Gilead Announces Third Quarter 1999 Financial Results

AmBisome® Sales Increase 24% Over Prior Year Quarter

Foster City, CA -- October 27, 1999

Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the third quarter ended September 30, 1999. These results represent the first quarter of combined earnings reported since Gilead’s completion of its merger with NeXstar Pharmaceuticals, Inc. in July 1999. All amounts prior to the completion of the merger have been restated under the pooling-of-interests method of accounting to include the balances and results of operations of NeXstar. For the third quarter, Gilead recorded revenues from net product sales of $34.6 million, royalty revenues of $2.5 million and contract revenues of $1.2 million, for total revenues of $38.4 million, a 20 percent increase over the same quarter in 1998. Total revenues of $31.9 million for the third quarter of 1998 include net product sales of $28.5 million, royalty revenues of $1.6 million and contract revenues of $1.8 million.

The net loss for the three months ended September 30, 1999 was $30.4 million, or $0.70 per share. In the third quarter of 1999, Gilead recorded expenses associated with the merger with NeXstar of $15.1 million, or $0.35 per share. Excluding these merger-related expenses, Gilead’s loss for the quarter would have been $0.35 per share. The net loss for the third quarter 1999 compares to net income of $2.2 million, or $0.05 per share, for the same quarter in 1998. The company’s profitability in the third quarter of 1998 was due to a one-time gain of $21.5 million on NeXstar’s August 1998 sale of its 51 percent interest in its subsidiary, Proligo LLC, to SKW Americas, Inc.

Net revenues from product sales were primarily derived from sales of AmBisome® ((amphotericin B) liposome for injection) in markets outside the United States, accounting for 92 percent of product revenues. AmBisome sales for the third quarter of 1999 were $31.9 million, a 24 percent increase in sales from the same period of 1998. In addition, Gilead recorded product revenues of $1.4 million and $1.2 million from the sale of VISTIDE® (cidofovir injection) and DaunoXome® (daunorubicin citrate liposome injection), respectively, during the third quarter of 1999.

The other revenues totaling $3.8 million result from collaborations with corporate partners, including contract revenues for research and development projects, and royalties on product sales of AmBisome in the United States by Gilead’s co-promotion partner Fujisawa Healthcare and VISTIDE in the European Union by Pharmacia & Upjohn.

Research and development expenses for the third quarter of 1999 were $28.2 million, compared to $28.6 million for the same quarter in 1998. Selling, general and administrative expenses for the three months ended September 30, 1999 were $18.8 million as compared to $19.1 million for the same quarter of 1998.

Net interest income for the third quarter 1999 was $2.2 million, as compared to $3.3 million for the same quarter in 1998.

Gilead also reported its results of operations for the nine months ended September 30, 1999. The Company recorded net revenues from product sales of $100.6 million and aggregate contract and royalty revenues of $19.6 million, for total revenues of $120.2 million. This compares to revenues from product sales of $81.9 million and aggregate contract and royalty revenues of $26.8 million, for total revenues of $108.7 million for the nine months ended September 30, 1998. The net loss for the nine months ended September 30, 1999 was $57.5 million, or $1.36 per share, compared to a net loss of $26.1 million, or $0.64 per share, for the nine months ended September 30, 1998. In the nine months ended September 1999, Gilead recorded expenses associated with the merger with NeXstar of $18.2 million or $0.43 per share. Excluding merger-related expenses, Gilead’s loss for the nine months would have been $0.93 per share.

Research and development expenses for the nine-month periods ended September 30, 1999 and 1998 were $81.7 million and $92.6 million, respectively. These expenses decreased in the 1999 period relative to 1998 because of Gilead’s reduced research activities at its Boulder, Colorado facility and reduced level of involvement in the development of Tamiflu. Such decreases were offset in part by greater levels of expense in 1999 for the development programs for adefovir dipivoxil for hepatitis B, tenofovir disoproxil fumarate (PMPA oral prodrug) for HIV, MiKasome® (liposomal amikacin) for severe bacterial infection and NX 211 (liposomal lurtotecan) for cancer. Selling, general and administrative expenses for the nine months ended September 30, 1999 were $57.7 million as compared to $56.6 million for the same nine-month period in 1998.

Net interest income for the nine months ended September 30, 1999 was $7.6 million, as compared to $11.1 million for the same nine-month period in 1998.

As of September 30, 1999, the Company had cash, cash equivalents and marketable securities of $307.4 million, compared to $348.7 million on December 31, 1998.

Gilead Sciences, headquartered in Foster City, CA, is an independent biopharmaceutical company that seeks to provide accelerated treatment solutions for patients and the people who care for them. The Company discovers, develops, manufactures and commercializes proprietary therapeutics for challenging infectious diseases (viral, fungal and bacterial infections) and cancer. Gilead maintains research, development or manufacturing facilities in Foster City, CA, Boulder, CO, San Dimas, CA, and Cambridge, UK, and sales and marketing organizations in the United States, Europe and Australia. Gilead common stock is traded on The Nasdaq Stock Market under the symbol GILD.

For more information on Gilead Sciences, call the Gilead Corporate Communications Department at 1-800-GILEAD-5 (1-800-445-3235).

GILEAD SCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts) (unaudited)

Three months ended       Nine months ended
September 30,       September 30,
1999       1998       1999       1998
Revenues:      
Product sales, net $34,598       $28,458       $100,628       $81,898
Contract revenues 1,247       1,811       12,149       22,250
Royalty revenues 2,545       1,597       7,426       4,520
Net revenues 38,390       31,866       120,203       108,668
 
Cost of products sold 7,552       5,769       22,710       16,945
 
Gross profit 30,838       26,097       97,493       91,723
 
Operating expenses:      
Research and development 28,192       28,584       81,745       92,559
Selling, general and administrative 18,785       19,068       57,702       56,560
Merger-related expenses 15,079       0       18,179       0
Total operating expenses 62,056       47,652       157,626       149,119
 
Loss from operations (31,218)       (21,255)       (60,133)       (57,396)
 
Gain on sale of subsidiary 0       21,480       0       21,480
Interest income 3,866       5,032       12,537       16,623
Interest expense (1,623)       (1,769)       (4,939)       (5,483)
Net income (loss) before taxes and
equity in loss of affiliate
(28,975)       3,188       (52,532)       (24,776)
 
Taxes 220       262       726       649
Equity in loss of affiliate 1,170       724       4,271       724
 
Net income (loss) $(30,365)       $2,202       $(57,532)       $(26,149)
 
Basic and diluted income (loss) per share $(0.70)       $0.05       $(1.36)       $(0.64)
 
Common shares used in the calculation of
basic income (loss) per share
43,467       41,286       42,446       40,886
 
Common shares used in the calculation of
diluted income (loss) per share
43,467       45,075       42,446       40,886

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

September 30,       December 31,
1999       1998
(unaudited)       (note)
Assets      
Cash, cash equivalents, and short-term investments $307,395       $348,743
Other current assets 80,283       68,146
Total current assets 387,678       416,889
Property and equipment, net 49,216       51,019
Other assets 12,298       19,856
$449,192       $487,764
Liabilities and stockholders' equity      
Current liabilities $56,841       $57,334
Long-term obligations 92,552       96,731
Stockholders' equity 299,799       333,699
$449,192       $487,764
     
Note: Derived from audited financial statements at that date.