10-QPeriod: Q3 FY2012

GILEAD SCIENCES, INC. Quarterly Report for Q3 Ended Sep 30, 2012

Filed November 6, 2012For Securities:GILD

Summary

Gilead Sciences, Inc. reported strong financial performance for the nine months ended September 30, 2012. Total revenues grew 15% year-over-year to $7.11 billion, driven by a 15% increase in product sales to $6.89 billion. This growth was primarily fueled by the company's antiviral franchise, with significant contributions from Atripla and Truvada. The company's financial results were significantly impacted by the acquisition of Pharmasset, Inc. for $11.1 billion in January 2012, which added substantial intangible assets. While this acquisition led to increased R&D and interest expenses, Gilead maintained a healthy product gross margin of 74% for the nine-month period. Despite a decrease in net income due to these investments and increased debt, diluted earnings per share remained robust. The company ended the period with $2.65 billion in cash, cash equivalents, and marketable securities, indicating solid liquidity to fund ongoing operations and strategic initiatives.

Financial Statements
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Key Highlights

  • 1Total revenues increased by 15% to $7.11 billion for the nine months ended September 30, 2012, compared to $6.19 billion in the prior year period.
  • 2Product sales grew by 15% to $6.89 billion for the nine months ended September 30, 2012, driven by the antiviral franchise, particularly Atripla and Truvada.
  • 3The significant acquisition of Pharmasset, Inc. for $11.1 billion in January 2012 resulted in a substantial increase in intangible assets and goodwill.
  • 4Despite increased R&D and interest expenses related to the Pharmasset acquisition, Gilead maintained a product gross margin of 74% for the nine-month period.
  • 5Net income attributable to Gilead decreased to $1.83 billion for the nine months ended September 30, 2012, from $2.14 billion in the prior year, primarily due to increased investment and financing costs.
  • 6Diluted earnings per share decreased to $2.33 for the nine months ended September 30, 2012, from $2.66 in the prior year, impacted by lower net income and increased diluted shares outstanding.
  • 7Cash, cash equivalents, and marketable securities decreased to $2.65 billion at September 30, 2012, from $9.96 billion at December 31, 2011, largely due to the Pharmasset acquisition.

Frequently Asked Questions

Gilead's revenue growth was primarily driven by its antiviral franchise, with strong sales performance from key products like Atripla and Truvada. Overall product sales increased by 15% for the nine months ended September 30, 2012.

The acquisition of Pharmasset for $11.1 billion significantly increased Gilead's intangible assets and goodwill. It also led to higher R&D and interest expenses due to the integration and financing of the deal, impacting net income and earnings per share despite overall revenue growth.

As of September 30, 2012, Gilead had $2.65 billion in cash, cash equivalents, and marketable securities. This represents a significant decrease from the prior year-end, mainly due to the cash used for the Pharmasset acquisition, but still indicates a healthy liquidity position.

Gilead is involved in several ongoing legal proceedings, particularly patent litigation with generic manufacturers concerning key products like Truvada, Viread, and Atripla. The company is also subject to regulatory inquiries and faces risks related to competition, healthcare reforms, and potential product liability claims. The outcomes of these matters are uncertain and could materially affect financial results.