Ladies and gentlemen, thank you for standing-by and welcome to the Gilead Sciences' Fourth Quarter 2014 Earnings Conference Call. My name is Janney, and I will be your conference operator today. At this time, all participants are in a listen-only mode and as a reminder this conference call is being recorded. I would now like to turn the call over to Patrick O'Brien, Vice President of Investor Relations. Please go ahead sir.

Thank you, Janney and good afternoon everyone. As you will have seen we issued a press release earlier this afternoon and our earnings results for the fourth quarter and fiscal year 2014. The press release along with detailed slides is available on the Investor Relations section of our Web site. Speaking on the call today will be John Martin, our 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, are John Milligan, President and Chief Operating Officer; and Norbert Bischofberger, Executive Vice President of Research & Development. Before we begin our formal remarks, let me remind you that we will be making forward-looking statements, including plans and expectations, with respect to our product candidates, estimates for the number of HCV patients we believe the U.S. Medical System will treat in 2015, estimates of the blended rebate percentage for government and private payors in our HCV franchise and financial projections, all of which involves 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 release. 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 underlying business performance. The GAAP to non-GAAP reconciliations are provided in our press release as well as on our Web site. I will now turn the call over to John Martin.

Thank you, Patrick and thank you all for joining us today. I will mention a few highlights for the past quarter and then make brief remarks about the year ahead before turning the call over to Paul. 2014 was marked by the launch of our first oncology product Zydelig, our second Hepatitis C product Harvoni, regulatory filings for the next-generation HIV medicine E/C/F/TAF and a doubling of product revenues relative to 2013. We are entering 2015 with financial strength, a portfolio of 19 marketable products that address significant unmet medical needs and a pipeline for which we respect a number of milestones and data readouts during the coming year. Regarding HCV since the launch of Sovaldi in December 2013 and Harvoni in October 2014 more than 170,000 individuals around the world have been treated with the sofosbuvir-based regimen. Harvoni has become the most widely used Hepatitis C regimen since its approval in October 2014 and prescription data at year-end indicate that for each Sovaldi patient, three patients started therapy with Harvoni. Gilead continues to investigate the use of Harvoni in different patient groups including non-genotype 1 infected patients and HIV co-infections and in patients with advanced liver disease. Data from these studies support the utility of Harvoni in these patient populations and the results will be presented at upcoming scientific conferences. In addition to sofosbuvir we are exploring other potent pan-genotypic agents. A single-tablet of sofosbuvir and GS-5816 is currently being evaluated in four Phase III studies and top-line data from all these studies will be available in the third quarter of this year. Moreover, we are exploring GS-9857 a pan-genotypic protease inhibitor in combination with sofosbuvir and GS-5816 to potentially further reduce treatment duration from eight to 12 weeks to four to six weeks. Even though great progress has…

Thanks, John and good afternoon, everyone. Gilead achieved $7.2 billion of net product revenue in the fourth quarter, representing a 137% year-over-year growth. Net product revenue for the quarter consisted of $5.5 billion U.S. sales, $1.4 billion of European sales and more than 300 million sales from the rest of the world, the primary drivers of the Company’s strong performance during the fourth quarter with a continued uptake of sofosbuvir containing HCV regimens and the continued healthy demand in our HIV business. I'll start with some commentary around our HCV business. Hepatitis C revenue increased to $3.8 billion in the fourth quarter. In the U.S. revenues were 3.2 billion with 1.2 billion from Sovaldi and 2 billion from Harvoni. We estimate that 43,000 patients started treatment on a sofosbuvir-based regimen in the quarter with 31,000 of those starting on Harvoni following its launch in October. To-date approximately 140,000 patients have started HCV therapy on a Gilead product in the United States. Harvoni's launch in the U.S. is going well with filled prescriptions tracking above Sovaldi’s at the same time point. The base of treated is expanding with more than 10,000 physicians now having prescribed a sofosbuvir-based regimen about 11,000 of who began subscribing after the launch of Harvoni. Indeed seven out of 10 HCV patients initiating treatment in the fourth quarter started on Harvoni the remainder on a Sovaldi containing regimen. Across our franchise about three quarters of patients treated were genotype 1, 16% were genotype 2, 7% were genotype 3 and 3% were other genotypes. As in prior quarters we saw prescriptions written for all stages of fibrosis. Although after the launch of Harvoni we saw payor restrictions increasingly in place across all patient types and especially for those with lower fibrosis scores. As expected there was a net…

Thank you, Paul and good afternoon. For the first time we have announced the initiation of a quarterly dividend of $0.43 per share that will begin in the second quarter of 2015 subject to a declaration by our Board of Directors. The quarterly dividend is equivalent to a $1.72 per share on an annual basis and approximates an annual yield of 1.6% based on yesterday’s closing stock price. Also the Board of Directors authorized a new 15 billion five year share repurchase program, which we will initiate in 2013 on completion of our currently authorized $5 billion program. The initiation of a dividend and our increased level of share repurchases underscore our abilities and the strength of our future cash flow. Consistent with prior communication we also believe our future cash flow will provide us with adequate financial flexibility to support our pipeline growth in any future M&A opportunities or collaborations that we might consider. Turning to the financial results. Total revenues were 24.9 billion for the year, up 122% year-over-year and 7.3 billion for the fourth quarter up 21% sequentially. Non-GAAP diluted EPS was $8.09 per share for the year. Net product sales for the year were 24.5 billion ahead of our 2014 revised guidance. Our product sales for 2014 excluding HCV products were 12.1 billion an increase of 13% compared to the prior year, driven by continued uptake of our HIV single-tablet regimen across geographies. During 2014 Complera, Eviplera and Stribild product sales each exceeded the $1 billion mark for the first time. Our HCV product sales were 12.4 billion for 2014 and 3.8 billion for the fourth quarter, an increase of 36% sequentially, driven by continued launches of Sovaldi across geographies and the launch uptake of Harvoni following U.S. and European approvals during the fourth quarter. Turning…

[Operator Instructions] The first question comes from Geoffrey Porges from Sanford Bernstein.

Many items to ask questions about, but first and could you just quickly give us a comment on your intentions with the dividend is this something that we should expect you to continue to grow in the future or is it sort of static as it is? And secondly, is your guidance assuming 250,000 patients treated and a greater than 40% gross to net or is it assuming something different to that? Thanks very much.

Hi Geoff, it's Robin, I’ll answer the first part of the question and I’ll turn the second part over to Paul. It is our intention to grow the dividend overtime, but I would say at the moment we still use share repurchases as the component that would be the larger percentage of our share return strategy, it will be larger than dividends for the foreseeable future.

And thanks very much.

Yes Geoff, I mean in terms of our guidance we have still some variables ahead of us here, but mainly the number of patients that are coming through, we believe that the system has the capacity to treat as I said in my script in excess of 250,000 patients and the agreement that we have entered into, a design to open up access and we’re confident that we’re going to see a large increase in the number of patients across the U.S. So yes, our guidance does consider the patient numbers that we think, plus the gross to net, that we just described.

The next question comes from Geoff Meacham from Barclays.

So just want to know what you guys have learnt from the field in Hep C in the U.S. and in Europe that supports the market that’s just different from older stats some of the stats that we see out there are pretty tired and maybe decades old? And then how does it speak to the sustainability of patient inflows and I guess for that part of the question you may be consider the volume increases that you may expect to see for the next several year from the launch? Thanks.

Geoff this is John Milligan just to be clear you said the stats that are getting a little tired are you meaning the number of patients who are available for treatment?

Correct yes some of the prevalence and in incident stats I think are pretty dated I know you guys have updated on one of your slides. But I wanted to kind of get your view from the field John and maybe some of the sources of some of the stats that you guys have collated?

Yes thanks for clarifying that. So it's pretty clear based on our field-based research and the comments from the doctors that there are a lot of people continuing to seek therapy who were denied therapy and it was getting pretty difficult through the last part of last year for patients even as high as F3 scores to get some treatment. So we believe based on this and trying to triangulate with the numbers that are in the public domain that there is a very considerable number of patients who will seek therapy for 2015 thus the numbers that we're talking about in terms of the potential of patients who could seek care. Looking beyond that we still feel that it is a number that’s pretty strong is the 1.6 million people who are currently diagnosed and have been under care at least at some point in the past and we see there is great opportunity for Gilead in future years to drive those patients into care. And so there are a number of program that we'll be embarking upon this year. Educational campaigns, with things like primary care not with the intent of them treating but with referring and identifying the disease and all the way through advertising campaigns that in 2016, 2017 and 2018 and beyond and probably a number of years beyond that we will continue to strive those patients into care. I think additionally as these therapies have gotten both more affordable for the system and better because of the simplicity of use we will see those other patients that roughly 3 million to 4 million people who are out there. The additional two plus million who are out there or above the 1.6 we'll also have an opportunity to seek care and we do see a great opportunity to drive those patients. So we do see this as a long-term sustainable business based on what we’ve seen to-date despite the rapid influx that we saw in 2014 and the continued influx that we anticipate in 2015.

The same situation John in Europe?

In Europe the situation is actually quite sustainable I think for a number of years. What we're seeing our commitments from the public sectors to treat a certain number of patients and in most of those cases it's a considerable higher number of patients and have historically been treated. But when we look at the denominator the total number of patients who could be treated this is something that plays out roughly 10 to 15 years or in the cases some of the high prevalence countries like Italy even beyond that. So we do think it is quite a sustainable market through Europe.

The next question comes from Mark Schoenebaum from ISI.

Just a clarification on Geoff Porges’ question I am not sure you answered if you did I apologize. But within your guidance rather than passing the system what actually is your patient estimate AbbVie of course on their call mentioned they thought 175 roughly to 215 a U.S. G1 patients would be treated would actually be treated in 2015 I was wondering if you would be willing to tell us what you're actually, how many patients are actually assuming will be treated? And then what was your government to private mix in '14 and what do you expect it to be in '15? Thanks.

So Mark let's just start with the first part of that question in terms of what our guidance provides and so there is a specific patient number that I'm going to give to you. What we have in there is the range of different prices depending on the mix of private to public and there are a range of different discounts offered across all those areas. There is a range of market share assumptions that we have put in there and then of course there is a range of patient numbers in there and I thought the AbbVie sort of general range of patients was a reasonable one we think there could be capacity to go up as Paul said up to $250,000 but our assumption on total patient numbers isn’t actually $250,000 it's less than that. Sorry $250,000 patients it’s less than that, so it's fair to say that there is a range of things that will come into play and that will determine how we do on a quarter and on yearly basis as we hit that different mix of patients across those segments. Your second question was about last year and about 70% of our patients last year came from the private sector.

And this year?

This year we're not actually sure because there is a number, so I can't tell you that number because there is too many factors that flux right now. Including the different contracts that we and AbbVie are competing for in the Medicaid sectors we do anticipate that these contracts will get signed earlier than they have historical in fact some are being signed now. And so you will see a sort of historically if you think about Gilead it starts very private with our launches and then it eventually becomes to sort of a steady state with the public and private mix, we will get to that mix much more quickly this year because of the acceleration and the negotiations and so we should have a better handle on that as we get into Q2, but I don’t know exactly where it’s going to shake out right now because there are so many contracts in flux right now.

The next question comes from Matt Roden from UBS.

And also thanks for the increased clarity on the gross to net, that’s obviously been a major issue for people. You obviously felt confident enough about that number to disclose it, but you mentioned contracting is one of the uncertainties reflected in your guidance the range of payor mix et cetera. So how confident are you that you can hold that level for this year? And then what would you expect when additional entrants come to market next year and years to come? Thanks.

So, we think that as of today and some of the negotiations are ongoing but about 60% of the covered lives across the U.S. have now been negotiated and signed on, and of that 60% Gilead we think has access or patients have access around 80% of those, of that 60% will access to Harvoni. The rest of the 40% is still in play. But I can say for the 60% part of covered lives that we are very confident that the terms that have been negotiated will last through the rest of this year. And as I already said those terms have been designed to increase access. So we do expect to see a significant number of patients increasing through those PBMs and payors compared to 2014.

Okay, and for the coming years when there is additional entrants to the market?

Well, I think the real life-data first of all on our products is going to be a key piece here. And I should say I would like to emphasize that in our negotiations already with payors most of those payors have really taken into consideration the highly differentiated product that we offer compared to competition and have made a full assessment of that. So I think we have to wait until we see the profile, the real-world profile of our existing competition and of course the data with the future competitors before we start. We are very-very confident in Harvoni with its one pill once a day and the ability to treat perhaps 50% of GT1 patients in the U.S. with just eight weeks with no need for ribavirin issues, no need for drug-drug interaction issues with tenofovir and for most classes of patients absolutely fine to take Harvoni unlike our competitors. So I think time will tell a little bit before we can see what happens.

The next question comes from Michael Yee from RBC Capital Markets.

One question is you have been talking about government versus non-government or commercial versus non-commercial, versus in the patients treated in 2015 what do you think that breakout is between those two buckets 30-35 or 65 closer to 50-50 how should we think about those two buckets which obviously have different rebates?

As John said in 2014 the proportion of private to public was about 70-30, we expect during 2015 it might be a little bit more public but I suspect it will be more in that type of proportion.

Well how does that differ in Europe, because we are thinking about one payor system but there is obviously competition and should we be thinking about similar negotiations where they are thinking about exclusives or we should be thinking about equal parity and they are offering both the drugs just so we understand the stuff that come across the table in the course of your negations, countries getting deals?

Yes, we have negotiated for Sovaldi with most of the countries in Europe and these have not been on an exclusive basis, but the nature of the arrangements are tied directly to increasing access to patients. So we have volume type incentive to try and encourage a much higher number of patients treated going forward than has ever been seen in the past. So, I think our competition will be doing similar kinds of arrangements but again we are very-very confident in the clinical profile of our drug and we hope that will be very successful in Europe as we have been so far.

The next question comes from Brian Abrahams from Wells Fargo.

Just curious of the plans that allow access to both Harvoni and the competitive drug Viekira what proportion of patients are you seeing go on to Harvoni. And you have patients with relative use to be eight week or 12 week Harvoni regimen? Thanks.

It’s just too early, I think as a launch of the Viekira Pak is less than a month old, so we don’t really have any good data to suggest how our competition is fairing versus how we are fairing. So it’s too early to say in terms of how these parity deals are working out for either of us. And many of these things have just been point of high so it’s very early day so please be patient with us. You had mentioned also whether the eight week versus 12 week. It was our expectation and our continued expectation that in the initial launch of Harvoni far more patients to go on to 12-week than the eight-week because there were the more severely ill patients and that in fact is what we’ve seen that the very small percentage of patients perhaps that has used at least 20% of patients going on the eight weeks versus the 12-weeks. We do anticipate that that will increase overtime as restrictions go down and as less severely ill patients come onboard and those patients get benefit from the eight-week therapy.

The next question comes from Yaron Werber from Citigroup.

If you don’t mind I just have a follow-up and the new question, the -- if I sort of listen to what you're saying and I am sort of backing into the commercial discounts, I am still getting about sort of 40% range assuming just a slight year-over-year increase in the component of public over private, am I sort of in the right ballpark? And then secondly, when you look at Europe, Europe grew by 10% quarter-over-quarter, how fast should we think about the volume increasing in Europe, now that you have reimbursement? Thanks.

Yaron, yes, let me just talk about the European peace and I’ll hand back to John. So, the European part we’re seeing most of these agreements have only really been finalized in the last quarter of 2014. So, I would say, I would characterize Europe as really just beginning access to the majority of patients, and what we’ve tried to do though is with each of our agreements is work with the governments to assess that budgetary constraints, the prevalence of patients in the country and then tried to come to an arrangement which as John had alluded to earlier, probably the kind of longer-term approach to addressing their HCV challenge. So kind of lower proportion of the total diagnosed patients will be treated each year, but we do think there is going to be a significant increase in patients treated across Europe and we’re starting to see the first signs of that as we exit 2014.

And Yaron, we’re just not going to be able to give you any greater conformation of any specific discount, I just want to remind you of a couple of things, this is a blended discount that is across those Sovaldi and Harvoni inclusive of public and private and I want to remind you as Paul said in the lot of these private negotiation this were related to certain relaxation of restrictions so that more patients could get access and so that was factored into this as well, but other than that I can’t give any more color on what the exact specific discount would be.

The next question comes from Ian Somaiya from Nomura Securities.

Just trying to get a I guess a better handle on how we should model what are the essence of the cost of cure, and I know you mentioned that the duration of treatment therapy is roughly 20% it reached 30% I think 12 weeks. How should we think about that going forward and given the more moderate pace of patients being treated in Europe, how will that differ relative to the U.S.?

So I mean Ian, I think we’ve given you all the things that you need to model this, we’ve given you the specific gross to net, we’ve talked a little bit about where this eight-week versus 12 could come out, we think it could grow to close to half of U.S. patients, I can’t tell you how that’s going to play out during the course of this year as some doctors still prefer 12 and we don’t know what the percentage of patients with different underlying for gross disclosure would be that would preclude them from the eight-week. So it's challenging for us as it is for you, but I think we’ve given you the -- as many details as we can to build out a model to get to where we are in our guidance as well.

The next question comes from Phil Nadeau from Cowen and Company.

First, on the gross to net that seems to be taking everyone by surprise, you qualitatively discussed whether this gross to net is about where you thought it would eventually get to or because of the things that you're doing to open up access is the gross side a bit bigger than you would have anticipated? And secondly in Europe, it sounds like you have a lot of information on budgets and whatnot. Can you give us a sense of overtime more proportion of your HCV revenues in any given year do you think will come out of Europe? Thank you.

Phil, I am trying to figure out how I would answer this question but what my expectations were, my expectation that overtime prices in this deal would go down based on two things; one would be, increased competition and the other would be decreasing time of therapy and both of those things are occurring and so I guess my expectation is that it came down a little bit more than we thought but at the end of the day we felt that it would come down to a level of about this for the treatment of HCV. And so I think we’re at about where we thought we would be in this area. On the Europe part, I think it was just proportionately we’re going to head, I mean I think overtime we’ll see Europe as a bigger proportion relative to the U.S. and that is partly because of the time lag on the regulatory process and agreeing pricing and really kind of Europe getting into a swing. But I would caveat that by just kind of repeating that there are these clear budget caps across European countries which will slow things down there. So, I think probably our HCV business will be proportionately same to the U.S. as it is in HIV overtime when we kind of get to that sort of steady state they and just to emphasize again we do see Europe as having a long sort of time tail to it. So we should see our business continue to grow there for many years.

The next question comes from Robyn Karnauskas from Deutsche Bank.

But I am just trying to think about the discount I think are ahead of what the street is thinking and as a blended rate and we know that other competitors are coming on in the market. How aggressive how low can we go, can you give us any comfort on these gross to net can't erode significantly over the next year or two? And then a question on the volume side as I'm looking at what you're saying like the 250 range you’ve mentioned before as being a really great year. How much do you think the system can handle is 250 like what these payors have said that they actually could handle so they will control volumes to keep it that way? Or do you think eventually we could higher and they may be willing to go higher if prices remain relatively stable? Thanks.

On the first one as I look at our products then I look at the future competition that we're going have and I look at our emerging really remarkable profile of our Harvoni it's proving to be useful on a far greater range of patients than we thought. And look at our next-generation opportunities and I think we have by far the most competitive portfolio out there and that gives me great confident that we will be able to continue to have good product pricing throughout our segments. I am not at all concerned about future competition that people seem to be concerned about I think it's a very as it is a very strong category for us with our profile. So I think this first decrease in gross net is getting everybody to about where they want to be for the industry and for the patients as well. I forget the second question circle you can remember what it was?

The volume so you've mentioned like 250 being a good year and like the question is, can the system handle more at the same price like overtime or would they keep it in that range managing by fibrosis score, do you think that that’s like what they could handle overtime?

So right now that number is not a number that’s being managed. Paul did mention some things in Europe for their accounts. This is not a specific number that our managed care is working towards this is our estimation of what the capacity of this system would be and an estimation of what we think the patient inflows could be for 2015. The capacity of this system will depend on quite frankly on how well these products perform how many patients it cures and how many of the restrictions are really taken away for the physician and patient to get on therapy. And there are commitments that we have seen to remove those restriction we will have to wait to see how that plays out and whether those restrictions will capped at a certain level or not in the future. I don’t know beyond 2015 what our expectation is yet because I have to see how things perform in 2015 so it’s very difficult for us to predict.

Yes, and would add our sales team has been spending a lot of their time focused on kind of securing access during 2014 and we do see them being able to shift to really driving demand for the products and differentiating product benefits going forward. So it’s a good thing.

The next question comes from Cory Kasimov from JPMorgan.

I'll get off with the HCV market dynamic questions for a minute and go back to the dividend. So I don’t think many people are expecting you to start paying one just yet. I am curious have anything changed with your thinking on this front and does this imply anything about the acquisition opportunities that you currently see in this market? Thanks.

Hi Cory not at all this is Robin and may be John will chime in as well. But no really the timing of our dividend really reflects a confidence that we have in our business and our robust balance sheet as well as just the strength of our future cash flow as we look at it and again as we said all along there are no so vehicles that we can use to return free cash flow this gives us a disciplined approach of having a portion of it regular and something that people can count on or bake into their models and the rest will allow us to be flexible. But also as I mentioned it doesn’t in anyway prevent us from invested in our business our pipeline or M&A it be between our free cash flows as well as our access to borrowing capacity we don’t feel constrained in anyway by issuing a dividend.

I think Robin you said it all very well. I agree with that.

The next question comes from Matthew Harrison from Morgan Stanley.

I just wanted to ask specifically about access restrictions. We saw in the Express Scripts’ release where they talked about specifically lowering the fibrosis status we haven’t seen that out a lot of the releases that have gone for a Gilead product can you just maybe specifically state what sort of access restrictions have you gained with the discounts and what do you see is sort of the ability of patients to access. Are we talking all the way up to zero or are we talking only F1 sort of just top categorize that a little bit? Thanks.

Yes Matt as I said negotiated with the aim of increasing access and we've submitted during those negotiations what I describe as a kind of big metrics in order to secure those agreements and those bid matrices encourage why the access base on fibrosis scores amongst other things. So the agreements we have signed will not be going to any specific ones do go as far as opening up to F0 but if actions don’t mean words then those rebates wouldn’t be given. So that’s kind of how we are looking at it. And I can confirm that in some agreements we have got full access signed up, in terms of fibrosis scores.

And maybe just the follow-up the 46% growth there that you talked about, what kind of access on that metrics are you assuming?

Well we cannot go into any detail on that. I mean as John said earlier it’s a whole mix of product mix of payor mix of timing and it’s a calculation we have done but I wouldn’t want to equate that to any kind of access criteria.

The next question comes from Howard Liang from Leerink.

So maybe I will have some R&D question. Could your three HCV regimen the 9857 Sovaldi and 5816 could be four week and six week data to be available earlier than second half of ’15 than to the start of in the fourth quarter. And could you start a Phase III this year?

And so Howard this is Norbert. Thanks for asking and non-gross to net non-capital allocation question. I really appreciate it. So, yes, we are looking at the three door combination in pan-genotypic and we are currently looking at four weeks, six weeks, cirrhotic, non-cirrhotic treatment experienced treatment naïve. You should see some of those data in EASL in April in Vienna. And based on the emerging data and it’s really just merging we will then make a decision to go into Phase III and that could happen sometime in the second half of this year, yes.

And just a follow-up, have you made it into a single tablet?

Yes, it kind of goes without saying that all the combination we will doing the single-tablet regimens, yes.

The next question comes from Brian Skorney from Robert W. Baird.

Just on the 250,000 patient number that you have been talking about for this year, if we look back last year at IMS and something health data, NRx is actually a really good surrogates for the numbers you have being given us for new patients. But if I look back like the last couple of weeks of total NRxs I mean it would indicate that if annualized and it actually sees somewhere around 300,000 patients in 2015 and that’s it looks so on a pretty early growth curve trajectory and that is assuming that Viekira is not being underreported at what you with the at least says but it is, -- I guess where is the disconnect there? Or what we are seeing in IMS data not actually a reflection of what you are seeing in terms of new patients coming on anymore?

Well Brian we have put a lot of faith in a couple of data points, and so that would be my main concern there is if you are taking two points and drawing a line out for the future and there is a lot more variability that than, since we are just getting into the early part of a launch. So we will continue to monitor as will you and come up with some better idea what the long-term sustainable rate of patients is for the year.

And if I could just ask on Sovaldi can you give us any indication in terms of the breakout of usage over the last couple of months say, are we still seeing genotype 1 new patients or has this kind of become now a non-genotype 1 market here?

Brian there a are few genotype 1 I would say that Sovaldi according to the latest research we have which is mainly around quarter four I would say that about 30% of Sovaldi use is in genotype 1, but we would imagine that would disappear fairly quickly during quarter one and quarter two.

The next question comes from Ying Huang from Bank of America.

First question how should we think about European pricing, because we know that Sovaldi is priced at about 20% to 40% discounts the VAT pricing for U.S. pricing. Should we think about a Harvoni pricing in Europe at that range of discount on top of the 46% growth in that already? And then second quarter is exactly in terms of the patients taking Harvoni today, what is the percentage of patients that are F0 to F2 and how much more relaxation do you think you will get from the payors if you already have seen a significant amount of patients who are early stage? Thank you.

Yes the European prices we are not going to go into any detail of any of our arrangements there between countries, what I can say is that we have public prices, list prices in several of the countries which are in the public domain most of those are underpinned by the positive endorsement that NICE gave in the UK which shows Sovaldi is the highly effective at that price. We do have and I have alluded to this some rebate arrangements in place which encourage significant increase of volumes in those countries. And I think that’s all I can really say about the European arrangements.

Sure.

F0 to F2 we don’t have very good data on this. What we do have data on is what the intension to describe rather than the prescriptions that are actually filled. So, I can say F0 to F2, the intention to describe as defined by prescriptions written in the U.S. is actually around -- a surprisingly high around 50%. We believe that the actual prescriptions filled for those fibrosis types is significantly lower historically because of all these restrictions that were put in place. So, we would anticipate that that number would increase during the first couple of quarters this year in line with the arrangements we’ve signed up.

The next question comes from Terence Flynn from Goldman Sachs.

Just wondering if you guys have, thought about a target payout ratio with respect to buybacks and dividends overtime? And then second question is just regarding, you gave us some pretty detailed data on U.S. capacity, but what about EU capacity, any color there long-term? Thanks.

Hi Terence, I’ll start with the first part. We don’t really want to set a target, again as I mentioned earlier our focus will still be primarily share repurchases for shareholder returns and that’s the level and aggressiveness with which we do them will really be based on how we feel about our evaluations. If you look over the past several years, we returned about 50 a little over 50% of our free cash flow and based on our evaluation, I mean that’s an area that we’re comfortable with, but we reserve the right to ratchet that down overtime I think particularly as you think about a dividend for the second half you’d expect us lower share repurchases a bit.

And the European capacity, I mean I said in my script, that so far up till the end of 2014 with just Sovaldi really in the EU we treated we think around 32,000 patients last year. Now we’ve only really timed up several of the governments on Sovaldi towards the end of last year and we’re moving fast with Harvoni and we would anticipate Harvoni being a far more attractive product because of its simplicity and all the other very clear benefits it has. So it's hard to say, but I think that we have got a substantial number of patients in Europe that could and should be treated it will depend somewhat on the budget tax as I’ve already alluded to how strictly those are enforced. But I think we have a large and healthy growing and sustainable market in Europe for many years.

But can you give us directionally versus the U.S. the 250, the same magnitude lower or higher?

I think it's just a really hard question to answer, I am sorry, I can’t answer that, but I think that if you thought of a number north of a hundred thousand that would kind of seem logical.

The next question comes from Thomas Wei from Jefferies.

Just wanted to ask about the waterfall part perhaps fee and the bar that’s missing on the diagnosed patients that are under the care of a physician? And then also wanted to ask about Simtuzumab, I thought I heard you say no activity in myelofibrosis, I thought you were looking at bone marrow biopsies there and does that mean you did not see any effect as like any anti-fibrotic effect and what do you think that in terms of NASH? Thanks.

Yes, so Thomas it Norbert I’ll answer the last question first, quick. And so we’re looking at it in myelofibrosis, pancreatic and colorectal cancer in all of those three educations there was no activity and you're right in myelofibrosis we looked at histology at the end point and the other two indications that was PFS. But I would like to point out that it's -- myelofibrosis is biologically different from liver and pulmonary fibrosis and I do not think you can extrapolate those two diseases. So, we still have hope and somewhat confidence that it's different and we’ll see that in Phase II for NASH or PSC and for IPF.

And Thomas your first question was about the missing bar in the waterfall and we just didn’t have any confidence in what number to put in for patients who are under care, we’re confident in the 1.6 million people who have been diagnosed, we do recognize that a number of those have soft care directly from that bar if you will and many of if any care over the course this year and sort of bypass that middle part of the waterfall and because it's such a fast moving field and because our data is a quarter to rare as we felt it was no longer representative and so we stopped using the draft ball together the last quarter, but brought back the diagnosed bar and the overall bars for more confident that those two numbers are reasonably accurate. We just can’t tell you who is in the care right now because it is moving so quickly.

And Mr. O'Brien, we have time for one more question. Our final question comes from Josh Schimmer from Piper Jaffray.

Just given that you’ve experienced rapid acceleration and then deceleration in earnings growth, is it a priority to find a more stable and sustainable face of EPS growth, and so when do you think you’ll become or you’ll move on to a more stable trajectory and do you believe that over the long-term you can continue to deliver double-digit earnings growth despite some of the mid to long-term headwinds? Thanks.

Josh there is a lot of pronouncements in there. We have certainly made great progress over the last year I think we continue to make great progress and have a very reasonable stable base of business. But as always we're going invest in numbers pipeline and continuing to bring products out we have some really interesting things going on as we announced today the MMP9 antibody is moving ahead because it shows activity in two different times of very interesting long-term diseases and we'll continue to invest in products by licensing. So I feel we have as Robin said the capability financially to buy back shares to pay dividends and to invest heavily in the pipeline for the future. I frankly never have felt like the Company has been in better shape in terms of our stable base of business and our way forward. So we'll continue to focus on that.

Great and thank you Janney and thank you all for joining us today, we appreciate your continued interest in Gilead, the team here looks forward to providing you with updates on future progress. Many thanks.

Ladies and gentleman that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.