<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, 1998
 
  / /    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                   (Zip Code)
   (Address of principal executive
               offices)
</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 26, 1999 was $762,213,210*.
 
    The number of shares outstanding of the Registrant's Common Stock was
30,884,298 as of February 26, 1999.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    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 No. 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, 1997, 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 and
the Registrant's Current Report on Form 8-K filed March 9, 1999 are incorporated
herein by reference into Part IV of this Report.
 
- ------------------------
 
* Based on a closing price of $41.25 per share. Excludes 12,406,402 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 26, 1999. 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
 
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
 
    THIS REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO
CLINICAL AND REGULATORY DEVELOPMENTS (INCLUDING ANTICIPATED CLINICAL TRIAL
COMMENCEMENT AND FDA FILING AND APPROVAL DATES), MARKETING AND SALES MATTERS,
FUTURE EXPENSE LEVELS, FINANCIAL RESULTS AND YEAR 2000 MATTERS. THESE STATEMENTS
INVOLVE INHERENT RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL FINANCIAL AND
OPERATING 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 ONGOING DEVELOPMENT AND COMMERCIALIZATION OF THE COMPANY'S
POTENTIAL PHARMACEUTICAL PRODUCTS AND, IN THE CASE OF YEAR 2000 MATTERS, THE
ABILITY TO IDENTIFY AND CORRECT ALL RELEVANT COMPUTER CODE AND THE SUCCESS OF
REMEDIAL EFFORTS IMPLEMENTED BY THIRD-PARTY SUPPLIERS AND BUSINESS PARTNERS.
 
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, be
uneconomical to market or be precluded from commercialization by either
proprietary rights or competing products of others.
 
    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,
expensive and uncertain 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 and size of the market
for any of the Company's products or products in development.
 
    The Company expects that its financial results will continue to 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, nor can there be assurance that the
Company will either achieve or sustain profitability.
 
    On March 1, 1999, Gilead and NeXstar Pharmaceuticals, Inc. ("NeXstar")
announced a definitive merger agreement (the "Merger") providing for the
acquisition by Gilead of all the outstanding common stock of NeXstar. The Merger
is structured as a tax-free, stock-for-stock transaction. The Company intends to
account for the Merger under the pooling-of-interests method. NeXstar,
headquartered in Boulder, Colorado, is engaged in the discovery, development,
manufacture and commercialization of products to treat serious and
life-threatening illnesses. In addition to its Boulder headquarters, NeXstar
maintains research, development and manufacturing facilities in San Dimas,
California, and marketing subsidiaries
 
                                       1

<PAGE>
outside of the United States. Under the terms of the Merger agreement, NeXstar
stockholders will receive between 0.3786 and 0.5000 of a share of Gilead common
stock for each share of NeXstar common stock. The exact exchange ratio will be
determined based on the trading range of Gilead common stock prior to completion
of the Merger. The Merger is subject to certain conditions, including approval
by the stockholders of Gilead and NeXstar. The Merger is expected to be
completed in mid-1999. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation--Proposed Merger Agreement."
 
    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 19 THROUGH
24 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.
 
    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, PREVEON-Registered Trademark- (adefovir
dipivoxil), adefovir dipivoxil for hepatitis B and PMPA.
 
                                       2

<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>
        PRODUCT/CANDIDATE               TARGET INDICATIONS        DEVELOPMENT STATUS(1)        WORLDWIDE RIGHTS
<S>                                <C>                           <C>                       <C>
- -------------------------------------------------------------------------------------------------------------------
VISTIDE-Registered Trademark-      CMV Retinitis                 Launched in U.S.          Gilead (U.S.)
                                                                                           Pharmacia & Upjohn
                                                                                           (Ex-U.S.)
                                                                 Launched in E.U.
- -------------------------------------------------------------------------------------------------------------------
 
PREVEON-Registered Trademark-      HIV-AIDS                      Phase III                 Gilead
 
                                   Influenza Virus (Treatment)   Phase III                 Roche
GS 4104 Oral
                                   Influenza Virus
                                     (Prophylaxis)               Phase III                 Roche
 
Adefovir Dipivoxil                 Hepatitis B Virus             Phase III                 Gilead
 
PMPA Oral Prodrug                  HIV-AIDS                      Phase II                  Gilead
 
Cidofovir Topical Ophthalmic       Viral Keratoconjunctivitis    Phase II                  Bausch & Lomb
- -------------------------------------------------------------------------------------------------------------------
 
Adenosine Receptor Regulators      Stroke                        Preclinical/Research      Gilead/NIH CRADA
 
HIV Protease Inhibitors            HIV-AIDS                      Research                  Gilead
 
Hepatitis C Virus Inhibitors       HCV                           Research                  Gilead
</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 United States Food and Drug Administration
("FDA") clearance to market its first product, VISTIDE for the treatment of 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--Cidofovir."
 
    Cytomegalovirus is an opportunistic infection 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 75%
since 1996 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 may continue as these therapies effectively control HIV infection.
 
    VISTIDE was cleared for marketing based on clinical trials demonstrating
that the drug 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, VISTIDE has 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.
 
                                       3

<PAGE>
    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 detail physicians, hospitals, clinics,
pharmacies and other healthcare providers involved in the treatment of patients
with CMV retinitis. Gilead sells VISTIDE 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
Hong Kong, and applications for approval are pending in several other countries.
By the end of 1998, Pharmacia & Upjohn had launched the product in twelve
European countries and two other countries. VISTIDE product launches by
Pharmacia & Upjohn in additional countries are expected as approvals are
obtained. Pharmacia & Upjohn pays 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 ("Bausch & Lomb"), provides local therapy
to an affected eye and is implanted through a surgical procedure. In addition,
Astra U.S.A. markets foscarnet, another approved intravenous therapy for CMV
retinitis, and CibaVision markets formivirsen, an antisense drug injected
directly into the eye. There are also potentially competing 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
declining 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 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
 
                                       4

<PAGE>
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. During the years ended December 31,
1998, 1997 and 1996, the Company's research and development expenses were $75.3
million, $59.2 million, $41.9 million, respectively.
 
PREVEON
 
    PREVEON is a mononucleotide analogue developed as an oral prodrug of
adefovir, 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,
hepatitis B virus and herpesviruses. 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
loss of appetite. Nephrotoxicity, including changes in serum creatinine and
phosphate, is the most significant toxicity observed. Nephrotoxicity has been
observed in approximately one-third of patients dosed for six months to one year
at the 120 mg daily dose level. In clinical trials, observed nephrotoxicity has
generally been gradual in onset, asymptomatic, detectable by routine monitoring
and resolvable upon dose reduction or withdrawal. Some patients have also
experienced elevations in liver transaminases. In clinical trials, PREVEON is
administered as a single oral tablet once per day, along with a single oral
capsule of L-carnitine, a nutritional supplement. L-carnitine is administered to
counteract the decrease of natural serum carnitine that 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 were approved for marketing beginning in 1996, 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 becoming
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, less prone to develop significant resistance and active
against resistant strains of HIV.
 
    PREVEON is a reverse transcriptase inhibitor that is being evaluated in a
series of clinical studies sponsored by Gilead, as well as by government
organizations, in the United States and abroad. These studies were designed to
test the safety and efficacy of PREVEON in a variety of drug combinations and
patient populations, including studies of patients not previously treated with
anti-HIV therapies, patients not previously treated with a protease inhibitor
and patients who had failed treatment with triple combination or protease
containing regimens. PREVEON is also available in the United States under an
expanded access program for patients with limited treatment options, and more
than 7,000 patients have enrolled in the program as of March 1999. In both the
clinical studies and the expanded access program, PREVEON has been administered
at one of two dose levels (120 mg or 60 mg, once per day).
 
    Based on the data obtained from the clinical studies and expanded access
program, as well as ongoing feedback from the FDA, Gilead plans to submit a new
drug application ("NDA") for the 60 mg dose of PREVEON during mid-1999. In
November 1998, the FDA granted "fast track" designation to PREVEON for the
treatment of HIV-infected patients with clinical, immunologic and/or virologic
progression despite prior reverse transcriptase inhibitor therapy. In January
1999, Gilead initiated a rolling submission by filing
 
                                       5

<PAGE>
the Chemistry, Manufacturing and Controls section of the NDA. In addition to
ongoing Phase III clinical trials for PREVEON, additional Phase IV studies will
be initiated during 1999 to confirm the safety and efficacy of PREVEON at the 60
mg dose level. 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 nature, timing or ultimate approval of the NDA by the
FDA.
 
    HIV is the causative agent of AIDS. HIV infects an estimated 33 million
people worldwide. There were an estimated 260,000 people with AIDS in the United
States in 1998. A number of therapeutics are currently marketed or are in
advanced stages of clinical development for the treatment of HIV infection and
AIDS, including 13 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 announced the discovery of GS 4104 (also known as
Ro 64-0796), an oral prodrug of the active neuraminidase inhibitor GS 4071,
which inhibits the replication of influenza virus in a variety of animal models.
GS 4104 is a potent and specific inhibitor of influenza A and B virus
neuraminidase activity and has shown potent antiviral activity when tested
against laboratory strains of influenza A and B viruses IN VITRO.
 
    Based on these data, Gilead and F. Hoffmann-La Roche Ltd. and Hoffmann-La
Roche, Inc. (collectively, "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 100% of this program. GS 4104 is a systemic treatment for
influenza, administered as an oral capsule and designed to reach all sites of
infection. GS 4104 targets one of the two major surface structures of the
influenza virus, the neuraminidase protein. The neuraminidase site is highly
conserved in all common strains of influenza. If neuraminidase is inhibited, the
virus is not able to infect new cells.
 
    During 1998, Roche and Gilead completed and announced the results of several
Phase III clinical studies of GS 4104. In two treatment studies, one conducted
in the United States and another in Europe, Canada and Hong Kong and each
involving over 600 patients, GS 4104 significantly decreased the duration and
severity of acute influenza in adults. In addition, GS 4104 reduced secondary
flu complications, such as bronchitis and sinusitis, in previously healthy
adults. In both of these treatment studies, the drug was generally well
tolerated. Transient nausea was reported more often in the active drug arm of
each study than in the placebo group. In a third study, which involved testing
GS 4104 as a preventative therapy, the drug reduced the incidence of influenza
infection relative to placebo and was well tolerated by the over 1,000
participants who were on a six-week regimen of the active drug.
 
    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." Roche expects to submit an NDA for the
treatment indication for GS 4104 to the FDA during the first half of 1999.
However, there can be no assurance as to when or whether Roche will file the
NDA. Moreover, even if the NDA is filed, there can be no assurance as to the
nature, timing or ultimate approval of the NDA by the FDA.
 
    Glaxo Wellcome, in collaboration with Biota Holdings Limited, is also
pursuing development of zanamavir, a neuraminidase inhibitor to treat influenza.
This compound, delivered with a dry powder
 
                                       6

<PAGE>
inhaler, has been approved in some countries and is under review for approval in
the United States by the FDA. Zanamavir represents significant potential
competition for GS 4104. See "Competition."
 
ADEFOVIR DIPIVOXIL FOR HBV
 
    Gilead is also developing adefovir dipivoxil for the potential treatment of
HBV. More than 350 million people worldwide are chronically infected with HBV,
primarily in Asian countries. Complications of chronic HBV include cirrhosis,
cancer of the liver and liver failure. 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 1998, Gilead completed two Phase II randomized, double-blind,
placebo-controlled clinical studies of adefovir dipivoxil for the treatment of
hepatitis B infection. Data from both studies indicate that twelve
weeks of dosing with adefovir dipivoxil at 5 mg, 30 mg or 60 mg once per day was
well tolerated and resulted in a statistically significant decline in HBV DNA
levels in treated patients compared to placebo. The decline in HBV DNA was
greater than 4 logs (99.99%) at the higher doses tested. Treatment with adefovir
dipivoxil was also associated with seroconversion in a portion of the patients
in one of the studies. In March 1999, the Company initiated the first of a
series of multinational Phase III trials in HBV infected patients.
 
    Glaxo Wellcome, in collaboration with Biochem Pharma, is pursuing
development of lamivudine, a nucleoside analogue to treat HBV infection. This
compound was recently approved for marketing in the United States, China and
several other countries and represents significant potential competition for
adefovir dipivoxil for HBV. 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 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 February 1998, the
Company presented data from a Phase I/II study of PMPA Prodrug, indicating that
the highest dose of the drug tested reduced viral load by a median of 1.22 logs
after one month of dosing. In this study, PMPA Prodrug was administered as a
single oral tablet at one of three doses (75 mg, 150 mg or 300 mg) once per day.
Based on these results, the Company initiated a long-term Phase II safety study
of PMPA Prodrug, in combination with other anti-retroviral therapies, which
completed enrollment at 180 patients in March 1999. Depending on the results
from this study, Gilead intends to initiate a program of Phase III studies of
PMPA Prodrug before the end of 1999.
 
    The National Institutes of Health ("NIH") is evaluating possible
applications of intravenous PMPA in the prevention of maternal-fetal HIV
transmission, as well as a topical version of PMPA for the prevention of sexual
transmission of HIV.
 
    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."
 
                                       7

<PAGE>
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 and other
viruses.
 
    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.
 
    In 1994, Gilead entered into a license and supply agreement with Bausch &
Lomb (formerly Storz Instrument Company, a subsidiary of American Home Products
Corporation) to develop 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."
The license to Bausch & Lomb 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. Bausch & Lomb is
conducting clinical development of topical ophthalmic cidofovir and is currently
analyzing the data from Phase II clinical studies. See "Collaborative
Relationships--Bausch & Lomb."
 
    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 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."
 
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 infectious diseases, primarily viral diseases, as well as cancer.
 
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, longer half-life and enhanced therapeutic index. Several
nucleotide analogues are also being evaluated for activity against cancer in
animal models.
 
HIV 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. Gilead
has evaluated several HIV protease inhibitors in animal models. The current
focus of this program is to enhance the pharmacological
 
                                       8

<PAGE>
properties and cross-resistance profile of these compounds before conducting
further preclinical development.
 
HEPATITIS C VIRUS
 
    Building on its expertise in the discovery and development of antiviral
therapeutics, the Company is evaluating different approaches that could lead to
inhibitors of hepatitis C virus ("HCV"). This research includes identification
of HCV targets, establishment of assays and screening of compounds as potential
inhibitors. See "Legal Proceedings."
 
ANTIBACTERIAL PROGRAM
 
    Gilead has synthesized a series of small molecule compounds with IN VITRO
activity against bacteria, including methicillin-resistent staphylococcus aureus
("MRSA"). The current focus of this program is the optimization of potency and
selectivity and evaluation of these compounds in preclinical animal models.
 
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 also implicated adenosine receptors in
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 receptor antagonist or agonist activity in animal
models of stroke, and also intends to evaluate the anti-inflammatory and anti-
allergic properties of these compounds.
 
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 also evaluates opportunities
for in-licensing products and technologies complementary to its business. The
Company's existing collaborative relationships are as follows:
 
PHARMACIA & UPJOHN
 
    In August 1996, Gilead and Pharmacia & Upjohn entered into a license and
supply 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, a price 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 Gilead's 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 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.
 
                                       9

<PAGE>
Pharmacia & Upjohn has the right to terminate the agreement at any time with six
months notice. See "VISTIDE."
 
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 total 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 100% of its own and Gilead's research and
development costs for the program and will pay Gilead royalties on 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 Laboratories Inc. ("Roche Labs") 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. This co-promotion agreement concluded at the end
of 1998.
 
GLAXO WELLCOME
 
    In July 1990, Gilead entered into a collaborative research and development
agreement with Glaxo Wellcome Inc. ("Glaxo"). Concurrent with the signing of the
agreement Glaxo made an $8.0 million equity investment in Gilead and currently
holds 889,911 shares (approximately 2.8%) of the Company's outstanding common
stock. Under the terms of the agreement, as amended over time, Glaxo funded
Gilead's ongoing research in the antisense field at a level of approximately
$3.0 million per year. This agreement and the related funding was terminated in
June 1998. In December 1998, Gilead sold its antisense patent estate to Isis
Pharmaceuticals, Inc. ("Isis") for $6.0 million, payable in installments over
three years. Gilead does not expect to perform additional research in the
antisense field.
 
BAUSCH & LOMB
 
    In August 1994, the Company entered into a license and supply agreement with
Bausch & Lomb (formerly Storz Instrument Company, a subsidiary of American Home
Products Corporation), pursuant to which Bausch & Lomb will develop and have the
right to market an eye drop formulation of cidofovir for the potential treatment
of topical ophthalmic viruses. The field of the exclusive, worldwide license to
Bausch & Lomb 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. Bausch & Lomb is
conducting clinical development of topical ophthalmic cidofovir and is currently
analyzing the data from Phase II clinical trials. Gilead is entitled to receive
a fee each year until Bausch & Lomb files an NDA under the agreement. In
addition, Bausch & Lomb is obligated to make a series of payments based on the
achievement of development milestones in different countries during the term of
the agreement. Gilead is responsible for supplying bulk cidofovir to Bausch &
Lomb, and Bausch & Lomb is obligated to make royalty payments to Gilead based on
net sales of any products developed under the agreement. Bausch & Lomb may
terminate this agreement at any time on three months notice. See "Clinical
Development Programs--Cidofovir."
 
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
 
                                       10

<PAGE>
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. Either party may terminate this agreement on
six months notice.
 
ACADEMIC AND CONSULTING RELATIONSHIPS
 
    To supplement its research and development efforts, the Company collaborates
with and has licensed certain patents, patent applications and technology 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 intends to file for approval of this supplier with the
FDA in 1999. 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 1999. 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. The use of alternative suppliers for any
of the Company's products or products in development will require FDA approval,
which will be time consuming.
 
    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 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
 
                                       11

<PAGE>
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 detail
physicians, hospitals, clinics, pharmacies and other healthcare providers
involved in the treatment of AIDS patients with CMV retinitis. Gilead sells
VISTIDE 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 is supplemented by a marketing and sales staff
of approximately 20 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. The Company does
not currently intend to directly market and sell any product outside of the
United States and Europe.
 
    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 by Gilead
which encompass
 
                                       12

<PAGE>
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 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 and
is seeking patent protection in other Asian countries on commercial forms of
adefovir dipivoxil. Asia is a major market for hepatitis B therapies, one of the
potential indications for adefovir dipivoxil. 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. Similar patent term extensions may be available for other
products in development.
 
    The Company is the exclusive licensee or holder of patents and patent
applications relating to methoxyphosphonate derivatives and neuraminidase
inhibitors and their use in the treatment and prevention of viral infections.
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
patent applications 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. In August 1998, the Company was served
with a patent infringement lawsuit filed by Chiron Corporation ("Chiron") in the
U.S. District Court for the Northern District of California. In the lawsuit,
Chiron alleges that Gilead is conducting scientific research that infringes
Chiron's patents covering the hepatitis C NS3 protease protein and gene
sequences and their use in screening for potential hepatitis C therapeutics. See
"Legal Proceedings."
 
    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 or its licensors' 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.
 
    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.
 
                                       13

<PAGE>
    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 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, foscarnet,
marketed by Astra U.S.A., and formivirsen, a local injection marketed by
CibaVision, 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 13 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, Merck & Co. and DuPont Pharma.
 
    Glaxo Wellcome, in collaboration with Biota Holdings Limited, is pursuing
development of zanamavir, a neuraminidase inhibitor to treat influenza. This
compound has been approved in some countries and is under review for approval in
the United States by the FDA. If approved, zanamavir would represent significant
potential competition for GS 4104. In addition, Glaxo Wellcome, in collaboration
with Biochem Pharma, is pursuing development of lamivudine, a nucleoside
analogue to treat HBV infection. This compound was recently approved for
marketing in the United States, China and several other countries 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.
 
    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.
 
                                       14

<PAGE>
    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 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
regulatory 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, third-party reimbursement 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 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 an 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 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.
 
    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
 
                                       15

<PAGE>
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") or Ethics Committee 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 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.
 
    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. The FDA will generally review NDAs for
fast track products within six months. 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 characterize further the
drug's safety and
 
                                       16

<PAGE>
efficacy profile. The FDA has granted fast track designation to PREVEON for the
treatment of HIV-infected patients and the Company believes that 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.
 
    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. After
approval under the centralized procedure, pricing and reimbursement approvals
are generally required in most countries. VISTIDE was approved by the European
Community under the centralized procedure, and the Company anticipates that
PREVEON and GS 4104 will also be reviewed under the centralized procedure when
marketing authorization applications for these products are filed.
 
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. 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
 
                                       17

<PAGE>
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, as well as patient
advocacy organizations, 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, 1998, Gilead employed 293 people full-time, of whom 75
hold Ph.D. and/or M.D. degrees and 46 hold other advanced degrees. Approximately
182 employees are engaged in research and development activities and 111 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.
 
    PAUL BERG, PH.D., has been a member of Gilead's Scientific Advisory Board
since April 1998 and also serves on the Company's Board of Directors. Dr. Berg
is currently Cahill Professor in Cancer Research in the Department of
Biochemistry at Stanford University School of Medicine, where he has been on the
faculty since 1959. He received the Nobel Prize for Chemistry in 1980.
 
    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.
 
                                       18

<PAGE>
RISK FACTORS
 
    GILEAD IS DEVELOPING DRUGS TO TREAT AIDS AND AIDS-RELATED CONDITIONS, AND
THEREFORE CAN BE ADVERSELY AFFECTED BY CHANGES IN THE REGULATORY AND COMMERCIAL
ENVIRONMENT FOR AIDS THERAPIES.
 
    Several of Gilead's products and products in development address AIDS or
AIDS-related conditions. These products include VISTIDE (cidofovir injection)
for CMV retinitis, PREVEON (adefovir dipivoxil) for HIV and AIDS and PMPA for
HIV and AIDS. The medical, regulatory and commercial environment for AIDS
therapies changes quickly and often in ways that Gilead is unable to accurately
predict. Gilead develops its AIDS products based upon current policy and the
current marketplace for AIDS therapies, as well as its prediction of future
policy and the future marketplace for these therapies. Gilead's business is
subject to substantial risk because these policies and markets change quickly
and unpredictably and in ways that could have a material adverse impact on its
ability to obtain regulatory approval and commercial acceptance of its
AIDS-related products.
 
    GILEAD'S OPERATIONS DEPEND ON COMPLIANCE WITH COMPLEX GOVERNMENTAL
REGULATIONS.
 
    The products that Gilead develops and sells must be approved and are subject
to extensive regulation by the FDA and comparable agencies in other countries.
Gilead has plans to file an application with the FDA for marketing approval of
PREVEON in the second quarter of 1999. In addition, Hoffmann-La Roche, Gilead's
corporate partner for the development and commercialization of GS 4104, expects
to file an application with the FDA for marketing approval of GS 4104 to treat
influenza in the second quarter of 1999. Gilead anticipates conducting a variety
of clinical trials and filing for marketing approval of additional products over
the next several years. These products may fail to receive marketing approval on
a timely basis, or at all. In addition, these products may receive marketing
approvals that place limitations on the uses of the product. These failures,
delays or limitations, as well as other regulatory changes, actions and recalls,
could delay commercialization of any products and adversely affect Gilead's
results of operations.
 
    In addition, even after Gilead's products are marketed, the products and
their manufacturers are subject to continual review. Later discovery of
previously unknown problems with Gilead's products or manufacturers may result
in restrictions on such product or manufacturer, including withdrawal of the
product from the market.
 
    RESULTS OF CLINICAL TRIALS AND APPROVAL OF PRODUCTS ARE UNCERTAIN, AND
GILEAD MAY BE DELAYED IN OR PROHIBITED FROM SELLING ITS PRODUCTS.
 
    Gilead has a number of potential products that have reached the development
stage. These potential products include PREVEON, GS 4104, adefovir dipivoxil for
HBV and PMPA. Gilead will be required to demonstrate the safety and
effectiveness of these and any other products it develops in each intended use
through extensive preclinical studies and clinical trials in order to obtain
regulatory approval of those products. The results from preclinical and early
clinical studies do not always accurately predict results in later, large-scale
clinical trials for several reasons including:
 
    - preliminary results may not be indicative of effectiveness;
 
    - further clinical trials may not achieve the desired result; and
 
    - further clinical trials may reveal unduly harmful side effects or may show
      the drugs to be less effective than other drugs or delivery systems for
      the desired indications.
 
    Even successfully completed large-scale clinical trials may not result in
marketable products for several reasons, including:
 
    - the potential products are not shown to be safe and effective;
 
    - regulatory authorities disagree with the results of Gilead's studies and
      trials;
 
    - required regulatory approvals are not obtained;
 
    - the potential products are too difficult to develop into commercially
      viable products; or
 
                                       19

<PAGE>
    - the potential products do not obtain market acceptance.
 
    A number of companies in Gilead's industry have suffered significant
setbacks in advanced clinical trials despite promising results in earlier
trials. In the end, Gilead may be unable to develop marketable products.
 
    The rate of completion of Gilead's clinical trials will depend on the rate
of patient enrollment. There will be substantial competition to enroll patients
in Gilead's clinical trials, particularly for AIDS and HBV therapies. This
competition has delayed Gilead's clinical trials in the past. In addition,
recent improvements in existing AIDS and HBV drug therapy may make it more
difficult for Gilead to enroll patients in its clinical trials as the patient
population may choose to enroll in clinical trials sponsored by other companies
or choose alternative therapies. Delays in planned patient enrollment can result
in increased development costs and delays in regulatory approvals.
 
    PRODUCT DEVELOPMENT EFFORTS MAY NOT YIELD MARKETABLE PRODUCTS.
 
    Gilead's future business success will depend on its ability to successfully
develop and obtain regulatory approval to market new pharmaceutical products.
Development of a product requires substantial technical, financial and human
resources even if the product is not successfully completed. Gilead's potential
products may appear to be promising at various stages of development yet fail to
reach the market for a number of reasons, including:
 
    - lack of efficacy or unacceptable toxicity during preclinical studies or
      clinical trials;
 
    - failure to receive necessary regulatory approvals;
 
    - failure to achieve market acceptance;
 
    - existence of proprietary rights of third parties; and
 
    - inability to develop manufacturing methods that are efficient,
      cost-effective and capable of meeting stringent regulatory standards.
 
    In addition, due to uncertainties that are part of the development process,
Gilead may underestimate the costs associated with the development of a
potential product. Delays or unanticipated increases in costs of development or
failure to obtain regulatory approval or market acceptance for Gilead's products
could adversely affect Gilead's operating results.
 
    GILEAD DEPENDS ON RELATIONSHIPS WITH OTHER COMPANIES FOR RESEARCH FUNDING,
CLINICAL DEVELOPMENT, SALES AND MARKETING PERFORMANCE AND REVENUES. FAILURE TO
MAINTAIN THESE RELATIONSHIPS WOULD NEGATIVELY IMPACT GILEAD'S BUSINESS.
 
    Gilead has established a number of significant collaborative relationships
with major pharmaceutical companies, including Pharmacia & Upjohn, Hoffmann-La
Roche and Bausch & Lomb. Gilead depends to a large degree on these partners for
its research funding, clinical development and/or sales and marketing
performance. In addition, Gilead has historically relied on collaborative
relationships for a significant portion of its revenues and expects this to be
the case in future periods. Reliance or collaborative relationships poses a
number of risks, including:
 
    - Gilead cannot control whether its corporate partners will devote
      sufficient resources to its programs or products;
 
    - disputes may arise in the future with respect to the ownership of rights
      to technology developed with corporate partners;
 
    - disagreements with corporate partners could lead to delays in or
      termination of the research, development or commercialization of product
      candidates, or result in litigation or arbitration;
 
    - contracts with Gilead's corporate partners may fail to provide significant
      protection or may fail to be effectively enforced if one of these partners
      fails to perform;
 
                                       20

<PAGE>
    - corporate partners have considerable discretion in electing whether to
      pursue the development of any additional products and may pursue
      alternative technologies or products either on their own or in
      collaboration with Gilead's competitors; and
 
    - corporate partners with marketing rights may choose to devote fewer
      resources to the marketing of Gilead's products than they do to products
      of their own development.
 
    Given these risks, there is a great deal of uncertainty regarding the
success of Gilead's current and future collaborative efforts. If these efforts
fail, Gilead's product development or commercialization of new products could be
delayed or revenue from existing products could decline.
 
    Gilead may seek future collaborative relationships with corporate partners
to fund some of its research and development expenses and to develop and
commercialize some of its potential products. For example, the Company is in
discussions with several potential corporate partners about collaborative
development and commercialization of adefovir dipivoxil for HBV, particularly in
Asian territories. Further, we anticipate that the Company's receipt of revenues
from collaborative agreements will continue to be affected by existing
agreements, as well as by the timing of drug development programs of its
corporate partners. Gilead may not be able to negotiate acceptable collaborative
arrangements in the future, and any arrangements it does negotiate may not be
successful. If the Company fails to establish additional collaborative
relationships, it will be required to undertake research, development, marketing
and manufacturing of its proposed products at its own expense.
 
    GILEAD EXPECTS TO OPERATE AT A LOSS FOR THE FORESEEABLE FUTURE AND MAY NEVER
BE PROFITABLE.
 
    Gilead has never been profitable on a full-year basis and may never become
profitable. At December 31, 1998, Gilead's accumulated deficit was approximately
$218.5 million. Gilead's losses have resulted principally from expenses
associated with its research and development programs and, to a lesser extent,
from sales, general and administrative expenses. Gilead's revenues to date have
been generated primarily from collaborative arrangements rather than product
revenues. Gilead's current product revenues are derived solely from sales of
VISTIDE in the United States and a royalty arrangement for VISTIDE sales with
Pharmacia & Upjohn outside of the United States. VISTIDE has limited sales
potential relative to many pharmaceutical products.
 
    GILEAD'S EXISTING PRODUCT AND PRODUCTS UNDER DEVELOPMENT MAY NOT BE ACCEPTED
BY PHYSICIANS, INSURERS AND PATIENTS.
 
    Many of Gilead's products in development, if approved for marketing, have no
established market. The ability of these products to achieve and sustain market
acceptance will depend on the receipt and scope of regulatory approvals and
whether or not government authorities and managed care organizations will
adequately reimburse patients who use these products.
 
    In addition, Gilead needs to convince the medical and patient advocacy
community of:
 
    - the effectiveness of these products in treating disease;
 
    - the safety of these products when administered to patients; and
 
    - the advantages of these products over competitive products.
 
    Physicians, patients, patient advocates, payors and the medical community in
general may not accept and use any products that Gilead may develop. If Gilead's
products are not accepted, its results of operations will suffer.
 
    COMPETITIVE PRODUCTS FROM OTHER COMPANIES COULD SIGNIFICANTLY REDUCE THE
MARKET ACCEPTANCE OF GILEAD'S PRODUCTS.
 
    Gilead's products and development programs target a number of diseases and
conditions, including viral infections and cancer. There are many commercially
available products for these diseases. Certain of these products are well
established therapies and have generated substantial sales. In addition, a large
number of companies and institutions are conducting well-funded research and
development activities
 
                                       21

<PAGE>
directed at developing treatments for these diseases. Products currently on the
market and those under development by Gilead's competitors could make its
technology and products obsolete or noncompetitive. Gilead expects that
competition for the treatment of these diseases will increase in the future as
new products enter the market and advanced technologies become available. Gilead
will also be competing to license or acquire technology from other companies.
 
    Most of Gilead's competitors and potential competitors have substantially
greater resources than Gilead. Those resources include superior product
development capabilities and financial, scientific, manufacturing, managerial
and human resources. These competitors may achieve superior patent protection,
obtain key technology, receive regulatory approval or achieve product
commercialization earlier than Gilead.
 
    GILEAD'S MARKETING STAFF COMPETES WITH THE MARKETING ORGANIZATIONS OF LARGE
PHARMACEUTICAL COMPANIES.
 
    Gilead's products compete, and the products Gilead may develop are likely to
compete, with products of other companies that currently have extensive and
well-funded marketing and sales operations. Because these companies are capable
of devoting significantly greater resources to their marketing efforts, Gilead's
marketing or sales efforts may not compete successfully against the efforts of
these other companies.
 
    PHARMACEUTICAL PRICING AND REIMBURSEMENT PRESSURES MAY REDUCE PROFITABILITY.
 
    Successful commercialization of Gilead's products depends, in part, on the
availability of governmental and third-party payor reimbursement for the cost of
such products and related treatments. Reimbursement is generally provided by
government health administration authorities, private health insurers and other
organizations. Government authorities and third-party payors increasingly are
challenging the price of medical products and services, particularly for
innovative new products and therapies. This has resulted in lower average sales
prices. For example, a majority of VISTIDE sales is subject to reimbursement by
government agencies, resulting in significant discounts from list price and
rebate obligations. Gilead expects that several of its products in development,
particularly for AIDS indications, if they receive regulatory approval, will
have a similar reimbursement profile. Even if reimbursement is available,
reimbursement policies may adversely affect Gilead's ability to sell its
products on a profitable basis.
 
    In addition, in many international markets, governments control the prices
of prescription pharmaceuticals. In these markets, once marketing approval is
received, pricing negotiation can take another six to 12 months or longer.
Product sales, attempts to gain market share or introductory pricing programs of
Gilead's competitors could require Gilead to lower its prices in these
countries, which could adversely affect its results of operations.
 
    GILEAD MAY NOT BE ABLE TO OBTAIN EFFECTIVE PATENTS TO PROTECT ITS
TECHNOLOGIES FROM USE BY COMPETITORS, AND PATENTS OF OTHER COMPANIES COULD
REQUIRE GILEAD TO STOP USING OR PAY FOR THE USE OF REQUIRED TECHNOLOGY.
 
    Gilead's success will depend to a significant degree on its ability to:
 
    - obtain patents and licenses to patent rights;
 
    - preserve trade secrets; and
 
    - operate without infringing on the proprietary rights of others.
 
    Gilead has rights to United States and foreign issued patents and has filed
and will continue to file patent applications in the United States and abroad
relating to its technologies. There is a risk, however, that patents may not
issue from any of these applications or that the patents will not be sufficient
to protect Gilead's technology. Patent applications in the United States are
confidential until a patent is granted. As a result, Gilead would not know if
its competitors filed patent applications for technology covered by its pending
applications. Gilead also can not be certain that it was the first to invent the
technology that is the subject of its patent applications. Competitors may have
filed patent applications or received patents and may obtain additional patents
and proprietary rights that block or compete with Gilead's patents.
 
                                       22

<PAGE>
    Gilead 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. Gilead may obtain patents for certain
products many years before marketing approval is obtained for those products.
Because patents have a limited life, which may begin to run prior to commercial
sale, the commercial value of the product may be limited.
 
    Gilead's competitors may file patent applications covering its technology.
If so, Gilead may have to participate in interference proceedings or litigation
to determine the right to a patent. Litigation and interference proceedings are
expensive even if successful. In August 1998, the Company was served with a
patent infringement lawsuit filed by Chiron Corporation alleging that Gilead's
research infringes Chiron's patents covering the hepatitis C protein and gene
sequences and their use in screening for potential hepatitis C therapeutics.
 
    Gilead's success depends in large part on its ability to operate without
infringing upon the patents or other proprietary rights of third parties. If
Gilead infringes patents of others, it may be prevented from commercializing
products or may be required to obtain licenses from these third parties. Gilead
cannot be certain that it would be able to obtain alternative technologies or
any required license. Even if Gilead were to obtain such technologies or
licenses, it cannot be certain that the terms would be reasonable. If Gilead
fails to obtain such licenses or alternative technologies, it may be unable to
develop some or all of its products.
 
    In addition, Gilead uses significant unpatented proprietary technology and
relies on unpatented trade secrets and proprietary know-how to protect certain
aspects of its production and other technologies. Gilead's trade secrets may
become known or independently discovered by its competitors.
 
    UNCERTAINTY OF SUPPLY MAY AFFECT GILEAD'S ABILITY TO PRODUCE AND SELL ITS
PRODUCTS.
 
    Gilead generally relies on third parties for the manufacture of bulk drug
substance and final drug product for clinical and commercial purposes, including
for VISTIDE, adefovir dipivoxil, PMPA and GS 4104. Gilead depends on these third
parties to perform their obligations effectively and on a timely basis. If these
third parties fail to perform as required, Gilead's clinical trials or
submission of products for regulatory approval may be delayed. These delays
could impair Gilead's ability to deliver commercial products on a timely basis
and could impair its competitive position.
 
    Many of the materials Gilead utilizes in its operations are made at only one
facility. A shutdown in any of these facilities due to technical, regulatory or
other problems, resulting in an interruption in supply of these materials, could
have an adverse impact on Gilead's financial results. For example, Gilead has
qualified only one supplier with the FDA for the bulk drug substance used in
VISTIDE and one different supplier for the final drug product. Gilead has also
established a second source of bulk drug substance supply for VISTIDE but has
not yet qualified this source with the FDA and cannot be certain that the FDA
will approve this second source. Because the suppliers of key components and
materials must be named in the New Drug Application filed with the FDA for a
product, significant delays can occur if the qualification of a new supplier is
required. If supplies from Gilead's suppliers were interrupted for any reason,
Gilead could be unable to ship VISTIDE or any of its products in development.
 
    GILEAD HAS LIMITED EXPERIENCE MANUFACTURING PRODUCTS AND COULD BE ADVERSELY
AFFECTED IF IT FAILS TO DEVELOP MANUFACTURING CAPACITY.
 
    For some of Gilead's potential products, Gilead 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. Gilead cannot be certain that it will be able to implement any of these
developments successfully.
 
                                       23

<PAGE>
    The manufacturing process for pharmaceutical products is highly regulated,
and regulators may shut down manufacturing facilities that they believe do not
comply with regulations. The FDA's current Good Manufacturing Practices are
extensive regulations governing manufacturing processes, stability testing,
record-keeping and quality standards. Similar, but not identical, regulations
are in effect in other countries.
 
    PRODUCT LIABILITY CLAIMS MAY INCREASE COSTS AND DECREASE PROFITS.
 
    Testing, manufacturing, marketing and use of VISTIDE and Gilead's products
in development involve substantial risk of product liability claims. These
claims may be made directly by consumers, healthcare providers, pharmaceutical
companies or others. Although Gilead maintains product liability insurance, a
single product liability claim could exceed its coverage limits, and multiple
claims are possible. If that happens, the insurance coverage Gilead has may not
be adequate. A successful product liability claim in excess of Gilead's coverage
could require Gilead to pay substantial amounts. This could adversely affect
Gilead's results of operations. Moreover, the amount and scope of any coverage
may be inadequate to protect Gilead in the event of a successful product
liability claim. In addition, in the future such insurance may not be renewed at
an acceptable cost or at all.
 
    GILEAD'S USE OF HAZARDOUS MATERIAL EXPOSES IT TO POTENTIAL LIABILITIES.
 
    Gilead's research and development involves the controlled use of hazardous
materials, chemicals, viruses and various radioactive compounds. Although Gilead
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, Gilead
cannot completely eliminate the risk of accidental contamination or injury from
these materials. In the event of such an accident, Gilead could be held liable
for significant damages or fines.
 
    YEAR 2000 ISSUES MAY NOT SUCCESSFULLY BE ADDRESSED.
 
    Gilead is implementing a Year 2000 project designed to address the issue of
computer software and hardware correctly processing dates through and beyond the
Year 2000. Due to the uncertainty inherent in the Year 2000 problem, however,
there can be no assurance that Year 2000 failures will not have a material
impact on Gilead's operations, financial results or financial condition. In
addition, Gilead cannot predict whether its critical third-party suppliers and
business partners will achieve Year 2000 compliance, or whether the failure of
any third party to do so would have a material effect on Gilead's business.
 
                                       24

<PAGE>

I
TEM 2. PROPERTIES
 
    Gilead's administrative offices and research laboratories are located in
Foster City, California. The Company leases approximately 163,200 square feet of
space in seven 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
 
    In August 1998, the Company was served with a patent infringement lawsuit
filed by Chiron Corporation in the U.S. District Court for the Northern District
of California. In the lawsuit, Chiron alleges that Gilead is conducting
scientific research that infringes Chiron's patents covering the hepatitis C
protein and gene sequences and their use in screening for potential hepatitis C
therapeutics. Gilead has taken the position that its research activities do not
infringe the Chiron patents and believes that the lawsuit will not have a
material impact on Gilead's business, operating results or financial condition.
 

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

                                    PART II
 

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
    Gilead common stock is traded on The Nasdaq Stock Market under the symbol
"GILD." The following table sets forth for the periods indicated the high and
low prices per share of the Company's common stock on The Nasdaq Stock Market.
These prices represent quotations among dealers without adjustments for retail
mark-ups, mark-downs or commissions, and may not represent prices of actual
transactions.
 

<TABLE>
<CAPTION>
1997                                                                                   CLOSING HIGH      CLOSING 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 1/4
 
1998
- --------------------------------------------------------------------------------------
First Quarter......................................................................... $         42     $         35 5/8
Second Quarter........................................................................ $         43 1/4 $         31 5/8
Third Quarter......................................................................... $         30 3/8 $         18 1/4
Fourth Quarter........................................................................ $         41 1/16 $         18 3/4
</TABLE>

 
    As of February 26, 1999, there were approximately 480 stockholders of
record. 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.
 
                                       25

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
 
    We derived this information from Gilead's audited financial statements for
1994 through 1998. This information is only a summary, and you should read it in
conjunction with Gilead's historical financial statements and related notes and

Management's Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein, and the annual and quarterly reports and
other information on file with the Securities and Exchange Commission. See Items
7 and 8.
 
                             GILEAD SCIENCES, INC.
                      SELECTED CONSOLIDATED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 

<TABLE>
<CAPTION>
                                                                                       NINE MONTHS
                                                        YEAR ENDED DECEMBER 31,           ENDED      YEAR ENDED
CONSOLIDATED STATEMENT                             ----------------------------------  DECEMBER 31,   MARCH 31,
OF OPERATIONS DATA:                                   1998        1997        1996       1995 (1)       1995
                                                   ----------  ----------  ----------  ------------  -----------
<S>                                                <C>         <C>         <C>         <C>           <C>
Revenues:
  Product sales, net.............................  $    6,074  $   11,735  $    8,477   $       --    $      --
  Contract revenue...............................      24,198      27,413      24,910        2,685        4,922
  Royalty revenue, net...........................       2,298         889          33           14           --
                                                   ----------  ----------  ----------  ------------  -----------
Total revenues...................................      32,570      40,037      33,420        2,699        4,922
                                                   ----------  ----------  ----------  ------------  -----------
Costs and expenses:
  Cost of sales..................................         594       1,167         910           --           --
  Research and development.......................      75,298      59,162      41,881       25,670       30,360
  Selling, general and administrative............      31,003      25,472      26,692        9,036        9,669
                                                   ----------  ----------  ----------  ------------  -----------
Total costs and expenses.........................     106,895      85,801      69,483       34,706       40,029
                                                   ----------  ----------  ----------  ------------  -----------
Loss from operations.............................     (74,325)    (45,764)    (36,063)     (32,007)     (35,107)
Interest income, net.............................      18,250      17,771      14,331        4,592        3,833
                                                   ----------  ----------  ----------  ------------  -----------
Net loss.........................................  $  (56,075) $  (27,993) $  (21,732)  $  (27,415)   $ (31,274)
                                                   ----------  ----------  ----------  ------------  -----------
                                                   ----------  ----------  ----------  ------------  -----------
Basic and diluted loss per common share..........  $    (1.85) $    (0.95) $    (0.78)  $    (1.29)   $   (1.65)
                                                   ----------  ----------  ----------  ------------  -----------
                                                   ----------  ----------  ----------  ------------  -----------
Common shares used to calculate basic and diluted
  loss per common share..........................      30,363      29,326      27,786       21,274       18,971
                                                   ----------  ----------  ----------  ------------  -----------
                                                   ----------  ----------  ----------  ------------  -----------
</TABLE>

 

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                 ---------------------------------------------------  MARCH 31,
CONSOLIDATED BALANCE SHEET DATA:                     1998         1997         1996       1995 (1)       1995
                                                 ------------  -----------  -----------  -----------  ----------
<S>                                              <C>           <C>          <C>          <C>          <C>
Cash, cash equivalents and short-term
  investments..................................   $  279,939   $   322,298  $   295,963  $   155,659  $   89,146
Working capital................................      256,560       306,867      284,154      145,539      80,190
Total assets...................................      302,860       352,069      310,673      166,659     102,395
Non-current portion of long-term debt..........          563         1,331        2,914        3,482       5,454
Accumulated deficit............................     (218,554)     (162,479)    (134,486)    (112,754)    (85,339)
Total stockholders' equity (2).................      270,547       317,347      291,660      151,499      86,056
</TABLE>

 
- ------------------------
 
(1) In October 1995, Gilead 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 Gilead's common stock.
 
                                       26

<PAGE>

ITEM 7. 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. In June 1996, the FDA
granted marketing clearance of VISTIDE for the treatment of CMV retinitis in
patients with AIDS. Since that time, the Company has independently marketed
VISTIDE in the United States with an antiviral specialty sales force and has
entered into a collaboration agreement with Pharmacia & Upjohn to market VISTIDE
in all countries outside the United States.
 
    The Company began to incur significant expenses relating to
commercialization of VISTIDE and other potential product candidates in 1996.
With the exception of the second quarter of 1997 and the third quarter of 1996,
when the Company earned significant one-time fees related to collaborations, the
Company has incurred losses since its inception. Gilead expects to continue to
incur losses for at least an additional year, 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 and
other potential products.
 
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
 
    This Report contains forward-looking statements relating to clinical and
regulatory developments, marketing and sales matters, future expense levels,
financial results and Year 2000 matters. These statements involve inherent risks
and uncertainties. The Company's actual financial and operating results may
differ significantly from those discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to, the
risks summarized below and described in more detail under "Risk Factors" on
pages 19 to 24 of this Report. In particular, factors that could result in a
material difference include, but are not limited to, those relating to the
ongoing development and commercialization of the Company's potential
pharmaceutical products and, in the case of Year 2000 matters, the ability to
identify and correct all relevant computer code and the success of remedial
efforts implemented by third-party suppliers and business partners.
 
    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 either proprietary rights or competing products 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, expensive and uncertain 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 of and size of the market
for VISTIDE or any of the Company's products in development.
 
    The Company expects that its financial results will continue to 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, nor can there be assurance that the
 
                                       27

<PAGE>
Company will either achieve or sustain profitability. As of December 31, 1998,
the Company's accumulated deficit was approximately $218.6 million.
 
    As a result of the proposed acquisition of NeXstar described below, Gilead's
business will be subject to additional risks related to NeXstar's business.
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
operating results, financial condition and stock price. In addition, the
forward-looking statements included in this Report relate to Gilead as a
stand-alone business, and do not take into account the potential impact of the
proposed acquisition of NeXstar.
 
RESULTS OF OPERATIONS
 
REVENUES
 
    The Company had total revenues of $32.6 million, $40.0 million and $33.4
million for the years ended December 31, 1998, 1997 and 1996, respectively.
Total revenues include revenues from net product sales, contracts, including
research and development ("R&D") collaborations, and net royalties.
 
    Net product sales revenue was $6.1 million, $11.7 million, and $8.5 million
for 1998, 1997, and 1996, respectively. All of the Company's product sales
revenue relates to VISTIDE, which the Company began to sell in mid-1996. As
expected, VISTIDE sales declined in 1998, primarily due to a decline in the
incidence of CMV retinitis as a result of more effective HIV therapies. The 38%
increase in net product sales revenue in 1997 as compared to 1996 is due to the
fact that 1997 results represent a full year of sales, while 1996 revenue
reflects approximately six months of sales. VISTIDE product sales revenue is
expected to continue to be modest.
 
    Net royalty revenue was $2.3 million in 1998 and $0.9 million in 1997, and
was derived from two sources. During 1998 and 1997, respectively, the Company
earned $1.7 million and $0.7 million of net royalties from Pharmacia & Upjohn on
sales of VISTIDE outside of the United States. This amount increased primarily
because the number of countries in which Pharmacia & Upjohn sells the product
expanded in 1998 as compared to 1997. The Company expects that royalties from
Pharmacia & Upjohn's sales of VISTIDE will continue to increase during 1999 as a
result of recognizing a full year of sales in a greater number of countries. The
Company also reported $0.6 million and $0.2 million in 1998 and 1997,
respectively, of royalty revenue from Roche Labs for co-promoting Roferon in the
United States for the treatment of chronic hepatitis C virus infection. This
co-promotion agreement with Roche Labs concluded at the end of 1998. While the
Company expects to receive transition payments under this agreement in 1999,
such amounts are not expected to be significant. Royalty revenue is 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 revenue before 1997.
 
    Contract revenue was $24.2 million, $27.4 million and $24.9 million in 1998,
1997, and 1996, respectively. The most significant source of contract revenue in
each of these three years relates to the development of GS 4104 under an R&D
collaboration agreement between the Company and Roche. GS 4104 is an orally
administered compound to treat and prevent viral influenza in humans. During
1998, 1997 and 1996, the Company recorded approximately $16.4 million, $14.2
million and $11.4 million, respectively, of contract revenue under this
agreement with Roche. The $16.4 million recorded during 1998 represents
reimbursed R&D expenses and includes $5.2 million attributable to R&D expenses
incurred in the fourth quarter of 1997, which were subject to Roche's approval
as of December 31, 1997. Such expenses were approved for reimbursement and
recognized as revenue in 1998. During 1997 and 1996, the Company recognized as
contract revenue R&D reimbursements of $8.2 million and $1.1 million,
respectively. Also during 1997 and 1996, the Company recognized milestone
payments of $6.0 million and a license fee of $10.3 million, respectively.
Gilead is entitled to additional milestone payments of up to $34.0 million upon
achieving certain developmental and regulatory milestones. R&D reimbursements
under the Roche
 
                                       28

<PAGE>
agreement are expected to be significantly lower in 1999 as compared both to
1998 and 1997. The reimbursements will approximate actual related R&D costs the
Company incurs.
 
    Contract revenue for each year in the three-year period ended December 31,
1998 also includes reimbursement of research expenses under the Company's
collaborative R&D agreement with Glaxo related to the Company's antisense
program ($1.8 million in 1998 and $3.0 million in both 1997 and 1996). In June
1998, the agreement and the funding for the program were terminated, resulting
in reduced revenue in 1998 as compared to 1997 and 1996.
 
    In 1998, Gilead and Isis entered into an agreement under which Gilead sold
Isis the holdings of its antisense patent estate, including patents and patent
applications covering antisense chemistry and antisense drug delivery systems.
Under the terms of the agreement, Isis is required to pay Gilead a total of $6.0
million in four installments. The first $2.0 million was paid in December 1998,
and the remaining $4.0 million is payable in three additional payments (one
payment per year in 1999, 2000 and 2001). The total sale price of $6.0 million
is included in contract revenue in 1998.
 
    During 1997, Gilead recognized a $10.0 million milestone payment under its
collaborative agreement with Pharmacia & Upjohn following the marketing
authorization for VISTIDE in the European Union, which is the only milestone
payment provided for under that agreement. The Company also recognized as
revenue a $10.0 million license fee from Pharmacia & Upjohn in 1996, the year
the agreement went into effect.
 
COSTS AND EXPENSES
 
    Cost of product sales was $0.6 million, $1.2 million and $0.9 million for
the years ended December 31, 1998, 1997 and 1996, respectively, and resulted
from sales of VISTIDE. The Company's declining cost of sales corresponds to the
decrease in net product sales.
 
    The Company's R&D expenses were $75.3 million for the year ended December
31, 1998, compared to $59.2 million for the year ended December 31, 1997. This
27% increase is primarily attributable to costs associated with the ongoing
series of PREVEON Phase III clinical trials, as well as the expanded access
program for patients with HIV infection, which commenced in the fourth quarter
of 1997. PREVEON is an investigational reverse transcriptase inhibitor currently
being studied to treat HIV. Increased R&D expenses also reflect costs associated
with an additional product candidate that is advancing into later stage clinical
trials (adefovir dipivoxil for the treatment of chronic hepatitis B infection).
R&D expenses of $41.9 million in 1996 increased by 41% in 1997. The increase in
1997 as compared to 1996 is primarily attributable to costs associated with GS
4104 clinical trials, as well as PREVEON clinical trials and the commencement of
the expanded access program for patients with HIV. The Company expects its R&D
expenses to continue to increase significantly in 1999 over 1998 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 $31.0 million in
1998 compared to $25.5 million in 1997, an increase of 22%. This increase
represents costs incurred to expand sales, marketing and operational capacity in
anticipation of the potential commercial launch of PREVEON and to support a
greater level of R&D activities. SG&A expenses were $26.7 million during 1996,
which is 5% greater than SG&A expense levels in 1997. 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 the Company's United States
marketing and sales capabilities. As expected, these expenses were somewhat
lower in 1997. The Company's selling, general and administrative expenses are
expected to increase substantially during 1999, as Gilead continues to expand
its sales and marketing capacity and increase support activities for its R&D
efforts.
 
                                       29

<PAGE>
NET INTEREST INCOME
 
    The Company had net interest income of $18.3 million, $17.8 million and
$14.3 million in 1998, 1997 and 1996, respectively. The increased level of net
interest income in 1998 as compared to 1997 is primarily due to increased
returns on the investment portfolio in 1998. Net interest income in 1997
exceeded the 1996 amount mainly due to the full-year benefit in 1997 of the
investment of the proceeds from the Company's public offering of common stock in
1996 and a $40.0 million equity investment by Pharmacia & Upjohn in 1997. The
Company expects net interest income to decline substantially in 1999 due to
increased spending levels and the corresponding decreasing balances of invested
cash.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Cash and cash equivalents and short-term investments totaled $279.9 million
at December 31, 1998, compared to $322.3 million at December 31, 1997. This
$42.4 million decrease is primarily due to the net use of cash to fund
operations. Significantly lesser amounts of cash were also used to purchase
property and equipment and repay debt obligations. Such uses of cash were offset
in part by cash received from exercises of employee stock options. During 1999,
the Company expects that its balances of cash and cash equivalents and
short-term investments will continue to decline substantially as R&D, SG&A and
capital equipment spending levels increase.
 
    The Company believes that its existing capital resources, supplemented by
net product sales, contract revenue and net royalty revenue, 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 R&D efforts, 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,
levels of 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, possible
geographic expansion and the establishment of additional 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 is implementing a Year 2000 project to address the issue of
computer software and hardware correctly processing dates through and beyond the
Year 2000. The goal of this project is to ensure that all computer software and
hardware that the Company uses or relies upon is retired, replaced or made Year
2000 compliant before December 31, 1999.
 
    There are three primary aspects to the Company's Year 2000 project:
computers and other equipment, information systems software and third-party
suppliers and business partners. Gilead is addressing each of these areas on a
phased basis, as follows: 1) educating the internal user community at Gilead; 2)
conducting an inventory of all software and hardware; 3) evaluating all software
and hardware for Year 2000 compliance; 4) implementing modifications, retirement
or replacement of software or hardware, prioritized based on an analysis of
importance to Gilead's business; 5) testing and validating all modified or
replaced software and hardware; and 6) designing and implementing contingency
and business continuation plans for critical systems.
 
    To date, Gilead has completed the education and inventory phases of the
project, and estimates that 80% of software and hardware has completed the
evaluation phase. Implementation of modifications or
 
                                       30

<PAGE>
replacements and testing and validation are on schedule, and the Company
anticipates that, for business-critical systems, all of these activities will be
complete by the end of 1999.
 
    The Company has prioritized the implementation phase to first address
software or hardware that affects product manufacturing, quality control and
safety, employee safety, revenues or cash reserves. Two systems that have been
identified as critical to Gilead's operations are software programs from JD
Edwards, Inc. ("JDE") and Beckman-Coulter, Inc. ("Beckman"). The JDE system is
an enterprise-wide program that tracks financial information, processes sales
orders and monitors purchasing and manufacturing activities. During 1998, the
Company upgraded the JDE system to a Year 2000 compliant version, which is
presently operational. The Beckman system monitors and records laboratory data.
The Beckman system upgrades are approximately 80% complete and are scheduled to
be finished during the second quarter of 1999.
 
    To date, the Company has initiated evaluations of more than 90% of its
critical third-party suppliers and business partners. The Company anticipates
completing these evaluations by the second quarter of 1999, on a prioritized
basis. Responses to Gilead's inquiries regarding Year 2000 compliance in many
cases have been general and nonbinding. To date, substantially all respondents
indicate that their Year 2000 compliance efforts are progressing on schedule,
and that their computer systems either are or will be Year 2000-compliant at the
appropriate time. A significant majority of these respondents are presently in
the final testing phase of their Year 2000 compliance projects, and many of them
indicate that they are concurrently developing contingency plans.
 
    Among the most critical third parties the Company relies on are the
financial institutions that manage Gilead's cash and investments of
approximately $280 million, the Company's stock transfer agent, contract
manufacturers, contract research and laboratory organizations and the FDA. The
Company intends to continue monitoring and evaluating these third parties to the
extent practical through the end of 1999.
 
    Gilead anticipates that the total cost of its Year 2000 compliance efforts
will not be material to its financial condition or results of operations. The
current estimate for external costs of total compliance efforts is approximately
$2.1 million, of which $1.1 million has been incurred to date. Of the amount
incurred to date, $0.8 million has been expensed and the remainder has been
capitalized. The $1.0 million of remaining costs includes $0.8 million of
capitalizable costs, primarily computer hardware and software, and $0.2 million
of costs to be charged to expense, primarily consulting fees. These external
costs are included in Gilead's operating budget for 1999. However, this estimate
does not include any costs to Gilead that may be associated with the failure of
any third-party supplier or business partner to achieve Year 2000 compliance.
 
    The Company is also developing a series of contingency plans for certain of
its critical applications. These plans involve, among other actions, manual
solutions, increased inventories and modified staffing strategies. These
contingency plans are expected to be finalized and ready for implementation, if
necessary, before the end of 1999.
 
    The Company's Year 2000 project is designed to significantly reduce
uncertainty and risk arising from the Year 2000 problem. The Company believes
that the implementation actions described above reduce the potential for
disruption of operations or significant financial impact. Due to the uncertainty
inherent in the Year 2000 problem, however, there can be no assurance that Year
2000 failures will not have a material impact on the Company's operations,
financial results or financial condition. In particular, the Company cannot
predict with any certainty whether its critical third-party suppliers and
business partners will achieve Year 2000 compliance, or whether the failure of
any such third party to do so would have a material effect on the Company's
business.
 
                                       31

<PAGE>
MARKET RISK
 
    The Company's portfolio of short-term investments creates an exposure to
interest rate risk. Changes in interest rate levels affect the fair value of
these financial instruments. A sensitivity analysis to measure potential losses
in the fair value of Gilead's short-term investment portfolio arising from a
change in interest rates indicates that a one percentage point increase in
interest rates would have decreased the fair value of the short-term investment
portfolio by approximately $2.7 million at December 31, 1998. A one percentage
point decrease in interest rates at December 31, 1998 would have increased the
fair value of the short-term investment portfolio by $2.7 million.
 
PROPOSED MERGER AGREEMENT
 
    On March 1, 1999, Gilead and NeXstar announced a definitive merger agreement
providing for the acquisition by Gilead of all the outstanding common stock of
NeXstar. The merger is structured as a tax-free, stock-for-stock transaction.
The Company intends to account for this merger under the pooling-of-interests
method. NeXstar, headquartered in Boulder, Colorado, is engaged in the
discovery, development, manufacture and commercialization of products to treat
serious and life-threatening illnesses. In addition to its Boulder headquarters,
NeXstar maintains research, development and manufacturing facilities in San
Dimas, California, and marketing subsidiaries worldwide. Under the terms of the
merger agreement, NeXstar stockholders will receive between 0.3786 and 0.5000 of
a share of Gilead common stock for each share of NeXstar common stock. The exact
exchange ratio will be determined based on the trading range of Gilead common
stock over a specified period prior to completion of the merger. The merger is
subject to certain conditions, including approval of the stockholders of Gilead
and NeXstar. The transaction is expected to be completed in mid-1999.
 

I
TEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    The financial statements required by this item are set forth beginning at
page 44 of this report.
 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
        DISCLOSURE
 
    Not applicable.
 

                                    PART III
 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
               IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
 
DIRECTORS
 
    The names of the directors in alphabetical order, and certain information
about them as of March 18, 1999, are set forth below:
 

<TABLE>
<CAPTION>
NAME                                       AGE                    POSITION WITH GILEAD/PRINCIPAL OCCUPATION
- -------------------------------------      ---      ---------------------------------------------------------------------
<S>                                    <C>          <C>
Paul Berg............................          72   Cahill Professor, Department of Biochemistry, Stanford University
                                                      School of Medicine
 
Etienne F. Davignon..................          66   Chairman, Societe Generale de Belgique
 
James M. Denny, Sr.(1)(2)............          66   Managing Director, William Blair Capital Partners V
 
John C. Martin.......................          47   President and Chief Executive Officer
 
Gordon E. Moore(1)(2)................          70   Chairman Emeritus, Intel Corporation
 
Donald H. Rumsfeld(1)(2).............          66   Chairman of the Gilead Board of Directors
 
George P. Shultz(2)..................          78   Distinguished Fellow, Hoover Institution, Stanford University
</TABLE>

 
- ------------------------
 
(1) Member of the compensation committee
 
                                       32

<PAGE>
(2) Member of the audit committee
 
    Dr. Berg joined the Gilead board of directors in April 1998. Dr. Berg is
currently Cahill Professor in Cancer Research in the Department of Biochemistry
at Stanford University School of Medicine, where he has been on the faculty
since 1959. He has served as Director of the Stanford University Beckman Center
for Molecular and Genetic Medicine since its founding in 1985. Dr. Berg is a
director of Affymetrix, Inc. and Transgene, Inc. He is the founder and a
scientific advisor to Schering-Plough's DNAX Research Institute. Dr. Berg also
serves as a member of Gilead's Scientific Advisory Board. Dr. Berg received the
Nobel Prize for Chemistry in 1980.
 
    Mr. Davignon joined the Gilead board of directors in September 1990. He has
served as the Chairman of Societe Generale de Belgique, a diversified financial
and industrial company, since 1985. Mr. Davignon served as the European
Community's Commissioner for Industry and International Markets from 1977 to
1981, and as the EC's Vice President for Research, Industry and Energy Policies
from 1981 to 1984. Mr. Davignon is a director of Fiat S.A., Compagnie de Suez,
Minorco S.A. and a number of other European companies.
 
    Mr. Denny joined the Gilead board of directors in January 1996. Mr. Denny is
a Managing Director of William Blair Capital Partners V and VI, private equity
funds. Mr. Denny is a retired Vice Chairman of Sears, Roebuck & Co. As Vice
Chairman, he had responsibility for Allstate Insurance Corporation, Coldwell
Banker Real Estate Group and the corporate financial organization. Previously,
he served as Executive Vice President and Chief Financial and Planning Officer
of G.D. Searle & Co., as well as Chairman of Pearle Health Services, Inc., a
Searle-affiliated company. He is a director of Allstate Corporation, Astra A.B.,
GATX Corporation and ChoicePoint, Inc. and is a Chairman of Northwestern
Memorial Hospital.
 
    Dr. Martin is Gilead's President and Chief Executive Officer. Dr. Martin
joined Gilead in October 1990 as Vice President for Research and Development,
was appointed Chief Operating Officer in October 1995, and was appointed
President and Chief Executive Officer and elected to the Gilead board of
directors in April 1996. From 1984 to 1990 he was employed at Bristol-Myers
Squibb, a pharmaceutical company, where he was Director of Antiviral Chemistry.
Dr. Martin was employed at Syntex Corporation, a pharmaceutical company, from
1978 to 1984. Dr. Martin is the co-inventor of ganciclovir, a pharmaceutical now
used for treatment of cytomegalovirus infection. He is currently the President
of the International Society for Antiviral Research. Dr. Martin received his
Ph.D. in organic chemistry from the University of Chicago.
 
    Dr. Moore joined the Gilead board of directors in January 1996, and served
as a member of Gilead's Business Advisory Board from July 1991 until January
1996. Dr. Moore is a co-founder and Chairman Emeritus of Intel Corporation,
where he previously served as Chairman, President and Chief Executive Officer.
He also served as Director of Research and Development for the Fairchild
Semiconductor Division of Fairchild Camera and Instrument Corporation. Dr. Moore
is a director of Transamerica Corporation and is Chairman of the Board of
Trustees at the California Institute of Technology. He received the National
Medal of Technology in 1990.
 
    Mr. Rumsfeld joined the Gilead board of directors in July 1988 and was
elected Chairman of the Board in January 1997. Mr. Rumsfeld has been in private
business since August 1993. He served as the Chairman and Chief Executive
Officer of General Instrument Corporation, a diversified electronics company,
from 1990 to 1993, and was Chief Executive Officer of G.D. Searle & Co., a
pharmaceutical company, from 1977 to 1985. Mr. Rumsfeld formerly served as
Presidential Envoy to the Middle East, U.S. Secretary of Defense, White House
Chief of Staff, U.S. Ambassador to NATO and a U.S. Congressman. Mr. Rumsfeld is
a director of ABB AB, Gulfstream Aerospace Corp., RAND Corporation and Tribune
Company. In 1977, Mr. Rumsfeld was awarded the Medal of Freedom, the nation's
highest civilian award.
 
                                       33

<PAGE>
    Dr. Shultz joined the Gilead board of directors in January 1996. Dr. Shultz
currently serves as Distinguished Fellow at the Hoover Institution and as a
director of the Bechtel Group, Inc., AirTouch Communications and Gulfstream
Aerospace Corporation. Dr. Shultz served as U.S. Secretary of State from 1982 to
1989 and earlier served as Secretary of Labor, Director of the Office of
Management and Budget and Secretary of the Treasury. Previously, he served as
Dean of the Graduate School of Business at the University of Chicago and as
President of the Bechtel Group, Inc. In 1989, Dr. Shultz was awarded the Medal
of Freedom, the nation's highest civilian honor.
 
EXECUTIVE OFFICERS
 
    The names of Gilead's executive officers who are not also directors of
Gilead and certain information about each of them are set forth below:
 
    Jeffrey W. Bird, age 38, is Gilead's Senior Vice President, Business
Operations. Dr. Bird joined Gilead in September 1988 and worked as Director of
Scientific Programs and Research Scientist until March 1990. After completing
his medical degree, he returned to Gilead in December 1991 as Director of
Corporate Development, became Vice President of Corporate Development in March
1995 and was appointed Senior Vice President, Business Operations in January
1998, at which time he became an executive officer. Dr. Bird received his M.D.
and Ph.D. degrees at Stanford University Medical School.
 
    Norbert W. Bischofberger, age 43, is Gilead's Senior Vice President,
Research. Dr. Bischofberger joined Gilead in 1990 as Director of Organic
Chemistry, became Vice President of Organic Chemistry in March 1993 and was
named Vice President of Research in August 1995. Dr. Bischofberger was appointed
Senior Vice President, Research in January 1998, at which time he became an
executive officer. Prior to joining Gilead, Dr. Bischofberger worked in research
at Genentech, Inc. from 1986 to 1990, most recently as Manager of DNA Synthesis.
He received his B.S. in chemistry at the University of Innsbruck in Austria, and
his Ph.D. in Organic Chemistry at the Eidgennossische Technische Hochschule
(ETH) in Zurich, Switzerland.
 
    Howard S. Jaffe, age 41, is Gilead's Senior Vice President, Drug
Development. Dr. Jaffe joined Gilead in December 1991 as Vice President,
Clinical Affairs, became Vice President and Chief Medical Officer in March 1995
and became Senior Vice President, Drug Development in August 1996. Dr. Jaffe is
an assistant clinical professor and attending physician at the University of
California, San Francisco. From 1986 until joining Gilead, he was employed by
Genentech, Inc., most recently as Director of Clinical Research and Cytokine
Project Team Leader. Dr. Jaffe received his M.D. from the Yale University School
of Medicine and performed his residency and fellowship training at the
University of California, San Francisco.
 
    Mark L. Perry, age 43, is Gilead's Senior Vice President, Chief Financial
Officer and General Counsel. Mr. Perry joined Gilead in July 1994 as its Vice
President and General Counsel and became Chief Financial Officer in May 1996.
Mr. Perry was appointed Senior Vice President, Chief Financial Officer and
General Counsel in January 1998. He has also served as Corporate Secretary since
May 1994. From 1981 to 1994, Mr. Perry was with Cooley Godward LLP in San
Francisco and Palo Alto, California. Cooley Godward serves as Gilead's primary
outside counsel. Mr. Perry was an associate with Cooley Godward from 1981 to
1987, and a partner from 1987 to 1994. Mr. Perry received his J.D. from the
University of California, Davis and is a member of the California bar.
 
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    Section 16(a) of the Securities Exchange Act of 1934 requires Gilead's
directors and executive officers, and persons who own more than ten percent of a
registered class of Gilead's equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of Gilead. Executive officers, directors and greater
than ten percent stockholders are required by SEC regulation to furnish Gilead
with copies of all Section 16(a) forms they file.
 
                                       34

<PAGE>
    To Gilead's knowledge, based solely on a review of the copies of such
reports furnished to Gilead and written representations that no other reports
were required, during 1998, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than ten percent beneficial owners
were met.
 

ITEM 11. EXECUTIVE COMPENSATION
 
COMPENSATION OF DIRECTORS
 
    Each non-employee director of Gilead receives a fee of $1,000 for each
meeting attended. In the year ended December 31, 1998, the total compensation
paid to current non-employee directors was $19,000. The members of the Gilead
board of directors are also eligible for reimbursement for their expenses
incurred in connection with attendance at Gilead board of directors meetings in
accordance with Gilead's policy.
 
    Each non-employee director of Gilead also receives stock option grants under
the Directors' Option Plan. The Directors' Option Plan provides for
non-discretionary grants of nonstatutory stock options to non-employee directors
of Gilead, on an automatic basis pursuant to a pre-approved schedule. Options
granted under the Directors' Option Plan are at prices not less than fair market
value on the date of grant, become exercisable over a period of five years in
equal quarterly installments at the rate of 5% per quarter and expire after ten
years. Such vesting is conditioned upon continuous service as a non-employee
director of or consultant to Gilead. The exercise price of options granted must
be paid in cash or shares of common stock of Gilead at the time the option is
exercised.
 
    Each non-employee director was granted as of January 2, 1996, or will be
granted on the date he or she is first elected to be a non-employee director, an
option to purchase 25,000 shares of Gilead common stock, the initial grant.
Thereafter, on each anniversary date of a non-employee director's initial grant,
such non-employee director shall automatically be granted an option to purchase
5,000 shares of Gilead common stock, the annual grant. A non-employee director
who is also the Chairperson of the Gilead board of directors shall be granted an
option to purchase an additional 20,000 shares of Gilead common stock at the
time of his or her initial grant or later election as Chairperson, and an
additional 4,000 shares of Gilead common stock at the time of his or her annual
grant. Each non-employee director who also serves on a standing committee of the
Gilead board of directors shall automatically be granted an option to purchase
an additional 1,000 shares of Gilead common stock at the time of his or her
initial grant, and an additional 1,000 shares of Gilead common stock at the time
of his or her annual grant, for each such committee. Each non-employee director
who serves on a standing committee and who is also the Chairperson of that
committee shall automatically be granted an option to purchase an additional
2,000 shares of Gilead common stock at the time of his or her annual grant. No
other options may be granted under the Directors' Option Plan.
 
    During 1998, Gilead granted options covering 66,000 shares (net of
cancellations) to its current non-employee directors, at exercise prices ranging
from $25.00 to $38.25 per share. Each option granted had an exercise price equal
to fair market value on the date of grant.
 
    As of February 26, 1999, options to purchase a total of 305,000 shares of
Gilead common stock were outstanding under the Directors' Option Plan.
 
                                       35

<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
 
SUMMARY OF COMPENSATION
 
    The following table shows, for the years ended December 31, 1998, 1997, and
1996, certain compensation awarded or paid to, or earned by, Gilead's Chief
Executive Officer and its four other most highly compensated executive officers
at December 31, 1998 (the "named executive officers"):
 
                           SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                                                      LONG TERM
                                                                                                    COMPENSATION
                                                                           ANNUAL COMPENSATION     ---------------
                                                         FISCAL YEAR     ------------------------    SECURITIES
                                                            ENDED           SALARY                   UNDERLYING
NAME AND PRINCIPAL POSITION                              DECEMBER 31,       ($)(1)     BONUS ($)   OPTIONS (#)(2)
- -----------------------------------------------------  ----------------  ------------  ----------  ---------------
<S>                                                    <C>               <C>           <C>         <C>
John C. Martin.......................................        1998         $  354,375   $  150,000        65,000
President and Chief Executive                                1997         $  326,667   $  150,000        75,000
Officer                                                      1996         $  298,333   $  110,000        75,000
 
Jeffrey W. Bird......................................        1998         $  222,750   $  100,000        65,000
Senior Vice President,                                       1997         $  187,917   $  100,000        40,000
Business Operations                                          1996         $  150,417   $   30,000        20,000
 
Norbert W. Bischofberger.............................        1998         $  222,752   $  115,000        55,000
Senior Vice President,                                       1997         $  199,583   $   75,000        40,000
Research                                                     1996         $  179,167   $   50,000        30,000
 
Howard S. Jaffe......................................        1998         $  278,461   $  100,000        35,000
Senior Vice President,                                       1997         $  269,167   $  100,000        40,000
Drug Development                                             1996         $  250,417   $  100,000        65,000
 
Mark L. Perry........................................        1998         $  253,125   $  100,000        35,000
Senior Vice President,                                       1997         $  244,458   $   75,000        40,000
Chief Financial Officer and                                  1996         $  238,000   $   60,000        20,000
General Counsel
</TABLE>

 
- ------------------------
 
(1) Includes amounts earned but deferred at the election of the named executive
    officer pursuant to Gilead's 401(k) employee savings and retirement plan. To
    date, Gilead has not made any matching contributions under such plan.
 
(2) Gilead has not granted any stock appreciation rights, has not made any
    long-term incentive plan awards and did not make any restricted stock grants
    to the named executive officers during the periods covered.
 
STOCK OPTION GRANTS AND EXERCISES
 
    As of February 26, 1999, options to purchase a total of 3,921,698 shares of
common stock had been granted and remained outstanding under the 1991 Stock
Option Plan, and options to purchase 842,530 shares of common stock remained
available for grant thereunder. In addition, as of such date, options to
purchase a total of 190,351 shares of common stock were outstanding under
Gilead's 1987 Incentive Stock Option Plan and 1987 Supplemental Stock Option
Plan and pursuant to certain option grants made outside of Gilead's option
plans.
 
    Gilead grants both incentive stock options and nonstatutory stock options to
its executive officers under the 1991 Stock Option Plan. The following tables
show, for the year ended December 31, 1998, the
 
                                       36

<PAGE>
last fiscal year, certain information regarding options granted to, exercised
by, and held at year end by the named executive officers:
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 

<TABLE>
<CAPTION>
                                                    INDIVIDUAL GRANTS                                 POTENTIAL REALIZABLE
                                    -------------------------------------------------               VALUE AT ASSUMED ANNUAL
                                       NUMBER OF                                                      RATES OF STOCK PRICE
                                      SECURITIES     % OF TOTAL OPTIONS   EXERCISE OR               APPRECIATION FOR OPTION
                                      UNDERLYING         GRANTED TO          BASE                           TERM(3)
                                    OPTIONS GRANTED  EMPLOYEES IN FISCAL     PRICE     EXPIRATION   ------------------------
NAME                                    (#)(1)             YEAR(2)          ($/SH.)       DATE        5% ($)      10% ($)
- ----------------------------------  ---------------  -------------------  -----------  -----------  ----------  ------------
<S>                                 <C>              <C>                  <C>          <C>          <C>         <C>
John C. Martin....................        65,000               6.12%       $  22.875     07/22/08   $  935,096  $  2,369,633
Jeffrey W. Bird...................        30,000               2.82%       $  38.000     01/21/08   $  716,946  $  1,816,818
                                          35,000               3.29%       $  22.875     07/22/08   $  503,513  $  1,275,956
Norbert W. Bischofberger..........        20,000               1.88%       $  38.000     01/21/08   $  477,964  $  1,211,212
                                          35,000               3.29%       $  22.875     07/22/08   $  503,513  $  1,275,956
Howard S. Jaffe...................        35,000               3.29%       $  22.875     07/22/08   $  503,513  $  1,275,956
Mark L. Perry.....................        35,000               3.29%       $  22.875     07/22/08   $  503,513  $  1,275,956
</TABLE>

 
- ------------------------
 
(1) The terms of such options, which include both incentive and nonstatutory
    stock options, are consistent with those of options granted to other
    employees under Gilead's 1991 Stock Option Plan. The options vest at the
    rate of 20% after one year and 5% per quarter thereafter during the
    optionee's employment. Subject to certain exceptions, the maximum term of
    options granted under the 1991 Stock Option Plan is ten years.
 
(2) Based on options to purchase 1,062,400 shares of Gilead common stock granted
    to employees, including executive officers, for the year ended December 31,
    1998.
 
(3) The potential realizable value is based on the term of the option at the
    date of the grant (10 years). It is calculated by assuming that the stock
    price on the date of grant appreciates at the indicated annual rate,
    compounded annually for the entire term, and that the option is exercised
    and sold on the last day of the option term for the appreciated stock price.
    Actual gains, if any, are dependent on the actual future performance of
    Gilead common stock and the timing of exercise and sale transactions by the
    holder. There can be no assurance that the amounts reflected in this table,
    or that any gains, will be achieved.
 
   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES
 

<TABLE>
<CAPTION>
                                                                    NUMBER OF SECURITIES        VALUE OF UNEXERCISED
                                                                   UNDERLYING UNEXERCISED       IN-THE-MONEY OPTIONS
                                         SHARES        VALUE      OPTIONS AT 12/31/98 (#)         AT 12/31/98 ($)
                                       ACQUIRED ON    REALIZED   --------------------------  --------------------------
NAME                                  EXERCISE (#)     ($)(1)    EXERCISABLE/UNEXERCISABLE(2) EXERCISABLE/UNEXERCISABLE(3)
- ------------------------------------  -------------  ----------  --------------------------  --------------------------
<S>                                   <C>            <C>         <C>                         <C>
John C. Martin......................       25,165    $  540,196         288,325/208,000       $   7,509,989/$3,378,875
Jeffery W. Bird.....................       15,832    $  587,141          59,097/120,600       $   1,631,730/$1,815,612
Norbert W. Bischofberger............        2,000    $   44,500          91,599/112,600       $   2,374,795/$1,776,613
Howard S. Jaffe.....................       42,735    $  886,837          76,065/132,200       $   1,745,509/$2,715,038
Mark L. Perry.......................       15,000    $  397,500          74,000/121,000       $   2,115,875/$1,991,937
</TABLE>

 
- ------------------------
 
(1) Represents the fair market value of Gilead common stock on the date of
    exercise (based on the closing sales price reported on the Nasdaq Stock
    Market or the actual sales price if the shares were sold by the optionee)
    less the exercise price, and does not necessarily indicate that the shares
    were sold by the optionee.
 
(2) Includes both in-the-money and out-of-the-money options.
 
                                       37

<PAGE>
(3) Fair market value of Gilead common stock at December 31, 1998 ($41.0625,
    based on the closing sales price reported on the Nasdaq Stock Market), less
    the exercise price.
 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The following table sets forth certain information regarding the ownership
of Gilead common stock as of February 26, 1999 by: (1) each current director and
nominee for director; (2) each named executive officer (as defined above in Item
11); (3) all executive officers and directors of Gilead as a group; and (4) all
those known by Gilead to be beneficial owners of more than five percent of
Gilead common stock and series B preferred stock on a combined basis.
 

<TABLE>
<CAPTION>
                                                                                             BENEFICIAL OWNERSHIP(1)
                                                                                            -------------------------
<S>                                                                                         <C>         <C>
                                                                                            NUMBER OF    PERCENT OF
BENEFICIAL OWNER                                                                              SHARES        TOTAL
- ------------------------------------------------------------------------------------------  ----------  -------------
Wellington Management Company, LLP(2) ....................................................   4,287,860         13.4%
75 State Street
Boston, MA 02109
 
T. Rowe Price Associates(3) ..............................................................   3,164,300          9.9%
100 East Pratt Street
Baltimore, MD 21202
 
Capital Research and Management Company(4) ...............................................   2,895,000          9.0%
333 South Hope Street
Los Angeles, CA 90025
 
Capital Guardian Trust Company and Capital International S.A.(5) .........................   1,895,000          5.9%
11100 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025
 
John C. Martin(6).........................................................................     349,045          1.1%
 
Donald H. Rumsfeld(7).....................................................................     166,232        *
 
Norbert W. Bischofberger(8)...............................................................     112,153        *
 
Howard S. Jaffe(9)........................................................................      96,213        *
 
Mark L. Perry(10).........................................................................      94,548        *
 
Jeffrey W. Bird(11).......................................................................      79,043        *
 
James M. Denny, Sr.(12)...................................................................      53,524        *
 
Etienne F. Davignon(13)...................................................................      53,330        *
 
Gordon E. Moore(14).......................................................................      47,531        *
 
George P. Shultz(15)......................................................................      31,400        *
 
Paul Berg(16).............................................................................       5,200        *
 
All executive officers and directors as a group (11 persons)(17)..........................   1,088,219          3.4%
</TABLE>

 
- ------------------------
 
   * Less than one percent
 
 (1) This table is based upon information supplied by Gilead's officers,
     directors and principal stockholders and Schedules 13D and 13G filed with
     the Securities and Exchange Commission. Unless otherwise indicated in the
     footnotes to this table, and subject to community property laws where
     applicable, each of the stockholders named in this table has sole voting
     and investment power with respect to the shares indicated as beneficially
     owned. Applicable percentages are based on
 
                                       38

<PAGE>
     30,884,298 shares of Gilead common stock and 1,133,786 shares of Gilead
     series B preferred stock outstanding on February 26, 1999, for a total of
     32,018,084 outstanding shares, adjusted as required by rules promulgated by
     the SEC.
 
 (2) Based on a Schedule 13G filed with the Commission on January 24, 1999. The
     Wellington Management Company, LLP is a registered investment adviser. The
     Wellington Management Company in its capacity as investment adviser is
     considered a "beneficial owner" in the aggregate of 4,287,860 shares of
     Gilead common stock. Such shares are owned by numerous investment advisory
     clients of The Wellington Management Company, none of which is known to
     have beneficial ownership of more than 5% of that class of securities of
     Gilead. As of December 31, 1998 The Wellington Management Company had
     shared voting power with respect to 1,770,280 shares and shared dispositive
     power with respect to 4,228,860 shares.
 
 (3) Based on a Schedule 13G filed with the Commission on February 12, 1999. T.
     Rowe Price Associates, Inc., in its capacity as a registered investment
     adviser is considered a "beneficial owner" in the aggregate of 3,164,300
     shares of Gilead common stock. Such shares are owned by various individual
     and institutional investors for which T. Rowe Price Associates, Inc. serves
     as investment adviser with power to direct investments and/or sole power to
     vote the shares. For purposes of the reporting requirements of the
     Securities and Exchange Act of 1934, T. Rowe Price Associates is deemed to
     be a beneficial owner of such shares; however, T. Rowe Price Associates
     expressly disclaims such beneficial ownership.
 
 (4) Based on a Schedule 13G filed with the Commission on February 8, 1999. The
     Capital Research and Management Company is a registered investment adviser
     that manages The American Funds Group of mutual funds. The Capital Research
     and Management Company in its capacity as investment adviser is considered
     a "beneficial owner" in the aggregate of 2,895,000 shares of Gilead common
     stock. Such shares are owned by accounts under the discretionary investment
     management of The Capital Research and Management Company. As of December
     31, 1998, The Capital Research and Management Company had sole dispositive
     power with respect to 2,895,000 shares.
 
 (5) Based on a Schedule 13G filed with the Commission on February 8, 1999. The
     Capital Guardian Trust Company is a California state-chartered trust
     company that acts as investment manager to large institutional accounts
     (primarily pension funds). Capital International S.A. provides investment
     management services to institutional accounts. The Capital Guardian Trust
     Company and Capital International S.A., in their capacity as investment
     managers, are considered "beneficial owners" in the aggregate of 1,865,000
     shares of Gilead common stock. Such shares are owned by accounts under the
     discretionary investment management of The Capital Guardian Trust Company
     and Capital International S.A. As of December 31, 1998, The Capital
     Guardian Trust Company had sole voting power with respect to 1,662,000
     shares and sole dispositive power with respect to 1,865,000 shares and
     Capital International S.A. had sole voting and dispositive power with
     respect to 30,000 shares.
 
 (6) Includes 318,325 shares subject to stock options exercisable within 60
     days.
 
 (7) Includes 39,889 shares held in a grantor annuity trust for which Mr.
     Rumsfeld is the donor and trustee and 37,000 shares subject to stock
     options exercisable within 60 days.
 
 (8) Includes 12,534 shares held in trust for which Dr. Bischofberger and his
     wife are trustees and 96,599 shares subject to stock options exercisable
     within 60 days.
 
 (9) Includes 13,548 shares held in trust for which Dr. Jaffe and his wife are
     trustees and 82,665 shares subject to stock options exercisable within 60
     days.
 
 (10) Includes 500 shares held in account for Mr. Perry's minor child for which
      Mr. Perry is the custodian and 86,000 shares subject to stock options
      exercisable within 60 days.
 
 (11) Includes 72,597 shares subject to stock options exercisable within 60
      days.
 
                                       39

<PAGE>
 (12) Includes 19,998 shares held by a partnership in which Mr. Denny is a
      managing partner, as to which Mr. Denny disclaims beneficial ownership.
      Also includes 7,426 shares held in partnership with Mr. Denny's wife and
      26,100 shares subject to stock options exercisable within 60 days.
 
 (13) Includes 53,330 shares subject to stock options exercisable within 60
      days.
 
 (14) Includes 30,866 shares subject to stock options exercisable within 60
      days.
 
 (15) Includes 21,400 shares subject to stock options exercisable within 60
      days.
 
 (16) Includes 5,200 shares subject to stock options exercisable within 60 days.
 
 (17) Includes 830,082 shares subject to stock options exercisable within 60
      days. See notes (6) through (16) above.
 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    In November 1990, Gilead entered into a Relocation Loan Agreement with John
C. Martin, currently Gilead's President and Chief Executive Officer. The
principal amount of the loan is $100,000 with a term of ten years. The loan is
non-interest bearing and 100% of the principal amount will be forgiven on a pro
rata basis over years six through ten as long as Dr. Martin is still employed by
Gilead. In the event Dr. Martin ceases to be employed by Gilead, the loan
becomes interest-bearing and due within ninety days. The loan is secured by a
deed of trust on Dr. Martin's residence. As of December 31, 1998, $40,000 was
outstanding.
 
    In October 1994, Gilead entered into a Loan Agreement with Mark L. Perry,
currently Gilead's Senior Vice President, Chief Financial Officer and General
Counsel. The principal amount of the loan is $100,000 with a term of ten years.
The loan is non-interest bearing and 50% of the principal amount will be
forgiven on a pro rata basis over years six through ten as long as Mr. Perry is
still employed by Gilead. In the event Mr. Perry ceases to be employed by
Gilead, the loan becomes interest-bearing and due within sixty days. The loan is
secured by a deed of trust on Mr. Perry's residence. As of December 31, 1998,
the entire loan amount was outstanding.
 
    During 1998, Gilead paid an aggregate of $2,551,134 to Pharma Research
Corporation, a contract research organization. James M. Denny, a member of
Gilead's board of directors, is a managing director of William Blair Capital,
LLC, which manages William Blair Capital Fund V, which owns a controlling
interest (45% of the voting stock) in Pharma Research Corporation. Mr. Denny is
not involved in the supervision of the operations of Pharma Research
Corporation. Pharma Research Corporation provided services to Gilead prior to
William Blair Capital's investment.
 
    Gilead has entered into indemnity agreements with all of its officers
(including the named executive officers) and directors which provide, among
other things, that Gilead will indemnify such officer or director, under the
circumstances and to the extent provided for therein, for expenses, damages,
judgments, fines and settlements he may be required to pay in actions or
proceedings which he is or may be made a party by reason of his position as a
director, officer or other agent of Gilead, and otherwise to the full extent
permitted under Delaware law and Gilead's by-laws.
 
                                       40

<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) 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.
        (13)         10.7   Registrant's Employee Stock Purchase Plan, as amended January 22, 1998.
        (13)         10.8   Registrant's 1991 Stock Option Plan, as amended January 22, 1998.
         (2)         10.15  Form of Non-Qualified Stock Option issued to certain executive officers and directors in 1991.
         (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.
                     10.33  Registrant's 1995 Non-Employee Directors' Stock Option Plan, as amended January 26, 1999, and
                            related form of stock option grant.
</TABLE>

 
                                       41

<PAGE>

<TABLE>
<CAPTION>
   EXHIBIT       EXHIBIT
  FOOTNOTE       NUMBER     DESCRIPTION OF DOCUMENT
- -------------  -----------  ----------------------------------------------------------------------------------------------
<C>            <C>          <S>
         (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)         10.45  Amended and Restated Copromotion Agreement between Registrant and Roche Laboratories, Inc.
                            dated September 12, 1997 with certain confidential information deleted.
        (13)         10.46  Amendment No. 1 to Collaborative Research Agreement, dated as of December 22, 1997, between
                            Registrant and Glaxo Wellcome Inc.
                *    10.47  Patent Rights Purchase Agreement between Registrant and Isis Pharmaceuticals, Inc. dated
                            December 18, 1998.
                     10.48  Amendment No. 3 to Vintage Park Research and Development Lease by and between Registrant and
                            Spieker Properties, L.P. dated August 14, 1998 for premises located at 355 Lakeside Drive,
                            Foster City, California.
        (14)         10.49  Agreement and Plan of Merger dated February 28, 1999 by and among Registrant, Gazelle
                            Acquisition Sub, Inc. and NeXstar Pharmaceuticals, Inc.
        (14)         10.50  Share Option Agreement dated February 28, 1999 by and between Registrant and NeXstar
                            Pharmaceuticals, Inc.
        (14)         10.51  Form of Voting Agreement in connection with merger with NeXstar Pharmaceuticals, Inc.
                     23.1   Consent of Ernst & Young LLP, Independent Auditors. Reference is made to page 66.
                     24.1   Power of Attorney. Reference is made to page 64.
                     27.1   Financial Data Schedule.
</TABLE>

 
- ------------------------
 
   * Registrant is applying for confidential treatment with respect to portions
     of this Exhibit.
 
 (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.
 
                                       42

<PAGE>
 (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 Quarterly Report on Form 10-Q for the
      quarter ended September 30, 1997 and incorporated herein by reference.
 
 (13) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
      year ended December 31, 1997 and incorporated herein by reference.
 
 (14) Filed as an exhibit to Registrant's Current Report on Form 8-K filed on
      March 9, 1999 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, 1998. On March 9, 1999, the
Registrant filed a Current Report on Form 8-K regarding the proposed merger with
NeXstar Pharmaceuticals, Inc.
 
                                       43

<PAGE>
                             GILEAD SCIENCES, INC.
 
                       CONSOLIDATED FINANCIAL STATEMENTS
 
                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                    CONTENTS
 

<TABLE>
<S>                                                                                      <C>
Report of Ernst & Young LLP, Independent Auditors......................................         45
 
Audited Consolidated Financial Statements
 
Consolidated Balance Sheets............................................................         46
 
Consolidated Statements of Operations..................................................         47
 
Consolidated Statement of Stockholders' Equity.........................................         48
 
Consolidated Statements of Cash Flows..................................................         49
 
Notes to Consolidated Financial Statements.............................................         50

</TABLE>

 
                                       44

<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, 1998 and 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1998. 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, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
 
                                          /s/ ERNST & YOUNG LLP
 
Palo Alto, California
January 21, 1999

 
                                       45

<PAGE>
                             GILEAD SCIENCES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                        --------------------
                                                                          1998       1997
                                                                        ---------  ---------
<S>                                                                     <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents...........................................  $  32,475  $  31,990
  Short-term investments..............................................    247,464    290,308
  Other current assets................................................      8,371     17,960
                                                                        ---------  ---------
Total current assets..................................................    288,310    340,258
 
Property and equipment, net...........................................     10,182     10,313
 
Other assets..........................................................      4,368      1,498
                                                                        ---------  ---------
                                                                        $ 302,860  $ 352,069
                                                                        ---------  ---------
                                                                        ---------  ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable....................................................  $   3,422  $   3,303
  Accrued clinical and preclinical expenses...........................     11,925     12,989
  Other accrued liabilities...........................................     12,358      5,705
  Deferred revenue....................................................      3,275      9,541
  Current portion of long-term debt and equipment financing
    obligations.......................................................        770      1,853
                                                                        ---------  ---------
Total current liabilities.............................................     31,750     33,391
 
Non-current portion of long-term debt.................................        563      1,331
 
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, 1998
    and 1997 (liquidation preference of $40,000)......................          1          1
  Common stock, par value $.001 per share; 60,000,000 shares
    authorized; 30,710,435 shares and 30,041,584 shares issued and
    outstanding at December 31, 1998 and 1997, respectively...........         31         30
  Additional paid-in capital..........................................    489,183    479,737
  Accumulated other comprehensive income..............................         43        344
  Deferred compensation...............................................       (157)      (286)
  Accumulated deficit.................................................   (218,554)  (162,479)
                                                                        ---------  ---------
Total stockholders' equity............................................    270,547    317,347
                                                                        ---------  ---------
                                                                        $ 302,860  $ 352,069
                                                                        ---------  ---------
                                                                        ---------  ---------
</TABLE>

 
                             See accompanying notes
 
                                       46

<PAGE>
                             GILEAD SCIENCES, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                 -------------------------------
                                                                   1998       1997       1996
                                                                 ---------  ---------  ---------
<S>                                                              <C>        <C>        <C>
Revenues:
  Product sales, net...........................................  $   6,074  $  11,735  $   8,477
  Contract revenue.............................................     24,198     27,413     24,910
  Royalty revenue, net.........................................      2,298        889         33
                                                                 ---------  ---------  ---------
Total revenues.................................................     32,570     40,037     33,420
                                                                 ---------  ---------  ---------
Costs and expenses:
  Cost of product sales........................................        594      1,167        910
  Research and development.....................................     75,298     59,162     41,881
  Selling, general and administrative..........................     31,003     25,472     26,692
                                                                 ---------  ---------  ---------
Total costs and expenses.......................................    106,895     85,801     69,483
                                                                 ---------  ---------  ---------
Loss from operations...........................................    (74,325)   (45,764)   (36,063)
 
Interest income................................................     18,442     18,260     15,042
Interest expense...............................................       (192)      (489)      (711)
                                                                 ---------  ---------  ---------
Net loss.......................................................  $ (56,075) $ (27,993) $ (21,732)
                                                                 ---------  ---------  ---------
                                                                 ---------  ---------  ---------
Basic and diluted loss per common share........................  $   (1.85) $   (0.95) $   (0.78)
                                                                 ---------  ---------  ---------
                                                                 ---------  ---------  ---------
Common shares used to calculate basic and diluted loss per
  common share.................................................     30,363     29,326     27,786
                                                                 ---------  ---------  ---------
                                                                 ---------  ---------  ---------
</TABLE>

 
                             See accompanying notes
 
                                       47

<PAGE>
                             GILEAD SCIENCES, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  ADDITIONAL   ACCUMULATED OTHER
                                      PREFERRED                     PAID-IN      COMPREHENSIVE       DEFERRED      ACCUMULATED
                                        STOCK      COMMON STOCK     CAPITAL         INCOME         COMPENSATION      DEFICIT
                                    -------------  -------------  -----------  -----------------  ---------------  ------------
<S>                                 <C>            <C>            <C>          <C>                <C>              <C>
Balance at December 31, 1995......    $      --      $      24     $ 265,460       $     167         $  (1,398)     $ (112,754)
  Net Loss........................           --             --            --              --                --         (21,732)
  Unrealized loss on
    available-for-sale short-term
    investments, net..............           --             --            --             (78)               --              --
    Comprehensive loss............           --             --            --              --                --              --
  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              --
                                            ---            ---    -----------            ---           -------     ------------
Balance at December 31, 1996......    $      --      $      29     $ 426,577       $      89         $    (549)     $ (134,486)
  Net Loss........................           --             --            --              --                --         (27,993)
  Unrealized gain on
    available-for-sale short-term
    investments, net..............           --             --            --             255                --              --
    Comprehensive loss............           --             --            --              --                --              --
  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              --
                                            ---            ---    -----------            ---           -------     ------------
Balance at December 31, 1997......    $       1      $      30     $ 479,737       $     344         $    (286)     $ (162,479)
  Net Loss........................           --             --            --              --                --         (56,075)
  Unrealized loss on
    available-for-sale short-term
    investments, net..............           --             --            --            (301)               --              --
    Comprehensive loss............           --             --            --              --                --              --
  Issuance of 568,969 shares of
    common stock upon the exercise
    of stock options..............           --              1         6,859              --                --              --
  Issuance of 99,882 shares of
    common stock pursuant to the
    employee stock purchase
    plan..........................           --             --         2,153              --                --              --
  Amortization of deferred
    compensation..................           --             --            --              --               129              --
  Amounts recognized under
    compensatory stock
    transactions..................           --             --           434              --                --              --
                                            ---            ---    -----------            ---           -------     ------------
Balance at December 31, 1998......    $       1      $      31     $ 489,183       $      43         $    (157)     $ (218,554)
                                            ---            ---    -----------            ---           -------     ------------
                                            ---            ---    -----------            ---           -------     ------------
 
<CAPTION>
                                        TOTAL
                                    STOCKHOLDERS'
                                       EQUITY
                                    -------------
<S>                                 <C>
Balance at December 31, 1995......    $ 151,499
                                    -------------
  Net Loss........................      (21,732)
  Unrealized loss on
    available-for-sale short-term
    investments, net..............          (78)
                                    -------------
    Comprehensive loss............      (21,810)
                                    -------------
  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
                                    -------------
Balance at December 31, 1996......    $ 291,660
                                    -------------
  Net Loss........................      (27,993)
  Unrealized gain on
    available-for-sale short-term
    investments, net..............          255
                                    -------------
    Comprehensive loss............      (27,738)
                                    -------------
  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
                                    -------------
Balance at December 31, 1997......    $ 317,347
                                    -------------
  Net Loss........................      (56,075)
  Unrealized loss on
    available-for-sale short-term
    investments, net..............         (301)
                                    -------------
    Comprehensive loss............      (56,376)
                                    -------------
  Issuance of 568,969 shares of
    common stock upon the exercise
    of stock options..............        6,860
  Issuance of 99,882 shares of
    common stock pursuant to the
    employee stock purchase
    plan..........................        2,153
  Amortization of deferred
    compensation..................          129
  Amounts recognized under
    compensatory stock
    transactions..................          434
                                    -------------
Balance at December 31, 1998......    $ 270,547
                                    -------------
                                    -------------
</TABLE>

 
                             See accompanying notes
 
                                       48

<PAGE>
                             GILEAD SCIENCES, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1998       1997       1996
                                                              ---------  ---------  ---------
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $ (56,075) $ (27,993) $ (21,732)
  Adjustments to reconcile net loss
  to net cash used in operating activities:
    Depreciation and amortization...........................      2,757      2,983      3,773
    Stock plan compensation expense.........................        434         --        706
    Changes in assets and liabilities:
      Other current assets..................................      9,589    (13,670)    (2,732)
      Other assets..........................................     (2,870)      (250)      (175)
      Accounts payable......................................        119        802         89
      Accrued clinical and preclinical expenses.............     (1,064)     7,982      1,084
      Other accrued liabilities.............................      6,653      1,272      2,204
      Deferred revenue......................................     (6,266)     9,014        319
                                                              ---------  ---------  ---------
        Total adjustments...................................      9,352      8,133      5,268
                                                              ---------  ---------  ---------
Net cash used in operating activities.......................    (46,723)   (19,860)   (16,464)
                                                              ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short-term investments.......................   (486,067)  (410,997)  (437,627)
  Sales of short-term investments...........................    390,251    196,515    248,552
  Maturities of short-term investments......................    138,359     88,408    153,257
  Capital expenditures......................................     (2,497)    (3,861)    (3,727)
                                                              ---------  ---------  ---------
Net cash provided by (used in) investing activities.........     40,046   (129,935)   (39,545)
                                                              ---------  ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments of financing obligations and long-term debt......     (1,851)    (3,361)    (2,843)
  Proceeds from issuance of long-term debt..................         --         --      3,000
  Proceeds from issuance of preferred stock.................         --     40,000         --
  Proceeds from issuances of common stock...................      9,013     13,162    160,416
                                                              ---------  ---------  ---------
Net cash provided by financing activities...................      7,162     49,801    160,573
                                                              ---------  ---------  ---------
Net increase (decrease) in cash and cash equivalents........        485    (99,994)   104,564
Cash and cash equivalents at beginning of year..............     31,990    131,984     27,420
                                                              ---------  ---------  ---------
Cash and cash equivalents at end of year....................  $  32,475  $  31,990  $ 131,984
                                                              ---------  ---------  ---------
                                                              ---------  ---------  ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid...............................................  $     202  $     509  $     731
                                                              ---------  ---------  ---------
                                                              ---------  ---------  ---------
</TABLE>

 
                             See accompanying notes
 
                                       49

<PAGE>
                             GILEAD SCIENCES, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1998
 
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. All of the Company's operations are located
in the United States. 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.
 
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.
 
BUSINESS SEGMENTS
 
    In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, which addresses how public business enterprises must report
information about operating segments. For a number of years, the Company has
been primarily engaged in the discovery, development and marketing of a new
class of human therapeutics based on nucleotides. VISTIDE-Registered Trademark-
(cidofovir injection), a drug for the treatment of cytomegalovirus ("CMV")
retinitis in patients with AIDS, received marketing clearance from the FDA in
June 1996 and is the Company's first commercially available product. Gilead
sells this product in the United States through major drug wholesalers and it is
currently the Company's only source of product sales revenue. At the present
time, the Company is organized and managed along functional lines.
 
    Gilead also derives revenue from contracts, including reimbursement of
research and development ("R&D") costs and the sale of patent rights, and from
royalties. During 1998, Gilead recognized royalty revenue from sales of VISTIDE
outside the United States by Pharmacia & Upjohn S.A. ("P&U"), and from the
co-promotion with Roche Laboratories Inc. ("Roche Labs") of
Roferon-A-Registered Trademark- (Interferon alfa-2a, recombinant) for the
treatment of chronic hepatitis C infection in the United States. The amounts,
sources and nature of the Company's contract and royalty revenues are described
in more detail in Note 3.
 
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 revenue recognized under the Company's
collaborative R&D agreements, license and supply agreements and patent rights
purchase agreement is recorded as earned based upon the performance requirements
of the contract. Payments received in advance under these agreements are
recorded as deferred revenue until earned. Royalty revenue is 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 SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, the Company has elected to follow Accounting
Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK
 
                                       50

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 7 for pro forma disclosures of stock-based compensation pursuant to
SFAS No. 123.
 
BASIC AND DILUTED LOSS PER COMMON SHARE
 
    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.
 
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.
 
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 are classified as available-for-sale and
carried at estimated fair values in cash equivalents and short-term investments.
At December 31, 1998, cash and cash equivalents includes $30.5 million of
securities designated as available-for-sale ($28.5 million at December 31,
1997). Fair values of available-for-sale securities are based on prices obtained
from commercial pricing services. 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.
 
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 maturity, 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.
 
ACCOUNTS RECEIVABLE AND OTHER CURRENT ASSETS
 
    Trade receivables, net of allowances for returns, discounts, rebates and bad
debts, are reported on the consolidated balance sheet in other current assets.
At December 31, 1997, other current assets includes reimbursable R&D expenses
and a milestone payment totaling approximately $12.4 million due from F.
Hoffmann-La Roche Ltd. and Hoffmann-La Roche, Inc. (collectively, "Roche"). For
additional information, refer to Note 3.
 
                                       51

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
 
    Property and equipment are stated at cost and consist of the following (in
thousands):
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          --------------------
                                                            1998       1997
                                                          ---------  ---------
<S>                                                       <C>        <C>
Equipment subject to financing obligations..............  $      34  $   2,732
Laboratory equipment....................................      7,037      5,571
Office furniture and equipment..........................      2,863      2,019
Computer equipment......................................      3,685      2,062
Capitalized software....................................      1,422        956
Leasehold improvements..................................     12,797     12,583
                                                          ---------  ---------
                                                             27,838     25,923
Less accumulated depreciation and amortization..........    (17,656)   (15,610)
                                                          ---------  ---------
                                                          $  10,182  $  10,313
                                                          ---------  ---------
                                                          ---------  ---------
</TABLE>

 
    Property and equipment are depreciated on a straight-line basis over their
estimated useful lives, as follows:
 

<TABLE>
<CAPTION>
                                                                   ESTIMATED USEFUL LIFE (IN
DESCRIPTION                                                                 YEARS)
- ---------------------------------------------------------------  -----------------------------
<S>                                                              <C>
Laboratory equipment...........................................               4-8
Office furniture and equipment.................................                6
Computer equipment.............................................               2-3
Capitalized software...........................................                3
</TABLE>

 
    Leasehold improvements and equipment subject to financing obligations are
amortized on a straight-line basis over the shorter of the estimated useful life
of the item or the term of the related lease or borrowing.
 
OTHER ACCRUED LIABILITIES
 
    Other accrued liabilities are summarized as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                             --------------------
                                                               1998       1997
                                                             ---------  ---------
<S>                                                          <C>        <C>
Accrued compensation.......................................  $   2,251  $   1,833
Accrued Medicaid rebates...................................      1,705      1,881
Estimated liability to Roche (Note 3)......................      5,000         --
Other......................................................      3,402      1,991
                                                             ---------  ---------
                                                             $  12,358  $   5,705
                                                             ---------  ---------
                                                             ---------  ---------
</TABLE>

 
                                       52

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY INSTRUMENTS
 
    The Company periodically 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. 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.
 
    Gains and losses on these contracts are deferred and reported as a component
of the related transaction in the period in which it occurs. At both December
31, 1998 and 1997, the Company's outstanding forward foreign exchange contracts
and their fair values were immaterial.
 
NEW ACCOUNTING PRONOUNCEMENT
 
    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which establishes
accounting and reporting standards for derivative instruments, including forward
foreign exchange contracts, and for hedging activities. SFAS No. 133 is
effective for years beginning after June 15, 1999. Under Gilead's existing
derivatives activity levels and hedging strategies, the adoption of SFAS No. 133
would not have a significant impact on the Company's present financial
accounting and reporting practices.
 
RECLASSIFICATIONS
 
    Certain prior period amounts have been reclassified to conform to the 1998
presentation.
 
                                       53

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
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, 1998
U.S. treasury securities and obligations of
  U.S. government agencies...................  $   78,703    $      62     $    (123)  $   78,642
Certificates of deposit......................      38,058           65           (11)      38,112
Corporate debt securities....................      34,676          152           (18)      34,810
Asset-backed securities......................      89,565          101          (185)      89,481
Other debt securities........................      36,984           --            --       36,984
                                               ----------        -----         -----   ----------
  Total......................................  $  277,986    $     380     $    (337)  $  278,029
                                               ----------        -----         -----   ----------
                                               ----------        -----         -----   ----------
DECEMBER 31, 1997
U.S. treasury securities and obligations of
  U.S. government agencies...................  $   35,615    $      55     $      (6)  $   35,664
Certificates of deposit......................      65,485           20            (2)      65,503
Corporate debt securities....................      78,054          192            (1)      78,245
Asset-backed securities......................     118,362          121           (35)     118,448
Other debt securities........................      20,965           --            --       20,965
                                               ----------        -----         -----   ----------
  Total......................................  $  318,481    $     388     $     (44)  $  318,825
                                               ----------        -----         -----   ----------
                                               ----------        -----         -----   ----------
</TABLE>

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

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                -------------------------------
                                                  1998       1997       1996
                                                ---------  ---------  ---------
<S>                                             <C>        <C>        <C>
Proceeds from sales...........................  $ 390,251  $ 196,515  $ 248,552
Gross realized gains on sales.................  $   1,127  $     225  $     451
Gross realized losses on sales................  $     654  $     142  $      65
</TABLE>

 
    At both December 31, 1998 and 1997, 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. CONTRACT REVENUE AND ROYALTIES
 
PHARMACIA & UPJOHN
 
    In August 1996, the Company and P&U entered into a License and Supply
Agreement ("P&U Agreement") to market VISTIDE in all countries outside the
United States. Under the terms of the P&U 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 the European Union by the European Commission, which
 
                                       54

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
3. CONTRACT REVENUE AND ROYALTIES (CONTINUED)
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 of
1997 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 7.
 
    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 revenue until
such third-party sales occur. At December 31, 1998, the Company has recorded on
its balance sheet approximately $3.3 million of P&U deferred revenue ($2.1
million at December 31, 1997).
 
HOFFMANN-LA ROCHE
 
    In September 1996, Gilead and 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 contract revenue. Upon achieving certain
developmental milestones, 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.
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 R&D
costs under this program by funding such costs quarterly and generally in
advance, based on an annual budget. Reimbursements are included in contract
revenue as the Company incurs the related R&D costs. Amounts incurred by the
Company in excess of amounts funded may also be reimbursed, subject to Roche's
approval. In this event, revenue is not recognized until such approval has been
obtained. Conversely, if amounts funded by Roche exceed the Company's related
R&D costs, the Company may be required to repay such excess funding to Roche.
 
    For the years ended December 31, 1998, 1997 and 1996, the Company recorded
approximately $16.4 million, $8.2 million and $1.1 million, respectively, of R&D
reimbursement revenue related to the Roche Agreement, which is reported as
contract revenue in the accompanying consolidated statements of operations. The
$16.4 million recorded as revenue during 1998 includes $5.2 million attributable
to R&D expenses incurred in the fourth quarter of 1997, which were subject to
Roche's approval as of December 31, 1997. Such expenses were approved for
reimbursement in 1998. Except for this $5.2 million, R&D costs related to the
Roche Agreement approximate the reimbursement revenue in each year presented and
are included in R&D expenses.
 
    At December 31, 1998, the Company has recorded an accrued liability of $5.0
million, which represents 1998 R&D funding from Roche in excess of actual 1998
R&D costs. The Company and Roche are in the process of finalizing the 1999
budget and, as a result, the Company has not yet received funding
 
                                       55

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
3. CONTRACT REVENUE AND ROYALTIES (CONTINUED)
for estimated 1999 R&D spending under the Roche Agreement. At December 31, 1997,
deferred revenue includes $7.2 million, representing Roche's advance
reimbursement of budgeted R&D costs for the first quarter of 1998.
 
    In September 1996, Gilead and Roche Labs entered into an agreement to
co-promote Roche's Roferon-A for the treatment of chronic hepatitis C infection
in the United States. Roche paid Gilead a $0.2 million one-time fee in 1996 in
connection with the signing of this agreement. Beginning in 1997, Roche was
required to pay Gilead a royalty based on the net product sales. The Company
recognizes these royalties when received. During 1998, Gilead received $0.6
million, which is reported as royalty revenue. This co-promotion agreement
concluded at the end of 1998. While the Company expects to receive transition
payments under the agreement in 1999, such amounts are not expected to be
significant.
 
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 (approximately 2.8%) of the Company's outstanding common stock at
December 31, 1998. Under the terms of the Glaxo agreement, as amended over time,
the Company received $1.8 million in 1998, and $3.0 million in both 1997 and
1996, to fund research, which is reported as contract revenue in the
accompanying consolidated statements of operations. The R&D costs reimbursed by
Glaxo approximate the related revenue and are included in R&D expense. This
agreement and the related funding were terminated in June 1998.
 
BAUSCH & LOMB
 
    In August 1994, the Company entered into a license and supply agreement with
Bausch & Lomb Incorporated (formerly Storz Instrument Company, a subsidiary of
American Home Products Corporation), to develop and market an eyedrop
formulation of cidofovir for the potential treatment of topical ophthalmic
viruses. The Company received a $0.3 million annual fee under this agreement in
each of the years ended December 31, 1997 and 1996, which is reported as
contract revenue. The Company also may be entitled to receive milestone payments
and future royalties on product sales under the agreement.
 
ISIS PHARMACEUTICALS
 
    In December 1998, Gilead and Isis Pharmaceuticals, Inc. ("Isis") entered
into an agreement under which Gilead sold Isis its antisense patent estate,
including patents and patent applications covering antisense chemistry and
antisense drug delivery systems. Under the terms of the agreement, Isis is
required to pay Gilead a total of $6.0 million in four installments. The first
$2.0 million was paid in December 1998, and the remaining $4.0 million is
payable in three additional payments (one payment of $1.0 million in both 1999
and 2000, and one payment of $2.0 million in 2001). The total sale price of $6.0
million is included in contract revenue in the Company's consolidated statement
of operations for the year ended December 31, 1998.
 
                                       56

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
4. LONG-TERM DEBT
 
    In October 1996, the Company entered into an unsecured $3.0 million term
loan to finance its office and R&D 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, and resets periodically thereafter based on applicable
LIBOR rates. At December 31, 1998, the total debt outstanding is approximately
$1.3 million, the current portion outstanding is $0.8 million and the book value
of the debt approximates its fair value.
 
    The terms of the debt require the Company to comply with certain financial
and operating covenants. At December 31, 1998, the Company was in compliance
with all such covenants.
 
5. COMMITMENTS
 
    The Company leases its facilities pursuant to operating leases that have
expiration dates in March 2006, with two five-year renewal options. Rent expense
net of sublease income under these leases totaled approximately $2.2 million,
$2.3 million and $2.1 million for the years ended December 31, 1998, 1997 and
1996, respectively.
 
    At December 31, 1998, 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>
<S>                                                                  <C>
Year ending December 31:
  1999.............................................................  $   2,825
  2000.............................................................      2,992
  2001.............................................................      3,106
  2002.............................................................      3,224
  2003.............................................................      3,347
Thereafter.........................................................      8,005
                                                                     ---------
                                                                     $  23,499
                                                                     ---------
                                                                     ---------
</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, 1998, a total of $0.5 million was secured under this letter of
credit arrangement.
 
                                       57

<PAGE>
                             GILEAD SCIENCES, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                               DECEMBER 31, 1998
 
6. COMPREHENSIVE INCOME
 
    On January 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME, which establishes new requirements for reporting and
displaying comprehensive income (loss) and its components. The adoption of SFAS
No. 130 has no impact on the Company's net loss or total stockholders' equity.
This new accounting standard requires net unrealized gains or losses on the
Company's available-for-sale securities to be reported as accumulated other
comprehensive income (loss). Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 130.
 
    The following reclassification adjustments are required to avoid
double-counting net realized gains on sales of securities that were previously
included in comprehensive income prior to the sales of the securities (in
thousands):
 

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                         -------------------------------
                                                           1998       1997       1996
                                                         ---------  ---------  ---------
<S>                                                      <C>        <C>        <C>
Net gains on sales of securities included in interest
  income...............................................  $     473  $      83  $     386
                                                         ---------  ---------  ---------
                                                         ---------  ---------  ---------
Other comprehensive income:
  Net unrealized gain arising during the year..........  $     172  $     338  $     308
  Reclassification adjustment..........................       (473)       (83)      (386)
                                                         ---------  ---------  ---------
    Net unrealized gain (loss) reported in other
      comprehensive income.............................  $    (301) $     255  $     (78)
                                                         ---------  ---------  ---------
                                                         ---------  ---------  ---------
</TABLE>

 
7. 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 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. No dividends have been declared or
paid on the Series B Convertible Preferred Stock.
 
EMPLOYEE STOCK PURCHASE PLAN
 
    Under the Company's Employee Stock Purchase Plan ("ESPP"), 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 1,250,000 shares of common stock are reserved for issuance under the ESPP. As
of December 31, 1998, 794,049 shares had been issued under the ESPP (694,167
shares as of December 31, 1997).
 
                                       58

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
7. STOCKHOLDERS' EQUITY (CONTINUED)
    Emerging Issues Task Force ("EITF") Issue No. 97-12, ACCOUNTING FOR
INCREASED SHARE AUTHORIZATIONS IN AN IRS SECTION 423 EMPLOYEE STOCK PURCHASE
PLAN UNDER APB OPINION NO. 25, 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. During 1998,
the Company recognized compensation expense of $0.4 million related to an ESPP
share authorization approved in 1998 in accordance with the provisions of EITF
Issue No. 97-12. In future years, the Company will not be required to recognize
additional compensation expense related to the 1998 share authorization.
 
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. In
May 1998, the 1991 Plan was amended such that the exercise price of all stock
options must be at least equal to the fair value of the Company's 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, 1998, 958,380 shares were available for grant of future options.
 
    In November 1995, the Company adopted the 1995 Non-Employee Directors' Stock
Option Plan ("Directors' Plan") for issuance of common stock to non-employee
Directors pursuant to a predetermined formula. The exercise price of options
granted under the Directors' Plan must be at least equal to the fair value of
the Company's 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, 1998, 85,000 shares were available for grant of
future options under the Directors' Plan.
 
                                       59

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
7. STOCKHOLDERS' EQUITY (CONTINUED)
    The following table summarizes activity under all stock option plans for
each of the three years in the period ended December 31, 1998. All option grants
presented in the table had exercise prices not less than the fair value of the
underlying stock on the grant date (shares in thousands):
 

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                        --------------------------------------------------------------------------
                                                                  1998                     1997                     1996
                                                        ------------------------  ----------------------  ------------------------
                                                                      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 year........................       4,117    $   19.39       4,651   $   14.96        4,144    $   10.55
  Granted.............................................       1,128        27.69         923       29.21        1,239        25.89
  Forfeited...........................................        (241)       27.11        (266)      20.51         (231)       13.70
  Exercised...........................................        (569)       12.06      (1,191)       9.42         (501)        6.15
                                                             -----                ---------                    -----
Outstanding, end of year..............................       4,435    $   22.16       4,117   $   19.39        4,651    $   14.96
                                                             -----   -----------  ---------  -----------       -----   -----------
                                                             -----   -----------  ---------  -----------       -----   -----------
Exercisable, end of year..............................       1,885    $   16.66       1,673   $   13.83        2,025    $   10.23
                                                             -----   -----------  ---------  -----------       -----   -----------
                                                             -----   -----------  ---------  -----------       -----   -----------
</TABLE>

 
    In 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 years ended December 31, 1998, 1997 and 1996 totaled $0.1 million, $0.3
million and $0.8 million, respectively.
 
    The following table summarizes information about exercise price ranges of
outstanding and exercisable options at December 31, 1998 (options in thousands):
 

<TABLE>
<CAPTION>
                                                           OPTIONS OUTSTANDING
                                             -----------------------------------------------     OPTIONS EXERCISABLE
                                                                  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>
$ 0.24 - $16.50............................         1,245              4.47       $   10.55        1,072     $   10.57
$17.50 - $22.88............................         1,417              7.96           20.50          421         18.86
$23.00 - $32.00............................         1,114              8.27           27.65          279         28.70
$32.13 - $42.88............................           659              8.48           37.45          113         36.54
                                                   ------               ---      -----------  -----------       ------
    Total..................................         4,435              7.14       $   22.16        1,885     $   16.66
                                                   ------               ---      -----------  -----------       ------
                                                   ------               ---      -----------  -----------       ------
</TABLE>

 
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
 
                                       60

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
7. STOCKHOLDERS' EQUITY (CONTINUED)
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>
                                                     YEAR ENDED DECEMBER 31,
                                                 -------------------------------
                                                   1998       1997       1996
                                                 ---------  ---------  ---------
<S>                                              <C>        <C>        <C>
Pro forma net loss (in thousands)..............  $ (68,656) $ (38,503) $ (29,586)
Pro forma basic and diluted loss per share.....  $   (2.26) $   (1.31) $   (1.06)
</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>
                                                                            1998       1997       1996
                                                                          ---------  ---------  ---------
<S>                                                                       <C>        <C>        <C>
Expected life in years (from vesting date)--options.....................       1.78       1.75       1.54
Expected life in years--ESPP............................................       1.51       0.75       1.54
Interest rate--options..................................................        5.5%       6.2%       6.0%
Interest rate--ESPP.....................................................        5.2%       5.6%       6.0%
Volatility..............................................................         66%        66%        69%
Dividend yield..........................................................          0%         0%         0%
</TABLE>

 
    The weighted average estimated fair value of each stock option granted for
the years ended December 31, 1998, 1997 and 1996 was $15.90, $17.14 and $15.17,
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
Company's 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.
 
8. INCOME TAXES
 
    As of December 31, 1998, the Company had federal net operating loss
carryforwards of approximately $223.0 million. The Company also had federal R&D
tax credit carryforwards of approximately $7.9 million. The net operating loss
and credit carryforwards will expire at various dates beginning in 2001 through
2018, if not utilized.
 
                                       61

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
8. INCOME TAXES (CONTINUED)
    Significant components of the Company's deferred tax assets for federal and
state income taxes are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          --------------------
                                                            1998       1997
                                                          ---------  ---------
<S>                                                       <C>        <C>
Deferred tax assets:
  Net operating loss carryforwards......................  $  77,200  $  57,100
  R&D credits...........................................     10,700      6,800
  Capitalized R&D for California........................     11,200      4,400
  Other.................................................      4,500      2,300
                                                          ---------  ---------
Total deferred tax assets...............................    103,600     70,600
Valuation allowance for deferred tax assets.............   (103,600)   (70,600)
                                                          ---------  ---------
Net deferred tax assets.................................  $      --  $      --
                                                          ---------  ---------
                                                          ---------  ---------
</TABLE>

 
    The valuation allowance increased by $33.0 million and $15.3 million during
the years ended December 31, 1998 and 1997, 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 $14.9 million of the valuation allowance at December 31, 1998
relates to the tax benefits of stock option deductions, which will be credited
to additional paid-in capital when realized.
 
9. SUBSEQUENT EVENTS (UNAUDITED)
 
    On January 26, 1999, the Board of Directors authorized an additional 200,000
shares of common stock as available for grant under the Directors' Plan. This
increase is subject to stockholder approval at the Company's annual
stockholders' meeting to be held in 1999.
 
    On March 1, 1999, Gilead and NeXstar Pharmaceuticals, Inc. ("NeXstar")
announced a definitive merger agreement providing for the acquisition by Gilead
of all the outstanding common stock of NeXstar. The merger is structured as a
tax-free, stock-for-stock transaction. The Company intends to account for this
merger under the pooling-of-interests method. NeXstar, headquartered in Boulder,
Colorado, is engaged in the discovery, development, manufacture and
commercialization of products to treat serious and life-threatening illnesses.
In addition to its Boulder headquarters, NeXstar maintains research, development
and manufacturing facilities in San Dimas, California, and marketing
subsidiaries worldwide. Under the terms of the merger agreement, NeXstar
stockholders will receive between 0.3786 and 0.5000 of a share of Gilead common
stock for each share of NeXstar common stock. The exact exchange ratio will be
determined based on the trading range of Gilead common stock over a specified
period prior to completion of the merger. The merger is subject to certain
conditions, including approval of the stockholders of Gilead and NeXstar. The
transaction is expected to be completed in mid-1999.
 
                                       62

<PAGE>
                             GILEAD SCIENCES, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                               DECEMBER 31, 1998
 
10. 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>
1998
Total revenues..............................................   $  13,560    $   7,036    $   3,038    $   8,936
Total costs and expenses....................................      25,902       26,887       24,715       29,393
Net loss....................................................      (7,384)     (14,844)     (17,559)     (16,290)
Basic and diluted loss per share............................       (0.25)       (0.49)       (0.58)       (0.53)
 
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 and diluted income (loss) per share...................       (0.27)        0.09        (0.35)       (0.42)
</TABLE>

 
                                       63

<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.
 

<TABLE>
<S>                             <C>  <C>
                                GILEAD SCIENCES, INC.
 
                                BY:              /s/ JOHN C. MARTIN
                                     -----------------------------------------
                                                   John C. Martin
                                       PRESIDENT AND CHIEF EXECUTIVE OFFICER
 
                                Date: March 22, 1999
</TABLE>

 
                               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.
 
    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>
                                President and Chief
      /s/ JOHN C. MARTIN          Executive Officer,
- ------------------------------    Director (Principal         March 22, 1999
        John C. Martin            Executive Officer)
 
                                Senior Vice President,
      /s/ MARK L. PERRY           Chief Financial Officer
- ------------------------------    and General Counsel         March 22, 1999
        Mark L. Perry             (Principal Financial and
                                  Accounting Officer)
 
    /s/ DONALD H. RUMSFELD
- ------------------------------  Chairman of the Board of      March 22, 1999
      Donald H. Rumsfeld          Directors
 
        /s/ PAUL BERG
- ------------------------------  Director                      March 22, 1999
          Paul Berg
</TABLE>

 
                                       64

<PAGE>

<TABLE>
<CAPTION>
          SIGNATURE                       TITLE                    DATE
- ------------------------------  --------------------------  -------------------
 
<C>                             <S>                         <C>
   /s/ ETIENNE F. DAVIGNON
- ------------------------------  Director                      March 22, 1999
     Etienne F. Davignon
 
   /s/ JAMES M. DENNY, SR.
- ------------------------------  Director                      March 22, 1999
     James M. Denny, Sr.
 
     /s/ GORDON E. MOORE
- ------------------------------  Director                      March 22, 1999
       Gordon E. Moore
 
     /s/ GEORGE P. SHULTZ
- ------------------------------  Director                      March 22, 1999
       George P. Shultz
</TABLE>

 
                                       65

<PAGE>

                                 EXHIBIT INDEX
 

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER     DESCRIPTION OF DOCUMENT
- -----------  --------------------------------------------------------------------------------------------------------
<C>          <S>
     10.33   Registrant's 1995 Non-Employee Directors' Stock Option Plan, as amended January 26, 1999, and related
             form of stock option grant.
 *   10.47   Patent Rights Purchase Agreement between Registrant and Isis Pharmaceuticals, Inc. dated December 18,
             1998.
     10.48   Amendment No. 3 to Vintage Park Research and Development Lease by and between Registrant and Spieker
             Properties, L.P. dated August 14, 1998 for premises located at 355 Lakeside Drive, Foster City,
             California.
      23.1   Consent of Ernst & Young LLP, Independent Auditors. Reference is made to page 66.
      24.1   Power of Attorney. Reference is made to page 64.
      27.1   Financial Data Schedule.
</TABLE>

 
- ------------------------
 
   * Registrant is applying for confidential treatment with respect to portions
     of this Exhibit.





<PAGE>
                                                                 Exhibit 10.33

                              GILEAD SCIENCES, INC.

                1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN 

                         ADOPTED ON NOVEMBER 27, 1995

                           APPROVED BY STOCKHOLDERS

                              ON APRIL 25, 1996

                          AMENDED ON JANUARY 26, 1999

                          APPROVED BY STOCKHOLDERS
                          ON _______________, 1999

                      TERMINATION DATE: NOVEMBER 26, 2005


1.   PURPOSE.

     (a)     The purpose of the 1995 Non-Employee Directors' Stock Option 
Plan (the "Plan") is to provide a means by which each director of Gilead 
Sciences, Inc. (the "Company") who is not otherwise an employee of the 
Company or of any Affiliate of the Company (each such person being hereafter 
referred to as a "Non-Employee Director") will be given an opportunity to 
purchase stock of the Company.  

     (b)     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 from time to time (the "Code").

     (c)     The Company, by means of the Plan, seeks to retain the services 
of persons now serving as Non-Employee Directors of the Company, to secure 
and retain 

                                       1


<PAGE>

the services of persons capable of serving in such capacity, and to provide 
incentives for such persons to exert maximum efforts for the success of the 
Company.

2.   ADMINISTRATION.

     (a)     The
 Plan shall be administered by the Board of Directors of the 
Company (the "Board") unless and until the Board delegates administration to 
a committee, as provided in subparagraph 2(b).  

     (b)     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.

     (a)     Subject to the provisions of paragraph 10 relating to 
adjustments upon changes in stock, the stock that may be sold pursuant to 
options granted under the Plan shall not exceed in the aggregate Five Hundred 
Fifty Thousand (550,000) shares of the Company's common stock.  If any option 
granted under the Plan shall for any reason expire or otherwise terminate 
without having been exercised in full, the stock not purchased under such 
option shall again become available for the Plan.    

     (b)     The stock subject to the Plan may be unissued shares or 
reacquired shares, bought on the market or otherwise.

4.   ELIGIBILITY.

     Options shall be granted only to Non-Employee Directors of the Company.  

5.   NON-DISCRETIONARY GRANTS.

                                       2


<PAGE>

     (a)     On January 2, 1996, each person who is then a Non-Employee 
Director automatically shall be granted an option to purchase twenty-five 
thousand (25,000) shares of common stock of the Company on the terms and 
conditions set forth herein.  

     (b)     Each person who is, after January 2, 1996, elected for the first 
time to be a Non-Employee Director automatically shall, upon the date of 
initial election to be a Non-Employee Director by the Board or stockholders 
of the Company, be granted an option to purchase twenty-five thousand 
(25,000) shares of common stock of the Company on the terms and conditions 
set forth herein.  

     (c)     On the one-year anniversary date of each Non-Employee Director's 
initial grant under subparagraph 5(a) or 5(b) above, and on each one-year 
anniversary date thereafter, each person who is then a Non-Employee Director 
automatically shall be granted an option to purchase five thousand (5,000) 
shares of common stock of the Company on the terms and conditions set forth 
herein.

     (d)     In addition to the option grants described above, the 
Chairperson of the Board, if he or she is a Non-Employee Director, or a 
Non-Employee Director designated by the Board as a "lead director" in 
circumstances where there is no Chairperson or the Chairperson is an employee 
of the Company, automatically shall be granted options to purchase:  (i) 
twenty thousand (20,000) shares of common stock of the Company, at the time 
of his or her initial grant under subparagraph 5(a) or 5(b) above or upon 
later election as Chairperson or designation as lead director; and (ii) four 
thousand (4,000) shares of common stock of the Company at the time of each 
annual grant under subparagraph 5(c) above, all such grants to be on the 
terms and conditions set forth herein.

     (e)     In addition to the option grants described above, each 
Non-Employee Director who serves on a standing committee of the Board 
automatically shall be 


                                       3


<PAGE>

granted options to purchase:  (i) one thousand (1,000) shares of common stock 
of the Company, at the time of his or her initial grant under subparagraph 
5(a) or 5(b) above or upon later election to each such committee, plus an 
additional two thousand (2,000) shares of common stock of the Company at the 
same time for the Chairperson of each such committee; and (ii) one thousand 
(1,000) shares of common stock of the Company at the time of each annual 
grant under subparagraph 5(c) above, plus an additional two thousand (2,000) 
shares of common stock of the Company for the Chairperson of each such 
committee, at the time of each annual grant, all such grants to be on the 
terms and conditions set forth herein.

6.   OPTION PROVISIONS.

     Each option granted under the Plan shall be subject to the following 
terms and conditions:

     (a)     The term of each option commences on the date it is granted and, 
unless sooner terminated as set forth herein, expires on the date 
("Expiration Date") ten (10) years from the date of grant.  If the optionee's 
service as a Non-Employee Director or employee of or consultant to the 
Company or any Affiliate terminates for any reason or for no reason, the 
option shall terminate on the earlier of the Expiration Date or the date 
three (3) months following the date of termination of all such service; 
PROVIDED, HOWEVER, that if such termination of service is due to the 
optionee's death or permanent and total disability (within the meaning of 
Section 422(c)(6) of the Code), the option shall terminate on the earlier of 
the Expiration Date or one (1) year following the date of the optionee's 
death or permanent and total disability.  In any and all circumstances, an 
option may be exercised following termination of the optionee's service as a 
Non-Employee Director or employee of or consultant to the Company or any 
Affiliate only as to that number of shares as to which it was exercisable on 
the date of termination of all 


                                       4


<PAGE>

such service under the provisions of subparagraph 6(e).

     (b)     The exercise price of each option shall be one hundred percent 
(100%) of the fair market value of the stock subject to such option on the 
date such option is granted.  

     (c)     Payment of the exercise price of each option is due in full in 
cash upon any exercise when the number of shares being purchased upon such 
exercise is less than 1,000 shares; but when the number of shares being 
purchased upon an exercise is 1,000 or more shares, the optionee may elect to 
make payment of the exercise price under one of the following alternatives:

             (i)     Payment of the exercise price in cash at the time of 
exercise; or

             (ii)    Provided that at the time of the exercise the Company's 
common stock is publicly traded and quoted regularly in the Wall Street 
Journal, payment by delivery of shares of common stock of the Company already 
owned by the optionee, held for the period required to avoid a charge to the 
Company's reported earnings, and owned free and clear of any liens, claims, 
encumbrances or security interests, which common stock shall be valued at its 
fair market value on the date preceding the date of exercise; or

             (iii)   Payment by a combination of the methods of payment 
specified in subparagraphs 6(c)(i) and 6(c)(ii) above.

     Notwithstanding the foregoing, this option may be exercised pursuant to 
a program developed under Regulation T as promulgated by the Federal Reserve 
Board which results in the receipt of cash (or check) by the Company prior to 
the issuance of shares of the Company's common stock.

     (d)     An option shall not be transferable except by will or by the 
laws of descent 


                                       5


<PAGE>

and distribution, or pursuant to a qualified domestic relations order 
satisfying the requirements of Rule 16b-3 under the Securities Exchange Act 
of 1934, as amended ("Rule 16b-3") and shall be exercisable during the 
lifetime of the person to whom the option is granted only by such person (or 
by his guardian or legal representative) or transferee pursuant to such an 
order.  Notwithstanding the foregoing, the optionee 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)     The option shall become exercisable in installments over a 
period of five (5) years from the date of grant at the rate of five percent 
(5%) in equal quarterly installments commencing on the date three (3) months 
after the date of grant of the option, provided that the optionee has, during 
the entire period prior to such vesting date, continuously served as a 
Non-Employee Director or employee of or consultant to the Company or any 
Affiliate of the Company, whereupon such option shall become fully 
exercisable in accordance with its terms with respect to that portion of the 
shares represented by that installment.  

     (f)     The Company may require any optionee, or any person to whom an 
option is transferred under subparagraph 6(d), as a condition of exercising 
any such option:  (i) to give written assurances satisfactory to the Company 
as to the optionee's knowledge and experience in financial and business 
matters; and (ii) 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-


                                       6


<PAGE>

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. 

     (g)     Notwithstanding anything to the contrary contained herein, an 
option may not be exercised unless the shares issuable upon exercise of such 
option are then registered under the Securities Act or, if such shares are 
not then so registered, the Company has determined that such exercise and 
issuance would be exempt from the registration requirements of the Securities 
Act.

7.     COVENANTS OF THE COMPANY.

     (a)     During the terms of the options granted under the Plan, the 
Company shall keep available at all times the number of shares of stock 
required to satisfy such options.

     (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 granted under 
the Plan; PROVIDED, HOWEVER, that this undertaking shall not require the 
Company to register under the Securities Act either the Plan, any option 
granted under the Plan, 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.  

8.   USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of stock pursuant to options granted under the 
Plan shall 

                                       7


<PAGE>


constitute general funds of the Company.

9.   MISCELLANEOUS. 

     (a)     Neither an optionee nor any person to whom an option is 
transferred under subparagraph 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.

     (b)     Throughout the term of any option granted pursuant to the Plan, 
the Company shall make available to the holder of such option, not later than 
one hundred twenty (120) days after the close of each of the Company's fiscal 
years during the option term, upon request, such financial and other 
information regarding the Company as comprises the annual report to the 
stockholders of the Company provided for in the Bylaws of the Company and 
such other information regarding the Company as the holder of such option may 
reasonably request.  

     (c)     Nothing in the Plan or in any instrument executed pursuant 
thereto shall confer upon any Non-Employee Director any right to continue in 
the service of the Company or any Affiliate or shall affect any right of the 
Company, its Board or stockholders or any Affiliate to terminate the service 
of any Non-Employee Director with or without cause.

     (d)     No Non-Employee Director, individually or as a member of a 
group, and no beneficiary or other person claiming under or through him, 
shall have any right, title or interest in or to any option reserved for the 
purposes of the Plan except as to such shares of common stock, if any, as 
shall have been reserved for him pursuant to an option granted to him.

     (e)     In connection with each option made pursuant to the Plan, it 
shall be a 

                                       8


<PAGE>

condition precedent to the Company's obligation to issue or transfer shares 
to a Non-Employee Director, or to evidence the removal of any restrictions on 
transfer, that such Non-Employee Director make arrangements satisfactory to 
the Company to insure that the amount of any federal or other withholding tax 
required to be withheld with respect to such sale or transfer, or such 
removal or lapse, is made available to the Company for timely payment of such 
tax.

     (f)     As used in this Plan, "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 bid and 
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.

10.  ADJUSTMENTS UPON CHANGES IN STOCK.


                                       9


<PAGE>

     (a)     If any change is made in the stock subject to the Plan, or 
subject to any option 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 options 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 options.

     (b)     In the event of:  (1) a merger or consolidation in which the 
Company is not the surviving corporation; (2) 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 (3) any other capital reorganization in which more than fifty 
percent (50%) of the shares of the Company entitled to vote are exchanged, 
the time during which options outstanding under the Plan may be exercised 
shall be accelerated and the options terminated if not exercised prior to 
such event.

11.  AMENDMENT OF THE PLAN.

     (a)     The Board at any time, and from time to time, may amend the 
Plan, PROVIDED, HOWEVER, that the Board shall not amend the plan more than 
once every six (6) months, with respect to the provisions of the Plan which 
relate to the amount, price and timing of grants, other than to comport with 
changes in the Code, the Employee Retirement Income Security Act, or the 
rules thereunder.  Except as provided in paragraph 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 which may be issued under 


                                       10


<PAGE>

the Plan;

             (ii)    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 comply with the requirements of 
Rule 16b-3); or 

             (iii)   Modify the Plan in any other way if such modification 
requires stockholder approval in order for the Plan to comply with the 
requirements of Rule 16b-3 or Section 162(m) of the Internal Revenue Code.

     (b)     Rights and obligations under any option granted before any 
amendment of the Plan shall not be impaired by such amendment 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 November 26, 2005.  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 impaired by suspension or termination of the Plan, 
except with the consent of the person to whom the option was granted.

     (c)     The Plan shall terminate upon the occurrence of any of the 
events described in Section 10(b) above.

13.  EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.

     (a)     The Plan shall become effective upon adoption by the Board of 
Directors, subject to the condition subsequent that the Plan is approved by 
the stockholders of the Company. 

     (b)     No option granted under the Plan shall be exercised or 
exercisable unless 


                                       11


<PAGE>

and until the condition of subparagraph 13(a) above has been met.






                                       12




<PAGE>
                               GILEAD SCIENCES, INC.
                             NONSTATUTORY STOCK OPTION


_____________________________,  Optionee:


       GILEAD SCIENCES, INC. (the "Company"), pursuant to its 1995 Non-Employee
Directors' Stock Option Plan (the "Plan"), has this day granted to you, the
optionee named above, an option to purchase shares of the common stock of the
Company (the "Common Stock").  This option is not intended to qualify and will
not be treated as an "incentive stock option" within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended from time to time (the "Code").

       The details of your option are as follows:

       1.   The total number of shares of Common Stock subject to this option 
is (________). Subject to the limitations contained herein, this option shall 
be exercisable with respect to each installment shown below on or after the 
date of earliest exercise (vesting) applicable to such installment, as 
follows:

       NUMBER OF SHARES (INSTALLMENT)     DATE OF EARLIEST EXERCISE (VESTING)





       

       2.   (a)    The exercise price of this option is $____________
(____________ Dollars and ________ cents) per share.

            (b)  Payment of the exercise price is due in full in cash upon 
exercise of all or any part of each installment which has become exercisable 
by you when the number of shares being purchased is less than 1,000 shares; 
when the number of shares being purchased is 1,000 or more shares, you may 
elect to make payment of the exercise price under one of the following 
alternatives, all as set forth more fully in the Plan: (i) in cash upon 
exercise; (ii) provided that the Company's stock is publicly traded, payment 
by delivery of shares of Common Stock already owned by you, free and clear of 
any liens; or (iii) payment by a combination of the methods set forth in 
clauses (i) and (ii). Notwithstanding the foregoing, this option may be 
exercised pursuant to a program developed under Regulation T as promulgated 
by the Federal Reserve Board which results in the receipt of cash (or check) 
by the Company prior to the issuance of Common Stock.

       3.   In no event may this option be exercised for any number of shares 
which would require the issuance of anything other than whole shares.

                                      


<PAGE>

       4.   Notwithstanding anything to the contrary contained herein, this 
option may not be exercised unless the shares issuable upon exercise of this 
option are then registered under the Securities Act of 1933 (the "Securities 
Act") or, if such shares are not then so registered, the Company has 
determined that such exercise and issuance would be exempt from the 
registration requirements of the Securities Act.

       5.   The term of this option commences on the date hereof and, unless 
sooner terminated as set forth below or in the Plan, terminates on 
________________ (which date shall be ten (10) years from the date this 
option is granted).  In no event may this option be exercised on or after the 
date on which it terminates.  This option shall terminate prior to the 
expiration of its term as follows:  three (3) months after the termination of 
your service as a non-employee director or employee of or consultant to the 
Company or an affiliate of the Company (as defined in the Plan), for any 
reason or for no reason, unless:

            (a)  such termination of service is due to your permanent and 
total disability (within the meaning of Section 422 (c)(6) of the Code), in 
which event the option shall terminate on the earlier of the termination date 
set forth above or one (1) year following such permanent and total disability;

            (b)  such termination of service is due to your death, in which 
event the option shall terminate on the earlier of the termination date set 
forth above or one (1) year after your death; or

            (c)  exercise of the option within three (3) months after such 
termination of service would result in liability under Section 16(b) of the 
Securities Exchange Act of 1934 (the "Exchange Act"), in which case the 
option will terminate on the earlier of (i) the termination date set forth 
above, (ii) the tenth (10th) day after the last date upon which exercise 
would result in such liability, or (iii) six (6) months and ten (10) days 
after such termination of service.

       However, this option may be exercised following such termination of 
service only as to that number of shares as to which it was exercisable on 
the date of such termination under the provisions of paragraph 1 of this 
option.

       6.   This option may be exercised, to the extent specified above, by 
delivering a notice of exercise together with the exercise price to the 
Secretary of the Company, or to such other person as the Company may 
designate, during regular business hours, together with such additional 
documents as the Company may then require pursuant to subparagraph 6(f) of 
the Plan.

       7.   This option is not transferable except by will, by the laws of 
descent and distribution or pursuant to a qualified domestic relations order 
satisfying the requirements of Rule 16b-3 of the Exchange Act, and is 
exercisable during your life only by you or a transferee pursuant to a 
qualified domestic relations order.  Notwithstanding the foregoing, you may, 
by delivering written notice to the Company in a form satisfactory to the 
Company, designate a third party who, in the event of your death, shall 
thereafter be entitled to exercise this option.

                                       2


<PAGE>


       8.   This option is not an employment or consulting agreement and 
nothing in this option shall be deemed to create in any way whatsoever any 
obligation on your part to continue in the service of the Company, or of the 
Company to continue your service with the Company.

       9.   Any notices provided for in this option or the Plan shall be 
given in writing and shall be deemed effectively given upon receipt or, in 
the case of notices delivered by the Company to you, five (5) days after 
deposit in the United States mail, postage prepaid, addressed to you at the 
address specified below or at such other address as you hereafter designate 
by written notice to the Company.

       10.  This option is subject to all the provisions of the Plan, a copy 
of which is attached hereto and its provisions are hereby made a part of this 
option, including without limitation the provisions of paragraph 6 of the 
Plan relating to option provisions, and is further subject to all 
interpretations, amendments, rules and regulations which may from time to 
time be promulgated and adopted pursuant to the Plan.  In the event of any 
conflict between the provisions of this option and those of the Plan, the 
provisions of the Plan shall control.

       Dated ________________, 19___

                                       Very truly yours,

                                       GILEAD SCIENCES, INC.

                                       By: __________________________
                                           John C. Martin
                                           President and Chief Executive Officer




                                      3


<PAGE>

The undersigned:

       (a)  Acknowledges receipt of the foregoing option and understands that 
all rights and liabilities with respect to this option are set forth in the 
option and the Plan; and

       (b)  Acknowledges that as of the date of grant of this option, it sets 
forth the entire understanding between the undersigned optionee and the 
Company and its affiliates regarding the acquisition of stock in the Company 
and supersedes all prior oral and written agreements on that subject with the 
exception of any stock options previously granted to the optionee by the 
Company, and the following agreements only [if none, so state]:

       NONE  _________________
             (Initial)

       OTHER _________________________________________________________

             _________________________________________________________

             _________________________________________________________

             _________________________________________________________




                       _______________________________________________
                       Optionee
                      

            Address:   _______________________________________________

                       _______________________________________________



                                       4


<PAGE>

                               NOTICE OF EXERCISE


Gilead Sciences, Inc.
333 Lakeside Drive                          Date of
Foster City, CA 94404                       Exercise: _____________________
Attn:  Corporate Secretary

Ladies and Gentlemen:

This constitutes notice under my Nonstatutory Stock Option that I elect to 
purchase the number of shares for the price set forth below.

            Stock Option dated:        ____________________________________

            Number of shares as to
            which option is exercised: ____________________________________

            Certificates to be
            issued in name of:         ____________________________________

            Total exercise price:     $____________________________________
            Cash payment delivered
            herewith:                 $____________________________________

            Value of stock payment
            delivered herewith:       $____________________________________


By this exercise, I agree to provide such additional documents as you may 
require pursuant to the terms of the 1995 Non-Employee Directors' Stock 
Option Plan.

                                           Very truly yours,




                           Signature:      ________________________________



                           Printed Name:   ________________________________



                                    5




<PAGE>

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.

                        PATENT RIGHTS PURCHASE AGREEMENT



          This Patent Rights Purchase Agreement (this "Agreement") is made and
entered into as of December 18, 1998 (the "Effective Date") between Isis
Pharmaceuticals, Inc. ("Isis"), and Gilead Sciences, Inc. ("Gilead").

          1.   DEFINITIONS.

               1.1   "Cationic Lipid" means those compounds described in United
States Patent Nos. 5,777,153 and 5,705,693; United States Patent Application
Serial No. 08/672,206; and European Patent Application No. 97931462.2, to the
extent such compounds are not Codeblocker Compounds.

               1.2   "Codeblocker Compound" means an oligonucleotide that binds
directly to DNA or RNA within a cell on a selective basis determined by the
nucleotide sequence of the target DNA or RNA and exerts its biological activity
predominantly through binding to DNA or RNA to inhibit the transcription or
replication of the target DNA or RNA or binding to RNA to inhibit the
translation, processing, packaging or regulatory activity of the target RNA. A
Codeblocker Compound may also have a mechanism of action or biological activity

other than one conferred through direct binding to RNA or DNA provided that (i)
the compound originally was designed to bind a target DNA or RNA and (ii) the
final compound or any compounds used to derive the final compound were not
identified using selective purification and polymerase amplification in any
fashion. An oligonucleotide, is any oligomer or polymer made up [***] An
oligonucleotide includes RNA or DNA fragments, and may be composed of naturally
occurring or non-naturally occurring bases, sugars or intersugar linkages. An
oligonucleotide may have the bases, sugars or intersugar linkages partially or
completely absent. Oligonucleotides may be made such that adjacent nucleoside or
nucleoside fragments are linked together by phosphate groups or modified or
non-naturally occurring internucleoside linkages to form the internucleoside
backbone of the oligomer, whether or not such linkages retain a phosphorous atom
in the linkage.

               1.3   "Oligonucleotide Delivery System" means any carrier,
targeting entity, excipient, formulation, device, prodrug, covalent or
noncovalent conjugate, encapsulating vesicle, microcapsule, micro- or
nanosphere, emulsion, or microemulsion, lipid, liposome, virosome, or artificial
vial envelope which was developed by Gilead on or prior to the Effective Date,
and which (i) enhances the cellular penetration or circulating half-life of a
Codeblocker Compound, (ii) selectively delivers a Codeblocker compound to the
intended target tissue, cell or subcellular compartment, (iii) provides
sustained release of a Codeblocker Compound from a depot formulation, or (iv)
otherwise favorably alters the absorption, distribution, metabolism or excretion
of a Codeblocker Compound so as to enhance its pharmacological activity of
clinical value. "Oligonucleotide Delivery System" includes cationic lipids.



- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                       1.

<PAGE>

               1.4   "Patent Rights" means the patents and patent applications
listed in Exhibit A attached hereto.

         2.    ASSIGNMENTS AND LICENSES.

               2.1   Gilead hereby sells and assigns to Isis all of Gilead's
right, title and interest in Patent Rights, subject to the rights of Glaxo
Wellcome Inc. ("Glaxo") under the Collaborative Research Agreement between Glaxo
and Gilead dated March 25, 1996 (the "Glaxo Agreement"), provided however, that
the assignment of U.S. Patent Number 5,256,775 shall be subject to the condition
precedent that Gilead settle the interference involving this patent on
conditions of Gilead's choosing (including conceding priority). Gilead hereby
grants Isis an exclusive, royalty-free, worldwide, assignable license (with the
right to grant sublicenses) to U.S. Patent Number 5,256,775 beginning on the
Effective Date and continuing until such time that Gilead settles the
interference and the assignment to Isis becomes effective.

               2.2   Gilead hereby assigns and delegates to Isis (and Isis
accepts and agrees to perform) all of Gilead's rights and obligations under the
License Agreement between Glen Research Corporation ("Glen Research") and Gilead
dated January 1, 1994 and amended on November 19, 1996. A copy of the written
consent to such assignment and delegation signed by Glen Research is attached
hereto as Exhibit B. In the event that Isis, by reason of this Agreement, is
required to indemnify Glen Research under Section 8.1 (b) of the Glen Research
License Agreement, Gilead will indemnify Isis up to a maximum amount equal to
one hundred percent (100%) of total royalties received by Gilead from Glen
Research; thereafter, Gilead will not have any indemnity obligations to Isis
related to such Agreement. Gilead will continue to honor its obligations to Glen
Research for activities preceding the Effective Date of this Agreement.

               2.3   Subject to the rights of Glen Research above, Isis hereby
grants to Gilead an exclusive, perpetual, irrevocable, royalty-free, worldwide,
assignable license (with the right to grant sublicenses) to directly or
indirectly make, have made, use, import, export or sell compounds and other
subject matter falling within the scope of Patent Rights which are [***]

               2.4   Gilead hereby grants to Isis a nonexclusive, perpetual,
royalty-free, worldwide, assignable license (with the right to grant
sublicenses) to compounds and other subject matter which are within the scope of
Patent Rights, solely for use as intermediates in the manufacture of Codeblocker
Compounds or oligomers [***]

               2.5   Isis hereby grants to Gilead a non-exclusive,
non-sublicensable, non-assignable, perpetual, irrevocable, royalty-free,
worldwide license under Patent Rights to make and use Codeblocker Compounds and
Oligonucleotide Delivery Systems for internal research purposes, but not for any
commercial purpose.

               2.6   Isis will not have any obligations to Gilead relating to
Codeblocker Compounds or this Agreement to the extent arising prior to the
Effective Date.


- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                       2.

<PAGE>


               2.7   Each party hereby agrees to execute such documents and to
take such other actions as shall be necessary or appropriate to effectuate the
assignments and licenses set forth in this Section 2.

          3.   REPRESENTATIONS AND WARRANTIES BY GILEAD.

Gilead makes the following representations and warranties to Isis, each of which
will survive the Effective Date:

               3.1   To the best of Gilead's knowledge, the Patent Rights
include all of the patents and patent applications owned or controlled by Gilead
on or prior to the Effective Date that cover Codeblocker Compounds and
Oligonucleotide Delivery Systems, their manufacture or use. There are no other
US or unpublished foreign filings owned or controlled by Gilead filed prior to
the Effective Date which claim Codeblocker Compounds or Oligonucleotide Delivery
Systems other than as set forth in Exhibit A, nor does Gilead have any present
intention to make such filings. If Gilead becomes aware of any patents or patent
applications that (i) are owned or controlled by Gilead, (ii) claim inventions
made prior to the Effective Date, (iii) cover Codeblocker Compounds or
Oligonucleotide Delivery Systems, and (iv) are not included in Exhibit A, Gilead
will promptly notify Isis in writing and execute appropriate documents to
transfer such patents and patent applications to Isis.

               3.2   Gilead represents and Isis acknowledges that (i) the Glaxo
Agreement remains in effect and Gilead and Glaxo have ongoing rights and
obligations thereunder, modified to the extent specifically set forth in this
Agreement and (ii) this Agreement is not an assignment of Gilead's rights or
obligations under the Glaxo Agreement and that Isis assumes no rights or
obligations to Glaxo under this Agreement. Gilead represents that the Research
Term and all rights, obligations and funding relating thereto under the Glaxo
Agreement have been terminated. Gilead will not enter into any future amendments
to the Glaxo Agreement which in any way affect the rights of Isis hereunder.

               3.3   The Glaxo Agreement and the license to Glen Research
referenced in Section 2.2 above are the only licenses and Gilead is not aware of
any other third party rights of any kind affecting the Patent Rights. Except
with respect to U.S. Patent Number 5,256,775, which is subject to an
interference proceeding, the Patent Rights are not the subject of any pending
interference, cancellation or other protest proceeding not otherwise known to
Isis, or otherwise subject to rights or obligations to any third party other
than Glaxo and Glen Research. The complete terms and conditions of such rights
and obligations relating to Glaxo and Glen Research have been disclosed to Isis.

               3.4   There are no Collaboration Compounds (as defined in Section
1.7 of the Glaxo Agreement) and none were developed during the Research Term
under the Glaxo Agreement. Gilead does not owe any royalties to Glaxo or any
third party under the Glaxo Agreement nor does Gilead have any known or pending
claims against Glaxo arising out of the Glaxo Agreement. To the best of Gilead's
knowledge, (i) Glaxo does not owe any royalties to Gilead or any third party
under the Glaxo Agreement, (ii) nor does Glaxo have any known or pending claims
against Gilead arising out of the Glaxo Agreement.


                                       3.

<PAGE>

          4.   TECHNOLOGY TRANSFER.

               4.1   Gilead and Isis will cooperate in the filing and execution
of any and all documents necessary to effectuate the assignment to Isis of the
Patent Rights, including the filing of assignments or other transfer of title
covenants with the U.S. Patent and Trademark Office and foreign patent offices
as applicable to the Patent Rights. Within thirty (30) days from the Effective
Date, Gilead will notify all attorneys handling the prosecution of the Patent
Rights to contact the Isis Patent Department to provide an immediate status
update on the Patent Rights and to prepare the documents necessary to transfer
the Patent Rights to Isis. The cost of recording assignments of the Patent
Rights will be borne by Isis. Within forty-five (45) days from the Effective
Date, Gilead and its counsel will use their reasonable best efforts to transfer
all files and supporting documents relating to the Patent Rights to Isis,
including but not limited to, all initial invention disclosure documents, all
documents sent to the U.S. Patent and Trademark Office regarding inventions and
claims, all draft patent applications, all filing or prosecution documents
submitted to the patent offices, and all file wrappers. Conception notebooks and
all other documents in the possession or under the control of Gilead or its
counsel relating to conception and/or reduction to practice, such as scientist
notebooks shall be obtained in accord with Gilead's ordinary document retention
and made available to Isis upon Isis' reasonable request. All documents to be
provided to Isis hereunder are to be sent by expedited delivery service.

               4.2   Gilead will make appropriate scientific staff available to
Isis for a scientific tutorial on the subject matter of this Agreement, such
tutorial not to exceed more than [***] from Gilead's staff and not to obligate
Gilead to disclose any third party confidential information.

          5.   PATENT MAINTENANCE AND PROSECUTION RESPONSIBILITIES.

               5.1   On and after the Effective Date, Isis will take
responsibility for any action or proceeding involving Patent Rights. The cost of
recording the assignment of Patent Rights shall be borne solely by Isis. If Isis
elects not to take such responsibility involving Patent Right(s) in a particular
country then Isis will timely notify Gilead and Glaxo 30 days before the time
future action is due, and thereafter Gilead or Glaxo shall undertake such
responsibility. If Gilead or Glaxo elects to do so, Isis will grant any
necessary authority to Gilead. Gilead will determine whether Gilead or Glaxo
shall take such responsibility at their expense. Isis assumes no obligation to
Glaxo as a result of its agreement with Gilead in this Section 5.1.

               5.2   NOTICE OF INFRINGEMENT. Isis shall promptly notify Gilead
in writing of any infringement of any assigned Patent Right(s) of which it
becomes aware.

               5.3   ENFORCEMENT OF PATENTS. Except as otherwise set forth in
this Section, Isis may, but shall not be required to, prosecute any alleged
infringement or threatened infringement of any assigned Patent Right(s) of which
it is aware or which is brought to its attention. Isis shall act in its own name
and at its own expense. If Isis has failed to prosecute under the first sentence
of this paragraph with respect to alleged or threatened infringement


- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                       4.

<PAGE>

relating to any Patent Right(s) (i) two months after it has been notified in
writing of such alleged infringement, or (ii) one month before the time limit,
if any, set forth in the appropriate laws and regulations for the filing of such
actions, whichever comes first, Gilead (or at its election Glaxo) may, but shall
not be required to, prosecute any such alleged infringement or threatened
infringement of a Patent within the Patent Rights. In any such event, Gilead or
Glaxo shall be free to act in its own name and at its own expense.
Notwithstanding the foregoing and as between the parties, Gilead shall have the
sole and exclusive right of enforcement with respect to any alleged or
threatened infringement of any right within the scope of the license granted in
Section 2.3 of this Agreement. Isis shall cooperate fully with Gilead or Glaxo
in any action by Gilead or Glaxo, respectively, under this paragraph, including
if required in order to bring such an action, the furnishing of a power of
attorney.

          6.   INDEMNITY AND WARRANTY.

               6.1   Indemnity by Isis. Isis will indemnify, save, defend and
hold Gilead and its agents, directors and employees harmless from and against
any and all suits, claims, actions, demands, liabilities, expenses and/or loss,
including reasonable legal expense and attorneys fees, resulting from activities
under this agreement by Isis.

               6.2   INDEMNITY BY GILEAD. Gilead will indemnify, save, defend
and hold Isis and its agents, directors and employees harmless from and against
any and all suits, claims, actions, demands, liabilities, expenses and/or loss,
including reasonable legal expense and attorney fees, resulting from (i)
Gilead's, Gilead's sublicensee's or Gilead's assignee's activities under the
licenses provided for in Sections 2.3 and 2.5; (ii) Gilead's contractual
obligations to third parties including Glaxo and Glen Research, except to the
extent resulting from Isis' activities under this Agreement; or (iii) Gilead's
exercise of the Patent Rights prior to the Effective Date.

               6.3   WARRANTY. Gilead warrants that it has sufficient right and
title to enter into and to perform its obligations under this Agreement. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PARTIES DISCLAIM ALL WARRANTIES OF
ANY NATURE, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
VALIDITY, MERCHANTABILITY, NONINFRINGEMENT, AND FITNESS FOR A PARTICULAR
PURPOSE.

               7.    CONFIDENTIALITY. Confidential Information under the terms
of this Agreement is all information relating to the Patent Rights sold,
assigned or licensed to Isis under Section 2.1 and the Technology Transfer to
Isis by Gilead under Section 4.1. Gilead agrees to treat the Confidential
Information as confidential and to protect and maintain the confidentiality
thereof. Gilead will use at least the same standard of care as it uses to
protect its own Confidential Information to ensure that its employees, agents,
and consultants do not disclose or make any unauthorized use of such
Confidential Information. Gilead will promptly notify Isis upon discovery of any
unauthorized use or disclosure of the Confidential Information. Confidential
Information will not include any information which is generally available to the
public, is otherwise part of the public domain other than through any act or
omission of Gilead in breach of this Agreement, or which is required to be
disclosed by law or contract entered into


                                       5.

<PAGE>

prior to this Agreement (provided that Isis shall have notice thereof in advance
so that it can act to protect its interests should it decide to do so).

               8.    CONSIDERATION. Isis shall pay Gilead the following
noncontingent, non-refundable cash payments as consideration for the assignments
provided for in this Agreement: $2,000,000 on the Effective Date, $1,000,000 on
the first anniversary of the Effective Date, $1,000,000 on the second
anniversary of the Effective Date, and $2,000,000 on the third anniversary of
the Effective Date, for total payments of $6,000,000. In the event that Isis
defaults on any of these payments, after thirty (30) days notice and an
opportunity to cure, then ownership of all Patent Rights will automatically
revert to Gilead and Isis will take all actions reasonably requested by Gilead
for such purposes, including, without limitation, signing and delivering any
applicable assignments and other documents. Isis shall be entitled to no damages
exceeding the consideration set forth in this Section 8 for any uncured claim
against Gilead respecting Gilead's performance or representations hereunder.

               9.    NOTICES. Notices under this Agreement shall be sufficient
only if personally delivered, delivered by a major commercial rapid delivery
courier service, facsimile or mailed by certified or registered mail, return
receipt requested, to a party at its addresses set forth as follows:

               If to Isis:       Isis Pharmaceuticals, Inc.
                                 2292 Faraday Avenue
                                 Carlsbad, CA 92008
                                 Attn:  Executive Vice President, CFO
                                 Facsimile:  (760) 431-9448

               If to Gilead:     Gilead Sciences, Inc.
                                 333 Lakeside Drive
                                 Foster City, CA 94404
                                 Attn:  Vice President, Intellectual Property
                                 Facsimile:  (650) 577-6622

               If to Glaxo:      Glaxo Wellcome, Inc.
                                 Five Moore Drive
                                 Research Triangle Park, NC 27709
                                 Attn:  Company Secretary
                                 Facsimile:  (919) 483-0265

               10.   MISCELLANEOUS. If any provision of this Agreement shall be
adjudged by any court of competent jurisdiction to be unenforceable or invalid,
that provision shall be limited or eliminated to the minimum extent necessary to
continue to effect the intent of the parties, and this Agreement shall otherwise
remain in full force and effect and enforceable. Any waivers or amendments shall
be effective only if made in writing and signed by a representative of the
respective parties authorized to bind the parties. This Agreement shall be
governed by the laws of the State of Delaware, excluding conflicts-of-law
principles. This Agreement is the complete and exclusive statement of the mutual
understanding of the parties and supersedes and cancels all previous written and
oral agreements and communications relating to the subject matter of this


                                       6.

<PAGE>

Agreement, excluding the Confidential Disclosure Agreement between the parties
dated July 29, 1998.


                                       7.

<PAGE>


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

ISIS PHARMACEUTICALS, INC.               GILEAD SCIENCES, INC.

By:                                      By:  
   -------------------------------          ----------------------------------
Printed:                                 Printed:  
        --------------------------               -----------------------------
Title:                                   Title:
      ----------------------------             -------------------------------

Address: 2292 Faraday Avenue             Address: 333 Lakeside Drive
         Carlsbad, CA 92008                       Foster City, CA 94404


                                       8.

<PAGE>


12/16/98                           EXHIBIT A



<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------
GSI #         INFORMAL      FILING      FOR.FILNG      ISSUE         EXP.                                      FOREIGN      ANNTY
- -----------------------------------------------------------------------------------------------------------------------------------
 M&F           TITLE         DATE         DATE         DATE          DATE        COUNTRY/SER #    PATENT #     ASSOC.        DUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S>           <C>           <C>        <C>             <C>           <C>        <C>               <C>         <C>           <C> 
[***]           [***         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                 ]                        [***]        [***]         [***]      [***]               [***]     [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]           [***         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]            ]           [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]        [***]         [***]      [***]               [***]     [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]        [***]         [***]      [***]               [***]     [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                     Page 1

<PAGE>

12/16/98                           EXHIBIT A



<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------
GSI #         INFORMAL      FILING      FOR.FILNG      ISSUE         EXP.                                      FOREIGN      ANNTY
- -----------------------------------------------------------------------------------------------------------------------------------
 M&F           TITLE         DATE         DATE         DATE          DATE        COUNTRY/SER #    PATENT #     ASSOC.        DUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S>           <C>           <C>        <C>             <C>           <C>        <C>               <C>         <C>           <C> 
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]        [***]         [***]      [***]               [***]     [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]                      [***]        [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                     [***]                [***]        [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]        [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]            [***]  [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]        [***]         [***]      [***]               [***]     [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]     [***]                       [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]                    [***]               [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                   [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]           [***]      [***]      [***]               [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                     Page 2

<PAGE>


12/16/98                           EXHIBIT A



<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------
GSI #         INFORMAL      FILING      FOR.FILNG      ISSUE         EXP.                                      FOREIGN      ANNTY
- -----------------------------------------------------------------------------------------------------------------------------------
 M&F           TITLE         DATE         DATE         DATE          DATE        COUNTRY/SER #    PATENT #     ASSOC.        DUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S>           <C>           <C>        <C>             <C>           <C>        <C>               <C>         <C>           <C> 
[***]          [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                                                            [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                                       [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]                  [***]                  [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]            [***]                  [***]         [***]      [***]                  [***]                  [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]      [***]             [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------
           [***]
- -----------------------------------------------------------------------------------------------------------------------------------
           [***]
- -----------------------------------------------------------------------------------------------------------------------------------
           [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                           [***]  [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]            [***]                  [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]        [***]         [***]           [***]          [***]     [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                         [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                     Page 3

<PAGE>


12/16/98                           EXHIBIT A



<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------
GSI #         INFORMAL      FILING      FOR.FILNG      ISSUE         EXP.                                      FOREIGN      ANNTY
- -----------------------------------------------------------------------------------------------------------------------------------
 M&F           TITLE         DATE         DATE         DATE          DATE        COUNTRY/SER #    PATENT #     ASSOC.        DUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S>           <C>           <C>        <C>             <C>           <C>        <C>               <C>         <C>           <C> 
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]            [***]  [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]     [***]                       [***]                                       [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]                                                            [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                                                            [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]     [***]                       [***]                           [***]       [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]                        [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]            [***]                  [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                                                            [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                                                            [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]           [***]          [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                                                            [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                           [***]       [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]                                  [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]           [***]          [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                         [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                     [***]         [***]      [***]               [***]                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                     Page 4

<PAGE>


12/16/98                           EXHIBIT A



<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------------------------
GSI #         INFORMAL      FILING      FOR.FILNG      ISSUE         EXP.                                      FOREIGN      ANNTY
- -----------------------------------------------------------------------------------------------------------------------------------
 M&F           TITLE         DATE         DATE         DATE          DATE        COUNTRY/SER #    PATENT #     ASSOC.        DUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S>           <C>           <C>        <C>             <C>           <C>        <C>               <C>         <C>           <C> 
               [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                                [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                                          [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]
- -----------------------------------------------------------------------------------------------------------------------------------
                     [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------
               [***]                      [***]                                 [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]     [***]                                    [***]
- -----------------------------------------------------------------------------------------------------------------------------------
[***]          [***]         [***]                                              [***]
- -----------------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



- ----------------------
[***] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.


                                     Page 5

<PAGE>


                                    EXHIBIT B

December 16, 1998

VIA FACSIMILE AND COURIER

Hugh Mackie, Ph.D.
Glen Research Corporation
22825 Davis Drive
Sterling, VA 20164

RE: ASSIGNMENT OF LICENSE AGREEMENT

Dear Hugh:

As we discussed today by phone, Gilead has negotiated a Patent Rights Purchase
Agreement with Isis Pharmaceuticals, Inc. ("Isis"), a biopharmaceutical company
based in Carlsbad, California, pursuant to which Gilead will assign all of its
antisense patent rights to Isis. As part of this Agreement, Gilead will be
assigning to Isis the License Agreement between Gilead and Glen Research
Corporation dated January 1, 1994, as amended November 19, 1996 (the "License
Agreement"). The purpose of this letter is to obtain the formal consent of Glen
Research Corporation to the proposed assignment of the License Agreement to
Isis, as required by Section 16 of the License Agreement. Please indicate your
consent to the assignment by executing and dating this letter in the space
indicated below and returning it to my attention via facsimile at (650)
577-5488. When you receive the original copy of the letter please execute and
date it (using the same date) and return it to me by courier.

We would be happy to discuss the proposed assignment in more detail with you, or
put you in touch with appropriate people at Isis. Please give me a call at (650)
573-4772, or John Milligan at (650) 573-4756, if you have any questions. Thank
you for your prompt response to this matter.

Very truly yours,


Jeffrey W. Bird, M.D., Ph.D.
Senior Vice President, Business Operations

ACCEPTED AND AGREED TO:
Glen Research Corporation

By
  ------------------------------

Name:
Title:
Date:



<PAGE>
                                                                  Exhibit 10.48

                               THIRD AMENDMENT TO LEASE

     This Third Amendment (the "AMENDMENT") to Lease Agreement is made as of
August 14, 1998, by and between SPIEKER PROPERTIES, L.P., a California limited
partnership ("SPIEKER"), as successor in interest to WCB SEVENTEEN LIMITED
PARTNERSHIP, a Delaware limited partnership and GILEAD SCIENCES, INC., a
Delaware limited corporation ("GILEAD").

                                    WITNESSETH:

     WHEREAS, Spieker, as Landlord, and Gilead, as Tenant, have entered into
that certain Lease dated March 27, 1992, amended by Amendment No. 1, dated
October 11, 1993, and amended by Amendment No. 2, dated June 24, 1996 with
respect to space in the Building commonly known as 331, 344B, 346, and 353
Lakeside Drive, Foster City, California.

     NOW, THEREFORE, the parties hereto agree as follows:


1.   AMENDMENT OF BASIC LEASE INFORMATION. Those portions, as set forth below,
     are hereby added to the Basic Lease Information:

     PREMISES AND BUILDING:

     355 Lakeside Drive, Suites 200 & 210        Approximately 17,371 rentable
                                                 square feet ("Additional
                                                 Premises"), as outlined on
                                                 Exhibit A to this Amendment

     PERMITTED USE:

     355 Lakeside Drive, Suites 200 & 210        General office use only

     OCCUPANCY DENSITY:

     355 Lakeside Drive, Suites 200 & 210        4/1,000 rentable square feet

     PARKING DENSITY:

     355 Lakeside
 Drive, Suites 200 & 210        4/1,000 rentable square feet

     TERM COMMENCEMENT:

     355 Lakeside Drive, Suites 200 & 210        November 1, 1998, or as soon
                                                 as Landlord can deliver
                                                 Premises, whichever occurs
                                                 first

     TERM EXPIRATION:

     355 Lakeside Drive, Suites 200 & 210        March 31, 2006

     BASE RENT:

     355 Lakeside Drive, Suites 200 & 210        $39,953.30 per month

     The Base Rent for the Additional Premises shall be increased annually on
     each anniversary of the Term Commencement of this Third Amendment to an
     amount equal to $39,953.30 multiplied by a fraction, the numerator of which
     is the Consumer Price Index, All Urban Consumers, San Francisco, Oakland,
     and San Jose, published by the United States Department of Labor, Bureau of
     Statistics (1982-84=100) as of the month immediately preceding the current
     Adjustment Date, and the denominator of which is the index as of the month
     immediately preceding the Commencement Date.  There will be a minimum
     annual increase of 3% and a maximum annual increase of 5%.  Adjustment Date
     is defined as the anniversary date of the Term Commencement.

     INITIAL ESTIMATED MONTHLY OPERATING
     EXPENSES AND PROPERTY TAXES:

     355 Lakeside Drive, Suites 200 & 210        $12,854.54 per month

     TENANT'S PERCENTAGE SHARE:

     355 Lakeside Drive, Suites 200 & 210        31.45%

     LANDLORD'S ADDRESS FOR NOTICE:

     Spieker Properties, L.P.
     393 Vintage Park Drive, Suite 200
     Foster City, CA 94404

2.   ADDITION TO PREMISES.  Tenant shall accept the Additional Premises in its
     "as-is" condition.


<PAGE>

Third Amendment to Lease, dated 8/14/98
Page 2

3.   TENANT IMPROVEMENTS. Per the terms and conditions as outlined in Exhibit 
     B - Lease Improvement Agreement, Tenant shall receive a one time tenant
     improvement allowance not to exceed $100,000.  The tenant improvement
     allowance shall only be used for improvements to the Additional Premises.

4.   SECURITY DEPOSIT. Notwithstanding anything to the contrary contained in 
     Paragraph 15 of the Lease, the security deposit shall not be less than 
     $300,000 during the term of this Lease.

5.   Except as modified by this Amendment, all provisions of the Lease, First
     Amendment to Lease and Second Amendment to Lease shall remain in full force
     and effect.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.

GILEAD:                                 SPIEKER:
     GILEAD SCIENCES, INC.                   SPIEKER PROPERTIES, L.P.
     a Delaware corporation                  a California limited partnership

     BY: /s/ Mark L. Perry                   By: Spieker Properties, Inc.
        --------------------------               a Maryland corporation,
           Mark L. Perry                         its general partner

     Its: Sr. Vice President, Chief          By: /s/ Peter H. Schnugg
         Financial Officer and                  -----------------------------
         General Counsel                        Peter H. Schnugg
                                                Its: Senior Vice President

<PAGE>


                                   [FLOOR PLAN]

                                    EXHIBIT A



<PAGE>

                                     EXHIBIT B

                            LEASE IMPROVEMENT AGREEMENT

     This Lease Improvement Agreement ("IMPROVEMENT AGREEMENT") sets forth the
terms and conditions relating to construction of the initial tenant improvements
described in the Plans to be prepared and approved as provided below (the
"TENANT IMPROVEMENTS") in the Premises.

1.  PLANS AND SPECIFICATIONS.

     1.1  Tenant shall retain the services of a space planner (the "SPACE
PLANNER"), to be determined a later date, to prepare a detailed space plan (the
"SPACE PLAN") mutually satisfactory to Landlord and Tenant for the construction
of the Tenant Improvements in the Premises.  Tenant shall submit the Space Plan
and any proposed revisions thereto to Landlord for Landlord's approval.

     1.2  Based on the approved Space Plan, Tenant shall cause the Space Planner
to prepare detailed plans, specifications and working drawings mutually
satisfactory to Landlord and Tenant for the construction of the Tenant
Improvements (the "PLANS").  Landlord and Tenant shall diligently pursue the
preparation of the Plans.  Tenant shall submit the Plans and any proposed
revisions thereto, including the estimated cost of the Tenant Improvements.  All
necessary revisions to the Space Plan and the Plans shall be made within two (2)
business days after Landlord's response thereto.  This procedure shall be
repeated until Landlord ultimately approves the Space Plan and Plans.

     1.3  Tenant shall be responsible for ensuring that the Plans are compatible
with the design, construction and equipment of the Building, comply with
applicable Regulations and the Standards (defined below), and contain all such
information as may be required to show locations, types and requirements for all
heat loads, people loads, floor loads, power and plumbing, regular and special
HVAC needs, telephone communications, telephone and electrical outlets,
lighting, light fixtures and related power, and electrical and telephone
switches, B.T.U. calculations, electrical requirements and special receptacle
requirements.  The Plans shall also include mechanical, electrical, plumbing,
structural and engineering drawings mutually satisfactory to Landlord and Tenant
which shall be prepared by the mechanical contractor or contractors, to be
determined at a later date.  Notwithstanding Landlord's preparation, review and
approval of the Space Plan and the Plans and any revisions thereto, Landlord
shall have no responsibility or liability whatsoever for any errors or omissions
contained in the Space Plan or Plans or any revisions thereto, or to verify
dimensions or conditions, or for the quality, design or compliance with
applicable Regulations of any improvements described therein or constructed in
accordance therewith.  Tenant hereby waives all claims against Landlord relating
to, or arising out of the design or construction of, the Tenant Improvements.

     1.4  Landlord may approve or disapprove the Space Plan or Plans or any
proposed revision thereto submitted to Landlord in Landlord's reasonable
discretion.  Landlord shall not be deemed to have approved the Space Plan, the
Plans, or any proposed revisions thereto, unless approved by Landlord in
writing.  Landlord shall approve or disapprove any Space Plan, Plans or proposed
revisions thereto submitted to Landlord for Landlord's approval within five (5)
business days after Landlord's receipt thereof.

2.  SPECIFICATIONS FOR STANDARD TENANT IMPROVEMENTS.

     2.1  Specifications and quantities of standard building components which
will comprise and be used in the construction of the Tenant Improvements
("STANDARDS") are set forth in SCHEDULE 1 to this EXHIBIT B. As used herein,
"STANDARDS" or "BUILDING STANDARDS" shall mean the standards for a particular
item selected from time to time by Landlord for the Building, including those
set forth on SCHEDULE 1 of this EXHIBIT B, or such other standards of equal or
better quality as may be mutually agreed between Landlord and Tenant in writing.

     2.2  No deviations from the Standards are permitted.

3.  TENANT IMPROVEMENT COST.

     3.1  The cost of the Tenant Improvements shall be paid for by Tenant,
including, without limitation, the cost of: Standards; space plans and studies;
architectural and engineering fees; permits, approvals and other governmental
fees; labor, material, equipment and supplies; construction fees and other
amounts payable to contractors or subcontractors; taxes; off-site improvements;
remediation and preparation of the Premises for construction of the Tenant
Improvements; taxes; filing and recording fees; premiums for insurance and
bonds; attorneys' fees; financing costs; and all other costs expended or to be
expended in the construction of the Tenant Improvements.  Tenant shall reimburse
Landlord for actual expenses, estimated to be approximately $1,500, which
Landlord may incur in connection with the Tenant Improvements.

     3.2  Provided Tenant is not in material default under the Lease, including
this Improvement Agreement, Landlord shall contribute a one-time tenant
improvement allowance not to exceed $100,000 ("TENANT IMPROVEMENT ALLOWANCE")
toward the cost of the initial Tenant Improvements.  Provided Tenant is not then
in material default under the Lease, including this Improvement Agreement,
Landlord shall disburse the Tenant Improvement Allowance to Tenant upon
completion of construction of the Tenant Improvements and expiration of the time
for filing of any mechanics' liens claimed or which might be filed on account of
any work ordered by Tenant or its contractor or any subcontractor, and upon
receipt by Landlord of a certificate of completion executed by the Space Planner
and Tenant's contractor, and unconditional mechanics' lien releases (which
mechanics' lien releases shall be executed by the subcontractors, labor
suppliers and materialmen in addition to Tenant's contractor), in each case in
form and substance reasonably satisfactory to Landlord, and all appropriate
bills and supporting documentation for the work ordered by Tenant or its
contractor or any subcontractor.

     3.3  No credit shall be given to Tenant if the cost of the Tenant 
Improvements is less than the Tenant Improvement Allowance.

4.  CONSTRUCTION OF TENANT IMPROVEMENTS.

     4.1  Within ten (10) days after Tenant's and Landlord's approval of the 
Plans including the estimate of the cost of the Tenant Improvements and 
Landlord's receipt of payment of any such estimated cost exceeding the amount 
of the Tenant Improvement Allowance, Tenant shall cause the contractor to 
proceed to secure a building permit and commence construction of the Tenant 
Improvements provided that the Building has in Landlord's reasonable 
discretion reached the stage of construction where it is appropriate to 
commence construction of the Tenant Improvements in the Premises.

     4.2  Tenant shall be responsible for obtaining all governmental 
approvals to the full extent necessary for the construction and installation 
of the Tenant Improvements and for Tenant's occupancy of the Premises, in 
compliance with all applicable Regulations.


<PAGE>

Tenant shall employ a contractor or contractors, to be approved by Landlord in
writing, to construct the Tenant Improvements in conformance with the approved
Space Plan and Plans.  The construction contracts between Tenant and the
approved contractor shall be subject to Landlord's prior reasonable approval and
shall provide for progress payments.  The contractor(s) shall be duly licensed
and Landlord's approval of the contractor(s) shall be conditioned, among other
things, upon the contractor's reputation for quality of work, timeliness of
performance, integrity and Landlord's prior experience with such contractor.

     4.3  Landlord shall not be liable for any direct or indirect damages
suffered by Tenant as a result of delays in construction beyond Landlord's
reasonable control, including, but not limited to, delays due to strikes or
unavailability of materials or labor, or delays caused by Tenant (including
delays by the Space Planner, the contractor or anyone else performing services
on behalf of Tenant).

     4.4  All work to be performed on the Premises by Tenant or Tenant's
contractor or agents shall be subject to the following conditions:

          (a)  Such work shall proceed upon Landlord's written approval of 
Tenant's contractor, and public liability and property damage insurance 
carried by Tenant's contractor, and shall further be subject to the 
provisions of Paragraph 8 of the Lease.

          (b)  All work shall be done in conformity with a valid building 
permit when required, a copy of which shall be furnished to Landlord before 
such work is commenced, and in any case, all such work shall be performed in 
a good and workmanlike and first-class manner, and in accordance with all 
applicable Regulations and the requirements and standards of any insurance 
underwriting board, inspection bureau or insurance carrier insuring the 
Premises pursuant to the Lease.  Notwithstanding any failure by Landlord to 
object to any such work, Landlord shall have no responsibility for Tenant's 
failure to comply with all applicable Regulations.  Tenant shall be 
responsible for ensuring that construction and installation of the Tenant 
Improvements will not affect the structural integrity of the Building.

          (c)  If required by Landlord or any lender of Landlord, all work by 
Tenant or Tenant's contractor shall be done with union labor in accordance 
with all union labor agreements applicable to the trades being employed.

          (d)  Landlord or Landlord's agents shall have the right to inspect 
the construction of the Tenant Improvements by Tenant during the progress 
thereof. If Landlord shall give notice of faulty construction or any other 
deviation from the approved Space Plan or Plans, Tenant shall cause its 
contractor to make corrections promptly.  However, neither the privilege 
herein granted to Landlord to make such inspections, nor the making of such 
inspections by Landlord, shall operate as a waiver of any right of Landlord 
to require good and workmanlike construction and improvements erected in 
accordance with the approved Space Plan or Plans.

          (e)  Tenant shall cause its contractor to complete the Tenant 
Improvements as soon as reasonably possible.

          (f)  Tenant's construction of the Tenant Improvements shall comply 
with the following: (i) the Tenant Improvements shall be constructed in 
strict accordance with the approved Space Plan or Plans; (ii) Tenant's and 
its contractor shall submit schedules of all work relating to the Tenant 
Improvements to Landlord for Landlord's approval within fifteen (15) 
business days following the selection of the contractor and the approval of 
the Plans. Landlord shall within five (5) business days after receipt thereof 
inform Tenant of any changes which are necessary and Tenant's contractor 
shall adhere to such corrected schedule; and (iii) Tenant shall abide by all 
rules made by Landlord with respect to the use of freight, loading dock, and 
service elevators, storage of materials, coordination of work with the 
contractors of other tenants, and any other matter in connection with this 
Improvement Agreement, including, without limitation, the construction of the 
Tenant Improvements.

          (g)  Tenant or Tenant's contractor or agents shall arrange for 
necessary utility, hoisting and elevator service with Landlord's contractor 
and shall pay such reasonable charges for such services as may be charged by 
Tenant's or Landlord's contractor.

          (h)  Tenant's entry to the Premises for any purpose, including, 
without limitation, inspection or performance of Tenant construction by 
Tenant's agents, prior to the date Tenant's obligation to pay rent commences 
shall be subject to all the terms and conditions of the Lease except the 
payment of Rent.  Tenant's entry shall mean entry by Tenant, its officers, 
contractors, licensees, agents, servants, employees, guests, invitees, or 
visitors.

          (i)  Tenant shall promptly reimburse Landlord upon demand for any 
reasonable expense actually incurred by the Landlord by reason of faulty work 
done by Tenant or its contractors or by reason of any delays caused by such 
work, or by reason of inadequate clean-up.

          (j)  Tenant hereby indemnifies and holds Landlord harmless with 
respect to any and all costs, losses, damages, injuries and liabilities 
relating in any way to any act or omission of Tenant or Tenant's contractor 
or agents, or anyone directly or indirectly employed by any of them, in 
connection with the Tenant Improvements and any breach of Tenant's 
obligations under this Improvement Agreement, or in connection with Tenant's 
non-payment of any amount arising out of the Tenant Improvements.  Such 
indemnity by Tenant, as set forth above, shall also apply with respect to any 
and all costs, losses, damages, injuries, and liabilities related in any way 
to Landlord's performance or any ministerial acts reasonably necessary (i) to 
permit Tenant to complete the Tenant Improvements, and (ii) to enable Tenant 
to obtain any building permit or certificate of occupancy for the Premises.

          (k)  Tenant shall use its best efforts to contractually require its 
contractor and the subcontractors utilized by Tenant's contractor to 
guarantee to Tenant and for the benefit of Landlord that the portion of the 
Tenant Improvements for which it is responsible shall be free from any 
defects in workmanship and materials for a period of not less than one (1) 
year from the date of completion thereof. Pursuant to such guarantee, each of 
Tenant's contractor and the subcontractors utilized by Tenant's contractor 
shall be responsible for the replacement or repair, without additional 
charge, of all work done or furnished in accordance with its contract that 
shall become defective within one (1) year after the later to occur of (i) 
completion of the work performed by such contractor of subcontractors and 
(ii) the Term Commencement Date.  The correction of such work shall include, 
without additional charge, all additional expenses and damages incurred in 
connection with such removal or replacement of all or any part of the Tenant 
Improvements, and/or the Building and/or common areas that may be damaged or 
disturbed thereby. Tenant shall use its best efforts to ensure that all such 
warranties or guarantees as to materials or workmanship of or with respect to 
the Tenant Improvements shall be contained in the construction contract or 
subcontract and shall be written such that such guarantees or warranties 
shall inure to the benefit of both Landlord and Tenant, as their repective 
interests may appear, and can be directly enforced by either. Tenant 
covenants to give to Landlord any assignment or other assurances which may be 
necessary to effect such rights of direct enforcement.

5.  INSURANCE REQUIREMENTS.

     5.1  All of Tenant's contractors shall carry worker's compensation 
insurance covering all of their respective employees, and shall also carry 
public liability insurance, including property damage, all with limits, in 
form and with companies as are required to be carried by Tenant as set forth 
in the Lease.


<PAGE>

     5.2  Tenant shall carry "Builder's All Risk" insurance in an amount
approved by Landlord covering the construction of the Tenant Improvements, and
such other insurance as Landlord may reasonably require, it being understood and
agreed that the Tenant Improvements shall be insured by Tenant pursuant to the
Lease immediately upon completion thereof.  Such insurance shall be in amounts
and shall include such extended coverage endorsements as may be reasonably
required by Landlord including, but not limited to, the requirement that all of
Tenant's contractors shall carry excess liability and Products and Completed
Operation coverage insurance, each in amounts not less than $500,000 per
incident, $1,000,000 in aggregate, and in form and with companies as are
required to be carried by Tenant as set forth in the Lease.

     5.3  Certificates for all insurance carried pursuant to this Improvement
Agreement must comply with the requirements of the Lease and shall be delivered
to Landlord before the commencement of construction of the Tenant Improvements
and before the contractor's equipment is moved onto the site.  In the event the
Tenant Improvements are damaged by any cause during the course of the
construction thereof, Tenant shall promptly repair the same at Tenant's sole
cost and expense.  Tenant's contractors shall maintain all of the foregoing
insurance coverage in force until the Tenant Improvements are fully completed
and accepted by Landlord, except for any Product and Completed Operation
Coverage insurance required by Landlord, which is to be maintained for the
remaining Lease Term following completion of the work and acceptance by Landlord
and Tenant.  All policies carried under this Paragraph 5 shall name Landlord and
Tenant as "Additional Insureds".  All insurance maintained by Tenant's
contractors shall preclude subrogation claims by the insurer against anyone
insured thereunder.  Such insurance shall provide that it is primary insurance
as respects the owner and that any other insurance maintained by owner is excess
and noncontributing with the insurance required hereunder.

6. COMPLETION AND RENTAL COMMENCEMENT DATE.

     6.1  Tenant's obligation to pay Rent under the Lease shall commence on the
Scheduled Term Commencement Date and the Scheduled Term Commencement Date shall
be the Term Commencement Date notwithstanding anything to the contrary contained
in the Basic Lease Information, provided that Landlord shall have provided
Tenant with full access to the premises on such date.  However, Landlord Delays
(as defined below) shall extend the Term Commencement Date, but only in the
event that substantial completion of the Tenant Improvements is delayed despite
Tenant's reasonable efforts to adapt and compensate for such delays.  In
addition, no Landlord Delays shall be deemed to have occurred unless Tenant has
provided notice, in compliance with the Lease, to Landlord specifying that a
delay shall be deemed to have occurred because of actions, inactions or
circumstances specified in the notice in reasonable detail.  If such actions,
inactions or circumstances are not cured by Landlord within one (1) business day
after receipt of such notice ("COUNT DATE"), and if such actions, inaction or
circumstances otherwise qualify as a Landlord Delay, then a Landlord Delay shall
be deemed to have occurred commencing as of the Count Date.  The Term
Commencement Date shall be extended by one day for each day from the Count Date
that a Landlord Delay has occurred, as calculated as provided above.  The term
"Landlord Delays," as such term may be used in this Improvement Agreement, shall
mean any delays in the completion of the Tenant Improvements which are due to
any act or omission of Landlord, its agents or contractors.  Landlord Delays
shall include, but shall not be limited to: (i) delays in the giving of
authorizations or approvals by Landlord, (ii) delays due to the acts or failures
to act, of Landlord, its agents or contractors, where such acts or failures to
act delay the completion of the Tenant Improvements, provided that Tenant acts
in a commercially reasonable manner to mitigate any such delay, (iii) delays due
to the interference of Landlord, its agents or contractors with the completion
of the Tenant Improvements or the failure or refusal of any party to permit
Tenant, its agents and contractors, access to and use of the Building or any
Building facilities or services, including elevators and loading docks, which
access and use are necessary to complete the Tenant Improvements, and (iv)
delays due to Landlord's failure to allow Tenant sufficient access to the
Building and/or the Premises during Tenant's move into the Premises.

     6.2  Within ten (10) days after completion of construction of the Tenant
Improvements, Tenant shall cause a Notice of Completion to be recorded in the
office of the Recorder of the county in which the Building is located in
accordance with Section 3093 of the Civil Code of the State of California or any
successor statute, and shall furnish a copy thereof to Landlord upon such
recordation.  If Tenant fails to do so, Landlord may execute and file the same
on behalf of Tenant as Tenant's agent for such purpose, at Tenant's sole cost
and expense.  At the conclusion of construction, (i) Tenant shall cause the
Space Planner and the contractor (i) to update the approved working drawings as
necessary to reflect all changes made to the approved working drawings during
the course of construction, (ii) to certify to the best of their knowledge that
the "record-set" of as-built drawings are true and correct, which certification
shall survive the expiration or termination of the Lease, and (c) to deliver to
Landlord two (2) sets of copies of such record set of drawings within ninety
(90) days following issuance of a certificate of occupancy for the Premises, and
(iii) Tenant shall deliver to Landlord a copy of all warranties, guarantees, and
operating manuals and information relating to the improvements, equipment, and
systems in the Premises.

     6.3  A material default under this Improvement Agreement shall constitute a
default under the Lease, and the parties shall be entitled to all rights and
remedies under the Lease in the event of a material default hereunder by the
other party (notwithstanding that the Term thereof has not commenced).

     6.4  Without limiting the "as-is" provisions of the Amendment, except 
for the Tenant Improvements, if any, to be constructed by Landlord pursuant 
to this Improvement Agreement, Tenant accepts the Premises in its "as-is" 
condition and acknowledges that it has had an opportunity to inspect the 
Premises prior to signing the Amendment.


<PAGE>

                                  SCHEDULE 1
                                 TO EXHIBIT B

                              BUILDING STANDARDS


The following constitutes the Building Standard tenant improvements
("STANDARDS") in the quantities specified:

     1. Doors (existing)                Light Oak

     2. Ceiling Tiles (existing)        2' X 2' - Armstrong Cortega Minaboard

     3. Window Treatment (existing)     Manufacturer: Bali
                                        Quality: 1" Blind
                                        Color: Beige

     4. Hardware Sets (existing)        Stainless Steel

     5. Window Mullions (existing)      Existing Color




<PAGE>
                                                                    EXHIBIT 23.1
 
               CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
    We 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 1995 Non-Employee Directors' Stock Option
Plan, 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 21, 1999, with respect to the
consolidated financial statements of Gilead Sciences, Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1998.
 
                                          /s/ ERNST & YOUNG LLP
 
Palo Alto, California
March 19, 1999
 
                                       66





<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 4 AND 5 OF EXHIBIT 13.1 TO THE COMPANY'S FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                          32,475
<SECURITIES>                                   247,464
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                               288,310<F1>
<PP&E>                                          27,838
<DEPRECIATION>                                  17,656
<TOTAL-ASSETS>                                 302,860
<CURRENT-LIABILITIES>                           31,750
<BONDS>                                            563
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          1
<COMMON>                                            31
<OTHER-SE>                                     270,515
<TOTAL-LIABILITY-AND-EQUITY>                   302,860
<SALES>                                          6,074
<TOTAL-REVENUES>                                32,570
<CGS>                                              594
<TOTAL-COSTS>                                  106,895
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 192
<INCOME-PRETAX>                               (56,075)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                           (56,075)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                  (56,075)
<EPS-PRIMARY>                                   (1.85)
<EPS-DILUTED>                                   (1.85)
<FN>
<F1>CURRENT ASSETS INCLUDES RECEIVABLES, ALLOWANCES,
INVENTORY AND OTHER CURRENT ASSETS.
</FN>
        

</TABLE>