Gilead Sciences fourth quarter total revenues increase 18% to $2.59 billion

Gilead Sciences, Inc.Feb 5 2013

Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the fourth quarter and full year 2012. Total revenues for the fourth quarter of 2012 increased 18 percent to $2.59 billion, from $2.20 billion for the fourth quarter of 2011. Net income for the fourth quarter of 2012 was $762.5 million, or $0.47 per diluted share compared to $665.1 million, or $0.43 per diluted share for the fourth quarter of 2011. Non-GAAP net income for the fourth quarter of 2012, which excludes acquisition-related, restructuring and stock-based compensation expenses, was $823.4 million, or $0.50 per diluted share compared to $743.1 million, or $0.49 per diluted share for the fourth quarter of 2011. All earnings per share and share have been adjusted to reflect the two-for-one stock split that became effective on January 25, 2013.

Full year 2012 total revenues were $9.70 billion, up 16 percent compared to $8.39 billion for 2011. Net income for 2012 was $2.59 billion, or $1.64 per diluted share, compared to $2.80 billion, or $1.77 per diluted share for 2011. Non-GAAP net income for 2012, which excludes acquisition-related, restructuring and stock-based compensation expenses, was $3.08 billion, or $1.95 per diluted share, compared to $3.04 billion, or $1.93 per diluted share for 2011.

Product Sales

Product sales increased 18 percent to $2.51 billion for the fourth quarter of 2012 compared to $2.13 billion for the fourth quarter of 2011. For 2012, product sales increased 16 percent to $9.40 billion compared to $8.10 billion in 2011. The increase in product sales was due primarily to Gilead's antiviral franchise, resulting from increased sales of Complera^®/Eviplera^® (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir disoproxil fumarate 300 mg), Atripla^® (efavirenz 600 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg) and Truvada^® (emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg) as well as the launch of Stribild^® (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg).

Antiviral Franchise

Antiviral product sales increased 17 percent to $2.17 billion for the fourth quarter of 2012, up from $1.86 billion for the fourth quarter of 2011, reflecting sales growth of 20 percent in the U.S. and 9 percent in Europe. For 2012, antiviral product sales increased 15 percent to $8.14 billion from $7.05 billion in 2011, reflecting sales growth of 21 percent in the U.S. and 6 percent in Europe.

• Atripla
  Sales of Atripla increased 6 percent to $917.5 million for the fourth quarter of 2012, up from $863.3 million for the fourth quarter of 2011, reflecting sales growth of 6 percent in the U.S. and 5 percent in Europe. For 2012, Atripla sales increased 11 percent to $3.57 billion from $3.22 billion in 2011.

• Truvada
  Sales of Truvada increased 12 percent to $832.7 million for the fourth quarter of 2012, up from $746.0 million for the fourth quarter of 2011, reflecting sales growth of 16 percent in the U.S. and 6 percent in Europe. For 2012, Truvada sales increased 11 percent to $3.18 billion from $2.88 billion in 2011.

• Viread
  Sales of Viread^® (tenofovir disoproxil fumarate) increased 19 percent to $226.7 million for the fourth quarter of 2012, up from $190.9 million for the fourth quarter of 2011, reflecting sales growth of 25 percent in the U.S. and 2 percent in Europe. For 2012, Viread sales increased 15 percent to $848.7 million from $737.9 million in 2011.

• Complera/Eviplera
  Sales of Complera/Eviplera grew to $117.8 million for the fourth quarter of 2012 compared to $19.7 million for the fourth quarter of 2011. For 2012, Complera/Eviplera sales increased to $342.2 million from $38.7 million in 2011. Complera was approved in the U.S. in August 2011, and Eviplera was approved in the European Union in November 2011.

• Stribild
  Sales of our newest product, Stribild, which was launched in the U.S. in August 2012, were $40.0 million for the fourth quarter of 2012.

Cardiovascular Franchise

Cardiovascular product sales increased 33 percent to $215.2 million for the fourth quarter of 2012, up from $162.3 million for the fourth quarter of 2011. For 2012, cardiovascular product sales increased 28 percent to $783.0 million from $613.4 million in 2011.

• Letairis
  Sales of Letairis^® (ambrisentan) increased 48 percent to $116.1 million for the fourth quarter of 2012, up from $78.7 million for the fourth quarter of 2011. For 2012, Letairis sales increased 40 percent to $410.1 million from $293.4 million in 2011.

• Ranexa
  Sales of Ranexa^® (ranolazine) increased 19 percent to $99.1 million for the fourth quarter of 2012, up from $83.7 million for the fourth quarter of 2011. For 2012, Ranexa sales increased 17 percent to $372.9 million from $320.0 million in 2011.

Other Products

Sales of other products increased 15 percent to $127.7 million for the fourth quarter of 2012 compared to $111.0 million for the fourth quarter of 2011 and included AmBisome^® (amphotericin B) liposome for injection and Cayston^® (aztreonam for inhalation solution). For 2012, sales of other products increased 8 percent to $473.6 million from $439.2 million in 2011.

Royalty, Contract and Other Revenues

Royalty, contract and other revenues from collaborations were $77.5 million for the fourth quarter of 2012, up 16 percent from $67.0 million for the fourth quarter of 2011. For 2012, royalty, contract and other revenues were $304.1 million, up 7 percent from $283.0 million in 2011.

Research and Development Expenses

Research and development (R&D) expenses for the fourth quarter of 2012 were $439.7 million compared to $402.2 million for the fourth quarter of 2011. Non-GAAP R&D expenses for the fourth quarter of 2012, which exclude acquisition-related, restructuring and stock-based compensation expenses, were $409.3 million compared to $349.3 million for the fourth quarter of 2011. For 2012, R&D expenses were $1.76 billion compared to $1.23 billion in 2011. Non-GAAP R&D expenses for 2012 were $1.50 billion compared to $1.12 billion in 2011, due primarily to the continued investment in Gilead's product pipeline, particularly in liver disease and oncology.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the fourth quarter of 2012 were $365.8 million compared to $346.2 million for the fourth quarter of 2011. Non-GAAP SG&A expenses for the fourth quarter of 2012, which exclude acquisition-related, restructuring and stock-based compensation expenses, were $332.3 million compared to $289.9 million for the fourth quarter of 2011. For 2012, SG&A expenses were $1.46 billion compared to $1.24 billion in 2011. Non-GAAP SG&A expenses for 2012 were $1.23 billion compared to $1.09 billion in 2011, due primarily to increased expenses to support the ongoing growth of Gilead's business.

Interest Expense and Other Income (Expense), Net

Interest expense for the fourth quarter of 2012 was $85.9 million compared to $75.0 million for the fourth quarter of 2011. For 2012, interest expense was $360.9 million compared to $205.4 million in 2011. The increase was due primarily to the additional debt issued in connection with the acquisition of Pharmasset Inc. (Pharmasset). Other income (expense), net for the fourth quarter of 2012 was $1.4 million compared to $26.4 million in the fourth quarter of 2011. For 2012, other income (expense), net was a net expense of $(37.3) million compared to income of $66.6 million in 2011. The change was due primarily to a $40.1 million loss resulting from the Greek government's debt restructuring and decreased interest income resulting from lower cash, cash equivalents and marketable securities and lower yields.

Income Taxes

The effective tax rate for 2012 was 28.7 percent compared to 23.6 percent for 2011. The increase was primarily due to acquisition-related expenses which are not tax deductible and the expiration of the federal R&D tax credit at the end of 2011. The non-GAAP effective tax rate for 2012 was 26.8 percent compared to 24.6 percent for 2011. In January 2013, the United States Congress passed the American Taxpayer Relief Act of 2012 which retroactively extended the federal research tax credit. As a result, we expect that our income tax provision for the first quarter of fiscal 2013 will include a discrete tax benefit which will reduce our effective tax rate for the quarter and to a lesser extent, the annual effective tax rate.

Net Foreign Currency Exchange Impact

The net foreign currency exchange impact on fourth quarter 2012 product sales and pre-tax earnings was a favorable $12.4 million and $19.8 million, respectively, compared to the fourth quarter of 2011. For 2012, the net foreign currency exchange impact on product sales and pre-tax earnings was an unfavorable $57.1 million and $22.5 million, respectively, compared to 2011.

Cash, Cash Equivalents and Marketable Securities

As of December 31, 2012, Gilead had $2.58 billion of cash, cash equivalents and marketable securities compared to $9.96 billion as of December 31, 2011. The decrease was due to the acquisition of Pharmasset in the first quarter of 2012. Gilead generated $3.19 billion of operating cash flow in 2012 including $705.7 million generated in the fourth quarter of 2012.

Corporate Highlights

In December, Gilead's Board of Directors approved a two-for-one stock split of the Company's outstanding common stock to be effected through a stock dividend. Stockholders of record as of the close of business on January 7, 2013 were entitled to a stock dividend of one additional share of common stock for every share owned. Based on the total number of shares of common stock outstanding as of December 31, 2012, the stock split increased the total number of shares of common stock outstanding from approximately 759,581,290 to 1,519,162,580, out of the 2,800,000,000 shares of common stock authorized. All earnings per share and share have been adjusted to reflect the two-for-one stock split that became effective on January 25, 2013.

Also in December, Gilead and YM BioSciences Inc. (YM) signed a definitive agreement under which Gilead agreed to acquire YM for approximately USD $510 million. YM reported CAD $125.5 million in cash and cash equivalents as of September 30, 2012. Gilead plans to fund the acquisition with cash on hand. The transaction is expected to close in the first quarter of 2013.

Product and Pipeline Update

Antiviral Franchise

In November Gilead announced:

• Interim data from the ongoing Phase 2 ELECTRON study examining a 12-week course of therapy with the investigational nucleotide sofosbuvir (formerly referred to as GS-7977), the NS5A inhibitor ledipasvir (formerly referred to as GS-5885) and ribavirin in patients with genotype 1 chronic hepatitis C virus infection. Among treatment-naïve patients receiving this combination, 100 percent>
• A Phase 3b clinical trial result from STaR (Single Tablet Regimen), the first head-to-head study comparing the single tablet regimens Complera and Atripla in treatment-naïve adults with HIV infection. Data demonstrated that Complera, which is marketed as Eviplera in the European Union, is non-inferior to Atripla based on the proportion of patients with HIV RNA levels (viral load) < 50 copies/mL at 48 weeks.
• Two-year (96-week) results from two pivotal Phase 3 studies (Studies 102 and 103) evaluating the company's newest single tablet HIV regimen, Stribild, among treatment-naïve patients with HIV-1 infection. Data showed that Stribild was non-inferior after two years of treatment to two standard of care HIV regimens, Atripla in Study 102 and a protease-based regimen of ritonavir-boosted atazanavir plus Truvada in Study 103. The results were presented in an oral session at the 11th International Congress on Drug Therapy in HIV Infection in Glasgow, United Kingdom.
• Topline results from the Phase 3 POSITRON study examining a 12-week course of once-daily sofosbuvir plus ribavirin in patients with genotype 2 or 3 chronic HCV infection who are not candidates to take interferon. The study found that 78 percent of patients>
• The European Commission granted marketing authorization for two new indications for once-daily Viread. The first new indication permits the use of Viread in combination with other antiretroviral agents for the treatment of HIV-1 infected pediatric patients aged 2 to less than 18 years with nucleoside reverse transcriptase inhibitor resistance or toxicities precluding the use of first line pediatric agents. Additionally, Viread was approved for the treatment of chronic hepatitis B virus infection in adolescent patients aged 12 to less than 18 years with compensated liver disease and evidence of immune active disease.

In October, Gilead announced:

• A Phase 2 clinical trial evaluating tenofovir alafenamide (TAF), met its primary objective. TAF is an investigational novel prodrug of tenofovir for the treatment of HIV-1 infection formerly referred to as GS-7340. The ongoing study compares a once-daily single tablet regimen containing TAF 10 mg/elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg with Stribild among treatment-naïve adults.