Gilead Sciences Announces Second Quarter 2008 Financial Results

FOSTER CITY, Calif.--(BUSINESS WIRE)--Jul 17, 2008 - Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the quarter ended June 30, 2008. Total revenues for the second quarter of 2008 were $1.28 billion, up 22 percent compared to total revenues of $1.05 billion for the second quarter of 2007. Net income for the second quarter of 2008 was $442.8 million, or $0.46 per diluted share, including after-tax stock-based compensation expense of $26.4 million and after-tax purchased in-process research and development (IPR&D) expense of $7.8 million. Excluding after-tax stock-based compensation and IPR&D expenses of $34.2 million, non-GAAP net income for the second quarter of 2008 was $477.0 million, or $0.49 per diluted share. Non-GAAP net income for the second quarter of 2007 was $442.2 million, or $0.46 per diluted share, which excluded after-tax stock-based compensation expense of $34.3 million.

Product Sales

Product sales were a record $1.22 billion for the second quarter of 2008, compared to $905.1 million in the second quarter of 2007, a 34 percent increase. This growth was driven primarily by Gilead's antiviral franchise, including the strong growth of Atripla(R) (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg) sales due primarily to the continued uptake of Atripla in the United States and the recent launches in certain European countries, as well as the continued growth of Truvada(R) (emtricitabine and tenofovir disoproxil fumarate) sales in the United States and Europe.

Antiviral Franchise

Antiviral product sales were $1.12 billion in the second quarter of 2008, a 34 percent increase from $837.4 million for the same period in 2007. The increase was driven primarily by the sales volume growth of Atripla and Truvada, as well as a favorable foreign currency exchange impact.

-- Truvada

Truvada sales were $516.1 million for the second quarter of 2008, an increase of 34 percent from $385.4 million in the second quarter of 2007. The increase in Truvada sales in the second quarter of 2008 compared to the same period of 2007 was driven primarily by sales volume growth in the United States and Europe, and a favorable foreign currency exchange impact.

-- Atripla

Atripla sales were $355.1 million for the second quarter of 2008, an increase of 67 percent from $212.4 million in the second quarter of 2007. The increase in Atripla sales in the second quarter of 2008 compared to the same period in 2007 was driven primarily by the continued uptake in the United States, as well as the recent launches in certain European countries.

-- Viread

Viread(R) (tenofovir disoproxil fumarate) sales were $150.7 million for the second quarter of 2008, a three percent decrease from $154.9 million in the second quarter of 2007. The decrease in Viread sales in the second quarter of 2008 compared to the same period of 2007 was driven primarily by lower sales volumes in the United States and Europe, partially offset by a favorable foreign currency exchange impact.

-- Hepsera

Sales of Hepsera(R) (adefovir dipivoxil) for chronic hepatitis B were $90.4 million for the second quarter of 2008, a 20 percent increase from $75.2 million in the second quarter of 2007. The increase in Hepsera sales in the second quarter of 2008 compared to the same period of 2007 was driven primarily by a favorable foreign currency exchange impact and sales volume growth in certain European markets.

AmBisome

For the second quarter of 2008, sales of AmBisome(R) (amphotericin B) liposome for injection for severe fungal infections were $69.8 million, an increase of eight percent from $64.8 million for the second quarter of 2007. The increase in AmBisome sales in the second quarter of 2008 compared to the same period of 2007 was driven primarily by a favorable foreign currency exchange impact.

Royalty, Contract and Other Revenues

For the second quarter of 2008, royalty, contract and other revenues resulting primarily from collaborations with corporate partners were $60.9 million, a decrease of 57 percent from $143.0 million in the second quarter of 2007. The decrease in royalty, contract and other revenues during the second quarter of 2008 compared to the same period of 2007 was driven primarily by lower Tamiflu(R) (oseltamivir phosphate) royalties from F. Hoffmann-La Roche Ltd of $37.5 million in the second quarter of 2008 compared to Tamiflu royalties of $123.1 million in the second quarter of 2007 due to decreased sales related to pandemic planning initiatives worldwide.

Research and Development

Research and development (R&D) expenses in the second quarter of 2008 were $176.5 million compared to $135.9 million for the same quarter in 2007. Non-GAAP R&D expenses, which exclude stock-based compensation expense, for the second quarter of 2008 were $161.2 million, compared to $119.3 million for the same quarter in 2007. Non-GAAP R&D expenses for the second quarter of 2008 were higher primarily as a result of increased clinical study expenses as well as higher headcount related to the growth in Gilead's business.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses in the second quarter of 2008 were $219.5 million compared to $186.2 million for the same quarter in 2007. Non-GAAP SG&A expenses, which exclude stock-based compensation expense, for the second quarter of 2008 were $200.9 million, compared to $157.7 million for the same quarter in 2007. Non-GAAP SG&A expenses for the second quarter of 2008 were higher primarily as a result of increased marketing and promotional expenses including those related to the launch of Atripla in certain European countries, higher headcount related to the growth in Gilead's business, as well as costs associated with certain termination-related disputes in our international operations.

Net Foreign Currency Exchange Impact

The net foreign currency exchange impact on second quarter 2008 revenues and pre-tax earnings, which includes revenues and expenses generated from outside the United States, was a favorable $45.2 million and $20.7 million, respectively, compared to the same period in 2007.

Cash, Cash Equivalents and Marketable Securities

As of June 30, 2008, Gilead had cash, cash equivalents and marketable securities of $2.91 billion compared to $2.72 billion as of December 31, 2007. For the first six months of 2008, Gilead generated $1.00 billion of operating cash flows, which was partially offset by Gilead's repurchases of $965.8 million of its common stock under its share repurchase program.

Corporate Highlights

In April 2008, Gilead announced that Robin L. Washington joined the company as Senior Vice President and Chief Financial Officer.

In May 2008, Gilead announced that John C. Martin, PhD was appointed Chairman of the Board of Directors, and John F. Milligan, PhD was appointed President. Dr. Martin is assuming the additional role of Chairman of the Board from James M. Denny, who will remain a member of Gilead's Board of Directors, serving as lead director. Mr. Denny joined Gilead's Board in 1996 and was appointed Chairman in 2001. In addition to their new roles, Dr. Martin and Dr. Milligan will continue to serve in their respective roles as Chief Executive Officer and Chief Operating Officer.

Also in May 2008, Gilead and Navitas Assets, LLC (Navitas) announced that the companies had entered into an agreement under which Gilead acquired all of Navitas's assets related to its cicletanine business. Gilead plans to evaluate cicletanine as a potential treatment of pulmonary arterial hypertension (PAH).

In May and June 2008, the U.S. Patent & Trademark Office (PTO) completed three of four reexamination proceedings and confirmed the patentability of U.S. Patent No. 6,043,230, which covers a method of use for Viread, and U.S. Patent Nos. 5,922,695 and 5,977,089, both of which cover the composition of matter for Viread. In July 2008, the PTO completed the final reexamination proceeding and confirmed the patentability of U.S. Patent No. 5,935,946, which also covers the composition of matter for Viread.

Product and Pipeline Highlights

Antiviral Franchise

In April 2008, Gilead announced the presentation of detailed 72-week data from two pivotal Phase III clinical trials, Studies 102 and 103, evaluating the safety and efficacy of once-daily Viread among adult patients with chronic hepatitis B. These data were presented at the 43rd Annual Meeting of the European Association for the Study of the Liver in Milan, Italy in April 2008.

Also in April 2008, Gilead announced that the European Commission granted marketing authorization for Viread for the treatment of chronic hepatitis B in all 27 member states of the European Union.

Cardiovascular Franchise

In May 2008, Gilead announced the initiation of ATHENA-1, a Phase IV, randomized, double-blind, placebo-controlled study evaluating Letairis(R) (ambrisentan 5mg and 10mg tablets) in patients with PAH demonstrating a sub-optimal response to sildenafil monotherapy.

Also in May 2008, Gilead announced results of a post-hoc analysis of data collected during the ARIES-1, ARIES-2 and ARIES-E studies for Letairis in PAH (WHO Group 1) patients with primarily WHO functional class II or III symptoms. In addition, data from the pivotal Phase III ARIES-1 and ARIES-2 studies of Letairis were published in the journal Circulation.

Respiratory Franchise

In June 2008, Gilead announced results from an interim analysis of 12-month data from its open-label, Phase III AIR-CF3 study of aztreonam lysine for inhalation, an investigational therapy in development for the treatment of people with cystic fibrosis who have pulmonary Pseudomonas aeruginosa infection. These data were presented at the 31st Annual European Cystic Fibrosis Conference in Prague, Czech Republic in June 2008.

Conference Call

At 4:30 p.m. Eastern Time today, Gilead will host a conference call with a simultaneous webcast to discuss the results of its second quarter of 2008. During this call/webcast, Gilead's management will discuss the company's second quarter of 2008 results and provide a general business update. The webcast will be available live via the internet by accessing Gilead's website at www.gilead.com. To access the webcast, please connect to the company's website at least 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 1-866-825-1709 (U.S.) or 1-617-213-8060 (international) and dial the participant passcode 39304842 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 20, 2008. To access the phone replay, please call 1-888-286-8010 (U.S.) or 1-617-801-6888 (international) and dial the participant passcode 84267247.

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

Non-GAAP net income and net income per diluted share for the 2008 periods are presented excluding the after-tax impact of the IPR&D expense incurred in connection with the acquisition of all of Navitas's assets related to its cicletanine business, as well as the after-tax impact of stock-based compensation expense and the related methodology for computing dilutive securities for net income per diluted share purposes. Non-GAAP net income and net income per diluted share for the 2007 periods are presented excluding the after-tax impact of stock-based compensation expense and the related methodology for computing dilutive securities for net income per diluted share purposes. Non-GAAP R&D expenses and SG&A expenses for the 2008 and 2007 periods are presented excluding the impact of stock-based compensation expense. 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 the company's operating results as reported under United States generally accepted accounting principles.

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 and cardiovascular franchises; unpredictable variability of Tamiflu royalties and the strong relationship between this royalty revenue and global pandemic planning and supply; 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 any products that receive regulatory approvals; Gilead's ability to successfully develop its respiratory and cardiovascular franchises; initiating and completing clinical trials may take longer or cost more than expected; and other risks identified from time to time in Gilead's reports filed with the U.S. Securities and Exchange Commission. You are urged to consider statements that include the words "may," "will," "would," "could," "should," "might," "believes," "estimates," "projects," "potential," "expects," "plans," "anticipates," "intends," "continues," "forecast," "designed," "goal," or the negative of those words or other comparable words to be uncertain and forward-looking.

Gilead directs readers to its Annual Report on Form 10-K for the year ended December 31, 2007, its Quarterly Report on Form 10-Q for the first quarter of 2008 and its subsequent 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 any such forward-looking statements.

Truvada, Viread, Hepsera, AmBisome and Letairis 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). -0-

                        GILEAD SCIENCES, INC.

             CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                             (unaudited)

               (in thousands, except per share amounts)


                         Three Months Ended       Six Months Ended

                             June 30,                 June 30,

                      -----------------------  -----------------------

                         2008        2007         2008        2007

                      -----------  ----------  -----------  ----------

 Revenues:

    Product sales     $1,217,216  $  905,058   $2,358,522  $1,745,283

    Royalty, contract

     and other

     revenues             60,909     143,031      177,755     331,236

                      ----------- -----------  ----------- -----------

 Total revenues        1,278,125   1,048,089    2,536,277   2,076,519


 Costs and expenses:

    Cost of goods sold

     (1)                 265,684     183,131      505,532     354,769

    Research and

     development (1)     176,542     135,931      331,843     266,021

    Selling, general

     and

     administrative

     (1)                 219,533     186,179      414,490     352,737

    Purchased in-

     process research

     and development

     (2)                  10,851           -       10,851           -

                      ----------- -----------  ----------- -----------

 Total costs and

  expenses               672,610     505,241    1,262,716     973,527

                      ----------- -----------  ----------- -----------


 Income from

  operations             605,515     542,848    1,273,561   1,102,992


 Interest and other

  income, net             14,026      27,689       36,726      50,793

 Interest expense         (3,174)     (2,707)      (6,279)     (7,254)

 Minority interest         2,160       2,401        4,035       4,554

                      ----------- -----------  ----------- -----------

 Income before

  provision for income

  taxes                  618,527     570,231    1,308,043   1,151,085

 Provision for income

  taxes (1)              175,699     162,301      369,088     335,748

                      ----------- -----------  ----------- -----------

 Net income           $  442,828  $  407,930   $  938,955  $  815,337

                      =========== ===========  =========== ===========


 Net income per share

  - basic             $     0.48  $     0.44   $     1.01  $     0.88

                      =========== ===========  =========== ===========


 Net income per share

  - diluted           $     0.46  $     0.42   $     0.97  $     0.85

                      =========== ===========  =========== ===========


 Shares used in per

  share calculation -

  basic                  922,796     931,677      925,455     929,322

                      =========== ===========  =========== ===========


 Shares used in per

  share calculation -

  diluted                965,663     967,928      966,087     964,614

                      =========== ===========  =========== ===========


Notes:

(1) The following is the stock-based compensation expense included in

     the respective captions of the condensed consolidated statements

     of income above:


                         Three Months Ended       Six Months Ended

                             June 30,                 June 30,

                      -----------------------  -----------------------

                         2008        2007         2008        2007

                      -----------  ----------  -----------  ----------


   Stock-based

    compensation

    expense:

     Cost of goods

      sold            $    2,848  $    2,682   $    4,542  $    5,212

     Research and

      development         15,370      16,661       32,265      37,769

     Selling, general

      and

      administrative      18,657      28,464       36,204      62,120

   Income tax effect     (10,466)    (13,547)     (20,601)    (30,655)

                      ----------- -----------  ----------- -----------

       Total stock-

        based

        compensation

        expense, net

        of tax        $   26,409  $   34,260   $   52,410  $   74,446

                      =========== ===========  =========== ===========



(2) For the three and six months ended June 30, 2008, Gilead incurred

     $10.9 million of purchased in-process research and development

     expense as a result of the acquisition of all of Navitas Assets,

     LLC's assets related to its cicletanine business.

-0-
                        GILEAD SCIENCES, INC.

       RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

                             (unaudited)

               (in thousands, except per share amounts)


Below is a reconciliation of Gilead's GAAP operating results and

 diluted per share amounts as reported in the attached press release.

 Non-GAAP net income and net income per diluted share for the 2008

 periods are presented excluding the after-tax impact of the purchased

 in-process research and development expense incurred in connection

 with the acquisition of all of Navitas Assets, LLC's assets related

 to its cicletanine business, as well as the after-tax impact of

 stock-based compensation expense and the related methodology for

 computing dilutive securities for net income per diluted share

 purposes. Non-GAAP net income and net income per diluted share for

 the 2007 periods are presented excluding the after-tax impact of

 stock-based compensation expense and the related methodology for

 computing dilutive securities for net income per diluted share

 purposes. Non-GAAP R&D expenses and SG&A expenses for the 2008 and

 2007 periods are presented excluding the impact of stock-based

 compensation expense. 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 the company's operating results as reported under

 GAAP.


                                 Three Months Ended  Six Months Ended

                                      June 30,           June 30,

                                 ------------------ ------------------

                                   2008      2007     2008      2007

                                 --------  -------- --------  --------


 Net income (GAAP)               $442,828  $407,930 $938,955  $815,337

 Stock-based compensation

  expense, net of tax              26,409    34,260   52,410    74,446

 Purchased in-process research

  and development expense, net of

  tax                               7,769         -    7,769         -

                                 --------  -------- --------  --------

 Net income (Non-GAAP)           $477,006  $442,190 $999,134  $889,783

                                 ========  ======== ========  ========



 Shares used in per share

  calculation - diluted (GAAP)    965,663   967,928  966,087   964,614

 Dilutive securities                2,403     2,799    2,223     2,408

                                 --------  -------- --------  --------

 Shares used in per share

  calculation - diluted (Non-

  GAAP)                           968,066   970,727  968,310   967,022

                                 ========  ======== ========  ========



 Net income per share - diluted

  (GAAP)                         $   0.46  $   0.42 $   0.97  $   0.85

                                 ========  ======== ========  ========

 Net income per share - diluted

  (Non-GAAP)                     $   0.49  $   0.46 $   1.03  $   0.92

                                 ========  ======== ========  ========

-0-
                        GILEAD SCIENCES, INC.

                CONDENSED CONSOLIDATED BALANCE SHEETS

                            (in thousands)


                                              June 30,    December 31,

                                                2008          2007

                                            ------------- ------------

                                             (unaudited)    (Note 1)


    Cash, cash equivalents and marketable

     securities                             $   2,908,352 $  2,722,422

    Other current assets                        2,321,656    1,856,314

    Property, plant and equipment, net            493,012      447,696

    Other noncurrent assets                       794,397      808,284

                                            ------------- ------------

          Total assets                      $   6,517,417 $  5,834,716

                                            ============= ============


    Current liabilities (2)                 $   2,451,334 $    736,275

    Long-term liabilities and minority

     interest (2)                                 293,858    1,638,451

    Stockholders' equity                        3,772,225    3,459,990

                                            ------------- ------------

          Total liabilities and

           stockholders' equity             $   6,517,417 $  5,834,716

                                            ============= ============


Notes:


(1) Derived from audited consolidated financial statements at that

     date.


(2) Convertible senior notes totalling $1.30 billion were reclassified

     into current liabilities due to the exercisability of their

     conversion feature for the three months ending September 30,

     2008.

-0-
                          GILEAD SCIENCES, INC.

                          PRODUCT SALES SUMMARY

                               (unaudited)

                             (in thousands)



                             Three Months Ended    Six Months Ended

                                  June 30,             June 30,

                            -------------------- ---------------------

                               2008      2007       2008       2007

                            ---------- --------- ---------- ----------

                                       (Note 1)              (Note 1)

    Antiviral products:

      Truvada - U.S.        $  236,402 $ 186,256 $  474,934 $  373,044

      Truvada - Europe         240,911   172,776    459,278    317,984

      Truvada - Other

       International            38,836    26,328     61,322     40,270

                            ---------- --------- ---------- ----------

                               516,149   385,360    995,534    731,298

                            ========== ========= ========== ==========


      Atripla - U.S.           312,392   211,679    618,877    401,489

      Atripla - Europe          37,504         -     51,699          -

      Atripla - Other

       International             5,205       705      8,742      1,078

                            ---------- --------- ---------- ----------

                               355,101   212,384    679,318    402,567

                            ========== ========= ========== ==========


      Viread - U.S.             58,414    63,797    121,482    131,353

      Viread - Europe           61,273    65,034    126,989    136,948

      Viread - Other

       International            30,994    26,066     54,877     47,274

                            ---------- --------- ---------- ----------

                               150,681   154,897    303,348    315,575

                            ========== ========= ========== ==========


      Hepsera - U.S.            34,581    32,491     65,856     62,260

      Hepsera - Europe          50,531    39,265     98,994     77,632

      Hepsera - Other

       International             5,253     3,417      8,537      6,625

                            ---------- --------- ---------- ----------

                                90,365    75,173    173,387    146,517

                            ========== ========= ========== ==========


      Emtriva - U.S.             4,106     3,443      7,944      6,898

      Emtriva - Europe           2,094     2,732      4,675      6,606

      Emtriva - Other

       International             1,888     3,429      3,858      4,423

                            ---------- --------- ---------- ----------

                                 8,088     9,604     16,477     17,927

                            ========== ========= ========== ==========


    Total Antiviral products

     - U.S.                    645,895   497,666  1,289,093    975,044

    Total Antiviral products

     - Europe                  392,313   279,807    741,635    539,170

    Total Antiviral products

     - Other International      82,176    59,945    137,336     99,670

                            ---------- --------- ---------- ----------

                             1,120,384   837,418  2,168,064  1,613,884

                            ========== ========= ========== ==========


    AmBisome                    69,768    64,754    140,796    126,256

    Letairis                    24,686       113     45,023        113

    Other products               2,378     2,773      4,639      5,030

                            ---------- --------- ---------- ----------

                                96,832    67,640    190,458    131,399

                            ========== ========= ========== ==========



                            ---------- --------- ---------- ----------

    Total product sales     $1,217,216 $ 905,058 $2,358,522 $1,745,283

                            ========== ========= ========== ==========



Note:

(1) Certain prior period amounts have been reclassified to conform to

     current period presentation.

Contact

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

Posted: July 2008


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