Gilead Sciences Announces Fourth Quarter and Full Year 2006 Financial Results
Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of
operations for the fourth quarter and full year of 2006. Total
revenues for the fourth quarter of 2006 were $899.2 million, up 48
percent compared to total revenues of $609.3 million for the fourth
quarter of 2005, while full year total revenues exceeded $3 billion
for the first time. Net loss for the fourth quarter of 2006 was $1.67
billion, or $(3.62) per share, which included an acquisition-related
charge of $2.04 billion for purchased in-process research and
development (IPR&D) and after-tax stock-based compensation expense of
$24.9 million reflecting the impact of the adoption of the Financial
Accounting Standards Board's Statement No. 123 (revised 2004), "Share
Based Payment" (SFAS 123R) on January 1, 2006. Net income for the
fourth quarter of 2005 was $281.6 million, or $0.59 per diluted share.
Non-GAAP net income for the fourth quarter of 2006 was $372.8 million,
or $0.78 per diluted share, which excluded the impact of the purchased
IPR&D charges. Non-GAAP net income for the fourth quarter of 2005 was
$256.5 million, or $0.54 per diluted share, which excluded the tax
benefit realized from the repatriation of foreign earnings under the
American Jobs Creation Act.
Product Sales
Product sales were a record $768.1 million for the fourth quarter
of 2006, up 56 percent over the same period in 2005, marking more than
three years of consecutive quarterly product sales growth. For 2006,
product sales were $2.59 billion compared to $1.81 billion in 2005, a
43 percent increase. This growth continued to be driven primarily by
Gilead's HIV product franchise, including the strong uptake of
Atripla(TM) (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir
disoproxil fumarate 300 mg) following its launch in July 2006 in the
United States, and continued strong performance of Truvada(R)
(emtricitabine and tenofovir disoproxil fumarate) and Viread(R)
(tenofovir disoproxil fumarate), as well as Hepsera(R) (adefovir
dipivoxil).
HIV Franchise
HIV product sales were $642.4 million in the fourth quarter of
2006, a 67 percent increase from $384.8 million for the same period in
2005. For 2006, HIV product sales were $2.13 billion, an increase of
52 percent when compared to 2005.
-- Truvada
Truvada sales were $337.1 million for the fourth quarter of 2006,
a 76 percent increase from $191.1 million in the fourth quarter of
2005. For 2006, Truvada sales were $1.19 billion, more than double the
Truvada sales of $567.8 million in 2005. Truvada sales accounted for
52 percent of Gilead's total HIV product sales in the fourth quarter
of 2006 and 56 percent for the full year, reflecting its strong
position as the NRTI backbone of choice in the United States, as well
as rapid and significant uptake in key European territories during
2006.
-- Viread
Viread sales were $159.5 million in the fourth quarter of 2006, a
13 percent decrease from $182.4 million in the fourth quarter of 2005.
For 2006, Viread sales were $689.4 million compared to $778.8 million
for 2005, a decrease of 11 percent. The decrease in the quarter and
full year product sales was driven primarily by patients switching
from a Viread-containing regimen to one containing Truvada in
countries where Truvada is available, partially offset by sales volume
increases in Latin America.
-- Atripla
Atripla sales were $137.4 million in the fourth quarter of 2006,
an increase of 101 percent from $68.4 million in the third quarter of
2006, the quarter in which the product was launched.
-- Emtriva
Emtriva(R)(emtricitabine) sales were $8.5 million for the fourth
quarter of 2006, a decrease of 24 percent from $11.2 million in the
fourth quarter of 2005. For 2006, Emtriva sales were $36.4 million, a
decrease of 23 percent from $47.5 million in 2005. Emtriva sales
volume has decreased primarily from patients switching from an
Emtriva-containing regimen to one containing Truvada in countries
where Truvada is available.
AmBisome for Severe Fungal Infections
Sales of AmBisome(R)(amphotericin B) liposome for injection for
the fourth quarter of 2006 were $58.3 million, an increase of five
percent from $55.6 million for the fourth quarter of 2005. For 2006,
AmBisome sales were $223.0 million, an increase of one percent from
$220.8 million for 2005.
Hepsera for Chronic Hepatitis B
Hepsera sales were $65.9 million for the fourth quarter of 2006, a
29 percent increase from $51.2 million for the fourth quarter of 2005.
For 2006, Hepsera sales were $230.5 million, an increase of 24 percent
compared to $186.5 million in 2005. The increase in sales in the
fourth quarter and full year of 2006 compared to the same periods of
2005 was primarily driven by strong volume growth in Europe.
Royalty, Contract and Other Revenue
For the fourth quarter of 2006, royalty, contract and other
revenue resulting primarily from collaborations with corporate
partners totaled $131.1 million, an increase of 13 percent, compared
to $115.8 million in the fourth quarter of 2005. For 2006, royalty,
contract and other revenue was $437.9 million, approximately twice the
$219.1 million recognized in 2005. The increase in revenue during the
fourth quarter and full year of 2006 compared to the same periods of
2005 was driven primarily by the recognition of Tamiflu(R)
(oseltamivir phosphate) royalties from F. Hoffmann-La Roche Ltd
(Roche) of $113.2 million and $364.6 million, respectively. Higher
royalties were recognized from Roche for the fourth quarter and full
year of 2006 as compared to the same periods of 2005 primarily due to
the higher Tamiflu sales recorded by Roche, as well as the elimination
of a contractual cost of goods adjustment that had historically
reduced the amount of Tamiflu royalties recognized by Gilead.
"We are pleased to have achieved a very solid fourth quarter in
2006, including total revenues of almost $900 million," said John F.
Milligan, PhD, Executive Vice President and Chief Financial Officer of
Gilead. "Our total revenues for the full year 2006 have exceeded $3
billion, up 49 percent from 2005. This revenue growth is a result of
continued strong uptake of Atripla, robust U.S. and international
sales of Truvada, the solid performance of both Hepsera and AmBisome
in increasingly competitive markets, and considerable growth in
royalties recognized from worldwide Tamiflu sales. Significant total
revenues coupled with our diligent focus on managing operating
expenses have resulted in a record $1.2 billion in operating cash flow
for the year."
Research and Development
Research and development (R&D) expenses for the fourth quarter of
2006 were $111.6 million, which included stock-based compensation
expense of $14.1 million, compared to R&D expenses of $68.8 million
for the same quarter in 2005. R&D expenses for 2006 were $383.9
million, which included stock-based compensation expense of $52.2
million, compared to R&D expenses of $277.7 million for 2005. The
higher R&D expenses in the fourth quarter and full year of 2006 were
primarily due to increased headcount, increased contract services and
clinical study expenses from our clinical product development and
research activities relating to our HIV and hepatitis programs and
newly-acquired programs in respiratory and cardiopulmonary areas via
the acquisitions of Corus Pharma, Inc. (Corus) and Myogen, Inc.
(Myogen), as well as stock-based compensation expense from Gilead's
adoption of SFAS 123R. These higher expenses were partially offset by
lower milestone payments made to Japan Tobacco Inc. in 2006 compared
to 2005 related to the licensing and development of Gilead's lead
integrase inhibitor candidate, GS 9137, as well as a $15.0 million
payment to Emory University (Emory) in 2005 in connection with the
amendment of Gilead's license agreement with Emory related to the
company's obligation to develop emtricitabine for the hepatitis B
indication.
Selling, General and Administrative
Selling, general and administrative (SG&A) expenses for the fourth
quarter of 2006 were $147.1 million, which included stock-based
compensation expense of $19.0 million, compared to SG&A expenses of
$106.5 million for the same quarter in 2005. SG&A expenses for 2006
were $573.7 million, which included stock-based compensation expense
of $70.8 million, compared to SG&A expenses of $381.3 million for
2005. The higher SG&A expenses in the fourth quarter and full year of
2006 were primarily due to increased headcount and expenses driven by
our business growth, our acquisitions of Corus and Myogen, and other
business development activities, as well as stock-based compensation
expense from Gilead's adoption of SFAS 123R.
Purchased In-Process Research and Development
Gilead recorded total charges associated with purchased IPR&D of
$2.04 billion and $2.39 billion for the fourth quarter and full year
of 2006, respectively, related to the IPR&D programs acquired from
Corus and Myogen.
Cash, Cash Equivalents and Marketable Securities
As of December 31, 2006, Gilead had cash, cash equivalents and
marketable securities of $1.39 billion. This compared to $2.31 billion
as of December 31, 2005. The decrease in cash, cash equivalents and
marketable securities of $921.5 million during the year was
attributable primarily to $2.74 billion in net cash paid for the
acquisitions of Myogen, Corus and Raylo Chemicals Inc. (Raylo), and
$201.0 million paid toward principal on Gilead's term loan, partially
offset by $1.22 billion of operating cash flows generated during the
year and $587.6 million of net proceeds generated from the issuance of
convertible senior notes and related transactions.
Other Balance Sheet Highlights
As of December 31, 2006, inventories were $564.1 million, an
increase of $347.2 million from December 31, 2005, primarily driven by
the manufacture of Atripla inventory in 2006, including an increase in
inventory of efavirenz, the active pharmaceutical ingredient in
Sustiva(R), which we purchased from Bristol-Myers Squibb (BMS) at BMS'
approximate market value of Sustiva.
Corporate Highlights
In November 2006, Gilead announced that it completed its
acquisition of Raylo, a subsidiary of Germany-based specialty
chemicals company Degussa AG, for a total purchase price of $133.3
million. Gilead intends to utilize this Edmonton, Alberta-based site
for process research and scale-up of clinical development candidates,
the manufacture of active pharmaceutical ingredients for both
investigational and commercial products and chemical development
activities to improve existing commercial manufacturing processes.
Also in November 2006, Gilead announced that it completed its
acquisition of Myogen for a total purchase price of $2.44 billion.
Myogen's lead product candidate, ambrisentan, is an orally available
endothelin receptor antagonist for the potential treatment of
pulmonary arterial hypertension (PAH).
In December 2006, Gilead, the International Partnership for
Microbicides (IPM) and CONRAD, a cooperating agency of USAID committed
to improving reproductive health by expanding the contraceptive
choices of women and men, announced an agreement under which Gilead
granted to IPM and CONRAD the rights to develop, manufacture and, if
proven efficacious, arrange for distribution in resource-limited
countries of tenofovir as a topical microbicide to prevent infection
with HIV.
Product and Pipeline Highlights
"Gilead continued to make significant progress in the fourth
quarter, culminating another successful year for the company," said
John C. Martin, PhD, President and Chief Executive Officer of Gilead.
"We, along with our partners Bristol-Myers Squibb and Merck, filed for
marketing approval of Atripla in the European Union. We hope to bring
this once-daily single tablet regimen to the doctors and patients with
HIV who are working and living in Europe. Through the completion of
two significant acquisitions, we also began developing our respiratory
and cardiopulmonary franchise. In December, we completed the filing of
a New Drug Application (NDA) for marketing approval of ambrisentan for
the once-daily treatment of pulmonary arterial hypertension and we
continue to strive to provide solutions for patients suffering from
life-threatening diseases."
HIV/AIDS Franchise
In October 2006, Gilead, Bristol-Myers Squibb Company and Merck &
Co., Inc. announced the submission of a Marketing Authorisation
Application to the European Medicines Agency seeking approval of
Atripla in the European Union.
In December 2006, Gilead announced the publication of 96-week data
from an ongoing clinical trial, Study 934, in the Journal of Acquired
Immune Deficiency Syndromes (JAIDS). This study compares a once-daily
regimen of Viread, Emtriva and Sustiva to a twice-daily regimen of
Combivir(R) (lamivudine/zidovudine) with Sustiva once daily.
Respiratory and Cardiopulmonary Franchise
In December 2006, Gilead completed the submission of a New Drug
Application to the U.S. Food and Drug Administration for marketing
approval of ambrisentan for the once-daily treatment of PAH.
Also in December 2006, Gilead announced that its Phase III AIR-CF2
study of aztreonam lysine for inhalation for the treatment of people
with cystic fibrosis who have pulmonary Pseudomonas aeruginosa met its
primary efficacy endpoint, the time to need for inhaled or intravenous
antibiotics, which was assessed by the onset of common symptoms
predictive of a pulmonary exacerbation.
Conference Call
At 4:30 p.m. Eastern Time today, Gilead will webcast a conference
call live on Gilead's website to discuss its fourth quarter 2006
results. During the call, Gilead will be discussing additional
corporate, financial, statistical, product and pipeline information.
That information can be found on Gilead's website at www.gilead.com
under "Investors." To access the webcast via the internet, 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 hear the webcast.
Alternatively, please call 1-800-901-5259 (U.S.) or 1-617-786-4514
(international) and dial the participant passcode 19934233 to access
the call. Telephone replay is available approximately two hours after
the call through February 2, 2007. To access, please call
1-888-286-8010 (U.S.) or 1-617-801-6888 (international) and dial the
participant passcode 79206534. The webcast will be archived on
www.gilead.com for one year.
About Gilead
Gilead Sciences is a biopharmaceutical company that discovers,
develops and commercializes innovative therapeutics in areas of unmet
medical need. The company's mission is to advance the care of patients
suffering from life-threatening diseases worldwide. Headquartered in
Foster City, California, Gilead has operations in North America,
Europe and Australia.
Non-GAAP Financial Information
Non-GAAP net income and net income per diluted share for 2006
periods are presented excluding the impact of the IPR&D charges
incurred in connection with the acquisitions of Corus and Myogen.
Non-GAAP net income and net income per diluted share for 2005 periods
are presented excluding the tax benefit realized from the repatriation
of foreign earnings under the American Jobs Creation Act. Management
believes this non-GAAP information is useful for investors, taken in
conjunction with Gilead's GAAP financial statements, because it
facilitates the comparison of current and prior period operating
results after eliminating the effect of expense components that are
individually material in a particular period but were not present in
the prior period; additionally, management uses such information
internally for its operating, budgeting and financial planning
purposes. Non-GAAP financial information does not exclude stock-based
compensation expense resulting from Gilead's adoption of SFAS 123R on
January 1, 2006. Note 1 to the condensed consolidated statements of
operations on page 6 of the attached press release continues to enable
management and investors to understand the comparative impact of
stock-based compensation expense on the various captions of the
statements of operations in 2006. Non-GAAP information is not prepared
under a comprehensive set of accounting rules and should only be used
to supplement an understanding of the company's operating results as
reported under GAAP.
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. 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: our ability to
successfully integrate the products and employees of Corus, Myogen and
Raylo with Gilead; our ability to effectively utilize the site
purchased from Raylo to improve existing commercial manufacturing
processes; our ability to receive regulatory approvals, in a timely
manner or at all, for new and current products, including Truvada,
Atripla and ambrisentan; our ability to successfully develop our
respiratory and cardiopulmonary franchise; safety and efficacy data
from clinical studies of aztreonam lysine for inhalation may not
warrant further development of this compound and initiating and
completing clinical trials may take longer or cost more than expected;
and other risks identified from time to time in Gilead's reports filed
with the U.S. Securities and Exchange Commission. You are urged to
consider statements that include the words "may," "will," "would,"
"could," "should," "might," "believes," "estimates," "projects,"
"potential," "expects," "plans," "anticipates," "intends,"
"continues," "forecast," "designed," "goal," or the negative of those
words or other comparable words to be uncertain and forward-looking.
Gilead directs readers to its Annual Report on Form 10-K for the
year ended December 31, 2005, its Quarterly Reports on Form 10-Q for
the first, second and third quarters of 2006 and its current reports
on Form 8-K. 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, Truvada, AmBisome and Hepsera are registered
trademarks of Gilead Sciences, Inc.
Atripla is a trademark of Bristol-Myers Squibb & Gilead Sciences,
LLC.
Tamiflu is a registered trademark of F. Hoffmann-La Roche Ltd.
Sustiva is a registered trademark of Bristol-Myers Squibb Company.
Combivir is a registered trademark of GlaxoSmithKline 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).
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GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
Three months ended Year ended
December 31, December 31,
---------------------- ------------------------
2006 2005 2006 2005
------------ --------- ------------ -----------
Revenues:
Product sales $ 768,093 $493,426 $ 2,588,197 $1,809,299
Royalty, contract
and other revenue 131,133 115,840 437,942 219,101
------------ --------- ------------ -----------
Total revenues 899,226 609,266 3,026,139 2,028,400
Costs and expenses:
Cost of goods sold
(1) 155,289 74,144 433,320 260,326
Research and
development (1) 111,620 68,763 383,861 277,724
Selling, general
and administrative
(1)(2) 147,093 106,518 573,660 381,283
Purchased in-
process research
and development
(3) 2,038,483 - 2,394,051 -
------------ --------- ------------ -----------
Total costs and
expenses 2,452,485 249,425 3,784,892 919,333
------------ --------- ------------ -----------
Income (loss) from
operations (1,553,259) 359,841 (758,753) 1,109,067
Interest and other
income, net (2) 32,560 17,940 134,642 49,172
Interest expense (5,350) (392) (20,362) (442)
Minority interest in
joint venture 2,388 1,597 6,266 3,995
------------ --------- ------------ -----------
Income (loss) before
provision for income
taxes (1) (1,523,661) 378,986 (638,207) 1,161,792
Provision for income
taxes 141,986 97,384 551,750 347,878
------------ --------- ------------ -----------
Net income (loss) $(1,665,647) $281,602 $(1,189,957) $ 813,914
============ ========= ============ ===========
Net income (loss) per
share - basic $ (3.62) $ 0.61 $ (2.59) $ 1.79
============ ========= ============ ===========
Net income (loss) per
share - diluted $ (3.62) $ 0.59 $ (2.59) $ 1.72
============ ========= ============ ===========
Shares used in per
share calculation -
basic 460,099 458,538 459,106 454,339
============ ========= ============ ===========
Shares used in per
share calculation -
diluted (4) 460,099 479,175 459,106 474,284
============ ========= ============ ===========
---
Notes:
(1)On January 1, 2006, Gilead adopted SFAS 123R and recorded stock-
based compensation expense during the three months and year ended
December 31, 2006. The following is the stock-based compensation
expense recorded in the respective caption of the statements of
operations above:
Three months ended Year ended
December 31, 2006 December 31, 2006
--------------------- -----------------------
Stock-based
compensation
expense:
Cost of goods
sold $ 2,634 $ 10,870
Research and
development
expenses 14,055 52,163
Selling, general
and
administrative
expenses 18,993 70,793
Provision for
income taxes (10,778) (32,118)
--------- ------------
Total stock-
based
compensation
expense, net
of taxes $ 24,904 $ 101,708
========= ============
(2)Certain prior period amounts have been reclassified to be
consistent with current period presentation.
(3)For the quarter and year ended December 31, 2006, Gilead incurred
$2.04 billion and $2.39 billion, respectively, of purchased in-
process research and development as a result of the acquisitions
of Corus in August 2006 and Myogen in November 2006.
(4)The net loss per diluted share calculation for the quarter and year
ended December 31, 2006 does not include the effect of outstanding
stock options as they were antidilutive.
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GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS)
(unaudited)
(in thousands, except per share amounts)
Below is a reconciliation of Gilead's GAAP net loss and diluted per
share amounts as reported in the attached press release. Non-GAAP
net income and net income per diluted share for 2006 periods are
presented excluding the impact of the purchased in-process research
and development charges incurred in connection with the acquisitions
of Myogen and Corus during the three months and year ended December
31, 2006. Management believes this non-GAAP information is useful
for investors, taken in conjunction with Gilead's GAAP financial
statements, because it facilitates the comparison of current and
prior period operating results after eliminating the effect of
expense components that are individually material in a particular
period but were not present in the prior period; additionally,
management uses such information internally for its operating,
budgeting and financial planning purposes. Non-GAAP financial
information does not exclude stock-based compensation expense
resulting from Gilead's adoption of SFAS 123R on January 1, 2006.
Note 1 to the condensed consolidated statements of operations on page
6 of the attached press release continues to enable management and
investors to understand the comparative impact of stock-based
compensation expense on the various captions of the statements of
operations in 2006. Non-GAAP information is not prepared under a
comprehensive set of accounting rules and should only be used to
supplement an understanding of the company's operating results as
reported under GAAP.
Three months ended Year ended
December 31, 2006 December 31, 2006
------------------ ------------------
Net loss (GAAP) $ (1,665,647) $ (1,189,957)
Purchased in-process research
and development expense 2,038,483 2,394,051
------------------ ------------------
Net income (Non-GAAP) $ 372,836 $ 1,204,094
================== ==================
Shares used in per share
calculation - diluted (GAAP) 460,099 459,106
Dilutive securities 18,667 19,197
------------------ ------------------
Shares used in per share
calculation - diluted (Non-
GAAP) 478,766 478,303
================== ==================
Net loss per share - diluted
(GAAP) $ (3.62) $ (2.59)
================== ==================
Net income per share - diluted
(Non-GAAP) $ 0.78 $ 2.52
================== ==================
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GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
2006 2005
------------ -------------
(unaudited) (Note 1)
Cash, cash equivalents and marketable
securities (2) $ 1,389,566 $ 2,311,033
Other current assets (2) 1,492,355 781,175
Property, plant and equipment, net 361,299 242,568
Other noncurrent assets 842,761 431,540
------------ -------------
Total assets $ 4,085,981 $ 3,766,316
============ =============
Current liabilities (2) $ 805,912 $ 465,163
Long-term liabilities and minority
interest (2) 1,464,351 273,375
Stockholders' equity 1,815,718 3,027,778
------------ -------------
Total liabilities and stockholders'
equity $ 4,085,981 $ 3,766,316
============ =============
Note:
(1) Derived from audited consolidated financial statements at that
date.
(2) Certain prior period amounts have been reclassified to be
consistent with current period presentation.
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GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in thousands)
Three months ended Year ended
December 31, December 31,
--------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ----------- -----------
HIV products:
Truvada - U.S. $ 196,291 $ 149,359 $ 785,301 $ 489,802
Truvada - International 140,766 41,790 408,991 78,027
---------- ---------- ----------- -----------
337,057 191,149 1,194,292 567,829
Viread - U.S. 71,863 77,561 294,302 337,444
Viread - International 87,652 104,873 395,054 441,339
---------- ---------- ----------- -----------
159,515 182,434 689,356 778,783
Atripla - U.S. 137,192 - 205,565 -
Atripla - International 164 - 164 -
---------- ---------- ----------- -----------
137,356 - 205,729 -
Emtriva - U.S. 3,694 4,476 17,078 19,576
Emtriva - International 4,800 6,694 19,315 27,910
---------- ---------- ----------- -----------
8,494 11,170 36,393 47,486
Total HIV products - U.S. 409,040 231,396 1,302,246 846,822
Total HIV products -
International 233,382 153,357 823,524 547,276
---------- ---------- ----------- -----------
642,422 384,753 2,125,770 1,394,098
Hepsera - U.S. 27,710 23,553 97,325 82,932
Hepsera - International 38,209 27,616 133,206 103,600
---------- ---------- ----------- -----------
65,919 51,169 230,531 186,532
AmBisome 58,291 55,596 223,031 220,753
Other products 1,461 1,908 8,865 7,916
---------- ---------- ----------- -----------
Total product sales $ 768,093 $ 493,426 $2,588,197 $1,809,299
========== ========== =========== ===========
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