Gilead Sciences Announces Fourth Quarter and Full Year 2011 Financial Results February 2, 2012 4:06 PM ET - Fourth Quarter Product Sales of $2.13 Billion, up 11% Year over Year - - Full Year 2011 Product Sales of $8.10 Billion, up 10% over 2010 - - Full Year 2011 Non-GAAP EPS of $3.86, up 5% over 2010 - - Full Year 2011 Operating Cash Flows of $3.64 Billion - FOSTER CITY, Calif.--(BUSINESS WIRE)--Feb. 2, 2012-- Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of operations for the fourth quarter and full year 2011. Total revenues for the fourth quarter of 2011 increased 10 percent to $2.20 billion, from $2.00 billion for the fourth quarter of 2010. Net income for the fourth quarter of 2011 was $665.1 million, or $0.87 per diluted share, compared to $629.4 million, or $0.76 per diluted share for the fourth quarter of 2010. Non-GAAP net income for the fourth quarter of 2011, which excludes after-tax acquisition-related, restructuring and stock-based compensation expenses, was $743.1 million, or $0.97 per diluted share, compared to $779.3 million, or $0.95 per diluted share for the fourth quarter of 2010. Full year 2011 total revenues were $8.39 billion, up 5 percent compared to $7.95 billion for 2010. Net income for 2011 was $2.80 billion, or $3.55 per diluted share, compared to $2.90 billion, or $3.32 per diluted share for 2010. Non-GAAP net income for 2011, which excludes after-tax acquisition-related, restructuring and stock-based compensation expenses, was $3.04 billion, or $3.86 per diluted share, compared to $3.21 billion, or $3.69 per diluted share for 2010. Product Sales Product sales increased 11 percent to $2.13 billion for the fourth quarter of 2011, compared to $1.93 billion in the fourth quarter of 2010. For 2011, product sales increased 10 percent to $8.10 billion compared to $7.39 billion in 2010. This increase in product sales was driven primarily by Gilead’s antiviral franchise, resulting from continued growth in sales of Atripla® (efavirenz 600 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg) and Truvada® (emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg). Antiviral Franchise Antiviral product sales increased 9 percent to $1.86 billion in the fourth quarter of 2011, up from $1.70 billion for the same quarter of 2010, reflecting sales growth of 12 percent in the U.S. and 5 percent in Europe. For 2011, antiviral product sales increased 8 percent to $7.05 billion from $6.54 billion in 2010, reflecting sales growth of 9 percent in Europe and 6 percent in the U.S. ● Atripla Sales of Atripla increased 11 percent to $863.3 million for the fourth quarter of 2011, up from $775.2 million in the fourth quarter of 2010, reflecting sales growth of 11 percent in the U.S. and 10 percent in Europe. For 2011, Atripla sales increased 10 percent to $3.22 billion from $2.93 billion in 2010. ● Truvada Sales of Truvada increased 9 percent to $746.0 million for the fourth quarter of 2011, up from $681.7 million in the fourth quarter of 2010, reflecting sales growth of 10 percent in the U.S. and 5 percent in Europe. For 2011, Truvada sales increased 8 percent to $2.88 billion from $2.65 billion in 2010. ● Viread Sales of Viread® (tenofovir disoproxil fumarate) were consistent at $190.9 million for the fourth quarter of 2011, compared to Page 1/10 $191.1 million in the fourth quarter of 2010. For 2011, Viread sales increased 1 percent to $737.9 million from $732.2 million in 2010. ● Complera Sales of Complera® (emtricitabine 200 mg/ rilpilvirine 25 mg/ tenofovir disoproxil fumarate 300 mg) were $19.7 million for the fourth quarter of 2011 and $38.7 million for 2011. The U.S. Food and Drug Administration (FDA) approved Complera, a new once-daily, single-tablet complete HIV treatment regimen for patients new to therapy in August 2011. In November 2011, the European Commission granted marketing authorization for the product to be marketed in Europe with the trade name Eviplera®. Letairis Sales of Letairis® (ambrisentan) increased 23 percent to $78.7 million for the fourth quarter of 2011, up from $64.0 million for the fourth quarter of 2010. For 2011, Letairis sales increased 22 percent to $293.4 million from $240.3 million in 2010. Ranexa Sales of Ranexa® (ranolazine) increased 23 percent to $83.7 million for the fourth quarter of 2011, up from $67.8 million for the fourth quarter of 2010. For 2011, Ranexa sales increased 33 percent to $320.0 million from $239.8 million in 2010. Other Products Sales of other products were $151.1 million for the fourth quarter of 2011 compared to $150.4 million for the fourth quarter of 2010 and included AmBisome® (amphotericin B) liposome for injection, Hepsera® (adefovir dipivoxil), Emtriva® (emtricitabine) and Cayston® (aztreonam for inhalation solution). For 2011, sales of other products increased 2 percent to $612.7 million from $601.1 million in 2010. Royalty, Contract and Other Revenues Royalty, contract and other revenues from collaborations were $67.0 million in the fourth quarter of 2011, down 2 percent from $68.4 million in the fourth quarter of 2010. For 2011, royalty, contract and other revenues were $283.0 million, down 49 percent from $559.5 million in 2010, primarily due to lower Tamiflu royalties from F. Hoffmann-La Roche Ltd as pandemic planning initiatives worldwide have declined. Research and Development Research and development (R&D) expenses in the fourth quarter of 2011 were $402.2 million, compared to $392.8 million for the fourth quarter of 2010. Non-GAAP R&D expenses for the fourth quarter of 2011, which exclude acquisition-related, restructuring and stock-based compensation expenses, were $349.3 million, compared to $231.8 million for the fourth quarter of 2010. For 2011, R&D expenses were $1.23 billion compared to $1.07 billion in 2010. Non-GAAP R&D expenses for 2011 were $1.12 billion compared to $838.8 million in 2010. The increase in non-GAAP R&D expenses was due primarily to increased clinical activities and expenses associated with acquisitions, collaborations and continued advancements of our clinical pipeline. Selling, General and Administrative Selling, general and administrative (SG&A) expenses in the fourth quarter of 2011 were $346.2 million, compared to $280.2 million for the fourth quarter of 2010. Non-GAAP SG&A expenses for the fourth quarter of 2011, which exclude acquisition- related, restructuring and stock-based compensation expenses, were $289.9 million, compared to $239.3 million for the fourth quarter of 2010. For 2011, SG&A expenses were $1.24 billion compared to $1.04 billion in 2010. Non-GAAP SG&A expenses for 2011 were $1.09 billion compared to $912.6 million in 2010. The increase in non-GAAP SG&A expenses was driven primarily by the impact of the pharmaceutical excise tax resulting from the U.S. healthcare reform, increased expenses associated with the ongoing growth of Gilead’s business, and increased bad debt expense due to slower collections in certain Southern European countries. Page 2/10 Income Taxes The effective tax rate for 2011 was 23.6 percent compared to 26.2 percent for 2010. The decrease was primarily due to lower state taxes and the geographic mix of product sales, partially offset by the impact of the U.S. pharmaceutical excise tax. Net Foreign Currency Exchange Impact The net foreign currency exchange impact on fourth quarter 2011 revenues and pre-tax earnings was an unfavorable $21.2 million and $22.1 million, respectively, compared to the fourth quarter of 2010. The net foreign currency exchange impact on full year 2011 revenues and pre-tax earnings was a favorable $21.4 million and an unfavorable $18.6 million, respectively, compared to 2010. Cash, Cash Equivalents and Marketable Securities As of December 31, 2011, Gilead had cash, cash equivalents and marketable securities of $9.96 billion compared to $5.32 billion as of December 31, 2010, which included the proceeds from $3.70 billion of investment grade bonds raised to partially fund the Pharmasset, Inc. (Pharmasset) acquisition. Gilead generated $3.64 billion of operating cash flow in 2011 of which $978.1 million was generated in the fourth quarter of 2011. Acquisition of Pharmasset, Inc. In November, Gilead and Pharmasset announced that the companies had signed a definitive agreement under which Gilead would acquire Pharmasset for $137 per share in cash, or approximately $11.1 billion. In December, Gilead commenced a tender offer to purchase all outstanding common stock of Pharmasset. The acquisition was completed on January 17, 2012 at which time Pharmasset became a wholly-owned subsidiary of Gilead. Other Corporate Highlights In October, Gilead announced that it had entered into a licensing agreement with Boehringer Ingelheim (BI), under which BI granted Gilead exclusive worldwide rights for the research, development and commercialization of its novel non-catalytic site integrase inhibitors for HIV. This included the lead compound BI 224436, which has been evaluated in a Phase 1a dose- escalation study to assess bioavailability and pharmacokinetics in healthy volunteers. Also in October, Gilead announced that it had entered into an exclusive worldwide licensing and collaboration agreement with GlobeImmune, Inc. for the development and commercialization of therapeutic vaccine products for use in conjunction with Viread and other oral therapies for the treatment of chronic hepatitis B. Lastly, in October, Gilead announced a licensing agreement with Bristol-Myers Squibb (BMS) for BMS to develop and commercialize a fixed-dose combination containing BMS’s protease inhibitor atazanavir and Gilead’s cobicistat, a pharmacoenhancing or “boosting” agent that increases blood levels of certain HIV medicines to potentially allow for one-pill, once-daily dosing.