- Product Sales of $5.5 billion -
- Diluted EPS of $1.22 per share -
- Non-GAAP Diluted EPS of $1.68 per share -
FOSTER CITY, Calif.--(BUSINESS WIRE)--Apr. 30, 2020-- Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the first quarter 2020.
“Gilead’s performance during the first quarter demonstrates our continued progress and highlights the strength of our underlying business. While we are prepared to navigate the uncertainty and short-term impact from the pandemic, we are confident in our ability to deliver on our long-term goals,” said Daniel O’Day, Chairman and Chief Executive Officer of Gilead Sciences. “Our focus at this time is on both our work with remdesivir and our ongoing commitments to the people who depend on our medicines today.”
First Quarter Financial Results
The financial results that follow represent a year-over-year comparison of the first quarter 2020 to the first quarter 2019. Total revenues for the first quarter 2020 were $5.5 billion, an increase of 5% compared to the same period in 2019. Net income for the first quarter 2020 was $1.6 billion or $1.22 per diluted share, a decrease of 21% compared to the same period in 2019. Non-GAAP net income for the first quarter 2020 was $2.1 billion or $1.68 per diluted share, essentially flat compared to the same period in 2019.
Three Months Ended March 31,
(In millions, except per share amounts)2020 2019
Product sales $ 5,467 $ 5,200
Royalty, contract and other revenues 81 81
Total revenues $ 5,548 $ 5,281
Net income attributable to Gilead $ 1,551 $ 1,975
Non-GAAP net income attributable to Gilead $ 2,139 $ 2,141
Diluted earnings per share $ 1.22 $ 1.54
Non-GAAP diluted earnings per share $ 1.68 $ 1.67
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Starting in 2020, Gilead no longer regularly excludes share-based compensation expense from its non-GAAP financial information. To conform to this change, the prior period non-GAAP financial information has been recast to include share-based compensation expense. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 9 and 10.
Product Sales
Total product sales for the first quarter 2020 were $5.5 billion compared to $5.2 billion for the same period in 2019. Product sales for the first quarter 2020 were $4.0 billion in the United States, $927 million in Europe and $551 million in other locations. Product sales for the first quarter 2019 were $3.8 billion in the United States, $882 million in Europe and $522 million in other locations. Total product sales for the first quarter 2020 benefited from an estimated $200 million in revenue related to increased customer buying patterns and patient prescription trends, primarily in the United States, due to the coronavirus disease (COVID-19) pandemic.
HIV product sales were $4.1 billion for the first quarter 2020 compared to $3.6 billion for the same period in 2019. The increase was primarily driven by higher sales volume as a result of the continued uptake of Biktarvy® (bictegravir 50 mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg) and increased customer buying patterns and patient prescription trends due to the pandemic.
Chronic hepatitis C virus (HCV) product sales were $729 million for the first quarter 2020 compared to $790 million for the same period in 2019. The decline was primarily due to lower average net selling price.
Yescarta® (axicabtagene ciloleucel) generated $140 million in sales during the first quarter 2020 compared to $96 million for the same period in 2019. The increase was primarily driven by continued expansion in Europe.
Other product sales, which include Vemlidy® (tenofovir alafenamide 25 mg), Viread® (tenofovir disoproxil fumarate 300 mg), Letairis® (ambrisentan 5 mg and 10 mg), Ranexa® (ranolazine 500 mg and 1000 mg), Zydelig® (idelalisib 150 mg), AmBisome® (amphotericin B liposome for injection 50 mg/vial) and Cayston® (aztreonam for inhalation solution 75 mg/vial), were $464 million for the first quarter 2020 compared to $696 million for the same period in 2019. The decrease was primarily due to the expected declines in Ranexa and Letairis sales after generic entries in February and May 2019, respectively.
Operating Expenses
Three Months Ended March 31,
(In millions) 2020 2019
Research and development expenses (R&D) $ 1,101 $ 1,057
Non-GAAP R&D expenses $ 1,004 $ 932
Selling, general and administrative expenses (SG&A) - GAAP and non-GAAP
$ 1,076 $ 1,030
During the first quarter 2020, compared to the same period in 2019:
R&D expenses and non-GAAP R&D expenses increased primarily due to Gilead’s ramp up of remdesivir, an investigational antiviral for the treatment of COVID-19, including approximately $50 million of manufacturing scale-up and clinical trial costs, partially offset by lower clinical trial expenses as a result of Gilead’s pause or postponement of other clinical trials resulting from the pandemic.
SG&A expenses and non-GAAP SG&A expenses increased primarily due to higher promotional expenses in the United States.
Other Income (Expense), Net
Three Months Ended March 31,
(In millions) 2020 2019
Other income (expense), net $ (158) $ 367
Non-GAAP other income (expense), net $ 125 $ 170
During the first quarter 2020, compared to the same period in 2019:
Other income (expense), net decreased by $525 million primarily due to unfavorable changes in the fair value of investments in equity securities, largely resulting from Gilead’s equity investment in Galapagos NV.
Cash, Cash Equivalents and Marketable Debt Securities
As of March 31, 2020, Gilead had $24.3 billion of cash, cash equivalents and marketable debt securities, compared to $25.8 billion as of December 31, 2019. During the first quarter 2020, Gilead generated $1.4 billion in operating cash flow, repaid $500 million of debt, paid cash dividends of $874 million and utilized $1.3 billion on stock repurchases. Subsequent to March 31, 2020, Gilead paid approximately $4.9 billion in cash for the acquisition of Forty Seven, Inc. (Forty Seven).
Corporate Highlights
During the first quarter 2020, Gilead continued to make progress in advancing work across each of three long-term ambitions laid out in its corporate strategy: (i) to bring 10+ transformative therapies to patients in the next 10 years; (ii) to be the biotech employer and partner of choice; and (iii) to deliver shareholder value in a sustainable and responsible manner. This progress occurred amid challenges posed by the COVID-19 pandemic and an increased focus across the organization on rapidly advancing remdesivir.
Corporate Development: In March, Gilead reached an agreement to acquire Forty Seven for approximately $4.9 billion, gaining a drug candidate, magrolimab, which is currently in Phase 1b/2 clinical studies for a number of hematological cancers. The acquisition also brings a team with expertise in immuno-oncology, an area of increased focus for Gilead. The acquisition closed in April and Gilead is now working to accelerate progress of magrolimab and grow Gilead’s immuno-oncology pipeline. Approximately $4.6 to $4.8 billion of acquired in-process R&D and other expenses, or $3.70 to $3.80 per diluted share, are expected to be recognized in earnings in the second quarter 2020 and will be excluded from the non-GAAP financial results.
Gilead entered into several additional agreements to advance its business, including a four-year strategic collaboration with Second Genome, Inc. to identify biomarkers associated with clinical response in up to five of Gilead’s pipeline compounds in inflammation, fibrosis and other diseases, and to identify potential new targets and drug candidates for the treatment of inflammatory bowel disease.
Pipeline Progress: Gilead continued to advance several pipeline programs during the first quarter 2020. Kite, a Gilead company (Kite), achieved two key regulatory milestones for KTE-X19, an investigational cell therapy for the treatment of relapsed or refractory mantle cell lymphoma. In Europe, the marketing authorization application for KTE-X19 was fully validated and is now under review by the European Medicines Agency, and in the United States, the U.S. Food and Drug Administration (FDA) accepted the Biologics License Application and granted Priority Review designation.
In HIV, key data were presented at the Conference on Retroviruses and Opportunistic Infections (CROI) in March for several approved and investigational HIV products. This included new clinical study data for Gilead’s investigational HIV-1 capsid inhibitor lenacapavir as a potential long-acting treatment for people living with HIV, results from a study of the experimental toll-like receptor 7 agonist vesatolimod, which is part of Gilead’s HIV cure research program, and additional data on Biktarvy as a treatment for HIV and Descovy for the prevention of HIV.
Expanded Approval: In March, FDA approved Epclusa for children ages 6 and older (or weighing at least 17 kg) with HCV. Epclusa is the first pan-genotypic, protease inhibitor-free regimen approved in the United States for children and adults. An estimated 23,000 to 46,000 children in the United States are living with HCV.
New Board Member: In January, Sandra J. Horning, M.D., who retired in 2019 as Chief Medical Officer and Global Head of Product Development at Roche, joined Gilead’s Board of Directors. Dr. Horning’s appointment brings significant industry and drug development expertise to the Board, as Gilead seeks to bring forward transformative new therapies as part of its corporate strategy.
Recent Developments and Insights
Gilead’s COVID-19 Response:
Advancing remdesivir: Gilead made rapid progress in advancing remdesivir as a potential treatment for COVID-19. Gilead initiated two open-label Phase 3 studies in February (the Gilead SIMPLE studies). Additional global studies are ongoing, including a global, placebo-controlled trial being led by the U.S. National Institute of Allergy and Infectious Diseases (NIAID), as well as more recently initiated studies through the World Health Organization and INSERM in France.
Yesterday, NIAID announced that the preliminary results from their trial met the primary endpoint, and remdesivir was found to shorten the time to recovery for hospitalized patients with COVID-19 when compared with a placebo. Gilead also announced topline results from the first Gilead SIMPLE study evaluating 5-day and 10-day dosing durations of remdesivir in patients with severe COVID-19 disease. The study demonstrated similar clinical improvements in patients with severe symptoms of COVID-19, regardless of whether they received five or ten days of treatment.
Gilead also took significant steps to expand remdesivir manufacturing production, announcing the expectation that more than 140,000 treatment courses of remdesivir will be manufactured by the end of May 2020. As Gilead continues to work with international partners to expand production, Gilead announced it anticipates more than one million treatment courses will be manufactured by December 2020, with plans to be able to produce several million treatment courses in 2021. However, these projections assume a 10-day dosing duration, and the number of treatment courses expected to be available may actually be higher based on the recent topline results from the first Gilead SIMPLE study, which suggests the potential for certain patients to be treated with a shorter dosing duration.
Employee health, safety and productivity support: Gilead took steps and provided resources to help ensure the health, safety and productivity of its employees, with most staff in offices around the world being asked to work remotely. Individuals with physical-location dependent roles are reporting to work, and Gilead has implemented social distancing protocols, increased cleaning and sanitization and other measures to protect those employees.
Gilead is providing additional benefits to its employees during this time, including work-from-home and certain childcare expense reimbursements, employee well-being resources, essential onsite services pay for those physical-location dependent roles, and a revised volunteer medical service paid leave policy for its employees with medical training, such as doctors, nurses and physician assistants, to help treat patients.
Community support: Gilead announced the entirety of its initial supply of remdesivir of 1.5 million individual doses will be donated free of charge through current access programs and clinical trials and for broader distribution following any potential regulatory authorizations.
Gilead announced the creation of the global Gilead CARES (COVID-19 Acute Relief and Emergency Support) Grantee Fund to provide financial support to current nonprofit grantees facing an imminent closure or termination of vital services due to losses attributable to the pandemic. The fund will provide up to $20 million in donations to these groups. Gilead also announced the following community donations: $1 million to the San Mateo County Strong Fund, which is providing financial support to individuals, small businesses and nonprofit organizations in San Mateo County where Gilead is based, and $1 million to the Mayor’s Fund for Los Angeles, which is providing support for families and small businesses, relief for healthcare workers and other services in response to the COVID-19 pandemic.
Supply chain and access to medicines: There are currently no significant manufacturing concerns or supply shortages with any Gilead products. Gilead sources various raw materials and active pharmaceutical ingredient (API) for Gilead’s products from a number of suppliers. Gilead has adequate supply of its products and does not expect any significant risk or disruption to its supply chain for the foreseeable future.
Clinical trials and research: Following a review of its clinical trials and ongoing research, Gilead has determined to continue its fully enrolled trials, temporarily postpone new trials and pause enrollment in other trials. Gilead remains committed to commencing enrollment and initiating new studies when it is appropriate to do so.
Impact of COVID-19:
First Quarter 2020
Total product sales: Total product sales for the first quarter 2020 included an estimated $200 million in revenue related to increased customer buying patterns and patient prescription trends due to the pandemic, primarily in the United States, which is expected to reverse itself over subsequent quarters.
Research and development expense: The approximately $50 million in R&D expenses related to remdesivir exceeded the savings from Gilead’s pause on enrollment and temporary postponement of clinical trials resulting from the pandemic during the first quarter 2020.
Outlook
There is significant uncertainty about the progression and ultimate impact of the pandemic on Gilead’s business and operations. While COVID-19 did not materially impact Gilead’s first quarter results, Gilead anticipates that COVID-19 could impact its business in the short-term due to factors such as fewer patients accessing treatment for conditions such as HIV and HCV, however, the impact of these developments is uncertain. In addition to this uncertainty, during the first quarter 2020, Gilead began advancing remdesivir and rapidly expanding its manufacturing production. The total investments in remdesivir, primarily to expand manufacturing production, throughout 2020 could be material, but the amount, timing and accounting for the investments as well as the potential to recoup Gilead’s at-risk investments at some point in the future are dependent on clinical trial and regulatory outcomes. Where authorized by regulatory authorities, Gilead will focus on making remdesivir both accessible and affordable to governments and patients around the world. Further insights on the impact of the pandemic to date and remdesivir will be provided on the first quarter earnings call, and in Gilead’s first quarter 2020 earnings slides.
Gilead will continue to monitor the impact of the COVID-19 pandemic and expects to provide additional insights and outlook on its second quarter 2020 earnings call when Gilead expects there will be additional clarity on the duration and magnitude of the impact of the COVID-19 pandemic and the development of remdesivir.
Non-GAAP Financial Information
The information presented in this document has been prepared in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, 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 Gilead’s operating results as reported under GAAP. Non-GAAP financial information excludes acquisition-related expenses including amortization and impairments of purchased intangible assets, charges for in-process research and development, up-front collaboration and licensing expenses, and other items that are considered unusual or not representative of underlying trends of Gilead’s business, fair value adjustments of equity securities and discrete tax charges or benefits associated with changes in tax related laws and guidelines. Although Gilead consistently excludes the amortization of purchased intangible assets from the non-GAAP financial information, management believes that it is important for investors to understand that such intangible assets were recorded as part of acquisitions and contribute to ongoing revenue generation. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the tables on pages 9 and 10.
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Gilead Sciences Announces Second Quarter 2020 Dividend
FOSTER CITY, Calif.--(BUSINESS WIRE)--Apr. 30, 2020-- Gilead Sciences, Inc. (Nasdaq: GILD) today announced that the company’s Board of Directors has declared a cash dividend of $0.68 per share of common stock for the second quarter of 2020. The dividend is payable on June 29, 2020, to stockholders of record at the close of business on June 12, 2020. Future dividends will be subject to Board approval. |
