Patrick O’Brien - Vice President, IR John Martin - Chairman and CEO Paul Carter - EVP, Commercial Operations Robin Washington - EVP and Chief Financial Officer Norbert Bischofberger - EVP, Research & Development and CSO John Milligan - President and COO

Geoff Meacham - Barclays Mark Schoenebaum - Evercore ISI Geoffrey Porges - Bernstein Matt Roden - UBS Michael Yee - RBC Capital Markets Matthew Harrison - Morgan Stanley Phil Nadeau - Cowen and Company Cory Kasimov - JP Morgan Robyn Karnauskas - Deutsche Bank Brian Skorney - Robert W. Baird Terence Flynn - Goldman Sachs Ying Huang - Bank of America Merrill Lynch John Sonnier - William Blair Jason McCarthy - Maxim Group Alan Carr - Needham and Company

Ladies and gentlemen, thank you for standing-by and welcome to the Gilead Sciences’ Second Quarter 2015 Earnings Conference Call. My name is Candice and I will be your conference operator today. At this time, all participants are in a listen-only mode and as a reminder this conference call is being recorded. I would now like to turn the conference over to Patrick O’Brien, Vice President of Investor Relations. Please go ahead. Patrick O’Brien: Thank you, Candice and good afternoon everyone. Just after market closed today we issued a press release with the details of our earnings results for the second quarter of 2015. The press release and detailed slides are available on the Investor Relations section of the Gilead Sciences’ Web site. The speakers on today’s call will be John Martin, Chairman and Chief Executive Officer, Paul Carter, our Executive Vice President of Commercial Operations and Robin Washington, Executive Vice President and Chief Financial Officer. Also in the room with us for Q&A session are; John Milligan, President and Chief Operating Officer; and Norbert Bischofberger, Executive Vice President of Research & Development and Chief Scientific Officer. Before we begin our formal remarks, let me remind you that we'll be making forward-looking statements, including plans and expectations with respect to our product candidates and financial projections, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause our actual results to differ materially from these statements. A description of these risks can be found in our latest SEC disclosure documents and the recent press releases. In addition, Gilead does not undertake any obligation to update any forward-looking statements made during this call. We will also be using non-GAAP financial measures to help you understand our underlying business performance. The GAAP to non-GAAP reconciliations are provided in our press release as well as on our Web site. I would now turn the call over to John Martin.

Thank you Patrick and thanks everyone for joining us today. Paul and Robin will elaborate on our commercial and financial results in just a moment. I would like to first comment on our HIV and HCV development programs. Our newest antiretroviral agent TAF which is under review as part of multiple products for the treatment of HIV has a superior safety profile compared to TDF. This is important because most newly diagnosed patients would now be treated for decades and at the same time many HIV infected individuals who are in treatment particularly in the U.S. and Europe are advancing NIH. It has also become clear that upon diagnosis HIV patients should immediately begin treatment; this point was driven home by the presentation of the NIH-sponsored start study results last week at the International AIDS Society Conference called IAS in Vancouver, and the concurrent publication of results in the New England Journal of Medicine. The start trial was a two arm randomized study in which patients with CD4 count counts of greater than 500 were randomized to immediate treatment versus deferred treatment until their CD4 count had declined to 350. The study was stopped after it was apparent that there was a clear net benefit in the immediate treatment. For patients facing decades of therapy it's a profile of task suggest that it will be view favorably as a new treatment option. We now have three TAF containing products under review. Two single tablet regimens and a TAF and emtricitabine co-formulated tablet. Important data from Gilead study 109 were presented last week at IAS. Study 109 is an open label clinical trial with more than 1,400 biologically suppressed patients. Who are randomized to switch from a TDF containing regimen to E/C/F/TAF or to remaining on their TDF containing therapies. The study made its primary endpoint and shows statistical superiority of E/C/F/TAF in terms of proportion of patients with HIV R&A less than 50 copies per meal at week 48. The study also demonstrated statistically significant improvement in bone and renal laboratory parameters. E/C/F/TAF is poised to be the first half based regimen on the market with an FDA PDUFA date of November 5, and regulatory decision expected in Europe before year-end. Our second TAF single tablet regimen or F/TAF was submitted for FDA review earlier this month. We're using our Priority Review Voucher which shortens review by four months and means that expected FDA action date in March of 2016. Submission of a regulatory file application for R/F/TAF EU is planned for the third quarter. In the developing world more than 30 million people are living with HIV and nearly 8 million now receive TDF based treatment regimens. The switch data presented at IAS and overall safety profile of TAF make it an important option for these patients and Gilead has already licensed the technology to our generic manufacturing partners with the goal of expediting access as soon as initial regulatory approvals are received. Turning briefly to HCV since the approval of Sovaldi in December 2013 approximately 470,000 patients globally have initiated treatment with Sovaldi or Harvoni. The rapid uptake and utilization of these medicines is a testament to the fact that the real world safety and efficacy parallels the results obtained in our controlled clinical studies. Three supplemental new drug applications for Harvoni were submitted to FDA last quarter, each of which has been granted priority review. If approved these applications will expand the indicated use for Harvoni to include HCV, HIV co-infected patients, patients with genotypes 4, 5, or 6 and treatment experiencing cirrhotic patients. A decision from FDA for each of these three sNDA is expected by November 15. In closing I would like to thank Gilead's dedicated employees for their tireless efforts and collaboration with our partners to develop new therapies and deliver them to people around the world. I will now turn the call over to Paul.

Thanks, John. I am pleased to provide an update on our commercial business which in the second quarter generated $8.1 billion in worldwide net product sales. U.S. revenue was $5.6 billion at 7% sequential increase and a 16% increase compared to the second quarter of last year. European revenue was $2 billion during the second quarter, up 8% sequentially and more than 50% on a year-over-year basis despite the foreign exchange headwinds. Beginning with hepatitis C, as John mentioned earlier, we're very pleased with the number of patients we're reaching with Sovaldi and Harvoni which have now approved in 51 and 40 countries respectively. Total HCV revenue for the second quarter was $4.9 billion. In the U.S. HCV product revenue totaled $3.4 billion with Harvoni representing 2.8 billion of that amount. In the first half of 2015, an estimated 130,000 U.S. hepatitis C patients started treatment on a Gilead product almost matching the number of treated patients to all of 2014. While this demonstrates that improvements in assets have been made there were still many new prescriptions been written then been filled. Following the nearly 70,000 patients in quarter one more than 60,000 additional patients started therapy on a Gilead hepatitis C product during the second quarter, this represents the Gilead market share over 90% of all HCV patients with Harvoni alone representing approximately 85% of all patients captured in the standard third-party tracking data. We have also maintained our very strong position with U.S. payers as reflected by our formulary status across all payer segments, 83% of genotype 1 patients have direct access to Harvoni, a percentage that has remained stable since the first quarter. In Europe hepatitis C revenue was more than $1.1 billion this quarter with over 30,000 estimated new patients start. We saw particularly high patients' initiations in Spain, Italy and Portugal in the second quarter. As one example of this Sovaldi uptake in Spain was driven by unprecedented regional access and a significant increase over historic hepatitis C treatment rate. Additionally Harvoni was launched in April and has surpassed the success of Sovaldi with more than 6,000 Spanish patients got in treatment in the second quarter. We have seen a continued broadening of access and reimbursement across multiple European markets. Harvoni is now reimbursed in four of the five big EU countries and in France we completed pricing negotiations for Harvoni in June opening access to all five all patients with the fibrosis score of F2 and to all HIV co-infected patients. This is a broader group of patients in those previously treated under the French ATU or early access program. Looking ahead we are confident in the opportunities to reach more patients in Europe including in the UK where Sovaldi reimbursement is expected to come on online more broadly later the summer and Harvoni will follow after that. In both the U.S. and Europe we're starting to see average treatment durations shortening. For example fewer patients have been treated for 24 weeks and in the United States approximately 40% of Harvoni used in quarter two was for eight weeks. This is an encouraging trend as it suggests the payers should be seeing the value of earlier treatment for appropriate genotype 1 patients. And we believe this makes us strong case for payers to further ease restriction on patients access. In the U.S. we saw an unusually large number of patients starts in the first quarter, reflecting warehousing of patients in anticipation of access to Harvoni. In the second quarter we saw the number of total descriptions declined from a peak in the month of March reflecting a smaller pool of patients who were in need of immediate treatment. We’re thinking about hepatitis C patient numbers going forward, this market is still in its early days with many patients identified and waiting to be treated. As I mentioned earlier many prescriptions go unfilled due to denials in the prior authorization process. Going forward we believe more payers will lower restrictions allowing patients with lower fibrosis scores to access treatment. The increasing amount of real world data that should reinforce the confident that are highly differentiated product provide high cure rate that are in line with our clinical trial. Additionally we and others are increasingly active in generating awareness of hepatitis C and communicating the benefits of hepatitis C testing and early treatment. We believe our efforts of bringing a new patients to care and we'll do so in the future. So while the number of new patients starting on treatment will continue to be influenced by the retractions applied by the payers we see encouraging trends and remain highly confident both for the remainder of this year and for the long-term sustainability of the hepatitis C market in the United States. In Europe the dynamics of our hepatitis C business are defined by each country and their respective launch timings. Like in the U.S. at launch we've seen unusually high numbers of patients being treated as there has been some warehousing and especially so for Harvoni GT-1 patient. We also see a changing mix at the high volume Southern European countries like Spain, Italy and Portugal start to treat patients. Our pricing arrangements took into consideration macroeconomic circumstances hepatitis C prevalence and countries intend to increase treatment rates from past level. As a result we’re likely to see a changing mix in patient volumes as well as average selling prices over time. We've recognized that there remains a huge unmet medical in Europe and there is just a small fraction of diagnosed patients have so far been treated. As in the U.S. our European teams are working hard to encourage diagnosis and increasing levels of treatments in the years ahead. Turning to Japan. We’re pleased with the initial introduction of Sovaldi for genotype 2 patients, I'm excited about the prospects that Harvoni in genotype 1. With the approval in July we expect reimbursement for Harvoni to be in place in Japan later this summer. There is consensus within the medical community that Gilead Medications offer patients the simple and effective cure for hepatitis C. This is evidenced in treatment guidelines around the world and from the real world data that have been continue to be generated and presented and published in peer review forums. We’ll continue to work to bring these treatments to more patients as quickly as possible. And now turning to HIV. This quarter HIV revenues increased 8% year-over-year to $2.7 billion as our sofosbuvir based regimens continue to hold their market leadership position. In the United States revenues were $1.8 billion for the second quarter, showing sequential growth of 21% mostly driven by the price increase on April 01 and favorable sub-wholesaler inventory levels following the draw down in the first quarter as well as increased demand. In the second quarter we saw the big three wholesaler inventory levels remain at the bottom of established ranges. Underlying prescription demand remained strong, for Stribild and Complera driving the year-on-year revenue growth of 58% and 35% respectively. Gilead's HIV medications continue to be prescribed for approximately 8 out of 10 treatment naive patients initiating therapy. Six of 10 patients initiated treatment with the Gilead single-tablet regimen and our newest single-tablet regiment Stribild and Complera collectively captured five out of ten new patients. In Europe HIV revenue was $742 million for the second quarter. Despite strong competition volume has grown in line with overall market growth. Overall sequential revenue growth declined due to the impact of negative foreign currency movement net of our hedging activity. Eviplera and Stribild remained the most prescribed regimens to naïve patients in the EU big five and half of new patients started on Truvada based single-tablet regimen. Eviplera and Stribild also remained the most prescribed regimens for switch patients. Looking to the future of HIV John already gave the detailed accounts of where we stand on the regulatory front and bringing our TAF based treatments to market. And I can say that the Gilead commercial organization is focusing on insuring a successful launch around the world. We’re excited to introduce the TAF portfolio products to our customers and to all the patients who can benefit from them. In closing we’re very pleased with the commercial results for the second quarter. And now I'll turn the call over to Robin.

Thanks Paul and good afternoon everyone. We’re pleased to report solid second quarter results with non-GAAP diluted EPS of $3.15 for the second quarter, up 33% year-over-year. Total revenues were 8.2 billion up 26% year-over-year and 9% sequentially. Despite currency headwinds net product sales for the quarter were 8.1 billion up 27% year-over-year, driven by the launch of Harvoni across various geographies continued growth of Sovalid outside the U.S. and increased sales of our newer HIV single-tablet regimen. Non-GAAP product gross margin was 90% for the second quarter of 2015 compared to 89% for the second quarter of 2014, benefitting from changes in product mix, including a year-over-year decline in Atripla sales which had a lower margin. Turning to expenses, non-GAAP R&D expenses were $702 million for the second quarter, up 30% compared to the prior year due to the continued progression and expansion of our clinical studies, particularly Phase 3 studies in the liver disease and oncology areas. Non-GAAP SG&A expenses were $761 million for the second quarter, up 34% compared to the prior year, primarily due to an increase in our portion of the branded prescription geography and higher costs associated with the growth of our business including commercial expansion to support our HCV products. Turning to our balance sheet we ended the second quarter with 14.7 billion in cash and investment and generated cash flow from operations of 5.7 billion. On June 29 shareholders received their first quarterly cash dividend of 633 million or $0.43 per share. Our Q3 2015 quarterly cash dividend of $0.43 per share was announced this afternoon. During the quarter we repurchased approximately 9 million shares at an average price of $102.14 pursuant to our 15 billion share repurchase plan approved in January 2015. As of June 30th we have 14.1 billion remaining under the current plan and remain active in repurchasing shares. Additionally we utilize 3.9 billion in cash for the early retirement of 46 million warrants which will result in a third quarter decline in diluted shares outstanding of approximately 25 million shares. Approximately 9 million warrants remain outstanding at the end of June. Finally we are updating full year 2015 guidance which is outlined on Slide 46. The changes are as follows we expect product sales to be in the range of 29 billion to 30 billion an increase of 18% to 23% over 2014. Our guidance for product revenues is subject to a number of uncertainties including inaccuracy in our estimates of HCV patients starts a larger than anticipated shift in payer mix to more highly discounted payer segment such as PHF, FFS, Medicaid and the VA. The commercial launches of Sovaldi and Harvoni in Japan the potential adoption in Europe of additional pricing measures to reduce HCV spending and the potential for continued volatility foreign currency exchange rates. Product gross margin guidance is now in the 88% to 90%. We are lowering R&D expense guidance to be in the range of 2.8 billion to 3 billion driven by cost efficiencies in our clinical development activity and faster than expected enrollment of HIV and HCV studies. We are lowering our SG&A expense guidance to be in the range of 3 billion to 3.2 billion primarily driven by the favorable one-time adjustment to be expected in place from the IRS for the branded prescription drug fees. Our tax rate is now anticipated to be 17% to 18% all other components of our 2015 guidance remain unchanged. In summary Gilead had another very solid quarter and we see strong prospects for the remainder of the year with higher than originally forecasted revenues and lower than originally forecasted expenses. Thank you and we look forward to updating you on our progress during our next call. We would now like to open the call for questions. Operator?

Thank you. [Operator Instructions]. And our first question will come from the line of Geoff Meacham of Barclays. Your line is now open.

Congrats on the quarter very impressive. Want to ask you an excess question about hep C from par. If I look on Slide 25 and you’ve broken out new patients by fibrosis states I have a couple questions one what trends have you seen for F0 and F1 patients. And what could be the tipping point for new starts for F0 and F1 and then how important is that when you guys view in the durability for U.S sales.

The data that we have on intense to prescribe. We've seen that in this quarter the data we have the intend to prescribe was about 55% of prescription where F0 through F2. Now we actually don’t believe that nearly that many prescriptions were actually filled. By the definition of intend to prescribe is prescription that have actually been written not necessarily filled. So there is still a lot of restriction in place in the United States and I think this is the variable which really will influence the number of patients that we see being treated or the rates of number of patients been treated in the rest of the year and through the next few years. So clearly what we're hoping is those restrictions start to unwind somewhat, we're encouraged by a couple of things so we're encouraged that the number of people been treated for eight weeks and genotype 1 patients has started to increase that’s now at about 40% of Harvoni prescription. So that kind of implies that less sick patients have been treated and we also hope that as I said in my script starts to provide some encouragement to payers in terms of value as they think about curing patients. But we'll have to sort of wait and see over time how these restrictions unfold. I do think that as the market starts to become a bit more predictable now in terms of the numbers of patients coming through that the hopefully payers will also feel more encouraged to sort of open the gate slightly.

Thank you. And our next question comes from Mark Schoenebaum of Evercore ISI. Your line is now open.

If I may John Milligan perhaps three pharma CEOs companies with market caps some cases smaller than your have said something in fact that mid cap biotech is priced to perfection, one even said it's an bubble, the biggest question on everyone's mind for Gilead is who you're going to buy, who you're going to buy, who you're going to buy, who you're going to buy, who you're going to buy, everyday it's what we talked on investor circles, so I was wondering, A, if you could apply on the general state of evaluations in midcap, midcap small and midcap biotech then? And B, just kind of give us an update about what you're thinking on acquisitions, are you ready to do them now, if so, would you be willing to do a series of smaller ones and would you be willing to do for example a very large transformative type of deal?

Thank you for that one question. A couple of things so one number where you've talked about valuation of our industry, and we have seen the dramatic growth in the valuation of the lot of companies certainly the small and midcap company. I have to say that it has been a company by some really significant increases innovation and some very interesting and innovative products that have come along as I do think the innovation revolution that we're seeing has driven greater value creations that we've seen in the past and so it's a little hard to say that when a bubble when you've seen some dramatic innovations and I've got a lot of that value to innovate. So that's how I think about it. So the second thing I believe was about what are we going to buy? And so what I -- I think I am going to give you the answer that I usually give which is Gilead is in terrific shape, we've got a very strong work force, we've got a really strong balance sheet. We have great scientific expertise on board so that give us the capability to do a wide range of things as you suggested we could contemplate small deals, we could contemplate larger perhaps in transformative deals. And we're in position to strength we could be fairly selective in terms of the things that we like to do and take our time to make sure that those things that we do choose to do we can execute on them fairly effectively, bring new products to market and continue to grow our top line revenue and EPS and so we'll take all those. And obviously further than that I can't comment specifically on any kinds of targets that would be inappropriate.

Thank you. And our next question comes from Geoffrey Porges of Bernstein. Your line is now open.

Congratulations on the quarter probably the most remarkable sort of guidance we've seen in a long time, I have a question for Paul on HCV, you've traded roughly 300, when you and your competitors have actually traded a few as well, 300,000 patients in the U.S. over the last 18 months or so. And Paul my question is, is the patient pool that is still to be treated being replenished via a new diagnosis or new patient identification at the same rate does that 300,000 depletion or faster or slower in that 300,000?

The answer is yes, kind of correctly, so we have some quantitative evidence, we have some quantities evidence; we have plenty of anecdotal evidence. So we talk to doctors the whole time and positions such as in U.S. and all of them tell us that they have many patients in the queue if you like waiting for treatment and really the barriers of them be treated is the restrictions of the payers are putting on. We're also ourselves and competitors and but also a lot of stakeholders working hard to encourage awareness of hepatitis C, encourage testing, encourage people to think about how they link their status to treatment. And we do try and measure that to some extent as well, so we do measure the number of patients that are coming from diagnosis to undertreated care. And our definition is that we have better patients who visited doctor in the last 12 months with hepatitis C and we're seeing around at 30 stable rates actually around 30,000 a month moving undertreated care. So that is the answer why I give you guess. We're selling that number I think quite consistently. And as I said we’re doing a lot, and it takes time to actually get traction on some of these things. We’re doing a lot of things now with the view to the longer-term future as well to really try and think about how do we increase diagnosis rate. We've got about 1.6 million people in the U.S. diagnosed we've treated as you said maybe 300,000 in the last year or two, there is still a long way of diagnosed but we’re not resting on those, we’re thinking about how do we start to increase those diagnosed rates as well.

Thank you. And our next question comes from Matt Roden of UBS. Your line is now open.

I just wanted to ask about the product sales guidance nice deep raise in the quarter here, but if I plug in your half year sales of about 15.5 billion and look at your full year sales guidance of 29 to 30. That seems to demonstrate you are probably not thinking that hep C sales are going to roll off the cliff in the U.S. in the back half of the year. So could you talk a little bit more about your assumptions that went into your sales guidance raise here for this year in particular around the product mix and geographic mix? And then lastly I know you only provide guidance for this year's numbers but anything you can share about your thinking on the outlook in the 2016 in terms of the mix to the extent you can.

We don't think as many patients in the U.S. will be treated for hepatitis C is in the first half and the reason for that really is not that we feel that profoundly patient numbers are being treated less than that, but we did see a very big spike in quarter one as I mentioned in the script because there was such a warehouse of patients waiting and people really needed to be treated waiting for interferon free Harvoni to come along. And I do think that we should put in perspective Harvoni really did change everything for patients waiting for treatment. And to give some context to that, in quarter four last year Gilead treated about 45,000 patients. In quarter two we just had treated over 60,000 patients, and that -- and as two data points but that’s a 40% increase in patients. So we don't feel that the overall trend is this market is going down and down, but we did have this very big spike in quarter one and we don't see that that’s going to be repeated in the U.S. during the rest of the year. And we’re still subject to how the restrictions by payers play out in the rest of this year, so I think we've been fairly conservative in our view, we also have the VA situation which is well publicized where the VA is depleted funds at the moment, we've already seen VA purchase drop off towards the end of quarter two. Our assumption is that those purchase will start to come back again when their fund hope to get -- that bucket of funds gets filled hopefully from October, so we've taken that into consideration. And then outside of the U.S. we've got various dynamics going on. And as I said country-by-country in Europe we’re launching Harvoni and we’re seeing somewhat like the U.S. kind of early spike in volumes as these people who are very sick and really need immediate treatment do get treated. And then it started to stable off. We also see in Europe budget ceilings, the level of treatment in some of the countries is so high at the moment that we do recognize this budget ceilings maybe reached and we’re taking fairly conservative view of that as well. Then we have Japan I touched on we’re off to a good start but still a lot of uncertainty as the how our launch is go a very encouraged Sovaldi posted the only product interferon free GT2 patients, Harvoni has had incredible 100% FBR clinical data to support its filing for GT1 patients and we should hope to get pricing agreed in the next couple of months. So we’re excited about Japan. But I think overall we’re taking a fairly conservative view U.S. is still the big market for us and we’re recognizing that the second half is probably going to be smaller than the first half, that’s how we’re thinking about it. Going into 2016, we hope all the efforts that we’re putting into increasing diagnosis, increasing linkage to just to -- just to cast off too -- we're putting a linkage cure now, because our SVR rates really are so high in real life starts to play out and we’re see that still a lot of patients in the U.S. in Europe around other countries in the world to be treated, we've only touched that top of the iceberg and I should mention countries like Canada, Australia, some of the Asian countries that will be coming on stream in the next year or so.

And our next question comes from Michael Yee of RBC Capital Markets. Your line is now open.

Just a follow-up on a couple of these things I guess taking a step back. Should the takeaway be that U.S. patient treated continued to get a bit smaller here over the next few quarters but it's offset by OUS and to get people comfortable with the U.S. where do you think it's starts to stabilize or bottom out, how do you get comfortable with that and then start to pick back up. And to that is Medicaid a big part of that I know that you were talking about medication contract and there started to come on and haven’t really heard much about that but that’s part of the population. But with those contracts where is that in all editions where do you think U.S. can start to stabilize and stop declining.

We don’t know for sure yet whether the U.S has actually stabilized but we have a sense that directionally it will stabilize and it will stop to grow as the payer restriction start to get loosen up. I mean we feel very clear about that we mentioned the VA of now VA should start to come back on three I think in the fourth quarter. And we will see a gradual shift that makes the payers in the U.S I think slightly towards the public payers, year-to-date we're about 70 to 30 public and Medicare to private Medicare to the public payers, and we would anticipate that might grow to 60, 40 let's say in the second half of the year. So I'm not sure I've answered your question really but….

Well I guess the Medicaid population.

Yes the Medicaid population will start to come out. Our competitors have exclusive access to some Medicaid we have to other, Harvoni is patient in Medicaid around about 34 states have signed deals with to make Harvoni available that’s about two thirds of the patients covered by Medicaid. So we're getting reasonable access there and as I said I think that mix will start to shift very slightly towards Medicaid during the rest of the year.

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

So I guess I wanted to ask a little bit more about the access expansion that you’ve talked about in the U.S. What's the biggest hold up in the access expansion obviously you put rebates in place it sounds like you put a lot of ways to help people and plan whether it's eight weeks or things like that to help them expand access. So what is stopping them and are there anything that you can do or I guess what your confidence that just taking a little bit extra time will allow them to expand access.

I think our confidence is high Matthew the restrictions will start to loosen up. The question really is how long will that take? And I think real world evidence is a great help there. So as I said a couple of times we are seeing a numerous studies now being publish and presented which demonstrate that real world data matches or even it better than our clinical data in some cases. So I think it give payers a level of confidence that an expensive investment is worth making and I think that will start to play out. I think also the patient stories and there family stories really do resonate very strongly and when people hear of friends and relatives who been cured in a very simple way and in some cases in a shorter date week. That is a very strong message and a great encouragement. We are hearing stories show you but some patients are actually taking legal actions against their insurers because there insurers are not paying for them, paying for their treatment despite the fact they are insured. So I think it's a whole lot of things gradually put pressure. And as I also mentioned earlier not least as we start getting to slightly more predictable environment without despite of patient that just immediately need treatment and warehousing and so on, once it gets to a more predicted situation this kind of works with the models of the private payers and hopefully again they will feel more confident in opening up restrictions.

And our next question comes from Phil Nadeau of Cowen and Company. Your line is now open.

Just a specific question on gross to net adjustment HCV franchise on the Q1 call you highlighted the fact that had enough we adjusted during the quarter. In your prepared remarks this quarter you suggest that the full effect of the payer contracts is being felt. But your last comment it does sound like you still going to give more adjustment in future quarters because of public pay becoming of your portion of reimbursement. So could you kind of discuss where we are in evolution of gross to net in this quarter's run rate good for the second half of the year or is there is more net adjustment to come?

This is Robin, I would say this year is far articulated script. We do feel that we got more towards what we'd expect with having a full quarter of the contract in place and that impact on the growth to net was thus probably the biggest adjustment got to near the point estimate that we talked about at the beginning of the year which we don’t necessarily want to repeat. I would say also as Paul mentioned you can't expect the little further adjustment based on the payer mix going into the second half again going from 70 to 30 to 60 40. But for the most part in few added stage we don’t anticipate significant changes quarter-on-quarter at this point relative to growth to that.

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

Just following up on Phil's gross to net question. Would you expect to go through another round of payer negotiations upon the potential approval of Merck's regimen early next year?

Cory I'll try on that one We have agreements in place and I think if we look at all the lives in the U.S. about 96% of lives now so the covered have been agreed and Harvoni has access to 83% either as an exclusive or a parity access. I would take the opportunity to just emphasize yet again and the Gilead does not believe in exclusive access, we believe in physicians and their patients having the rights to prescribe whatever they want to prescribe and not been kind of dictated to by payers. So certainly we're not aiming to establish any more kind of exclusivity in a competitive way. So we have agreements in place with most of the payers most of those agreements are multiyear and we hope that we can compete on our products and we think that that's the way it's going, but we will depend on market share vigorously. We have competed before with the competitors want to compete on price and I think the results speak for themselves, so we will consider every scenario and be ready to for it.

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

Just to focus on something just for on the oncology area you have Celgene very aggressive in the blood cancer space with acquisitions and you've also mentioned I think many times probably about thinking about immuno-oncology, so just wondering, how aggressive you think you have to be in oncology to compete and do you think and I think you've said before blood cancer is crowded, do you think it's more like ready to in solid tumor reduction and how you're thinking about blood cancer versus solid tumor in new competitive landscape?

Robyn, this is John Milligan. That's a good question, how aggressive you want to be in the certain areas, so it has been fascinating again the rate of innovation that we've seen in the blood cancers space and it has gotten extremely crowded leaving fewer opportunities I think for new products or follow-on products to make headway into this area, so it has got quite crowded. So we're broadening our criteria for the things that we would be interested in and are looking at a wide range of things. I think you've mentioned immuno-oncology specifically we've not called that out specifically as an area of interest also partially due to how crowded it is and certainly in the PD-1, PD-L1 space, but we wouldn't us keep from thinking about areas that were novel and could provide further benefit to patients in those areas. But I don’t know on what scale we can talk about aggression, but I do think it's clear where it's going to be active will be opened to opportunities that can benefit our portfolio and the best we think possible.

Yes, Robyn, I would also like to point out that we are pursuing solid tumors we have our MMP9 antibody in gastric cancer pancreatic cancer and lung cancer. So you know there is of course evidence that these compounds do have effect on myeloid derived suppressor cells which is in a way of immuno-oncology as well.

Thank you. And our next question comes from Brian Skorney of Robert W. Baird. Your line is now open.

I guess just looking at Sovaldi, it looks like it's pretty big quarter in the U.S. it didn't quite match with the prescription data relative to the last few quarters, so I was just wondering if you could give any color is there some source of Sovaldi revenue that isn't getting captured in there or was there any one-times last quarter or this quarter that we need to keep in mind? And also I am just curious if there is specific midcap company who you think role in the biotech innovation wave that you've mentioned is maybe underappreciated by the public markets?

I don't think it was anything particular about the Sovaldi, there was a tiny little bit of inventory growth. Sovaldi seems to be in a pretty stable at this point in terms of patient number, so I don't think there was anything special about Sovaldi.

And in terms of your question undervalued small midcap stock, I am not into business of giving stock tips to folks but I think I'll continue to decline that.

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

Maybe just two part for me, so first it just looks like if we take sale to buy about patient numbers in the U.S. looks like average price per patient was higher this quarter versus last I was just wondering if that's simply a mix question meaning more Sovaldi patients versus Harvoni? And then the second question was just as we think about 5816 Phase 3 date now, just how to think about positioning there relative to Sovaldi. Would you guys pull Sovaldi from the market or would you keep it on the market and then anything to think about on pricing?

Yes, Terrence, the first question on -- it's a mix is the answer to your question. And I hand it over to Norbert.

And Terry with regards to 5816 one clearly opportunities here treatment of genotype 3 patients there is still an unmet need. You have might have seen the clatters we're in combination with Sovaldi, that we've got approved a few weeks ago and the response rates while substantial there suboptimal and particularly in cirrhotic patients they have response rates or SVR12 rates about 60%. So that's clearly an unmet need but we're also looking at other genotypes. And with regards to Sovaldi, no, we would absolutely not pull Sovaldi from the market Sovaldi still has a lot of value in subpopulation and then use other agents like the Gilead is here so et cetera.

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

First of all can you talk about Europe? Do you think the growth could be meeting a bottleneck as restricted by the governments' budget process in the second half and also next year. And then secondly your competitor AbbVie commented on the earnings call that they thinks the U.S. GT-1 patients being treated will be annualized at about 175,000 to 180,000, do you agree with AbbVie or do you think you're going to see actually higher number of patients being treated in the U.S.?

So let's just deal with the U.S. patient number question. I think that we feel that -- I think we feel that the AbbVie fee numbers are little bit low, we’re fairly confident and this depends somewhat as I said on the payers in the second half of the year, whether they open restrictions further or not, and it also to some extent making some assumptions about that VA coming back on stream. But we see no reason why there shouldn't be 250 plus patients treated in the U.S. next year, that total patient not just GT-1 and its total patients not Gilead share. We've said in the past I think we still feel that the capacity in the U.S. to treat HCV patients is around 300,000 we've no reason to believe will be higher than that at this point. So I think in the years going forward we’ll see 250,000 to 300,000 patients being treated in the U.S. and that will even flow somewhat but the main variable would be restriction by payers. And then the European question, well I said that the agreement that we had made with European government taken to consideration ability to pay and that defined by some of the macroeconomic metrics on countries by the prevalence of HCV in those countries, but probably most importantly by the political will of those countries to increase treatment rates above historical level. And so we work with them to agree a kind of volume based rebate structure that encourages high number of patients to treat and we’re seeing those becoming sort of executing now. And as I said in Southern Europe Italy, Spain, Portugal we’re seeing a substantial number of patients being treated. We’re also very aware of the fact that these countries single payer systems do you have finite budgets and the countries have made great efforts to increase those budgets to treat more patients because they do see the value of treating hepatitis C patients. Whether we hit those budgets or not, I can't predict at this moment, but one thing is for sure that either at the rate of patients being treated they allow have to slow down somewhat in some of those countries order have to increase their funding over the next couple of years if they want to keep it treating at the rate they are doing. But anyway we’re greatly encouraged that a lot of patients have being treated and we’re greatly encouraged that the real world data really support that investment in treating patients and we hope that will encourage further increases in budget.

And our next question comes from John Sonnier of William Blair. Your line is now open.

The question is for Paul, with the Japan coming on line can you talk a little bit more about the HCV market opportunity there. And I'm particularly interested in how the pricing mechanism works and whether or not there is any statutory discounting downstream or based on volume?

So Japan is exciting opportunity for us and as you may know it's the first product we've launched in Japan. So on the back of this we’re actually establishing or have established our Japanese entity and we hope that, that entity will be a platform in the future for us to launch whole series of future products, not just in the hepatitis C space. So it's exciting, we've launched Sovaldi for GT-2 we've launched that late in May, 25th of May we've got pricing agreement and launched and it's got off to a good start although it's extremely early day. They are around 200,000 GT2 patients in Japan who are diagnosed and as I already mentioned have really no interferon free option other than Sovaldi so we’re very happy to be able to help meet that unmet medical need. We’re working to agree pricing on Harvoni, we should have that agreed fairly soon and we’re confident that, that will be a happy outcome for everyone and we shouldn't have any delays in launch. There are no statutory discounts on pricing in the first years, there is a statutory system and it's typically 2% to 5% discount every two years or so that we've seen historically and we would envisage that that would happen. There is also a mechanism whereby you have to forecast your revenues going forward and there is a system of capping prices based on whether you go through that ceiling that you've sort of self agreed. So there are mechanisms but no discounts per-se on a day-to-day basis, and we wouldn't expect any discounts on Sovaldi or Harvoni at least for the first two years.

And our next question comes from Jason Kolbert of Maxim Group. Your line is now open.

This is Jason McCarthy for Jason Kolbert. My question is in terms of building the market for Harvoni in the U.S. How do you see it, I know it's been discussed before? The cost cutting insurance carriers and discount is like with express script trying to control pricing and how that could have impact the growth of Harvoni going forward?

Well I think we have to stand back and look at our products and recognize if there is incredible amount of value and incredible amount of innovation. First of Sovaldi then Harvoni and then in what we're calling our wave 3 and wave 4 products. And I think it's that innovation that is our negotiation strength really and I think all payers would like fundamentally to make highly innovative medicines that work incredibly well available to their patient. And so we have to negotiate and come up with terms that work for both sides. But we're very optimistic and we work very hard to keep good contact with the payers across the U.S to make sure that fully aware off and what's coming next and making sure that we’re all on the same page. And so I think we we're quietly confident that we can continue to have strong and good relationships and high levels of excess to all of our medicines and especially our next HCV innovations.

And our last question comes from the line of Alan Carr of Needham and Company. Your line is now open.

Could you comment more about the R&D and SG&A spend this year? Why this quarter is a bit lower than expected. I know you comment, if you could take a bit more about that and then your thoughts on long-term trends from that into '16 and '17.

Sure the overall year-over-year basis both of SG&A and R&D kind of increased and again the R&D was driven by discontinued acceleration of our pipeline. But as we always do and look we've had really good enrollment levels with those trials. So as we look at our out year or second half guidance you're able to turn it back again still making progress but doing it even faster than we have initially thought. On the SG&A side the one big adjustment that you saw Q1 versus Q2 related to the branded prescription drug fee. The rest is just related to the ongoing commercial advance since they were making Paul talked about the launch in Japan the other launches is ex U.S as well as just a direct to consumer investment that we're making. Even with all of those as we looked at our guidance again we've always been focused on conscious expense management and ended up being able to do a little bit at your given thoughts since reducing the guidance. The most of the SG&A reduction was related to the one-time adjustment in the brand and prescription drug fee.

And then with respect to a longer term trend here. Do you expect this to continue these levels in the '16 or '17? And any reason to believe will be any dramatic growth here or it might come down?

Yes it's a good question we haven’t really given long-term guidance. I think overall relative to our launches we continue to expand geographically which will drive some of the cost and as Paul articulated we're focused a lot on brining additional patients to care and look at care I don’t see that being major incremental step up in terms of SG&A. So there is no significant trend difference in what I'd say but I'm hard press to kind of give too forward look forward without providing additional guidance. Relative to R&D I think we've always taken approach that we'll advance things in the clinic as it makes sense right. We feel good with the level of spin we have today but we're very optimistic about our pipeline. So you could see absolute dollars go up where that falls relative to percentage of revenue that is something that will to be determine if we provide guidance in '16 and beyond.

Thank you. And there are no further questions at this time. I like to turn the conference back over to Mr. O’Brien for closing remarks. Patrick O’Brien: Thank you Candice, 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 future progress.

Ladies and gentlemen thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day everyone.