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Gilead Sciences, Inc. (NASDAQ:GILD)
Q1 2018 Earnings Conference Call
May. 1, 2018, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentleman, thank you for standing by and welcome to the Gilead Sciences first quarter 2018 earnings conference call. My name is Candace, and I'll be your conference operator today. At this time all participants are in a listen-only mode, and as a reminder, this conference call is being recorded. I will now turn the call over to Sung Lee, Vice President of Investor Relations. Please go ahead.

Sung LeeVice President of Investor Relations

Thank you, Candace, and good afternoon, everyone. Just after market closed today we issued a press release with earnings results for first quarter 2018. The press release and detailed slides are available on the investor relations section of the Gilead website. The speakers on today's call will be John Milligan, President and Chief Executive Officer, John McHutchison, Chief Scientific Officer and Head of Research and Development, and Robin Washington, Executive Vice President and Chief Financial Officer. Also in the room with us for the Q&A session is Andrew Cheng, Chief Medical Officer and Executive Vice President.

Before we begin with our prepared comments, let me remind you that we will be making forward-looking statements, including plans and expectations with respect to products, product candidates, financial projections, and the use of capital, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ materially from these statements. A description of these risks can be found in the latest SCC disclosure documents and recent press releases. In addition, Gilead does not undertake any obligation to update any forward-looking statements made during this call.

Non-GAAP financial measures will be used to help you understand the company's underlying business performance. The GAAP to non-GAAP reconciliations are provided in the earnings press release, as well as on the Gilead website. I will now turn the call over to John Milligan.

John Milligan -- President and Chief Executive Officer

Thank you, Sung, and thank you, everyone, for joining us today. I would like to start by introducing John McHutchison and Andrew Cheng in their new roles. As you know, Norbert made the decision earlier this year to step down from his position as chief scientific officer. I've worked along Norbert for 27 years, and on behalf of the entire Gilead organization, I would like to express my profound thanks to him for his many, many contributions. In terms of succession, Gilead is fortunate to have strong leaders across our R&D organization who will build on the tremendous success that we've had for over three decades. I look forward to the leadership of John in his new role as chief scientific officer and head of R&D, and Andrew in his new role as chief medical officer as we continue our work to invent and develop new products for patients in need.

Turning to the business and results of the quarter, we continue to see strong growth in our HIV business, driven by broad acceptance and uptake of our Descovy-based regimens. We are confident that this franchise will remain a key growth driver for the company moving forward. One of the products contributing to the growth is our latest Descovy-based single-tablet regimen Biktarvy, formerly referred to as Bic/F/Taf, which was approved in February by the US Food and Drug Administration for the treatment of HIV. In March Biktarvy was added to the US DHHS guidelines for the use of antiretroviral agents in adults and adolescents living with HIV as one of the recommended initial regimens. Last week we announced that the CHMP has adopted a positive opinion on the marketing authorization application for Biktarvy in the EU. We expect approval in the third quarter of this year.

Biktarvy represents Gilead's sixth single-tablet regimen, and with the approval of Symtuza in the EU by our partner Jansen, the fourth containing Descovy backbone. Symtuza is currently under FDA review in the US. Biktarvy is a combination of an unboosted integrated inhibitor and the well-established backbone Descovy. Its small size, minimal drug interactions, and established renal and bone safety profile make Biktarvy an important treatment option for most HIV patients. This is particularly true for an aging HIV population, which is at increased risk for AIDS-related morbidities.

In February at Croix, the conference on retroviruses and opportunistic infections, one of the most important meetings for HIV research, we had the opportunity to share our progress on the work we are doing to bring innovative therapies to people living with HIV. Gilead's compounds were featured in 21 abstracts and data presentations, including promising preclinical results from HIV cure research program. These data show that the combination of two investigational agents, Gs-9620, a toll-like receptor seven agonist, and PGT-121, a broadly neutralizing antibody that binds to the HIV envelope, induces viral remission in the absence of antiviral therapy in SIV-infected monkeys and supports clinical investigation of such combination strategies.

Investigators also presented phase 3 data in patients switching from a regimen containing a abacavir, dolutegravir, and lamivudine to Biktarvy, and data from a multinational phase 3 study of Biktarvy in women, a group that is often underrepresented in clinical trials. Data from these studies further demonstrate that Biktarvy may be appropriate for a wide range of people living with HIV. The data presented at Croix represented encouraging progress and demonstrated our continued leadership in driving innovation in HIV therapy.

Moving to liver disease, our team recently attended the International Liver Congress in Paris, where there's a lot of emerging data around NASH and hepatitis-B. The particular focus on NASH was very much like what we saw with the early breakthroughs in hepatitis-C before the disease took center stage at the conference. John will share more specifics about EASL and the data presented there in a few minutes.

In oncology, we're encouraged by the response from the healthcare provider and patient communities to the lifesaving for Yescarta and people with aggressive large B-cell lymphoma who have run out of options. We are seeing an increase in patient enrollment as clinical experience with Yescarta steadily grows and additional authorized cancer centers with expanded geographic reach come online. We have now completed the authorization of 40 cancer centers and are on track to have enough centers certified to treat 80% of Yescarta-eligible patients in the United States by the middle of the year.

The future's incredibly bright for cellular therapy, and we're excited to be at the forefront of the field, pursuing a variety of approaches to develop the next generation of cellular therapy in blood cancers and solid tumors.

As I look ahead to the remainder of 2018, we will continue to advance scientific innovation, including progressing our robust pipeline, which has the potential to transform the treatment of NASH, inflammatory diseases, and certain cancers. In addition, we'll look for business development opportunities to add to our pipeline and capabilities across our therapeutic areas, diversify our portfolio, and increase future opportunities for growth.

For example, earlier in the quarter we announced an agreement with Sangamo on gene editing to create next-generation cellular therapies, and just yesterday we announced another with Verily to better understand the immune system of patients and our clinical studies with Filgotinib. John McHutchison will provide more details on these collaborations.

I'm confident that our innovation and hard work will deliver on our goal of developing new treatments for people living with some of the world's most serious diseases. And, finally, tomorrow we will publish our 2017 year in review that highlights our scientific advancements, sustainability initiatives, community support programs, and our continued efforts to improve public health globally. I'm proud of the work that's being led by our employees and extend my many thanks to them for all the ways they are making a difference around the world. I will now turn the call over to John, who will provide additional updates on our R&D efforts. John.

John McHutchison -- Chief Science Officer and Executive Vice President

Thank you, John. I'm honored to have the opportunity to lead our R&D organization, which has been at the forefront of scientific innovation for more than 30 years. Under Norbert's leadership, Gilead has brought forward 25 innovative treatments that have improved the lives of millions of people with serious diseases around the world. I am confident that our team will build on these remarkable accomplishments.

I'd like to spend the next few minutes detailing our recent progress in liver diseases, inflammation, and cell therapy, beginning with liver disease. We continue to make excellent progress in NASH, where our efforts are focused on treating patients with the most serious forms of the disease, those with advanced fibrosis, who are at the highest risk to progress to end-stage liver disease, liver cancer, and ultimately the need for liver transplantation. As we recently announced, Stella-3 and Stella-4, our two ongoing phase 3 trials, completed enrollment ahead of schedule. Both studies are evaluating Selonsertib, our S1 inhibitor in patients with F3 and F4 stages of fibrosis. We now expect data from both phase 3 studies in the first half of 2019. If the data support the safety and a statistically significant and clinically meaningful effect on fibrosis, we could file for regulatory approval toward the end of 2019.

In addition, we are exploring combination therapy approaches with compounds with distinctly different mechanisms of action. In animal models of NASH, combination approaches have proven safe and have led to greater antifibrotic responses compared to monotherapy. As John mentioned, at the International Liver Congress in Paris last month, there was a growing interest and focus on NASH. We had the opportunity to present promising early results from a proof of concept study exploring both single-agent and combinations of Selonsertib with Gilead's ACC inhibitor Gs-0976 or our FXR agonist Gs-9674, in patients with NASH. Now the primary objective of this study was to determine the safety of the combination therapy. Based on the 12-week study, our combination therapies were well-tolerated, and they offered additional benefits for improving NASH by reducing liver fat content, liver cell injury, and other markers of fibrosis. This is also the first study to show the GS-9674 alone had activity in patients with NASH.

Based on these encouraging data and supported by the preclinical results, Gilead has initiated a larger 350-patient phase 2b study of combinations of Selonsertib, GS-0976, and GS-9674 in patients with advanced fibrosis due to NASH. The treatment duration will be 48 weeks with liver biopsies before and at the end of the treatment period.

Another goal of our NASH program is to identify accurate non-invasive tests that will hopefully allow healthcare providers to identify those in need of treatment. At the recent Liver Congress, we presented data using two different machine-learning methods on our earlier NASH studies. The results indicate that non-invasive tests can predict, with a high degree of specificity and sensitivity, the risk of clinical disease progression and separately improvement in liver histology. We will continue to investigate non-invasive tests, with the goal of replacing liver biopsies for the diagnosis of NASH and for patient management.

Moving to inflammation, I'm pleased to share that our three phase 3 studies of Filgotinib, a JAK1-specific inhibitor, in patients with rheumatoid arthritis, FINCH 1, FINCH 2, and FINCH 3, are now fully enrolled. These studies are evaluating the efficacy and safety of Filgotinib in biologic inadequate responder patients, methotrexate inadequate responder patients, and treatment naïve patients respectively. We expect the FINCH 2 data will be available in the second half of this year, and FINCH 1 and FINCH 3 data will be available in the first half of 2019.

Filgotinib is also being investigated in two other phase 3 studies in Crohn's disease and ulcerative colitis that will enroll more than 2,500 patients, and also in a number of smaller phase 2 studies of colitis, cutaneous lupus, Chagrin's syndrome, and uveitis. We expect to have data available from some of those phase 2 studies during this year.

Also yesterday, as John said, we announced an important scientific collaboration with Verily, the life sciences unit owned by Google's parent company Alphabet. To accelerate our understanding of three common and serious inflammatory diseases: rheumatoid arthritis, inflammatory valve disease, and lupus-related diseases. Most patients with these immunologically driven diseases don't experience deep or long-lasting remissions with currently available therapies. There's clearly a need. Through this partnership, we will use Verily's immunoscape platform to interrogate the molecular characteristics of these immune-related diseases. By segmenting each patient's individual leukocytes into more than two dozen component immune cell subsets and utilizing epigenetic and transcriptomic assays, we believe this technology could allow us to identify particular groups of patients that respond to specific therapies and also to potentially identify new drug discovery targets.

Moving to cell therapy, we anticipate that the CHMP will adopt an opinion for Yescarta in the second quarter, and, if positive, approval would follow likely in the third quarter of this year. Given the innovative nature of CAR T therapies, the European Medicines Agency is evaluating the application under standard review to allow them sufficient time to review that data that we submitted with the application.

Also in cell therapy, we continue to enroll patients in Zuma 7, a phase 3 randomized study comparing Yescarta to the standard of care, which is salvage chemotherapy followed by autologous stem cell transplantation in the second line treatment of patients with diffuse large B-cell lymphoma. Zuma 7 is also the first global randomized phase 3 study of a CAR T therapy and will enroll 350 patients across 50 sites in North America and Europe. There remains a significant unmet medical need for patients with relapsed or refractory DLBCL after first-line therapy. Salvaged chemotherapy followed by transplantation cures only approximately 10-20% of these patients. If the Zuma 7 trial provides positive data in this setting, Yescarta has the potential to become an alternative option earlier in the course of the disease, thereby expanding the therapeutic potential of cell therapy for patients living with diffuse large B-cell lymphoma.

We are also excited about our partnership with Sangamo Therapeutics, which was announced in February. This agreement will allow our researchers access to Sangamo's zinc finger nucleases gene editing technology, which we believe will lead to the development of allogeneic T-cell therapies that could be manifested using the cells of healthy donors. The gene editing approach would reduce or eliminate some of the complications currently seen in allogeneic stem cell transplants such as rejection and graft-versus-host disease. Allogeneic therapies would also enable us to manufacture CAR T therapy that could be used universally, providing people, particularly those who are very, very ill, to access treatment much more quickly.

Combining gene editing with the synthetic biology tools we acquired with Cell Design Laboratories last year will also help us develop treatment that can more precisely target hematological malignancies and solid tumors, and may prove safer, more effective, and easier to manufacture.

We have achieved a great deal across our R&D organization this quarter, and I am confident we will continue to make significant progress throughout the remainder of the year. I am excited to lead the talented Gilead R&D team going forward. I am also looking forward to partnering with Andrew Cheng in his new role, and of course with all my R&D colleagues. There has never been a more interesting time in science and medicine, with extraordinary new discoveries on an almost weekly basis. It will be our job here to leverage those advances and develop more effective and targeted therapies for patients with serious medical needs.

I'll now turn the call over to Robin.

Robin L. Washington -- Chief Financial Officer

Thank you, John, and good afternoon, everyone. We are pleased to share our financial results for the first quarter of 2018. Total revenues for the first quarter were $5.1 billion, with non-GAAP diluted earnings per share of $1.48. This compares to revenues of $6.5 billion, and non-GAAP earnings per share of $2.23 for the same period last year.

Starting with HIV and HBD, product sales for the first quarter were $3.3 billion, up 2% year-over-year and down 10% sequentially. The year-over-year increase was driven by the continued uptake of our Descovy-based regimens, partially offset by the entry of generics and greater UF inventory drawdown than in the prior year period. Sequentially the decline was due to UF sub-wholesaler inventory, reflective of the seasonal pattern from the fourth quarter to the first quarter, and the availability of generic version of PDF in the US, which impacted our HBD revenue.

Our US HIV business remains robust, led by the continued uptake of Descovy-based regimen. On a year-over-year basis, US HIV product sales grew 8% and total prescriptions for Descovy-based and Truvada-containing regimens grew 12%, consistent with growth seen in each of the preceding four quarters.

As John mentioned, Biktarvy, our newest single-tablet regimen for HIV, was approved in the US in February, and we are encouraged by the initial uptake among describers. It's very early days, but launch to date Biktarvy is tracking very well against our expectations. With this trajectory, we anticipate over time Biktarvy will become the No. 1 single-tablet regimen for treatment naïve and switch patients, a distinction currently held by Genvoya. Approximately 80% of Biktarvy's prescriptions came from switches, of which approximately one third came from Genvoya and two-thirds from other regimens, including approximately 20% from regimens that contain dolutegravir, confirming Biktarvy's broad utility across patient types. Similar to the launch, Biktarvy has been strong, with the vast majority of state aid ops and Medicaid programs now covering Biktarvy, with coverage in additional state program expected this quarter.

Truvada-4 prep continued to grow, with approximately 167,000 individuals taking Truvada for this indication in Q1. In Europe, sale of Descovy-based regimens comprised more than half of our HIV product revenues and continue to grow, primarily driven by strong uptake in important markets such as France and Italy. Genvoya remained the No. 1 regimen for naïve and switch patients across the EU-5 collectively for the fourth consecutive quarter, reflective of the strong physician and patient preference for Descovy-based regimens.

Turning to HCV, product sales for the first quarter were $1 billion, down 59% year-over-year and down 30% sequentially. Consistent with our expectation, in Q1 we observed a downward pricing and market share trend across the major geographies as a result of a more competitive environment. Price has now largely stabilized, and we expect market share to stabilize by midyear. In addition, patient starts have become more predictable, and we expect a slow and steady decline moving forward. We continue to see the HCV market as durable and albeit a smaller component of our revenues going forward. There are still many patients that remain to be treated.

Our cardiovascular products, Ranexa and Letairis, generate at $399 million in the first quarter. As a reminder, the patent for ambrisentan in the US will expire in July this year.

And finally, sales of Yescarta were $40 million in the first full quarter since approval in October. As John mentioned earlier, we are making great progress in training and certifying additional centers. In terms of access in the US, we are seeing the payer mix play out as expected with approximately two-thirds of Yescarta patients covered by commercial and fee-for-service plans, and approximately one-quarter of patients covered by Medicare. There is broad coverage of Yescarta-eligible patients with commercial insurance. It's encouraging to see the strong execution by our commercial medical affairs and manufacturing team, the positive feedback from centers, and the growing awareness of Yescarta in the hematology and patient communities.

Now turning to expenses. Non-GAAP R&D expenses were $814 million for the first quarter, down 8% compared to the same period last year, primarily due to our purchase of a priority-review voucher in the prior year. Non-GAAP SGNA expenses were $884 million for the first full quarter, up 10% compared to the same period last year, primarily due to cost associated with our newest product launches, including Biktarvy and Yescarta, geographic expansion, and increased expenses to support the growth of our business following the acquisition of Kite.

Moving to the balance sheet. During the first quarter, we generated cash flows from operations of $2.3 billion and ended the quarter with $32.1 billion in cash and investments. We repaid $4.5 billion of term loans, borrowed in connection with our acquisition of Kite, paid cash dividends of $753 million, and repurchased 13 million shares of stock for $1 billion. The amount of shares repurchased was aligned to our stock compensation awards, which are largely granted in the first quarter and reflects a one-time impact to repurchases related to unvested equity assumed from the Kite transaction.

While our cash flows will remain strong for the remainder of the year, we anticipate a sequential decrease in Q2 2018 due to anticipated tax-related payments. The year is progressing consistent with our expectations, and we are reiterating our full-year guidance, which can be found on slide 47 in the earnings results presentation. Our confidence in the future is supported by a strong and growing HIV business, led by the launch of Biktarvy in the US, increasing momentum in our cell therapy business, and potential opportunities in emerging R&D areas of NASH and inflammation.

I would like to conclude by thanking our nearly 10,000 employees for their commitment to excellence and hard work that is well represented in the results this quarter. Let's now open the call for questions. Operator?

Questions and Answers:

Operator

Thank you. Today's question and answer session will be conducted electronically. Anyone wishing to ask a question may signal us by firmly pressing the star key followed by the digit one on his or her touchtone telephone. We will call on you in the order that you signal us. If you find that your question has been asked, you may remove yourself from the roster by pressing the pound key. As a reminder, we will be taking a maximum of one question per person at a time. If you have further questions, you're welcome to rejoin the queue. We'll pause for just a moment to compile the Q&A roster.

And our first question comes from Geoffrey Porges of Leerink. Your line is now open.

Geoffrey Porges -- Leerink -- Director of Therapeutics Research, Managing Director

Thank you. Thank you very much and appreciate the question. John McHutchison, congratulations on all the responsibilities. Maybe we could start off with a commercial question. But more seriously, on the R&D side, could you give us the latest disclosure on the PE and DBT events you've seen So, far in the RA program for Filgotinib? And then perhaps you could talk a little bit more generally about what areas you are particularly excited about in your new position that you think the company has the opportunity to invest in more aggressively. Thanks

John McHutchison -- Chief Science Officer and Executive Vice President

Thank you, Geoff, for the kind words and for the question. So, regarding the first part of your question, the thromboembolic event rates with baricitinib, the most recent data that we have shown was a presentation at ACR late last year by Mark Genevieve, which was an oral presentation. Now, this is just from the DOW and one, two, and three extension studies, but we have about 1,700 patient years of exposure. But that rate was very low, only one patient in that presentation who had both a DVT and P, So, the rate actually in that presentation was 0.06 per hundred patient years. But, Geoff, you know, So, far, we've got thousands of patients in phase 3. We've got a relatively small data set in terms of exposure. But that's what we've said So, far. We continue to collect all of that information.

The other point to raise about this was the discussion recently of the advisory committee, and whether the slightly or partly related to JAK2 -- As you know, Filgotinib is very selective for JAK1, and in terms of JAK2 specificity we don't have that at all. So, we don't see any changes in hemoglobin. We see positive changes in hemoglobin. We don't see any increase in platelets. In fact, we see a small decrease in platelets. Whether or not that's related to thromboembolic phenomena, we don't know.

In terms of what we're excited about, or excited about in R&D, well, you know me, Geoff. I'm always excited about everything. But I mean the opportunity to make a huge progress in cell therapy, not just with Yescarta, which has enormous potential, but the future of cell therapy going forward. Investing in research as we have to come forward with next-generation products is really exciting for the organization, to lead that entire field, and we will continue to lead that and I will ensure that as will Andrew and others in the organization as well. Additionally, I think we have a lot of opportunities in NASH. The ability to have a drug approved for an anti-fibrotic endpoint in liver disease is -- It's never been done before, and we clearly want to do that, and there's a lot of patients out there with NASH. And then I believe our fledgling programs that are now developing in full force in inflammation, with Filgotinib in multiple diseases, are becoming differentiated, exciting, and heading in the right direction, particularly with things such as the Verily collaboration.

So, that's a long answer. I'm sorry, Geoff.

Operator

Thank you. And our next question comes from Geoff Meacham of Barclays. Your line is now open.

Geoff Meacham -- Barclays -- Managing Director, Senior Research Analyst

Afternoon, guys. Thanks for the question. So, the HIV franchise is really key to Gilead getting back to a growth company, So, I was hoping you guys could give a bit more detail on the underlying demand trends in the US and Europe, just independent of inventory fluctuations. I guess I'm trying to reconcile the 2% growth with maintaining guidance in the positive commentary. Thanks So, much.

Robin L. Washington -- Chief Financial Officer

So, I'm going to let Andrew start with just giving you really the underlying details around the Biktarvy launch, and then I'll kind of jump in with some of the revenue areas.

Andrew ChengChief Medical Officer and Executive Vice President

Geoff, it's Andrew. So, I just want to touch on and reiterate some of the things that Robin's mentioned during the call and her prepared remarks. Primarily that when we look at Biktarvy we see 80% of Biktarvy scrips come from switches. Of those switches, a third are from Genvoya, and about 20% come from dolutegravir-based regimens, both Tivicay and Triumeq. When we see the switches as well as the naïve patients' trajectory overall, they're right on target for what we predicted prior to the launch and really are in line for where we think Biktarvy will ultimately end up as the top switch as well as naïve drug in HIV, in a position that's currently occupied by Genvoya.

Robin L. Washington -- Chief Financial Officer

And, Geoff, I'd ask you that they keep in mind that the launch for Biktarvy, we basically got six weeks of revenue currently in the quarter. So, while a partial quarter, we also had about half of it was related to inventory. But underlying to your point, we're really excited with the overall launch of Biktarvy and the success to date. The launch trajectory is looking very close to Genvoya, and over time we expect it to overtake Genvoya, as I mentioned, as the No. 1 STR for naïve and switch patients over time. I think if you then turn and think about just Europe beyond Biktarvy, we're also seeing, as I mentioned, over 50% of our HIV sales came from Descovy-based products in Europe. And that's exceeding in advance of the fact that generics are widely available, So, to the point, I made on the call and John made, we're really excited with the opportunity for HIV to be a growth business. That's inclusive of prep, as well, but we're excited where we are for the year and for the opportunity to have this business be a growth trajectory for us beyond 2018.

Operator

Thank you. And our next question comes from Michael Yee of Jefferies. Your line is now open.

Michael Yee -- Jefferies -- Biotech Analyst

Hey, guys. Thanks for the question, as well. Two-part question. On HIV, can you just perhaps quantify how much inventory impacted the results? I think people are quite a bit concerned on the HIV numbers, So, maybe just help us out there relative to consensus. 100, 200 million or more of inventory. And on hep-C, there's a miss there, and I guess people are concerned about that relative to competition. So, maybe just talk to that, because you're reiterating the guidance. Thanks So, much.

Robin L. Washington -- Chief Financial Officer

Sure. So, Michael, let me start with HIV inventory. The drawdown in inventory was primarily from our HIV products, but as I mentioned, if you look at underlying US prescription growth overall it was 12% year-over-year and, as I mentioned, 50% of our HIV revenues in Europe were comprised of Descovy-containing regimens. So, while we haven't quantified the dollar magnitude, the drawdown was larger than what we have seen in past quarters. You know, typically, if you go back, the last eight quarters we've had that Q4 to Q1 dynamic relatively to inventory, So, it is seasonal.

There were two key events this quarter that made that inventory decline greater than expected. One was the availability of generic version PDF, So, therefore wholesalers weren't carrying Viread anymore. And then, two, the anticipation of the Biktarvy approval. So, lower stocking of both Taff and TDF-containing regimens. Keep in mind, if you look at year-on-year and quarter-on-quarter growth, the availability of generic version of PDF in the US impacted our HBD business.

Overall, if we think about our big three wholesalers, we were in line relative to our inventory agreements. I'll remind you that we don't have agreements in place for the sub-wholesalers. But again, just emphasizing that overall our underlying HIV growth remains strong, but we had the typical seasonal inventory driven by the two events that I just mentioned.

Andrew ChengChief Medical Officer and Executive Vice President

The second part was on HIV.

Robin L. Washington -- Chief Financial Officer

Yeah, So, to turn to your second question on HCV, which, the question...

Michael Yee -- Jefferies -- Biotech Analyst

Your competitive environment?

Robin L. Washington -- Chief Financial Officer

Yeah, the competitive environment. I mean, I would say if you step back and think about where we are relative to our guidance and our expectations, we reiterated guidance, it is pretty much playing out in line with our expectations. We talked about the fact of my comments that the US pricing has largely stabilized, and we expect market share to stabilize by midyear. I would say, Michael, that the XUS competition has intensified, but I'd also say that competition was more intense environment prior to the launch of a competitor and remains to be. So, we do believe that overall hep-C is a long and durable market. We'll continue to compete very aggressively with our competitor, but in summary, our expectations for 2018 are intact and we believe our revenue reflects the guidance that we provided at the beginning of the year.

Operator

Thank you. And our next question comes from Bryan Abrahams of RVC Capital Markets. Your line is now open.

Bryan Abrahams -- RVC Capital Markets -- Analyst

Hi. Thanks for taking my question, and my congrats to Norbert on all your accomplishments and to Andrew and John on your new roles and responsibilities. A question on Yescarta. As we try to gauge avenues of continued growth there this year and beyond, it would be helpful to understand the proportion of centers that are operating at high through-put and perhaps how far along in infrastructure establishment those additional centers that you expect will be authorized are going to be relative to those already online. And then I guess mostly I'm just curious on revenue recognition there relative to reimbursement, how we should be thinking about that. Thanks.

Robin L. Washington -- Chief Financial Officer

So, I'll start, Bryan. I would say you're right. It's early days, So, we're not going to get into through-put discussions or specifically what we're seeing at every center. We're really pleased with our full first-quarter revenue. We talked about this being a very measured launch with our focus being this year on getting centers authorized and being sure that their experience with Yescarta meets the expectation of the centers and the patients. So, I mentioned we have 40 centers authorized, and we expect by midyear that we'll have coverage for 80% of the eligible Yescarta patients if we continue to ramp up centers.

Relative to revenue recognition, no overall concerns there. We're seeing reimbursement overall for both commercial as well as Medicare patients. So, we're really comfortable where we are with the launch to date.

Operator

Thank you. And our next question comes from Matthew Harrison of Morgan Stanley. Your line is now open.

Matthew Harrison -- Morgan Stanley -- Analyst

Great. Good afternoon. Thanks for the question. I guess, one, with HCV price stabilizing, I wonder if you'd just give us some idea of where that's stabilized relative to some of the prior comments you've made around what the average price was across the regimens. And then, if I can ask a separate question for John McHutchison related to the UC program for Filgotinib, I believe you have a futility analysis to move from phase 2 to phase 3. Could you just talk a little bit about what the bar is and what the hurdle is to move into the phase 3 program and how you're thinking about that? Thanks.

Robin L. Washington -- Chief Financial Officer

So, I'll start, Matthew. I think the main change that you saw in Q1 in that stepdown, as we talked about on our February call, was related to Medicare in the US. So, as we mentioned this call and the prior, we expected that stepdown with the price adjustment as we move to the new contractual arrangements the beginning of the year.

John McHutchison -- Chief Science Officer and Executive Vice President

And, Matthew, the second part of the question, it's John McHutchison. The second part of the question was about the futility interim analysis for the selection for Filgotinib ulcerative colitis phase 3 study. Just to remind you the reason we did this futility analysis is we haven't studied Filgotinib in ulcerative colitis in phase 2. We had in Crohn's disease in the Fitzroy study, and we obviously had data in rheumatoid arthritis, but we had to have an interim analysis in the ulcerative colitis study to make sure that we were on track. And that analysis is planned, without getting into all the details, coming up shortly this year. It's based on the week 10 induction time point and the endoscopic response and improvement in endoscopic response in the two groups of patients that are enrolled in the trial, those that are naïve and those that are biologic non-responders. So, I'll leave it at that, I think, to answer the question, and we'll see how it goes.

Operator

Thank you. And our next question comes from Robyn Karnauskas of Citi. Your line is now open.

Robyn Karnauskas -- Citigroup -- Analyst

Hi, guys. Thank you for taking a question. So, just one quick question on HCV. You did not reiterate HCV guidance. I was just curious whether or not that's reiterated, as well. And then on Yescarta, just trying to understand a little bit about what you're seeing in the real world on safety given that it will be facing some competition. Are you seeing safety in line with your clinical trial work or side effects that are not as common? Thanks.

Robin L. Washington -- Chief Financial Officer

So, Robyn, I'll take the first question regarding guidance. We didn't give specific HCV guidance, but again, if you take a look at our revenues and you look at the components that we provided in our guidance overview last quarter, we're pretty much in line, and it's the high end of that guidance overall, with $1 billion-plus in global HCV revenues. And we did reiterate our total guidance, which is how we guided this year on total net product revenue.

Relative to safety on Yescarta...

John McHutchison -- Chief Science Officer and Executive Vice President

Robyn, it's John McHutchison. Hello. So, yes, I've been talking to some of the team members in Santa Monica over the last couple of days, and in general, there's nothing untoward that's been observed to my knowledge, as well. Outside of the clinical trial.

Operator

Thank you. And our next question comes from Umer Raffat of Evercore. Your line is now open.

Regina Grebla – Evercore ISI – Vice President, Pharmaceuticals and Biotech Research

Hi, this is Regina Grebla on for Umer. Thank you for taking our question. So, first, many investors think that you're in an earnings trough this year. Do you think you're in an earnings trough? And NASH is emerging as an important catalyst in your pipeline. We saw some data from Allergan at EASL where patients in their placebo arm seesawed between fibrosis stages. We do recognize that the Allergan study enrolled earlier fibrosis stage patients and UP3's, but how much of a risk do you think this could be in your phase 3 program? Thank you.

Robin L. Washington -- Chief Financial Officer

Hi, Regina. So, I'll start off. As I mentioned on the call, I think we're off to a great start. We've reiterated guidance, and the year is progressing in line with our expectations. We do believe that 2018 is a trough year for us on which we can grow. We'll have seasonality fluctuations from quarter to quarter, but we're very confident, hence reiterated our overall guidance for the year and expect to be able to grow off of our 2018 base going forward.

John McHutchison -- Chief Science Officer and Executive Vice President

Hi, Regina, it's John McHutchison. In terms of the second part of your question in relation to variability to placebo response rates, it is an issue with liver biopsy when we know there's a 30% variability if you have two pathologists read the same liver biopsy. Some of the presentations you referred to at ASLD may be partly reflecting that, So, it's an imperfect tool at best, but what we have in terms of drug approvals for NASH patients. We have had the fortunate opportunity of being able to address this. Our previous Symtuza med trials enrolled many hundreds of patients. Now the drug didn't work, unfortunately, but we have a lot of patients with two liver biopsies a long time apart. So, we are very, very confident of what we expect to see in F3 and F4 patients in terms of the placebo response rate, in terms of a fibrosis improvement score of one point with no worsening of NASH. So, we have that number. And that is what we've used to calculate our power and our sample size in our Stella-3 and Stella-4 programs.

Operator

Thank you. And our next question comes from Phil Nadu of Cohen. Your line is now open.

Phil Nadeau -- Cowen -- Managing Director and Senior Research Analyst

Good afternoon. Thanks for taking my question. Two follow-up questions on the commercial side. So, first, on HCV, just to maybe ask Robyn's question in a different way, on slide 35 of the slide deck you handed out on the last call, you did give a range for 2018 expected HCV sales with $3.5 to 4 billion, even if there wasn't formal guidance, and you said that the decrease versus the $9.1 billion from 2017 would be due to about a $1 billion hit from total market patient starts and $4.3 to 4.6 billion from the competitive environment. So, if you were going to redo that slide today, given what you've seen in Q1, would those numbers still hold? Would you still expect the same hit from market starts, competitive environment, leading to the same 2018 range?

And then just briefly on Biktarvy, I know you said that the access was good. We've heard from physician consultants that insurers are requiring power auths and other methods early in the launch of HIV products. What are you seeing in terms of prior auths from insurance plans for Biktarvy? Thanks.

Robin L. Washington -- Chief Financial Officer

Hi, Phil. So, I'll take the first part and then turn it over to Andrew for Biktarvy. So, yeah, looking at the slide that you referred to, and again I'll reiterate our HCV revenues for the quarter were $1 billion. If I think about what we talked about, the reason for the stepdown, one being price, right? Because we did the new contracting in Q1, that would fall under competitive environment as well as thinking about share. I mean the combination of those two make a competitive environment. Starts, we've talked about them being a slow and steady decline. So, yes, I believe this slide is intact, and it's included in our overall reiteration of our guidance for the full year of $20-21 billion.

Andrew ChengChief Medical Officer and Executive Vice President

So, Phil, it's Andrew. So, we'll switch gears, and you were asking about prior authorizations with Biktarvy. I think, as you're well aware, that when any new product launches, that there's some degree of prior authorization as they start to review the product. However, as John mentioned on his initial remarks of the call on March 27th, the DHHS guidelines place the Biktarvy top tier of its recommended initial regimens list. Since that time, we've received some feedback that the amount of prior authorizations has really decreased and become less of an impediment. Taken together, that helps put us to, and reiterate what Robin said earlier on the call, that we have every expectation that the Biktarvy will match and then exceed Genvoya when it comes to No. 1 position for both naïve and switch patients.

Operator

Thank you. And our next question from Terence Flynn of Goldman Sachs. Your line is now open.

Terence Flynn – Goldman Sachs -- Analyst

Hi, thanks for taking the question. I was just wondering maybe, John McHutchison, if you can discuss the importance of first mover advantage for Yescarta and DLBCL versus any potential modest benefit that a future competitor might have on CRS. Just wondering how you think about that. And then maybe one for Robin, just HIV pricing in Europe. Have you guys seen any change in the pricing dynamic from the branded side given the entry of generics? Thanks a lot.

John McHutchison -- Chief Science Officer and Executive Vice President

Hey, Terence, it's John McHutchison. Hello. Thank you for the question. I think the first mover advantage is important. We have the relationships. We have the experience now in the community, particularly in the US, which will obviously extend elsewhere. So, I think it's an important advantage, as it has been for us in other diseases, including HIV and hepatitis-C, where we were fortunate to be first as well. So, it's a brief and general answer, but I think it is important.

Andrew ChengChief Medical Officer and Executive Vice President

Terence, it's Andrew. So, I'll touch on the impact in Europe and what we've seen. You know, generics for Viread TDF are available in Europe, and we have seen some impact on certain prices in certain countries. However, I think it's important to recognize that over 50% of our European revenues come from TAF-based products, and you can see, as we mentioned on the last call, that in certain countries the conversion rate from TDF to TAF products, like Germany, exceed 70%. So, I think when one thinks about the impact, we've already made that switch over for a large, for a number of countries, and that impact is somewhat muted.

Robin L. Washington -- Chief Financial Officer

And, Terence, to follow on to that, we priced Genvoya at parity with Stribild, So, our ability to get early access in those markets where we've launched has helped, and it's helped that overall transition that Andrew just referred to as greater than 50%, being Descovy regimens overall.

Operator

Thank you. And our next question comes from Cory Kasimov of JP Morgan. Your line is now open.

Cory Kasimov -- JP Morgan -- Biotechnology Analyst

Hey, good afternoon, guys. Thanks for taking my question. It's on Yescarta, and I'm wondering is the $40 million in sales in Q1 pretty evenly distributed across your 40 authorized centers, or is it more concentrated in a handful of them? And then just in general terms, should we be thinking about patient capacity per center as something that also gradually evolves over time? Thanks.

Robin L. Washington -- Chief Financial Officer

Hi, Cory, it's Robin. I'd say, again, it's early days relative to our centers being certified and getting launched to really get at a through-put per center, any of those type of metrics, and I'd also say that, because is such a specialized treatment, we've selected centers that we think can be successful. We're helping them through that. Yes, some of the earlier centers, we're seeing higher volumes, as you would anticipate, but I think the volume is not just determined by saying you're now certified. It's just determined by the hospital and their resources and looking at the other various treatments, etc., and other capacities that any hospital has to manage. So, it's going to be harder, particularly in this therapeutic area, to provide the level of detail and granularity or, at this stage, details by center. The $40 million was very robust for us. We're happy with the results today. And as I mentioned, this is going to be a controlled, measured launch for us, and we're going to continue on that process and provide you updates on that as much as we can.

Operator

Thank you. And our next question comes from Alethia Young of Credit Suisse. Your line is now open.

Alethia Young – Credit Suisse – Analyst

Hey, guys. Thanks for taking my question, and congrats to John and Andrew. This is more one on the commercial standpoint, just from the big picture. So, Biktarvy's taken like rough pitch from Genvoya. I just kind of wanted to think about broadly. So, we think Genvoya kind of continues to grow, or does it kind of inflect and then Biktarvy kind of picks up where Genvoya left off? Or is it just the case that 80% Biktarvy switch most likely may moderate a little bit So, that trend may not be as pronounced? Thanks.

Andrew ChengChief Medical Officer and Executive Vice President

So, Alethia, let me just clarify something in your call, just to recognize that when we think about Biktarvy scrips, 80% come from switches. About a third of those come from Genvoya, So, I think when we think about it a third from Genvoya then about 20% from dolutegravir-based regimens, either Tivicay or Triumeq, and then the remainder of the switches come from a mix of different regimens. So, when we think about it overall, I think we're very happy with the mix, and given our robust development plan where two of the four studies were based on switch, one from Triumeq, the one from polyinhibitor based regimens, we expect that mix to actually to be the same going forward, about an 80-20 switch, given the overall dynamic.

Now there's certainly going to be some degree of variability from quarter to quarter and to the portion that's Genvoya versus dolutegravir-based regimen, but certainly, we're very comfortable with where we are and expect that the overall growth of Biktarvy to continue as we mentioned earlier.

Operator

Thank you. And our next question comes from Salim Syed of Mizuho. Your line is now open.

Salim Syed -- Mizuho -- Managing Director

Hi, guys. Thanks for taking the question. This one on Yescarta. Could you just maybe comment on what sort of education you guys are doing with the medical community for the non-CAR T oncology docs? And if these docs are actually referring patients to the CAR T centers, after which line of therapy in general? Thank you.

John Milligan -- President and Chief Executive Officer

Hi, Salim, it's John Milligan. I just wanted to, it's actually a very timely question. So, as you know, we've been out in the community detailing Zydelig, and we've just recently taken those representatives, our therapeutic specialists, and put them through specific CAR T training So, that they can start to have a conversation with doctors and the communities about what CAR T is, what kinds of patients are eligible for CAR T, and can help them with referral. I don't know if specific referrals, but certainly encourage doctors to refer those patients who would be eligible to specialists who then can handle those cases. So, we are starting an educational campaign in the community that really kicked off this week.

Operator

Thank you. And our next question comes from Ying Wong of Bank of America Merrill Lynch. Your line is now open.

Ying Wong -- Bank of America Merrill Lynch -- Analyst

Hi. Thanks for taking my question. First one I have related to the data you presented at EASL. So, if you look at the MRI PDF data, it seems that SY meter the does not appear to be very potent compared to the ACC meter or even FXR. So, I was wondering, based on that, how much confidence do you have on the ultimate success or I would say future of for SY in Stella-3 and 4 trials? And then maybe, Robin, can you elaborate a little bit on the XUS dynamics for HCV? Because it appears that Advil has enjoyed very much success in launching Madurad in XUS, based on the numbers reported. I was wondering if you see that evolving in the next few quarters where you can gain back yours from Advil or not? Thank you.

John McHutchison -- Chief Science Officer and Executive Vice President

Hello, Ying, it's John McHutchison to answer the first part of your question. The observation you made and noted in our EASL presentation that Selonsertib has less of an effect on steatosis and the livers than our ACC inhibitor that inhibits the Novo lipogenesis is exactly what we wanted to see and expected to see because of the mechanism of action. Selonsertib doesn't have a primary anti-lipo toxicity effect. It's an anti-ASK and it works on hepatic stellate cells, as well. So, that's what we expected to see.

In terms of the second part of your question, does that give us more or less confidence in terms of our phase 3 Stella programs, I think you need to take the context of what we presented at EASL in a 12-week study and think about it in the overall context. What we did in all of these programs is we did a single-agent small study first to show that each drug was effective, which we've done for all of our three drugs. Then we did a small combination study to see if there was combination safety. That's what we presented at EASL. We did, however, also present some of the parameters that you've been talking about, but our goal was always, once we had combination safety, to then be able to kick off a definitive, larger study with a longer duration of therapy to determine which of those drugs is safer, which is what we're doing.

To get back to the Selonsertib question, we decided to do a phase 3 Stella Selonsertib study, based on a previous study that we presented last year that was 24 weeks in duration that had two liver biopsies that showed a dose-dependent effect on the regression of fibrosis and an inverse relationship to the development of cirrhosis. We also showed that the target T phospho-p38 is upregulated in NASH patients, and it's also blocked or inhibited or downregulated by the drug. So, everything is heading in the right direction, and I think what's happening here is people are taking this small 12-week experiment that was due and looking at combination safety out of context. When we started our Stella phase 3 program, it was based on a larger phase 2 study, two biopsies, six months apart, that showed a definitive effect on fibrosis. So, we're in good shape. I'm excited about the results. We've enrolled them ahead of schedule, and we look forward to getting the results early next year.

Robin L. Washington -- Chief Financial Officer

Thanks, John, and I think, Ying, your other question related to XUS HCV sales. So, let me start by saying I think that's always been a much more competitive environment compared to the US. But OUS sales, if we compare what we did relative to our competitor, includes a wide variety of geographies, including Europe, Japan, and Asia, and I would say the market shares vary. They're very different from country to country. I think it is fair to say that we've seen our competitors do very well in Japan, for example, with some of the prior DAA failures in some warehousing there, but there are other countries where we're doing well. We're going to pick our opportunities to focus on. While we know this is a competitive market, we feel we have the field force and necessary folks in place to be competitive. And as mentioned, I think we're on track relative to where we expected to be. We see things playing out very close to that. So, as I also said, we expect our share to stabilize by midyear, So, I think we'll be able to provide more insight around share going forward, during the next call.

Operator

Thank you. And our final question comes from the line of Carter Gould of UBS. Your line is now open.

Carter Gould -- UBS -- Executive Director

Thanks, guys, for taking a question. I was looking to get some clarity on the regulatory strategy for Filgotinib, and if investors should expect you to file, I guess, following that be the FINCH 1 and FINCH 3 become available, or will you look to wait for maybe one of the GI-focused indications to have that phase 3 data in hand as well? Thank you.

John McHutchison -- Chief Science Officer and Executive Vice President

Yeah, so, Carter, it's John McHutchison. Thank you for the question. So, as I said today in my prepared notes, that we now are in the fortunate position to have all FINCH 3 trials enrolled, both methotrexate, naïve, and inadequate responders, and now biologic non-responders, So, we can file, if the data supports it, of course, we can file for RA, with all of those three studies. And they are on a different timeline from the inflammatory bowel disease studies, So, we would not wait for the inflammatory bowel disease studies.

Operator

Thank you. And that concludes our question and answer session for today. I'd like to turn the conference back over to Sung Lee for any closing remarks.

Sung LeeVice President of Investor Relations

Thank you, Candace, and thank you all for joining us today. We appreciate your continued interest in Gilead, and the team here looks forward to providing you with updates on our future progress.

Operator

Ladies and gentleman, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day.

Duration: 61 minutes

Call participants:

Sung LeeVice President of Investor Relations

John Milligan -- President and Chief Executive Officer

John McHutchison -- Chief Science Officer and Executive Vice President

Robin L. Washington -- Chief Financial Officer

Geoffrey Porges -- Leerink -- Director of Therapeutics Research, Managing Director

Geoff Meacham -- Barclays -- Managing Director, Senior Research Analyst

Andrew ChengChief Medical Officer and Executive Vice President

Michael Yee -- Jefferies -- Biotech Analyst

Bryan Abrahams -- RVC Capital Markets -- Analyst

Matthew Harrison -- Morgan Stanley -- Analyst

Robyn Karnauskas -- Citigroup -- Analyst

Regina Grebla – Evercore ISI – Vice President, Pharmaceuticals and Biotech Research

Phil Nadeau -- Cowen -- Managing Director and Senior Research Analyst

Terence Flynn – Goldman Sachs -- Analyst

Cory Kasimov -- JP Morgan -- Biotechnology Analyst

Alethia Young – Credit Suisse – Analyst

Salim Syed -- Mizuho -- Managing Director

Ying Wong -- Bank of America Merrill Lynch -- Analyst

Carter Gould -- UBS -- Executive Director

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