Gilead Sciences Announces Second Quarter 2023 Financial Results

03 Aug 2023
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Drug ApprovalClinical ResultPhase 3Phase 2Acquisition
Product Sales Excluding Veklury Increased 11% Year-Over-Year to $6.3 billion Biktarvy Sales Increased 17% Year-Over-Year to $3.0 billion Oncology Sales Increased 38% Year-Over-Year to $728 million Net Income Reflects $525 million Legal Settlement Accrual ($0.32 per share) FOSTER CITY, Calif.--(BUSINESS WIRE)-- Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the second quarter of 2023. “It was another strong quarter for Gilead, with continued commercial and clinical momentum,” said Daniel O’Day, Gilead's Chairman and Chief Executive Officer. “11% year-over-year growth across our base business was driven by our diverse portfolio of therapies for HIV, Oncology, and Liver Disease. We received positive regulatory updates for six of our therapies and presented a large body of data on our pipeline, reinforcing our growing potential to help more patients and communities worldwide.” Second Quarter 2023 Financial Results Total second quarter 2023 revenue increased 5% to $6.6 billion compared to the same period in 2022, primarily driven by increased sales in HIV and Oncology, partially offset by lower Veklury® (remdesivir) sales. Diluted Earnings Per Share (“EPS”) decreased to $0.83 for the second quarter of 2023 compared to $0.91 for the same period in 2022, mainly driven by a $525 million litigation accrual for settlements with certain plaintiffs in the HIV antitrust litigation, representing an unfavorable $0.32 impact to diluted EPS, as well as other higher operating costs and tax expense, partially offset by higher product revenues and unrealized gains on equity investments compared to unrealized losses in 2022. Non-GAAP diluted EPS decreased to $1.34 for the second quarter of 2023 compared to $1.58 for the same period in 2022, primarily driven by the litigation accrual referenced earlier, representing an unfavorable $0.32 impact to non-GAAP diluted EPS, as well as other higher operating costs, partially offset by higher product revenues. As of June 30, 2023, Gilead had $8.0 billion of cash, cash equivalents and marketable debt securities, up from $7.6 billion as of December 31, 2022. During the second quarter of 2023, Gilead generated $2.3 billion in operating cash flow. During the second quarter of 2023, Gilead paid dividends of $944 million and repurchased $150 million of common stock. Product Sales Performance Total second quarter 2023 product sales increased 7% to $6.6 billion compared to the same period in 2022. Total product sales, excluding Veklury, increased 11% to $6.3 billion in the second quarter of 2023 compared to the same period in 2022, primarily due to increased sales related to HIV, Cell Therapy and Trodelvy® (sacituzumab govitecan-hziy). HIV product sales increased 9% to $4.6 billion in the second quarter of 2023 compared to the same period in 2022, primarily driven by favorable pricing dynamics and higher demand, partially offset by lower channel inventory. Biktarvy® (bictegravir 50mg/emtricitabine 200mg (“FTC”)/tenofovir alafenamide 25mg (“TAF”)) sales increased 17% year-over-year in the second quarter of 2023, primarily driven by higher demand and favorable pricing dynamics, partially offset by lower channel inventory. Descovy® (FTC 200mg/TAF 25mg) sales increased 12% year-over-year in the second quarter of 2023, primarily driven by favorable pricing dynamics and higher demand, partially offset by lower channel inventory. The Liver Disease portfolio sales, which includes chronic hepatitis C virus (“HCV”), chronic hepatitis B virus (“HBV”), and chronic hepatitis delta virus (“HDV”), increased 4% to $711 million in the second quarter of 2023 compared to the same period in 2022. The increase was primarily driven by higher demand, partially offset by unfavorable pricing dynamics. Cell Therapy product sales increased 27% to $469 million in the second quarter of 2023 compared to the same period in 2022. Yescarta® (axicabtagene ciloleucel) sales increased 29% year-over-year to $380 million in the second quarter of 2023, primarily driven by strong demand in the second- and third-line settings for relapsed or refractory (“R/R”) large B-cell lymphoma (“LBCL”). Tecartus® (brexucabtagene autoleucel) sales increased 21% year-over-year to $88 million in the second quarter of 2023, primarily driven by increased demand in R/R adult acute lymphoblastic leukemia (“ALL”) and R/R mantle cell lymphoma (“MCL”). Trodelvy sales increased by 63% to $260 million in the second quarter of 2023 compared to the same period in 2022, primarily driven by growing adoption in pre-treated HR+/HER2- metastatic breast cancer (“mBC”)HR+/HER2- metastatic breast cancer (“mBC”) in the United States. Veklury sales decreased by 43% to $256 million for the second quarter of 2023 compared to the same period in 2022, primarily driven by lower rates of COVID-19 related hospitalizations in all regions. Veklury sales generally reflect COVID-19 related rates and severity of infections and hospitalizations, as well as the availability, uptake and effectiveness of vaccinations and alternative treatments for COVID-19. Second Quarter 2023 Product Gross Margin, Operating Expenses and Effective Tax Rate Product gross margin was 78.0% for the second quarter of 2023 compared to 76.5% for the same period in 2022. Non-GAAP product gross margin was 86.9% for the second quarter of 2023 compared to 85.6% in the same period in 2022. Research and development (“R&D”) expenses and non-GAAP R&D expenses for the second quarter of 2023 were $1.4 billion compared to $1.1 billion in the same period in 2022. The increases in GAAP and non-GAAP R&D expenses were primarily driven by higher clinical activities. Acquired in-process R&D (“IPR&D”) expenses for the second quarter of 2023 were $236 million, primarily driven by the acquisition of XinThera, Inc. (“XinThera”) and the expanded collaboration with Arcus Biosciences, Inc. (“Arcus”). Selling, general and administrative (“SG&A”) expenses for the second quarter of 2023 were $1.8 billion compared to $1.4 billion in the same period in 2022. Non-GAAP SG&A expenses for the second quarter of 2023 were $1.8 billion compared to $1.3 billion in the same period in 2022. The increases in GAAP and non-GAAP SG&A expenses were primarily driven by the litigation accrual referenced earlier, as well as increased commercial activities in Oncology and HIV, partially offset by lower corporate expenses. The effective tax rate (“ETR”) for the second quarter of 2023 was 34.6% compared to 24.5% for the same period in 2022, primarily driven by a remeasurement of certain deferred tax liabilities. Non-GAAP ETR for the second quarter of 2023 was 21.0% compared to 19.3% for the same period in 2022. Guidance and Outlook For the full-year, Gilead expects: Total product sales between $26.3 billion and $26.7 billion, compared to $26.0 billion and $26.5 billion previously. Total product sales, excluding Veklury, between $24.6 billion and $25.0 billion, compared to $24.0 billion and $24.5 billion previously. Total Veklury sales of approximately $1.7 billion, compared to approximately $2.0 billion previously. Diluted earnings per share between $4.50 and $4.85, compared to $4.75 and $5.15 previously. Non-GAAP diluted earnings per share between $6.45 and $6.80, compared to $6.60 and $7.00 previously. Additional information and a reconciliation between GAAP and non-GAAP financial information for the 2023 guidance is provided in the accompanying tables. Also see the Forward-Looking Statements described below. The financial guidance is subject to a number of risks and uncertainties, including uncertainty around the duration and magnitude of the COVID-19 pandemic. Key Updates Since Our Last Quarterly Release Virology Received U.S. Food and Drug Administration (“FDA”) and European Commission (“EC”) approval to extend the use of Veklury to treat COVID-19 in people with severe renal impairment, including those on dialysis. Presented data on Biktarvy at the International AIDS Society Conference that further demonstrate the safety and efficacy pro different subgroups of people with HIV, such as virologically suppressed pregnant women. Also presented patient-reported outcomes from the Phase 2/3 CAPELLA study of lenacapavir in heavily treatment-experienced people with HIV as well as data from use of oral lenacapavir as a bridging regimen. Note that the use of lenacapavir for oral bridging is not approved by any regulatory authority. Presented new long-term data at the European Association for the Study of the Liver Congress 2023 from the MYR301 Phase 3 trial evaluating bulevirtide for HDV, showing improved response rates at Week 96 compared to Week 48. Additionally, abstracts across viral hepatitis and liver fibrosis were highlighted. Received full marketing authorization from the EC for Hepcludex® (bulevirtide) for the treatment of adults with chronic HDV and compensated liver disease. Hepcludex was initially granted conditional marketing authorization in July 2020. Bulevirtide remains the only approved treatment for HDV in the EU and is not approved in the U.S. Announced partnerships with the Clinton Health Access Initiative and Penta to improve treatment and adherence rates among children with HIV in low and middle income countries. Oncology Received EC approval for Trodelvy as monotherapy for the treatment of adult patients with unresectable or metastatic HR+/HER2- mBC who have received endocrine-based therapy, and at least two additional systemic therapies in the advanced setting. Presented longer-term overall survival (“OS”) data from the Phase 3 TROPiCS-02 study evaluating Trodelvy in pre-treated HR+/HER2- mBC at the 2023 American Society of Clinical Oncology (“ASCO”) meeting, demonstrating durable and clinically meaningful improvement in median OS versus comparator chemotherapy. Data were also presented from a Phase 2 trial evaluating Trodelvy as a potential therapy in advanced endometrial cancer. Presented OS data at ASCO from the Phase 3 ZUMA-7 trial of Yescarta in second-line R/R LBCL, which demonstrated significantly longer OS versus standard of care. Additionally, real-world evidence data for Tecartus in MCL were reported, which showed consistently high complete response and overall response rates, regardless of the type of prior treatment received. Presented data at the European Hematology Association Annual Congress evaluating Yescarta, Tecartus, and magrolimab in a number of hematologic malignancies. Received a recommendation from the National Institute for Health and Care Excellence in the United Kingdom for use of Yescarta in the second-line setting for diffuse LBCL and high-grade B-cell lymphoma, and Tecartus in R/R B-cell precursor ALL in England’s National Health Service. Announced, through Fosun Kite Biotechnology Co., Ltd., a joint venture between Kite and Shanghai Fosun Pharmaceutical (Group) Co., Ltd., the approval of axicabtagene ciloleucel (under the trade name Yikaida®) by the China National Medical Products Administration for the treatment of adult patients with R/R LBCL who failed first-line immunochemotherapy or relapsed within 12 months after first-line immunochemotherapy. Completed the transfer of Yescarta’s marketing authorization in Japan from Daiichi Sankyo Co., Ltd. (“Daiichi Sankyo”) to Gilead Sciences K.K. Announced data from an interim analysis at ASCO from the Phase 2 ARC-7 study of domvanalimab, zimberelimab and etrumadenant in first-line, metastatic PD-L1-high non-small cell lung cancerPD-L1-high non-small cell lung cancer, demonstrating consistent improvement in progression-free survival and a clinically meaningful reduction in the risk of progression or death in the domvanalimab-containing arms, as compared to the zimberelimab monotherapy arm. Announced the Phase 3 ENHANCE trial of magrolimab in combination with azacitidine in higher-risk myelodysplastic syndromes was discontinued due to futility based on a planned analysis. Data from the trial will be presented at an upcoming medical meeting. Announced the acquisition of XinThera, adding additional pipeline assets including rights to a portfolio of small molecule inhibitors targeting PARP1 for oncology as well as MK2 for inflammatory diseases. Inflammation Announced expansion of the Arcus collaboration to include research programs in inflammatory diseases. Corporate Appointed Cindy Perettie as Executive Vice President of Kite, who joins with more than 20 years of scientific and commercial leadership experience in global biopharmaceutical organizations. The company’s Board of Directors declared a quarterly dividend of $0.75 per share of common stock for the third quarter of 2023. The dividend is payable on September 28, 2023, to stockholders of record at the close of business on September 15, 2023. Future dividends will be subject to Board approval. Certain amounts and percentages in this press release may not sum or recalculate due to rounding. Conference Call At 2:00 p.m. Pacific Time today, Gilead will host a conference call to discuss Gilead’s results. A live webcast will be available on and will be archived on for one year. 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 financial information generally excludes acquisition-related expenses including amortization of acquired intangible assets and inventory step-up charges, and other items that are considered unusual or not representative of underlying trends of Gilead’s business, fair value adjustments of equity securities and discrete and related tax charges or benefits associated with changes in tax related laws and guidelines. Although Gilead consistently excludes the amortization of acquired intangible assets from the non-GAAP financial information, management believes that it is important for investors to understand that such intangible assets were recorded as part of acquisitions and contribute to ongoing revenue generation. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the accompanying tables. About Gilead Sciences Gilead Sciences, Inc. is a biopharmaceutical company that has pursued and achieved breakthroughs in medicine for more than three decades, with the goal of creating a healthier world for all people. The company is committed to advancing innovative medicines to prevent and treat life-threatening diseases, including HIV, viral hepatitis, coronavirus disease 2019 (“COVID-19”), and cancer. Gilead operates in more than 35 countries worldwide, with headquarters in Foster City, California. Forward-Looking Statements Statements included in this press release that are not historical in nature are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Gilead cautions readers that forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include those relating to: the impact of the COVID-19 pandemic on Gilead’s business, financial condition and results of operations; the development, manufacturing and distribution of Veklury as a treatment for COVID-19, including the uncertainty of the amount and timing of Veklury sales and Gilead’s ability to effectively manage the global supply and distribution of Veklury; Gilead’s ability to achieve its anticipated full year 2023 financial results; Gilead’s ability to make progress on any of its long-term ambitions or strategic priorities laid out in its corporate strategy; Gilead’s ability to accelerate or sustain revenues for its virology, oncology and other programs; Gilead’s ability to realize the potential benefits of acquisitions, collaborations or licensing arrangements, including the arrangements with XinThera and Arcus; patent protection and estimated loss of exclusivity for our products and product candidates; Gilead’s ability to initiate, progress or complete clinical trials within currently anticipated timeframes or at all, the possibility of unfavorable results from ongoing and additional clinical trials, including those involving Hepcludex, Tecartus, Trodelvy, Yescarta, domvanalimab, etrumadenant, magrolimab, and zimberelimab, and the risk that safety and efficacy data from clinical trials may not warrant further development of Gilead’s product candidates or the product candidates of Gilead’s strategic partners; Gilead’s ability to submit new drug applications for new product candidates or expanded indications in the currently anticipated timelines; Gilead’s ability to receive regulatory approvals in a timely manner or at all, and the risk that any such approvals, if granted, may be subject to significant limitations on use; Gilead’s ability to successfully commercialize its products; the risk of potential disruptions to the manufacturing and supply chain of Gilead’s products, including the risk that Kite may be unable to increase its manufacturing capacity, timely manufacture and deliver its products or produce an amount of supply sufficient to satisfy demand for such products; pricing and reimbursement pressures from government agencies and other third parties, including required rebates and other discounts; a larger than anticipated shift in payer mix to more highly discounted payer segments; market share and price erosion caused by the introduction of generic versions of Gilead products; 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, including Hepcludex, Tecartus, Trodelvy, Veklury and Yescarta; and other risks identified from time to time in Gilead’s reports filed with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. 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 June 30, 2023 are not necessarily indicative of operating results for any future periods. Gilead directs readers to its press releases, annual reports on Form 10-K, quarterly reports on Form 10-Q 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. The reader is cautioned that forward-looking statements are not guarantees of future performance and is cautioned not to place undue reliance on these 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®, KITE™, AMBISOME®, ATRIPLA®, BIKTARVY®, CAYSTON®, COMPLERA®, DESCOVY®, DESCOVY FOR PREP®, EMTRIVA®, EPCLUSA®, EVIPLERA®, GENVOYA®, HARVONI®, HEPCLUDEX®, HEPSERA®, JYSELECA®, LETAIRIS®, ODEFSEY®, RANEXA®, SOVALDI®, STRIBILD®, SUNLENCA® , TECARTUS®, TRODELVY®, TRUVADA®, TRUVADA FOR PREP®, TYBOST®, VEKLURY®, VEMLIDY®, VIREAD®, VOSEVI®, YESCARTA® and ZYDELIG®. This report may also refer to trademarks, service marks and trade names of other companies. For more information on Gilead Sciences, Inc., please visit 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) Three Months Ended Six Months Ended June 30, June 30, (in millions, except per share amounts) 2023 2022 2023 2022 Revenues: Product sales $ 6,564 $ 6,138 $ 12,870 $ 12,672 Royalty, contract and other revenues 35 122 81 178 Total revenues 6,599 6,260 12,951 12,850 Costs and expenses: Cost of goods sold 1,442 1,442 2,843 2,866 Research and development expenses 1,407 1,102 2,854 2,280 Acquired in-process research and development expenses 236 330 717 338 In-process research and development impairment — — — 2,700 Selling, general and administrative expenses 1,849 1,357 3,168 2,440 Total costs and expenses 4,934 4,231 9,581 10,624 Operating income 1,665 2,029 3,370 2,226 Interest expense (230 ) (242 ) (459 ) (480 ) Other income (expense), net 152 (284 ) (22 ) (395 ) Income before income taxes 1,588 1,503 2,888 1,351 Income tax expense (549 ) (368 ) (865 ) (204 ) Net income 1,039 1,135 2,024 1,147 Net loss attributable to noncontrolling interest 6 9 32 16 Net income attributable to Gilead $ 1,045 $ 1,144 $ 2,055 $ 1,163 Basic earnings per share attributable to Gilead $ 0.84 $ 0.91 $ 1.65 $ 0.93 Shares used in basic earnings per share attributable to Gilead calculation 1,249 1,256 1,249 1,255 Diluted earnings per share attributable to Gilead $ 0.83 $ 0.91 $ 1.63 $ 0.92 Shares used in diluted earnings per share attributable to Gilead calculation 1,258 1,260 1,260 1,261 Cash dividends declared per share $ 0.75 $ 0.73 $ 1.50 $ 1.46 Research and development expenses as a % of revenues 21.3 % 17.6 % 22.0 % 17.7 % Selling, general and administrative expenses as a % of revenues 28.0 % 21.7 % 24.5 % 19.0 % GILEAD SCIENCES, INC. TOTAL REVENUE SUMMARY (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages) 2023 2022 Change 2023 2022 Change Product sales: HIV $ 4,626 $ 4,228 9 % $ 8,816 $ 7,935 11 % Oncology 728 527 38 % 1,398 947 48 % Liver Disease 711 682 4 % 1,386 1,317 5 % Other 243 256 (5 )% 442 493 (10 )% Total product sales excluding Veklury 6,308 5,693 11 % 12,041 10,692 13 % Veklury 256 445 (43 )% 829 1,980 (58 )% Total product sales 6,564 6,138 7 % 12,870 12,672 2 % Royalty, contract and other revenues 35 122 (71 )% 81 178 (54 )% Total revenues $ 6,599 $ 6,260 5 % $ 12,951 $ 12,850 1 % GILEAD SCIENCES, INC. NON-GAAP FINANCIAL INFORMATION(1) (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages) 2023 2022 Change 2023 2022 Change Non-GAAP: Cost of goods sold $ 861 $ 886 (3 )% $ 1,732 $ 1,711 1 % Research and development expenses $ 1,377 $ 1,102 25 % $ 2,816 $ 2,251 25 % Acquired IPR&D expenses $ 236 $ 330 (29 )% $ 717 $ 338 NM Selling, general and administrative expenses $ 1,848 $ 1,272 45 % $ 3,166 $ 2,355 34 % Other income (expense), net $ 83 $ 20 NM $ 165 $ 5 NM Diluted EPS $ 1.34 $ 1.58 (15 )% $ 2.71 $ 3.70 (27 )% Product gross margin 86.9 % 85.6 % 131 bps 86.5 % 86.5 % 4 bps Research and development expenses as a % of revenues 20.9 % 17.6 % 326 bps 21.7 % 17.5 % 422 bps Selling, general and administrative expenses as a % of revenues 28.0 % 20.3 % 768 bps 24.4 % 18.3 % 612 bps Operating margin 34.5 % 42.7 % -815 bps 34.9 % 48.2 % -1331 bps Effective tax rate 21.0 % 19.3 % 173 bps 20.0 % 18.8 % 118 bps NM - Not Meaningful (1) Refer to Non-GAAP Financial Information section above for further disclosures on non-GAAP financial measures. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 10 - 11. GILEAD SCIENCES, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages and per share amounts) 2023 2022 2023 2022 Cost of goods sold reconciliation: GAAP cost of goods sold $ 1,442 $ 1,442 $ 2,843 $ 2,866 Acquisition-related – amortization(1) (581 ) (556 ) (1,110 ) (1,113 ) Other(2) — — — (42 ) Non-GAAP cost of goods sold $ 861 $ 886 $ 1,732 $ 1,711 Product gross margin reconciliation: GAAP product gross margin 78.0 % 76.5 % 77.9 % 77.4 % Acquisition-related – amortization(1) 8.8 % 9.1 % 8.6 % 8.8 % Other(2) — % — % — % 0.3 % Non-GAAP product gross margin 86.9 % 85.6 % 86.5 % 86.5 % Research and development expenses reconciliation: GAAP research and development expenses $ 1,407 $ 1,102 $ 2,854 $ 2,280 Acquisition-related – other costs(3) (30 ) — (38 ) (11 ) Other(2) — — — (18 ) Non-GAAP research and development expenses $ 1,377 $ 1,102 $ 2,816 $ 2,251 IPR&D impairment reconciliation: GAAP IPR&D impairment $ — $ — $ — $ 2,700 IPR&D impairment — — — (2,700 ) Non-GAAP IPR&D impairment $ — $ — $ — $ — Selling, general and administrative expenses reconciliation: GAAP selling, general and administrative expenses $ 1,849 $ 1,357 $ 3,168 $ 2,440 Acquisition-related – other costs(3) (1 ) — (2 ) — Other(2) — (85 ) — (85 ) Non-GAAP selling, general and administrative expenses $ 1,848 $ 1,272 $ 3,166 $ 2,355 Operating income reconciliation: GAAP operating income $ 1,665 $ 2,029 $ 3,370 $ 2,226 Acquisition-related – amortization(1) 581 556 1,110 1,113 Acquisition-related – other costs(3) 31 — 40 11 IPR&D impairment — — — 2,700 Other(2) — 85 — 145 Non-GAAP operating income $ 2,277 $ 2,670 $ 4,521 $ 6,195 Operating margin reconciliation: GAAP operating margin 25.2 % 32.4 % 26.0 % 17.3 % Acquisition-related – amortization(1) 8.8 % 8.9 % 8.6 % 8.7 % Acquisition-related – other costs(3) 0.5 % — % 0.3 % 0.1 % IPR&D impairment — % — % — % 21.0 % Other(2) — % 1.4 % — % 1.1 % Non-GAAP operating margin 34.5 % 42.7 % 34.9 % 48.2 % Other income (expense), net reconciliation: GAAP other income (expense), net $ 152 $ (284 ) $ (22 ) $ (395 ) (Gain) loss from equity securities, net (69 ) 303 187 399 Non-GAAP other income (expense), net $ 83 $ 20 $ 165 $ 5 GILEAD SCIENCES, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION - (Continued) (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages and per share amounts) 2023 2022 2023 2022 Effective tax rate reconciliation: GAAP effective tax rate 34.6 % 24.5 % 29.9 % 15.1 % Income tax effect of above non-GAAP adjustments and discrete and related tax adjustments(4) (13.5 )% (5.2 )% (10.0 )% 3.7 % Non-GAAP effective tax rate 21.0 % 19.3 % 20.0 % 18.8 % Net income attributable to Gilead reconciliation: GAAP net income attributable to Gilead $ 1,045 $ 1,144 $ 2,055 $ 1,163 Acquisition-related – amortization(1) 461 442 884 885 Acquisition-related – other costs(3) 26 — 32 11 IPR&D impairment — — — 2,057 Loss (gain) from equity securities, net (70 ) 308 187 372 Discrete and related tax charges(4) 227 31 256 68 Other(2) — 59 — 104 Non-GAAP net income attributable to Gilead $ 1,688 $ 1,985 $ 3,414 $ 4,661 Diluted earnings per share reconciliation: GAAP diluted earnings per share $ 0.83 $ 0.91 $ 1.63 $ 0.92 Acquisition-related – amortization(1) 0.37 0.35 0.70 0.70 Acquisition-related – other costs(3) 0.02 — 0.03 0.01 IPR&D impairment — — — 1.63 Loss (gain) from equity securities, net (0.06 ) 0.24 0.15 0.30 Discrete and related tax charges(4) 0.18 0.02 0.20 0.05 Other(2) — 0.05 — 0.08 Non-GAAP diluted earnings per share $ 1.34 $ 1.58 $ 2.71 $ 3.70 Non-GAAP adjustment summary: Cost of goods sold adjustments $ 581 $ 556 $ 1,110 $ 1,155 Research and development expenses adjustments 30 — 38 29 IPR&D impairment adjustments — — — 2,700 Selling, general and administrative expenses adjustments 1 85 2 85 Total non-GAAP adjustments to costs and expenses 612 641 1,150 3,968 Other income (expense), net, adjustments (69 ) 303 187 399 Total non-GAAP adjustments before income taxes 543 945 1,338 4,368 Income tax effect of non-GAAP adjustments above (126 ) (135 ) (235 ) (938 ) Discrete and related tax charges(4) 227 31 256 68 Total non-GAAP adjustments after tax $ 644 $ 841 $ 1,358 $ 3,498 (1) Relates to amortization of acquired intangibles and inventory step-up charges. (2) Adjustments to Cost of goods sold and Research and development expenses primarily include various restructuring expenses during the first quarter of 2022. Adjustments to Selling, general and administrative expenses include donations to the Gilead Foundation, a California nonprofit organization, during the second quarter of 2022. (3) Adjustments include employee-related expenses, contingent consideration fair value adjustments and other expenses associated with Gilead’s acquisitions of MYR GmbH, MiroBio, Ltd., Tmunity Therapeutics, Inc. and XinThera, Inc. (4) Represents discrete and related deferred tax charges or benefits primarily associated with acquired intangible assets and transfers of intangible assets from a foreign subsidiary to Ireland and the United States. GILEAD SCIENCES, INC. RECONCILIATION OF GAAP TO NON-GAAP 2023 FULL-YEAR GUIDANCE(1) (unaudited) (in millions, except percentages and per share amounts) Provided February 2, 2023 Updated April 27, 2023 Updated August 3, 2023 Projected product gross margin GAAP to non-GAAP reconciliation: GAAP projected product gross margin 79.0% 77.0% 77.0% Acquisition-related expenses ~ 7% ~ 9% ~ 9% Non-GAAP projected product gross margin 86.0% 86.0% 86.0% Projected operating income GAAP to non-GAAP reconciliation: GAAP projected operating income $9,200 - $9,800 $8,600 - $9,200 $8,000 - $8,500 Acquisition-related expenses ~ 1,800 ~ 2,400 ~ 2,400 Non-GAAP projected operating income $11,000 - $11,600 $11,000 - $11,600 $10,400 - $10,900 Projected effective tax rate GAAP to non-GAAP reconciliation: GAAP projected effective tax rate ~ 22% ~ 22% ~ 21% Discrete and related tax adjustments, and income tax effect of adjustments above and fair value adjustments of equity securities (~ 2%) (~ 2%) (~ 4%) Non-GAAP projected effective tax rate ~ 20% ~ 20% ~ 17% Projected diluted EPS GAAP to non-GAAP reconciliation: GAAP projected diluted EPS $5.30 - $5.70 $4.75 - $5.15 $4.50 - $4.85 Acquisition-related expenses, fair value adjustments of equity securities and discrete and related tax adjustments ~ 1.30 ~ 1.85 ~ 1.95 Non-GAAP projected diluted EPS $6.60 - $7.00 $6.60 - $7.00 $6.45 - $6.80 (1) Our full-year guidance excludes the potential impact of any (i) acquisitions or business development transactions that have not been executed, (ii) future fair value adjustments of equity securities and (iii) discrete tax charges or benefits associated with changes in tax related laws and guidelines that have not been enacted, as Gilead is unable to project such amounts. The non-GAAP full-year guidance includes non-GAAP adjustments to actual current period results as well as adjustments for the known future impact associated with events that have already occurred, such as future amortization of our intangible assets and the future impact of discrete and related deferred tax charges or benefits primarily associated with acquired intangible assets and transfers of intangible assets from a foreign subsidiary to Ireland and the United States. GILEAD SCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) June 30, December 31, (in millions) 2023 2022 Assets Cash, cash equivalents and marketable debt securities $ 8,001 $ 7,630 Accounts receivable, net 4,229 4,777 Inventories 3,181 2,820 Property, plant and equipment, net 5,540 5,475 Intangible assets, net 27,750 28,894 Goodwill 8,314 8,314 Other assets 5,322 5,262 Total assets $ 62,337 $ 63,171 Liabilities and Stockholders’ Equity Current liabilities $ 13,964 $ 11,237 Long-term liabilities 27,279 30,725 Stockholders’ equity(1) 21,094 21,209 Total liabilities and stockholders’ equity $ 62,337 $ 63,171 (1) As of June 30, 2023 and December 31, 2022, there were 1,247 shares of common stock issued and outstanding. GILEAD SCIENCES, INC. SELECTED CASH FLOW INFORMATION (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions) 2023 2022 2023 2022 Net cash provided by operating activities $ 2,337 $ 1,802 $ 4,082 $ 3,642 Net cash used in investing activities (483 ) (308 ) (1,309 ) (1,378 ) Net cash used in financing activities (1,101 ) (1,003 ) (2,507 ) (2,797 ) Effect of exchange rate changes on cash and cash equivalents 14 (48 ) 26 (66 ) Net change in cash and cash equivalents 768 443 292 (599 ) Cash and cash equivalents at beginning of period 4,936 4,296 5,412 5,338 Cash and cash equivalents at end of period $ 5,704 $ 4,739 $ 5,704 $ 4,739 Three Months Ended Six Months Ended June 30, June 30, (in millions) 2023 2022 2023 2022 Net cash provided by operating activities $ 2,337 $ 1,802 $ 4,082 $ 3,642 Capital expenditures (139 ) (143 ) (248 ) (390 ) Free cash flow(1) $ 2,199 $ 1,659 $ 3,834 $ 3,252 (1) Free cash flow is a non-GAAP liquidity measure. Please refer to our disclosures in the Non-GAAP Financial Information section above. GILEAD SCIENCES, INC. PRODUCT SALES SUMMARY (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions) 2023 2022 2023 2022 HIV Biktarvy – U.S. $ 2,439 $ 2,095 $ 4,600 $ 3,801 Biktarvy – Europe 302 268 606 529 Biktarvy – Other International 237 193 449 376 2,979 2,556 5,656 4,707 Complera / Eviplera – U.S. 13 20 27 37 Complera / Eviplera – Europe 16 31 37 55 Complera / Eviplera – Other International 3 3 6 7 32 54 70 99 Descovy – U.S. 460 397 855 708 Descovy – Europe 25 32 50 64 Descovy – Other International 31 32 60 63 516 460 965 834 Genvoya – U.S. 455 482 872 939 Genvoya – Europe 56 72 111 149 Genvoya – Other International 29 29 58 76 540 582 1,041 1,164 Odefsey – U.S. 267 255 497 487 Odefsey – Europe 74 97 149 193 Odefsey – Other International 11 12 22 23 351 364 668 703 Stribild – U.S. 19 24 39 46 Stribild – Europe 5 8 11 16 Stribild – Other International 2 2 4 5 26 33 55 66 Truvada – U.S. 32 24 55 52 Truvada – Europe 3 5 7 9 Truvada – Other International 7 5 12 11 42 34 74 72 Revenue share – Symtuza(1) – U.S. 84 80 182 166 Revenue share – Symtuza(1) – Europe 33 42 70 86 Revenue share – Symtuza(1) – Other International 3 4 7 6 120 126 259 258 Other HIV(2) – U.S. 10 5 15 10 Other HIV(2) – Europe 7 9 8 13 Other HIV(2) – Other International 3 4 6 9 20 18 29 33 Total HIV – U.S. 3,778 3,383 7,142 6,245 Total HIV – Europe 521 562 1,049 1,112 Total HIV – Other International 326 282 624 577 4,626 4,228 8,816 7,935 GILEAD SCIENCES, INC. PRODUCT SALES SUMMARY - (Continued) (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions) 2023 2022 2023 2022 Oncology Cell Therapy Tecartus – U.S. 56 53 114 100 Tecartus – Europe 29 20 56 35 Tecartus – Other International 4 — 6 1 88 73 177 136 Yescarta – U.S. 217 193 427 318 Yescarta – Europe 133 85 254 162 Yescarta – Other International 30 17 58 26 380 295 739 506 Total Cell Therapy – U.S. 272 246 542 418 Total Cell Therapy – Europe 162 105 310 197 Total Cell Therapy – Other International 34 17 65 27 469 368 916 642 Trodelvy Trodelvy – U.S. 189 120 351 240 Trodelvy – Europe 53 35 107 61 Trodelvy – Other International 17 3 23 5 260 159 482 305 Total Oncology – U.S. 462 366 893 658 Total Oncology – Europe 215 141 417 258 Total Oncology – Other International 51 21 88 32 728 527 1,398 947 Liver Disease HCV Ledipasvir / Sofosbuvir(3) – U.S. 8 6 12 19 Ledipasvir / Sofosbuvir(3) – Europe 2 4 9 8 Ledipasvir / Sofosbuvir(3) – Other International 5 13 10 31 15 23 30 58 Sofosbuvir / Velpatasvir(4) – U.S. 223 227 427 389 Sofosbuvir / Velpatasvir(4) – Europe 84 75 174 157 Sofosbuvir / Velpatasvir(4) – Other International 90 74 181 159 397 376 782 706 Other HCV(5) – U.S. 28 30 51 54 Other HCV(5) – Europe 9 16 27 24 Other HCV(5) – Other International 3 3 6 5 40 49 85 83 Total HCV – U.S. 259 263 491 462 Total HCV – Europe 95 94 209 189 Total HCV – Other International 98 91 197 196 452 448 897 847 GILEAD SCIENCES, INC. PRODUCT SALES SUMMARY - (Continued) (unaudited) Three Months Ended Six Months Ended June 30, June 30, (in millions) 2023 2022 2023 2022 HBV/HDV Vemlidy – U.S. 96 97 183 177 Vemlidy – Europe 10 9 19 18 Vemlidy – Other International 113 89 216 199 219 195 418 394 Viread – U.S. 1 3 1 3 Viread – Europe 6 6 12 12 Viread – Other International 14 15 28 32 21 24 40 47 Other HBV/HDV(6) – Europe 20 15 31 28 20 16 31 28 Total HBV/HDV – U.S. 97 100 183 180 Total HBV/HDV – Europe 35 30 62 57 Total HBV/HDV – Other International 127 104 244 232 259 234 489 470 Total Liver Disease – U.S. 356 363 674 642 Total Liver Disease – Europe 131 124 271 247 Total Liver Disease – Other International 225 195 441 427 711 682 1,386 1,317 Veklury Veklury – U.S. 97 41 349 843 Veklury – Europe 52 126 163 430 Veklury – Other International 107 278 317 708 256 445 829 1,980 Other AmBisome – U.S. 20 15 27 40 AmBisome – Europe 69 63 129 129 AmBisome – Other International 61 54 111 107 151 132 267 275 Letairis – U.S. 39 49 70 92 Other(7) – U.S. 26 37 56 63 Other(7) – Europe 10 26 22 41 Other(7) – Other International 17 13 26 22 53 76 105 125 Total Other – U.S. 85 101 153 195 Total Other – Europe 80 88 152 169 Total Other – Other International 78 67 137 129 243 256 442 493 Total product sales – U.S. 4,777 4,254 9,211 8,582 Total product sales – Europe 999 1,042 2,052 2,216 Total product sales – Other International 788 842 1,607 1,873 $ 6,564 $ 6,138 $ 12,870 $ 12,672 (1) Represents Gilead’s revenue from cobicistat (“C”), FTC and TAF in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen Sciences Ireland Unlimited Company. (2) Includes Atripla, Emtriva, Sunlenca and Tybost. (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 Vosevi and Sovaldi. (6) Includes Hepcludex and Hepsera. (7) Includes Cayston, Jyseleca, Ranexa and Zydelig.
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