GILD
$75.68
Gilead Sciences
$.21
.28%
Earnings Details
4th Quarter December 2017
Tuesday, February 6, 2018 4:01:00 PM
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Summary

Gilead Sciences Misses

Gilead Sciences (GILD) reported 4th Quarter December 2017 earnings of $1.60 per share on revenue of $5.9 billion. The consensus earnings estimate was $1.65 per share on revenue of $5.8 billion. The Earnings Whisper number was $1.75 per share. Revenue fell 18.7% compared to the same quarter a year ago.

Gilead Sciences Inc is a research-based biopharmaceutical company that discovers, develops and commercializes new medicines for different medical sectors.

Results
Reported Earnings
$1.60
Earnings Whisper
$1.75
Consensus Estimate
$1.65
Reported Revenue
$5.95 Bil
Revenue Estimate
$5.78 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Gilead Sciences Announces Fourth Quarter and Full Year 2017 Financial Results

- Full Year 2017 Product Sales of $25.7 billion -

--- Full Year 2017 Diluted EPS of $3.51 per share -

--- Full Year 2017 Non-GAAP Diluted EPS of $8.84 per share -

Gilead Sciences, Inc. (GILD) announced today its results of operations for the fourth quarter and full year 2017. Total revenues for the fourth quarter of 2017 were $5.9 billion compared to $7.3 billion for the same period in 2016. Net loss for the fourth quarter of 2017 was $3.9 billion, or $2.96 loss per share, compared to net income of $3.1 billion, or $2.34 per diluted share for the same period in 2016. The net loss for the fourth quarter includes an estimated $5.5 billion charge related to the enactment of the Tax Cuts and Jobs Act (Tax Reform)(1). Non-GAAP net income for the fourth quarter of 2017 was $2.3 billion, or $1.78 per diluted share, compared to $3.6 billion, or $2.70 per diluted share for the same period in 2016. Non-GAAP net income excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, and the impact of Tax Reform.

Full year 2017 total revenues were $26.1 billion, compared to $30.4 billion for 2016. Net income for 2017 was $4.6 billion, or $3.51 per diluted share, compared to $13.5 billion, or $9.94 per diluted share for 2016. Non-GAAP net income for 2017 was $11.7 billion, or $8.84 per diluted share, compared to $15.7 billion, or $11.57 per diluted share for 2016.

Three Months Ended
Twelve Months Ended
December 31,
December 31,
(In millions, except per share amounts)
2017
2016
2017
2016
Product sales
$
5,837
$ 7,216
$ 25,662
$
29,953
Royalty, contract and other revenues
112
104
445
437
Total revenues
$
5,949
$ 7,320
$ 26,107
$
30,390
Net income (loss) attributable to Gilead
$ (3,865 )
$ 3,108
$
4,628
$
13,501
Non-GAAP net income*
$
2,343
$ 3,585
$ 11,654
$
15,713
Diluted earnings / (loss) per share**
$
(2.96 )
$
2.34
$
3.51
$
9.94
Non-GAAP diluted earnings per share*
$
1.78
$
2.70
$
8.84
$
11.57
*
Non-GAAP net income and non-GAAP diluted earnings per share
exclude acquisition-related, up-front collaboration, stock-based
compensation and other expenses, and the impact of Tax Reform. A
reconciliation between GAAP and non-GAAP financial information is
provided in the tables on pages 8, 9 and 10.
**
Shares used in loss per share calculation for the three months
ended December 31, 2017 exclude 13 million shares from dilutive
equity awards.

___________________________________

(1) Refer to page 3 for details.

Product Sales

Total product sales for the fourth quarter of 2017 were $5.8 billion, compared to $7.2 billion for the same period in 2016. Product sales for the fourth quarter of 2017 were $4.1 billion in the United States, $1.1 billion in Europe and $553 million in other locations. Product sales for the fourth quarter of 2016 were $4.9 billion in the United States, $1.4 billion in Europe and $870 million in other locations.

Total product sales during 2017 were $25.7 billion, compared to $30.0 billion in 2016. For 2017, product sales were $18.1 billion in the United States, $5.0 billion in Europe and $2.6 billion in other locations. For 2016, product sales were $19.3 billion in the United States, $6.1 billion in Europe and $4.6 billion in other locations.

Antiviral Product Sales

Antiviral product sales, which include sales of our HIV, chronic hepatitis B (HBV) and chronic hepatitis C (HCV) products, were $5.2 billion for the fourth quarter of 2017 compared to $6.6 billion for the same period in 2016. For 2017, antiviral product sales were $23.3 billion compared to $27.7 billion in 2016.

HIV and HBV product sales for the fourth quarter of 2017 were $3.7 billion compared to $3.4 billion for the same period in 2016 and $14.2 billion for the full year 2017 compared to $12.9 billion in 2016. The increases were primarily driven by the continued uptake of our tenofovir alafenamide (TAF)-based products, Genvoya(R) (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg), Descovy(R) (emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Odefsey(R) (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg).

HCV product sales, which consist of Harvoni(R) (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi(R) (sofosbuvir 400 mg), Epclusa(R) (sofosbuvir 400 mg/velpatasvir 100 mg) and Vosevi(R) (sofosbuvir 400 mg/velpatasvir 100 mg/voxilaprevir 100 mg), were $1.5 billion for the fourth quarter of 2017 compared to $3.2 billion for the same period in 2016 and $9.1 billion for the full year 2017 compared to $14.8 billion in 2016. The declines were across all major markets.

Other Product Sales

Other product sales, which include Letairis(R) (ambrisentan), Ranexa(R) (ranolazine) and AmBisome(R) (amphotericin B for liposome injection), were $624 million for the fourth quarter of 2017 compared to $621 million for the same period in 2016. For 2017, other product sales were $2.3 billion compared to $2.2 billion in 2016.

Operating Expenses

Three Months Ended
Twelve Months Ended
December 31,
December 31,
(In millions)
2017
2016
2017
2016
Research and development (R&D) expenses
$ 1,150
$ 1,208
$ 3,734
$
5,098
Non-GAAP R&D expenses*
$
845
$
959
$ 3,291
$
3,749
Selling, general and administrative (SG&A) expenses
$ 1,252
$
992
$ 3,878
$
3,398
Non-GAAP SG&A expenses*
$
923
$
938
$ 3,363
$
3,194
*
Non-GAAP R&D and SG&A expenses exclude acquisition-related,
up-front collaboration, stock-based compensation and other
expenses. A reconciliation between GAAP and non-GAAP financial
information is provided in the tables on pages 8, 9 and 10.

During the fourth quarter of 2017, compared to the same period in 2016:

R&D expenses decreased primarily due to the 2016 impacts of ongoing milestone payments and an impairment charge related to in-process R&D (IPR&D), partially offset by Gilead’s purchase of Cell Design Labs, Inc. (Cell Design Labs) in 2017.

Non-GAAP R&D expenses* decreased primarily due to the 2016 impact of ongoing milestone payments.

SG&A expenses increased primarily due to acquisition-related costs associated with Gilead’s acquisition of Kite Pharma, Inc. (Kite).

For 2017 compared to 2016:

R&D expenses decreased primarily due to the 2016 impacts of impairment charges related to IPR&D, ongoing milestone payments, up-front collaboration expenses related to Gilead’s license and collaboration agreement with Galapagos NV and Gilead’s purchase of Nimbus Apollo, Inc., partially offset by Gilead’s purchase of Cell Design Labs in 2017.

Non-GAAP R&D expenses* decreased primarily due to the 2016 impact of ongoing milestone payments.

SG&A expenses increased primarily due to acquisition-related costs associated with Gilead’s acquisition of Kite.

Non-GAAP SG&A expenses* increased primarily due to higher branded prescription drug fee expense.

Provision for Income Taxes and Tax Reform

Provision for income taxes was $6.0 billion for the fourth quarter of 2017 compared to $821 million for the same period in 2016 and $8.9 billion for the full year 2017 compared to $3.6 billion in 2016. The increases were primarily due to an estimated charge of $5.5 billion from Tax Reform, which was enacted on December 22, 2017 and lowers U.S. corporate income tax rates as of January 1, 2018, implements a territorial tax system and imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries. This estimate is provisional and based on our initial analysis and current interpretation. Given the complexity of the legislation, anticipated guidance from the U.S. Treasury, and the potential for additional guidance from the Securities and Exchange Commission ("SEC") or the Financial Accounting Standards Board, this estimate may be adjusted during 2018.

Non-GAAP provision for income taxes excludes the estimated charge of $5.5 billion from Tax Reform. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8, 9 and 10.

Cash, Cash Equivalents and Marketable Securities

As of December 31, 2017, Gilead had $36.7 billion of cash, cash equivalents and marketable securities compared to $32.4 billion as of December 31, 2016. During 2017, Gilead generated $11.9 billion in operating cash flow and in connection with the acquisition of Kite, Gilead issued $3.0 billion aggregate principal amount of senior unsecured notes and $6.0 billion aggregate principal amount of term loan facilities, of which $1.5 billion was repaid in December 2017. Additionally, Gilead paid cash dividends of $2.7 billion and utilized $954 million on stock repurchases.

Full Year 2018 Guidance

Gilead provided its full year 2018 guidance:

(In millions, except percentages and per share amounts)
Provided
February 6, 2018
Net Product Sales
$20,000 - $21,000
Non-GAAP*
Product Gross Margin
85% - 87%
R&D Expenses
$3,400 - $3,600
SG&A Expenses
$3,400 - $3,600
Effective Tax Rate
21.0% - 23.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration,
$1.41 - $1.51
Stock-Based Compensation and Other Expenses
*
Non-GAAP Product Gross Margin, R&D and SG&A expenses and
effective tax rate exclude acquisition-related, up-front
collaboration, stock-based compensation and other expenses, and
changes to our estimates relating to Tax Reform during 2018. A
reconciliation between GAAP and non-GAAP full year 2018 guidance
is provided in the tables on page 11.

Corporate Highlights

Announced that Executive Chairman John C. Martin, PhD will transition from his current role of Executive Chairman to Chairman of the Board of Directors effective March 9, 2018.

Announced the acquisition of Cell Design Labs, gaining new technology platforms that will enhance research and development efforts in cellular therapy.

Announced the launch of the Gilead COMPASS (COMmitment to Partnership in Addressing HIV/AIDS in Southern States) Initiative, a 10-year, $100 million commitment to support organizations working to address the HIV/AIDS epidemic in the Southern United States.

Announced the promotion of Alessandro Riva, MD, to Executive Vice President, Oncology Therapeutics, with responsibility for Gilead’s hematology and oncology programs, including cell therapy research and development.

Product & Pipeline Updates announced by Gilead during the Fourth Quarter of 2017 include:

HIV and Liver Diseases Programs

Presented data at The Liver Meeting(R) 2017 which included the announcement of: -- Results from a Phase 2, randomized, placebo-controlled trial evaluating two doses of GS-0976, an oral, investigational inhibitor of Acetyl-CoA carboxylase, in patients with nonalcoholic steatohepatitis (NASH). The data demonstrate that the higher dose of GS-0976 (20 mg taken orally once daily) when administered for 12 weeks was associated with statistically significant reductions in hepatic steatosis (buildup of fat in the liver) and a noninvasive marker of fibrosis compared to placebo.

Results from an open-label Phase 2 study evaluating once-daily Harvoni for 12 weeks among HCV genotype 1 patients with severe renal impairment (creatinine clearance less-than or equal to 30 mL/min). 100 percent of patients achieved a sustained virologic response 12 weeks after completing therapy (SVR12), including patients with compensated cirrhosis and those who had failed prior treatment.

Results from an open-label Phase 2 study evaluating once-daily Epclusa for 12 weeks among 79 liver transplant patients with genotype 1-4 chronic HCV infection. Treatment with Epclusa resulted in an overall SVR12 rate of 96 percent, including patients with cirrhosis and prior treatment failure, and was well tolerated.

Updated results from two Phase 3 studies demonstrating improved long-term bone and renal safety in HBV-infected patients 48-weeks after switching from Viread(R) (tenofovir disoproxil fumarate 300mg) to Vemlidy(R) (tenofovir alafenamide 25mg).

Announced detailed 48-week results from a Phase 3 study evaluating the efficacy and safety of switching virologically suppressed HIV-1 infected adult patients from a multi-tablet regimen containing a boosted protease inhibitor (bPI) to a fixed-dose combination of bictegravir (50 mg) (BIC), a novel investigational integrase strand transfer inhibitor, and emtricitabine/tenofovir alafenamide (200/25 mg) (FTC/TAF), a dual-NRTI backbone. In the ongoing study, BIC/FTC/TAF was found to be statistically non-inferior to regimens containing bPIs and demonstrated no treatment-emergent resistance at 48 weeks. The data were presented at IDWeek 2017.

Announced a new licensing agreement with the Medicines Patent Pool (MPP), a United Nations-backed public health organization, to expand access to BIC upon regulatory approval in the United States. Through this agreement, MPP can sub-license rights to BIC to generic drug companies in India, China and South Africa to manufacture therapies containing BIC for distribution in 116 low- and middle-income countries.

Oncology and Cell Therapy Programs

Announced updated results from the ongoing Phase 1/2 ZUMA-3 study of KTE-C19, a CD19 chimeric antigen receptor T (CAR T) cell therapy, which is investigational, for the treatment of adult patients with relapsed or refractory acute lymphoblastic leukemia (ALL). With a minimum of eight weeks of follow-up, 71 percent of ALL patients (n=17/24) who received a single infusion of KTE-C19 achieved complete tumor remission (complete remission (CR) or CR with incomplete hematological recovery). The ZUMA-3 study results were presented in an oral session at the Annual Meeting of the American Society of Hematology.

Announced long-term follow-up data from the ZUMA-1 study of Yescarta(TM) (axicabtagene ciloleucel) in patients with refractory large B-cell lymphoma. With a minimum follow-up of one year after a single infusion of Yescarta (median follow-up of 15.4 months), 42 percent of patients continued to respond to therapy, including 40 percent with a complete remission. Detailed results from this updated analysis were simultaneously presented at the Annual Meeting of the American Society of Hematology, and published in The New England Journal of Medicine.

Announced that U.S. Food and Drug Administration has granted regular approval to Yescarta, the first CAR T cell therapy for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (DLBCL) not otherwise specified, primary mediastinal large B-cell lymphoma, high-grade B-cell lymphoma, and DLBCL arising from follicular lymphoma (transformed follicular lymphoma).

Non-GAAP Financial Information

The information presented in this document has been prepared by Gilead in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 8, 9, 10 and 11.

Conference Call

At 4:30 p.m. Eastern Time today, Gilead’s management will host a conference call and a simultaneous webcast to discuss results from its fourth quarter 2017 and full year 2017 as well as provide 2018 guidance and a general business update. To access the webcast live via the internet, please connect to the company’s website at www.gilead.com/investors 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 (877) 359-9508 (U.S.) or (224) 357-2393 (international) and dial the conference ID 6478317 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 February 8, 2018. To access the phone replay, please call (855) 859-2056 (U.S.) or (404) 537-3406 (international) and dial the conference ID 6478317.

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. Gilead has operations 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: Gilead’s ability to achieve its anticipated full year 2018 financial results; Gilead’s ability to sustain growth in revenues for its antiviral and other programs; the risk that private and public payers may be reluctant to provide, or continue to provide, coverage or reimbursement for new products, including Vosevi, Yescarta, Epclusa, Harvoni, Genvoya, Odefsey, Descovy and Vemlidy; austerity measures in European countries that may increase the amount of discount required on Gilead’s products; an increase in discounts, chargebacks and rebates due to ongoing contracts and future negotiations with commercial and government payers; a larger than anticipated shift in payer mix to more highly discounted payer segments and geographic regions and decreases in treatment duration; availability of funding for state AIDS Drug Assistance Programs (ADAPs); continued fluctuations in ADAP purchases driven by federal and state grant cycles which may not mirror patient demand and may cause fluctuations in Gilead’s earnings; market share and price erosion caused by the introduction of generic versions of Viread and Truvada outside the United States, an uncertain global macroeconomic environment; and potential amendments to the Affordable Care Act or other government action that could have the effect of lowering prices or reducing the number of insured patients; the possibility of unfavorable results from clinical trials involving investigational compounds; Gilead’s ability to initiate clinical trials in its currently anticipated timeframes; the levels of inventory held by wholesalers and retailers which may cause fluctuations in Gilead’s earnings; Gilead’s ability to submit new drug applications for new product candidates in the timelines currently anticipated; Gilead’s ability to receive regulatory approvals in a timely manner or at all, for new and current products, including BIC/FTC/TAF; Gilead’s ability to successfully commercialize its products, including Vosevi, Yescarta, Epclusa, Harvoni, Genvoya, Odefsey, Descovy and Vemlidy; 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; Gilead’s ability to successfully develop its hematology/oncology and inflammation/respiratory programs; safety and efficacy data from clinical studies may not warrant further development of Gilead’s product candidates, including GS-0976 and KTE-C19; Gilead’s ability to pay dividends or complete its share repurchase program due to changes in its stock price, corporate or other market conditions; fluctuations in the foreign exchange rate of the U.S. dollar that may cause an unfavorable foreign currency exchange impact on Gilead’s future revenues and pre-tax earnings; and other risks identified from time to time in Gilead’s reports filed with the SEC. In addition, Gilead makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Gilead bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. 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 press releases, Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 and other subsequent disclosure documents filed with the SEC. Gilead claims the protection of the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements.

All forward-looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward-looking statements.

Gilead owns or has rights to various trademarks, copyrights and trade names used in our business, including the following: GILEAD(R), GILEAD SCIENCES(R), AMBISOME(R), AXI-CEL(TM), CAYSTON(R), COMPLERA(R), DESCOVY(R),EMTRIVA(R), EPCLUSA(R), EVIPLERA(R), GENVOYA(R), HARVONI(R), HEPSERA(R), LETAIRIS(R), ODEFSEY(R), RANEXA(R), SOVALDI(R), STRIBILD(R), TRUVADA(R), TYBOST(R), VEMLIDY(R), VIREAD(R), VOLIBRIS(R), VOSEVI(R), YESCARTA(TM) and ZYDELIG(R).

ATRIPLA(R) is a registered trademark of Gilead Sciences, LLC. LEXISCAN(R) is a registered trademark of Astellas U.S. LLC. MACUGEN(R) is a registered trademark of Eyetech, Inc. TAMIFLU(R) is a registered trademark of Hoffmann-La Roche Inc.

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

GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in millions, except per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2017
2016
2017
2016
Revenues:
Product sales
$
5,837
$ 7,216
$ 25,662
$ 29,953
Royalty, contract and other revenues
112
104
445
437
Total revenues
5,949
7,320
26,107
30,390
Costs and expenses:
Cost of goods sold
1,256
1,075
4,371
4,261
Research and development expenses
1,150
1,208
3,734
5,098
Selling, general and administrative expenses
1,252
992
3,878
3,398
Total costs and expenses
3,658
3,275
11,983
12,757
Income from operations
2,291
4,045
14,124
17,633
Interest expense
(297 )
(265 )
(1,118 )
(964 )
Other income (expense), net
132
140
523
428
Income before provision for income taxes
2,126
3,920
13,529
17,097
Provision for income taxes
5,962
821
8,885
3,609
Net income (loss)
(3,836 )
3,099
4,644
13,488
Net income (loss) attributable to noncontrolling interest
29
(9 )
16
(13 )
Net income (loss) attributable to Gilead
$ (3,865 )
$ 3,108
$
4,628
$ 13,501
Net income (loss) per share attributable to Gilead common
$
(2.96 )
$
2.36
$
3.54
$
10.08
stockholders - basic
Shares used in per share calculation - basic
1,307
1,316
1,307
1,339
Net income (loss) per share attributable to Gilead common
$
(2.96 )
$
2.34
$
3.51
$
9.94
stockholders - diluted
Shares used in per share calculation - diluted
1,307
1,327
1,319
1,358
Cash dividends declared per share
$
0.52
$
0.47
$
2.08
$
1.84
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited)
(in millions, except percentages and per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2017
2016
2017
2016
Cost of goods sold reconciliation:
GAAP cost of goods sold
$
1,256
$
1,075
$
4,371
$
4,261
Acquisition-related - amortization of purchased intangibles
(283 )
(214 )
(912 )
(844 )
Stock-based compensation expenses(1)
(12 )
(3 )
(24 )
(14 )
Other(2)
5
2
(13 )
11
Non-GAAP cost of goods sold
$
966
$
860
$
3,422
$
3,414
Product gross margin reconciliation:
GAAP product gross margin
78.5
%
85.1
%
83.0
%
85.8
%
Acquisition-related - amortization of purchased intangibles
4.8
%
3.0
%
3.6
%
2.8
%
Stock-based compensation expenses(1)
0.2
%
--
%
0.1
%
--
%
Other(2)
(0.1
)%
--
%
0.1
%
--
%
Non-GAAP product gross margin(6)
83.5
%
88.1
%
86.7
%
88.6
%
Research and development expenses reconciliation:
GAAP research and development expenses
$
1,150
$
1,208
$
3,734
$
5,098
Up-front collaboration expenses
--
--
--
(373 )
Acquisition-related expenses - acquired IPR&D
(222 )
--
(222 )
(400 )
Acquisition-related - IPR&D impairment
--
(201 )
--
(432 )
Acquisition-related - other costs
(8 )
--
(8 )
--
Stock-based compensation expenses(1)
(90 )
(47 )
(232 )
(176 )
Other(2)
15
(1 )
19
32
Non-GAAP research and development expenses
$
845
$
959
$
3,291
$
3,749
Selling, general and administrative expenses reconciliation:
GAAP selling, general and administrative expenses
$
1,252
$
992
$
3,878
$
3,398
Acquisition-related - transaction costs
(36 )
--
(48 )
--
Acquisition-related - other costs
(46 )
--
(46 )
--
Stock-based compensation expenses(1)
(243 )
(52 )
(393 )
(190 )
Other(2)
(4 )
(2 )
(28 )
(14 )
Non-GAAP selling, general and administrative expenses
$
923
$
938
$
3,363
$
3,194
Operating margin reconciliation:
GAAP operating margin
38.5
%
55.3
%
54.1
%
58.0
%
Up-front collaboration expenses
--
%
--
%
--
%
1.2
%
Acquisition-related - amortization of purchased intangibles
4.8
%
2.9
%
3.5
%
2.8
%
Acquisition-related expenses - acquired IPR&D
3.7
%
--
%
0.9
%
1.3
%
Acquisition-related - IPR&D impairment
--
%
2.7
%
--
%
1.4
%
Acquisition-related - transaction costs
0.6
%
--
%
0.2
%
--
%
Acquisition-related - other costs
0.9
%
--
%
0.2
%
--
%
Stock-based compensation expenses(1)
5.8
%
1.4
%
2.5
%
1.3
%
Other(2)
(0.3
)%
--
%
0.1
%
(0.1
)%
Non-GAAP operating margin(6)
54.0
%
62.3
%
61.4
%
65.9
%
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION -
(Continued)
(unaudited)
(in millions, except percentages and per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2017
2016
2017
2016
Interest expense reconciliation:
GAAP interest expense
$
(297 )
$
(265 )
$
(1,118 )
$
(964 )
Acquisition-related - transaction costs
--
--
18
--
Non-GAAP interest expense
$
(297 )
$
(265 )
$
(1,100 )
$
(964 )
Effective tax rate reconciliation:
GAAP effective tax rate
280.5
%
20.9
%
65.7
%
21.1
%
Up-front collaboration expenses
--
%
--
%
--
%
(0.4
)%
Acquisition-related - amortization of purchased intangibles
(1.1
)%
(1.5
)%
(1.2
)%
(0.8
)%
Acquisition-related expenses - acquired IPR&D
(2.1
)%
--
%
(0.4
)%
(0.4
)%
Acquisition-related - transaction costs
0.2
%
--
%
--
%
--
%
Acquisition-related - other costs
0.3
%
--
%
--
%
--
%
Stock-based compensation expenses(1)(3)
2.6
%
--
%
0.8
%
--
%
Tax Reform impact(5)
(258.3
)%
--
%
(40.6
)%
--
%
Other(2)
0.2
%
--
%
--
%
--
%
Non-GAAP effective tax rate(6)
22.2
%
19.4
%
24.5
%
19.5
%
Net income (loss) attributable to Gilead reconciliation:
GAAP net income (loss) attributable to Gilead
$
(3,865 )
$
3,108
$
4,628
$
13,501
Up-front collaboration expenses
--
--
--
373
Acquisition-related - amortization of purchased intangibles
246
206
851
818
Acquisition-related expenses - acquired IPR&D
222
--
222
400
Acquisition-related - IPR&D impairment
--
198
--
371
Acquisition-related - transaction costs
24
--
48
--
Acquisition-related - other costs
36
--
36
--
Stock-based compensation expenses(1)(3)
208
73
369
276
Tax Reform impact(5)
5,490
--
5,490
--
Other(2)
(18 )
--
10
(26 )
Non-GAAP net income attributable to Gilead
$
2,343
$
3,585
$
11,654
$
15,713
Diluted earnings / (loss) per share reconciliation:
GAAP diluted earnings / (loss) per share(4)
$
(2.96 )
$
2.34
$
3.51
$
9.94
Up-front collaboration expenses
--
--
--
0.27
Acquisition-related - amortization of purchased intangibles
0.19
0.16
0.65
0.60
Acquisition-related expenses - acquired IPR&D
0.17
--
0.17
0.29
Acquisition-related - IPR&D impairment
--
0.15
--
0.27
Acquisition-related - transaction costs
0.02
--
0.04
--
Acquisition-related - other costs
0.03
--
0.03
--
Stock-based compensation expenses(1)(3)
0.16
0.06
0.28
0.20
Tax Reform impact(5)
4.16
--
4.16
--
Other(2)
(0.01 )
--
0.01
(0.02 )
Non-GAAP diluted earnings per share(6)
$
1.78
$
2.70
$
8.84
$
11.57
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION -
(Continued)
(unaudited)
(in millions, except percentages and per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2017
2016
2017
2016
Non-GAAP adjustment summary:
Cost of goods sold adjustments
$
290
$
215
$
949
$
847
Research and development expenses adjustments
305
249
443
1,349
Selling, general and administrative expenses adjustments
329
54
515
204
Interest expense adjustments
--
--
18
--
Total non-GAAP adjustments before tax
924
518
1,925
2,400
Income tax effect(3)
(206 )
(40 )
(389 )
(191 )
Tax Reform impact(5)
5,490
--
5,490
--
Other(2)
--
(1 )
--
3
Total non-GAAP adjustments after tax
$
6,208
$
477
$
7,026
$
2,212
Notes:
(1)
Stock-based compensation expenses for the three and twelve months
ended December 31, 2017 include $238 million associated with
Gilead’s acquisition of Kite
(2)
Amounts related to restructuring, contingent consideration,
consolidation of a contract manufacturer and/or other individually
insignificant amounts
(3)
Income tax effect related to stock-based compensation expenses for
the three and twelve months ended December 31, 2017 includes the
incremental tax benefit of $31 million and $91 million,
respectively, recognized from the adoption of Accounting Standards
Update 2016-09 "Improvements to Employee Share-Based Payment
Accounting"
(4)
Shares used in loss per share calculation for the three months ended
December 31, 2017 exclude 13 million shares from dilutive equity
awards
(5)
Amounts for the three and twelve months ended December 31, 2017
include an estimated charge of $5.8 billion relating to the deemed
repatriation of unremitted earnings of foreign subsidiaries and an
estimated benefit of $308 million relating to the re-measurement of
deferred taxes
(6)
Amounts may not sum due to rounding
GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP 2018 FULL YEAR GUIDANCE
(unaudited)
(in millions, except percentages and per share amounts)
Provided
February 6, 2018
Projected product gross margin GAAP to non-GAAP reconciliation:
GAAP projected product gross margin
78% - 80%
Acquisition-related expenses
7% - 7%
Non-GAAP projected product gross margin(1)
85% - 87%
Projected research and development expenses GAAP to non-GAAP
reconciliation:
GAAP projected research and development expenses
$3,785 - $4,050
Stock-based compensation expenses(2)
(315) - (350)
Acquisition-related expenses / up-front collaboration expenses
(70) - (100)
Non-GAAP projected research and development expenses
$3,400 - $3,600
Projected selling, general and administrative expenses GAAP to
non-GAAP reconciliation:
GAAP projected selling, general and administrative expenses
$3,865 - $4,110
Stock-based compensation expenses(2)
(425) - (450)
Acquisition-related - other costs
(40) - (60)
Non-GAAP projected selling, general and administrative expenses
$3,400 - $3,600
Projected diluted EPS impact of acquisition-related, up-front
collaboration, stock-based compensation and other expenses(3):
Acquisition-related expenses / up-front collaboration expenses
$0.91 - $0.95
Stock-based compensation expenses(2)
0.50 - 0.56
Projected diluted EPS impact of acquisition-related, up-front
$1.41 - $1.51
collaboration, stock-based compensation and other expenses(3)
Notes:
(1) Stock-based compensation expenses have a less than
one percent impact on non-GAAP projected product gross margin
(2) Includes stock-based compensation expenses associated
with Gilead’s acquisition of Kite
(3) Excludes changes to our estimates relating to Tax
Reform during 2018. As a result, we are unable to project an
effective tax rate on a GAAP basis
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions)
December 31,
December 31,
2017
2016 (1)
Cash, cash equivalents and marketable securities
$ 36,694
$
32,380
Accounts receivable, net
3,851
4,514
Inventories
801
1,587
Property, plant and equipment, net
3,295
2,865
Intangible assets, net
17,100
8,971
Goodwill
4,159
1,172
Other assets
4,383
5,488
Total assets
$ 70,283
$
56,977
Current liabilities
$ 11,635
$
9,218
Long-term liabilities
38,147
28,396
Stockholders’ equity(2)
20,501
19,363
Total liabilities and stockholders’ equity
$ 70,283
$
56,977
Notes:
(1)
Derived from the audited consolidated financial statements as of
December 31, 2016. Certain amounts have been reclassified to conform
to current year presentation
(2)
As of December 31, 2017, there were 1,308 million shares of common
stock issued and outstanding
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in millions)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2017
2016
2017
2016
Antiviral products:
Genvoya - U.S.
$ 844
$
485
$ 3,033
$
1,301
Genvoya - Europe
176
68
534
160
Genvoya - Other International
40
10
107
23
1,060
563
3,674
1,484
Truvada - U.S.
631
604
2,266
2,384
Truvada - Europe
117
200
644
913
Truvada - Other International
49
64
224
269
797
868
3,134
3,566
Harvoni - U.S.
425
976
3,053
4,941
Harvoni - Europe
121
363
704
1,810
Harvoni - Other International
98
301
613
2,330
644
1,640
4,370
9,081
Epclusa - U.S.
262
934
2,404
1,591
Epclusa - Europe
220
101
869
141
Epclusa - Other International
83
13
237
20
565
1,048
3,510
1,752
Atripla - U.S.
314
444
1,288
1,898
Atripla - Europe
76
108
335
520
Atripla - Other International
50
55
183
187
440
607
1,806
2,605
Descovy - U.S.
276
112
958
226
Descovy - Europe
77
34
226
69
Descovy - Other International
12
3
34
3
365
149
1,218
298
Odefsey - U.S.
276
138
964
302
Odefsey - Europe
45
17
132
27
Odefsey - Other International
4
--
10
--
325
155
1,106
329
Stribild - U.S.
179
296
811
1,523
Stribild - Europe
34
71
195
314
Stribild - Other International
9
20
47
77
222
387
1,053
1,914
Complera / Eviplera - U.S.
91
146
406
821
Complera / Eviplera - Europe
118
135
503
580
Complera / Eviplera - Other International
13
16
57
56
222
297
966
1,457
Viread - U.S.
119
171
514
591
Viread - Europe
36
68
238
302
Viread - Other International
57
85
294
293
212
324
1,046
1,186
Vosevi - U.S.
150
--
267
--
Vosevi - Europe
17
--
22
--
Vosevi - Other International
3
--
4
--
170
--
293
--
GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY - (Continued)
(unaudited)
(in millions)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2017
2016
2017
2016
Sovaldi - U.S.
$
10
$
112
$
130
$
1,895
Sovaldi - Europe
20
164
258
891
Sovaldi - Other International
87
265
576
1,215
117
541
964
4,001
Other Antiviral - U.S.
56
12
157
48
Other Antiviral - Europe
7
4
24
22
Other Antiviral - Other International
11
--
15
2
74
16
196
72
Total antiviral products - U.S.
3,633
4,430
16,251
17,521
Total antiviral products - Europe
1,064
1,333
4,684
5,749
Total antiviral products - Other International
516
832
2,401
4,475
5,213
6,595
23,336
27,745
Other products:
Letairis
233
226
887
819
Ranexa
200
210
717
677
AmBisome
90
94
366
356
Zydelig
39
39
149
168
Other
62
52
207
188
624
621
2,326
2,208
Total product sales
$ 5,837
$
7,216
$ 25,662
$
29,953

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SOURCE: Gilead Sciences, Inc.

Gilead Sciences, Inc.
Investors
Robin Washington, 650-522-5688
Sung Lee, 650-524-7792
Media
Amy Flood, 650-522-5643