standalone agents or it can be used with other protease inhibitors. But in addition to that we're actively looking at coformulation opportunities other protease inhibitors in HIV and also other opportunities but those things haven't advanced far enough that we would be ready to talk about it.

Kevin Young

Hi, Michael, just to elaborate on that. One of the reasons why we had an advanced any talks in area because it's always important to have some data and so now that we have data in hand those will be presented at an upcoming meeting. That will give us an opportunity to go and speak to partners who are quite interested to talk to us about various coformulation opportunities and so we'll have to make some decisions on how we'll do such things, but it does create a really interesting opportunity for us and as Norbert pointed out that could be both of the HIV and the HCV arena as we see it today.

Michael Aberman – Credit Suisse

And your own HIV protease inhibitors you may have shelved because of TKA that could come back? Or is that too early to tell?

Kevin Young

We have a protease inhibitor that we have shelf and we are currently evaluating whether it would be feasible to bring that back and under what situations that might be worthwhile in this marketplace, yes.

Michael Aberman – Credit Suisse

Thanks.

Kevin Young

That was two questions, Michael.

Michael Aberman – Credit Suisse

Sorry.

Operator

The next question comes from the line of Rachel McMinn representing Bank of America/Merrill Lynch. Please proceed.

Rachel McMinn – Bank of America/Merrill Lynch

Thank you for the question. I might take a second as well. I’m curious, John, your last closing remarks about use of cash is there any potential that you're considering dividend and as is the corollary question is that where should we think about strategically Gilead focusing? Are you going to continue to add to cardiovascular products or you are considering adding new verticals? Thanks.

John Milligan

So Rachel, yes, the question use of capital we’ve been describing it to folks, we’re going through. And as you grow the company you go through a national evaluation program. And we have had a number of groups ask us whether we would consider a dividend and some have thought it would be a good idea for Gilead to consider dividend. So at that request what you would always do with your company, with your board of directors you go through the various scenarios for the future and you evaluate how you can invest in the company, so how you can grow organically R&D, how you can bring in licensed compounds to build the company and as you know how you can acquire to build the company, so that's part of the evaluation.

If you look at stock buybacks, which are important consideration to return share holder value, and then it’s often true the companies at some point start to pay a dividend. So what we're communicating right now is that we're continuing to evaluate those various scenarios for now and for the future. As you know it's a long-term planning process for us and we go through the scenarios at various times. So as we and the board importantly come to conclusions on what we should do in various areas we'll communicate those as we can or as we should, I should say.

And then finally your question was would we look at different areas? Our first and foremost opportunities are with our existing pipelines. So we will continue to evaluate in-licensing opportunities to augment the different areas that we have including cardiovascular disease where I think we have a good deal of expertise and good opportunities. And then your last point was would you continue to look at other verticals? In this business, there is always a chance that groups would do something that’s opportunistic that might fall into a different product category, but should have the same characteristics of the products we have. So you can never rule that out. Because there’s things become available during the course of the year and you have to use your team to evaluate things when they come up because they go away very quickly otherwise.

Operator

The next question comes from the line of Yaron Werber representing Citi. Please proceed.

Yaron Werber – Citi

Hi, thanks for taking my question and then thanks for the good guidance we definitely needed. I have a question about the clot fill and help us understand maybe a little bit your, I mean, it's not that the data that we’re going to get next month. It looks like you show statistical and inferiority would suggest maybe even numerically might be a little bit better but it's obviously a very small study. So as we think of Phase III it sounds like you're really trying to show a difference on safety. And in terms of side effects, obviously, it was pretty good. It got an Achilles heel in about 10 or 20% of patients in terms of newer thought. It's not a huge sample. So the question is really how do you differentiate and how do you set up the clinical study to show difference on safety? Thanks.

Norbert Bischofberger

Yes, so the Phase III design is actually very straightforward. It's a non-inferiority study, which is after a green with regulatory authorities on the delta from the delta follows the same of size, but if you look at some past studies, it would be something like total of 600 to 700 patients so 300 to 350 per arm. And with regards to differentiation, if you ask me to speculate, I do think it would be differentiated in terms of safety because we have a fair amount of data on our elvitegravir the integrase inhibitor from our ongoing Phase II study that is now in its third year and we do know a lot about the safety elvitegravir, it looks pretty clean. But again, this has to be shown in the Phase III study and we just have to wait until we have the data.

Operator

The next question comes from the line of Geoff Porges representing Bernstein. Please proceed.

Geoff Porges – Bernstein

Thanks very much for taking the question. Kevin, just one follow-up to the data you provided us on HIV. Could you tell us of the total Truvada patients that you mentioned in the U.S. and in the big five EU countries? What number or percentage are being treated with Retonavir combination with Truvada? Thanks.

Kevin Young

I don't have that in my fingertips, Geoff. I can certainly follow-up later. I can certainly give you the splits of NNRTIs to PIs. PIs are largely boosted here in the U.S. as they are in Europe. If you look at the ratio in terms of new patients, it's 55% NNRTIs to 45% protease inhibitors, but if you look at total, total patients, it's still 52% ratio in favor of protease inhibitors to have NNRTIs.

Geoff Porges – Bernstein

Is that in Europe or the U.S.?

Kevin Young

It's in the U.S.

Geoff Porges – Bernstein

Okay. And Europe?

Kevin Young

As you know, Geoff, there’s a fair spectrum in the use of protease inhibitors to NNRTIs across the five major markets. Spain and the UK are weighted towards NNRTIs because of the success of this introduction that and Italy and France are the protease inhibitor markets and they're skewed in about a 60-40 direction towards protease inhibitors.

John Martin

With all that data, Geoff, it's about half seem to be more or less about half on a Retonavir containing regimen if they're all on a boosted PI.

Geoff Porges – Bernstein

Terrific. That's very helpful. Thank you.

Operator

The next question comes from the line of Steve Harr representing Morgan Stanley. Please proceed.

Steve Harr – Morgan Stanley

Just in the past you guys have stated that you would expect the absolute growth in patient volume in the HIV business to grow at a level consistent what you see in the past or greater given the HIV guidelines incorporating the guidance you have given us. Is that a stable growth rate on patient volumes from ‘07-'08, is that an acceleration or is it some other number?

John Martin

I'll take a go at that, Steve. We expect 2010 as you can see from the very healthy guidance to be a good proportion of the applicable patients now coming under the guidelines to be moving onto antiretroviral therapy of course 85% of that is total Truvada. So I wouldn't call it an acceleration, I would call it a very healthy movement to patients from on the care to going on antiretroviral therapy. So nice thing about this HIV market. It continues to be very consistent in its growth. I actually went back and had a look at some numbers today when guidelines last changed, that was December 1st 2007 where all patients were recommending below 350. And there was a lot of hockey stick, but that was that continued very robust, very dependable growth of this market.

Operator

The next question comes from the line of Jason Kantor representing RBC Capital Markets. Please proceed.

Jason Kantor – RBC Capital Markets

Great, thanks for taking my question. When you think about the growth projections that you have for 2010 can you comment on the sources of growth relative to U.S., ex-U.S. maybe outside of Europe? And also, what's your factoring in for the non-retail component? Is that seems to be a big swing factor quarter to quarter?

John Martin

I can certainly give you qualitative comment in terms of what we're looking at, Jason. As we have talked about already, we will certainly see our HIV business to be very healthy in 2010, thanks to guideline changes and as being referred to the initiatives we're now seeing on testing. Obviously we are positive about our opportunities for Ranexa, now that we put in our new field-based teams and all of the extra resources and Europe looks also a high opportunity because of full year effects with a tripler in France and we still got several countries coming on stream. So I think you qualitatively they would be the main drivers behind our vision of 2010.

Operator

The next question comes from the line of Thomas Wei representing Jefferies. Please proceed.

Thomas Wei – Jefferies

Hi, thanks. I wanted to ask a question actually about the growth in the overall U.S. HIV market, but slightly different perspective than the answer that you gave previously. On the slide that you show, Slide #26 with these numbers I notice that the growth in the number of patients who are being treated looks very different this time relative to the prior earnings slides. It’s showing 4% year-over-year versus the 6%, 7% rates that you had calculated earlier. Should we be at all concerned about that? Are you surprised that it's that low given the fact that the data and treatment initiation and all of these moves to increase the diagnosis radius is actually been out there for some period of time?

Kevin Young

Hi, Thomas, nice to have you back on the call. I'm not unduly concerned by this one quarter effect. Again, I went back and looked at our data over the years and of course this is the sinuate survey data. And we do have from time to time quarters that are flat quarter-on-quarter. So we do see this. The survey is what it is. It's a survey; it’s only based on 200 physicians who present 20 patient records per quarter, so it’s 4000 patient records and then extrapolated up to national levels. So I think we should always look at prescriptions as the lead indicator for the health of our growth and obviously you know the IMS and (inaudible) data and it looked pretty good for the fourth quarter. So I would say we do see these types of sideways moves from time to time.

Susan Hubbard

Thomas, this is Susan. I’m just going to add one more point to Kevin’s response. Obviously, the sinuate data is on a quarter lag, right, so that’s Q3 data and that certainly also was an advance of the U.S. guidelines changing for earlier initiation so just one more point to add to that.

Operator

The next question comes from the line of Davis Bu representing Goldman Sachs. Please proceed.

Davis Bu – Goldman Sachs

Thanks. This is I guess just a little bit of a twist on some of the previous questions. So putting together 2010 guidance and sort of the broader context, first, I was wondering in terms of the guideline, like if you could think about in terms of your kind of waterfall diagram, what the drivers of growth and how much of it is coming from the guideline changes. And secondly, looking backwards, I just want to make sure I heard you correctly in terms of the non-retail sales that the point was that it looks like it's going to be robustly sustainable and it wasn't sort of the AMC or sort of a lumpy pattern in 4Q 2009.

John Martin

Hi, David. I'll take your second question first. It was a strong quarter for nonretail and that comes on the back of a strong Q3 so we have seen a couple of pretty strong quarters. If you recall the supplemental grants for ADAP were given out early in 2009 so that might indicate an earlier ordering pattern and I did mentioned this extra benefit that the Texas had. Difficult always to make predictions about nonretail. It's always qualitative comments that we get from our discussions with Florida and Texas ADAP but looks like Q1 will be a healthy quarter for that purchasing. But we never quite know they are. At the end of the day, they are state-run establishments.

Going back to your first question, probably the best way to look at it is you do know that the gap between the patients and the care and the patients currently on antiretroviral therapy is over 100,000 patients. It's approximately 125,000 patients. If you just look at the patients who are 500 CD 4 counts and below that’s in the region of 60,000 to 70,000 patients. And they would be the obvious patients that will be addressing with physicians and indeed we do have campaigns going directly out to patients. So what we have considered in our expectations for 2010 is a healthy conversion of those 60,000 to 70,000 patients coming onto therapy.

Davis Bu – Goldman Sachs

Thank you.

Operator

The next question comes from the line of Phil Nadeau representing Cowen & Company. Please proceed.

Phil Nadeau – Cowen & Company

Good evening. Thanks for taking my question. John, I think in your prepared remarks you mentioned that there was still six states that need to change their laws in order to accommodate the CVC screening guidelines. Some of those states are some of the ones with the larger high risk patient populations like New York and Massachusetts. I was wondering if you could give us an update specifically on New York and Massachusetts and the other larger high-risk states, where they are in the legislative processes.

John Milligan

I'm not sure you meant John Milligan or John Martin, but I'll take your question.

Phil Nadeau – Cowen & Company

It was John Martin that mentioned I’ll take either answer.

John Milligan

Phil, thank you. With regard to the legislative process in any state is slow and I know that we have folks help trying to make those states understand the importance of these various initiatives. I don’t know specifically when Massachusetts or New York and those are two of the most important states when we would expect those things to change. It’s kind of impossible to predict these things so we will just have to give you update as things happen, but I don't have any further update for you now.

John Martin

We also have screen programs within those states that allow for more expeditious compliance with those requirements while we're working on the legislative changes.

Phil Nadeau – Cowen & Company

Okay. And what’s at risk for these states who haven't changed their laws under the new Ryan White Care Act? Could they actually lose their Ryan White funding if the laws aren't changed the guideline screening programs are put in place?

John Milligan

Phil, they don't have to specifically change their laws. They are required to test certain number of individuals in accordance with the prevalence in their state. And so if they don't test that number of individuals they're at risk for some penalties and losses of funding. So for states never let that happen. So we would expect them to test those number of people, but it doesn't mean you have to change those guidelines in order to hit that number. You have to be more vigilant in getting people in and taking them through all the steps necessary to get there.

Phil Nadeau – Cowen & Company

Okay, that's very helpful. Thank you.

Operator

The next question comes from the line of Tom Russo representing Robert W. Baird. Please proceed.

Tom Russo – Robert W. Baird

Thanks for the question. I just wanted to revisit I think it was two questions ago. The number of patients that are available with CD 4 count over 500 and under care of a physician did I correctly calculate that’s about 55,000 to 65,000 patients and then when would you model that coming? It doesn't sound like it's 2010. Is that something you expect to see thereafter? Thanks.

Kevin Young

Hey, Tom, this is Kevin. Yes, you calculated is about right. The number that you've got would be over 500 and what the survey classifies as CD 4 count not recorded so there's a little bit of-if you like of sort of other in there. So you would have to make some assumptions about what the CD 4 count was. Don’t forget that today we do have physicians that are treating patients above 500. If you actually look at our survey of new patient starts, about 10% are already being started above the 500 level so as we've often said, guidelines often follow clinical care. So no doubt there are going to be a growing number of physicians who won't stop patients above 500. And the guidelines committee voted 55% in favor of that starting point. So, yes, I think there will be patients, there are patients and there will be more patients going above 500.

Tom Russo – Robert W. Baird

Okay, thanks.

Operator

The next question comes from the line of Jim Birchenough representing Barclays Capital. Please proceed.

Jim Birchenough – Barclays Capital

Hi, guys. I was just wondering if you could maybe speak to the positioning of the new fixed dose combinations that you are working on both the quad and the 278 combo. I was just trying to get a sense of the current patients on Atripla, what percent are not satisfied either by virtue of side effects or inadequate viral suppression and how do you position this for a switch and what patients do you think you will successfully gain on entry of either those products?

Kevin Young

Hi, Jim. I'll take the first part and I think John will come in, in terms of the positioning. If you look at Atripla today 53% of new patients begin on Atripla. When we look at the type of patients, there's very, very little difference when you look at Caucasian, African-American and Hispanic, it’s remarkably similar in terms of the use of Atripla. Probably the two differences we do see is the Atripla is less commonly used in females due to the cautions around (inaudible) pregnancy and probably less commonly used where patients have very low CD 4 count, below 200. So that would be your profile of the type of usage of Atripla.

John Milligan

Jim, we're going to try to do a couple of different things here, but that will really depend on the data at the end of the day. And if you think about the TMC 278 Truvada fixed dose combination that’s going to be head-to-head with Atripla, basically, it’s fibrin plus Truvada. So that will be the data set that we would have to detail off of. With respect to the quad program that is put together of two studies. One versus Atripla and one versus boost Atazanavir. So ideally we would have good data sets on both going out that would allow us to then position the product versus a protease inhibitor or versus Atripla, but at the end of the day we’re going to have to look at the data set of TMC 278 fixed dose combination and the quad and determine what is the best thing for patients based on the relative profile and we can't do that till we have the full data set down there.

Operator

The next question comes from the line of Brett Holley representing Oppenheimer. Please proceed.

Brett Holley – Oppenheimer

Yes, thanks for taking my question. Norbert, I just want to ask a point of clarification. Did you say that you actually confirmed the drug interaction between GS 9256 and 9190 and does that complicate things potentially?

Norbert Bischofberger

Brett, I did say we confirmed the drug interaction and I wouldn't say complicate. That's the wrong word. We just have to probably dose adjust the 9190. 9190, as you may remember was 40 milligrams BID and we're seeing about a doubling of the exposure when we go administer and put the protease inhibitor and that we think is too high in terms of the QTC risk. So we just have to figure out what that lower dose is. I think it's pretty straightforward to figure that out. You just do another drug interaction with a lower dose and see whether you get the same exposure as you get with the 40 milligram BID without the protease inhibitor.

Operator

At this time we have time for one final question. That question comes from the line of Joel Sendek representing Lazard. Please proceed.

Joel Sendek – Lazard

Hi, thanks a lot. My question is the quad for the Phase III studies in the treatment naive. I'm wondering what the gaining factors are to start that. I think you mentioned a meeting with the FDA. Do you have to wait for the data for the Phase II studies or any other commentary on timing? Thanks.

Norbert Bischofberger

Joel, the only gaining data that we need is really some confirmation of safety and efficacy from a Phase II study, which we have now. We will take this data now to FDA, present it to them, and that will be the factor to gaining factor to go into Phase III. That’s an agreement we previously had with them. We agreed on patient numbers. So I think it should be pretty straightforward.

Joel Sendek – Lazard

Thanks.

Operator

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

Susan Hubbard

Great, thank you, Katina, and thank you all very much for joining us today. We appreciate your continued support and interest in Gilead and we look forward to providing an update on our future progress. We'll be back in our offices shortly for your follow-on questions that you want to reach us with. Thanks a lot.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.

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Source: Gilead Sciences, Inc. Q4 2009 Earnings Call Transcript
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