Why did GAAP EPS increase so much year-over-year?

The prior-year quarter included a $525 million expense for HIV antitrust litigation settlements that did not recur in Q2 2024. Operating expenses fell sharply, with SG&A dropping to $1.4 billion from $1.8 billion, and the effective tax rate fell to 21.4% from 34.6%. Higher revenue also contributed, partly offset by $392 million in net unrealized losses on equity securities.

Why did cash fall so much, and is the balance sheet still healthy?

Cash and marketable securities dropped to $2.8 billion from $8.4 billion, mainly due to the $3.9 billion CymaBay acquisition and a $1.75 billion senior note repayment. Operating cash flow of $1.3 billion was reduced by a $1.2 billion transition tax payment. Gilead still generates substantial free cash flow, reporting $1.2 billion in the quarter, and continued to pay dividends of $972 million.

Why is the full-year GAAP EPS guidance so much lower than non-GAAP guidance?

GAAP results include large non-cash items such as amortization of acquired intangibles, a $2.43 billion IPR&D impairment recorded in Q1 2024, restructuring charges, and fair value losses on equity securities. Non-GAAP EPS excludes these items. The GAAP projected effective tax rate of about 87% also reflects the impairment, which is why GAAP EPS is near zero.

What are the main near-term catalysts for investors?

Key catalysts include the FDA decision on seladelpar for PBC with a PDUFA date of August 14, 2024, additional clinical readouts for lenacapavir in HIV prevention and other pipeline programs, and the commercial performance of Biktarvy and Trodelvy. The setbacks in Trodelvy's urothelial and lung cancer trials are a risk to the oncology growth story.

What is the impact of the Trodelvy trial setback?

The TROPiCS-04 trial did not meet its overall survival primary endpoint in urothelial cancer, and there were more treatment-related deaths than with chemotherapy, mainly from neutropenic complications. This puts the accelerated approval of Trodelvy for that indication at risk of not converting to full approval or of being withdrawn. Trodelvy sales still grew 23% to $320 million in Q2, so the near-term revenue impact is manageable, but the setback weakens the long-term oncology outlook.

GILD 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed August 8, 2024. Cited figures are marked; the original filing is the authoritative source.

Gilead Sciences reported second-quarter 2024 results with total revenue up 5% year-over-year to $6.95 billion^a and product sales of $6.91 billion.

Excluding Veklury (COVID-19 treatment, down 16%), product sales grew 6% to $6.7 billion^b, led by HIV (Biktarvy up 8% to $3.2 billion), Liver Disease (up 17%), and Oncology (up 15%, with Trodelvy up 23%). GAAP diluted EPS rose to $1.29 from $0.83, largely because the prior-year quarter included a $525 million HIV antitrust settlement expense that did not recur. Non-GAAP diluted EPS was $2.01 versus $1.34.

Gross margin on a GAAP basis slipped modestly to 77.7%, and operating expenses declined sharply, with SG&A down to $1.4 billion^c from $1.8 billion. The quarter also carried notable balance-sheet and pipeline developments. Cash and marketable securities fell to $2.8 billion from $8.4 billion at year-end 2023, reflecting the $3.9 billion CymaBay acquisition and a $1.75 billion senior note repayment.

Operating cash flow of $1.3 billion^d was held down by a $1.2 billion transition tax payment. The company paid $972 million in dividends and repurchased $100 million of stock. Management reaffirmed product sales guidance of $27.1–27.5 billion and raised GAAP diluted EPS guidance to $0.00–0.30 (from $0.10–0.50), while raising non-GAAP EPS guidance to $3.60–3.90.

The GAAP guidance is weighed down by a large first-half IPR&D impairment of $2.43 billion, which was recorded in Q1 2024. For investors, the key items to watch are the seladelpar PDUFA date of August 14, 2024, interim lenacapavir PrEP data from PURPOSE 1 showing 100% efficacy in cisgender women, and the setback in the TROPiCS-04 urothelial cancer Phase 3 trial, which missed its overall survival endpoint. The Q2 press release also notes a $320 million buyout of seladelpar royalties from Janssen, which will be reflected in Q3 results.

02—Key points

Key Highlights

Total revenue rose 5% year-over-year to $6.95 billion; product sales excluding Veklury grew 6% to $6.7 billion.
GAAP diluted EPS was $1.29 versus $0.83, mainly because the prior-year $525 million HIV antitrust settlement did not recur; non-GAAP diluted EPS was $2.01 versus $1.34.
Biktarvy sales grew 8% to $3.2 billion; Liver Disease rose 17% to $832 million and Oncology rose 15% to $841 million (Trodelvy up 23%).
Cash and marketable securities declined to $2.8 billion from $8.4 billion at year-end 2023, after the $3.9 billion CymaBay acquisition and a $1.75 billion debt repayment.
FY2024 product sales guidance of $27.1–27.5 billion was unchanged; GAAP diluted EPS guidance was narrowed upward to $0.00–0.30 and non-GAAP EPS raised to $3.60–3.90.
Trodelvy missed its overall survival primary endpoint in the TROPiCS-04 urothelial cancer Phase 3 trial, and EVOKE-01 in NSCLC also failed to meet its OS endpoint.
Seladelpar for primary biliary cholangitis is under FDA review with a PDUFA date of August 14, 2024; interim PURPOSE 1 data showed 100% efficacy for lenacapavir in HIV prevention.

03—Questions

Frequently Asked Questions

Why did GAAP EPS increase so much year-over-year?
The prior-year quarter included a $525 million expense for HIV antitrust litigation settlements that did not recur in Q2 2024. Operating expenses fell sharply, with SG&A dropping to $1.4 billion from $1.8 billion, and the effective tax rate fell to 21.4% from 34.6%. Higher revenue also contributed, partly offset by $392 million in net unrealized losses on equity securities.
Why did cash fall so much, and is the balance sheet still healthy?
Cash and marketable securities dropped to $2.8 billion from $8.4 billion, mainly due to the $3.9 billion CymaBay acquisition and a $1.75 billion senior note repayment. Operating cash flow of $1.3 billion was reduced by a $1.2 billion transition tax payment. Gilead still generates substantial free cash flow, reporting $1.2 billion in the quarter, and continued to pay dividends of $972 million.
Why is the full-year GAAP EPS guidance so much lower than non-GAAP guidance?
GAAP results include large non-cash items such as amortization of acquired intangibles, a $2.43 billion IPR&D impairment recorded in Q1 2024, restructuring charges, and fair value losses on equity securities. Non-GAAP EPS excludes these items. The GAAP projected effective tax rate of about 87% also reflects the impairment, which is why GAAP EPS is near zero.
What are the main near-term catalysts for investors?
Key catalysts include the FDA decision on seladelpar for PBC with a PDUFA date of August 14, 2024, additional clinical readouts for lenacapavir in HIV prevention and other pipeline programs, and the commercial performance of Biktarvy and Trodelvy. The setbacks in Trodelvy's urothelial and lung cancer trials are a risk to the oncology growth story.
What is the impact of the Trodelvy trial setback?
The TROPiCS-04 trial did not meet its overall survival primary endpoint in urothelial cancer, and there were more treatment-related deaths than with chemotherapy, mainly from neutropenic complications. This puts the accelerated approval of Trodelvy for that indication at risk of not converting to full approval or of being withdrawn. Trodelvy sales still grew 23% to $320 million in Q2, so the near-term revenue impact is manageable, but the setback weakens the long-term oncology outlook.

04—Continue

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