Document


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): February 4, 2019
 
 
GILEAD SCIENCES, INC.
(Exact name of registrant as specified in its charter)
 
 
DELAWARE
(State or other jurisdiction of
incorporation)
 
0-19731
(Commission File Number)
 
94-3047598
(I.R.S. Employer
Identification No.)

333 LAKESIDE DRIVE, FOSTER CITY, CALIFORNIA
(Address of principal executive offices)

94404
(Zip Code)
 
(650) 574-3000
(Registrant's telephone number, including area code)
 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 
 






Section 2 - FINANCIAL INFORMATION

Item 2.02
Results of Operations and Financial Condition.

On February 4, 2019, Gilead Sciences, Inc., a Delaware corporation (Gilead), issued a press release announcing its financial results for the quarter and year ended December 31, 2018. A copy of the press release is filed as Exhibit 99.1 to this report.

Gilead has presented certain financial information in accordance with U.S. generally accepted accounting principles (GAAP) and also on a non-GAAP basis. Management believes this non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial statements, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8, 9, 10 and 11 of the press release filed as Exhibit 99.1 to this report.

The information in this Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.


Section 9 - FINANCIAL STATEMENTS AND EXHIBITS

Item 9.01    Financial Statements and Exhibits.

(d)    Exhibits
Exhibit Number
 
Description
99.1
 




 





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GILEAD SCIENCES, INC.
(Registrant)
/s/ Robin L. Washington
Robin L. Washington
Executive Vice President and Chief Financial Officer

Date: February 4, 2019
        








Exhibit Index

Exhibit Number
 
Description
99.1
 





Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12673358&doc=3
CONTACTS:
Investors
 
 
Media
 
Robin Washington
 
 
Amy Flood
 
(650) 522-5688
 
 
(650) 522-5643
 
 
 
 
 
 
Sung Lee
 
 
 
 
(650) 524-7792    
 
 
 
 
 
 
 
 
For Immediate Release
GILEAD SCIENCES ANNOUNCES FOURTH QUARTER
AND FULL YEAR 2018 FINANCIAL RESULTS
- Fourth Quarter Product Sales of $5.7 billion -
- Full Year 2018 Product Sales of $21.7 billion -
- Full Year 2018 Diluted EPS of $4.17 per share -
- Full Year 2018 Non-GAAP Diluted EPS of $6.67 per share -
Foster City, CA, February 4, 2019 - Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the fourth quarter and full year 2018. Total revenues for the fourth quarter of 2018 were $5.8 billion compared to $5.9 billion for the same period in 2017. Net income for the fourth quarter of 2018 was $3 million, or $0.00 earnings per diluted share, compared to net loss of $3.9 billion, or $2.96 loss per diluted share for the same period in 2017. The earnings per share for the fourth quarter of 2018 included an unfavorable impact of $0.99 per diluted share from an impairment and a non-cash tax charge related to intangible assets acquired from Kite Pharma, Inc. (Kite). Non-GAAP net income for the fourth quarter of 2018 was $1.9 billion, or $1.44 per diluted share, compared to $2.3 billion, or $1.78 per diluted share for the same period in 2017.
Full year 2018 total revenues were $22.1 billion, compared to $26.1 billion for 2017. Net income for 2018 was $5.5 billion, or $4.17 per diluted share, compared to $4.6 billion, or $3.51 per diluted share for 2017. Non-GAAP net income for 2018 was $8.7 billion, or $6.67 per diluted share, compared to $11.7 billion, or $8.84 per diluted share for 2017.
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
(In millions, except per share amounts)
 
2018
 
2017
 
2018
 
2017
Product sales
 
$
5,681

 
$
5,837

 
$
21,677

 
$
25,662

Royalty, contract and other revenues
 
114

 
112

 
450

 
445

Total revenues
 
$
5,795

 
$
5,949

 
$
22,127

 
$
26,107

 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Gilead
 
$
3

 
$
(3,865
)
 
$
5,455

 
$
4,628

Non-GAAP net income
 
$
1,873

 
$
2,343

 
$
8,728

 
$
11,654

 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share
 
$

 
$
(2.96
)
 
$
4.17

 
$
3.51

Non-GAAP diluted earnings per share
 
$
1.44

 
$
1.78

 
$
6.67

 
$
8.84

 
 
 
 
 
 
 
 
 
___________________________________
Note: Non-GAAP financial information excludes acquisition-related, up-front collaboration, stock-based compensation and other expenses, fair value adjustments of marketable equity securities and discrete tax charges or benefits associated with changes in tax related laws and guidelines. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8 through 11.

- more -

Gilead Sciences, Inc. 333 Lakeside Drive Foster City, CA 94404 USA
www.gilead.com
phone (650) 574-3000 facsimile (650) 578-9264
 



February 4, 2019
 
2



Product Sales
Total product sales for the fourth quarter of 2018 were $5.7 billion, compared to $5.8 billion for the same period in 2017. Product sales for the fourth quarter of 2018 were $4.5 billion in the United States, $813 million in Europe and $398 million in other locations. Product sales for the fourth quarter of 2017 were $4.1 billion in the United States, $1.1 billion in Europe and $553 million in other locations.
Total product sales in 2018 were $21.7 billion, compared to $25.7 billion in 2017. For 2018, product sales were $16.2 billion in the United States, $3.7 billion in Europe and $1.8 billion in other locations. For 2017, product sales were $18.1 billion in the United States, $5.0 billion in Europe and $2.6 billion in other locations.
HIV product sales were $4.1 billion for the fourth quarter of 2018 compared to $3.4 billion for the same period in 2017. For 2018, HIV product sales were $14.6 billion compared to $13.0 billion in 2017. The increases were primarily due to the launch of Biktarvy® (bictegravir 50 mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg) in 2018 and the continued uptake of Descovy® (emtricitabine 200 mg/tenofovir alafenamide 25 mg), Genvoya® (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg) and Odefsey® (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg).
Chronic hepatitis C virus (HCV) product sales, which consist of Epclusa® (sofosbuvir 400 mg/velpatasvir 100 mg), Harvoni® (ledipasvir 90 mg/sofosbuvir 400 mg), Vosevi® (sofosbuvir 400 mg/velpatasvir 100 mg/voxilaprevir 100 mg) and Sovaldi® (sofosbuvir 400 mg), were $738 million for the fourth quarter of 2018 compared to $1.5 billion for the same period in 2017. For 2018, HCV product sales were $3.7 billion compared to $9.1 billion in 2017. The declines were primarily due to lower average net selling price and lower sales volume of Harvoni and Epclusa across all major markets as a result of increased competition and lower patient starts.
Yescarta® (axicabtagene ciloleucel), which was launched in the United States in October 2017, generated $81 million in sales during the fourth quarter of 2018 and $264 million in sales in 2018.
Other product sales, which include products from Gilead’s chronic hepatitis B virus (HBV), cardiovascular, oncology and other categories inclusive of Vemlidy® (tenofovir alafenamide 25 mg), Viread® (tenofovir disoproxil fumarate 300 mg), Letairis® (ambrisentan 5 mg and 10 mg), Ranexa® (ranolazine 500 mg and 1000 mg), Zydelig® (idelalisib 150 mg) and AmBisome® (amphotericin B liposome for injection 50 mg/vial), were $797 million for the fourth quarter of 2018 compared to $886 million for the same period in 2017. For 2018, other product sales were $3.1 billion compared to $3.5 billion in 2017.
Cost of Goods Sold and Product Gross Margin
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
(In millions, except percentages)
 
2018
 
2017
 
2018
 
2017
Cost of goods sold
 
$
1,570

 
$
1,256

 
$
4,853

 
$
4,371

Non-GAAP cost of goods sold
 
$
1,257

 
$
966

 
$
3,590

 
$
3,422

Product gross margin
 
72.4
%
 
78.5
%
 
77.6
%
 
83.0
%
Non-GAAP product gross margin
 
77.9
%
 
83.5
%
 
83.4
%
 
86.7
%
 
 
 
 
 
 
 
 
 
For the fourth quarter and full year 2018, compared to the same periods in 2017:
Cost of goods sold and non-GAAP cost of goods sold increased primarily due to reserves for excess raw material inventory. In the fourth quarter of 2018, inventory reserves of $410 million, or approximately $0.31 per diluted share, were recorded for excess raw materials primarily due to a sustained decrease in demand for Harvoni. The full year cost of goods sold also increased due to amortization expense related to intangible assets acquired in connection with Gilead’s acquisition of Kite.
Product gross margin and non-GAAP product gross margin decreased primarily due to the factors noted above.

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February 4, 2019
 
3



Operating Expenses
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
(In millions)
 
2018
 
2017
 
2018
 
2017
Research and development (R&D) expenses
 
$
1,950

 
$
1,150

 
$
5,018

 
$
3,734

Non-GAAP R&D expenses
 
$
939

 
$
845

 
$
3,518

 
$
3,291

 
 
 
 
 
 
 
 
 
Selling, general and administrative (SG&A) expenses
 
$
1,131

 
$
1,252

 
$
4,056

 
$
3,878

Non-GAAP SG&A expenses
 
$
1,032

 
$
923

 
$
3,608

 
$
3,363

 
 
 
 
 
 
 
 
 
For the fourth quarter of 2018, compared to the same period in 2017:
R&D expenses increased primarily due to an $820 million impairment charge related to in-process R&D (IPR&D) for the KITE-585 program (an anti-BCMA being evaluated for the treatment of multiple myeloma), up-front collaboration expenses and higher investments to support the growth of Gilead’s business following the acquisition of Kite, partially offset by Gilead’s purchase of Cell Design Labs, Inc. in 2017.
SG&A expenses decreased primarily due to lower stock-based compensation expenses associated with the acquisition of Kite, partially offset by higher investments to support the growth of Gilead’s business following the acquisition of Kite.
Non-GAAP R&D expenses and non-GAAP SG&A expenses increased primarily due to higher investments to support the growth of Gilead’s business following the acquisition of Kite.
For the full year 2018, compared to 2017:
R&D expenses increased primarily due to an $820 million impairment charge related to IPR&D for the KITE-585 program, up-front collaboration expenses, a full year of investments to support the growth of Gilead’s business following the acquisition of Kite and higher stock-based compensation expenses associated with the acquisition of Kite.
SG&A expenses increased primarily due to a full year of investments to support the growth of Gilead’s business following the acquisition of Kite, partially offset by lower acquisition-related costs associated with the acquisition of Kite.
Non-GAAP R&D expenses and non-GAAP SG&A expenses increased primarily due to a full year of investments to support the growth of Gilead’s business following the acquisition of Kite.
Cash, Cash Equivalents and Marketable Debt Securities
As of December 31, 2018, Gilead had $31.5 billion of cash, cash equivalents and marketable debt securities compared to $36.7 billion as of December 31, 2017. During 2018, Gilead generated $8.4 billion in operating cash flow, repaid $6.3 billion of debt, paid cash dividends of $3.0 billion and utilized $2.9 billion on stock repurchases.

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February 4, 2019
 
4



Full Year 2019 Guidance
Gilead provided its full year 2019 guidance below. The guidance for product sales reflects the anticipated entry of generic versions of Letairis and Ranexa in the United States and the full year impact of generic products containing tenofovir disoproxil fumarate in certain European countries.
(In millions, except percentages and per share amounts)
 
Provided
February 4, 2019
Product Sales
 
$21,300 - $21,800
Non-GAAP
 
 
Product Gross Margin
 
85% - 87%
R&D Expenses
 
$3,600 - $3,800
SG&A Expenses
 
$3,900 - $4,100
Effective Tax Rate
 
20.0% - 21.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-Based Compensation and Other Expenses
 
$1.40 - $1.50
Corporate Highlights
Announced that the Board of Directors named Daniel O’Day Chairman of the Board and Chief Executive Officer, effective March 1, 2019. Announced that the Board of Directors appointed Gregg Alton as interim Chief Executive Officer for the period of January 1, 2019 until March 1, 2019.
Announced an immuno-oncology partnership with Agenus Inc. focused on the development and commercialization of novel immuno-oncology therapies.
Announced a strategic collaboration with Scholar Rock Holding Corporation to discover and develop highly specific inhibitors of transforming growth factor beta activation for the treatment of fibrotic diseases.
Announced a global strategic collaboration with Tango Therapeutics, Inc. to discover, develop and commercialize a pipeline of innovative targeted immuno-oncology treatments for patients with cancer.
Product & Pipeline Updates announced by Gilead during the Fourth Quarter of 2018 include:
HIV and Liver Diseases Programs
Announced that the China National Medical Products Administration (NMPA) approved Harvoni in China for the treatment of HCV genotype 1-6 infection in adults and adolescents aged 12 to 18 years.
Announced that the NMPA approved Descovy in China for the treatment of HIV-1 infection in adults and adolescents.
Announced that the NMPA approved Vemlidy in China for the treatment of chronic HBV infection in adults and adolescents.
Presented data at The Liver Meeting® 2018, which included the announcement of:
Results from studies investigating Epclusa in HCV infected patients with severe renal impairment undergoing dialysis and Harvoni in pediatric HCV patients aged three to five years, adding to the efficacy and safety profile of sofosbuvir-based regimens across diverse patient populations.
Results from Gilead’s HBV cure development program.
Results from Gilead’s clinical development program for advanced fibrosis due to nonalcoholic steatohepatitis. Data presented support the ongoing development of Gilead’s investigational compounds, evaluate the utility of noninvasive tests for the identification of patients with advanced fibrosis and demonstrate the significant burden of disease in affected patients.
Results demonstrating that treatment with GS-9674, an investigational, selective, nonsteroidal farnesoid X receptor agonist, led to significant improvements in liver biochemistry and markers of cholestasis in patients with primary sclerosing cholangitis.

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February 4, 2019
 
5



Presented data at the 2018 HIV Glasgow conference, which included the announcement of 96-week results from a Phase 3, randomized, double-blinded study evaluating the safety and efficacy of Biktarvy for the treatment of HIV-1 infection in treatment-naïve adults. In the ongoing study, Biktarvy was found to be statistically non-inferior to a regimen of dolutegravir and emtricitabine/tenofovir alafenamide through 96 weeks of therapy.
Oncology and Cell Therapy Programs
Presented data at the Annual Meeting of the American Society of Hematology, which included the announcement of:
Updated results from ZUMA-3, a single-arm Phase 1/2 study evaluating KTE-X19 (formerly KTE-C19), an investigational CD19 chimeric antigen receptor T cell therapy, in adult patients with relapsed or refractory acute lymphoblastic leukemia. With a median follow-up of 15.1 months following a single infusion of KTE-X19, 69% of evaluable patients achieved complete tumor remission, defined as complete remission (CR) or CR with incomplete hematological recovery. The rate of undetectable minimal residual disease in patients who achieved complete tumor remission was 100%.
Two-year efficacy and safety data from the pivotal ZUMA-1 trial of Yescarta in patients with refractory large B-cell lymphoma. With a minimum follow-up of two years after a single infusion of Yescarta (median follow up of 27.1 months), 39% of patients were in an ongoing response.
Non-GAAP Financial Information
The information presented in this document has been prepared by Gilead in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8 through 11.
Conference Call
At 4:30 p.m. Eastern Time today, Gilead’s management will host a conference call and a simultaneous webcast to discuss results for the fourth quarter and full year 2018 and a general business update. To access the webcast live via the internet, please connect to Gilead’s website at http://investors.gilead.com/ 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast. Alternatively, please call (877) 359-9508 (U.S.) or (224) 357-2393 (international) and dial the conference ID 3826138 to access the call.
A replay of the webcast will be archived on Gilead’s website for one year and a phone replay will be available approximately two hours following the call through February 6, 2019. To access the phone replay, please call (855) 859-2056 (U.S.) or (404) 537-3406 (international) and dial the conference ID 3826138.
About Gilead Sciences
Gilead Sciences, Inc. is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. The company strives to transform and simplify care for people with life-threatening illnesses around the world. Gilead has operations in more than 35 countries worldwide, with headquarters in Foster City, California.
Forward-looking Statements
Statements included in this press release that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Gilead cautions readers that forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties

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February 4, 2019
 
6



include: Gilead’s ability to achieve its anticipated full year 2019 financial results; Gilead’s ability to sustain growth in revenues for its antiviral and other programs; the risk that private and public payers may be reluctant to provide, or continue to provide, coverage or reimbursement for new products, including Yescarta and Biktarvy; austerity measures in European countries that may increase the amount of discount required on Gilead’s products; an increase in discounts, chargebacks and rebates due to ongoing contracts and future negotiations with commercial and government payers; a larger than anticipated shift in payer mix to more highly discounted payer segments and geographic regions and decreases in treatment duration; availability of funding for state AIDS Drug Assistance Programs (ADAPs); continued fluctuations in ADAP purchase driven by federal and state grant cycles as well as purchase by retail pharmacies and other non-wholesaler locations with whom we have no inventory management agreements may not mirror patient demand and may cause fluctuations in Gilead’s earnings; market share and price erosion caused by the introduction of generic versions of Viread and Truvada; an uncertain global macroeconomic environment; potential amendments to the Affordable Care Act or other government action that could have the effect of lowering prices or reducing the number of insured patients; Gilead’s ability to initiate clinical trials in its currently anticipated timeframes; the levels of inventory held by wholesalers and retailers which may cause fluctuations in Gilead’s earnings; Gilead’s ability to develop products under the collaborations with Agenus Inc., Scholar Rock Holding Corporation and Tango Therapeutics, Inc.; Gilead’s ability to submit new drug applications for new product candidates in the timelines currently anticipated; Gilead’s ability to receive regulatory approvals in a timely manner or at all, for new and current products; Gilead’s ability to successfully commercialize its products, including Yescarta; the risk that physicians and patients may not see advantages of these products over other therapies and may therefore be reluctant to prescribe the products; safety and efficacy data from clinical studies may not warrant further development of Gilead’s product candidates, including GS-9674, KTE-X19 and product candidates evaluated for advanced fibrosis due to nonalcoholic steatohepatitis and under Gilead’s HBV cure program; Gilead’s ability to pay dividends or complete its share repurchase program due to changes in its stock price, corporate or other market conditions; fluctuations in the foreign exchange rate of the U.S. dollar that may cause an unfavorable foreign currency exchange impact on Gilead’s future revenues and pre-tax earnings; and other risks identified from time to time in Gilead’s reports filed with the U.S. Securities and Exchange Commission (the SEC). In addition, Gilead makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Gilead bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There may be other factors of which Gilead is not currently aware that may affect matters discussed in the forward-looking statements and may also cause actual results to differ significantly from these estimates. Further, results for the quarter and the year ended December 31, 2018 are not necessarily indicative of operating results for any future periods. You are urged to consider statements that include the words may, will, would, could, should, might, believes, estimates, projects, potential, expects, plans, anticipates, intends, continues, forecast, designed, goal or the negative of those words or other comparable words to be uncertain and forward-looking. Gilead directs readers to its press releases, Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 and other subsequent disclosure documents filed with the SEC. Gilead claims the protection of the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements.
All forward-looking statements are based on information currently available to Gilead and Gilead assumes no obligation to update or supplement any such forward-looking statements other than as required by law. Any forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements.
# # #
Gilead owns or has rights to various trademarks, copyrights and trade names used in its business, including the following: GILEAD®, GILEAD SCIENCES®, AMBISOME®, ATRIPLA®, BIKTARVY®, CAYSTON®, COMPLERA®, DESCOVY®, EMTRIVA®, EPCLUSA®, EVIPLERA®, GENVOYA®, HARVONI®, HEPSERA®, LETAIRIS®, ODEFSEY®, RANEXA®, SOVALDI®, STRIBILD®, TRUVADA®, TYBOST®, VEMLIDY®, VIREAD®, VOSEVI®, YESCARTA® and ZYDELIG®.
LEXISCAN® is a registered trademark of Astellas U.S. LLC. MACUGEN® is a registered trademark of Eyetech, Inc. SYMTUZA® is a registered trademark of Janssen Sciences Ireland UC. TAMIFLU® is a registered trademark of Hoffmann-La Roche Inc.
For more information on Gilead Sciences, Inc., please visit www.gilead.com or
call the Gilead Public Affairs Department at 1-800-GILEAD-5 (1-800-445-3235).

- more -


February 4, 2019
 
7



GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in millions, except per share amounts)

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
 
2018
 
2017
 
2018
 
2017
 Revenues:
 
 
 
 
 
 
 
 Product sales
$
5,681

 
$
5,837

 
$
21,677

 
$
25,662

 Royalty, contract and other revenues
114

 
112

 
450

 
445

 Total revenues
5,795

 
5,949

 
22,127

 
26,107

 Costs and expenses:
 
 
 
 
 
 
 
 Cost of goods sold
1,570

 
1,256

 
4,853

 
4,371

 Research and development expenses
1,950

 
1,150

 
5,018

 
3,734

 Selling, general and administrative expenses
1,131

 
1,252

 
4,056

 
3,878

 Total costs and expenses
4,651

 
3,658

 
13,927

 
11,983

 Income from operations
1,144

 
2,291

 
8,200

 
14,124

 Interest expense
(257
)
 
(297
)
 
(1,077
)
 
(1,118
)
 Other income (expense), net
129

 
132

 
676

 
523

 Income before provision for income taxes
1,016

 
2,126

 
7,799

 
13,529

 Provision for income taxes
1,013

 
5,962

 
2,339

 
8,885

 Net income (loss)
3

 
(3,836
)
 
5,460

 
4,644

 Net income attributable to noncontrolling interest

 
29

 
5

 
16

 Net income (loss) attributable to Gilead
$
3

 
$
(3,865
)
 
$
5,455

 
$
4,628

 
 
 
 
 
 
 
 
 Net income (loss) per share attributable to Gilead common stockholders - basic
$

 
$
(2.96
)
 
$
4.20

 
$
3.54

 Shares used in per share calculation - basic
1,290

 
1,307

 
1,298

 
1,307

 Net income (loss) per share attributable to Gilead common stockholders - diluted
$

 
$
(2.96
)
 
$
4.17

 
$
3.51

 Shares used in per share calculation - diluted
1,299

 
1,307

 
1,308

 
1,319

 Cash dividends declared per share
$
0.57

 
$
0.52

 
$
2.28

 
$
2.08




February 4, 2019
 
8



GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited)
(in millions, except percentages and per share amounts)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
Cost of goods sold reconciliation:
 
 
 
 
 
 
 
 
GAAP cost of goods sold
 
$
1,570

 
$
1,256

 
$
4,853

 
$
4,371

Acquisition-related – amortization of purchased intangibles
 
(301
)
 
(283
)
 
(1,203
)
 
(912
)
Stock-based compensation expenses(1)
 
(12
)
 
(12
)
 
(61
)
 
(24
)
Other(2)
 

 
5

 
1

 
(13
)
Non-GAAP cost of goods sold
 
$
1,257

 
$
966

 
$
3,590

 
$
3,422

 
 
 
 
 
 
 
 
 
Product gross margin reconciliation:
 
 
 
 
 
 
 
 
GAAP product gross margin
 
72.4
%
 
78.5
 %
 
77.6
 %
 
83.0
%
Acquisition-related – amortization of purchased intangibles
 
5.3
%
 
4.8
 %
 
5.5
 %
 
3.6
%
Stock-based compensation expenses(1)
 
0.2
%
 
0.2
 %
 
0.3
 %
 
0.1
%
Other(2)
 
%
 
(0.1
)%
 
 %
 
0.1
%
Non-GAAP product gross margin(7)
 
77.9
%
 
83.5
 %
 
83.4
 %
 
86.7
%
 
 
 
 
 
 
 
 
 
Research and development expenses reconciliation:
 
 
 
 
 
 
 
 
GAAP research and development expenses
 
$
1,950

 
$
1,150

 
$
5,018

 
$
3,734

Up-front collaboration expenses
 
(118
)
 

 
(278
)
 

Acquisition-related – acquired IPR&D
 

 
(222
)
 

 
(222
)
Acquisition-related – IPR&D impairment
 
(820
)
 

 
(820
)
 

Acquisition-related – other costs
 
1

 
(8
)
 
(21
)
 
(8
)
Stock-based compensation expenses(1)
 
(75
)
 
(90
)
 
(379
)
 
(232
)
Other(2)
 
1

 
15

 
(2
)
 
19

Non-GAAP research and development expenses
 
$
939

 
$
845

 
$
3,518

 
$
3,291

 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses reconciliation:
 
 
 
 
 
 
 
 
GAAP selling, general and administrative expenses
 
$
1,131

 
$
1,252

 
$
4,056

 
$
3,878

Acquisition-related – transaction costs
 

 
(36
)
 

 
(48
)
Acquisition-related – other costs
 
(1
)
 
(46
)
 
(24
)
 
(46
)
Stock-based compensation expenses(1)
 
(88
)
 
(243
)
 
(405
)
 
(393
)
Other(2)
 
(10
)
 
(4
)
 
(19
)
 
(28
)
Non-GAAP selling, general and administrative expenses
 
$
1,032

 
$
923

 
$
3,608

 
$
3,363

 
 
 
 
 
 
 
 
 
Operating margin reconciliation:
 
 
 
 
 
 
 
 
GAAP operating margin
 
19.7
%
 
38.5
 %
 
37.1
 %
 
54.1
%
Up-front collaboration expenses
 
2.0
%
 
 %
 
1.3
 %
 
%
Acquisition-related – amortization of purchased intangibles
 
5.2
%
 
4.8
 %
 
5.4
 %
 
3.5
%
Acquisition-related – acquired IPR&D
 
%
 
3.7
 %
 
 %
 
0.9
%
Acquisition-related – IPR&D impairment
 
14.2
%
 
 %
 
3.7
 %
 
%
Acquisition-related – transaction costs
 
%
 
0.6
 %
 
 %
 
0.2
%
Acquisition-related – other costs
 
%
 
0.9
 %
 
0.2
 %
 
0.2
%
Stock-based compensation expenses(1)
 
3.0
%
 
5.8
 %
 
3.8
 %
 
2.5
%
Other(2)
 
0.2
%
 
(0.3
)%
 
0.1
 %
 
0.1
%
Non-GAAP operating margin(7)
 
44.3
%
 
54.0
 %
 
51.6
 %
 
61.4
%
 
 
 
 
 
 
 
 
 
Interest expense reconciliation:
 
 
 
 
 
 
 
 
GAAP interest expense
 
$
(257
)
 
$
(297
)
 
$
(1,077
)
 
$
(1,118
)
Acquisition-related – transaction costs
 

 

 

 
18

Non-GAAP interest expense
 
$
(257
)
 
$
(297
)
 
$
(1,077
)
 
$
(1,100
)



February 4, 2019
 
9



GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION - (Continued)
(unaudited)
(in millions, except percentages and per share amounts)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
Other income (expense), net reconciliation:
 
 
 
 
 
 
 
 
GAAP other income (expense), net
 
$
129

 
$
132

 
$
676

 
$
523

Unrealized (gains) losses from marketable equity securities(6)
 
34

 

 
(115
)
 

Non-GAAP other income (expense), net
 
$
163

 
$
132

 
$
561

 
$
523

 
 
 
 
 
 
 
 
 
Effective tax rate reconciliation:
 
 
 
 
 
 
 
 
GAAP effective tax rate
 
99.6
 %
 
280.5
 %
 
30.0
 %
 
65.7
 %
Up-front collaboration expenses
 
(0.3
)%
 
 %
 
0.1
 %
 
 %
Acquisition-related – amortization of purchased intangibles
 
(6.5
)%
 
(1.1
)%
 
(2.0
)%
 
(1.2
)%
Acquisition-related – acquired IPR&D
 
 %
 
(2.1
)%
 
 %
 
(0.4
)%
Acquisition-related – IPR&D impairment
 
(4.0
)%
 
 %
 
(0.5
)%
 
 %
Acquisition-related – transaction costs
 
 %
 
0.2
 %
 
 %
 
 %
Acquisition-related – other costs
 
 %
 
0.3
 %
 
 %
 
 %
Stock-based compensation expenses(1)
 
(0.2
)%
 
2.6
 %
 
(0.1
)%
 
0.8
 %
Unrealized (gains) losses from marketable equity securities(6)
 
(5.2
)%
 
 %
 
(0.1
)%
 
 %
Discrete tax charge(4)
 
(57.9
)%
 
 %
 
(7.5
)%
 
 %
Tax Reform impact(5)
 
(1.4
)%
 
(258.3
)%
 
(0.1
)%
 
(40.6
)%
Other(2)
 
 %
 
0.2
 %
 
 %
 
 %
Non-GAAP effective tax rate(7)
 
24.2
 %
 
22.2
 %
 
19.8
 %
 
24.5
 %
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Gilead reconciliation:
 
 
 
 
 
 
 
 
GAAP net income (loss) attributable to Gilead
 
$
3

 
$
(3,865
)
 
$
5,455

 
$
4,628

Up-front collaboration expenses
 
91

 

 
216

 

Acquisition-related – amortization of purchased intangibles
 
281

 
246

 
1,124

 
851

Acquisition-related – acquired IPR&D
 

 
222

 

 
222

Acquisition-related – IPR&D impairment
 
696

 

 
696

 

Acquisition-related – transaction costs
 

 
24

 

 
48

Acquisition-related – other costs
 

 
36

 
36

 
36

Stock-based compensation expenses(1)
 
135

 
208

 
681

 
369

Unrealized (gains) losses from marketable equity securities(6)
 
59

 

 
(87
)
 

Discrete tax charge(4)
 
588

 

 
588

 

Tax Reform impact(5)
 
14

 
5,490

 
4

 
5,490

Other(2)
 
6

 
(18
)
 
15

 
10

Non-GAAP net income attributable to Gilead
 
$
1,873

 
$
2,343

 
$
8,728

 
$
11,654

 
 
 
 
 
 
 
 
 



February 4, 2019
 
10



GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION - (Continued)
(unaudited)
(in millions, except percentages and per share amounts)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
Diluted earnings (loss) per share reconciliation:
 
 
 
 
 
 
 
 
GAAP diluted earnings / (loss) per share(3)
 
$
0.00

 
$
(2.96
)
 
$
4.17

 
$
3.51

Up-front collaboration expenses
 
0.07

 

 
0.17

 

Acquisition-related – amortization of purchased intangibles
 
0.22

 
0.19

 
0.86

 
0.65

Acquisition-related – acquired IPR&D
 

 
0.17

 

 
0.17

Acquisition-related – IPR&D impairment
 
0.54

 

 
0.53

 

Acquisition-related – transaction costs
 

 
0.02

 

 
0.04

Acquisition-related – other costs
 

 
0.03

 
0.03

 
0.03

Stock-based compensation expenses(1)
 
0.10

 
0.16

 
0.52

 
0.28

Unrealized (gains) losses from marketable equity securities(6)
 
0.05

 

 
(0.07
)
 

Discrete tax charge(4)
 
0.45

 

 
0.45

 

Tax Reform impact(5)
 
0.01

 
4.16

 

 
4.16

Other(2)
 

 
(0.01
)
 
0.01

 
0.01

Non-GAAP diluted earnings per share(7)
 
$
1.44

 
$
1.78

 
$
6.67

 
$
8.84

 
 
 
 
 
 
 
 
 
Non-GAAP adjustment summary:
 
 
 
 
 
 
 
 
Cost of goods sold adjustments
 
$
313

 
$
290

 
$
1,263

 
$
949

Research and development expenses adjustments
 
1,011

 
305

 
1,500

 
443

Selling, general and administrative expenses adjustments
 
99

 
329

 
448

 
515

Interest expense adjustments
 

 

 

 
18

Other income (expense), net adjustments
 
34

 

 
(115
)
 

Total non-GAAP adjustments before tax
 
1,457

 
924

 
3,096

 
1,925

Income tax effect
 
(189
)
 
(206
)
 
(415
)
 
(389
)
Discrete tax charge(4)
 
588

 

 
588

 

Tax Reform impact(5)
 
14

 
5,490

 
4

 
5,490

Total non-GAAP adjustments after tax
 
$
1,870

 
$
6,208

 
$
3,273

 
$
7,026

 
 
 
 
 
 
 
 
 
Notes:
 
 
 
 
 
 
 
 
(1)    Amounts include stock-based compensation expenses associated with the acquisition of Kite, which were $44 million and $367 million for the three and twelve months ended December 31, 2018, respectively, and $238 million for both the three and twelve months ended December 31, 2017
(2)    Amounts related to restructuring, contingent consideration and/or other individually insignificant amounts
(3)    Shares used in loss per share calculation for the three months ended December 31, 2017 exclude 13 million shares from dilutive equity awards
(4)    Amount represents a deferred tax charge resulting from a transfer of acquired intangible assets between wholly owned subsidiaries
(5)    Amounts represent impact from the enactment of the 2017 Tax Cuts and Jobs Act (Tax Reform)
(6)    Amounts represent fair value adjustments of marketable equity securities recorded in Other income (expense), net, on Gilead’s Condensed Consolidated Statements of Income as a result of the adoption of Accounting Standards Update No. 2016-01 “Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities” in 2018
(7)    Amounts may not sum due to rounding



February 4, 2019
 
11



GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP 2019 FULL YEAR GUIDANCE
(unaudited)
(in millions, except percentages and per share amounts)
 
 
Provided
February 4, 2019
Projected product gross margin GAAP to non-GAAP reconciliation:
 
 
GAAP projected product gross margin
 
80% - 81%
Acquisition-related expenses
 
5% - 6%
Non-GAAP projected product gross margin(1)
 
85% - 87%
 
 
 
Projected research and development expenses GAAP to non-GAAP reconciliation:
 
 
GAAP projected research and development expenses
 
$4,195 - $4,480
Stock-based compensation expenses
 
(345) - (380)
Up-front collaboration expenses
 
(250) - (300)
Non-GAAP projected research and development expenses
 
$3,600 - $3,800
 
 
 
Projected selling, general and administrative expenses GAAP to non-GAAP reconciliation:
 
 
GAAP projected selling, general and administrative expenses
 
$4,255 - $4,490
Stock-based compensation expenses
 
(355) - (390)
Non-GAAP projected selling, general and administrative expenses
 
$3,900 - $4,100
 
 
 
Projected effective tax rate GAAP to non-GAAP reconciliation:
 
 
GAAP projected effective tax rate (2)
 
21.5% - 22.5%
Tax rate effect of adjustments noted above (2)
 
(1.5%) - (1.5%)
Non-GAAP projected effective tax rate
 
20.0% - 21.0%
 
 
 
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses(2):
 
 
Acquisition-related expenses / up-front collaboration expenses
 
$0.93 - $0.97
Stock-based compensation expenses
 
$0.47 - $0.53
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses(2)
 
$1.40 - $1.50
 
 
 
Notes:
 
 
(1)    Total stock-based compensation expenses have a less than one percent impact on non-GAAP projected product gross margin
(2)    Excludes fair value adjustments of marketable equity securities and the associated income tax effect, as Gilead is unable to project future fair value adjustments, and other discrete tax charges or benefits




February 4, 2019
 
12



GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions)
 
December 31,
 
December 31,
 
2018
 
2017
 

 
 
Cash, cash equivalents and marketable securities
$
31,512

 
$
36,694

Accounts receivable, net
3,327

 
3,851

Inventories
814

 
801

Property, plant and equipment, net
4,006

 
3,295

Intangible assets, net
15,738

 
17,100

Goodwill
4,117

 
4,159

Other assets
4,161

 
4,383

Total assets
$
63,675

 
$
70,283

 
 
 
 
Current liabilities
$
10,605

 
$
11,635

Long-term liabilities
31,536

 
38,147

Stockholders’ equity(1)
21,534

 
20,501

Total liabilities and stockholders’ equity
$
63,675

 
$
70,283

 
 
 
 
Notes:
 
 
 
(1)    As of December 31, 2018, there were 1,282 million shares of common stock issued and outstanding



February 4, 2019
 
13



GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in millions)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Atripla – U.S.
 
$
244

 
$
314

 
$
967

 
$
1,288

Atripla – Europe
 
12

 
76

 
131

 
335

Atripla – Other International
 
29

 
50

 
108

 
183

 
 
285

 
440

 
1,206

 
1,806

 
 
 
 
 
 
 
 
 
Biktarvy – U.S.
 
551

 

 
1,144

 

Biktarvy – Europe
 
26

 

 
39

 

Biktarvy – Other International
 
1

 

 
1

 

 
 
578

 

 
1,184

 

 
 
 
 
 
 
 
 
 
Complera / Eviplera – U.S.
 
66

 
91

 
276

 
406

Complera / Eviplera – Europe
 
48

 
118

 
327

 
503

Complera / Eviplera – Other International
 
11

 
13

 
50

 
57

 
 
125

 
222

 
653

 
966

 
 
 
 
 
 
 
 
 
Descovy – U.S.
 
322

 
276

 
1,217

 
958

Descovy – Europe
 
74

 
77

 
308

 
226

Descovy – Other International
 
15

 
12

 
56

 
34

 
 
411

 
365

 
1,581

 
1,218

 
 
 
 
 
 
 
 
 
Genvoya – U.S.
 
953

 
844

 
3,631

 
3,033

Genvoya – Europe
 
198

 
176

 
794

 
534

Genvoya – Other International
 
55

 
40

 
199

 
107

 
 
1,206

 
1,060

 
4,624

 
3,674

 
 
 
 
 
 
 
 
 
Odefsey – U.S.
 
337

 
276

 
1,242

 
964

Odefsey – Europe
 
105

 
45

 
335

 
132

Odefsey – Other International
 
6

 
4

 
21

 
10

 
 
448

 
325

 
1,598

 
1,106

 
 
 
 
 
 
 
 
 
Stribild – U.S.
 
117

 
179

 
505

 
811

Stribild – Europe
 
14

 
34

 
97

 
195

Stribild – Other International
 
6

 
9

 
42

 
47

 
 
137

 
222

 
644

 
1,053

 
 
 
 
 
 
 
 
 
Truvada – U.S.
 
784

 
631

 
2,605

 
2,266

Truvada – Europe
 
15

 
117

 
260

 
644

Truvada – Other International
 
24

 
49

 
132

 
224

 
 
823

 
797

 
2,997

 
3,134

 
 
 
 
 
 
 
 
 
Other HIV(1) – U.S.
 
10

 
9

 
40

 
43

Other HIV(1) – Europe
 
1

 
1

 
7

 
6

Other HIV(1) – Other International
 
4

 
7

 
14

 
9

 
 
15

 
17

 
61

 
58

 
 
 
 
 
 
 
 
 
Revenue share – Symtuza(2) – U.S.
 
19

 

 
27

 

Revenue share – Symtuza(2) – Europe
 
18

 

 
52

 

 
 
37

 

 
79

 

 
 
 
 
 
 
 
 
 
Total HIV – U.S.
 
3,403

 
2,620

 
11,654

 
9,769

Total HIV – Europe
 
511

 
644

 
2,350

 
2,575

Total HIV – Other International
 
151

 
184

 
623

 
671

 
 
4,065

 
3,448

 
14,627

 
13,015

 
 
 
 
 
 
 
 
 



February 4, 2019
 
14



GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY - (Continued)
(unaudited)
(in millions)


 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
AmBisome – U.S.
 
$
6

 
$
2

 
$
46

 
$
28

AmBisome – Europe
 
59

 
54

 
229

 
207

AmBisome – Other International
 
43

 
34

 
145

 
131

 
 
108

 
90

 
420

 
366

 
 
 
 
 
 
 
 
 
Epclusa – U.S.
 
201

 
262

 
934

 
2,404

Epclusa – Europe
 
152

 
220

 
654

 
869

Epclusa – Other International
 
100

 
83

 
378

 
237

 
 
453

 
565

 
1,966

 
3,510

 
 
 
 
 
 
 
 
 
Harvoni – U.S.
 
153

 
425

 
802

 
3,053

Harvoni – Europe
 
28

 
121

 
144

 
704

Harvoni – Other International
 
51

 
98

 
276

 
613

 
 
232

 
644

 
1,222

 
4,370

 
 
 
 
 
 
 
 
 
Letairis – U.S.
 
254

 
233

 
943

 
887

 
 
 
 
 
 
 
 
 
Ranexa – U.S.
 
177

 
200

 
758

 
717

 
 
 
 
 
 
 
 
 
Vemlidy – U.S.
 
73

 
45

 
245

 
111

Vemlidy – Europe
 
4

 
2

 
12

 
5

Vemlidy – Other International
 
23

 
5

 
64

 
6

 
 
100

 
52

 
321

 
122

 
 
 
 
 
 
 
 
 
Viread – U.S.
 
10

 
119

 
50

 
514

Viread – Europe
 
10

 
36

 
82

 
238

Viread – Other International
 
38

 
57

 
175

 
294

 
 
58

 
212

 
307

 
1,046

 
 
 
 
 
 
 
 
 
Vosevi – U.S.
 
54

 
150

 
304

 
267

Vosevi – Europe
 
21

 
17

 
78

 
22

Vosevi – Other International
 
2

 
3

 
14

 
4

 
 
77

 
170

 
396

 
293

 
 
 
 
 
 
 
 
 
Yescarta – U.S.
 
80

 
7

 
263

 
7

Yescarta – Europe
 
1

 

 
1

 

Yescarta – Other International
 

 

 

 

 
 
81

 
7

 
264

 
7

 
 
 
 
 
 
 
 
 
Zydelig – U.S.
 
15

 
17

 
61

 
69

Zydelig – Europe
 
26

 
20

 
70

 
77

Zydelig – Other International
 

 
2

 
2

 
3

 
 
41

 
39

 
133

 
149

 
 
 
 
 
 
 
 
 
Other(3) – U.S.
 
44

 
55

 
137

 
283

Other(3) – Europe
 
1

 
35

 
76

 
314

Other(3) – Other International
 
(10
)
 
87

 
107

 
583

 
 
35

 
177

 
320

 
1,180

 
 
 
 
 
 
 
 
 
Total product sales – U.S.
 
4,470

 
4,135

 
16,197

 
18,109

Total product sales – Europe
 
813

 
1,149

 
3,696

 
5,011

Total product sales – Other International
 
398

 
553

 
1,784

 
2,542

 
 
$
5,681

 
$
5,837

 
$
21,677

 
$
25,662

Notes:
 
 
 
 
 
 
 
 
(1)    Includes Emtriva and Tybost
(2)    Represents Gilead’s revenue from cobicistat (C), emtricitabine (FTC) and tenofovir alafenamide (TAF) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen Sciences Ireland UC
(3)    Includes Cayston, Hepsera and Sovaldi