Gilead Reports 4Q Loss

The FINANCIAL — Gilead Sciences, Inc. announced on February 6 its results of operations for the fourth quarter and full year 2017.

Total revenues for the fourth quarter of 2017 were $5.9 billion compared to $7.3 billion for the same period in 2016. Net loss for the fourth quarter of 2017 was $3.9 billion, or $2.96 loss per share, compared to net income of $3.1 billion, or $2.34 per diluted share for the same period in 2016. The net loss for the fourth quarter includes an estimated $5.5 billion charge related to the enactment of the Tax Cuts and Jobs Act (Tax Reform). Non-GAAP net income for the fourth quarter of 2017 was $2.3 billion, or $1.78 per diluted share, compared to $3.6 billion, or $2.70 per diluted share for the same period in 2016. Non-GAAP net income excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, and the impact of Tax Reform, according to Gilead.

Full year 2017 total revenues were $26.1 billion, compared to $30.4 billion for 2016. Net income for 2017 was $4.6 billion, or $3.51 per diluted share, compared to $13.5 billion, or $9.94 per diluted share for 2016. Non-GAAP net income for 2017 was $11.7 billion, or $8.84 per diluted share, compared to $15.7 billion, or $11.57 per diluted share for 2016.

Product Sales

Total product sales for the fourth quarter of 2017 were $5.8 billion, compared to $7.2 billion for the same period in 2016. Product sales for the fourth quarter of 2017 were $4.1 billion in the United States, $1.1 billion in Europe and $553 million in other locations. Product sales for the fourth quarter of 2016 were $4.9 billion in the United States, $1.4 billion in Europe and $870 million in other locations.

Total product sales during 2017 were $25.7 billion, compared to $30.0 billion in 2016. For 2017, product sales were $18.1 billion in the United States, $5.0 billion in Europe and $2.6 billion in other locations. For 2016, product sales were $19.3 billion in the United States, $6.1 billion in Europe and $4.6 billion in other locations.

Antiviral Product Sales

Antiviral product sales, which include sales of our HIV, chronic hepatitis B (HBV) and chronic hepatitis C (HCV) products, were $5.2 billion for the fourth quarter of 2017 compared to $6.6 billion for the same period in 2016. For 2017, antiviral product sales were $23.3 billion compared to $27.7 billion in 2016.

HIV and HBV product sales for the fourth quarter of 2017 were $3.7 billion compared to $3.4 billion for the same period in 2016 and $14.2 billion for the full year 2017 compared to $12.9 billion in 2016. The increases were primarily driven by the continued uptake of our tenofovir alafenamide (TAF)-based products, Genvoya (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg), Descovy (emtricitabine 200 mg/tenofovir alafenamide 25 mg) and Odefsey (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg).

HCV product sales, which consist of Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), Sovaldi (sofosbuvir 400 mg), Epclusa (sofosbuvir 400 mg/velpatasvir 100 mg) and Vosevi (sofosbuvir 400 mg/velpatasvir 100 mg/voxilaprevir 100 mg), were $1.5 billion for the fourth quarter of 2017 compared to $3.2 billion for the same period in 2016 and $9.1 billion for the full year 2017 compared to $14.8 billion in 2016. The declines were across all major markets.
Other Product Sales

Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B for liposome injection), were $624 million for the fourth quarter of 2017 compared to $621 million for the same period in 2016. For 2017, other product sales were $2.3 billion compared to $2.2 billion in 2016.

During the fourth quarter of 2017, compared to the same period in 2016:

R&D expenses decreased primarily due to the 2016 impacts of ongoing milestone payments and an impairment charge related to in-process R&D (IPR&D), partially offset by Gilead’s purchase of Cell Design Labs, Inc. (Cell Design Labs) in 2017.

Non-GAAP R&D expenses decreased primarily due to the 2016 impact of ongoing milestone payments.

SG&A expenses increased primarily due to acquisition-related costs associated with Gilead’s acquisition of Kite Pharma, Inc. (Kite).
For 2017 compared to 2016:

R&D expenses decreased primarily due to the 2016 impacts of impairment charges related to IPR&D, ongoing milestone payments, up-front collaboration expenses related to Gilead’s license and collaboration agreement with Galapagos NV and Gilead’s purchase of Nimbus Apollo, Inc., partially offset by Gilead’s purchase of Cell Design Labs in 2017.

Non-GAAP R&D expenses decreased primarily due to the 2016 impact of ongoing milestone payments.

SG&A expenses increased primarily due to acquisition-related costs associated with Gilead’s acquisition of Kite.

Non-GAAP SG&A expenses increased primarily due to higher branded prescription drug fee expense.

Provision for Income Taxes and Tax Reform

Provision for income taxes was $6.0 billion for the fourth quarter of 2017 compared to $821 million for the same period in 2016 and $8.9 billion for the full year 2017 compared to $3.6 billion in 2016. The increases were primarily due to an estimated charge of $5.5 billion from Tax Reform, which was enacted on December 22, 2017 and lowers U.S. corporate income tax rates as of January 1, 2018, implements a territorial tax system and imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries. This estimate is provisional and based on our initial analysis and current interpretation. Given the complexity of the legislation, anticipated guidance from the U.S. Treasury, and the potential for additional guidance from the Securities and Exchange Commission (“SEC”) or the Financial Accounting Standards Board, this estimate may be adjusted during 2018.

Cash, Cash Equivalents and Marketable Securities

As of December 31, 2017, Gilead had $36.7 billion of cash, cash equivalents and marketable securities compared to $32.4 billion as of December 31, 2016. During 2017, Gilead generated $11.9 billion in operating cash flow and in connection with the acquisition of Kite, Gilead issued $3.0 billion aggregate principal amount of senior unsecured notes and $6.0 billion aggregate principal amount of term loan facilities, of which $1.5 billion was repaid in December 2017. Additionally, Gilead paid cash dividends of $2.7 billion and utilized $954 million on stock repurchases.

Corporate Highlights

Announced that Executive Chairman John C. Martin, PhD will transition from his current role of Executive Chairman to Chairman of the Board of Directors effective March 9, 2018.

Announced the acquisition of Cell Design Labs, gaining new technology platforms that will enhance research and development efforts in cellular therapy.

Announced the launch of the Gilead COMPASS (COMmitment to Partnership in Addressing HIV/AIDS in Southern States) Initiative, a 10-year, $100 million commitment to support organizations working to address the HIV/AIDS epidemic in the Southern United States.

Announced the promotion of Alessandro Riva, MD, to Executive Vice President, Oncology Therapeutics, with responsibility for Gilead’s hematology and oncology programs, including cell therapy research and development.

Product & Pipeline Updates announced by Gilead during the Fourth Quarter of 2017 include:

HIV and Liver Diseases Programs

Presented data at The Liver Meeting 2017 which included the announcement of:

Results from a Phase 2, randomized, placebo-controlled trial evaluating two doses of GS-0976, an oral, investigational inhibitor of Acetyl-CoA carboxylase, in patients with nonalcoholic steatohepatitis (NASH). The data demonstrate that the higher dose of GS-0976 (20 mg taken orally once daily) when administered for 12 weeks was associated with statistically significant reductions in hepatic steatosis (buildup of fat in the liver) and a noninvasive marker of fibrosis compared to placebo.

Results from an open-label Phase 2 study evaluating once-daily Harvoni for 12 weeks among HCV genotype 1 patients with severe renal impairment (creatinine clearance ≤ 30 mL/min). 100 percent of patients achieved a sustained virologic response 12 weeks after completing therapy (SVR12), including patients with compensated cirrhosis and those who had failed prior treatment.

Results from an open-label Phase 2 study evaluating once-daily Epclusa for 12 weeks among 79 liver transplant patients with genotype 1-4 chronic HCV infection. Treatment with Epclusa resulted in an overall SVR12 rate of 96 percent, including patients with cirrhosis and prior treatment failure, and was well tolerated.
Updated results from two Phase 3 studies demonstrating improved long-term bone and renal safety in HBV-infected patients 48-weeks after switching from Viread (tenofovir disoproxil fumarate 300mg) to Vemlidy (tenofovir alafenamide 25mg).

Announced detailed 48-week results from a Phase 3 study evaluating the efficacy and safety of switching virologically suppressed HIV-1 infected adult patients from a multi-tablet regimen containing a boosted protease inhibitor (bPI) to a fixed-dose combination of bictegravir (50 mg) (BIC), a novel investigational integrase strand transfer inhibitor, and emtricitabine/tenofovir alafenamide (200/25 mg) (FTC/TAF), a dual-NRTI backbone. In the ongoing study, BIC/FTC/TAF was found to be statistically non-inferior to regimens containing bPIs and demonstrated no treatment-emergent resistance at 48 weeks. The data were presented at IDWeek 2017.

Announced a new licensing agreement with the Medicines Patent Pool (MPP), a United Nations-backed public health organization, to expand access to BIC upon regulatory approval in the United States. Through this agreement, MPP can sub-license rights to BIC to generic drug companies in India, China and South Africa to manufacture therapies containing BIC for distribution in 116 low- and middle-income countries.

Oncology and Cell Therapy Programs

Announced updated results from the ongoing Phase 1/2 ZUMA-3 study of KTE-C19, a CD19 chimeric antigen receptor T (CAR T) cell therapy, which is investigational, for the treatment of adult patients with relapsed or refractory acute lymphoblastic leukemia (ALL). With a minimum of eight weeks of follow-up, 71 percent of ALL patients (n=17/24) who received a single infusion of KTE-C19 achieved complete tumor remission (complete remission (CR) or CR with incomplete hematological recovery). The ZUMA-3 study results were presented in an oral session at the Annual Meeting of the American Society of Hematology.
Announced long-term follow-up data from the ZUMA-1 study of Yescarta (axicabtagene ciloleucel) in patients with refractory large B-cell lymphoma. With a minimum follow-up of one year after a single infusion of Yescarta (median follow-up of 15.4 months), 42 percent of patients continued to respond to therapy, including 40 percent with a complete remission. Detailed results from this updated analysis were simultaneously presented at the Annual Meeting of the American Society of Hematology, and published in The New England Journal of Medicine.

Announced that U.S. Food and Drug Administration has granted regular approval to Yescarta, the first CAR T cell therapy for the treatment of adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (DLBCL) not otherwise specified, primary mediastinal large B-cell lymphoma, high-grade B-cell lymphoma, and DLBCL arising from follicular lymphoma (transformed follicular lymphoma).