Good afternoon, everyone, welcome to Gilead's first quarter 2026 earnings conference call. My name is Rebecca, I'll be today's host. In a moment, we'll begin our prepared remarks, followed by our Q&A session. Please note that the process for queuing questions has changed this quarter. To ask a question, press star one, and to withdraw your question, press star one again. Now, I'll hand the call over to Jacquie Ross, Senior Vice President, Treasurer, and Head of Investor Relations.
Thank you, Rebecca. Just after market close today, we issued a press release with earnings results for the first quarter of 2026. The press release, slides, and supplementary data are available on the Investors section of our website at gilead dot com. The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day, our Chief Commercial and Corporate Affairs Officer, Johanna Mercier, our Chief Medical Officer, Dietmar Berger, and our Chief Financial Officer, Andrew Dickinson. After that, we'll open the call to Q&A, where the team will be joined by Cindy Perettie, the Executive Vice President of Kite. Let me remind you that we will be making forward-looking statements. Please refer to slide 2 regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially. With that, I'll turn the call over to Dan.
Thank you, Jacquie, and good afternoon, everyone. I'm pleased to share highlights from Gilead's first quarter, which has extended our consistent track record of commercial, clinical, and financial execution. Our strong financial performance and increase in sales guidance reflects the depth and quality of our portfolio, the numerous launches underway, and our continued focus on financial discipline. As we execute on the strongest pipeline in our history, Gilead is also taking steps to further strengthen the company's position for the future. We are looking forward to sharing much more on our Arcellx, Ouro, and Tubulis in the coming quarters. Our HIV business grew 10% year over year, reflecting 7% growth for BIKTARVY and an impressive 87% growth for our U.S. PrEP business. The ongoing success of the Yeztugo launch is a key driver of this growth in HIV prevention, with first quarter sales growing 72% sequentially.
Looking forward, with no major LOEs until 2036, Gilead's HIV business is poised for strong, durable growth, supported by up to 7 potential new HIV product launches by 2033. The first of these potential launches is bictegravir plus lenacapavir, an investigational once-daily oral regimen for virally suppressed people with HIV. This is now under priority review, and we expect an FDA decision in August. Other upcoming HIV milestones include phase III updates later this quarter from the ISLEND-1 and ISLEND-2 studies evaluating a potential first once-weekly oral for virally suppressed people with HIV. We shared encouraging phase I data at CROI in February for a long-acting integrase inhibitor, GS-3242. Later this year, we plan to share additional data that could support the combination of GS-3242 with lenacapavir as a potential twice-yearly injectable treatment regimen.
The timeframe for potential launch is between 2031 and 2033. In oncology, first quarter Trodelvy sales were up 37% year-over-year, reflecting growing demand for Trodelvy. We anticipate regulatory decisions on extending into first-line metastatic triple-negative breast cancer in the second half of this year. Ahead of these decisions, Trodelvy has already received NCCN Category 1 recommendations across the first-line and is the leading ADC in second-line metastatic TNBC treatment. We are also expecting Phase III updates from the EVOKE-03 trial in first-line metastatic non-small cell lung cancer and the ASCENT-GYN trial in second-line plus metastatic endometrial cancer in the second half of this year. The pending acquisition of Tubulis is another significant milestone in building Gilead's oncology franchise.
The company brings a clinical-stage candidate, TUB-040, which we believe has the potential to be a leading ADC in ovarian cancer and a next-generation ADC platform with a promising early pipeline. At the upcoming ASCO meeting, we look forward to additional phase I data on TUB-040 in platinum-resistant ovarian cancer. We are expecting a regulatory decision on anito-cel, our potential best-in-disease BCMA CAR T in December of this year. Our acquisition of Arcellx, which closed on April 28th, reflects our conviction in the potential of anito-cel as a differentiated option for patients with multiple myeloma. Given the significant opportunity in 4th line as well as earlier lines of therapy, we believe anito-cel could become a foundational therapy for multiple myeloma, driving growth in our cell therapy business in 2027 and beyond.
The Arcellx platform will leverage Kite's industry-leading manufacturing capabilities and could further strengthen our future in oncology and inflammation. In liver disease, LIVDELZI revenue for second-line primary biliary cholangitis more than tripled year-over-year. We are expecting an update from our phase III IDEAL study for LIVDELZI in the second half of this year. If positive, the IDEAL study could support a label update and expand the second-line PBC addressable population. Additionally, we expect a regulatory decision and potential U.S. launch of Hepcludex for chronic hepatitis delta virus infection later this quarter. In inflammation, the potential acquisition of Ouro Medicines will add to our portfolio with gamgertamig, a BCMAxCD3 T-cell engager in multiple B-cell driven autoimmune diseases. We will also share phase II updates for our oral IRAK4 inhibitor and oral α4β7 small molecule this year.
These commercial and clinical updates demonstrate the strength of our execution today, underpinned by our continued commitment to financial discipline. As we look to the remainder of 2026, we see many exciting opportunities to further expand our impact on the patients and communities we aim to serve. With that, I'll hand it over to Johanna.
Thanks, Dan, and good afternoon, everyone. It has been a remarkable start to the year from a commercial perspective, reflecting the innovative nature of our portfolio and our strong execution. Beginning on slide 7, first quarter total product sales, excluding VEKLURY, were $6.8 billion, up 8% year-over-year, driven by continued growth across our key products in HIV, breast cancer, and PBC, partially offset by HCV and cell therapy. Including VEKLURY, first quarter total product sales were $6.9 billion, up 5% year-over-year. Sequentially, sales were down 12% in line with normal first quarter seasonality. Moving to slide 8, our HIV commercial teams drove first quarter sales of $5 billion, up an impressive 10% year-over-year. This growth was driven by strong demand across BIKTARVY, YES2GO, and Descovy, as well as pricing favorability.
Sequentially, HIV sales were down 13%, primarily driven by Q1 seasonality in line with our expectations. These typical first quarter factors included inventory drawdown following a year-end build in the prior quarter and lower average realized price due to channel mix. Looking at HIV treatment in more detail on slide 9, BIKTARVY sales of $3.4 billion were up 7% year-over-year, driven by higher demand and average realized price, partially offset by inventory drawdown. Sequentially, sales were down 15%, reflecting the first quarter seasonality that I just discussed. BIKTARVY continues to lead as the regimen of choice for both naive and switch patients across major markets. In the U.S., BIKTARVY's share was once again more than 52%, continuing its record of year-over-year gains in every quarter since launch. This market leadership is a testament to BIKTARVY's differentiation and continued physician confidence.
We also continue to innovate with bictegravir plus lenacapavir, or Biclen, our once-daily single-tablet regimen. We are targeting a potential launch in late August for people with virally suppressed HIV, including those on complex regimens. Building on our long-standing track record of delivering highly effective, differentiated therapies for people with HIV, we believe that Biclen is an exciting addition to our HIV treatment portfolio and has the potential to further expand Gilead's leadership in the switch market. Moving to slide 10, our U.S. HIV prevention or PrEP business grew 87% year-over-year, comprised of the market-leading branded daily oral Descovy and the first and only twice-yearly injectable YES2GO. This performance was driven primarily by commercial execution and the strong product profiles of Descovy and YES2GO.
We believe we have the most compelling portfolio of PrEP products on the market and expect to retain and grow our leadership in the rapidly expanding PrEP market in both the near and long term. In the first quarter, the U.S. PrEP market grew approximately 14% year-over-year, and we look forward to further growth as we expand the reach of HIV prevention over time. Descovy first quarter sales of $807 million were up 38% year-over-year, driven by higher average realized price and demand growth. Sequentially, Descovy sales were down 1% due to typical first quarter seasonality and partially offset by favorable channel mix. Specifically within PrEP, which accounts for about 80% of Descovy's business, first quarter U.S. sales were up approximately 50% year-over-year.
YES2GO continues to show an unprecedented launch trajectory for a new long-acting PrEP product. First quarter sales of $166 million were up 72% sequentially, exceeding our expectations. I am pleased to share we continue to see strong performance across our key YES2GO launch metrics. This includes access, where now approximately 95% of individuals are covered in the U.S., of which 95% can access YES2GO with $0 copay. Market share, where we are now the leading long-acting injectable in switch, we continue to see a higher than expected number of naive PrEP users initiating on YES2GO with early signs of growing momentum in this segment. Persistency, where our initial experience of return users is encouraging. Although it is still early, we expect YES2GO persistency to be the highest in the HIV prevention category.
The impact of our direct-to-consumer campaign, where we are creating strong brand awareness and interest in YES2GO through our omni-channel approach, focusing on communities and geographies with the highest needs. Given the outperformance of YES2GO in the first quarter and our growing confidence in the trends we're seeing, we're increasing our 2026 YES2GO guidance to $1 billion, potentially achieving blockbuster status in its first full year. Beyond 2026, we continue to expect a steady and durable build in sales over many years as we work to eliminate stigma associated with HIV PrEP and broaden adoption to all communities and individuals who can benefit. Both YES2GO and Descovy for PrEP sales are expected to meaningfully grow in 2026.
Reflecting this increase to our YES2GO guidance, in addition to first quarter strength across HIV, we are now expecting 2026 total HIV sales, including both treatment and prevention, to grow approximately 8% year-over-year compared to the 6% previously shared in our February guidance. This is inclusive of headwinds of approximately 2% associated with the drug pricing agreement with the U.S. government to lower Medicaid pricing for some of our products and proposed changes to the Affordable Care Act. Turning to slide 11, LIVDELZI sales of $133 million more than tripled year-over-year as the launch continues to generate strong and growing demand in the U.S. as well as across Europe. Demand growth continues to be driven by expansion in prescriber adoption, confidence in LIVDELZI clinical profile, and broader utilization among appropriate second line PBC patients.
Sequentially, sales declined 11%, largely driven by inventory drawdown. As we previously highlighted, fourth quarter sales included a bolus of switches associated with the discontinuation of a competing product, which has normalized in the first quarter. As we enter the second quarter, LIVDELZI's rapid market capture continues to impress, maintaining its position as market leader with more than 50% share of the U.S. second line PBC market. More broadly in liver disease, first quarter sales of $767 million were up 1% year-over-year, primarily reflecting the continued launch of LIVDELZI, partially offset by inventory drawdown across the portfolio and lower HCV patient starts. Sequentially, sales were down 9%, reflecting seasonality, partially offset by higher average realized price for HCV products.
Moving to TRODELVY on slide 12, sales of $402 million were up 37% year-over-year and 5% sequentially, with growing demand across breast cancer indications in all regions. TRODELVY is already approved in over 60 countries and has been firmly established as the leading regimen in second-line metastatic TNBC across major markets. Turning to the first-line metastatic setting, in the phase III ASCENT-03 and 04 trials, TRODELVY demonstrated highly statistically significant and clinically meaningful improvements in progression-free survival over the standard of care, both as a monotherapy in PD-L1 negative patients and in combination with pembrolizumab in PD-L1 positive patients. Ahead of potential FDA decisions, the NCCN updated their guidelines with category 1 recommendations across first-line metastatic TNBC, which reinforces the strength of the data in first-line with a potential launch in the U.S. in the second half of 2026.
Moving to cell therapy on slide 13 and on behalf of Cindy and the Kite team, first quarter cell therapy sales were $407 million, down 12% year-over-year and down 11% sequentially, reflecting the expected ongoing in and out of class competition across regions. We continue to pursue expanding access and global reach of our cell therapies. For example, in April, Tecartus received full FDA approval in adult relapsed or refractory mantle cell lymphoma, adding data on patients who are BTK inhibitor naive. This important work of increasing awareness and physician comfort with CAR T helped set the stage for the potential launch of our next generation products. Turning to anito-cel, and with the close of the Arcellx acquisition last week, we are ramping up our detailed launch preparations for what we believe could be a best-in-disease multiple myeloma therapy.
Adding Kite's end-to-end expertise in cell therapy to anito-cel's demonstrated deep, durable efficacy and differentiated safety profile positions anito-cel to maximize its potential in the $3.5 billion fourth-line plus CAR T market. With a late December PDUFA date and factoring in the time needed for site activation, we expect revenue from anito-cel to begin in early 2027. As we wrap up the first quarter and look forward to up to four additional launches this year, shown on slide 14, I want to recognize our commercialization teams for their exceptional execution in driving another strong quarter in Q1 and thank them for their commitment to growing patient impact in the second quarter and beyond. With that, I'll hand the call over to Dietmar Berger.
Thank you, Johanna, and good afternoon, everyone. I'm pleased to share that the strong momentum across our research and clinical programs has accelerated since our full year earnings in February. This is supported by disciplined portfolio prioritization and strong execution. With the close of the Arcellx acquisition, our pipeline now consists of 47 clinical programs spanning our portfolio of first in class or best in class assets. The completed acquisition of Arcellx and pending acquisitions of Ouro Medicines and Tubulis add potential best in class CAR Ts, T-cell engagers, and antibody drug conjugates, as well as capability expanding technologies to the novel D domain binder and next generation ADC conjugation platforms.
Starting with HIV on slide 16, we shared 60 abstracts at CROI in February, continuing our track record of showcasing our comprehensive and innovative HIV pipeline at this flagship conference. This year, we highlighted new data across our suite of lenacapavir-based regimens for treatment and prevention, as well as our other investigational programs for HIV treatment. Updates across our HIV portfolio include our once daily oral bictegravir plus lenacapavir or BIC/LEN for treatment of virally suppressed people with HIV has been filed with FDA, and we expect a regulatory decision based on priority review in August. At CROI, we highlighted that BIC/LEN demonstrated viral suppression in people switching from a multi-tablet regimen in ARTISTRY-1 or from BIKTARVY in ARTISTRY-2 with no clinically meaningful emergent resistance.
Moving to our once weekly oral programs, we continue to target updates from the phase III ISLEND-1 and ISLEND-2 trials in collaboration with Merck later this quarter. These trials are evaluating islatravir plus lenacapavir for virally suppressed people with HIV. If successful, this could result in the first-ever long-acting oral treatment regimen. We also continue to develop a wholly-owned weekly oral treatment regimen combining a capsid inhibitor with an integrase inhibitor for treatment of people with HIV. With multiple alternative molecules in our portfolio, we are finalizing the selection of the capsid inhibitor and integrase inhibitor for the new combination and look forward to updating you in due course. Moving to even longer-acting options, we are excited to be initiating a phase II trial combining our investigational integrase inhibitor, GS-3242, with lenacapavir in the second half of this year.
This follows phase I data shared at CROI that showed potential for injectable dosing every 4 months. The higher dose phase I cohorts with potential for twice-yearly dosing are ongoing. In HIV prevention, we continue to drive innovation building on the exceptional clinical profile of YES2GO, and I'm pleased to share that enrollment in our phase III PURPOSE 365 study evaluating once yearly intramuscular lenacapavir is complete. This registrational study is testing PK, safety, and tolerability across a diverse set of participants indicated for PrEP. We expect these data, along with the unprecedented efficacy and safety results from PURPOSE 1 and 2, to form the basis of regulatory submission with target U.S. approval in 2028. Transitioning to oncology and starting on slide 17, we have announced several strategic investments over the last few months that we believe further strengthen our ADC and cell therapy capabilities and portfolios.
ADCs are one of the most promising modalities in cancer today, as highlighted by the incredible impact TRODELVY has demonstrated for patients with second-line metastatic triple-negative breast cancer and pre-treated hormone receptor-positive HER2 negative metastatic breast cancer. We continue to expect regulatory decisions from FDA for first-line metastatic TNBC in the second half of 2026, and we now also anticipate European Commission decisions later this year. Further, we continue to expect Phase III updates from EVOKE-03 in first-line PD-L1 high metastatic non-small cell lung cancer and ASCENT-GYN in second-line plus metastatic endometrial cancer in the second half of this year. Given our foundational ADC experience with TRODELVY, we are excited to expand our portfolio and capabilities with the acquisition of Tubulis.
The lead asset, TUB-040, is a potential first-in-class NaPi2b-directed ADC that we believe has transformative potential in platinum-resistant ovarian cancer, a challenging and aggressive condition with a poor prognosis for many women. At the ESMO conference last year, TUB-040 phase I data showed early treatment responses that deepened over time in a broad ovarian cancer population without any biomarker selection. This is potentially meaningful differentiation from other approved ADCs. In the shared data, TUB-040 was generally well-tolerated across a wide therapeutic index with no clinically relevant bleeding, pneumonitis, ocular toxicity, stomatitis, or neuropathy observed. In the immediate future, we look forward to more mature phase I data on TUB-040 in ovarian cancer at this year's ASCO meeting in June and expect to enter registrational phase III studies for platinum-resistant ovarian cancer in 2027.
Looking longer term, Tubulis' pipeline includes TUB-030, a potential first-in-class ADC targeting 5T4, being evaluated in a phase I basket trial in multiple solid tumors, including head and neck cancer and non-small cell lung cancer. Further, Tubulis has multiple preclinical assets that utilize its next-generation ADC platform. We're excited by the potential to develop ADCs that incorporate novel payloads, including ones developed by Gilead's industry-leading medicinal chemistry group. Moving to cell therapy on slide 18 and on behalf of Cindy and the Kite team, we are pleased to have closed our acquisition of Arcellx at the end of April, which formally brings anito-cel's entire program and the broader D domain binder portfolio into our R&D organization. We have long believed anito-cel has a potential best-in-disease profile in multiple myeloma, and this is supported by clinically meaningful, deep, and durable efficacy as well as a differentiated safety profile.
This includes no delayed or non-ICANS neurotoxicities and enterocolitis in our clinical program. Given our confidence in anito-cel's clinical profile, we are evaluating anito-cel in earlier treatment lines, including second to fourth line relapse or refractory multiple myeloma in the phase III iMMagine-3 trial. This trial is recruiting ahead of expectations with enrollment completion expected in the second quarter. We are also planning to develop anito-cel in newly diagnosed multiple myeloma. Beyond anito-cel, the Arcellx acquisition brings an array of promising research assets, and we are particularly excited to explore the broader applications of the unique D domain binder platform across a variety of targets in oncology and autoimmune diseases, and notably for in vivo cell therapies. With our increasingly differentiated cell therapy pipeline, we look forward to bringing CAR T to even more patients in the years ahead.
Moving to slide 19, our inflammation pipeline has nearly doubled since 2019 and now consists of 10 clinical stage assets spanning small molecules, antibodies, including bispecifics and cell therapies that enable a diverse array of approaches to address challenging autoimmune diseases. We are excited about the pending acquisition of Ouro Medicines and its lead asset gamgertamig, a clinical stage subcutaneously administered BCMAxCD3 bispecific T-cell engager that we expect to develop in collaboration with Galapagos. Together with Kite's portfolio of anito-cel and next generation bispecific CAR Ts, we believe we could achieve durable immune reset, shifting some autoimmune diseases from chronic symptom control to a transformative long-term treatment effect. Each asset offers unique potential advantages that could allow us to target different patient populations.
Specifically, gamgertamig has shown rapid, deep, and sustained plasma and B-cell depletion while maintaining low rate and low-grade CRS with no ICANS to date in over 60 patients with immune-mediated diseases. We are focusing first on orphan autoimmune indications with established proof of concept and high unmet need, including autoimmune cytopenias, pemphigus, and idiopathic inflammatory myopathies. We're targeting phase III registrational trials in select autoimmune diseases as early as 2027. Longer term, we believe gamgertamig has potential in more than 20 autoimmune diseases that are driven by pathogenic B and plasma cells.
Additionally, this year we plan to share updates from our broader inflammation portfolio, including the phase III IDEAL study evaluating LIVDELZI in PBC patients with incomplete response to UDCA, the phase II SWIFT study evaluating GS-1427 or emvistegrast, our investigational oral α4β7 inhibitor for inflammatory bowel diseases, and the phase IIa COSMIC study evaluating edecesertib, our investigational IRAK4 kinase inhibitor in cutaneous lupus erythematosus. Reviewing our 2026 pipeline milestones on slide 20, we remain on track across all our key deliverables. We expect an FDA regulatory decision for bulevirtide as a treatment for chronic HDV infection later this quarter. Bulevirtide has been approved as Hepcludex in the EU since 2020, and we look forward to making this available to patients in the U.S.
We expect FDA regulatory decisions for BIC/LEN in August and anito-cel in December of this year, as well as phase III updates for ISLEND-1 and 2 in the first half of this year and for EVOKE-03, ASCENT-GYN, and IDEAL in the second half. With that, I'd like to thank our research and development teams and our partners whose continued strong clinical execution are driving the progress we have seen across our pipeline. I'll turn over the call to Andy.
Thank you, Dietmar, and good afternoon, everyone. As you've heard, Gilead delivered strong first quarter results with continued commercial outperformance and disciplined operating execution. As shown on slide 22, our base business grew 8% year-over-year to $6.8 billion, driven by continued growth in sales for HIV products, TRODELVY and LIVDELZI, partially offset by lower sales of HCV and cell therapy products. Sequentially, sales were down 12%, reflecting typical seasonal inventory dynamics in line with our expectations. Total product sales of $6.9 billion were up 5% year-over-year, reflecting lower VEKLURY sales due to fewer COVID-19 related hospitalizations. Moving to our non-GAAP first quarter results on slide 23.
Product gross margin was 87% in line with our full-year guidance and up 2 percentage points year-over-year due to the expiration of a long-standing TAF-related royalty obligation in addition to product mix. R&D expenses were $1.4 billion, relatively flat year-over-year, reflecting higher investments in virology clinical manufacturing offset by lower oncology clinical study activity. Acquired IPR&D expenses were $107 million, primarily driven by an upfront payment related to our Genhouse Bio licensing deal. We have now closed the acquisition of Arcellx and the acquisitions of Ouro Medicines and Tubulis are expected to close later this quarter. The upfront payments related to these transactions are expected to be recorded in our second quarter acquired IPR&D and have been reflected in our full-year EPS guidance, which I will discuss shortly. Back to our first quarter results.
SG&A expenses were up 12% year-over-year, primarily reflecting higher selling and marketing expenses related to the Yeztugo launch. First quarter operating margin was 47%, reflecting our continued focus on operating expense discipline and delivering top quartile margins. The non-GAAP effective tax rate was 18.3% in the first quarter. Finally, non-GAAP diluted EPS was $2.03, up 12% year-over-year. This reflected higher product sales and lower IPR&D expenses incurred this quarter, partially offset by higher tax and SG&A expenses. Moving to our full year guidance, we are pleased to share our updated expectations for 2026, reflecting revenue outperformance in the first quarter and expected momentum through the rest of the year. As a result, we are increasing our revenue ranges by $400 million.
With regards to operating expenses in 2026, as discussed on our transaction call a few weeks ago, we continue the careful prioritization of operational spend consistent with our track record over the last several years. For R&D, we expect a transaction-related modest and manageable $ increase compared to our start of the year guidance. In SG&A, we are effectively absorbing incremental expenses associated with the acquisitions in our prior guidance. Upfront IPR&D of $11.5 billion, together with transaction financing expenses collectively amounting to $9.50 per share, are reflected in our updated EPS guidance. We are pleased to note that excluding these transaction-related costs, we are effectively maintaining our start of the year non-GAAP EPS guidance, highlighting the flexibility in our operating model and our agility as we flex to accommodate the needs of the business.
Looking at the details starting on slide 24, reflecting strength across our HIV businesses, we now expect 2026 HIV sales to grow 8% year-over-year, ahead of our prior guidance of 6% growth. Within HIV, we now expect YES2GO sales of approximately $1 billion, up from $800 million at the start of the year. As a result, we are increasing our 2026 base business guidance and now expect a range between $29.4 billion-$29.8 billion. This increase of $400 million results in 5%-6% growth compared to 2025, up from the 4%-5% growth expectation we shared in February.
As we highlighted last quarter, our guidance includes a roughly 2% growth headwind from policy-related changes this year, primarily related to the drug pricing agreement announced in December 2025 and the Affordable Care Act. Absent this headwind, base business growth would be expected to be 7%-8%. Our full year VEKLURY guidance remains unchanged at approximately $600 million, contributing to expected 2026 total product sales between $30 billion and $30.4 billion, an increase of $400 million. Moving to the non-GAAP P&L for the full year 2026, we are adjusting our guidance to reflect the Arcellx, Ouro Medicines, and Tubulis acquisitions. Specifically, we expect R&D expenses to increase a mid-single-digit percentage from 2025, slightly higher than the low single-digit percentage increase shared in our February guidance.
This is primarily driven by our investment in clinical programs related to the announced acquisitions of Tubulis and Arcellx. Overall, we expect R&D expense as a percentage of total product sales to be less than 20% in 2026. We expect acquired IPR&D investments of approximately $11.8 billion for the year, which includes the upfront payments associated with our recently announced acquisitions. We expect SG&A expenses to remain in line with our February guidance of a mid-single-digit percentage increase compared to 2025, and we expect full year 2026 operating income of $2.4 billion-$2.9 billion. Full year 2026 effective tax rate is expected to be between 140% and 190%, reflecting the nondeductible expenses from the Arcellx, Ouro Medicines, and Tubulis transactions.
Excluding the $11.5 billion in upfront payments related to these recent transactions, operating income would be between $14 billion and $14.5 billion, or $200 million higher than our February guidance. On slide 25, you can see that we now expect full year 2026 non-GAAP loss per share in the range of $1.05 to $0.65 per share. This includes an expense of approximately $9.50 per share relating to the upfront payments and financing costs associated with the Arcellx, Ouro, and Tubulis transactions. Excluding this impact, our non-GAAP diluted EPS would be $8.45 to $8.85, or in line with the non-GAAP EPS guidance we shared back in February.
We are pleased to note that the strength in our commercial business, reflected in the $400 million increase in product sales, is effectively offsetting the impact, primarily R&D, of the 3 deals on an EPS basis. On slide 26, we returned greater than $1.4 billion to shareholders in the first quarter of 2026. Including over $400 million of share repurchases. Combined with our dividend, we returned approximately 60% of our free cash flow to shareholders in the first quarter of 2026. Looking ahead, given the pace of our activity in the first 4 months of 2026, our business development focus in the near term will be closing and successfully integrating these programs and maintaining strong clinical momentum. At the same time, we will continue to pursue ordinary course business development transactions.
It is less likely that we will pursue more sizable M&A this year, although we will always leave the door open to consider strategic acquisitions if a compelling opportunity emerges. Overall, we are pleased with Gilead's consistent strong performance, highlighted by solid clinical and commercial execution and supported by our disciplined operating model. We continue to be very well-positioned for both near-term and long-term growth and fully focused on executing our strategic commitments. With that, I'll invite Rebecca to begin the Q&A.
Thank you, Andy. At this time, we'll invite your questions. Please be courteous and limit yourself to one question so we can get to as many analysts as possible during today's call. Again, to ask a question, press star one, and to withdraw your question, press star one again. Jim comes from Akash Tewari at Jefferies. Go ahead. Your line is open.
Hey, thanks so much. Can you talk a bit more about the Tubulis deal? How much of that MPV was driven by ovarian and the signal you're seeing there for 040 versus the potential to take this into lung, given the amount of NaPi2b expression there? Additionally, we're kind of seeing 2 steps forward, 1 step back with the PD-1 VEGFs. You guys haven't been in that class so far. What additional validation would you need to see from the class at ASCO to look forward towards combination approaches with your ADC platform? Thank you.
Yeah. Thanks for the question, Akash. I'll invite some of my colleagues to comment as well. Let me just frame this and the other transactions. You know, as I've said before, we have one of the strongest portfolios ever in Gilead's history, in fact, the strongest before these acquisitions. Each of these kind of contribute to different aspects of strengthening our business. Tubulis in particular, and we'll get to that, you know, is not only TUB-040, as you've heard in the prepared remarks, and TUB-030, but also the strength of the platform overall. I'll invite Dietmar to comment a little bit further on how he sees the uniqueness of this platform. Andy, if you have any additional comments, please, I welcome them as well. Dietmar, over to you first.
Yeah. Thanks, Akash, for the question. The Tubulis platform, to just expand a bit on what Dan has said, right? We see the value of the frontrunner molecule, which was what we think is unprecedented data in ovarian cancer. When you look at the data, they're presented at ESMO in platinum-resistant ovarian cancer, the objective response rate, the durability of the response, and also the tolerability in the patients treated, we think that really stands out. On top of that, this is not in a biomarker selected population, so we really see a lot of value there. Obviously also with the objective to take this into earlier lines of therapy, especially into platinum sensitive ovarian cancer.
Then there's a second clinical program with a 5T4 targeted TUB-030 program with broader potential in different tumor types currently in dose escalation, but already with encouraging findings when you look at expression of 5T4 in some of the early data. Talking about the platform, these are really two technologies we are especially excited about. One is the P5 technology that is a linker technology that from a chemical perspective is entirely new, allows for very stable linkage and allows for delivery of the payload directly at the tumor site with limited general toxicity. The toxicity profile that we see with the molecule with at this point in time, no lung toxicity, no ocular toxicity, et cetera, really underpins that biological story.
The second part of the platform being the Alco5 platform, which allows to link different types of payloads. This is also where the synergy between Tubulis and Gilead comes in, developing novel payloads both from a Tubulis perspective, but also from a Gilead perspective using our medicinal chemistry capabilities. We have been scouring the world for developed and really attractive ADC technologies. We have good experience, obviously, with Trodelvy, we wanted to add to that and expand beyond that. The Tubulis technology is really the first that convinced us to add that to our portfolio because it's just so transformational and has so much opportunity. Regarding your second question with the VEGF PD-1, obviously, this is an interesting mechanism that we follow closely.
The combinations need to be, in my mind, you know, very targeted to the individual tumor type. So you need to really evaluate, does the PD-1 mechanism play a role? Does the VEGF mechanism play a role? We're also obviously looking at the data that is coming out with these different molecules currently in development across different tumor types.
Akash, it's Andy, maybe I would just add following what you heard from Dietmar and Dan, there are clearly numerous sources of value in the acquisition that we're excited about. I think I said on our call a couple weeks ago, the ovarian opportunity alone is very large. The data is really encouraging. You know, the financial return for our company and the shareholders on ovarian cancer alone can justify the transaction price. You're absolutely right. There is upside in lung cancer, potentially. We'll see as the data develops.
All of these products have the potential to be a pipeline and a product, just the ovarian cancer opportunity alone is very exciting. We'll leave it at that for now.
As a reminder, we ask that you please limit yourself to one question so we can get to as many analysts as possible on today's call. Our next question comes from Terence Flynn at Morgan Stanley. Terence, go ahead. Your line is open.
Great. Thanks so much, and congrats on all the progress. This is a question for Johanna, and it's one question, I promise. Just on the YES2GO launch, can you provide the latest mix of switch versus naive buy and bill? Anything new on the adherence its assumption that's embedded in the $1 billion guidance? Thank you.
Thanks for the question. We're really excited about what we're seeing with the strong performance in the first quarter, and that's really across all of the launch metrics that you were referring to. I would start with just growing confidence with healthcare professionals as the access pathways are getting a lot easier, the logistics, the experience is growing. We're really seeing that pick up as well as new prescribers of YES2GO also adding every single week. From an access standpoint, we're now at about 95% of coverage with the 95% of those have $0 copay.
We're in a really good situation, which I think is what you're seeing kind of that growth post the January 1st play because of the updates in the prescriber fees schedules for J-code and everything else just kind of coming into play. On the market share front that you were referring to, we're obviously tracking both the naive and switch share. Switch share is obviously greater than the naive, but naive is coming along really quite nicely, and we're seeing strong momentum there as well. We see in the switch share, we see a bit of a split across 1/3, 1/3, 1/3, basically across L.A., other LAI injectable, the TRUVADA generics, as well as Descovy. We're seeing a little bit of a play there.
We're seeing really strong market growth at about 14%. That is driving not just YES2GO, that's obviously helping Descovy as well. Your last comment was around persistency. Still early days, right? If you think about the volume, only really started in Q4. What we are seeing, we're really pleased with, very encouraging. HCPs are starting the second injection and thinking it's a lot easier, access is easier, as well as the experience, the confidence in the injection and the experience for the people getting the injection is also better as well, is what we're hearing anecdotally. We do expect YES2GO's persistency to keep growing over time and to be the highest in the overall HIV prevention market. Basically that sums up our first quarter for YES2GO.
Incredibly strong performance explains why we've updated our guidance to the billion-dollar opportunity for 2026.
Our next question comes from Salveen Richter at Goldman Sachs. Go ahead. Your line is open.
My question, with regard to users who haven't yet returned for a second dose, do you have a sense of what's driving this? You know, how it breaks down between users who are stopping PrEP versus switching to another option or just delayed in coming back from the second dose? Maybe just speak to the DTC efforts as well. Thank you.
Sure. Thanks, Salveen Richter. I think what we're doing is we're tracking the claims data pretty closely. It's not perfect data, I'll be honest with you. I don't have the level of detail that you're referring to. What we are seeing, however, is really good comeback on the second dose and within a certain timeframe. As long as you give it a couple of weeks, plus or minus, I think what we're seeing is really positive and encouraging. What we're hearing as well, right? As we do a lot of market research with our healthcare professionals as well. The DTC only adds to that. We have a lot of efforts going on with persistency.
We really leverage our specialty pharmacies to make sure that they call and remind them to make their appointments well ahead of time. The DTC helps that as well. Our DTC started late February, what we've been seeing is a huge increase in brand awareness and visibility for YES2GO. It really also helps remind people to come back for their injection as well. All those pieces are coming together, let alone additional work that we're doing to kind of accelerate that and support the DTC campaign. As for actual results on DTC, it's still really early. We just launched late February. We're seeing social media awareness really ramp up because of those efforts, but it takes 6-12 months before we really see kind of the outputs of the DTC.
Our next question comes from Mohit Bansal at Wells Fargo. Go ahead. Your line is open.
Great. Thank you very much for taking my question. Hope your BD team got some rest off from the crazy first quarter. My question is regarding the attractiveness of BIC/LEN treatment here, as you are about to launch. 5%-6% of the HIV market could still be a sizable opportunity. Could you please help us understand the opportunity here, and how big this product could be even in the switch market? Thank you.
Thanks, Mohit. It's Johanna. I'll take that one. Yeah, we're really excited about BIC/LEN with the PDUFA date around the corner, right, late August. The way we're thinking about BIC/LEN is really 2 opportunities within it. 1 is what you referred to, which is with ARTISTRY-1 showing with virologically suppressed complex regimen, there are still about 5%-6% people living with HIV that are on multiple pills, 5, 6, 7, 8 pills on a daily basis. This is an opportunity to simplify their regimen and move to 1 pill once a day. That is something that we will be very focused on at launch.
In addition to that opportunity, we also believe that in the switch market, which is the dynamic market for people living with HIV, there's about 20% or so that switch. That has to do with the innovation life cycle that we've seen over the years. People want to switch to the next thing that comes on the market. That does happen in our marketplace. We see that as an opportunity for BIC/LEN. As you think about Biktarvy, and obviously Biktarvy we believe will continue to remain the standard of care for many years to come with an LOE out to 2036. We do believe, though, that some people do switch off Biktarvy, and right now they're switching off to competitor products.
We believe with BIC/LEN, there's an opportunity to play in that switch market, which we haven't had in the past, and move them from BIKTARVY, if they're gonna switch anyway, to BIC/LEN. As you think about BIC/LEN with bictegravir as the integrase inhibitor standard of care and lenacapavir as a really innovative capsid inhibitor, pulling those two together, that combination of two orthogonal mechanisms with really high resistance and no cross-resistance makes it a really appealing option for patients. That's how we're thinking about the BIC/LEN opportunity. I will say, obviously, with a late launch in 2027 and not late August, access will need to ramp up, so it'll be modest revenues in 2026 with a nice ramp in 2027 and beyond.
Our next question comes from Carter Gould at Cantor Fitzgerald. Go ahead. Your line is open.
Great. Good afternoon. Thanks for taking the question. Another one on YES2GO adherence. Johanna, I appreciate your framing of adherence as sort of highest in the category. Fair to assume those comments are anchoring on APRETUDE adherence around 50% still? Are there any reasons based, I guess, on the early days that the greater than 80% adherence that you outlined at HIV Day, 18 months ago, is not still in play? Thank you. With the once yearly offering.
Yeah. Thanks, Carter Gould. I think what you're referring to is also the adherence, not the persistency at 80%. We still believe, obviously, that adherence is obviously much greater because you're at 100% for 6 months. From a persistency level, we do believe with a Q6M monthly, what we're seeing in early days is definitely much stronger than what the current competition is seeing in the marketplace. That's what's encouraging to see people coming back for their second injection and obviously potentially even third later this year. That's what we're tracking super closely and supporting those efforts as well.
I think we, you know, what we're also very conscious of is just making sure the logistics and the schedule is happening in a timely way and working with clinics and different specialty pharmacies to make sure that happens exactly in line with that. I do see the opportunity for Yes2go to be very persistent moving forward. Of course, understanding that you're in a prevention market, so it's never gonna be 100%. I, I think it's just that balance is important as well.
Our next question comes from Geoff Meacham at Citi. Go ahead. Your line is open.
Hey, everyone. Congrats on the quarter, thanks for the question. One on anito-cel. As you guys approach the launch and just looking at the development in earlier lines, just wanna get your perspective on the safety advantage among CAR-Ts. You know, would we expect it to narrow or to widen as you treat patients upstream that are maybe perhaps less heavily pretreated? Thank you.
Thanks, Geoff. It's Cindy. We actually agree with the statement you just made. We're really excited about the potential for anito-cel going into earlier lines, whether it's newly diagnosed multiple myeloma or even in smoldering where patients aren't technically diagnosed with the disease. Safety really matters at that point. I think it's a combination though, particularly with our efficacy profile that we've seen to date, coupled with the safety profile. We think it's going to be a really important option for patients in earlier lines. We're working on right now the trial designs in newly diagnosed multiple myeloma, and we'll be sharing more information on those as available. We think it's going to be an opportunity based on both the exceptional efficacy that we're observing as well as a differentiated safety profile.
Our next question comes from Alex Hammond at Wolfe. Go ahead. Your line is open.
Hey, guys. Thanks for taking the question. Obviously this year you guys have had 3 new acquisition integrations running simultaneously alongside multiple commercial launches. I guess, like, how should we think about margins in the near term and the long term? Is there room for continued margin expansion, particularly in that 2027-2028 timeframe? Thank you.
Hey, Alex. It's Andy. Thanks for the question. We appreciate it. I mean, look, you see in the first quarter a 47% operating margin, significant strengthening of the margin from last year. The business continues to perform really well. You see that in our updated guidance, including the increase in the revenue guidance. You also see the ability to absorb all three of these deals, essentially to offset with the revenue outperformance, the incremental expenses that we expect this year. Of the roughly $400 million in incremental expenses, a little over $200 million of those are R&D expenses this year. The remainder of them are the financing expenses. You see our ability with the revenue outperformance and the disciplined expense management
To pull those in and offset them when you exclude the IPR&D and kind of look at our EPS expectation on an apples-to-apples basis. I will say, you know, we expect in 2027 to find room in our portfolio and our P&L for these as well. We've spent a lot of time planning for this as we were looking at the transaction. We feel very comfortable about the ability to navigate the incremental expenses. When you look beyond 27, you know, our expectation was that we were going to have more room in our portfolio in any event. As you know, we've been wrapping up a number of phase III trials across our entire portfolio. I think 2026 and 2027, these are modest increases. They're manageable.
2028 and beyond, we needed to add to the portfolio in any event. These are really high-quality assets that we can add. You should still expect very strong financial performance. We, you know, on the bottom line and the top line. There is room to strengthen the margin over time. Of course, it, you know, can vary from quarter to quarter. When we look at where we are, we feel like we're in a great spot today and really excited about what lies ahead.
Our next question comes from Umer Raffat at Evercore. Umer, go ahead. Your line is open.
Thank you, guys. I was actually really looking forward to a possible update on your phase II ulcerative colitis trial of the oral α4β7. I think ClinicalTrials.gov says it wrapped up in March. I guess, how should I interpret lack of any update there? Thank you.
Umer, thank you for the question. We are really excited about the oral alpha four beta-seven, and we're very much looking forward to updating you in due course, right? Don't read anything into the current timeline, right? We are looking at the data, and we will update you very soon.
Our next question comes from Tyler Van Buren at TD Cowen. Tyler, go ahead. Your line is open.
Hey, guys. Thanks very much. For you, Stu, can you discuss what regions in the U.S. you're seeing the greatest uptake so far in the launch and how you expect that to evolve in the coming months and years?
Sure, Tyler. It's Johanna. I'll take that. Where we are seeing the greatest uptake is actually where we had already penetrated the HIV PrEP market. As you think about certain cities across the U.S., San Francisco, L.A., New York, Florida, et cetera, those are definitely areas where they were more comfortable with PrEP, and so therefore, it's more of a switch market there. What we're also very focused on in parallel to that kind of build has been on the naive market and making sure that we're creating awareness where there's a high unmet medical need, where you see the highest HIV incidence in certain parts, for example, the rural South of the U.S. That's obviously, that's going to be over time, but that's also where we're seeing more of the naive prescriptions coming through as well.
Our next question comes from Mike Yee at UBS. Mike, go ahead. Your line is open.
Great. Thank you. On GS-3242, you had some great data at CROI recently. Your competitor seems to think that they are ahead, I think publicly stating 2030 type time to market, and you're saying 2031 to 33. Can you talk a little bit about your timing and what drives the difference between 31 and 33 and how you're thinking about that program? Thanks.
Thanks for the question. I mean, obviously, currently and what you've seen at CROI, we're currently in the dose escalation phase. We're looking at the pharmacokinetics for different doses. We are very comfortable with the Q4-month dosing. Obviously, our ambition, and we're really encouraged by the data that we've seen, is to bring this to once every six months dosing. I'm confident moving forward there. 31 to 33 is really only a reflection, and I would call it a conservative reflection of, you know, the different trial designs and the different clinical plans that we're currently working on.
What I do want to assure you about is we will try to bring this forward to patients as quickly as possible because we feel a once every 6 month injectable treatment on the basis of GS-3242 will really be able to make a difference for patients.
Our next question comes from Chris Schott at J.P. Morgan. Chris, go ahead. Your line is open. Apologies. Our next question comes from Tazeen Ahmad at BofA. Go ahead. Your line is open.
Okay, great. Thanks for taking my question. Wanted to ask your thoughts on how you're thinking about the impact to TRODELVY sales and triple-negative, in particular in the case that AstraZeneca's DATROWAY is approved. I think they have a PDUFA in June. You know, they're claiming a superior overall survival benefit relative to chemotherapy in patients that aren't eligible for immunotherapy. Does that change what you think the market opportunity is in this indication for TRODELVY? Thanks.
Yeah. Thanks, Tazeen, for the question. Listen, we're really excited about Trodelvy performance. Let me start with Q1, right? With the 37% year-over-year growth, and a lot of that growth is really driven by the confidence that is building with physicians with Trodelvy. We had really been building as a standard of care and second-line setting for metastatic TNBC. What we've seen since the publications and the NCCN guidelines updating us to a Category 1 for both first line PD-L1 negative as well as PD-L1 positive, what we've seen is a really nice uptake in earlier lines, including first line and obviously that spontaneous use that we're seeing.
We feel very confident that the offering that Trodelvy is bringing to these patients, to these women, is really gonna make a difference, and I think it's the overall profile of Trodelvy. I think the data speaks for itself. I think it's practice-changing, as we've been told both at ASCO and at ESMO when both studies were presented. We're excited about the potential approvals of both first line and second line towards the later, I guess, Q3 of this year. More to come.
Our last question comes from Chris Schott at J.P. Morgan. Chris, go ahead. Your line is open.
Great. Sorry, I was muted before. I just wanted to come back to anito-cel and launch dynamics as we look out to 2027. I guess, specifically, do you think you're gonna need the second line, iMMagine-3 data before you can broadly convert over practices? Do you think there's an ability to ramp this product just based on the initial later line approvals? Thank you.
Thanks a lot for the question, Chris. This is Cindy. You know, we feel really confident about the anito-cel launch. We think that it's gonna offer the one-and-done treatment that Cell therapy has with stellar efficacy, but also with not compromising on safety, that matters in every line. We're excited to bring it forward in fourth line. We're hearing from our KOLs and many of our authorized treatment centers, their excitement, that pans through in two ways. One is we've seen it in our enrollment for iMMagine-3, which went faster than we expected. The second is that we expect to have a majority of our authorized treatment centers activated within the first quarter of 2027 based on their enthusiasm to bring this on board. We see an opportunity at a patient level.
We know the market in fourth line plus is $3.5 billion. There's a substantial opportunity there. We also think that anito-cel offers that differentiated both efficacy and safety profile that patients and physicians are looking for.
That completes the time that we have for questions. I'll now invite Dan to share any closing remarks.
Thanks everybody for joining. I just want to wrap up a very strong quarter with thanking the Gilead teams for another impressive quarter. You know, I think the performance that you're seeing at Gilead today in this second quarter is clearly driven by the quality of our portfolio that's been enhanced also by adding some acquisitions since the beginning of the year, the numerous launches underway, and our continued focus on financial discipline, financial management, which you heard today, and our ability to, you know, add to the portfolio and continue to have our focus on disciplined financial management. Underpinning all this is obviously the dedication of our teams that I get to work with every day, the people and communities.
We're gonna continue to stay very focused on commercial and clinical execution like you've seen us do in past quarters. I would just say, you know, closing off as we look for the remainder of 2026, in addition to the 2 really strong launches that are underway right now with YES2GO and LIVDELZI, we have up to 4 potential upcoming launches before the end of the year and up to 5 phase III updates this year. There's just so many opportunities on the horizon to increase our impact, and we look forward to keeping you informed on the progress throughout the year. As usual, if you have any additional questions that you weren't able to get answered today, please reach out to our investor relations group. We're happy to help you and support you in any way possible.
Thank you for your attention and focus on Gilead today.