Gilead Sciences Announces Third Quarter 2012 Financial Results

- Product Sales of $2.36 Billion, Up 14 Percent over Third Quarter of 2011 -

- Antiviral Product Sales of $2.04 Billion, Up 13 Percent over Third Quarter of 2011 -

FOSTER CITY, Calif.--(BUSINESS WIRE)--Oct 23, 2012 - Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the quarter ended September 30, 2012. Total revenues for the third quarter of 2012 increased 14 percent to $2.43 billion, from $2.12 billion for the third quarter of 2011. Net income for the third quarter of 2012 was $675.5 million, or $0.85 per diluted share compared to $741.1 million, or $0.95 per diluted share for the third quarter of 2011. Non-GAAP net income for the third quarter of 2012, which excludes acquisition-related, restructuring and stock-based compensation expenses, was $788.9 million, or $1.00 per diluted share compared to $795.2 million, or $1.02 per diluted share for the third quarter of 2011.

Product Sales

Product sales increased 14 percent to $2.36 billion for the third quarter of 2012 compared to $2.07 billion for the third quarter of 2011. This increase in product sales was due primarily to Gilead's antiviral franchise, resulting from increased sales of Complera®/Eviplera® (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir disoproxil fumarate 300 mg), Atripla® (efavirenz 600 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg) and Truvada® (emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg) as well as the launch of StribildTM (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg).

Antiviral Franchise

Antiviral product sales increased 13 percent to $2.04 billion for the third quarter of 2012, up from $1.79 billion for the third quarter of 2011, reflecting sales growth of 19 percent in the U.S. and 5 percent in Europe.

 

  • Atripla
    Sales of Atripla increased 9 percent to $865.4 million for the third quarter of 2012, up from $794.7 million for the third quarter of 2011, reflecting sales growth of 8 percent in the U.S. and 6 percent in Europe.
  • Truvada
    Sales of Truvada increased 8 percent to $804.2 million for the third quarter of 2012, up from $744.7 million for the third quarter of 2011, reflecting sales growth of 16 percent in the U.S. and 3 percent in Europe.
  • Viread
    Sales of Viread® (tenofovir disoproxil fumarate) increased 11 percent to $214.9 million for the third quarter of 2012, up from $192.9 million for the third quarter of 2011, reflecting sales growth of 13 percent in the U.S. partially offset by a decrease of 1 percent in Europe.
  • Complera/Eviplera
    Sales of Complera/Eviplera grew more than fivefold to $99.3 million for the third quarter of 2012 compared to $19.0 million for the third quarter of 2011. Complera was approved in the U.S. in August 2011, and Eviplera was approved in the European Union in November 2011.
  • Stribild
    Sales of our newest product, Stribild, which was launched in the U.S. in August 2012, were $17.5 million for the third quarter of 2012.

Cardiopulmonary Franchise

Cardiopulmonary product sales increased 24 percent to $200.1 million for the third quarter of 2012, up from $160.9 million for the third quarter of 2011.

 

  • Letairis
    Sales of Letairis® (ambrisentan) increased 33 percent to $105.1 million for the third quarter of 2012, up from $79.0 million for the third quarter of 2011.
  • Ranexa
    Sales of Ranexa® (ranolazine) increased 16 percent to $95.1 million for the third quarter of 2012, up from $82.0 million for the third quarter of 2011.

Other Products

Sales of other products were $122.0 million for the third quarter of 2012 compared to $110.3 million for the third quarter of 2011 and included AmBisome® (amphotericin B) liposome for injection and Cayston® (aztreonam for inhalation solution).

Royalty, Contract and Other Revenues

Royalty, contract and other revenues were $68.6 million for the third quarter of 2012, up 23 percent from $55.8 million for the third quarter of 2011, due to an increase in royalty revenues, which included higher royalties from GlaxoSmithKline Inc. for Volibris® and Japan Tobacco for Truvada.

Research and Development Expenses

Research and development (R&D) expenses for the third quarter of 2012 were $465.8 million compared to $290.1 million for the third quarter of 2011. Non-GAAP R&D expenses for the third quarter of 2012, which exclude acquisition-related, restructuring and stock-based compensation expenses, were $383.6 million compared to $269.3 million for the third quarter of 2011 due primarily to the continued advancement of Gilead's product pipeline, particularly in liver disease and oncology.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the third quarter of 2012 were $319.6 million compared to $295.9 million for the third quarter of 2011. Non-GAAP SG&A expenses for the third quarter of 2012, which exclude acquisition-related, restructuring and stock-based compensation expenses, were $287.2 million compared to $265.1 million for the third quarter of 2011 due primarily to increased expenses to support the ongoing growth of Gilead's business and an increase in the U.S. pharmaceutical excise tax, partially offset by lower bad debt expense.

Interest Expense and Other Income (Expense), Net

Interest expense for the third quarter of 2012 was $89.3 million compared to $43.1 million for the third quarter of 2011. The increase was due primarily to the additional debt issued in connection with the acquisition of Pharmasset Inc. (Pharmasset). Other income (expense), net for the third quarter of 2012 was a net expense of $3.5 million compared to net income of $14.4 million in the third quarter of 2011. The change was due primarily to decreased interest income resulting from lower cash, cash equivalents and marketable securities and lower yields.

Net Foreign Currency Exchange Impact

The net foreign currency exchange impact on third quarter 2012 product sales and pre-tax earnings was an unfavorable $20.5 million and $7.2 million, respectively, compared to the third quarter of 2011.

Cash, Cash Equivalents and Marketable Securities

As of September 30, 2012, Gilead had $2.65 billion of cash, cash equivalents and marketable securities compared to $9.96 billion as of December 31, 2011. The decrease was due to the acquisition of Pharmasset in the first quarter of 2012. Gilead generated $2.49 billion of operating cash flow during the first nine months of 2012 including $745.4 million generated in the third quarter of 2012. The operating cash flow for the first nine months of 2012 includes the collection of $460 million of accounts receivable in Spain.

Corporate Highlights

In August, Gilead together with Mylan Laboratories, Ranbaxy Laboratories Limited and Strides Arcolab, announced a collaboration agreement to promote access to high-quality, low-cost generic versions of Gilead's HIV medicine emtricitabine in developing countries - including single tablet regimens containing emtricitabine, and fixed-dose combinations of emtricitabine co-formulated with other Gilead HIV medicines.

Product and Pipeline Update

Antiviral Franchise

In July, Gilead announced:

 

  • The U.S. Food and Drug Administration (FDA) approved once-daily oral Truvada, in combination with safer sex practices, to reduce the risk of sexually acquired HIV-1 infection in adults at high risk for acquiring HIV. Truvada is the first drug to be approved for HIV prevention in uninfected adults, a strategy called pre-exposure prophylaxis (PrEP).
  • 24-week data from a Phase 3 clinical trial, SPIRIT (Switching boosted PI to Rilpivirine In Combination with Truvada as a Single Tablet Regimen), which evaluated virologically suppressed treatment-experienced HIV patients switching from a multi-pill regimen containing a ritonavir-boosted protease inhibitor to the once-daily single tablet regimen Complera. The study met its 24-week primary endpoint, which found that switching to Complera was non-inferior to remaining on a ritonavir-boosted protease inhibitor regimen. The findings were presented in an oral session at the 19th International AIDS Conference in Washington, D.C.
  • Two-year Phase 3 clinical trial results showing that the integrase inhibitor elvitegravir dosed once daily is non-inferior to raltegravir dosed twice daily among treatment-experienced HIV patients. The findings were presented in an oral session at the 19th International AIDS Conference in Washington, D.C.
  • Full clinical trial results from a pivotal Phase 3 study evaluating cobicistat, a pharmacoenhancing or “boosting” agent for HIV therapy, compared to ritonavir, currently the only approved agent used to boost certain antiretroviral treatment regimens. The study found that an HIV regimen containing a cobicistat-boosted protease inhibitor was non-inferior to a regimen containing a ritonavir-boosted protease inhibitor at 48 weeks of therapy. The findings were presented in an oral session at the 19th International AIDS Conference in Washington, D.C.

In August, the FDA approved Stribild, a complete once-daily single tablet regimen for the treatment of HIV-1 infection in treatment-naïve adults. Stribild, previously referred to as “Quad” prior to FDA approval, combines four compounds in one daily tablet: elvitegravir, cobicistat, emtricitabine and tenofovir disoproxil fumarate.

Conference Call

At 4:15 p.m. Eastern Time today, Gilead's management will host a conference call and a simultaneous webcast to discuss results from its third quarter 2012, provide an update on Gilead's full year 2012 guidance, as well as provide a general business update, including an update on pipeline advancements. 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 1-800-659-1966 (U.S.) or 1-617-614-2711 (international) and dial the participant passcode 31853534 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 26, 2012. To access the phone replay, please call 1-888-286-8010 (U.S.) or 1-617-801-6888 (international) and dial the participant passcode 84574172.

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 worldwide. Headquartered in Foster City, California, Gilead has operations in North America, Europe and Asia Pacific.

Non-GAAP Financial Information

Gilead has presented certain financial information in accordance with U.S. GAAP (GAAP) and also on a non-GAAP basis for the third quarter of 2012 and 2011. 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 7.

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 2012 financial results; Gilead's ability to sustain growth in revenues for its antiviral, cardiopulmonary and respiratory franchises; the availability of funding for state AIDS Drug Assistance Programs (ADAPs) and their ability to purchase at levels to support the number of patients that rely on ADAPs; continued fluctuations in ADAP purchases driven by federal and state grant cycles which may not mirror patient demand and may cause fluctuations in Gilead's earnings; the possibility of unfavorable results from additional arms of the ATOMIC, ELECTRON and QUANTUM studies and subsequent clinical trials involving GS-7977 and ribavirin and GS-7977 plus pegylated interferon and ribavirin; the levels of inventory held by wholesalers and retailers which may cause fluctuations in Gilead's earnings; Gilead's ability to submit new drug applications for new product candidates in the timelines currently anticipated, including GS-7977 for the treatment of hepatitis C (HCV); Gilead's ability to receive regulatory approvals in a timely manner or at all, for new and current products, including cobicistat or elvitegravir; Gilead's ability to successfully commercialize its products, including Complera/Eviplera and Stribild; Gilead's ability to successfully develop its respiratory, cardiopulmonary and oncology franchises; safety and efficacy data from clinical studies may not warrant further development of Gilead's product candidates, including GS-7977; the potential for additional austerity measures in European countries that may increase the amount of discount required on Gilead's products; 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; Gilead's ability to advance Pharmasset's product pipeline or develop an all-oral antiviral regimen for HCV; 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 Report on Form 10-Q for the quarter ended June 30, 2012 and other subsequent disclosure documents filed with the Securities and Exchange Commission and 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.

We own or have rights to various trademarks, copyrights and trade names used in our business, including the following: GILEAD®, GILEAD SCIENCES®, TRUVADA®, VIREAD®, HEPSERA®, AMBISOME®, EMTRIVA®, COMPLERA®, EVIPLERA®, STRIBILDTM, VISTIDE®, LETAIRIS®, VOLIBRIS®, RANEXA®, CAYSTON® and RAPISCAN®. ATRIPLA® is a registered trademark belonging to Bristol-Myers Squibb & Gilead Sciences, LLC.

LEXISCAN® is a registered trademark belonging to Astellas U.S. LLC.

MACUGEN® is a registered trademark belonging to Valeant Pharmaceuticals International, Inc.

SUSTIVA® is a registered trademark of Bristol-Myers Squibb Pharma Company.

TAMIFLU® is a registered trademark belonging to 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 thousands, except per share amounts)

 

         
    2012   2011   2012   2011
Revenues:                
Product sales   $ 2,357,978     $ 2,065,859     $ 6,887,560     $ 5,969,025  
Royalty, contract and other revenues   68,619     55,801     226,672     215,982  
Total revenues   2,426,597     2,121,660     7,114,232     6,185,007  
Costs and expenses:                
Cost of goods sold   597,269     531,989     1,795,545     1,539,963  
Research and development   465,831     290,066     1,320,286     826,915  
Selling, general and administrative   319,583     295,927     1,095,209     895,764  
Total costs and expenses   1,382,683     1,117,982     4,211,040     3,262,642  
Income from operations   1,043,914     1,003,678     2,903,192     2,922,365  
Interest expense   (89,322 )   (43,097 )   (275,010 )   (130,420 )
Other income (expense), net   (3,505 )   14,406     (38,665 )   40,216  
Income before provision for income taxes   951,087     974,987     2,589,517     2,832,161  
Provision for income taxes   280,052     237,449     774,877     704,861  
Net income   671,035     737,538     1,814,640     2,127,300  
Net loss attributable to noncontrolling interest   4,470     3,586     14,385     11,192  
Net income attributable to Gilead   $ 675,505     $ 741,124     $ 1,829,025     $ 2,138,492  
Net income per share attributable to Gilead common stockholders - basic   $ 0.89     $ 0.97     $ 2.42     $ 2.72  
Net income per share attributable to Gilead common stockholders - diluted   $ 0.85     $ 0.95     $ 2.33     $ 2.66  
Shares used in per share calculation - basic   757,385     767,033     757,032     787,272  
Shares used in per share calculation - diluted   792,304     781,312     783,824     802,762  
                         
GILEAD SCIENCES, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

(unaudited)

(in thousands, except percentages and per share amounts)

 

         
    2012   2011   2012   2011
Cost of goods sold reconciliation:                
GAAP cost of goods sold   $ 597,269     $ 531,989     $ 1,795,545     $ 1,539,963  
Stock-based compensation expenses   (1,864 )   (2,234 )   (6,084 )   (7,765 )
Acquisition related-amortization of purchased intangibles   (15,837 )   (17,407 )   (47,509 )   (52,222 )
Non-GAAP cost of goods sold   $ 579,568     $ 512,348     $ 1,741,952     $ 1,479,976  
                 
Product gross margin reconciliation:                
GAAP product gross margin   74.7 %   74.3 %   74.0 %   74.3 %
Stock-based compensation expenses   0.1 %   0.1 %   0.1 %   0.1 %
Acquisition related-amortization of purchased intangibles   0.7 %   0.8 %   0.7 %   0.9 %
Non-GAAP product gross margin(1)   75.5 %   75.3 %   74.8 %   75.3 %
                 
Research and development expenses reconciliation:                
GAAP research and development expenses   $ 465,831     $ 290,066     $ 1,320,286     $ 826,915  
Stock-based compensation expenses   (23,236 )   (18,389 )   (162,214 )   (54,529 )
Restructuring expenses   (232 )   (806 )   (7,322 )   (1,360 )
Acquisition related-transaction costs           (345 )   (446 )
Acquisition related-contingent consideration remeasurement   (58,810 )   (1,616 )   (64,116 )   (1,198 )
Non-GAAP research and development expenses   $ 383,553     $ 269,255     $ 1,086,289     $ 769,382  
                 
Selling, general and administrative expenses reconciliation:                
GAAP selling, general and administrative expenses   $ 319,583     $ 295,927     $ 1,095,209     $ 895,764  
Stock-based compensation expenses   (29,364 )   (25,897 )   (177,237 )   (83,821 )
Restructuring expenses   (2,792 )   (4,388 )   (13,199 )   (6,054 )
Acquisition related-transaction costs   (222 )   (535 )   (11,096 )   (1,278 )
Non-GAAP selling, general and administrative expenses   $ 287,205     $ 265,107     $ 893,677     $ 804,611  
                 
Operating margin reconciliation:                
GAAP operating

Posted: October 2012


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