Gilead Sciences Announces First Quarter 2007 Financial Results

  • Record Total Revenues of $1.03 Billion, Up 48 Percent over First Quarter 2006
  • Record Product Sales of $840.2 Million, Up 50 Percent over First Quarter 2006
  • First Quarter EPS of $0.85 per Share
  • First Quarter Non-GAAP EPS of $0.93 per Share, Excluding Stock-based Compensation Expense

FOSTER CITY, Calif.--(BUSINESS WIRE)--April 18, 2007--Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of operations for the quarter ended March 31, 2007. Total revenues for the first quarter of 2007 were $1.03 billion, up 48 percent compared to total revenues of $692.9 million for the first quarter of 2006. Net income for the first quarter of 2007 was $407.4 million, or $0.85 per diluted share, which included after-tax stock-based compensation expense of $40.2 million. Excluding after-tax stock-based compensation expense, non-GAAP net income for the first quarter of 2007 was $447.6 million, or $0.93 per diluted share, compared to non-GAAP net income of $286.2 million, or $0.59 per diluted share, for the first quarter of 2006.

Product Sales

Product sales were a record $840.2 million for the first quarter of 2007, compared to $559.4 million in the first quarter of 2006, a 50 percent increase. This growth was driven primarily by Gilead's HIV product franchise, including the strong uptake of Atripla(TM) (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg) following its launch in July 2006 in the United States as well as strong growth of Truvada(R) (emtricitabine and tenofovir disoproxil fumarate) in Europe. Hepsera(R) (adefovir dipivoxil) and AmBisome(R) (amphotericin B) liposome for injection also experienced solid sales growth compared to the same quarter last year.

HIV Franchise

HIV product sales were $705.1 million in the first quarter of 2007, a 56 percent increase from $450.7 million for the same period in 2006.

-- Truvada

Truvada sales were $345.9 million for the first quarter of 2007, an increase of 39 percent from $248.9 million in the first quarter of 2006. Truvada sales accounted for approximately 49 percent of total HIV product sales and approximately 41 percent of Gilead's total product sales in the first quarter of 2007.

-- Atripla

Atripla sales were $190.2 million in the first quarter of 2007, a sequential increase of 38 percent from $137.4 million in the fourth quarter of 2006. Sales of Atripla commenced in the United States in the third quarter of 2006.

-- Viread

Sales of Viread(R) (tenofovir disoproxil fumarate) were $160.7 million in the first quarter of 2007, a 16 percent decrease from $191.8 million in the first quarter of 2006.

-- Emtriva

Emtriva(R) (emtricitabine) sales were $8.3 million for the first quarter of 2007, a decrease of 16 percent from $10.0 million in the first quarter of 2006.

Hepsera for Chronic Hepatitis B

Hepsera sales totaled $71.3 million for the first quarter of 2007, a 35 percent increase from $52.7 million in the first quarter of 2006.

AmBisome for Severe Fungal Infections

Sales of AmBisome for the first quarter of 2007 were $61.5 million, an increase of 14 percent from $53.8 million for the first quarter of 2006, primarily driven by sales volume growth across major European territories, as well as a favorable foreign currency exchange impact.

Royalty, Contract and Other Revenues

For the first quarter of 2007, royalty, contract and other revenues resulting primarily from collaborations with corporate partners totaled $188.2 million, an increase of $54.7 million from the first quarter of 2006. The increase in the first quarter of 2007 was driven primarily by the recognition of Tamiflu(R) (oseltamivir phosphate) royalties from F. Hoffmann-La Roche Ltd (Roche) of $167.9 million compared to Tamiflu royalties of $115.3 million recognized in the first quarter of 2006. This increase was due to the significantly higher Tamiflu sales recorded by Roche during the fourth quarter of 2006 compared to the same period in 2005.

"As Gilead enters its twentieth year, our business has never been stronger than today," said John F. Milligan, PhD, Chief Operating Officer and Chief Financial Officer (CFO) of Gilead. "We are very pleased with the solid results, including revenues of over $1 billion, driven by the continued strong uptake of Atripla, robust worldwide sales of Truvada and strong performance of our other products, as well as continued expense management. As we prepare for future new product launches and advance key pipeline programs, we recognize that our operating expenses will need to grow to support these efforts. We remain dedicated to managing our expense growth in order to maintain robust operating cash flow."

Research and Development

Research and development (R&D) expenses in the first quarter of 2007 were $130.1 million compared to $88.4 million for the same quarter in 2006. Non-GAAP R&D expenses, which exclude stock-based compensation expense, for the first quarter of 2007 were $109.0 million, compared to $76.5 million for the same quarter in 2006. Non-GAAP R&D expenses for the first quarter of 2007 were higher primarily from increased compensation and benefits related to higher headcount, and increased contract service and clinical study expenses relating to clinical, product development and research activities in our HIV, hepatitis, respiratory and cardiopulmonary programs.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses in the first quarter of 2007 were $166.6 million compared to $142.5 million for the same quarter in 2006. SG&A expenses in the first quarter of 2006 included the write-off of certain capital assets related to renovations at our corporate headquarters. Non-GAAP SG&A expenses, which exclude stock-based compensation expense, for the first quarter of 2007 were $132.9 million, compared to $128.0 million for the same quarter in 2006. Non-GAAP SG&A expenses for the first quarter of 2007 were higher primarily from increased compensation and benefits related to higher headcount.

Cash, Cash Equivalents and Marketable Securities

As of March 31, 2007, Gilead had cash, cash equivalents and marketable securities of $1.86 billion compared to $1.39 billion as of December 31, 2006. The increase in cash, cash equivalents and marketable securities was primarily attributable to $490.5 million of operating cash flows generated during the quarter, partially offset by our repayment of the remaining principal under our term loan of $99.0 million.

Corporate Highlights

In January 2007, Gilead announced that Carla A. Hills was appointed to the company's Board of Directors, increasing the number of directors to 10. Mrs. Hills is the Chair and Chief Executive Officer (CEO) of Hills & Company, International Consultants, a firm providing advice to U.S. businesses on investment, trade and risk assessment issues abroad, particularly in emerging markets. From 1989 to 1993, she served as U.S. Trade Representative, and was the principal advisor on international trade to President George H. W. Bush. Mrs. Hills was a Cabinet member under President Gerald R. Ford as well, serving as Secretary of the Department of Housing and Urban Development. She also served as Assistant Attorney General, Civil Division, U.S. Department of Defense.

In March 2007, Gilead announced the appointment of Norbert W. Bischofberger, PhD to the position of Executive Vice President, Research and Development and Chief Scientific Officer, and John F. Milligan, PhD to the position of Chief Operating Officer, with continued responsibilities as CFO until a new CFO is identified.

Product and Pipeline Highlights

"We are pleased with the significant progress seen in our pipeline products during the first quarter," said John C. Martin, PhD, President and CEO of Gilead. "We presented positive data from the Phase II study of elvitegravir, our novel HIV integrase inhibitor also known as GS 9137, and based on these results, we are currently in discussions with the U.S. Food and Drug Administration (FDA) about the Phase III registrational program for this compound. In addition, the FDA granted a priority review for the New Drug Application (NDA) for ambrisentan for pulmonary arterial hypertension (PAH). Our commercial efforts are ramping up to expeditiously bring this product to market, and pending FDA approval, to provide patients with PAH a new, once-daily treatment option."

HIV/AIDS Franchise

In February 2007, Gilead announced the completion of a 24-week Phase II dose-ranging trial of GS 9137 (elvitegravir) and stated that the clinical study met its primary endpoint of non-inferiority in viral load reduction in HIV-positive patients. In early March, data from this study were presented at the 14th Conference on Retroviruses and Opportunistic Infections by Andrew Zolopa, M.D., Associate Professor, Stanford School of Medicine.

Hepatitis Franchise

In February 2007, Gilead and Achillion Pharmaceuticals, Inc. (Achillion) announced results from a Phase Ib/II trial evaluating GS 9132 (also known as ACH-806), a novel NS4A antagonist, in patients infected with hepatitis C virus. Preliminary data demonstrated positive antiviral activity of GS 9132, but an unsuitable safety profile led to the discontinuation of the clinical program. The two companies will continue to explore other NS4A antagonists discovered by Achillion with Gilead taking the lead on future preclinical and clinical development work once an appropriate candidate is identified.

Respiratory and Cardiopulmonary Franchise

In February 2007, Gilead announced that the FDA accepted for filing and granted priority review to the company's NDA seeking marketing approval of ambrisentan (5 mg and 10 mg) for a once-daily treatment of PAH. The FDA has established a target review date, under the Prescription Drug User Fee Act, of June 18, 2007.

In March 2007, Gilead announced that GlaxoSmithKline's Marketing Authorisation Application for ambrisentan for the treatment of PAH was validated by the European Medicines Agency following a review by the Committee for Medicinal Products for Human Use.

Conference Call

At 4:30 p.m. Eastern Time today, Gilead will host a conference call with a simultaneous webcast to discuss the results of its first quarter of 2007. During this call/webcast, Gilead's management will be discussing the company's first quarter 2007 results and providing a general business update. The webcast will be available live via the internet by accessing Gilead's website at www.gilead.com. To access the webcast, please connect to the company's website at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast. Alternatively, please call 1-866-510-0712 (U.S.) or 1-617-597-5380 (international) and dial the participant passcode 30443590 to access the call.

A replay of the webcast will be archived on the company's website for one year, and a phone replay will be available approximately two hours following the call through April 21, 2007. To access the phone replay, please call 1-888-286-8010 (U.S.) or 1-617-801-6888 (international) and dial the participant passcode 71136594.

About Gilead

Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes innovative therapeutics in areas of unmet medical need. The company's mission is to advance the care of patients suffering from life-threatening diseases worldwide. Headquartered in Foster City, California, Gilead has operations in North America, Europe and Australia.

Non-GAAP Financial Information

Non-GAAP net income, net income per diluted share, R&D expenses and SG&A expenses are presented excluding the impact of stock-based compensation expense. Management believes this non-GAAP information is useful for investors, taken in conjunction with Gilead's GAAP financial statements, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the company's operating results as reported under GAAP.

Forward-looking Statements

Statements included in this press release that are not historical in nature are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Gilead cautions readers that forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially. These risks and uncertainties include: our ability to sustain the uptake and revenues for our HIV franchise, Hespera and AmBisome, unpredictable variability of Tamiflu royalties and the strong relationship between this revenue and global pandemic planning and supply, our ability to receive regulatory approvals, in a timely manner or at all, for new and current products, including Truvada, Atripla and ambrisentan; our ability to successfully develop our respiratory and cardiopulmonary franchise; future clinical studies of GS 9137 may not warrant further development of this compound and initiating and completing clinical trials may take longer or cost more than expected; our ability to identify a lead candidate for development with Achillion for the treatment of HCV infection, and other risks identified from time to time in Gilead's reports filed with the U.S. Securities and Exchange Commission. You are urged to consider statements that include the words "may," "will," "would," "could," "should," "might," "believes," "estimates," "projects," "potential," "expects," "plans," "anticipates," "intends," "continues," "forecast," "designed," "goal," or the negative of those words or other comparable words to be uncertain and forward-looking.

Gilead directs readers to its Annual Report on Form 10-K for the year ended December 31, 2006, and its subsequent current reports on Form 8-K. Gilead claims the protection of the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements. All forward-looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward-looking statements.

Viread, Emtriva, Truvada, AmBisome and Hepsera are registered trademarks of Gilead Sciences, Inc.

Atripla is a trademark of Bristol-Myers Squibb & Gilead Sciences, LLC.

Tamiflu is a registered trademark of F. Hoffmann-La Roche Ltd.

For more information on Gilead Sciences, Inc., please visit www.gilead.com or call the Gilead Public Affairs Department at 1-800-GILEAD-5 (1-800-445-3235).

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

                                                  Three months ended
                                                      March 31,
                                               -----------------------
                                                  2007        2006
                                               -----------  ----------
Revenues:
    Product sales                              $  840,225  $  559,353
    Royalty, contract and other revenues          188,205     133,525
                                               ----------- -----------
Total revenues                                  1,028,430     692,878

Costs and expenses:
    Cost of goods sold (1)                        171,638      90,357
    Research and development (1)                  130,090      88,400
    Selling, general and administrative (1)       166,558     142,469
                                               ----------- -----------
Total costs and expenses                          468,286     321,226
                                               ----------- -----------

Income from operations                            560,144     371,652

Interest and other income, net                     23,104      28,525
Interest expense                                   (4,547)     (3,724)
Minority interest in joint venture                  2,153         994
                                               ----------- -----------
Income before provision for income taxes          580,854     397,447
Provision for income taxes (1)                    173,447     134,743
                                               ----------- -----------
Net income                                     $  407,407  $  262,704
                                               =========== ===========

Net income per share - basic                   $     0.88  $     0.57
                                               =========== ===========

Net income per share - diluted                 $     0.85  $     0.55
                                               =========== ===========

Shares used in per share calculation - basic      463,470     461,425
                                               =========== ===========

Shares used in per share calculation - diluted    481,358     481,802
                                               =========== ===========

----
 Notes:
(1) The following is the stock-based compensation expense included in
     the respective captions of the condensed consolidated statements
     of income above:

                                                  Three months ended
                                                      March 31,
                                               -----------------------
                                                  2007        2006
                                               -----------  ----------

    Stock-based compensation expense:
      Cost of goods sold                       $    2,530  $    3,187
      Research and development expenses            21,108      11,949
      Selling, general and administrative
       expenses                                    33,656      14,496
    Income tax effect                             (17,108)     (6,129)
                                               ----------- -----------
         Total stock-based compensation
          expense, net of tax                  $   40,186  $   23,503
                                               =========== ===========
                        GILEAD SCIENCES, INC.
            RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
                             (unaudited)
               (in thousands, except per share amounts)

Below is a reconciliation of Gilead's GAAP net income and diluted per
 share amounts as reported in the attached press release.  Non-GAAP
 net income and net income per diluted share are presented excluding
 the impact of after-tax stock-based compensation expense. Management
 believes this non-GAAP information is useful for investors, taken in
 conjunction with Gilead's GAAP financial statements, because
 management uses such information internally for its operating,
 budgeting and financial planning purposes.  Non-GAAP information is
 not prepared under a comprehensive set of accounting rules and should
 only be used to supplement an understanding of the company's
 operating results as reported under GAAP.

                                                  Three months ended
                                                       March 31,
                                                 ---------------------
                                                    2007       2006
                                                 ---------- ----------

Net income (GAAP)                                $ 407,407  $ 262,704
Stock-based compensation expense, net of tax        40,186     23,503
                                                 ---------- ----------
Net income (Non-GAAP)                            $ 447,593  $ 286,207
                                                 ========== ==========


Shares used in per share calculation - diluted
 (GAAP)                                            481,358    481,802
Dilutive securities                                    960        985
                                                 ---------- ----------
Shares used in per share calculation - diluted
 (Non-GAAP)                                        482,318    482,787
                                                 ========== ==========


Net income per share - diluted (GAAP)            $    0.85  $    0.55
                                                 ========== ==========
Net income per share - diluted (Non-GAAP)        $    0.93  $    0.59
                                                 ========== ==========
                        GILEAD SCIENCES, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)

                                              March 31,   December 31,
                                                 2007         2006
                                             ------------ ------------
                                              (unaudited)    (Note 1)

 Cash, cash equivalents and marketable
  securities                                 $ 1,860,458  $ 1,389,566
 Other current assets                          1,514,823    1,492,355
 Property, plant and equipment, net              377,067      361,299
 Other noncurrent assets                         863,031      842,761
                                             ------------ ------------
        Total assets                         $ 4,615,379  $ 4,085,981
                                             ============ ============

 Current liabilities                         $   710,486  $   764,276
 Long-term liabilities and minority interest   1,522,214    1,505,987
 Stockholders' equity                          2,382,679    1,815,718
                                             ------------ ------------
   Total liabilities and stockholders'
    equity                                   $ 4,615,379  $ 4,085,981
                                             ============ ============


Note:
(1) Derived from audited consolidated financial statements at that
 date.
                        GILEAD SCIENCES, INC.
                        PRODUCT SALES SUMMARY
                             (unaudited)
                            (in thousands)


                                                 Three months ended
                                                      March 31,
                                               -----------------------
                                                  2007        2006
                                               ----------- -----------
HIV products:
   Truvada - U.S.                              $  186,788  $  179,790
   Truvada - Europe                               145,207      65,298
   Truvada - Other International                   13,943       3,858
                                               ----------- -----------
                                                  345,938     248,946

   Atripla - U.S.                                 189,810           -
   Atripla - Europe                                     -           -
   Atripla - Other International                      373           -
                                               ----------- -----------
                                                  190,183           -

   Viread - U.S.                                   67,556      75,842
   Viread - Europe                                 71,914      87,720
   Viread - Other International                    21,208      28,213
                                               ----------- -----------
                                                  160,678     191,775

   Emtriva - U.S.                                   3,455       4,006
   Emtriva - Europe                                 3,874       5,338
   Emtriva - Other International                      994         618
                                               ----------- -----------
                                                    8,323       9,962

Total HIV products - U.S.                         447,609     259,638
Total HIV products - Europe                       220,995     158,356
Total HIV products - Other International           36,518      32,689
                                               ----------- -----------
                                                  705,122     450,683

Hepsera - U.S.                                     29,769      22,388
Hepsera - Europe                                   33,290      25,140
Hepsera - Other International                       8,285       5,127
                                               ----------- -----------
                                                   71,344      52,655

AmBisome                                           61,502      53,800
Other products                                      2,257       2,215

Total product sales                            $  840,225  $  559,353

CONTACT: Gilead Sciences, Inc.
John Milligan, 650-522-5756
Susan Hubbard, 650-522-5715
SOURCE: Gilead Sciences, Inc.