10-QPeriod: Q2 FY2019

GILEAD SCIENCES, INC. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 6, 2019For Securities:GILD

Summary

Gilead Sciences, Inc. (GILD) reported its second-quarter 2019 financial results, demonstrating steady performance with a 1% increase in total revenues to $5.7 billion, driven by growth in HIV product sales. Despite a decline in Hepatitis C (HCV) revenues, the company's strategic focus on its core HIV portfolio, particularly with the strong uptake of Biktarvy, continues to be a key revenue driver. Operationally, Gilead saw a decrease in Cost of Goods Sold, leading to an improved product gross margin of 82%. While R&D expenses saw a slight dip year-over-year for the quarter, they increased for the six-month period, reflecting ongoing investments in cell therapy programs. SG&A expenses increased due to promotional activities and international expansion. Net income attributable to Gilead saw a rise to $1.9 billion ($1.47 diluted EPS) for the quarter, reflecting improved operational performance. The company maintained a strong liquidity position with over $30 billion in cash, cash equivalents, and marketable debt securities as of June 30, 2019.

Financial Highlights

57 data points
Beta

Revenue

$5.68B

81.0% Gross Margin

Net Income

$1.88B

33.1% Net Margin

EPS (Diluted)

$1.47

Total Assets

$63.21B

Cash & Equivalents

$11.24B

Free Cash Flow

$2.16B

Financial Statements
Beta
Revenue$5.68B
Cost of Revenue$1.00B
Gross Profit$4.61B
R&D Expenses$1.16B
SG&A Expenses$1.09B
Operating Expenses$3.25B
Operating Income$2.43B
Interest Expense$248.00M
Net Income$1.88B
EPS (Basic)$1.48
EPS (Diluted)$1.47
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1Total revenues increased by 1% to $5.7 billion for Q2 2019, driven by a 1% rise in product sales to $5.6 billion.
  • 2HIV product sales grew by 10% to $4.0 billion in Q2 2019, with Biktarvy showing strong uptake and contributing significantly.
  • 3HCV product sales decreased by 16% to $842 million in Q2 2019, reflecting competitive dynamics and lower patient starts.
  • 4Cost of goods sold decreased by 16% in Q2 2019, leading to an improved product gross margin of 82%.
  • 5Net income attributable to Gilead increased to $1.9 billion in Q2 2019, or $1.47 per diluted share.
  • 6Gilead maintained a strong liquidity position with $30.2 billion in cash, cash equivalents, and marketable debt securities as of June 30, 2019.
  • 7Significant subsequent event: In July 2019, Gilead entered into a $3.95 billion collaboration agreement with Galapagos NV, including an equity investment of approximately $1.1 billion, to expand its pipeline.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in HIV product sales, which rose by 10% to $4.0 billion in Q2 2019. The continued uptake of Biktarvy was a key contributor to this growth. Additionally, favorable adjustments for government rebates and discounts related to prior year sales also positively impacted revenue.

Gilead successfully reduced its Cost of Goods Sold by 16% in Q2 2019 compared to the prior year. This was mainly due to lower royalty expenses, reduced inventory reserves, and lower amortization of intangible assets, particularly the Ranexa intangible asset which was fully amortized. These factors contributed to an improved product gross margin of 82%.

A major subsequent event was the announcement in July 2019 of a significant global research and development collaboration with Galapagos NV. This collaboration involves an upfront payment of $3.95 billion and an equity investment of approximately $1.1 billion, aiming to expand Gilead's pipeline in areas like idiopathic pulmonary fibrosis and osteoarthritis.

The HCV business continues to face challenges, with product sales decreasing by 16% in Q2 2019. This decline is attributed to competitive dynamics, lower patient starts, and a decrease in U.S. Medicare prices. While favorable rebate adjustments in Europe provided some offset, the trend indicates ongoing pressure in the HCV segment.