<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
 
/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
 
                          COMMISSION FILE NO. 0-19731
 
                             GILEAD SCIENCES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

<TABLE>
<S>                                       <C>
                DELAWARE                                94-3047598
    (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                Identification No.)
    333 LAKESIDE DRIVE, FOSTER CITY,                      94404
               CALIFORNIA
(Address of principal executive offices)                (Zip Code)
</TABLE>

 
        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 650-574-3000
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                          COMMON STOCK $.001 PAR VALUE
                                (TITLE OF CLASS)
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes _X_ No ___.
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  [X]
 
    The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the closing price of the Common Stock on the Nasdaq Stock
Market on February 27, 1998 was $804,097,418.*
 
    The number of shares outstanding of the Registrant's Common Stock was
30,131,484 as of February 27, 1998.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Registrant's annual report to security holders furnished to the Securities
and Exchange Commission (the "Commission") pursuant to Rule 14a-3(b) in
connection with Registrant's 1998 Annual Meeting of Stockholders to be held on
May 27, 1998 (the "1998 Annual Meeting") is attached hereto as Exhibit 13.1 and
portions are incorporated herein by reference into Part II of this Report.
 
    Portions of Registrant's Definitive Proxy Statement filed with the
Commission pursuant to Regulation 14A in connection with the 1998 Annual Meeting
are incorporated herein by reference into Part III of this Report.
 
    Certain Exhibits filed with the Registrant's Registration Statements on Form
S-1 (Registration Nos. 33-44534 and 33-55680), as amended, the Registrant's
Registration Statement on Form S-3 (No. 333-868), as amended, the Registrant's
Registration Statement on Form S-8 (Registration Nos. 33-46058), the
Registrant's Annual Reports on Form 10-K for the fiscal periods ended March 31,
1994, December 31, 1995 and December 31, 1996, and the Registrant's Quarterly
Reports on Form 10-Q for the fiscal quarters ended September 30, 1993, September
30, 1994, December 31, 1994, June 30, 1996, September 30, 1996 and September 30,
1997 are incorporated herein by reference into Part IV of this Report.
- ------------------------
* Based on a closing price of $35.8125 per share. Excludes 7,678,502 shares of
  the Registrant's Common Stock held by executive officers, directors and
  stockholders whose ownership exceeds 5% of the Common Stock outstanding at
  February 27, 1998. Exclusion of such shares should not be construed to
  indicate that any such person possesses the power, direct or indirect, to
  direct or cause the direction of the management or policies of the Registrant
  or that such person is controlled by or under common control with the
  Registrant.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

                                     PART I
 

ITEM 1. BUSINESS
 
    THIS REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO
CLINICAL AND REGULATORY DEVELOPMENTS (INCLUDING ANTICIPATED TRIAL COMMENCEMENT
AND FDA FILING AND APPROVAL DATES), MARKETING AND SALES MATTERS, FUTURE EXPENSE
LEVELS AND FINANCIAL RESULTS. THESE STATEMENTS INVOLVE INHERENT RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," PARTICULARLY THOSE RELATING TO THE DEVELOPMENT, APPROVAL AND MARKETING
OF PHARMACEUTICAL PRODUCTS.
 
GENERAL
 
    Gilead Sciences, Inc. ("Gilead" or the "Company") is an independent
biopharmaceutical company that seeks to provide accelerated solutions for
patients and the people who care for them. The Company discovers, develops, and
commercializes proprietary therapeutics for important viral diseases, including
the currently marketed product, VISTIDE-Registered Trademark- (cidofovir
injection), for the treatment of cytomegalovirus ("CMV") retinitis, a
sight-threatening viral infection in patients with acquired immune deficiency
syndrome ("AIDS"). In addition, the Company is developing products to treat
diseases caused by human immunodeficiency virus ("HIV"), hepatitis B virus
("HBV") and influenza virus.
 
    The successful development and commercialization of the Company's products
will require substantial and ongoing efforts at the forefront of the life
sciences industry. The Company is pursuing preclinical or clinical development
of a number of product candidates. Even if these product candidates appear
promising during various stages of development, they may not reach the market
for a number of reasons. Such reasons include the possibilities that the
potential products will be found ineffective or cause harmful side effects
during preclinical or clinical trials, fail to receive necessary regulatory
approvals, be difficult or uneconomical to manufacture on a commercial scale,
fail to achieve market acceptance or be precluded from commercialization by
proprietary rights of third parties.
 
    The Company faces significant challenges and risks in an industry undergoing
rapid change, including the risks inherent in its research and development
programs, uncertainties in obtaining and enforcing patents, the lengthy and
expensive regulatory approval process, reliance on third party manufacturers,
intense competition from pharmaceutical and biotechnology companies, dependence
on collaborative relationships, increasing pressure on pharmaceutical pricing
from payors, patients and government agencies, and uncertainties associated with
the market acceptance of any of the Company's products in development.
 
    The Company was incorporated in Delaware in 1987. The Company's principal
executive offices are located at 333 Lakeside Drive, Foster City, California
94404 and its telephone number is (650) 574-3000, or (800) GILEAD5
(800-445-3235).
 
    FOR A MORE DETAILED DISCUSSION OF THE RISK FACTORS RELATING TO THE COMPANY
SUMMARIZED ABOVE, SEE "RISK FACTORS" AT THE END OF THIS ITEM 1 (PAGES 21 THROUGH
26 OF THIS REPORT). STOCKHOLDERS AND PROSPECTIVE INVESTORS IN THE COMPANY SHOULD
CAREFULLY CONSIDER THESE RISK FACTORS.
 
OVERVIEW OF NUCLEOTIDES
 
    Nucleotides exist in every human cell and are the building blocks of the
nucleic acids DNA and RNA. A single nucleotide is called a mononucleotide, and
several nucleotides linked together are called an oligonucleotide. Nucleotides
are involved in the metabolism and regulation of certain activities of cells and
microorganisms. Oligonucleotides are the material containing genetic
information.
 
                                       2

<PAGE>
    Natural oligonucleotides are coupled to one another in a specific manner to
form DNA or RNA strands. The specific sequences of nucleotides that compose each
strand of DNA contain the genetic codes for the different proteins produced by
the cell. Proteins perform most of the normal physiologic functions of humans,
viruses and other organisms. However, when the production or activity of
proteins becomes aberrant, numerous diseases, such as vascular disease,
inflammatory disease or cancer, can result. Diseases may also result from a
foreign organism, such as a virus, which directs a cell to produce proteins
necessary for viral replication.
 
    Natural nucleotides are a versatile class of compounds that can be
chemically modified to inhibit the production or activity of disease-causing
proteins. Natural nucleotides have three molecular components: a sugar, a
phosphate group and a base. Every nucleotide in DNA has the same sugar and
phosphate group but a different base. Nucleotide analogues designed to be
therapeutic compounds can work by a number of different mechanisms.
Mononucleotides can be designed to interfere with the metabolism of cells or
with the replication of viruses. Oligonucleotides can be designed to interfere
with transcription or translation by binding to DNA or RNA.
 
    The Company believes that the precise interaction of nucleotides in binding
to DNA, RNA and proteins provides the chemical basis for the development of
therapeutic products with high specificity and potency and long duration of
action. Many of the Company's products or products in development are nucleotide
analogues, including VISTIDE-Registered Trademark- (cidofovir injection),
PREVEON-TM- (adefovir dipivoxil) and PMPA.
 
                                       3

<PAGE>
PRODUCT PIPELINE
 
    The following table summarizes Gilead's products and product candidates.
This table is qualified in its entirety by reference to the more detailed
descriptions elsewhere in this Report.
 

<TABLE>
<CAPTION>
                                                                                                WORLDWIDE
          PRODUCT/CANDIDATE                 TARGET INDICATIONS       DEVELOPMENT STATUS(1)       RIGHTS
- -------------------------------------  ----------------------------  ----------------------  ---------------
<S>                                    <C>                           <C>                     <C>
VISTIDE-Registered Trademark-          CMV Retinitis                 Launched in U.S.        Gilead
(cidofovir injection)
                                                                     Launched in E.U.        Pharmacia &
                                                                                               Upjohn
- ------------------------------------------------------------------------------------------------------------
PREVEON-TM- (adefovir dipivoxil)       HIV-AIDS                      Phase II/III and        Gilead
                                                                     Expanded Access
GS 4104 (Ro64-0796) Oral               Influenza Virus (Treatment)   Phase II/III            Roche
                                       Influenza Virus               Phase II/III            Roche
                                         (Prophylaxis)
Adefovir Dipivoxil                     Hepatitis B Virus             Phase II                Gilead
PMPA Oral Prodrug                      HIV-AIDS                      Phase II                Gilead
PMPA I.V.                              HIV-AIDS                      Phase I/II              Gilead
                                       (maternal/fetal
                                         transmission)
PMPA Topical Gel                       HIV-AIDS (Prophylaxis)        Clinical Candidate      Gilead
VISTIDE-Registered Trademark-          PML-CNS Infection             Phase I/II Pending      Gilead
(cidofovir injection)
Cidofovir Topical Ophthalmic           Viral Keratoconjunctivitis    Phase II                Storz
- ------------------------------------------------------------------------------------------------------------
Protease Inhibitors                    HIV-AIDS                      Research                Gilead
                                       Hepatitis C Virus             Research                Gilead
Adenosine Receptor Regulators          Stroke                        Preclinical/Research    Gilead/NIH
                                                                                               CRADA
Antisense Research                     Cancer                        Research                Gilead/Glaxo
                                                                                               Wellcome
</TABLE>

 
- ------------------------
 
(1) See "Government Regulation" for a description of the phases of clinical
    testing and the regulatory approval process.
 
VISTIDE
 
    In June 1996, Gilead received U.S. Food and Drug Administration ("FDA")
clearance to market its first product, VISTIDE-Registered Trademark- (cidofovir
injection) for the treatment of cytomegalovirus ("CMV") retinitis in patients
with AIDS. The active ingredient in VISTIDE is cidofovir, a mononucleotide
analogue that has demonstrated activity in preclinical studies and clinical
trials against several viruses in the herpesvirus family. In addition to
VISTIDE, cidofovir is under evaluation for other indications. See "Clinical
Development Programs."
 
    Cytomegalovirus is one of the most common opportunistic infections in
patients with AIDS. CMV is a systemic viral infection that may infect several
sites in the body, including the retina, gastrointestinal tract, lungs, liver
and central nervous system. Retinitis is the most frequent manifestation of CMV
infection in patients with AIDS. The incidence of CMV retinitis in AIDS patients
declined by more than 30% from 1996 to 1997 as a result of more effective
therapeutics for AIDS, as well as the use of oral ganciclovir for CMV
prophylaxis. The Company anticipates that this decline will continue.
 
                                       4

<PAGE>
    VISTIDE was cleared for marketing by the FDA based on the results of three
pivotal clinical trials. These trials demonstrated that VISTIDE has a
statistically significant effect in delaying the progression of CMV retinitis
lesions in newly diagnosed patients, and in previously treated patients who had
failed other therapies. In addition, these studies indicate a more convenient
dosing regimen than the other intravenous CMV treatments. VISTIDE is
administered by intravenous infusion once per week for the first two weeks as
induction therapy, and then once every other week as maintenance therapy until
progression of the disease or intolerance to the therapy. Other intravenous
treatments must be administered once or multiple times per day and often require
the surgical implantation of a chronic catheter in the patient's chest for the
daily infusions.
 
    Renal toxicity is the primary dose-limiting side effect of VISTIDE
administration. Prior to each administration, patients must be monitored for
urinary protein and serum creatinine (laboratory markers of renal toxicity). In
addition, patients receive intravenous saline hydration and oral probenecid on
each treatment day, to mitigate the potential for toxicity. VISTIDE is
contraindicated in patients receiving other agents with nephrotoxic potential,
and patients are required to undergo a "wash out" period of seven days after
completing therapy with such agents and before receiving VISTIDE. In certain
animal studies, cidofovir, the active ingredient in VISTIDE, was carcinogenic.
 
    VISTIDE is marketed and sold in the United States by Gilead's sales force of
antiviral specialists. This group currently consists of 26 sales representatives
and three regional directors who call directly on physicians, hospitals,
clinics, pharmacies and other healthcare providers involved in the treatment of
patients with CMV retinitis. VISTIDE is sold by Gilead to wholesalers and
specialty distributors, who in turn sell the product to hospitals, home
healthcare companies, pharmacies and other healthcare providers. See "Marketing
and Sales."
 
    In August 1996, Gilead licensed commercial rights to Pharmacia & Upjohn S.A.
("Pharmacia & Upjohn") to market and sell VISTIDE in all territories outside of
the United States. In April 1997, the European Commission granted marketing
approval for VISTIDE for all the member countries in the European Union under
the centralized procedure of the European Medicines Evaluation Agency ("EMEA").
Subsequently, VISTIDE was approved for marketing in Switzerland, Australia and
Brazil, and applications for approval are pending in several other countries.
Pharmacia & Upjohn has launched the product in most major European countries,
and expects to launch the product in additional countries as pricing and
reimbursement approvals are obtained. Pharmacia & Upjohn is paying Gilead a
royalty on its net sales of VISTIDE, on a trailing, quarterly basis. See
"Collaborative Relationships--Pharmacia & Upjohn."
 
    There are several approved therapies that compete with VISTIDE in the CMV
retinitis market. Ganciclovir, marketed by Roche Laboratories, is the most
widely used treatment for CMV retinitis. Ganciclovir is available in intravenous
and oral formulations, and the oral formulation is approved for both prophylaxis
and maintenance treatment of CMV retinitis. A ganciclovir ocular implant,
marketed by Bausch & Lomb Incorporated, provides local therapy to an affected
eye and is implanted through a surgical procedure. Astra U.S.A. markets
foscarnet, the other approved intravenous therapy for CMV retinitis. There are
also several products in clinical development for the treatment of CMV
retinitis. Although the Company believes that VISTIDE has competitive advantages
over these products, particularly with regard to dosing convenience and
efficacy, there can be no assurance that the Company will be successful in
maintaining or increasing VISTIDE's share of the CMV retinitis treatment market.
See "Competition."
 
CLINICAL DEVELOPMENT PROGRAMS
 
    Gilead is developing small molecule nucleotide analogues that are intended
to treat viral infections by selectively interfering with proteins essential for
viral replication. Numerous disease processes, particularly viral infections,
require precise interactions between cellular or viral proteins and nucleotides
or
 
                                       5

<PAGE>
oligonucleotides. For example, many viruses depend upon certain proteins known
as enzymes to synthesize their own DNA. This dependence of the virus upon
specific interactions between proteins and nucleic acids provides opportunities
for the development of therapeutic products that disrupt these crucial
interactions. Preclinical and clinical studies have demonstrated that small
molecule nucleotide analogues can selectively interrupt these interactions.
 
    The Company believes that small molecule nucleotide analogues offer several
potential advantages as therapeutics. First, these molecules may have a long
duration of action, permitting less frequent and therefore more convenient
dosing. Second, because certain nucleotides can be active in both infected and
uninfected cells, these molecules may provide prophylactic protection of
uninfected cells. Third, when compared to existing antiviral drugs, viruses may
be less likely to develop resistance to these analogues. In addition, these
analogues may be active against viral strains that have developed resistance to
existing antiviral drugs. Finally, the low molecular weight of these analogues,
or prodrug derivatives of them, may permit their development into drugs suitable
for oral administration.
 
    A major portion of the Company's operating expenses to date has been related
to the research and development of products on its own behalf. During the years
ended December 31, 1997 and December 31, 1996 and the nine month period ended
December 31, 1995, the Company's research and development expenses were $59.2
million, $41.9 million and $25.7 million, respectively.
 
PREVEON
 
    PREVEON-TM- (adefovir dipivoxil) is a mononucleotide analogue developed as
an oral prodrug of adefovir (also known as GS 393 or PMEA), the Company's first
HIV clinical candidate. A prodrug is a modified version of a parent compound
designed to enhance delivery characteristics. PREVEON has demonstrated
preclinical and clinical activity against HIV, CMV and hepatitis B virus. See
"Adefovir Dipivoxil for HBV." PREVEON has been generally well tolerated in
clinical trials. The most common adverse events have been dose-related
gastrointestinal effects, including nausea and anorexia. Elevations in liver
transaminases and serum creatinine, and decreases in serum carnitine levels,
have also been reported during therapy with PREVEON. The Company is developing
PREVEON in a series of Phase II/ III clinical trials as a potential oral
treatment for HIV. In clinical trials, PREVEON is administered as a single oral
tablet once per day, along with a single oral tablet of L-carnitine, a
nutritional supplement. L-carnitine is administered to counteract the decrease
of natural serum carnitine which can be caused by PREVEON administration.
 
    A number of products with different mechanisms of action have been approved
for the treatment of HIV. The first generation of approved HIV drugs are reverse
transcriptase inhibitors, including nucleoside and non-nucleoside compounds.
Several protease inhibitors have recently been approved for marketing, and
others are in clinical development. Combination therapy with reverse
transcriptase inhibitors and protease inhibitors is proving to be effective for
many people with AIDS, in some cases lowering the patient's viral load (level of
virus in the blood) to undetectable levels for prolonged periods of time. The
Company believes, however, that there is still substantial room for improvement
in AIDS drug therapy. Many patients are developing resistance or become
intolerant to combination therapy, and require new combinations for therapy to
be effective. Patients would benefit from AIDS drugs that are better tolerated,
more convenient to dose and less prone to develop significant resistance.
 
    PREVEON is a reverse transcriptase inhibitor that is currently being tested
in a series of Phase II/III clinical trials sponsored by Gilead, as well as by
the National Institutes of Health ("NIH") and other government organizations. In
these trials, PREVEON is being evaluated in combination with most approved and
investigational antiretroviral agents in a variety of patient populations at
different stages of disease. Trials are ongoing in the United States, several
European countries and Australia. In one of Gilead's pivotal trials, Study 408,
442 patients with HIV infection received either PREVEON (one tablet per day) or
placebo, in addition to continuing their current antiretroviral therapy. Gilead
anticipates
 
                                       6

<PAGE>
unblinding the data from Study 408 and presenting the data at a scientific forum
in 1998. If the results from Study 408 are positive, Gilead intends to file a
new drug application ("NDA") with the FDA for PREVEON, seeking approval for use
of the product in combination with other antiretroviral agents for the treatment
of HIV and AIDS. The NDA would be supplemented by results from the Phase I/II
program for PREVEON, as well as efficacy and safety data from other Phase II/III
trials currently underway. There can be no assurance as to when or whether
Gilead will file an NDA for approval of PREVEON. Moreover, even if the NDA is
filed, there can be no assurance as to the timing or the ultimate approval of
the NDA by the FDA.
 
    PREVEON is also available in the United States under an expanded access
program for patients with limited treatment options. This program began in
December 1997 and has enrolled approximately 1,000 patients through March 1998.
 
    HIV is the causative agent of AIDS. HIV infects an estimated 30 million
people worldwide. There were an estimated 240,000 people with AIDS in the United
States in 1997. A number of therapeutics are currently marketed or are in
advanced stages of clinical development for the treatment of HIV infection and
AIDS, including 12 products currently marketed in the United States. See
"Competition."
 
    The Company has an exclusive, worldwide license to patent rights and related
technology for adefovir, which is the parent compound of adefovir dipivoxil,
from the Institute of Organic Chemistry and Biochemistry of the Academy of
Sciences of the Czech Republic and the REGA Stichting Research Institute in
Belgium (collectively, "IOCB/REGA"), and would be obligated to pay a royalty to
IOCB/ REGA on any net sales of adefovir dipivoxil. See "Collaborative
Relationships--IOCB/REGA."
 
GS 4104
 
    In September 1996, Gilead researchers announced the discovery of GS 4104
(Ro64-0796 under the Roche identification system), an orally active
neuraminidase inhibitor that inhibits the replication of influenza virus in a
variety of animal models. In these experiments, the parent compound of GS 4104
was well tolerated and demonstrated antiviral activity against multiple strains
of influenza A and B.
 
    Based on these data, Gilead and F. Hoffmann-La Roche ("Roche") entered into
an exclusive, worldwide development and commercialization collaboration covering
Gilead's neuraminidase inhibitors. Gilead and Roche are jointly conducting
research and development of neuraminidase inhibitors for the prevention and
treatment of influenza, with Roche funding the efforts of both parties. Roche
has exclusive commercial rights to GS 4104 and to any other products developed
under the collaboration. Roche is obligated to pay Gilead cash payments upon
achievement of development milestones and royalties on net sales of any products
developed under the collaboration. See "Collaborative Relationships--Hoffmann-La
Roche."
 
    During 1997, Roche completed Phase I studies of GS 4104, and Gilead
completed Phase II placebo-controlled challenge studies of GS 4104 in both
treatment and prevention. In the Phase II studies, volunteers were artificially
infected with influenza virus, before administration of the drug (treatment), or
after administration of the drug (prevention). GS 4104 was administered as an
oral tablet once or twice a day, at several dosage levels. The Company presented
the results of these studies in September 1997, indicating that GS 4104 had a
statistically significant effect in reducing viral load and the duration of
influenza symptoms in the treatment study, and prevented infection in the
prevention study.
 
    Based on the results of the Phase II studies, in December 1997 Gilead and
Roche initiated a series of four placebo-controlled Phase II/III studies of GS
4104, each designed to enroll up to 750 adult patients. Two of these studies are
evaluating treatment in naturally infected patients, with a five-day course of
therapy. The other two studies will evaluate prevention in healthy volunteers,
with a six-week course of drug administration. In addition to these studies,
Roche and Gilead anticipate conducting a series of smaller studies in children
and the elderly, as well as drug interaction studies, during 1998.
 
                                       7

<PAGE>
    Glaxo Wellcome, in collaboration with Biota Holdings Limited, is also
pursuing development of a neuraminidase inhibitor to treat influenza. This
compound, delivered as a dry powder inhaler or nasal spray, is in advanced
clinical trials and represents significant potential competition for GS 4104.
See "Competition."
 
ADEFOVIR DIPIVOXIL FOR HBV
 
    Gilead is also developing adefovir dipivoxil for the potential treatment of
hepatitis B virus ("HBV"), in a lower dosage form than PREVEON for HIV.
Approximately 300 million people worldwide are chronically infected with HBV,
primarily in Asian countries. HBV can lead to cirrhosis and cancer of the liver.
A vaccine is available that can prevent the transmission of HBV; however, it has
no activity in those already infected with the virus. Alpha interferon is
approved for the treatment of HBV, is administered by injection and is not
always successful in controlling the disease.
 
    In 1996, Gilead completed a Phase I/II placebo-controlled trial of adefovir
dipivoxil for the treatment of hepatitis B infection at multiple centers in the
United Kingdom, enrolling 20 patients. Data from this trial indicate that
adefovir dipivoxil was well tolerated and resulted in a statistically
significant decline in HBV DNA levels in treated patients compared to placebo.
Gilead recently completed enrollment in multinational Phase II trials of
adefovir dipivoxil for the treatment of HBV, evaluating the drug as a single
oral tablet once per day at three dose levels. The Company anticipates
presenting the data from these Phase II trials at a scientific forum in 1998,
and initiating a series of Phase III trials in HBV infected patients before the
end of 1998.
 
    Glaxo Wellcome, in collaboration with Biochem Pharma, is pursuing
development of a nucleoside analogue to treat HBV infection. This compound is in
advanced clinical trials and represents significant potential competition for
adefovir dipivoxil for HBV. See "Competition."
 
    The Company has exclusive, worldwide license to patent rights and related
technology for adefovir, which is the parent compound of adefovir dipivoxil,
from IOCB/REGA, and would be obligated to pay a royalty to IOCB/REGA on any net
sales of adefovir dipivoxil. See "Collaborative Relationships--IOCB/ REGA."
 
PMPA AND PMPA PRODRUG
 
    The Company is evaluating PMPA, a nucleotide analogue with structural
similarities to adefovir dipivoxil, as a potential therapeutic for HIV and AIDS.
PMPA has shown significant activity against simian immunodeficiency virus
("SIV") in a variety of preclinical treatment and prevention models. SIV causes
an AIDS-like syndrome in primates. In these experiments, primates treated with
injections of PMPA either before or after exposure to SIV were completely
protected from infection. In another primate study, a topical gel form of PMPA
also provided protection against SIV transmission when applied intravaginally.
 
    Gilead has conducted placebo-controlled Phase I/II studies of PMPA in both
intravenous and oral formulations (PMPA Prodrug). In both studies, PMPA was well
tolerated and had a statistically significant effect in reducing viral load
relative to placebo after short-term dosing. In February 1998, the Company
presented data from a Phase I/II study of PMPA Prodrug, indicating that highest
dose of the drug tested reduced viral load by a median of more than 90% after
one month of dosing. In this study, PMPA Prodrug was administered as a single
oral tablet once per day. Based on these results, the Company intends to
initiate a program of Phase II studies of PMPA Prodrug, in combination with
other anti-retroviral therapies, during 1998.
 
    The Company anticipates that the NIH will initiate clinical studies of a
topical version of PMPA, for the prevention of sexual transmission of HIV,
during 1998. The NIH is also evaluating possible applications of intravenous
PMPA in the prevention of maternal-fetal HIV transmission.
 
                                       8

<PAGE>
    The Company has an exclusive, worldwide license to patent rights and related
technology for PMPA from IOCB/REGA, and would be obligated to pay a royalty to
IOCB/REGA on any net sales of PMPA. See "Collaborative
Relationships--IOCB/REGA."
 
CIDOFOVIR
 
    Cidofovir is a mononucleotide analogue that has demonstrated activity in
preclinical studies and clinical trials against several viruses in the
herpesvirus family. Cidofovir is the active ingredient in the Company's
commercial product VISTIDE (cidofovir injection). See "VISTIDE." Gilead is
currently evaluating cidofovir in different formulations for the potential
treatment of certain infectious diseases caused by herpesviruses. In addition, a
collaborative partner of Gilead, Storz Instrument Company, is conducting
clinical trials of topical ophthalmic cidofovir, an eye drop formulation, for
the potential treatment of adenovirus and herpes simplex virus, which can cause
external infections of the eye.
 
    The side effect profiles of the drugs under development based on cidofovir
have not yet been fully characterized. Renal toxicity is the primary
dose-limiting side effect of VISTIDE administration. In addition, in certain
animal studies, cidofovir was carcinogenic. There can be no assurance that the
Company will be successful in developing or commercializing any therapeutic
products, other than VISTIDE, based on cidofovir.
 
    The Company has developed a topical formulation of cidofovir called
FORVADE-TM- (cidofovir gel). This compound has been evaluated in a variety of
preclinical models and clinical trials for the potential treatment of herpes
simplex virus ("HSV") lesions and genital warts caused by human papillomavirus
("HPV"). FORVADE has demonstrated clinical benefit in Phase I/II studies for
both of these indications. In late 1996, Gilead filed an NDA with the FDA
seeking marketing approval for FORVADE for the treatment of HSV lesions
unresponsive to therapy with acyclovir, in patients with AIDS. The NDA was based
on the results from a single Phase I/II trial in 30 patients, demonstrating a
statistically significant treatment effect in healing these lesions. In May
1997, the FDA determined that Gilead's NDA for FORVADE was not approvable
without additional clinical information. The Company is not actively pursuing
development or approval of FORVADE for any indication at this time, and does not
anticipate doing so in the future without the support of a corporate partner.
 
    In 1994, Gilead entered into a license agreement Storz Instrument Company
("Storz"). Storz is developing an eye drop formulation of cidofovir for the
potential treatment of certain viruses that cause external eye infections,
including adenovirus, which is the leading cause of viral conjunctivitis, or
"pink eye." Storz was a subsidiary of American Cyanamid and then American Home
Products, until its sale to Bausch & Lomb Incorporated in late 1997. The license
to Storz is limited to topical ophthalmic use for external viral eye disease,
and excludes any treatment requiring injection and any treatment for other eye
diseases such as CMV retinitis. Storz commenced clinical testing of topical
ophthalmic cidofovir in December 1995 and is currently completing Phase II
trials. See "Collaborative Relationships--Storz."
 
    Preclinical studies have demonstrated that cidofovir is active against a
variety of viruses that cause disease in people with AIDS, including molluscum
contagiosum, which causes disfiguring skin lesions, Kaposi's sarcoma, an
AIDS-related malignancy, and progressive multifocal leukoencephalopathy ("PML"),
a rapidly progressive, often fatal brain disease. An intravenous formulation of
cidofovir is in early clinical testing for the potential treatment of PML.
 
    The Company has an exclusive, worldwide license to patent rights and related
technology for cidofovir from IOCB/REGA, and is obligated to pay a royalty to
IOCB/REGA on the net sales of VISTIDE, as well as on any other future products
containing cidofovir. See "VISTIDE" "Collaborative Relationships-- IOCB/REGA."
 
                                       9

<PAGE>
RESEARCH
 
    Gilead's research efforts are conducted by a scientific team with the
multi-disciplinary skills that the Company believes are critical for the
discovery and preclinical development of therapeutics based on nucleotides or
other small molecules. The primary therapeutic targets of the Company's research
program are viral diseases, cancer and cardiovascular diseases.
 
NUCLEOTIDE ANALOGUES
 
    The Company has an extensive library of proprietary nucleotide compounds
that it is evaluating for antiviral and antiproliferative activity. Among the
primary targets of this screening activity are HIV, herpesviruses, hepatitis B
virus and poxviruses. In addition, Gilead is evaluating novel nucleotide
prodrugs with the potential for enhanced pharmaceutical properties, including
better bioavailability and longer half-life. Several nucleotide analogues are
also being evaluated for activity against cancer in animal models.
 
PROTEASE INHIBITORS
 
    Through its structure-based drug design program, the Company has synthesized
a number of small molecule compounds with IN VITRO activity against HIV protease
or hepatitis C virus ("HCV") protease. Gilead has evaluated several HIV protease
inhibitors in animal models. The current focus of this program is to enhance the
pharmacological properties and cross-resistance profile of these compounds
before conducting further preclinical development.
 
GS 522 AND DERIVATIVES
 
    Gilead is evaluating derivatives of GS 522, a thrombin inhibitor, in
preclinical testing for potential use as anticoagulants in cardiopulmonary
bypass surgery. Preclinical studies performed by the Company have demonstrated
that GS 522 is an effective anticoagulant during cardiopulmonary bypass
procedures in animals. Continuous infusions of GS 522 during surgery in animals
have demonstrated rapid onset, dose-related anticoagulant activity and rapid
return to normal clotting times after discontinuation of infusion. However,
animal models do not necessarily predict effectiveness in humans.
 
PROTEIN C ACTIVATOR
 
    In order to exploit the potent antithrombotic activity of
naturally-occurring Protein C, the Company developed a modified version of
thrombin which does not stimulate thrombosis, but retains the ability to
activate Protein C and thereby inhibit thrombosis. Gilead has named this novel
recombinant protein Protein C Activator ("PCA"). Gilead has performed animal
studies which demonstrate that PCA causes potent, dose-dependent anticoagulation
without increased bleeding time. These results suggest that administration of
PCA may result in effective inhibition of thrombosis, while not increasing the
risk of intracerebral hemorrhage or stroke. However, animal models do not
necessarily predict effectiveness in humans.
 
ADENOSINE RECEPTOR REGULATORS
 
    Gilead is working with the National Institute of Diabetes, Digestive and
Kidney Diseases at the NIH to study adenosine receptor agonists and antagonists
in the treatment and prevention of neurodegenerative disorders, particularly
stroke. Independent research has implicated adenosine receptors in the
regulation of neurodegeneration, inflammation and allergic disorders. NIH
researchers have synthesized a series of novel small molecule adenosine agonist
and antagonist compounds and have identified several compounds with A3 receptor
agonist and antagonist activity which exhibit protective effects in an animal
model of stroke. These compounds also have potential utility in the treatment of
inflammatory and allergic conditions. In collaboration with the NIH, Gilead is
currently evaluating several compounds with A3
 
                                       10

<PAGE>
receptor antagonist or agonist activity in animal models of stroke, and also
intends to evaluate the anti-inflammatory and antiallergic properties of these
compounds.
 
GENETIC CODE BLOCKERS
 
    The Company is conducting research on oligonucleotide analogues that are
designed to act inside the cell to block or regulate the production of
disease-causing proteins. The Company is focusing on two types of code blocker
compounds: antisense compounds that interfere with the function of RNA and
triple helix compounds that inhibit gene expression by binding to the DNA double
helix. The Company's therapeutic targets in its code blocker program include
cancer (particularly the cell cycle genes implicated in cancer) and viral
infections. The Company believes that its code blocker technology may also have
utility as a drug discovery tool in the field of genomics. The Company's ability
to selectively inhibit the activity of specific genes within cells provides a
rapid method of determining the function of a gene that has a known sequence.
 
    The Company's collaborative relationship with Glaxo Wellcome covers the
research and development of code blocker compounds for all potential diagnostic
and therapeutic applications, and has been the exclusive funding source for the
code blocker program since 1990. In March 1996, Glaxo Wellcome and Gilead
extended the existing collaboration for a period of five years. Glaxo Wellcome
has the right to terminate the collaboration at any time, without prior notice
beginning in June 1998. There can be no assurance that additional sources of
funding will be available, or that Gilead would continue the code blocker
program, if the collaboration is terminated by Glaxo Wellcome. See
"Collaborative Relationships--Glaxo Wellcome."
 
COLLABORATIVE RELATIONSHIPS
 
    As part of its business strategy, Gilead establishes collaborations with
pharmaceutical companies to assist in the clinical development and/or
commercialization of certain of its products and product candidates, and to
provide support for research programs. The Company is also evaluating
opportunities for in-licensing products and technologies complementary to its
business, although no negotiations regarding any such opportunities are
currently in progress. The Company's existing collaborative relationships are as
follows:
 
PHARMACIA & UPJOHN
 
    In August 1996, Gilead and Pharmacia & Upjohn entered into an agreement
providing Pharmacia & Upjohn with exclusive rights to market and sell VISTIDE in
all countries outside of the United States. Under the terms of the agreement,
Pharmacia & Upjohn paid Gilead an initial license fee of $10.0 million. In June
1997, after VISTIDE was approved for marketing in the European Union, Gilead
received an additional cash milestone payment of $10.0 million. In addition,
Pharmacia & Upjohn purchased 1,133,786 newly issued shares of Series B Preferred
Stock at $35.28 per share, equal to 145% of the average closing price of
Gilead's Common Stock over the 30 trading days prior to public announcement of
the European approval, for a total purchase price of $40.0 million. The Series B
Preferred Stock is not publicly registered, votes together with Gilead's Common
Stock and is convertible at any time into an equal number of shares of Common
Stock at Pharmacia & Upjohn's option. Pharmacia & Upjohn is restricted in its
ability to sell the Series B Preferred Stock (or underlying Common Stock), or
purchase any additional stock of the Company, for a period of five years from
the original purchase, until June 2002. Gilead is entitled to royalty payments
on a quarterly basis on the net sales of VISTIDE by Pharmacia & Upjohn. Gilead
is recognizing royalties on a delayed basis, one quarter after the Pharmacia &
Upjohn sales that generated the royalties. Pharmacia & Upjohn has the right to
terminate the agreement at any time beginning in August 1998, upon six months
notice. See "VISTIDE."
 
                                       11

<PAGE>
HOFFMANN-LA ROCHE
 
    In September 1996, Gilead and Roche entered into a collaboration agreement
to develop and commercialize therapies to treat and prevent viral influenza.
Under the agreement, Roche received exclusive worldwide rights to Gilead's
proprietary influenza neuraminidase inhibitors, including GS 4104. Gilead and
Roche are jointly conducting the clinical development of GS 4104. In October
1996, Roche made an initial license fee payment to Gilead of $10.3 million and
Gilead is entitled to additional cash milestone payments of up to $40.0 million
upon achievement of development milestones, $6.0 million of which were
recognized in 1997. Roche is funding its own and Gilead's research and
development costs and will pay Gilead royalties on the net sales on GS 4104 and
any other products developed under the collaboration. Roche has the right to
terminate the agreement at any time upon 12 months notice. See "Clinical
Development Programs--GS 4104."
 
    In September 1996, Gilead and Roche entered into an agreement to co-promote
Roche's Roferon-Registered Trademark--A (Interferon alfa-2a, recombinant) for
the treatment of chronic hepatitis C infection in the United States. The
agreement continues until December 31, 1999, unless earlier terminated by either
party as of December 31, 1998. Under the agreement, Gilead's antiviral specialty
sales force is obligated to make a fixed number of calls to promote Roferon-A in
each year. Roche paid Gilead a $150,000 one-time fee in 1996. Roche is obligated
to pay Gilead a royalty based on the net product sales in 1997 and thereafter
during the term of the agreement. See "Marketing and Sales."
 
GLAXO WELLCOME
 
    In July 1990, Gilead entered into a research and development agreement with
Glaxo Wellcome. Concurrent with the signing of the agreement Glaxo Wellcome made
an $8.0 million equity investment in Gilead, and currently holds 889,911 shares
of the Company's outstanding Common Stock. The collaboration with Glaxo Wellcome
has been modified and extended on several occasions since 1990. In March 1996,
Gilead and Glaxo Wellcome entered into a new collaborative research agreement,
extending for five years the existing collaboration between the parties. Under
the terms of the 1996 agreement, Glaxo Wellcome will fund Gilead's ongoing
research in the code blocker field for five years, subject to its termination
rights. Each party has a worldwide license to the other party's patent rights to
research, develop, manufacture and sell products based on code blocker
technology for all applications. Glaxo Wellcome will have the primary right to
develop any products identified during the collaboration. Gilead is entitled to
payments for achievement of development milestones, as well as royalties on any
product sales. The agreement was amended in December 1997 to provide Glaxo
Wellcome with the right to terminate the collaborative research and funding at
any time, without prior notice beginning in June 1998. In the event of
termination, Gilead could develop code blocker technology independently or with
a third party, subject to Glaxo Wellcome's ownership rights to joint technology.
There can be no assurance that additional sources of funding will be available,
or that Gilead will continue the code blocker program, if the collaboration is
terminated by Glaxo Wellcome.
 
STORZ
 
    In August 1994, the Company entered into a license and supply agreement with
American Cyanamid Company, pursuant to which the Storz Instrument Company
("Storz") will develop and have the right to market an eye drop formulation of
cidofovir for the potential treatment of topical ophthalmic viruses. American
Cyanamid was later acquired by American Home Products, who sold Storz to Bausch
& Lomb Incorporated in late 1997. The field of the exclusive, worldwide license
to Storz is limited to topical ophthalmic use for external viral eye disease,
and specifically excludes any treatment requiring injection, and any treatment
for other eye diseases such as CMV retinitis. In December 1995, Storz commenced
human clinical trials of topical ophthalmic cidofovir and is currently
completing Phase II trials. Gilead is entitled to receive a fee each year until
Storz files an NDA under the agreement. In addition, Storz is obligated to make
a series of payments based on the achievement of development milestones in
different
 
                                       12

<PAGE>
countries during the term of the agreement. Gilead is responsible for supplying
bulk cidofovir to Storz, and Storz is obligated to make royalty payments to
Gilead based on net sales of any products developed under the agreement. Storz
may terminate this agreement at any time on three months notice.
 
IOCB/REGA
 
    In 1991 and 1992, the Company entered into agreements with IOCB/REGA
regarding a class of nucleotide compounds, including cidofovir, adefovir (the
parent compound of adefovir dipivoxil) and PMPA. Under these agreements and
later amendments, Gilead received from IOCB/REGA an exclusive license to
manufacture, use and sell the compounds covered by issued United States patents
and patent applications plus foreign counterparts throughout the world, subject
to an obligation to pay royalties on product sales to IOCB/REGA. The Company is
currently paying IOCB/REGA quarterly royalties on sales of VISTIDE, and will be
obligated to pay additional royalties upon any future sales of adefovir
dipivoxil or PMPA. IOCB/REGA may terminate the licenses under these agreements
with respect to any particular product, in specified countries, if the Company
does not make any sales of such product in such countries within 12 months after
regulatory approval. Under one of these agreements, the Company has an option to
receive an exclusive license to any new developments by IOCB/REGA during the
term of this agreement. Such agreement may be terminated by either party on six
months notice.
 
ACADEMIC AND CONSULTING RELATIONSHIPS
 
    To supplement its research and development efforts, the Company collaborates
with and has licensed certain patents and patent applications from a number of
universities and medical research institutions.
 
MANUFACTURING
 
    The Company generally relies on third parties for the manufacture of bulk
drug substance and drug product for clinical and commercial purposes, including
cidofovir (VISTIDE), adefovir dipivoxil (PREVEON) and PMPA. In the case of GS
4104, Gilead's influenza neuraminidase inhibitor in clinical development, Roche
is responsible for the manufacture of clinical and any commercial supplies of
drug substance and drug product. Pursuant to these relationships, the Company
depends on such third parties to perform their manufacturing obligations
effectively and on a timely basis. There can be no assurance that such parties
will perform and any failures by third parties may delay clinical trials or the
submission of products for regulatory approval, impair the Company's ability to
deliver commercial products on a timely basis, or otherwise impair the Company's
competitive position, which could have a material adverse effect on the Company.
 
    The Company has qualified a sole source supplier with the FDA for the bulk
drug substance used in VISTIDE and another sole source supplier for the final
drug product. Gilead has established a second source of bulk drug substance
supply for VISTIDE, and is in the process of qualifying this supplier with the
FDA. The use of any alternative suppliers will require FDA approval, which will
be time consuming. The Company anticipates including two suppliers of bulk drug
substance and one supplier of drug product for PREVEON in the NDA it intends to
file in 1998. PMPA drug substance is manufactured at Gilead and at a contract
manufacturer, and PMPA drug product for clinical trials is manufactured at two
contract manufacturing sites. In the event that supplies from any of Gilead's
suppliers were interrupted for any reason, the Company's ability to complete its
clinical trials or ship its products could be impaired, which would have a
material adverse effect on the Company.
 
    Gilead has developed in-house capabilities to synthesize and purify
nucleotides and oligonucleotides, and believes that it has a base of proprietary
technologies, including patent applications and trade secrets, for the
manufacture of these compounds. Gilead has established a pilot-scale, bulk
chemical facility, which operates in compliance with the FDA's current Good
Manufacturing Practices ("cGMP"), to meet its current preclinical and limited
early-stage clinical requirements. The Company believes that it has or will
 
                                       13

<PAGE>
be able to develop, acquire or contract for sufficient supply capacity to meet
its additional clinical and commercial manufacturing requirements, although
there can be no assurance that it will be able to do so. Gilead currently has no
commercial-scale cGMP manufacturing facilities for either the production of bulk
drug substance or final drug product, and no current plans to establish such
capacity.
 
    The manufacture of sufficient quantities of new drugs can be an expensive,
time-consuming and complex process and may require the use of materials with
limited availability or require dependence on sole source suppliers. If the
Company is unable to develop manufacturing capabilities internally or contract
for large scale manufacturing with third parties on acceptable terms, the
Company's ability to conduct preclinical studies and clinical trials, and/or
meet demand for commercial products, will be adversely affected. This could
prevent or delay commercial shipment, submission of products for regulatory
approval and initiation of new development programs, which would have a material
adverse effect on the Company.
 
    The production of the Company's compounds is based in part on technology
that the Company believes to be proprietary. Gilead has licensed this technology
to contract manufacturers to enable them to manufacture compounds for the
Company. There can be no assurance that such manufacturers will abide by any use
limitations or confidentiality restrictions in licenses with the Company. In
addition, any such manufacturer may develop process technology related to its
work for Gilead, which could increase the Company's reliance on such
manufacturer or require the Company to obtain a license from such manufacturer
in order to have its products manufactured elsewhere. There can be no assurance
that such license, if required, would be available on terms acceptable to the
Company, if at all.
 
    For certain of its potential products, the Company will need to develop
further its production technologies for use on a larger scale in order to
conduct clinical trials and produce such products for commercial sale at an
acceptable cost. There can be no assurance that the Company or its partners will
be able to implement any of these developments successfully.
 
MARKETING AND SALES
 
    In connection with the launch of VISTIDE in 1996, Gilead established a sales
force of antiviral specialists in the United States. This group currently
consists of 26 sales representatives and three regional directors who call
directly on physicians, hospitals, clinics, pharmacies and other healthcare
providers involved in the treatment of AIDS patients with CMV retinitis. VISTIDE
is sold by Gilead to wholesalers and specialty distributors, who in turn sell
the product to hospitals, home healthcare companies, pharmacies and other
healthcare providers. Gilead's sales force also promotes Roferon-Registered
Trademark--A (Interferon alfa-2a, recombinant), Roche's product for the
treatment of hepatitis C in the United States, pursuant to a co-promotion
agreement with Roche entered into in September 1996. See "Collaborative
Relationships-- Hoffmann-La Roche." Gilead's sales force is supplemented by a
marketing and sales staff of approximately 15 people based at the Company's
headquarters in Foster City, California.
 
    The Company anticipates that it will expand its existing sales force in
order to promote PREVEON in the United States, if that product receives
marketing clearance from the FDA. A larger sales force and additional marketing
resources will be required to reach the broader market of healthcare
professionals treating patients infected with HIV. If any of the Company's other
products in development for specialty markets receive marketing clearance in the
United States, or if the Company obtains marketing rights to such a product from
a third party, Gilead's current intention would be to market and sell such a
product directly, supplementing its existing marketing and sales staff as
appropriate. Gilead has not established a marketing and sales capacity in Europe
or any other country outside of the United States. Pharmacia & Upjohn has
exclusive commercial rights to VISTIDE outside the United States, and Roche has
exclusive commercial rights to GS 4104 on a worldwide basis. Gilead is
evaluating the establishment of a direct European marketing and sales capacity
in connection with the potential launch of PREVEON in Europe for the treatment
of HIV and AIDS, if that product receives marketing approval. The Company does
not currently intend to directly market and sell any product outside of the
United States and Europe.
 
                                       14

<PAGE>
    The revenues received by Gilead for its products subject to commercial
collaborations, including VISTIDE outside of the United States, and GS 4104 on a
worldwide basis, are dependent to a large degree on the efforts of third
parties. There can be no assurance that such efforts will be successful, that
the interests of the Company and its partners will not be in conflict or that
any of the Company's partners will not terminate their relationship with the
Company. See "Collaborative Relationships."
 
PATENTS AND PROPRIETARY RIGHTS
 
    Gilead has a proprietary portfolio of patent rights and exclusive licenses
to patents and patent applications related to its products and technologies. The
Company has filed patent applications directed to the compositions of matter,
methods of preparation and uses of novel compounds on the commercial market,
under research or in development. Patent applications have been filed which
encompass compounds that are relevant to many of the targets the Company is
currently researching, as well as other targets that may be of interest to
Gilead in the future. Gilead intends to file additional patent applications,
when appropriate, relative to improvements in its technologies and to specific
products that it develops.
 
    Patents covering cidofovir (the active ingredient in VISTIDE) and adefovir
dipivoxil, including composition of matter claims, have been issued or allowed
in the United States, Western Europe and other jurisdictions. The Company has
exclusive licenses from third parties covering these patents and other patent
applications. See "Collaborative Relationships--IOCB/REGA." The Company does not
have patent filings covering adefovir dipivoxil in China or in other certain
other Asian countries, although it does have an application pending in Japan.
Asia is a major market for hepatitis B therapies, one of the potential
indications for adefovir dipivoxil. In addition, patents on certain of the
Company's compounds may issue many years before marketing approval is obtained,
limiting the ultimate commercial value of the product. However, patent term
extensions for cidofovir have been applied for or granted in the United States
and a number of European countries, compensating in part for delays in obtaining
marketing approval.
 
    The Company is the holder of, or is a licensee with respect to, patents and
patent applications in the United States and abroad relating to certain basic
aspects of code blocker technology, and is the holder of patent applications
relating to neuraminidase inhibitors and their use in the treatment and
prevention of influenza. The Company is aware that others have patents or
pending applications that relate to its own in these fields. The Company cannot
predict whether its patent or license rights or those of third parties will
result in a significant position in these fields, whether its patents or those
of third parties will be issued, whether its patents or those of third parties
will provide significant proprietary protection, or whether they will be
dominated, circumvented or invalidated.
 
    The commercial success of the Company will also depend in part on not
infringing patents or proprietary rights of others and not breaching the
licenses granted to the Company. There can be no assurance that the Company will
be able to obtain a license to any third-party technology that it may require to
conduct its business or that, if obtainable, such technology can be licensed at
a reasonable cost. Failure by the Company to obtain a license to any technology
that it may require to commercialize its technologies or products may have a
material adverse effect on the Company.
 
    The patent positions of pharmaceutical, biopharmaceutical and biotechnology
firms, including Gilead, are generally uncertain and involve complex legal and
factual questions. Consequently, even though Gilead is currently prosecuting its
patent applications with the United States and foreign patent offices, the
Company does not know whether any of its pending applications will result in the
issuance of any patents or, if any patents are issued, whether they will provide
significant proprietary protection. Since patent applications in the United
States are maintained in secrecy until patents are issued, and since publication
of discoveries in the scientific or patent literature tend to lag behind actual
discoveries by several months, Gilead cannot be certain that it has rights as
the first inventor of technologies covered by pending patent applications or
that it was the first to file patent applications for such inventions.
 
                                       15

<PAGE>
    The Company also relies upon unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, collaborators,
employees, consultants and vendors. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets will not otherwise become
known or be independently discovered by competitors.
 
    Gilead's practice is to require its corporate partners, collaborators,
employees, consultants and vendors to execute a confidentiality agreement upon
the commencement of a relationship with the Company. The agreements provide that
all confidential information developed or made known to an individual during the
course of the relationship shall be kept confidential and not disclosed to third
parties except in specified circumstances. In the case of employees, the
agreements provide that all inventions conceived by the individual while
employed by the Company shall be the exclusive property of the Company. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets in the event of unauthorized use or
disclosure of such information.
 
COMPETITION
 
    The Company's products and development programs target a number of diseases
and conditions, including viral infections, cardiovascular disease and cancer.
Even if the Company is successful in developing products to treat any of these
diseases or conditions, there can be no assurance that any product that receives
marketing clearance will achieve significant commercial acceptance. There are
many commercially available products for these diseases, and a large number of
companies and institutions are conducting well-funded research and development
activities directed at developing additional treatments for these diseases.
 
    Ganciclovir, marketed in intravenous and oral formulations by Roche
Laboratories and as an ocular implant by Bausch & Lomb Incorporated, and
foscarnet, marketed by Astra U.S.A., are commercially available for the
treatment of CMV retinitis. These products are directly competitive with
VISTIDE. Several other potential CMV retinitis therapeutics are being developed
by other companies. A number of therapeutics are currently marketed or are in
advanced stages of clinical development for the treatment of HIV infection and
AIDS, including 12 products currently marketed in the United States. These
products represent significant potential competition for PREVEON and PMPA. Among
the companies with significant commercial presence in the AIDS market are Glaxo
Wellcome, Bristol-Myers Squibb, Hoffmann-La Roche, Agouron Pharmaceuticals and
Merck & Co.
 
    Glaxo Wellcome, in collaboration with Biota Holdings Limited, is pursuing
development of a neuraminidase inhibitor to treat influenza. This compound is in
late-stage clinical trials and represents significant potential competition for
GS 4104. In addition, Glaxo Wellcome, in collaboration with Biochem Pharma, is
pursuing development of a nucleoside analogue to treat HBV infection. This
compound is also in advanced clinical trials and represents significant
potential competition for adefovir dipivoxil for HBV.
 
    The Company believes that its products and product candidates have potential
competitive advantages over many of these products, particularly with regard to
dosing convenience and the potential for resistance development. However, there
can be no assurance that any of the Company's products or products in
development will compete successfully with other available products.
 
    A number of companies are pursuing the development of technologies
competitive with the Company's research programs. These competing companies
include specialized pharmaceutical firms and large pharmaceutical companies
acting either independently or together with biopharmaceutical companies.
Furthermore, academic institutions, government agencies and other public and
private organizations conducting research may seek patent protection and may
establish collaborative arrangements for competitive products and programs.
 
                                       16

<PAGE>
    Gilead anticipates that it will face increased competition in the future as
new products enter the market and advanced technologies become available. There
can be no assurance that existing products or new products developed by the
Company's competitors will not be more effective, or more effectively marketed
and sold, than any that may be developed by the Company. Competitive products
may render Gilead's technology and products obsolete or noncompetitive prior to
the Company's recovering research, development or commercialization expenses
incurred with respect to any such products.
 
    Many of the Company's existing or potential competitors, particularly large
pharmaceutical companies, have substantially greater financial, technical and
human resources than the Company. In addition, many of these competitors have
significantly greater experience than the Company in undertaking research,
preclinical studies and clinical trials of new pharmaceutical products,
obtaining FDA and other regulatory approvals, and manufacturing, marketing and
selling such products. Accordingly, the Company's competitors may succeed in
commercializing the products more rapidly or more effectively than the Company,
which would have a material adverse effect on the Company.
 
    The Company's competition will be determined in part by the potential
indications for which the Company's compounds are developed and ultimately
approved by regulatory authorities. For certain of the Company's potential
products, an important competitive factor may be the timing of market
introduction of its products or competitive products. Accordingly, the relative
speed with which Gilead can develop products, complete the clinical trials and
approval processes, and supply commercial quantities of the products to the
market are expected to be important competitive factors. The Company expects
that competition among products approved for sale will be based, among other
things, on product efficacy, safety, dosing convenience, availability, price and
patent position.
 
    The Company's competitive position also depends upon its ability to attract
and retain qualified personnel, obtain patent protection or otherwise develop
proprietary products or processes, and secure sufficient capital resources for
the often substantial period between technological conception and commercial
sales.
 
GOVERNMENT REGULATION
 
    The production and marketing of the Company's products and its research and
development activities are subject to regulation for safety, efficacy and
quality by numerous government authorities in the United States and other
countries. In the United States, drugs are subject to rigorous FDA regulation.
The Federal Food, Drug and Cosmetic Act, as amended ("FFDCA") and the
regulations promulgated thereunder, and other federal and state statutes and
regulations, govern, among other things the testing, manufacture, safety,
efficacy, labeling, storage, record keeping, approval, advertising and promotion
of the Company's products. Product development and approval within this
regulatory framework, and under equivalent regulations in other countries, takes
a number of years and involves the expenditure of substantial resources.
 
    The steps required before a pharmaceutical agent may be marketed in the
United States include (i) preclinical laboratory tests, IN VIVO preclinical
studies and formulation studies, (ii) the submission to the FDA of an
investigational new drug application ("IND"), which must become effective before
clinical trials commence, (iii) adequate and well-controlled clinical trials to
establish the safety and efficacy of the drug, (iv) the submission of a new drug
application ("NDA") to the FDA and (v) the FDA approval of the NDA, prior to any
commercial sale or shipment of the drug. In addition to obtaining FDA approval
for each product, each drug manufacturing establishment must be registered with,
and approved by, the FDA. Domestic manufacturing establishments, including third
party contract manufacturers producing a drug sponsor's products, are subject to
periodic inspections by the FDA and must comply with cGMP. To supply products
for use in the United States, foreign manufacturing establishments must comply
with cGMP and are subject to periodic inspection by the FDA or by regulatory
authorities in certain of such countries
 
                                       17

<PAGE>
under reciprocal agreements with the FDA. Drug product and drug substance
manufacturing establishments located in California also must be licensed by the
State of California in compliance with local regulatory requirements.
 
    The FDA has implemented accelerated approval procedures for pharmaceutical
products that treat serious or life-threatening diseases and conditions, if
those products have the potential to address unmet medical needs. Under the Food
and Drug Modernization Act of 1997, effective in February 1998, such products
may be designated as "fast track" products, and may be approved on the basis of
surrogate as well as clinical endpoints. Drug sponsors are generally required to
conduct post-marketing clinical trials of drugs that have been approved under
the FDA's accelerated approval procedures, in order to further characterize the
drug's safety and efficacy profile. The Company believes that PREVEON and
certain of its other products in development may qualify as fast track products
and be eligible for accelerated approval. The Company cannot predict the
ultimate impact, however, of the FDA's accelerated approval procedures on the
timing or likelihood of approval of any of its potential products or those of
any competitor.
 
    Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the potential safety and
efficacy of the product. Compounds must be formulated according to cGMP and
preclinical safety tests must be conducted by laboratories that comply with FDA
regulations regarding current Good Laboratory Practices ("GLP"). The results of
the preclinical tests are submitted to the FDA as part of an IND and are
reviewed by the FDA prior to the commencement of clinical trials. Additional
pharmacology and toxicology studies are generally conducted concurrently with
clinical trials.
 
    Clinical trials involve the administration of the investigational new drug
to healthy volunteers or to patients, under the supervision of qualified
principal investigators. Clinical trials are conducted in accordance with Good
Clinical Practices under protocols that detail the objectives of the study, the
parameters to be used to monitor safety and the efficacy criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.
Further, each clinical trial must be conducted under the auspices of an
independent Institutional Review Board ("IRB") at the institution at which the
study will be conducted. The IRB will consider, among other things, ethical
factors, the safety of human subjects and the possible liability of the
institution.
 
    Clinical trials are typically conducted in three sequential phases, but the
phases often overlap. In Phase I, the initial introduction of the drug into
healthy human subjects, the drug is tested for safety (adverse effects), dosage
tolerance, metabolism, distribution, excretion and pharmacodynamics (clinical
pharmacokinetics and pharmacology). Phase II involves studies in a limited
patient population to (i) determine the efficacy of the drug for specific,
targeted indications, (ii) determine dosage tolerance and optimal dosage and
(iii) identify possible adverse effects and safety risks. When a compound
appears to be effective and to have an acceptable safety profile in Phase II
clinical trials, Phase III clinical trials are undertaken to further evaluate
and confirm clinical efficacy and to further test for safety within an expanded
patient population at geographically dispersed clinical study sites. There can
be no assurance that Phase I, Phase II or Phase III clinical trials will be
completed successfully within any specified time period, if at all, with respect
to any of the Company's products subject to such testing. Furthermore, the
Company or the FDA may delay or suspend clinical trials at any time if it is
felt that the subjects or patients are being exposed to an unacceptable health
risk.
 
    The results of the preclinical studies and clinical trials are submitted to
the FDA in the form of an NDA for approval of the marketing and commercial
shipment of the drug. The testing and approval process is likely to require
substantial time and effort and there can be no assurance that any approval will
be granted on a timely basis, if at all. The FDA may deny an NDA if applicable
regulatory criteria are not satisfied, require additional testing or
information, require significant improvements to manufacturing facilities or
require extensive post-marketing testing and surveillance to monitor the safety
or efficacy of
 
                                       18

<PAGE>
the Company's products if they do not view the NDA as containing adequate
evidence of the quality, safety and efficacy of the drug. Notwithstanding the
submission of such data, the FDA may ultimately decide that the application does
not satisfy its regulatory criteria for approval. Moreover, if regulatory
approval of a drug is granted, such approval may entail limitations on the
indicated uses for which it may be marketed. Finally, product approvals may be
withdrawn if compliance with regulatory standards is not maintained or if
problems occur following initial marketing.
 
    Among the conditions for NDA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to cGMP, which must be followed at all times. In complying with standards set
forth in these regulations, manufacturers (including a drug sponsor's third-
party contract manufacturers) must continue to expend time, money and effort in
the area of production and quality control to ensure full technical compliance.
 
    In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other federal, state or local regulations. The Company's
research and development involves the controlled use of hazardous materials,
chemicals, viruses and various radioactive compounds. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for significant damages or fines.
 
    In the European Community, human pharmaceutical products are also subject to
extensive regulation. The European Community Pharmaceutical Directives govern,
among other things, the testing, manufacture, safety, efficacy, labeling,
storage, record keeping, advertising and promotion of human pharmaceutical
products. Effective in January 1995, the European Community enacted regulations
providing for a centralized licensing procedure, which is mandatory for certain
kinds of products, as well as a decentralized (country by country) procedure. A
license granted under the centralized procedure authorizes marketing of the
product in all of the member states of the European Community. Under the
decentralized procedure, a license granted in one member state can be extended
to additional member states pursuant to a simplified application process. In the
centralized procedure, the EMEA coordinates a scientific review by one or more
rapporteurs chosen from among the membership of the Committee for Proprietary
Medical Products ("CPMP"), which represent the medicine authorities of the
member states. The final approval is granted by a decision of the Commission or
Council of the European Community, based on the opinion of the CPMP.
 
PRICING AND REIMBURSEMENT
 
    The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of government and
third-party payors to contain or reduce the cost of health care through various
means. For example, in certain foreign markets pricing or profitability of
prescription pharmaceuticals is subject to government control. In particular,
individual pricing negotiations are often required in many countries of the
European Community, even if approval to market the drug under the EMEA's
centralized procedure is obtained. In the United States, there have been, and
the Company expects that there will continue to be, a number of federal and
state proposals to implement similar government control. In addition, an
increasing emphasis on managed care in the United States has and will continue
to increase the pressure on pharmaceutical pricing. While the Company cannot
predict whether any such legislative or regulatory proposals will be adopted or
the effect such proposals or managed care efforts may have on its business, the
announcement of such proposals or efforts could have a material adverse effect
on the trading price of the Company's Common Stock, and the adoption of such
proposals or efforts could have a material adverse effect on the Company.
Further, to the extent that such proposals or efforts have a material adverse
effect on other pharmaceutical companies that are prospective corporate partners
for the Company, the Company's ability to establish a strategic alliance may be
adversely affected.
 
                                       19

<PAGE>
In addition, in both the United States and elsewhere, sales of prescription
pharmaceuticals are dependent in part on the availability of reimbursement to
the consumer from third-party payors, such as government and private insurance
plans that mandate rebates or predetermined discounts from list prices. For
example, a significant proportion of VISTIDE sales is subject to reimbursement
by government agencies, resulting in significant discounts from list price and
rebate obligations. The Company expects that PREVEON and several of its other
products in development, particularly for AIDS indications, will have a similar
reimbursement profile. In addition, third-party payors are increasingly
challenging the prices charged for medical products and services. If the Company
succeeds in bringing one or more additional products to the market, there can be
no assurance that these products will be considered cost effective and that
reimbursement will be available or will be sufficient to allow the Company to
sell its products on a competitive basis.
 
HUMAN RESOURCES
 
    As of December 31, 1997, Gilead employed 289 people full-time, of whom 75
hold Ph.D. and/or M.D. degrees and 50 hold other advanced degrees. Approximately
180 employees are engaged in research and development activities and 109 are
employed in finance, sales and marketing, corporate development, legal and
general administrative positions. Gilead believes that it maintains good
relations with its employees.
 
SCIENTIFIC ADVISORY BOARD
 
    The Company's Scientific Advisory Board is composed of individuals with
expertise in fields related to the Company's programs. This Board holds formal
meetings with scientists from the Company at least once a year. In some cases,
individual members of this Board consult and meet informally with the Company on
a more frequent basis. Each of the members of this Board has a consulting
agreement with the Company.
 
    The members of Gilead's Scientific Advisory Board are as follows:
 
    DANIEL L. AZARNOFF, M.D., has been a member of Gilead's Scientific Advisory
Board since January 1990. He headed G.D. Searle & Co.'s research and development
from 1979 through 1985, and previously was Professor of Medicine and
Pharmacology at the University of Kansas. Dr. Azarnoff is a member of the
Institute of Medicine of the National Academy of Sciences.
 
    JACQUELINE K. BARTON, PH.D., has been a member of Gilead's Scientific
Advisory Board since January 1989. She is a Professor of Chemistry at the
California Institute of Technology ("Cal Tech"), a member of the American
Academy of Arts and Sciences and a recipient of a MacArthur Foundation
Fellowship.
 
    PETER B. DERVAN, PH.D., has been a member of Gilead's Scientific Advisory
Board since September 1987. He is Bren Professor of Chemistry at Cal Tech and a
member of the National Academy of Sciences and the American Academy of Arts and
Sciences.
 
    MICHAEL J. GAIT, PH.D., has been a member of Gilead's Scientific Advisory
Board since July 1989. He is a Senior Staff Scientist with the Medical Research
Council in Cambridge, England.
 
    RALPH F. HIRSCHMANN, PH.D., has been a member of Gilead's Scientific
Advisory Board since October 1989. He is a Research Professor of Chemistry at
the University of Pennsylvania. Previously, Dr. Hirschmann was employed by Merck
& Co., most recently as Senior Vice President of Basic Research and Chemistry.
Dr. Hirschmann is a member of the American Academy of Arts and Sciences.
 
    LAWRENCE L.-K. LEUNG, M.D., has been a member of Gilead's Scientific
Advisory Board since September 1994. He is Chief of the Division of Hematology
at the Stanford University Medical School. Dr. Leung was previously Director of
Cardiovascular Biology and Medicine at Gilead.
 
                                       20

<PAGE>
                                  RISK FACTORS
 
    IN THIS SECTION, THE COMPANY SUMMARIZES CERTAIN RISKS THAT SHOULD BE
CONSIDERED BY STOCKHOLDERS AND PROSPECTIVE INVESTORS IN THE COMPANY. THESE RISKS
ARE DISCUSSED IN DETAIL BELOW, AND ARE DISCUSSED IN CONTEXT IN OTHER SECTIONS OF
THIS REPORT.
 
RAPIDLY CHANGING ENVIRONMENT FOR AIDS THERAPEUTICS
 
    Several of the Company's products and products in development address AIDS
or AIDS-related conditions, including VISTIDE for CMV retinitis, PREVEON for HIV
and AIDS and PMPA for HIV and AIDS. The medical, regulatory and commercial
environment for AIDS therapies is changing at a rapid pace, often in
unpredictable ways. For example, medical opinion on appropriate treatment
regimens for people with AIDS is evolving and is often in conflict. This
evolution can have a dramatic impact on the regulatory requirements for the
approval of AIDS therapies as well as the commercial prospects of individual
therapies. In addition, improvements in AIDS therapy reduce the potential
commercial market for therapies to treat AIDS-related conditions such as CMV
retinitis, and make clinical trials for new AIDS therapies more difficult to
design, enroll and complete. As a participant in the development and marketing
of AIDS therapies, Gilead is subject to dramatic changes in the regulatory and
commercial environment in which it operates, which could have a material adverse
impact on the Company. See "VISTIDE" and "Clinical Development Programs."
 
NO ASSURANCE OF REGULATORY APPROVAL; GOVERNMENT REGULATION
 
    The Company's preclinical studies and clinical trials, as well as the
manufacturing and marketing of its potential products, are subject to extensive
regulation by numerous federal, state and local government authorities in the
United States. Similar regulatory requirements exist in Europe and in other
countries where the Company intends to test and market its potential products.
The Company anticipates filing for marketing approval of PREVEON and several
additional products over the next several years. There can be no assurance that
PREVEON or any of the Company's other products in development will receive
marketing approval in any country on a timely basis, or at all.
 
    The regulatory process, which includes preclinical studies and clinical
trials of each compound to establish its safety and efficacy, takes many years
and requires the expenditure of substantial resources. Moreover, if regulatory
approval of a drug is granted, such approval may entail limitations on the
indicated uses for which it may be marketed. Failure to comply with applicable
regulatory requirements can, among other things, result in fines, suspension of
regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecutions. Further, FDA policy may change and
additional government regulations may be established that could prevent or delay
regulatory approval of the Company's potential products. In addition, a marketed
drug and its manufacturer are subject to continual review, and later discovery
of previously unknown problems with a product or manufacturer may result in
restrictions on such product or manufacturer, including withdrawal of the
product from the market. See "Government Regulation."
 
UNCERTAINTIES RELATED TO CLINICAL TRIALS
 
    Before obtaining regulatory approvals for the commercial sale of any of its
products under development, the Company must demonstrate through preclinical
studies and clinical trials that the product is safe and efficacious for use in
each target indication. The Company anticipates announcing clinical data from
Phase II or Phase II/III trials for PREVEON, adefovir dipivoxil for HBV and GS
4104 during 1998. The results from preclinical studies and early clinical trials
may not be predictive of results that will be obtained in large-scale testing,
and there can be no assurance that the Company's clinical trials will
demonstrate the safety and efficacy of any products or will result in marketable
products. A number of companies in the
 
                                       21

<PAGE>
biotechnology industry have suffered significant setbacks in advanced clinical
trials, despite promising results in earlier trials.
 
    The rate of completion of the Company's clinical trials is dependent upon
the rate of patient accrual. Patient accrual is a function of many factors,
including the size of the patient population, the nature of the protocol, the
proximity of patients to clinical sites and the eligibility criteria for the
study. In addition, recent improvements in AIDS drug therapy have made clinical
trials for new AIDS therapies more difficult to enroll. Delays in planned
patient enrollment can result in increased costs and delays. In addition, if the
Company is unable to successfully complete its clinical trials, its business
could be materially adversely affected. See "Clinical Development Programs."
 
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
 
    The Company has established a number of significant collaborative
relationships with major pharmaceutical companies, including Pharmacia & Upjohn,
Hoffmann-La Roche and Glaxo Wellcome. The Company is dependent to a large degree
on its collaborative partners with respect to research funding, clinical
development and/or sales and marketing performance. There can be no assurance
that the efforts of the Company's collaborative partners will be successful,
that the interests of the Company and its partners will not be in conflict or
that any of the Company's partners will not terminate their relationship with
the Company. All of the Company's collaborative partners have termination
rights, with limited or no notice required. In addition, a significant portion
of the Company's revenues have historically come from collaborative
relationships, and the Company expects this to be the case in future periods.
Although the Company has established contractual relationships with each of its
collaborative partners, there can be no assurance that these contracts will
provide significant protection or can be effectively enforced if one of these
partners fails to perform. The Company cannot control whether its corporate
partners will devote sufficient resources to the Company's programs or products.
The Company anticipates seeking collaborative relationships for certain of its
programs in the future, and there can be no assurance that such relationships
will be available on acceptable terms, if at all. See "Collaborative
Relationships."
 
LOSS HISTORY AND ACCUMULATED DEFICIT; QUARTERLY FLUCTUATIONS; UNCERTAINTY OF
  FUTURE PROFITABILITY
 
    Gilead has incurred net losses since its inception. At December 31, 1997,
the Company's accumulated deficit was approximately $162.5 million. Such losses
have resulted principally from expenses incurred in the Company's research and
development programs and commercialization efforts, as well as administrative
expenses. The Company's revenues to date have been generated primarily from
collaborative arrangements rather than product revenues. The Company's current
product revenues are derived solely from sales of VISTIDE and from the
co-promotion of Roche's Roferon-A for hepatitis C. Both of these products have
limited sales potential relative to most pharmaceutical products. Gilead expects
to incur substantial losses at least in 1998 and 1999, due primarily to the
expansion of its research and development programs, including preclinical
studies, clinical trials and manufacturing, as well as increasing
commercialization expenses. The Company expects that losses will fluctuate from
quarter to quarter and that such fluctuations may be substantial. There can be
no assurance that the Company will successfully develop, receive regulatory
approval for, commercialize, manufacture, market and sell any additional
products, or achieve or sustain or profitability.
 
TECHNOLOGICAL UNCERTAINTY
 
    The development of new pharmaceutical products is highly uncertain and is
subject to a number of significant risks. Potential products that appear to be
promising at various stages of development may not reach the market for a number
of reasons. Such reasons include the possibilities that the potential products
will be found ineffective or cause harmful side effects during preclinical
studies or clinical trials, fail to receive necessary regulatory approvals, be
difficult or uneconomical to manufacture on a commercial scale,
 
                                       22

<PAGE>
fail to achieve market acceptance or be precluded from commercialization by
proprietary rights of third parties.
 
    There are a number of technological challenges the Company must address to
successfully develop commercial products in each of its development programs.
Certain of the Company's potential products will require significant additional
research and development efforts, including process development and significant
additional clinical testing, prior to any commercial use. There can be no
assurance that the Company will successfully address any of these technological
challenges, or others that may arise in the course of development. See "Clinical
Development Programs."
 
NO ASSURANCE OF MARKET ACCEPTANCE
 
    VISTIDE has achieved limited market acceptance in a small commercial market
with significant competition. There can be no assurance that any of Gilead's
products in development, if approved for marketing, will achieve market
acceptance. The degree of market acceptance depends upon a number of factors,
including the receipt and scope of regulatory approvals, the establishment and
demonstration in the medical and patient advocacy community of the clinical
efficacy and safety of the Company's product candidates and their potential
advantages over competitive products, and reimbursement policies of government
and third-party payors. There can be no assurance that physicians, patients,
patient advocates, payors or the medical community in general will accept and
utilize any products that may be developed by the Company. See "VISTIDE,"
"Clinical Development Programs" and "Competition."
 
INTENSE COMPETITION
 
    The Company's products and development programs target a number of diseases
and conditions, including viral infections, cancer and cardiovascular disease.
Even if the Company is successful in developing products to treat any of these
diseases or conditions, there can be no assurance that any product that receives
marketing clearance will achieve significant commercial acceptance. There are
many commercially available products for these diseases, and a large number of
companies and institutions are conducting well-funded research and development
activities directed at developing treatments for these diseases.
 
    Gilead anticipates it will face increased competition in the future as new
products enter the market and advanced technologies become available. There can
be no assurance that existing products or new products developed by the
Company's competitors will not be more effective, or be more effectively
marketed and sold, than any that may be developed by the Company. Competitive
products may render Gilead's technology and products obsolete or noncompetitive
prior to the Company's recovery of research, development or commercialization
expenses incurred with respect to any such products.
 
    Many of the Company's existing or potential competitors, particularly large
pharmaceutical companies, have substantially greater financial, technical and
human resources than the Company. In addition, many of these competitors have
significantly greater experience than the Company in undertaking research,
preclinical studies and clinical trials of new pharmaceutical products,
obtaining FDA and other regulatory approvals, and manufacturing, marketing and
selling such products. Accordingly, the Company's competitors may succeed in
commercializing products more rapidly or effectively than the Company, which
would have a material adverse effect on the Company. See "Competition."
 
UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT
 
    The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of government and
third-party payors to contain or reduce the cost of health care through various
means. For example, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In particular,
individual pricing negotiations are often required in many countries of the
European Community, even if approval to market the drug under the
 
                                       23

<PAGE>
EMEA's centralized procedure is obtained. In the United States, there have been,
and the Company expects that there will continue to be, a number of federal and
state proposals to implement similar government control. In addition, an
increasing emphasis on managed care in the United States has and will continue
to increase the pressure on pharmaceutical pricing. While the Company cannot
predict whether any such legislative or regulatory proposals will be adopted or
the effect such proposals or managed care efforts may have on its business, the
announcement of such proposals or efforts could have a material adverse effect
on the trading price of the Company's Common Stock, and the adoption of such
proposals or efforts could have a material adverse effect on the Company.
Further, to the extent that such proposals or efforts have a material adverse
effect on other pharmaceutical companies that are prospective corporate partners
for the Company, the Company's ability to establish corporate collaborations may
be adversely affected. In addition, in both the United States and elsewhere,
sales of prescription pharmaceuticals are dependent in part on the availability
of reimbursement to the consumer from third-party payors, such as government and
private insurance plans that mandate rebates or predetermined discounts from
list prices. For example, a significant proportion of VISTIDE sales is subject
to reimbursement by government agencies, resulting in significant discounts from
list price and rebate obligations. The Company expects that PREVEON and several
of its other products in development, particularly for AIDS indications, will
have a similar reimbursement profile. In addition, third-party payors are
increasingly challenging the prices charged for medical products and services.
If the Company succeeds in bringing one or more additional products to the
market, there can be no assurance that these products will be considered cost
effective and that reimbursement will be available or will be sufficient to
allow the Company to sell its products on a competitive basis. See "Pricing and
Reimbursement."
 
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
 
    The Company's success will depend in part on its ability to obtain and
enforce patent protection for its products both in the United States and other
countries. No assurance can be given that patents will issue from any pending
applications or that, if patents do issue, the claims allowed will be
sufficiently broad to protect the Company's technology. In addition, no
assurance can be given that any patents issued to or licensed by the Company
will not be challenged, invalidated, infringed or circumvented, or that the
rights granted thereunder will provide competitive advantages to the Company.
The Company does not have patent filings covering adefovir dipivoxil in China or
in certain other Asian countries, although it does have an application pending
in Japan. Asia is a major market for hepatitis B therapies, one of the potential
indications for adefovir dipivoxil. In addition, patents on certain of the
Company's compounds may issue many years before marketing approval is obtained,
limiting the commercial value of the product.
 
    The commercial success of the Company will also depend in part on not
infringing patents or proprietary rights of others and not breaching the
licenses granted to the Company. There can be no assurance that the Company will
be able to obtain a license to any third-party technology that it may require to
conduct its business or that, if obtainable, such technology can be licensed at
a reasonable cost. Failure by the Company to obtain a license to any technology
that it may require to commercialize its technologies or products may have a
material adverse effect on the Company.
 
    Litigation, which could result in substantial cost to the Company, may also
be necessary to enforce any patents issued to the Company or to determine the
scope and validity of other parties' proprietary rights. If the outcome of any
such litigation is adverse to the Company, the Company's business could be
adversely affected. To determine the priority of inventions, the Company may
have to participate in interference proceedings declared by the United States
Patent and Trademark Office, which could result in substantial cost to the
Company.
 
    The Company also relies on unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position, which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, collaborators,
employees, consultants and vendors. There can be no assurance that these
agreements will not be breached, that the
 
                                       24

<PAGE>
Company would have adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known or be independently discovered by
competitors. See "Patents and Proprietary Rights."
 
RELIANCE ON THIRD PARTY MANUFACTURERS
 
    The Company generally relies on third parties for the manufacture of bulk
drug substance and drug product for clinical and commercial purposes, including
cidofovir (VISTIDE), adefovir dipivoxil (PREVEON) and PMPA. In the case of GS
4104, Gilead's influenza neuraminidase inhibitor in clinical development, Roche
is responsible for the manufacture of clinical and any commercial supplies of
drug substance and drug product. Pursuant to these relationships, the Company
depends on such third parties to perform their manufacturing obligations
effectively and on a timely basis. There can be no assurance that such parties
will perform and any failures by third parties may delay clinical trials or the
submission of products for regulatory approval, impair the Company's ability to
deliver commercial products on a timely basis, or otherwise impair the Company's
competitive position, which could have a material adverse effect on the Company.
 
    The Company has qualified a sole source supplier with the FDA for the bulk
drug substance used in VISTIDE and another sole source supplier for the final
drug product. Gilead has established a second source of bulk drug substance
supply for VISTIDE, and is in the process of qualifying this supplier with the
FDA. The use of any alternative suppliers will require FDA approval, which will
be time consuming. The Company anticipates including two suppliers of bulk drug
substance and one supplier of final drug product for PREVEON in the NDA it
intends to file in 1998. PMPA drug substance is manufactured at Gilead and at a
contract manufacturer, and PMPA drug product for clinical trials is manufactured
at two contract manufacturing sites. In the event that supplies from any of
Gilead's suppliers were interrupted for any reason, the Company's ability to
complete its clinical trials or ship its products could be impaired, which would
have a material adverse effect on the Company.
 
    For certain of its potential products, the Company will need to develop
further its production technologies for use on a larger scale in order to
conduct clinical trials and produce such products for commercial sale at an
acceptable cost. There can be no assurance that the Company or its partners will
be able to implement any of these developments successfully. See
"Manufacturing."
 
PRODUCT LIABILITY EXPOSURE AND INSURANCE
 
    The commercial use of VISTIDE or any other product approved for marketing,
and use of any of the Company's potential products in clinical trials, exposes
the Company to product liability claims. These claims might be made directly by
patients, health care providers or by pharmaceutical companies or others selling
such products. Gilead has obtained product liability insurance coverage for its
commercial products and clinical trials. There can be no assurance that such
coverage will be adequate for any liability arising from the use of commercial
or clinical products of the Company. Moreover, no assurance can be given that
the Company will be able to maintain insurance coverage at a reasonable cost or
in sufficient amounts to protect the Company against losses due to liability.
There can also be no assurance that the Company will be able to obtain
commercially reasonable product liability insurance for any future clinical
trials or products approved for marketing. A successful product liability claim
or series of claims could have a material adverse effect on the Company.
 
HAZARDOUS MATERIALS
 
    The Company's research and development involves the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by state and
federal regulations, the risk of accidental contamination or injury from these
materials cannot be
 
                                       25

<PAGE>
completely eliminated. In the event of such an accident, the Company could be
held liable for significant damages or fines.
 
VOLATILITY OF STOCK PRICE
 
    The market prices for securities of biopharmaceutical companies, including
Gilead, have historically been highly volatile, and the market has from time to
time experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. Factors such as fluctuations
in the Company's operating results, announcements of technological innovations
or new therapeutic products by the Company or its competitors, clinical trial
results, government actions or regulation, developments in patent or other
proprietary rights, public concern as to the safety of drugs developed by the
Company or others and general market conditions can have an adverse effect on
the market price of the Common Stock. In particular, the realization of any of
the risks described in these "Risk Factors" could have a dramatic and adverse
impact on such market price.
 
ANTITAKEOVER PROVISIONS
 
    The Company has adopted a number of provisions that could have antitakeover
effects. In November 1994, the Company's Board of Directors adopted a Preferred
Share Purchase Rights Plan, commonly referred to as a "poison pill." The
Company's Restated Certificate of Incorporation (the "Restated Certificate")
does not permit cumulative voting. The Board of Directors has the authority,
without further action by the stockholders, to fix the rights and preferences
of, and issue shares of, preferred stock. These provisions and other provisions
of the Restated Certificate and Delaware corporate law may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or
management of the Company, including transactions in which stockholders might
otherwise receive a premium for their shares over then current market prices.
 

I
TEM 2. PROPERTIES
 
    Gilead's administrative offices and research laboratories are located in
Foster City, California. The Company leases approximately 145,800 square feet of
space in six adjacent buildings. The leases on this space expire March 31, 2006,
and the Company has an option to renew the leases for two additional five year
periods. The Company believes that it will need to expand its facilities in the
future to support any significant growth in its operations. Gilead anticipates
it will be able to expand its facilities in nearby locations. There can be no
assurance, however, that such space will be available on favorable terms, if at
all.
 

ITEM 3. LEGAL PROCEEDINGS
 
    Not Applicable.
 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
    Not Applicable.
 
                                       26

<PAGE>

                                    PART II
 

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
    The information required by this Item is incorporated by reference to page
51 of the Registrant's annual report to security holders furnished to the
Commission pursuant to Rule 14a-3(b) in connection with the 1998 Annual Meeting
attached hereto as Exhibit 13.1 (the "Annual Report").
 

ITEM 6. SELECTED FINANCIAL DATA
 
    The information required by this Item is incorporated by reference to page
27 of the Annual Report attached hereto as Exhibit 13.1.
 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.
 
    The information required by this Item is incorporated by reference to pages
28 through 31 of the Annual Report attached hereto as Exhibit 13.1.
 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    The following consolidated financial statements of the Company and the
related report of independent auditors are incorporated herein by reference to
pages 32 through 50 of the Annual Report attached here as to Exhibit 13.1:
 
    Consolidated Balance Sheets
 
    Consolidated Statements of Operations
 
    Consolidated Statements of Stockholders' Equity
 
    Consolidated Statements of Cash Flows
 

    Notes to Consolidated Financial Statements
 
    Report of Ernst & Young LLP, Independent Auditors
 

I
TEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
        DISCLOSURE
 
    Not applicable.
 
                                       27

<PAGE>

                                    PART III
 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
               IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
 
    The information required by this Item concerning the Company's directors and
executive officers is incorporated by reference to pages 2 through 5 of
Registrant's Definitive Proxy Statement filed with the Commission pursuant to
Regulation 14A in connection with the 1998 Annual Meeting (the "Proxy
Statement") under the headings "Nominees" and "Executive Officers."
 
               COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
    The information required by this Item is incorporated by reference to page
16 of the Proxy Statement under the heading "Compliance with Section 16(a) of
the Securities Exchange Act of 1934."
 

ITEM 11. EXECUTIVE COMPENSATION
 
    The information required by this Item is incorporated by reference to pages
17 through 20 of the Proxy Statement under the heading "Executive Compensation."
 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The information required by this Item is incorporated by reference to pages
15 through 16 of the Proxy Statement under the heading "Security Ownership of
Certain Beneficial Owners and Management."
 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information required by this Item is incorporated by reference to page
24 of the Proxy Statement under the heading "Certain Transactions" and by
reference to pages 17 through 20 of the Proxy Statement under the heading
"Executive Compensation."
 
                                       28

<PAGE>

                                    PART IV
 

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS FORM 10-K:
 
    (1) Index to Consolidated Financial Statements. The following Consolidated
       Financial Statements of Gilead Sciences, Inc. are filed as part of this
       Form 10-K and are included in the Annual Report attached hereto as
       Exhibit 13.1 and incorporated herein by reference.
 

       Report of Ernst & Young LLP, Independent Auditors
 
       Consolidated Balance Sheets at December 31, 1997 and 1996
 
       Consolidated Statements of Operations for the years ended December 31,
       1997 and 1996 and the nine months ended December 31, 1995
 
       Consolidated Statements of Stockholders' Equity for the years ended
       December 31, 1997 and 1996 and the nine months ended December 31, 1995
 
       Consolidated Statements of Cash Flows for the years ended December 31,
       1997 and 1996 and the nine months ended December 31, 1995
 

       Notes to Consolidated Financial Statements
 
       All schedules are omitted because they are not required or the required
       information is included in the financial statements or notes thereto.
 
    (2) Exhibits
 

<TABLE>
<CAPTION>
  EXHIBIT      EXHIBIT
 FOOTNOTE      NUMBER                                        DESCRIPTION OF DOCUMENT
- -----------  -----------  ----------------------------------------------------------------------------------------------
<C>          <C>          <S>
        (1)         3.1   Amended and Restated Certificate of Incorporation of the Registrant.
        (2)         3.2   Amended and Restated By-laws of the Registrant.
        (3)         3.3   Certificate of Amendment of Restated Certificate of Incorporation.
                    4.1   Reference is made to Exhibits 3.1, 3.2, and 3.3.
        (4)         4.2   Rights Agreement, dated as of November 21, 1994, between Registrant and First Interstate Bank,
                          with exhibits.
        (4)         4.3   Form of letter sent to Gilead Sciences, Inc. stockholders, dated December 14, 1994.
        (3)        10.1   Form of Indemnity Agreement entered into between the Registrant and its directors and
                          executive officers.
        (5)        10.3   Form of Employee Proprietary Information and Invention Agreement entered into between
                          Registrant and certain of its officers and key employees.
        (2)        10.4   Registrant's 1987 Incentive Stock Option Plan and related agreements.
        (2)        10.5   Registrant's 1987 Supplemental Stock Option Plan and related agreements.
                   10.7   Registrant's Employee Stock Purchase Plan, as amended January 22, 1998.
                   10.8   Registrant's 1991 Stock Option Plan, as amended January 22, 1998.
        (2)        10.11  Series C Preferred Stock Purchase Agreement, dated as of July 26, 1990, by and between
                          Registrant and Glaxo Inc.
        (2)        10.13  Registration Rights Agreement, dated as of June 28, 1991, by and among Registrant and the
                          investors identified on Schedule 1 attached thereto.
        (2)        10.15  Form of Non-Qualified Stock Option issued to certain executive officers and directors in 1991.
</TABLE>

 
                                       29

<PAGE>

<TABLE>
<CAPTION>
  EXHIBIT      EXHIBIT
 FOOTNOTE      NUMBER                                        DESCRIPTION OF DOCUMENT
- -----------  -----------  ----------------------------------------------------------------------------------------------
<C>          <C>          <S>
        (2)        10.16  Relocation Loan Agreement, dated as of November 1, 1990 among Registrant, John C. Martin and
                          Rosemary Martin.
        (2)        10.17  Vintage Park Research and Development Net Lease by and between Registrant and Vintage Park
                          Associates dated March 27, 1992 for premises located at 344B, 346 and 353 Lakeside Drive,
                          Foster City, California with related addendum, exhibits and amendments.
        (2)        10.21  Letter Agreement, dated as of September 23, 1991 between Registrant and IOCB/ REGA, with
                          exhibits with certain confidential information deleted.
        (6)        10.23  Vintage Park Research and Development Net Lease by and between Registrant and Vintage Park
                          Associates dated September 16, 1993 for premises located at 335 Lakeside Drive, Foster City,
                          California with related exhibits.
        (7)        10.26  Amendment Agreement, dated October 25, 1993 between Registrant and IOCB/ REGA, and related
                          license agreements and exhibits with certain confidential information deleted.
        (7)        10.28  Loan Agreement among Registrant and The Daiwa Bank, Limited dated May 17, 1994 with certain
                          confidential information deleted.
        (8)        10.29  License and Supply agreement between Registrant and American Cyanamid Company dated August 1,
                          1994 with certain confidential information deleted.
        (4)        10.30  Loan Agreement, dated as of October 1, 1994 among Registrant and Mark L. Perry and Melanie P.
                          Pena.
        (3)        10.33  Registrant's 1995 Non-Employee Directors' Stock Option Plan and related form of stock option
                          grant.
        (9)        10.34  Collaborative Research Agreement, dated as of March 25, 1996, by and between Registrant and
                          Glaxo Wellcome Inc. with certain confidential information deleted.
       (10)        10.36  Vintage Park Research and Development Lease by and between Registrant and WCB Sixteen Limited
                          Partnership dated June 24, 1996 for premises located at 333 Lakeside Drive, Foster City,
                          California.
       (10)        10.37  Amendment No. 1 to Vintage Park Research and Development Lease by and between Registrant and
                          WCB Seventeen Limited Partnership dated June 24, 1996 for premises located at 335 Lakeside
                          Drive, Foster City, California.
       (10)        10.38  Amendment No. 2 to Vintage Park Research and Development Lease by and between Registrant and
                          WCB Seventeen Limited Partnership dated June 24, 1996 for premises located at 344B, 346 and
                          353 Lakeside Drive, Foster City, California.
       (11)        10.40  License and Supply Agreement between Registrant and Pharmacia & Upjohn S.A. dated August 7,
                          1996 with certain confidential information deleted.
       (11)        10.41  Series B Preferred Stock Purchase Agreement between Registrant and Pharmacia & Upjohn S.A.
                          dated August 7, 1996.

       (11)        10.42  Development and License Agreement between Registrant and F. Hoffmann-La Roche Ltd and
                          Hoffmann-La Roche Inc dated September 27, 1996 with certain confidential information deleted.
       (12)        10.44  Agreement among Registrant and Michael L. Riordan, M.D.
       (13)        10.45  Amended and Restated Copromotion Agreement between Registrant and Roche Laboratories, Inc.
                          dated September 12, 1997 with certain confidential information deleted.
</TABLE>

 
                                       30

<PAGE>

<TABLE>
<CAPTION>
  EXHIBIT      EXHIBIT
 FOOTNOTE      NUMBER                                        DESCRIPTION OF DOCUMENT
- -----------  -----------  ----------------------------------------------------------------------------------------------
<C>          <C>          <S>
                   10.46  Amendment No. 1 to Collaborative Research Agreement, dated as of December 22, 1997, between
                          Registrant and Glaxo Wellcome Inc.
                   13.1   Registrant's Annual Report to Stockholders for the year ended December 31, 1997.
                   23.1   Consent of Ernst & Young LLP, Independent Auditors. Reference is made to page 34.
                   24.1   Power of Attorney. Reference is made to page 32.
                   27.1   Financial Data Schedule.
                   27.2   Financial Data Schedule.
</TABLE>

 
- ------------------------
 
 (1) Filed as an exhibit to Registrant's Registration Statement on Form S-8 (No.
    33-46058) and incorporated herein by reference.
 
 (2) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
    33-44534) or amendments thereto and incorporated herein by reference.
 
 (3) Filed as an exhibit to Registrant's Registration Statement on Form S-3 (No.
    333-868) or amendments thereto and incorporated herein by reference.
 
 (4) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
    quarter ended December 31, 1994 and incorporated herein by reference.
 
 (5) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
    33-55680) or amendments thereto and incorporated herein by reference.
 
 (6) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1993 and incorporated herein by reference.
 
 (7) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
    fiscal year ended March 31, 1994 and incorporated herein by reference.
 
 (8) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1994 and incorporated herein by reference.
 
 (9) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the nine
    month period ended December 31, 1995.
 
(10) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
    quarter ended June 30, 1996 and incorporated herein by reference.
 
(11) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1996 and incorporated herein by reference.
 
(12) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
    fiscal year ended December 31, 1996 and incorporated herein by reference.
 
(13) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1997 and incorporated herein by reference.
 
(B) REPORTS ON FORM 8-K
 
    There were no reports on Form 8-K filed by the Registrant during the fourth
    quarter of the fiscal year ended December 31, 1997.
 
                                       31

<PAGE>

 
                                  SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                GILEAD SCIENCES, INC.
 
                                By:              /s/ JOHN C. MARTIN
                                     -----------------------------------------
                                                   John C. Martin
                                       PRESIDENT AND CHIEF EXECUTIVE OFFICER
 
                                Date: March 30, 1998
 
                               POWER OF ATTORNEY
 
    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John C. Martin and Mark L. Perry, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming that all said attorneys-in-fact
and agents, or any of them or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
 
                                       32

<PAGE>
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 

<TABLE>
<CAPTION>
               SIGNATURE                              TITLE                       DATE
- ----------------------------------------  ------------------------------  --------------------
 
<C>                                       <S>                             <C>
           /s/ JOHN C. MARTIN             President and Chief Executive
   ---------------------------------        Officer, Director (Principal     March 30, 1998
            (John C. Martin)                Executive Officer)
 
                                          Senior Vice President, Chief
           /s/ MARK L. PERRY                Financial Officer and
   ---------------------------------        General Counsel (Principal       March 30, 1998
            (Mark L. Perry)                 Financial and Accounting
                                            Officer)
 
         /s/ DONALD H. RUMSFELD
   ---------------------------------      Chairman of the Board of           March 30, 1998
          (Donald H. Rumsfeld)              Directors
 
        /s/ ETIENNE F. DAVIGNON
   ---------------------------------      Director                           March 30, 1998
         (Etienne F. Davignon)
 
        /s/ JAMES M. DENNY, SR.
   ---------------------------------      Director                           March 30, 1998
         (James M. Denny, Sr.)
 
          /s/ GORDON E. MOORE
   ---------------------------------      Director                           March 30, 1998
           (Gordon E. Moore)
 
         /s/ MICHAEL L. RIORDAN
   ---------------------------------      Director                           March 30, 1998
          (Michael L. Riordan)
 
          /s/ GEORGE P. SHULTZ
   ---------------------------------      Director                           March 30, 1998
           (George P. Shultz)
</TABLE>

 
                                       33

<PAGE>

                                                                    EXHIBIT 23.1
 
               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
    We consent to the incorporation by reference in this Annual Report (Form
10-K) of Gilead Sciences, Inc. of our report dated January 23, 1998, included in
the 1997 Annual Report to Stockholders of Gilead Sciences, Inc. for the year
ended December 31, 1997.
 
    We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-46058) pertaining to the Gilead Sciences, Inc. 1987
Incentive Stock Option Plan, 1987 Supplemental Stock Option Plan, 1991 Stock
Option Plan, Employee Stock Purchase Plan, and Officer, Director and Key
Employee Nonqualified Stock Options, the Registration Statement (Form S-8 No.
33-62060) pertaining to the Gilead Sciences, Inc. 1991 Stock Option Plan, and
the Registration Statement (Form S-8 No. 33-81670) pertaining to the Gilead
Sciences, Inc. Employee Stock Purchase Plan, of our report dated January 23,
1998, with respect to the consolidated financial statements incorporated by
reference in the Annual Report (Form 10-K) of Gilead Sciences, Inc. for the year
ended December 31, 1997.
 
                                          ERNST & YOUNG LLP
 
Palo Alto, California
March 30, 1998
 
                                       34





<PAGE>
                                                                    EXHIBIT 10.7
 
                             GILEAD SCIENCES, INC.
 
                          EMPLOYEE STOCK PURCHASE PLAN
 
                           ADOPTED NOVEMBER 15, 1991
                              AMENDED MAY 25, 1994
                     AMENDED AND RESTATED JANUARY 22, 1998
 
                      TERMINATION DATE: NOVEMBER 14, 2001
 
1.  PURPOSE.
 
    (a) The purpose of the Employee Stock Purchase Plan ("the Plan") is to
provide a means by which employees of GILEAD SCIENCES, INC., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(c), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
 
    (b) Plan initially was adopted on November 15, 1991 and subsequently amended
on May 25, 1994 (the "Initial Plan"). The Initial Plan hereby is amended and
restated in its entirety effective as of January 22, 1998. The terms of the
Initial Plan (other than the aggregate number of shares issuable thereunder)
shall remain in effect and apply to all options granted pursuant to the Initial
Plan.
 
    (c) The word "Affiliate" as used in the Plan means any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
 
    (d) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure
 and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
 
    (e) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
 
2.  ADMINISTRATION.
 
    (a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
 
    (b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
 
        (i) To determine when and how rights to purchase stock of the Company
    shall be granted and the provisions of each offering of such rights (which
    need not be identical).
 
        (ii) To designate from time to time which Affiliates of the Company
    shall be eligible to participate in the Plan.
 
       (iii) To construe and interpret the Plan and rights granted under it, and
    to establish, amend and revoke rules and regulations for its administration.
    The Board, in the exercise of this power, may correct any defect, omission
    or inconsistency in the Plan, in a manner and to the extent it shall deem
    necessary or expedient to make the Plan fully effective.
 
        (iv) To amend the Plan as provided in paragraph 13.
 
                                       1

<PAGE>
        (v) Generally, to exercise such powers and to perform such acts as the
    Board deems necessary or expedient to promote the best interests of the
    Company.
 
    (c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
 
3.  SHARES SUBJECT TO THE PLAN.
 
    Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate one million two hundred fifty
thousand (1,250,000) shares of the Company's .001 par value common stock (the
"Common Stock"). If any right granted under the Plan shall for any reason
terminate without having been exercised, the Common Stock not purchased under
such right shall again become available for the Plan. The stock subject to the
Plan may be unissued shares or reacquired shares, bought on the market or
otherwise.
 
4.  GRANT OF RIGHTS; OFFERING.
 
    The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
Offering or otherwise) the substance of the provisions contained in paragraphs 5
through 8, inclusive.
 
5.  ELIGIBILITY.
 
    (a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be equal to or greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is at least twenty (20) hours per week and at least
five (5) months per calendar year.
 
    (b) The Board or the Committee may provide that, each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a
 
                                       2

<PAGE>
part of that Offering. Such right shall have the same characteristics as any
rights originally granted under that Offering, as described herein, except that:
 
        (i) the date on which such right is granted shall be the "Offering Date"
    of such right for all purposes, including determination of the exercise
    price of such right;
 
        (ii) the Purchase Period (as defined below) for such right shall begin
    on its Offering Date and end coincident with the end of such Offering; and
 
       (iii) the Board or the Committee may provide that if such person first
    becomes an eligible employee within a specified period of time before the
    end of the Purchase Period (as defined below) for such Offering, he or she
    will not receive any right under that Offering.
 
    (c) No employee shall be eligible for the grant of any rights under the Plan
if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
 
    (d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
 
    (e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
 
6.  RIGHTS; PURCHASE PRICE.
 
    (a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase the number of shares
of Common Stock of the Company purchasable with up to fifteen percent (15%) (or
such lower percentage as the Board determines for a particular Offering) of such
employee's Earnings (as defined in Section 7(a)) during the period which begins
on the Offering Date (or such later date as the Board determines for a
particular Offering) and ends on the date stated in the Offering, which date
shall be no more than twenty-seven (27) months after the Offering Date (the
"Purchase Period"). In connection with each Offering made under this Plan, the
Board or the Committee shall specify a maximum number of shares which may be
purchased by any employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more than one Exercise
Date (as defined in the Offering), the Board or the Committee may specify a
maximum aggregate number of shares which may be purchased by all eligible
employees on any given Exercise Date under the Offering. If the aggregate
purchase of shares upon exercise of rights granted under the Offering would
exceed any such maximum aggregate number, the Board or the Committee shall make
a pro rata allocation of the shares available in as nearly a uniform manner as
shall be practicable and as it shall deem to be equitable.
 
    (b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on
 
                                       3

<PAGE>
any given Purchase Date under the Offering. If the aggregate purchase of shares
upon exercise of rights granted under the Offering would exceed any such maximum
aggregate number, the Board or the Committee shall make a pro rata allocation of
the shares available in as nearly a uniform manner as shall be practicable and
as it shall deem to be equitable.
 
    (c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
 
        (i) an amount equal to eighty-five percent (85%) of the fair market
    value of the stock on the Offering Date; or
 
        (ii) an amount equal to eighty-five percent (85%) of the fair market
    value of the stock on the Exercise Date.
 
7.  PARTICIPATION; WITHDRAWAL; TERMINATION.
 
    (a) An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to fifteen percent (15%) (or such lower
percentage as the Board determines for a particular Offering) of such employee's
Earnings during the Purchase Period. "Earnings" is defined as an employee's
total compensation, including all salary, wages and other remuneration paid to
an employee (including amounts elected to be deferred by the employee, that
would otherwise have been paid, under any cash or deferred arrangement
established by the Company), overtime pay, commissions, bonuses, profit sharing,
any special payments for extraordinary services, provided, however, that the
Board in its sole discretion may limit the above definition from time to time
with respect to each Offering. The payroll deductions made for each participant
shall be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce,
increase or begin such payroll deductions after the beginning of any Purchase
Period only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Purchase Period.
 
    (b) At any time during a Purchase Period a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Purchase Period. Upon such withdrawal from the Offering by a participant, the
Company shall distribute to such participant all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the participant) under the Offering, without interest
unless the terms of the Offering specifically so provide, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
 
    (c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company or an Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock
for the terminated employee), under the Offering, without interest unless the
terms of the Offering specifically so provide.
 
    (d) Rights granted under the Plan shall not be transferable by a participant
otherwise than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14 and,
 
                                       4

<PAGE>
otherwise during his or her lifetime, shall be exercisable only by the person to
whom such rights are granted.
 
8.  EXERCISE.
 
    (a) On each exercise date, as defined in the relevant Offering (an "Exercise
Date"), each participant's accumulated payroll deductions (without any increase
for interest unless the terms of the Offering specifically so provide) will be
applied to the purchase of whole shares of stock of the Company, up to the
maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Exercise Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after said final
Exercise Date, without interest unless the terms of the Offering specifically so
provide. The amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the amount
required to purchase whole shares of stock on the final Exercise Date of an
Offering shall be distributed in full to the participant after such Exercise
Date, without interest unless the terms of the Offering specifically so provide.
 
    (b) No rights granted under the Plan may be exercised to any extent unless
the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If on an Exercise Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Exercise Date and all payroll deductions accumulated during
the purchase period (reduced to the extent, if any, such deductions have been
used to acquire stock) shall be distributed to the participants, without
interest unless the terms of the Offering specifically so provide.
 
    (c) Shares of stock of the Company that are purchased may be registered in
the name of the participant or jointly in the name of the participant and his or
her spouse as joint tenants with right of survivorship or community property.
 
9.  COVENANTS OF THE COMPANY.
 
    (a) During the terms of the rights granted under the Plan, the Company shall
keep available at all times the number of shares of stock required to satisfy
such rights.
 
    (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
 
10. USE OF PROCEEDS FROM STOCK.
 
    Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
 
                                       5

<PAGE>
11. RIGHTS AS A STOCKHOLDER.
 
    A participant shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to rights granted under
the Plan unless and until certificates representing such shares shall have been
issued.
 
12. ADJUSTMENTS UPON CHANGES IN STOCK.
 
    (a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
rights will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding rights.
 
    (b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, as determined by the Board in its sole discretion (i)
any surviving corporation may assume outstanding rights or substitute similar
rights for those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to the transaction described above and
the participants' rights under the ongoing Offering terminated.
 
13. AMENDMENT OF THE PLAN.
 
    (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
 
        (i) Increase the number of shares reserved for rights under the Plan;
 
        (ii) Modify the provisions as to eligibility for participation in the
    Plan (to the extent such modification requires stockholder approval in order
    for the Plan to obtain employee stock purchase plan treatment under Section
    423 of the Code or to comply with the requirements of Rule 16b-3 promulgated
    under the Exchange Act of 1934, as amended ( the "Exchange Act")); or
 
       (iii) Modify the Plan in any other way if such modification requires
    stockholder approval in order for the Plan to obtain employee stock purchase
    plan treatment under Section 423 of the Code or to comply with the
    requirements of Rule 16b-3 promulgated under the Exchange Act or any Nasdaq
    or securities exchange listing requirements.
 
The Board may, in its sole discretion, submit any other amendment to the Plan
for stockholder approval. It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to provide
eligible employees with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated thereunder relating
to employee stock purchase plans and/or to bring the Plan and/or rights granted
under it into compliance therewith.
 
    (b) Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted or except as
necessary to comply with any laws or governmental regulations or to
 
                                       6

<PAGE>
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.
 
14. DESIGNATION OF BENEFICIARY.
 
    (a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
 
    (b) The participant may change such designation of beneficiary at any time
by written notice. In the event of the death of a participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such participant's death, the Company shall deliver such shares and/or cash to
the executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
 
15. TERMINATION OR SUSPENSION OF THE PLAN.
 
    (a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is
adopted by the Board or approved by the stockholders of the Company, whichever
is earlier. No rights may be granted under the Plan while the Plan is suspended
or after it is terminated.
 
    (b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation or to ensure that the Plan and/or rights granted under
the Plan comply with the requirements of Section 423 of the Code.
 
16. EFFECTIVE DATE OF PLAN.
 
    The Plan shall become effective as determined by the Board, but no rights
granted under the Plan shall be exercised unless and until the stockholders of
the Company have approved the Plan.
 
                                       7



<PAGE>
                                                                    EXHIBIT 10.8
 
                             GILEAD SCIENCES, INC.
                             1991 STOCK OPTION PLAN
                           ADOPTED NOVEMBER 15, 1991
                             AMENDED APRIL 8, 1992
                             AMENDED APRIL 21, 1993
                            AMENDED OCTOBER 17, 1995
                     AMENDED AND RESTATED JANUARY 22, 1998
                       TERMINATION DATE: OCTOBER 31, 2001
 
1.  PURPOSES.
 
    (a) The Plan initially was adopted on November 15, 1991 and amended through
October 17, 1995 (the "Initial Plan"). The Initial Plan hereby is amended and
restated in its entirety effective as of January 22, 1998. The terms of the Plan
(excluding the amended provision relating to the exercise price of Nonstatutory
Stock Options) shall apply to all options granted pursuant to the Initial Plan.
 
    (b) The purpose of the Plan is to provide a means by which selected
Employees and Directors of, and Consultants to, the Company and its Affiliates
may be given an opportunity to purchase stock of the Company.
 
    (c) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company, to secure and
retain the services of new Employees and Consultants, and to provide incentives
for such persons to exert maximum efforts for the success of the Company.
 
    (d) The Company intends that the Options issued under the Plan shall, in the
discretion of the Board
 or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
 
2.  DEFINITIONS.
 
    (a) "AFFILIATE" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
 
    (b) "BOARD" means the Board of Directors of the Company.
 
    (c) "CODE" means the Internal Revenue Code of 1986, as amended.
 
    (d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
 
    (e) "COMPANY" means Gilead Sciences, Inc., a Delaware corporation.
 
    (f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render services and who is compensated for such
services, provided that the term "Consultant" shall not include Directors who
are paid only a director's fee by the Company or who are not otherwise
compensated by the Company for their services as Directors. The term
"Consultant" shall include a member of the Board of Directors of an Affiliate.
 
    (g) "CONTINUOUS SERVICE" (formerly designated as "CONTINUOUS STATUS AS AN
EMPLOYEE OR CONSULTANT") means that the Optionee's service with the Company or
its Affiliates is not interrupted or terminated. The Optionee's Continuous
Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Optionee renders service to the Company or its Affiliates
or a change in the entity for
 
                                       1

<PAGE>
which the Optionee renders such service, provided that there is no interruption
or termination of the Optionee's Continuous Service. For example, a change in
status from an Employee of the Company to a Consultant or Director of the
Company or a member of the Board of Directors of an Affiliate will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by the Board or the chief executive officer of the
Company, including sick leave, military leave, or any other personal leave.
 
    (h) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
 
    (i) "DIRECTOR" means a member of the Board.
 
    (j) "DISABILITY" means total and permanent disability as defined in Section
22(e)(3) of the Code.
 
    (k) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
 
    (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
 
    (m) "FAIR MARKET VALUE" means, as of any date, the value of the common stock
of the Company determined as follows:
 
        (i) If the common stock is listed on any established stock exchange or a
    national market system, including without limitation the National Market
    System of the National Association of Securities Dealers, Inc. Automated
    Quotation ("NASDAQ") System, the Fair Market Value of a share of common
    stock shall be the closing sales price for such stock (or the closing bid,
    if no sales were reported) as quoted on such system or exchange (or the
    exchange with the greatest volume of trading in common stock) on the last
    market trading day prior to the day of determination, as reported in The
    Wall Street Journal or such other source as the Board deems reliable;
 
        (ii) If the common stock is quoted on the NASDAQ System (but not on the
    National Market System thereof) or is regularly quoted by a recognized
    securities dealer but selling prices are not reported, the Fair Market Value
    of a share of common stock shall be the mean between the high bid and high
    asked prices for the common stock on the last market trading day prior to
    the day of determination, as reported in The Wall Street Journal or such
    other source as the Board deems reliable;
 
       (iii) In the absence of an established market for the common stock, the
    Fair Market Value shall be determined in good faith by the Board.
 
    (n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
 
    (o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or subsidiary, does not receive
compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act),
does not possess an interest in any other transaction as to which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
 
    (p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
 
                                       2

<PAGE>
    (q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
 
    (r) "OPTION" means a stock option granted pursuant to the Plan.
 
    (s) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
 
    (t) "OPTIONED STOCK" means the common stock of the Company subject to an
Option.
 
    (u) "OPTIONEE" means a person who holds an outstanding Option.
 
    (v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
 
    (w) "PLAN" means this 1991 Stock Option Plan.
 
    (x) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
 
3.  ADMINISTRATION.
 
    (a) The Board shall administer the Plan unless and until the Board delegates
administration to a Committee, as provided in subsection 3(c).
 
    (b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
 
        (i) To determine from time to time which of the persons eligible under
    the Plan shall be granted Options; when and how the Option shall be granted;
    whether the Option will be an Incentive Stock Option or a Nonstatutory Stock
    Option; the provisions of each Option granted (which need not be identical),
    including the time or times such Option may be exercised in whole or in
    part; and the number of shares for which an Option shall be granted to each
    such person.
 
        (ii) To construe and interpret the Plan and Options granted under it,
    and to establish, amend and revoke rules and regulations for its
    administration. The Board, in the exercise of this power, may correct any
    defect, omission or inconsistency in the Plan or in any Option Agreement, in
    a manner and to the extent it shall deem necessary or expedient to make the
    Plan fully effective.
 
       (iii) To amend the Plan as provided in Section 11.
 
        (iv) Generally, to exercise such powers and to perform such acts as the
    Board deems necessary or expedient to promote the best interests of the
    Company.
 
    (c) The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board. In the discretion of the Board,
a Committee may consist solely of two or more Outside Directors, in accordance
with Code Section 162(m), or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3 of the Exchange Act. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board (and references in
this Plan to the Board shall thereafter be to the Committee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest
 
                                       3

<PAGE>
in the Board the administration of the Plan. Within the scope of this authority,
the Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant Options to eligible persons who (1) are not
then subject to Section 16 of the Exchange Act and/or (2) are either (i) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
 
4.  SHARES SUBJECT TO THE PLAN.
 
    (a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Six Million Five Hundred Thousand (6,500,000) shares of
the Company's common stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not purchased under such Option shall revert to again become available
for issuance under the Plan.
 
    (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
 
5.  ELIGIBILITY.
 
    (a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted to Employees, Directors and Consultants.
 
    (b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
 
    (c) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than Five Hundred Thousand (500,000) shares of the Company's common stock
in any calendar year.
 
6.  OPTION PROVISIONS.
 
    Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
 
    (a)  TERM.  No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
 
    (b)  PRICE.
 
         (i)  EXERCISE PRICE.  The exercise price of each Incentive Stock Option
    and each Nonstatutory Stock Option shall be not less than one hundred
    percent (100%) of the fair market value of the stock subject to the Option
    on the date the Option is granted.
 
        (ii)  NO AUTHORITY TO REPRICE.  Without the consent of the stockholders
    of the Company, the Board shall have no authority to effect (a) the
    repricing of any outstanding Options under the Plan and/or (b) the
    cancellation of any outstanding Options under the Plan and the grant in
    substitution therefor of new Options under the Plan covering the same or
    different numbers of shares of Common Stock.
 
                                       4

<PAGE>
    (c)  CONSIDERATION.  The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
 
    In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
 
    (d)  TRANSFERABILITY.  An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is granted only
by such person. A Nonstatutory Stock Option but not an Incentive Stock Option,
may be transferred to the extent provided in the Option Agreement; provided that
if the Option Agreement does not expressly permit the transfer of a Nonstatutory
Stock Option, the Nonstatutory Stock Option shall not be transferable except by
will, by the laws of descent and distribution and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person.
The person to whom the Option is granted may, by delivering written notice to
the Company, in a form satisfactory to the Company, designate a third party who,
in the event of the death of the Optionee, shall thereafter be entitled to
exercise the Option.
 
    (e)  VESTING.  The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. During the remainder of the term of the Option (if its term extends
beyond the end of the installment periods), the option may be exercised from
time to time with respect to any shares then remaining subject to the Option.
The Option may be subject to such other terms and conditions on the time or
times when it may be exercised (which may be based on performance or other
criteria) as the Board may deem appropriate. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.
 
    (f)  SECURITIES LAW COMPLIANCE.  The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may require the Optionee to provide such other representations, written
assurances, or information which the Company shall determine is necessary,
desirable or appropriate to comply with applicable securities and other laws as
a condition of granting an Option to such
 
                                       5

<PAGE>
Optionee or permitting the Optionee to exercise such Option. The Company may,
upon advice of counsel to the Company, place legends on stock certificates
issued under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
 
    (g)  TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.  In the event an
Optionee's Continuous Status as an Employee or Consultant terminates (other than
upon the Optionee's death or Disability), the Optionee may exercise his or her
Option, but only within such period of time as is determined by the Board, and
only to the extent that the Optionee was entitled to exercise it at the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the case of an Incentive Stock
Option, the Board shall determine such period of time (in no event to exceed
ninety (90) days from the date of termination) when the Option is granted. If,
at the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified in the Option Agreement, the Option
shall terminate, and the shares covered by such Option shall revert to the Plan.
 
    (h)  DISABILITY OF OPTIONEE.  In the event an Optionee's Continuous Service
terminates as a result of the Optionee's Disability, the Optionee may exercise
his or her Option, but only within twelve (12) months from the date of such
termination (or such shorter period specified in the Option Agreement), and only
to the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to the Plan.
 
    (i)  DEATH OF OPTIONEE.  In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (or such shorter period specified in the Option Agreement) (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. If, at
the time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after death, the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.
 
    (j)  EARLY EXERCISE.  The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee or Consultant to
exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.
 
    (k)  WITHHOLDING.  To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
 
7.  COVENANTS OF THE COMPANY.
 
    (a) During the terms of the Options, the Company shall keep available at all
times the number of shares of stock required to satisfy such Options.
 
                                       6

<PAGE>
    (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
 
8.  USE OF PROCEEDS FROM STOCK.
 
    Proceeds from the sale of stock pursuant to Options shall constitute general
funds of the Company.
 
9.  MISCELLANEOUS.
 
    (a) The Board shall have the power to accelerate the time at which an Option
may first be exercised or the time during which an Option or any part thereof
will vest pursuant to subsection 6(e), notwithstanding the provisions in the
Option stating the time at which it may first be exercised or the time during
which it will vest.
 
    (b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
 
    (c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Consultant or Optionee any
right to continue in the employ of the Company or any Affiliate (or to continue
acting as a Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment or relationship as a Consultant of any
Employee, Consultant or Optionee with or without cause.
 
    (d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
 
10. ADJUSTMENTS UPON CHANGES IN STOCK.
 
    (a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the maximum number of shares subject to award to any person
during any calendar year period pursuant to subsection 5(d), and the outstanding
Options will be appropriately adjusted in the class(es) and number of shares and
price per share of stock subject to such outstanding Options.
 
    (b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, at the sole discretion of the Board and to the extent
permitted by applicable law: (i) any surviving corporation shall assume any
Options outstanding
 
                                       7

<PAGE>
under the Plan or shall substitute similar Options for those outstanding under
the Plan, (ii) the time during which such Options may be exercised shall be
accelerated and the Options terminated if not exercised prior to such event, or
(iii) such Options shall continue in full force and effect.
 
11. AMENDMENT OF THE PLAN.
 
    (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
 
        (i) Increase the number of shares reserved for options under the Plan;
 
        (ii) Effect (a) the repricing of any outstanding Options under the Plan
    and/or (b) the cancellation of any outstanding Options under the Plan and
    the grant in substitution therefor of new Options under the Plan covering
    the same or different numbers of shares of Common Stock;
 
       (iii) Modify the requirements as to eligibility for participation in the
    Plan (to the extent such modification requires stockholder approval in order
    for the Plan to satisfy the requirements of Section 422 of the Code); or
 
        (iv) Modify the Plan in any other way if such modification requires
    stockholder approval in order for the Plan to satisfy the requirements of
    Section 422 of the Code or to comply with the requirements of Rule 16b-3 or
    any Nasdaq or securities exchange listing requirements.
 
    (b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
 
    (c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
 
    (d) Rights and obligations under any Option granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan unless (i)
the Company requests the consent of the person to whom the Option was granted
and (ii) such person consents in writing.
 
12. TERMINATION OR SUSPENSION OF THE PLAN.
 
    (a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on October 31, 2001. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
 
    (b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
 
13. EFFECTIVE DATE OF PLAN.
 
    The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the stockholders of
the Company have approved the Plan.
 
                                       8



<PAGE>

                            AMENDMENT NO. 1
                                  TO
                  COLLABORATIVE RESEARCH AGREEMENT
                    BETWEEN GILEAD SCIENCES, INC.
                                 AND
                        GLAXO WELLCOME INC.
                      DATED DECEMBER 22, 1997

This Amendment No. 1 (the "Amendment") to the Collaborative Research 
Agreement entered into as of the 25th day of March, 1996, (the "Original 
Agreement"), is made by and between GILEAD SCIENCES, INC., a Delaware 
corporation, having its principal place of business at 353 Lakeside Drive, 
Foster City, California, 94404 ("Gilead") and GLAXO WELLCOME INC., a North 
Carolina corporation, having offices at Five Moore Drive, Research Triangle 
Park, North Carolina 27709 ("Glaxo"), effective as of December 22, 1997.

WHEREAS, the Parties desire to amend the Original Agreement regarding Section 
13.4 "Termination of Research Term by Glaxo."

NOW, THEREFORE, in consideration of the foregoing premises and of the mutual 
promises and covenants set forth below, for other good and valuable 
consideration the receipt and sufficiency of which the Parties acknowledge, 
and in accordance with Article 16.7 of the Original Agreement allowing 
modifications by written agreements duly signed by persons authorized to sign 
on behalf of the Parties, the Parties, intending to be legally bound, agree 
as follows:

1.  Unless otherwise
 defined in this Amendment, the capitalized terms used in 
this Amendment shall have the same meaning as given them in the Original 
Agreement.

2.  Article 13.4 shall be amended by deleting the first sentence of Article 
13.4 in its entirety and the following new first sentence of Article 13.4 
shall be inserted in lieu thereof:

    "Glaxo shall have the right to terminate the Research term prior to 
    expiration hereunder upon written notice to Gilead; provided, however, 
    that such termination be effective on the later of (a) June 22, 1998, or 
    (b) the date notice of termination pursuant to this Article 13.4 is given 
    to Gilead."

3.  Except as modified above, the Original Agreement shall remain in full 
force and effect, including, but not limited to, the unamended provisions of 
Article 13.4.


<PAGE>

IN WITNESS WHEREOF, the Parties have executed this Agreement, as of the day 
and year first above written.

GILEAD SCIENCES, INC.                    GLAXO WELLCOME INC.

By:  /s/ John C. Martin                  By:  /s/ Robert M. Bell
     ------------------------                 ------------------------

Name:  John C. Martin                    Name:  Robert M. Bell, Ph.D.
     ------------------------                 ------------------------

Title:  CEO                              Title:  Vice President, Research
                                                 Glaxo Wellcome Inc.
     ------------------------                 ------------------------



                                      -2-



<PAGE>
                        1997 GILEAD SCIENCES FINANCIALS
 

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Selected Consolidated Financial Data.......................................................................          27
 
Management's Discussion and Analysis of Financial Condition and Results of Operations......................          28
 
Consolidated Balance Sheets................................................................................          32
 
Consolidated Statements of Operations......................................................................          33
 
Consolidated Statements of Stockholders' Equity............................................................          34
 
Consolidated Statements of Cash Flows......................................................................          36
 
Notes to Consolidated Financial Statements.................................................................          37
 
Report of Ernst & Young LLP, Independent Auditors..........................................................          50
</TABLE>

 
                                       26

<PAGE>
                      SELECTED CONSOLIDATED FINANCIAL DATA
                   CONSOLIDATED STATEMENTS OF OPERATIONS DATA
 

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER    NINE MONTHS
                                                              31,               ENDED       YEAR ENDED MARCH 31,
                                                     ----------------------  DECEMBER 31,  ----------------------
                                                        1997        1996       1995(1)        1995        1994
                                                     ----------  ----------  ------------  ----------  ----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                  <C>         <C>         <C>           <C>         <C>
Revenues:
  Product sales, net...............................  $   11,735  $    8,477   $   --       $   --      $
  Contract revenues and royalties..................      28,302      24,943        2,699        4,922       4,085
                                                     ----------  ----------  ------------  ----------  ----------
Total revenues.....................................      40,037      33,420        2,699        4,922       4,085
Costs and expenses:
  Cost of product sales............................       1,167         910       --           --          --
  Research and development.........................      59,162      41,881       25,670       30,360      26,046
  Selling, general and administrative..............      25,472      26,692        9,036        9,669       7,639
                                                     ----------  ----------  ------------  ----------  ----------
Total operating costs and expenses.................      85,801      69,483       34,706       40,029      33,685
                                                     ----------  ----------  ------------  ----------  ----------
Loss from operations...............................     (45,764)    (36,063)     (32,007)     (35,107)    (29,600)
Interest income, net...............................      17,771      14,331        4,592        3,833       3,888
                                                     ----------  ----------  ------------  ----------  ----------
Net loss...........................................
  $  (27,993) $  (21,732)  $  (27,415)  $  (31,274) $  (25,712)
                                                     ----------  ----------  ------------  ----------  ----------
                                                     ----------  ----------  ------------  ----------  ----------
Basic and diluted loss per share...................  $    (0.95) $    (0.78)  $    (1.29)  $    (1.65) $    (1.37)
                                                     ----------  ----------  ------------  ----------  ----------
                                                     ----------  ----------  ------------  ----------  ----------
Common shares used in the calculation of basic and
  diluted loss per share...........................      29,326      27,786       21,274       18,971      18,779
                                                     ----------  ----------  ------------  ----------  ----------
                                                     ----------  ----------  ------------  ----------  ----------
</TABLE>

 
                        CONSOLIDATED BALANCE SHEETS DATA
 

<TABLE>
<CAPTION>
                                                                DECEMBER 31,                     MARCH 31,
                                                    -------------------------------------  ----------------------
                                                       1997         1996        1995(1)       1995        1994
                                                    -----------  -----------  -----------  ----------  ----------
                                                                           (IN THOUSANDS)
<S>                                                 <C>          <C>          <C>          <C>         <C>
Cash, cash equivalents and short-term
  investments.....................................  $   322,298  $   295,963  $   155,659  $   89,146  $  114,968
Working capital...................................      306,867      284,154      145,539      80,190     108,071
Total assets......................................      352,069      310,673      166,659     102,395     126,602
Non-current portion of equipment financing
  obligations and long-term debt..................        1,331        2,914        3,482       5,454       2,479
Accumulated deficit...............................     (162,479)    (134,486)    (112,754)    (85,339)    (54,065)
Total stockholders' equity (2)....................      317,347      291,660      151,499      86,056     115,280
</TABLE>

 
- ------------------------
 
(1) In October 1995, the Company changed its fiscal year end from March 31 to
    December 31, effective with the nine months ended December 31, 1995.
 
(2) No dividends have been declared or paid on the common stock.
 
                                       27

<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
 
    Since its inception in June 1987, Gilead has devoted the substantial portion
of its resources to its research and development programs, with significant
expenses relating to commercialization beginning in 1996. With the exception of
the second quarter of 1997 and the third quarter of 1996, when the Company
earned significant fees related to collaborations, the Company has incurred
losses since its inception. Gilead expects to incur losses at least in 1998 and
1999, due primarily to its research and development programs, including
preclinical studies, clinical trials and manufacturing, as well as marketing and
sales efforts in support of VISTIDE-Registered Trademark- (cidofovir injection)
and other potential products. On June 26, 1996, the U.S. Food and Drug
Administration ("FDA") granted marketing clearance of VISTIDE for the treatment
of cytomegalovirus ("CMV") retinitis in patients with AIDS. The Company is
independently marketing VISTIDE in the United States with an antiviral specialty
sales force and has entered into a collaboration agreement with Pharmacia &
Upjohn S.A. ("P&U") to market VISTIDE in all countries outside the United
States. The Company expects that its financial results will fluctuate from
quarter to quarter and that such fluctuations may be substantial. There can be
no assurance that the Company will successfully develop, commercialize,
manufacture and market additional products or sustain profitability. As of
December 31, 1997, the Company's accumulated deficit was approximately $162.5
million.
 
    The successful development and commercialization of the Company's products
will require substantial and ongoing efforts at the forefront of the life
sciences industry. The Company is pursuing preclinical or clinical development
of a number of product candidates. Even if these product candidates appear
promising during various stages of development, they may not reach the market
for a number of reasons. Such reasons include the possibilities that the
potential products will be found ineffective or unduly toxic during preclinical
or clinical trials, fail to receive necessary regulatory approvals, be difficult
to manufacture on a large scale, be uneconomical to market or be precluded from
commercialization by proprietary rights of others.
 
    As a company in an industry undergoing rapid change, the Company faces
significant challenges and risks, including the risks inherent in its research
and development programs, uncertainties in obtaining and enforcing patents, the
lengthy and expensive regulatory approval process, intense competition from
pharmaceutical and biotechnology companies, increasing pressure on
pharmaceutical pricing from payors, patients and government agencies and
uncertainties associated with the market acceptance and size of the market for
VISTIDE or any of the Company's products in development. These risks are
discussed in greater detail in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. Stockholders and potential investors in the
Company should carefully consider these risks in evaluating the Company and
should be aware that the realization of any of these risks could have a dramatic
and negative impact on the Company's stock price.
 
    This report contains forward-looking statements relating to clinical and
regulatory developments, marketing and sales matters, future expense levels and
financial results. These statements involve inherent risks and uncertainties.
The Company's actual results may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, the risks discussed in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, particularly those
relating to the development and marketing of pharmaceutical products.
 
RESULTS OF OPERATIONS
 
    REVENUES  The Company had total revenues of $40.0 million, $33.4 million,
and $2.7 million, for the years ended December 31, 1997 and 1996, and the nine
months ended December 31, 1995, respectively. During 1997, each category of
revenues (net product sales, contract revenues and royalty revenues) increased
from 1996 levels. Net product sales revenues were $11.7 million in 1997 and
increased by $3.3 million, or 38 percent, as compared with 1996. Substantially
all of the Company's product sales revenues
 
                                       28

<PAGE>
relate to VISTIDE. The 38 percent increase is due to the fact that 1997 results
represent a full year of sales, while 1996 revenues reflect approximately six
months of sales (the Company began selling VISTIDE in June 1996). Royalty
revenues were $0.9 million in 1997 and include net royalties from P&U on
European sales of VISTIDE and royalties from F. Hoffmann-La Roche ("Roche") for
co-promoting Roferon-A-Registered Trademark- (Interferon alfa-2a, recombinant)
in the United States for the treatment of hepatitis C virus infection. Such
revenues are recognized as income when received, which is generally in the
quarter following that in which the corresponding sales occur. The Company did
not earn significant royalty revenues before 1997. In spite of the overall
increases in product sales and the commencement of VISTIDE royalties, VISTIDE
product sales experienced a declining trend in 1997 as compared to 1996,
primarily due to a decline in the incidence of CMV retinitis as a result of more
effective human immunodeficiency virus ("HIV") therapies. VISTIDE product sales
revenues and royalties are expected to continue to be modest. The Company had no
product sales before 1996.
 
    Contract revenues of $27.4 million increased by $2.5 million, or 10 percent,
in 1997. For 1997, contract revenues include a total of $24.2 million earned
under the Company's collaborative agreements with P&U and Roche. During the
second quarter of 1997, Gilead recognized a $10.0 million milestone payment
under the P&U agreement, which is the only milestone payment provided for under
that agreement. Under the Roche collaboration in 1997, the Company recognized
$8.2 million in reimbursement for research and development expenses. During the
fourth quarter of 1997, the Company incurred approximately $5.2 million of
additional research and development expenses that were subject to Roche's review
and approval as of December 31, 1997. Such expenses were subsequently approved
for reimbursement and will be recognized in contract revenues in the first
quarter of 1998. Also under the Roche agreement in 1997, the Company received a
total of $6.0 million of milestone payments. Gilead is entitled to additional
payments of up to $34.0 million upon achieving certain developmental and
regulatory milestones. The Company recognized contract revenues of $21.6 million
related to both the P&U and Roche agreements during 1996, the year these
contracts went into effect.
 
    Contract revenues in all three periods included reimbursement of research
expenses under the Company's agreements with Glaxo Wellcome Inc. ($3.0 million
in 1997 and 1996, and $2.1 million in the nine-month period ended December 31,
1995).
 
    COSTS AND EXPENSES  Cost of product sales was $1.2 million and $0.9 million
for the years ended December 31, 1997 and 1996, respectively, and resulted from
sales of VISTIDE. The Company had no cost of product sales for the nine months
ended December 31, 1995.
 
    The Company's research and development ("R&D") expenses were $59.2 million
for the year ended December 31, 1997, compared to $41.9 million for the year
ended December 31, 1996. This 41 percent increase is primarily attributable to
costs associated with the GS 4104 clinical trials, as well as the ongoing series
of PREVEON-TM- (adefovir dipivoxil) clinical trials and the recently announced
expanded access program for patients with HIV, which commenced in the fourth
quarter of 1997. GS 4104 is an orally administered compound to treat and prevent
viral influenza in humans and is being developed in connection with the
Company's collaboration with Roche. PREVEON is an investigational, orally-
administered, once-daily, reverse transcriptase inhibitor currently being
studied to treat HIV. R&D expenses increased 63 percent for the year ended
December 31, 1996, compared to the nine months ended December 31, 1995,
primarily due to the shorter reporting period in 1995 and higher staffing,
preclinical and clinical expenses in 1996. The Company expects its R&D expenses
to continue to increase significantly in 1998 over 1997 amounts, reflecting
anticipated increased expenses related to clinical trials for several product
candidates as well as related increases in staffing and manufacturing.
 
    Selling, general and administrative ("SG&A") expenses were $25.5 million and
$26.7 million for the years ended December 31, 1997 and 1996, respectively, and
$9.0 million for the nine months ended December 31, 1995. The Company launched
its first product, VISTIDE, in June 1996, and the level of expenses in that year
is largely attributable to costs incurred to establish and maintain the
Company's U.S. marketing and sales capabilities. As expected, these expenses
were somewhat lower in 1997. The 195
 
                                       29

<PAGE>
percent increase in SG&A expenses between the nine-month period ended December
31, 1995 and the year ended December 31, 1996 is also attributable to the
shorter reporting period in 1995. The Company expects its SG&A expenses to
increase substantially during 1998, primarily to support the expansion of sales
and marketing capacity in anticipation of the potential launch of PREVEON, as
well as to support planned increases in research and development activities.
 
    NET INTEREST INCOME  The Company had net interest income of $17.8 million
for the year ended December 31, 1997, compared to $14.3 million for the year
ended December 31, 1996. Gilead reported net interest income of $4.6 million for
the nine months ended December 31, 1995. The significant increase in net
interest income between the 1995 period and the year ended December 31, 1996 is
due to substantial increases in Gilead's cash and cash equivalents and
short-term investment balances during 1996, which resulted from the Company's
two public offerings of common stock completed in February 1996 and August 1995.
Net interest income in 1997 exceeded the 1996 amount primarily due to the
full-year benefit in 1997 of the one public offering in 1996 and a $40.0 million
equity investment by P&U.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Cash and cash equivalents and short-term investments were $322.3 million at
December 31, 1997 and $296.0 million at December 31, 1996. This $26.3 million
increase is primarily attributable to a $40.0 million equity investment from
P&U, partially offset by $19.9 million of net cash used in operations. In
October 1996, the Company entered into a $3.0 million term loan to finance its
facilities expansion, which began in the fourth quarter of 1996. In 1998, the
Company expects to incur construction and equipment costs of approximately $2.4
million related to the final build-out of a 37,000 square foot facility leased
in August 1996, as well as improvements to several of its other leased
facilities.
 
    Net cash used in operations was $19.9 million and $16.5 million for the
years ended December 31, 1997 and 1996, respectively, and $23.0 million for the
nine months ended December 31, 1995. The Company believes that its existing
capital resources, supplemented by net product sales, contract and royalty
revenues, will be adequate to satisfy its capital needs for the foreseeable
future. The Company's future capital requirements will depend on many factors,
including the progress of the Company's research and development, the scope and
results of preclinical studies and clinical trials, the cost, timing and
outcomes of regulatory reviews, the rate of technological advances,
determinations as to the commercial potential of the Company's products under
development, the commercial performance of VISTIDE and any of the Company's
products in development that receive marketing approval, administrative and
legal expenses, the status of competitive products, the establishment of
manufacturing capacity or third-party manufacturing arrangements, the expansion
of sales and marketing capabilities and the establishment of collaborative
relationships with other companies.
 
    The Company may in the future require additional funding, which could be in
the form of proceeds from equity or debt financings or additional collaborative
agreements with corporate partners. If such funding is required, there can be no
assurance that it will be available on favorable terms, if at all.
 
IMPACT OF YEAR 2000
 
    The Company believes that with upgrades of existing software and conversions
to new software, both of which are readily available in the market, the Year
2000 issue will not pose significant operational problems for its internal
computer systems. All required modifications and conversions of computer systems
that are critical to the Company's business operations are expected to be
completed not later than December 31, 1998, which is prior to the estimated
occurrence of any Year 2000 issues. The Company has initiated formal
communications with its significant suppliers, service providers and large
customers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. There is no guarantee that the systems of other companies on which the
Company's systems rely will be timely converted and would not have an adverse
impact on the Company's systems. The Company estimates that the cost of required
upgrades and conversions will not have a significant impact on its results of
operations.
 
                                       30

<PAGE>
                                GILEAD SCIENCES
 
                          CONSOLIDATED BALANCE SHEETS
 

<TABLE>
<CAPTION>
                                           ASSETS
 
<S>                                                                     <C>        <C>
                                                                            DECEMBER 31,
                                                                        --------------------
                                                                          1997       1996
                                                                        ---------  ---------
                                                                           (IN THOUSANDS,
                                                                        EXCEPT SHARE AND PER
                                                                           SHARE AMOUNTS)
Current assets:
  Cash and cash equivalents...........................................  $  31,990  $ 131,984
  Short-term investments..............................................    290,308    163,979
  Other current assets................................................     17,960      4,290
                                                                        ---------  ---------
Total current assets..................................................    340,258    300,253
Property and equipment, net...........................................     10,313      9,172
Other assets..........................................................      1,498      1,248
                                                                        ---------  ---------
                                                                        $ 352,069  $ 310,673
                                                                        ---------  ---------
                                                                        ---------  ---------
 
                            LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable....................................................  $   3,303  $   2,501
  Accrued clinical and preclinical expenses...........................     12,989      5,007
  Other accrued liabilities...........................................      5,705      4,433
  Deferred revenues...................................................      9,541        527
  Current portion of equipment financing obligations and long-term
    debt..............................................................      1,853      3,631
                                                                        ---------  ---------
Total current liabilities.............................................     33,391     16,099
Non-current portion of equipment financing obligations and long-term
  debt................................................................      1,331      2,914
Commitments
Stockholders' equity:
  Preferred stock, par value $.001 per share, issuable in series;
    5,000,000 shares authorized; 1,133,786 shares of Series B
    convertible preferred issued and outstanding at December 31,1997;
    none at December 31, 1996 (liquidation preference of $40,000).....          1     --
  Common stock, par value $.001 per share; 60,000,000 shares
    authorized; 30,041,584 shares and 28,758,165 shares issued and
    outstanding at December 31, 1997 and 1996, respectively...........         30         29
  Additional paid-in capital..........................................    479,737    426,577
  Unrealized gains on investments, net................................        344         89
  Deferred compensation...............................................       (286)      (549)
  Accumulated deficit.................................................   (162,479)  (134,486)
                                                                        ---------  ---------
Total stockholders' equity............................................    317,347    291,660
                                                                        ---------  ---------
                                                                        $ 352,069  $ 310,673
                                                                        ---------  ---------
                                                                        ---------  ---------
</TABLE>

 
                             See accompanying notes
 
                                       31

<PAGE>
                                GILEAD SCIENCES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER    NINE MONTHS
                                                                                       31,               ENDED
                                                                              ----------------------  DECEMBER 31,
                                                                                 1997        1996         1995
                                                                              ----------  ----------  ------------
                                                                                (IN THOUSANDS, EXCEPT PER SHARE
                                                                                            AMOUNTS)
<S>                                                                           <C>         <C>         <C>
Revenues:
  Product sales, net........................................................  $   11,735  $    8,477   $   --
  Contract revenues.........................................................      27,413      24,910        2,685
  Royalty revenues..........................................................         889          33           14
                                                                              ----------  ----------  ------------
Total revenues..............................................................      40,037      33,420        2,699
                                                                              ----------  ----------  ------------
Costs and expenses:
  Cost of product sales.....................................................       1,167         910       --
  Research and development..................................................      59,162      41,881       25,670
  Selling, general and administrative.......................................      25,472      26,692        9,036
                                                                              ----------  ----------  ------------
Total costs and expenses....................................................      85,801      69,483       34,706
                                                                              ----------  ----------  ------------
Loss from operations........................................................     (45,764)    (36,063)     (32,007)
Interest income.............................................................      18,260      15,042        5,199
Interest expense............................................................        (489)       (711)        (607)
                                                                              ----------  ----------  ------------
Net loss....................................................................  $  (27,993) $  (21,732)  $  (27,415)
                                                                              ----------  ----------  ------------
                                                                              ----------  ----------  ------------
Basic and diluted loss per common share.....................................  $     (.95) $    (0.78)  $    (1.29)
                                                                              ----------  ----------  ------------
                                                                              ----------  ----------  ------------
Common shares used to calculate basic and diluted loss per common share.....      29,326      27,786       21,274
                                                                              ----------  ----------  ------------
                                                                              ----------  ----------  ------------
</TABLE>

 
                             See accompanying notes
 
                                       32

<PAGE>
                                GILEAD SCIENCES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                 UNREALIZED GAINS
                                                                    ADDITIONAL      (LOSSES) ON
                                        PREFERRED                     PAID-IN      INVESTMENTS,        DEFERRED      ACCUMULATED
                                          STOCK      COMMON STOCK     CAPITAL           NET          COMPENSATION      DEFICIT
                                      -------------  -------------  -----------  -----------------  ---------------  ------------
                                                          (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S>                                   <C>            <C>            <C>          <C>                <C>              <C>
BALANCE AT MARCH 31, 1995...........    $              $      19     $ 172,947       $      33         $  (1,604)     $  (85,339)
  Issuance of 380,595 shares of
    common stock upon the exercise
    of stock options................       --                  1         1,963          --                --              --
  Issuance of 207,165 shares of
    common stock pursuant to the
    employee stock purchase plan....       --             --             1,430          --                --              --
  Issuance of 4,053,750 shares of
    common stock at $23.25 per share
    (net of issuance costs of
    $5,575).........................       --                  4        88,670          --                --              --
  Deferred compensation related to
    grant of certain stock
    options.........................       --             --               450          --                  (450)         --
  Amortization of deferred
    compensation....................       --             --            --              --                   656          --
  Unrealized gains on
    available-for-sale short-term
    investments, net................       --             --            --                 134            --              --
  Net loss..........................       --             --            --              --                --             (27,415)
                                            -----            ---    -----------          -----           -------     ------------
BALANCE AT DECEMBER 31, 1995........       --                 24       265,460             167            (1,398)       (112,754)
  Issuance of 500,853 shares of
    common stock upon the exercise
    of stock options................       --                  1         3,077          --                --              --
  Issuance of 181,590 shares of
    common stock pursuant to the
    employee stock purchase plan....       --             --             1,856          --                --              --
  Issuance of 4,305,844 shares of
    common stock at $37.75 per share
    (net of issuance costs of
    $7,063).........................       --                  4       155,478          --                --              --
  Compensation related to
    accelerated vesting on stock
    options.........................       --             --               706          --                --              --
  Amortization of deferred
    compensation....................       --             --            --              --                   849          --
  Unrealized losses on
    available-for-sale short-term
    investments, net................       --             --            --                 (78)           --              --
  Net loss..........................       --             --            --              --                --             (21,732)
                                            -----            ---    -----------          -----           -------     ------------
BALANCE AT DECEMBER 31, 1996........       --                 29       426,577              89              (549)       (134,486)
  Issuance of 1,190,541 shares of
    common stock upon the exercise
    of stock options................       --                  1        11,243          --                --              --
  Issuance of 92,878 shares of
    common stock pursuant to the
    employee stock purchase plan....       --             --             1,918          --                --              --
  Issuance of 1,133,786 shares of
    preferred stock.................            1         --            39,999          --                --              --
  Amortization of deferred
    compensation....................       --             --            --              --                   263          --
  Unrealized gains on
    available-for-sale short-term
    investments, net................       --             --            --                 255            --              --
  Net loss..........................       --             --            --              --                --             (27,993)
                                            -----            ---    -----------          -----           -------     ------------
BALANCE AT DECEMBER 31, 1997........    $       1      $      30     $ 479,737       $     344         $    (286)     $ (162,479)
                                            -----            ---    -----------          -----           -------     ------------
                                            -----            ---    -----------          -----           -------     ------------
 
<CAPTION>
 
                                          TOTAL
                                      STOCKHOLDERS'
                                         EQUITY
                                      -------------
 
<S>                                   <C>
BALANCE AT MARCH 31, 1995...........    $  86,056
  Issuance of 380,595 shares of
    common stock upon the exercise
    of stock options................        1,964
  Issuance of 207,165 shares of
    common stock pursuant to the
    employee stock purchase plan....        1,430
  Issuance of 4,053,750 shares of
    common stock at $23.25 per share
    (net of issuance costs of
    $5,575).........................       88,674
  Deferred compensation related to
    grant of certain stock
    options.........................       --
  Amortization of deferred
    compensation....................          656
  Unrealized gains on
    available-for-sale short-term
    investments, net................          134
  Net loss..........................      (27,415)
                                      -------------
BALANCE AT DECEMBER 31, 1995........      151,499
  Issuance of 500,853 shares of
    common stock upon the exercise
    of stock options................        3,078
  Issuance of 181,590 shares of
    common stock pursuant to the
    employee stock purchase plan....        1,856
  Issuance of 4,305,844 shares of
    common stock at $37.75 per share
    (net of issuance costs of
    $7,063).........................      155,482
  Compensation related to
    accelerated vesting on stock
    options.........................          706
  Amortization of deferred
    compensation....................          849
  Unrealized losses on
    available-for-sale short-term
    investments, net................          (78)
  Net loss..........................      (21,732)
                                      -------------
BALANCE AT DECEMBER 31, 1996........      291,660
  Issuance of 1,190,541 shares of
    common stock upon the exercise
    of stock options................       11,244
  Issuance of 92,878 shares of
    common stock pursuant to the
    employee stock purchase plan....        1,918
  Issuance of 1,133,786 shares of
    preferred stock.................       40,000
  Amortization of deferred
    compensation....................          263
  Unrealized gains on
    available-for-sale short-term
    investments, net................          255
  Net loss..........................      (27,993)
                                      -------------
BALANCE AT DECEMBER 31, 1997........    $ 317,347
                                      -------------
                                      -------------
</TABLE>

 
                             See accompanying notes
 
                                       33

<PAGE>
                                GILEAD SCIENCES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,   NINE MONTHS
                                                                                                           ENDED
                                                                              ------------------------  DECEMBER 31,
                                                                                 1997         1996          1995
                                                                              -----------  -----------  ------------
                                                                               INCREASE (DECREASE) IN CASH AND CASH
                                                                                           EQUIVALENTS
                                                                                          (IN THOUSANDS)
<S>                                                                           <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss..................................................................  $   (27,993) $   (21,732)  $  (27,415)
  Adjustments to reconcile net loss to net cash used in operating
    activities:
    Depreciation and amortization...........................................        2,983        4,479        3,247
    Changes in assets and liabilities:
      Other current assets..................................................      (13,670)      (2,732)         371
      Other assets..........................................................         (250)        (175)        (148)
      Accounts payable......................................................          802           89        1,365
      Accrued clinical and preclinical expenses.............................        7,982        1,084          757
      Other accrued liabilities.............................................        1,272        2,204         (366)
      Deferred revenues.....................................................        9,014          319         (859)
                                                                              -----------  -----------  ------------
  Total adjustments.........................................................        8,133        5,268        4,367
                                                                              -----------  -----------  ------------
Net cash used in operating activities.......................................      (19,860)     (16,464)     (23,048)
                                                                              -----------  -----------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of short-term investments.......................................     (410,997)    (437,627)    (173,971)
  Sales of short-term investments...........................................      196,515      248,552       10,455
  Maturities of short-term investments......................................       88,408      153,257       94,147
  Capital expenditures......................................................       (3,861)      (3,727)        (565)
                                                                              -----------  -----------  ------------
Net cash used in investing activities.......................................     (129,935)     (39,545)     (69,934)
                                                                              -----------  -----------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Payments of financing obligations and long-term debt......................       (3,361)      (2,843)      (2,076)
  Proceeds from issuance of long-term debt..................................      --             3,000       --
  Proceeds from issuance of preferred stock.................................       40,000      --            --
  Proceeds from issuances of common stock...................................       13,162      160,416       92,068
                                                                              -----------  -----------  ------------
Net cash provided by financing activities...................................       49,801      160,573       89,992
                                                                              -----------  -----------  ------------
Net increase (decrease) in cash and cash equivalents........................      (99,994)     104,564       (2,990)
Cash and cash equivalents at beginning of period............................      131,984       27,420       30,410
                                                                              -----------  -----------  ------------
Cash and cash equivalents at end of period..................................  $    31,990  $   131,984   $   27,420
                                                                              -----------  -----------  ------------
                                                                              -----------  -----------  ------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
  Deferred compensation related to grant of certain stock options...........  $   --       $   --        $      450
                                                                              -----------  -----------  ------------
                                                                              -----------  -----------  ------------
  Compensation related to accelerated vesting of stock options..............  $   --       $       706   $   --
                                                                              -----------  -----------  ------------
                                                                              -----------  -----------  ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid.............................................................  $       509  $       731   $      619
                                                                              -----------  -----------  ------------
                                                                              -----------  -----------  ------------
</TABLE>

 
                             See accompanying notes
 
                                       34

<PAGE>
                                GILEAD SCIENCES
 

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1997
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    ORGANIZATION AND PRINCIPLES OF CONSOLIDATION  Gilead Sciences, Inc. (the
"Company" or "Gilead") was incorporated in the State of Delaware on June 22,
1987. The Company is primarily engaged in the discovery, development and
marketing of a new class of human therapeutics based on nucleotides.
VISTIDE-Registered Trademark-, the Company's first commercially available
product, which received marketing clearance from the FDA in June 1996, is sold
by Gilead in the United States through drug wholesalers.
 
    The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary Gilead Sciences Limited, which was formed under
the laws of the United Kingdom in November 1995. To date, the subsidiary has
been inactive and has no material assets or liabilities.
 
    CHANGE IN YEAR END  In October 1995, the Company changed its fiscal year end
from March 31 to December 31 effective with the nine-month period ended December
31, 1995.
 
    USE OF ESTIMATES  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
    CASH EQUIVALENTS  The Company considers highly liquid investments with
insignificant interest rate risk and a remaining maturity of three months or
less at the purchase date to be cash equivalents.
 
    CONCENTRATIONS OF CREDIT RISK  Cash and cash equivalents and short-term
investments are the financial instruments that primarily subject the Company to
credit risk. By policy, the Company limits amounts invested in securities by
industry group, investment type and issuer, except for securities issued by the
U.S. government. Gilead is not exposed to any significant concentrations of
credit risk.
 
    REVENUE RECOGNITION  The Company recognizes product sales revenue at the
time product is shipped. Provisions are made for estimated product returns, cash
discounts and government discounts and rebates. Contract revenues recognized
under the Company's collaborative research and development agreements, license
and supply agreements and government grants are recorded as earned based upon
the performance requirements of the contracts. Payments received in advance
under these agreements are recorded as deferred revenues until earned. Royalty
revenues are recognized when received, which is generally in the quarter
following that in which the corresponding sales occur.
 
    STOCK-BASED COMPENSATION  In accordance with the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which the Company adopted in 1996, the Company has elected to
follow Accounting Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, and related interpretations in accounting for its employee
stock option plans. Under APB No. 25, if the exercise price of the Company's
employee and director stock options equals or exceeds the fair value of the
underlying stock on the date of grant, no compensation expense is recognized.
See Note 8 for pro forma disclosures of stock-based compensation pursuant to
SFAS No. 123.
 
    SECURITIES AVAILABLE-FOR-SALE  Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates such
designation at each balance sheet date. The Company's debt securities, which
consist primarily of U.S. treasury securities, corporate commercial paper, bonds
and notes of domestic corporations and asset-backed securities, are classified
as available-for-sale and carried at
 
                                       41

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
estimated fair values in cash equivalents and short-term investments. At
December 31, 1997, cash and cash equivalents include $28.5 million of securities
designated as available-for-sale ($132.6 million at December 31, 1996).
Unrealized gains and losses on available-for-sale securities are excluded from
earnings and reported as a separate component of stockholders' equity. Interest
income includes interest, dividends, amortization of purchase premiums and
discounts and realized gains and losses on sales of securities. The cost of
securities sold is based on the specific identification method.
 
    FOREIGN CURRENCY INSTRUMENTS  The Company enters into foreign exchange
forward contracts with financial institutions in accordance with its foreign
exchange risk management policy to hedge the currency exchange risk associated
with certain firmly committed purchase transactions. Gains and losses on these
contracts are deferred and reported as a component of the related transaction in
the period in which it occurs. For further information, see Note 7.
 
    PROPERTY AND EQUIPMENT  Property and equipment are stated at cost and
consist of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
                                                                           1997        1996
                                                                        ----------  ----------
<S>                                                                     <C>         <C>
Equipment subject to financing obligations............................  $    2,732  $    5,320
Laboratory equipment..................................................       5,571       1,904
Office equipment and furniture and fixtures...........................       5,037       4,081
Leasehold improvements................................................      12,583      10,887
                                                                        ----------  ----------
                                                                            25,923      22,192
Less accumulated depreciation and amortization........................     (15,610)    (13,020)
                                                                        ----------  ----------
                                                                        $   10,313  $    9,172
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>

 
    Laboratory equipment, office equipment and furniture and fixtures are
depreciated on a straight-line basis over their estimated useful lives of three
to five years. Leasehold improvements and equipment subject to financing
obligations are amortized on a straight-line basis over the shorter of their
estimated useful life or the term of the related lease or borrowing.
 
    See Note 5 for information about certain laboratory and office equipment
acquired pursuant to equipment financing obligations.
 
    OTHER ACCRUED LIABILITIES  Other accrued liabilities are summarized as
follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                             --------------------
                                                                               1997       1996
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
Accrued compensation.......................................................  $   1,833  $   1,662
Accrued Medicaid rebates...................................................      1,881      1,100
Other......................................................................      1,991      1,671
                                                                             ---------  ---------
                                                                             $   5,705  $   4,433
                                                                             ---------  ---------
                                                                             ---------  ---------
</TABLE>

 
                                       42

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    BASIC AND DILUTED LOSS PER COMMON SHARE  At December 31, 1997, the Company
adopted SFAS No. 128, EARNINGS PER SHARE, which requires the Company to report
basic and diluted loss per share in its financial statements. For all periods
presented, both basic and diluted loss per common share are computed based on
the weighted average number of common shares outstanding during the period.
Convertible preferred stock and stock options could potentially dilute basic
earnings per share in the future but were excluded from the computation of
diluted loss per share as their effect is antidilutive for the periods
presented.
 
    NEW ACCOUNTING PRONOUNCEMENTS  In June 1997, the Financial Accounting
Standards Board issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION, which establishes standards pertaining to how public
business enterprises report operating segments in annual financial statements
and requires those enterprises to report selected information about operating
segments in interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements for fiscal years beginning
after December 15, 1997, and therefore the Company will adopt the new
requirements retroactively in 1998. Management has not completed its review of
SFAS No. 131, but does not anticipate that its adoption will have a significant
effect on its existing financial reporting practices.
 
    In September 1997, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 97-12, ACCOUNTING FOR INCREASED SHARE AUTHORIZATIONS IN
AN IRS SECTION 423 EMPLOYEE STOCK PURCHASE PLAN under APB OPINION NO. 25. EITF
Issue No. 97-12 provides that new shares authorized under existing Section 423
employee stock purchase plans may give rise to compensation expense under
circumstances specified in that accounting standard. The Company has a Section
423 employee stock purchase plan ("ESPP"), which is discussed in Note 8, with a
share authorization increase pending stockholder approval, as described in Note
10. It is likely that some number of these newly authorized shares will require
the Company to recognize compensation expense in its results of operations
during 1998 and 1999. The amount of such potential compensation expense is not
currently estimable, but the Company expects that it will not have a significant
impact on its results of operations in either year.
 
    RECLASSIFICATIONS  Certain prior period amounts have been reclassified to
conform to the 1997 presentation.
 
                                       43

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
2. INVESTMENTS
 
    The following is a summary of available-for-sale securities (in thousands):
 

<TABLE>
<CAPTION>
                                                               GROSS          GROSS
                                               AMORTIZED    UNREALIZED     UNREALIZED    ESTIMATED
                                                  COST         GAINS         LOSSES      FAIR VALUE
                                               ----------  -------------  -------------  ----------
<S>                                            <C>         <C>            <C>            <C>
DECEMBER 31, 1997
U.S. Treasury Securities and obligations of
  U.S. government agencies...................  $   35,615    $      55      $      (6)   $   35,664
Corporate debt securities....................      78,054          192             (1)       78,245
Asset-backed securities......................     118,362          121            (35)      118,448
Other debt securities........................      86,450           20             (2)       86,468
                                               ----------        -----            ---    ----------
  Total......................................  $  318,481    $     388      $     (44)   $  318,825
                                               ----------        -----            ---    ----------
                                               ----------        -----            ---    ----------
DECEMBER 31, 1996
U.S. Treasury Securities and obligations of
  U.S. government agencies...................  $   48,728    $       7      $     (89)   $   48,646
Corporate debt securities....................      27,115           24             (3)       27,136
Asset-backed securities......................      75,421          147             (5)       75,563
Other debt securities........................     145,158            8         --           145,166
                                               ----------        -----            ---    ----------
  Total......................................  $  296,422    $     186      $     (97)   $  296,511
                                               ----------        -----            ---    ----------
                                               ----------        -----            ---    ----------
</TABLE>

 
    The following table presents certain information related to sales of
available-for-sales securities (in thousands):
 

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER    NINE MONTHS
                                                                  31,               ENDED
                                                         ----------------------  DECEMBER 31,
                                                            1997        1996         1995
                                                         ----------  ----------  ------------
<S>                                                      <C>         <C>         <C>
Proceeds from sales....................................  $  196,515  $  248,552   $   10,445
Gross realized gains on sales..........................  $      225  $      451   $   --
Gross realized losses on sales.........................  $      142  $       65   $   --
                                                         ----------  ----------  ------------
                                                         ----------  ----------  ------------
</TABLE>

 
    At both December 31, 1997 and 1996, neither the contractual maturities of
the debt securities (excluding asset-backed securities) nor the estimated
maturities of the asset-backed securities exceed three years. Under the
Company's investment policy, it may enter into repurchase agreements ("repos")
with major banks and authorized dealers provided that such repos are
collateralized by U.S. government securities with a fair value of at least 102
percent of the fair value of securities sold.
 
3. COLLABORATIVE RESEARCH AGREEMENTS
 
    PHARMACIA & UPJOHN  In August 1996, the Company and Pharmacia & Upjohn S.A.
("P&U") entered into a License and Supply Agreement ("P&U Agreement") to market
VISTIDE-Registered Trademark- (cidofivir injection) in all countries outside the
United States. Under the terms of the agreement, P&U paid Gilead an initial
license fee of $10.0 million. During the second quarter of 1997, VISTIDE was
approved for marketing in Europe by the European Commission, which triggered an
additional cash milestone payment of $10.0 million by P&U to the Company. Also
as a result of achieving this milestone, in the second quarter
 
                                       44

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
3. COLLABORATIVE RESEARCH AGREEMENTS (CONTINUED)
the Company issued and P&U purchased 1,133,786 shares of Series B Convertible
Preferred Stock for approximately $40.0 million, or $35.28 per share. For
additional information about the preferred stock, refer to Note 8.
 
    Under the terms of the P&U Agreement and related agreements covering
expanded access programs for VISTIDE outside of the United States, the Company
supplies to P&U either the bulk drug substance used to manufacture VISTIDE or
the finished VISTIDE product ("Product"). Gilead is entitled to receive a
royalty based upon P&U's sale of Product. It receives a portion of the royalty
upon shipping either bulk drug substance or Product to P&U and the remainder
upon P&U's sale of Product to third parties. Any royalties that Gilead receives
before Product is sold to third parties are recorded as deferred revenues until
such sales occur. At December 31, 1997, the Company has recorded on its balance
sheet approximately $2.1 million of deferred revenues ($0.3 million at December
31, 1996).
 
    HOFFMANN-LA ROCHE  In September 1996, Gilead and F. Hoffmann-La Roche Ltd.
and Hoffmann-La Roche, Inc. (collectively, "Roche") entered into a collaboration
agreement ("Roche Agreement") to develop and commercialize therapies to treat
and prevent viral influenza. Under the Roche Agreement, Roche received exclusive
worldwide rights to Gilead's proprietary influenza neuraminidase inhibitors. In
October 1996, Roche made an initial license fee payment to Gilead of $10.3
million, which the Company reported as income. In both the second and fourth
quarters of 1997, Gilead earned cash payments of $3.0 million per quarter, for a
total of $6.0 million, upon achieving certain developmental milestones. Gilead
is entitled to additional cash payments of up to $34.0 million upon achieving
additional developmental and regulatory milestones. If any commercial products
are developed under the collaboration, Roche will pay Gilead royalties based on
net product sales.
 
    Under the Roche Agreement, Roche reimburses the Company for its related
research and development costs under this program by funding such costs
quarterly in advance, based on an annual budget. Amounts incurred by the Company
in excess of amounts funded in advance may also be reimbursed, subject to
Roche's approval. For the years ended December 31, 1997 and 1996, the Company
recorded approximately $8.2 million and $1.1 million, respectively, of research
and development reimbursement revenue related to the Roche Agreement. In the
fourth quarter of 1997, the Company incurred approximately $5.2 million of costs
related to the Roche Agreement in excess of costs originally estimated for the
quarter. Because reimbursement of the excess costs is subject to Roche's review
and approval in the first quarter of 1998, the Company did not record the
potential reimbursement of any of these excess costs as revenues in its results
of operations for the year ended December 31, 1997. Except for the $5.2 million
subject to approval as of year-end, related research and development costs
approximate the reimbursement revenue and are included in research and
development expenses in the accompanying consolidated financial statements.
Reimbursements are included in contract revenues. At December 31, 1997, the
Company has recorded deferred revenues of $7.2 million, which represent Roche's
advance reimbursement of budgeted research and development costs for the first
quarter of 1998.
 
    In September 1996, Gilead and Roche entered into an agreement to co-promote
Roche's Roferon-A-Registered Trademark- (Interferon alfa-2a, recombinant) for
the treatment of chronic hepatitis C infection in the United States. Roche paid
Gilead a $0.2 million one-time fee in 1996. Beginning in 1997, Roche is required
to pay Gilead a royalty based on the net product sales.
 
                                       45

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
3. COLLABORATIVE RESEARCH AGREEMENTS (CONTINUED)
    GLAXO WELLCOME  In July 1990, the Company entered into a collaborative
research agreement with Glaxo Wellcome Inc. ("Glaxo"). Concurrent with the
signing of the agreement, Glaxo made an $8.0 million equity investment in the
Company and holds 889,911 shares of the Company's outstanding common stock at
December 31, 1997. The agreement provided for the Company to conduct research
over a period of five years with a goal of identifying code blocker compounds
with potential application in the diagnosis, prevention and treatment of cancer.
The collaboration was extended to all potential therapeutic applications in July
1992.
 
    In March 1996, the Company and Glaxo entered into a new collaborative
research agreement extending for five years the existing collaboration between
the parties. Under the terms of the new agreement, Glaxo will fund the Company's
ongoing research in the code blocker field for five years. Each party has a
worldwide right to the other party's patent rights to research, develop,
manufacture and sell products based on code-blocker technology for all
applications. Glaxo will have the primary right to develop any products
identified during the collaboration. Gilead is entitled to payments for
achievement of regulatory milestones, as well as royalties on any product sales.
Glaxo has the right to terminate the collaborative research and funding at any
time, without prior notice beginning in June 1998, in which case Gilead could
develop code blocker technology independently or with a third party, subject to
Glaxo's ownership rights to joint technology. Under the terms of the Glaxo
agreements, the Company received $3.0 million in both 1997 and 1996, and $2.1
million in the nine months ended December 31, 1995, to fund research. Such
reimbursed research and development costs approximate the related revenue and
are included in research and development expenses in the accompanying financial
statements.
 
    AMERICAN HOME PRODUCTS  In August 1994, the Company entered into a license
and supply agreement with Storz Instrument Company ("Storz"), a subsidiary of
American Cyanamid Company, to develop and market an eye-drop formulation of
cidofovir for the potential treatment of topical ophthalmic viruses. American
Cyanamid was later acquired by American Home Products, who sold Storz to Bausch
& Lomb Incorporated in late 1997. The Company received a $0.3 million annual fee
in each of the years ended December 31, 1997 and 1996, which were recognized as
revenue (the Company also recognized as revenue a $0.3 million annual fee in the
nine months ended December 31, 1995). In addition, under the agreement the
Company is entitled to receive annual fees, milestone payments and future
royalties on product sales.
 
4. ACCOUNTS RECEIVABLE AND OTHER CURRENT ASSETS
 
    Gilead sells VISTIDE through major drug wholesalers in the United States. In
August 1996 a major wholesaler, FoxMeyer Corporation, filed for bankruptcy
protection under Chapter 11 of the U.S. Bankruptcy Code. The total receivable
outstanding as of December 31, 1996 from FoxMeyer of $0.6 million has been
reserved. In 1997, the Company collected approximately $0.1 million of this
amount by assigning its claim to a third party. Accordingly, no additional
recovery of this receivable is expected. Trade receivables, net of allowances,
are reported on the consolidated balance sheet in other current assets.
 
    At December 31, 1997, other current assets include reimbursable research and
development expenses and a milestone payment totaling approximately $12.4
million due from Roche. For additional information, refer to Note 3.
 
                                       46

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
5. EQUIPMENT FINANCING OBLIGATIONS AND LONG-TERM DEBT
 
    Included in property and equipment at December 31, 1997 and 1996 are assets
with a cost of $2.7 million and $5.3 million, respectively, acquired pursuant to
capital lease obligations and equipment loans. Accumulated amortization of
assets acquired pursuant to these obligations was approximately $1.7 million and
$4.4 million at December 31, 1997 and 1996, respectively. Assets acquired under
these arrangements secure the related obligations. Amounts due under these
obligations beyond 1998 are immaterial. The present value of these outstanding
obligations at December 31, 1997 was $0.4 million.
 
    In May 1994, the Company entered into an unsecured $6.0 million term loan to
finance its office and research and development facilities expansion and the
acquisition of related laboratory equipment. The four-year loan requires
quarterly principal payments of $0.4 million, plus applicable interest at a
fixed rate of 8 percent, commencing July 1994. In addition, the Company is
required to comply with certain financial and operating covenants. At December
31, 1997, the total debt outstanding under the term loan is $0.8 million, all of
which is classified as a current liability. The book value of this debt
approximates its fair value at December 31, 1997.
 
    In October 1996, the Company entered into an unsecured $3.0 million term
loan to finance its office and research and development facilities expansion.
The four-year loan requires quarterly principal payments of $0.2 million, plus
applicable interest, commencing October 1, 1996. The interest rate was fixed at
6.9 percent for the first year of the loan, but resets periodically thereafter
based on applicable LIBOR rates. In addition, the Company is required to comply
with certain financial and operating covenants. At December 31, 1997, the total
debt outstanding is approximately $2.1 million. The current portion outstanding
is $0.8 million. At December 31, 1997, the book value of this long-term debt
approximates its fair value.
 
    At December 31, 1997, the Company is in compliance with all financial and
operating covenants under the unsecured term loans.
 
                                       47

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
6. COMMITMENTS
 
    The Company leases its facilities pursuant to operating leases. Rent expense
under these leases totaled approximately $2.3 million and $2.1 million for the
years ended December 31, 1997 and 1996, respectively, and approximately $1.5
million for the nine-month period ended December 31, 1995.
 
    At December 31, 1997, the aggregate noncancelable future minimum payments
under the operating leases, net of aggregate future minimum rentals to be
received by the Company under noncancelable subleases, are as follows (in
thousands):
 

<TABLE>
<CAPTION>
<S>                                                                                  <C>
Year ending December 31:
  1998.............................................................................  $   2,080
  1999.............................................................................      2,341
  2000.............................................................................      2,484
  2001.............................................................................      2,573
  2002.............................................................................      2,664
                                                                                         9,330
                                                                                     ---------
Thereafter.........................................................................  $  21,472
                                                                                     ---------
                                                                                     ---------
</TABLE>

 
The Company has in place a letter of credit agreement from a bank, which secures
the aggregate future payments under one of its facilities leases. At December
31, 1997, a total of $1.4 million was secured under this letter of credit
arrangement.
 
7. FOREIGN CURRENCY INSTRUMENTS
 
    Gilead enters into forward foreign exchange contracts to hedge the currency
risk associated with certain firmly committed purchase orders denominated in
foreign currencies. At December 31, 1997, the Company had outstanding forward
contracts with maturity dates early in 1998 to sell approximately $1.0 million
of foreign currencies (primarily the French franc). At December 31, 1996, the
Company had outstanding forward contracts to sell $1.4 million of French francs
with maturity dates in early 1997.
 
    In general, these contracts do not expose the Company to market risk because
gains and losses on the contracts offset gains and losses on the transactions
being hedged. The Company's exposure to credit risk from these contracts is a
function of changes in interest and currency exchange rates and, therefore,
varies over time. Gilead limits its risk that counterparties to these contracts
may be unable to perform by transacting only with major U.S. banks. The Company
also limits its risk of loss by entering into contracts that provide for net
settlement at maturity. Therefore, the Company's overall risk of loss in the
event of a counterparty default is limited to the amount of any unrecognized and
unrealized gains on outstanding contracts (i.e., those contracts that have a
positive fair value) at the date of default. Estimates of the fair values of
contracts are based on established pricing models and prevailing market rates.
At December 31, 1997, the aggregate fair value of the Company's forward foreign
exchange contracts was approximately ($0.2) million. The fair values of such
contracts were immaterial at December 31, 1996.
 
8. STOCKHOLDERS' EQUITY
 
    PREFERRED STOCK  The Company has 5,000,000 shares of authorized preferred
stock issuable in series. The Company's Board of Directors is authorized to
determine the designation, powers, preferences and
 
                                       35

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
8. STOCKHOLDERS' EQUITY (CONTINUED)
rights of any such series. The Company has reserved 400,000 shares of preferred
stock for potential issuance under the Preferred Share Purchase Rights Plan.
 
    In June 1997, the Company issued 1,133,786 shares of Series B Convertible
Preferred Stock to P&U for approximately $40.0 million, or $35.28 per share.
Each preferred share is convertible at the option of the holder into one share
of common stock at any time, and each has a liquidation value equal to its
purchase price. The Series B Preferred Stock has substantially the same voting
rights as the Company's common stock. Dividends are noncumulative and payable at
the rate of 5 percent of the original issue price per year only when, as and if
declared by the Company's Board of Directors.
 
    COMMON STOCK  The Company has 60,000,000 shares of authorized common stock
at December 31, 1997. In January 1996, the Board of Directors approved an
amendment to the Company's Certificate of Incorporation, increasing the number
of shares of common stock authorized from 35,000,000 to 60,000,000 shares. The
amendment was approved by the Company's stockholders and filed with the Delaware
Secretary of State in May 1996.
 
    EMPLOYEE STOCK PURCHASE PLAN  The Company has adopted an ESPP under which
employees can purchase shares of the Company's common stock based on a
percentage of their compensation. The purchase price per share must equal at
least the lower of 85 percent of the market value on the date offered or the
date purchased. A total of 750,000 shares of common stock are reserved for
issuance under the ESPP. As of December 31, 1997, 694,167 shares had been issued
under the ESPP (601,289 shares as of December 31, 1996).
 
    STOCK OPTION PLANS  In December 1987, the Company adopted the 1987 Incentive
Stock Option Plan and the Supplemental Stock Option Plan for issuance of common
stock to employees, consultants and scientific advisors. In April 1991, the
Company's Board of Directors approved the granting of certain additional
nonqualified stock options with terms and conditions substantially similar to
those granted under the 1987 Supplemental Stock Option Plan. At the grant date,
none of the options described above had exercise prices that were less than the
fair value of the underlying stock on that date. The options vest over five
years pursuant to a formula determined by the Company's Board of Directors and
expire after ten years. No shares are available for grant of future options
under any of these plans.
 
    In November 1991, the Company adopted the 1991 Stock Option Plan ("1991
Plan") for issuance of common stock to employees and consultants. Options issued
under the 1991 Plan shall, at the discretion of the Company's Board of
Directors, be either incentive stock options or nonqualified stock options. The
exercise price of incentive stock options must be at least equal to the fair
value of the common stock on the date of grant. The options vest over five years
pursuant to a formula determined by the Company's Board of Directors and expire
after ten years. At December 31, 1997, 979,420 shares were available for grant
of future options.
 
    In November 1995, the Company adopted the 1995 Non-Employee Directors' Stock
Option Plan ("1995 Plan") for issuance of common stock to non-employee Directors
pursuant to a predetermined formula. The exercise price of options granted under
the 1995 Plan must be at least equal to the fair value of the common stock on
the date of grant. The options vest over five years from the date of grant in
quarterly 5 percent installments and expire after ten years. At December 31,
1997, 151,000 shares were available for grant of future options.
 
                                       36

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
8. STOCKHOLDERS' EQUITY (CONTINUED)
    The following table summarizes activity under all stock option plans for
each of the two years in the period ended December 31, 1997, and the nine-month
period ended December 31, 1995. All option grants presented in the table had
exercise prices not less than the fair value of the underlying stock on the
grant date, except as noted below (shares in thousands):
 

<TABLE>
<CAPTION>
                                                                                                         NINE MONTHS ENDED
                                                             YEAR ENDED              YEAR ENDED
                                                            DECEMBER 31,            DECEMBER 31,            DECEMBER 31,
                                                                1997                    1996                    1995
                                                       ----------------------  ----------------------  ----------------------
                                                                   WEIGHTED                WEIGHTED                WEIGHTED
                                                                    AVERAGE                 AVERAGE                 AVERAGE
                                                                   EXERCISE                EXERCISE                EXERCISE
                                                        SHARES       PRICE      SHARES       PRICE      SHARES       PRICE
                                                       ---------  -----------  ---------  -----------  ---------  -----------
<S>                                                    <C>        <C>          <C>        <C>          <C>        <C>
Outstanding, beginning of period.....................      4,651   $   14.96       4,144   $   10.55       4,069   $    8.96
  Granted............................................        923       29.21       1,239       25.89         532       18.04
  Granted (exercise price less than fair value)......     --          --          --          --              75       19.00
  Forfeited..........................................       (266)      20.51        (231)      13.70        (155)      11.60
  Exercised..........................................     (1,191)       9.42        (501)       6.15        (377)       5.20
                                                       ---------  -----------  ---------  -----------  ---------  -----------
Outstanding, end of period...........................      4,117   $   19.39       4,651   $   14.96       4,144   $   10.55
                                                       ---------  -----------  ---------  -----------  ---------  -----------
Exercisable, end of period...........................      1,673   $   13.83       2,025   $   10.23       1,663   $    8.54
                                                       ---------  -----------  ---------  -----------  ---------  -----------
</TABLE>

 
    During the nine-month period ended December 31, 1995, the Company granted
75,000 stock options with exercise prices less than the fair value of the
underlying stock at the grant date. For these options only, the Company recorded
deferred compensation expense of $0.5 million, based on the difference between
the grant price and the fair value of the underlying stock at the date of grant.
This deferred compensation is being amortized to expense over the five-year
vesting period of the options. Amortization expense for the year ended December
31, 1997 totaled $0.3 million ($0.8 million for the year ended December 31, 1996
and $0.7 million for the nine-month period ended December 31, 1995).
 
    The following table summarizes information about significant exercise price
ranges of outstanding and exercisable options at December 31, 1997 (options in
thousands):
 

<TABLE>
<CAPTION>
                                                                     WEIGHTED-
                                                                      AVERAGE         WEIGHTED-                   WEIGHTED-
                                                                     REMAINING         AVERAGE                     AVERAGE
                                                    OPTIONS      CONTRACTUAL LIFE     EXERCISE       OPTIONS      EXERCISE
RANGE OF EXERCISE PRICES                          OUTSTANDING        IN YEARS           PRICE      EXERCISABLE      PRICE
- -----------------------------------------------  -------------  -------------------  -----------  -------------  -----------
<S>                                              <C>            <C>                  <C>          <C>            <C>
$0.09--$12.25..................................        1,054              5.11        $    7.56           739     $    7.72
$12.50--$18.75.................................        1,211              6.64            15.99           647         15.30
$19.00--$29.00.................................        1,030              8.83            24.12           158         21.34
$29.625--$42.88................................          822              8.59            33.65           129         32.30
                                                       -----               ---       -----------        -----    -----------
  Total........................................        4,117              7.19        $   19.39         1,673     $   13.83
                                                       -----               ---       -----------        -----    -----------
                                                       -----               ---       -----------        -----    -----------
</TABLE>

 
                                       37

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
8. STOCKHOLDERS' EQUITY (CONTINUED)
    PRO FORMA DISCLOSURES  The table below reflects Gilead's net loss and basic
and diluted loss per common share if compensation cost for the Company's stock
plans had been determined based on their estimated fair values at the grant
dates for awards under those plans. Since pro forma compensation cost is
amortized over the vesting periods of the related awards, and because SFAS No.
123 is applicable only to options granted or shares issued subsequent to March
31, 1995, its pro forma effect will not be fully reflected until 1999.
 

<TABLE>
<CAPTION>
                                                                                                      NINE MONTHS
                                                                                    YEAR ENDED           ENDED
                                                                                   DECEMBER 31,       DECEMBER 31,
                                                                              ----------------------  ------------
                                                                                 1997        1996         1995
                                                                              ----------  ----------  ------------
<S>                                                                           <C>         <C>         <C>
Pro forma net loss (in thousands)...........................................  $  (38,503) $  (29,586)  $  (29,162)
Pro forma basic and diluted loss per share..................................  $    (1.31) $    (1.06)  $    (1.37)
                                                                              ----------  ----------  ------------
</TABLE>

 
    Fair values of the options were estimated at grant dates using a
Black-Scholes option pricing model. The Company used the multiple option
approach and the following assumptions:
 

<TABLE>
<CAPTION>
<S>                                                                                    <C>        <C>        <C>
Expected life in years (from vesting date)--options..................................       1.75       1.54       1.54
Expected life in years--ESPP.........................................................        .75       1.54       1.54
Interest rate--options...............................................................        6.2%       6.0%       6.0%
Interest rate--ESPP..................................................................        5.6%       6.0%       6.0%
Volatility...........................................................................         66%        69%        69%
Dividend yield.......................................................................          0%         0%         0%
                                                                                       ---------  ---------  ---------
</TABLE>

 
    The weighted average estimated fair value of each stock option granted for
the years ended December 31, 1997 and 1996, and for the nine months ended
December 31, 1995, was $17.14, $15.17 and $11.26, respectively.
 
    PREFERRED SHARE PURCHASE RIGHTS PLAN  In November 1994, the Company adopted
a Preferred Share Purchase Rights Plan (the "Plan"). The Plan provides for the
distribution of a preferred stock purchase right (a "Right") as a dividend for
each share of Gilead common stock held of record at the close of business on
December 14, 1994. The Rights are not currently exercisable. Under certain
conditions involving an acquisition or proposed acquisition by any person or
group of 15 percent or more of the common stock, the Rights permit the holders
(other than the 15 percent holder) to purchase Gilead common stock at a 50
percent discount from the market price at that time, upon payment of an exercise
price of $60 per Right. In addition, in the event of certain business
combinations, the Rights permit the purchase of the common stock of an acquirer
at a 50 percent discount from the market price at that time. Under certain
conditions, the Rights may be redeemed by the Company's Board of Directors in
whole, but not in part, at a price of $.01 per Right. The Rights have no voting
privileges and are attached to and automatically trade with Gilead common stock.
The Rights expire on November 21, 2004.
 
                                       38

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
9. INCOME TAXES
 
    As of December 31, 1997, the Company had federal net operating loss
carryforwards of approximately $166.9 million. The net operating loss
carryforwards will expire at various dates beginning in 2001 through 2012, if
not utilized.
 
    Significant components of the Company's deferred tax assets for federal and
state income taxes are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                        ----------------------
                                                                           1997        1996
                                                                        ----------  ----------
<S>                                                                     <C>         <C>
Deferred tax assets:
  Net operating loss carryforwards....................................  $   57,100  $   43,000
  Research credits (expire 2001-2012).................................       6,800       5,400
  Capitalized R&D for California......................................       4,400       4,100
  Other...............................................................       2,300       2,800
                                                                        ----------  ----------
Total deferred tax assets.............................................      70,600      55,300
Valuation allowance for deferred tax assets...........................     (70,600)    (55,300)
                                                                        ----------  ----------
Net deferred tax assets...............................................  $        0  $        0
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>

 
    The net valuation allowance increased by $15.3 million and $8.2 million
during the years ended December 31, 1997 and 1996, respectively.
 
    Utilization of the net operating losses and credit carryforwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986.
 
    Approximately $12.1 million of the valuation allowance at December 31, 1997
relates to the tax benefits of stock option deductions which will be credited to
additional paid-in capital when realized.
 
10. SUBSEQUENT EVENTS
 
    On January 22, 1998, the Board of Directors authorized an additional 500,000
shares of common stock as available to be issued under the ESPP. It also
authorized an additional 800,000 shares of common stock as available for grant
under the 1991 Plan. Both increases are subject to stockholder approval. See
Note 1 for additional information about the ESPP share authorization increase.
 
                                       39

<PAGE>
                                GILEAD SCIENCES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1997
 
11. QUARTERLY RESULTS (UNAUDITED)
 
    The following table is in thousands, except per share amounts:
 

<TABLE>
<CAPTION>
                                                              1ST QUARTER  2ND QUARTER  3RD QUARTER  4TH QUARTER
                                                              -----------  -----------  -----------  -----------
<S>                                                           <C>          <C>          <C>          <C>
1997
  Total revenues............................................   $   5,466    $  19,726    $   4,937    $   9,909
  Total costs and expenses..................................      17,460       21,170       20,017       27,155
  Net income (loss).........................................      (7,948)       2,711      (10,331)     (12,424)
  Basic earnings (loss) per share...........................       (0.27)        0.14        (0.35)       (0.42)
  Diluted earnings (loss) per share.........................       (0.27)        0.09        (0.35)       (0.42)
1996
  Total revenues............................................   $     779    $   2,206    $  24,654    $   5,781
  Total costs and expenses..................................      14,148       18,104       19,251       17,980
  Net income (loss).........................................     (10,802)     (12,158)       9,310       (8,082)
  Basic earnings (loss) per share...........................       (0.42)       (0.43)        0.33        (0.28)
  Diluted earnings (loss) per share.........................       (0.42)       (0.43)        0.30        (0.28)
                                                              -----------  -----------  -----------  -----------
                                                              -----------  -----------  -----------  -----------
</TABLE>

 
                                       40

<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
Gilead Sciences, Inc.
 
    We have audited the accompanying consolidated balance sheets of Gilead
Sciences, Inc. as of December 31, 1997 and 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
two years in the period ended December 31, 1997, and the nine months ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Gilead
Sciences, Inc. at December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1997, and the nine months ended December 31, 1995, in conformity
with generally accepted accounting principles.
 
                                          Ernst & Young LLP
 
Palo Alto, California
 
January 23, 1998

 
                                       48

<PAGE>
                             CORPORATE INFORMATION
 
TRANSFER AGENT AND REGISTRAR
 
    Communications concerning stock transfer requirements, lost certificates and
changes of address should be directed to the Transfer Agent:
 
       ChaseMellon Shareholder Services LLC
       85 Challenger Road
       Overpeck Centre
       Ridgefield Park, NJ 07660 USA
       http://www.chasemellon.com
       1-800-522-6645
 
STOCKHOLDER INQUIRIES
 
    Inquiries from our stockholders and potential investors regarding our
company are always welcome and will receive a prompt response. Please direct
your requests for information to:
 
       Investor Relations
       Gilead Sciences, Inc.
       333 Lakeside Drive
       Foster City, California 94404 USA
       650-574-3000 or 1-800-GILEAD-5
 
    Information regarding Gilead is available via the Internet on our Web site
at: www.gilead.com
 
STOCK LISTING
 
    Gilead common stock is traded on The Nasdaq Stock Market under the symbol
GILD.
 
PRICE RANGE OF COMMON STOCK
 
    As of February 27, 1998, there were approximately 564 stockholders of record
of the Company's common stock and 30,131,484 shares of common stock outstanding.
No dividends have been paid on the common stock since the Company's inception,
and the Company does not anticipate paying any dividends in the foreseeable
future.

<TABLE>
<CAPTION>
1996                  HIGH        LOW
- -------------------- -------    -------
<S>                  <C>        <C>
First Quarter....... $41 7/8    $26 3/4
Second Quarter...... $39        $21 3/4
Third Quarter....... $29 3/4    $17 1/4
Fourth Quarter...... $28 3/4    $21 1/2
 
<CAPTION>
 
1997                  HIGH        LOW
- -------------------- -------    -------
<S>                  <C>        <C>
First Quarter....... $34 1/4    $22 7/8
Second Quarter...... $32 1/8    $21 5/8
Third Quarter....... $46 1/8    $24 1/4
Fourth Quarter...... $44 7/8    $32 3/4
</TABLE>

 
ANNUAL MEETING
 
    The annual meeting of stockholders will be held at 10:00 a.m. on Wednesday,
May 27, 1998, at Hotel Sofitel, 223 Twin Dolphin Drive, Redwood City,
California.
 
    VISTIDE-Registered Trademark- is a registered trademark and PREVEON-TM- is a
    trademark of Gilead Sciences, Inc.
 
    -C- 1998 Gilead Sciences, Inc.
 
    Design: Cahan &Associates, San Francisco
 
    Photography: Daniel de Souza
 
                                       49





<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                          31,990
<SECURITIES>                                   290,308
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                               340,258<F1>
<PP&E>                                          25,923
<DEPRECIATION>                                  15,610
<TOTAL-ASSETS>                                 352,069
<CURRENT-LIABILITIES>                           33,391
<BONDS>                                          1,331
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          1
<COMMON>                                            30
<OTHER-SE>                                     317,316
<TOTAL-LIABILITY-AND-EQUITY>                   352,069
<SALES>                                         11,735
<TOTAL-REVENUES>                                40,037
<CGS>                                            1,167
<TOTAL-COSTS>                                   85,801
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 489
<INCOME-PRETAX>                               (27,993)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                           (27,993)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                  (27,993)
<EPS-PRIMARY>                                    (.95)
<EPS-DILUTED>                                    (.95)
<FN>
<F1>Current assets includes other current assets.
</FN>
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<RESTATED> 
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   3-MOS                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1997             DEC-31-1996
<PERIOD-START>                             APR-01-1997             JUL-01-1996
<PERIOD-END>                               JUN-30-1997             SEP-30-1996
<CASH>                                         138,961                 156,043
<SECURITIES>                                   198,393                 134,260
<RECEIVABLES>                                        0                   4,320
<ALLOWANCES>                                         0                   1,326
<INVENTORY>                                          0                       0
<CURRENT-ASSETS>                               342,038                 306,627<F1>
<PP&E>                                          10,458                   7,609<F2>
<DEPRECIATION>                                       0                       0
<TOTAL-ASSETS>                                 353,960                 315,445
<CURRENT-LIABILITIES>                           21,526                  16,054
<BONDS>                                          1,828                   1,492
<PREFERRED-MANDATORY>                                0                       0
<PREFERRED>                                          1                       0
<COMMON>                                            29                      29
<OTHER-SE>                                     330,576                 297,870
<TOTAL-LIABILITY-AND-EQUITY>                   353,960                 315,445
<SALES>                                          3,956                   3,353
<TOTAL-REVENUES>                                19,726                  24,654
<CGS>                                              328                     447
<TOTAL-COSTS>                                   21,170                  19,251
<OTHER-EXPENSES>                                     0                       0
<LOSS-PROVISION>                                     0                       0
<INTEREST-EXPENSE>                                   0                       0
<INCOME-PRETAX>                                  2,711                   9,310
<INCOME-TAX>                                         0                       0
<INCOME-CONTINUING>                              2,711                   9,310
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                     2,711                   9,310
<EPS-PRIMARY>                                      .14                     .33
<EPS-DILUTED>                                      .09                     .30
<FN>
<F1>Current assets includes other current assets.
<F2>PP&E is net of accumulated depreciation.
</FN>
        

</TABLE>