10-QPeriod: Q3 FY2019

GILEAD SCIENCES, INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 5, 2019For Securities:GILD

Summary

Gilead Sciences, Inc. reported revenues of $5,604 million for the third quarter of 2019, a slight increase from $5,596 million in the prior year period, driven by higher product sales, particularly in HIV. However, the company posted a net loss of $1.2 billion, or $0.92 per share, for the quarter. This loss was primarily attributable to a significant $3.92 billion up-front payment related to the Option, License and Collaboration Agreement with Galapagos NV, which also included an equity investment of $1.13 billion. Despite the quarterly loss, Gilead's cash position remains robust, with $25.1 billion in cash, cash equivalents, and marketable debt securities as of September 30, 2019. The company's HIV product sales showed strong growth, increasing by 13% year-over-year, largely due to the uptake of Biktarvy. Conversely, HCV product sales continued to decline, down 25%, impacted by increased competition and pricing pressures. R&D expenses saw a substantial increase due to the Galapagos collaboration, while SG&A expenses rose moderately to support international expansion. Investors should note the ongoing litigation related to key products and the company's dependence on HIV and HCV revenues, alongside efforts to diversify through pipeline development and strategic partnerships.

Financial Statements
Beta
Revenue$5.60B
Cost of Revenue$1.03B
Gross Profit$4.48B
R&D Expenses$4.99B
SG&A Expenses$1.05B
Operating Expenses$7.08B
Operating Income-$1.47B
Interest Expense$250.00M
Net Income-$1.17B
EPS (Basic)$-0.92
EPS (Diluted)$-0.92
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.27B

Key Highlights

  • 1Total revenues for Q3 2019 were $5.604 billion, a slight increase of 0.1% year-over-year, primarily driven by product sales.
  • 2Net loss attributable to Gilead for Q3 2019 was $1.165 billion (loss of $0.92 per share), compared to a net income of $2.097 billion (income of $1.60 per diluted share) in Q3 2018, largely due to significant R&D expenses related to the Galapagos collaboration.
  • 3HIV product sales increased by 13% to $4.2 billion in Q3 2019, fueled by strong uptake of Biktarvy and increased usage of Truvada for PrEP.
  • 4Hepatitis C Virus (HCV) product sales decreased by 25% to $674 million in Q3 2019, impacted by increased competition and pricing pressures.
  • 5Research and Development (R&D) expenses surged 431% to $5.0 billion in Q3 2019, mainly due to a $3.92 billion up-front payment for the Galapagos collaboration.
  • 6Cash, cash equivalents, and marketable debt securities stood at $25.1 billion as of September 30, 2019, although this represents a decrease from $31.5 billion at the end of 2018.
  • 7The company announced the approval of Descovy for PrEP by the U.S. FDA and continued advancement of its filgotinib pipeline for rheumatoid arthritis.

Frequently Asked Questions

The net loss of $1.165 billion in the third quarter of 2019 was primarily due to a substantial increase in Research and Development (R&D) expenses. This increase was largely driven by a $3.92 billion up-front payment made in connection with Gilead's Option, License and Collaboration Agreement with Galapagos NV, which also included an equity investment.

Gilead saw robust growth in its HIV product sales, which increased by 13% year-over-year in Q3 2019, largely attributed to the strong performance of Biktarvy. However, sales in its Hepatitis C Virus (HCV) segment continued to decline, decreasing by 25% in the same period, due to increased competition and pricing pressures.

As of September 30, 2019, Gilead maintained a strong liquidity position with $25.1 billion in cash, cash equivalents, and marketable debt securities. While this is a decrease from the end of 2018, the company indicated that its existing capital resources and operating cash flow are expected to be adequate for its foreseeable future capital needs.

Yes, the filing mentions ongoing litigation and potential risks related to intellectual property for key products like sofosbuvir, axicabtagene ciloleucel, and bictegravir. Additionally, the company faces risks associated with healthcare legislative and regulatory actions, pricing pressures, potential product liability claims, and government investigations, all of which could adversely affect its financial results and reputation.