Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of operations for the quarter ended June 30, 2010. Total revenues for the second quarter of 2010 were $1.93 billion, up 17 percent compared to total revenues of $1.65 billion for the second quarter of 2009. Net income for the second quarter of 2010 was $712.1 million, or $0.79 per diluted share, compared to net income for the second quarter of 2009 of $571.4 million, or $0.61 per diluted share. Non-GAAP net income for the second quarter of 2010, which excludes after-tax acquisition-related expenses, restructuring expenses and stock-based compensation expenses, was $760.7 million, or $0.85 per diluted share. Non-GAAP net income for the second quarter of 2009, which excludes after-tax acquisition-related expenses, restructuring expenses and stock-based compensation expenses, was $648.9 million, or $0.69 per diluted share.
Product Sales
Product sales increased 15 percent to $1.81 billion for the second quarter of 2010, compared to $1.57 billion in the second quarter of 2009. This increase in sales was driven primarily by Gilead's antiviral franchise, due to the strong growth in sales of Atripla® (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg).
Antiviral Franchise
Antiviral product sales increased 13 percent to $1.59 billion in the second quarter of 2010, up from $1.41 billion for the same quarter of 2009.
Sales of Atripla for the treatment of HIV infection increased 26 percent to $715.8 million for the second quarter of 2010, up from $569.1 million in the second quarter of 2009, driven primarily by sales volume growth in the United States and Europe.
Sales of Truvada® (emtricitabine/tenofovir disoproxil fumarate) for the treatment of HIV infection increased 6 percent to $641.7 million for the second quarter of 2010, up from $608.1 million in the second quarter of 2009, driven primarily by increased prices in the United States as well as sales volume growth in the United State and Europe.
Sales of Viread® (tenofovir disoproxil fumarate) for the treatment of HIV infection and chronic hepatitis B increased 11 percent to $176.2 million for the second quarter of 2010, up from $158.9 million in the second quarter of 2009, driven primarily by sales volume growth in the United States and Europe.
Letairis
Sales of Letairis® (ambrisentan) for the treatment of pulmonary arterial hypertension increased 37 percent to $60.3 million for the second quarter of 2010, up from $44.1 million for the second quarter of 2009, driven primarily by sales volume growth in the United States.
Ranexa
Sales of Ranexa® (ranolazine) for the treatment of chronic angina increased 68 percent to $60.5 million for the second quarter of 2010, up from $36.1 million for the second quarter of 2009, driven primarily by sales volume growth in the United States. Ranexa sales for the second quarter of 2009 began on April 15, 2009, the date Gilead acquired CV Therapeutics, Inc.
Other Products
Sales of AmBisome® (amphotericin B liposome for injection) for the treatment of severe fungal infections, Hepsera® (adefovir dipivoxil) for the treatment of chronic hepatitis B, Emtriva® (emtricitabine) for the treatment of HIV infection and other products were $151.6 million for the second quarter of 2010 compared to $152.0 million for the second quarter of 2009. Sales of Cayston® (aztreonam for inhalation solution) as a treatment for the improvement of respiratory symptoms in cystic fibrosis patients with Pseudomonas aeruginosa (P. aeruginosa), included in other products, were $10.5 million for the second quarter of 2010. Cayston was approved by the U.S. Food and Drug Administration (FDA) in February 2010.
Royalty, Contract and Other Revenues
Royalty, contract and other revenues resulting primarily from collaborations with corporate partners were $121.2 million in the second quarter of 2010, up from $78.8 million in the second quarter of 2009. This increase was driven primarily by higher Tamiflu® (oseltamivir phosphate) royalties from F. Hoffmann-La Roche Ltd of $83.8 million in the second quarter of 2010, compared to Tamiflu royalties of $51.9 million in the second quarter of 2009, resulting from increased sales related to influenza pandemic planning initiatives worldwide.
Research and Development
Research and development (R&D) expenses in the second quarter of 2010 were $231.1 million, compared to $241.6 million for the second quarter of 2009. Non-GAAP R&D expenses for the second quarter of 2010, which exclude restructuring and stock-based compensation expenses, were $207.4 million, relatively flat when compared to $206.1 million for the second quarter of 2009, which exclude restructuring and stock-based compensation expenses.
Selling, General and Administrative
Selling, general and administrative (SG&A) expenses in the second quarter of 2010 were $248.0 million, compared to $261.4 million for the second quarter of 2009. Non-GAAP SG&A expenses for the second quarter of 2010, which exclude restructuring and stock-based compensation expenses, were $223.5 million, compared to $213.2 million for the second quarter in 2009, which exclude acquisition-related, restructuring and stock-based compensation expenses. The increase in non-GAAP SG&A expenses was driven primarily by higher headcount and expenses to support Gilead's expanding commercial activities.
Net Foreign Currency Exchange Impact
The net foreign currency exchange impact on second quarter 2010 revenues and pre-tax earnings, which includes revenues and expenses generated from outside the United States, was an unfavorable $16.3 million and $19.5 million, respectively, compared to the second quarter of 2009, and an unfavorable $18.5 million and $16.5 million, respectively, compared to the first quarter of 2010.
Cash, Cash Equivalents and Marketable Securities
As of June 30, 2010, Gilead had cash, cash equivalents and marketable securities of $4.22 billion compared to $3.90 billion as of December 31, 2009. Gilead generated $1.37 billion of operating cash flow for the first six months of 2010 including $699.0 million in the second quarter of 2010.
Corporate Highlights
In May, Gilead announced that it had completed the $1.0 billion stock repurchase program that was authorized by its Board of Directors in January 2010, and that its Board of Directors had authorized an additional repurchase of up to $5.0 billion of its common stock through May 2013. During the second quarter of 2010, Gilead repurchased and retired 44.3 million shares of its common stock for $1.69 billion at an average purchase price of $38.14 per share.
In June:
- Gilead and the AIDS Drug Assistance Program (ADAP) Crisis Task Force announced a series of initiatives to help state ADAPs continue to provide antiretroviral medicines to people living with HIV in the United States.
- Gilead announced that John G. McHutchison, MD, will join the company as Senior Vice President, Liver Disease Therapeutics. In this position, Dr. McHutchison will report to Norbert W. Bischofberger, PhD, Executive Vice President, Research and Development and Chief Scientific Officer and will have responsibility for Gilead's R&D efforts supporting the company's programs in liver disease, including hepatitis C.
- Gilead announced an agreement to acquire CGI Pharmaceuticals, Inc. (CGI) for up to $120 million, the majority as an upfront payment and the remaining based on clinical development progress, all of which will be financed through available cash on hand. This transaction closed on July 8, at which time CGI became a wholly-owned subsidiary of Gilead.
Product and Pipeline Update
Antiviral Franchise
In April:
- Gilead announced that it had dosed the first patient in the Phase III clinical program evaluating its investigational fixed-dose, single-tablet "Quad" regimen of elvitegravir, cobicistat (formerly GS 9350) and Truvada. The Phase III clinical program for the Quad includes two studies (Studies 102 and 103) that will evaluate the Quad regimen versus a standard of care among HIV-1 infected antiretroviral treatment- naïve adults. By the end of July, Gilead anticipates completing patient enrollment in Study 102, the first of these two studies to begin screening patients.
- Gilead provided an update on the development of the fixed-dose combination of Truvada and Tibotec's investigational non-nucleoside reverse transcriptase inhibitor TMC278 (rilpivirine hydrochloride, 25 mg). Johnson & Johnson, which owns Tibotec, announced that the two pivotal Phase III studies evaluating TMC278 as a treatment for HIV in treatment-naïve patients met the primary efficacy objective of non-inferiority as compared to efavirenz based on the proportion of patients achieving HIV RNA levels of less than 50 copies/mL at 48 weeks. These data will be presented in a late-breaker oral session on July 22, 2010 at the International AIDS Conference taking place in Vienna, Austria. Johnson & Johnson also announced in April that the submission of TMC278 for regulatory review is on track for the third quarter of this year.
- Gilead announced that it had obtained data supporting bioequivalence of a formulation of the fixed-dose combination of Truvada and TMC278. Gilead anticipates submitting a New Drug Application (NDA) to the FDA for the fixed-dose combination following validation of the TMC278 NDA.
Respiratory Franchise
In June, Gilead announced that its head-to-head Phase III clinical trial of Cayston versus tobramycin inhalation solution in cystic fibrosis patients with P. aeruginosa achieved one of its co-primary endpoints of non-inferiority for mean percent change in forced expiratory volume in one second (FEV1) percent predicted after 28 days of treatment. These data were presented during a late-breaker oral session at the 33rd European Cystic Fibrosis Conference in Valencia, Spain on June 18, 2010.
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