10-QPeriod: Q3 FY2010

GILEAD SCIENCES, INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 8, 2010For Securities:GILD

Summary

Gilead Sciences, Inc. reported robust financial performance for the nine months ended September 30, 2010, demonstrating significant year-over-year growth. Total revenues increased by 19.7% to $5.95 billion, driven primarily by a 17% surge in product sales, reaching $5.46 billion. This growth was largely fueled by strong performances in their antiviral franchise, particularly Atripla and Truvada, which together accounted for over 73% of total product sales in the third quarter. The company also saw a notable increase in cash and cash equivalents, reaching $5.05 billion by the end of the period, supported by strong operating cash flows and proceeds from the issuance of convertible senior notes. While R&D expenses saw a slight decrease, likely due to a reimbursement from a collaboration, overall investment in growth remains evident. Management highlighted advancements in their pipeline, particularly in the HIV and liver disease areas, underscoring a continued commitment to innovation. However, investors should note the impact of U.S. healthcare reform, estimated to reduce net product sales by approximately $200 million in 2010. Additionally, Gilead has undertaken significant stock repurchases and has issued convertible senior notes, demonstrating active capital management. The company's strong financial footing, coupled with a promising pipeline, positions it well for continued growth, though regulatory and market access challenges remain key considerations.

Financial Statements
Beta
Revenue$1.94B
Cost of Revenue$477.58M
Gross Profit$1.39B
SG&A Expenses$250.56M
Operating Expenses$958.58M
Operating Income$979.07M
Interest Expense$33.62M
Net Income$704.88M
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)1.67B
Shares Outstanding (Diluted)1.69B

Key Highlights

  • 1Total revenues increased by 19.7% to $5.95 billion for the first nine months of 2010 compared to the same period in 2009.
  • 2Product sales grew by 17% to $5.46 billion for the first nine months of 2010, primarily driven by strong performance in the antiviral franchise (Atripla and Truvada).
  • 3Cash, cash equivalents, and marketable securities increased significantly to $5.05 billion by September 30, 2010.
  • 4Net income attributable to Gilead stockholders rose by 24.4% to $2.27 billion for the nine months ended September 30, 2010.
  • 5The company issued $2.5 billion in convertible senior notes in July 2010 to fund stock repurchases and repay existing debt.
  • 6Research and development expenses decreased slightly by 3% for the nine months, largely due to reimbursements from a collaboration.
  • 7Gilead is actively managing its capital through significant stock repurchases totaling $3.41 billion in the first nine months of 2010.

Frequently Asked Questions

Gilead's primary source of revenue is product sales, which are predominantly from its antiviral franchise. For the nine months ended September 30, 2010, product sales increased by 17% to $5.46 billion compared to the same period in 2009, with strong contributions from Atripla and Truvada.

Gilead has seen a substantial increase in its cash, cash equivalents, and marketable securities, reaching $5.05 billion by September 30, 2010. This was bolstered by strong operating cash flows and the proceeds from issuing $2.5 billion in convertible senior notes. The company also actively repurchased $3.41 billion of its common stock during the first nine months of 2010.

The U.S. healthcare reform legislation enacted in March 2010 is expected to reduce Gilead's U.S. net product sales by approximately $200 million in 2010 due to increased rebates and discounts to public payers. The full impact and specific implementation details are still being determined, and it is a significant factor to monitor.

Gilead is involved in several patent litigation cases against generic manufacturers (Teva, Lupin, Sigmapharm, Ranbaxy) concerning its key products like Truvada, Atripla, Viread, Hepsera, and Ranexa. While the company is actively defending its patents, adverse outcomes could shorten patent protection and potentially lead to generic competition, which would impact future revenues.