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Gilead Sciences, Inc. (NASDAQ:GILD)

Q4 FY07 Earnings Call

January 23, 2008, 4:30 PM ET

Executives

Susan Hubbard - VP of IR

John C. Martin, PhD - President and CEO

John F. Milligan, PhD - COO and CFO

Kevin Young - EVP of Commercial Operations

Analysts

Margaret Malloy - Goldman Sachs

Michael King - Rodman & Renshaw

Thomas Wei - Piper Jaffray

Mark Schoenebaum - Bear Stearns

Geoffrey Porges - Sanford Bernstein

Yaron Werber - Citigroup

Geoffrey Meacham - J.P. Morgan

William Ho - Banc of America Securities

Michael Aberman - Credit Suisse

Sapna Srivastava - Morgan Stanley

Joel Sendek - Lazard Capital Markets

Maged Shenouda - UBS

Phil Nadeau - Cowen & Company

Ian Somaiya - Thomas Weisel Partners

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Gilead Sciences Fourth Quarter 2007 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct the question-and-answer session. As a reminder, this conference call is being recorded today, January 23, 2008.

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

Susan Hubbard - Vice President of Investor Relations

Thank you. Good afternoon everyone and welcome to Gilead's fourth quarter and full year 2007 earnings conference call. We are pleased you could join us today. We issued a press release this afternoon providing results for the fourth quarter and year ended December 31, 2007 and describing the company's quarterly and full year highlights. This press release is also available on our website at www.gilead.com. Joining me on today's call to discuss our results are John Martin, President and Chief Executive Officer; John Milligan, Chief Operating Officer and Chief Financial Officer; Kevin Young, Executive Vice President of Commercial Operations; Norbert Bischofberger, Executive Vice President of Research and Development and Chief Scientific Officer; and Matt Howe, Vice President of Finance. John Martin will take you through the corporate and product-related highlights for the quarter, John Milligan will be reviewing the fourth quarter and full year 2007 financial results and financial guidance for 2008, and Kevin Young will summarize our commercialize milestones and provide more color on the market dynamics surrounding our various franchises. We'll then allow time at the end of this call to answer your questions.

Before I turn the call over to John Martin for the corporate updates I would first like to remind you that we will be making forward-looking statements relating to future events, expectations, trends, objectives, and financial results that constitute forward-looking statements within the meaning of the Private Securities 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-Q for the third quarter ended September 30, 2007, subsequent press releases, and other publicly filed SEC disclosure documents for a 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 also be making certain references to financial measures that are on a non-GAAP basis. We provide a reconciliation between GAAP and non-GAAP numbers on our website.

I will now turn the call over to John Martin.

John C. Martin, PhD - President and Chief Executive Officer

Thank you Susan. Good afternoon everyone and thank you for joining us today. We are pleased to summarize for you Gilead's accomplishments during the fourth quarter of 2007. I will start by reviewing our corporate milestones for the quarter and provide an update on our research and development programs. Then John Milligan will run through the financial results for the quarter and provide our 2008 guidance and finally Kevin will review our commercial efforts.

First, Caroline Dorsa got off to a good start at Gilead as Chief Financial Officer so we were disappointed by her departure for personal reasons after only two months. We will work hard to identify a replacement so that John Milligan can focus on his role as Chief Operating Officer. In the interim he will reassume the role of Chief Financial Officer, a continuation of his previous responsibilities.

2007 marked a year of many important milestones for Gilead. We saw a continued significant growth in our product sales particularly our HIV franchise which grew 48% from 2006 to 2007 which is the primary driver of our non-GAAP earnings per share growth of 33% year-over-year. We executed on several product approvals and launches in multiple territories and particular Letairis for PAH in the U.S. and Atripla in the EU and Canada. We also completed the integration of multiple acquired sites, embarked on several new collaboration, and in-licensed compounds and expanded our footprints in Europe. In addition we completed regulatory submissions for Aztreonam Lysine for inhalation for cystic fibrosis and Viread for HBV and Glaxo filed for approval of Letairis in the EU.

With all three products... with all three products currently undergoing review in the U.S. and/or the European Union. We are prepared to launch these products later this year leveraging the commercial infrastructure we already have in place as Kevin will expand on in a bit. All this was accomplished by approximately 2900 dedicated Gilead employees who are committed to advancing patient care worldwide.

In November at ASLD we presented positive data from the two key pivotal studies for Viread for chronic hepatitis B. These data support the U.S. and European filings which we submitted in the fourth quarter of 2007. The U.S. NDA was accepted by the FDA and assuming a 10 month review we would expect to launch the product in the third quarter of this year. In the EU the filings is of Type II variation therefore we anticipate that the review could be quicker and if approved we could be in a position to begin launching in the free pricing countries of Europe in the second quarter of this year.

The data from two pivotal studies show Viread to be superior to Hepsera based on the primary end point of HBV viral load decrease and histologic improvement. These results coupled with the long-term safety data base, based on the use of Viread in HIV infected individuals comprising more than 1 million patient years of safety data suggest that Viread will be an excellent choice for the treatment of chronic hepatitis B. Despite the fact that there are now several antivirals on the market including Hepsera, chronic hepatitis B continues to represent a significant unmet medical need. The market dynamics are very different in HBV and HIV. There are approximately the same number of HBV infected individuals in the U.S. as is the case with HIV but the diagnosis rate is significantly lower and the treatment rate is extremely low. We believe this creates a significant opportunity for hepatitis B franchise.

Turning now to our efforts in HCV, as you know we have numerous research efforts for the treatment of HCV which also represents a significant unmet medical need and an area of research in which numerous biotech and pharmaceutical companies are focussed. Our lead compound for HCV is GS 9190, a non-nucleoside polymerase inhibitor. We presented preliminary data on the single dose and the first two doses of a 7-day treatment course at the AASLD conference last November, which demonstrated favorable antiviral activity, pharmacokinetics, and exposure at the doses evaluated. In this study, we also observed a possible QTc prolongation after 120 milligram dose, and we proceeded to assess the effect of GS 9190 on QTc in a separate study of healthy volunteers. We have now completed the assessment of the QTc effects of GS 9190 at the 120 milligram and at the 40 milligram BID doses. QTc prolongations were confirmed at 120 milligrams dose, but prolongations at the 40 milligram dose were small and we believe clinically manageable. Therefore, we are in the process of reinitiating dosing of HCV affected individuals to further decline the efficacy and safety of the compound.

GS 9450 are caspase inhibitor in license last year is currently being evaluated as heparo protectant [ph] in an ongoing Phase IIa study in HCV infected individuals. We anticipate data from this trial by the end of this year. We think that this molecule may also have utility and other diseases such as fatty liver disease or NASH.

Turning to HIV, in 2007 significant progress was made to increase the diagnosis and treatment of HIV in the U.S. and the EU. In the U.S., eight states took legislative steps to reduce the barriers to testing and guidelines were modified to recommend treatment at higher CD portal in an effort to better preserve patient's immune system. Similar initiatives were seen in the EU where new treatment guidelines were implemented as well as initiatives to increase testing. We also saw the approval of two new classes of drugs targeting the treatment of patients that have failed on the other regiments, an integrase inhibitor and the CCR-5 inhibitor.

In light of these new options for patients the new standard for the evaluation of novel agents in treatment experienced patients such as Elvitegravir is a non-inferiority study versus an active comparative. With the FDA's guidance we have been working hard to finalize the design of the Phase III program for Elvitegravir. We will be conducting two non-inferiority studies evaluating Elvitegravir doses of either 150 milligrams or 300 milligrams versus 400 milligrams of Elvitegravir in up to 1560 patients.

Our primary endpoint will be the proportion of patients to achieve and maintain HIV RNA less than 50 copies per milliliter at week 48. We are evaluating the 300 milligram dose of Elvitegravir because of the clean safety profile, in fact it would be the highest dose of 125 milligrams evaluated in the Phase II, warrant to exploration of this higher dose. This may result in greater efficacy for patients with more advanced disease.

With regards to our cardiovascular franchise, we plan to initiate the Phase IV program for Letairis in second quarter of this year. The initial study will be blinded, a blinded two arm study comparing to PDE-5 inhibitor sildenafil to the combination of sildenafil and Letairis in patients who are not optimally responding to sildenafil monotherapy. The study is intended to demonstrate the clinical value... at the addition of Letairis therapy early in the treatment process.

Phase III studies for Darusentan in resistant hypertension saw progress in terms of the enrollment in both the DAR-311 and the DAR-312 studies which are approximately 45% and 10% enrolled, respectively. We believe we are on-track to complete enrollment and receive data from these studies in 2009.

On the respiratory front, Aztreonam Lysine for inhalation is Gilead's unique drug formulation, specifically designed to achieve high, long antibiotic concentrations with a short duration of administration. Based on data from the two Phase III pivotal studies the dose set provides the best efficacy as 75 milligrams delivered in 2 to 3 minutes three times daily. The U.S. NDA was filed on November 16, 2007 and we have been notified that the contract has been accepted and was granted a traditional review with the PDUFA date of September 16th of this year. Based on discussions with the EMEA we plan to submit an MAA in the second quarter of this year. We are preparing to conduct a head-to-head open label study versus TOBI in the European Union to support registration and will initiate this study shortly. This study will not need to be competed in order to getting approval of Aztreonam Lysine but we will support a conditional approval strategy.

I am very pleased with all the progress Gilead made in 2007, and look forward to further growth of our organization in 2008. Next John Milligan will review our financial results for the quarter.

John F. Milligan, PhD - Chief Operating Officer and Chief Financial Officer

Thank you, John. The fourth quarter of 2007 was another very successful quarter and completes the tremendous year of growth for the company. Total revenues, which includes product sales and royalty, contract and other revenues for the fourth quarter of 2007 were $1.1 billion, our fourth consecutive quarter of surpassing $1 billion in total quarterly revenues.

Fourth quarter product sales were $1 billion, 34% increase compared to the fourth quarter of 2006. This marks the first time the company has exceeded $1 billion in products sales on a given quarter. For the full year, total revenues were $4.2 billion. HIV product sales totaled $864 million for the fourth quarter of 2007, driven primarily by the continued strong uptake of Atripla in United States, as well as the strong growth of Truvada across most major international regions.

Operating expenses were $355 million, a 41% increase over the fourth quarter of the prior year. This reflects our commitment to investing in our pipeline and our geographic expansion while keeping a sharp focus on overall expense management. I know you've heard in the past about our plans to expand our operations in EU and Kevin will speak to you in a few minutes about the strong progress we are making in this regard. We believe this positions us well for the future.

Our fourth quarter 2007 net income was $402 million or $0.41 per share on a fully diluted basis. Our full year 2007 net income was $1.6 billion or $1.68 per share on a fully diluted basis. Non-GAAP net income per share for the fourth quarter of 2007, excluding the impact of after-tax stock-based compensation expense was $0.44 per share on a fully diluted basis. A 6% increase over the fourth quarter of 2006 non-GAAP net income per share of $0.41 per share, which excluded both the purchase in-process R&D expenses as well as the after-tax stock-based compensation expense. We generated $512 million in operating cash flow during the fourth quarter of 2007 bringing the full year operating cash flow to $1.8 billion.

Now turning to the specific results for the fourth quarter, total revenues for the fourth quarter of 2007 were $1.1 billion, an increase of 22% from total revenues of $899 million in the fourth quarter of 2006. This performance is driven by a 34% increase in our product sales partially offset by a 48% reduction in our royalty, contract, and other revenues compared to the fourth quarter of 2006. Product sales were record $1 billion for the fourth quarter of 2007 marking four consecutive years of quarterly product sales growth. Product sales from the fourth quarter increased sequentially by 7% as our HIV product sales continue to grow.

In terms of foreign exchange impact $36 million of our product sales increased in the fourth quarter of 2007 was due to the strengthening of the underlying European currencies compared to the same period in 2006 and $40 million when compared to third quarter of 2007. This favorable impact takes into account our hedging activity. Royalty, contract, and other revenues decreased sequentially by 29% due primarily to the decline in Tamiflu sales.

Now turning to more specifics on product sales. HIV products sales grew to $864 million for the fourth quarter of 2007 up 35% from $642 million in the fourth quarter of 2006 and up 7% sequentially from the third quarter of 2007. Truvada sales were $449 million for the fourth quarter of 2007 up 33% compared to the fourth quarter of 2006 of which approximately 6% was driven by favorable foreign currency exchange impact when compared to the fourth quarter of 2006. Truvada sales for the fourth quarter of 2007 were up 10% sequentially from the third quarter of 2007 of which approximately 2% was driven by a favorable foreign exchange impact when compared to the third quarter of 2007.

Truvada sales accounted for approximately 52% of our total HIV franchise sales in the fourth quarter of 2007. In the U.S., Truvada sales were $210 million for the fourth quarter of 2007 up 7% compared to the fourth quarter of 2006. Sequentially U.S. sales were up 2% even though the fourth quarter 2007 was the sixth quarter of Atripla availability in U.S. thereby demonstrating Truvada's continuous hold on its place as the NRTI backbone of choice in combinational studies in the U.S.

In Europe, Truvada sales for fourth quarter of 2007 were $212 million, an increase of 67% compared to the fourth quarter of 2006 and an increase of 15% compared to the third quarter of 2007 strong sales volume growth in Europe and a favorable foreign exchange environment were the key drivers of the increased Truvada sales.

In response to an increased level of parallel trade activity in the region effective December 1, 2007, the company initiated the Supply Management System in France to manage orders of Truvada and Viread to ensure adequate and appropriate supplies of products to France commensurate with the market demands of France. We do not believe the impact from parallel trade was material to our overall HIV product sales during in the quarter. We currently estimate that the Supply Management System has accomplished what we had hoped and we expect that future sales in the region will better approximate future demand.

Atripla contributed $260 million to our fourth quarter HIV's product sales as demand for this product continued to rise in the U.S. Atripla sales accounted for 30% of our total HIV franchise sales in the fourth quarter of 2007. The Sustiva portion of Atripla which is distributed back to BMS and reflected in the cost of goods sold line was approximately $96 million or 37% of Atripla sales in the fourth quarter of 2007. Although the EU collaborations is structured somewhat differently from the North American joint venture, Gilead will still pay BMS' Sustiva portion of Atripla sales in EU and product sales and cost of goods sold will be impacted similarly. We have booked minimal sales of Atripla in the EU in the fourth quarter and we are reminding you here for future reference.

Viread sales were $148 million for the fourth quarter of 2007, down 7% from the same period in 2006 due primarily to lower sales volume in the U.S. partially offset by a favorable foreign currency exchange impact of 4% when compared to the same period in 2006. Viread sales for the fourth quarter of 2007 remained strong and stayed relatively flat sequentially compared to the third quarter of 2007.

Hepsera for the treatment of chronic hepatitis B generated sales of $77 million in the fourth quarter of 2007, up 17% compared to the fourth quarter of 2006 of which approximately 7% was driven by the favorable foreign currency exchange impact. Hepsera sales for the fourth quarter of 2007 experienced a 3% decrease sequentially. In the United States, Hepsera sales increased by 4% when compared to the fourth quarter of 2006 and decreased by 11% sequentially. In the fourth quarter of 2007, there was a slight reduction in Hepsera inventory held at the wholesalers, but the inventory level remained within our contractual band.

Fourth quarter 2007 Hepsera sales in EU increased by 20% when compared to the same period last year and decreased by 1% sequentially. The increase in EU Hepsera sales in the fourth quarter of 2007 compared to the same period in 2006 was driven primarily by sales volume growth in the European territories. Finally, sales of AmBisome were $68 million for the fourth quarter of 2007, an increase of 16% when compared to the fourth quarter of 2006 of which approximately 9% was driven by favorable foreign currency environment. AmBisome sales decreased by 1% sequentially.

Our royalty, contract and other revenues for the fourth quarter of 2007 decreased by 48% compared to the same quarter 2006 and decreased by 29% sequentially. These decreases were primarily driven by lower Tamiflu royalty revenues recognized from Tamiflu sales made by Roche due to lower pandemic purchases. Royalties received from Roche and recognized in our revenue in the fourth quarter of 2007 were $46 million. Those royalties which are paid one quarter in arrears reflected royalty rate of approximately 22% as applied to Roche's sales of Tamiflu during the third quarter of 2007. As you may be aware, Roche is currently scheduled to report fourth quarter 2007 earnings on Wednesday of next week. We expect on that call Roche will provide estimated 2008 Tamiflu pandemic sales guidance.

Now turning to product gross margins, non-GAAP product gross margin for the fourth quarter of 2007 would exclude stock based compensation expenses approximately 79% compared to non-GAAP product gross margin of approximately 80% for the same quarter of 2006 and 80% for the third quarter of 2007. The lower product gross margin when compared to the same period last year was primarily due to the higher portion of Atripla sales. Remember Atripla sales carried a [indiscernible] portion at zero gross margin. So what you are seeing is the simple impact of sales being slightly more weighted towards Atripla.

Now turning to expenses, non-GAAP R&D expenses for the fourth quarter of 2007, which excludes stock based compensation expense for $159 million. This was an increase of 73% from $98 million in the same period last year and a $47 million or 30% increase from the third quarter of 2007 primarily as a result of increased license payments made to Gilead's corporate partners related to our collaboration, increased clinical study expenses, as well as higher head count driven both organically as well as by the absorption of acquisitions made in late 2006. As you may recall in the fourth quarter of 2007 we paid a $20 million upfront license fee to LG Life Sciences Limited which was included in R&D expenses and which is disclosed at the time we announced the transaction.

As John mentioned, we are seeing good progress at enrolling patients in our two Phase III studies for Darusentan and you will see the financial impact of that here as well. Non-GAAP SG&A expenses for the fourth quarter of 2007, which excludes stock based compensation expense were $165 million, an increase of 29% compared to $128 million in the same period last year, due primarily to increased marketing, promotional, and other expenses to support our antiviral and cardiovascular programs as well as higher headcount especially in our cardiovascular business.

On a sequential basis, non-GAAP SG&A expenses for the fourth quarter of 2007 increased by 11% from $148 million in the third quarter of 2007 due primarily to increased marketing, promotional, and other expenses in support of our antiviral and cardiovascular programs.

On pre-tax earning, foreign exchange had a net favorable impact of $26 million in the fourth quarter of 2007 when compared to the same period last year, and then $11 million net favorable impact when compared to the third quarter of 2007. This favorable impact takes into account the product sales and expenses generated from outside the United States, as well as, our hedging activities.

Our effective tax-rate for the fourth quarter of 2007 was 26.1%. Our effective tax-rate for the fourth quarter of 2006 before the acquisition related in-process R&D expenses was 27.6%. Our full year 2007 effective tax-rate was 28.9%, a decrease from 31.4% effective tax-rate for 2006 before the in-process R&D expenses. The lower effective tax-rates were primarily driven by increased earnings in favorable tax jurisdictions and a lower state effective tax-rate.

Next, I would like to turn to our operating cash flow performance for the quarter and finally our net cash position at the year end. In the fourth quarter of 2007, we generated $512 million in operating cash flow bringing total operating cash flow generation for the year to a record $1.8 billion. We also repurchased $33 million of our common shares this quarter through our $3 billion stock repurchase program brining our total repurchases of common shares to $488 million for the year.

Our balance sheet at December 31, 2007 showed cash, cash equivalent, and marketable securities of $2.7 billion. This was an increase of $504 million when compared to the balance of $2.2 billion at the end of September 30, 2007. We continue to actively evaluate strategic ways to use our cash and investments, including continuing our efforts to pursue opportunities to in-license or acquire products to compliment our own internal efforts. Whilst we are clearly committed to returning cash to our stock holders as is evidenced by the $1 billion stock repurchase program we completed in the second quarter of 2007 and our new $3 billion stock repurchase program which we initiated at the end of 2007 and which we intend to complete within the next three years.

Now, I would like to turn to the financial guidance for the full year 2008. You can locate all of our guidance for the 2007 year on Gilead's corporate website. Our guidance for the full year 2008 product sales is in the range of $4.7 billion to $4.8 billion which is approximately a 26% to 29% increase over 2007. To be clear, this product sales guidance is for direct product sales only and does not include royalty, contract, and other revenues. This guidance also does not include any potential sale for Aztreonam Lysine, the inhalation for CF or for Viread specifically for HBV consistent with our practice of not issuing guidance prior to product approval and initial launch.

As a reminder the product gross margin and expense guidance we are providing today will be non-GAAP which excludes the impact of stock-based compensation expense, providing non-GAAP product gross margin guidance for the full year 2008, of 77% to 79%. The lower product gross margin compared to 2007 is entirely due to the expected higher Atripla revenue from both the U.S. and the EU, which includes the... portion of zero gross profit partially offset by product gross margin improvements driven by lower API cost.

Providing non-GAAP R&D expense guidance for 2008, from $610 million to $630 million which is an approximately 18% to 21% increase over the 2007 non-GAAP R&D expenses which excludes the impact of stock-based compensation expense. The expected growth in R&D expenses is primarily driven by the expectation of our product candidates entering and progressing to late stage clinical studies, including Darusentan for resistant hypertension and Elvitegravir for HIV, as well a continuation of our Phase III Viread for HBV studies and the initiation of the Phase IV program for Letairis.

Providing non-GAAP SG&A guidance of $710 million to $730 million, and approximately 17% to 21% increase over 2007 non-GAAP SG&A expenses which excludes the impact of stock-based compensation expense. This expected increase in SG&A expenses over 2007 spending reflects anticipated higher headcount and spending to support our business growth, including expansion of the European footprint in the Nordics and Benelux as well as the costs associated with anticipated launch of Atripla in EU. Viread for HBV in both the U.S. and EU and Aztreonam Lysine for inhalation for cystic fibrosis in the U.S.

Our effective tax rate guidance for the full year 2008 is expected to be in the range of 29% to 30% compared to the 28.9% effective tax rate for the full year of 2007. We expect the tax rate benefit from increased earnings and favorable tax jurisdictions to be the offset by the exploration of the Federal R&D tax credit on December 31, 2007.

Regarding stock-based compensation expense, we expect the 2008 fully dilutive per share impact to be in the range of $0.12 to $0.14 compared to $0.14 per diluted share in 2007. The 2007 stock-based compensation expense reflecting back to the Myogen and Corus under the stock options that we assumed is part of the acquisition, some of which had accelerated investing due to employee transitions.

In conclusion, our solid operating performance continues to be a validation of the significant efforts made by the more than 2900 Gilead employees around the world. We remain committed to driving performance for our shareholders by working to improve the lives of patients around the world.

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

Kevin Young - Executive Vice President of Commercial Operations

Thank you, John, and good afternoon everyone. 2007 was an extraordinary year to Gilead sales and marketing operations. New product launches and expanding process in Europe as well as products which are pending approvals have paved the way for what we expect to be a very exciting 2008. In anticipation of the launch of Atripla and the expected approval of Viread for HBV we expanded our European operations in 2007 by opening marketing subsidiaries in three additional countries taking up total European presence to 11 countries. We believe we are well positioned to successfully execute on our 2008 marketing strategy.

I would now like to turn to the commercial update for the quarter. I will start with an antiviral franchise which as you know 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 markets. As a reminder this data lags behind our financial resource by one quarter. Our U.S. HIV franchise performance remained the best in the industry in Q3 of 2007 and the gap between Gilead and our closest competitors continue to widen. Atripla build on its leadership position in the U.S. as approximately 25% of the estimated 514,000 patients or just 130,000 patients, were on Atripla therapy.

For the four consecutive quarters since the launch of Atripla over 80% of treatment naïve patients started therapy with one of Gilead's products with approximately 55% taking Atripla, 25% on a Truvada regimen and 1% initiating on Viread based regimen. In patients switching to Atripla from other therapies approximately 49% were from non-Gilead based regimens. Primarily Combivir patients at 21% of total such patients.

As demonstrated by two consecutive quarters of sales growth, Truvada continued to be the backbone of choice for anti-viral therapy in the U.S. with an estimated 160,000 patients receiving Truvada. This represents approximately 31% of all patients treated with antiretrovirals. Notably 64% of all U.S. patients or 330,000 received the tenofovir molecule during the third quarter in one of its three forms namely Atripla, Truvada, or Viread.

We continue to make good progress with our HIV products in Europe and believe that with the launch of Atripla we will be able to further strengthen our position. In late December, Gilead along with our partner Bristol-Myers Squibb announced the improvement of Atripla in the 27 countries that comprised the European Union as well as Norway and Iceland. We have already shipped product to wholesalers and hospitals in the UK, Germany, and Austria where our sales representatives have begun detailing Atripla. The rest of the European Union will follow over the course of the year.

We will market Atripla with BMS in most of Europe, while BMS will be primarily responsible for marketing in several countries in Eastern Europe. Atripla sales across the majority of Europe will be captured essentially in the same way that it is in the U.S. Gilead will recall revenues and distribute back to BMS the Sustiva portion of Atripla as reflected in our cost of goods sold line. We are very excited to offer the first once-daily single tablet regimen throughout the EU and we anticipate similar uptake dynamics in each country as we have seen when we launched Atripla in the U.S. The estimated market opportunity in just the big five countries alone is now 250,000 patients on antiretroviral therapy. This population grew at an estimated rate of 9% year-over-year.

Truvada has continued to build on a strong base throughout the EU. At the end of the third quarter of 2007, we estimated that approximately a 100,000 patients are just under 40% of all treated patients within the big five EU markets were being treated with Truvada. In the big five EU markets, Truvada for Sustiva was a leading treatment regimen up 14%, followed by Truvada plus Kaletra at 9% and Truvada plus Reyataz at 6%. In naïve patients approximately 60% of patients initiated therapy on Truvada. Having the top three regimens of Europe in exactly the same starting points that the U.S. was when Atripla was launched in mid 2006. Truvada is now the number one brand throughout the big five markets, while tenofovir is the leading molecule in Germany and Spain. When... we anticipate we will achieve the same position in the other countries in the coming quarters.

As John Martin mentioned in 2007 significant progress was made in the U.S. as well as in the EU to continue to reduce the virus testing and to accelerate the initiation of treatment. These steps will continue to outgrow to the treated HIV patient population in 2008 and beyond.

Turning briefly to our hepatitis franchise; during the fourth quarter of 2007 in the United States, Hepsera continued to be the leading antiviral agent for the treatment of chronic hepatitis B. As of the end of December 2007, Hepsera maintained its place as market leader with the total prescription share of just over 45%.

In the Gilead territories outside the U.S., Hepsera continue to grow as well. We anticipate the approval of Viread for HBV in the EU and U.S. later this year and commercially we are already preparing for the launch in these markets. We believe we have the infrastructure in place to support the successful launch without the need for major restructuring effort.

Now turning to our cardiovascular franchise and Letairis for the treatment of pulmonary arterial hypertension or PAH. We are very pleased with the recent performance of Letairis as well as the market trends we have been seeing. We are beginning to hit full stride in our launch. We now have approximately 3200 physicians enrolled in our Letairis Education and Access Program otherwise known as LEAP. Although only a subset of these positions are prescribers they are all partners of the physician referring base that others turn to, an important group for expanding awareness and diagnosis of the disease. To date nearly 800 physicians have prescribed Letairis and during the fourth quarter we recorded approximately $15 million in Letairis sales.

Letairis patients are coming from four prime resources; new patients to therapy, patients that have accelerated LFTs that have been taking ambrisentan [ph], patients who were initiated on PDE-5 inhibitors and have not responded to therapy, and patients that have discontinued to strive III clinical program. Moreover we have observed small cohort of patients switch from ambrisentan [ph] because of poor efficacy. On the reimbursement front All State Medicaid plans and the top managed care plans are reimbursing Letairis as an equivalent to Tracleer. Structural changes we have implemented since the launch of Letairis to our LEAP program as well as recent modifications in our risk minimization action plan or risk MAP have been positively received and help them to reduce barriers to treatment. Overall, we believe we are well positioned to continue to build upon the very solid first six months of Letairis.

In closing, I am personally very proud of what the whole commercial organization accomplished in 2007. And I am excited about the many opportunities we have ahead of us to continue to deliver upon our sales goals while maintaining a diligent focus on operational excellence and business compliance.

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

Question And Answer

Operator

[Operator Instructions]. As a reminder we will take one question per person. We will pause for just a moment to compile the Q&A roster. And our first question comes from the line of Meg Malloy with Goldman Sachs. Go ahead.

Margaret Malloy - Goldman Sachs

Thanks very much. Just a quick one on Letairis what do you contemplate in terms of your '08 sales guidance, is there a range you could provide there and then a very quick follow-up, sorry I missed the R&D expense line guidance for 2008, thanks?

John F. Milligan, PhD - Chief Operating Officer and Chief Financial Officer

Meg, it's John. So we are not breaking out any of our individual products, so we are not going to be able to break out Letairis specifically for the course of the year. It is within the full guidance range that we gave you of $4.7 billion to $4.8 billion for all our product revenues. The R&D guidance for the year is $610 million to $630 million for the full year.

Margaret Malloy - Goldman Sachs

Thanks, I will get back in queue. Thanks.

Operator

Our next question comes from the line of Mike King with Rodman & Renshaw. Go ahead.

Michael King - Rodman & Renshaw

Thanks for taking my question and congratulations on an outstanding year. Just wanted to maybe understand Atripla a little bit better, so if I can do a two part question. First is, you seem like you have gotten the most you are going to get as far as the step function of new patients at this therapy based on the new testing, the dropping of consent laws, I wondered if you guys could also look out longer term and talk about the new NNRTI class, Etravirine and TMC278 and how you look at those competitively and how it might impact the Atripla franchise?

Kevin Young - Executive Vice President of Commercial Operations

So, Mike, with regard to the step function you are describing, I think what you are saying is that we've done a lot of work to try to push more patients into care and has that actually been completed. And the fact that it's very, very early in that stage of the development of bringing new patients into care. And I think also we're getting 80% of those new starts. Certainly we're not satisfied with 80% of those patients but obviously bringing more patients into care benefits us greatly. So we'll continue to work with public health officials, government officials and thought leaders in the industry to increase testing, to increase awareness to try to take that 25% of patients who don't know they have HIV and help them figure out that they have a disease that they can spread quite readily.

The second portion is with regard to the new Tibotec compounds, etravirine which just came to market at 278. I guess it's fair to say that etravirine as a solid agent is going to be used in combination with other products. I don't see that as being competitive with Atripla that was the specific question because it's... really it's excluded from treatment-naive patients. And as a twice a day product I don't think it has much of a use in those patients. It could potentially be competitive with Viramune I would say.

With 278, 278 from what we understand, from what's out there, there are some issues with 278. And it's going to take longer to develop and maybe at a lower dose than was previously thought. So we're going to standby and watch and see how that product profile evolves over time but it's clearly going to be delayed more significantly than people had thought even maybe 6 months ago. So I don't see a huge competitive out there at the moment.

John C. Martin, PhD - President and Chief Executive Officer

Yes I'll just add to that Mike. You've seen in this quarter, the data of Q3 data that now Atripla has taken over in terms of the naïve patients of 55%. So it's now moved from Truvada to Atripla. And so I think that's a very strong position and shows the importance of having a one tablet once a today regimen for compliance and avoidance of resistance. So, I think it's a very strong position to be in and shows the importance of having that as a once-a-day regimen.

John F. Milligan, PhD - Chief Operating Officer and Chief Financial Officer

And Mike if I just... may add something else as well. From a clinical perspective, Atripla I think establishes a very high hurdle bar for other compounds to come in because of the tolerability and safety of the regimen and the single pill once daily and also the long-term data as you know we have now clinical data. We have extended our 903 study to 10 years. So in two years from now we'll have 10 years of clinical safety and efficacy data on this particular regimen. That's a very high hurdle bar for future compounds to overcome.

Michael King - Rodman & Renshaw

Great, thanks for the color.

Operator

Our next question comes from the line of Thomas Wei with Piper Jaffray. Go ahead.

Thomas Wei - Piper Jaffray

Hi, thanks very much. I had a question on the HIV drugs and then one on Letairis. For the HIV trends in U.S. they were little bit light relative to what we might have expected from some of the prescription data sources. Can you help us understand if there were any other factors on changes within the pre-specified wholesaler ranges, wholesaler inventory ranges or on non-retail sales during the quarter? And then on Letairis, the 15 million number for the fourth quarter seems a little bit low relative to the metrics that you had provided on the last call. And some of the extrapolations that we were all doing. Are you seeing good expansion among the original 450 docs you had who you had last quarter? Or is most of the growth there just coming from some initial trialing among the new 350 docs that you added during the quarter? Thanks.

John F. Milligan, PhD - Chief Operating Officer and Chief Financial Officer

Tom, I will start with the HIV numbers. Yes we did see pretty significant drawdown of our inventory within our U.S. wholesalers. So it went from on the higher end of the range to fairly low, still within the contractual band. We saw that about all the HIV products and also fairly pronounced in Hepsera as well. So that was one of the reasons there was a slight disconnect. Outside of the retail market, the non-retail segment was fairly stronger during the course of the quarter. So I think most of the... as you put it lightness will be due to the drawdown in the inventory.

John C. Martin, PhD - President and Chief Executive Officer

HiTom, on Letairis as you have seen we moved from 450 prescribers up to 800. So I think that's a fairly significant increase in physicians who at least try Letairis in one patient. So I think that's very encouraging. Whilst we are not including it in numbers for competitive reasons, yes we did see an increase in some of the larger prescribers, so there is that increase going on. And I think as I said we are seeing prescribing in the four main buckets. And what I would also add is I am encouraged by seeing those early patients who are not doing one on the centum. I think that's an encouraging sign for the positioning of Letairis going forward.

I think what we are also hearing is I think the interaction between sildenafil on the centum if you look closely at the sildenafil label and you see how the per centum affects the dosing of Revatio sildenafil. I think not to have that interaction is a very positive profile for Letairis is now coming through.

Operator

[Operator Instructions]. Our next question comes from the line of Mark Schoenebaum with Bear Stearns. Go ahead

Mark Schoenebaum - Bear Stearns

Hey guys, thanks for taking the question and add my congratulations. I will ask a question I know you won't answer but my job is to do it. It looks like your product sales guidance is $100 million to $200 million above the street. I know you won't break it down but can... I don't know John if you could help us at all when we were building their models where the difference may be... your entire projections versus the street. So we'll be looking at HIV. Is that early the message here? And if you won't answer that, I've got another question?

John F. Milligan, PhD - Chief Operating Officer and Chief Financial Officer

That is a very complicated question we need to answer if I could. The street consensus has a wide variety of models that's feed into it. So there are people with different opinions for different products. I think if you think about as for the next year there is a lot to think about with regard HIV growth particularly in Europe. As Kevin mentioned earlier because we are so much early in the launch of Atripla in Europe than we are in the Untied Sates. It's really almost as if we were two years back there because we were 55% of patients. So there is a good opportunity there. We do have good opportunity across all our product lines, obviously with Viread launching late in the year for HPV. We are not including that product guidance, and we are certainly not at the point where we can give any guidance on the street now. So there's bit of pieces that are missing there, but unfortunately Mark I can't give you any greater color on that, but thank you for the nice thought.

Mark Schoenebaum - Bear Stearns

No that's fair, that was colorful now. I appreciate it. And a follow-up on that is, I am thinking about the European lunch for Atripla how should we think about that modeling it over the year. I know you're not going to give portions of guidance obviously. But can you walk us through kind of key milestones or again happen over the year with regards to reimbursement etcetera things like that?

Kevin Young - Executive Vice President of Commercial Operations

Hi Mark, this is Kevin. Well good new is we have already shipped out products in three first markets. Actually this week we just got some really good news for the UK and the London consortium which is basically approximately 65% of your HIV business in the UK, just listed Atripla at the pricing that we wanted which is our target of one plus one. So that now allows London hospitals to begin their usage of Atripla, so that was a very nice milestone for us.

In terms of the rest of the markets and we are particularly, obviously concerned about France, Spain, Italy. We think it will be approximately about an nine-month rollout in terms of pricing and reimbursements. Again our target is one-plus-one pricing, and we think we can get that in about three quarters of the year which would be a little bit under what we achieved with the Truvada. So our expectation is certainly during 2008 we'll have all the Big 5 and hopefully one or two additional countries like Portugal that make nice additions to our European sales.

Mark Schoenebaum - Bear Stearns

So prior to the three quarters from now will be there be meaningful sales in France, Spain and Italy?

Kevin Young - Executive Vice President of Commercial Operations

I think the meaningful sales in those three markets will start to happen towards the end of the year more like the fourth quarter.

Mark Schoenebaum - Bear Stearns

Okay, great. Thanks a lot, I appreciate it.

Operator

Our next question comes from the line of Geoffrey Porges with Sanford Bernstein. Go ahead.

Geoffrey Porges - Sanford Bernstein

Thanks very much. Couple of questions quickly on HIV, Kevin, you mentioned that 64% of treated patients are now on some sorts of tenofovir-based regimens. And could you confirm that? But also give us a sense of... what do you think, there must be a maximum for what I can get to and what do you think that is? Because obviously at some point patients are going to be resistant to tenofovir and going to other medications. And could you give us a sense of what the comparable number is today in the EU and where that might go to? And then I just wanted to ask about the integration here with it John you mentioned quickly about the Elvitegravir Phase III trial. Could you give us a little bit more detail about the dose retronavir boosting and then compare that on the patient population because I think that that would be useful.

Kevin Young - Executive Vice President of Commercial Operations

Jeff, I may not answer in the right order. If you take Europe we've now got 40% of all patients on Truvada. I'm not quite sure but we can follow up on total tenofovir for you. The other thing I would pull out with Europe is that we've now achieved 60% of new patients now if I compare that to where we were going to launch of Atripla, and we are one quarter behind that in terms of data for Europe. The U.S. was at 66% Truvada naïve patients. So you can see we have virtually got to the same basis of launch of Atripla in Europe that we had for the launch in the U.S.

In terms of how much farther we can go and I think the same comment applies to both U.S. and Europe. We still think we can go further. We believe we've got the preferred product in Atripla, and obviously we double detail with Truvada. What's also very encouraging is that if the patient comes off Atripla 85% to 90% of the time they are going to Truvada-based regimen with a PI. So we think we are in a very strong position. So I just left national sales meeting Monday, Tuesday. I can tell you our expectation is to continue that growth.

Geoffrey Porges - Sanford Bernstein

So, could that 64% be 80% or 90% or...?

Kevin Young - Executive Vice President of Commercial Operations

Difficult to put a number, but we certainly still consider this growth Jeff.

John F. Milligan, PhD - Chief Operating Officer and Chief Financial Officer

Kevin if I may answer the question about Elvitegravir quickly so it's two studies of identical design. One is primarily being carried out in the U.S., one in Europe. Each study will have three arms of our 240 patients per arm, and they are randomized one to one to one to two doses of Elvitegravir, so either 150 to 300 milligrams. And the control arm is where Elvitegravir [ph] we write the commercial dose. You are correct Elvitegravir has to be given with retonovir boosted and the way we deal with this in the protocol is we require patients to be on the boosted protease inhibitors. So that will take care of the boosting. And we have confirmed that in numerous drug interaction studies that we have carried out over the last two years or so. And then the endpoint is fairly simple, it's the proportion of patients that are below 50 copies per mill week 48. It's a non-inferiority design with a delta of 10%.

Kevin Young - Executive Vice President of Commercial Operations

And Jeff, back to me. I just took out a number for you. We have achieved just over 50% share for the tenofovir molecule in the big five markets and right now very, very close. And I'll expect to cross 3GC very, very soon. So it's very, very close to becoming the leading molecule.

Operator

Our next question comes from the line of Yaron Werber with Citi. Go ahead.

Yaron Werber - Citigroup

Yes hi, thanks for taking my question and congrats again on good performance. John I'll stick to the one question rule. It's a really quick question. I am not sure you can answer this, but relating to Tamiflu can you give us a little bit of a sense as to what are you... I know you can't give us guidance but what are you seeing at the year ahead on Tamiflu? And then as presumably stockpiling demands rise up how do you look at that drop in royalty revenues as kind of a markers to how much you are willing to spend on your expense line? So another way of asking that are you managing your expenses as a percentage of product sales? And so the contract revenues might not impact you as much as, I'm just trying to understand how you think about your expense structure. Thanks.

John C. Martin, PhD - President and Chief Executive Officer

Yes that's a good question Yaron. So we don't have any... we don't know what Roche's numbers are. So we can't give you even any body language into what will happen next week. We have been saying somewhat nickel and what they have been saying is that we expect those pandemic orders to be down substantially year-over-year without having a definition of what substantially means and recognizing that it's fairly fluid product category because birth [ph] showing up at different parts of the world can have it back to or not if and when it happens over the course of the year. But we do expect it to be down substantially year-over-year.

Roche will not give product guidance for seasonal prophylaxis used of individuals so that won't be part of their guidance. And again we are not sure what that's going to play out. But I did want to in advance say a couple of things. They said most of the orders that they have were mostly sold in 2007. So it didn't sound like there were lot of orders that were left to be sold in 2008. I don't know what the magnitude of those orders are. Also it's about the seasonal issue we were just alerted that there is heightened flu throughout Europe. We don't know if that's going to be in Roche's sales. It has been fairly a fairly mild season in the US as well. So again a lot of things where we can't say much more than that. Because that's about all we know about how the product is going to behave during the course of the year.

And then the second part of your one question was about the how we manage the business and it really relates to percentages of product sales, around product sales. Because that's the only way you really can manage the business since Tamiflu is completely out of our hand at this point in time. So that's how we are looking at it. We do manage it very efficiently. So there is not a lot that you could do up or down, certainly down to decrease expenses given all the exciting things we have to work on.

Operator

Our next question comes from line of Geoff Meacham with J.P. Morgan, go ahead.

Geoffrey Meacham - J.P. Morgan

Hi guys, congrats on a good quarter and I wanted to ask you an 8-part single question, if that's okay.

John C. Martin, PhD - President and Chief Executive Officer

Go ahead Geoff.

Geoffrey Meacham - J.P. Morgan

A question on gross margin. Atripla is now accounting for in '07 roughly 20% of revenues, yet your margin from '06 to '07 is only down 300 basis points. What can you tell us about that? It's... why it's been better performing? Is it a better contribution from for instance Truvada doing better, better market growth and then any extrapolation of those answers looking to 2008?

John C. Martin, PhD - President and Chief Executive Officer

So why the gross margin better than you would predict. I think there is a couple of answers in there one of the which of course lies on currencies, the effect of prices in dollars as many of our prices have gone out. So, that helped us somewhat. We have also worked very hard on initiatives behind the scenes to lower our manufacturing costs, so trying to drive down our API costs including differing outsourcing strategies bringing in different contractors to lower our raw material costs. And importantly moving on the profits itself, so we had a lot of people just trying to improve the efficiency of manufacturing by getting more out retraction that we are on. And that's actually been quiet successful. So across our product mix we have been doing that that's really helped offset some of the decreases that would otherwise occur with Atripla. It's really those two reasons.

Operator

Our next question comes from line of William Ho with Banc of America Securities, go ahead.

William Ho - Banc of America Securities

Hi guys, quick question with respect to the market for PAH and Letairis or ambrisentan. Actelion had just reported I guess roughly 16% growth of bosentan or Tracleer. Can you describe a little bit as to what you are thinking is occurring in that market? Where are we getting like both in new products and theirs from and how do you think that will progress?

John F. Milligan, PhD - Chief Operating Officer and Chief Financial Officer

Obviously it's difficult for us to talk about the competitive sales. I mean, they did drop by 10% in the third quarter and backed up 16%. So how you interpret that? I... that's probably how we best select for Actelion. I think the good news is with the noise from both companies and additions from people like United Health that there is a lot of noise out there. And the very fact that we've increased the prescriber base by almost 80% over the quarter, I think is an indication that the bigger group of physicians outside the big period centers that are aware of PAH, many of them largely are referring to the big centers. And we certainly support that. Our educational efforts are very much targeted to the opinion leaders with their large centers, and many of them rely on these networks. And we fully support that as specialist. So, I think to the fact that you got a lot of education in the area and a lot of commotion in the area is making the ability to pick up PAH higher among some of physicians who see PAH in the first instance.

Operator

Our next question comes from the line of Mark Aberman with Credit Suisse, go ahead.

Michael Aberman - Credit Suisse

Actually it's Michael but thank you for taking the call. I guess I am going to ask a question on 9190. Can you give us... can you remind us again, what the doses that you use already, what efficacy you saw in that Phase I trial? And then can you give us more color as to the de novo second change in QT at the 40 and the 120 that give you comfort that the QT prolongation will be manageable? And I mean I guess... and with that what typical marks the flux and control QTC?

Kevin Young - Executive Vice President of Commercial Operations

So Michael just a quick update, we can also call you afterwards if you want more details about this. But we tested in the original study, our current study the 40 and 120 milligram BID dose at both doses we saw significant and fairly large reductions in each CVR naïve. They range from about 0.5 logs to 2 logs depending on what you look at is 1A genotype 1A or 1B is differed somewhat. And we don't really have enough patients in either growth to definitively say what the viral load reduction was.

Now we did observe and confirm at the 120 milligram dose definitively QTC effect at a 40 milligram dose we saw the effect was still there. But we have now consulted a number of cardiologists and their consensus opinion was that this was definitely a clinically manageable issue. And we now are in the process of reinitiating dosing in this study and of course what we have to do first is talk to regulatory authorities what they think about this.

The QTC effect was less than 10 milliseconds. As you know also with only a smaller number of patients it's really difficult to say what exactly the effect was and it's also complicated by the fact that there were a number of different corrections that you can do for heart beat and all those corrections give you a slightly different number. But again the overall message is that the effect that we see is clinically manageable, and we are confident that we can move forward with the program.

Operator

Our next question comes from the line of Sapna Srivastava with Morgan Stanley. Go ahead.

Sapna Srivastava - Morgan Stanley

Hi, two very quick questions. One is on the inventory ranges there, you mentioned that it was at the low end of your contracted range. Is there normally a progression to the mean? Does it... do we expect it to come back on the mean levels over the next quarter? And secondly just of the Letairis combination trials, can you give some timelines as to when we can actually start looking at some data?

John C. Martin, PhD - President and Chief Executive Officer

So Sapna, yes things to tend to regress towards the mean. And we were a little bit on the high side. It came down farther than we would have predicted based on the historical way the things fluctuate, but came down to a very low-end. So that's not the worst thing that all to happen towards at the end of the year. So I was unhappy with it. My expectation is that it will probably slowly regress towards the midline of that. But I can't say for sure that that will happen. Because it's difficult for us to predict how wholesale to behave over the course of the years.

And I guess the second thing I'd say is that Letairis studies are designed to be initiate dosing in the second quarter or so. Depending on the enrolment I think I said it wouldn't be till next year that you will start to see data on that so 2009.

Operator

Our next question comes from the line of Joel Sendek with Lazard Capital Management. Go ahead.

Joel Sendek - Lazard Capital Markets

Hi, thanks. Lazard Capital Markets. I had a question about Viread and the patent claims and what that all means? And specifically what the next steps are in the process and what we should be looking for? Thanks.

Kevin Young - Executive Vice President of Commercial Operations

Thanks for asking that question Joe. So there was a press release that came out today from Powhatan [ph]. And I think if you read to that certainly it seems very misleading to me in terms of what has actually occurred with some exaggeration in there. So basically what happens is what thought what happened. Initially there were two patents which were rejected. There were two more that were potentially going to be rejected. We had, talking about that we expected that to happen. And in fact it did a couple of days ago. And so now this allows us to go back and so these are non final rejection. So that's important as for the initial ones. And this now allows us to go back in and submit more data back to the patent agency and to begin to work with them towards defending the claims that we think are fully valid.

Operator

Our next question comes from the line of Maged Shenouda with UBS. Go ahead.

Maged Shenouda - UBS

: Thanks for taking my question. Can you help us quantify the impact of the new treatment guidelines recommending treatment CD4 counts below 350?I mean is it appropriate to think of this as the bullish new patients coming on saying 2008, 2009 and then just kind of leveling off in terms of growth?

Kevin Young - Executive Vice President of Commercial Operations

It's actually quite difficult to sort of quantify, finding data around the number of patients of various CD4 counts, it's quite high. One of the data that we saw, we have looked specifically that so called ad-hoc patients, those with the AIDS some assistance programs. And about half of those patients presents at 350 or below. So it's a significant portion. Now ad-hoc patients make up about 27% of our overall patient group here in the U.S. But I think it's still the case that there are many patients 350 and below presenting both in the U.S. and in Europe. So I think it's going to be a big encouragement for physicians to begin prescribing earlier.

I think the opinion leaders in the major centers are already there. What really helps us with these guidelines from a promotional point of view and with a medical sciences in the filed is a... I think it's more of the general HIV physician who adheres more closely or is or takes their time in changing their practice with the patients staffs. And so I think it's going to very much help us with what we call the lower decile physicians to encourage them to be beginning antiretroviral therapy specifically Atripla, Truvada in that new patients.

Operator

Our next question comes from the line of Phil Nadeau with Cowen & Company. Go ahead.

Phil Nadeau - Cowen & Company

Good afternoon. Thanks for taking my question. My question is on the European market for your drugs. You mentioned that there is 250,000 or so patients in the big five European countries with HIV, but my reason where it has to adjust many times that in the not big five countries and in particularly in the countries in Eastern Europe. So, my question what can you do to access those markets, is it realistic to think over the next several years, you can have meaningful sales and non big five countries or is the reimbursement environment those non big five countries such that you have never really had meaningful sales there?

Kevin Young - Executive Vice President of Commercial Operations

I think it's a bit of both, it's clearly a lot of HIV in some of the Eastern block countries certainly in this the HIV in Russia is talked about like where we deal. Some of those countries have as you said lower pricing, poor reimbursements and just access to HIV therapy is more restricted. What worries it I think interesting Europe is to see some of the movements of population so there is HIV going into countries like Germany, particularly the UK right now from the economic migration of populations from the eastern side of Europe. So they then go into the healthcare system because they are employed people and therefore qualify for the national health systems and so we will increase the treatable population. So I think it will be slower in terms of uptake of our HIV therapies in Eastern European countries, we do operate right now largely through distributors, countries like Hungary, Poland, Czechoslovakia. We will be thinking about whether there comes a time to put Gilead as an affiliate into those countries. So we will thinking about that, but I think it's going to be little bit slower in those countries. But, they will in the long term get there and become I think a bigger proportion of our sales contribution.

Operator

Our next question comes from the line of Ian Somaiya with Thomas Weisel Partners. Go ahead.

Ian Somaiya - Thomas Weisel Partners

Thanks and let me add my congratulations on a great year. Just a question on the price increases that we saw for Atripla, Truvada and [indiscernible] January, whether wholesalers are giving an option to buying or have continued option to buy in related to those price increases?

Kevin Young - Executive Vice President of Commercial Operations

Hi Ian, its Kevin. Yes there is an option because that's part of our inventory, monies [ph] and agreements that we have with four major wholesalers. So that is standard calculation. As you know we have put those in place a few years ago and so that's kind of a standard calculation. That's also one of the reasons that we typically tried to announce a price change early in the quarter to allow that increase to when move down during the quarter. So that's the reason that those price increases came in Jan, the 1st.

Ian Somaiya - Thomas Weisel Partners

Okay and just a related question was can you quantify the dollar impact of the inventory draw down in the fourth quarter?

Kevin Young - Executive Vice President of Commercial Operations

Ian, we are not going to disclose the dollar impact of that.

Operator

Ladies and gentlemen, that does conclude the time we have for questions. Miss Hubbard, I'll turn it back over to you.

Susan Hubbard - Vice President of Investor Relations

Great, thank you operator. Thank you all for joining us today. We appreciate your continuing interest in Gilead and look forward as always to providing update on our future progress.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect, have a wonderful day.

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Source: Gilead Sciences, Inc. Q4 2007 Earnings Call Transcript
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