01—Abstract
Summary
Summary of the 10-K filed February 27, 2018. Cited figures are marked; the original filing is the authoritative source.
Gilead Sciences, Inc. (GILD) reported significant financial and operational developments for the fiscal year ending December 30, 2017.
The company experienced a notable decline in total revenues, primarily driven by a decrease in sales of its Hepatitis C Virus (HCV) products due to increased market competition. However, this was partially offset by strong performance in its HIV products, bolstered by the uptake of TAF-based regimens. A key strategic move was the acquisition of Kite Pharma, Inc. in October 2017, significantly expanding Gilead's presence in the promising field of cellular therapy, with the subsequent FDA approval of Yescarta™ for specific B-cell lymphomas.
The company also made progress in its inflammation and respiratory pipeline, notably with filgotinib. Financially, Gilead reported a substantial increase in provision for income taxes, largely due to the Tax Cuts and Jobs Act enacted in late 2017. Despite the revenue dip, the company maintained a strong cash position, demonstrating robust operating cash flow and continuing its commitment to returning capital to shareholders through dividends and share repurchases.
02—Key points
Key Highlights
- Total revenues decreased by 14% to $26.1 billion in 2017 compared to $30.4 billion in 2016, primarily due to a 16% decline in antiviral product sales, driven by the competitive HCV market.
- The acquisition of Kite Pharma, Inc. for approximately $11.2 billion in October 2017 significantly bolstered Gilead's position in the hematology/oncology segment, particularly in cellular therapy with the subsequent approval of Yescarta™.
- HIV and HBV product sales increased by 10% to $14.2 billion, driven by the strong uptake of TAF-based products (Genvoya, Descovy, Odefsey).
- HCV product sales declined by 37% to $9.1 billion, primarily due to increased competition and fewer new patient starts for Harvoni and Sovaldi.
- Research and development expenses decreased by 27% to $3.7 billion, impacted by lower business development activities compared to the prior year, but continued investment in pipeline advancement, including selonsertib for NASH and filgotinib for inflammatory diseases.
- Selling, general, and administrative expenses increased by 14% to $3.9 billion, largely due to costs associated with the Kite acquisition and higher branded drug prescription (BPD) fees.
- Net income attributable to Gilead decreased significantly to $4.6 billion ($3.51 per diluted share) in 2017, compared to $13.5 billion ($9.94 per diluted share) in 2016, heavily influenced by lower product sales and a substantial charge related to the Tax Cuts and Jobs Act.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Gilead Sciences, Inc. kept $0.18.
- Revenue$26.11B100.0%
- Cost of revenue−$4.37B16.7%
- Gross profit$21.74B83.3%
- Operating costs−$7.61B29.2%
- Operating income$14.12B54.1%
- Interest, other & tax−$9.50B36.4%
- Net income$4.63B17.7%
Where FY2017 revenue went
$26.11B- Interest, other & tax: $9.50B, 36% of revenue
- Net income: $4.63B, 18% of revenue
- Cost of revenue: $4.37B, 17% of revenue
- SG&A: $3.88B, 15% of revenue
- R&D: $3.73B, 14% of revenue
Kept 18% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 27, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $26.11B$30.39B | −14.1% |
| Cost of Revenue | $4.37B$4.26B | +2.6% |
| Gross Profit | $21.74B$26.13B | −16.8% |
| R&D Expenses | $3.73B$5.10B | −26.8% |
| SG&A Expenses | $3.88B$3.40B | +14.1% |
| Operating Expenses | $11.98B$12.76B | −6.1% |
| Operating Income | $14.12B$17.63B | −19.9% |
| Interest Expense | $1.12B$964.00M | +16.0% |
| Net Income | $4.63B$13.50B | −65.7% |
| EPS (Basic) | $3.54$10.08 | −64.9% |
| EPS (Diluted) | $3.51$9.94 | −64.7% |
| Shares Outstanding (Basic) | 1.31B1.34B | −2.4% |
| Shares Outstanding (Diluted) | 1.32B1.36B | −2.9% |
05—Questions
Frequently Asked Questions
What was the primary driver for the revenue decline in 2017?
The primary driver for the revenue decline in 2017 was a significant decrease in sales of Gilead's Hepatitis C Virus (HCV) products, which fell by 37% to $9.1 billion. This was attributed to increased competition in the HCV market and a lower number of new patient starts.
What was the strategic significance of the Kite Pharma acquisition?
The acquisition of Kite Pharma, Inc. in October 2017 for approximately $11.2 billion marked a major strategic move for Gilead, establishing it as a leader in the cutting-edge field of cellular therapy for cancer. This acquisition brought key CAR T-cell therapy candidates and the recently FDA-approved Yescarta™ into Gilead's portfolio, positioning the company for future growth in oncology.
How did the Tax Cuts and Jobs Act impact Gilead's financial results?
The Tax Cuts and Jobs Act, enacted in December 2017, had a significant impact on Gilead's financial results. The company recorded an estimated $5.5 billion net charge to income tax expense in the fourth quarter of 2017, primarily due to a provisional $5.8 billion charge related to the transition tax on the mandatory deemed repatriation of accumulated foreign earnings. This substantially increased the company's overall tax provision for the year.
What is the outlook for Gilead's HIV business?
Gilead anticipates continued strong performance in its HIV business. The company is focused on supporting the launch of its new TAF-based regimen, Biktarvy, and promoting the use of its existing TAF-containing regimens. Truvada for pre-exposure prophylaxis (PrEP) is also expected to remain a key growth driver in the U.S. HIV market.
06—Continue