Gilead Sciences Announces Third Quarter 2010 Financial Results

- Total Revenues of $1.94 Billion, Up 8 Percent over Third Quarter 2009 -

- Record Product Sales of $1.87 Billion, Up 13 Percent over Third Quarter 2009 -

- Third Quarter Non-GAAP EPS of $0.90 per Share, Up 15 Percent over Third Quarter 2009 -

FOSTER CITY, Calif.--(BUSINESS WIRE)-- Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of operations for the quarter ended September 30, 2010. Total revenues for the third quarter of 2010 were $1.94 billion, up 8 percent compared to total revenues of $1.80 billion for the third quarter of 2009. Net income for the third quarter of 2010 was $704.9 million, or $0.83 per diluted share, compared to net income for the third quarter of 2009 of $673.0 million, or $0.72 per diluted share. Non-GAAP net income for the third quarter of 2010, which excludes after-tax acquisition-related expenses, restructuring expenses and stock-based compensation expenses, was $759.7 million, or $0.90 per diluted share. Non-GAAP net income for the third quarter of 2009, which excludes after-tax acquisition-related expenses, restructuring expenses and stock-based compensation expenses, was $730.3 million, or $0.78 per diluted share.

Product Sales

Product sales increased 13 percent to $1.87 billion for the third quarter of 2010, compared to $1.65 billion in the third quarter of 2009.

Antiviral Franchise

Antiviral product sales increased 12 percent to $1.65 billion in the third quarter of 2010, up from $1.47 billion for the same quarter of 2009.

  • Atripla

Sales of Atripla® (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg) for the treatment of HIV infection increased 23 percent to $742.7 million for the third quarter of 2010, up from $605.3 million in the third quarter of 2009, driven primarily by sales volume growth in the United States and Europe.

  • Truvada

Sales of Truvada® (emtricitabine/tenofovir disoproxil fumarate) for the treatment of HIV infection increased 8 percent to $668.7 million for the third quarter of 2010, up from $620.6 million in the third quarter of 2009, driven primarily by sales volume growth in the United States and Europe.

  • Viread

Sales of Viread® (tenofovir disoproxil fumarate) for the treatment of HIV infection and chronic hepatitis B increased 9 percent to $184.3 million for the third quarter of 2010, up from $169.7 million in the third quarter of 2009, driven primarily by sales volume growth in the United States, Europe and Latin America.

Letairis

Sales of Letairis® (ambrisentan) for the treatment of pulmonary arterial hypertension increased 26 percent to $60.4 million for the third quarter of 2010, up from $48.1 million for the third quarter of 2009, driven primarily by sales volume growth in the United States.

Ranexa

Sales of Ranexa® (ranolazine) for the treatment of chronic angina increased 23 percent to $60.3 million for the third quarter of 2010, up from $49.0 million for the third quarter of 2009, driven primarily by sales volume growth in the United States.

Other Products

Sales of other products were $149.1 million for the third quarter of 2010 compared to $156.3 million for the third quarter of 2009 and included AmBisome® (amphotericin B liposome for injection) for the treatment of severe fungal infections, Hepsera® (adefovir dipivoxil) for the treatment of chronic hepatitis B, Emtriva® (emtricitabine) for the treatment of HIV infection, and Cayston® (aztreonam for inhalation solution) for the improvement of respiratory symptoms in cystic fibrosis patients with Pseudomonas aeruginosa (P. aeruginosa). Sales of Cayston were $14.7 million for the third quarter of 2010.

Royalty, Contract and Other Revenues

Royalty, contract and other revenues resulting primarily from collaborations with corporate partners were $72.1 million in the third quarter of 2010, down from $152.4 million in the third quarter of 2009. This decrease was due primarily to lower Tamiflu® (oseltamivir phosphate) royalties from F. Hoffmann-La Roche Ltd of $34.5 million in the third quarter of 2010, compared to Tamiflu royalties of $113.5 million in the third quarter of 2009.

Research and Development

Research and development (R&D) expenses in the third quarter of 2010 were $230.4 million, compared to $269.9 million for the third quarter of 2009. Non-GAAP R&D expenses for the third quarter of 2010, which exclude restructuring and stock-based compensation expenses, were $203.2 million, compared to $242.2 million for the third quarter of 2009. The decrease in non-GAAP R&D expenses was due primarily to lower R&D expense reimbursement related to Gilead’s collaboration with Tibotec Pharmaceuticals (Tibotec).

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses in the third quarter of 2010 were $250.6 million, compared to $227.4 million for the third quarter of 2009. Non-GAAP SG&A expenses for the third quarter of 2010, which exclude acquisition-related, restructuring and stock-based compensation expenses, were $220.6 million, compared to $200.3 million for the third quarter in 2009. The increase in non-GAAP SG&A expenses was driven primarily by higher headcount and expenses to support Gilead’s expanding commercial activities.

Net Foreign Currency Exchange Impact

The net foreign currency exchange impact on third quarter 2010 revenues and pre-tax earnings, which includes revenues and expenses generated from outside the United States, was an unfavorable $44.2 million and $37.4 million, respectively, compared to the third quarter of 2009, and an unfavorable $7.0 million and $1.7 million, respectively, compared to the second quarter of 2010.

Cash, Cash Equivalents and Marketable Securities

As of September 30, 2010, Gilead had cash, cash equivalents and marketable securities of $5.05 billion compared to $3.90 billion as of December 31, 2009. Gilead generated $2.11 billion of operating cash flow for the first nine months of 2010 including $739.5 million in the third quarter of 2010.

Corporate Highlights

Under the company's previously announced $5.0 billion stock repurchase program authorized by its Board of Directors in May 2010, Gilead has repurchased approximately $2.41 billion in common stock through September 30, 2010. In conjunction with the company's announcement of its convertible debt offering on July 26, 2010, Gilead has since acquired approximately $1.18 billion of shares repurchased at an average price of $33.84 per share. Total purchase activity was $1.55 billion in common stock for the third quarter of 2010. Total purchase activity for the year to date was $3.41 billion in common stock, representing 93.6 million repurchased shares or approximately 10% of Gilead’s total common shares outstanding at December 31, 2009.

Product and Pipeline Update

Antiviral Franchise

In September, Gilead announced that it had submitted a Marketing Authorization Application to the European Medicines Agency for marketing approval of the fixed-dose combination of Truvada and Tibotec’s investigational non-nucleoside reverse transcriptase inhibitor TMC278 (rilpivirine) for the treatment of HIV-1 infection in adults.

Also in September, Gilead released positive 48-week results from two of its ongoing Phase II clinical studies in HIV-infected patients. The first were from the study of its investigational fixed-dose, single-tablet “Quad” regimen of elvitegravir, cobicistat and Truvada versus Atripla. The second were from the study of cobicistat-boosted atazanavir plus Truvada compared to ritonavir-boosted atazanavir plus Truvada. Results from both studies were presented at the 50th Annual Interscience Conference on Antimicrobial Agents and Chemotherapy in Boston.

Conference Call

At 5:00 p.m. Eastern Time today, Gilead’s management will host a conference call and a simultaneous webcast to discuss results from its third quarter 2010 as well as provide a general business update. To access the webcast live via the internet, please connect to the company’s website at www.gilead.com 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast. Alternatively, please call 1-866-770-7051 (U.S.) or 1-617-213-8064 (international) and dial the participant passcode 16880218 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 October 22, 2010. To access the phone replay, please call 1-888-286-8010 (U.S.) or 1-617-801-6888 (international) and dial the participant passcode 60311851.

About Gilead

Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes innovative therapeutics in areas of unmet medical need. Gilead’s mission is to advance the care of patients suffering from life-threatening diseases worldwide. Headquartered in Foster City, California, Gilead has operations in North America, Europe and Australia.

Non-GAAP Financial Information

Gilead has presented certain financial information in accordance with GAAP and also on a non-GAAP basis for the three and nine months ended September 30, 2010 and 2009. Management believes this non-GAAP information is useful for investors, taken in conjunction with Gilead’s GAAP financial statements, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under U.S. GAAP. A reconciliation between GAAP and non-GAAP financial information is provided in the table on page 6.

Forward-looking Statements

Statements included in this press release that are not historical in nature are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Gilead cautions readers that forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: Gilead’s ability to sustain growth in revenues for its antiviral, cardiovascular and respiratory franchises; unpredictable variability of Tamiflu royalties and the strong relationship between this royalty revenue and global pandemic planning and supply; Gilead’s ability to submit NDAs for new product candidates, including the fixed-dose combination of Truvada and TMC278, in the timelines currently anticipated; Gilead’s ability to receive regulatory approvals in a timely manner or at all, for new and current products, including its investigational fixed-dose single-tablet “Quad” regimen of elvitegravir, cobicistat (formerly GS 9350) and Truvada and the fixed-dose combination of Truvada and TMC278, both for the treatment of HIV infection; Gilead’s ability to successfully commercialize its products, including Cayston as a treatment for the improvement of respiratory symptoms in cystic fibrosis patients with P. aeruginosa; Gilead’s ability to successfully develop its respiratory and cardiovascular franchises; safety and efficacy data from clinical studies may not warrant further development of Gilead’s product candidates, including the Quad and the fixed-dose combination of Truvada and TMC278; initiating and completing clinical trials may take longer or cost more than expected, including in the clinical studies evaluating the Quad for the treatment of HIV infection; fluctuations in the foreign exchange rate of the U.S. dollar that may reduce or eliminate the favorable foreign currency exchange impact on Gilead’s future revenues and pre-tax earnings; Gilead’s ability to consummate the $5.0 billion share repurchase program due to changes in its stock price, corporate or other market conditions; risks and uncertainties related to Gilead’s ability to successfully advance CGI Pharmaceuticals, Inc.’s pipeline programs; whether the FDA or other international regulatory authorities will agree that steps taken or to be taken by Gilead to correct matters described in the Warning Letter received from the FDA on September 24, 2010, with respect to Gilead’s manufacturing and distribution center in San Dimas, California, are adequate; Gilead’s ability to resolve any continuing concerns that may be expressed by the FDA or other international regulatory authorities in a timely manner and whether the FDA or other international regulatory authorities decide to take further corrective or disciplinary actions against Gilead, including, without limitation, withholding permission to export AmBisome to certain countries outside the United States and Europe; and other risks identified from time to time in Gilead’s reports filed with the U.S. Securities and Exchange Commission. In addition, Gilead makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Gilead bases its estimates on historical experience and on various other market-specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates. You are urged to consider statements that include the words “may,” “will,” “would,” “could,” “should,” “might,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “anticipates,” “intends,” “continues,” “forecast,” “designed,” “goal,” or the negative of those words or other comparable words to be uncertain and forward-looking. Gilead directs readers to its Quarterly Reports on Form 10-Q for the first and second quarters and other publicly filed disclosure documents filed with the Securities and Exchange Commission and subsequent press releases. Gilead claims the protection of the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements. All forward-looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward-looking statements.

Truvada, Viread, Hepsera, Emtriva, AmBisome, Letairis, Cayston and Ranexa are registered trademarks of Gilead Sciences, Inc.

Atripla is a registered trademark of Bristol-Myers Squibb & Gilead Sciences, LLC.

Tamiflu is a registered trademark of F. Hoffmann-La Roche Ltd.

For more information on Gilead Sciences, Inc., please visit www.gilead.com or call the Gilead Public Affairs Department at 1-800-GILEAD-5 (1-800-445-3235).

 
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
           
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Revenues:
Product sales $ 1,865,559 $ 1,648,955 $ 5,459,683 $ 4,664,913
Royalty, contract and other revenues   72,097     152,434     491,050     314,091  
Total revenues   1,937,656     1,801,389     5,950,733     4,979,004  
Costs and expenses:
Cost of goods sold 477,584 409,700 1,373,539 1,122,159
Research and development 230,440 269,856 680,170 700,273
Selling, general and administrative   250,559     227,427     764,183     692,789  
Total costs and expenses   958,583     906,983     2,817,892     2,515,221  
Income from operations 979,073 894,406 3,132,841 2,463,783
Interest and other income, net 15,593 14,017 49,523 31,098
Interest expense   (33,620 )   (17,217 )   (68,339 )   (52,372 )
Income before provision for income taxes 961,046 891,206 3,114,025 2,442,509
Provision for income taxes   258,883     220,728     850,641     616,310  
Net income 702,163 670,478 2,263,384 1,826,199
Net loss attributable to noncontrolling interest   2,713     2,555     8,454     7,344  
Net income attributable to Gilead $ 704,876   $ 673,033   $ 2,271,838   $ 1,833,543  
Net income per share attributable to Gilead common stockholders - basic $ 0.85   $ 0.75   $ 2.61   $ 2.02  
Net income per share attributable to Gilead common stockholders - diluted $ 0.83   $ 0.72   $ 2.55   $ 1.96  
Shares used in per share calculation - basic   833,006     903,319     871,887     906,213  
Shares used in per share calculation - diluted   847,228     932,424     890,216     936,530  
 
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited)
(in thousands, except percentages and per share amounts)
         
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Cost of goods sold reconciliation:
GAAP cost of goods sold $ 477,584 $ 409,700 $ 1,373,539 $ 1,122,159
Acquisition-related amortization of inventory mark-up - (4,922 ) (7,020 ) (8,633 )
Acquisition-related amortization of purchased intangibles (14,981 ) (14,585 ) (44,946 ) (26,651 )
Stock-based compensation expenses   (2,728 )   (2,461 )   (8,548 )   (8,486 )
Non-GAAP cost of goods sold $ 459,875   $ 387,732   $ 1,313,025   $ 1,078,389  
 
Product gross margin reconciliation:
GAAP product gross margin 74.4 %

 

75.2 % 74.9 % 76.0 %
Acquisition-related amortization of inventory mark-up - 0.3 % 0.1 % 0.2 %
Acquisition-related amortization of purchased intangibles 0.8 % 0.9 % 0.8 % 0.6 %
Stock-based compensation expenses   0.1 %   0.1 %   0.2 %   0.2 %
Non-GAAP product gross margin (1)   75.4 %

 

  76.5 %   76.0 %   77.0 %
 
Research and development expenses reconciliation:
GAAP research and development expenses $ 230,440 $ 269,856 $ 680,170 $ 700,273
Restructuring expenses (6,315 ) (5,780 ) (10,545 ) (17,031 )
Stock-based compensation expenses   (20,946 )   (21,916 )   (62,536 )   (63,192 )
Non-GAAP research and development expenses $ 203,179   $ 242,160   $ 607,089   $ 620,050  
 
Selling, general and administrative expenses reconciliation:
GAAP selling, general and administrative expenses $ 250,559 $ 227,427 $ 764,183 $ 692,789
Acquisition-related transaction costs (387 ) (239 ) (387 ) (8,404 )
Restructuring expenses (1,413 ) (2,623 ) (14,903 ) (15,478 )
Stock-based compensation expenses   (28,128 )   (24,230 )   (75,606 )   (72,255 )
Non-GAAP selling, general and administrative expenses $ 220,631   $ 200,335   $ 673,287   $ 596,652  
 
Operating margin reconciliation:
GAAP operating margin 50.5 % 49.7 % 52.6 % 49.5 %
Acquisition-related transaction costs 0.0 % 0.0 % 0.0 % 0.2 %
Acquisition-related amortization of inventory mark-up - 0.3 % 0.1 % 0.2 %
Acquisition-related amortization of purchased intangibles 0.8 % 0.8 % 0.8 % 0.5 %
Restructuring expenses 0.4 % 0.5 % 0.4 % 0.7 %
Stock-based compensation expenses   2.7 %   2.7 %   2.5 %   2.9 %
Non-GAAP operating margin (1)   54.4 %   53.9 %   56.4 %   53.9 %
 
Net income attributable to Gilead reconciliation:
GAAP net income attributable to Gilead $ 704,876 $ 673,033 $ 2,271,838 $ 1,833,543
Acquisition-related transaction costs 388 239 388 8,404
Acquisition-related amortization of inventory mark-up - 3,667 5,090 6,326
Acquisition-related amortization of purchased intangibles 10,951 10,866 32,680 19,775
Restructuring expenses 5,639 6,260 18,488 24,052
Stock-based compensation expenses   37,812     36,218     106,620     106,467  
Non-GAAP net income attributable to Gilead $ 759,666   $ 730,283   $ 2,435,104   $ 1,998,567  
 
Diluted earnings per share reconciliation:
GAAP diluted earnings per share $ 0.83 $ 0.72 $ 2.55 $ 1.96
Acquisition-related transaction costs 0.00 0.00 0.00 0.01
Acquisition-related amortization of inventory mark-up - 0.00 0.01 0.01
Acquisition-related amortization of purchased intangibles 0.01 0.01 0.04 0.02
Restructuring expenses 0.01 0.01 0.02 0.03
Stock-based compensation expenses   0.04     0.04     0.12     0.11  
Non-GAAP diluted earnings per share (1) $ 0.90   $ 0.78   $ 2.74   $ 2.13  
 
Shares used in per share calculation (diluted) reconciliation:
GAAP shares used in per share calculation (diluted) 847,228 932,424 890,216 936,530
Share impact of current stock-based compensation guidance   (2,208 )   (119 )   (1,621 )   245  
Non-GAAP shares used in per share calculation (diluted)   845,020     932,305     888,595     936,775  
 
Non-GAAP adjustment summary:
Cost of goods sold adjustments $ 17,709 $ 21,968 $ 60,514 $ 43,770
Research and development expenses adjustments 27,261 27,696 73,081 80,223
Selling, general and administrative expenses adjustments   29,928     27,092     90,896     96,137  
Total non-GAAP adjustments before tax 74,898 76,756 224,491 220,130
Income tax effect   (20,108 )   (19,506 )   (61,225 )   (55,106 )
Total non-GAAP adjustments after tax $ 54,790   $ 57,250   $ 163,266   $ 165,024  
 
Note:
(1) Amounts may not sum due to rounding
 
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
   
 
September 30, December 31,
2010 2009
(unaudited) (Note 1)
 
 
Cash, cash equivalents and marketable securities $ 5,051,681 $ 3,904,846
Accounts receivable, net 1,670,405 1,389,534
Inventories 1,273,389 1,051,771
Property, plant and equipment, net 692,032 699,970
Intangible assets 1,576,573 1,524,777
Other assets   1,191,511   1,127,661
Total assets $ 11,455,591 $ 9,698,559
 
Current liabilities $ 2,590,108 $ 1,871,631
Long-term liabilities 2,986,711 1,321,770
Stockholders’ equity (Note 2)   5,878,772   6,505,158
Total liabilities and stockholders’ equity $ 11,455,591 $ 9,698,559
 
Notes:
 
(1) Derived from audited consolidated financial statements at that date.
(2) As of September 30, 2010, there were 815,474 shares of common stock issued and outstanding.
 
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in thousands)
         
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
 
Antiviral products:
Atripla – U.S. $ 491,645 $ 407,896 $ 1,414,365 $ 1,180,072
Atripla – Europe 222,727 182,222 661,424 461,836
Atripla – Other International   28,320   15,181   75,579   42,416
  742,692   605,299   2,151,368   1,684,324
 
Truvada – U.S. 325,545 292,918 969,884 859,603
Truvada – Europe 292,028 292,819 867,929 859,036
Truvada – Other International   51,168   34,827   130,409   100,357
  668,741   620,564   1,968,222   1,818,996
 
Viread – U.S. 82,431 74,675 239,225 212,122
Viread – Europe 72,489 67,989 216,636 199,329
Viread – Other International   29,343   27,047   85,260   77,790
  184,263   169,711   541,121   489,241
 
Hepsera – U.S. 19,055 25,795 60,090 74,218
Hepsera – Europe 25,095 38,123 87,021 117,837
Hepsera – Other International   3,369   4,010   9,866   15,661
  47,519   67,928   156,977   207,716
 
Emtriva – U.S. 3,966 3,865 12,345 11,211
Emtriva – Europe 1,657 1,863 5,216 6,369
Emtriva – Other International   1,073   1,001   3,036   3,421
  6,696   6,729   20,597   21,001
 
Total Antiviral products – U.S. 922,642 805,149 2,695,909 2,337,226
Total Antiviral products – Europe 613,996 583,016 1,838,226 1,644,407
Total Antiviral products – Other International   113,273   82,066   304,150   239,645
  1,649,911   1,470,231   4,838,285   4,221,278
 
AmBisome 75,132 77,064 230,355 214,645
Letairis 60,446 48,073 176,293 131,781
Ranexa 60,312 49,005 172,015 85,070
Other products   19,758   4,582   42,735   12,139
  215,648   178,724   621,398   443,635
 
Total product sales $ 1,865,559 $ 1,648,955 $ 5,459,683 $ 4,664,913



CONTACT:

Gilead Sciences, Inc.
Investors
Robin Washington, 650-522-5688
Susan Hubbard, 650-522-5715
Media
Amy Flood, 650-522-5643

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