Print Page | Close Window
8-K
GILEAD SCIENCES INC filed this Form 8-K on 07/25/2016
Entire Document
 
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): July 25, 2016
 
 
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))

 





Section 2 - FINANCIAL INFORMATION

Item 2.02
Results of Operations and Financial Condition.

On July 25, 2016, Gilead Sciences, Inc., a Delaware corporation (Gilead), issued a press release announcing its financial results for the quarter ended June 30, 2016. 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 for the three and six months ended June 30, 2016 and 2015. 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 table on pages 8, 9 and 10 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
 
Press Release, issued by Gilead Sciences, Inc. on July 25, 2016




 




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: July 25, 2016

        







Exhibit Index

Exhibit Number
 
Description
99.1
 
Press Release, issued by Gilead Sciences, Inc. on July 25, 2016





Exhibit
 

CONTACTS:
Investors
 
 
Media
 
Robin Washington
 
 
Amy Flood
 
(650) 522-5688
 
 
(650) 522-5643
 
 
 
 
 
 
Sung Lee
 
 
 
 
(650) 524-7792
 
 
 
 
 
 
 
 
For Immediate Release

GILEAD SCIENCES ANNOUNCES SECOND QUARTER 2016 FINANCIAL RESULTS

- Product Sales of $7.7 billion -
- Diluted EPS of $2.58 per share -
- Non-GAAP Diluted EPS of $3.08 per share -
- Revised Full Year 2016 Guidance -

Foster City, CA, July 25, 2016 - Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the second quarter ended June 30, 2016. The financial results that follow represent a year-over-year comparison of second quarter 2016 to the second quarter 2015. Total revenues were $7.8 billion in 2016 compared to $8.2 billion in 2015. Net income was $3.5 billion or $2.58 per diluted share in 2016 compared to $4.5 billion or $2.92 per diluted share in 2015. Non-GAAP net income, which excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $4.2 billion or $3.08 per diluted share in 2016 compared to $4.8 billion or $3.15 per diluted share in 2015.

 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions, except per share amounts)
 
2016
 
2015
 
2016
 
2015
Product sales
 
$
7,651

 
$
8,126

 
$
15,332

 
$
15,531

Royalty, contract and other revenues
 
125

 
118

 
238

 
307

Total revenues
 
$
7,776

 
$
8,244

 
$
15,570

 
$
15,838

 
 
 
 
 
 
 
 
 
Net income attributable to Gilead
 
$
3,497

 
$
4,492

 
$
7,063

 
$
8,825

Non-GAAP net income* 
 
$
4,177

 
$
4,845

 
$
8,451

 
$
9,449

 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
2.58

 
$
2.92

 
$
5.11

 
$
5.68

Non-GAAP diluted earnings per share* 
 
$
3.08

 
$
3.15

 
$
6.11

 
$
6.08


*
Non-GAAP net income and non-GAAP diluted earnings per share exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8 and 9.
Product Sales
Total product sales for the second quarter of 2016 were $7.7 billion compared to $8.1 billion for the same period in 2015.
Product sales for the second quarter of 2016 were $4.9 billion in the U.S., $1.6 billion in Europe, $619 million in Japan and $531 million in other locations. Product sales for the second quarter of 2015 were $5.6 billion in the U.S., $2.0 billion in Europe, $62 million in Japan and $515 million in other locations.

- more -

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


July 25, 2016
 
2

Antiviral Product Sales
Antiviral product sales, which include products in Gilead's HIV and liver disease areas, were $7.1 billion for the second quarter of 2016 compared to $7.6 billion for the same period in 2015.
HIV and other antiviral product sales were $3.1 billion compared to $2.7 billion for the same period in 2015 primarily due to increases in sales of our tenofovir alafenamide (TAF) based products, Genvoya® (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg), Descovy® (emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Odefsey® (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg).
HCV product sales, which consist of Harvoni® (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi® (sofosbuvir 400 mg) and Epclusa® (sofosbuvir 400 mg/velpatasvir 100 mg), were $4.0 billion compared to $4.9 billion for the same period in 2015 primarily due to a decline in sales of Harvoni.

Other Product Sales
Other product sales, which include Letairis® (ambrisentan), Ranexa® (ranolazine) and AmBisome® (amphotericin B liposome for injection), were $525 million for the second quarter of 2016 compared to $495 million for the same period in 2015.
Cost of Goods Sold
During the second quarter of 2016, compared to the same period in 2015, cost of goods sold decreased to $864 million from $998 million and non-GAAP cost of goods sold* decreased to $653 million from $788 million, reflecting the reversal of the $200 million litigation reserve recorded in the first quarter of 2016 following a favorable court decision.
Operating Expenses
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2016
 
2015
 
2016
 
2015
Research and development expenses (R&D)
 
$
1,484

 
$
818

 
$
2,749

 
$
1,514

Non-GAAP research and development expenses* 
 
$
1,040

 
$
702

 
$
1,809

 
$
1,353

 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses (SG&A)
 
$
890

 
$
812

 
$
1,575

 
$
1,457

Non-GAAP selling, general and administrative expenses* 
 
$
838

 
$
761

 
$
1,476

 
$
1,361


*
Non-GAAP Cost of Goods Sold, R&D and SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8 and 9.

During the second quarter of 2016, compared to the same period in 2015:
Research and development expenses and non-GAAP research and development expenses* increased primarily due to Gilead's purchase of a U.S. Food and Drug Administration (FDA) priority review voucher and the overall progression of Gilead's clinical studies. Research and development expenses for the second quarter of 2016 also include Gilead’s purchase of Nimbus Apollo, Inc. (Nimbus).
Selling, general and administrative expenses and non-GAAP selling, general and administrative expenses* increased primarily due to higher costs to support Gilead's new product launches and geographic expansion of its business.

- more -


July 25, 2016
 
3

Cash, Cash Equivalents and Marketable Securities
As of June 30, 2016, Gilead had $24.6 billion of cash, cash equivalents and marketable securities compared to $21.3 billion as of March 31, 2016. Cash flow from operating activities was $4.9 billion for the quarter. During the second quarter and the first six months of 2016, Gilead utilized $1.0 billion and $9.0 billion on stock repurchases, respectively.
Revised 2016 Full Year Guidance
Gilead revised its full year 2016 guidance, which it initially provided on February 2, 2016:
(In millions, except percentages and per share amounts)
 
Initially Provided February 2, 2016 Reiterated
April 28, 2016
 
Updated
July 25, 2016
Net Product Sales
 
$30,000 - $31,000
 
$29,500 - $30,500
Non-GAAP*
 
 
 
 
 
Product Gross Margin
 
88% - 90%
 
88% - 90%
 
R&D Expenses
 
$3,200 - $3,500
 
$3,600 - $3,800
 
SG&A Expenses
 
$3,300 - $3,600
 
$3,100 - $3,300
 
Effective Tax Rate
 
18.0% - 20.0%
 
18.0% - 20.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-based Compensation and Other Expenses
 
$1.10 - $1.16
 
$1.47 - $1.53
 
* Non-GAAP Product Gross Margin, R&D and SG&A expenses and effective tax rate exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP full year 2016 guidance is provided in the tables on page 10.
Corporate Highlights
Announced that Kevin Young CBE was appointed Chief Operating Officer, and Martin Silverstein, MD was appointed Executive Vice President, Strategy. Both Mr. Young and Dr. Silverstein will report to John F. Milligan, PhD, President and Chief Executive Officer.
Announced that Gilead acquired Nimbus, a wholly-owned subsidiary of Nimbus Therapeutics, and its Acetyl-CoA Carboxylase (ACC) inhibitor program. The Nimbus program includes the lead candidate NDI-010976, an ACC inhibitor, and other pre-clinical ACC inhibitors for the potential treatment of non-alcoholic steatohepatitis, hepatocellular carcinoma and other diseases. NDI-010976 was granted Fast Track designation by FDA in February 2016.
Product & Pipeline Updates announced by Gilead during the Second Quarter of 2016 include:
Announced that FDA approved Epclusa (sofosbuvir 400 mg/velpatasvir 100 mg; SOF/VEL), the first all-oral, pan-genotypic, single tablet regimen (STR) for the treatment of adults with genotype 1-6 chronic hepatitis C virus (HCV) infection. Epclusa is also the first STR approved for the treatment of patients with HCV genotype 2 and 3, without the need for ribavirin (RBV). Epclusa for 12 weeks was approved in patients without cirrhosis or with compensated cirrhosis (Child-Pugh A), and in combination with RBV for patients with decompensated cirrhosis (Child-Pugh B or C). FDA granted Epclusa a Priority Review and Breakthrough Therapy designation, which is given to investigational medicines that may offer major advances in treatment over existing options. Additionally, the Committee for Medicinal Products for Human Use, the scientific committee of the European Medicines Agency, adopted a positive opinion on the company’s Marketing Authorization Application and in July 2016, the European Commission granted marketing authorization for Epclusa.
Announced that the European Commission granted marketing authorization for the once-daily STR Odefsey (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg) for the treatment of HIV-1 infection. Odefsey combines Gilead's emtricitabine and tenofovir alafenamide (marketed as Descovy) with rilpivirine,

- more -


July 25, 2016
 
4

marketed by Janssen Sciences Ireland UC, one of the Janssen Pharmaceutical Companies of Johnson & Johnson. Odefsey is Gilead's second STR based on the Descovy backbone to receive marketing authorization in the European Union and is currently the smallest STR for the treatment of HIV.
Announced positive data from four pre-clinical and Phase 1 studies evaluating bictegravir (GS-9883), a novel, unboosted, investigational once-daily integrase inhibitor. The studies, which examined the antiviral potency, resistance profile, pharmacokinetics and safety of bictegravir, were presented at the American Society of Microbiology Microbe 2016 Conference.
Presented data at the 51st Annual Meeting of the European Association for the Study of the Liver, which included the announcement of:
Positive results from the open-label, Phase 3 ASTRAL-5 study evaluating once-daily SOF/VEL for 12 weeks among patients with HCV genotype 1-6 who are co-infected with HIV demonstrated that SOF/VEL was well-tolerated and resulted in high SVR12 rates.
Positive results from three Phase 2 trials evaluating SOF/VEL plus voxilaprevir (VOX), a pan-genotypic protease inhibitor (Studies 1168 and 1169 and TRILOGY-3). Studies 1168 and 1169 evaluated 6 weeks of SOF/VEL plus VOX among treatment-naïve patients, 8 weeks of SOF/VEL plus VOX, with or without RBV, among treatment-naïve patients, and 12 weeks of SOF/VEL plus VOX among patients who failed prior treatment including those previously exposed to a direct acting antiviral (DAA) regimen. Study 1168 evaluated genotype 1 patients and Study 1169 evaluated genotype 2-6 patients. TRILOGY-3 featured data from the Phase 2 trial evaluating 12 weeks of a fixed-dose combination of SOF/VEL/VOX, with or without RBV, among genotype 1, DAA-experienced, HCV-infected patients, including patients with cirrhosis.
Announced that the European Commission granted marketing authorization for two doses of Descovy (200/10 mg and 200/25 mg), a fixed-dose combination for the treatment of HIV-1 infection. Descovy is Gilead's second TAF-based therapy to receive marketing authorization in the European Union. Descovy was approved by FDA and is indicated in combination with other antiretroviral agents for the treatment of HIV-1 infection in adults and pediatric patients 12 years of age and older.

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, 9, and 10.

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 from its second quarter 2016 as well as provide a general business update. To access the webcast live via the internet, please connect to the company's website at www.gilead.com/investors 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 1-877-359-9508 (U.S.) or 1-224-357-2393 (international) and dial the conference ID 34263799 to access the call.
A replay of the webcast will be archived on the company's website for one year, and a phone replay will be available approximately two hours following the call through July 27, 2016. To access the phone replay, please call 1-855-859-2056 (U.S.) or 1-404-537-3406 (international) and dial the conference ID 34263799.


- more -


July 25, 2016
 
5


About Gilead
Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes innovative therapeutics in areas of unmet medical need. The company's mission is to advance the care of patients suffering from life-threatening diseases. Gilead has operations in more than 30 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 include: Gilead's ability to achieve its anticipated full year 2016 financial results; Gilead's ability to sustain growth in revenues for its antiviral and other programs; the risk that estimates of patients with HCV or anticipated patient demand may not be accurate; the risk that private and public payers may be reluctant to provide, or continue to provide, coverage or reimbursement for new products, including Epclusa, Genvoya, Sovaldi and Harvoni; the potential for increased pricing pressure and contracting pressure as well as decreased volume and market share from additional competitive HCV launches, austerity measures in European countries and Japan that may increase the amount of discount required on Gilead's products, additional negotiated discounts for patient access, shifts in payer mix to more deeply discounted government payer segments and geographic regions and decreases in treatment duration; availability of funding for state AIDS Drug Assistance Programs (ADAPs); continued fluctuations in ADAP purchases driven by federal and state grant cycles which may not mirror patient demand and may cause fluctuations in Gilead's earnings; the possibility of unfavorable results from clinical trials involving investigational compounds, including bictegravir and SOF/VEL/VOX; 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 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 Epclusa, Genvoya, Odefsey and Descovy; 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; Gilead's ability to successfully develop its oncology, inflammation, cardiovascular and respiratory programs; safety and efficacy data from clinical studies may not warrant further development of Gilead's product candidates; Gilead's ability to 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 (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. Actual results may differ significantly from these estimates. 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 March 31, 2016 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 any such forward-looking statements.
# # #

- more -


July 25, 2016
 
6

Gilead owns or has rights to various trademarks, copyrights and trade names used in our business, including the following: GILEAD®, GILEAD SCIENCES®, AMBISOME®, CAYSTON®, COMPLERA®, DESCOVY®, EMTRIVA®, EPCLUSA®, EVIPLERA®, GENVOYA®, HARVONI®, HEPSERA®, LETAIRIS®, ODEFSEY®, RANEXA®, RAPISCAN®, SOVALDI®, STRIBILD®, TRUVADA®, TYBOST®, VIREAD®, VITEKTA®, VOLIBRIS®, and ZYDELIG®.
 
ATRIPLA® is a registered trademark belonging to Bristol-Myers Squibb & Gilead Sciences, LLC. LEXISCAN® is a registered trademark belonging to Astellas U.S. LLC. MACUGEN® is a registered trademark belonging to Eyetech, Inc. SUSTIVA® is a registered trademark of Bristol-Myers Squibb Pharma Company. TAMIFLU® is a registered trademark belonging to 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 -


July 25, 2016
 
7

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

 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2016
 
2015
 
2016
 
2015
 Revenues:
 
 
 
 
 
 
 
 
 Product sales
 
$
7,651

 
$
8,126

 
$
15,332

 
$
15,531

 Royalty, contract and other revenues
 
125

 
118

 
238

 
307

 Total revenues
 
7,776

 
8,244

 
15,570

 
15,838

 Costs and expenses:
 
 
 
 
 
 
 
 
 Cost of goods sold
 
864

 
998

 
2,057

 
1,880

 Research and development expenses
 
1,484

 
818

 
2,749

 
1,514

 Selling, general and administrative expenses
 
890

 
812

 
1,575

 
1,457

 Total costs and expenses
 
3,238

 
2,628

 
6,381

 
4,851

 Income from operations
 
4,538

 
5,616

 
9,189

 
10,987

 Interest expense
 
(227
)
 
(140
)
 
(457
)
 
(293
)
 Other income (expense), net
 
88

 
35

 
169

 
56

 Income before provision for income taxes
 
4,399

 
5,511

 
8,901

 
10,750

 Provision for income taxes
 
902

 
1,014

 
1,837

 
1,921

 Net income
 
3,497

 
4,497

 
7,064

 
8,829

Net income attributable to noncontrolling interest
 

 
5

 
1

 
4

 Net income attributable to Gilead
 
$
3,497

 
$
4,492

 
$
7,063

 
$
8,825

 
 
 
 
 
 
 
 
 
 Net income per share attributable to Gilead common stockholders - basic
 
$
2.62

 
$
3.05

 
$
5.20

 
$
5.96

 Shares used in per share calculation - basic
 
1,335

 
1,472

 
1,359

 
1,480

 Net income per share attributable to Gilead common stockholders - diluted
 
$
2.58

 
$
2.92

 
$
5.11

 
$
5.68

 Shares used in per share calculation - diluted
 
1,355

 
1,540

 
1,383

 
1,555

Cash dividends declared per share
 
$
0.47

 
$
0.43

 
$
0.90

 
$
0.43





July 25, 2016
 
8

GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited)
(in millions, except percentages and per share amounts)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2016
 
2015
 
2016
 
2015
Cost of goods sold reconciliation:
 
 
 
 
 
 
 
 
GAAP cost of goods sold
 
$
864

 
$
998

 
$
2,057

 
$
1,880

Acquisition related-amortization of purchased intangibles
 
(210
)
 
(207
)
 
(420
)
 
(413
)
Stock-based compensation expenses
 
(4
)
 
(3
)
 
(7
)
 
(6
)
Other(1)
 
3

 

 
6

 
1

Non-GAAP cost of goods sold
 
$
653

 
$
788

 
$
1,636

 
$
1,462

 
 
 
 
 
 
 
 
 
Product gross margin reconciliation:
 
 
 
 
 
 
 
 
GAAP product gross margin
 
88.7
%
 
87.7
%
 
86.6
 %
 
87.9
%
Acquisition related-amortization of purchased intangibles
 
2.7
%
 
2.5
%
 
2.7
 %
 
2.7
%
Non-GAAP product gross margin(2)
 
91.5
%
 
90.3
%
 
89.3
 %
 
90.6
%
 
 
 
 
 
 
 
 
 
Research and development expenses reconciliation:
 
 
 
 
 
 
 
 
GAAP research and development expenses
 
$
1,484

 
$
818

 
$
2,749

 
$
1,514

Up-front collaboration expenses
 

 

 
(368
)
 

Acquisition related expenses-acquired IPR&D
 
(400
)
 
(66
)
 
(400
)
 
(66
)
Acquisition related-IPR&D impairment
 

 

 
(114
)
 

Stock-based compensation expenses
 
(44
)
 
(42
)
 
(85
)
 
(84
)
Other(1)
 

 
(8
)
 
27

 
(11
)
Non-GAAP research and development expenses
 
$
1,040

 
$
702

 
$
1,809

 
$
1,353

 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses reconciliation:
 
 
 
 
 
 
 
 
GAAP selling, general and administrative expenses
 
$
890

 
$
812

 
$
1,575

 
$
1,457

Stock-based compensation expenses
 
(47
)
 
(51
)
 
(91
)
 
(98
)
Other(1)
 
(5
)
 

 
(8
)
 
2

Non-GAAP selling, general and administrative expenses
 
$
838

 
$
761

 
$
1,476

 
$
1,361

 
 
 
 
 
 
 
 
 
Operating margin reconciliation:
 
 
 
 
 
 
 
 
GAAP operating margin
 
58.4
%
 
68.1
%
 
59.0
 %
 
69.4
%
Up-front collaboration expenses
 
%
 
%
 
2.4
 %
 
%
Acquisition related-amortization of purchased intangibles
 
2.7
%
 
2.5
%
 
2.7
 %
 
2.6
%
Acquisition related expenses-acquired IPR&D
 
5.1
%
 
0.8
%
 
2.6
 %
 
0.4
%
Acquisition related-IPR&D impairment
 
%
 
%
 
0.7
 %
 
%
Stock-based compensation expenses
 
1.2
%
 
1.2
%
 
1.2
 %
 
1.2
%
Other(1)
 
%
 
0.1
%
 
(0.2
)%
 
0.1
%
Non-GAAP operating margin(2)
 
67.5
%
 
72.7
%
 
68.4
 %
 
73.6
%
 
 
 
 
 
 
 
 
 
Notes:
 
 
 
 
 
 
 
 
 (1) Amounts related to consolidation of a contract manufacturer, contingent consideration and/or other individually insignificant amounts
 (2) Amounts may not sum due to rounding



July 25, 2016
 
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
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2016
 
2015
 
2016
 
2015
Effective tax rate reconciliation:
 
 
 
 
 
 
 
 
GAAP effective tax rate
 
20.5
 %
 
18.4
 %
 
20.6
 %
 
17.9
 %
Up-front collaboration expenses
 
 %
 
 %
 
(0.7
)%
 
 %
Acquisition related-amortization of purchased intangibles
 
(0.7
)%
 
(0.5
)%
 
(0.7
)%
 
(0.5
)%
Acquisition related expenses-acquired IPR&D
 
(1.5
)%
 
(0.2
)%
 
(0.8
)%
 
(0.1
)%
Other (1)
 
 %
 
— %

 
0.1
 %
 
 %
Non-GAAP effective tax rate(2)
 
18.3
 %
 
17.7
 %
 
18.5
 %
 
17.3
 %
 
 
 
 
 
 
 
 
 
Net income attributable to Gilead reconciliation:
 
 
 
 
 
 
 
 
GAAP net income attributable to Gilead
 
$
3,497

 
$
4,492

 
$
7,063

 
$
8,825

Up-front collaboration expenses
 

 

 
368

 

Acquisition related-amortization of purchased intangibles
 
204

 
202

 
408

 
403

Acquisition related expenses-acquired IPR&D
 
400

 
66

 
400

 
66

Acquisition related-IPR&D impairment
 

 

 
99

 

Stock-based compensation expenses
 
69

 
71

 
133

 
140

Other(1)
 
7

 
14

 
(20
)
 
15

Non-GAAP net income
 
$
4,177

 
$
4,845

 
$
8,451

 
$
9,449

 
 
 
 
 
 
 
 
 
Diluted earnings per share reconciliation:
 
 
 
 
 
 
 
 
GAAP diluted earnings per share
 
$
2.58

 
$
2.92

 
$
5.11

 
$
5.68

Up-front collaboration expenses
 

 

 
0.27

 

Acquisition related-amortization of purchased intangibles
 
0.15

 
0.13

 
0.30

 
0.26

Acquisition related expenses-acquired IPR&D
 
0.30

 
0.04

 
0.29

 
0.04

Acquisition related-IPR&D impairment
 

 

 
0.07

 

Stock-based compensation expenses
 
0.05

 
0.05

 
0.10

 
0.09

Other(1)
 
0.01

 

 
(0.01
)
 
0.01

Non-GAAP diluted earnings per share(2)
 
$
3.08

 
$
3.15

 
$
6.11

 
$
6.08

 
 
 
 
 
 
 
 
 
Shares used in per share calculation (diluted) reconciliation:
 
 
 
 
 
 
 
 
GAAP shares used in per share calculation (diluted)
 
1,355

 
1,540

 
1,383

 
1,555

Share impact of current stock-based compensation rules
 
(1
)
 

 

 

Non-GAAP shares used in per share calculation (diluted)
 
1,354

 
1,540

 
1,383

 
1,555

 
 
 
 
 
 
 
 
 
Non-GAAP adjustment summary:
 
 
 
 
 
 
 
 
Cost of goods sold adjustments
 
$
211

 
$
210

 
$
421

 
$
418

Research and development expenses adjustments
 
444

 
116

 
940

 
161

Selling, general and administrative expenses adjustments
 
52

 
51

 
99

 
96

Total non-GAAP adjustments before tax
 
707

 
377

 
1,460

 
675

Income tax effect
 
(32
)
 
(30
)
 
(77
)
 
(58
)
Other(1)
 
5

 
6

 
5

 
7

Total non-GAAP adjustments after tax
 
$
680

 
$
353

 
$
1,388

 
$
624

 
 
 
 
 
 
 
 
 
Notes:
 
 
 
 
 
 
 
 
 (1) Amounts related to consolidation of a contract manufacturer, contingent consideration and/or other individually insignificant amounts
 (2) Amounts may not sum due to rounding



July 25, 2016
 
10

GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP 2016 FULL YEAR GUIDANCE
(unaudited)
(in millions, except percentages and per share amounts)

 
 
Initially Provided February 2, 2016 Reiterated
April 28, 2016
 
Updated
July 25, 2016
Projected product gross margin GAAP to non-GAAP reconciliation:
 
 
 
 
GAAP projected product gross margin
 
85% - 87%
 
85% - 87%
Acquisition-related expenses
 
3% - 3%
 
3% - 3%
Non-GAAP projected product gross margin *
 
88% - 90%
 
88% - 90%
 
 
 
 
 
Projected research and development expenses GAAP to non-GAAP reconciliation:
 
 
 
 
GAAP projected research and development expenses
 
$3,837 - $4,182
 
$4,700 - $4,945
Acquisition-related expenses / up-front collaboration expenses
 
(447) - (477)
 
(915) - (945)
Stock-based compensation expenses
 
(190) - (205)
 
(185) - (200)
Non-GAAP projected research and development expenses
 
$3,200 - $3,500
 
$3,600 - $3,800
 
 
 
 
 
Projected selling, general and administrative expenses GAAP to non-GAAP reconciliation:
 
 
 
 
GAAP projected selling, general and administrative expenses
 
$3,530 - $3,840
 
$3,305 - $3,515
Stock-based compensation expenses
 
(230) - (240)
 
(205) - (215)
Non-GAAP projected selling, general and administrative expenses
 
$3,300 - $3,600
 
$3,100 - $3,300
 
 
 
 
 
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses:
 
 
 
 
Acquisition-related expenses / up-front collaboration expenses
 
$0.88 - $0.92
 
$1.26 - $1.30
Stock-based compensation expenses
 
$0.22 - $0.24
 
$0.21 - $0.23
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses
 
$1.10 - $1.16
 
$1.47 - $1.53
 
 
 
 
 
Notes:
 
 
 
 
 * Stock-based compensation expenses have a less than one percent impact on non-GAAP projected product gross margin.




July 25, 2016
 
11

GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions)
 
 
June 30,
 
December 31,
 
 
2016
 
2015(1)
 
 
 
 
 
Cash, cash equivalents and marketable securities
 
$
24,616

 
$
26,208

Accounts receivable, net
 
5,752

 
5,854

Inventories
 
1,862

 
1,955

Property, plant and equipment, net
 
2,599

 
2,276

Intangible assets, net
 
9,713

 
10,247

Goodwill
 
1,172

 
1,172

Other assets
 
4,266

 
4,004

Total assets
 
$
49,980

 
$
51,716

 
 
 
 
 
Current liabilities
 
$
10,444

 
$
9,890

Long-term liabilities
 
23,421

 
22,711

Equity component of currently redeemable convertible notes
 

 
2

Stockholders’ equity(2)
 
16,115

 
19,113

Total liabilities and stockholders’ equity
 
$
49,980

 
$
51,716

 
 
 
 
 
Notes:
 
 
 
 
(1) Derived from the audited consolidated financial statements as of December 31, 2015. Certain amounts have been reclassified to conform to current year presentation.
(2) As of June 30, 2016, there were 1,331 million shares of common stock issued and outstanding.





July 25, 2016
 
12

GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in millions)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2016
 
2015
 
2016
 
2015
Antiviral products:
 
 
 
 
 
 
 
 
Harvoni – U.S.
 
$
1,474

 
$
2,826

 
$
2,881

 
$
5,842

Harvoni – Europe
 
512

 
623

 
1,067

 
1,100

Harvoni – Japan
 
448

 

 
1,335

 

Harvoni – Other International
 
130

 
159

 
298

 
245

 
 
2,564

 
3,608

 
5,581

 
7,187

 
 
 
 
 
 
 
 
 
Sovaldi – U.S.
 
775

 
615

 
1,420

 
1,036

Sovaldi – Europe
 
263

 
522

 
543

 
1,005

Sovaldi – Japan
 
171

 
62

 
373

 
62

Sovaldi – Other International
 
149

 
92

 
299

 
160

 
 
1,358

 
1,291

 
2,635

 
2,263

 
 
 
 
 
 
 
 
 
Truvada – U.S.
 
631

 
500

 
1,207

 
909

Truvada – Europe
 
245

 
277

 
496

 
578

Truvada – Other International
 
66

 
72

 
137

 
133

 
 
942

 
849

 
1,840

 
1,620

 
 
 
 
 
 
 
 
 
Atripla – U.S.
 
479

 
549

 
968

 
1,043

Atripla – Europe
 
140

 
178

 
283

 
372

Atripla – Other International
 
54

 
55

 
97

 
101

 
 
673

 
782

 
1,348

 
1,516

 
 
 
 
 
 
 
 
 
Stribild – U.S.
 
326

 
364

 
702

 
646

Stribild – Europe
 
84

 
65

 
165

 
126

Stribild – Other International
 
19

 
18

 
39

 
31

 
 
429

 
447

 
906

 
803

 
 
 
 
 
 
 
 
 
Complera / Eviplera – U.S.
 
199

 
207

 
421

 
370

Complera / Eviplera – Europe
 
156

 
145

 
302

 
290

Complera / Eviplera – Other International
 
13

 
15

 
26

 
27

 
 
368

 
367

 
749

 
687

 
 
 
 
 
 
 
 
 
Genvoya – U.S.
 
268

 

 
409

 

Genvoya – Europe
 
30

 

 
46

 

Genvoya – Other International
 
4

 

 
5

 

 
 
302

 

 
460

 

 
 
 
 
 
 
 
 
 
Viread – U.S.
 
142

 
134

 
265

 
234

Viread – Europe
 
81

 
77

 
157

 
157

Viread – Other International
 
64

 
60

 
137

 
114

 
 
287

 
271

 
559

 
505

 
 
 
 
 
 
 
 
 
Epclusa – U.S.
 
64

 

 
64

 

 
 
 
 
 
 
 
 
 
Descovy – U.S.
 
49

 

 
49

 

Descovy – Europe
 
12

 

 
12

 

 
 
61

 

 
61

 

 
 
 
 
 
 
 
 
 
Odefsey – U.S.
 
58

 

 
69

 

 
 
 
 
 
 
 
 
 





July 25, 2016
 
13

GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY - (Continued)
(unaudited)
(in millions)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2016
 
2015
 
2016
 
2015
Other Antiviral – U.S.
 
$
12

 
$
8

 
$
22

 
$
22

Other Antiviral – Europe
 
7

 
7

 
13

 
14

Other Antiviral – Other International
 
1

 
1

 
2

 
2

 
 
20

 
16

 
37

 
38

 
 
 
 
 
 
 
 
 
Total antiviral products – U.S.
 
4,477

 
5,203

 
8,477

 
10,102

Total antiviral products – Europe
 
1,530

 
1,894

 
3,084

 
3,642

Total antiviral products – Japan
 
619

 
62

 
1,708

 
62

Total antiviral products – Other International
 
500

 
472

 
1,040

 
813

 
 
7,126

 
7,631

 
14,309

 
14,619

 
 
 
 
 
 
 
 
 
Other products:
 
 
 
 
 
 
 
 
Letairis
 
203

 
176

 
378

 
327

Ranexa
 
153

 
141

 
297

 
258

AmBisome
 
85

 
103

 
171

 
188

Zydelig
 
41

 
30

 
90

 
56

Other
 
43

 
45

 
87

 
83

 
 
525

 
495

 
1,023

 
912

 
 
 
 
 
 
 
 
 
 Total product sales
 
$
7,651

 
$
8,126

 
$
15,332

 
$
15,531