Gilead Sciences Announces Third Quarter 2006 Financial Results
Gilead Sciences, Inc. (Nasdaq:GILD) announced today its results of
operations for the quarter ended September 30, 2006. Total revenues
for the third quarter of 2006 were $748.7 million, up 52 percent
compared to total revenues of $493.5 million for the third quarter of
2005. Net loss for the third quarter of 2006 was $52.2 million, or
$(0.11) per diluted share, which included a charge of $355.6 million
for purchased in-process research and development (IPR&D) incurred in
connection with the acquisition of Corus Pharma, Inc. (Corus) in
August 2006 and after-tax stock-based compensation expense of $25.6
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. Excluding the impact of
the IPR&D charge, non-GAAP net income for the third quarter of 2006
was $303.4 million, or $0.64 per diluted share. Net income for the
third quarter of 2005 was $179.2 million, or $0.38 per diluted share.
Product Sales
Product sales were a record $670.1 million for the third quarter
of 2006, up 43 percent over the same period in 2005, marking twelve
consecutive quarters of product sales growth. This growth continues to
be driven primarily by Gilead's HIV product franchise, including the
strong performance of Truvada(R) (emtricitabine and tenofovir
disoproxil fumarate) and the rapid uptake of Atripla(TM) (efavirenz
600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg)
following its U.S. launch in July of this year, as well as continued
solid product sales of Hepsera(R) (adefovir dipivoxil).
HIV Franchise
HIV product sales were $557.3 million in the third quarter of
2006, a 53 percent increase from $363.5 million for the same period in
2005.
-- Truvada
Truvada sales were $309.0 million for the third quarter of 2006,
an increase of 90 percent from Truvada sales in the third quarter of
2005. Truvada sales accounted for more than 55 percent of Gilead's
total HIV product sales in the third quarter of 2006.
-- Viread
Sales of Viread(R) (tenofovir disoproxil fumarate) were $170.6
million in the third quarter of 2006, a 10 percent decrease from
$189.4 million in the third quarter of 2005. Viread sales volume has
decreased due primarily to patients switching from a Viread-containing
regimen to one containing Truvada in countries where Truvada is
available.
-- Atripla
Sales of Atripla were $68.4 million in the third quarter of 2006.
-- Emtriva
Emtriva(R) (emtricitabine) sales were $9.3 million for the third
quarter of 2006, down 21 percent from the third quarter of 2005.
Emtriva sales volume has decreased due primarily to 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 third quarter of 2006 were $55.3 million, an increase of one
percent compared to the third quarter of 2005.
Hepsera for Chronic Hepatitis B
Sales of Hepsera totaled $55.1 million for the third quarter of
2006, an 18 percent increase from $46.9 million in the third quarter
of 2005. The increase in sales for the third quarter of 2006 was
primarily driven by strong volume growth in Europe.
Royalty and Contract Revenues
For the third quarter of 2006, royalty and contract revenues
resulting from collaborations with corporate partners totaled $78.7
million, an increase of $52.4 million from the third quarter of 2005.
The increase in the third quarter of 2006 was primarily driven by the
recognition of Tamiflu(R) (oseltamivir phosphate) royalties from F.
Hoffmann-La Roche Ltd (Roche) of $62.7 million. This amount was
significantly higher than the Tamiflu royalties of $12.1 million
recognized in the third quarter of 2005. The increase was primarily
due to the significantly higher Tamiflu sales recorded by Roche during
the second quarter of 2006 compared to the same period in 2005, 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 third quarter in
2006, including total revenues of $749 million," said John F.
Milligan, Ph.D., Executive Vice President and Chief Financial Officer
of Gilead. "Revenues from the first nine months of this year have
already exceeded total revenues recorded for all of last year. Our
continued sales growth is a result of strong initial uptake of
Atripla, robust U.S. and international sales of Truvada, and continued
solid performance of both Hepsera and AmBisome in increasingly
competitive markets."
Research and Development
Research and development (R&D) expenses for the third quarter of
2006 were $93.3 million, which included stock-based compensation
expense of $13.3 million, compared to R&D expenses of $78.8 million
for the same quarter in 2005. R&D expenses for the third quarter of
2006 were higher due to increased headcount and increased clinical,
product development and research activities associated with our HIV,
hepatitis B and hepatitis C programs, as well as stock-based
compensation expense from Gilead's adoption of SFAS 123R. During the
third quarter of 2005, Gilead made a $15.0 million payment to Emory
University (Emory) in connection with the amendment of our existing
license agreement with Emory related to our obligation to develop
emtricitabine for the hepatitis B indication.
Selling, General and Administrative
Selling, general and administrative (SG&A) expenses for the third
quarter of 2006 were $132.5 million, which included stock-based
compensation expense of $16.0 million, compared to SG&A expenses of
$100.9 million for the same quarter in 2005. The higher SG&A expenses
in the third quarter of 2006 as compared to the third quarter of 2005
were primarily due to increased headcount and expenses driven by our
significant business growth and business development activities, as
well as stock-based compensation expense from Gilead's adoption of
SFAS 123R.
Purchased In-Process Research and Development
In August 2006, Gilead completed its acquisition of Seattle-based
Corus and recorded a charge of $355.6 million to reflect Corus's
incomplete IPR&D programs. Gilead did not record any income tax
benefit for this charge.
Cash, Cash Equivalents and Marketable Securities
As of September 30, 2006, Gilead had cash, cash equivalents and
marketable securities of $3.20 billion. This compared to $2.31 billion
as of December 31, 2005. The increase in cash, cash equivalents and
marketable securities was primarily attributable to $738.6 million of
operating cash flows generated during the first nine months of 2006
and $587.6 million of net proceeds generated from our issuance of
convertible senior notes and related transactions, offset by $356.2
million in net cash paid on our acquisition of Corus and $161.0
million paid toward principal on our term loan.
Other Balance Sheet Highlights
Inventories increased by $156.4 million from December 31, 2005 to
$373.3 million as of September 30, 2006, primarily driven by increases
in Atripla inventory, which includes the purchases of Sustiva(R)
(efavirenz) active pharmaceutical ingredient from Bristol-Myers Squibb
(BMS) at BMS' approximate market value of Sustiva.
Corporate Highlights
In July 2006, Gilead announced a donation to The Institute of
Organic Chemistry and Biochemistry at the Academy of Sciences of the
Czech Republic (IOCB) for the establishment of a Gilead Sciences
Research Centre. Gilead will provide a $1.1 million annual donation to
IOCB for an initial five-year term to fund the Centre's operations and
ongoing research activities.
In August 2006, Gilead and Merck & Co., Inc. (Merck) announced
that the companies established an agreement for the distribution of
Atripla in developing countries around the world.
In August 2006, Gilead announced that it completed its acquisition
of Corus following an initial investment of $25.0 million in Corus in
April 2006. Corus's lead product candidate, aztreonam lysine for
inhalation, is an inhaled antibiotic with activity against
Gram-negative bacteria including Pseudomonas aeruginosa, which can
cause lung infections in patients with cystic fibrosis. The product
candidate is currently being evaluated in Phase III clinical studies.
Also in August and September of 2006, Gilead announced that it
signed non-exclusive agreements to provide eleven generic companies in
India with a license to produce and distribute generic versions of
Viread to 95 low-income countries around the world, including India.
In September 2006, Gilead and BMS announced an agreement to
commercialize Atripla in Canada for the treatment of HIV-1 infection
in adults, subject to the approval of the product by Health Canada.
In October 2006, Gilead and Myogen, Inc. (Myogen), announced that
the companies have signed a definitive agreement under which Gilead
plans to acquire Myogen for approximately $2.5 billion. Myogen is a
publicly held biopharmaceutical company focused on the discovery,
development and commercialization of small molecule therapeutics for
the treatment of cardiovascular disorders. This press release is
neither an offer to purchase nor a solicitation of an offer to sell
any securities of Myogen. A tender offer for Myogen's outstanding
shares is being made only by the Offer to Purchase filed with the
Securities and Exchange Commission on October 16, 2006.
Product and Pipeline Highlights
"We are all very proud of Gilead's achievements in the third
quarter of 2006," said John C. Martin, PhD, President and Chief
Executive Officer of Gilead. "After only a two and a half month review
period, we, along with our partner Bristol-Myers Squibb, received U.S.
approval for Atripla, the first-ever once-daily single tablet regimen
for the treatment of HIV-1 infection in adults. I am pleased to report
that Atripla is off to a very strong launch and am proud that we have
contributed to providing improved dosing convenience for many
physicians and patients. We also worked diligently in partnership with
colleagues at Bristol-Myers Squibb and Merck to complete the
submission of our Marketing Authorisation Application for Atripla in
the European Union earlier this month."
Dr. Martin continued, "We also made significant progress with our
research programs during the third quarter. This progress will be
further augmented, pending the completion of our acquisition of
Myogen, by the addition of ambrisentan to Gilead's pipeline - a
product with important potential for the treatment of pulmonary
arterial hypertension. The Myogen transaction allows Gilead to
strengthen our efforts in the specialty market of pulmonary-related
diseases, as initially established with our acquisition of Corus."
HIV Franchise
In July 2006, Gilead and BMS announced that the U.S. Food and Drug
Administration granted approval of Atripla for the treatment of HIV-1
infection in adults.
In August 2006, Gilead announced the presentation of positive
96-week data from an ongoing clinical trial (Study 934) comparing a
once-daily regimen of Viread, Emtriva and Sustiva to a twice-daily
regimen of Combivir(R) (lamivudine/zidovudine) with Sustiva once daily
in treatment-naive adults with HIV. The data were presented at the XVI
International AIDS Conference, which took place August 13 to 18, 2006
in Toronto, Canada.
In September 2006, Gilead announced two presentations of long-term
efficacy and safety data from Study 903E, evaluating the company's
once-daily anti-HIV medication, Viread, as part of combination
therapy. Data from both analyses of Study 903E were presented at the
8th International Workshop on Adverse Drug Reactions and Lipodystrophy
in HIV, held September 24 to 26, 2006 in San Francisco, California.
Conference Call
At 4:30 p.m. Eastern Time today, Gilead will webcast a conference
call live on Gilead's website to discuss its third 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 1-800-798-2884 (U.S.) or 1-617-614-6207
(international) and dial the participant passcode 91313116 to access
the call. Telephone replay is available approximately two hours after
the call through October 21 2006. To access, please call
1-888-286-8010 (U.S.) or 1-617-801-6888 (international) and dial the
participant passcode 43684597. 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 earnings and earnings per diluted share are presented
excluding the impact of the IPR&D charge incurred in connection with
the acquisition of Corus. Our management believes this non-GAAP
information is useful for investors, in conjunction with our 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 the current
period but were not present in the prior period. Non-GAAP financial
information no longer excludes stock-based compensation expense
resulting from our adoption of SFAS 123R on January 1, 2006 as
management believes that investors have gained a better understanding
of stock-based compensation expense and are now including such expense
in their evaluation of the company; however, 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 our 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. These statements
include those relating to our ability to close the acquisition of
Myogen and to the potential benefits to Gilead of owning ambrisentan..
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 Gilead's
ability to successfully integrate the products and employees of Gilead
and Myogen, the ability of ambrisentan to receive regulatory approvals
and market acceptance, our ability to consummate the purchase of
Myogen as the transaction is subject to closing conditions, including
successfully completing the tender offer for Myogen shares and the
expiration or termination of the applicable Hart-Scott-Rodino
Antitrust Improvements Act waiting period., 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 and second 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 Nine months ended
September 30, September 30,
------------------- -----------------------
2006 2005 2006 2005
--------- --------- ----------- -----------
Revenues:
Product sales $670,060 $467,204 $1,820,104 $1,315,873
Royalty and contract
revenues 78,673 26,247 306,809 103,261
--------- --------- ----------- -----------
Total revenues 748,733 493,451 2,126,913 1,419,134
Costs and expenses:
Cost of goods sold
(1)(3) 109,791 65,498 278,031 186,182
Research and
development (1) 93,305 78,830 272,241 208,961
Selling, general and
administrative
(1)(5) 132,529 100,873 426,567 274,765
Purchased in-process
research and
development (4) 355,568 - 355,568 -
--------- --------- ----------- -----------
Total costs and expenses 691,193 245,201 1,332,407 669,908
--------- --------- ----------- -----------
Income from operations 57,540 248,250 794,506 749,226
Interest and other
income, net (5) 36,197 14,127 102,082 31,232
Interest expense (6,081) (26) (15,012) (50)
Minority interest in
joint venture 1,640 1,223 3,878 2,398
--------- --------- ----------- -----------
Income before provision
for income taxes (1) 89,296 263,574 885,454 782,806
Provision for income
taxes 141,460 84,342 409,764 250,494
--------- --------- ----------- -----------
Net income (loss) $(52,164) $179,232 $ 475,690 $ 532,312
========= ========= =========== ===========
Net income (loss) per
share - basic $ (0.11) $ 0.39 $ 1.04 $ 1.18
========= ========= =========== ===========
Net income (loss) per
share - diluted $ (0.11) $ 0.38 $ 0.99 $ 1.13
========= ========= =========== ===========
Shares used in per share
calculation - basic 457,433 456,098 458,773 452,923
========= ========= =========== ===========
Shares used in per share
calculation - diluted
(2) 457,433 475,965 478,101 472,350
========= ========= =========== ===========
------
Notes:
(1) On January 1, 2006, we adopted SFAS 123R and recorded stock-based
compensation expense during the three and nine months ended September
30, 2006. The following is the stock-based compensation expense
recorded in the respective caption of the statements of operations
above:
Three months ended Nine months ended
September 30, 2006 September 30, 2006
------------------- -----------------------
Stock-based
compensation
expense:
Cost of goods sold $ 2,524 $ 8,236
Research and
development
expenses 13,267 38,108
Selling, general
and
administrative
expenses 15,954 51,800
Provision for income
taxes (6,165) (21,340)
--------- ------------
Total stock-
based
compensation
expense, net of
taxes $ 25,580 $ 76,804
========= ============
(2) The net loss per diluted share calculation for the quarter ended
September 30, 2006 does not include the effect of outstanding stock
options as they were antidilutive. Shares used in the calculation of
net income per diluted share for the nine months ended September 30,
2006 include the effect of outstanding stock options to purchase 19.3
million shares of common stock applying the treasury stock method.
(3) For the nine months ended September 30, 2006, cost of goods sold
includes $6.8 million recorded in the first quarter of 2006 to
decrease the book value of inventory for our Access Program to
reflect its net realizable value.
(4) For the three and nine months ended September 30, 2006, we
incurred $355.6 million of purchased in-process research and
development as a result of our acquisition of Corus Pharma, Inc.
(5) Certain prior period amounts have been reclassified to be
consistent with current period presentation.
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GILEAD SCIENCES, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited)
(in thousands, except per share amounts)
Below is a reconciliation of our GAAP operating results and per share
amounts as reported in the attached press release. Non-GAAP earnings
and earnings per diluted share are presented excluding the impact of
the purchased in-process research and development charge incurred in
connection with the acquisition of Corus. Our management believes
this non-GAAP information is useful for investors, in conjunction
with our 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 the current period but were not present in the prior
period. Non-GAAP financial information no longer excludes stock-based
compensation expense resulting from our adoption of SFAS 123R on
January 1, 2006 as management believes that investors have gained a
better understanding of stock-based compensation expense and are now
including such expense in their evaluation of the company; however,
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 our operating results as reported
under GAAP.
Three months ended Nine months ended
September 30, 2006 September 30, 2006
------------------ ------------------
Net income (loss) (GAAP) $(52,164) $475,690
Purchased in-process research
and development expense 355,568 355,568
------------------ ------------------
Net income (Non-GAAP) $303,404 $831,258
================== ==================
Shares used in per share
calculation - diluted (GAAP) 457,433 478,101
Dilutive securities 18,829 -
------------------ ------------------
Shares used in per share
calculation - diluted (Non-
GAAP) 476,262 478,101
================== ==================
Net income (loss) per share -
diluted (GAAP) $ (0.11) $ 0.99
================== ==================
Net income per share - diluted
(Non-GAAP) $ 0.64 $ 1.74
================== ==================
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GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2006 2005
------------- ------------
(unaudited) (Note 1)
Cash, cash equivalents and marketable
securities (2) $3,204,443 $2,311,033
Other current assets (2) 1,178,452 781,175
Property, plant and equipment, net 288,105 242,568
Other noncurrent assets 628,132 431,540
------------- ------------
Total assets $5,299,132 $3,766,316
============= ============
Current liabilities (2) $ 581,829 $ 465,163
Long-term liabilities (2) 1,418,473 273,375
Stockholders' equity 3,298,830 3,027,778
------------- ------------
Total liabilities and
stockholders' equity $5,299,132 $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 Nine months ended
September 30, September 30,
------------------- -----------------------
2006 2005 2006 2005
--------- --------- -----------------------
HIV products:
Truvada - U.S. $201,482 $140,004 $ 589,010 $ 340,442
Truvada - International 107,551 22,399 268,225 36,238
--------- --------- ----------- -----------
309,033 162,403 857,235 376,680
Viread - U.S. 71,795 74,939 222,439 259,884
Viread - International 98,829 114,456 307,402 336,465
--------- --------- ----------- -----------
170,624 189,395 529,841 596,349
Atripla - U.S. 68,373 - 68,373 -
Atripla - International - - - -
--------- --------- ----------- -----------
68,373 - 68,373 -
Emtriva - U.S. 5,064 4,787 13,384 15,100
Emtriva - International 4,208 6,950 14,515 21,214
--------- --------- ----------- -----------
9,272 11,737 27,899 36,314
Total HIV products - U.S. 346,714 219,730 893,206 615,426
Total HIV products -
International 210,588 143,805 590,142 393,917
--------- --------- ----------- -----------
557,302 363,535 1,483,348 1,009,343
Hepsera - U.S. 23,426 21,940 69,615 59,379
Hepsera - International 31,687 24,953 94,997 75,985
--------- --------- ----------- -----------
55,113 46,893 164,612 135,364
AmBisome 55,313 54,736 164,740 165,157
Other products 2,332 2,040 7,404 6,009
--------- --------- ----------- -----------
Total product sales $670,060 $467,204 $1,820,104 $1,315,873
========= ========= =========== ===========
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