Second Quarter and
First Half 2020
- Second Quarter Product Sales of $5.1
billion -
- First Half Product Sales of $10.5 billion
-
- Second Quarter GAAP Loss of $(2.66) per
share -
- Second Quarter Non-GAAP Diluted EPS of
$1.11 per share -
Revised Full Year 2020
Guidance
- Product Sales of $23 billion to $25
billion -
- Non-GAAP Diluted EPS of $6.25 to $7.65 per
share -
Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results
of operations for the second quarter and first half 2020.
“Gilead’s first half performance demonstrates the strength and
durability of our core HIV business, even as we navigated the
expected impact of the COVID-19 pandemic. We are already starting
to see early signs of recovery from this impact and we are fully
confident in our long-term HIV leadership,” said Daniel O’Day,
Chairman and Chief Executive Officer of Gilead Sciences. “We are
also making important progress with our pipeline. In addition to
the critical work of advancing remdesivir, we have continued to
strengthen our presence in immuno-oncology. This includes six
immuno-oncology agreements this year and the recent FDA approval
for TecartusTM in mantle cell lymphoma.”
Financial Results
- Total revenues for the second quarter and first half 2020 were
$5.1 billion and $10.7 billion, respectively, compared to $5.7
billion and $11.0 billion, respectively, for the same periods in
2019.
- GAAP net loss and diluted loss per share for the second quarter
2020 were $(3.3) billion and $(2.66), respectively, compared to net
income and diluted EPS of $1.9 billion and $1.47, respectively, for
the same period in 2019.
- GAAP net loss for the second quarter 2020 included an acquired
in-process research and development (“IPR&D”) charge of $4.5
billion related to Gilead’s acquisition of Forty Seven, Inc (“Forty
Seven”).
- Non-GAAP net income and diluted EPS for the second quarter 2020
were $1.4 billion and $1.11, respectively, compared to $2.2 billion
and $1.72, respectively, for the same period in 2019.
- Gilead’s core business delivered a solid performance, despite
the global impacts of COVID-19.
Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions, except per share
amounts)
2020
2019
2020
2019
Product sales
$
5,067
$
5,607
$
10,534
$
10,807
Royalty, contract and other revenues
76
78
157
159
Total revenues
$
5,143
$
5,685
$
10,691
$
10,966
Net income (loss) attributable to
Gilead
$
(3,339
)
$
1,880
$
(1,788
)
$
3,855
Non-GAAP net income attributable to
Gilead(1)
$
1,400
$
2,196
$
3,539
$
4,337
Diluted earnings (loss) per share
$
(2.66
)
$
1.47
$
(1.42
)
$
3.01
Non-GAAP diluted earnings per share(1)
$
1.11
$
1.72
$
2.80
$
3.39
________________________________
(1) Starting in 2020, Gilead no longer
regularly excludes share-based compensation expense from its
non-GAAP financial information. To conform to this change, the
prior period non-GAAP financial information has been recast to
include share-based compensation expense. A reconciliation between
GAAP and non-GAAP financial information is provided in the tables
on pages 12 through 14.
Total Product Sales
Total product sales reflected a solid financial
performance, despite the global impacts of COVID-19. Total product
sales decreased 10% to $5.1 billion for the second quarter 2020 and
3% to $10.5 billion for the first half 2020, compared to $5.6
billion and $10.8 billion, respectively, for the same periods in
2019.
- The decreases were primarily driven by:
- Lower sales volume of chronic hepatitis C virus (“HCV”)
products due to COVID-19, which led to fewer healthcare provider
(“HCP”) visits and screenings;
- Lower sales of Letairis® (ambrisentan 5 mg and 10 mg) and
Ranexa® (ranolazine 500 mg and 1000 mg) after generic entries in
the first half 2019; and
- Approximately $160 million of favorable adjustments for
statutory rebates primarily related to HCV and HIV sales recorded
in Europe in the second quarter 2019, which did not reoccur in
2020.
- The decreases were partially offset by:
- Underlying demand growth in the core HIV business, with
continued patient uptake of Biktarvy ® (bictegravir 50
mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg), and Descovy ®
(emtricitabine 200 mg/tenofovir alafenamide 25 mg) for pre-exposure
prophylaxis (“PrEP”).
HIV product sales decreased 1% to $4.0 billion for the
second quarter 2020 and increased 6% to $8.1 billion for the first
half 2020, compared to $4.0 billion and $7.7 billion, respectively,
for the same periods in 2019. The increases in the first half 2020,
despite the global impacts of COVID-19, were primarily due to the
underlying strength of the HIV franchise as demonstrated by
increases in Biktarvy share and overall Gilead treatment share in
the U.S.
Second Quarter
- The decreases for the second quarter 2020 were driven by:
- Lower sales volume of Truvada® (emtricitabine (“FTC”) and
tenofovir disoproxil fumarate (“TDF”))-based products;
- COVID-19 impact including lower PrEP demand, driven by reduced
initiations and therapy discontinuations due to reduced HCP visits
and impact on social dynamics;
- Unfavorable payer mix in the U.S.;
- The reversal of the pull forward of revenues into the first
quarter due to COVID-19, as outlined in Gilead’s prior quarter
earnings release; and
- The favorable adjustments for statutory rebates in Europe
recorded in the second quarter 2019.
- The decreases were substantially offset by the continued
patient uptake of Biktarvy and Descovy for PrEP®.
First Half
The HIV franchise demonstrated growth of 6% in the first half
2020 compared to prior year, driven by increased demand including
for Biktarvy.
HCV product sales decreased 47% to $448 million for the
second quarter 2020 and 28% to $1.2 billion for the first half
2020, compared to $842 million and $1.6 billion, respectively, for
the same periods in 2019.
- The decreases were primarily due to:
- Lower sales volume driven by lower patient starts in the U.S.
and Europe attributable to a decrease in HCP visits and screenings
due to COVID-19;
- Lower average net selling price; and
- The second quarter 2019 favorable adjustments for statutory
rebates recorded in Europe.
Yescarta® (axicabtagene ciloleucel) generated $156
million and $296 million in sales during the second quarter and
first half 2020, respectively, compared to $120 million and $216
million, respectively, for the same periods in 2019. The increases
were primarily driven by the continued uptake in Europe.
Product Sales by
Geography
U.S. product sales decreased 7% to $3.8 billion for the second
quarter 2020 and 1% to $7.8 billion for the first half 2020,
compared to the same periods in 2019.
- The decreases were primarily due to:
- Lower sales of Letairis and Ranexa after generic entries in the
first half 2019;
- Lower sales volume of HCV products driven by lower patient
starts attributable to a decrease in HCP visits and screenings due
to COVID-19; and
- The reversal of the pull forward of revenues into the first
quarter due to COVID-19, as outlined in Gilead’s prior quarter
release.
- The decreases were partially offset by HIV treatment demand
growth driven by the continued patient uptake of Biktarvy and the
increased usage of Descovy for PrEP.
Europe product sales decreased 30% to $724 million for the
second quarter 2020 and 14% to $1.7 billion for the first half
2020, compared to the same periods in 2019.
- The decreases were primarily due to lower sales volume of HCV
products driven by lower patient starts due to COVID-19. The
decreases were also impacted by the second quarter 2019 favorable
adjustments for statutory rebates.
Other international product sales increased 12% to $573 million
for the second quarter 2020 and 9% to $1.1 billion, for the first
half 2020, compared to the same periods in 2019.
- The increases were primarily due to higher sales volume of
Epclusa® (sofosbuvir 400 mg/velpatasvir 100 mg), Biktarvy and
Vemlidy® (tenofovir alafenamide 25 mg), partially offset by lower
average net selling price.
Operating
Expenses
Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Research and development expenses
(“R&D”)(1)
$
1,299
$
995
$
2,303
$
1,926
Non-GAAP R&D expenses
$
1,186
$
996
$
2,190
$
1,928
Acquired IPR&D expenses(1)
$
4,524
$
165
$
4,621
$
291
Non-GAAP Acquired IPR&D
expenses(1)
$
—
$
—
$
—
$
—
Selling, general and administrative
expenses (“SG&A”)
$
1,239
$
1,095
$
2,315
$
2,125
Non-GAAP SG&A expenses
$
1,164
$
1,096
$
2,240
$
2,126
________________________________
(1) Beginning in the second quarter 2020,
Acquired IPR&D expenses were reported separately from R&D
expenses in Gilead’s Condensed Consolidated Statements of
Operations to provide additional information. Prior periods have
been recast to reflect the change. Acquired IPR&D expenses
reflect IPR&D impairments as well as the initial costs of
externally developed IPR&D projects, acquired directly in a
transaction other than a business combination, that do not have an
alternative future use, including upfront payments related to
various collaborations and the initial costs of rights to IPR&D
projects. Acquired IPR&D expenses are excluded from Gilead’s
Non-GAAP financial information.
During the second quarter 2020, compared to the same period in
2019:
- R&D expenses and non-GAAP R&D expenses increased
primarily due to higher clinical trial and manufacturing ramp-up
expenses related to remdesivir, partially offset by lower clinical
trial expenses from other pipeline programs as a result of Gilead’s
pause or postponement of other clinical trials during the COVID-19
pandemic.
- Acquired IPR&D expenses increased primarily due to a $4.5
billion charge recorded in connection with Gilead’s acquisition of
Forty Seven.
- SG&A expenses and non-GAAP SG&A expenses for the second
quarter 2020 increased primarily driven by a $97 million accrual
related to a previously disclosed Department of Justice
investigation and certain remdesivir donations, partially offset by
lower operating expenses due to COVID-19. In addition, the SG&A
expenses in the second quarter 2020 reflect increased expenses as a
result of the acquisition of Forty Seven.
Other Income
(Expense), Net
Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Other income (expense), net
$
250
$
228
$
92
$
595
Non-GAAP other income (expense), net
$
49
$
171
$
174
$
341
During the second quarter 2020, compared to the same period in
2019:
- Other income (expense), net increased by $22 million primarily
due to favorable changes in the fair value of investments in equity
securities, partially offset by lower interest income.
- Non-GAAP Other income (expense), net decreased by $122 million
primarily due to lower interest income.
Effective Tax Rate
The GAAP effective tax rate (“ETR”) and non-GAAP ETR for the
second quarter 2020 were (12.5)% and 22.8%, respectively, compared
to 22.2% and 21.5% for the same period in 2019, respectively. The
negative GAAP ETR for the second quarter 2020 was primarily due to
a non-deductible $4.5 billion IPR&D charge related to Gilead’s
acquisition of Forty Seven. The year-over-year increase in non-GAAP
ETR is primarily due to a shift in jurisdictional mix of
earnings.
Cash, Cash Equivalents and Marketable
Debt Securities
As of June 30, 2020, Gilead had $21.2 billion of cash, cash
equivalents and marketable debt securities, compared to $25.8
billion as of December 31, 2019. During the second quarter 2020,
Gilead generated $2.6 billion in operating cash flow, utilized $4.8
billion primarily related to the acquisition of Forty Seven, paid
cash dividends of $856 million and utilized $54 million on stock
repurchases.
Revised Full Year 2020
Guidance
Gilead revised its full year 2020 guidance, initially provided
on February 4, 2020.
(In millions, except percentages and
per share amounts)
Initially Provided
February 4, 2020
Updated July 30,
2020
Product Sales
$21,800 - $22,200
$23,000 - $25,000
Non-GAAP
Product Gross Margin
86% - 87%
86% - 87%
R&D Expenses
Mid-single digit percentage
growth
Mid-teens percentage growth
SG&A Expenses
Mid-single digit percentage
growth
High-single digit percentage
growth
Operating Income
$10,100 - $10,800
$10,700 - $13,000
Effective Tax Rate
~ 21%
~ 21%
Diluted EPS
$6.05 - $6.45
$6.25 - $7.65
GAAP Diluted EPS
$5.15 - $5.55
$0.83 - $2.23
COVID-19 Outlook
The impact of COVID-19 on Gilead’s business continues to be
subject to a high degree of uncertainty given unpredictable
dynamics related to the incidence, spread and efforts to treat
COVID-19 around the world. However, Gilead is in a strong position
due to underlying demand drivers, its level of product
differentiation and patient benefit in Gilead’s core HIV franchise.
Gilead expects a gradual recovery in HIV PrEP. In HCV, Gilead
expects patient starts to re-gain momentum in the third quarter
2020 and beyond.
Business Highlights
During the second quarter 2020, Gilead made important strides in
advancing work across each of three long-term ambitions laid out in
its corporate strategy: (i) to bring 10+ transformative therapies
to patients by 2030; (ii) to be the biotech employer and partner of
choice; and (iii) to deliver shareholder value in a sustainable and
responsible manner. This progress occurred amid challenges posed by
the COVID-19 pandemic and an increased focus across the
organization on rapidly advancing remdesivir to ensure rapid and
broad access for patients, subject to clinical trial outcomes and
regulatory approvals.
Corporate Development:
Gilead completed an acquisition and entered into several
strategic transactions during the second quarter 2020 to develop a
robust immuno-oncology portfolio.
- In April 2020, Gilead completed its acquisition of Forty Seven.
Pursuant to the acquisition, Gilead gained magrolimab, an
investigational monoclonal antibody in clinical development for the
treatment of a number of hematological cancers.
- In May 2020, Gilead entered into a transaction to establish a
10-year partnership with Arcus Biosciences, Inc (“Arcus”). Under
the terms of the transaction, which closed in July 2020, Gilead
made an upfront payment of $175 million and acquired 6 million
additional shares of Arcus’ common stock for $200 million. Arcus is
building a portfolio of novel investigational products that target
important mechanisms involved in tumor evasion of the immune system
and developing drug candidates that target cell-intrinsic pathways
important for cancer growth and metastasis. Arcus is also advancing
antibody products that target immune checkpoint receptors,
including PD-(L)1 and TIGIT. Gilead has the right to opt-in to all
current and future investigational product candidates that emerge
from Arcus’ research portfolio for the ten years following the
closing of the transaction. Upon Gilead’s exercise of an option for
a program, unless Arcus opts out according to terms of the
transaction, the companies will co-develop and share global
development costs and will co-commercialize and share profits in
the U.S.
- Gilead and Kite Pharma Inc. (“Kite”), a Gilead company, entered
into two additional agreements to further advance their
immuno-oncology pipeline: a three-year cancer immunotherapy
research collaboration with oNKo-innate to support discovery and
development of next-generation drug and engineered cell therapies
focused on natural killer cells; and a license and collaboration
agreement with Teneobio, Inc. (“Teneobio”), to collaborate on
next-generation dual-targeting chimeric antigen receptor (“CAR”) T
cell therapies in multiple myeloma utilizing Teneobio’s UniAb
antibodies.
- In June 2020, Gilead entered into a transaction with Pionyr
Immunotherapeutics, Inc. (“Pionyr”), a privately held company
pursuing novel biology in the field of immuno-oncology.
Subsequently, on July 13, 2020, Gilead closed the transaction and
acquired a 49.9% equity interest in Pionyr and an exclusive option
to purchase the remainder of Pionyr. Under the terms of the
transaction, Gilead will pay $275 million in cash to Pionyr’s
shareholders, subject to certain customary adjustments. From the
first anniversary of the closing date, Gilead may choose to
exercise its option to purchase the remaining equity interest from
Pionyr’s current shareholders for a $315 million option exercise
fee and up to $1.2 billion in potential future milestone payments
upon achievement of certain development and regulatory milestones,
in each case subject to certain negotiated adjustments. Pionyr’s
Myeloid Tuning™ therapies have the potential to treat patients who
currently do not benefit from checkpoint inhibitor therapies.
- In an event subsequent to the second quarter 2020, in July
2020, Gilead entered into a transaction with Tizona Therapeutics,
Inc. (“Tizona”), a privately held company developing cancer
immunotherapies. Under the terms of the transaction, Gilead will
pay $300 million in cash to Tizona’s shareholders, subject to
certain customary adjustments, and it will obtain a 49.9% equity
interest in Tizona and an exclusive option to purchase the
remainder of Tizona. From the first anniversary of the closing
date, Gilead may choose to exercise its option to purchase the
remaining equity interest from Tizona’s current shareholders for up
to $1.3 billion, including an option fee and potential future
milestone payments, in each case subject to certain negotiated
adjustments. The transaction is expected to close in the third
quarter 2020, subject to regulatory approvals and other customary
closing conditions.
Remdesivir and Gilead’s Ongoing COVID-19 Pandemic
Response:
Ensuring Broader Access to Remdesivir.
- Regulatory approvals and authorizations of remdesivir for the
treatment of COVID-19 continue to facilitate broader access to
remdesivir. In May 2020, the U.S. Food and Drug Administration
(“FDA”) issued an Emergency Use Authorization (“EUA”) for Veklury®
(remdesivir), an investigational antiviral for the treatment of
hospitalized patients with severe COVID-19. The EUA is temporary
and does not take the place of the formal new drug application
submission, review and approval process. Veklury (remdesivir) has
not been approved by FDA for any use. Following FDA’s issuance of
the EUA, in May 2020, the Japanese Ministry of Health, Labour and
Welfare granted regulatory approval of Veklury (remdesivir) for the
treatment of patients with severe COVID-19 under an exceptional
approval pathway. In addition, in July 2020, the European
Commission granted conditional Marketing Authorization for Veklury
(remdesivir) for the treatment of COVID-19, which represents the
first approved treatment for COVID-19 in the European Union.
- Gilead completed delivery of its previously announced donation
of its initial supply of 1.5 million doses of remdesivir at the end
of June 2020. As Gilead transitions beyond this donation, Gilead
set the pricing of Veklury (remdesivir) at $390 per vial for
governments of developed countries and $520 per vial for U.S.
private insurance companies and others. To facilitate broad and
equitable access, the pricing was set well below the value that
Gilead believes it provides to the healthcare system. In the
developing world, Gilead has entered into agreements with generic
manufacturers to deliver remdesivir at a substantially lower
cost.
- In June 2020, Gilead entered into an agreement with the U.S.
Department of Health and Human Services (“HHS”) to make available
for purchase more than 500,000 treatment courses through the end of
September 2020, allowing American hospitals to purchase Veklury
(remdesivir) in amounts allocated by HHS as identified by state
health departments. In July 2020, Gilead entered into an agreement
with the European Commission to enable the European Commission to
centrally purchase Veklury (remdesivir) over the next few months
under the Emergency Support Instrument for allocation to European
Union member states and the United Kingdom.
- In order to expand manufacturing production and broadly supply
remdesivir, Gilead implemented process refinements to substantially
shorten the manufacturing lead time from raw materials to finished
product. Gilead has also supplemented internal manufacturing with
significant additional capacity from multiple partners in North
America, Europe and Asia. Gilead currently expects to have
manufactured more than two million remdesivir treatment courses by
the end of 2020, and several million more treatment courses in
2021.
Advancing Remdesivir Clinical Development:
Gilead made rapid progress in advancing remdesivir as a
potential treatment for COVID-19, and during the second quarter
2020, data were released from several key trials that further
enhance the understanding of remdesivir and point to its important
role in treating patients with COVID-19.
- In June 2020, Gilead announced the results from the Phase 3
SIMPLE trial evaluating five-day and ten-day dosing durations of
remdesivir in hospitalized patients with moderate COVID-19
pneumonia. The study demonstrated that the five-day treatment
course resulted in significantly greater clinical improvement
versus treatment with standard of care alone. These data
corroborate the results from the first Gilead Phase 3 SIMPLE study,
announced in April 2020, which demonstrated similar clinical
improvements in remdesivir-treated patients with severe symptoms of
COVID-19, regardless of whether they received a five-day or ten-day
treatment course.
- In April 2020, the U.S. National Institute of Allergy and
Infectious Diseases announced that preliminary results from their
global, placebo-controlled trial of remdesivir met the primary
endpoint, and remdesivir was found to shorten the time to recovery
for hospitalized patients with COVID-19 when compared to placebo.
In addition, the New England Journal of Medicine published data on
53 patients treated with remdesivir through the compassionate use
program, which demonstrated clinical improvement and no new safety
signals.
- Gilead has a plan for the next wave of remdesivir clinical
development, which will study remdesivir in treating earlier in the
disease, in combination with other therapies and in additional
patient groups. Gilead announced initiation of a Phase 1a clinical
study to evaluate the safety, tolerability and pharmacokinetics of
an investigational, inhaled solution of remdesivir in healthy
volunteers.
- Gilead also announced the company’s plans for trials using
intravenous infusions in outpatient settings such as infusion
centers and nursing homes; trials evaluating remdesivir in
combination with the JAK inhibitor, baricitinib, and the IL-6
receptor antagonist tocilizumab; and trials including vulnerable
patient populations, such as children, pregnant women and patients
with end-stage renal disease.
Other Pipeline Updates:
Gilead continued to make progress with its pipeline programs
during the second quarter 2020.
- In oncology, new data were presented at the 2020 American
Society of Clinical Oncology Annual Meeting highlighting Kite’s
leading cell therapy portfolio and magrolimab, the investigational
antibody gained through the Forty Seven acquisition. The
presentation included new clinical study data evaluating Yescarta
in patients with relapsed or refractory indolent non-Hodgkin
lymphoma, as well as updated data for magrolimab in combination
with azacitidine in patients with myelodysplastic syndrome and
patients with acute myeloid leukemia.
- In HIV, new data were presented at the 23rd International AIDS
Conference in July. The presentation included new clinical study
data for a sustained-delivery subcutaneous formulation of Gilead’s
novel investigational HIV-1 capsid inhibitor lenacapavir, which is
being developed as a component of a long-acting treatment regimen
in combination with other antivirals for people living with HIV;
additional data evaluating the safety and efficacy of Biktarvy as a
treatment for HIV in adults aged 65 or older; data from the
DISCOVER trial indicating no increase in sexual health risk
behavior among those taking Descovy for PrEP or Truvada for PrEP,
and an update on Gilead’s cure research strategy through data on
dose-dependent immune responses with vesatolimod, an
investigational toll-like receptor 7 (TL7R) agonist.
- In inflammatory diseases, new data were presented at the
European E-Congress of Rheumatology 2020. The presentation included
new analyses from two clinical trials conducted in partnership with
Galapagos NV (“Galapagos”), which evaluated filgotinib, an
investigational, oral, selective JAK inhibitor, in adults with
psoriatic arthritis. Gilead and Galapagos also announced positive
topline results from a Phase 2b/3 trial evaluating filgotinib in
moderately to severely active ulcerative colitis. Filgotinib
demonstrated greater efficacy compared with placebo in the
induction and maintenance of remission in the SELECTION trial,
while rates of adverse events were low and comparable across
treatment groups. In July 2020, Gilead and Galapagos announced that
the European Medicines Agency’s (“EMA”) Committee for Medicinal
Products for Human Use (“CHMP”) adopted a positive opinion for
Jyseleca® (filgotinib 200 mg and 100 mg tablets), an
investigational, once-daily, oral, selective JAK inhibitor for the
treatment of adults with moderate to severe rheumatoid arthritis
who have responded inadequately or are intolerant to one or more
disease modifying anti-rheumatic drugs. The CHMP positive opinion
is a scientific recommendation to the European Commission to grant
marketing authorization in Europe.
FDA Approval of Tecartus™ (brexucabtagene autoleucel):
FDA has granted accelerated approval to Tecartus, the first and
only approved CAR T cell therapy for the treatment of adult
patients with relapsed or refractory mantle cell lymphoma. The
approval of this one-time therapy follows a priority review and FDA
Breakthrough Therapy Designation and is based on results of ZUMA-2,
a single-arm, open-label study in which 87 percent of patients
responded to a single infusion of Tecartus, including 62 percent of
patients achieving a complete response. Among patients evaluable
for safety, 18 percent experienced Grade 3 or higher cytokine
release syndrome and 37 percent experienced Grade 3 or higher
neurologic toxicities.
European Cell Therapy Manufacturing Facility: In June
2020, Kite received approval to implement a variation to the
Yescarta Marketing Authorization from EMA for end-to-end
manufacturing. With this approval, Kite's European manufacturing
facility, which is designed and dedicated to the manufacture of
individual cell therapies, is now fully operational.
Board Appointment: In June 2020, Javier Rodriguez, the
Chief Executive Officer (“CEO”) of DaVita Inc., joined Gilead’s
Board of Directors. Mr. Rodriguez’s appointment brings the
perspective of an active CEO who has deep expertise in the
healthcare industry.
Non-GAAP Financial
Information
The information presented in this document has been prepared in
accordance with U.S. generally accepted accounting principles
(“GAAP”), unless otherwise noted as non-GAAP. Management believes
non-GAAP information is useful for investors, when considered in
conjunction with Gilead’s GAAP financial information, because
management uses such information internally for its operating,
budgeting and financial planning purposes. Non-GAAP information is
not prepared under a comprehensive set of accounting rules and
should only be used to supplement an understanding of Gilead’s
operating results as reported under GAAP. Non-GAAP financial
information excludes acquisition-related expenses including
amortization and impairments of acquired intangible assets, charges
for in-process research and development, upfront collaboration and
licensing expenses, and other items that are considered unusual or
not representative of underlying trends of Gilead’s business, fair
value adjustments of equity securities and discrete tax charges or
benefits associated with changes in tax related laws and
guidelines. Although Gilead consistently excludes the amortization
of acquired intangible assets from the non-GAAP financial
information, management believes that it is important for investors
to understand that such intangible assets were recorded as part of
acquisitions and contribute to ongoing revenue generation. Non-GAAP
measures may be defined and calculated differently by other
companies in the same industry. Reconciliations of the non-GAAP
financial measures to the most directly comparable GAAP financial
measures are provided in the tables on pages 12 through 14.
Conference Call
At 4:30 p.m. Eastern Time today, Gilead’s management will host a
conference call and a simultaneous webcast to discuss the company’s
second quarter 2020 financial results and provide a business
update. The live webcast of the call can be accessed at Gilead’s
Investors page at http://investors.gilead.com. Please connect to
the website at least 15 minutes prior to the start of the call to
allow adequate time for any software download that may be required
to listen to the webcast. Alternatively, please call 877-359-9508
(U.S.) or 224-357-2393 (international) and dial the conference ID
9561515 to access the call. Telephone replay will be available
approximately two hours after the call through 8:00 p.m. Eastern
Time, August 1, 2020. To access the replay, please call
855-859-2056 (U.S.) or 404-537-3406 (international) and dial the
conference ID 9561515. The webcast will be archived on
www.gilead.com for one year.
About Gilead Sciences
Gilead Sciences, Inc. is a research-based biopharmaceutical
company that discovers, develops and commercializes innovative
medicines in areas of unmet medical need. The company strives to
transform and simplify care for people with life-threatening
illnesses around the world. Gilead has operations in more than 35
countries worldwide, with headquarters in Foster City,
California.
Forward-Looking
Statements
Statements included in this press release that are not
historical in nature are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Gilead cautions readers that forward-looking statements are subject
to certain risks and uncertainties that could cause actual results
to differ materially. These risks and uncertainties include: the
risks and uncertainties related to the impact of the COVID-19
pandemic on Gilead’s business, financial condition and results of
operations; the risks and uncertainties related to the development
and distribution of remdesivir as a treatment for COVID-19,
including the possibility that FDA and other regulatory authorities
may not approve remdesivir as a treatment for COVID-19, Gilead may
never successfully commercialize remdesivir and Gilead may be
unable to recoup the expenses incurred to date and future expenses
related to the development and production of remdesivir; the risk
that Gilead may be unable to sufficiently scale up the production
of remdesivir in the currently anticipated timelines and unable to
meet future supply needs; Gilead’s ability to achieve its
anticipated full year 2020 financial results, including as a result
of potential adverse revenue impacts from COVID-19 or increases in
expenses due to the development and commercialization of
remdesivir; Gilead’s ability to make progress on any of its
long-term ambitions laid out in its corporate strategy; Gilead’s
ability to accelerate or sustain revenues for its antiviral and
other programs; Gilead’s ability to realize the potential benefits
of acquisitions, collaborations or licensing arrangements,
including those of or with Forty Seven, Arcus, oNKo-innate,
Teneobio, Pionyr, and Tizona; the ability of the parties to close
the Tizona transaction in a timely manner or at all; the ability to
initiate, progress or complete clinical trials within currently
anticipated timeframes, including the ongoing and additional
clinical trials for remdesivir for the treatment of COVID-19; the
possibility of unfavorable results from ongoing and additional
clinical trials involving Veklury (remdesivir), Tecartus, Yescarta,
Biktarvy, Descovy for PrEP and Truvada for PrEP; the risk that
safety and efficacy data from clinical studies may not warrant
further development of Gilead’s product candidates, including
remdesivir, magrolimab, lenacapavir, vesatolimod and filgotinib, or
the product candidates of Gilead’s strategic partners; Gilead’s
ability to submit new drug applications for new product candidates
in the currently anticipated timelines; Gilead’s ability to receive
regulatory approvals in a timely manner or at all, for new and
current products, including FDA and European Commission approval of
filgotinib for the treatment of rheumatoid arthritis and European
Commission approval of KTE-X19 for the treatment of relapsed or
refractory mantle cell lymphoma; Gilead’s ability to successfully
commercialize its products; the risk of potential disruptions to
the manufacturing and supply chain of Gilead’s products; the risk
that private and public payers may be reluctant to provide, or
continue to provide, coverage or reimbursement for new products; a
larger than anticipated shift in payer mix to more highly
discounted payer segments; market share and price erosion caused by
the introduction of generic versions of Gilead products; the risk
that physicians and patients may not see advantages of these
products over other therapies and may therefore be reluctant to
prescribe the products; and other risks identified from time to
time in Gilead’s reports filed with the U.S. Securities and
Exchange Commission (the “SEC”). In addition, Gilead makes
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosures. Gilead
bases its estimates on historical experience and on various other
market specific and other relevant assumptions that it believes to
be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources.
There may be other factors of which Gilead is not currently aware
that may affect matters discussed in the forward-looking statements
and may also cause actual results to differ significantly from
these estimates. Further, results for the quarter ended June 30,
2020 are not necessarily indicative of operating results for any
future periods. Information about these and other risks,
uncertainties and factors can be found in Gilead’s periodic reports
filed with the SEC, including annual reports on Form 10-K,
quarterly reports on Form 10-Q and 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 or supplement any such
forward-looking statements other than as required by law. Any
forward-looking statements speak only as of the date hereof or as
of the dates indicated in the statements.
Gilead owns or has rights to various
trademarks, copyrights and trade names used in its business,
including the following: GILEAD®, GILEAD SCIENCES®, AMBISOME®,
ATRIPLA®, BIKTARVY®, CAYSTON®, COMPLERA®, DESCOVY®, DESCOVY FOR
PREP®, EMTRIVA®, EPCLUSA®, EVIPLERA®, GENVOYA®, HARVONI®, HEPSERA®,
JYSELECA®, LETAIRIS®, ODEFSEY®, RANEXA®, SOVALDI®, STRIBILD®,
TECARTUSTM, TRUVADA®, TRUVADA FOR PREP®, TYBOST®, VEKLURY®
(remdesivir), VEMLIDY®, VIREAD®, VOSEVI®, YESCARTA® and
ZYDELIG®.
This report also refers to trademarks, service
marks and trade names of other companies.
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 OPERATIONS
(unaudited)
(in millions, except per share
amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Revenues:
Product sales
$
5,067
$
5,607
$
10,534
$
10,807
Royalty, contract and other revenues
76
78
157
159
Total revenues
5,143
5,685
10,691
10,966
Costs and expenses:
Cost of goods sold
1,064
1,000
2,033
1,957
Research and development expenses
1,299
995
2,303
1,926
Acquired in-process research and
development expenses
4,524
165
4,621
291
Selling, general and administrative
expenses
1,239
1,095
2,315
2,125
Total costs and expenses
8,126
3,255
11,272
6,299
Income (loss) from operations
(2,983
)
2,430
(581
)
4,667
Interest expense
(240
)
(248
)
(481
)
(502
)
Other income (expense), net
250
228
92
595
Income (loss) before provision for income
taxes
(2,973
)
2,410
(970
)
4,760
Provision for income taxes
373
535
838
917
Net income (loss)
(3,346
)
1,875
(1,808
)
3,843
Net loss attributable to noncontrolling
interest
(7
)
(5
)
(20
)
(12
)
Net income (loss) attributable to
Gilead
$
(3,339
)
$
1,880
$
(1,788
)
$
3,855
Net income (loss) per share attributable
to Gilead common stockholders - basic
$
(2.66
)
$
1.48
$
(1.42
)
$
3.03
Shares used in per share calculation -
basic
1,255
1,270
1,258
1,273
Net income (loss) per share attributable
to Gilead common stockholders - diluted
$
(2.66
)
$
1.47
$
(1.42
)
$
3.01
Shares used in per share calculation -
diluted
1,255
1,277
1,258
1,280
Cash dividends declared per share
$
0.68
$
0.63
$
1.36
$
1.26
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL INFORMATION(2)
(unaudited)
(in millions, except
percentages and per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Cost of goods sold
reconciliation:
GAAP cost of goods sold
$
1,064
$
1,000
$
2,033
$
1,957
Acquisition-related – amortization of
purchased intangibles
(266
)
(273
)
(532
)
(556
)
Non-GAAP cost of goods sold
$
798
$
727
$
1,501
$
1,401
Product gross margin
reconciliation:
GAAP product gross margin
79.0
%
82.2
%
80.7
%
81.9
%
Acquisition-related – amortization of
purchased intangibles
5.2
%
4.9
%
5.1
%
5.1
%
Non-GAAP product gross margin(7)
84.3
%
87.0
%
85.8
%
87.0
%
Research and development expenses
reconciliation:
GAAP research and development expenses
$
1,299
$
995
$
2,303
$
1,926
Acquisition-related – other costs(4)
(113
)
—
(113
)
—
Other(5)
—
1
—
2
Non-GAAP research and development
expenses
$
1,186
$
996
$
2,190
$
1,928
Acquired IPR&D expenses
reconciliation(1) :
GAAP acquired IPR&D expenses
$
4,524
$
165
$
4,621
$
291
Acquired IPR&D expenses
(4,524
)
(165
)
(4,621
)
(291
)
Non-GAAP acquired IPR&D expenses
$
—
$
—
$
—
$
—
Selling, general and administrative
expenses reconciliation:
GAAP selling, general and administrative
expenses
$
1,239
$
1,095
$
2,315
$
2,125
Acquisition-related – other costs(4)
(77
)
—
(77
)
—
Other(5)
2
1
2
1
Non-GAAP selling, general and
administrative expenses
$
1,164
$
1,096
$
2,240
$
2,126
Operating margin reconciliation
GAAP operating margin
(58.0
)
%
42.7
%
(5.4
)
%
42.6
%
Acquired IPR&D expenses(1)
88.0
%
2.9
%
43.2
%
2.7
%
Acquisition-related – amortization of
purchased intangibles
5.2
%
4.8
%
5.0
%
5.1
%
Acquisition-related – other costs(4)
3.7
%
—
%
1.8
%
—
%
Non-GAAP operating margin(7)
38.8
%
50.4
%
44.5
%
50.3
%
Other income (expense), net
reconciliation:
GAAP other income (expense), net
$
250
$
228
$
92
$
595
Losses (gains) from equity securities,
net
(201
)
(57
)
82
(254
)
Non-GAAP other income (expense), net
$
49
$
171
$
174
$
341
Effective tax rate
reconciliation:
GAAP effective tax rate
(12.5
)
%
22.2
%
(86.4
)
%
19.3
%
Income tax effect of above non-GAAP
adjustments
35.3
%
(0.7
)
%
107.4
%
(0.1
)
%
Non-GAAP effective tax rate(7)
22.8
%
21.5
%
21.0
%
19.2
%
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL INFORMATION(2) - (Continued)
(unaudited)
(in millions, except
percentages and per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income attributable to Gilead
reconciliation:
GAAP net income (loss) attributable to
Gilead
$
(3,339
)
$
1,880
$
(1,788
)
$
3,855
Acquired IPR&D expenses(1)
4,514
128
4,589
226
Acquisition-related – amortization of
purchased intangibles
224
252
448
512
Acquisition-related – other costs(4)
148
—
148
—
Losses (gains) from equity securities,
net
(149
)
(63
)
107
(254
)
Discrete tax charges(3)
4
—
37
—
Other(5)
(2
)
(1
)
(2
)
(2
)
Non-GAAP net income attributable to
Gilead
$
1,400
$
2,196
$
3,539
$
4,337
Diluted earnings per share
reconciliation:
GAAP diluted earnings (loss) per
share(6)
$
(2.66
)
$
1.47
$
(1.42
)
$
3.01
Acquired IPR&D expenses(1)
3.58
0.10
3.62
0.18
Acquisition-related – amortization of
purchased intangibles
0.18
0.20
0.35
0.40
Acquisition-related – other costs(4)
0.12
—
0.12
—
Losses (gains) from equity securities,
net
(0.12
)
(0.05
)
0.08
(0.20
)
Discrete tax charges(3)
—
—
0.03
—
Non-GAAP diluted earnings per
share(6)(7)
$
1.11
$
1.72
$
2.80
$
3.39
Non-GAAP adjustment summary:
Cost of goods sold adjustments
$
266
$
273
$
532
$
556
Research and development expenses
adjustments
113
(1
)
113
(2
)
Acquired IPR&D expenses(1)
4,524
165
4,621
291
Selling, general and administrative
expenses adjustments
75
(1
)
75
(1
)
Other income (expense), net
adjustments
(201
)
(57
)
82
(254
)
Total non-GAAP adjustments before tax
4,777
379
5,423
590
Income tax effect
(42
)
(63
)
(133
)
(108
)
Discrete tax charges(3)
4
—
37
—
Total non-GAAP adjustments after tax
$
4,739
$
316
$
5,327
$
482
____________________
(1) Beginning in the second quarter 2020,
Acquired IPR&D expenses were reported separately from R&D
in Gilead’s Condensed Consolidated Statements of Operations to
provide additional information. Prior periods have been recast to
reflect the change. Acquired IPR&D expenses reflect IPR&D
impairments as well as the initial costs of externally developed
IPR&D projects, acquired directly in a transaction other than a
business combination, that do not have an alternative future use,
including upfront payments related to various collaborations and
the initial costs of rights to IPR&D projects. Acquired
IPR&D expenses are excluded from Gilead’s Non-GAAP financial
information.
(2) Starting in the first quarter 2020,
Gilead no longer regularly excludes share-based compensation
expense from its non-GAAP financial information. To conform to this
change, the prior period non-GAAP financial information has been
recast to include share-based compensation expense.
(3) Amounts represent the reversal of the
deferred tax assets established in the fourth quarter 2019. The
reversal arose from the amortization of the intangible assets that
were transferred from a foreign subsidiary to Ireland and the
United States.
(4) Includes employee-related and other
expenses associated with Gilead’s acquisition of Forty Seven.
(5) Amounts represent restructuring,
contingent consideration and/or other individually insignificant
amounts.
(6) Shares used in GAAP loss per diluted
share calculation for the three and six months ended June 30, 2020
exclude all outstanding potentially dilutive securities of 38
million and 37 million, respectively. Shares used in Non-GAAP
diluted earnings per share calculation for the three and six months
ended June 30, 2020 exclude potentially dilutive securities of 7
million and 8 million shares, respectively.
(7) Amounts may not sum due to
rounding.
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO
NON-GAAP 2020 FULL YEAR GUIDANCE(1)(2)
(unaudited)
(in millions, except
percentages and per share amounts)
Initially Provided February 4,
2020
Updated July 30,
2020
Projected product gross margin GAAP to
non-GAAP reconciliation:
GAAP projected product gross margin
81% - 82%
81% - 82%
Acquisition-related expenses
5%
5%
Non-GAAP projected product gross
margin
86% - 87%
86% - 87%
Projected operating income GAAP to
non-GAAP reconciliation:
GAAP projected operating income
$8,980 - $9,680
$3,700 - $6,000
Acquisition-related and acquired IPR&D
expenses
1,120
7,000
Non-GAAP projected operating income
$10,100 - $10,800
$10,700 - $13,000
Projected effective tax rate GAAP to
non-GAAP reconciliation:
GAAP projected effective tax rate
~ 23%
~ 50%
Amortization of deferred tax assets and
tax rate effects of adjustments noted above
(2)%
(29)%
Non-GAAP projected effective tax rate
~ 21%
~ 21%
Projected diluted EPS GAAP to non-GAAP
reconciliation:
GAAP projected diluted EPS
$5.15 - $5.55
$0.83 - $2.23
Acquisition-related, acquired IPR&D
expenses, amortization of deferred tax assets and historical fair
value adjustments of equity securities
0.90
5.42
Non-GAAP projected diluted EPS
$6.05 - $6.45
$6.25 - $7.65
(1) Starting in 2020, Gilead no longer
regularly excludes stock-based compensation expense from its
non-GAAP financial information. For comparability purposes, full
year 2019 non-GAAP operating income and non-GAAP diluted earnings
per share would have been $10.4 billion and $6.13, respectively,
had stock-based compensation expense not been excluded.
(2) Excludes the impact of any potential
future acquisition-related, acquired IPR&D expenses (other than
those transactions announced herein which are expected to close in
the third quarter 2020) and other expenses, fair value adjustments
of equity securities and discrete tax charges or benefits
associated with changes in tax related laws and guidelines as
Gilead is unable to project such amounts.
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
(in millions)
June 30,
December 31,
2020
2019
Assets
Cash, cash equivalents and marketable
securities
$
21,190
$
25,840
Accounts receivable, net
3,194
3,582
Inventories
1,967
2,067
Property, plant and equipment, net
4,653
4,502
Intangible assets, net
13,225
13,786
Goodwill
4,117
4,117
Other assets
7,588
7,733
Total assets
$
55,934
$
61,627
Liabilities and Stockholders’
Equity
Current liabilities
$
10,564
$
9,759
Long-term liabilities
27,228
29,218
Stockholders’ equity(1)
18,142
22,650
Total liabilities and stockholders’
equity
$
55,934
$
61,627
________________________________
(1) As of June 30, 2020, there were 1,254
million shares of common stock issued and outstanding.
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Atripla – U.S.
$
95
$
122
$
176
$
255
Atripla – Europe
5
26
12
42
Atripla – Other International
3
4
10
26
103
152
198
323
Biktarvy – U.S.
1,350
1,023
2,762
1,762
Biktarvy – Europe
153
73
334
121
Biktarvy – Other International
101
20
201
26
1,604
1,116
3,297
1,909
Complera / Eviplera – U.S.
27
42
51
86
Complera / Eviplera – Europe
42
72
89
134
Complera / Eviplera – Other
International
3
9
8
18
72
123
148
238
Descovy – U.S.
337
246
700
479
Descovy – Europe
46
69
107
137
Descovy – Other International
34
43
68
84
417
358
875
700
Genvoya – U.S.
646
733
1,258
1,461
Genvoya – Europe
109
177
260
370
Genvoya – Other International
61
70
122
164
816
980
1,640
1,995
Odefsey – U.S.
273
266
542
548
Odefsey – Europe
98
111
225
217
Odefsey – Other International
11
10
24
19
382
387
791
784
Stribild – U.S.
39
78
73
145
Stribild – Europe
12
24
29
42
Stribild – Other International
8
6
10
17
59
108
112
204
Truvada – U.S.
370
657
753
1,208
Truvada – Europe
6
41
14
74
Truvada – Other International
11
20
26
42
387
718
793
1,324
Other HIV(1) – U.S.
11
9
14
20
Other HIV(1) – Europe
1
1
3
2
Other HIV(1) – Other International
16
5
19
10
28
15
36
32
Revenue share – Symtuza(2) – U.S
90
55
162
97
Revenue share – Symtuza(2) – Europe
40
29
78
53
Revenue share – Symtuza(2) – Other
International
2
—
4
—
132
84
244
150
Total HIV – U.S.
3,238
3,231
6,491
6,061
Total HIV – Europe
512
623
1,151
1,192
Total HIV – Other International
250
187
492
406
4,000
4,041
8,134
7,659
AmBisome – U.S.
10
10
28
18
AmBisome – Europe
49
60
108
117
AmBisome – Other International
36
35
78
63
95
105
214
198
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY -
(Continued)
(unaudited)
(in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Ledipasvir/Sofosbuvir(3) – U.S.
$
24
$
86
$
77
$
203
Ledipasvir/Sofosbuvir(3) – Europe
4
22
15
49
Ledipasvir/Sofosbuvir(3) – Other
International
39
85
87
166
67
193
179
418
Letairis – U.S.
80
204
163
401
Ranexa – U.S.
1
19
9
174
Sofosbuvir/Velpatasvir(4) – U.S.
165
219
476
449
Sofosbuvir/Velpatasvir(4) – Europe
57
156
179
310
Sofosbuvir/Velpatasvir(4) – Other
International
113
118
244
225
335
493
899
984
Vemlidy – U.S.
76
71
149
136
Vemlidy – Europe
7
5
14
9
Vemlidy – Other International
68
40
124
72
151
116
287
217
Viread – U.S.
3
9
7
21
Viread – Europe
8
28
19
42
Viread – Other International
54
38
79
84
65
75
105
147
Vosevi – U.S.
27
53
60
98
Vosevi – Europe
6
15
17
31
Vosevi – Other International
6
7
10
9
39
75
87
138
Yescarta – U.S.
95
99
198
189
Yescarta – Europe
56
21
93
27
Yescarta – Other International
5
—
5
—
156
120
296
216
Zydelig – U.S.
8
12
16
23
Zydelig – Europe
9
14
21
29
Zydelig – Other International
1
—
1
1
18
26
38
53
Other(5) – U.S.
43
41
85
77
Other(5) – Europe
16
97
34
117
Other(5) – Other International
1
2
4
8
60
140
123
202
Total product sales – U.S.
3,770
4,054
7,759
7,850
Total product sales – Europe
724
1,041
1,651
1,923
Total product sales – Other
International
573
512
1,124
1,034
$
5,067
$
5,607
$
10,534
$
10,807
____________________
(1) Includes Emtriva and Tybost.
(2) Represents Gilead’s revenue from
cobicistat (“C”), emtricitabine (“FTC”) and tenofovir alafenamide
(“TAF”) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination
product commercialized by Janssen Sciences Ireland UC.
(3) Amounts consist of sales of Harvoni
and the authorized generic version of Harvoni sold by Gilead’s
separate subsidiary, Asegua Therapeutics LLC.
(4) Amounts consist of sales of Epclusa
and the authorized generic version of Epclusa sold by Gilead’s
separate subsidiary, Asegua Therapeutics LLC.
(5) Includes Cayston, Hepsera and
Sovaldi.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005990/en/
Investors Adam Levy, MBA,
Ph.D. (650) 574-3000
Douglas Maffei, Ph.D. (650) 574-3000
Media Amy Flood (650)
522-5643
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