Gilead Sciences Announces Third Quarter 2002 Financial Results

FOSTER CITY, Calif., Oct 31, 2002 (BUSINESS WIRE) --

-Increase in Viread Sales Push Total Product Revenues to $120 Million-
   -Company Turns Cash Flow Positive for First Nine Months of 2002-
Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of operations for the third quarter ended September 30, 2002. Total revenues for the third quarter ended September 30, 2002, were $134.0 million, up 163 percent, compared to total revenues of $50.9 million for the third quarter of 2001. Net income for the third quarter 2002 was $20.8 million, or $0.10 per diluted share, which includes a one-time non-operating loss of $16.0 million realized upon the July 2002 sale of Gilead's shares in OSI Pharmaceuticals. This compares to a net loss in the third quarter 2001 of $25.2 million, or $0.13 per share.

Gilead reached a significant financial milestone during the third quarter, achieving positive operating cash flow for both the quarter and the first nine months of 2002. Operating cash flow for the quarter was $44.7 million, driven by higher earnings and improved working capital performance, compared with a decrease in cash from operations of $31.1 million for the same period last year.

Net revenues from product sales totaled $120.2 million, up 169 percent from the third quarter 2001. This growth was primarily driven by higher revenues from Viread(R) (tenofovir disoproxil fumarate) and AmBisome(R) (amphotericin B) liposome for injection. Sales of Viread were $68.9 million in the third quarter of 2002, or 57 percent of product sales, up from $44.7 million in the second quarter of 2002. AmBisome sales for the third quarter of 2002 were $48.6 million, an increase of 18 percent compared to the third quarter of 2001. Excluding the impact of foreign currencies relative to the U.S. dollar, AmBisome sales grew 11 percent for the third quarter of 2002 over the comparable quarter of 2001.

"With product revenues in excess of $120 million, our third quarter financial performance demonstrates our ability to continue to deliver novel therapeutics like Hepsera(TM) (adefovir dipivoxil) for chronic HBV to the market while continuing to increase our product sales of Viread and AmBisome," said John C. Martin, Ph.D., President and Chief Executive Officer of Gilead Sciences.

For the third quarter of 2002, royalty and contract revenues resulting from collaborations with corporate partners totaled $13.8 million. These revenues primarily include royalties on sales of AmBisome in the United States by Gilead's co-promotion partner Fujisawa Healthcare and contract revenue recognized for the licensing of a portion of the SELEX(TM) (Systemic Evolution of Ligands through EXponential Enrichment) process patent estate to Archemix Corporation in October 2001.

Research and development expenses for the third quarter of 2002 were $35.3 million, compared to $45.7 million for the same quarter in 2001. The lower expenses during the third quarter of 2002 is primarily attributable to the decrease in expenses associated with the Viread clinical program and the divestiture of Gilead's oncology portfolio to OSI Pharmaceuticals in December 2001.

Selling, general and administrative expenses for the three months ended September 30, 2002 were $42.3 million, compared to $32.0 million for the same quarter of 2001. The significant increase in expenses is primarily due to Gilead's increased global marketing efforts and the expansion of Gilead's U.S. and European sales forces to support the commercial launches of Viread and Hepsera.

Gilead also reported its results of operations for the nine months ended September 30, 2002. The company recorded net revenues from product sales of $284.7 million and aggregate contract and royalty revenues of $37.1 million. Sales of Viread for the nine months ended September 30, 2002 were $140.8 million, or 49 percent of product sales. AmBisome sales for the nine months ended September 30, 2002 were $136.0 million, a 12 percent increase over the nine months ended September 30, 2001. Excluding the impact of foreign currencies relative to the U.S. dollar, AmBisome sales grew 9 percent for the nine months ended September 30, 2002 over the comparable period of 2001. Net revenues of $321.8 million in the nine months ended September 30, 2002 compare to net revenues of $159.4 million in the first nine months of 2001. Net revenues for the first nine months of 2001 included product sales of $131.3 million and aggregate contract and royalty revenues of $28.1 million.

Net income for the nine months ended September 30, 2002 was $36.6 million, or $0.18 per diluted share. This compares to a net loss of $79.3 million, or $0.41 per share for the nine months ended September 30, 2001.

Research and development expenses for the nine months ended September 30, 2002 and 2001 were $99.7 million and $141.0 million, respectively. The substantially lower expenses during the first nine months of 2002 was attributable in part to the recognition in the first quarter 2001 of $10.6 million of a $13.0 million up-front payment to Cubist Pharmaceuticals related to the European licensing agreement for daptomycin signed in January 2001 and subsequently terminated in September 2002. In addition, Gilead's expenses have decreased compared to the first nine months in 2001 due to a decrease in expenses associated with the Viread clinical program and the divestiture of Gilead's oncology portfolio to OSI Pharmaceuticals in December 2001.

Selling, general and administrative expenses for the nine months ended September 30, 2002 were $123.7 million compared to $83.7 million for the same period in 2001. The significant increase in expenses is primarily due to Gilead's increased global marketing efforts and the expansion of Gilead's U.S. and European sales forces to support the commercial launches of Viread and Hepsera.

    Corporate Highlights
In September, Gilead and Cubist Pharmaceuticals jointly announced the termination of their licensing agreement for the commercialization of Cidecin(R) (daptomycin for injection) and an oral formulation of daptomycin. The agreement, executed in January 2001, granted Gilead exclusive commercialization rights to the products in 16 European countries following regulatory approval. Under the terms of the discontinuation, Gilead does not owe any future payments to Cubist, and Cubist reacquired all European rights to both products.

    Products and Pipeline Highlights
"The third quarter marked the achievement of several important milestones in Gilead's efforts to advance novel treatments for patients in need," said Dr. Martin. "The approval of Hepsera in the United States and the launch of Viread in additional countries in Europe continues to demonstrate our ability to effectively work with the various regulatory bodies around the world in order to facilitate rapid access to important treatments."

    Viread(R) (tenofovir disoproxil fumarate) for HIV
During the third quarter, Gilead established pricing for Viread and launched the drug in several additional countries in Europe, including Spain, the Netherlands and Sweden. Most recently, Gilead launched Viread in Australia, and completed regulatory filings in Brazil and Switzerland.

In July, Gilead took part in the 14th International AIDS Conference in Barcelona, Spain. During this meeting, 18 Viread-related abstracts were presented. Highlights from the conference included:

-- Forty-eight week data from a Phase III clinical trial (Study 903) comparing Viread to stavudine (d4T) when used in combination with lamivudine (3TC) and efavirenz in treatment-naive HIV patients. Preliminary results from this study were previously announced on May 7.

-- Genotypic and phenotypic analyses from a 48-week Phase II trial (Study 902) and a 48-week Phase III trial (Study 907) of Viread.

On September 27, at the 42nd Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) in San Diego, California, the company presented new data from Study 903 regarding Viread's positive effects on serum lipid profiles and mitochondrial DNA content through 48 weeks compared to stavudine.

    Hepsera(TM) (adefovir dipivoxil) for Chronic Hepatitis B
In late September, Gilead received marketing clearance from the U.S. Food and Drug Administration (FDA) for its antiviral agent Hepsera, for the treatment of chronic hepatitis B. Hepsera's marketing authorization followed a unanimous recommendation from the FDA's Antiviral Drugs Advisory Committee for approval of the drug in early August 2002. Hepsera was granted a broad ient Report on Form 6-K filed with the Commission on April 3, 2002, its Current Reports on Forms 6-K filed with the Commission on May 6, 2002, its Current Report on Form 6-K filed with the Commission on May 7, 2002, its Current Report on Form 6-K filed with the Commission on May 20, 2002, its Current Report on Form 6-K filed with the Commission on May 24, 2002, its Current Report on Form 6-K filed with the Commission on June 28, 2002, its Current Report on Form 6-K filed with the Commission on July 2, 2002, its Current Report on Form 6-K filed with the Commission on July 31, 2002, and its Current Report on Form 6-K filed with the Commission on August 2, 2002, its Current Reports on Form 6-K filed with the Commission on August 6, 2002, its Current Report on Form 6-K filed with the Commission on August 9, 2002, its Current Report on Form 6-K filed with the Commission on August 15, 2002 its Current Report on Form 6-K filed with the Commission on August 16, 2002, its Current Report on Form 6-K filed with the Commission on August 28, 2002, its Current Report on Form 6-K filed with the Commission on August 30, 2002, its Current Report on Form 6-K filed with the Commission on September 16, 2002, its Current Report on Form 6-K filed with the Commission on September 20, 2002, its Current Report on Form 6-K filed with the Commission on September 24, 2002, its Current Report on Form 6-K filed with the Commission on October 1, 2002, its Current Report on Form 6-K filed with the Commission on October 15, 2002, its Current Report on Form 6-K filed with the Commission on October 17, 2002, its Current Report on Form 6-K filed with the Commission on October 22, 2002 and its Current Report on Form 6-K filed with the Commission on October 25, 2002. Netia undertakes no obligation to publicly update or revise any forward-looking statements.

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