GILEAD SCIENCES, INC. Q1 2026 earnings call

Thank you, Rebecca. Just after market close today, we issued a press release with earnings results for the first quarter of 2026. The press release, slides, and supplementary data are available on the Investors section of our website at gilead.com. The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day; our Chief Commercial and Corporate Affairs Officer, Johanna Mercier; our Chief Medical Officer, Dietmar Berger; and our Chief Financial Officer, Andrew Dickinson. After that, we'll open the call to Q&A, where the team will be joined by Cindy Perettie, the Executive Vice President of Kite. Let me remind you that we will be making forward-looking statements. Please refer to slide two regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially. With that, I'll turn the call over to Dan.

Thank you, Jacquie, and good afternoon, everyone. I'm pleased to share highlights from Gilead's first quarter, which has extended our consistent track record of commercial, clinical, and financial execution. Our strong financial performance and increase in sales guidance reflects the depth and quality of our portfolio, the numerous launches underway, and our continued focus on financial discipline. As we execute on the strongest pipeline in our history, Gilead is also taking steps to further strengthen the company's position for the future. We are looking forward to sharing much more on our Arcellx, Ouro, and Tubulis in the coming quarters. Our HIV business grew 10% year-over-year, reflecting 7% growth for BIKTARVY and an impressive 87% growth for our U.S. PrEP business. The ongoing success of the YEZTUGO launch is a key driver of this growth in HIV prevention, with first quarter sales growing 72% sequentially.

Looking forward, with no major LOEs until 2036, Gilead's HIV business is poised for strong, durable growth, supported by up to seven potential new HIV product launches by 2033. The first of these potential launches is bictegravir + lenacapavir, an investigational once-daily oral regimen for virally suppressed people with HIV. This is now under priority review, and we expect an FDA decision in August. Other upcoming HIV milestones include phase III updates later this quarter from the ISLEND-1 and ISLEND-2 studies evaluating a potential first once-weekly oral for virally suppressed people with HIV. We shared encouraging phase I data at CROI in February for a long-acting integrase inhibitor, GS-3242. Later this year, we plan to share additional data that could support the combination of GS-3242 with lenacapavir as a potential twice-yearly injectable treatment regimen.

The timeframe for potential launch is between 2031 and 2033. In oncology, first quarter TRODELVY sales were up 37% year-over-year, reflecting growing demand for TRODELVY. We anticipate regulatory decisions on extending into first-line metastatic triple-negative breast cancer in the second half of this year. Ahead of these decisions, TRODELVY has already received NCCN Category 1 recommendation across the first-line and is the leading ADC in second-line metastatic TNBC treatment. We are also expecting phase III updates from the EVOKE-03 trial in first-line metastatic non-small cell lung cancer and the ASCENT-GYN trial in second-line plus metastatic endometrial cancer in the second half of this year. The pending acquisition of Tubulis is another significant milestone in building Gilead's oncology franchise.

The company brings a clinical-stage candidate, TUB-040, which we believe has the potential to be a leading ADC in ovarian cancer and a next-generation ADC platform with a promising early pipeline. At the upcoming ASCO meeting, we look forward to additional phase I data on TUB-040 in platinum-resistant ovarian cancer. Additionally, we are expecting a regulatory decision on Anito-cel, our potential best-in-disease BCMA CAR-T in December of this year. Our acquisition of Arcellx, which closed on April 28th, reflects our conviction in the potential of Anito-cel as a differentiated option for patients with multiple myeloma. Given the significant opportunity in fourth-line as well as earlier lines of therapy, we believe Anito-cel could become a foundational therapy for multiple myeloma, driving growth in our cell therapy business in 2027 and beyond.

The Arcellx platform will leverage Kite's industry-leading manufacturing capabilities and could further strengthen our future in oncology and inflammation. In liver disease, LIVDELZI revenue for second-line primary biliary cholangitis more than tripled year-over-year. We are expecting an update from our phase III IDEAL study for LIVDELZI in the second half of this year. If positive, the IDEAL study could support a label update and expand the second-line PBC addressable population. Additionally, we expect a regulatory decision and potential U.S. launch of HEPCLUDEX for chronic hepatitis delta virus infection later this quarter. In inflammation, the potential acquisition of Ouro Medicines will add to our portfolio with gamgertamig, a BCMAxCD3 T cell engager in multiple B cell-driven autoimmune diseases. We will also share phase II updates for our oral IRAK4 inhibitor and oral α4β7 small molecule this year.

These commercial and clinical updates demonstrate the strength of our execution today, underpinned by our continued commitment to financial discipline. As we look to the remainder of 2026, we see many exciting opportunities to further expand our impact on the patients and communities we aim to serve. With that, I'll hand it over to Johanna.

Thanks, Dan, and good afternoon, everyone. It has been a remarkable start to the year from a commercial perspective, reflecting the innovative nature of our portfolio and our strong execution. Beginning on slide seven, first quarter total product sales, excluding VEKLURY, were $6.8 billion, up 8% year-over-year, driven by continued growth across our key products in HIV, breast cancer, and PBC, partially offset by HCV and cell therapy. Including VEKLURY, first quarter total product sales were $6.9 billion, up 5% year-over-year. Sequentially, sales were down 12% in line with normal first quarter seasonality. Moving to slide eight, our HIV commercial teams drove first quarter sales of $5 billion, up an impressive 10% year-over-year. This growth was driven by strong demand across BIKTARVY, YEZTUGO, and DESCOVY, as well as pricing favorability.

Sequentially, HIV sales were down 13%, primarily driven by Q1 seasonality in line with our expectations. These typical first quarter factors included inventory drawdown following a year-end build in the prior quarter and lower average realized price due to channel mix. Looking at HIV treatment in more detail on slide nine, BIKTARVY sales of $3.4 billion were up 7% year-over-year, driven by higher demand and average realized price, partially offset by inventory drawdown. Sequentially, sales were down 15%, reflecting the first quarter seasonality that I just discussed. BIKTARVY continues to lead as the regimen of choice for both naïve and switch patients across major markets. In the U.S., BIKTARVY's share was once again more than 52%, continuing its record of year-over-year gains in every quarter since launch. This market leadership is a testament to BIKTARVY's differentiation and continued physician confidence.

We also continue to innovate with bictegravir + lenacapavir, or BIC/LEN, our once-daily single-tablet regimen. We are targeting a potential launch in late August for people with virally suppressed HIV, including those on complex regimens. Building on our long-standing track record of delivering highly effective, differentiated therapies for people with HIV, we believe that BIC/LEN is an exciting addition to our HIV treatment portfolio and has the potential to further expand Gilead's leadership in the switch market. Moving to slide 10, our U.S. HIV prevention or PrEP business grew 87% year-over-year, comprised of the market-leading branded daily oral DESCOVY and the first and only twice-yearly injectable YEZTUGO. This performance was driven primarily by commercial execution and the strong product profiles of DESCOVY and YEZTUGO.

We believe we have the most compelling portfolio of PrEP products on the market and expect to retain and grow our leadership in the rapidly expanding PrEP market in both the near and long term. In the first quarter, the U.S. PrEP market grew approximately 14% year-over-year, and we look forward to further growth as we expand the reach of HIV prevention over time. DESCOVY first quarter sales of $807 million were up 38% year-over-year, driven by higher average realized price and demand growth. Sequentially, DESCOVY sales were down 1% due to typical first quarter seasonality and partially offset by favorable channel mix. Specifically within PrEP, which accounts for about 80% of DESCOVY's business, first quarter U.S. sales were up approximately 50% year-over-year.

YEZTUGO continues to show an unprecedented launch trajectory for a new long-acting PrEP product. First quarter sales of $166 million were up 72% sequentially, exceeding our expectations. I am pleased to share we continue to see strong performance across our key YEZTUGO launch metrics. This includes access, where now approximately 95% of individuals are covered in the U.S., of which 95% can access YEZTUGO with $0 copay. Market share, where we are now the leading long-acting injectable in switch, we continue to see a higher than expected number of naïve PrEP users initiating on YEZTUGO with early signs of growing momentum in this segment. Persistency, where our initial experience of return users is encouraging. Although it is still early, we expect YEZTUGO persistency to be the highest in the HIV prevention category.

The impact of our direct-to-consumer campaign, where we are creating strong brand awareness and interest in YEZTUGO through our omni-channel approach, focusing on communities and geographies with the highest needs. Given the outperformance of YEZTUGO in the first quarter and our growing confidence in the trends we're seeing, we're increasing our 2026 YEZTUGO guidance to $1 billion, potentially achieving blockbuster status in its first full year. Beyond 2026, we continue to expect a steady and durable build in sales over many years as we work to eliminate stigma associated with HIV PrEP and broaden adoption to all communities and individuals who can benefit. Both YEZTUGO and DESCOVY for PrEP sales are expected to meaningfully grow in 2026.

Reflecting this increase to our YEZTUGO guidance, in addition to first quarter strength across HIV, we are now expecting 2026 total HIV sales, including both treatment and prevention, to grow approximately 8% year-over-year compared to the 6% previously shared in our February guidance. This is inclusive of headwinds of approximately 2% associated with the drug pricing agreement with the U.S. government to lower Medicaid pricing for some of our products and proposed changes to the Affordable Care Act. Turning to slide 11, LIVDELZI sales of $133 million more than tripled year-over-year as the launch continues to generate strong and growing demand in the U.S. as well as across Europe. Demand growth continues to be driven by expansion in prescriber adoption, confidence in LIVDELZI clinical profile, and broader utilization among appropriate second-line PBC patients.

Sequentially, sales declined 11%, largely driven by inventory drawdown. As we previously highlighted, fourth quarter sales included a bolus of switches associated with the discontinuation of a competing product, which has normalized in the first quarter. As we enter the second quarter, LIVDELZI's rapid market capture continues to impress, maintaining its position as market leader with more than 50% share of the U.S. second-line PBC market. More broadly in liver disease, first quarter sales of $767 million were up 1% year-over-year, primarily reflecting the continued launch of LIVDELZI, partially offset by inventory drawdown across the portfolio and lower HCV patient starts. Sequentially, sales were down 9%, reflecting seasonality, partially offset by higher average realized price for HCV products.

Moving to TRODELVY on slide 12, sales of $402 million were up 37% year-over-year and 5% sequentially, with growing demand across breast cancer indications in all regions. TRODELVY is already approved in over 60 countries and has been firmly established as the leading regimen in second-line metastatic TNBC across major markets. Turning to the first-line metastatic setting, in the phase III ASCENT-03 and ASCENT-04 trials, TRODELVY demonstrated highly statistically significant and clinically meaningful improvements in progression-free survival over the standard of care, both as a monotherapy in PD-L1 negative patients and in combination with pembrolizumab in PD-L1 positive patients. Ahead of potential FDA decisions, the NCCN updated their guidelines with Category 1 recommendation across first-line metastatic TNBC, which reinforces the strength of the data in first-line with a potential launch in the U.S. in the second half of 2026.

Moving to cell therapy on slide 13 and on behalf of Cindy and the Kite team, first quarter cell therapy sales were $407 million, down 12% year-over-year and down 11% sequentially, reflecting the expected ongoing in-class and out-of-class competition across regions. We continue to pursue expanding access and global reach of our cell therapies. For example, in April, TECARTUS received full FDA approval in adult relapsed or refractory mantle cell lymphoma, adding data on patients who are BTK inhibitor naïve. This important work of increasing awareness and physician comfort with CAR-T helped set the stage for the potential launch of our next-generation products. Turning to Anito-cel, and with the close of the Arcellx acquisition last week, we are ramping up our detailed launch preparations for what we believe could be a best-in-disease multiple myeloma therapy.

Adding Kite's end-to-end expertise in cell therapy to Anito-cel's demonstrated deep, durable efficacy and differentiated safety profile positions Anito-cel to maximize its potential in the $3.5 billion fourth-line plus CAR-T market. With a late December PDUFA date and factoring in the time needed for site activation, we expect revenue from Anito-cel to begin in early 2027. As we wrap up the first quarter and look forward to up to four additional launches this year, shown on slide 14, I want to recognize our commercialization teams for their exceptional execution in driving another strong quarter in Q1 and thank them for their commitment to growing patient impact in the second quarter and beyond. With that, I'll hand the call over to Dietmar.

Thank you, Johanna, and good afternoon, everyone. I'm pleased to share that the strong momentum across our research and clinical programs has accelerated since our full year earnings in February. This is supported by disciplined portfolio prioritization and strong execution. With the close of the Arcellx acquisition, our pipeline now consists of 47 clinical programs spanning our portfolio of first-in-class or best-in-class assets. The completed acquisition of Arcellx and pending acquisitions of Ouro Medicines and Tubulis add potential best in class CAR-Ts, T cell engagers, and antibody drug conjugates, as well as capability expanding technologies to the novel D-Domain binder and next-generation ADC conjugation platforms.

Starting with HIV on slide 16, we shared 60 abstracts at CROI in February, continuing our track record of showcasing our comprehensive and innovative HIV pipeline at this flagship conference. This year, we highlighted new data across our suite of lenacapavir-based regimens for treatment and prevention, as well as our other investigational programs for HIV treatment. Updates across our HIV portfolio include our once daily oral bictegravir + lenacapavir or BIC/LEN for treatment of virally suppressed people with HIV has been filed with FDA, and we expect a regulatory decision based on priority review in August. At CROI, we highlighted that BIC/LEN demonstrated viral suppression in people switching from a multi-tablet regimen in ARTISTRY-1 or from BIKTARVY in ARTISTRY-2 with no clinically meaningful emergent resistance.

Moving to our once-weekly oral programs, we continue to target updates from the phase III ISLEND-1 and ISLEND-2 trials in collaboration with Merck later this quarter. These trials are evaluating islatravir + lenacapavir for virally suppressed people with HIV. If successful, this could result in the first-ever long-acting oral treatment regimen. We also continue to develop a wholly-owned weekly oral treatment regimen combining a capsid inhibitor with an integrase inhibitor for treatment of people with HIV. With multiple alternative molecules in our portfolio, we are finalizing the selection of the capsid inhibitor and integrase inhibitor for the new combination and look forward to updating you in due course. Moving to even longer-acting options, we are excited to be initiating a phase II trial combining our investigational integrase inhibitor, GS-3242, with lenacapavir in the second half of this year.

This follows phase I data shared at CROI that showed potential for injectable dosing every four months. The higher dose phase I cohorts with potential for twice-yearly dosing are ongoing. In HIV prevention, we continue to drive innovation building on the exceptional clinical profile of YEZTUGO, and I'm pleased to share that enrollment in our phase III PURPOSE 365 study evaluating once-yearly intramuscular lenacapavir is complete. This registrational study is testing PK, safety, and tolerability across a diverse set of participants indicated for PrEP. We expect these data, along with the unprecedented efficacy and safety results from PURPOSE 1 and PURPOSE 2, to form the basis of regulatory submission with target U.S. approval in 2028. Transitioning to oncology and starting on slide 17, we have announced several strategic investments over the last few months that we believe further strengthen our ADC and cell therapy capabilities and portfolios.

ADCs are one of the most promising modalities in cancer today, as highlighted by the incredible impact TRODELVY has demonstrated for patients with second-line metastatic triple-negative breast cancer and pre-treated hormone receptor-positive HER2-negative metastatic breast cancer. We continue to expect regulatory decisions from FDA for first-line metastatic TNBC in the second half of 2026, and we now also anticipate European Commission decisions later this year. Further, we continue to expect Phase III updates from EVOKE-03 in first-line PD-L1 high metastatic non-small cell lung cancer and ASCENT-GYN in second-line plus metastatic endometrial cancer in the second half of this year. Given our foundational ADC experience with TRODELVY, we are excited to expand our portfolio and capabilities with the acquisition of Tubulis.

The lead asset, TUB-040, is a potential first-in-class NaPi2b-directed ADC that we believe has transformative potential in platinum-resistant ovarian cancer, a challenging and aggressive condition with a poor prognosis for many women. At the ESMO conference last year, TUB-040 phase I data showed early treatment responses that deepened over time in a broad ovarian cancer population without any biomarker selection. This is potentially meaningful differentiation from other approved ADCs. In the shared data, TUB-040 was generally well-tolerated across a wide therapeutic index with no clinically relevant bleeding, pneumonitis, ocular toxicity, stomatitis, or neuropathy observed. In the immediate future, we look forward to more mature phase I data on TUB-040 in ovarian cancer at this year's ASCO meeting in June and expect to enter registrational phase III studies for platinum-resistant ovarian cancer in 2027.

Looking longer term, Tubulis' pipeline includes TUB-030, a potential first-in-class ADC targeting 5T4, being evaluated in a phase I basket trial in multiple solid tumors, including head and neck cancer and non-small cell lung cancer. Further, Tubulis has multiple preclinical assets that utilize its next-generation ADC platform. We're excited by the potential to develop ADCs that incorporate novel payloads, including ones developed by Gilead's industry-leading medicinal chemistry group. Moving to cell therapy on slide 18 and on behalf of Cindy and the Kite team, we are pleased to have closed our acquisition of Arcellx at the end of April, which formally brings Anito-cel's entire program and the broader D-Domain binder portfolio into our R&D organization. We have long believed Anito-cel has a potential best-in-disease profile in multiple myeloma, and this is supported by clinically meaningful, deep, and durable efficacy as well as a differentiated safety profile.

This includes no delayed or non-ICANS neurotoxicities and enterocolitis in our clinical program. Given our confidence in Anito-cel's clinical profile, we are evaluating Anito-cel in earlier treatment lines, including second- to fourth-line relapse or refractory multiple myeloma in the phase III iMMagine-3 trial. This trial is recruiting ahead of expectations with enrollment completion expected in the second quarter. We are also planning to develop Anito-cel in newly diagnosed multiple myeloma. Beyond Anito-cel, the Arcellx acquisition brings an array of promising research assets, and we are particularly excited to explore the broader applications of the unique D-Domain binder platform across a variety of targets in oncology and autoimmune diseases, and notably for in vivo cell therapies. With our increasingly differentiated cell therapy pipeline, we look forward to bringing CAR-T to even more patients in the years ahead.

Moving to slide 19, our inflammation pipeline has nearly doubled since 2019 and now consists of 10 clinical stage assets spanning small molecules, antibodies, including bispecifics and cell therapies that enable a diverse array of approaches to address challenging autoimmune diseases. We are excited about the pending acquisition of Ouro Medicines and its lead asset gamgertamig, a clinical-stage subcutaneously administered BCMAxCD3 bispecific T cell engager that we expect to develop in collaboration with Galapagos. Together with Kite's portfolio of Anito-cel and next-generation bispecific CAR-Ts, we believe we could achieve durable immune reset, shifting some autoimmune diseases from chronic symptom control to a transformative long-term treatment effect. Each asset offers unique potential advantages that could allow us to target different patient populations.

Specifically, gamgertamig has shown rapid, deep, and sustained plasma and B cell depletion while maintaining low rate and low-grade CRS with no ICANS to date in over 60 patients with immune-mediated diseases. We are focusing first on orphan autoimmune indications with established proof of concept and high unmet need, including autoimmune cytopenias, pemphigus, and idiopathic inflammatory myopathies. We're targeting phase III registrational trials in select autoimmune diseases as early as 2027. Longer term, we believe gamgertamig has potential in more than 20 autoimmune diseases that are driven by pathogenic B and plasma cells.

Additionally, this year we plan to share updates from our broader inflammation portfolio, including the phase III IDEAL study evaluating LIVDELZI in PBC patients with incomplete response to UDCA, the phase II SWIFT study evaluating GS-1427 or emvistegrast, our investigational oral α4β7 inhibitor for inflammatory bowel diseases, and the phase II-A COSMIC study evaluating edecesertib, our investigational IRAK4 kinase inhibitor in cutaneous lupus erythematosus. Reviewing our 2026 pipeline milestones on slide 20, we remain on track across all our key deliverables. We expect an FDA regulatory decision for bulevirtide as a treatment for chronic HDV infection later this quarter. Bulevirtide has been approved as HEPCLUDEX in the E.U. since 2020, and we look forward to making this available to patients in the U.S.

We expect FDA regulatory decisions for BIC/LEN in August and Anito-cel in December of this year, as well as phase III updates for ISLEND-1 and ISLEND-2 in the first half of this year and for EVOKE-03, ASCENT-GYN, and IDEAL in the second half. With that, I'd like to thank our research and development teams and our partners whose continued strong clinical execution are driving the progress we have seen across our pipeline. I'll turn over the call to Andy.

Thank you, Dietmar, and good afternoon, everyone. As you've heard, Gilead delivered strong first quarter results with continued commercial outperformance and disciplined operating execution. As shown on slide 22, our base business grew 8% year-over-year to $6.8 billion, driven by continued growth in sales for HIV products, TRODELVY and LIVDELZI, partially offset by lower sales of HCV and cell therapy products. Sequentially, sales were down 12%, reflecting typical seasonal inventory dynamics in line with our expectations. Total product sales of $6.9 billion were up 5% year-over-year, reflecting lower VEKLURY sales due to fewer COVID-19 related hospitalizations. Moving to our non-GAAP first quarter results on slide 23.

Product gross margin was 87% in line with our full-year guidance and up 2 percentage points year-over-year due to the expiration of a long-standing TAF-related royalty obligation in addition to product mix. R&D expenses were $1.4 billion, relatively flat year-over-year, reflecting higher investments in virology clinical manufacturing offset by lower oncology clinical study activity. Acquired IPR&D expenses were $107 million, primarily driven by an upfront payment related to our Genhouse licensing deal. We have now closed the acquisition of Arcellx, and the acquisitions of Ouro Medicines and Tubulis are expected to close later this quarter. The upfront payments related to these transactions are expected to be recorded in our second quarter acquired IPR&D and have been reflected in our full-year EPS guidance, which I will discuss shortly. Back to our first quarter results.

SG&A expenses were up 12% year-over-year, primarily reflecting higher selling and marketing expenses related to the YEZTUGO launch. First quarter operating margin was 47%, reflecting our continued focus on operating expense discipline and delivering top quartile margins. The non-GAAP effective tax rate was 18.3% in the first quarter. Finally, non-GAAP diluted EPS was $2.03, up 12% year-over-year. This reflected higher product sales and lower IPR&D expenses incurred this quarter, partially offset by higher tax and SG&A expenses. Moving to our full year guidance, we are pleased to share our updated expectations for 2026, reflecting revenue outperformance in the first quarter and expected momentum through the rest of the year. As a result, we are increasing our revenue ranges by $400 million.

With regards to operating expenses in 2026, as discussed on our transaction call a few weeks ago, we continue the careful prioritization of operational spend consistent with our track record over the last several years. For R&D, we expect a transaction-related modest and manageable dollar increase compared to our start of the year guidance. In SG&A, we are effectively absorbing incremental expenses associated with the acquisitions in our prior guidance. Upfront IPR&D of $11.5 billion, together with transaction financing expenses collectively amounting to $9.50 per share, are reflected in our updated EPS guidance. We are pleased to note that excluding these transaction-related costs, we are effectively maintaining our start of the year non-GAAP EPS guidance, highlighting the flexibility in our operating model and our agility as we flex to accommodate the needs of the business.

Looking at the details starting on slide 24, reflecting strength across our HIV businesses, we now expect 2026 HIV sales to grow 8% year-over-year, ahead of our prior guidance of 6% growth. Within HIV, we now expect YEZTUGO sales of approximately $1 billion, up from $800 million at the start of the year. As a result, we are increasing our 2026 base business guidance and now expect a range between $29.4 billion-$29.8 billion. This increase of $400 million results in 5%-6% growth compared to 2025, up from the 4%-5% growth expectation we shared in February.

As we highlighted last quarter, our guidance includes a roughly 2% growth headwind from policy-related changes this year, primarily related to the drug pricing agreement announced in December 2025 and the Affordable Care Act. Absent this headwind, base business growth would be expected to be 7%-8%. Our full year VEKLURY guidance remains unchanged at approximately $600 million, contributing to expected 2026 total product sales between $30 billion and $30.4 billion, an increase of $400 million. Moving to the non-GAAP P&L for the full year 2026, we are adjusting our guidance to reflect the Arcellx, Ouro Medicines, and Tubulis acquisitions. Specifically, we expect R&D expenses to increase a mid-single-digit percentage from 2025, slightly higher than the low single-digit percentage increase shared in our February guidance.

This is primarily driven by our investment in clinical programs related to the announced acquisitions of Tubulis and Arcellx. Overall, we expect R&D expense as a percentage of total product sales to be less than 20% in 2026. We expect acquired IPR&D investments of approximately $11.8 billion for the year, which includes the upfront payments associated with our recently announced acquisitions. We expect SG&A expenses to remain in line with our February guidance of a mid-single-digit percentage increase compared to 2025, and we expect full year 2026 operating income of $2.4 billion-$2.9 billion. Full year 2026 effective tax rate is expected to be between 140% and 190%, reflecting the nondeductible expenses from the Arcellx, Ouro Medicines, and Tubulis transactions.

Excluding the $11.5 billion in upfront payments related to these recent transactions, operating income would be between $14 billion and $14.5 billion, or $200 million higher than our February guidance. On slide 25, you can see that we now expect full year 2026 non-GAAP loss per share in the range of $1.05-$0.65 per share. This includes an expense of approximately $9.50 per share relating to the upfront payments and financing costs associated with the Arcellx, Ouro, and Tubulis transactions. Excluding this impact, our non-GAAP diluted EPS would be $8.45-$8.85, or in line with the non-GAAP EPS guidance we shared back in February.

We are pleased to note that the strength in our commercial business, reflected in the $400 million increase in product sales, is effectively offsetting the impact, primarily R&D, of the three deals on an EPS basis. On slide 26, we returned greater than $1.4 billion to shareholders in the first quarter of 2026, including over $400 million of share repurchases. Combined with our dividend, we returned approximately 60% of our free cash flow to shareholders in the first quarter of 2026. Looking ahead, given the pace of our activity in the first four months of 2026, our business development focus in the near term will be closing and successfully integrating these programs and maintaining strong clinical momentum. At the same time, we will continue to pursue ordinary course business development transactions.

It is less likely that we will pursue more sizable M&A this year, although we will always leave the door open to consider strategic acquisitions if a compelling opportunity emerges. Overall, we are pleased with Gilead's consistent strong performance, highlighted by solid clinical and commercial execution and supported by our disciplined operating model. We continue to be very well-positioned for both near-term and long-term growth and fully focused on executing our strategic commitments. With that, I'll invite Rebecca to begin the Q&A.