Form 8-K GILEAD SCIENCES INC For: Jul 26
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 26, 2017
GILEAD SCIENCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE (State or other jurisdiction of incorporation) | 0-19731 (Commission File Number) | 94-3047598 (I.R.S. Employer Identification No.) | ||
333 LAKESIDE DRIVE, FOSTER CITY, CALIFORNIA (Address of principal executive offices) 94404 (Zip Code) | ||||
(650) 574-3000 (Registrant's telephone number, including area code) | ||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Section 2 - FINANCIAL INFORMATION
Item 2.02 | Results of Operations and Financial Condition. |
On July 26, 2017, Gilead Sciences, Inc., a Delaware corporation (Gilead), issued a press release announcing its financial results for the quarter ended June 30, 2017. A copy of the press release is filed as Exhibit 99.1 to this report.
Gilead has presented certain financial information in accordance with U.S. generally accepted accounting principles (GAAP) and also on a non-GAAP basis for the three and six months ended June 30, 2017 and 2016. Management believes this non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial statements, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7, 8 and 9 of the press release filed as Exhibit 99.1 to this report.
The information in this Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Section 9 - FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number | Description | |
99.1 | Press Release, issued by Gilead Sciences, Inc. on July 26, 2017 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GILEAD SCIENCES, INC. |
(Registrant) |
/s/ Robin L. Washington |
Robin L. Washington Executive Vice President and Chief Financial Officer |
Date: July 26, 2017
Exhibit Index
Exhibit Number | Description | |
99.1 | Press Release, issued by Gilead Sciences, Inc. on July 26, 2017 | |
CONTACTS: | Investors | Media | ||
Robin Washington | Amy Flood | |||
(650) 522-5688 | (650) 522-5643 | |||
Sung Lee | ||||
(650) 524-7792 | ||||
For Immediate Release | ||||
GILEAD SCIENCES ANNOUNCES SECOND QUARTER 2017 FINANCIAL RESULTS
- Product Sales of $7.0 billion -
- Diluted EPS of $2.33 per share -
- Non-GAAP Diluted EPS of $2.56 per share -
- Revised Full Year 2017 Guidance -
Foster City, CA, July 26, 2017 - Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the second quarter ended June 30, 2017. The financial results that follow represent a year-over-year comparison of the second quarter 2017 to the second quarter 2016. Total revenues were $7.1 billion in 2017 compared to $7.8 billion in 2016. Net income was $3.1 billion or $2.33 per diluted share in 2017 compared to $3.5 billion or $2.58 per diluted share in 2016. Non-GAAP net income, which excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $3.4 billion or $2.56 per diluted share in 2017 compared to $4.2 billion or $3.08 per diluted share in 2016.
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(In millions, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Product sales | $ | 7,046 | $ | 7,651 | $ | 13,423 | $ | 15,332 | ||||||||
Royalty, contract and other revenues | 95 | 125 | 223 | 238 | ||||||||||||
Total revenues | $ | 7,141 | $ | 7,776 | $ | 13,646 | $ | 15,570 | ||||||||
Net income attributable to Gilead | $ | 3,073 | $ | 3,497 | $ | 5,775 | $ | 7,063 | ||||||||
Non-GAAP net income* | $ | 3,372 | $ | 4,177 | $ | 6,321 | $ | 8,451 | ||||||||
Diluted earnings per share | $ | 2.33 | $ | 2.58 | $ | 4.38 | $ | 5.11 | ||||||||
Non-GAAP diluted earnings per share* | $ | 2.56 | $ | 3.08 | $ | 4.79 | $ | 6.11 | ||||||||
* | Non-GAAP net income and non-GAAP diluted earnings per share exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8. |
Product Sales
Total product sales for the second quarter of 2017 were $7.0 billion compared to $7.7 billion for the same period in 2016. Product sales for the second quarter of 2017 were $5.0 billion in the United States, $1.4 billion in Europe and $665 million in other locations. Product sales for the second quarter of 2016 were $4.9 billion in the United States, $1.6 billion in Europe and $1.2 billion in other locations.
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Gilead Sciences, Inc. 333 Lakeside Drive Foster City, CA 94404 USA | www.gilead.com | |
phone (650) 574-3000 facsimile (650) 578-9264 | ||
July 26, 2017 | 2 | |
Antiviral Product Sales
Antiviral product sales, which include sales of our HIV, chronic hepatitis B (HBV) and chronic hepatitis C (HCV) products, were $6.4 billion for the second quarter of 2017 compared to $7.1 billion for the same period in 2016.
• | HIV and HBV product sales were $3.6 billion compared to $3.1 billion for the same period in 2016. The increase was primarily due to the continued uptake of our tenofovir alafenamide (TAF) based products, Genvoya® (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg), Descovy® (emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Odefsey® (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg). |
• | HCV product sales, which consist of Harvoni® (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi® (sofosbuvir 400 mg) and Epclusa® (sofosbuvir 400 mg/velpatasvir 100 mg), were $2.9 billion compared to $4.0 billion for the same period in 2016. The decline was due to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa, which was approved in the United States and Europe in June and July 2016, respectively. |
Other Product Sales
Other product sales, which include Letairis® (ambrisentan), Ranexa® (ranolazine) and AmBisome® (amphotericin B liposome for injection), were $607 million for the second quarter of 2017 compared to $525 million for the same period in 2016.
Operating Expenses
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Research and development expenses (R&D) | $ | 864 | $ | 1,484 | $ | 1,795 | $ | 2,749 | ||||||||
Non-GAAP R&D expenses* | $ | 812 | $ | 1,040 | $ | 1,701 | $ | 1,809 | ||||||||
Selling, general and administrative expenses (SG&A) | $ | 897 | $ | 890 | $ | 1,747 | $ | 1,575 | ||||||||
Non-GAAP SG&A expenses* | $ | 827 | $ | 838 | $ | 1,634 | $ | 1,476 | ||||||||
* | Non-GAAP R&D and SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8. |
During the second quarter of 2017, compared to the same period in 2016:
• | R&D expenses decreased primarily due to the 2016 impact of Gilead’s purchase of Nimbus Apollo, Inc. and a U.S. Food and Drug Administration (FDA) priority review voucher. |
• | Non-GAAP R&D expenses* decreased primarily due to the 2016 impact of Gilead’s purchase of an FDA priority review voucher. |
Cash, Cash Equivalents and Marketable Securities
As of June 30, 2017, Gilead had $36.6 billion of cash, cash equivalents and marketable securities compared to $34.0 billion as of March 31, 2017. Cash flow from operating activities was $3.5 billion for the quarter. During the second quarter of 2017, Gilead paid cash dividends of $680 million and utilized $130 million on stock repurchases.
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Revised Full Year 2017 Guidance
Gilead revised its full year 2017 guidance, initially provided on February 7, 2017:
(In millions, except percentages and per share amounts) | Initially Provided February 7, 2017 Reiterated May 2, 2017 | Updated July 26, 2017 | ||
Net Product Sales | $22,500 - $24,500 | $24,000 - $25,500 | ||
Non-HCV Product Sales | $15,000 - $15,500 | $15,500 - $16,000 | ||
HCV Product Sales | $7,500 - $9,000 | $8,500 - $9,500 | ||
Non-GAAP* | ||||
Product Gross Margin | 86% - 88% | 86% - 88% | ||
R&D Expenses | $3,100 - $3,400 | $3,200 - $3,400 | ||
SG&A Expenses | $3,100 - $3,400 | $3,200 - $3,400 | ||
Effective Tax Rate | 25.0% - 28.0% | 25.0% - 28.0% | ||
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-based Compensation and Other Expenses | $0.84 - $0.91 | $0.86 - $0.93 | ||
* | Non-GAAP Product Gross Margin, R&D and SG&A expenses and effective tax rate exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP full year 2017 guidance is provided in the tables on page 9. |
Product and Pipeline Updates announced by Gilead during the Second Quarter of 2017 include:
Antiviral and Liver Diseases Programs
• | Announced that the European Committee for the Medicinal Products for Human Use, the scientific committee of the European Medicines Agency, adopted a positive opinion on the marketing authorization application for VoseviTM, a once-daily, single-tablet regimen of sofosbuvir 400 mg, velpatasvir 100 mg and voxilaprevir 100 mg for the treatment of HCV-infected patients. On July 18, 2017, Vosevi was approved by FDA. |
• | Announced the submission of a new drug application (NDA) to FDA for an investigational, once-daily single-tablet regimen containing bictegravir (50 mg) (BIC), a novel investigational integrase strand transfer inhibitor, and emtricitabine/tenofovir alafenamide (200/25 mg) (FTC/TAF) for the treatment of HIV-1 infection in adults. BIC/FTC/TAF demonstrated high rates of virologic suppression and no treatment-emergent resistance through 48 weeks in Phase 3 clinical trials among treatment-naïve adult patients and among virologically suppressed adult patients who switched regimens. Additionally, Gilead submitted a marketing authorization application for BIC/FTC/TAF in the European Union during the second quarter of 2017. |
• | Presented data at the 52nd Annual Meeting of the European Association for the Study of the Liver: The International Liver Congress™ 2017 which included the announcement of: |
▪ | Positive results from an open-label, proof-of-concept study evaluating GS-0976, an investigational inhibitor of acetyl-CoA carboxylase, in patients with nonalcoholic steatohepatitis. The data, from ten patients treated with GS-0976 20 mg taken orally once daily for 12 weeks, indicated that treatment was associated with statistically significant improvements in liver fat content and noninvasive markers of fibrosis, via inhibition of hepatic de novo lipogenesis. |
▪ | Positive results from two Phase 2 studies evaluating Harvoni tablets in HCV-infected patient populations not previously studied in dedicated clinical trials with direct-acting antiviral therapies. The studies demonstrated HCV cure rates of 99 percent in children aged 6 to 11 years, and 100 percent in adult patients co-infected with HCV and HBV. |
▪ | Positive 96-week results from two ongoing Phase 3 studies evaluating the safety and efficacy of daily Vemlidy® (TAF 25mg) in immune active patients and in patients switching from Gilead’s Viread |
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(tenofovir disoproxil fumarate, TDF 300 mg). Vemlidy is a once-daily treatment approved for adults with HBV infection with compensated liver disease.
• | Announced that FDA approved supplemental indications for Harvoni tablets and Sovaldi tablets for the treatment of HCV infection in adolescents without cirrhosis or with compensated cirrhosis, 12 years of age and older, or weighing at least 35kg. Harvoni was approved for pediatric patients with genotype 1, 4, 5 or 6 HCV infection. Sovaldi was approved for pediatric patients with genotype 2 or 3 HCV infection, in combination with ribavirin. |
Non-GAAP Financial Information
The information presented in this document has been prepared by Gilead in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7, 8 and 9.
Conference Call
At 4:30 p.m. Eastern Time today, Gilead’s management will host a conference call and a simultaneous webcast to discuss results from its second quarter 2017 and a general business update. To access the webcast live via the internet, please connect to the company’s website at www.gilead.com/investors 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast. Alternatively, please call 1-877-359-9508 (U.S.) or 1-224-357-2393 (international) and dial the conference ID 43105505 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 28, 2017. To access the phone replay, please call 1-855-859-2056 (U.S.) or 1-404-537-3406 (international) and dial the conference ID 43105505.
About Gilead
Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes innovative therapeutics in areas of unmet medical need. The company’s mission is to advance the care of patients suffering from life-threatening diseases. Gilead has operations in more than 30 countries worldwide, with headquarters in Foster City, California.
Forward-looking Statements
Statements included in this press release that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Gilead cautions readers that forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: Gilead’s ability to achieve its anticipated full year 2017 financial results; Gilead’s ability to sustain growth in revenues for its antiviral and other programs; the risk that estimates of patients with HCV or anticipated patient demand may not be accurate; the risk that private and public payers may be reluctant to provide, or continue to provide, coverage or reimbursement for new products, including Vosevi, Vemlidy, Epclusa, Descovy, Odefsey and Genvoya; the potential for increased pricing pressure globally and contracting pressure as well as decreased volume and market share from additional competitive HCV launches; a larger than anticipated shift in payer mix to more highly discounted payer segments and geographic regions and decreases in treatment duration; availability of funding for state AIDS Drug Assistance Programs (ADAPs) and Veterans Administration (VA); continued fluctuations in ADAP and VA purchases driven by federal and state grant cycles which may not mirror patient demand and may cause fluctuations in Gilead’s earnings; market share and price erosion caused by the introduction of generic versions of Viread and Truvada outside the United States; potential amendments to the Affordable Care Act or other government action that could have the effect of lowering prices or reducing the number of insured patients; the possibility of unfavorable results from clinical trials involving investigational compounds; the levels of inventory held by wholesalers
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July 26, 2017 | 5 | |
and retailers which may cause fluctuations in Gilead’s earnings; Gilead’s ability to submit new drug applications and receive regulatory approval for new product candidates in the timelines currently anticipated or at all, including for Vosevi and BIC/FTC/TAF; Gilead’s ability to successfully develop its oncology, inflammation, cardiovascular and respiratory programs; safety and efficacy data from clinical studies may not warrant further development of Gilead’s product candidates, including GS-0976; Gilead’s ability to pay dividends or complete its share repurchase program due to changes in its stock price, corporate or other market conditions; fluctuations in the foreign exchange rate of the U.S. dollar that may cause an unfavorable foreign currency exchange impact on Gilead’s future revenues and pre-tax earnings; and other risks identified from time to time in Gilead’s reports filed with the U.S. Securities and Exchange Commission (SEC). In addition, Gilead makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Actual results may differ significantly from these estimates. You are urged to consider statements that include the words may, will, would, could, should, might, believes, estimates, projects, potential, expects, plans, anticipates, intends, continues, forecast, designed, goal, or the negative of those words or other comparable words to be uncertain and forward-looking. Gilead directs readers to its press releases, Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 and other subsequent disclosure documents filed with the SEC. Gilead claims the protection of the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements.
All forward-looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward-looking statements.
# # #
Gilead owns or has rights to various trademarks, copyrights and trade names used in our business, including the following: GILEAD®, GILEAD SCIENCES®, AMBISOME®, CAYSTON®, COMPLERA®, DESCOVY®, EMTRIVA®, EPCLUSA®, EVIPLERA®, GENVOYA®, HARVONI®, HEPSERA®, LETAIRIS®, ODEFSEY®, RANEXA®, SOVALDI®, STRIBILD®, TRUVADA®, TYBOST®, VEMLIDY®, VIREAD®, VITEKTA®, VOLIBRIS®, VOSEVITM and ZYDELIG®.
ATRIPLA® is a registered trademark of Bristol-Myers Squibb & Gilead Sciences, LLC. LEXISCAN® is a registered trademark of Astellas U.S. LLC. MACUGEN® is a registered trademark of Eyetech, Inc. SUSTIVA® is a registered trademark of Bristol-Myers Squibb Pharma Company. TAMIFLU® is a registered trademark of Hoffmann-La Roche Inc.
For more information on Gilead Sciences, Inc., please visit www.gilead.com or
call the Gilead Public Affairs Department at 1-800-GILEAD-5 (1-800-445-3235).
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GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in millions, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||||
Product sales | $ | 7,046 | $ | 7,651 | $ | 13,423 | $ | 15,332 | ||||||||
Royalty, contract and other revenues | 95 | 125 | 223 | 238 | ||||||||||||
Total revenues | 7,141 | 7,776 | 13,646 | 15,570 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold | 1,126 | 864 | 2,083 | 2,057 | ||||||||||||
Research and development expenses | 864 | 1,484 | 1,795 | 2,749 | ||||||||||||
Selling, general and administrative expenses | 897 | 890 | 1,747 | 1,575 | ||||||||||||
Total costs and expenses | 2,887 | 3,238 | 5,625 | 6,381 | ||||||||||||
Income from operations | 4,254 | 4,538 | 8,021 | 9,189 | ||||||||||||
Interest expense | (269 | ) | (227 | ) | (530 | ) | (457 | ) | ||||||||
Other income (expense), net | 130 | 88 | 241 | 169 | ||||||||||||
Income before provision for income taxes | 4,115 | 4,399 | 7,732 | 8,901 | ||||||||||||
Provision for income taxes | 1,046 | 902 | 1,964 | 1,837 | ||||||||||||
Net income | 3,069 | 3,497 | 5,768 | 7,064 | ||||||||||||
Net income (loss) attributable to noncontrolling interest | (4 | ) | — | (7 | ) | 1 | ||||||||||
Net income attributable to Gilead | $ | 3,073 | $ | 3,497 | $ | 5,775 | $ | 7,063 | ||||||||
Net income per share attributable to Gilead common stockholders - basic | $ | 2.35 | $ | 2.62 | $ | 4.42 | $ | 5.20 | ||||||||
Shares used in per share calculation - basic | 1,307 | 1,335 | 1,307 | 1,359 | ||||||||||||
Net income per share attributable to Gilead common stockholders - diluted | $ | 2.33 | $ | 2.58 | $ | 4.38 | $ | 5.11 | ||||||||
Shares used in per share calculation - diluted | 1,317 | 1,355 | 1,319 | 1,383 | ||||||||||||
Cash dividends declared per share | $ | 0.52 | $ | 0.47 | $ | 1.04 | $ | 0.90 | ||||||||
July 26, 2017 | 7 | |
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited)
(in millions, except percentages and per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Cost of goods sold reconciliation: | ||||||||||||||||
GAAP cost of goods sold | $ | 1,126 | $ | 864 | $ | 2,083 | $ | 2,057 | ||||||||
Acquisition related-amortization of purchased intangibles | (210 | ) | (210 | ) | (420 | ) | (420 | ) | ||||||||
Stock-based compensation expenses | (4 | ) | (4 | ) | (8 | ) | (7 | ) | ||||||||
Other(1) | (20 | ) | 3 | (20 | ) | 6 | ||||||||||
Non-GAAP cost of goods sold | $ | 892 | $ | 653 | $ | 1,635 | $ | 1,636 | ||||||||
Product gross margin reconciliation: | ||||||||||||||||
GAAP product gross margin | 84.0 | % | 88.7 | % | 84.5 | % | 86.6 | % | ||||||||
Acquisition related-amortization of purchased intangibles | 3.0 | % | 2.7 | % | 3.1 | % | 2.7 | % | ||||||||
Other(1) | 0.3 | % | — | % | 0.1 | % | — | % | ||||||||
Non-GAAP product gross margin(2) | 87.3 | % | 91.5 | % | 87.8 | % | 89.3 | % | ||||||||
Research and development expenses reconciliation: | ||||||||||||||||
GAAP research and development expenses | $ | 864 | $ | 1,484 | $ | 1,795 | $ | 2,749 | ||||||||
Up-front collaboration expenses | — | — | — | (368 | ) | |||||||||||
Acquisition related expenses-acquired IPR&D | — | (400 | ) | — | (400 | ) | ||||||||||
Acquisition related-IPR&D impairment | — | — | — | (114 | ) | |||||||||||
Stock-based compensation expenses | (47 | ) | (44 | ) | (89 | ) | (85 | ) | ||||||||
Other(1) | (5 | ) | — | (5 | ) | 27 | ||||||||||
Non-GAAP research and development expenses | $ | 812 | $ | 1,040 | $ | 1,701 | $ | 1,809 | ||||||||
Selling, general and administrative expenses reconciliation: | ||||||||||||||||
GAAP selling, general and administrative expenses | $ | 897 | $ | 890 | $ | 1,747 | $ | 1,575 | ||||||||
Stock-based compensation expenses | (51 | ) | (47 | ) | (94 | ) | (91 | ) | ||||||||
Other(1) | (19 | ) | (5 | ) | (19 | ) | (8 | ) | ||||||||
Non-GAAP selling, general and administrative expenses | $ | 827 | $ | 838 | $ | 1,634 | $ | 1,476 | ||||||||
Operating margin reconciliation: | ||||||||||||||||
GAAP operating margin | 59.6 | % | 58.4 | % | 58.8 | % | 59.0 | % | ||||||||
Up-front collaboration expenses | — | % | — | % | — | % | 2.4 | % | ||||||||
Acquisition related-amortization of purchased intangibles | 2.9 | % | 2.7 | % | 3.1 | % | 2.7 | % | ||||||||
Acquisition related expenses-acquired IPR&D | — | % | 5.1 | % | — | % | 2.6 | % | ||||||||
Acquisition related-IPR&D impairment | — | % | — | % | — | % | 0.7 | % | ||||||||
Stock-based compensation expenses | 1.4 | % | 1.2 | % | 1.4 | % | 1.2 | % | ||||||||
Other(1) | 0.6 | % | — | % | 0.3 | % | (0.2 | )% | ||||||||
Non-GAAP operating margin(2) | 64.6 | % | 67.5 | % | 63.6 | % | 68.4 | % | ||||||||
Notes: | ||||||||||||||||
(1) Amounts related to restructuring, contingent consideration, consolidation of a contract manufacturer and/or other individually insignificant amounts | ||||||||||||||||
(2) Amounts may not sum due to rounding | ||||||||||||||||
July 26, 2017 | 8 | |
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION - (Continued)
(unaudited)
(in millions, except percentages and per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Effective tax rate reconciliation: | ||||||||||||||||
GAAP effective tax rate | 25.4 | % | 20.5 | % | 25.4 | % | 20.6 | % | ||||||||
Up-front collaboration expenses | — | % | — | % | — | % | (0.7 | )% | ||||||||
Acquisition related-amortization of purchased intangibles | (1.1 | )% | (0.7 | )% | (1.1 | )% | (0.7 | )% | ||||||||
Acquisition related expenses-acquired IPR&D | — | % | (1.5 | )% | — | % | (0.8 | )% | ||||||||
Stock-based compensation expenses(1) | 0.5 | % | — | % | 0.5 | % | — | % | ||||||||
Other(2) | (0.1 | )% | — | % | (0.1 | )% | 0.1 | % | ||||||||
Non-GAAP effective tax rate(3) | 24.7 | % | 18.3 | % | 24.7 | % | 18.5 | % | ||||||||
Net income attributable to Gilead reconciliation: | ||||||||||||||||
GAAP net income attributable to Gilead | $ | 3,073 | $ | 3,497 | $ | 5,775 | $ | 7,063 | ||||||||
Up-front collaboration expenses | — | — | — | 368 | ||||||||||||
Acquisition related-amortization of purchased intangibles | 202 | 204 | 404 | 408 | ||||||||||||
Acquisition related expenses-acquired IPR&D | — | 400 | — | 400 | ||||||||||||
Acquisition related-IPR&D impairment | — | — | — | 99 | ||||||||||||
Stock-based compensation expenses(1) | 61 | 69 | 106 | 133 | ||||||||||||
Other(2) | 36 | 7 | 36 | (20 | ) | |||||||||||
Non-GAAP net income attributable to Gilead | $ | 3,372 | $ | 4,177 | $ | 6,321 | $ | 8,451 | ||||||||
Diluted earnings per share reconciliation: | ||||||||||||||||
GAAP diluted earnings per share | $ | 2.33 | $ | 2.58 | $ | 4.38 | $ | 5.11 | ||||||||
Up-front collaboration expenses | — | — | — | 0.27 | ||||||||||||
Acquisition related-amortization of purchased intangibles | 0.15 | 0.15 | 0.31 | 0.30 | ||||||||||||
Acquisition related expenses-acquired IPR&D | — | 0.30 | — | 0.29 | ||||||||||||
Acquisition related-IPR&D impairment | — | — | — | 0.07 | ||||||||||||
Stock-based compensation expenses(1) | 0.05 | 0.05 | 0.08 | 0.10 | ||||||||||||
Other(2) | 0.03 | 0.01 | 0.03 | (0.01 | ) | |||||||||||
Non-GAAP diluted earnings per share(3) | $ | 2.56 | $ | 3.08 | $ | 4.79 | $ | 6.11 | ||||||||
Non-GAAP adjustment summary: | ||||||||||||||||
Cost of goods sold adjustments | $ | 234 | $ | 211 | $ | 448 | $ | 421 | ||||||||
Research and development expenses adjustments | 52 | 444 | 94 | 940 | ||||||||||||
Selling, general and administrative expenses adjustments | 70 | 52 | 113 | 99 | ||||||||||||
Total non-GAAP adjustments before tax | 356 | 707 | 655 | 1,460 | ||||||||||||
Income tax effect(1) | (57 | ) | (32 | ) | (109 | ) | (77 | ) | ||||||||
Other(2) | — | 5 | — | 5 | ||||||||||||
Total non-GAAP adjustments after tax | $ | 299 | $ | 680 | $ | 546 | $ | 1,388 | ||||||||
Notes: | ||||||||||||||||
(1) Income tax effect related to stock-based compensation expenses for the three and six months ended June 30, 2017 include the incremental tax benefit of $13 million and $33 million, respectively, recognized from the adoption of Accounting Standards Update 2016-09 “Improvements to Employee Share-Based Payment Accounting” | ||||||||||||||||
(2) Amounts related to restructuring, contingent consideration, consolidation of a contract manufacturer and/or other individually insignificant amounts | ||||||||||||||||
(3) Amounts may not sum due to rounding | ||||||||||||||||
July 26, 2017 | 9 | |
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP 2017 FULL YEAR GUIDANCE
(unaudited)
(in millions, except percentages and per share amounts)
Initially Provided February 7, 2017 Reiterated May 2, 2017 | Updated July 26, 2017 | |||
Projected product gross margin GAAP to non-GAAP reconciliation: | ||||
GAAP projected product gross margin | 82% - 84% | 82% - 84% | ||
Acquisition-related expenses | 4% - 4% | 4% - 4% | ||
Non-GAAP projected product gross margin(1) | 86% - 88% | 86% - 88% | ||
Projected research and development expenses GAAP to non-GAAP reconciliation: | ||||
GAAP projected research and development expenses | $3,295 - $3,640 | $3,410 - $3,655 | ||
Acquisition-related expenses / up-front collaboration expenses | (15) - (45) | (15) - (45) | ||
Stock-based compensation expenses | (180) - (195) | (195) - (210) | ||
Non-GAAP projected research and development expenses | $3,100 - $3,400 | $3,200 - $3,400 | ||
Projected selling, general and administrative expenses GAAP to non-GAAP reconciliation: | ||||
GAAP projected selling, general and administrative expenses | $3,305 - $3,615 | $3,435 - $3,645 | ||
Stock-based compensation expenses | (205) - (215) | (235) - (245) | ||
Non-GAAP projected selling, general and administrative expenses | $3,100 - $3,400 | $3,200 - $3,400 | ||
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses: | ||||
Acquisition-related expenses / up-front collaboration expenses | $0.62 - $0.67 | $0.62 - $0.67 | ||
Stock-based compensation expenses | 0.22 - 0.24 | 0.24 - 0.26 | ||
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses | $0.84 - $0.91 | $0.86 - $0.93 | ||
Note: | ||||
(1) Stock-based compensation expenses have a less than one percent impact on non-GAAP projected product gross margin | ||||
July 26, 2017 | 10 | |
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions)
June 30, | December 31, | |||||||
2017 | 2016(1) | |||||||
Cash, cash equivalents and marketable securities | $ | 36,576 | $ | 32,380 | ||||
Accounts receivable, net | 4,478 | 4,514 | ||||||
Inventories | 1,408 | 1,587 | ||||||
Property, plant and equipment, net | 3,012 | 2,865 | ||||||
Intangible assets, net | 8,551 | 8,971 | ||||||
Goodwill | 1,172 | 1,172 | ||||||
Other assets | 5,066 | 5,488 | ||||||
Total assets | $ | 60,263 | $ | 56,977 | ||||
Current liabilities | $ | 8,492 | $ | 9,218 | ||||
Long-term liabilities | 28,680 | 28,396 | ||||||
Stockholders’ equity(2) | 23,091 | 19,363 | ||||||
Total liabilities and stockholders’ equity | $ | 60,263 | $ | 56,977 | ||||
Notes: | ||||||||
(1) Derived from the audited consolidated financial statements as of December 31, 2016. Certain amounts have been reclassified to conform to current year presentation | ||||||||
(2) As of June 30, 2017, there were 1,306 million shares of common stock issued and outstanding | ||||||||
July 26, 2017 | 11 | |
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in millions)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Antiviral products: | ||||||||||||||||
Harvoni – U.S. | $ | 984 | $ | 1,474 | $ | 1,910 | $ | 2,881 | ||||||||
Harvoni – Europe | 230 | 512 | 473 | 1,067 | ||||||||||||
Harvoni – Other International | 168 | 578 | 370 | 1,633 | ||||||||||||
1,382 | 2,564 | 2,753 | 5,581 | |||||||||||||
Epclusa – U.S. | 864 | 64 | 1,599 | 64 | ||||||||||||
Epclusa – Europe | 248 | — | 386 | — | ||||||||||||
Epclusa – Other International | 59 | — | 78 | — | ||||||||||||
1,171 | 64 | 2,063 | 64 | |||||||||||||
Genvoya – U.S. | 710 | 268 | 1,379 | 409 | ||||||||||||
Genvoya – Europe | 125 | 30 | 212 | 46 | ||||||||||||
Genvoya – Other International | 22 | 4 | 35 | 5 | ||||||||||||
857 | 302 | 1,626 | 460 | |||||||||||||
Truvada – U.S. | 567 | 631 | 1,031 | 1,207 | ||||||||||||
Truvada – Europe | 184 | 245 | 373 | 496 | ||||||||||||
Truvada – Other International | 61 | 66 | 122 | 137 | ||||||||||||
812 | 942 | 1,526 | 1,840 | |||||||||||||
Atripla – U.S. | 334 | 479 | 650 | 968 | ||||||||||||
Atripla – Europe | 86 | 140 | 180 | 283 | ||||||||||||
Atripla – Other International | 55 | 54 | 97 | 97 | ||||||||||||
475 | 673 | 927 | 1,348 | |||||||||||||
Sovaldi – U.S. | 61 | 775 | 88 | 1,420 | ||||||||||||
Sovaldi – Europe | 113 | 263 | 219 | 543 | ||||||||||||
Sovaldi – Other International | 141 | 320 | 321 | 672 | ||||||||||||
315 | 1,358 | 628 | 2,635 | |||||||||||||
Viread – U.S. | 141 | 142 | 258 | 265 | ||||||||||||
Viread – Europe | 76 | 81 | 147 | 157 | ||||||||||||
Viread – Other International | 83 | 64 | 155 | 137 | ||||||||||||
300 | 287 | 560 | 559 | |||||||||||||
Stribild – U.S. | 225 | 326 | 451 | 702 | ||||||||||||
Stribild – Europe | 54 | 84 | 121 | 165 | ||||||||||||
Stribild – Other International | 14 | 19 | 30 | 39 | ||||||||||||
293 | 429 | 602 | 906 | |||||||||||||
Descovy – U.S. | 232 | 49 | 441 | 49 | ||||||||||||
Descovy – Europe | 47 | 12 | 84 | 12 | ||||||||||||
Descovy – Other International | 7 | — | 12 | — | ||||||||||||
286 | 61 | 537 | 61 | |||||||||||||
Odefsey – U.S. | 230 | 58 | 433 | 69 | ||||||||||||
Odefsey – Europe | 27 | — | 50 | — | ||||||||||||
Odefsey – Other International | 1 | — | 2 | — | ||||||||||||
258 | 58 | 485 | 69 | |||||||||||||
Complera / Eviplera – U.S. | 112 | 199 | 224 | 421 | ||||||||||||
Complera / Eviplera – Europe | 127 | 156 | 252 | 302 | ||||||||||||
Complera / Eviplera – Other International | 15 | 13 | 31 | 26 | ||||||||||||
254 | 368 | 507 | 749 | |||||||||||||
July 26, 2017 | 12 | |
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY - (Continued)
(unaudited)
(in millions)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Other Antiviral – U.S. | $ | 28 | $ | 12 | $ | 53 | $ | 22 | ||||||||
Other Antiviral – Europe | 6 | 7 | 10 | 13 | ||||||||||||
Other Antiviral – Other International | 2 | 1 | 3 | 2 | ||||||||||||
36 | 20 | 66 | 37 | |||||||||||||
Total antiviral products – U.S. | 4,488 | 4,477 | 8,517 | 8,477 | ||||||||||||
Total antiviral products – Europe | 1,323 | 1,530 | 2,507 | 3,084 | ||||||||||||
Total antiviral products – Other International | 628 | 1,119 | 1,256 | 2,748 | ||||||||||||
6,439 | 7,126 | 12,280 | 14,309 | |||||||||||||
Other products: | ||||||||||||||||
Letairis | 230 | 203 | 441 | 378 | ||||||||||||
Ranexa | 200 | 153 | 353 | 297 | ||||||||||||
AmBisome | 92 | 85 | 184 | 171 | ||||||||||||
Zydelig | 35 | 41 | 70 | 90 | ||||||||||||
Other | 50 | 43 | 95 | 87 | ||||||||||||
607 | 525 | 1,143 | 1,023 | |||||||||||||
Total product sales | $ | 7,046 | $ | 7,651 | $ | 13,423 | $ | 15,332 | ||||||||