Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of
operations for the quarter ended September 30, 2006. Total revenues
for the third quarter of 2006 were $748.7 million, up 52 percent
compared to total revenues of $493.5 million for the third quarter
of 2005. Net loss for the third quarter of 2006 was $52.2 million,
or $(0.11) per diluted share, which included a charge of $355.6
million for purchased in-process research and development
(IPR&D) incurred in connection with the acquisition of Corus
Pharma, Inc. (Corus) in August 2006 and after-tax stock-based
compensation expense of $25.6 million reflecting the impact of the
adoption of the Financial Accounting Standards Board�s Statement
No. 123 (revised 2004), �Share Based Payment� (SFAS 123R) on
January 1, 2006. Excluding the impact of the IPR&D charge,
non-GAAP net income for the third quarter of 2006 was $303.4
million, or $0.64 per diluted share. Net income for the third
quarter of 2005 was $179.2 million, or $0.38 per diluted share.
Product Sales Product sales were a record $670.1 million for the
third quarter of 2006, up 43 percent over the same period in 2005,
marking twelve consecutive quarters of product sales growth. This
growth continues to be driven primarily by Gilead�s HIV product
franchise, including the strong performance of Truvada�
(emtricitabine and tenofovir disoproxil fumarate) and the rapid
uptake of AtriplaTM (efavirenz 600 mg/ emtricitabine 200 mg/
tenofovir disoproxil fumarate 300 mg) following its U.S. launch in
July of this year, as well as continued solid product sales of
Hepsera� (adefovir dipivoxil). HIV Franchise HIV product sales were
$557.3 million in the third quarter of 2006, a 53 percent increase
from $363.5 million for the same period in 2005. Truvada Truvada
sales were $309.0 million for the third quarter of 2006, an
increase of 90 percent from Truvada sales in the third quarter of
2005. Truvada sales accounted for more than 55 percent of Gilead�s
total HIV product sales in the third quarter of 2006. Viread Sales
of Viread� (tenofovir disoproxil fumarate) were $170.6 million in
the third quarter of 2006, a 10 percent decrease from $189.4
million in the third quarter of 2005. Viread sales volume has
decreased due primarily to patients switching from a
Viread-containing regimen to one containing Truvada in countries
where Truvada is available. Atripla Sales of Atripla were $68.4
million in the third quarter of 2006. Emtriva Emtriva�
(emtricitabine) sales were $9.3 million for the third quarter of
2006, down 21 percent from the third quarter of 2005. Emtriva sales
volume has decreased due primarily to patients switching from an
Emtriva-containing regimen to one containing Truvada in countries
where Truvada is available. AmBisome for Severe Fungal Infections
Sales of AmBisome� (amphotericin B) liposome for injection for the
third quarter of 2006 were $55.3 million, an increase of one
percent compared to the third quarter of 2005. Hepsera for Chronic
Hepatitis B Sales of Hepsera totaled $55.1 million for the third
quarter of 2006, an 18 percent increase from $46.9 million in the
third quarter of 2005. The increase in sales for the third quarter
of 2006 was primarily driven by strong volume growth in Europe.
Royalty and Contract Revenues For the third quarter of 2006,
royalty and contract revenues resulting from collaborations with
corporate partners totaled $78.7 million, an increase of $52.4
million from the third quarter of 2005. The increase in the third
quarter of 2006 was primarily driven by the recognition of Tamiflu�
(oseltamivir phosphate) royalties from F. Hoffmann-La Roche Ltd
(Roche) of $62.7 million. This amount was significantly higher than
the Tamiflu royalties of $12.1 million recognized in the third
quarter of 2005. The increase was primarily due to the
significantly higher Tamiflu sales recorded by Roche during the
second quarter of 2006 compared to the same period in 2005, as well
as the elimination of a contractual cost of goods adjustment that
had historically reduced the amount of Tamiflu royalties recognized
by Gilead. �We are pleased to have achieved a very solid third
quarter in 2006, including total revenues of $749 million,� said
John F. Milligan, Ph.D., Executive Vice President and Chief
Financial Officer of Gilead. �Revenues from the first nine months
of this year have already exceeded total revenues recorded for all
of last year. Our continued sales growth is a result of strong
initial uptake of Atripla, robust U.S. and international sales of
Truvada, and continued solid performance of both Hepsera and
AmBisome in increasingly competitive markets.� Research and
Development Research and development (R&D) expenses for the
third quarter of 2006 were $93.3 million, which included
stock-based compensation expense of $13.3 million, compared to
R&D expenses of $78.8 million for the same quarter in 2005.
R&D expenses for the third quarter of 2006 were higher due to
increased headcount and increased clinical, product development and
research activities associated with our HIV, hepatitis B and
hepatitis C programs, as well as stock-based compensation expense
from Gilead�s adoption of SFAS 123R. During the third quarter of
2005, Gilead made a $15.0 million payment to Emory University
(Emory) in connection with the amendment of our existing license
agreement with Emory related to our obligation to develop
emtricitabine for the hepatitis B indication. Selling, General and
Administrative Selling, general and administrative (SG&A)
expenses for the third quarter of 2006 were $132.5 million, which
included stock-based compensation expense of $16.0 million,
compared to SG&A expenses of $100.9 million for the same
quarter in 2005. The higher SG&A expenses in the third quarter
of 2006 as compared to the third quarter of 2005 were primarily due
to increased headcount and expenses driven by our significant
business growth and business development activities, as well as
stock-based compensation expense from Gilead�s adoption of SFAS
123R. Purchased In-Process Research and Development In August 2006,
Gilead completed its acquisition of Seattle-based Corus and
recorded a charge of $355.6 million to reflect Corus�s incomplete
IPR&D programs. Gilead did not record any income tax benefit
for this charge. Cash, Cash Equivalents and Marketable Securities
As of September 30, 2006, Gilead had cash, cash equivalents and
marketable securities of $3.20 billion. This compared to $2.31
billion as of December 31, 2005. The increase in cash, cash
equivalents and marketable securities was primarily attributable to
$738.6 million of operating cash flows generated during the first
nine months of 2006 and $587.6 million of net proceeds generated
from our issuance of convertible senior notes and related
transactions, offset by $356.2 million in net cash paid on our
acquisition of Corus and $161.0 million paid toward principal on
our term loan. Other Balance Sheet Highlights Inventories increased
by $156.4 million from December 31, 2005 to $373.3 million as of
September 30, 2006, primarily driven by increases in Atripla
inventory, which includes the�purchases of Sustiva� (efavirenz)
active pharmaceutical ingredient from Bristol-Myers Squibb (BMS) at
BMS� approximate market value of Sustiva. Corporate Highlights In
July 2006, Gilead announced a donation to The Institute of Organic
Chemistry and Biochemistry at the Academy of Sciences of the Czech
Republic (IOCB) for the establishment of a Gilead Sciences Research
Centre. Gilead will provide a $1.1 million annual donation to IOCB
for an initial five-year term to fund the Centre's operations and
ongoing research activities. In August 2006, Gilead and Merck &
Co., Inc. (Merck) announced that the companies established an
agreement for the distribution of Atripla in developing countries
around the world. In August 2006, Gilead announced that it
completed its acquisition of Corus following an initial investment
of $25.0 million in Corus in April 2006. Corus's lead product
candidate, aztreonam lysine for inhalation, is an inhaled
antibiotic with activity against Gram-negative bacteria including
Pseudomonas aeruginosa, which can cause lung infections in patients
with cystic fibrosis. The product candidate is currently being
evaluated in Phase III clinical studies. Also in August and
September of 2006, Gilead announced that it signed non-exclusive
agreements to provide eleven generic companies in India with a
license to produce and distribute generic versions of Viread to 95
low-income countries around the world, including India. In
September 2006, Gilead and BMS announced an agreement to
commercialize Atripla in Canada for the treatment of HIV-1
infection in adults, subject to the approval of the product by
Health Canada. In October 2006, Gilead and Myogen, Inc. (Myogen),
announced that the companies have signed a definitive agreement
under which Gilead plans to acquire Myogen for approximately $2.5
billion. Myogen is a publicly held biopharmaceutical company
focused on the discovery, development and commercialization of
small molecule therapeutics for the treatment of cardiovascular
disorders. This press release is neither an offer to purchase nor a
solicitation of an offer to sell any securities of Myogen. A tender
offer for Myogen�s outstanding shares is being made only by the
Offer to Purchase filed with the Securities and Exchange Commission
on October 16, 2006. Product and Pipeline Highlights �We are all
very proud of Gilead�s achievements in the third quarter of 2006,�
said John C. Martin, PhD, President and Chief Executive Officer of
Gilead. �After only a two and a half month review period, we, along
with our partner Bristol-Myers Squibb, received U.S. approval for
Atripla, the first-ever once-daily single tablet regimen for the
treatment of HIV-1 infection in adults. I am pleased to report that
Atripla is off to a very strong launch and am proud that we have
contributed to providing improved dosing convenience for many
physicians and patients. We also worked diligently in partnership
with colleagues at Bristol-Myers Squibb and Merck to complete the
submission of our Marketing Authorisation Application for Atripla
in the European Union earlier this month.� Dr. Martin continued,
�We also made significant progress with our research programs
during the third quarter. This progress will be further augmented,
pending the completion of our acquisition of Myogen, by the
addition of ambrisentan to Gilead�s pipeline � a product with
important potential for the treatment of pulmonary arterial
hypertension. The Myogen transaction allows Gilead to strengthen
our efforts in the specialty market of pulmonary-related diseases,
as initially established with our acquisition of Corus.� HIV
Franchise In July 2006, Gilead and BMS announced that the U.S. Food
and Drug Administration granted approval of Atripla for the
treatment of HIV-1 infection in adults. In August 2006, Gilead
announced the presentation of positive 96-week data from an ongoing
clinical trial (Study 934) comparing a once-daily regimen of
Viread, Emtriva and Sustiva to a twice-daily regimen of Combivir�
(lamivudine/zidovudine) with Sustiva once daily in treatment-naive
adults with HIV. The data were presented at the XVI International
AIDS Conference, which took place August 13 to 18, 2006 in Toronto,
Canada. In September 2006, Gilead announced two presentations of
long-term efficacy and safety data from Study 903E, evaluating the
company�s once-daily anti-HIV medication, Viread, as part of
combination therapy. Data from both analyses of Study 903E were
presented at the 8th International Workshop on Adverse Drug
Reactions and Lipodystrophy in HIV, held September 24 to 26, 2006
in San Francisco, California. Conference Call At 4:30 p.m. Eastern
Time today, Gilead will webcast a conference call live on Gilead�s
website to discuss its third quarter 2006 results. During the call,
Gilead will be discussing additional corporate, financial,
statistical, product and pipeline information. That information can
be found on Gilead�s website at www.gilead.com under �Investors.�
To access the webcast via the internet, log on to www.gilead.com.
Please connect to the company's website at least 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 1-800-798-2884 (U.S.) or 1-617-614-6207 (international)
and dial the participant passcode 91313116 to access the call.
Telephone replay is available approximately two hours after the
call through October 21 2006. To access, please call 1-888-286-8010
(U.S.) or 1-617-801-6888 (international) and dial the participant
passcode 43684597. The webcast will be archived on www.gilead.com
for one year. 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 worldwide. Headquartered in Foster City, California,
Gilead has operations in North America, Europe and Australia.
Non-GAAP Financial Information Non-GAAP�earnings and earnings�per
diluted share are presented excluding the impact of the IPR&D
charge incurred in connection with the acquisition of Corus. Our
management believes this non-GAAP information is useful for
investors, in conjunction with our GAAP financial statements,
because it facilitates the comparison of current and prior period
operating results after eliminating the effect of expense
components that are individually material in the current period but
were not present in the prior period. Non-GAAP financial
information no longer excludes stock-based compensation expense
resulting from our adoption of SFAS 123R on January 1, 2006�as
management believes that investors have gained a
better�understanding of stock-based compensation expense�and are
now including such expense in their evaluation of the company;
however, note 1 to the condensed consolidated statements of
operations on page 6 of the attached press release continues to
enable management and investors to�understand�the comparative
impact of stock-based compensation expense on the various captions
of the statements of operations in 2006. Non-GAAP information is
not prepared under a comprehensive set of accounting rules and
should only be used to supplement an understanding of our operating
results as reported under GAAP. 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. These
statements include those relating to our ability to close the
acquisition of Myogen and to the potential benefits to Gilead of
owning ambrisentan.. Gilead cautions readers that forward-looking
statements are subject to certain risks and uncertainties, which
could cause actual results to differ materially. These risks and
uncertainties include Gilead's ability to successfully integrate
the products and employees of Gilead and Myogen, the ability of
ambrisentan to receive regulatory approvals and market acceptance,
our ability to consummate the purchase of Myogen as the transaction
is subject to closing conditions, including successfully completing
the tender offer for Myogen shares and the expiration or
termination of the applicable Hart-Scott-Rodino Antitrust
Improvements Act waiting period., and other risks identified from
time to time in Gilead�s reports filed with the U.S. Securities and
Exchange Commission. 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 Annual Report on Form 10-K for the year
ended December 31, 2005, its Quarterly Reports on Form 10-Q for the
first and second quarters of 2006 and its current reports on Form
8-K. 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. Viread, Emtriva, Truvada, AmBisome and Hepsera are
registered trademarks of Gilead Sciences, Inc. Atripla is a
trademark of Bristol-Myers Squibb & Gilead Sciences, LLC.
Tamiflu is a registered trademark of F. Hoffmann-La Roche Ltd.
Sustiva is a registered trademark of Bristol-Myers Squibb Company.
Combivir is a registered trademark of GlaxoSmithKline Inc. For more
information on Gilead Sciences, please visit www.gilead.com or Call
the Gilead Public Affairs Department at 1-800-GILEAD-5
(1-800-445-3235). GILEAD SCIENCES, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited) (in thousands, except per
share amounts) � Three months ended Nine months ended September 30,
September 30, 2006� 2005� 2006� 2005� Revenues: Product sales $
670,060� $ 467,204� $ 1,820,104� $ 1,315,873� Royalty and contract
revenues � 78,673� � 26,247� � 306,809� � 103,261� Total revenues
748,733� 493,451� 2,126,913� 1,419,134� � Costs and expenses: Cost
of goods sold (1)(3) 109,791� 65,498� 278,031� 186,182� Research
and development (1) 93,305� 78,830� 272,241� 208,961� Selling,
general and administrative (1)(5) 132,529� 100,873� 426,567�
274,765� Purchased in-process research and development (4) �
355,568� � -� � 355,568� � -� Total costs and expenses � 691,193� �
245,201� � 1,332,407� � 669,908� � Income from operations 57,540�
248,250� 794,506� 749,226� � Interest and other income, net (5)
36,197� 14,127� 102,082� 31,232� Interest expense (6,081) (26)
(15,012) (50) Minority interest in joint venture � 1,640� � 1,223�
� 3,878� � 2,398� Income before provision for income taxes (1)
89,296� 263,574� 885,454� 782,806� Provision for income taxes �
141,460� � 84,342� � 409,764� � 250,494� Net income (loss) $
(52,164) $ 179,232� $ 475,690� $ 532,312� � Net income (loss) per
share - basic $ (0.11) $ 0.39� $ 1.04� $ 1.18� � Net income (loss)
per share - diluted $ (0.11) $ 0.38� $ 0.99� $ 1.13� � Shares used
in per share calculation - basic � 457,433� � 456,098� � 458,773� �
452,923� � Shares used in per share calculation - diluted (2) �
457,433� � 475,965� � 478,101� � 472,350� � Notes: � (1) On January
1, 2006, we adopted SFAS 123R and recorded stock-based compensation
expense during the three and nine months ended September 30, 2006.
The following is the stock-based compensation expense recorded in
the respective caption of the statements of operations above: Three
months ended Nine months ended September 30, 2006 September 30,
2006 � Stock-based compensation expense: Cost of goods sold $
2,524� $ 8,236� Research and development expenses 13,267� 38,108�
Selling, general and administrative expenses 15,954� 51,800�
Provision for income taxes � (6,165) � � (21,340) Total stock-based
compensation expense, net of taxes $ 25,580� $ 76,804� � (2) The
net loss per diluted share calculation for the quarter ended
September 30, 2006 does not include the effect of outstanding stock
options as they were antidilutive. Shares used in the calculation
of net income per diluted share for the nine months ended September
30, 2006 include the effect of outstanding stock options to
purchase 19.3 million shares of common stock applying the treasury
stock method. � (3) For the nine months ended September 30, 2006,
cost of goods sold includes $6.8 million recorded in the first
quarter of 2006 to decrease the book value of inventory for our
Access Program to reflect its net realizable value. � (4) For the
three and nine months ended September 30, 2006, we incurred $355.6
million of purchased in-process research and development as a
result of our acquisition of Corus Pharma, Inc. � (5) Certain prior
period amounts have been reclassified to be consistent with current
period presentation. GILEAD SCIENCES, INC. RECONCILIATION OF GAAP
TO NON-GAAP FINANCIAL INFORMATION (unaudited) (in thousands, except
per share amounts) � Below is a reconciliation of our GAAP
operating results and per share amounts as reported in the attached
press release.��Non-GAAP earnings and earnings per diluted share
are presented excluding the impact of the purchased in-process
research and development charge incurred in connection with the
acquisition of Corus.�Our management believes this non-GAAP
information is useful for investors, in conjunction with our GAAP
financial statements, because it facilitates the comparison of
current and prior period operating results after eliminating the
effect of expense components that are individually material in the
current period but were not present in the prior period.�Non-GAAP
financial information no longer excludes stock-based compensation
expense resulting from our adoption of SFAS 123R on January 1, 2006
as management believes that investors have gained a better
understanding of stock-based compensation expense and are now
including such expense in their evaluation of the company; however,
note 1 to the condensed consolidated statements of operations on
page 6 of the attached press release continues to enable management
and investors to understand the comparative impact of stock-based
compensation expense on the various captions of the statements of
operations in 2006. Non-GAAP information is not prepared under a
comprehensive set of accounting rules and should only be used to
supplement an understanding of our operating results as reported
under GAAP. � Three months endedSeptember 30, 2006 Nine months
endedSeptember 30, 2006 � � Net income (loss) (GAAP) $ (52,164) $
475,690� Purchased in-process research and development expense �
355,568� � 355,568� Net income (Non-GAAP) $ 303,404� $ 831,258� � �
Shares used in per share calculation - diluted (GAAP) 457,433�
478,101� Dilutive securities � 18,829� � -� Shares used in per
share calculation - diluted (Non-GAAP) � 476,262� � 478,101� � �
Net income (loss) per share - diluted (GAAP) $ (0.11) $ 0.99� Net
income per share - diluted (Non-GAAP) $ 0.64� $ 1.74� GILEAD
SCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
� September 30, December 31, 2006� 2005� (unaudited) (Note 1) �
Cash, cash equivalents and marketable securities (2) $ 3,204,443� $
2,311,033� Other current assets (2) 1,178,452� 781,175� Property,
plant and equipment, net 288,105� 242,568� Other noncurrent assets
� 628,132� � 431,540� Total assets $ 5,299,132� $ 3,766,316� �
Current liabilities (2) $ 581,829� $ 465,163� Long-term liabilities
(2) 1,418,473� 273,375� Stockholders' equity � 3,298,830� �
3,027,778� Total liabilities and stockholders' equity $ 5,299,132�
$ 3,766,316� � � Note: (1) Derived from audited consolidated
financial statements at that date. � (2) Certain prior period
amounts have been reclassified to be consistent with current period
presentation. GILEAD SCIENCES, INC. PRODUCT SALES SUMMARY
(unaudited) (in thousands) � � Three months ended Nine months ended
September 30, September 30, 2006� 2005� 2006� � 2005� HIV products:
Truvada � U.S. $ 201,482� $ 140,004� $ 589,010� $ 340,442� Truvada
� International � 107,551� � 22,399� � 268,225� � 36,238� 309,033�
162,403� 857,235� 376,680� � Viread � U.S. 71,795� 74,939� 222,439�
259,884� Viread � International � 98,829� � 114,456� � 307,402� �
336,465� 170,624� 189,395� 529,841� 596,349� � Atripla � U.S.
68,373� -� 68,373� -� Atripla � International � -� � -� � -� � -�
68,373� -� 68,373� -� � Emtriva � U.S. 5,064� 4,787� 13,384�
15,100� Emtriva � International � 4,208� � 6,950� � 14,515� �
21,214� 9,272� 11,737� 27,899� 36,314� � Total HIV products � U.S.
346,714� 219,730� 893,206� 615,426� Total HIV products �
International � 210,588� � 143,805� � 590,142� � 393,917� 557,302�
363,535� 1,483,348� 1,009,343� � Hepsera � U.S. 23,426� 21,940�
69,615� 59,379� Hepsera � International � 31,687� � 24,953� �
94,997� � 75,985� 55,113� 46,893� 164,612� 135,364� � AmBisome
55,313� 54,736� 164,740� 165,157� Other products � 2,332� � 2,040�
� 7,404� � 6,009� � Total product sales $ 670,060� $ 467,204� $
1,820,104� $ 1,315,873� Gilead Sciences, Inc. (Nasdaq:GILD)
announced today its results of operations for the quarter ended
September 30, 2006. Total revenues for the third quarter of 2006
were $748.7 million, up 52 percent compared to total revenues of
$493.5 million for the third quarter of 2005. Net loss for the
third quarter of 2006 was $52.2 million, or $(0.11) per diluted
share, which included a charge of $355.6 million for purchased
in-process research and development (IPR&D) incurred in
connection with the acquisition of Corus Pharma, Inc. (Corus) in
August 2006 and after-tax stock-based compensation expense of $25.6
million reflecting the impact of the adoption of the Financial
Accounting Standards Board's Statement No. 123 (revised 2004),
"Share Based Payment" (SFAS 123R) on January 1, 2006. Excluding the
impact of the IPR&D charge, non-GAAP net income for the third
quarter of 2006 was $303.4 million, or $0.64 per diluted share. Net
income for the third quarter of 2005 was $179.2 million, or $0.38
per diluted share. Product Sales Product sales were a record $670.1
million for the third quarter of 2006, up 43 percent over the same
period in 2005, marking twelve consecutive quarters of product
sales growth. This growth continues to be driven primarily by
Gilead's HIV product franchise, including the strong performance of
Truvada(R) (emtricitabine and tenofovir disoproxil fumarate) and
the rapid uptake of Atripla(TM) (efavirenz 600 mg/ emtricitabine
200 mg/ tenofovir disoproxil fumarate 300 mg) following its U.S.
launch in July of this year, as well as continued solid product
sales of Hepsera(R) (adefovir dipivoxil). HIV Franchise HIV product
sales were $557.3 million in the third quarter of 2006, a 53
percent increase from $363.5 million for the same period in 2005.
-- Truvada Truvada sales were $309.0 million for the third quarter
of 2006, an increase of 90 percent from Truvada sales in the third
quarter of 2005. Truvada sales accounted for more than 55 percent
of Gilead's total HIV product sales in the third quarter of 2006.
-- Viread Sales of Viread(R) (tenofovir disoproxil fumarate) were
$170.6 million in the third quarter of 2006, a 10 percent decrease
from $189.4 million in the third quarter of 2005. Viread sales
volume has decreased due primarily to patients switching from a
Viread-containing regimen to one containing Truvada in countries
where Truvada is available. -- Atripla Sales of Atripla were $68.4
million in the third quarter of 2006. -- Emtriva Emtriva(R)
(emtricitabine) sales were $9.3 million for the third quarter of
2006, down 21 percent from the third quarter of 2005. Emtriva sales
volume has decreased due primarily to patients switching from an
Emtriva-containing regimen to one containing Truvada in countries
where Truvada is available. AmBisome for Severe Fungal Infections
Sales of AmBisome(R) (amphotericin B) liposome for injection for
the third quarter of 2006 were $55.3 million, an increase of one
percent compared to the third quarter of 2005. Hepsera for Chronic
Hepatitis B Sales of Hepsera totaled $55.1 million for the third
quarter of 2006, an 18 percent increase from $46.9 million in the
third quarter of 2005. The increase in sales for the third quarter
of 2006 was primarily driven by strong volume growth in Europe.
Royalty and Contract Revenues For the third quarter of 2006,
royalty and contract revenues resulting from collaborations with
corporate partners totaled $78.7 million, an increase of $52.4
million from the third quarter of 2005. The increase in the third
quarter of 2006 was primarily driven by the recognition of
Tamiflu(R) (oseltamivir phosphate) royalties from F. Hoffmann-La
Roche Ltd (Roche) of $62.7 million. This amount was significantly
higher than the Tamiflu royalties of $12.1 million recognized in
the third quarter of 2005. The increase was primarily due to the
significantly higher Tamiflu sales recorded by Roche during the
second quarter of 2006 compared to the same period in 2005, as well
as the elimination of a contractual cost of goods adjustment that
had historically reduced the amount of Tamiflu royalties recognized
by Gilead. "We are pleased to have achieved a very solid third
quarter in 2006, including total revenues of $749 million," said
John F. Milligan, Ph.D., Executive Vice President and Chief
Financial Officer of Gilead. "Revenues from the first nine months
of this year have already exceeded total revenues recorded for all
of last year. Our continued sales growth is a result of strong
initial uptake of Atripla, robust U.S. and international sales of
Truvada, and continued solid performance of both Hepsera and
AmBisome in increasingly competitive markets." Research and
Development Research and development (R&D) expenses for the
third quarter of 2006 were $93.3 million, which included
stock-based compensation expense of $13.3 million, compared to
R&D expenses of $78.8 million for the same quarter in 2005.
R&D expenses for the third quarter of 2006 were higher due to
increased headcount and increased clinical, product development and
research activities associated with our HIV, hepatitis B and
hepatitis C programs, as well as stock-based compensation expense
from Gilead's adoption of SFAS 123R. During the third quarter of
2005, Gilead made a $15.0 million payment to Emory University
(Emory) in connection with the amendment of our existing license
agreement with Emory related to our obligation to develop
emtricitabine for the hepatitis B indication. Selling, General and
Administrative Selling, general and administrative (SG&A)
expenses for the third quarter of 2006 were $132.5 million, which
included stock-based compensation expense of $16.0 million,
compared to SG&A expenses of $100.9 million for the same
quarter in 2005. The higher SG&A expenses in the third quarter
of 2006 as compared to the third quarter of 2005 were primarily due
to increased headcount and expenses driven by our significant
business growth and business development activities, as well as
stock-based compensation expense from Gilead's adoption of SFAS
123R. Purchased In-Process Research and Development In August 2006,
Gilead completed its acquisition of Seattle-based Corus and
recorded a charge of $355.6 million to reflect Corus's incomplete
IPR&D programs. Gilead did not record any income tax benefit
for this charge. Cash, Cash Equivalents and Marketable Securities
As of September 30, 2006, Gilead had cash, cash equivalents and
marketable securities of $3.20 billion. This compared to $2.31
billion as of December 31, 2005. The increase in cash, cash
equivalents and marketable securities was primarily attributable to
$738.6 million of operating cash flows generated during the first
nine months of 2006 and $587.6 million of net proceeds generated
from our issuance of convertible senior notes and related
transactions, offset by $356.2 million in net cash paid on our
acquisition of Corus and $161.0 million paid toward principal on
our term loan. Other Balance Sheet Highlights Inventories increased
by $156.4 million from December 31, 2005 to $373.3 million as of
September 30, 2006, primarily driven by increases in Atripla
inventory, which includes the purchases of Sustiva(R) (efavirenz)
active pharmaceutical ingredient from Bristol-Myers Squibb (BMS) at
BMS' approximate market value of Sustiva. Corporate Highlights In
July 2006, Gilead announced a donation to The Institute of Organic
Chemistry and Biochemistry at the Academy of Sciences of the Czech
Republic (IOCB) for the establishment of a Gilead Sciences Research
Centre. Gilead will provide a $1.1 million annual donation to IOCB
for an initial five-year term to fund the Centre's operations and
ongoing research activities. In August 2006, Gilead and Merck &
Co., Inc. (Merck) announced that the companies established an
agreement for the distribution of Atripla in developing countries
around the world. In August 2006, Gilead announced that it
completed its acquisition of Corus following an initial investment
of $25.0 million in Corus in April 2006. Corus's lead product
candidate, aztreonam lysine for inhalation, is an inhaled
antibiotic with activity against Gram-negative bacteria including
Pseudomonas aeruginosa, which can cause lung infections in patients
with cystic fibrosis. The product candidate is currently being
evaluated in Phase III clinical studies. Also in August and
September of 2006, Gilead announced that it signed non-exclusive
agreements to provide eleven generic companies in India with a
license to produce and distribute generic versions of Viread to 95
low-income countries around the world, including India. In
September 2006, Gilead and BMS announced an agreement to
commercialize Atripla in Canada for the treatment of HIV-1
infection in adults, subject to the approval of the product by
Health Canada. In October 2006, Gilead and Myogen, Inc. (Myogen),
announced that the companies have signed a definitive agreement
under which Gilead plans to acquire Myogen for approximately $2.5
billion. Myogen is a publicly held biopharmaceutical company
focused on the discovery, development and commercialization of
small molecule therapeutics for the treatment of cardiovascular
disorders. This press release is neither an offer to purchase nor a
solicitation of an offer to sell any securities of Myogen. A tender
offer for Myogen's outstanding shares is being made only by the
Offer to Purchase filed with the Securities and Exchange Commission
on October 16, 2006. Product and Pipeline Highlights "We are all
very proud of Gilead's achievements in the third quarter of 2006,"
said John C. Martin, PhD, President and Chief Executive Officer of
Gilead. "After only a two and a half month review period, we, along
with our partner Bristol-Myers Squibb, received U.S. approval for
Atripla, the first-ever once-daily single tablet regimen for the
treatment of HIV-1 infection in adults. I am pleased to report that
Atripla is off to a very strong launch and am proud that we have
contributed to providing improved dosing convenience for many
physicians and patients. We also worked diligently in partnership
with colleagues at Bristol-Myers Squibb and Merck to complete the
submission of our Marketing Authorisation Application for Atripla
in the European Union earlier this month." Dr. Martin continued,
"We also made significant progress with our research programs
during the third quarter. This progress will be further augmented,
pending the completion of our acquisition of Myogen, by the
addition of ambrisentan to Gilead's pipeline - a product with
important potential for the treatment of pulmonary arterial
hypertension. The Myogen transaction allows Gilead to strengthen
our efforts in the specialty market of pulmonary-related diseases,
as initially established with our acquisition of Corus." HIV
Franchise In July 2006, Gilead and BMS announced that the U.S. Food
and Drug Administration granted approval of Atripla for the
treatment of HIV-1 infection in adults. In August 2006, Gilead
announced the presentation of positive 96-week data from an ongoing
clinical trial (Study 934) comparing a once-daily regimen of
Viread, Emtriva and Sustiva to a twice-daily regimen of Combivir(R)
(lamivudine/zidovudine) with Sustiva once daily in treatment-naive
adults with HIV. The data were presented at the XVI International
AIDS Conference, which took place August 13 to 18, 2006 in Toronto,
Canada. In September 2006, Gilead announced two presentations of
long-term efficacy and safety data from Study 903E, evaluating the
company's once-daily anti-HIV medication, Viread, as part of
combination therapy. Data from both analyses of Study 903E were
presented at the 8th International Workshop on Adverse Drug
Reactions and Lipodystrophy in HIV, held September 24 to 26, 2006
in San Francisco, California. Conference Call At 4:30 p.m. Eastern
Time today, Gilead will webcast a conference call live on Gilead's
website to discuss its third quarter 2006 results. During the call,
Gilead will be discussing additional corporate, financial,
statistical, product and pipeline information. That information can
be found on Gilead's website at www.gilead.com under "Investors."
To access the webcast via the internet, log on to www.gilead.com.
Please connect to the company's website at least 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 1-800-798-2884 (U.S.) or 1-617-614-6207 (international)
and dial the participant passcode 91313116 to access the call.
Telephone replay is available approximately two hours after the
call through October 21 2006. To access, please call 1-888-286-8010
(U.S.) or 1-617-801-6888 (international) and dial the participant
passcode 43684597. The webcast will be archived on www.gilead.com
for one year. 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 worldwide. Headquartered in Foster City, California,
Gilead has operations in North America, Europe and Australia.
Non-GAAP Financial Information Non-GAAP earnings and earnings per
diluted share are presented excluding the impact of the IPR&D
charge incurred in connection with the acquisition of Corus. Our
management believes this non-GAAP information is useful for
investors, in conjunction with our GAAP financial statements,
because it facilitates the comparison of current and prior period
operating results after eliminating the effect of expense
components that are individually material in the current period but
were not present in the prior period. Non-GAAP financial
information no longer excludes stock-based compensation expense
resulting from our adoption of SFAS 123R on January 1, 2006 as
management believes that investors have gained a better
understanding of stock-based compensation expense and are now
including such expense in their evaluation of the company; however,
note 1 to the condensed consolidated statements of operations on
page 6 of the attached press release continues to enable management
and investors to understand the comparative impact of stock-based
compensation expense on the various captions of the statements of
operations in 2006. Non-GAAP information is not prepared under a
comprehensive set of accounting rules and should only be used to
supplement an understanding of our operating results as reported
under GAAP. 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. These statements include
those relating to our ability to close the acquisition of Myogen
and to the potential benefits to Gilead of owning ambrisentan..
Gilead cautions readers that forward-looking statements are subject
to certain risks and uncertainties, which could cause actual
results to differ materially. These risks and uncertainties include
Gilead's ability to successfully integrate the products and
employees of Gilead and Myogen, the ability of ambrisentan to
receive regulatory approvals and market acceptance, our ability to
consummate the purchase of Myogen as the transaction is subject to
closing conditions, including successfully completing the tender
offer for Myogen shares and the expiration or termination of the
applicable Hart-Scott-Rodino Antitrust Improvements Act waiting
period., and other risks identified from time to time in Gilead's
reports filed with the U.S. Securities and Exchange Commission. 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
Annual Report on Form 10-K for the year ended December 31, 2005,
its Quarterly Reports on Form 10-Q for the first and second
quarters of 2006 and its current reports on Form 8-K. 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. Viread, Emtriva,
Truvada, AmBisome and Hepsera are registered trademarks of Gilead
Sciences, Inc. Atripla is a trademark of Bristol-Myers Squibb &
Gilead Sciences, LLC. Tamiflu is a registered trademark of F.
Hoffmann-La Roche Ltd. Sustiva is a registered trademark of
Bristol-Myers Squibb Company. Combivir is a registered trademark of
GlaxoSmithKline Inc. For more information on Gilead Sciences,
please visit www.gilead.com or Call the Gilead Public Affairs
Department at 1-800-GILEAD-5 (1-800-445-3235). -0- *T GILEAD
SCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (in thousands, except per share amounts) Three months
ended Nine months ended September 30, September 30,
------------------- ----------------------- 2006 2005 2006 2005
--------- --------- ----------- ----------- Revenues: Product sales
$670,060 $467,204 $1,820,104 $1,315,873 Royalty and contract
revenues 78,673 26,247 306,809 103,261 --------- ---------
----------- ----------- Total revenues 748,733 493,451 2,126,913
1,419,134 Costs and expenses: Cost of goods sold (1)(3) 109,791
65,498 278,031 186,182 Research and development (1) 93,305 78,830
272,241 208,961 Selling, general and administrative (1)(5) 132,529
100,873 426,567 274,765 Purchased in-process research and
development (4) 355,568 - 355,568 - --------- --------- -----------
----------- Total costs and expenses 691,193 245,201 1,332,407
669,908 --------- --------- ----------- ----------- Income from
operations 57,540 248,250 794,506 749,226 Interest and other
income, net (5) 36,197 14,127 102,082 31,232 Interest expense
(6,081) (26) (15,012) (50) Minority interest in joint venture 1,640
1,223 3,878 2,398 --------- --------- ----------- -----------
Income before provision for income taxes (1) 89,296 263,574 885,454
782,806 Provision for income taxes 141,460 84,342 409,764 250,494
--------- --------- ----------- ----------- Net income (loss)
$(52,164) $179,232 $ 475,690 $ 532,312 ========= =========
=========== =========== Net income (loss) per share - basic $
(0.11) $ 0.39 $ 1.04 $ 1.18 ========= ========= ===========
=========== Net income (loss) per share - diluted $ (0.11) $ 0.38 $
0.99 $ 1.13 ========= ========= =========== =========== Shares used
in per share calculation - basic 457,433 456,098 458,773 452,923
========= ========= =========== =========== Shares used in per
share calculation - diluted (2) 457,433 475,965 478,101 472,350
========= ========= =========== =========== ------ Notes: (1) On
January 1, 2006, we adopted SFAS 123R and recorded stock-based
compensation expense during the three and nine months ended
September 30, 2006. The following is the stock-based compensation
expense recorded in the respective caption of the statements of
operations above: Three months ended Nine months ended September
30, 2006 September 30, 2006 -------------------
----------------------- Stock-based compensation expense: Cost of
goods sold $ 2,524 $ 8,236 Research and development expenses 13,267
38,108 Selling, general and administrative expenses 15,954 51,800
Provision for income taxes (6,165) (21,340) --------- ------------
Total stock- based compensation expense, net of taxes $ 25,580 $
76,804 ========= ============ (2) The net loss per diluted share
calculation for the quarter ended September 30, 2006 does not
include the effect of outstanding stock options as they were
antidilutive. Shares used in the calculation of net income per
diluted share for the nine months ended September 30, 2006 include
the effect of outstanding stock options to purchase 19.3 million
shares of common stock applying the treasury stock method. (3) For
the nine months ended September 30, 2006, cost of goods sold
includes $6.8 million recorded in the first quarter of 2006 to
decrease the book value of inventory for our Access Program to
reflect its net realizable value. (4) For the three and nine months
ended September 30, 2006, we incurred $355.6 million of purchased
in-process research and development as a result of our acquisition
of Corus Pharma, Inc. (5) Certain prior period amounts have been
reclassified to be consistent with current period presentation. *T
-0- *T GILEAD SCIENCES, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL INFORMATION (unaudited) (in thousands, except per share
amounts) Below is a reconciliation of our GAAP operating results
and per share amounts as reported in the attached press release.
Non-GAAP earnings and earnings per diluted share are presented
excluding the impact of the purchased in-process research and
development charge incurred in connection with the acquisition of
Corus. Our management believes this non-GAAP information is useful
for investors, in conjunction with our GAAP financial statements,
because it facilitates the comparison of current and prior period
operating results after eliminating the effect of expense
components that are individually material in the current period but
were not present in the prior period. Non-GAAP financial
information no longer excludes stock-based compensation expense
resulting from our adoption of SFAS 123R on January 1, 2006 as
management believes that investors have gained a better
understanding of stock-based compensation expense and are now
including such expense in their evaluation of the company; however,
note 1 to the condensed consolidated statements of operations on
page 6 of the attached press release continues to enable management
and investors to understand the comparative impact of stock-based
compensation expense on the various captions of the statements of
operations in 2006. Non-GAAP information is not prepared under a
comprehensive set of accounting rules and should only be used to
supplement an understanding of our operating results as reported
under GAAP. Three months ended Nine months ended September 30, 2006
September 30, 2006 ------------------ ------------------ Net income
(loss) (GAAP) $(52,164) $475,690 Purchased in-process research and
development expense 355,568 355,568 ------------------
------------------ Net income (Non-GAAP) $303,404 $831,258
================== ================== Shares used in per share
calculation - diluted (GAAP) 457,433 478,101 Dilutive securities
18,829 - ------------------ ------------------ Shares used in per
share calculation - diluted (Non- GAAP) 476,262 478,101
================== ================== Net income (loss) per share -
diluted (GAAP) $ (0.11) $ 0.99 ==================
================== Net income per share - diluted (Non-GAAP) $ 0.64
$ 1.74 ================== ================== *T -0- *T GILEAD
SCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 2006 2005 ------------- ------------
(unaudited) (Note 1) Cash, cash equivalents and marketable
securities (2) $3,204,443 $2,311,033 Other current assets (2)
1,178,452 781,175 Property, plant and equipment, net 288,105
242,568 Other noncurrent assets 628,132 431,540 -------------
------------ Total assets $5,299,132 $3,766,316 =============
============ Current liabilities (2) $ 581,829 $ 465,163 Long-term
liabilities (2) 1,418,473 273,375 Stockholders' equity 3,298,830
3,027,778 ------------- ------------ Total liabilities and
stockholders' equity $5,299,132 $3,766,316 =============
============ Note: (1) Derived from audited consolidated financial
statements at that date. (2) Certain prior period amounts have been
reclassified to be consistent with current period presentation. *T
-0- *T GILEAD SCIENCES, INC. PRODUCT SALES SUMMARY (unaudited) (in
thousands) Three months ended Nine months ended September 30,
September 30, ------------------- ----------------------- 2006 2005
2006 2005 --------- --------- ----------------------- HIV products:
Truvada - U.S. $201,482 $140,004 $ 589,010 $ 340,442 Truvada -
International 107,551 22,399 268,225 36,238 --------- ---------
----------- ----------- 309,033 162,403 857,235 376,680 Viread -
U.S. 71,795 74,939 222,439 259,884 Viread - International 98,829
114,456 307,402 336,465 --------- --------- ----------- -----------
170,624 189,395 529,841 596,349 Atripla - U.S. 68,373 - 68,373 -
Atripla - International - - - - --------- --------- -----------
----------- 68,373 - 68,373 - Emtriva - U.S. 5,064 4,787 13,384
15,100 Emtriva - International 4,208 6,950 14,515 21,214 ---------
--------- ----------- ----------- 9,272 11,737 27,899 36,314 Total
HIV products - U.S. 346,714 219,730 893,206 615,426 Total HIV
products - International 210,588 143,805 590,142 393,917 ---------
--------- ----------- ----------- 557,302 363,535 1,483,348
1,009,343 Hepsera - U.S. 23,426 21,940 69,615 59,379 Hepsera -
International 31,687 24,953 94,997 75,985 --------- ---------
----------- ----------- 55,113 46,893 164,612 135,364 AmBisome
55,313 54,736 164,740 165,157 Other products 2,332 2,040 7,404
6,009 --------- --------- ----------- ----------- Total product
sales $670,060 $467,204 $1,820,104 $1,315,873 ========= =========
=========== =========== *T
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