10-QPeriod: Q1 FY2013

GILEAD SCIENCES, INC. Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 8, 2013For Securities:GILD

Summary

Gilead Sciences, Inc. reported strong financial performance for the first quarter of 2013, with total revenues increasing 11% year-over-year to $2.53 billion, driven by robust product sales and a significant rise in royalty revenues. Product sales grew 8% to $2.39 billion, primarily fueled by the antiviral franchise and cardiovascular products, despite a slight sequential decline due to inventory adjustments. Net income attributable to Gilead saw a substantial increase of 63% to $722.2 million, resulting in diluted earnings per share of $0.43. This growth was propelled by increased revenues, a significant decrease in Selling, General, and Administrative (SG&A) expenses (largely due to lower stock-based compensation post-acquisition), and a favorable adjustment to the effective tax rate. The company also completed the acquisition of YM BioSciences Inc. for $487.6 million, bolstering its oncology pipeline, and generated a healthy $672.1 million in operating cash flow.

Financial Highlights

53 data points
Beta

Revenue

$2.53B

69.5% Gross Margin

Net Income

$722.00M

28.5% Net Margin

EPS (Diluted)

$0.43

Total Assets

$22.21B

Cash & Equivalents

$1.86B

Free Cash Flow

$672.10M

Financial Statements
Beta
Revenue$2.53B
Cost of Revenue$634.45M
Gross Profit$1.76B
R&D Expenses$497.63M
SG&A Expenses$374.30M
Operating Expenses$1.51B
Operating Income$1.03B
Interest Expense$81.79M
Net Income$722.00M
EPS (Basic)$0.47
EPS (Diluted)$0.43
Shares Outstanding (Basic)1.52B
Shares Outstanding (Diluted)1.67B

Key Highlights

  • 1Total revenues increased 11% to $2.53 billion in Q1 2013 compared to Q1 2012.
  • 2Net income attributable to Gilead increased 63% to $722.2 million, with diluted EPS of $0.43.
  • 3Product sales grew 8% to $2.39 billion, driven by antivirals and cardiovascular products.
  • 4Royalty revenues more than doubled, increasing 89% to $134.4 million, largely due to Tamiflu royalties.
  • 5SG&A expenses decreased by 16% due to lower stock-based compensation following the Pharmasset acquisition's prior year impact.
  • 6Acquired YM BioSciences Inc. for $487.6 million to strengthen the oncology portfolio.
  • 7Generated $672.1 million in cash flow from operations.

Frequently Asked Questions

The substantial increase in net income was driven by several factors: strong overall revenue growth from product sales and royalties, a notable decrease in Selling, General, and Administrative (SG&A) expenses primarily due to the prior year's significant stock-based compensation related to the Pharmasset acquisition, and a reduction in the effective tax rate, partly due to the retroactive reinstatement of the federal research tax credit.

The acquisition of YM BioSciences for $487.6 million on February 8, 2013, added $362.7 million to in-process R&D and $127.2 million to goodwill. It was funded by operating cash flow and resulted in a significant use of cash in investing activities ($378.6 million for the acquisition, net of cash acquired) during the quarter. While the purchase accounting is preliminary, it strengthens Gilead's oncology pipeline with momelotinib.

Gilead's HIV franchise remains a significant revenue driver, with products like Atripla and Truvada contributing substantially, although facing some inventory adjustments and potential generic competition. The company is advancing its pipeline, including initiating Phase 3 trials for TAF in HIV treatment. For Hepatitis C (HCV), Gilead is making significant progress with its sofosbuvir-based therapies, having filed an NDA for sofosbuvir and advancing combination therapies like sofosbuvir/ledipasvir through Phase 3 trials, indicating a strong future outlook for this segment.

Gilead maintained a strong liquidity position with $2.63 billion in cash, cash equivalents, and marketable securities at the end of the quarter. Operating cash flow of $672.1 million was robust. The company repaid $247.1 million in debt during the quarter, net of proceeds from convertible note hedges, and has a substantial amount of its cash generated from foreign operations ($1.25 billion) intended for use internationally. The company's long-term debt remained relatively stable, with some debt repayments and convertible note conversions occurring.