Gilead Sciences Q3 2007 Earnings Call Transcript

Executives

John Martin - President and CEO

John Milligan - COO and CFO

Norbert Bischofberger - EVP, R&D and CSO

Kevin Young - EVP, Commercial

Matt Howe - VP of Finance

Susan Hubbard - VP of IR

Analysts

Meg Malloy - Goldman Sachs

Thomas Wei -Piper Jaffray

Mark Schoenebaum - Bear Stearns

Geoffrey Porges - Bernstein

Yaron Werber - Citigroup

Bret Holley - CIBC World Markets

Geoff Meacham - JP Morgan

Michael Aberman - Credit Suisse

William Ho - Banc of America Securities

Sapna Srivastava - Morgan Stanley

Joel Sendek - Lazard Capital Markets

Gilead Sciences Inc. (GILD) Q3 2007 Earnings Call October 18, 2007 4:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Gilead Sciences Third Quarter 2007 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder this conference call is being recorded today, October 18th, 2007.

Your speakers for today are John Milligan, Chief Operating Officer and Chief Financial Officer; John Martin, President and Chief Executive Officer, Norbert Bischofberger, Executive Vice President of Research and Development and Chief Scientific Officer and Kevin Young, Executive Vice President of Commercial Operations.

I would now like to turn the call over to Dr. Milligan. Please go ahead, sir.

John Milligan

Good afternoon and welcome to Gilead's third quarter 2007 earnings conference call. We issued a press release this afternoon providing results for the third quarter ended September 30th, 2007 describing the company's quarterly highlights. This press release is also available on our website at www.gilead.com.

Also joining us on today’s call are Matt Howe, Vice President of Finance and Susan Hubbard, Vice President of Investor Relations.

I’ll begin the call by reviewing the third quarter financial results and then I will provide updated financial guidance for 2007. John Martin, Norbert Bischofberger and Kevin Young will take you through the corporate and product-related highlights for the quarter and we will allow time at the end of this call to answer your questions.

First, I’d like to remind you that we’d be making statements related to future events, expectations, trends, objectives, and financial results that constitute forward-looking statements within the meaning of the Private Securities Act of 1995. These statements are based on certain assumptions and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from those expressed in any forward-looking statement.

I refer you to our Form 10-Q for the second quarter ended June 30, 2007, subsequent press releases and other publicly filed SEC disclosure documents for detailed description of the risk factors affecting our business.

In addition, please note that we undertake no obligation to update or revise these forward-looking statements. We will be making certain references to financial measures that are on a non-GAAP basis. We provide reconciliation between GAAP and non-GAAP on our website.

The third quarter of 2007 was another very successful quarter for Gilead. Total revenues for the third quarter of 2007 were again over $1 billion, driven by record quarterly product sales of $962 million, a 44% increase compared to product sales from the third quarter of 2006.

HIV product sales totaled $806 million for the third quarter of 2007, driven primarily by the continued strong uptake of ATRIPLA in the United States, as well as strong growth of Truvada in Europe. We generated approximately $251 million of operating cash flow during the third quarter of 2007. Operating expenses continued to demonstrate controlled growth, as we continue to implement and execute strategies to grow revenues and cash flow, progress our research and development program, and to expand our sales and marketing infrastructure.

Now, turning to the specific results for the third quarter. Our third quarter 2007 net income was $398 million, or $0.42 per share on a fully diluted basis. Our third quarter 2006 net loss effect was $52 million, which included the $356 million in-process R&D charge related to our acquisition of Corus Pharma Inc.

Non-GAAP net income per share for the third quarter of 2007, excluding the impact of after tax stock-based compensation expense was $0.45 per share on fully diluted basis. A 30% increase over the third quarter 2006 non-GAAP net income per share of $0.34 per share, which excluded both after tax stock-based compensation expenses at both the quarter in-process R&D charge.

Now, turning to revenues. Total revenue for the third quarter of 2007 was $1 billion, an increase of 41% from total revenues of $749 million from the third quarter of 2006. This performance is driven primarily by a 44% increase in our product sales, as well as the 23% increase in our royalty, contract and other revenues compared to third quarter of 2006.

Product sales were a record $962 million for the third quarter of 2007, marking four years of consecutive quarterly product sales growth. Product sales for the third quarter increased sequentially by 6%, at our HIV Franchise, as well as Hepsera and AmBisome product sales continue to grow.

Royalty, contract, and other revenues decreased sequentially by 32% due primarily to the seasonality of influenza, and as resulting effect on Tamiflu sales and royalties, which I will discuss later.

Now turning to product sales, HIV product sales grew to $806 million for the third quarter of 2007, up 45% from $557 million from the third quarter of 2006, and up 6% sequentially from the second quarter of 2007. Truvada sales were $409 million for the third quarter of 2007, up 32% compared to the third quarter of 2006 and up 6% sequentially from the second quarter of 2007.

Truvada sales accounted for approximately half of our total HIV franchisees sales on third quarter of 2007.

In the U.S., Truvada sales were $207 million for the third quarter of 2007, up 3% compared to the third quarter of 2006. Sequentially, U.S. sales were up 11% as Truvada continued to hold its place at the NRTI backbone of choice in combination with protease inhibitors.

In Europe, Truvada sales for the third quarter of 2007 were $184 million, an increase of 83% compared to the third quarter of 2006, and an increase of 6% compared to the second quarter of 2007.

Strong sales volume growth in Europe was a key driver of the increased Truvada sales. Additionally, $11 million of the Truvada sales increases due to the strength of the underlying European currencies when compared to the same period last year.

Based on the review of recently available sales data in France, we are confirming there has been an increased level of parallel trade activity within this region, where certain wholesalers are purchasing and perhaps holding in their inventory of HIV products with the expectations of re-exporting them to other countries at higher prices.

We currently do not know if this level of buying is material; however, it may result in normally higher volatility to our sales growth in the next few quarters, especially for Truvada.

We will be implementing a supply management system in France to manage the orders of Truvada and Viread effective December 1st of this year, with the intent of ensuring adequate and appropriate supply to the French domestic market.

Because of the timing of the implementation of this management system, we do not anticipate any material impact to our sales in the European Union in the fourth quarter this year, and will continue to monitor and analyze the situation closely as we move into 2008.

In Latin America, Truvada sales for the third quarter of 2007 decreased by $9 million when compared to the second quarter of 2007, primarily due to large Mexican government tender order in the second quarter of 2007.

Atripla contributed $241 million to our third quarter HIV product sales as demand for this product continued to rise. Atripla sales accounted for 30% of our total HIV franchise sales in the third quarter of 2007.

Sustiva portion of Atripla sales was $89 million in the third quarter of 2007, which, as you know, carries a zero product gross margin since our joint venture purchases of Sustiva from Bristol-Myers Squibb, at BMS' net selling price of Sustiva in United States.

Viread sales were $149 million for the third quarter of 2007, down 30% from the same period last year, and down 4% sequentially. Third quarter 2007 Viread sales in both the United Sales and Europe decreased by 12% compared to the same period last year, but were relatively flat sequentially from second quarter of 2007, as Viread continues to play an important role for patients in later lines of therapy.

Outside of the U.S and Europe, third quarter 2007 Viread sales decreased by 60% compared to the same period last year, and decreased by 30% sequentially due primarily to cyclical buying patterns in Latin America.

Hepsera for the treatment of chronic hepatitis B generated sales of $79 million in the third quarter of 2007, a 44% increase compared to the third quarter of 2006, and a 5% increase sequentially.

In the United States, Hepsera sales increased by 38% when compared to the third quarter of 2006, or sequentially flat. In the third quarter of 2007, there was a slight reduction in Hepsera inventory held at the wholesalers, but the inventory level remained within our contractual ban.

Third quarter of 2007; Hepsera sales in the EU increased by 44% when compared to the same period last year, and by 7% sequentially as we continue to experience sales volume growth across the territory.

And finally, sales of AmBisome were $69 million for the third quarter of 2007, an increase of 24% over the same period of 2006, and an increase of 6% sequentially.

The increase in AmBisome sales in the third quarter of 2007 compared to the same quarter in 2006, driven primarily by sales volume growth in Europe and Australia as well as the weaker U.S. dollar, which contributed to an additional $4 million in revenue when compared to the same period last year.

Compared to the same period last year, our royalty, contract, and other revenues for the third quarter of 2007 increased by 23%, but decreased by $46 million or 32% sequentially.

Sequential decrease was primarily driven by the seasonal nature of Tamiflu, royalty revenues recognized from Tamiflu sale, made by Roche as well as a lower level of pandemic purposes during the quarter.

Royalties received from Roche in the third quarter of 2007 was $77 million. These royalties, which are paid one quarter in arrears, reflected royalty rate of approximately 22% as applied to Roche and sales of Tamiflu during the second quarter of 2007.

As you may have seen, Roche reported their third quarter 2007 earnings on Tuesday of this week, with 257 million Swiss francs or approximately $212 million reported in Tamiflu sale. We, therefore, expected the Tamiflu royalty revenue that we will report in the fourth quarter will be at a rate of approximately 22% of that figure.

Turning to product gross margin; Non-GAAP product gross margin for the third quarter of 2007, which excludes stock-based compensation expense, was approximately 80% compared to non-GAAP product gross margin of approximately 84% for the same quarter of 2006 and 80% for the second quarter of 2007.

The lower product gross margin compared to same period last year was primarily due to the higher proportionally Atripla sales, which have a lower product gross margin due to the Sustiva portion at zero gross margin.

Now turning to expenses; Non-GAAP R&D expenses for the third quarter of 2007, which excludes stock-based compensation expense, were $122 million. This is an increase of 52% from $80 million in the same period last year and a $3 million or 2% increase in the second quarter of 2007, primarily as a result of the increased competition and benefits related to higher headcount, as well as increased clinical study expenses related to our respiratory and cardiovascular franchises which we acquired in the later part of 2006.

In the third quarter of 2007, we also paid $5 million up-front license fee to Parion Sciences, which was included in R&D expenses.

Non-GAAP SG&A expenses for the third quarter of 2007, which includes stock based compensation were $148 million, an increase of 27% compared to $117 million at the same period last year, due primarily to increased competition benefits related to increased headcount, increased marketing and promotional expenses, as well as, other consulting and supportive services related to our cardiovascular franchise.

On a sequential basis, non-GAAP SG&A expenses for the third quarter of 2007 decreased by 6% from $158 million in the second quarter of 2007 due primarily to decrease promotional expenses. The second quarter of 2007, we incurred higher promotional expenses related to launch of Letairis pulmonary arterial hypertension in June 2007.

In terms of foreign exchange impact, $25 million of our product sales increased in the third, our product sales increased in the third quarter 2007 was due to the strength of the underlying European currency when compared with same period last year, and $3 million when compared to the second quarter of this year. This favorable impact takes in account our hedging activities.

On pre-tax earning, foreign exchange had a net favorable impact of $17 million in the third quarter of 2007 when compared to the same period last year and $1 million net favorable impact when compared to the second quarter of 2007. This favorable impact takes into account the product sales and expenses generated outside the United States, as well as, our hedging activity.

Our tax rate for the third quarter of 2007 was 30.8%. Our tax-rate for the third quarter of 2006, before the Corus acquisition related in-process R&D expenses 31.8%. The lower tax rate was primarily driven by increased earnings and lower tax jurisdiction.

Sequentially, our third quarter 2007 tax rate increased from 28.5% in the second quarter of 2007, due primarily to the finalization of certain purchase accounting adjustments in the second quarter of 2007.

And finally, I would like to turn to our cash position and operating cash flow to highlight our cash flow performance for the quarter. Our balance sheet at September 30th, 2007 shows total cash, cash equivalents and marketable securities of $2.2 billion. This is an increase of $231 million when compared to the balance of $2 billion at June 30th, 2007. The increase during the third quarter of 2007 was primarily attributable to $251 million of operating cash flow generated during the quarter.

We continue to actively evaluate in a strategic way to use our cash and investments, including potential opportunities to in-license or acquired products, to complement our own internal efforts, as well as other strategies to enhance stockholder value, including future additional share repurchase program.

Now, I would like to turn to our financial guidance for the full year of 2007. You can locate all of our guidance for the 2007 year on Gilead's corporate website. We are very pleased with the sequential quarter-over-quarter growth in our product revenue, which is in line with our expectation.

Therefore, we now expect our product sales for 2007 to be at the upper end of our guidance range of $2.6 billion to $2.7 billion, which includes approximately $15 million of estimated U.S. Letairis for 2007, which Kevin will give more color on later in the call.

This product revenue guidance is for direct product build only and does not include royalty revenue or contract and other revenue. This guidance also does not include any revenues generated from a triple sale in the European Union, and we expect the approval too late, and up in the year that will push any potential country launches this early part of 2008.

As a reminder, the expense guidance we are updating today will be non-GAAP, which excludes the impact of stock-based compensation expense. First, we are lowering our non-GAAP R&D expense guidance from a range of $500 million to $520 million to range of $490 to $500 million, based in large part the delayed expenses associated with certain clinical programs. In particular, the Phase III Elvitegravir for HIV study for which we don’t expect to begin enrolling patients until the first half of next year, as well as lower than expected hiring.

Regarding non-GAAP SG&A expenses, we are tightening our guidance to a range of $590 million to $600 million from a range of $580 million to $600 million. We expect to end 2007 at the upper end of this range due to the impact of the weaker U.S. dollar on an international foreign currency denominated operating expense, which we do not hedge, and the acquisition cost associated with the cork Ireland manufacturing facility.

Regarding stock-based compensation expense, we are reiterating the 2007 fully diluted EPS impact to be in the range of $0.13 to $0.15 per share on a split adjusted basis. We are also reiterating our non-GAAP product gross margin guidance range of 78% to 80% for 2007. And finally, we are also reiterating our tax rate guidance of 29% to 30% for 2007.

In conclusion, our solid operating performance continues to be a validation of significant efforts made by the more than 2800 Gilead employees around the world. Each employees played integral part in executing on the strategy, implemented by the company for growing revenues and operating cash flows, including making prudent investments in both our research and development efforts, as well as our sales and marketing efforts.

At this point, I would like to turn the call over to John Martin, who will review our corporate milestones for the third quarter of 2007.

John Martin

Thank you, John. Good afternoon, everyone, and thank you for joining us today. We are pleased to summarize for you Gilead's accomplishments during the third quarter of this year, as well as several important recent events. I will start by reviewing our corporate milestones for the quarters, then Norbert will provide an update on our research and development programs, and then Kevin will review our commercial efforts.

First, I am very pleased to welcome Caroline Dorsa to the Gilead management team as Senior Vice President and Chief Financial Officer. Caroline brings extensive pharmaceutical industry to Gilead. She spent 20 years at Merck & Co., most recently in the role of Vice President and Treasurer with responsibility for the company's treasury, tax, portfolio management and investor relations functions, as well as financial controllership of Merck Research Laboratories and Merck's manufacturing division.

Caroline joined Gilead from Avaya, a global provider of business communication systems, where she was Senior Vice President and Chief Financial Officer. In her new role at Gilead, Caroline will have responsibility for the company's finance and investor relations functions. Caroline will officially join Gilead in early November reporting to John Milligan.

As you know in March of this year, John was appointed to the role of Chief Operating Officer continuing to serve in the interim as CFO. A role I held for the past five years. I would personally like to thank John for his many significant contributions as CFO. Following Caroline's appointment, John in his continuing role of Chief Operating Officer will oversee Gilead's commercial organization, manufacturing, finance and business operations.

While Kevin and Norbert will expand on our research, development and commercial milestones later in the call, there are few key events I would like to take a moment to highlight.

Earlier today, we along with our partners Bristol-Myers Squibb and Merck were very pleased to announce that the Committee from additional products for human use issued a positive opinion on the marketing authorization application of the Atripla in Europe. We anticipate that the European Commission approval may occur prior to the end of this year.

In addition, to further Atripla's commercial registration in additional marketplaces, we announced yesterday that Health Canada approved Atripla for the treatment of HIV infection in adults.

We anticipate the product to be available within the Canadian pharmacy distribution system by early next week.

With regard to our hepatitis B franchise, just last week we completed several regulatory filings for Viread for chronic hepatitis B in adults for the United States and the European Union, as well as Canada, Australia and New Zealand. We also expect to file in Turkey before year end.

These filings were supported by data from two pivotal studies, Study 102 and Study 103 comparing Viread to Hepsera in both “e”antigen positive and “e” antigen negative patients.

We will present detailed data from both of the pivotal studies at the upcoming American Association for the Study of Liver Diseases Conference taking place in Boston from November 2nd through 6th.

The third quarter also marks the first full quarter after the U.S. launch of Letairis. The launch date is proceeding in line with our expectations, with a very favorable initial response from the trading community both to the label and to the programs we are quick in place to ensure access to the product.

Kevin will expand on this topic, and to the insights we are gaining into this market a little later in the call.

On the business development front, in early September, we completed the acquisition of a former Nycomed manufacturing plant in Cork Ireland. This new facility will be used for solid dose manufacturing of Gilead’s current and future products, while our existing team in Dublin will continue to manage customer operations and distribution activities.

This marks Gilead’s six successful acquisitions since the company's conception and further extends our broad worldwide operations.

I would like to take this moment to welcome the Nycomed employees to Gilead.

To further build upon our respiratory franchise, in July of this year, we announced the partnership with Durham, North Carolina-based Parion Sciences, branching Gilead worldwide commercialization rights to P-680, an epithelial sodium channel for ENaC inhibitor discovered by Parion.

P-680 is being developed for the treatment of certain pulmonary diseases, including cystic fibrosis, chronic obstructive pulmonary disease and non-CF bronchiectasis. Parion will perform the R&D-enabling studies for P-680, and will transition development responsibilities to Gilead during the Phase I clinical trial period.

With regards to Tamiflu, as John Milligan mentioned earlier, Roche released their third quarter financial results on Tuesday of this week. They've reported third quarter Tamiflu sales of 257 million Swiss francs, and increased their guidance to close to 1.6 billion Swiss francs for pandemic sales only for the full year 2007.

On their call, Roche stated that they could not provide any guidance at this point for potential 2008 pandemic orders.

Finally, as you know, last year the CDC introduced new guidelines recommending routine HIV testing in the U.S. for all individuals between the ages of 13 and 64 years of age.

Diagnosing those infected with HIV would ultimately reduce the number of new infections, and give better treatment outcomes.

I would like to give a brief update on the status of the adoption of these recommendations.

Seven states Illinois, Maine, New Hampshire, Louisiana, New Mexico, Iowa and most recently California have already signed into law legislation designed to remove some of the barriers to HIV testing, such as requirements around informed written consent and pre-test counseling.

And several other states have legislation or regulatory actions pending, including North Carolina and Massachusetts. We are encouraged by this progress, and believe that other states will also pursue changes to allow for voluntary opt out routine HIV screening over time, consistent with the CDC’s recommendations.

Additionally in Washington DC, congresswoman matching Walters legislation, which would expand HIV screening in the federal proofing setting has passed the first hurdle of house approval in September of this year, and has now moved on to the senate for its review.

Beyond the testing initiatives, we are closely monitoring the impact of the Ryan White CARE reauthorization, last December, which we allocated some funding or antiretrovirals to those states [hit] by new incidences of HIV.

The new finding is having a positive impact as it begins to reach those states. South Carolina recently announced that it no longer has a white list for its AIDS Drug Assistance program. And North Carolina was able to raise the income threshold for its eligibility. A move anticipated to bring 100s of more patients on to treatment. These actions can be directly measured by the fact that many patients who have been in need of receiving free drug through our patient assistance program have either transitioned, or are transitioning to care under their respective [PDAC] programs.

We are greatly encouraged by the progress being made to all HIV infected individuals diagnosed, and on treatment both of which will help to stop the spread of the still deadly disease. And we believe that with the profile Gilead antiretrovirals we will be in a key position to continue to help to many patients in this country living with HIV, who need treatment.

At this point, I will turn the call over to Norbert to discuss our research and development milestones for the quarter. Norbert?

Norbert Bischofberger

Thank you, John. In the third quarter of this year, Gilead achieved to several significant research and development milestones, further advancing our pipeline programs. Importantly, on the antiviral front, and as John highlighted earlier, we are very pleased that the CHMP they have recommended that Atripla be approved in European Union.

The recommended indication is for the treatment of HIV infections in adults with virological suppression on their current combination antiretrovirals therapy. This indication is supported along with other data from earlier studies and patient experience in the US by positive 24 week data from a study conducted jointly by BMS and Gilead called the 07 free study, in which approximately 300 patients who were virologically suppressed at entry were either switched to Atripla or maintained on their stable baseline therapy. Data from this study have been accepted as a late breaker presentation at the upcoming 11th European AIDS conference taken place in Madrid, October 24 through 27.

We are excited about the CHMP positive opinion, and we are in discussion with the CHMP regarding the requirement for data leading to an expansion of the indication to treatment naïve patients.

Turning now to Elvitegravir or GS 9137 as it was called previously. As we discussed on the last earnings call, due to the availability of novel classes of antiretrovirals with demonstrative antiviral activity in treatment-experienced-patients, we will be conducting our Phase III studies versus an active comparator.

With raltegravir's in the US just last week, we are preparing to initiate the two Phase III pivotal studies both of which will be head-to-head non-inferiority studies versus raltegravir's. The specifics of the Phase III program are being currently discussed with FDA and European regulatory authorities. Once agreement has been reached and following raltegravir's commercial availability, we will work rapidly to produce the blinded study drug supply necessary, and we will concurrently work to get study sites up and running. One Phase III study would be conducted primarily in the United States and one primarily in Europe.

We would anticipate dosing the first patent in this program in the first half of next year. At the Interscience conference on antimicrobial agent and chemotherapy in Chicago in September, we presented data on a compound from our internal research efforts, GS-9148 the prodrug of which is called GS-9131.

GS-9131 is a novel nucleotide analog, designed to deliver high intracellular concentrations of the active molecule allowing for lower dosage with higher potency. In addition, the compound possesses a differentiated resistance profile with activity against nucleoside resistant strains of HIV harboring the K65R, M184B and multiple TAM mutations.

Based on this exciting preclinical profile of GS 9131, we initiated and have now completed the Phase I single-dose pharmacokinetic study in the healthy volunteers. This study confirms the preclinical results of delivery of high intracellular concentrations of the compound at low dosage of GS 9131. As a result, we are now finalizing the details of the Phase I/II protocols. This study will likely evaluate GS 9131 in treatment experienced patients, HIV infected patients with confirmed NRTI resistance. We expect this study to begin early next year.

Turning now to HCV; as we announced previously our novel non-nucleotide polymerase inhibitor GS 9190 is currently in a Phase 1ab study in HCV infected patients. In the first single dose part of this study, GS 9190 demonstrated encouraging pharmacokinetics exposure and antiviral activity. The second multiple dose part of this study is designed to enroll 60 HCV infected patients in total and access the safety, tolerability, pharmacokinetics and antiviral activity of ascending doses of GS 9190, both once and twice daily for eight days. Monitoring for QTC prolongation is standard test for cardiovascular safety was one of the safety assessments included in this study, along with other standard safety assessments.

In the second multiple dose cohort, a potential QTC signal was observed, although the data are very limited and non conclusive. Therefore, before escalating to the next higher dose, we decided to conduct a pilot QTC study in healthy volunteers. The study has begun and we should have results prior to the end of the year.

So while this has caused a delay in the program, we are hopeful that we will be able to resume dosing of GS 9190 in HCV infected patients next year. Also, we will be able to present data from both the complete single dose and the first two multiple dose cohort at the ASLD conference in November.

In addition to 9190, which is an HCV polymerase inhibitor, we are making significant progress with our internal protease inhibitor research efforts with interesting lead compounds, progressing into preclinical evaluation. Also, our research collaboration with both Achillion and Genelabs continue, and we hope that development candidate emerge from those efforts in the relatively nearly future.

Another novel nuclear type product from our research efforts, making its way into clinical evaluation is 9191, which has demonstrated activity in a preclinical model or papillomavirus. Based on these data, we have begun dosing patient with perineum HPV infections in a Phase I safety and efficiency study of GS 9190 ointment. This will be both the strength and schedule escalation study conducted in United States.

It is estimated that approximately 1% of the sexual active adults in the United States have HPV related genital warts. And while a number of options exeunt for patients, including both pharmacological and the bladder therapies, there remains significant room for improvement and an opportunity, particularly for the topical ointment that is well tolerated and enhances the rate of complete clearance of genital warts.

Under respiratory franchises front, as you know we presented detailed data from the second of two phase studies of two pivotal studies aztreonam lysine for inhalation, AIR-CF1 at the NACF meeting which took place in Anaheim earlier this month. This study evaluated the safety and efficiency of aztreonam lysine for inhalation versus placebo over 28 days in patient with cystic fibrosis.

The study met its primary efficacy end point of change from baseline in respiratory symptoms, as assessed by CFQR a patient reported outcome tool used to measure health related quality of life for people with CF. Aztreonam lysine for inhalation patients also experienced significant improvements at day 28 in respiratory function, as measured by FEV1 with a mean treatment related improvement of 10.3% versus placebo. We believe this is particularly impressive due to the more advanced stage of this population, as compared to earlier registrational studies conducted with Tobi.

In addition an update from our study AIR-CF3 was presented during a plenary presentation at the NACF conference by Dr. Felix Ratjen who is Head of Respiratory Medicine at the hospital for Sick Children, and Professor of Paediatrics at the University of Toronto. In AIR-CF3 the extension studies for patients who participated in our two pivotal phase III studies. Patient received repeated courses of 28 day treatment with aztreonam lysine for inhalation three times daily, followed by 28 days of alternative therapies.

The result from this study demonstrate that following the first three 28 day courses of treatment with aztreonam lysine, patients continue to have similar response in FEV1 scores, as well as in symptoms as measured by CFQR, as we have seen in the placebo control study.

With positive results, we now have in hand from both pivotal studies and the growing body of data we have from our extension study; we remain on track to file the drug application in the U.S. for aztreonam lysine for inhalation for cystic fibrosis patients with pseudomonas infection before the end of this year. We plan to have further discussions with the European regulators to define a path for filing there as well and we'll provide you with an update after we have more clarity.

We also presented data at the NACF conference on [GS9310/11], formally known an Corus 1040, which is a proprietary formulation of combination tobramycin and fosfomycin for inhalation, demonstrating the compounds activity against pathogens commonly found in cystic fibrosis and bronchiectasis.

Based on these and other preclinical study results, we initiated and completed a single Phase I study in healthy volunteers, and have begun enrolling patients with either cystic fibrosis or bronchiectasis in two Phase II studies.

Currently, there are no approved inhaled antibody therapies for bronchiectasis to represent a clear unmet medical need, and due to emerging resistance to existing compounds for the treatment of infections associated with CF.

There is a need for new antibacterial therapies to treat respiratory infections in CF. Ultimately, should the data support its use in cystic fibrosis, we would anticipate that this compound could be used as a TOBI replacement in those alternating months between treatment with aztreonam lysine for inhalation.

Now a brief update on the Phase III program for Darusentan in resistant hypertension. We are making steady progress in getting additional sites on board for both 311, 312 studies, which we believe will significantly impact the rate of patient enrollment in both studies.

At this point, our goal is to complete enrollment in both of these studies in the first half of 2009 with data available from these studies later that year.

With regard to 9219, our novel nucleotide analog that has shown evidence of anticancer activity in preclinical studies. We are currently screening patients with non-Hodgkin's lymphoma and chronic lymphocytic leukemia for enrollment in a Phase I study of 9219 at cancer centers in United States.

Based on the outcome from Phase I studies, we will make a decision about the development of potential commercialization path for this compound.

In summary, I am proud of the mainly research, development and regulatory advancements we've achieved over this quarter. We have many exciting opportunities to work on over the course of the coming years and we look forward to keeping you updated on our progress.

With that, I will now turn the call over to Kevin Young to discuss our commercial efforts. Kevin?

Kevin Young

Thank you, Norbert, and good afternoon everyone. To begin the commercial update, I would like to start with our antiviral franchise, which is comprised of our HIV and HBV marketed products.

For the analysis of our market share data in the U.S. and Europe, we rely on the most up-to-date third-party data available to us in each market. As a remainder, this data lacks our financial results by one quarter.

Our U.S. HIV franchise performance continued to achieve significant milestones in Q3. And I would like to start by highlighting a few of those achievements.

In just one year since its launch, we are approaching 1-in-4 antiretroviral treated patients now taking Atripla. Eight out of every 10 new antiretroviral-treated patients began therapy on a Truvada-based regimen, either, Atripla or Truvada.

Truvada grew quarter-over-quarter and continues to be the NRTI backbone of choice when prescribed with protease inhibitors.

We anticipate both future growth in our HIV franchise to come from both Atripla and Truvada.

Almost two-thirds of all treated patients received tenofovir molecule and Gilead's HIV franchise continued to have the two most prescribed an NRTI brands and two most prescribed molecules widening their respective leads over competitive products.

I would now like to provide more details around those very impressive commercial headlines. Gilead's HIV franchise achieved a 50% share of NRTI TRx market share, with nearly 40% share coming from total Truvada, Atripla and Truvada.

The ratio of total Truvada to Epzicom in TRx share continued to widen and rose to 4.1 to 1 in the third quarter of 2007. And Combivir share continued to steadily decline.

Over 120,000 patients received Atripla as of the end of the second quarter of 2007. This represented 24% of all patients taking antiretrovirals at this time. The uptake of Atripla continued to be driven predominantly from switches after level of 60% during the second quarter 2007.

Importantly, approximately half of the switches came from antiretroviral regimens not containing tenofovir or FTC.

26% of all switches to Atripla in the second quarter of 2007 were from Combivir containing regimens, mostly from Combivir plus Sustiva. Importantly, approximately 24% of Combivir plus Sustiva patient population has been switched since the launch of Atripla.

At the end of the second quarter, there were approximately 167,000 patients receiving Truvada, which represented 33% of all patients treated with antiretrovirals. Truvada remained the most prescribed brand in HIV, and was the leading NRT backbone with all three leading third agents, Sustiva, Reyataz and Kaletra and across all patient demographics.

Of the patients being treated with antiretrovirals 65% of all treated patients of 332,000 patients received it not only a molecule, in one of its three forms namely Atripla, Truvada or Viread.

Finally, the cost of the new CDC guidelines on simplification of therapy brought by our products, a number of patients being treated with antiviral therapy in the US at the end of the second quarter of this year, grew by an impressive 10% over the last 12 months, and is estimated to be just 510,000 patients. The news of legislated change to state loss on HIV testing, referred to earlier by John Martin, bodes well for the continued flow of new patients and the opportunity for Gilead to impact both the treatment and transmission of HIV.

Additionally, the approval of Atripla in Canada is exciting news for our young organization based outside of Toronto, Ontario.

In August, Truvada, gained reimbursement in Ontario the last prudential approval needed in Canada, and we have seen a significant ramp-up in sales. Equally, we believe Atripla has an important role to play in the treatment of Canadian HIV patients. Once it follows a similar reimbursement cost into 2008. We look forward to working with our partner BMS in ensuring rapid access to Atripla.

Turning to our HIV franchise performance in Europe; as John Martin highlighted earlier, we are very pleased with the CHMP's recommendation for the approval of Atripla by the European Commission. Once approved, we anticipate launching Atripla in the UK and Germany in early January next year, with the rest of Europe rolling out upon the completion of pricing and reimbursement negotiations.

Atripla will be marketed by Gilead and BMS in the big five European countries plus Island, and by Gilead emerge in all of the markets.

With regard to the European HIV market dynamics, the total number of patients treated with antiretroviral therapy in the big five European countries increased to approximately 247,000.

Truvada continued to be the leading branded NRTI across all big five European markets with approximately 33% of all treated patients receiving Truvada. Approximately 81,000 patients were on a Truvada-based therapy.

Combivir switches still represents significant opportunity as approximately 44,000 patients remained on Combivir-based regimens in the big five EU countries.

Use of Truvada accounted for 50% of new starts in treatment-naïve patients during the second quarter. Truvada plus Sustiva continued to extend its leads for patients initiating therapy, growing to 24% of new patient market share followed by Truvada plus Kaletra up 13%.

Similar to the US we see opportunities to grow at the European HIV market. This will require both renewed efforts on changing public policies and national legislation around testing and linkage to care, especially, in light of the significant demographic changes taking place across Europe. In this respect an important symposium will be taking place in Brussels later this year. We need to get our all key HIV stake holders to discuss the importance of testing. This parallel is a similar event that took place in Washington DC in 2006.

Finally, as you may know the European AIDS Clinical Society Conference, EACS will kick-off next week in Madrid, Spain. Various studies highlighting the use of Gilead products will be feature of the conference. Dr. Martin Fisher of Brighton and Sussex University Hospital, UK will present the 48 week data from the SWEET study. One year results confirm that switching from Combivir to Truvada provides an easier regimen that maintains biological control and results in protection from limb fat loss.

Turning briefly to our hepatitis franchise; during the third quarter 2007 in the United States, Hepsera continued to be the leading antiviral agent for the treatment of chronic hepatitis B. In the third quarter of 2007, Hepsera continued its track record of posted quarter-on-quarter growth in total prescriptions, since its launch in 2002, as well as solid year-over-year growth of 8% of the third quarter of 2006.

As of the end of September 2007, Hepsera maintained its place as market leader with a total prescription marker share of just over 46%.

Importantly, in patients new to therapy, Hepsera continued to be the therapeutic charge with the 38% market share.

In the Gilead territories outside the US, Hepsera continued to grow significantly as awareness of chronic hepatitis B increased. In the European continent as a whole, approximately 9 million people are estimated to be infected with HPV, with only 25% of those being diagnosed, and less than 15% of the diagnosed population currently receiving treatments.

Hepsera has continued its strong revenue contributions outside the United States with sales of $47 million in the third quarter, up an impressive 48% over the same period one year ago.

The American Association for the Study of Liver Diseases Conference will be held from November 2^nd, through the 6^th, in Boston. We will be presenting data from both pivotal studies for Viread and HBV. But in addition, the conference will showcase some interesting data, supporting the use of antiviral agents in the treatments of hepatitis.

Commercially, we are in high gear planning to a 2008 launch of Viread and HBV, which is pending regulatory approval in Europe and the US. We believe that we both have the infrastructure and the expertise, based upon five years of Hepsera promotion, to bring a best-in-class product to market.

Moreover, what is especially exciting for the Gilead organization outside North America, is that given, that the European filing is Type II variation, which is highly likely that we will receive approval in Europe prior to the U.S., where we are anticipating a standard review.

Now turning to our cardiovascular franchise and Letairis for the treatment of pulmonary arterial hypertension or PAH. Having completed the first full quarter post launch, I am pleased to say that the uptake of Letairis, along with physician and patient interest in the product has been excellent and has met our pre-approval expectations.

As you know Letairis, as an ERA, is in the class of agents known to be teratogenic in animals. Therefore, every patient is required to be enrolled in a risk minimization action plan or risk map. The goal of such a program is to monitor and track patients ensuring that monthly testing of liver function occurs and that for woman, a child bearing capacity, monthly pregnancy testing also takes place. This requires a very careful process of record keeping and clearance, all steps of which are designed are approved by the FDA.

We also put in place for the launch of Letairis the Comprehensive Letairis Educational Access Program, otherwise known as LEAP, to coordinate risk map activities and Emtriva patients to specialty pharmacy. Strong demand we have had for Letairis has challenged the third party resources we initially put in place to administer our LEAP program. As a result we have recently made a number of structural changes designed to streamline the process, and improve the physician and patient experience with starting on Letairis. Our decision to price Letairis is parity to [TriClear] applicable to both dosage strengths has accelerated the overall payer coverage picture.

Currently, 49 of 50 state medicade plans are now reimbursing Letairis. Three of the largest pharmacy benefit managers Caremark, Medco and Express Groups, representing upwards of a 180 million lives are covering Letairis on their respective national formularies at a level on par with TriClear. Nine of the top 20 managed care plans have given Letairis full approval with an equivalent tearing of the TriClear. The remaining are listing Letairis on an interim basis pending formal review.

And finally, while as Medicare Part D plans have six months to review the listing of a new drug, Letairis is already being covered on an interim basis by many plans, again at an equivalent level to that of TriClear.

At this early stage in the launch of Letairis we have decided that we will not be sharing patient numbers. At this point we do not believe this will be a reliable or accurate predictor for any type of trend analysis for the product. However, it’s important to provide some points as to the quality of our launch.

We have over 2500 physicians enrolled in our lead program. It equates over 60% of our calculated total prescribing potential for Letairis, and is a lead indicator of intend to prescribe. Almost two thirds of the enrolling physicians are pulmonologists. Over 450 physicians have prescribed Letairis to date, with over 20% of those have prescribed Letairis for five or more patients. The top 25 physicians representing the large PAH treatment centers have enrolled in LEAP, and have prescribed Letairis for over 17 patients on average. Of the time, but at the end of the third quarter, our year-to-date sales of Letairis are just over $6 million.

The patients that started on Letairis are predominantly coming from three main buckets. Treatment naïve or patients nutratherapy, patients that have experienced elevated liver enzymes that were on TriClear, as well as both the patients that transitioned from the discontinuation of (inaudible).

In summary, even though it is very early in the launch of Letairis, it appears that the promotional platform we have laid down, namely a comprehensive clinical and safety profile, together with strong and differentiated product labeling, is a step towards reaching our aspiration of Letairis being the first line ERA choice. There will further opportunity to highlight the features of Letairis at the upcoming CHEST meeting in Chicago, later this month, with data from the longer-term follow-up of patients in ARIES-E). The data demonstrates that the efficacy of Letairis was sustained in patients treated from mean exposure about to 76 weeks.

Overall, I would like to thank the Gilead worldwide commercial organization for its results in Q3 adding some wavering commitments to help patients.

I will now turn the call over to the operator to begin the quarter-and-answer portion of the call. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Meg Malloy with Goldman Sachs. Please proceed.

Meg Malloy - Goldman Sachs

Thanks very much, and thanks for such a comprehensive overview. Just a question in terms of Atripla in Europe, I guess, could you elaborate on your understanding of the protease inhibitor preferences for first line and sort of the big five, and I guess particularly in the UK and Germany where you are likely to launch first?

Kevin Young

Hi Meg, it's Kevin speaking. As you know, I answered this in the past. There is sort of a mix of NRTI protease sort of split. So, it mixed across the European countries. If you look generally, France and Italy are more predominantly PI markets. UK and Spain are more predominantly NNRTI markets and Germany is kind of in the middle with the fairly equal split between the two.

So, we certainly think that Atripla is applicable to all of those markets. We think the label is strong in terms of allowing us to switch patients. So, we are as committed to Atripla in all of those big five, but the split of NNRTI to PI does vary across the courtiers.

Meg Malloy - Goldman Sachs

Thanks much.

John Milligan

And Meg, this is John. I just wanted a little color on that; I think that was fairly vague but accurate. I would say that the UK and Spain is going to point more than half more than half of the patients on NNRTI, while Germany is just below half on NNRTI, so it just gives you a little bit quantification there.

Meg Malloy - Goldman Sachs

Thanks.

Operator

Your next question comes from the line of Thomas Wei with Piper Jaffray. Please proceed.

Thomas Wei -Piper Jaffray

Thanks. A question on the U.S. HIV sales and one on the international sales, can you help us understand how much of the growth in the U.S. HIV sales on a sequential basis were related to recovery in the non-retail sales ordering patterns?

And then on the French stock piling situation, can you help us understand a little better what the impact has been to-date. Should we interpret that that means that demand in Europe so far has been overstated by this, as the fact, and by how much?

Kevin Young

Hi, Thomas, I will take the first question in terms of non-retail. I wouldn't call a recovery, but we had a very good non-retail quarter. It was basically exactly in line with the retailer prescription date, so there was a very good matching within this quarter.

In terms of sales relative to the first quarter, you know that we did have a large first quarter for non-retail and that's primarily because of the buying patterns.

As you know, non-retail is basically a sale. So, it's a sale among whole distribution of buying points, and primarily the non-retail large amounts in the first quarter was caused by the Florida ADAP, which is one purchase point, which applies for the whole of Florida.

We continue to see Florida order throughout the rest of the year to date, but that was an especially large order in Q1. What happens in Q4 and Q1 2008 remains to be seen.

John Milligan

Tom, this is John Milligan. With regard to your question about the wholesalers in France, a couple of things to say about that, what you might have noticed and what we have noticed is that sales in Germany, we are not growing as much as we had anticipated based on the retail -- based on our data about where the prescriptions are going.

And sales in France were exceeding those sales levels based on the prescription data we are getting there as well, which indicated to us that our sales from France were going into Germany. So, we are effectively recording a lower sales price than we would have otherwise based on the product demand and the individual country.

So, we have given notice and are implementing a different distribution system to try to ensure adequate supplies for France and to make sure that the product ends up in an appropriate country.

So, in watching the sales and in watching the prescription, it is certainly possible that there is additional inventory that's in place with these different wholesalers to move product from France to Germany, but it's very difficult for us to know the magnitude of those sales. I am sorry, all those stockpiles, if any.

There must be some inventory. We know that. And also the impact of the distribution change could also allow for some stock piling to occur in the future. And so these are the things that are unknown to us right now.

It will take place [intra-quarter] which so hopefully any buy-in and sell-out would occur mostly within the fourth quarter, but we don't know the magnitude, nor do we know what the demand would be like, and to complicate things further to get into next year we will be launching Atripla in the Germany which will create a further uncertainty as to where product would end up with anywhere. So, it’s an imperfect system much unlike the US, we have very difficult time getting paid. We do know the trends and we are working hard to try to identify this to the best of our ability under the current situation with the data gaps we have.

Thomas Wei -Piper Jaffray

Thank you.

Operator

Your next question comes from the line of Mark Schoenebaum with Bear Stearns. Please proceed.

Mark Schoenebaum - Bear Stearns

Hi, thank you very much for taking my question, and congratulations on another good quarter. I was just wondering John, Norbert maybe you can just, there is some confusion about exactly what the indication was for the European label over Atripla. Is it really indicated for true naïves? Can you explain the label and do you think it’s going to have any material impact on demand if in fact it’s not truly indicated for true naïve can you just clarify that for us?

John Martin

I’ll quickly answer the question how we got to the label because it’s fairly straight forward, even though it's may be a little bit confusing when you read it. And then Kevin can talk about commercial implications. So, as you know we had this issue in the European Union about different labeling, so Truvada is indicated to be taken with food whereas efavirenz is indicated to be taken on an empty stomach at bedtime.

And we recommended Atripla similarly to be taken on an empty stomach at bed time like efavirenz, but that led us and [the regulators] a little bit in search for data that would indicate that this, the fact that you now don’t take Truvada portion with food that it wouldn’t lead to an adverse clinical outcome.

And the data that we had, the only control study that we had where Atripla was used, was this 073 study and then the 073 study basically we took patients at base line that were suppressed on their current heart regimen and randomize them to continue to (inaudible) those switch to Atripla. And really, the indications completely reflect the base line of those patients.

So, it's indicated in patients that are suppressed at their current regimen at base line and those patients then can be switch to Atripla. So, that’s how we got here. And as said in portion of my conference call, we’re now working with regulators to look for what data would be adequate to really extend the indication to naïve patients as well.

And Kevin how do you, answer the question about the impact?

Kevin Young

Hi Mark. From a commercial point of view, when the promotion does begin early next year, very comfortable with the label that we've been given, the label actually allows us to ask for any patient in terms of a switch situation where they are stabilized on other antivirals.

Just as a reminder, when you look at total patients on antivirals the vast majority certain 90% are patients already on antiviral therapy about 10% on new patients any point in time. So, we really are playing in the majority of the market with this label. So, we’ll be leading out with Atripla and we think it has all the potential that we would like.

And secondly, don’t forget that, we always do two product details. So, we'll lead out with Atripla and then we follow up with Truvada and of course Truvada is there to be used in the naïve setting, whether it would be for NNRTI or the PI patient or indeed to follow on from Atripla where patient passes resistance ultimately to Atripla and then move on to the PI treatment regimen

Mark Schoenebaum - Bear Stearns

Okay, thank you. May I ask a follow up?

Kevin Young

Go ahead.

Mark Schoenebaum - Bear Stearns

Okay. Just on the Hepatitis C program 9190 can you provide us anymore details about the QT effect that you saw and if not will those data be presented at the labor meeting and we released the QT study data to the street by the end of the year? And thanks very much.

John Martin

Yes. So, may be I should back up. As you know part of the routine pre-clinical evaluation is evaluation for HERG inhibition, the potassium channel that plays a role in QTC elongation. We observe that a very high dose is 9190, somewhat inhibits to HERG channel but our calculations point to that, we have about 100 fold or more safety margin.

Nevertheless, the regulatory authorities felt that we should include QTC monitoring in our Phase I study, which we did. Unfortunately, since these were three sites, they used different equipments, et cetera. We ended up with data where there could be a potential signal but I want to just clearly say, we did not see a QTC signal but unfortunately, we also can't say we didn't see one.

So, we were really in the situation where we felt in the interest of patients to be safe and not running the risk we will do a pilot QTC study, which is fairly easy to do in about two to three months period. We will not have to final data at ASLD but we hope shortly thereafter in the middle of December we should have the final data from this QTC study and then if does it looks clean, we will move on with the current HCV study next year.

Mark Schoenebaum - Bear Stearns

Okay, great. Thanks a lot congrats.

Operator

Your next question comes from the line of Geoffrey Porges with Bernstein. Please proceed.

Geoffrey Porges - Bernstein

Thanks very much for taking the question. Couple of question, first on the 10% patient growth that you highlighted in the HIV market in the U.S. Kevin could you just tell you whether that - how closely is that correlated with the change that you have seen in California or Illinois and the other states? What does the trend look like when you look at other patient number data or script number in those states and is that really tightly correlated or something else going on?

And then secondly, if you could just talk a little bit more about Letairis. I think you said that it was 6 million year-to-date and just wondering if could give us a sense of how much of the sort of initial free good is included in the cost of goods line that we should be thinking about as we think about the evolution of that market? Thanks.

Kevin Young

Well, Geoff your first question about the impact of the different legislation that’s occurring, I mean effectively that impacted us zero. Many of the laws that have signed and sign of the place have not yet taken effect. For example, the California legislation will take effect on January 1st of 2008.

And what we do think is helping with the growth of patients of course is just initiative and the educational awareness about the importance of testing a different population, but we don’t yet have any way to quantify that across the United States and really I think the legislator barriers continue to be formidable from the states.

If you notice with exception of legislation path, pending in Massachusetts, we don’t have as much traction in these costs that we'd like to, yes there are still great opportunities before us there.

The second question was regard to the cost of goods line relating to Letairis and how that would flow through there? So with regard to cost of goods it doesn’t show up in the cost of goods line, in fact its - its an expense associated with the Letairis program, so it doesn’t have COGS impact at this point in time, right, its just like I never will going forward.

Geoffrey Porges - Bernstein

Could you give perhaps so much of the preliminary to the SG&A line then?

John Milligan

Yes.

Kevin Young

Yes. And in terms of the program itself, Geoff we are now phasing that out so that will be going away here in the fourth quarter. So, that was basically something that we always decided that would be around toward the initial uptake of the product, but it will be going away in this quarter.

Geoffrey Porges - Bernstein

Could you tell us what SG&A would be if you netted that out?

John Milligan

Good question. I don't know that's off the top of my head, Geoff. We can, we'll have to track it down. I am not sure that we tracked it down that easily, but we'll work on that.

Geoffrey Porges - Bernstein

Okay. Thanks.

Operator

Your next question comes from the line of Yaron Werber with the Citigroup. Please proceed.

Yaron Werber - Citigroup

Yeah. Hi, good afternoon. Thanks for taking my question. I have two questions just to clarify and if I just I am repeating previous question, I just want an extra clarification on what specifically you are seeing in terms of the inventory patterns in Europe with regard to Truvada and specifically Viread and given Emtriva was a bit weak. So if I look in my model overall I am looking at roughly almost a 400 basis points or 450 basis points decline quarter-over-quarter.

So could you just, if you don't mind help us understand, are you comfortable that Q2 was a good gauge of demand and if not should we be looking at Q1 as a trend of the earliest possible kind of beginning of where the real demand were?

And then the follow-up question is, can you explain to us what you are seeing in terms of actual patient growth in Europe? You mentioned it's 10% in the U.S. What do you think in Europe, is there a move to treating patients earlier in diagnostic earlier as well? Thanks.

John Milligan

Yeah so, Yaron, that's a good question about the demand in Europe and so what we haven't seen in fact, what we think of seeing is revenues that are somewhat lower than demand and the reason for that of course is because we are selling product into France that's going into Germany.

So, as it relates to total amount of euros we receive it has been, disproportionate the number of patients coming on in Germany. So it’s a little bit light compared to that. And that could be offset slightly by any inventory, which is to build up. We don’t know what the magnitude of that is. So, I can frankly think that this quarter is a pretty reasonably quarter for judging demand and we are monitoring that to make sure that surely its going to take at least one more quarter if not more to understand that.

Yaron Werber - Citigroup

Thank you.

Kevin Young

It’s Kevin. I don’t have the numbers at my fingertips for the overall growth of patients in Europe. But I do recall it’s slightly less than here in the U.S. because of course the U.S. is a little bit ahead in terms of testing and linkage to care. But undoubtedly, we think there are growth opportunities there, there is a lot of movement of infected patients around here right now and we think that’s very solid for our underlying business.

Yaron Werber - Citigroup

Can I just follow up John on your earlier points? So should we assume that Q2 then, the trends in Europe perhaps had some inventory build, is the current quarter is the real demand in Q3?

John Milligan

We started to see this in Q1 to a great extent. So, what’s happening, people are buying Truvada in France and Viread to some extent and reselling it predominantly in Germany, but also in Eastern Europe as well. So we know those two things. And we are trying to figure out also, because we can’t track everything, and because it doesn’t match up entirely with the script in Germany. We don’t know how much went into Eastern Europe, which where there a considerable sales and how much is sitting in warehouse.

And also much like the United States the script demand is not perfect. So, this is the uncertainty that we are dealing with right now. So, it seems to us that Q2 is a pretty reasonable profit for the growth and we are monitoring that very closely. And then of course as we put these new management systems in place, there are contractual obligations to allow people time before we can completely change the distribution model. And so that may create an opportunity for somebody to buy and [keep forward] and that's what I am largely concerned about.

Yaron Werber - Citigroup

Okay. Great, thank you.

Operator

Your next question comes from the line of Bret Holley with CIBC World Markets. Please proceed.

Bret Holley - CIBC World Markets

Yeah, hi, thanks for taking the question. Kevin, I am little bit intrigue about something you said that you expected a standard review for Viread and HPV. And I guess just on the backdrop of the other antiretrovirals for HPV being approved on a six months review. Have you requested the six months review, or is that now something you are even interested in?

Kevin Young

We have requested a priority review yes, as we always do routinely with our antiretrovirals, some preliminary unofficial conversations that we had with the agency would led us to believe that this was probably going to be a standard review.

And I want to tell you the main argument in support of that notion is that Viread is essentially available on the market. And so, there is not an unmet medical need.

Bret Holley - CIBC World Markets

Okay, thank you.

Operator

Your next question comes from the line of Geoff Meacham with JP Morgan. Please proceed.

Geoff Meacham - JP Morgan

Hi guys, congrats on the quarter. I have one question for you on Letairis, your competitors have been focusing a lot on the FDA review, the documents posted online for Letairis. My question is how comfortable are you with the data supporting once daily dosing and what's the risk that the peak-trough study suggest BID dosing, I guess when that prints data maybe 2009?

Kevin Young

Yes, I want to tell you the issue about or the concern about peak-trough comes from antihypertensive medications where if you take the drug, the effect, which is blood pressure lowering is very dependent on drug levels. And once the drug has disappeared, your pharmacological effect may have disappeared. Our endpoint that we looked at was six-minute walk. Now, six-minute walk takes about 12 weeks to lead up to. You have to dose for 12 weeks before you can really see the effect. And I do not really understand the rationale for why somebody would say that that effect could disappear within 12 hours when the drug levels are lower, but nevertheless, there is a post-marketing commitment that we agreed on and we are going to do the study and I am very, very confident that the outcome of that study will be that the trough six-minute-walk test is exactly the same as the peak.

John Milligan

Now they start during the -- in the field visits, but I have made and I think my colleagues have made. I haven't (inaudible) any doubts about this been a once-daily drug.

Geoff Meacham - JP Morgan

Okay. And the one follow-up if I may, Kevin, I guess this is for you. You mentioned that WHO or you mentioned the screening guideline in your prepared remarks. Just wondering if you can give us a sense for what the consent procedure is in the screening process for maybe the big five European countries, and then if there is any action near term, what timelines could you give for consensus opinion for broader screening in Europe?

Kevin Young

I don't have a country-by-country, it's a great question and process, you don't find that information, don’t have it country-by-country, but the need for kind of written consent is kind of standard from a patient right point of view. I think the challenge in Europe is that you generally need a complete national change, it's not a region-by-region, basically a country has to change some legislation and certainly change that guideline. So, you have to tackle that. We have been I think professionally facilitating is to get the parties together to stop talking about that, and I think as some of the European countries try to meet the challenges of some of the new populations that they are seeing in that countries, I think HIV carriers are going up back upon their [radars].

Geoff Meacham - JP Morgan

Okay. Thank you.

Operator

Your next question comes from the line of Michael Aberman with Credit Suisse. Please proceed.