10-QPeriod: Q1 FY2001

GILEAD SCIENCES, INC. Quarterly Report for Q1 Ended Mar 31, 2001

Filed May 14, 2001For Securities:GILD

Summary

Gilead Sciences, Inc. (GILD) reported a net loss of $21.7 million for the first quarter ended March 31, 2001, an increase from the $16.9 million loss in the prior year's comparable quarter. While total revenues grew to $57.8 million from $47.7 million year-over-year, driven by a 21% increase in AmBisome® product sales and new contributions from VISTIDE® and DaunoXome®, this revenue growth was outpaced by a significant increase in research and development (R&D) expenses. R&D expenses nearly doubled to $51.1 million, largely due to upfront licensing fees for daptomycin and increased clinical trial spending for key HIV and HBV drug candidates, particularly tenofovir DF. Selling, general, and administrative (SG&A) expenses also rose, reflecting preparations for the anticipated launch of tenofovir DF. The company ended the quarter with $483.8 million in cash, cash equivalents, and marketable securities, but experienced a substantial decrease in cash and cash equivalents due to higher operating expenditures. Investors should monitor the success of clinical trials and the upcoming launch of tenofovir DF, as well as manage concerns around the increasing R&D spend and continued net losses.

Key Highlights

  • 1Total revenues increased by 21.2% to $57.8 million in Q1 2001 from $47.7 million in Q1 2000, primarily driven by AmBisome® sales growth.
  • 2Product sales, led by AmBisome®, grew 24.0% to $45.1 million, while contract revenue saw a significant increase to $6.4 million from $0.8 million, bolstered by milestone payments.
  • 3Research and Development (R&D) expenses nearly doubled, rising 95% to $51.1 million, driven by upfront payments for daptomycin and increased clinical trial spending for tenofovir DF and adefovir dipivoxil.
  • 4Net loss widened to $21.7 million ($0.23 per share) from $16.9 million ($0.19 per share) in the prior year's quarter, reflecting the substantial increase in R&D expenses.
  • 5Cash, cash equivalents, and marketable securities stood at $483.8 million at quarter-end, a decrease from $512.9 million at year-end 2000, with cash and cash equivalents alone falling significantly due to operating activities.
  • 6Gilead submitted New Drug Applications (NDAs) for tenofovir DF to the FDA and EMA, signaling a potential major product launch on the horizon.
  • 7The company reported an increase in accounts receivable overdue by more than 120 days in certain European countries, though management believes these are collectible.

Frequently Asked Questions

The primary driver for the increased net loss is the significant rise in Research and Development (R&D) expenses, which nearly doubled to $51.1 million. This increase is attributed to an upfront license fee paid for daptomycin and escalated spending on late-stage clinical trials for key drug candidates like tenofovir DF (for HIV) and adefovir dipivoxil (for HBV).

AmBisome® sales increased by 21% year-over-year to $41.9 million in the first quarter of 2001. A significant portion of Gilead's product sales are denominated in foreign currencies. While the company hedges its accounts receivable balances to mitigate some currency risk, it does not hedge its exposure to fluctuating foreign exchange rates on forecasted sales, which can negatively impact its U.S. Dollar returns.

Gilead submitted marketing applications for tenofovir DF (a potential HIV treatment) to the U.S. FDA and the European regulatory agency in early May 2001. This represents a critical step towards a potential major product launch. The company anticipates significant increases in SG&A expenses to support this launch, and the success of tenofovir DF is a key factor for Gilead's future growth and potential profitability.

Gilead maintained a substantial cash, cash equivalents, and marketable securities balance of $483.8 million as of March 31, 2001. However, cash and cash equivalents alone decreased significantly by $119.9 million during the quarter, primarily due to substantial cash used in operating activities, largely driven by increased R&D and SG&A expenditures. The company believes its current resources will be adequate for the foreseeable future but may require additional funding.