Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 20 20 Gilead Sciences Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Senior Director of Investor Relations, Doug Maffei.
Thank you, Andrew, and good afternoon, everyone. Just after market closed today, we issued a press release with earnings results for the Q1 2020. 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 Daniel O'Day, Chairman and Chief Executive Officer and Andrew Dickinson, Chief Financial Officer. Also on the call will be Joanna Mercier, Chief Commercial Officer Murdad Parthi, Chief Medical Officer Christy Shaw, Chief Executive Officer of KITE and Diana Brainard, SVP and Head of HIV and Emerging Viruses Therapeutic Area.
Before we begin with our prepared comments, let me remind you that we will be making forward looking statements, including risks and uncertainties related to the impact of the COVID-nineteen pandemic on Gilead's business and results of operations. Plans and expectations with regards to products, product candidates, financial projections and the use of capital and 2020 financial guidance, 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 earnings press release and our latest SEC disclosure documents. All forward looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward looking statements. Non GAAP financial measures will be used to help you understand the company's underlying business performance.
The GAAP to non GAAP reconciliations are are provided in the earnings press release as well as on the Gilead website. I will now turn the call over to Dan.
Thank you very much, Doug, and good afternoon, everyone. Well, as you can imagine, it's been an extraordinary week for Gilead given the terrific news on our investigational antiviral drug remdesivir. The news shared yesterday that the data show the potential of remdesivir to help ease some of the burden of the pandemic is the outcome that we had all hoped would be possible. We're incredibly humbled to think about what this news could mean for patients and communities. I'd like to start by sharing my thanks to everyone who has helped to bring remdesivir to this point, including all those involved in the collaborative clinical trials, the trial investigators, governments, hospitals and above all the patients who participated.
I want to acknowledge our internal teams that have been working day and night on remdesivir for the past 3 months, following many years of research long before the outbreak began. Because of their remdesivir news, the original focus today's call has somewhat shifted. I'm sure you have a lot of questions on the results and the next steps. We'll provide an overview of what was a strong Q1 for Gilead, but with an abbreviated set of opening comments so we can leave more time for questions. I'll speak briefly about the quarter and remdesivir before turning the call over to Andy to discuss financial details and the impact of COVID-nineteen on our business.
As Doug noted in the opening, Christy, Joanna, Mehrdad and Diana have joined us today to answer your questions at the end of the call. Gilead has been built to withstand significant challenges. There's a short term uncertainty for all of us, but the solid foundations that Gilead has laid over the past 30 years and our focus on transformational therapeutics give us confidence in the long term durability of the business. We'll do our best to provide you with a clear picture of where we are and what we expect as far as the near term impact of COVID-nineteen, while acknowledging that as we all know, these are uncertain times with many unknowns, not least of which is how long the pandemic will last. So turning to the quarter, I'll use the framework we introduced at the start of the year with the 3 pillars that will shape our future: a strong core business, our internal pipeline and supplemental growth opportunities that are being enabled through our strategy.
Our performance in the Q1 demonstrated the strength of our foundational business once again with double digit growth in HIV. We reached and in fact exceeded all of our targets. Revenues for our HIV franchise were up 14% year over year. This was driven by both treatment and prevention as Biktarvy remained the number one prescribed HIV regimen in the U. S.
During the quarter and approximately 38% of individuals on PrEP are now taking Descovy. What I would say in general about where we stand in HIV is this. We are very confident in the underlying competitiveness of our products and our position as a leader in HIV. Completing the picture in our core antiviral business, we saw sustained revenues from our HCV franchise in the last quarter. Since the introduction of authorized generics in the U.
S, we've regained market share and now hold around 61% of share through ASEGA and Gilead. So moving from our core business to advancing our pipeline, I'll provide just a brief overview. More detailed information is available as part of our Q1 earnings materials in the Investor Relations section of our website. Filgotinib, as you are aware, is under regulatory review in the United States, Europe and Japan as a potential treatment for rheumatoid arthritis. Our teams are preparing for a competitive launch and remain in close contact with regulators to understand the effect COVID-nineteen could have on review timelines.
In HIV, we made progress across our pipeline sharing important data at the virtual CROI conference with our innovative long acting antiviral and HIV cure programs reinforcing our long term commitment to people living with HIV. In cell therapy, the FDA accepted KITE BLA for KITE X19 as a treatment for relapse and refractory mantle cell lymphoma during the Q1 and granted a priority review designation. As you might recall, the European Medicines Agency validated our application in January. This represents really important progress. Patients with relapsed mantle cell lymphoma, a rare form of non Hodgkin lymphoma are in need of new therapies.
If approved, KITE would be the 1st company with 2 cell therapies on the market. So I've touched on our strong core business in advancing our pipeline. Now I want to say a few words about the work we are doing to expand our pipeline through business development, including of course the acquisition of 47 completed earlier this month. Acquiring 47 is a great early example of our strategy in action. We said we would build on our core area of expertise, which as you know are virology and immunomodulation that we would keep a high bar and that our business development efforts were focused on clinical stage assets such as migrolizumab, which we gained as a part of this acquisition.
We're working to integrate the teams and the programs, a joint effort, which I'm leading with Mark McCamish, the CEO of 47, with the objectives of keeping things moving smoothly with migrolumab and defining a working model that supports continued innovation. Next month, researchers will present data on our next generation cancer therapies virtually at ASCO, including megrolumab and a number of abstracts that highlight the kite cell therapy portfolio. The presentations at ASCO underscore the strength of our scientific approach in immuno oncology and we look forward to sharing this latest research. Beyond 47, our business development team remains as active as ever. In the last month, we've announced 3 partnerships, a collaboration with 2nd Genome to identify biomarkers and potential new drug targets and inflammation, a licensing agreement between Kite and Teneo Bio covering a dual targeting CAR T therapies and a 3 year collaboration with Onco Innate to discover cancer immunotherapies.
Overall, we continue to maintain our momentum and I'm pleased with all the progress we've made this quarter. I'll now turn to remdesivir. The study results shared yesterday from the randomized placebo controlled Phase 3 NIAID study and from our own open label Phase 3 SIMPLE study in patients with severe disease are important progress as we seek to understand the role that remdesivir play in easing the burden of COVID-nineteen around the world. These trials are part of a suite of clinical trials investigating the effects of remdesivir. We designed the clinical research program to ask multiple questions in parallel, including which groups of patients are most likely to respond and when to treat and for how long.
Various study designs were used from placebo controlled to open label to answer very specific questions in each case. We expected that the answers would emerge around the same time and that taken together they would form a clear picture of how remdesivir might best be used for patients. Yesterday, we answered important questions with the initial results of the NIAID trial and simple trials. The NIAID data demonstrated that patients with COVID-nineteen who received remdesivir recovered faster than similar patients who received placebo. The results from the Gilead sponsored SIMPLE study address a critical question about dosing.
The data from the first of the simple studies showed similar clinical improvements in patients with severe symptoms of COVID-nineteen regardless of whether they received 5 or 10 of treatment. The ability to shorten duration for severely ill patients is very important. It means patients can go home earlier, hospital resources can be freed up and it has a positive impact of course on our supply. We've calculated having 1 point 5,000,000 doses by the end of May amounting to 140,000 treatment courses at a 10 day treatment duration. The Gilead Simple study suggests we may now be able to significantly increase the number of courses available with a 5 day treatment duration for certain patients.
As we announced previously, we are donating our entire existing supply, frankly, because this is the right thing to do at this time and the human health need in the pandemic. As you know, we've been ramping up production since January. We've significantly reduced lead times and expanded our global network of partners. As additional raw materials come available, we'll have an exponential increase in supplies towards the latter half of this year. We hope to have produced enough supply to treat over 1,000,000 patients by year end.
We are also working to build a global consortium of pharmaceutical and chemical manufacturers to expand global capacity and production. It will be essential for countries to work together to create enough supply for people all over the world and we look forward to these collaborative efforts. For access and allocation, we'll work closely with governments and healthcare system to provide access. We intend to allocate our available supply based on guiding principles that aim to direct global access for appropriate patients in urgent need of treatment. We recognize there's a lot of work left to be done and a long way to go in finding medical solutions to end the pandemic.
And we'll continue to work with regulatory authorities on the best path forward for remdesivir. At the same time, all of us at Gilead are relieved and grateful that our efforts on remdesivir have led to this important progress at a time when we all need a beacon of hope. Before I turn the call over to Andy, I want to reiterate how grateful we are for the partnership with many groups outside Gilead to support the work on remdesivir. The collaboration throughout this pandemic has been critical.
We also want to say how proud we are of the way our employees have demonstrated such dedication to meeting the needs of patients, those with COVID-nineteen as well as those with conditions including HIV, viral hepatitis and cancer who depend on us for their medications. So with that, I will turn to our financial comments and then we'll move to Q and A. Good afternoon, everyone. My name is Andy Dickinson. I'm the company's CFO.
Before I start, I'd also like to acknowledge the incredible work of our 12,000 employees and what they're doing during these challenging times. Their dedication and resilience is really inspiring. In addition, from the outset, I'd like to emphasize that our core business is very strong, durable and provides a solid foundation to navigate the current environment. We continue to have confidence in 2020 and beyond. The pandemic has not diminished that view at all and we remain confident in our long term outlook.
I'd like to first briefly share some commentary on our very strong Q1 results. And I'll remind you that the earnings materials posted on our website contain all of the details, including preliminary color on the impact of COVID-nineteen on our business to date, as well as our preliminary expectations for the coming months. We are happy to walk through the results and the impact of COVID-nineteen on our business to date in detail during the Q and A session. Starting with our revenues for the quarter. Total revenues for the Q1 were $5,500,000,000 with non GAAP earnings of $1.68 per diluted share.
This compares to revenue of $5,300,000,000 with non GAAP earnings of $1.67 per diluted share for the same period last year. Product sales for the Q1 were 5,500,000,000 dollars down 6% sequentially and up 5% year over year. I'd like to call out that we believe approximately 200,000,000 dollars of revenues were pulled forward in Q1, primarily for our HIV franchise due to the COVID-nineteen pandemic across the U. S. And Europe.
This was the result of payers and pharmacies providing greater access to medicines by allowing 90 day refills and in some cases early refills among other offerings. We expect this to reverse itself out over subsequent quarters. Now turning to our expenses. Non GAAP R and D expense was $1,000,000,000 for the quarter, up 8% compared to the same period last year, primarily due to the ramp up of remdesivir, including manufacturing scale up and clinical trial costs. Non GAAP SG and A expense was $1,100,000,000 up 4% compared to the same period last year, primarily due to higher promotional expenses in the United States related to our HIV products.
As Dan highlighted, we completed our acquisition of 47 this month. We currently expect to incur approximately $120,000,000 in expenses this year related to 47, primarily in research and development. In addition, I'd like to highlight that the acquisition qualifies as an asset acquisition. And as a result, we currently expect to incur approximately $4,800,000,000 in GAAP R and D expense, primarily related to in process research and development. Turning to our strong balance sheet.
During the quarter, we generated $1,400,000,000 in cash from operations. We ended the quarter with $24,300,000,000 in cash and marketable debt securities. We repaid $500,000,000 of debt, paid cash dividends of $874,000,000 and repurchased 19,000,000 shares of stock for $1,300,000,000 I want to note that we paid approximately $4,900,000,000 in cash upon closing of 47 in April. Our strong balance sheet and disciplined allocation of capital has positioned us to continue to grow and build our business despite current environment and associated risk. We remain very confident in the durability of our business and expect to generate significant operating cash flow during 2020.
I'll turn now to COVID-nineteen and its impact on our business. Like others, we have anticipated that there could be a short term financial impact to our company and to the sector as a whole. We continue to carefully review our results to assess the potential magnitude of that impact. Towards the end of the quarter and in April, we did begin to see some effects on our business, primarily as fewer patients accessed healthcare and the number of new starts in HCV and HIV prevention began to slow. However, to date, the overall effect on our business has been modest and it remains unclear what the ultimate impact will be.
Given this significant uncertainty regarding the duration and magnitude of the COVID-nineteen pandemic, we are actively planning for a number of scenarios and we'd like to focus on our base case assumptions today, which we are making from data drawn from a number of sources, including epidemiologists, economists and public health officials. First, these base case assumptions suggest the pandemic will peak between March July. We would point to recent data from Johns Hopkins, which show trends reflecting a slowing of the rate of new cases since late March in the United States and a declining number of new cases in some critically affected regions of the world. 2nd, if the virus returns in the fall or winter, the impact will be lessened due to preparedness and hopefully the emergence of therapeutics, including potentially our own remdesivir. 3rd, the global economy will begin a recovery late in Q2 and a return to the pre COVID dynamics
will be underway by year end.
We have, of course, considered external views that anticipate more or less favorable scenarios, but we believe this best this base case provides the best foundation at this time to plan in this uncertain situation. Let me share a few qualitative perspectives on potential business implications of this scenario. Please bear in mind the forward looking statement disclosures we shared at the beginning of the call. I'd also like to highlight again that we have added significant commentary throughout the investor presentation that's posted on our site and we would encourage you to review those materials. There are 3 key takeaways from our perspective.
First, we had a very strong quarter. 2nd, to date, the impact on our business has been modest. And third, we remain very confident in our long term outlook. That said, on the commercial side, driven by lessened health care provider access and fewer patient visits, we may see revenues adversely impacted in Q2 and potentially beyond. This would likely be different across our franchises with our HCV franchise disproportionately affected due to the acute care nature of the therapy.
We believe that the majority of any revenue decrease in HCV revenue due to the pandemic could be recouped in a warehousing type effect later in 2020 or into 2021. In HIV, early signals suggest that switches both for treatment and prevention patients may be impacted by COVID-nineteen as people defer healthcare visits. Specifically, in April, we are observing reductions in Descovy for PrEP initiations and lower switch volume. PrEP refills may also be affected, but it's still too early to fully understand any trends here. In contrast, our HIV treatment business is less likely to be significantly impacted as we believe patients will continue to prioritize refilling their prescriptions and access their physicians through telemedicine.
In cell therapy, reduced access to authorized treatment centers could unfortunately result in critically ill patients having access challenges, which would impact the business. Turning to clinical development. Like many others in our industry, we are pausing enrollment for most trials. The exception to this is studies where patient outcomes are critically impacted such as trials of our HIV capsid inhibitor in heavily pretreated individuals who have few other treatment options and some of our KITE programs that have enrolled patients with cancer who are critically ill. Enrollment in these studies is at the discretion of the investigators.
Overall, we expect reduced clinical development expenses in the short term. In addition, the dynamic could lead to delays in potential approvals for pipeline assets over the longer run. WIF Challenge brings opportunity to health. And as Dan described earlier, we are excited by emerging results on remdesivir as a potential therapy for COVID-nineteen. As we ramp up further development and manufacturing of remdesivir, we will incur additional costs beyond those forecast at the beginning of the year.
The magnitude of this investment is dependent on the continued evolution of the data, the duration of the pandemic and other factors. The potential range of this investment for 2020 is up to $1,000,000,000 and the accounting treatment of this investment is dependent upon a number of factors, including potential regulatory approvals. Where authorized by regulatory authorities, Gilead will focus on making remdesivir both accessible and affordable to governments and patients around the world. Given the continued uncertainty in the trajectory of the pandemic and in remdesivir clinical data, it's premature to define what the right post donation business model is to create a sustainable long term supply for global needs. In the context of a strong underlying business and Q1 results, we will continue to monitor the situation and expect to provide additional insights and outlook on our Q2 earnings call.
I'd like to close by thanking our team for their extraordinary efforts and for delivering a very strong Q1 during these challenging times. We can now turn the call over to Q and A. Operator?
Thank you. And our first question comes from the line of Michael Yee with Jefferies.
Yes, I'm back.
So my question is for you guys on remdesivir as it relates to the line. Can you just describe the inputs and how to think about what revenue impact to the positive remdesivir could have this year?
What are the
impacts on that inputs into that? On expenses, you guys obviously don't expense guidance. You kind of walk through that. You described upwards of dollars for Remdesivir. Maybe just walk through the inputs there and how to think about why would it be on the low end and comment on that because it makes the model here.
So talk to that direct to room business. Thanks.
Thanks, Michael. Appreciate the question. And sorry, guys, that I got cut off there before. Thanks, Andy, for picking up. The only thing I want to conclude with as my comments is probably the most important comment is to really thank the colleagues throughout Gilead that are working on remdesivir and non remdesivir projects alike.
They've really kept the momentum going in quarter 1, and I'm humbled and proud to be working with them. So Michael, thank you for the call. On the revenue side, it is just as Andy mentioned also and I mentioned it's too premature. There's a lot of moving parts right now. Our focus will be on making sure we come up with a sustainable model that allows us to provide remdesivir to patients around the globe that is intent on providing access and affordability.
We're just now going through the clinical data, the demand scenarios, the regulatory approvals, all these things are essential for us to input inputs into our plan about how that will work post the donation. So we can't really give more insight into that at this stage, but certainly when we can, we will. On the expense side, Andy, I mean, obviously, you had mentioned already that up to $1,000,000,000 and unclear on how the accounting will occur, but perhaps you want to add something else to Michael's question?
Sure, Michael. At this point, it's too early to tell you where that's going to fall in the P and L because there are a number of scenarios. It could those expenses could fall into cost of goods sold. As you know, they could be R and D expenses. And in some scenarios, a portion of them could also be SG and A expenses.
So at a high level, the expenses that we're referencing, as you would expect, come from manufacturing predominantly and to a lesser extent clinical trials. And I think that's our best good faith estimate at this time based on what we know in terms of the expenses that we see as we ramp up over the year. And we'll do everything we can to provide more color and commentary in particular on our Q2 earnings call.
I appreciate it. Up $1,000,000,000 of expenses and not knowing the revenue, it's an interesting position. Appreciate it. Thank you.
Thanks, Michael. We have the next question, please.
Certainly. Our next question comes from the line of Cory Kasimov with JPMorgan.
Hey, good afternoon guys. Thank you for taking my question. Wanted to also ask on remdesivir, no surprise. I was wondering if you could talk about the formulation work that's underway to potentially develop an oral and or an inhaled version of the product. Like, how far along might you be on this front?
And when can we expect to see something more there?
Yes. Thanks, Corey. I'll start out and maybe others on the call want to add. But our focus, as you can imagine, since January has been on ramping up the supply, particularly so that we have the lyophilized version that's appropriate for intravenous administration, the clinical program, all of that. So that's really where we've been.
At the same time though, we have had a team just as with everything with this program, including the supply. We've had teams that have been really since the very day 1 in January, been focusing on success. And so if successful, what how else could we potentially develop this medicine? I think that's been taken into account from the totality of the clinical trial program looking at both critical, severe and moderate patients. But likewise, we've done the same thing with other alternative delivery mechanisms, presuming success that might make it more convenient for patients or allowed us to broaden the patient group that can benefit from a successful antiviral.
And that work is, as you can imagine, still early, but we can't say a couple of things. It's not this particular medicine because it's heavily first half metabolized in the liver is not really appropriate as an oral formulation. We've known that for years, probably a decade. But we are looking into things like subcutaneous formulations and potentially inhaled formulations. And although it's too premature to give you timelines on that, rest assured that we are we've been actively working on those.
And as soon as we can give some timelines, we will, to see now particularly because of the efficacy that we've seen this week, we'll continue to pursue those with a great sense of urgency. But timeline is a little premature, know that we've been working on it now for several months.
Okay.
I don't know, Mehrdad, if you want to add anything. Okay, good. Mehrdad is okay. Is that okay, Corey? I know you need more, but we'll give you more as soon as we can.
No, no, fair enough. Appreciate you answering the question and good luck with continued progress there.
Thank you, Corey.
Thank you. And our next question comes from the line of Brian Abrahams with RBC Capital Markets.
Hey, guys. Thanks for taking my question. Two questions on remdesivir, if I could, and appreciate all the work that you guys are doing to bring this treatment to patients. First off, on the NIAID study, can you give us any sense of the proportion of patients who are involved in the interim? Is there any additional update that we should be expecting that could be a gating factor to availability and your level of confidence that differences in baseline risk factors didn't influence those results as may have happened in the China study?
And then just secondly related to supply, any particular subsets of patients across the studies where you may be seeing the most optimal benefits we might consider working with regulators to
direct the agent to while you're scaling up? Thanks.
Yes. Thanks, Brian. Sorry, just to be clear on your second one related to supply, you said, is there any subset of patients? Can you just complete that one more time?
Yes. Any subset of patients where you might be seeing more benefits, more optimal benefits across the study where you might consider working with regulators to try and direct the agent to initially as supply gets scaled up in the pipeline.
In terms of
like an allocation, yes, with limited allocation, you mean, or limited supply. Exactly. Yes, got it. Okay. I'm going to turn it over to Mehrdad and I'll let Mehrdad take a stab at both of us, please.
Hi, Brian. On the first question, this is Murde. On the first question, we have not seen a lot of the baseline demography and the sorts of data that would help in terms of answering your question on the NIAID study. So, I think we're all going to have to wait for those data to get published and get put out for us all to review. So I think that's pending and we'll look for that to come out.
In terms of patient subsets, I think our data and if you look at who's been enrolled in the trials overall, I think we're clearly looking at the hospitalized patient population and we're looking at patients who are requiring supplemental oxygen as the primary population that we're after, including those that may either become ventilated or may start out mechanically ventilated. Certainly, our data support that from our open label trials. The NIAID study enrolled that breadth of patients, but we have not seen subgroup analyses of the different patient populations to give you clarity there. But we believe it will be in that fairly broad population early on.
Got it. Thanks for that.
Thanks, Brian.
Thank you. And our next question comes from the line of Geoff Meacham with Bank of America.
Afternoon, guys. Just want
to say great job on the whole team really for remdesivir development. A couple of points here. On COVID-nineteen, have you guys looked at other nukes for earlier stage patients? Just thinking about 938 or ceposbuvir. I know you guys have a lot probably that is there that could be more applicable to mild to moderate patients.
And then on the remdesivir access, is there a model to license out IP and or manufacturing? I'm just thinking about how to accelerate perhaps broader access outside the U. S. Thank you.
Yes. Thanks so much, Jeff, for the thoughts. Everybody at Gilead will appreciate your sentiments. Let's start with COVID and the other nukes. I didn't know whether Mirdad or Diana, you want to handle that.
I'm not sure how you want to
Sure. I think right now this is Mirdad again, Jeff. Thanks for the question. Right now, we do believe that remdesivir is the best molecule and has the best potency against the coronavirus. Anything we do, we look at and both we and others have been looking for other molecules that could have potency here.
Remdesivir is certainly the most potent molecule that we have and that's been our focus. We'll certainly keep looking there. One of the reasons we are focused on looking at alternatives formulations for remdesivir is to address the question that you asked, which is how can we get to other patient populations who may benefit from the drug, as outpatients, for example. And I think in the short run, I would I believe that that's going to be the best the short to medium term, I think that will be the best approach for us to go. And then I think your second question was about manufacturing, right?
Yes. So I mean, Andy, maybe you want to take this question as well because you're leading the group on this.
Yes. And I'd be happy to. Hi, Jeff. Thanks for your comments. Look, on the manufacturing side, I'd say a couple of things at a high level is that, again, our primary focus is on providing access to patients around the world.
So just like we did with our HIV medicines and ACV medicines, we are deeply focused on this. We are we have 2 separate work streams. 1 is working on our internal supply chain and making sure that we have a robust supply of starting materials intermediates and a strong manufacturing consortium built with companies around the world. You've seen some of the references to that in Dan's CEO letters and I would expect that we'll provide some additional information over the coming weeks months. We do have a second work stream where we are in discussions with large sophisticated companies around the globe exploring the potential for other companies to help establish separate end to end manufacturing supply chains.
The difficulty there as you might imagine is that given the scarcity of some of the starting materials, we want to make sure that we don't do anything to impact our supply chain given that that is the quickest route to getting product to patients who need it all around the world. But we are looking at alternatives. It's too early to give you any specific guidance or to tell you where we're going to land on it. But we are working with a number of companies around the world that you and others know well to see what we could do together and if there's an opportunity to benefit patients in that way. So I'll leave it at that and then you see
That's great, Andy. And I appreciate your leadership there with your business development head on working with manufacturing. I would just add that we've been a student of other small molecules in this type of setting, whether it's Tamiflu in the past and some of the scale up and stockpiling that occurred there or students of our own work, if you like, within our HIV portfolio between the developed and the developing world. So we're putting all that knowledge to work as we think about moving fast and wide in terms of our ability to produce supply, but also thinking very thoughtfully about a global footprint here, which would allow for this to, as Andy said, have different geographic representation, which we think is going to be really important. So more to come on that, but we've had teams really focused on that day and night for the past several months, just to give you an idea of that.
Thanks,
Jeff. Okay. Thanks.
Thank you. And our next question comes from the line of Geoffrey Porges with SVB Leerink.
Thank you very much. And I can't help but echo the comments and appreciate all the great communication as well from Dan on Dan. So on remdesivir, I'll ask a controversial question that's no surprise. But Dan, Gilead has generated effective returns for investors and effective return on capital from treating hepatitis C and potentially nearly eliminating hepatitis C from treating HIV and turning it into a chronic disease and for building a really important global stockpile of an antiviral for influenza. So what's special about COVID?
Should we assume that the capital returns and the profitability for providing a global treatment for COVID long term after the first 200000 or 300000 courses are provided on a donation basis. Should we assume the returns are going to be similar to the returns that you've generated in other parts of the business? And then just quickly, can you give us an update on filgotinib? And can you launch this on a virtual basis? Or do you expect to be out of a
Joanna, I'll let you handle the Filgotinib, but let me start with your first question, Jeff, and thanks again. And obviously, we are conscious of the fact that this is unique and this is different. You mentioned some parallels to HIV, HCV, even Tamiflu. But there's been no other time like this in the history of the planet than any of us have been alive. In terms of the far reaching effect of this pandemic, both medically, from a patient perspective, most importantly, but also economically.
And so I think there is no guide book out there. There is no rule book out there other than that we need to be very thoughtful about how we can make sure we provide access of our medicine to patients around the globe and do that in a sustainable way for the company, for you as shareholders. And we acknowledge that. And so points well taken. And I would I guess the short answer to your question is, I don't think there is a precedent for this.
And so we understand our responsibility and we understand our responsibility to a variety of different audiences as we approach this. So we'll be working back with you and we'll certainly be getting feedback from different individuals as we evolve this and as we understand more data around this. But rest assured, we understand our responsibility. With that, I'm going to turn it over to Joanna please to talk a little bit about filgotinib.
Sure. So Jeffrey, I think just a quick update on Silgo. We basically have hired all of our home office personnel both from a commercial medical standpoint. We've hired our sales leadership, field leadership as well. And we're monitoring the situation really closely to be honest with you because nobody really knows when this ends or what's the new normal and when that begins.
And so we're just kind of monitoring that and planning for success to be honest with you to make sure that we are ready for launch for the second half of twenty twenty across all of the markets where we will get we hope to get regulatory approval with the U. S, Japan as well
as
to to the timing of this pandemic. Having said that, I will also tell you that a lot of our teams are doing virtual right now. Many of the markets are doing remote detailing, virtual speaker programs, etcetera. And we're working through this environment despite obviously the offices and patients not being open at this point in time. So we're working through all that and looking at the different scenarios.
I think we need to know a little bit more information on the timing of this pandemic and how that plays out towards the end
of this year.
Great. Thanks very much for the answers.
Thank you, Jeff.
Thank you. And our next question comes from the line of Matthew Harrison with Morgan Stanley.
Great. Good evening. Thanks for taking the questions and thanks for all your work with remdesivir. I'm going to ask 2 on HIV. One, can you just talk
a little bit about prep conversion
with DESCOVE? I think you said you're at 38%, which is actually fairly close to the target you guys were talking about. Do you think you can do better than that or not this year? And then I also noticed in the back of the slides you were talking about a long acting, bictegravir that you're putting in the clinical studies. Maybe you could comment on that?
Thanks.
Terrific. Thank you so much, Matthew, for the comments. So Joanna, yes, why don't you start and perhaps Diana can add on the development side.
Okay, great. Thanks for the question Matt. So HIV overall business is of course another quarter, solid quarter again this year. It's the 8th consecutive quarter of double digit growth. And that's obviously driven by both the treatment and the prep business.
So your question specific to Descovy, yes, so we just hit 38%. And so tracking exactly to our plan, right, we had said anywhere between 40% to 45% towards the end of this year. So we feel confident with that number. Obviously, as Andy mentioned in his opening comments, there has been a little bit of a slowdown from a switch standpoint in the prep market for obvious reasons, because patients are not going to their to the physicians' offices. But it's modest thus far and we think a lot of those will be able to recoup towards the end of this year when the pandemic does lift.
So we feel still very confident that yes, we think we're going to be in the range of the 40, 45 that we had originally set out and maybe even if all goes well and we can get out of this pandemic a little bit earlier, maybe a little bit north of that. So Diana, maybe to address the long acting? Yes, I'd be happy to. Hi, Matt. So as you probably know, we're really pursuing multiple shots on goal for developing a partner for our capsid inhibitor.
We are looking at molecules across different classes and part of that is looking at integrase inhibitor class and we've got really what's the best in class ideal integrase inhibitor right now with vitegravir. And so we've one of our efforts has been in formulating that such that it could be a long acting injectable and a potential sort of first generation partner for a capsid inhibitor. We've made a lot of progress. As you know, we've got great formulation team here and we're on the verge of getting that into the clinic now. Most Phase 1 sensors globally really have been shut down or paused.
So the timing there is a little bit uncertain, but we're ready and hoping to have data by the end of the year.
Great. Thank you, Diana. So why don't we go to the next question? Thanks, Matt.
Our next question comes from the line of Umer Raffat with Evercore.
Hi, thanks so much for taking my question. Dan, we really admire Gilead's efforts during the pandemic and the drug donations, etcetera. But as we go beyond that, it does seem like there will be a commercial business in the broader COVID landscape. And I don't want to peg you to a dollar number, but I do want to ask this. Do you envision Gilead's product offering for COVID being beyond remdesivir, for example, PI combinations and or even partnering with vaccine companies of sorts?
I'm just trying to understand how you envision this category for Gilead, if I may. And Miradad, if I may ask you a quick 2 part question. First, do you have a certain lung concentration in mind that you're targeting? And is that much less than the 20 micromolars that was laid out in the New England Journal paper? And do we have any data from humans on what lung concentrations are we actually seeing with remdesivir with the dose set in the clinic?
Thank you so much.
Thank you, Omer. Thank you for your comments. Thank you for your thoughtful work. Yes, getting back to remdesivir and how do we see this playing out over time. Again, I'm going to have to come back to some of the basis of what I said before, which is we really need some time now to reflect upon a very volatile changing situation to determine both on a clinical side, regulatory side, pandemic side, epidemiology, what the right sustainable model is.
Rest assured that we'll come back to you as soon as we can digest that and soon as actually a little bit more time passes, which was also one of the important reasons for the donation to allow to obtain more information as well about what that sustainable plan and model is. But I'll just make a couple of comments on what you said and it was also echoed by Doctor. Fauci yesterday, which is with the NIAID results and the highly statistical significant reduction in time to recovery, this now changes the landscape, if you'd like, for drug development within COVID-nineteen being that one has to now think about comparing to remdesivir and or looking at adding to remdesivir, which I think is exactly what the NIH trial is going to do now. And I'm sure, all of our collaborators within the drug development space, We have been working with them. We're going to continue to work with them on the most thoughtful hypotheses around how we might be a shooter just as one reflects upon the HIV building decades ago, that remdesivir becomes kind of the base therapy and one looks to try to improve symptomology improvements, mortality improvements, expanding patient populations.
And so that is yet another factor that will go into how we determine how best to create a sustainable solution for remdesivir. But clearly, all those things, we have been thinking about and now we have to accelerate now that we have these trial results. So more to come on that. I will have Mehrdad, you answer the lung question if you could please for Umer.
Yes. Thanks, Dan. Hey, Umer. So what I would say is the concentration that we're looking for, as you know, we think our EC50 in human cells is in the tens of nanomolar range. And we know our serum concentration gets in the micromolar range.
And so we should be more than adequately covered by achieving those levels with the current dosing paradigm that we have, probably by an order of magnitude or 2. Certainly in the serum and based on model data in non human primates as well as mice, We see more than adequate concentrations getting into the lung of those animals and in vivo efficacy in those animals. And I think the clinical benefits we're seeing suggest that that's exactly what's happening in humans as well. So I think we're pretty comfortable with where we are in terms of both dosing and exposure, including in
the lung.
Thank you very much.
Thanks a lot, Umer. Okay, may I have the next question please?
Our next question comes from the line of Alethia Young with Cantor Fitzgerald.
Hey guys, thanks for taking my question and thank you for your contribution in solving the world's Maybe just 1.5 for me. Were you surprised just with the severe kind of working as it did with an antiretroviral that you kind of think that you might need to have people kind of earlier in the virus for it to work and do you think it works better there? And then the second question is just a little bit around HIV. Are you seeing buying patterns changing in the public markets like the Medicaid, the
prisons, etcetera, etcetera? Thanks.
Yes. Thanks an awful lot Alethia again for your comments. I'm going to turn the first question over to Murdad and the second one over to Joanna. But just as I do on your first question, and I think Mehrdad can fill in the details here, but there's been a surprising consistency across all the different data elements in our clinical program from compassionate use to interrogating what we know about the China trial to the severe trial to the NIAID trial. And I think that is maybe not something that's completely well understood out there.
And I think, Murdad, as a part of your response, I think it'd be helpful for you to reflect upon that as well, if it's okay.
Yes. No, of course. I think Alethia, we all were using the parallel construct of influenza for our thinking around remdesivir, right, which was, you got to get in really early, given the viral kinetics in influenza and getting into late probably won't have much of an impact. And I remember an investor call a couple of months ago where I said that as well and that was certainly our expectation. However, the wildcard here and what I think we're still learning is what are the viral kinetics in patients with this virus?
How long does that last? And how quickly does it go up and how quickly can we have an impact on it. So I think the data are the data essentially. We are seeing efficacy across both patient populations, but also across trials that are really all tracking in the same direction as Dan alluded to. So even if you look at the China data, the hazard ratios for improvement are consistently positive.
The study was underpowered and I think the hazard ratios we'll probably see from the NIAID study are going to be in the same ballpark. But with an appropriate sample size, they're highly statistically significant. Similarly, I think when we look at the mortality data, when we look at all of those different factors, this virus seems to be behaving differently. Remdesivir seems to be having efficacy in a relatively broad patient population. And so I think we're learning as we go.
We'll learn more as more data are generated, right. We have our moderate data coming up where we'll be looking at it and even less severely ill patient population. So there'll be more data coming out in that population that may add to our knowledge base here to understand the spectrum. And as we talked about earlier, I think all those data will contribute to our overall understanding of how early do you need to be in? Do patients who have symptoms for less time do better?
Those are certainly the trends, but there certainly seems to be benefit even in patients who have longer duration of symptoms right now. Maybe I'll hand it off to Joanna for the HIV question.
Yes. Thanks Paretosh. So Bikesh, just a couple of things. We have a couple of moving pieces in the Q1 for HIV. So I just want to because it's not just one piece that's making the difference here.
And so the first one is obviously the seasonal inventory, right? There's a Q4 load up and then Q1, drawdown. Sure
many did as well, the prescription
number of sure many did as well, the prescription number of days per prescription rise and inventory to rise towards end of March. It had a bit of a mix of those two things. And specifically to government channels that you were asking the buying pattern, we do normally see in Q1 a little bit more of a higher mix towards government channels in the Q1 and that obviously negatively impacts our payer mix. So that is definitely happening in the Q1 of this year.
Great. Thank you, Joanna. Thank you, Alethia. Can we have the next question, please?
Yes. Our next question comes from the line of Mohit Bansal with Citigroup.
Great. Thanks for taking my question. And I would also add my appreciation for your efforts against COVID-nineteen. A quick one from my side, if you can help me. If you can can you please update us on your collaboration programs with Galapagos time lines at this point, both for IPF as well as osteoarthritis?
And specifically on osteoarthritis program, how important is it for Gilead to see the improvement in pain when we see the data for you to take a decision to obtain there? Thank you.
Thank you, Mohit. I'm going to turn it over to Murde. Thank you, Murde.
Yes. Thanks for the question, Mohit. So with the IPF program, there is a scheduled interim analysis that will be coming up early next year and we think things will stay on track. Again, I'll put some error bars around the pandemic, but I don't think that should be impacted at least today. So that will be something that we'll be clearly looking forward to and will be important to how we proceed there.
In terms of the osteoarthritis, it's a great question. I think while seeing structural improvement is going to be really important and interesting, certainly thus far the regulatory guidance has included looking at symptoms like pain for improvement. So we can push on that. Obviously, if we see structural improvements and we haven't been powered, for example, for pain, then we'll have to look at that and think about what the implications of that are and discuss it with the regulators. So I think what we'll be looking for is directionality on all the endpoints that we will be measuring to make the smart decision in terms of moving forward with that program.
Okay. Thank you. Great.
Thanks, Mukit. So let's go to the next question, please.
Our next question comes from the line of Robin Karnauskas with SunTrust.
Hi, guys. Thanks for taking my question. And again, great work on all the things you're doing to help us with COVID. So there's a lot of talk about RINVESTRA being approved for emergencies. And can you just clarify, does that mean at that point in time versus now or it's compassionate use, you actually could charge for the drug?
And when you say affordable, does that mean a positive margin for the product? And then lastly, from a science point of view, help me understand, what would it take for some of these drugs or your drug on top of other drugs to work in a ventilator patient? Do you think theoretically? Thank you.
Great. So I'll turn the ventilator question over to Bernadette in just a second, but thanks. So clarify the EUA. So yes, I mean under an emergency use authorization, one could charge for the product. We made a decision, as you know, to donate 1,500,000 vials, which is the entirety of our supply through the early summer.
And that's for a variety of uses, right? I mean, that's for clinical trials as one would expect not to charge for those who cause compassionate use, EAT in other countries, but also available is that supply for regulatory approvals around the world and then we'll allocate accordingly as those regulatory approvals come online. So yes, it is possible to charge. I would just say that our goal here is to get a full approval for remdesivir. We feel the data supports that.
And in EUA, therefore, is a step to really a more formalized approval. The reason the agency and we are talking about that is that these are extraordinary times, right? So weeks would make a difference to be able to get medicine to patients by enacting an EUA, that's what the FDA chooses to do prior to another form of approval. And so it's a stepwise approach, which allows us to immediately address the humanitarian need, while still pursuing all the aspects of a normal approval, which we are doing with the FDA. So I think that's probably the most important point.
And again, I know Robin and trust us, we will be answering your questions, the sustainable model for remdesivir in the future, in the near future. We just don't have the answers yet. And we but we deeply respect and appreciate the fact that when we get into millions of doses, we have to have a sustainable economic model that works here and that achieves access to affordability to patients around the world. So more to come on that. If I could turn it over to Murdad on the ventilated treatment approach?
Yes, Robin, excellent question. Thanks. The criticality of this comes down to a timing question, right? It really comes down to how long is viral replication ongoing in the lungs with patients and how quickly do patients deteriorate to needing mechanical ventilation. Certainly, what we're seeing is that patients are very, very rapidly deteriorating.
Some patients deteriorate rapidly. Wow. And so getting them antiviral therapy in that timeframe where it seems that there's still viral replication going on, certainly seems to be benefiting those patients. And probably what's going on and this is speculation on my part is by limiting the viral replication, you're going to limit the inflammation.
You're going to reduce the number of people who develop lung injury
and you're going to get them off the ventilator faster. So the discharge rates that we're seeing where the people are being discharged 4 days earlier, for example, in the NIAID study, underlying that are patients who are
deescalating or need for oxygenation
and that leads them
to getting on to Rumare more quickly. And I think it so there's a time element in all of this that I think is probably where we're benefiting these patients. Certainly, if you talk about people who've been ventilated for a week or 2 weeks, there the question of whether an antiviral would be beneficial, I think seems more difficult to tie into what's going on. But again, it comes down to understand the viral kinetics here, and that's a work in progress,
I think, for all of us.
Thank you.
Thanks a lot, Robin. Can we have the next question please?
Our next question comes from the line of Salim Syed with Mizuho.
Hey guys, thanks so much for the question. I echo all my peers' comments on the great work you guys have done on remdesivir. Dan, maybe just one for me, high level question here around your involvement maybe with folks in Washington, your discussions there. So obviously like biotech for some time has been about from Washington perspective about drug pricing and the rhetoric has been pretty negative. I'm wondering if the rhetoric has changed at all in your view when you're dealing with folks there, how it's particularly changed given you guys are so key to this from remdesivir in this solution to COVID-nineteen?
Yes. Thanks, Salim. Yes, these are unusual times for all of us. I'm sure all of your areas of interest as well as ours. And so what I can say is that I think people have come together in a bright way and certainly that's also occurred to a certain degree in Washington.
And I've spent a decent amount of time in Washington over the past several months, well, certainly before the shelter in place. And I think even then, there is some change in the rhetoric. I think for highly innovative research based
companies that have immediately kind of shifted their efforts to solutions from the coronavirus.
It's pretty impressive actually
to many of the peers in the industry that I stay in very close touch with,
have spared no expense to kind of pivot and shift. So I think at the end of the day, I think this will certainly help
the industry's reputation, the ability
to solve a human crisis like this because of the decades of investment and the at risk investment that's done by so many companies. People I think will and the general public will see that and whether that's treatment, new different types of treatments or vaccines, I think that will be the case. But certainly to your point, I think the tone is different in Washington. I think people are very appreciative and concerned about finding solutions here and it's brought us all together, which I think is a good thing. I'm not suggesting that there won't continue to be focus and pressure on drug pricing.
Of course, there will be. And we continue to work appropriately to make sure that in particular the patients that are bearing the brunt sometimes of some of the pharmaceutical pricing that legislation has put into place that supports that and improves that for patients and that we lean in as an industry and as a company to give more that flows through the patient. So all of those principles, I think still apply, but it's being done now in a way where we can have an appreciation for the innovation the industry brings. So more to come and a lot still to happen this year with the election coming up and with other things. But I think from a daily perspective, we stay focused on innovative medicines and making sure we have access programs on leaning into legislation that supports the innovative industry and that supports reducing patient out of pocket costs.
And that will be our focus accordingly, Celine. So hope that gives
a little bit of insight.
Super helpful. Thanks. Thanks, Tim. Thank you.
Thank you. Our next question comes from the line of Tyler Van Buren with Piper Sandler.
Hey, good afternoon. Thanks for everything that you're doing and have a couple more rendezvous of your questions, of course, during your experience, your expertise in viral infections and all the natural history that you guys are collecting in real time. I wanted to ask you about your best latest thoughts on the nature of COVID-nineteen recurrence. Your base case assumes
a peak potentially by July,
a return in the fall and winter, but a lower impact. So is it possible to provide a rough quantification of what that lower impact might be? And then also in subsequent years, is this something that you would expect in that base case to peter out or to be with us for potentially the next decade or 2? And then the second question is just following up on your earlier comments on FDA interactions and potential pathways to approval, which was helpful. Have you guys had labeling discussions?
Is there
any color you could provide there? On remdesivir, right?
Yes.
Yes. Okay. Sure. Thanks, Tyler, again for the comments. And I might ask if Andy and my dad want to comment on the first question.
Let me start with the second. So, yes, we've been in constant dialogue with the agency on remdesivir. I just have to really also say how thankful we are for the FDA and other members of the government, new coronavirus task force that have really made themselves available really literally all the time when we need them and vice versa. So it's been a very good collaborative relationship. In terms of remdesivir and the interactions with the FDA, I mean, we have been working with them on the submission.
They've been open to receiving parts of the submission, which has been very helpful under a normal process, plus there's the whole EUA process that kind of goes on top of that. So yes, the answer is and you can imagine that obviously that's been going on for weeks and actually a couple of months now, But in the past 48 hours, it's increasing intensity. So we are and the team is in constant kind of information exchange with the agency right now and we're getting information from us, obviously from NIH and the NIV trial. And there's a big sense of urgency here. I think FDA understands the importance of reacting quickly to this.
And so it's intense right now. I think the FDA will move quite quickly on their decisioning on the labeling side. So back to the lower impact on the base case. I don't know, Murdeft, from a scientific perspective or Andy, if you want to provide any other. I think we don't have a crystal ball, like I said.
Yes. I think, Tyler, we're as much a consumer as others. I think we are obviously, our data are a snapshot into what's going on. But we use for our modeling, we use the external epidemiology data and use that right now to get the broader picture. So I don't think we have any unique insights today that don't rely on the same sources that everyone else.
So that's I think where we are. Obviously, as we capture more data, maybe that will change. But today, I think that's where we are. And I'll just echo what Dan said. This has been an unprecedented time in terms of our interactions with the regulators, both here in the U.
S. As well as outside the U. S. It's been really impressive and truly collaborative working with the NIH and the FDA in parallel over the past couple of months. We talk constantly and the same is true with the EMA, same is true with Japan.
We're talking to all the regulators in parallel. So it's been a pretty unique situation and I think everyone understands the gravity. So that's been very helpful in moving forward collaboratively.
Thanks for taking the questions.
Yes. Thanks, Tyler. Appreciate it. So we have time for one last question. Operator, we can have the last question, that would be terrific.
Our last question comes from the line of Phil Nadeau with Cowen and Company.
Good afternoon. Thanks for fitting me in. And let me add my appreciation for your diligence in attacking COVID.
Thanks, Phil. Two more
questions on remdesivir. The first is on the upcoming data from the SIMPLE trial, the MODER trial due in May. Can you remind us how the enrollment criteria and endpoint definitions differed between the NIAID trial and that upcoming data set? And therefore, should we expect similar data? Or are there notable differences?
And then second, just a follow-up question on Tyler's. On the FDA approval pathway, Dan, your answer to Tyler's question suggests that you may not need any more data to get a a formal FDA approval. The NIAID trial might be sufficient. Is that your current understanding of your FDA dialogue?
Yes. I'll let Mehrdad discuss. So yes, I just look, the discussions are still ongoing in terms of what's required for a formal approval. But I meant to infer earlier is that the NIOD data are demonstrate safety and efficacy at a highly statistical level, right, which is usually the barrier for a full approval. So that's what we're working with them on.
And I don't want to get ahead of the agency on that, if that's okay. So but again, I do believe that there is most likely kind of a 2 step process, but potentially an EUA being granted and then moving on to full approval. Having said that, can I turn to Murdad or Diana Murdad, okay, on the first question?
Yes. I was actually going to see if Diana wanted to answer that question.
Okay. Yes. That's great, Diana. Thank you.
Sure thing. Yes. So in terms of endpoints, the NIAID study looked at time to clinical recovery using the 7 point ordinal scale. And the ordinal scale is really tracking throughout most of the major clinical trials right now. But as our understanding of the disease has evolved, the types of endpoints using that scale has evolved.
And so NIA changed to time to clinical recovery, which basically means no longer requiring medical care within the hospital getting off of oxygen or live discharge. In our moderate study, we're looking we're using the ordinal scale as well, but we're looking at the day 11 the day 11 distribution along that ordinal scale. So similar to what we did in our severe study, but looking at day 11 instead of day 14, recognizing that we're looking at a population that's less sick. So the MODERATE study is looking at patients who are hospitalized, but they're not hypoxic, they're not requiring oxygen. The NIAID study enrolled patients from starting there, but always through mechanical ventilation.
So slightly different endpoints for slightly different patient populations and most importantly, really looking at different questions. We're looking at treatment duration. They're looking at primary safety and efficacy with the placebo control.
That's helpful. Thank you.
Thanks a lot, Phil. So with that, I think we'll turn the call over to Doug to close. Let me just say thank you very much to all of you. And we really appreciate your trust and confidence in Gilead. And we'll continue to do our best throughout what we do for patients and certainly for COVID-nineteen.
So with that, Doug, do you want to have the last word?
Thank you, Dan. 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.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect.