10-QPeriod: Q2 FY2017

GILEAD SCIENCES, INC. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 7, 2017For Securities:GILD

Summary

Gilead Sciences, Inc. (GILD) reported financial results for the second quarter ended June 30, 2017. Total revenues decreased by 8% year-over-year to $7.1 billion, primarily driven by a decline in antiviral product sales, particularly within the Hepatitis C (HCV) segment. While HIV and Hepatitis B (HBV) product sales showed growth, largely due to the uptake of newer tenofovir alafenamide (TAF)-based treatments, the decrease in HCV sales, attributed to a maturing market and increased competition, significantly impacted overall revenue. Net income attributable to Gilead for the quarter was $3.1 billion, or $2.33 per diluted share, a decrease from the prior year's $3.5 billion, or $2.58 per diluted share. This decline reflects the lower revenues, partially offset by reduced operating expenses, especially in Research & Development, and share repurchases which favorably impacted earnings per share. The company maintained a strong liquidity position with substantial cash, cash equivalents, and marketable securities totaling $36.6 billion.

Financial Highlights

57 data points
Beta

Revenue

$7.14B

82.9% Gross Margin

Net Income

$3.07B

43.0% Net Margin

EPS (Diluted)

$2.33

Total Assets

$60.26B

Cash & Equivalents

$8.71B

Free Cash Flow

$3.40B

Financial Statements
Beta
Revenue$7.14B
Cost of Revenue$1.13B
Gross Profit$5.92B
R&D Expenses$864.00M
SG&A Expenses$897.00M
Operating Expenses$2.89B
Operating Income$4.25B
Interest Expense$269.00M
Net Income$3.07B
EPS (Basic)$2.35
EPS (Diluted)$2.33
Shares Outstanding (Basic)1.31B
Shares Outstanding (Diluted)1.32B

Key Highlights

  • 1Total revenues declined 8% year-over-year to $7.1 billion, largely due to a significant drop in Hepatitis C (HCV) product sales.
  • 2HIV and Hepatitis B (HBV) product sales increased, driven by the adoption of TAF-based regimens like Genvoya and Descovy.
  • 3Net income attributable to Gilead was $3.1 billion ($2.33 per diluted share), down from $3.5 billion ($2.58 per diluted share) in the prior year's quarter.
  • 4Research and Development (R&D) expenses decreased by 42% year-over-year to $864 million, influenced by the prior year's acquisition-related expenses.
  • 5Selling, General, and Administrative (SG&A) expenses remained relatively flat year-over-year.
  • 6Gilead maintained a strong balance sheet with $36.6 billion in cash, cash equivalents, and marketable securities as of June 30, 2017.
  • 7The company continued its share repurchase program, repurchasing $695 million worth of stock in the first six months of the year, with $8.3 billion remaining authorization.

Frequently Asked Questions

The primary driver for the revenue decrease is the significant decline in Hepatitis C (HCV) product sales, specifically Harvoni and Sovaldi. This is attributed to a maturing HCV market where a large number of patients have already been treated, coupled with increased competition and pricing pressures.

Sales for HIV and HBV products showed growth, increasing by approximately 17% year-over-year for the six months ended June 30, 2017. This growth is primarily driven by the continued uptake and strong performance of their newer tenofovir alafenamide (TAF)-based regimens, such as Genvoya, Descovy, and Odefsey.

Gilead Sciences maintained a very strong liquidity position. As of June 30, 2017, the company reported $36.6 billion in cash, cash equivalents, and marketable securities. This robust financial position provides significant flexibility for operations, strategic investments, and capital allocation.

The report highlights significant legal risks, most notably the ongoing patent litigation concerning sofosbuvir-based products, where a jury awarded $2.54 billion in past damages, with a potential total loss estimated between zero and $9.1 billion pending appeals. There are also various other patent litigations with generic manufacturers and ongoing investigations that could lead to material financial impacts.