Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of
operations for the quarter ended June 30, 2008. Total revenues for
the second quarter of 2008 were $1.28 billion, up 22 percent
compared to total revenues of $1.05 billion for the second quarter
of 2007. Net income for the second quarter of 2008 was $442.8
million, or $0.46 per diluted share, including after-tax
stock-based compensation expense of $26.4 million and after-tax
purchased in-process research and development (IPR&D) expense
of $7.8 million. Excluding after-tax stock-based compensation and
IPR&D expenses of $34.2 million, non-GAAP net income for the
second quarter of 2008 was $477.0 million, or $0.49 per diluted
share. Non-GAAP net income for the second quarter of 2007 was
$442.2 million, or $0.46 per diluted share, which excluded
after-tax stock-based compensation expense of $34.3 million.
Product Sales Product sales were a record $1.22 billion for the
second quarter of 2008, compared to $905.1 million in the second
quarter of 2007, a 34 percent increase. This growth was driven
primarily by Gilead�s antiviral franchise, including the strong
growth of Atripla� (efavirenz 600 mg/ emtricitabine 200 mg/
tenofovir disoproxil fumarate 300 mg) sales due primarily to the
continued uptake of Atripla in the United States and the recent
launches in certain European countries, as well as the continued
growth of Truvada� (emtricitabine and tenofovir disoproxil
fumarate) sales in the United States and Europe. Antiviral
Franchise Antiviral product sales were $1.12 billion in the second
quarter of 2008, a 34 percent increase from $837.4 million for the
same period in 2007. The increase was driven primarily by the sales
volume growth of Atripla and Truvada, as well as a favorable
foreign currency exchange impact. Truvada Truvada sales were $516.1
million for the second quarter of 2008, an increase of 34 percent
from $385.4 million in the second quarter of 2007. The increase in
Truvada sales in the second quarter of 2008 compared to the same
period of 2007 was driven primarily by sales volume growth in the
United States and Europe, and a favorable foreign currency exchange
impact. Atripla Atripla sales were $355.1 million for the second
quarter of 2008, an increase of 67 percent from $212.4 million in
the second quarter of 2007. The increase in Atripla sales in the
second quarter of 2008 compared to the same period in 2007 was
driven primarily by the continued uptake in the United States, as
well as the recent launches in certain European countries. Viread
Viread� (tenofovir disoproxil fumarate) sales were $150.7 million
for the second quarter of 2008, a three percent decrease from
$154.9 million in the second quarter of 2007. The decrease in
Viread sales in the second quarter of 2008 compared to the same
period of 2007 was driven primarily by lower sales volumes in the
United States and Europe, partially offset by a favorable foreign
currency exchange impact. Hepsera Sales of Hepsera� (adefovir
dipivoxil) for chronic hepatitis B were $90.4 million for the
second quarter of 2008, a 20 percent increase from $75.2 million in
the second quarter of 2007. The increase in Hepsera sales in the
second quarter of 2008 compared to the same period of 2007 was
driven primarily by a favorable foreign currency exchange impact
and sales volume growth in certain European markets. AmBisome For
the second quarter of 2008, sales of AmBisome� (amphotericin B)
liposome for injection for severe fungal infections were $69.8
million, an increase of eight percent from $64.8 million for the
second quarter of 2007. The increase in AmBisome sales in the
second quarter of 2008 compared to the same period of 2007 was
driven primarily by a favorable foreign currency exchange impact.
Royalty, Contract and Other Revenues For the second quarter of
2008, royalty, contract and other revenues resulting primarily from
collaborations with corporate partners were $60.9 million, a
decrease of 57 percent from $143.0 million in the second quarter of
2007. The decrease in royalty, contract and other revenues during
the second quarter of 2008 compared to the same period of 2007 was
driven primarily by lower Tamiflu� (oseltamivir phosphate)
royalties from F. Hoffmann-La Roche Ltd of $37.5 million in the
second quarter of 2008 compared to Tamiflu royalties of $123.1
million in the second quarter of 2007 due to decreased sales
related to pandemic planning initiatives worldwide. Research and
Development Research and development (R&D) expenses in the
second quarter of 2008 were $176.5 million compared to $135.9
million for the same quarter in 2007. Non-GAAP R&D expenses,
which exclude stock-based compensation expense, for the second
quarter of 2008 were $161.2 million, compared to $119.3 million for
the same quarter in 2007. Non-GAAP R&D expenses for the second
quarter of 2008 were higher primarily as a result of increased
clinical study expenses as well as higher headcount related to the
growth in Gilead�s business. Selling, General and Administrative
Selling, general and administrative (SG&A) expenses in the
second quarter of 2008 were $219.5 million compared to $186.2
million for the same quarter in 2007. Non-GAAP SG&A expenses,
which exclude stock-based compensation expense, for the second
quarter of 2008 were $200.9 million, compared to $157.7 million for
the same quarter in 2007. Non-GAAP SG&A expenses for the second
quarter of 2008 were higher primarily as a result of increased
marketing and promotional expenses including those related to the
launch of Atripla in certain European countries, higher headcount
related to the growth in Gilead�s business, as well as costs
associated with certain termination-related disputes in our
international operations. Net Foreign Currency Exchange Impact The
net foreign currency exchange impact on second quarter 2008
revenues and pre-tax earnings, which includes revenues and expenses
generated from outside the United States, was a favorable $45.2
million and $20.7 million, respectively, compared to the same
period in 2007. Cash, Cash Equivalents and Marketable Securities As
of June 30, 2008, Gilead had cash, cash equivalents and marketable
securities of $2.91 billion compared to $2.72 billion as of
December 31, 2007. For the first six months of 2008, Gilead
generated $1.00 billion�of operating cash flows, which was
partially offset by Gilead�s repurchases of $965.8 million of its
common stock under its share repurchase program. Corporate
Highlights In April 2008, Gilead announced that Robin L. Washington
joined the company as Senior Vice President and Chief Financial
Officer. In May 2008, Gilead announced that John C. Martin, PhD was
appointed Chairman of the Board of Directors, and John F. Milligan,
PhD was appointed President. Dr. Martin is assuming the additional
role of Chairman of the Board from James M. Denny, who will remain
a member of Gilead�s Board of Directors, serving as lead director.
Mr. Denny joined Gilead�s Board in 1996 and was appointed Chairman
in 2001. In addition to their new roles, Dr. Martin and Dr.
Milligan will continue to serve in their respective roles as Chief
Executive Officer and Chief Operating Officer. Also in May 2008,
Gilead and Navitas Assets, LLC (Navitas) announced that the
companies had entered into an agreement under which Gilead acquired
all of Navitas�s assets related to its cicletanine business. Gilead
plans to evaluate cicletanine as a potential treatment of pulmonary
arterial hypertension (PAH). In May and June 2008, the U.S. Patent
& Trademark Office (PTO) completed three of four reexamination
proceedings and confirmed the patentability of U.S. Patent No.
6,043,230, which covers a method of use for Viread, and U.S. Patent
Nos. 5,922,695 and 5,977,089, both of which cover the composition
of matter for Viread. In July 2008, the PTO completed the final
reexamination proceeding and confirmed the patentability of U.S.
Patent No. 5,935,946, which also covers the composition of matter
for Viread. Product and Pipeline Highlights Antiviral Franchise In
April 2008, Gilead announced the presentation of detailed 72-week
data from two pivotal Phase III clinical trials, Studies 102 and
103, evaluating the safety and efficacy of once-daily Viread among
adult patients with chronic hepatitis B. These data were presented
at the 43rd Annual Meeting of the European Association for the
Study of the Liver in Milan, Italy in April 2008. Also in April
2008, Gilead announced that the European Commission granted
marketing authorization for Viread for the treatment of chronic
hepatitis B in all 27 member states of the European Union.
Cardiovascular Franchise In May 2008, Gilead announced the
initiation of ATHENA-1, a Phase IV, randomized, double-blind,
placebo-controlled study evaluating Letairis� (ambrisentan 5mg and
10mg tablets) in patients with PAH demonstrating a sub-optimal
response to sildenafil monotherapy. Also in May 2008, Gilead
announced results of a post-hoc analysis of data collected during
the ARIES-1, ARIES-2 and ARIES-E studies for Letairis in PAH (WHO
Group 1) patients with primarily WHO functional class II or III
symptoms. In addition, data from the pivotal Phase III ARIES-1 and
ARIES-2 studies of Letairis were published in the journal
Circulation. Respiratory Franchise In June 2008, Gilead announced
results from an interim analysis of 12-month data from its
open-label, Phase III AIR-CF3 study of aztreonam lysine for
inhalation, an investigational therapy in development for the
treatment of people with cystic fibrosis who have pulmonary
Pseudomonas aeruginosa infection. These data were presented at the
31st Annual European Cystic Fibrosis Conference in Prague, Czech
Republic in June 2008. Conference Call At 4:30 p.m. Eastern Time
today, Gilead will host a conference call with a simultaneous
webcast to discuss the results of its second quarter of 2008.
During this call/webcast, Gilead�s management will discuss the
company�s second quarter of 2008 results and provide a general
business update. The webcast will be available live via the
internet by accessing Gilead�s website at www.gilead.com. To access
the webcast, 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 1-866-825-1709 (U.S.) or 1-617-213-8060
(international) and dial the participant passcode�39304842 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
20, 2008. To access the phone replay, please call 1-888-286-8010
(U.S.) or 1-617-801-6888 (international) and dial the participant
passcode�84267247. About Gilead Gilead Sciences is a
biopharmaceutical company that discovers, develops and
commercializes innovative therapeutics in areas of unmet medical
need. Gilead�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�net income
and net income per diluted share for the 2008 periods are presented
excluding the after-tax impact of the IPR&D expense incurred in
connection with the acquisition of all of Navitas�s assets related
to its cicletanine business, as well as the after-tax impact of
stock-based compensation expense and the related methodology for
computing dilutive securities for net income per diluted share
purposes. Non-GAAP�net income and net income per diluted share for
the 2007 periods are presented excluding the after-tax impact of
stock-based compensation expense and the related methodology for
computing dilutive securities for net income per diluted share
purposes. Non-GAAP�R&D expenses and SG&A expenses for the
2008 and 2007 periods are presented excluding the impact of
stock-based compensation expense. Management believes this non-GAAP
information is useful for investors,�taken 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 the company�s operating results as
reported under United States generally accepted accounting
principles. 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 sustain
growth in revenues for its antiviral and cardiovascular franchises;
unpredictable variability of Tamiflu royalties and the strong
relationship between this royalty revenue and global pandemic
planning and supply; 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 any
products that receive regulatory approvals; Gilead�s ability to
successfully develop its respiratory and cardiovascular franchises;
initiating and completing clinical trials may take longer or cost
more than expected; 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, 2007, its Quarterly Report on Form 10-Q for the
first quarter of 2008 and its subsequent 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. Truvada, Viread, Hepsera, AmBisome and Letairis are
registered trademarks of Gilead Sciences, Inc. Atripla is a
registered trademark of Bristol-Myers Squibb & Gilead Sciences,
LLC. Tamiflu is a registered trademark of F. Hoffmann-La Roche Ltd.
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). GILEAD SCIENCES, INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except
per share amounts) � � � Three Months Ended Six Months Ended June
30, June 30, � 2008 � 2007 � � 2008 � 2007 � Revenues: Product
sales $ 1,217,216 $ 905,058 $ 2,358,522 $ 1,745,283 Royalty,
contract and other revenues � 60,909 � � 143,031 � � 177,755 � �
331,236 � Total revenues 1,278,125 1,048,089 2,536,277 2,076,519 �
Costs and expenses: Cost of goods sold (1) 265,684 183,131 505,532
354,769 Research and development (1) 176,542 135,931 331,843
266,021 Selling, general and administrative (1) 219,533 186,179
414,490 352,737 Purchased in-process research and development (2) �
10,851 � � - � � 10,851 � � - � Total costs and expenses � 672,610
� � 505,241 � � 1,262,716 � � 973,527 � � Income from operations
605,515 542,848 1,273,561 1,102,992 � Interest and other income,
net 14,026 27,689 36,726 50,793 Interest expense (3,174 ) (2,707 )
(6,279 ) (7,254 ) Minority interest � 2,160 � � 2,401 � � 4,035 � �
4,554 � Income before provision for income taxes 618,527 570,231
1,308,043 1,151,085 Provision for income taxes (1) � 175,699 � �
162,301 � � 369,088 � � 335,748 � Net income $ 442,828 � $ 407,930
� $ 938,955 � $ 815,337 � � Net income per share - basic $ 0.48 � $
0.44 � $ 1.01 � $ 0.88 � � Net income per share - diluted $ 0.46 �
$ 0.42 � $ 0.97 � $ 0.85 � � Shares used in per share calculation -
basic � 922,796 � � 931,677 � � 925,455 � � 929,322 � � Shares used
in per share calculation - diluted � 965,663 � � 967,928 � �
966,087 � � 964,614 � � Notes: (1) The following is the stock-based
compensation expense included in the respective captions of the
condensed consolidated statements of income above: � Three Months
Ended Six Months Ended June 30, June 30, � 2008 � 2007 � � 2008 �
2007 � � Stock-based compensation expense: Cost of goods sold $
2,848 $ 2,682 $ 4,542 $ 5,212 Research and development 15,370
16,661 32,265 37,769 Selling, general and administrative 18,657
28,464 36,204 62,120 Income tax effect � (10,466 ) � (13,547 ) �
(20,601 ) � (30,655 ) Total stock-based compensation expense, net
of tax $ 26,409 � $ 34,260 � $ 52,410 � $ 74,446 � � � (2) For the
three and six months ended June 30, 2008, Gilead incurred $10.9
million of purchased in-process research and development expense as
a result of the acquisition of all of Navitas Assets, LLC�s assets
related to its cicletanine business. GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited) (in thousands, except per share amounts) � Below is a
reconciliation of Gilead's GAAP operating results and diluted per
share amounts as reported in the attached press release.�Non-GAAP
net income and net income per diluted share for the 2008 periods
are presented excluding the after-tax impact of the purchased
in-process research and development expense incurred in connection
with the acquisition of all of Navitas Assets, LLC�s assets related
to its cicletanine business, as well as the after-tax impact of
stock-based compensation expense and the related methodology for
computing dilutive securities for net income per diluted share
purposes.�Non-GAAP net income and net income per diluted share for
the 2007 periods are presented excluding the after-tax impact of
stock-based compensation expense and the related methodology for
computing dilutive securities for net income per diluted share
purposes.�Non-GAAP R&D expenses and SG&A expenses for the
2008 and 2007 periods are presented excluding the impact of
stock-based compensation expense. Management believes this non-GAAP
information is useful for investors, taken 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 the company�s operating results as
reported under GAAP. � � � � � � � Three Months Ended Six Months
Ended June 30, June 30, � 2008 � 2007 � 2008 � 2007 � Net income
(GAAP) $ 442,828 $ 407,930 $ 938,955 $ 815,337 Stock-based
compensation expense, net of tax 26,409 34,260 52,410 74,446
Purchased in-process research and development expense, net of tax �
7,769 � - � 7,769 � - Net income (Non-GAAP) $ 477,006 $ 442,190 $
999,134 $ 889,783 � � Shares used in per share calculation -
diluted (GAAP) 965,663 967,928 966,087 964,614 Dilutive securities
� 2,403 � 2,799 � 2,223 � 2,408 Shares used in per share
calculation - diluted (Non-GAAP) � 968,066 � 970,727 � 968,310 �
967,022 � � Net income per share - diluted (GAAP) $ 0.46 $ 0.42 $
0.97 $ 0.85 Net income per share - diluted (Non-GAAP) $ 0.49 $ 0.46
$ 1.03 $ 0.92 GILEAD SCIENCES, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands) � � � � June 30, December 31, 2008 2007
(unaudited) (Note 1) � Cash, cash equivalents and marketable
securities $ 2,908,352 $ 2,722,422 Other current assets 2,321,656
1,856,314 Property, plant and equipment, net 493,012 447,696 Other
noncurrent assets � 794,397 � 808,284 Total assets $ 6,517,417 $
5,834,716 � Current liabilities (2) $ 2,451,334 $ 736,275 Long-term
liabilities and minority interest (2) 293,858 1,638,451
Stockholders� equity � 3,772,225 � 3,459,990 Total liabilities and
stockholders� equity $ 6,517,417 $ 5,834,716 � Notes: � (1) Derived
from audited consolidated financial statements at that date. � (2)
Convertible senior notes totalling $1.30 billion were reclassified
into current liabilities due to the exercisability of their
conversion feature for the three months ending September 30, 2008.
GILEAD SCIENCES, INC. PRODUCT SALES SUMMARY (unaudited) (in
thousands) � � � � � Three Months Ended Six Months Ended June 30,
June 30, 2008 2007 2008 2007 (Note 1) (Note 1) Antiviral products:
Truvada � U.S. $ 236,402 $ 186,256 $ 474,934 $ 373,044 Truvada �
Europe 240,911 172,776 459,278 317,984 Truvada � Other
International � 38,836 � 26,328 � 61,322 � 40,270 � 516,149 �
385,360 � 995,534 � 731,298 � Atripla � U.S. 312,392 211,679
618,877 401,489 Atripla � Europe 37,504 - 51,699 - Atripla � Other
International � 5,205 � 705 � 8,742 � 1,078 � 355,101 � 212,384 �
679,318 � 402,567 � Viread � U.S. 58,414 63,797 121,482 131,353
Viread � Europe 61,273 65,034 126,989 136,948 Viread � Other
International � 30,994 � 26,066 � 54,877 � 47,274 � 150,681 �
154,897 � 303,348 � 315,575 � Hepsera � U.S. 34,581 32,491 65,856
62,260 Hepsera � Europe 50,531 39,265 98,994 77,632 Hepsera � Other
International � 5,253 � 3,417 � 8,537 � 6,625 � 90,365 � 75,173 �
173,387 � 146,517 � Emtriva � U.S. 4,106 3,443 7,944 6,898 Emtriva
� Europe 2,094 2,732 4,675 6,606 Emtriva � Other International �
1,888 � 3,429 � 3,858 � 4,423 � 8,088 � 9,604 � 16,477 � 17,927 �
Total Antiviral products � U.S. 645,895 497,666 1,289,093 975,044
Total Antiviral products � Europe 392,313 279,807 741,635 539,170
Total Antiviral products � Other International � 82,176 � 59,945 �
137,336 � 99,670 � 1,120,384 � 837,418 � 2,168,064 � 1,613,884 �
AmBisome 69,768 64,754 140,796 126,256 Letairis 24,686 113 45,023
113 Other products � 2,378 � 2,773 � 4,639 � 5,030 � 96,832 �
67,640 � 190,458 � 131,399 � � � � � Total product sales $
1,217,216 $ 905,058 $ 2,358,522 $ 1,745,283 � � Note: (1) Certain
prior period amounts have been reclassified to conform to current
period presentation.
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