Ladies and gentlemen, thank you for standing by and welcome to Gilead Sciences 4th Quarter 2018 Earnings Conference Call. My name is Jonathan and I will 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 would now like to turn the call over to Sung Lee, Vice President of Investor Relations.
Please go ahead.
Thank you, Jonathan, and good afternoon, everyone. Just after market closed today, we issued a press release with earnings results for the fourth quarter of 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 Robin Washington, Executive Vice President And Chief Financial Officer Laura Hamill, Executive Vice President Worldwide Commercial Operations and John McHutchison, Chief Scientific Officer And Head of Research And Development. Also in the room is Greg Alden, interim CEO and Chief Patient Officer.
Before we begin with our prepared comments, Let me remind you that we will be making forward looking statements, including plans and expectations with respect to products product candidates, financial projections and the use of capital, all of which involve certain assumptions risks and uncertainties that are beyond our control and could cause actual results to differ materially from these statements. A description of these risks can be found in our latest SEC disclosure documents and recent press releases In addition, Gilead does not undertake any obligation to update any forward looking statements made during this call. Non GAAP financial measures will be used to help you understand the company's underlying business performance. The GAAP to non GAAP reconciliations are provided in the earnings press release as well as on the Gilead website.
Thank you, Sung, and good afternoon, everyone. We are pleased to share our financial results for the fourth quarter full year 2018 and provide 2019 guidance. 2018 was a year filled with accomplishments where we met our financial and operational goals. Beginning with our HIV franchise, We extended our leadership position and We continue to execute and maximize our opportunity in HCD and initiated a plan to launch authorized generics this year. Which should keep us very competitive saw the steady and measured adoption of Yescarta in the U.
S. And the approval of Yescarta in Europe. We advanced our pipeline and finished the year with a strong balance sheet that will enable us to continue to execute on M and A and partner ships to drive future growth. Turning to the financials. Total revenues for the 4th quarter were $5,800,000,000 with non GAAP earnings of $1.78 per share for the same period last year.
For the full year 2018, total revenues were 22,100,000,000, down 15% year over year. Non GAAP diluted earnings were $8.4 per share for the full year 2017. The full year 2018 GAAP diluted earnings at $4.17 per share included an unfavorable impact of $0.98 per share due to an impairment charge for in process research and development for the KITE 585 anti BCMA program for the treatment of multiple myeloma Now turning to our product sales. Product sales for the fourth quarter were 5,700,000,000 up 4% sequentially and down 3% year over year. For the full year, product sales were $21,700,000,000, down 16% year over year, driven by lower HCV sales.
In the U S, Product sales for the quarter were $4,500,000,000, up 8% sequentially and 8% year over year. This marks the first quarter in several years where U. S. Product sales grew year over year as the revenue growth of our HIV franchise more than offset the market dynamics of our HCB franchise. While demand, particularly for Biktarvy and Truvada for prep, was a driver of sequential These two factors contributed an estimated incremental $250,000,000 to the sequential performance.
In Europe, product sales for the quarter were $813,000,000, down 7% sequentially and 29% year over year. The sequential and year over year declines were anticipated and included the full quarter impact and launch of generic HIV products in certain markets, as well as an accounting adjustment related to statutory revenue callback reserves. Now turning to the expenses for the full year 2018. Non GAAP cost of goods sold were $300,600,000,000, up 5% compared to $3,400,000,000 in 2017. The increase was caused by a $410,000,000 reserve or an unfavorable $0.31 EPS impact.
Primarily for excess harvoni inventory due to a shift in demand to Eclusa. Non GAAP R and D expenses were $3,500,000,000 and non GAAP SG and A expenses were $3,600,000,000. Both expense categories increased by 7% compared to the same period last year, primarily due to a full year of investments to support the growth for the full year 2018 decreased to 19.8% compared to 24.5% in the same period last and the favorable impact of a tax settlement. Turning to the balance sheet. We generated $8,400,000,000 in cash from operations for the full year 2018 $2,300,000,000
for the quarter.
We ended the year with $31,500,000,000 equivalents. During 2018, we repaid $6,300,000,000 of debt, the majority of which was related to our acquisition of KITE. And paid cash dividends of $3,000,000,000. In 2018, we repurchased 40,000,000 shares for 2,900,000,000 In Q4, we made opportunistically purchases resulting in a reduction of diluted shares outstanding in our quarterly dividend from $0.57 to $0.63 per share, which will become effective in the first quarter of 2019. This represents the 4th consecutive year of double digit increases to and future cash flows.
In 2019, our capital allocation priorities will remain the same with a focus on M And A And partnerships to augment our pipeline, followed by dividends and share repurchases. Before I provide details for our full as illustrated on Slide 20, which will impact the anticipated level of product revenue growth in 2019, relative to 2018. In October, during our full year product revenue guidance due to 2 unanticipated events. Our second half twenty eighteen revenues did not reflect the at S. Countries than we had originally expected.
It is important to keep these events in mind as our 2019 revenue performance unfold. As they will have an impact Our 2019 non GAAP financial guidance is summarized on slides 19 through 23 and the earnings presentation available on our corporate Web site. Product sales are expected to be in the range of $21,300,000,000 to $21,800,000,000 This guidance is subject to a number a larger than anticipated shift in payer mix to more highly discounted payer segments such as PHS, FSS, Medicaid and the VA, lower than expected market share and greater price erosion resulting from the sale of generic versions of TDA. The fixed dose combination of FTC, TDF, and the fixed dose combination of FTC, TDF, of Fabrin. The accuracy CV patient starts in 2019.
Unanticipated pricing pressures from payers and competitors. As well as volatility in foreign currency exchange rates, which could be plus or -1000000 for each 10% change relative to our assumptions. Non GAAP product gross margins are expected to be in the range of 85% to 87%. We expect our non GAAP R and D expenses to be in the range of $3,600,000,000 to 3,800,000,000 Non GAAP SG and A expenses are expected to be in the range of $3,900,000,000 and include investments effective tax rate is expected to be in the range of 20% to 21%. We anticipate the full year diluted EPS impact of acquisition related, stock based compensation and other expenses to be in the range of $1.40 to $1.50 per share.
As we look towards Q1 2019, we anticipate total Gilead product sales will decline sequentially by a percentage similar to what we've seen over the past 2 years. Which was in the range and buying patterns of public payers is a step down in price for our HCV drugs sold into U. S. Medicare. Despite this anticipated sequential decline in total product sales in Q1.
I want to underscore our confidence in the health of our worldwide HIV business from which we expect double digit year on year growth again in 2019. I will now turn the call over to Laura.
Thank you, Robin. Good afternoon, everyone. I will provide an update on our commercial performance during the fourth quarter and share some highlights from markets around the world. Beginning with HIV, we achieved an all time high in quarterly revenues, This speaks to the appeal of our Descovy based regimen led by Biktarvy, the growing use of Truvada for PrEP and our ability to execute commercially. In the U.
S, total HIV revenue was $3,400,000,000 in the 4th quarter, up 30% year over year and 13% quarter over quarter. Year over year growth was driven by a 13% increase in prescription, and also benefited from an inventory purchases and favorable payer mix mentioned earlier by Robin. We continue to see strong adoption of Descovy based regimens, which accounted for 77% of Gilead's total U S HIV prescription volume as we ended the 4th quarter. This is a remarkable achievement considering the first Descovy based regimen was introduced just 3 years ago. Through its 1st 11 months, Biktarvy remains the best HIV launch of all time in the U.
S. As measured by total prescriptions on a launch aligned basis. During the fourth quarter, biktarvy generated $551,000,000 in revenue in the U. S. And is the number one prescribed regimen for both treatment naive and switch patients.
Approximately 80 percent of Biktarvy's U. S. Prescriptions came from switches. 25% of these switches from dolutegravir and another 25 coming from Genvoya. This is a testament to the profile of Atari.
It's strong efficacy and no identified cases of treatment emergent resistance at week 96 in our Phase III studies. Biktarvy provides the renal and bone safety advantages offered by Descovy backbone with minimal drug to drug interactions. These are important considerations for an aging HIV population and for younger patients on lifelong Moving to prevention. Truvada for prep continues to grow as we invest in the U. S.
To raise awareness among at risk individuals and treating physicians. We estimate that approximately 202,000 people were taking Truvada for PrEP at the end of the fourth quarter in 2008. We initiated 2 direct to consumer campaigns in mid-two thousand and eight and have a dedicated team of therapeutic specialists focused on Truvada for PrEP. Additionally, we have a number of commercial programs aimed at helping populations disproportionately impacted by HIV where utilization of Truvada for PrEP is low. While these investments have helped increase awareness, there is still so much more we can do.
The CDC estimates that 1,100,000 people in the U. S. Could benefit from Prep. Now turning to Europe. Total HIV revenue was $511,000,000 in the 4th quarter, down 21% year over year and down 13% quarter over quarter.
This decline was driven by the expected availability of generics across all major EU countries During 2018, we experienced slower erosion of the HIV franchise due to later generic entry in a few countries. While at the same time, we saw rapid uptake of our Descovy based products, which accounted for more than 80% of our total HIV revenue in Europe for the fourth quarter. We are encouraged by the In Germany, Biktarvy was number 1 prescribed regimen for both treatment naive and switch patients during the fourth quarter. And in France, just 6 weeks after launch, Biktarvy was among the top 5 regimens for switch patients. We anticipate by mid year, biktarvy will also launch in Spain, Italy and the UK.
Once Bacardi is broadly reimbursed and entrenched in the market, we believe our European HIV business will stabilize and return to growth. Now turning to HCV. Product sales for the fourth quarter were $738,000,000, down 51% year over year and 18% quarter over quarter, in line with the guidance we provided in 2018. As previously announced, our authorized generic version of Aclusa and Harvoni have become available in the U. S.
This quarter through Osegua Therapeutics LLC, a separate subsidiary. We expect to see a positive impact on share in Medicaid market during the second half of twenty nineteen. Over the long to be more competitive in a rapidly growing Medicaid segment. In 2018, we launched Eclusa as a pan genotypic, pan fibrotic, single tablet regimen. Eclusa has the right profile to address the broadest population in HCV.
As a leading liver company, we remain fully committed to serving patients with HCV, contributing to the elimination of the disease and competing with a great deal of confidence based on the profiles of our HCV products. Turning to Yescarta. We are building on the momentum generated by the 2 year real world data presented at the American Society of Hematology annual meeting. This year, we expect to steadily and measurably progress in the U. S.
And in Europe and potentially see a doubling of our revenue for Yescarta as centers gain experience and community oncologists become increasingly aware of this life saving therapy. We now have 68 centers in the U. S. Certified to provide treatment with Yescarta. In Europe, we are encouraged by the early stages of our launch.
We have treated commercial patients in the UK and in Germany, and we have activated sites in France. In total, we have authorized 12 centers and look forward to additional centers coming online this quarter. We are pleased with the engagement Finally, our U. S. Cardiopulmonary team continues to deliver impressive results.
Leteris and Ranexo revenue totaled $431,000,000 for the quarter, We did not see any generic competition for Leterus in the fourth quarter. We currently anticipate the entry of generics in the second quarter of 2009. We begin the year from a position of strength. I would like to thank the teams around the world for their incredible effort With a continued focus on our outstanding portfolio of products and operational excellence, we are confident in our ability to deliver on our 20 team goals. Now I will turn the call over to John.
Thank you, Laura, and thank you everyone for joining us today. As you know, this is a very exciting time for Gilead's R and D organization. We anticipate readouts from 5 phase 3 clinical trials in the first half of this year. I will talk briefly about those studies, provide an update on our cell therapy and oncology programs, and then close with some thoughts on 2019. We expect upcoming readouts of STELLAR3 and STELLAR4 our ongoing Phase III trials evaluating Solonstantinib and ASK-one inhibitor in patients with advanced fibrosis due to NASH.
It's supported by the data we expect to file for regulatory approvals in the second half of this year. In addition, we continue to advance multiple other investigational compounds in NASH as both single agents and as combination therapies. We anticipate ATLAS, our Phase 2b study of various 2 drug combinations or regimens in patients with NASH and advanced fibrosis to read out in the fourth quarter. As we continue to build our pipeline in NASH, I would like to highlight 2 other recent preclinical agreements. Last month, we announced a collaboration and license agreement with Johan to co develop novel treatments for patients with advanced fibrosis, human NASH, that will complement our other internal programs.
In December, we also entered into another collaboration with Scholar Rock to discover and develop highly specific inhibitors of TGF beta activation. We will work with Scholar Rock to investigate this novel approach directed towards one of the core pathways driving fibrotic diseases, including NASH and diabetic kidney disease. Now turning to inflammation. This quarter, we expect results from FINCH 1 and FINCH 3. 2 Phase 3 studies of our selective JAK1 inhibitor Filgotinib in rheumatoid arthritis.
As you may recall, last year, we announced positive results from FINCH 2, the first of our Phase III studies to read out. Those results demonstrated that Filgotinib met all primary and secondary efficacy endpoints in a difficult to treat group of patients. Now if supported by the data, we expect to be able to then progress In the U S, our ability to file the NDA is dependent on data from the MANTA study, a safety study in men with ulcerative colitis. Was requested by the FDA and is designed to address non clinical findings observed in preclinical animal studies. The FDA recently allowed us to expand the inclusion criteria, which has enabled us to enhance enrollment.
We will continue to evaluate our progress and options to advance timelines. Once we have the phase 3 data from 3 FINCH studies in hand, We will initiate and request further interactions with the FDA and other regulatory groups worldwide. We will then be able to provide greater clarity as to filing timelines in the U. S. Moving to HIV.
In the coming months, we anticipate the results from the Discover trial a Phase III randomized double blind study of more than 5000 people, evaluating whether Descovy is as safe and as effective as Truvada at reducing the risk of HIV infection when used as PrEP or pre exposure prophylaxis. The trial speaks to our ongoing commitment to people at risk of HIV infection and those living with HIV where our goal is to a cure. And finally, I'd like to make a few comments on cell therapy. Our investment in cell therapy is and always has been an investment in the future. Similar to what we've done in other areas historically, we are committed to Last December, the American Society of Hematology Annual Meeting, we presented a number of significant updates The 2 year safety and efficacy ZUMA-one data presented at the meeting and simultaneously published in Lancet oncology showed an unprecedented plateau in duration of response and overall survival in patients with refractory large B cell lymphoma.
After a single infusion of Yescarta with a minimum follow-up of 2 years, more than half of the patients were still alive and nearly 40% of patients had an ongoing response. The two year point is a major milestone for Yescarta. This is the longest duration of follow-up of any registrational clinical cell therapy study and the results set the bar, reinforcing our leadership in cell therapy. Also at the ASH meeting, there were numerous presentations highlighting real world Yescarta data from centers outside of the clinical trial setting. It was encouraging to see similar 30 day efficacy and safety data in this setting.
Despite sicker patients compared with Ooma-one as well as the consistent manufacturing performance and product turnaround time. Finally for Yescarta, we are moving forward in earlier lines of therapy in large B cell lymphoma and several new indications for other B cell malignancies as part of our broader registrational plan. This year, we will also continue several studies aimed at investigating strategies to further improve the safety and we are advancing an allogeneic platform to IND this year, progressing different cell therapy approaches in multiple solid tumors, with next generation technologies and leveraging our best in class cell therapy manufacturing. We will also continue to pursue scientific collaborations that will help us achieve these goals when they make sense. With regard to our other oncology programs, During the fourth quarter, we announced a global collaboration with tango Therapeutics to discover develop and commercialize a pipeline of innovative targeted immuno oncology treatments for patients with cancer.
Our collaboration will combine Tango's CRISFA based discovery technology alongside Gilead's drug discovery and development capabilities. We also recently entered into a partnership with Agenus focused on the development and commercialization of up to 5 novel immuno oncology therapies, 3 of which are expected to be in the clinic in 2019. We believe these double approaches can augment the impressive benefits that have been seen with checkpoint inhibition in a variety of cancers. Last quarter, we disclosed an initial patent outlining some of our exciting preclinical work related to our small molecule PD L1 program. To that end, we have now initiated a phase 1 study of GS-four thousand two hundred and twenty four in healthy volunteers.
I am confident we will continue to make significant progress in 2019 and want to close by highlighting several key areas for Gilead this year. We are focused on returning to growth in terms of product sales and are confident this can be achieved with our operational excellence, a strong and growing HIV franchise and a stabilizing hepatitis C market. As I have just shared on the R and D side, we continue to make excellent progress with our pipeline and we are looking forward to the readouts of the five Phase III studies, as I described today. With regard to cell therapy, we will maintain our position of leadership as we continue to reach And finally, we are in a position of financial strength, which gives us the flexibility to execute on M and A and partnerships. To augment our pipeline.
On behalf of the entire organization, we look forward to welcoming Dan Oday to Gilead next month as our new Chairman and CEO. In closing, I would like to thank our 11,000 employees around the world. It is your commitment and dedication that have made us successful and will continue to make us successful in 2019 and into the future. So let's now open the call for questions.
Conducted electronically his or her touch tone telephone. You. If you have further questions, you're welcome to rejoin the queue. We'll pause for just a moment to compile the Q And A roster. And our first question comes from the line of Geoff Meacham from Barclays.
John, I want to continue the thought on BD. I'm looking at the step up in 2018 that you guys had. It's mostly on early to mid stage assets. So The question is, 1, does this change Gilead's appetite for later stage deals? And 2, what's the appetite for an expansion beyond your core therapeutic areas.
And I realized the answer is likely to change after Dan gives a more detailed review of the business. Thanks.
Hi, Jeff. It's Robin. Why don't I start? I'd say again, the high bar and criteria for us when it comes to M and A is scientific differentiation. I think you're right to state that we are primarily focused on our existing therapeutic areas.
While these have been small deals, I think we've need to look for deals with commercial assets as well as later stage pipeline deals as well. But they happen when they happen. So as you can see, we've been very active. We've been even more active the second half of the year. And will continue to focus in this area as Dan joins us.
Jeff, it's John. And I'll just add on to what Robin has said also. We have looked at many other things as well over the last year and we'll continue to do so. And it is driven by the science and it is driven by the the opportunity and the importance and impact it will have on certain diseases. So we will look at late and earlier stage opportunities as they come forward.
But as Robin said, the late stage opportunities are few and far between.
Thank you, guys. Thank you. Our next question comes from the line of Michael Yee from Jefferies. Your question please.
Thanks for the question. I guess, my question is, although Dan hasn't come on board yet, I mean, what do you think investors should anticipate or should expect through the course of the year is that, him just trying to get onboard familiar with everything in that take a year? Do you think that he would or management and the board anticipate urgency to put the balance sheet to work? I mean, yes, what should investors expect through 2019 as it relates to Dan coming on board? Thanks.
Sure. This is Greg Alton. I'll take this question. Yes. I think it's neither of the scenarios that you laid out there.
I think that Dan will come on board March 1, as you know. I think he will be patient. He's going to take his time to get to know the company, spend more time with the management team, get to know our strategy. Certainly, he will then I think he'll put his own mark on where he wants to take the company. I wouldn't expect it to take up a year, but I think he will be patient.
And I think he's going to be thought full and make sure that he's, really understanding what we're doing.
Thank you. Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Your question please.
Hi, thanks very much for taking my question and congrats on the quarter. How should we be thinking about your 2019 guidance for HIV with respect to contribution from volume versus price? And then along those lines, for the longer term, there's been some discussion around CMS practices shifting for protected classes. Can you talk a little bit about the impact that you foresee elements like formulary management or prior authorizations potentially having on clinical practice and HIV and on potential future revenues for the franchise? Thanks.
Hi, Brian, it's Robin. Maybe I'll take the first part of your question and then turn it over to Greg. So, thank you for calling out both those parameters. I mean, keep in mind that volume is the major driver of growth for our business. And that will be the case in 2019.
For our HIV business, we have taken price increases in the U. S. In the past. But keep in mind that the net effect of them has been limited because the majority of our volume goes through public channels. For instance, ADAP has not had a price increase since 2008.
And that's part of our U. S. Business. In Europe, as you know, we actually take price decreases. So the net result on a worldwide basis is really a low single digit price benefit when we think about any price increases.
For this year's, you can appreciate due to competitive reasons. We're not going to mention if we are taking price increases at this point in times, recall back midyear, we announced no price increases for 6 months. But any thinking that we you have around price increases is currently reflected in our guidance. And I'd say that we've we're aware and continue to be aware of the climate out there. And we've always a very sensible approach to how we think about pricing.
And so if I can just jump in on the second part of the question relating to the proposal by CMS on the protected classes. As you're all aware, Gillette has been on the forefront of innovation in HIV for 30 years now. Bringing out products for treatment and prevention that improve potency, safety, tolerability, simplicity. And the protected classes has been a very important component to ensure that patients have access to that and then physicians are free to prescribe what's best for their patients. And the reason for the protected classes, as many of you know, is These are, disease areas or 6 disease areas where the products really are not interchangeable and they really need to be, the right patient, right for the patients This has allowed patients, individuals to do very well with HIV, but also allows us to have a very good public health response.
To HIV and reducing new infections. We believe that any challenges to protected class, particularly the prior authorization or step therapy would be a significant step backwards in these efforts. We also share this with a lot of the other therapeutic areas that are impacted by the protected classes. So we are in constant discussions with them. This is the number one public policy initiative by Gillette is ensuring that people understand the importance of protected classes.
We're very engaged with the administration, the at CMS, HHS, as well as the Senate And Congress. So we are ensuring that we're very vocal there. We're also very closely tied with the patient groups and the physician groups who care very much about this issue. So this isn't the first time this has come up, but we take this very seriously. And we are making sure that the message is very strong that this would be a step backwards.
And we also don't see significant cost savings, to our health system from doing this and potentially a long term step back in terms of what we've
accomplished. Thank you. Our next question comes from the line of Geoffrey Porges from Leerink. Your question please
Thank you very much for taking the question and for the information provided in the call. Robin, could you talk us through the increase in SG And A specifically. It's about a 10% increase compared to where you are this year. It's about $500,000,000 above what the Street was expecting. Could you talk us through where the incremental $500,000,000 is going?
And was it at all possible, presume you went through everything else you were spending on previously and couldn't find any way to reduce in other areas. Thanks.
Yes. Thanks for the question, Geoff. Let me, first talk about the sequential increase. That was driven by a one time grant. So I wouldn't take Q4 and assume that's the run rate, right?
I mean, during the second half of the year to your specific question, we have included incremental expenses focused on our new emerging therapeutic area launches, in particular NASH and inflammation. We've also included some incremental expense for our cell therapy ramp because as you know, we're continuing to build outside of the U. S. In that area as well. So those are some of the primary drivers.
The kind of the smaller drivers includes just some geographic expansion. If you saw from our guidance, we're expected to have HIV revenue in Japan next year. So there's some investments that we're making there. We also continue to get products approved in China. Support those variant launches.
I would say, Geoff, to your point, have we thought about trade offs? Yes, we have. I would say particularly for NASH, we have and maybe Laura can comment on this as well. We do believe continuing to stay focus on our hep C franchise in a much more competitive environment is the way to go. So there are some incremental expenses that we hadn't initially thought about associated with NASH, but we've appropriately included them in our guidance.
Yes. I think Robert did a tough covering it for HCV, we believe not only from a field force perspective that we want to be fully focused around the world, but also in terms of reaching consumers in the United States, that's a very strong focus. And external and outside of the United States, there is a number of initiatives to really help with elimination in conjunction with the government and we're committed to that. So I think that's really what we were contemplating with, flogative, when we have an opportunity to join forces, we believe that we should keep those separate and continue to focus on them as individual very important products uniquely. Thank
you. Our next question comes from the line of Matthew Harrison from Morgan Stanley. Your question please. Great, good afternoon. Thanks for taking the question.
John, I have one for you specifically on the NASH studies. Can you talk a little bit about how you've powered those studies? I know you've talked in the past that 20% Delta is clinically meaningful. I wonder if you could comment if you achieved the Delta below that. If those studies could still be statistically successful and how you might look at a result like that?
Thanks.
Thank you, Matthew. We're excited about the NASH readouts from STELLAR-three and STELLAR-four. We have 1600 patients with bridging fibrosis for cirrhosis. So those results are due to imminently readout this quarter. So, we are looking for them.
To answer your question, We are looking for a significant increase over placebo response rate, which we believe we can calculate accurately from our previous trials. And we believe that we would like to show a 10% to 15% increase or a doubling of response rates over placebo to have a meaningful effect in a group of people that have a high likelihood of disease progressing to transplant, etcetera. So without getting into all the details, about the numbers. This would be our first step forward for patients with advanced fibrosis due to NASH and a meaningful improvement if we could allow 1 in 5 of them to prevent progression of the disease to transplant decompensation, etcetera. We believe that would be meaningful.
Clinically, statistically and otherwise.
Our next question comes from the line of Robin Karnas from Citi. Your question please.
Hi guys, thanks for the question and congratulations on all the progress. My question is on prep. So you talked about over $200,000 on prep. And by our math, that could be around $2,000,000,000 worth of sales coming from prep. I don't know if that's right, but my question is more about your data out there saying that this could be a 1,000,000 to 2,000,000 million people that ideally could benefit from press.
How are you thinking about getting that, getting Descovy in the hands of those people? What is the argument you would make to make sure those patients go on, on press? And do you think my question is more about a lot of these patients are young. So how are you going to make that argument? And where do you think prep could go and what kind of benefit from DTC?
Very long question.
Yes. So how about if I take the conversion question and on the clinical study, I'm going to leave that up to John. So this is Laura. Thank you Robin for the question. So as it relates to prep, as I mentioned earlier, in the United States, there's 1,100,000 people that the CDC estimates that could benefit from prep.
And we really believe there's a lot more to do. There's a lot of populations that are affected that just don't have the awareness that they really need to protect themselves So not only do we have a dedicated field force, but we have a lot of community, individuals that have come from nonprofits that are very much committed to helping these communities and we are leaning into these communities to try to raise awareness. In addition, we've actually put a significant amount of additional funding behind both biktarvy and Truvada for PrEP in 2019 because we believe that's a very important thing to do. Now the answer to your question about, the conversion from a TDS based regimen to a TAP based regimen or Descovy based regimen. Obviously, the clinical trial results I'll let John talk to But I what I would say is when we look at, the treatment market, as I mentioned, in the U.
S, we're at 77% of prescriptions, total prescriptions, now a Descovy based backbone and in Europe were at 80%. And we believe that the benefits that accrue to a patient for HIV are the same benefits that we need to have for a patient at risk that is being treated for prep. Some of the duration of therapy is longer than we would when you may anticipate. So these otherwise healthy individuals want to have a normal healthy life and the discovery based regimen really wins wins for that to be a great treatment option. Turn it over to Don on the study.
So Robin, the safety advantages of taking a TAF based backbone as has been the case and seen in the conversion rates for the HIV infected individual will apply equally to the at risk differences I presume in terms of safety, kidney, and bone. And because of the young age and their longevity in terms of taking medicines to prevent HIV infection, the same principles apply as it does to somebody who's infected already. So Another way of saying what Laura has already said. And hopefully, the study will lead us down the answers to that question. We it's reading out in the coming months.
Thank you. Our next question comes from the line of Alethia Young from Cantor Fitzgerald. Your question please.
Hey guys, thanks for taking my question. I'm just asking about the MANTA study. I just wanted to clarify maybe one thing Is that study needed for like a label, or is it really needed actually for the filing package? And then just can you update a little bit more precision on how those initiatives have played out with your enrollment timelines? Thanks.
Thanks, Alethia. And thank you for your question on MANTA. Before I go into it and answer that first. So let me say that I really do appreciate everybody's interest in the program. It's a somewhat different situation than we've found ourselves in before.
And the data that we're generating in the phase 3 trials will provide me with a lot more and our team with a lot more details that will allow us to be able to answer your questions with greater clarity regarding the timeline. So we have had a pickup in enrollment, Alethia, since we've made the modifications to the programs, And as I said today, really, I think we don't need it for labeling necessary, but it would give clarity as to whether there's any risk associated with a male utility and so forth because it is a male safety study. So it's not required, but it's obviously advantageous for us to have it in all of those respects. As I said to you, this is an issue that we're really addressing an FDA issue of a non clinical finding that we observed in preclinical animal studies. We've seen a pickup in enrollment.
I don't want to get into specifics about the numbers, but there has been a significant pickup in enrollment. And I'll keep watching. And we will keep watching that process very carefully to advance our timelines. Once we have the data from the 3 phase 3 FINCH trials, we will be able to initiate further interactions, discuss the MANTA study and its progress more and then be able to provide
Evercore ISI. Your question please.
Hi, thanks so much for taking my question. I have one for Robin and one quick clarification. On something John said. So Robin, there was an expectation among investors based on a lot of the comments you shared, and the rest of the shared at the January conference that, 2018 was the trough in 2019 should be a growth year in product sales. But judging by guidance, at it doesn't quite look like that.
So can you please go over that? And also particularly curious about, HepC, because it looks like versus 4Q run rate, there isn't a whole lot erosion modeled into it. And John, just to clarify something you mentioned on NASH earlier, is there a hierarchical analysis for the low dose versus high dose in the readout or is the P value being split? Thank you very much.
So, Umer, let me start with your question on guidance. And so I just want to reiterate, as I've said, your conference, I mean, yes, we are very focused on returning to growth in 2019 and really believe that's achievable. If you look at the sense of our HIV franchise. As I've said, we expect double digit year on year growth stabilizing trends in our CV business as well as the momentum of our cell therapy franchise, whereas you saw, we expect it to practically double, this year. I think the other thing we've tried to do is to be very transparent in our 2019 guidance of outlining those unplanned factors in 2018.
That definitely will impact growth or the level of growth that we expect in 2019. The other thing I want to point is just our philosophy around setting beginning of years. It remains pretty consistent with how we've done it prior years, and it includes all the uncertainties that you you could expect that could impact our franchises. I mentioned several on the call and just take FX, that alone volatility could have a plus or minus $300,000,000 impact. So yes, the guidance, particularly our first guidance of the year, does include downside risk.
We're going to monitor those and manage them throughout the year. But our conviction as well as our confidence around returning a net product revenue growth is very, very strong. And we're going to look forward to updating you throughout the year, as, as, activities progress across our franchises.
In regard to your second question, it's John. We took 2 doses into the Phase III trials a, because we had target engagement of both doses in terms of the immunohistochemistry. We also allowed ourselves to have another chance in terms of the safety profile that might be potentially differentiated at lower or higher doses. There were the 2 reasons for taking 2 doses forward into phase 3. And without getting into all the details of the statistical analysis plan, we will be able to compare both doses to Placebo in terms of the primary endpoint.
Thank you. Our next question comes from the line of Cory Kasimov from JP Morgan. Your question please.
Hey, good afternoon guys. Thank you for taking my question. I wanted to ask on the cell therapy side of things. Can you talk about the source of your confidence in the projected for Yescarta in 2019. I believe you said it's up $200,000,000, given there's only $6,000,000 of sequential growth from 3Q to 4Q.
And along these lines, I think you guided having more centers online for the product in Europe by the end of 'eighteen than where you ended up. So how should we be thinking about kind of the cadence of opening centers in into 2019 and how that plays into your guidance? Thanks.
Hi, this is Laura. Thanks for the question. I'll say that our launches of Yescarta have really made excellent progress, both in the U. S. And in EU.
As part of our guidance, we do expect gift card revenue to nearly double as you had mentioned. So we feel like we have very, very strong momentum. We are seeing greater depth and breadth of treatment with Yescarta across the 68 certified sites in the U. S. So When we started off, there is a process of the institution really figuring out how to operationalize treatment And we had a very high amount in the 1st top 20 academic institutions.
We're starting to see that spread further across the 60 eight tuition and also, like I said, deaths of patients coming through. In addition, at ASH, as we mentioned, the data that was presented for the follow-up to the real world evidence. I think really is providing that extra energy in the community about the importance of treating not only at the obviously the 68 sites, but what's more important is that the community oncologists are referring these patients into the sites for treatment. And we do have a field force focused on helping with that referral process. And you did ask us specifically about Europe.
So we do have 12 sites in Europe that are, actively engaged and we will tell you that in terms of what we're seeing in Germany, we're very, very impressed with the the results and we continue to have additional Jeremy actually in the UK. And we also have, provided product and open up sites in France, and we will continue to expand throughout 2019, in the European markets.
Thank you. Our next question comes from the line of Phil Nadeau from Cowen and Company. Your question please.
Good afternoon. Thanks for taking my question. Question on the HIV franchise, I think in your prepared remarks, you mentioned that the use of TDF generic regimens is a risk to HIV pricing this year. And in fact, we have seen some payer programs to incentivize the use of those generic regimens. So if you could maybe talk in a little bit more detail what you are seeing from payers and the impact on pricing of those generic regimens how they're being used by physicians and should payers get more aggressive about, recommending their use?
How would gateway to counter that? Thank you.
So this is Laura. Thank you for taking the question. Yeah, that was a pretty, consistent question that we had at the JP Morgan Conference too. And when we look at specifically one particular pair that was emphasized, we really have not seen any major impact at all. As a matter of fact, when we look at the program, which was specifically supporting Symduo, We saw no more than 100 prescriptions generated during a 10 month period of time.
And in addition to that, in December, United basically sent a letter out to a physician saying they were no longer going to run the Myscripts program. So that's, I think that that was an effort that was tried to see if patients would choose to switch back, but we really did not see it in any impact.
Thank you. Our next question comes from the line of Salim Syed from Mizuho Securities.
Taking the questions. I actually have 2 quick ones, if you don't mind. The first is on HIV Japan. So if I recall at the end of last year, towards the end of last year, you guys bought back HIV rights from Japan Tobacco.
I
was wondering if you could just give us some color. How should we be modeling that opportunity coming out pin now that you are marketing that solo? And what should we be taking out of the royalty line where I believe you previously booked the economics? And then on the second question, just on your allo CD19 cart, I'm wondering if you guys view CD19 CAR and K cells therapy as complimentary or competition to your ALLO T cell therapy? Thank you.
So maybe I'll start with the HIV question, Salim. Thanks for asking that Yes, we're really excited about the opportunity in Japan. It is included in our guidance. And to your point, in the past, we got between about $50,000,000 $60,000,000 a year in Japan Tobacco Royalty. So that was in total revenue, not credit product revenues.
So net net, this is a positive for us and that we'll now see those revenues flow through net product revenue, but we'll lose that royalty contract and other, going forward. So again, I think very excited about gaining the commercial rights to the HIV products. And Laura, I don't know if you want to expand a bit on the commercialization of that relationship. At all?
Yes. So the teams have been actively working in this move for a smooth transition, for the HIV franchise. I think It's not only the HIV franchise, that exists most currently, but it's really the opportunity this year 2019 to launch Biktarvy. So we're really, really excited about that opportunity. And, the teams, like I said, are working hard and we appreciate the great partner with Japan Tobacco on, helping us with the conversion and building this franchise for us in helping us with the a successful launch.
In terms of the question, Salim, related to the allogeneic program. As I said on the call, we are very pleased to announce that we hope to have our IND for our allogeneic CD19 program this year. And we will engineer certain factors into that program one of which we've already announced that will be HLA high related that will have an effect on NK cells that will allow, we hope. An advantage in terms of persistence of those cell persistence of the manipulated or engineered CAR T cells. So it's an early field, more to be seen lots of different approaches.
We are pleased with our progress so far.
Thank you. Our next question comes from the line of Terence Flynn from Goldman Sachs. Your question please.
Hi, thanks for taking the question. Maybe just on selonsertib, I was just wondering if you can confirm if you'd be able file on only one positive phase 3 trial or if you need both of those trials to file? And then would love your thoughts on how you see this market playing out over the near and longer term, under a positive outcome for the STELLAR studies. Importantly, what are the key inputs pricing? Do you need the event free survival data to really drive the value proposition?
Or do you think just the histology data is enough? Thanks.
Thanks, Terence. Look, we would like those studies to be positive. They're imminently going to be available and the next quarter or a few months as well. If one was positive and 1 was negative, as you outlined, we'd have to have a discussion with the regulators. And that would be something that we would discuss analyzing data in that situation.
Look, in terms of pricing and moving forward, I'll hand those aspects on to Laura, but Absolutely.
Yes. Thank you, John. Thank you. So obviously, it's too early to really comment on our pricing strategy. But of course, we modeled scenarios I will say that the medical affairs team has done a lot of work from a health economics perspective.
We're quite familiar with the overall cost of an F3F4 patient. These patients are extremely expensive to the system So having that real world data, which shows us how expensive and unfortunately, how many patients when they get to that level really are in pretty dire need, we can take that information coupled with what John produces from a clinical perspective and be able to utilize that for our discussions.
Terence, just to add, it is subpart age approval. So once we have the histological endpoint at week 48, that's that would then allow approval of the drug that would be linked to the 5 year follow-up to show the improvement in clinical benefit as well over time. Thank
you. Our next question comes from the line of Ying Huang from Bank of America Merrill Lynch. Your question please.
Hi, thanks for the questions. So maybe first for Robin, in your assumption for the incremental SG and A for 2019 impact for the launch for Filgotinib and NASH, I assume that will probably mostly occur in the second half. And if NASH unfortunately fails, does that mean SG and A would actually be lower than expected? And then secondly, on the assumption for the HIV launch in your guidance, does that assume incremental, more so is from dolutegravir containing regimens or not in 2019? Thank you.
Sure, Ying. So, first to talk about SG and A, As I mentioned earlier, yes, it is the ramp in SG And A is more second half twenty nineteen. Don't use Q4 2018 as your baseline. Yes, it's an unfortunate yes. If for some reason, we would not launch our SG and A expenses would go down.
And that is hopefully not what happens. This is one place where as a CFO, I hope we spend every single dollar that we've allocated. I'll also add that, again, because of the health of our HIV franchise, I didn't mention earlier, but there is a component of incremental investment we're making there as well. But to your question, if NASH did not launch, you would have lower expenses. If you think about 100,000,000 for us in terms of, SG and A spend or expenses in general, it's about $0.06 a share.
And then, Nate, there is a question on the HIV launch assumptions in terms of a competitor I think Ian, it's safe to say we're not going to get into our detailed assumptions of our guidance, but we fully anticipate, biktarvy will go on to the best selling single tablet regimen.
Our next question comes from the line of Carter Gold from UBS. Your question please.
Thanks guys. I just wanted to dig in a little bit deeper to the EU dynamics in HIV. You obviously highlighted a couple of countries still to launch with Biktarvy. But you were a little bit more, I guess, opaque on around, if that business will sort of stabilize this year, and or return to growth or is that really something we should be looking to 2024? Any color there would be appreciated.
Thank you.
Yes, this is Carter.
Yes. Okay.
Hi Carter. This is Robin. Maybe I'll start and if Laura has any color. Yeah, I would say in 2019, we actually don't expect U. S.
HIV revenues to grow. But we'll have the full year impact of genericization And as Laura talked about, we'll continue to see that ramp of our Descovy based products. And keep in mind over the 2 years, we'll be launching Biktarvy throughout Europe. The one component of that quarter sequential decline that we saw was a one time adjustment we had to make relative to prior periods where certain Southern European countries reach a cap in terms of spending on pharmaceutical products. And then they do what's called clawback.
Kind of an additional tax. There's been a lot of changes in governments there and we did make an additional adjustment. If you take that out, I'd say the sequential declines are more consistent of what we've seen in the past. But beyond 20 team. Again, Laura talked about the great uptake of Descovy and with Biktarvy.
We do expect over time in 2020 or 2021 in return to to growth for, EU HIV?
Yes. So I'll just add a little bit. I think Rob it very well. In terms of launches, we've definitely been able to with Biktarvy launch. Like I said, just some at the very end of the year, some of the big countries, what we have launched is going on all through 2019 for Biktarvy.
There will still be erosion of generics occurring through 2019. So we had it in 2018. We'll see it happen through 2019. But we believe we're going to have some erosion, but the conversion of the, to the Escobi based regimen being at 80%. Those three variables, we believe that we will be able to move through 2019 and then continue to grow from that base.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to management for any further remarks.
Thank you, Johnson, and thank you all for joining us today. We appreciate your continued interest in Gilead as the team here looks forward to providing you with updates on our future progress.
Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.