Gilead Sciences Announces Second Quarter 2017 Financial Results

Gilead Sciences, Inc. on Wednesday announced its results of operations for the second quarter ended June 30, 2017.

The financial results that follow represent a year-over-year comparison of the second quarter 2017 to the second quarter 2016. Total revenues were $7.1 billion in 2017 compared to $7.8 billion in 2016. Net income was $3.1 billion or $2.33 per diluted share in 2017 compared to $3.5 billion or $2.58 per diluted share in 2016.

Non-GAAP net income, which excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $3.4 billion or $2.56 per diluted share in 2017 compared to $4.2 billion or $3.08 per diluted share in 2016.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions, except per share amounts)	2017		2016		2017		2016
Product sales	$	7,046	$	7,651	$	13,423	$	15,332
Royalty, contract and other revenues	95		125		223		238
Total revenues	$	7,141	$	7,776	$	13,646	$	15,570

Net income attributable to Gilead	$	3,073	$	3,497	$	5,775	$	7,063
Non-GAAP net income*	$	3,372	$	4,177	$	6,321	$	8,451

Diluted earnings per share	$	2.33	$	2.58	$	4.38	$	5.11
Non-GAAP diluted earnings per share*	$	2.56	$	3.08	$	4.79	$	6.11

* Non-GAAP net income and non-GAAP diluted earnings per share exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses.

Product Sales

Total product sales for the second quarter of 2017 were $7.0 billion compared to $7.7 billion for the same period in 2016. Product sales for the second quarter of 2017 were $5.0 billion in the United States, $1.4 billion in Europe and $665 million in other locations. Product sales for the second quarter of 2016 were $4.9 billion in the United States, $1.6 billion in Europe and $1.2 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 $6.4 billion for the second quarter of 2017 compared to $7.1 billion for the same period in 2016.

HIV and HBV product sales were $3.6 billion compared to $3.1 billion for the same period in 2016. The increase was primarily due to the continued uptake of our tenofovir alafenamide (TAF) based products, Genvoya® (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg), Descovy® (emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Odefsey® (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg).
HCV product sales, which consist of Harvoni® (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi® (sofosbuvir 400 mg) and Epclusa®(sofosbuvir 400 mg/velpatasvir 100 mg), were $2.9 billion compared to $4.0 billion for the same period in 2016. The decline was due to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa, which was approved in the United States and Europe in June and July 2016, respectively.

Other Product Sales

Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B liposome for injection), were $607 million for the second quarter of 2017 compared to $525 million for the same period in 2016.

Operating Expenses

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2017		2016		2017		2016
Research and development expenses (R&D)	$	864	$	1,484	$	1,795	$	2,749
Non-GAAP R&D expenses*	$	812	$	1,040	$	1,701	$	1,809

Selling, general and administrative expenses (SG&A)	$	897	$	890	$	1,747	$	1,575
Non-GAAP SG&A expenses*	$	827	$	838	$	1,634	$	1,476

* Non-GAAP R&D and SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses.

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

R&D expenses decreased primarily due to the 2016 impact of Gilead’s purchase of Nimbus Apollo, Inc. and a U.S. Food and Drug Administration (FDA) priority review voucher.
Non-GAAP R&D expenses* decreased primarily due to the 2016 impact of Gilead’s purchase of an FDA priority review voucher.

Cash, Cash Equivalents and Marketable Securities

As of June 30, 2017, Gilead had $36.6 billion of cash, cash equivalents and marketable securities compared to $34.0 billion as of March 31, 2017. Cash flow from operating activities was $3.5 billion for the quarter. During the second quarter of 2017, Gilead paid cash dividends of $680 million and utilized $130 million on stock repurchases.

Revised Full Year 2017 Guidance

Gilead revised its full year 2017 guidance, initially provided on February 7, 2017:

(In millions, except percentages and per share amounts)	Initially Provided February 7, 2017 Reiterated May 2, 2017	Updated July 26, 2017
Net Product Sales	$22,500 – $24,500	$24,000 – $25,500
Non-HCV Product Sales	$15,000 – $15,500	$15,500 – $16,000
HCV Product Sales	$7,500 – $9,000	$8,500 – $9,500
Non-GAAP*
Product Gross Margin	86% – 88%	86% – 88%
R&D Expenses	$3,100 – $3,400	$3,200 – $3,400
SG&A Expenses	$3,100 – $3,400	$3,200 – $3,400
Effective Tax Rate	25.0% – 28.0%	25.0% – 28.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-based Compensation and Other Expenses	$0.84 – $0.91	$0.86 – $0.93

* 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.

Product and Pipeline Updates announced by Gilead during the Second Quarter of 2017 include:

Antiviral and Liver Diseases Programs

Announced that the European Committee for the Medicinal Products for Human Use, the scientific committee of the European Medicines Agency, adopted a positive opinion on the marketing authorization application for Vosevi, a once-daily, single-tablet regimen of sofosbuvir 400 mg, velpatasvir 100 mg and voxilaprevir 100 mg for the treatment of HCV-infected patients. On July 18, 2017, Vosevi was approved by FDA.
Announced the submission of a new drug application (NDA) to FDA for an investigational, once-daily single-tablet regimen containing bictegravir (50 mg) (BIC), a novel investigational integrase strand transfer inhibitor, and emtricitabine/tenofovir alafenamide (200/25 mg) (FTC/TAF) for the treatment of HIV-1 infection in adults. BIC/FTC/TAF demonstrated high rates of virologic suppression and no treatment-emergent resistance through 48 weeks in Phase 3 clinical trials among treatment-naïve adult patients and among virologically suppressed adult patients who switched regimens. Additionally, Gilead submitted a marketing authorization application for BIC/FTC/TAF in the European Union during the second quarter of 2017.
Presented data at the 52nd Annual Meeting of the European Association for the Study of the Liver: The International Liver Congress 2017 which included the announcement of:
- Positive results from an open-label, proof-of-concept study evaluating GS-0976, an investigational inhibitor of acetyl-CoA carboxylase, in patients with nonalcoholic steatohepatitis. The data, from ten patients treated with GS-0976 20 mg taken orally once daily for 12 weeks, indicated that treatment was associated with statistically significant improvements in liver fat content and noninvasive markers of fibrosis, via inhibition of hepatic de novo lipogenesis.
- Positive results from two Phase 2 studies evaluating Harvoni tablets in HCV-infected patient populations not previously studied in dedicated clinical trials with direct-acting antiviral therapies. The studies demonstrated HCV cure rates of 99 percent in children aged 6 to 11 years, and 100 percent in adult patients co-infected with HCV and HBV.
- Positive 96-week results from two ongoing Phase 3 studies evaluating the safety and efficacy of daily Vemlidy® (TAF 25mg) in immune active patients and in patients switching from Gilead’s Viread (tenofovir disoproxil fumarate, TDF 300 mg). Vemlidy is a once-daily treatment approved for adults with HBV infection with compensated liver disease.
Announced that FDA approved supplemental indications for Harvoni tablets and Sovaldi tablets for the treatment of HCV infection in adolescents without cirrhosis or with compensated cirrhosis, 12 years of age and older, or weighing at least 35kg. Harvoni was approved for pediatric patients with genotype 1, 4, 5 or 6 HCV infection. Sovaldi was approved for pediatric patients with genotype 2 or 3 HCV infection, in combination with ribavirin.

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.

(Source: Business Wire)