10-QPeriod: Q2 FY2013

GILEAD SCIENCES, INC. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 1, 2013For Securities:GILD

Summary

Gilead Sciences, Inc. reported solid financial performance for the second quarter and first half of 2013, demonstrating robust revenue growth driven by its antiviral and cardiovascular product portfolios. Total revenues increased by 15% year-over-year for the quarter to $2.77 billion, with product sales up 14% to $2.66 billion. This growth was primarily fueled by strong demand for HIV treatments like Complera/Eviplera and Stribild, alongside continued strength in established products. The company also saw a significant 31% increase in royalty revenues, notably from Tamiflu. Despite increased investments in Research and Development (R&D) to support its pipeline, particularly in oncology and liver disease, Gilead maintained healthy profitability, with net income attributable to Gilead increasing by 9% to $772.6 million for the quarter. Financially, Gilead maintained a strong liquidity position, with cash, cash equivalents, and marketable securities totaling $2.98 billion as of June 30, 2013. The company successfully managed its debt, repaying a significant portion of its outstanding obligations. A notable event during the period was the completion of the acquisition of YM BioSciences Inc. for $487.6 million, which is expected to bolster its oncology pipeline. Looking ahead, Gilead is advancing its Hepatitis C (HCV) program with the filing of an NDA for sofosbuvir and promising data from its sofosbuvir/ledipasvir combination studies, positioning the company for potential future growth in this critical therapeutic area. Investors should monitor patent litigation developments and the ongoing regulatory review of key pipeline assets.

Financial Highlights

53 data points
Beta

Revenue

$2.77B

71.3% Gross Margin

Net Income

$773.00M

27.9% Net Margin

EPS (Diluted)

$0.46

Total Assets

$22.62B

Cash & Equivalents

$2.20B

Free Cash Flow

$953.00M

Financial Statements
Beta
Revenue$2.77B
Cost of Revenue$684.66M
Gross Profit$1.97B
R&D Expenses$523.90M
SG&A Expenses$404.99M
Operating Expenses$1.61B
Operating Income$1.15B
Interest Expense$78.01M
Net Income$773.00M
EPS (Basic)$0.51
EPS (Diluted)$0.46
Shares Outstanding (Basic)1.53B
Shares Outstanding (Diluted)1.69B

Key Highlights

  • 1Total revenues increased 15% to $2.77 billion in Q2 2013 compared to $2.41 billion in Q2 2012.
  • 2Product sales grew 14% to $2.66 billion in Q2 2013 compared to Q2 2012, driven by antiviral and cardiovascular products.
  • 3Significant growth in Complera/Eviplera (up 159%) and Stribild (newly launched, $99.4 million in Q2 2013) highlighted the antiviral franchise's strength.
  • 4Royalty revenues increased 31% to $106.5 million in Q2 2013, boosted by Tamiflu sales.
  • 5R&D expenses increased 32% to $523.9 million in Q2 2013, reflecting continued investment in pipeline development, particularly in oncology and liver disease.
  • 6Acquisition of YM BioSciences Inc. for $487.6 million completed in February 2013, adding momelotinib to the oncology pipeline.
  • 7Cash, cash equivalents, and marketable securities stood at $2.98 billion as of June 30, 2013, indicating a strong liquidity position.

Frequently Asked Questions

Gilead's revenue growth in Q2 2013 was primarily driven by increased product sales, particularly in its antiviral franchise (HIV and Hepatitis C) and cardiovascular products. Strong demand for new HIV treatments like Complera/Eviplera and the newly launched Stribild, along with continued sales of established products like Atripla and Truvada, contributed significantly.

Key R&D developments include the filing of a New Drug Application (NDA) with the U.S. FDA for sofosbuvir for the treatment of chronic Hepatitis C (HCV) infection, which received priority review. The company also reported promising interim data for its sofosbuvir/ledipasvir combination in HCV and announced plans for Phase 3 studies. In oncology, positive response data from a Phase 2 study for idelalisib was highlighted.

Gilead maintained a strong liquidity position with $2.98 billion in cash, cash equivalents, and marketable securities as of June 30, 2013. The company actively managed its debt, repaying $929.6 million in debt during the first half of 2013, net of proceeds from convertible note hedges. The acquisition of YM BioSciences was financed through existing cash and operational cash flows.

Key risks include potential delays or failures in obtaining regulatory approvals for pipeline drugs, particularly sofosbuvir and its combination therapies for HCV, which could significantly impact stock price. Dependence on HIV products like Atripla and Truvada, competition from generic drugs, patent litigation, pricing and reimbursement pressures in healthcare systems globally, and potential safety issues with marketed products are also significant concerns. The company also highlighted the risk associated with significant accounts receivable in Southern Europe and potential manufacturing disruptions.