Press Releases
July 29, 2004
Gilead Sciences Announces Second Quarter 2004 Financial Results
FOSTER CITY, Calif.--(BUSINESS WIRE)--July 29, 2004--Gilead Sciences, Inc. (Nasdaq:GILD)
- Total Revenues of $320 Million, Up 34 Percent over Second Quarter 2003
- Record Viread(R) Sales of $197 Million, Up 18 Percent over Second Quarter 2003
- GAAP EPS of $0.49 Per Share
Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the second quarter ended June 30, 2004. Total revenues for the second quarter were $319.7 million, up 34 percent, compared to total revenues of $238.9 million for the second quarter of 2003. Operating cash flow for the quarter increased by 106 percent to $122.5 million, compared to $59.4 million for the same period last year.
Net income for the second quarter 2004 was $111.5 million, or $0.49 per diluted share, an increase of 11 percent compared to net income of $100.4 million, or $0.46 per diluted share, for the second quarter of 2003. Included in the second quarter 2004 net income is an after-tax gain of $1.6 million resulting from the liquidation of Gilead's equity position in EyeTech Pharmaceuticals, Inc. Pre-tax income increased 53 percent from $105.6 million to $161.5 million. The difference between the growth rates is principally due to the company's effective GAAP tax rate, which increased to 31 percent during the first and second quarters of 2004 compared to 5 percent for the same periods last year.
Net revenues from product sales totaled $299.3 million, up 30 percent from the second quarter of 2003. This growth primarily was driven by higher revenues from Viread(R) (tenofovir disoproxil fumarate). Sales of Viread were $197.2 million in the second quarter of 2004, up from $167.0 million in the second quarter of 2003, an increase of 18 percent. U.S. sales of Viread in the second quarter of 2004 were $109.2 million, and sales outside the United States totaled $88.0 million. Viread sales growth for the second quarter of 2004 was driven by higher prescription volumes in both the United States and Europe and increased sales outside the United States and Europe, as well as a favorable currency environment. Viread sales in the second quarter of 2004 were $5.8 million higher due to a stronger European currency environment compared to the same quarter last year. AmBisome(R) (amphotericin B) liposome for injection sales for the second quarter of 2004 were $55.0 million, an increase of 7 percent compared to the second quarter of 2003. This increase was primarily driven by a favorable currency impact of $3.5 million due to a stronger European currency environment and by higher sales volumes in Latin America and Asia compared to the second quarter 2003. Sales of Hepsera(R) (adefovir dipivoxil 10 mg) totaled $28.0 million for the second quarter of 2004, up from $12.4 million in the second quarter of 2003. This increase was primarily driven by prescription growth in the United States and the European Union. Sales of Emtriva(R) (emtricitabine) were $16.5 million for the second quarter of 2004, up from $12.0 million in the first quarter of 2004. Emtriva sales growth for the second quarter of 2004 was primarily driven by increased prescription volumes in both the United States and Europe.
"We are very pleased to report another quarter of significant increases in product revenues. This strong growth was fueled primarily by increasing sales of Viread and Hepsera, as well as Emtriva's continued uptake in the United States and roll-out in Europe," said John C. Martin, PhD, President and Chief Executive Officer of Gilead Sciences. "We are focused on continuing this sales momentum through our current antiviral product portfolio, as well as preparing for the potential launch of our fixed-dose co-formulation of Viread and Emtriva later this quarter."
For the second quarter of 2004, royalty and contract revenues resulting from collaborations with corporate partners totaled $20.4 million, compared to $8.2 million in the second quarter of 2003. Significant components of royalty and contract revenues for the second quarter of 2004 include royalties of $9.7 million on sales of Tamiflu(R) (oseltamivir phosphate) by F. Hoffmann-La Roche and a $4.8 million milestone payment under our collaboration agreement with EyeTech Pharmaceuticals, Inc. for the filing of the New Drug Application (NDA) for Macugen(TM) (pegaptanib sodium injection).
Research and development (R&D) expenses for the second quarter of 2004 were $45.6 million. During the second quarter 2004, certain European phase IV clinical trial expenses were recorded as R&D. Previously these expenses were recorded as selling, general and administrative (SG&A). Such expenses for the second quarter 2003 of $4.5 million have been reclassified from SG&A to R&D to be consistent with the current presentation. After the reclassification, R&D expenses for the second quarter 2003 were $43.3 million. The higher expenses during the second quarter of 2004 are primarily attributable to increased headcount and increased spending on the company's proprietary prodrug technology.
SG&A expenses for the three months ended June 30, 2004 were $73.8 million, compared to $55.7 million for the same quarter of 2003 after giving effect to the reclassification of $4.5 million to R&D expense. The higher expenses are due primarily to increased global marketing efforts, the significant expansion of Gilead's U.S. and European sales forces towards the latter part of 2003, and increased infrastructure costs.
The net foreign exchange impact on earnings, including revenue and expenses generated from outside the United States, as well as hedging activity for the three and six months ended June 30, 2004, was a favorable $4.4 million and $15.1 million, respectively, due primarily to a stronger Euro relative to the U.S. dollar.
Gilead also reported its results of operations for the six months ended June 30, 2004. The company recorded net revenues from product sales of $575.9 million and aggregate contract and royalty revenues of $52.9 million, up 49 percent and 205 percent, respectively, compared to the same period last year. Net revenues for the first six months of 2003 included product sales of $386.6 million and aggregate contract and royalty revenues of $17.3 million. Sales of Viread for the six months ended June 30, 2004 were $390.3 million, up from $274.3 million in the six months ended June 30, 2003. AmBisome sales for the six months ended June 30, 2004 were $106.8 million, a 16 percent increase over the six months ended June 30, 2003. Reported AmBisome sales in the first six months of 2004 were $10.8 million higher due to the favorable currency environment compared to the same period last year. On a volume basis, AmBisome sales increased by 4 percent in Europe compared to the first six months of 2003. Sales of Hepsera totaled $46.4 million for the first six months of 2004, an increase of 184 percent over the $16.3 million in the first six months of 2003. Sales of Emtriva were $28.4 million for the first six months of 2004.
Net income for the six months ended June 30, 2004 was $225.9 million, or $0.99 per diluted share. This compares to a net loss of $337.7 million, or $1.69 per diluted share for the six months ended June 30, 2003 which included a charge of $488.6 million for in-process research and development associated with the acquisition of Triangle Pharmaceuticals, Inc. in January 2003. Excluding this in-process research and development charge, non-GAAP earnings would have been $150.9 million or $0.70 per diluted share for the six months ended June 30, 2003, which includes the impact of dilutive stock options and convertible debt.
Research and development expenses for the six months ended June 30, 2004 and 2003 were $104.2 million and $86.9 million, respectively, after giving effect to the reclassifications of $4.9 million and $6.9 million to R&D expenses, respectively. The higher expenses during the first six months of 2004 are primarily attributable to the clinical trials associated with the development of Emtriva and other drug candidates from the Triangle Pharmaceuticals, Inc. acquisition.
Selling, general and administrative expenses for the six months ended June 30, 2004 were $145.0 million, compared to $100.8 million for 2003 after giving effect to the reclassifications of $4.9 million and $6.9 million to R&D expenses, respectively. 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.
As of June 30, 2004, the company had cash, cash equivalents and marketable securities of $975.6 million, compared to $707.0 million at December 31, 2003. The increase in cash, cash equivalents and marketable securities is primarily attributable to strong operating cash flow of $220.7 million and to the proceeds received from the company's sale of EyeTech Pharmaceuticals, Inc. common stock in June 2004.
Corporate Highlights
In April, Gilead announced a restructuring and expansion of its commercial organization, designed to support the anticipated growth of the company and its marketed products.
At the close of trading on Wednesday, June 30, 2004, Standard & Poor's added Gilead to the S&P 500 Index. Gilead is included in the S&P 500 Global Industry Classification Standard (GICS) Biotechnology Sub-Industry Index.
Product and Pipeline Highlights
"During the quarter, we were very pleased with the continued strong momentum of our HIV franchise," said John C. Martin, PhD, President and Chief Executive Officer. "The FDA's decision in May to grant expedited review status to the NDA for the fixed dose co-formulation of Viread and Emtriva may now allow us to bring to market this once daily medicine for the treatment of HIV/AIDS sooner than originally expected. In addition, we welcome the U.S. government's support of increasing treatment options for people with HIV/AIDS and will continue to focus our efforts on simplified regimens in the fight against this devastating disease."
HIV/AIDS Franchise
In early April, Japan Tobacco Inc. announced that its pharmaceutical business subsidiary, Torii Pharmaceutical Co., Ltd., launched Viread in Japan. In July 2003, Gilead signed a licensing agreement with Japan Tobacco for the commercialization of Viread and Emtriva, and any future co-formulation of the two products.
In May, Gilead, Bristol-Myers Squibb Company, and Merck & Co., Inc. announced that they are in discussions on the development of a once-daily, fixed-dose combination of three anti-HIV drugs and are also considering co-packaging options for the individual products. These discussions are continuing, as the companies focus on a number of significant commercial issues that must be resolved before agreement can be reached on the potential collaboration.
Also in May, the company announced that the U.S. Food and Drug Administration (FDA) granted expedited review status to the New Drug Application (NDA) for the fixed dose co-formulation of the company's anti-HIV medications Viread and Emtriva. The action date by which the FDA will make a decision is September 12, 2004.
During the second quarter, Gilead continued the global launches of Viread, with introductions in Argentina and Israel. Viread and Emtriva are now marketed in 24 and 11 countries, respectively.
Hepatitis B Franchise
On April 15, 2004, Gilead announced positive 144-week efficacy, tolerability and safety data from a clinical trial (Study 438) of Hepsera in patients with chronic hepatitis B at the 39th Annual Meeting of the European Association for the Study of the Liver in Berlin, Germany. To date, Study 438 is the largest placebo-controlled clinical trial in hepatitis B "e" antigen-negative patients.
During the second quarter, Gilead's commercialization partner in Asia and Latin America, GlaxoSmithKline (GSK), received marketing approvals for Hepsera in the Philippines, Malaysia, Columbia and Peru. Gilead anticipates product launches to occur in those countries throughout the remainder of 2004.
Conference Call
At 4:30 p.m. Eastern today, Gilead will webcast a conference call live on the company's website to discuss its quarterly results and outlook. During the call, Gilead will be discussing additional financial and statistical information. That information can be found on the company's website at www.gilead.com, under "About Gilead," "Investors." For Internet access to the live webcast or the archive, which will be available for one year, log on to www.gilead.com. 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 view the webcast.
Alternatively, please call 1-800-299-9630 (U.S.) or 1-617-786-2904 (international) and dial the participant passcode 38409326 to access the call. Telephone replay is available approximately two hours after the call through 6:30 p.m. Eastern, August 1, 2004. To access, please call 1-888-286-8010 (U.S.) or 1-617-801-6888 (international), and dial the participant passcode 90507551.
About Gilead
Gilead Sciences is a biopharmaceutical company that discovers, develops and commercializes therapeutics to advance the care of patients suffering from life-threatening diseases worldwide. The company has six marketed products and focuses its research and clinical programs on anti-infectives. Headquartered in Foster City, CA, Gilead has operations in the United States, Europe and Australia.
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. These statements include those that can affect Gilead's future financial results, including those relating to: revenues, research and development expenses, and selling, general and administrative expenses; the efficacy of any marketed or pipeline development products; the ability and timing to file for or obtain marketing approval for Gilead's pipeline development products; or the market introduction, competitive positioning and commercial arrangements for sale of its marketed or pipeline development products. 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 those that can cause fluctuations in our financial results, such as our ability and the ability of our partners to successfully introduce and market our products and maintain revenue growth, in particular our ability to sustain the uptake and revenues for Viread; our ability to reach agreement with Bristol-Myers Squibb and Merck & Co. on a potential co-formulation collaboration; our ability to accurately estimate end-user demand since we must make numerous assumptions and must rely on incomplete data to make these estimations; our ability to effectively manage wholesaler inventory levels and the impact of those efforts on revenues; our ability to generate additional positive clinical data and expand the labels for our existing products; our ability to control the timing and amount of spending in our research and clinical programs; our ability to obtain regulatory approvals of the co-formulated product; fluctuations in foreign currency against the U.S. dollar; our ability to achieve and the timing of milestones, as well as risk and uncertainties that affect our future prospects such as the risk that we may not continue to observe the safety, tolerability and efficacy data for Viread, Hepsera and Emtriva that we are observing today; and other risks identified from time to time in the company's reports filed with the U.S. Securities and Exchange Commission.
The company directs readers to its Annual Report on Form 10-K, for the year ended December 31, 2003, filed in March 2004 and subsequent quarterly reports on Form 10-Q. 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, AmBisome and Hepsera are registered trademarks of Gilead Sciences, Inc. Tamiflu is a registered trademark of F. Hoffmann-La Roche Ltd. Macugen is a trademark of EyeTech Pharmaceuticals, Inc. For more information on Gilead Sciences, 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 OPERATIONS
(in thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
------------------- --------------------
2004 2003 2004 2003
--------- --------- --------- ----------
(unaudited) (unaudited)
Revenues:
Product sales $299,332 $230,668 $575,917 $386,632
Royalty and
contract revenue 20,390 8,202 52,932 17,343
--------- --------- --------- ----------
Total revenues 319,722 238,870 628,849 403,975
Cost of goods sold 42,092 32,106 77,041 53,478
--------- --------- --------- ----------
Gross profit 277,630 206,764 551,808 350,497
Operating expenses:
Research and
development(2) 45,643 43,318 104,188 86,882
Selling, general
and administrative(2) 73,789 55,674 144,999 100,841
In-process research
and development - - - 488,599
--------- --------- --------- ----------
Total operating
expenses 119,432 98,992 249,187 676,322
--------- --------- --------- ----------
Income (loss)
from operations 158,198 107,772 302,621 (325,825)
Gain on EyeTech warrants - - 20,576 -
Interest and other
income, net 5,408 3,444 8,336 7,261
Interest expense (2,071) (5,569) (4,160) (11,183)
--------- --------- --------- ----------
Income (loss) before
provision for income taxes 161,535 105,647 327,373 (329,747)
Provision for income taxes 50,076 5,275 101,486 7,935
--------- --------- --------- ----------
Net income (loss) $111,459 $100,372 $225,887 $(337,682)
========= ========= ========= ==========
Net income (loss)
per share - basic $0.52 $0.50 $1.06 $(1.69)
========= ========= ========= ==========
Net income (loss)
per share - diluted(1) $0.49 $0.46 $0.99 $(1.69)
========= ========= ========= ==========
Shares used in per
share calculation
- basic 214,562 200,236 214,098 199,288
========= ========= ========= ==========
Shares used in per
share calculation
- diluted(1) 230,989 230,340 230,586 199,288
========= ========= ========= ==========
Notes:
(1) In accordance with Statement of Financial Accounting Standard No.
128, using the If-Converted Method, interest expense related to
convertible debt of $1.3 million and $2.6 million has been added back
to net income for purposes of calculating diluted net income per share
for the quarter and six months ended June 30, 2004, respectively. The
shares used in the calculation of net income per diluted share for the
quarter and six months ended June 30, 2004 includes the effect of 9.1
million stock options outstanding and the effect of the $345.0 million
2% convertible senior debt, which converts to approximately 7.3
million shares.
(2) Certain prior period amounts associated with phase IV clinical
trial expenses totaling $4.9 million, $4.5 million and $6.9 million
for the six months ended June 30, 2004 and the three and six months
ended June 30, 2003, respectively, have been reclassified from
Selling, general and administrative to Research and development to be
consistent with the current period presentation.
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, Dec. 31,
2004 2003
----------- -----------
(unaudited) (note 1)
Assets
Cash, cash equivalents and marketable
securities $975,588 $707,000
Other current assets 556,188 558,898
----------- -----------
Total current assets 1,531,776 1,265,898
Property, plant and equipment, net 206,789 198,200
Other noncurrent assets 69,902 90,624
----------- -----------
$1,808,467 $1,554,722
=========== ===========
Liabilities and stockholders' equity
Current liabilities $174,829 $185,895
Long-term obligations 366,475 365,853
Stockholders' equity 1,267,163 1,002,974
----------- -----------
$1,808,467 $1,554,722
=========== ===========
Notes:
(1) Derived from audited consolidated financial statements at that
date.
GILEAD SCIENCES, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
The non-GAAP financial information presented below is utilized by
Gilead management to help gain a better understanding of the
comparative operating performance of the company. The company believes
that the presentation of this non-GAAP financial table is useful in
excluding those unusual activities or transactions that are not
necessarily relevant to obtaining an understanding of the trends in
the results of the company.
Six months
Six months ended ended
June 30, 2004 June 30,
2003
------------------------------- ---------
GAAP Adjustment Non-GAAP Non-
(1) GAAP(2)
--------- ---------- --------- ---------
Revenues:
Product sales $575,917 $- $575,917 $386,632
Royalty and
contract revenue 52,932 - 52,932 17,343
--------- ---------- --------- ---------
Total revenues 628,849 - 628,849 403,975
Cost of goods sold 77,041 - 77,041 53,478
--------- ---------- --------- ---------
Gross profit 551,808 551,808 350,497
Operating expenses:
Research and development(3) 104,188 - 104,188 86,882
Selling, general
and administrative(3) 144,999 - 144,999 100,841
--------- ---------- --------- ---------
Total operating expenses 249,187 - 249,187 187,723
--------- ---------- --------- ---------
Income from operations 302,621 302,621 162,774
Gain on EyeTech warrants 20,576 (20,576) - -
Interest and other
income, net 8,336 - 8,336 7,261
Interest expense (4,160) - (4,160) (11,183)
--------- ---------- --------- ---------
Income (loss) before provision
for(benefit from) income
taxes 327,373 (20,576) 306,797 158,852
Provision for (benefit from)
income taxes 101,486 (8,025) 93,461 7,935
--------- ---------- --------- ---------
Net income (loss) $225,887 $(12,551) $213,336 $150,917
========= ========== ========= =========
Net income per share - basic $1.06 $1.00 $0.76
========= ========= =========
Net income per share - diluted $0.99 $0.94 $0.70
========= ========= =========
Shares used in per share
calculation - basic 214,098 214,098 199,288
========= ========= =========
Shares used in per share
calculation - diluted 230,586 230,586 228,257
========= ========= =========
Notes:
(1) The adjustment reflects a pre-tax gain of $20.6 million related to
our warrants in EyeTech Pharmaceuticals, Inc., which completed its
initial public offering during the first quarter.
(2) The non-GAAP results for the six months ended June 30, 2003
exclude the in-process research and development charge of $488.6
million from the acquisition of Triangle Pharmaceuticals, Inc.
(3) Certain prior period amounts have been reclassified to be
consistent with the current period presentation.
CONTACT: Gilead Sciences, Inc.
John Milligan, 650-522-5756
Susan Hubbard, 650-522-5715
SOURCE: Gilead Sciences, Inc.