Gilead Sciences Announces Third Quarter 2012 Financial Results

We own or have rights to various trademarks, copyrights and trade names used in our business, including the following: GILEAD ^® , GILEAD SCIENCES ^® , TRUVADA ^® , VIREAD ^® , HEPSERA ^® , AMBISOME ^® , EMTRIVA ^® , COMPLERA ^® , EVIPLERA ^® , STRIBILD ^TM , VISTIDE ^® , LETAIRIS ^® , VOLIBRIS ^® , RANEXA ^® , CAYSTON ^® and RAPISCAN ^® . ATRIPLA ^® is a registered trademark belonging to Bristol-Myers Squibb & Gilead Sciences, LLC.

LEXISCAN ^® is a registered trademark belonging to Astellas U.S. LLC.

MACUGEN ^® is a registered trademark belonging to Valeant Pharmaceuticals International, Inc.

SUSTIVA ^® is a registered trademark of Bristol-Myers Squibb Pharma Company.

TAMIFLU ^® is a registered trademark belonging to Hoffmann-La Roche Inc.

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)
		2012				2011				2012				2011
Revenues:
Product sales		$	2,357,978			$	2,065,859			$	6,887,560			$	5,969,025
Royalty, contract and other revenues		68,619				55,801				226,672				215,982
Total revenues		2,426,597				2,121,660				7,114,232				6,185,007
Costs and expenses:
Cost of goods sold		597,269				531,989				1,795,545				1,539,963
Research and development		465,831				290,066				1,320,286				826,915
Selling, general and administrative		319,583				295,927				1,095,209				895,764
Total costs and expenses		1,382,683				1,117,982				4,211,040				3,262,642
Income from operations		1,043,914				1,003,678				2,903,192				2,922,365
Interest expense		(89,322		)		(43,097		)		(275,010		)		(130,420		)
Other income (expense), net		(3,505		)		14,406				(38,665		)		40,216
Income before provision for income taxes		951,087				974,987				2,589,517				2,832,161
Provision for income taxes		280,052				237,449				774,877				704,861
Net income		671,035				737,538				1,814,640				2,127,300
Net loss attributable to noncontrolling interest		4,470				3,586				14,385				11,192
Net income attributable to Gilead		$	675,505			$	741,124			$	1,829,025			$	2,138,492
Net income per share attributable to Gilead common stockholders - basic		$	0.89			$	0.97			$	2.42			$	2.72
Net income per share attributable to Gilead common stockholders - diluted		$	0.85			$	0.95			$	2.33			$	2.66
Shares used in per share calculation - basic		757,385				767,033				757,032				787,272
Shares used in per share calculation - diluted		792,304				781,312				783,824				802,762

GILEAD SCIENCES, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION (unaudited) (in thousands, except percentages and per share amounts)
		2012				2011				2012				2011
Cost of goods sold reconciliation:
GAAP cost of goods sold		$	597,269			$	531,989			$	1,795,545			$	1,539,963
Stock-based compensation expenses		(1,864		)		(2,234		)		(6,084		)		(7,765		)
Acquisition related-amortization of purchased intangibles		(15,837		)		(17,407		)		(47,509		)		(52,222		)
Non-GAAP cost of goods sold		$	579,568			$	512,348			$	1,741,952			$	1,479,976
Product gross margin reconciliation:
GAAP product gross margin		74.7		%		74.3		%		74.0		%		74.3		%
Stock-based compensation expenses		0.1		%		0.1		%		0.1		%		0.1		%
Acquisition related-amortization of purchased intangibles		0.7		%		0.8		%		0.7		%		0.9		%
Non-GAAP product gross margin (1)		75.5		%		75.3		%		74.8		%		75.3		%
Research and development expenses reconciliation:
GAAP research and development expenses		$	465,831			$	290,066			$	1,320,286			$	826,915
Stock-based compensation expenses		(23,236		)		(18,389		)		(162,214		)		(54,529		)
Restructuring expenses		(232		)		(806		)		(7,322		)		(1,360		)
Acquisition related-transaction costs		—				—				(345		)		(446		)
Acquisition related-contingent consideration remeasurement		(58,810		)		(1,616		)		(64,116		)		(1,198		)
Non-GAAP research and development expenses		$	383,553			$	269,255			$	1,086,289			$	769,382
Selling, general and administrative expenses reconciliation:
GAAP selling, general and administrative expenses		$	319,583			$	295,927			$	1,095,209			$	895,764
Stock-based compensation expenses		(29,364		)		(25,897		)		(177,237		)		(83,821		)
Restructuring expenses		(2,792		)		(4,388		)		(13,199		)		(6,054		)
Acquisition related-transaction costs		(222		)		(535		)		(11,096		)		(1,278		)
Non-GAAP selling, general and administrative expenses		$	287,205			$	265,107			$	893,677			$	804,611
Operating margin reconciliation:
GAAP operating margin		43.0		%		47.3		%		40.8		%		47.2		%
Stock-based compensation expenses		2.2		%		2.2		%		4.9		%		2.4		%
Restructuring expenses		0.1		%		0.2		%		0.3		%		0.1		%
Acquisition related-transaction costs		0.0		%		0.0		%		0.2		%		0.0		%
Acquisition related-amortization of purchased intangibles		0.7		%		0.8		%		0.7		%		0.8		%
Acquisition related-contingent consideration remeasurement		2.4		%		0.1		%		0.9		%		0.0		%
Non-GAAP operating margin (1)		48.5		%		50.7		%		47.7		%		50.6		%
Interest expense reconciliation:
GAAP interest expense		$	(89,322	)		$	(43,097	)		$	(275,010	)		$	(130,420	)
Acquisition related-transaction costs		—				—				7,333				—
Non-GAAP interest expense		$	(89,322	)		$	(43,097	)		$	(267,677	)		$	(130,420	)
Net income attributable to Gilead reconciliation:
GAAP net income attributable to Gilead, net of tax		$	675,505			$	741,124			$	1,829,025			$	2,138,492
Stock-based compensation expenses		39,442				35,221				304,282				109,750
Restructuring expenses		2,165				3,908				14,937				5,569
Acquisition related-transaction costs		123				535				13,665				1,724
Acquisition related-amortization of purchased intangibles		11,462				13,172				34,581				39,225
Acquisition related-contingent consideration remeasurement		60,243				1,213				64,116				900
Non-GAAP net income attributable to Gilead, net of tax		$	788,940			$	795,173			$	2,260,606			$	2,295,660
Diluted earnings per share reconciliation:
GAAP diluted earnings per share		$	0.85			$	0.95			$	2.33			$	2.66
Stock-based compensation expenses		0.05				0.05				0.39				0.14
Restructuring expenses		0.00				0.01				0.02				0.01
Acquisition related-transaction costs		0.00				0.00				0.02				0.00
Acquisition related-amortization of purchased intangibles		0.01				0.02				0.04				0.05
Acquisition related-contingent consideration remeasurement		0.08				0.00				0.08				0.00
Non-GAAP diluted earnings per share (1)		$	1.00			$	1.02			$	2.89			$	2.87
Shares used in per share calculation (diluted) reconciliation:
GAAP shares used in per share calculation (diluted)		792,304				781,312				783,824				802,762
Share impact of current stock-based compensation rules		(1,310		)		(2,096		)		(1,427		)		(2,007		)
Non-GAAP shares used in per share calculation (diluted)		790,994				779,216				782,397				800,755
Non-GAAP adjustment summary:
Cost of goods sold adjustments		$	17,701			$	19,641			$	53,593			$	59,987
Research and development expenses adjustments		82,278				20,811				233,997				57,533
Selling, general and administrative expenses adjustments		32,378				30,820				201,532				91,153
Interest expense adjustments		—				—				7,333				—
Total non-GAAP adjustments before tax		132,357				71,272				496,455				208,673
Income tax effect		(18,922		)		(17,223		)		(64,874		)		(51,505		)
Total non-GAAP adjustments after tax		$	113,435			$	54,049			$	431,581			$	157,168
Note:
(1) Amounts may not sum due to rounding

GILEAD SCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
		September 30,				December 31,
		2012				2011
		(unaudited)				(Note 1)
Cash, cash equivalents and marketable securities		$	2,651,088			$	9,963,972
Accounts receivable, net		1,766,091				1,951,167
Inventories		1,617,369				1,389,983
Property, plant and equipment, net		856,184				774,406
Intangible assets, net		11,735,354				1,062,864
Goodwill		1,078,919				1,004,102
Other assets		1,258,824				1,156,640
Total assets		$	20,963,829			$	17,303,134
Current liabilities		$	4,802,148			$	2,514,790
Long-term liabilities		7,411,519				7,920,995
Stockholders’ equity (Note 2)		8,750,162				6,867,349
Total liabilities and stockholders’ equity		$	20,963,829			$	17,303,134

Notes:

(1) Derived from the audited consolidated financial statements as of December 31, 2011.

(2) As of September 30, 2012, there were 757,933 shares of common stock issued and outstanding.

GILEAD SCIENCES, INC. PRODUCT SALES SUMMARY (unaudited) (in thousands)
		2012				2011				2012				2011
Antiviral products:
Atripla – U.S.		$	539,797			$	501,576			$	1,672,676			$	1,474,580
Atripla – Europe		270,273				254,957				821,094				775,167
Atripla – Other International		55,308				38,166				163,227				111,456
		865,378				794,699				2,656,997				2,361,203
Truvada – U.S.		414,452				357,660				1,180,791				1,011,837
Truvada – Europe		329,936				319,149				980,626				940,312
Truvada – Other International		59,802				67,918				186,969				176,990
		804,190				744,727				2,348,386				2,129,139
Viread – U.S.		98,969				87,712				282,737				240,420
Viread – Europe		81,962				82,927				250,955				245,062
Viread – Other International		33,978				22,248				88,324				61,517
		214,909				192,887				622,016				546,999
Complera / Eviplera – U.S.		82,099				19,044				195,742				19,044
Complera / Eviplera – Europe		14,306				—				24,771				—
Complera / Eviplera – Other International		2,892				—				3,873				—
		99,297				19,044				224,386				19,044
Stribild – U.S.		17,511				—				17,511				—
Hepsera – U.S.		12,615				14,170				33,596				42,809
Hepsera – Europe		11,999				18,223				41,384				60,293
Hepsera – Other International		2,705				3,238				7,827				9,281
		27,319				35,631				82,807				112,383
Emtriva – U.S.		4,717				4,666				13,580				12,482
Emtriva – Europe		1,617				1,772				5,169				5,162
Emtriva – Other International		895				1,229				3,070				3,331
		7,229				7,667				21,819				20,975
Total Antiviral products – U.S.		1,170,160				984,828				3,396,633				2,801,172
Total Antiviral products – Europe		710,093				677,028				2,123,999				2,025,996
Total Antiviral products – Other International		155,580				132,799				453,290				362,575
		2,035,833				1,794,655				5,973,922				5,189,743
Letairis		105,054				78,954				293,976				214,765
Ranexa		95,066				81,983				273,822				236,353
AmBisome		87,448				82,241				255,865				249,372
Other products		34,577				28,026				89,975				78,792
		322,145				271,204				913,638				779,282
Total product sales		$	2,357,978			$	2,065,859			$	6,887,560			$	5,969,025

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