Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results
of operations for the quarter ended March 31, 2011. Total revenues
for the first quarter of 2011 were $1.93 billion, down 8 percent
compared to total revenues of $2.09 billion for the first quarter
of 2010. Net income for the first quarter of 2011 was $651.1
million, or $0.80 per diluted share, compared to net income for the
first quarter of 2010 of $854.9 million, or $0.92 per diluted
share. Non-GAAP net income for the first quarter of 2011, which
excludes after-tax acquisition-related, restructuring and
stock-based compensation expenses, was $702.8 million, or $0.87 per
diluted share, compared to non-GAAP net income for the first
quarter of 2010 of $914.8 million, or $0.99 per diluted share.
Total revenues, GAAP and non-GAAP net income and diluted earnings
per share decreased for the first quarter of 2011 due primarily to
a $235.2 million or 95 percent decrease in Tamiflu® (oseltamivir
phosphate) royalties resulting from a decline in pandemic planning
initiatives worldwide.
Product Sales
Product sales increased 4 percent to $1.86 billion for the first
quarter of 2011, compared to $1.79 billion in the first quarter of
2010, inclusive of the net price reductions taken in the United
States due to healthcare reform and due to austerity measures in
certain countries of Europe.
Antiviral Franchise
Antiviral product sales increased 2 percent to $1.63 billion in
the first quarter of 2011, up from $1.60 billion for the same
quarter of 2010, driven primarily by sales volume growth in the
United States and Europe. Sequentially, antiviral product sales
decreased 4 percent from $1.70 billion for the previous quarter,
due primarily to declines in wholesaler inventory within the
contractual boundaries set by Gilead’s inventory management
agreements and lower levels of purchasing by certain AIDS Drug
Assistance Program (ADAP) entities.
Sales of Atripla® (efavirenz 600 mg/ emtricitabine 200 mg/
tenofovir disoproxil fumarate 300 mg) for the treatment of HIV
infection increased 7 percent to $744.5 million for the first
quarter of 2011, up from $692.9 million in the first quarter of
2010, driven primarily by sales volume growth in the United States
and Europe.
Sales of Truvada® (emtricitabine 200 mg/tenofovir disoproxil
fumarate 300 mg) for the treatment of HIV infection increased 2
percent to $673.1 million for the first quarter of 2011, up from
$657.8 million in the first quarter of 2010, driven primarily by
sales volume growth in the United States, Europe and Latin
America.
Sales of Viread® (tenofovir disoproxil fumarate) for the
treatment of HIV infection and chronic hepatitis B decreased 7
percent to $168.4 million for the first quarter of 2011, down from
$180.7 million in the first quarter of 2010, due primarily to
decreased sales volume in Brazil.
Letairis
Sales of Letairis® (ambrisentan) for the treatment of pulmonary
arterial hypertension increased 12 percent to $62.2 million for the
first quarter of 2011, up from $55.5 million for the first quarter
of 2010, driven primarily by sales volume growth.
Ranexa
Sales of Ranexa® (ranolazine) for the treatment of chronic
angina increased 33 percent to $68.3 million for the first quarter
of 2011, up from $51.2 million for the first quarter of 2010,
driven primarily by sales volume growth.
Other Products
Sales of other products were $147.1 million for the first
quarter of 2011 compared to $150.0 million for the first quarter of
2010 and included AmBisome® (amphotericin B) liposome for injection
for the treatment of severe fungal infections, Hepsera® (adefovir
dipivoxil) for the treatment of chronic hepatitis B, Emtriva®
(emtricitabine) for the treatment of HIV infection and Cayston®
(aztreonam for inhalation solution) for the improvement of
respiratory symptoms in cystic fibrosis patients with Pseudomonas
aeruginosa (P. aeruginosa). The decrease in other products was due
primarily to lower sales volume of Hepsera in the United States and
Europe. Sales of Cayston were $19.8 million for the first quarter
of 2011, up from $2.9 million in the same quarter of 2010.
Royalty, Contract and Other
Revenues
Royalty, contract and other revenues from collaborations were
$62.5 million in the first quarter of 2011, down 79 percent from
$297.8 million in the first quarter of 2010. This decrease was due
to lower Tamiflu royalties from F. Hoffmann-La Roche Ltd of $11.1
million in the first quarter of 2011, compared to Tamiflu royalties
of $246.3 million in the first quarter of 2010 as pandemic planning
initiatives worldwide have declined.
Research and Development
Research and development (R&D) expenses in the first quarter
of 2011 were $254.4 million, compared to $218.7 million for the
first quarter of 2010. Non-GAAP R&D expenses for the first
quarter of 2011, which exclude acquisition-related, restructuring
and stock-based compensation expenses, were $237.5 million,
compared to $196.5 million for the first quarter of 2010. The
increase in non-GAAP R&D expenses was due primarily to the
timing of reimbursements related to Gilead’s collaboration with
Tibotec Pharmaceuticals (Tibotec) and higher headcount and expenses
associated with acquisitions and ongoing growth of Gilead’s
business.
Selling, General and
Administrative
Selling, general and administrative (SG&A) expenses in the
first quarter of 2011 were $295.6 million, compared to $265.6
million for the first quarter of 2010. Non-GAAP SG&A expenses
for the first quarter of 2011, which exclude acquisition-related,
restructuring and stock-based compensation expenses, were $263.1
million, compared to $229.1 million for the first quarter of 2010.
The increase in non-GAAP SG&A expenses was driven primarily by
the impact of the pharmaceutical excise tax resulting from U.S.
healthcare reform, bad debt expenses associated with slower
collections in southern European countries and higher headcount
associated with the ongoing growth of Gilead’s business.
Net Foreign Currency Exchange
Impact
The net foreign currency exchange impact on first quarter 2011
revenues and pre-tax earnings, which includes revenues and expenses
generated from outside the United States, was an unfavorable $3.3
million and $6.6 million, respectively, compared to the first
quarter of 2010.
Cash, Cash Equivalents and Marketable
Securities
As of March 31, 2011, Gilead had cash, cash equivalents and
marketable securities of $6.36 billion compared to $5.32 billion as
of December 31, 2010. Gilead generated $820.5 million of operating
cash flow for the first three months of 2011.
Full Year 2011 Guidance
Gilead reiterates its Full Year 2011 Guidance of: (in millions
except percentages and per share amounts) Net Product Sales
$ 7,900 – $ 8,100 Non-GAAP Product Gross Margin* 74% – 76% Non-GAAP
Expenses R&D* $ 950 – $ 1,000 SG&A* $ 1,000 – $ 1,050
Effective Tax Rate 25% – 27%
Diluted EPS Impact of Acquisition-Related
and Stock-Based Compensation Expenses
$ 0.25 – $ 0.28
* Non-GAAP product gross margin and expenses exclude the impact of
acquisition-related and stock-based compensation expenses where
applicable.
Corporate Highlights
In February, Gilead entered into an agreement to acquire
Calistoga Pharmaceuticals, Inc. (Calistoga) for $375 million in
cash plus potential payments of up to $225 million based on the
achievement of certain milestones. Calistoga has a portfolio of
proprietary compounds that selectively target isoforms of
phosphoinositide-3 kinase (PI3K). Calistoga’s lead product
candidate, CAL-101, is a first-in-class specific inhibitor of the
PI3K delta isoform. The transaction closed on April 1, 2011.
In March, Gilead issued ten-year senior unsecured notes in an
aggregate principal amount of $1.00 billion, in an underwritten,
registered public offering. The notes will mature on April 1, 2021,
and will bear interest at an annual rate of 4.5 percent. This
offering followed the completion of the ratings process by Standard
& Poor's and Moody's. Standard & Poor's has rated the notes
A- and Moody's has rated the notes Baa1.
Under the company's $5.00 billion stock repurchase program
authorized in May 2010, Gilead has repurchased approximately $3.57
billion in common stock through March 31, 2011. Total purchase
activity was $548.5 million in common stock for the first quarter
of 2011. In January 2011, Gilead’s Board of Directors authorized an
additional three-year, $5.00 billion stock repurchase program which
will commence upon the completion of the existing program.
Product and Pipeline
Update
Antiviral Franchise
In February, Gilead announced that it had refiled its New Drug
Application (NDA) with the U.S. Food and Drug Administration (FDA)
for the single-tablet regimen of Truvada and Tibotec’s
investigational non-nucleoside reverse transcriptase inhibitor
TMC278 (rilpivirine hydrochloride) for HIV-1 infection in adults.
Gilead previously submitted an NDA for the single-tablet regimen of
Truvada/TMC278 in 2010. Gilead announced in January that it had
received a "refuse to file" notification from the FDA requesting
additional information on the analytical methodology and
qualification data used to establish acceptable levels of recently
identified degradants related to emtricitabine; this information
was included in the refiling. Gilead was notified on April 6, 2011,
that the FDA has accepted the filing, granting it a “Priority
Review” and assigning a Prescription Drug User Fee Act (PDUFA) date
of August 10, 2011.
In March, Gilead announced the topline results of the Phase III
clinical trial of its investigational antiretroviral agent
elvitegravir, a novel oral HIV integrase inhibitor. The primary
endpoint of this study was non-inferiority at week 48 of
elvitegravir, dosed once daily, compared to raltegravir, dosed
twice daily, each administered with a background regimen that
includes a ritonavir-boosted protease inhibitor and a second
antiretroviral agent in HIV-infected treatment-experienced
patients. Responses at 48 weeks of elvitegravir met the statistical
criteria of non-inferiority as compared to raltegravir based on the
proportion of subjects who achieved and maintained HIV RNA levels
(viral load) of less than 50 copies/mL. Discontinuation rates due
to adverse events were comparable in both arms of the study.
Cardiovascular Franchise
In March, Gilead announced that the FDA had approved a change to
the prescribing information for Letairis for the treatment of
pulmonary arterial hypertension (PAH). This change removed language
concerning the potential risk of liver injury from the Boxed
Warning. In conjunction with this label update, PAH patients
receiving Letairis are no longer required to obtain monthly liver
function tests before their prescription of Letairis is sent to
them. This change will help reduce the administrative burden on
patients and the staff at the specialist centers who care for
them.
Oncology Franchise
In March, Gilead announced the formation of a multi-year
research collaboration with the Yale School of Medicine (Yale),
focused on the discovery of novel cancer therapies. The research
effort will initially span four years with an option to renew for
up to ten years. Gilead will provide $40 million in research
support and basic science infrastructure development during the
initial four-year period, and will provide a total of up to $100
million over ten years should the collaboration be extended through
that timeframe. Gilead will have the first option to license Yale
inventions that result from the collaboration.
Conference Call
At 5:30 p.m. Eastern Time today, Gilead’s management will host a
conference call and a simultaneous webcast to discuss results from
its first quarter of 2011 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 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
1-877-299-4454 (U.S.) or 1-617-597-5447 (international) and dial
the participant passcode 45089365 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 April 25, 2011.
To access the phone replay, please call 1-888-286-8010 (U.S.) or
1-617-801-6888 (international) and dial the participant passcode
41368400.
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 Asia Pacific.
Non-GAAP Financial
Information
Gilead has presented certain financial information in accordance
with GAAP and also on a non-GAAP basis for the first quarter of
2011 and 2010. 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 Gilead’s operating results as
reported under U.S. GAAP. A reconciliation between GAAP and
non-GAAP financial information is provided in the tables on pages 7
and 10.
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 2011
financial results, including the possibility that its full year
2011 guidance may be revised at a later date; Gilead’s ability to
sustain growth in revenues for its antiviral, cardiovascular and
respiratory franchises; unpredictable variability of Tamiflu
royalties and the strong relationship between this royalty revenue
and global pandemic planning and supply; the availability of
funding for state ADAPs and their ability to purchase at levels to
support the number of patients that rely on ADAPs; the levels of
inventory held by wholesalers and retailers which may cause
fluxuations in Gilead's earnings; Gilead’s ability to submit NDAs
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, including its fixed-dose
combination of Truvada and TMC278 for the treatment of HIV
infection; Gilead’s ability to successfully commercialize its
products, including the risk that the label change for Letairis
will not impact physicians' decisions to prescribe Letairis over
other competing products; Gilead’s ability to successfully develop
its respiratory, cardiovascular and oncology franchises; safety and
efficacy data from clinical studies may not warrant further
development of Gilead’s product candidates, including the clinical
studies evaluating elvitegravir for the treatment of HIV;
initiating and completing clinical trials may take longer or cost
more than expected, including the clinical studies evaluating
elvitegravir for the treatment of HIV; the potential for additional
austerity measures in European countries that may increase the
amount of discount required on Gilead’s products; 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; Gilead’s ability to complete the
$5.00 billion share repurchase programs due to changes in its stock
price, corporate or other market conditions; risks and
uncertainties related to Gilead’s ability to successfully advance
Calistoga’s pipeline programs; risks that the collaboration with
Yale may not advance Gilead's product pipeline in the area of
oncology; and other risks identified from time to time in Gilead’s
reports filed with the U.S. Securities and Exchange Commission. 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 Annual Report on
Form 10-K for the year ended December 31, 2010 and other subsequent
disclosure documents filed with the Securities and Exchange
Commission and press releases. 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, Emtriva, AmBisome,
Letairis, Cayston and Ranexa 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 March
31, 2011 2010 Revenues: Product sales $ 1,863,578 $ 1,788,063
Royalty, contract and other revenues 62,516
297,790 Total revenues 1,926,094
2,085,853 Costs and expenses: Cost of goods sold 474,111
440,430 Research and development 254,446 218,664 Selling, general
and administrative 295,568 265,618
Total costs and expenses 1,024,125 924,712
Income from operations 901,969 1,161,141 Interest and other
income, net 13,832 15,645 Interest expense (41,216 )
(16,955 ) Income before provision for income taxes 874,585
1,159,831 Provision for income taxes 227,282
307,737 Net income 647,303 852,094 Net loss attributable to
noncontrolling interest 3,838 2,807 Net
income attributable to Gilead $ 651,141 $ 854,901
Net income per share attributable to
Gilead common stockholders - basic
$ 0.82 $ 0.95
Net income per share attributable to
Gilead common stockholders - diluted
$ 0.80 $ 0.92 Shares used in per share calculation -
basic 796,115 901,606 Shares used in
per share calculation - diluted 811,857
928,368
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited) (in thousands, except percentages and per
share amounts) Three Months Ended March
31,
2011
2010
Cost of goods sold reconciliation: GAAP cost of goods sold $
474,111 $ 440,430 Acquisition-related amortization of inventory
mark-up - (4,978 ) Acquisition-related amortization of purchased
intangibles (17,407 ) (14,984 ) Stock-based compensation expenses
(2,644 ) (2,853 ) Non-GAAP cost of goods sold $
454,060 $ 417,615
Product gross margin
reconciliation: GAAP product gross margin 74.6 %
75.5 % Acquisition-related amortization of inventory mark-up - 0.3
% Acquisition-related amortization of purchased intangibles 0.9 %
0.8 % Stock-based compensation expenses 0.1 % 0.2 %
Non-GAAP product gross margin (1) 75.7 %
76.7 %
Research and development expenses
reconciliation: GAAP research and development expenses $
254,446 $ 218,664 Acquisition-related transaction costs (446 ) -
Restructuring expenses 213 (2,100 ) Stock-based compensation
expenses (16,720 ) (20,069 ) Non-GAAP research and
development expenses $ 237,493 $ 196,495
Selling, general and administrative expenses reconciliation:
GAAP selling, general and administrative expenses $ 295,568 $
265,618 Acquisition-related transaction costs (378 ) -
Restructuring expenses (2,019 ) (12,584 ) Stock-based compensation
expenses (30,106 ) (23,919 ) Non-GAAP selling,
general and administrative expenses $ 263,065 $ 229,115
Operating margin reconciliation: GAAP
operating margin 46.8 % 55.7 % Acquisition-related transaction
costs 0.0 % - Acquisition-related amortization of inventory mark-up
- 0.2 % Acquisition-related amortization of purchased intangibles
0.9 % 0.7 % Restructuring expenses 0.1 % 0.7 % Stock-based
compensation expenses 2.6 % 2.2 % Non-GAAP operating
margin (1) 50.4 % 59.6 %
Net income
attributable to Gilead reconciliation: GAAP net income
attributable to Gilead $ 651,141 $ 854,901 Acquisition-related
transaction costs 824 - Acquisition-related amortization of
inventory mark-up - 3,657 Acquisition-related amortization of
purchased intangibles 12,883 11,008 Restructuring expenses 1,337
10,788 Stock-based compensation expenses 36,614
34,413 Non-GAAP net income attributable to Gilead $
702,799 $ 914,767
Diluted earnings per
share reconciliation: GAAP diluted earnings per share $ 0.80 $
0.92 Acquisition-related transaction costs 0.00 -
Acquisition-related amortization of inventory mark-up - 0.00
Acquisition-related amortization of purchased intangibles 0.02 0.01
Restructuring expenses 0.00 0.01 Stock-based compensation expenses
0.05 0.04 Non-GAAP diluted earnings per
share (1) $ 0.87 $ 0.99
Shares used in per
share calculation (diluted) reconciliation: GAAP shares used in
per share calculation (diluted) 811,857 928,368 Share impact of
current stock-based compensation guidance (2,030 )
(703 ) Non-GAAP shares used in per share calculation (diluted)
809,827 927,665
Non-GAAP
adjustment summary: Cost of goods sold adjustments $ 20,051 $
22,815 Research and development expenses adjustments 16,953 22,169
Selling, general and administrative expenses adjustments
32,503 36,503 Total non-GAAP adjustments
before tax 69,507 81,487 Income tax effect (17,849 )
(21,621 ) Total non-GAAP adjustments after tax $ 51,658 $
59,866 Note: (1) Amounts may not sum due to rounding
GILEAD SCIENCES, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (in thousands)
March 31,
December 31, 2011 2010 (unaudited) (Note 1) Cash,
cash equivalents and marketable securities $ 6,356,298 $ 5,318,071
Accounts receivable, net 1,801,212 1,621,966 Inventories 1,304,457
1,203,809 Property, plant and equipment, net 703,794 701,235
Intangible assets 1,629,971 1,425,592 Other assets 1,191,622
1,321,957 Total assets $ 12,987,354 $ 11,592,630
Current liabilities $ 2,768,765 $ 2,464,950 Long-term liabilities
4,043,228 3,005,843 Stockholders’ equity (Note 2) 6,175,361
6,121,837 Total liabilities and stockholders’ equity $
12,987,354 $ 11,592,630 Notes: (1) Derived from
audited consolidated financial statements at that date. (2) As of
March 31, 2011, there were 791,470 shares of common stock issued
and outstanding.
GILEAD SCIENCES, INC. PRODUCT
SALES SUMMARY (unaudited) (in thousands)
Three Months Ended March 31,
2011
2010
Antiviral products: Atripla – U.S. $ 462,767 $ 455,901
Atripla – Europe 253,057 217,548 Atripla – Other International
28,688 19,423 744,512 692,872
Truvada – U.S. 320,113 326,817 Truvada – Europe 299,156 297,528
Truvada – Other International 53,842 33,454
673,111 657,799 Viread – U.S. 72,480 78,007 Viread –
Europe 76,012 73,143 Viread – Other International 19,903
29,536 168,395 180,686 Hepsera – U.S.
13,874 21,565 Hepsera – Europe 21,488 33,375 Hepsera – Other
International 2,734 3,184 38,096 58,124
Emtriva – U.S. 3,902 4,244 Emtriva – Europe 1,685 1,875
Emtriva – Other International 989 1,037 6,576
7,156 Total Antiviral products – U.S. 873,136 886,534
Total Antiviral products – Europe 651,398 623,469 Total Antiviral
products – Other International 106,156 86,634
1,630,690 1,596,637 AmBisome 78,506 77,049 Letairis
62,174 55,499 Ranexa 68,293 51,243 Other products 23,915
7,635 232,888 191,426 Total product
sales $ 1,863,578 $ 1,788,063
GILEAD SCIENCES, INC.
FULL YEAR 2011 GUIDANCE RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL INFORMATION (unaudited) (in millions,
except percentages and per share amounts)
Projected product gross margin GAAP to non-GAAP
reconciliation:
April 20,
2011
GAAP projected product gross margin 73% - 75% Acquisition-related
amortization of purchased intangibles 1% - 1% Non-GAAP projected
product gross margin (1) 74% - 76%
Projected research and
development expenses GAAP to non-GAAP reconciliation: GAAP
projected research and development expenses $1,036 - $1,096
Stock-based compensation expenses ($86 - $96) Non-GAAP projected
research and development expenses $950 - $1,000
Projected
selling, general and administrative expenses GAAP to non-GAAP
reconciliation: GAAP projected selling, general and
administrative expenses $1,101 - $1,162 Stock-based compensation
expenses ($101 - $112) Non-GAAP projected selling, general and
administrative expenses $1,000 - $1,050
Projected diluted
EPS impact of acquisition-related and stock-based compensation
expenses: Acquisition-related expenses $0.06 - $0.06
Stock-based compensation expenses $0.19 - $0.22 Projected diluted
EPS impact of acquisition-related and stock-based compensation
expenses $0.25 - $0.28 Note (1)
Stock-based compensation expenses have a
less than one percent impact on non-GAAP projected product gross
margin
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