10-QPeriod: Q2 FY2016

GILEAD SCIENCES, INC. Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 5, 2016For Securities:GILD

Summary

Gilead Sciences, Inc. reported total revenues of $7.8 billion for the second quarter of 2016, a 6% decrease year-over-year, primarily driven by a 6% decline in product sales to $7.7 billion. This decrease was largely attributed to lower sales of Hepatitis C (HCV) treatments, particularly Harvoni, which saw a 29% drop in sales for the quarter. Despite the decline in HCV revenue, Gilead demonstrated growth in its HIV franchise, with sales of tenofovir alafenamide (TAF)-based products like Genvoya, Descovy, and Odefsey showing strong uptake. Research and development expenses significantly increased to $1.5 billion due to strategic acquisitions and pipeline progression, while net income attributable to Gilead was $3.5 billion, or $2.58 per diluted share, a decrease from the prior year's $4.5 billion, or $2.92 per diluted share. The company also continued its aggressive share repurchase program, demonstrating a commitment to returning capital to shareholders.

Financial Highlights

58 data points
Beta

Revenue

$7.78B

87.3% Gross Margin

Net Income

$3.50B

45.0% Net Margin

EPS (Diluted)

$2.58

Total Assets

$49.98B

Cash & Equivalents

$6.49B

Free Cash Flow

$4.78B

Financial Statements
Beta
Revenue$7.78B
Cost of Revenue$864.00M
Gross Profit$6.79B
R&D Expenses$1.48B
SG&A Expenses$890.00M
Operating Expenses$3.24B
Operating Income$4.54B
Interest Expense$227.00M
Net Income$3.50B
EPS (Basic)$2.62
EPS (Diluted)$2.58
Shares Outstanding (Basic)1.33B
Shares Outstanding (Diluted)1.35B

Key Highlights

  • 1Total revenues for Q2 2016 were $7.8 billion, a decrease of 6% compared to Q2 2015, primarily due to lower HCV product sales.
  • 2Product sales decreased by 6% to $7.7 billion, with HCV product sales (Harvoni, Sovaldi, Epclusa) declining by 7% due to lower sales of Harvoni.
  • 3HIV product sales showed strength, increasing by 15% year-over-year for the quarter, driven by TAF-based regimens like Genvoya, Descovy, and Odefsey.
  • 4Research and Development (R&D) expenses significantly increased by 81% to $1.5 billion, largely due to acquisitions (Nimbus Apollo) and pipeline progression.
  • 5Net income attributable to Gilead was $3.5 billion, down from $4.5 billion in Q2 2015, resulting in diluted EPS of $2.58 compared to $2.92.
  • 6Gilead continued significant capital allocation towards share repurchases, spending $9 billion on buybacks in the first half of 2016, including a $5 billion accelerated share repurchase program.
  • 7The company received FDA approval for Epclusa (sofosbuvir/velpatasvir), the first pan-genotypic, single-tablet regimen for HCV, and gained European Commission approval for Odefsey (emtricitabine/rilpivirine/tenofovir alafenamide) for HIV treatment.

Frequently Asked Questions

The primary driver for the year-over-year decline in total revenues is the decrease in sales of Hepatitis C (HCV) products, particularly Harvoni. Sales of HCV treatments declined by 7% for the quarter, with Harvoni sales down 29% year-over-year.

Gilead's HIV franchise demonstrated strong performance, with product sales increasing by 15% year-over-year for the quarter. This growth is primarily attributed to the uptake of its newer tenofovir alafenamide (TAF)-based regimens, including Genvoya, Descovy, and Odefsey.

R&D expenses increased substantially by 81% to $1.5 billion. This increase is mainly due to strategic acquisitions, such as the purchase of Nimbus Apollo and its ACC inhibitor program, and ongoing progression in the company's clinical trial pipeline, including the acquisition of a FDA priority review voucher.

Gilead remains committed to returning capital to shareholders through its share repurchase program. In the first half of 2016, the company repurchased approximately $9 billion of its common stock, including a $5 billion accelerated share repurchase program, and continued its quarterly dividend payments.