10-QPeriod: Q1 FY2012

GILEAD SCIENCES, INC. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 4, 2012For Securities:GILD

Summary

Gilead Sciences, Inc. (GILD) reported its first-quarter 2012 financial results, showcasing robust revenue growth driven primarily by its antiviral franchise. Total revenues increased by 19% year-over-year to $2.28 billion, with product sales reaching $2.21 billion, up 19% from the prior year. This growth was largely fueled by strong performances from Atripla and Truvada, alongside the launch of Complera/Eviplera. The company also significantly advanced its strategic agenda with the completion of the $11.1 billion acquisition of Pharmasset, Inc., a move expected to bolster its Hepatitis C (HCV) portfolio and accelerate its development of all-oral HCV regimens. While net income saw a decline of 32% to $442 million, this was primarily due to a substantial $193.9 million charge for accelerated stock option vesting related to the Pharmasset acquisition, as well as increased interest expenses from new debt financing. The company continues to invest heavily in research and development, with R&D expenses increasing by 80% to $458.2 million, largely driven by the aforementioned acquisition-related stock compensation and ongoing clinical studies. Selling, General, and Administrative (SG&A) expenses also rose by 50% to $443.1 million, impacted by similar acquisition-related costs and increased pharmaceutical excise taxes. Despite these increased expenses and the significant cash outflow for the Pharmasset acquisition, Gilead's operating cash flow remained strong at $453 million, demonstrating its underlying business resilience.

Financial Highlights

54 data points
Beta

Revenue

$2.28B

71.3% Gross Margin

Net Income

$441.96M

19.4% Net Margin

EPS (Diluted)

$0.28

Total Assets

$19.95B

Cash & Equivalents

$1.45B

Free Cash Flow

$452.97M

Financial Statements
Beta
Revenue$2.28B
Cost of Revenue$580.93M
Gross Profit$1.63B
R&D Expenses$458.21M
SG&A Expenses$443.12M
Operating Expenses$1.48B
Operating Income$800.19M
Interest Expense$97.27M
Net Income$441.96M
EPS (Basic)$0.29
EPS (Diluted)$0.28
Shares Outstanding (Basic)1.51B
Shares Outstanding (Diluted)1.55B

Key Highlights

  • 1Total revenues increased 19% to $2.28 billion in Q1 2012 compared to Q1 2011.
  • 2Product sales grew 19% to $2.21 billion, primarily driven by the antiviral franchise (Atripla, Truvada, Complera/Eviplera).
  • 3Completed the $11.1 billion acquisition of Pharmasset, Inc. in January 2012 to strengthen its Hepatitis C pipeline.
  • 4Net income decreased 32% to $442 million, largely due to a $193.9 million stock-based compensation charge from the Pharmasset acquisition.
  • 5Research and Development (R&D) expenses increased significantly by 80% to $458.2 million, primarily due to acquisition-related costs and ongoing clinical trials.
  • 6Significant increase in long-term debt and credit facilities, totaling $9.43 billion as of March 31, 2012, to finance the Pharmasset acquisition.
  • 7Accounts receivable in Southern Europe (Italy, Spain, Portugal, Greece) remain substantial at $1.25 billion, with a significant portion past due.

Frequently Asked Questions

Gilead's revenue growth in the first quarter of 2012 was primarily driven by its antiviral franchise, with notable increases in sales for Atripla and Truvada, and the launch of Complera/Eviplera. Total product sales increased by 19% year-over-year.

The acquisition of Pharmasset for $11.1 billion in January 2012 was a major strategic move to significantly bolster Gilead's Hepatitis C (HCV) pipeline. Pharmasset's lead compound, GS-7977, is expected to be a key component of Gilead's future all-oral HCV treatment regimens.

The decrease in net income was largely due to a one-time stock-based compensation expense of $193.9 million recognized from the accelerated vesting of Pharmasset employee stock options as part of the acquisition. Additionally, increased interest expense from the debt taken on to finance the acquisition also contributed to the decline.

Gilead significantly increased its long-term debt and credit facilities in Q1 2012 to finance the Pharmasset acquisition, with total debt reaching $9.43 billion. This includes substantial amounts from senior unsecured notes and newly established revolving credit facilities and a term loan.