Ladies and gentlemen, thank you for standing by, and welcome to the Gilead Sciences first quarter 2019 earnings conference call. My name is Jonathan, and I will be your conference operator today. At this time, all participants are in listen-only mode. 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 close today, we issued a press release with earnings results for the first quarter 2019. 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, 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. 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. Gilead does not undertake any obligation to update any forward-looking statements made during this call. Non-GAAP financial measures will be used to help you understand the company's underlying business performance. The GAAP to non-GAAP reconciliations are provided in the earnings press release as well as on the gilead website. I will now turn the call over to Dan.
Thank you, Sung, and good afternoon, everyone. I'm really pleased to join all of you today for my first earnings call at Gilead. Robin, Laura, and John will take you through the key highlights of the quarter. I'd like to start by sharing some of the perspectives that I've gained since arriving here in March. Many of you know, when I made the decision to join Gilead, I was drawn to the potential that I saw to build on the legacy of transforming care for people with serious illnesses in a company that has a deep commitment to patients and science. I've now had a chance to see the extent of that potential up close. Let me share some of what I've observed, the areas that I've focused on up until now, and a few thoughts on what you can expect next.
The first thing I'll say is that it's been really exciting to see the scientific strength from the perspective of being inside the company. I've taken part in a series of deep dives into the R&D programs in each of our therapeutic areas. This includes spending time at Kite to dig into our work in cell therapy. I'm excited about the progress that we're making in inflammation and with the results of FINCH 1 and FINCH 3, the studies that were announced at the end of March. John will walk you through the detailed study results later in this call, but I just want to express my enthusiasm for this work as we mobilize the organization for the launch of filgotinib, a medicine that will be a significant step forward for patients with rheumatoid arthritis.
Inflammation is one of the three emerging areas for us, and we anticipate that filgotinib will be an important future growth driver. As I deepen my understanding of Gilead's therapeutic areas, I've had the pleasure of participating in two scientific congresses, beginning with CROI, or the Conference on Retroviruses and Opportunistic Infections. Here I had the opportunity to watch as we shared the promising results from the DISCOVER study of Descovy for PrEP. More recently, I attended the International Liver Congress in Vienna, where we presented data from across our liver disease programs and had the chance at both of these conferences to meet with key thought leaders and get their perspectives on our R&D programs. During my first two months, I've also begun to get to know our shareholders and to understand their perspectives.
These conversations have helped me understand the external view of Gilead, this feedback will help inform the decisions that I make to shape the organization and position Gilead for the future. As I've settled into my new role, I've been greatly impressed with the people at Gilead and the extent of talent across the organization. I spent a lot of time talking to groups and individuals, and it's great to meet so many really smart, passionate, and thoughtful people. I want to close my portion of the call by sharing with you a little bit about what you can expect from me and when. In terms of immediate priorities, broadly speaking, I'm looking first at three key areas. Number one, strengthening the pipeline, both internal programs and corporate development opportunities.
Number two is ensuring optimal commercial delivery, both on our current medicines and those that we're getting ready to launch. Number three, the organizational piece, ensuring that we have the right people and the right roles, and that they are well-equipped for success. I want to make sure we tap into the talent at all levels of the company. In my early days, one area of pressing need has been working to better understand the work we are doing at Kite, identifying what it needs for short and long-term success in cell therapy. I wanted to take some swift decisions here, and at the end of March, we announced internally that Kite would become a separate business unit.
We've initiated a search for a CEO of Kite. Once appointed, that individual will report to me and will have full accountability for all aspects of cell therapy. I believe that providing Kite with this degree of autonomy will foster agility, innovation, and entrepreneurialism. Cell therapy is a critical piece of the puzzle with regards to the long-term future of oncology and a critical element of Gilead's long-term strategy, helping us to build on a legacy of transformational medicines. Between now and the end of the year, I will also have a series of meetings with the leadership team and the board to shape our long-term strategy and vision for the future of Gilead. I anticipate that later this year, I'll be in a position to begin sharing more with all of you.
Finally, I'd like to thank all the people who have contributed to the excellent progress my colleagues will outline today, Gilead's 11,000 employees, our partners, the scientific community, and the patients who take part in our clinical trials. I'm excited to see what we can achieve together in the months and years ahead. Before I turn the call over to Robin, I would like to acknowledge the news we shared earlier this week regarding her retirement from her role as CFO. Over the past two months, I've come to know Robin as an exceptional and talented leader. This is a transition that I know she has contemplated for some time. While I had hoped to have the opportunity to work with her for longer, she has my full support.
I'm grateful to Robin for agreeing to stay at Gilead through March first, 2020, to see us through the completion of the reporting of the company's 2019 financial results. Thank you, Robin, for your leadership through this period and over the past 11 years. I'll now turn the call over to you.
Thank you, Dan. Good afternoon, everyone. We are pleased to share our financial results for the first quarter of 2019. Total revenues for the first quarter were $5.3 billion, with non-GAAP diluted earnings per share of $1.76. This compares to revenues of $5.1 billion in non-GAAP earnings per share of $1.48 for the same period last year. Turning to product sales. Product sales for the first quarter were $5.2 billion, up 4% year-over-year and down 8% sequentially. This is the first quarter in the past three years where the company has posted year-over-year growth. It reinforces our belief that the company can grow product sales year-over-year on a full year basis. In the U.S., product sales for the first quarter were $3.8 billion, up 8% year-over-year and down 15% sequentially.
The sequential decline was primarily due to the anticipated inventory drawdown associated with our HIV products, reflective of the seasonal inventory pattern from the fourth quarter to the first quarter. As expected, our HIV payer mix moved more toward public payers, which also contributed to the sequential decline. Combined, inventory and payer mix contributed an estimated $400 million to the sequential decline. Turning to Europe. Product sales for the first quarter were $882 million, down 12% year-over-year and up 8% sequentially. Sequentially, the increase was due to an unfavorable accounting adjustment related to statutory revenue clawback reserves recorded in Q4. Without these Q4 adjustments, product sales would have been flat. On a year-over-year basis, the decline was driven by lower HCV sales due to lower patient starts and competitive dynamics and the broader availability of generic HIV products in 2019. Turning to expenses.
Non-GAAP R&D expenses were $871 million for the first quarter, up 7% compared to the same period last year, primarily due to higher investments to support our cell therapy programs. Non-GAAP SG&A expenses were $962 million for the first quarter, up 9% compared to the same period last year, primarily due to higher promotional expenses in the U.S. and expenses associated with the expansion of Gilead Sciences's products in Europe and Japan. Our non-GAAP effective tax rate in the first quarter was 16.7%, compared to 22.8% in the same period last year due to a $0.09 per share favorable tax settlement. Note that this settlement was reflected in the full year 2019 non-GAAP effective tax rate guidance of 20%-21% as previously provided. Moving to the balance sheet.
During the first quarter, we generated $1.4 billion in cash from operations and ended the quarter with $30.1 billion in cash and investments. We repaid $750 million of debt borrowed in connection with our acquisition of Kite. We paid cash dividends of $817 million, and we repurchased 12 million shares of stock for $834 million. As a reminder, the majority of our stock compensation awards are issued in the first quarter. 2019 is progressing consistent with our expectations as we enter the second quarter of our fiscal year, and we are reiterating our full year guidance, which can be found on slide 18 in the earnings results presentation. As we mentioned in the previous earnings call, our SG&A guidance included funding to support commercial launch activities for NASH. Given the results of STELLAR phase III studies, SG&A funding for these activities will not be utilized in 2019.
We do believe there may be opportunities to enhance launch readiness for filgotinib that we are monitoring. As such, we will revisit SG&A and our other guidance assumptions mid-year and provide you with an update during our Q2 call. We remain committed to vigilant expense management and ensuring that we retain industry-leading operating margins. 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 first quarter and share highlights from markets around the world. Beginning with HIV, we continue to see double-digit revenue growth on a year-over-year basis, led by uptake of our Descovy-based regimen and growing use of Truvada for PrEP. In the U.S., HIV revenue was $2.8 billion in the first quarter, up 19% year-over-year and down 17% quarter-over-quarter. As Robin noted, the sequential change reflects the anticipated inventory drawdown and payer mix in the first quarter. This trend is a typical pattern that we see between Q1 and the preceding Q4. Underlying prescription demand remains robust, growing 12% year-over-year. We continue to see excellent adoption of Biktarvy. It has become the top-selling product in the U.S. and generated $739 million in revenue.
It remains the number one prescribed regimen in both treatment-naive and switch patients. Approximately 80% of Biktarvy's U.S. prescriptions come from switches, with about 25% coming from Genvoya and 25% coming from dolutegravir-based regimens. Overall, Descovy-based regimens continue to gain share and now account for approximately 80% of Gilead's total U.S. treatment prescription volume. In Europe, total HIV revenue was $569 million in the first quarter, down 7% year-over-year and up 11% quarter-over-quarter. The year-over-year decline was driven by the broad availability of generic versions of Truvada across the EU. The decline, however, is moderating as we continue to see rapid uptake of our Descovy-based products, which now account for almost 80% of our total HIV revenue in Europe in the first quarter. Biktarvy is now available in Germany, France, and Spain. We anticipate launching in the U.K. and Italy mid-year.
We are encouraged by the strong uptake of Biktarvy across all markets where we have launched. In 2018, we launched Biktarvy in Germany in June and France in November. In both markets, Biktarvy has quickly become the number one regimen for naive and switch patients. As you will recall, in Japan, we acquired rights to certain products from our HIV franchise from our marketing partner, Japan Tobacco, at the beginning of the year. We subsequently received approval for Biktarvy in March and launched earlier this quarter. Moving to prevention. Use of Truvada for PrEP continues to grow in the U.S. as we work to educate at-risk individuals and treating physicians. We estimate more than 200,000 people were taking Truvada for PrEP at the end of Q1. These estimates reflect an external industry-wide restatement from IQVIA, a source that we use to quantify Truvada for PrEP use.
On a like-for-like basis, we saw 28% year-over-year growth. We were also very pleased to see the outstanding results from the DISCOVER trial presented at CROI. If approved, we believe Descovy for PrEP will bring a meaningful benefit to at-risk individuals, where we have been seeing increase in persistency of use. Turning to HCV. U.S. product sales for the first quarter were $393 million, down 33% year-over-year and down 4% quarter-over-quarter. The year-over-year U.S. decline was primarily driven to competitive dynamics, including an alignment of the Medicare and commercial pricing at the start of 2019 and lower patient starts. Sequentially, revenue in Q1 were positively impacted by the timing of a Department of Corrections order, which was originally anticipated later in the year. Over the full year, HCV revenue expectations for 2019 remain unchanged.
Revenue for our HCV generics sold by our separate subsidiary, Asegua Therapeutics, is in line with our expectations. Sales in the first quarter included some wholesaler inventory stocking. Asegua is continuing negotiations with payers. As we've previously communicated, we anticipate Asegua launch will continue to gain momentum in the second half of 2019. In Europe, HCV product sales for the first quarter were $203 million, down 25% from the prior year due to declining patient starts. 8% quarter-over-quarter. The quarter-over-quarter increase was primarily due to Q4 accounting adjustments that Robin mentioned earlier. We are continuing to see favorable share trends, particularly with Epclusa in France, Spain, and the U.K. We launched Hepcludex in Japan in late February. We believe this has the potential to bring meaningful benefit to patients with HCC. Now, turning to Yescarta.
The commercial performance continues to meet our expectations of a steady adoption. Worldwide sales were $93 million during the first quarter, up 19% quarter-over-quarter. Since launch, more than 1,500 patients have been treated with Yescarta, including patients for commercial markets and clinical trials. This is an important milestone for our cell therapy business. In the U.S., hospitals continue to learn how to operationalize CAR T therapy. Physicians' awareness of Yescarta's data continues to improve. Our efforts remain focused on educating providers about the profile of Yescarta, working with centers on operational setup. Engaging with community oncologists to identify patients for whom Yescarta is appropriate. We're beginning to see benefits of all of these efforts. Additionally, we continue to engage with centers for Medicare and Medicaid services, or CMS, and other stakeholders as we work to improve Medicare reimbursement and access.
Last week, CMS released the 2020 proposed rule for Medicare inpatient prospective payment, which contains an increase in the new technology add-on payment. The proposal is currently open for public comment through the end of June. This is a positive step. While we believe more needs to be done, we are very encouraged by the progress. In Europe, we are focused on getting sites certified. It's early days for Yescarta in Europe. We have already achieved reimbursement in countries such as Germany, France, and U.K. Across Europe, we are continuing to build awareness about the therapy. Finally, I'd like to acknowledge the strong closing performance of our cardiopulmonary team as we lost exclusivity for Ranexa and Letairis. Letairis and Ranexa revenue totaled $352 million for the quarter. As expected, we saw generic versions of Ranexa enter the market during the quarter, leading to a drop in revenue.
We anticipated generic competition for Letairis during the second quarter as FDA approved the single shared REMS in March. The year's off to a great start. I'd like to thank the teams around the world for their incredible effort. With a continued focus on our outstanding portfolio of products, we are making wonderful progress. Now, I'd like to turn the call over to John.
Thank you, Laura, and thank you everyone for joining us today. Let me start by saying that this has been another important quarter for the R&D part of our organization, and I remain excited about our ongoing program. So far this year, we have had five phase III registrational clinical trials read out. I will spend some time discussing these studies and then cover other progress we are making across our pipeline. In March, we announced additional positive results from our FINCH program in rheumatoid arthritis. FINCH 1 and FINCH 3, phase III studies of our selective JAK1 inhibitor, filgotinib, in adults with moderately to severely active rheumatoid arthritis, each met their respective primary endpoint. Taken together with the FINCH 2 data reported last year, the three FINCH data sets support the potential of filgotinib as an important treatment option across a broad range of patient populations with rheumatoid arthritis.
FINCH 3 evaluated filgotinib in combination with methotrexate and as monotherapy in methotrexate-naive patients. Filgotinib was generally well-tolerated and met the study's primary endpoint in terms of the proportion of patients achieving an ACR 20 response at week 24 of treatment. In addition, the proportion of patients achieving the primary endpoint was significantly higher for filgotinib 200 mg plus methotrexate and filgotinib 100 mg plus methotrexate compared with methotrexate alone. Key secondary endpoints, specifically ACR 50 and ACR 70 or deeper responses, and clinical remission rates at week 24, were also significantly higher with filgotinib plus methotrexate compared with patients receiving methotrexate alone. The FINCH 1 trial evaluated filgotinib compared to adalimumab or placebo on a stable background dose of methotrexate in patients with a prior inadequate response to methotrexate.
The safety profile of filgotinib was also consistent with previously reported results, and the study also achieved its primary endpoint for both doses of filgotinib in terms of the proportion of patients achieving an ACR 20 response compared to placebo at week 12. Similar to results seen throughout our FINCH program, FINCH 1 ACR 50 and ACR 70 deeper responses were also significantly greater for filgotinib compared with placebo at week 12 for both doses. Across the three FINCH trials, we have therefore observed deep, consistent responses similar to or higher than other JAK inhibitors and other approved biologic agents. Given the high proportion of patients achieving remission or control of their disease. These responses are encouraging, and the safety profile associated with JAK1 specificity continues to be differentiated.
Based on these data, we will progress the filgotinib rheumatoid arthritis indication filing for regulatory approval in Europe in the second half of this year. As you know, the MANTA study was requested by the FDA. Now that we have the phase III data in-hand from three FINCH studies, we have initiated a request to have further interactions with the FDA. Following those discussions, we will be able to provide greater clarity on a filing timeline in the U.S. Turning to HIV. We are pleased with the results from our DISCOVER trial, a phase III randomized double-blind study of more than 5,000 people evaluating whether once-daily Descovy is as safe and effective as once-daily Truvada at reducing the risk of HIV infection when used as PrEP or pre-exposure prophylaxis.
In a late-breaker oral abstract presented at CROI in Seattle earlier this year, the trial demonstrated that Descovy is non-inferior to Truvada in terms of preventing new HIV infections, with additional statistically significant advantages with respect to bone and renal safety. Based on these data, last month we submitted a supplemental NDA to the FDA for Descovy for the PrEP indication as a potential important new option to prevent HIV infection. If approved, we believe this will help contribute to achieving national and global HIV prevention goals. We submitted a priority review voucher with the filing, and we would anticipate approval in the fourth quarter of 2019. Moving to liver disease and our broader NASH development programs.
In the last two months, we released top-line results from the STELLAR-3 and STELLAR-4 programs, the two phase III studies evaluating the safety and efficacy of our investigational ASK1 inhibitor, selonsertib, in patients with bridging fibrosis stage 3 due to NASH and stage 4 or compensated cirrhosis due to NASH. Both studies did not meet their primary endpoint at week 48 of a greater than or equal to one-stage histologic improvement in fibrosis without worsening of NASH. Although this is not the outcome we were hoping for, these were important studies to conduct. There's a significant unmet need for patients with advanced fibrosis in this disease. NASH is also a complex biological disease with multiple drivers of the disease, and we believe that combination therapy will likely be necessary to effectively treat most of these patients.
To that end, the ATLAS trial, a phase II study evaluating combinations of our investigational compounds in patients with NASH and advanced fibrosis, is expected to read out in the fourth quarter of this year. At the International Liver Congress in Vienna last month, we had more than 35 abstracts across NASH, viral hepatitis, and primary sclerosing cholangitis. In particular, we presented new data supporting our efforts to develop combination therapies targeting different aspects of NASH, to evaluate the utility of non-invasive tests for the identification of patients living with the disease, and to advance our overall understanding of the complexities and the burdens of NASH. Lastly, as it relates to our NASH program, I would like to highlight two recent agreements that will also augment our efforts.
A few weeks ago, we announced our intent to enter into a clinical collaboration with Novo Nordisk to evaluate the utility of combining their approved GLP-1 drug, semaglutide, with both our FXR agonist, cilofexor, and our ACC inhibitor, firsocostat, for the treatment of patients with NASH. We also announced a strategic collaboration with insitro to discover and develop therapies for patients with NASH. As part of that three-year collaboration, we will leverage insitro's proprietary platform, which applies machine learning, human genetics, and functional genomics to create disease models for NASH and discover relevant drug targets that have an influence on clinical progression and regression of the disease. We therefore have a broad, deep, and strong pipeline in NASH, combining both internal programs and multiple external collaborations to advance therapies, and we remain committed to developing effective combination therapies for patients with the disease.
Finally, let's shift gears to cell therapy and the momentum we're seeing there in advancing the next generation of medicine. We're gearing up for ASCO, the American Society of Clinical Oncology, the annual meeting in Chicago in a few weeks. I'm excited by the abstracts we will present. Our anticipated data updates include a presentation of the preliminary result of earlier steroid use with axicell in patients with relapsed or refractory large B-cell lymphoma. This study is part of a broader clinical effort to optimize the safety and efficacy profile of Yescarta by evaluating various combination approaches, bridging chemotherapy, and revised safety management practices. I'm also pleased to share that we plan to announce top-line results of ZUMA-2, a registrational trial of KTE-X19 cell therapy in patients with relapsed/refractory mantle cell lymphoma.
Pending positive results, we expect to file for U.S. regulatory approval of KTE-X19 in patients with relapsed/refractory mantle cell lymphoma for this indication by the end of 2019. This would represent the first regulatory submission for X19. As a reminder, KTE-X19 employs the same engineered T-cell construct as Yescarta, with a slightly modified manufacturing process to address the specific characteristics of mantle cell lymphoma, acute lymphoblastic leukemia, and other diseases where there's a large burden of circulating tumor cells. KTE-X19 was granted breakthrough designation by the FDA, so the application would be considered for expedited review. Our commitment to cell therapy is simple. We continue to try to reach more patients in need with Yescarta and to try and optimize the safety and efficacy of the treatment.
We are focused on creating a path to cure with subsequent generation products that enhance the efficacy and safety of cell therapy for hematological malignancies and ultimately solid tumors. We are also advancing allogeneic cell therapies, which could offer a significant benefit to patients, making time to treat quicker and also more convenient. As I look across our R&D organization, including both our earlier and later-stage pipeline, I'm excited about the momentum we have established. In closing, I would like to thank our R&D organization and all of our employees around the world for the hard work and commitment to translating the most important scientific discoveries into the best treatments for patients. Let's now open the call for questions. Operator?
Thank you. Today's question and answer session will be conducted electronically. Anyone wishing to ask a question may signal us by firmly pressing the star key followed by the digit 1 on his or her touch-tone telephone. We will call on you in the order that you signal us. If you find that your question has been answered, you may remove yourself from the roster by pressing the pound or hash key. As a reminder, we will be taking a maximum of 1 question per person at a time. If you have further questions, you are welcome to rejoin the queue. We'll pause for just a moment to compile our Q&A roster. Our first question comes from the line of Geoffrey Meacham from Barclays. Your question please.
Hey, guys. Thanks for the question. Dan, welcome to your first Gilead call.
Thanks, Geoff.
I know you've just finished the listening tour, at this point, how much of a strategic priority would you say the NASH portfolio or the Hep B portfolio is? If the answer is high, how aggressive do you think you want to be on the BD front to add assets for these two categories? Thanks very much.
Yeah, great. Thanks, Geoff. It gives me a chance to maybe just characterize what I've seen so far. I've obviously seen, as all of you have, the incredible depth of strength in HIV and in HCV, more broadly from HCV into liver diseases, where obviously NASH and Hep B are paramount. At the same time, I've had a chance to see the broader portfolio in inflammation with filgotinib at the lead of a comprehensive lifecycle management program, as well as some very interesting partnerships and earlier-stage molecules in inflammation. Likewise, in oncology, of course, with the cell therapy being in a leadership position and all the lifecycle managements that go around cell therapy, also the interesting partnerships around both the biologics and small molecule oncology program.
Still early days of digging into that, but I've been impressed by the breadth, I would say, of the portfolio and the partnerships and some of the recent BD activities. Specifically related to NASH and hep B, I would say that what I've come to understand about NASH is the significant unmet medical need, and growing unmet medical need, I would say. Although the results in the first quarter of this year didn't turn out as we had expected, it's very clear that this disease needs scientific advancements. It's a heterogeneous disease. There are challenges with diagnosis. At the same time, Gilead's experts in liver disease make it an area of continued interest for us. I'm particularly interested in the fact that a disease like this, with the challenges associated with it, may very well require combination therapies.
Of course, we'll have some readouts on our combination approaches in the second half of this year. You heard already from John some of the partnerships that we're entering into in that front. hep B, similarly, obviously we have a treatment for hep B today, which we will continue to focus on. The opportunity to continue to try to advance the science in hep B, particularly around moving towards a cure, is something that I've been impressed by to see the different scientific approaches that the scientists here at Gilead are looking at. Bottom line, Geoff, is that I think that NASH and hep B as areas of liver and with the expertise of Gilead are areas we need to continue to explore. Both internally and through partnerships as a part of a broader portfolio of approaches across different therapeutic areas.
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. On filgotinib, coming out of FINCH 1 and 3, where do you see the most differentiation for that product versus currently available in late-stage therapies and late-stage JAK1 inhibitors? Obviously, you're awaiting FDA feedback, but I'm curious your willingness to file prior to completion of the MANTA study. I guess, how do you weigh speed to market for that product in a competitive space versus having a potentially optimized label right off the bat at the launch? Thanks.
Well, thanks, Brian. It's John here. Multi-part question. Look, let me just step back a bit and think, try and summarize what we think about the entire data set. We have the full data package now from our phase III clinical trials. We have over 3,200 patients. Look, we've shown in terms of characterization, although it's hard to do head-to-head comparisons across drugs, across studies, of course. What we have seen in our FINCH program, consistent with our phase II program, is deep efficacy responses in broad patient populations. If you're a practicing rheumatologist, that's what's most important to you. You're not getting to ACR 20, you're getting strong ACR 50 and strong ACR 70 responses, remission responses, low disease activity. All the FINCH trials show those deep responses when you characterize them by those characteristics.
Look, each of the studies achieved all of their primary endpoints, they showed improvement in functional status. Where we explored it, we showed that we could slow the rate of structural damage on the X-ray finding. These are all important additional advantages of the drug of what we showed in our clinical programs. We'll go to, as I said today on the earnings call, we have the full data package. We're impressed by the risk benefit. We think it's relevant to patients and rheumatologists. We'll be able to file in Europe in the second half of this year, we'll go and have a discussion now with the FDA.
We've requested that meeting, where we'll sit down and talk with them about what we have in terms of data from the MANTA studies, what we have in terms of our phase III registrational program, what we should do. The timelines around that will play out during that meeting. Look, I think it's important to us, Dan has brought this with his fresh eyes on the program recently, is that there is some degree of urgency for us to get this drug approved as quickly as we can, obviously in collaboration with the regulators across the world.
Yeah. Thank you, John. I would just add, Brian, that I think I've been impressed by the profile of the product through all 3 FINCH studies, the consistency in the outcome, and the results on both the efficacy and safety side. Knowing that rheumatoid arthritis patients are waiting for highly efficacious medicines that also have good safety and tolerability profiles. I think we're looking forward to the totality now of the discussion with the FDA. We put the request for the meeting in. We expect to have that beginning by mid-year, we'll be looking forward to getting back to you on kind of the next steps. We remain bullish on this looking forward to bringing this as soon as possible to patients around the world and in the U.S.
Of course, if I could add, thank you, Dan, I forgot to mention unfortunately, the safety profile. We actually had a press release about this because we thought it was important as well. Again, it's impossible to make cross-drug, cross-trial comparisons, but the safety profile we're seeing with this JAK1 specific inhibitor leads us to believe we have an additional benefit for patients as well. We're seeing low rates of infections, low rates of discontinuations, herpes zoster, thromboembolic advanced cardiovascular events, and so forth. We also believe that that's an important advantage for patients as well.
Thank you. Our next question comes from the line of Geoffrey Porges from SVB Leerink. Your question, please. Mr. Porges, you might have your phone on mute.
Thank you very much. Sorry about that. Robin, it might be premature to say congratulations. I know you're around through the end of the year, at the very least, just wondering if you could help me with some Gmail settings. My storage is getting a little filled up.
We'll work on that in 2020, Geoff.
I'm sure you can take care of that. Seriously, Dan, I wonder if you could comment, perhaps Robin could weigh in on this as well, about capital allocation. You effectively returned 100% of your cash flow to shareholders through dividends and share buybacks this quarter. Obviously, that's not really sustainable. Dan, could you talk about how you feel about dividends versus buybacks and whether you will be willing to make any firm commitment to a certain proportion of cash flow being returned to investors versus other items? Thanks.
Sure, Geoff, I know that Robin will want to weigh in on this as well, but let me just say a couple of things. As you noted in my priorities, my top three priorities, obviouslyFocusing on the pipeline and understanding it both from an internal Gilead perspective and also what's on the outside horizon is my top priority, as you can imagine. Therefore, I'm really pleased to get my deep dives into the R&D organization. Equally, and I should have mentioned this, I've spent a good amount of time with our corporate development organization that I think is working really hand in glove with our research colleagues to identify and scan the external environment. You can see the level of activity we've had now over the past year or so, year and a half. Lots of partnerships and things that are going to supplement that portfolio.
Back to the capital allocation. I consider it really to be in the following order in terms of priority. The first one is where we can find opportunities to supplement our portfolio through M&A or partnerships, that's priority number 1, because we think that's in the best interest of the long-term journey of shareholders in the company. Secondly, I would say, obviously, we want to keep an attractive dividend policy, and I think that's been shown by the past behavior that I've seen coming into Gilead. Thirdly, smartly looking at share repurchases when those make sense. I'm very clear that those are the orders of priority to create value for shareholders in my experience, and also been reinforced on my journey into Gilead. Robin, what do you think about storage capacity? No, I'm sorry, about capital allocation.
Yeah. I think as we've continued to discuss externally pre-Dan and ongoing, I think we're very aligned in terms of our priorities. Dan, I think you articulated that very well. We've been fairly consistent with continuing to focus on our dividend as being the primary shareholder return vehicle. We expect that to continue. We believe ultimately that's very important to our shareholders. Share repurchases, we've leveraged, as you said, where appropriate. I think we continue to be aligned, Geoff. You're right, we haven't necessarily published a specific level of cash flow returns. I think if you look over the multiple-year period, we've returned about 50% of free cash flows to shareholders in the forms of dividends, as well as share repurchases. That's varied year by year as we've made the necessary investments to grow the company.
We believe we have the financial flexibility to retain the dividend and make the investments that Dan and the rest of the leadership team sees as appropriate to grow and strengthen the pipeline, as Dan outlined.
Geoff, I would just say in my listening tour, I've been listening to many of you on the phone here and beyond. I think broadly speaking, there was quite a bit of alignment between that capital allocation policy. Hopefully we're also meeting your needs, as well as the company needs, which should go hand in hand. Thank you.
Thank you. Our next question comes from the line of Michael Yee from Jefferies. Your question please.
Hey, thank you. I wanted to ask a question to Dan. You listed pipeline enhancement as a top priority. Maybe just speak a little bit more to that in terms of how you think about prioritizing parts of the pipeline. I mean, at Roche, which obviously you had a long time at, you didn't really do any deals above $8 billion. Maybe just talk about how you think about what may be different here at Gilead and maybe the appetite for M&A, how you're looking at the environment out there, here at Gilead. Thanks so much.
Thanks, Michael, for the question. Maybe just to expand a little bit from the previous question, I would say that, as usual, I think priority number one is that our M&A activity is led by science at the end of the day. Therefore, one focuses on some of the expertise that we have within the company, and that would obviously be in the areas of now oncology with the acquisition of Kite and the growing portfolio we have here, liver diseases, inflammation, and HIV. Not to suggest that we want to be opportunistic on something that has an interesting scientific profile and a high unmet medical need where we think we can bring a transformational difference. I want you to know we're scanning the entirety of the environment and we're science-led.
Obviously, I think overall, you're generally better positioned to identify the opportunities where you have expertise in-house. I think that was true in my previous company, and it also seems to be true from what I've seen here at Gilead as well. I think, again, as we all know, and it's been true here when I've looked at the Gilead activity over the past couple of years, the vast majority of the opportunities are at kind of an early stage or a mid-stage. I think the opportunity to create value exists quite a bit in those areas, particularly when you can find something earlier or more exciting because of the relevance of your science. Having said that, we also acknowledge that we need to look at our late-stage portfolio and pipeline and strengthen that. I think there's two different ways to do that.
One is to look at accelerating internal programs, which I know John and the team are constantly looking at, and I've been interested in speaking more about that. There's maybe opportunities to take some risk and to accelerate things and to expedite things through applying resources. The other thing is, of course, to bring interesting late-stage assets in. Overall, I think the vast majority of the work that Gilead has done, and arguably, they've been quite successful with their late-stage acquisition approach over the course of their 30-year history. We'll be looking for opportunities like that as well, of course, to fulfill the pipeline with a keen sense on the science. I think bolt-on type acquisitions continue to be, in my opinion, the highest likelihood in the way that we'll be proceeding. John, I don't know if you want to add anything from your-
I completely-
side here
I completely agree, Daniel O'Day. I think we've always had the philosophy and the success with being led by the science. We feel most comfortable in making those decisions when we have the expertise internally, as you articulated. We are opportunistic and prepared to take risks when we feel the science and the opportunity and the need exists.
Thank you.
Our next question comes from the line of Carter Gould from UBS. Your question please.
Great. Good afternoon. Thanks for taking the question. Maybe to follow up, Dan, on your comments around the Kite organizational structure and separating that as its own business unit. Maybe talk about what drove that decision, what you hope that will achieve, and maybe any sort of consequences for future BD focused on cell therapy. Thank you.
Absolutely, Carter. Yeah. I think the bottom line is that I've been very encouraged by what I've seen at Kite since I've come in and how the Gilead colleagues have approached their entry into oncology in a very significant way. I think the concept of moving towards a new platform, a new technology in this space as an entry point into oncology, having come from a background of deep oncology experience and understanding the depth of the competitive environment, is an intriguing way to go. To really go for a future-oriented technology, I think makes a lot of sense. Then to supplement that with interesting partnerships like the one that John and his team have done in bispecific antibodies, for instance, with Agenus, or some of the interesting small molecule work that's going on here within the walls of Gilead.
First and foremost, I think one needs to consider the early but interesting oncology work that's going on here at Gilead. Then with that context, I said, as I've looked at it in discussions with the leadership team, that Kite itself in cell therapy oncology is in an ultra-competitive area. I think we have a leadership position, but I think we need to maintain that leadership position. For the reasons of focus, we decided to create Kite as an independent business unit that will wake up and go to sleep every day thinking about how to be leaders in oncology cell therapy. Now, that's not to suggest that they won't work with the rest of the organization to complement. As we know, specifically in oncology, the combination approach and the multi-science approach is absolutely the way to go.
We need to make sure we secure that leadership in cell therapy while we complement it with combination approaches in immuno-oncology or targeted therapies or other mechanisms. That's the context. Let's make sure we win in cell therapy and leverage the remaining parts of the Gilead focus on oncology to win in the broader oncology market as well. It's with that lens that I took the decision to create a separate business unit to focus that, and now in the process of recruiting a CEO that will report into me, but work very closely with the leadership team for success in oncology. Now, on the BD side, they've been very active, as you know, since the Kite acquisition.
A very active M&A and partnership work within cell therapy, which I think is fundamental and essential because the science is occurring, of course, within Kite in cell therapy, but all around us as well. I have been impressed with the landscape analysis that the BD team has done here with the research and development team at Kite and at Gilead. I think we're really well-positioned to continue to scan that environment and to complement it with the appropriate pieces of the puzzle that we need to continue to write the next chapter in cell therapy history. As John articulated, it's advances in hematologic malignancies, it's moving to solid tumors, and it's also getting ready for the future of science, the allogeneic form as well, which has risks, but I think lots of opportunities as well.
Very comprehensive approach on the BD side, and that will continue. John, any perspectives?
Completely agree, Dan.
Thank you. Our next question comes from the line of Ying Huang from Bank of America Merrill Lynch. Your question please.
Hi. Thanks for taking my questions. Maybe for Daniel. Is there anything you actually want to change in the Gilead organization after two months in the job? Maybe another one for John. A question quickly. You decided to have a collaboration with Novo Nordisk in NASH. How does it compare to the other medicinal vaccines in the market today or under development today if you look at semaglutide data in NASH? Thank you.
Thanks, Ying. Look, let me first say that I have been incredibly welcomed and very impressed with coming into Gilead. I think I probably know more what I don't want to change than what I do want to change after two months in the role. That is the focus on science. I've been really impressed by the science, and the motivation and intelligence of the colleagues at Gilead. I think both the level of expertise that is here in many different areas, as well as the intrinsic motivation of our employees, is something that I've been deeply impressed by. In terms of what to change, as I said before, I'm still in the process of evaluating the organization, looking at pipeline, looking at commercial execution, looking at the organizational structure and people.
I think you would agree with me that two months is a relatively short period of time to evaluate that, which is why I said there are certain things that I'm acting quickly on and won't hesitate to, like the Kite decision. There are other things I think I need to learn a little bit more and understand. It'll be an evolution, not a revolution, and it will be based upon good observations, good discussions with the leadership teams in terms of how we progress here.
Stay tuned on that, and as I think we as a leadership team and a leadership community here at Gilead with the board and with continuing to have our outside ears open to investors and to thought leaders and to what our patient needs are, we'll continue the evolution of the company, and I'll be articulating better what my priorities are as I go into the later part of this year, and we'll certainly inform you as I go. Thank you for the question, and John, over to you.
Yes. Re Novo Nordisk Ying. It's a compelling mechanism of action. Novo Nordisk is clearly a leader in the pharmaceutical development of products for patients with diabetes and metabolic syndromes. The mechanism of action is not necessarily directly related to NASH, but it has many of the effects you would want to see in patients with NASH. Additionally and importantly, as well as all those other metabolic benefits in terms of glucose control, insulin secretion, and so forth, there's a weight loss component to these drugs, a significant weight loss component. That weight loss component, we think, is very compelling for us to explore with our other mechanisms of action that are really focusing on different and separate drivers of NASH pathogenesis. We believe it's a very exciting and a very important collaboration.
Novo Nordisk brings a lot of people and a lot of depth of knowledge about metabolic syndrome to the table, whilst we bring a lot of expertise in liver disease. It's a wonderful collaboration that we're just starting and looking forward to it. We will combine semaglutide with our FXR agonist and our ACC drug as well, and that will be the initial clinical collaboration.
Thank you. Our next question comes from the line of Umer Raffat from Evercore. Your question, please.
Hi. Thanks so much for taking my question, and welcome again, Dan, to your first Gilead call. I wanted to keep it fairly high level today and maybe just ask, Dan, do you see Gilead as growing top line into the 2020s? Also, what are the biggest risks and the biggest opportunities that you see at Gilead currently?
Thanks a lot, Umer, for the warm welcome again. I really appreciate it. Look forward to working with all of you, and obviously articulating my views and visions for the company as I go. It is definitely premature to talk about sales in 2020 at this stage. In fact, in the first two months, I've really been focusing, as you know, on pipeline and understanding our current commercial delivery. We will, over the coming months, of course, in the natural process of things, start to digest the progress that we have for this year, the opportunities we have for next year, and put those into some ideas of a plan. I think it's a bit too premature for that. What I can assure you is that we'll give you a sense for that much later in the year.
At this stage, maybe just to add a little additional color to that from the way that I see the business today. I see the strengths in HIV, clearly, as a real foundation, of course, of Gilead, and a strong and growing business. Laura mentioned the progress in Biktarvy. Both Laura and John talked about the really good data on Descovy and the opportunity there with the DISCOVER trial. I do see good strength in the HIV business. I see the opportunity that HCV is much more predictable at this stage and a much smaller part of the overall revenue and turnover at Gilead. I see the future opportunities, such as filgotinib and others that we'll be discussing with all of you as upsides to that relatively stable base.
The question that I need to digest with the team is to understand how and when those opportunities will be hitting, and I just want to give you a little bit more color to how I see the business and I think the opportunities. What are the risks and opportunities? Again, I need a bit more time than two months to come back to you with a comprehensive list. I think I've given you a bit of an idea on the call here today. I do think that there are tremendous opportunities in the early- and mid-stage pipeline, and I think we also have a real opportunity with filgotinib. This is a profile of a product in a space that patients and physicians need more treatment options, and they're looking for treatment options that are highly efficacious, that are safe, and that are convenient.
I think I've been working with the organization, with the leadership team to really think about how can we accelerate some of the plans around filgotinib. How do we get ready for entering this very competitive space? Obviously, with all of these launches comes both risks and opportunities. I do think that we have a very good profile product on which to build one of our next legs of success at Gilead, the whole leg of inflammation accordingly. Likewise, I think we should mention in that same statement around the overall business picture, the ongoing success of Yescarta, the ability to think about moving into other diseases and hematologic malignancies. Lots of readouts on Yescarta. I was reviewing with John just before the call.
There's a lot of interesting readouts that will come in the coming year, two years, three years, that I think will help us understand the utility of cell therapy both with and without combination approaches in oncology. I'll give you an even more complete view of the business, Umer, later this year from my perspective, but those are some of my early insights into what I've seen so far.
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. Robin, let me add my congratulations on the announcement of your retirement. Dan, a question for you actually on HIV, just to focus there. Gilead's clearly been a leader in HIV treatment for almost two decades, but arguably you've fallen behind in the development of nucleotide sparing regimens and long-acting regimens. As you've brought fresh eyes to looking at your HIV portfolio, how do you see the treatment of HIV evolving over the next 5 to 10 years? Do you feel like Gilead's HIV pipeline has all the programs that it needs to stay competitive over that period?
Thanks, Phil. I'd welcome John and Laura to feed in on this as well, but I'll give you my top line take first, and that is that there's no doubt that Gilead is the leader in HIV, has been for a long time and to your point, Phil, we need to make sure that we continue to have the most significant next advance for patients. That's certainly been the case from TAF, the regimens, and to the Descovy regimens, and now of course with the PrEP data. Certainly there's lots more that we can do in improving the patient experience in HIV, including long acting, as you mentioned, and other approaches.
I think there's a very comprehensive life cycle plan around this. I think the thinking that's gone into this in terms of making sure that the next generation programs, like a long acting, are something that are going to be well received by the patients, that are convenient, easy to take, and really allow for, if you like, the next best advance from a daily oral medicine, which is, let's face it, highly convenient to begin with. I think they've really scrutinized the target product profile well. I think the science that's going on here is well-positioned to continue to take the next meaningful advances for patients into the future. I would ask John if you want to feed in on this? Great.
Sure. Thanks, Phil. Phil, we have led the field of HIV therapeutic development for over a decade. One of the critical components of that approach and our success has been no resistance, and that has been achieved with effective three-drug regimens. For example, with all the Biktarvy studies, as you know, we have no resistance through week 96, which is a critical advantage for anybody. You can't afford to increase the fragility of a regimen by decreasing or diminishing or cutting out one of the components, and theoretically or not theoretically increasing the risk of resistance. That's very important. Two drug regimens where adherence is potentially not so important, such as an effective long-acting regimen, is actually one of our critical programs internally.
We believe that our ultimate goal with a long-acting regimen should be a subcutaneous, at home, small volume, non-painful injection that's probably got two components to it, but it won't have that adherence issue to it, and we'd like to be giving it every three months. That would be a great advance for patients as well. In terms of our other activities in HIV, we have many cure programs. As you know, we also have programs for those most in need in terms of the highly resistant groups of patients. Then, of course-
We have all of our PrEP programs as we discussed on the call today. We are very much laser-focused on maintaining our leadership position scientifically and for patients with HIV and preventing HIV by all of these initiatives. I think the issue of two versus three drug regimens has to be put in context of the decades of history of this disease and where the long-acting ultimate goal should be.
Thank you. Our next question comes from the line of Cory Kasimov from JPMorgan. Your question please.
Hey, good afternoon, guys, and thank you for taking my question. I also have one on HIV, but more from a near-term commercial standpoint. Basically curious how you're thinking about potential pricing pressures within the category over the near to medium term from both potential U.S. healthcare reform as well as competitors entering the space at substantial discounts to Gilead's regimens. Thanks.
Thanks for the question. This is Laura. Let me start off with the pricing pressures in the U.S. healthcare, and I assume what you're talking about is maybe the protected class with the Medicare population. Let me just address that. We've been actively engaged in the discussion around the protected class. This is the Part D benefit for the senior population. All along, I think what's most important for the senior population is to ensure that they have access to safe and effective medicines that are appropriate as per the guidelines. We really want to make sure that there is no prior authorization that impedes rapid treatment and renewal of the long-term treatment for patients.
I think that there's been a significant groundswell across the community of advocacy people, physicians that really believe that it's important for the Medicare population to have access to the HIV regimens that they need and to maintain a protected class. That's specific to the Medicare population. As it relates to the commercial population, I would say that we're very pleased with the amazing coverage that we've been able to achieve with Biktarvy. Over 90% of the plans have Biktarvy rapidly available. You can see that in the numbers in what we just said in terms of treatment-naïve and switch patients, how quickly patients are moving to Biktarvy, and obviously 80% of our overall prescriptions coming from a Descovy-based backbone. We don't feel significant pressure on the commercial side as it relates to coverage and access.
As it relates to the overall growth that we see, as I mentioned, we had a 12% prescription growth year-over-year, and we've continued to maintain double-digit growth for the last couple of years. Very pleased with that. Finally, you asked about the competition and pricing pressures. I think we've always tried to make sure as we bring innovation into the market, and I believe there are, for Gilead, it's been 11 products in 17 years. We've always been mindful of the pricing in the market to make sure that our innovation gets rapid access, and people can access these new brands. If we look at new entrants, I believe that their pricing is relative to the branded pricing of the components.
For example, Dovato is really the branded price of the two drugs, and I believe Biktarvy has been also priced very competitively within the Descovy-based backbone. We feel very comfortable with our pricing.
Yeah. Cory, I'd just add also, remember that for Gilead, our franchise has really been driven by volume, right? Pricing has been frozen in the public market since I've been here. We don't get real upside relative to pricing, particularly in the U.S. As you know, ex-U.S., it's all pricing decreases. I'm totally in agreement with everything Laura provided in terms of our focus legislatively, and competitively, but it's just underlying price has never been a key factor when you take a look at our HIV revenues.
Thank you. Our final question for today comes from the line of Ronny Gal from Bernstein. Your question, please.
Hi, good afternoon, everybody, and thanks for fitting me in. Two of them, if I can. One about HCV. I noticed the agreement you just had in the U.K. and the one you had in Louisiana. Can you just explain to us from a financial perspective how you're thinking about this? There's some implied discount in those contracts, but obviously you're getting access to other patients you wouldn't otherwise. Can you just tell us how you're thinking about this as a strategy? Coming back to this issue of HIV pricing, I hear you about not raising prices. Robin, I think you mentioned that with this shift of patients to government programs, you're actually seeing a bit of a net decline. If we look at the revenue reported and divided by IMS scripts, we are seeing modest declines year-over-year in your price point.
Should that be the baseline assumption going forward, essentially more people going on those programs, you guys not raising prices, and thus in effect, we should see a net price decrease a little bit per year the way the market is working right now?
Yeah, Ronny, I'll take the second part of your question. What I was referring to was just a shift relative to when public buyers purchase, right? That's about payer mix, right? Typically in Q1, as you end the ADAP cycle, we do see that downward shift driven by payer mix. The biggest overall driver of our sequential decline this past quarter, however, was not pricing at all. It was inventory. Right? I just want to clarify that. Happy to follow up after the call on that component. Do you want to address the-
Yeah
Louisiana and the Washington market?
I think you also mentioned U.K., if I heard you correctly. I thought it was U.K., maybe Louisiana and Washington. Was it all three? Yes. Okay. Let me talk about the U.K. and then also talk about Louisiana. Really our goal is to make sure that we work with governments as best we can, whether it's federal or state or country, to be able to provide the appropriate access for patients. We believe HCV is a huge value to the healthcare system. As it relates to Louisiana, this is particular to the needs of that government. Really, if you think about what we were trying to accomplish with Louisiana, they wanted to be able to treat a number of patients, but their annual budget is a certain amount every year.
If you think about 5 years, you have a certain amount every year, but the need actually is to treat more people earlier on. Really the discussions that we're in with Louisiana is how do we basically smooth that out so you don't have a big peak and then a trough from a payment perspective. We can be flexible to try to work within the needs of the budgets and be able to give people access. From the U.K. perspective, we're partnering with the U.K. as it relates to really an elimination project in the U.K. There actually are a number of governments around the world that Gilead participates in arrangements such as this. Really that's the focus. There's a price, and then we're also working to make sure that we find patients and get them properly diagnosed and treated.
Finally, the last thing that I wanted to mention, which kind of plays into all of this, as you all know, is the launch of the AG by our subsidiary, Asegua. I think that was another opportunity or strategy that was deployed by Gilead to make sure we were servicing the needs of the managed Medicaid market. We have the flexibility between the Gilead portfolio of Sovaldi, Harvoni, and Epclusa that is made available in the commercial markets. Of course, Asegua is also available in the commercial markets, but specifically to address the needs of the managed Medicaid market, we have offered up this opportunity to be able to address their particular needs. Hopefully that addressed your question.
Perfect. Ronny, I also wanted to go back to the other component that HIV line also includes prevention, right? PrEP. To your point, there is that impact on the average price per patient because it's not the STR. You're looking at the Descovy component of that, right? That would also impact average price per patient as PrEP usage continues to go up as well.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Sung Lee for any further remarks.
Thank you, Jonathan, 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.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.