10-QPeriod: Q3 FY2002

GILEAD SCIENCES, INC. Quarterly Report for Q3 Ended Sep 30, 2002

Filed November 14, 2002For Securities:GILD

Summary

Gilead Sciences, Inc. reported a significant shift in its financial performance for the nine months ended September 30, 2002, compared to the same period in 2001. The company transitioned from a substantial net loss in 2001 to a net income in 2002, largely driven by a dramatic increase in product sales, particularly from its HIV treatment, Viread®. Total revenues more than doubled year-over-year, with product sales surging by 117%. This growth, coupled with improved gross margins (82.4% in 2002 vs. 76.7% in 2001), highlights the growing commercial success of Gilead's key products. Despite increased Selling, General, and Administrative (SG&A) expenses to support product launches, Research and Development (R&D) expenses decreased, reflecting the commercialization of Viread and the divestiture of oncology assets. The company ended the period with a healthy cash and marketable securities balance of $624.8 million, indicating sufficient liquidity. While there are risks related to market competition, regulatory processes, and international payment delays, the strong revenue growth and improved profitability position Gilead positively.

Key Highlights

  • 1Significant revenue growth driven by Viread® (HIV treatment) and AmBisome® (antifungal), with total revenues increasing by 102% for the nine months ended September 30, 2002, compared to the prior year.
  • 2Transition from a net loss of $79.3 million in the first nine months of 2001 to a net income of $36.6 million in the same period of 2002.
  • 3Product sales increased by 117% to $284.7 million for the nine months ended September 30, 2002, with Viread® contributing $140.8 million and AmBisome® contributing $136.0 million.
  • 4Gross profit margin improved to 82.4% for the first nine months of 2002 from 76.7% in the prior year, mainly due to a favorable product mix with higher-margin Viread® sales.
  • 5Research and Development (R&D) expenses decreased by 29% for the nine months ended September 30, 2002, reflecting reduced expenses for the Viread® clinical program post-approval and the divestiture of oncology assets.
  • 6Selling, General, and Administrative (SG&A) expenses increased by 48% for the nine months ended September 30, 2002, primarily to support the global commercialization of Viread® and Hepsera™.
  • 7The company maintained a strong liquidity position with $624.8 million in cash, cash equivalents, and marketable securities as of September 30, 2002.

Frequently Asked Questions

The primary driver of Gilead's revenue growth is the significant increase in product sales, particularly driven by Viread®, its HIV treatment. Viread® sales were minimal in the prior year as it was approved in October 2001, but in the nine months ended September 30, 2002, it generated $140.8 million in sales, contributing significantly to the overall 117% increase in net product sales.

Gilead has transitioned from a substantial net loss of $79.3 million for the first nine months of 2001 to a net income of $36.6 million for the same period in 2002. This improvement is attributed to a dramatic increase in revenues, primarily from Viread®, coupled with improved gross margins and a decrease in R&D expenses.

Gilead maintains a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $624.8 million as of September 30, 2002. The company believes its existing capital resources, supplemented by revenues, are adequate to meet its foreseeable needs. However, they note that future capital requirements will depend on various factors, and they may require additional funding.

Yes, Gilead faces several risks. These include intense competition in the HIV/AIDS and antifungal markets, potential regulatory challenges, governmental legislation impacting drug pricing and reimbursement, credit risk from slow-paying European government customers, and the potential for compulsory licensing or generic competition in developing countries. The company also relies on collaborations and is exposed to foreign currency fluctuations.