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Gilead Sciences Announces First Quarter 2019 Financial Results

May 2, 2019 4:01 PM

- Product Sales of $5.2 billion -

- Diluted EPS of $1.54 per share -

- Non-GAAP Diluted EPS of $1.76 per share -

- Reiterates Full Year 2019 Guidance -

FOSTER CITY, Calif.--(BUSINESS WIRE)-- Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the first quarter ended March 31, 2019. The financial results that follow represent a year-over-year comparison of the first quarter 2019 to the first quarter 2018. Total revenues were $5.3 billion in 2019 compared to $5.1 billion in 2018. Net income was $2.0 billion or $1.54 per diluted share in 2019 compared to $1.5 billion or $1.17 per diluted share in 2018. Non-GAAP net income was $2.3 billion or $1.76 per diluted share in 2019 compared to $2.0 billion or $1.48 per diluted share in 2018.

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Three Months Ended
March 31,
(In millions, except per share amounts) 2019 � 2018
Product sales $ 5,200 $ 5,001
Royalty, contract and other revenues 81 � 87
Total revenues $ 5,281 � $ 5,088
�
Net income attributable to Gilead $ 1,975 $ 1,538
Non-GAAP net income $ 2,258 $ 1,958
�
Diluted earnings per share $ 1.54 $ 1.17
Non-GAAP diluted earnings per share $ 1.76 $ 1.48
�

Product Sales

Total product sales for the first quarter of 2019 were $5.2 billion compared to $5.0 billion for the same period in 2018. Product sales for the first quarter of 2019 were $3.8 billion in the United States, $882 million in Europe and $522 million in other locations. Product sales for the first quarter of 2018 were $3.5 billion in the United States, $1.0 billion in Europe and $469 million in other locations.

___________________________________

Note: � Non-GAAP financial information excludes acquisition-related, up-front collaboration, stock-based compensation and other expenses, fair value adjustments of equity securities and discrete tax charges or benefits associated with changes in tax related laws and guidelines. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8 through 10.

Operating Expenses

� Three Months Ended
March 31,
(In millions) 2019 � 2018
Research and development expenses (R&D) $ 1,057 $ 937
Non-GAAP R&D expenses $ 871 $ 814
�
Selling, general and administrative expenses (SG&A) $ 1,030 $ 997
Non-GAAP SG&A expenses $ 962 $ 884
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During the first quarter of 2019, compared to the same period in 2018:

Effective Tax Rate

The effective tax rate and non-GAAP effective tax rate in the first quarter of 2019 were 16.3% and 16.7% compared to 24.3% and 22.8% for the same period in 2018, respectively. The decreases were primarily due to favorable settlements with taxing authorities. For the full year 2019, Gilead reiterates its effective tax rate guidance and non-GAAP effective tax rate guidance to be in the range of�21.5% - 22.5% and 20.0% - 21.0%, respectively.

Cash, Cash Equivalents and Marketable Debt Securities

As of March 31, 2019, Gilead had $30.1 billion of cash, cash equivalents and marketable debt securities, compared to $31.5 billion as of December 31, 2018. During the first quarter of 2019, Gilead generated $1.4 billion in operating cash flow, repaid $750 million of debt, paid cash dividends of $817 million and utilized $834 million on stock repurchases.

Full Year 2019 Guidance Reiterated

Gilead reiterates its full year 2019 guidance, initially provided on February 4, 2019. The guidance for product sales reflects the anticipated entry of generic versions of Letairis and Ranexa in the United States and the full year impact of generic products containing tenofovir disoproxil fumarate in certain European countries.

(In millions, except percentages and per share amounts) � Initially Provided
February 4, 2019
Net Product Sales $21,300 - $21,800
Non-GAAP
Product Gross Margin 85% - 87%
R&D Expenses $3,600 - $3,800
SG&A Expenses $3,900 - $4,100
Effective Tax Rate 20.0% - 21.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-based Compensation and Other Expenses $1.40 - $1.50
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Corporate Highlights, Including the Announcement of:

Product and Pipeline Updates, Including the Announcement of:

Inflammation Program

HIV and Liver Diseases Programs

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 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 8 through 10.

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 financial results for the first quarter 2019 and provide a business update. The live webcast of the call can be accessed at Gilead’s Investor page at http://investors.gilead.com/. Please connect to Gilead’s 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 5259422 to access the call. Telephone replay will be available approximately two hours after the call through 8:00 p.m. Eastern Time, May 4, 2019. To access the replay, please call 855-859-2056 (U.S.) or 404-537-3406 (international) and dial the conference ID 5259422. 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 Statement

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 2019 financial results; Gilead’s ability to sustain growth in revenues for its antiviral and other programs; the risk that private and public payers may be reluctant to provide, or continue to provide, coverage or reimbursement for new products; austerity measures in European countries that may increase the amount of discount required on Gilead’s products; an increase in discounts, chargebacks and rebates due to ongoing contracts and future negotiations with commercial and government payers; 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); continued fluctuations in ADAP purchase driven by federal and state grant cycles as well as purchase by retail pharmacies and other non-wholesaler locations with whom we have no inventory management agreements 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 our products; an uncertain global macroeconomic environment; 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; Gilead’s ability to initiate clinical trials in its currently anticipated timeframes; the levels of inventory held by wholesalers and retailers which may cause fluctuations in Gilead’s earnings; Gilead’s ability to realize the potential benefits of collaborations, including with Yuhan Corporation; Gilead’s ability to submit new drug applications 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; Gilead’s ability to successfully commercialize its products, including Yescarta; 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; safety and efficacy data from clinical studies may not warrant further development of Gilead’s product candidates, including filgotinib, selonsertib and GS-6207; 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 (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 March 31, 2019 are not necessarily indicative of operating results for any future periods. 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, Annual Report on Form 10-K for the year ended December 31, 2018 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 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®, EMTRIVA®, EPCLUSA®, EVIPLERA®, GENVOYA®, HARVONI®, HEPSERA®, LETAIRIS®, ODEFSEY®, RANEXA®, SOVALDI®, STRIBILD®, TRUVADA®, TRUVADAFORPREP®, TYBOST®, VEMLIDY®, VIREAD®, VOSEVI®, YESCARTA® and ZYDELIG®.

LEXISCAN® is a registered trademark of Astellas U.S. LLC. MACUGEN® is a registered trademark of Eyetech, Inc. SYMTUZA® is a registered trademark of Janssen Sciences Ireland UC. 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).

�
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in millions, except per share amounts)
�
Three Months Ended
March 31,
2019 � 2018
Revenues:
Product sales $ 5,200 $ 5,001
Royalty, contract and other revenues 81 � 87 �
Total revenues 5,281 � 5,088 �
Costs and expenses:
Cost of goods sold 957 1,001
Research and development expenses 1,057 937
Selling, general and administrative expenses 1,030 � 997 �
Total costs and expenses 3,044 � 2,935 �
Income from operations 2,237 2,153
Interest expense (254 ) (290 )
Other income (expense), net 367 � 170 �
Income before provision for income taxes 2,350 2,033
Provision for income taxes 382 � 494 �
Net income 1,968 1,539
Net income (loss) attributable to noncontrolling interest (7 ) 1 �
Net income attributable to Gilead $ 1,975 � $ 1,538 �
Net income per share attributable to Gilead common stockholders - basic $ 1.55 $ 1.18
Shares used in per share calculation - basic 1,276 1,307
Net income per share attributable to Gilead common stockholders - diluted $ 1.54 $ 1.17
Shares used in per share calculation - diluted 1,283 1,320
Cash dividends declared per share $ 0.63 $ 0.57
�
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GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited)
(in millions, except percentages and per share amounts)
�
Three Months Ended
March 31,
2019 � 2018
Cost of goods sold reconciliation:
GAAP cost of goods sold $ 957 $ 1,001
Acquisition-related – amortization of purchased intangibles (283 ) (301 )
Stock-based compensation expenses(1) (14 ) (13 )
Non-GAAP cost of goods sold $ 660 � $ 687 �
�
Product gross margin reconciliation:
GAAP product gross margin 81.6 % 80.0 %
Acquisition-related – amortization of purchased intangibles 5.4 % 6.0 %
Stock-based compensation expenses(1) 0.3 % 0.3 %
Non-GAAP product gross margin 87.3 % 86.3 %
�
Research and development expenses reconciliation:
GAAP research and development expenses $ 1,057 $ 937
Up-front collaboration expenses (126 ) —
Acquisition-related – other costs — (16 )
Stock-based compensation expenses(1) (61 ) (103 )
Other(2) 1 � (4 )
Non-GAAP research and development expenses $ 871 � $ 814

�

�
Selling, general and administrative expenses reconciliation:
GAAP selling, general and administrative expenses $ 1,030 $ 997
Acquisition-related – other costs — (6

)

Stock-based compensation expenses(1) (68 ) (104 )
Other(2)

—

�

(3 )
Non-GAAP selling, general and administrative expenses $ 962 � $ 884 �
�
Operating margin reconciliation:
GAAP operating margin 42.4 % 42.3 %
Up-front collaboration expenses 2.4 % — %
Acquisition-related – amortization of purchased intangibles 5.4 % 5.9 %
Acquisition-related – other costs — % 0.4 %
Stock-based compensation expenses(1) 2.7 % 4.3 %
Other(2) — % 0.1 %
Non-GAAP operating margin(3) 52.8 % 53.1 %
�
Other income (expense), net reconciliation:
GAAP other income (expense), net $ 367 $ 170
Unrealized gains from equity securities, net (197 ) (45 )
Non-GAAP other income (expense), net $ 170 � $ 125 �
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GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION - (Continued)
(unaudited)
(in millions, except percentages and per share amounts)
�
Three Months Ended
March 31,
2019 � 2018
Effective tax rate reconciliation:
GAAP effective tax rate 16.3 % 24.3 %
Up-front collaboration expenses 0.3 % — %
Acquisition-related – amortization of purchased intangibles

(1.0)

%

(2.3)

%

Acquisition-related – other costs — %

(0.1)

%

Stock-based compensation expenses(1) 0.1 % 0.3 %
Unrealized gains from equity securities, net 1.1 % 0.6 %
Non-GAAP effective tax rate(3) 16.7 % 22.8 %
�
Net income attributable to Gilead reconciliation:
GAAP net income attributable to Gilead $ 1,975 $ 1,538
Up-front collaboration expenses 98 —
Acquisition-related – amortization of purchased intangibles 260 281
Acquisition-related – other costs — 18
Stock-based compensation expenses(1) 117 160
Unrealized gains from equity securities, net

(191)

�

(45)

�

Other(2)

(1)

�

6 �
Non-GAAP net income attributable to Gilead $ 2,258 � $ 1,958 �
�
Diluted earnings per share reconciliation:
GAAP diluted earnings per share $ 1.54 $ 1.17
Up-front collaboration expenses 0.08 —
Acquisition-related – amortization of purchased intangibles 0.20 0.21
Acquisition-related – other costs — 0.01
Stock-based compensation expenses(1) 0.09 0.12
Unrealized gains from equity securities, net

(0.15)

�

(0.03 )
Non-GAAP diluted earnings per share $ 1.76 � $ 1.48 �
�
Non-GAAP adjustment summary:
Cost of goods sold adjustments $ 297 $ 314
Research and development expenses adjustments 186 123
Selling, general and administrative expenses adjustments 68 113
Other income (expense), net adjustments

(197)

�

(45 )
Total non-GAAP adjustments before tax 354 505
Income tax effect

(71)

�

(85 )
Total non-GAAP adjustments after tax $ 283 � $ 420 �
____________________
Notes:

(1)

�

The period-over-period decrease was primarily due to stock-based compensation expenses incurred in the first quarter of 2018 associated with Gilead’s acquisition of Kite

(2)

Amounts represent restructuring, contingent consideration and/or other individually insignificant amounts

(3)

Amounts may not sum due to rounding

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GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP 2019 FULL YEAR GUIDANCE
(unaudited)
(in millions, except percentages and per share amounts)
�

Initially Provided
February 4, 2019
Reiterated
May 2, 2019

Projected product gross margin GAAP to non-GAAP reconciliation:
GAAP projected product gross margin 80% - 81%
Acquisition-related expenses 5% - 6%
Non-GAAP projected product gross margin(1) 85% - 87%
�
Projected research and development expenses GAAP to non-GAAP reconciliation:
GAAP projected research and development expenses $4,195 - $4,480
Stock-based compensation expenses (345) - (380)
Up-front collaboration expenses (250) - (300)
Non-GAAP projected research and development expenses $3,600 - $3,800
�
Projected selling, general and administrative expenses GAAP to non-GAAP reconciliation:
GAAP projected selling, general and administrative expenses $4,255 - $4,490
Stock-based compensation expenses (355) - (390)
Non-GAAP projected selling, general and administrative expenses $3,900 - $4,100
�
Projected effective tax rate GAAP to non-GAAP reconciliation:
GAAP projected effective tax rate (2) 21.5% - 22.5%
Tax rate effect of adjustments noted above (2) (1.5%) - (1.5%)
Non-GAAP projected effective tax rate 20.0% - 21.0%
�
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses(2):
Acquisition-related expenses / up-front collaboration expenses $0.93 - $0.97
Stock-based compensation expenses $0.47 - $0.53
Projected diluted EPS impact of acquisition-related, up-front collaboration, stock-based compensation and other expenses(2) $1.40 - $1.50
____________________

Notes:

(1)

� Total stock-based compensation expenses have a less than one percent impact on non-GAAP projected product gross margin

(2)

Excludes fair value adjustments of equity securities and the associated income tax effect, as Gilead is unable to project future fair value adjustments, and other discrete tax charges or benefits
�
�
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions)
� �
March 31, December 31,
2019 2018
�
Cash, cash equivalents and marketable securities $ 30,125 $ 31,512
Accounts receivable, net 3,283 3,327
Inventories 898 814
Property, plant and equipment, net 4,116 4,006
Intangible assets, net 15,438 15,738
Goodwill 4,117 4,117
Other assets 4,860 � 4,161
Total assets $ 62,837 � $ 63,675
�
Current liabilities $ 9,397 $ 10,605
Long-term liabilities 31,349 31,536
Stockholders’ equity(1) 22,091 � 21,534
Total liabilities and stockholders’ equity $ 62,837 � $ 63,675
____________________

Note:

�

�

(1)

As of March 31, 2019, there were 1,274 million shares of common stock issued and outstanding
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GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in millions)
�
Three Months Ended
March 31,
2019 � 2018
�
Atripla – U.S. $ 133 $ 228
Atripla – Europe 16 51
Atripla – Other International 22 � 35
171 � 314
�
Biktarvy – U.S. 739 35
Biktarvy – Europe 48 —
Biktarvy – Other International 6 � —
793 � 35
�
Complera / Eviplera – U.S. 44 67
Complera / Eviplera – Europe 62 109
Complera / Eviplera – Other International 9 � 14
115 � 190
�
Descovy – U.S. 233 274
Descovy – Europe 68 75
Descovy – Other International 41 � 12
342 � 361
�
Genvoya – U.S. 728 853
Genvoya – Europe 193 186
Genvoya – Other International 94 � 43
1,015 � 1,082
�
Odefsey – U.S. 282 279
Odefsey – Europe 106 58
Odefsey – Other International 9 � 5
397 � 342
�
Stribild – U.S. 67 133
Stribild – Europe 18 29
Stribild – Other International 11 � 12
96 � 174
�
Truvada – U.S. 551 507
Truvada – Europe 33 97
Truvada – Other International 22 � 48
606 � 652
�
Other HIV(1) – U.S. 11 9
Other HIV(1) – Europe 1 1
Other HIV(1) – Other International 5 � 3
17 � 13
�
Revenue share – Symtuza(2) – U.S. 42 —
Revenue share – Symtuza(2) – Europe 24 � 7
66 � 7
�
Total HIV – U.S. 2,830 2,385
Total HIV – Europe 569 613
Total HIV – Other International 219 � 172
3,618 � 3,170
�
AmBisome – U.S. 8 17
AmBisome – Europe 57 56
AmBisome – Other International 28 � 34
93 � 107
�
�
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY - (Continued)
(unaudited)
(in millions)
�
Three Months Ended
March 31,
2019 � 2018
�
Ledipasvir/Sofosbuvir(3) – U.S. $ 117 $ 234
Ledipasvir/Sofosbuvir(3) – Europe 27 56
Ledipasvir/Sofosbuvir(3) – Other International � 81 � 58
� 225 � 348
� �
Letairis – U.S. � 197 � 204
� �
Ranexa – U.S. � 155 � 195
�
Sofosbuvir/Velpatasvir(4) – U.S. 230 269
Sofosbuvir/Velpatasvir(4) – Europe 154 198
Sofosbuvir/Velpatasvir(4) – Other International � 107 � 69
� 491 � 536
�
Vemlidy – U.S. 65 47
Vemlidy – Europe 4 3
Vemlidy – Other International � 32 � 8
� 101 � 58
�
Viread – U.S. 12 7
Viread – Europe 14 30
Viread – Other International � 46 � 60
� 72 � 97
�
Vosevi – U.S.

45

86

Vosevi – Europe

16

16

Vosevi – Other International �

2

�

5

�

63

�

107

�
Yescarta – U.S.

90

40

Yescarta – Europe

6

—

Yescarta – Other International �

—

�

—

�

96

�

40

�
Zydelig – U.S.

11

14

Zydelig – Europe

15

18

Zydelig – Other International �

1

�

1

�

27

�

33

�
Other(5) – U.S.

36

29

Other(5) – Europe

20

15

Other(5) – Other International �

6

�

62

�

62

�

106

�
Total product sales – U.S.

3,796

3,527

Total product sales – Europe

882

1,005

Total product sales – Other International �

522

�

469

$ 5,200 $ 5,001
____________________
Notes:

(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
�

Investors

Robin Washington

(650) 522-5688



Sung Lee

(650) 524-7792



Media

Amy Flood

(650) 522-5643

Source: Gilead Sciences, Inc.

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