GILEAD SCIENCES, INC.
This Quarterly Report on Form 10-Q contains forward-looking statements regarding
future events and our future results that are subject to the safe harbors
created under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. The forward-looking statements are contained
principally in this section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Risk Factors." Words such as
"expect," "anticipate," "target," "goal," "project," "hope," "intend," "plan,"
"believe," "seek," "estimate," "continue," "may," "could," "should," "might,"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. In addition, any statements other than
statements of historical fact are forward-looking statements, including
statements regarding overall trends, operating cost and revenue trends,
liquidity and capital needs, collaboration and licensing arrangements, ongoing
litigation and investigation matters, statements regarding the anticipated
future impact on our business of the ongoing coronavirus disease 2019
("COVID-19") and related public health measures and other statements of
expectations, beliefs, future plans and strategies, anticipated events or trends
and similar expressions. We have based these forward-looking statements on our
current expectations about future events. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that are
difficult to predict. Our actual results may differ materially from those
suggested by these forward-looking statements for various reasons, including
those identified below under Risk Factors. Given these risks and uncertainties,
you are cautioned not to place undue reliance on forward-looking statements. The
forward-looking statements included in this report are made only as of the date
hereof unless otherwise specified. Except as required under federal securities
laws and the rules and regulations of the Securities and Exchange Commission , we
do not undertake and specifically decline any obligation to update any of these
statements or to publicly announce the results of any revisions to any
forward-looking statements after the distribution of this report, whether as a
result of new information, future events, changes in assumptions or otherwise.
In evaluating our business, you should carefully consider the risks described in
the section entitled Risk Factors under Part II, Item 1A of this Quarterly
Report in addition to the other information in this Quarterly Report on
Form 10-Q. Any of the risks contained herein could materially and adversely
affect our business, results of operations and financial condition.
You should read the following management's discussion and analysis of our
financial condition and results of operations in conjunction with our audited
Consolidated Financial Statements and related notes thereto included as part of
our Annual Report on Form 10-K for the year ended December 31, 2020 and our
unaudited Condensed Consolidated Financial Statements for the six months ended
June 30, 2021 and other disclosures (including the disclosures under Part II,
Item 1A, "Risk Factors") included in this Quarterly Report on Form 10-Q. Our
Condensed Consolidated Financial Statements have been prepared in accordance
with U.S. generally accepted accounting principles and are presented in U.S.
dollars.
MANAGEMENT OVERVIEW
Gilead Sciences, Inc. ("Gilead", "we", "our" or "us") is a biopharmaceutical
company that has pursued and achieved breakthroughs in medicine for more than
three decades, with the goal of creating a healthier world for all people. We
are committed to advancing innovative medicines to prevent and treat
life-threatening diseases, including HIV, viral hepatitis and cancer. We operate
in more than 35 countries worldwide, with headquarters in Foster City,
California .
Our portfolio of marketed products includes AmBisome®, Atripla®, Biktarvy®,
Cayston®, Complera®/Eviplera®, Descovy®, Descovy for PrEP®, Emtriva®, Epclusa®,
Genvoya®, Harvoni®, Hepcludex® (bulevirtide), Hepsera®, Jyseleca®, Letairis®,
Odefsey®, Ranexa®, Sovaldi®, Stribild®, Tecartus®, Trodelvy®, Truvada®, Truvada
for PrEP®, Tybost®, Veklury®, Vemlidy®, Viread®, Vosevi®, Yescarta® and
Zydelig®. The approval status of Hepcludex and Jyseleca vary worldwide, and
Hepcludex and Jyseleca are not approved in the United States . We also sell and
distribute authorized generic versions of Epclusa and Harvoni in the United
States through our separate subsidiary, Asegua Therapeutics, LLC . In addition,
we sell and distribute certain products through our corporate partners under
collaborative agreements.
Business Highlights(1)
Oncology
•In July 2021 , Kite Pharma, Inc. ("Kite"), a Gilead company, entered into a
purchase agreement with BioNTech SE ("BioNTech") for BioNTech to acquire Kite's
solid tumor neoantigen T cell receptor research and development platform and
clinical manufacturing facility in Gaithersburg, Maryland . The transaction was
completed in August 2021 .
•In June 2021 , Fosun Kite Biotechnology Co. Ltd , a joint venture between Kite
and Shanghai Fosun Pharmaceutical (Group) Co., Ltd, received approval from the
China National Medical Products Administration for axicabtagene ciloleucel for
the treatment of adult patients with relapsed or refractory large B-cell
lymphoma in China .
•In June 2021 , Kite entered into a research collaboration and license agreement
with Shoreline Biosciences, Inc. to develop novel allogeneic cell therapies
across a variety of cancer targets.
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Viral Diseases
•In June 2021 , Gilead submitted a New Drug Application ("NDA") to U.S. Food and
Drug Administration ("FDA") for lenacapavir, an investigational, long-acting
agent in development for the treatment of HIV-1 in people with limited therapy
options.
•In June 2021 , FDA granted approval of a new oral pellet formulation of Epclusa,
expanding the pediatric indication to treat children as young as 3 years of age
with chronic hepatitis C virus ("HCV").
______________________________________________________
(1) We announced and discussed these updates, subsequent to the issuance of our
Quarterly Report on Form 10-Q for the first quarter of 2021, in further detail
in press releases available on our website at www.gilead.com. Readers are also
encouraged to review all other press releases available on our website mentioned
above. The content on the referenced websites does not constitute a part of and
is not incorporated by reference into this Quarterly Report on Form 10-Q.
Quarterly Financial Highlights
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except percentages and
per share amounts) 2021 2020 Change 2021 2020 Change
Total revenues $ 6,217 $ 5,143 21 % $ 12,640 $ 10,691 18 %
Net income (loss) attributable to
Gilead $ 1,522 $ (3,339) NM $ 3,251 $ (1,788) NM
Diluted earnings (loss) per share
NM$ 2.58 $ (1.42) NM
________________________________
NM - Not Meaningful Total revenues increased by 21% to$6.2 billion for the second quarter of 2021, compared to$5.1 billion for the same period in 2020, primarily due to sales of Veklury, our FDA-approved treatment for hospitalized patients with COVID-19. Net income attributable to Gilead was$1.5 billion , or$1.21 diluted earnings per share, for the second quarter of 2021, compared to net loss attributable to Gilead of$3.3 billion , or$2.66 loss per share for the same period in 2020. The change was primarily due to an IPR&D charge of$4.5 billion in the second quarter of 2020 related to our acquisition ofForty Seven, Inc. ("Forty Seven") and revenue growth in the second quarter of 2021, partially offset by unfavorable changes in the fair value of our equity investments primarily in Galapagos NV ("Galapagos"). RESULTS OF OPERATIONS Total Revenues The following table summarizes the period-over-period changes in our revenues: Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages) 2021 2020 Change 2021 2020 Change Product sales: HIV$ 3,938 $ 4,000 (2)%$ 7,588 $ 8,134 (7)% HCV 549 448 23% 1,059 1,177 (10)% HBV/HDV 237 219 8% 457 405 13% Veklury 829 - NM 2,285 - NM Cell Therapy 219 157 39% 410 297 38% Trodelvy 89 - NM 161 - NM Other 291 243 20% 532 521 2% Total product sales 6,152 5,067 21% 12,492 10,534 19% Royalty, contract and other revenues 65 76 (14)% 148 157 (6)% Total revenues$ 6,217 $ 5,143 21%$ 12,640 $ 10,691 18%
________________________________
NM - Not Meaningful
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For the second quarter of 2021 compared to the second quarter of 2020
Total Product Sales
Total product sales increased by 21% to $6.2 billion for the second quarter of
2021, compared to $5.1 billion for the same period in 2020, primarily due to
sales of Veklury. The second quarter of 2021 also reflects the continued growth
of Biktarvy in all geographies, higher HCV product sales in the United States
and Europe , and the continued uptake of Trodelvy and Tecartus in the United
States . We obtained Trodelvy through the fourth quarter 2020 acquisition of
Immunomedics, Inc. ("Immunomedics"). The increases were partially offset by
lower HIV product sales, as expected, primarily due to the continued generic
competition following the October 2020 loss of exclusivity of Truvada and
Atripla in the United States .
HIV
HIV product sales decreased by 2% to $3.9 billion for the second quarter of
2021, compared to $4.0 billion for the same period in 2020. The decline was
primarily due to the anticipated decline in sales volume of our Truvada
(emtricitabine ("FTC") and tenofovir disoproxil fumarate ("TDF"))-based products
driven by the continued generic competition following the October 2020 loss of
exclusivity of Truvada and Atripla in the United States . Truvada and Atripla
product sales were $322 million lower for the second quarter of 2021, compared
to the same period in 2020. The decline was partially offset by Descovy
(FTC /TAF)-based products, driven by Biktarvy growth and demand for Descovy for
pre-exposure prophylaxis ("PrEP"), as well as the second quarter 2020 reversal
of the first quarter 2020 pull forward of channel inventory purchases due to the
COVID-19 pandemic. HIV product sales for the second quarter of 2021 were also
impacted by lower average net selling price driven by unfavorable payer mix. We
expect Truvada sales to continue to decline in 2021 and beyond as multiple
generics are expected to enter the market.
The COVID-19 pandemic continues to impact our HIV business. In the United
States , as anticipated, we started to see gradual recovery in the HIV treatment
market volume in the second quarter of 2021; however, it may take several
quarters for the United States treatment market to return to pre-pandemic
levels.
HCV
HCV product sales increased by 23% to $549 million for the second quarter of
2021, compared to $448 million for the same period in 2020, primarily due to
improved market starts in the United States and Europe and higher average net
selling price.
Hepatitis B Virus ("HBV")/Hepatitis Delta Virus ("HDV")
HBV and HDV product sales increased by 8% to $237 million for the second quarter
of 2021, compared to $219 million for the same period in 2020, primarily due to
higher Vemlidy sales volume driven by increased demand primarily in geographies
outside the United States and Europe . Hepcludex also contributed $7 million in
the second quarter of 2021 reflecting the first full quarter of sales for Gilead
following the completion of our first quarter 2021 acquisition of MYR GmbH
("MYR"). The increases were partially offset by lower Viread product sales.
Veklury
Veklury product sales were $829 million in the second quarter of 2021. There
were no Veklury sales in the second quarter of 2020. Sales of Veklury are
generally affected by, among other things, COVID-19 related rates of infections,
hospitalizations and vaccinations, and will continue to be subject to
significant volatility and uncertainty.
Cell Therapy
Cell Therapy product sales increased by 39% to $219 million for the second
quarter of 2021, compared to $157 million for the same period in 2020. The
growth was primarily due to the July 2020 launch of Tecartus in the United
States and higher demand for Yescarta, including for the treatment of relapsed
or refractory indolent follicular lymphoma in the United States , as well as
volume growth for Yescarta and the launch of Tecartus in Europe .
Trodelvy
Trodelvy product sales were $89 million in the United States for the second
quarter of 2021, following the full FDA approval for second-line metastatic
triple-negative breast cancer and accelerated approval in April 2021 for
metastatic urothelial cancer.
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Other Product Sales
Other product sales, which include AmBisome, Cayston, Jyseleca, Letairis, Ranexa
and Zydelig, increased by 20% to $291 million in the second quarter of 2021,
compared to $243 million for the same period in 2020. The increase was primarily
due to higher AmBisome sales volume driven by higher demand in geographies
outside the United States , partially offset by lower Letairis sales, as
anticipated, due to continued generic competition following the loss of
exclusivity in 2019.
Product Sales by Geographic Area
Of our total product sales, 32% and 26% were generated outside the United States
for the second quarter of 2021 and 2020, respectively. We generally face
exposure to movements in foreign currency exchange rates, primarily in the Euro.
We use foreign currency exchange contracts to hedge a portion of our foreign
currency exposures. Foreign currency exchange, net of hedges, had a favorable
impact on our product sales of $86 million for the second quarter of 2021, based
on a comparison using foreign currency exchange rates from the second quarter of
2020.
Product sales in the United States increased by 12% to $4.2 billion in the
second quarter of 2021, compared to $3.8 billion for the same period in 2020,
primarily due to sales of Veklury as well as the continued growth of Biktarvy,
higher HCV sales driven by improved market starts, and the continued uptake of
Trodelvy and Cell Therapy products. The increase in product sales in the United
States were also impacted by the second quarter 2020 reversal of the first
quarter 2020 pull forward of channel inventory purchases due to the COVID-19
pandemic. The increases were partially offset by the loss of exclusivity in 2020
of Truvada and Atripla, as expected, and lower sales of Letairis, as
anticipated, due to the losses of exclusivity in 2019.
Product sales in Europe increased by 58% to $1.1 billion for the second quarter
of 2021, compared to $724 million for the same period in 2020, primarily due to
sales of Veklury, the continued growth of Biktarvy, higher HCV sales driven by
improved market starts and higher AmBisome sales driven by an increase in
demand. Foreign currency exchange, net of hedges, had a favorable impact on our
Europe product sales of $52 million for the second quarter of 2021, based on a
comparison using foreign currency exchange rates from the second quarter of
2020.
Product sales in other locations increased by 38% to $792 million for the second
quarter of 2021, compared to $573 million for the same period in 2020, primarily
due to higher sales volumes of Veklury, Biktarvy, AmBisome and Vemlidy.
For the first half of 2021 compared to the first half of 2020
Total Product Sales
Total product sales increased by 19% to $12.5 billion for the first half of
2021, compared to $10.5 billion for the same period in 2020, primarily due to
sales of Veklury. The first half of 2021 also reflects the continued growth of
Biktarvy in all geographies and the continued uptake of Trodelvy and Cell
Therapy and HBV/HDV products. The increases were partially offset by a decline
in HIV product sales other than Biktarvy as well as lower HCV sales. The
decrease in HIV product sales, as expected, were primarily due to the continued
generic competition following the October 2020 loss of exclusivity of Truvada
and Atripla in the United States .
HIV
HIV product sales decreased by 7% to $7.6 billion for the first half of 2021,
compared to $8.1 billion for the same period in 2020. The decrease was primarily
due to the anticipated decline in sales volume of our Truvada (FTC /TDF)-based
products driven by the continued generic competition following the October 2020
loss of exclusivity of Truvada and Atripla in the United States . Truvada and
Atripla product sales were $657 million lower for the first half of 2021,
compared to the same period in 2020. The decline was partially offset by Descovy
(FTC /TAF)-based products driven by Biktarvy growth. HIV product sales for the
first half of 2021 were also impacted by lower average net selling price driven
by unfavorable payer mix.
HCV
HCV product sales decreased by 10% to $1.1 billion for the first half of 2021,
compared to $1.2 billion for the same period in 2020, primarily due to lower
market starts due to the impact from the COVID-19 pandemic.
HBV/HDV
HBV and HDV product sales increased by 13% to $457 million for the first half of
2021, compared to $405 million for the same period in 2020, primarily due to
higher Vemlidy sales volume in certain other international locations. The first
half of 2021 also reflects $13 million of Hepcludex sales following the
completion of our first quarter 2021 acquisition of MYR. The increases were
partially offset by lower Viread product sales.
Veklury
Veklury product sales were $2.3 billion in the first half of 2021. There were no
Veklury sales during the first half of 2020.
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Cell Therapy
Cell Therapy product sales increased by 38% to $410 million for the first half
of 2021, compared to $297 million for the same period in 2020. The growth was
primarily due to the July 2020 launch of Tecartus in the United States , as well
as higher volume for Yescarta and the launch of Tecartus in Europe .
Trodelvy
Trodelvy product sales were $161 million in the United States for the first half
of 2021 following the completion of our fourth quarter 2020 acquisition of
Immunomedics.
Other Product Sales
Other product sales, which include AmBisome, Cayston, Jyseleca, Letairis, Ranexa
and Zydelig, increased by 2% to $532 million in the first half of 2021, compared
to $521 million for the same period in 2020. The increase was primarily due to
higher AmBisome sales volume driven by higher demand in geographies outside the
United States , partially offset by lower Letairis sales, as anticipated, due to
continued generic competition following the loss of exclusivity in 2019.
Product Sales by Geographic Area
Of our total product sales, 32% and 26% were generated outside the United States
for the first half of 2021 and 2020, respectively. We generally face exposure to
movements in foreign currency exchange rates, primarily in the Euro. We use
foreign currency exchange contracts to hedge a portion of our foreign currency
exposures. Foreign currency exchange, net of hedges, had a favorable impact on
our product sales of $166 million for the first half of 2021, based on a
comparison using foreign currency exchange rates from the first half of 2020.
Product sales in the United States increased by 9% to $8.5 billion in the first
half of 2021, compared to $7.8 billion for the same period in 2020, primarily
due to sales of Veklury, the growth of Biktarvy, the continued uptake of
Trodelvy and the launch Tecartus in the third quarter of 2020. The increases
were partially offset by lower HCV sales driven by lower demand, the loss of
exclusivity of Truvada and Atripla, as expected, and the anticipated decline in
sales volume of Letairis following the loss of exclusivity in 2019.
Product sales in Europe increased by 47% to $2.4 billion for the first half of
2021, compared to $1.7 billion for the same period in 2020, primarily due to
sales of Veklury, the continued growth of Biktarvy, higher AmBisome sales driven
by higher demand and the continued growth of Yescarta and the launch of
Tecartus. The higher HCV sales were driven by higher average net selling price
due to a favorable government rebate adjustment from the first quarter of 2021,
partially offset by lower sales volume driven by lower market starts due to the
impact from the COVID-19 pandemic. Foreign currency exchange, net of hedges, had
a favorable impact on our Europe product sales of $104 million for the first
half of 2021, based on a comparison using foreign currency exchange rates from
the first half of 2020.
Product sales in other locations increased by 44% to $1.6 billion for the first
half of 2021, compared to $1.1 billion for the same period in 2020, primarily
due to higher sales volumes of Veklury, Biktarvy, Vemlidy and AmBisome.
The following table summarizes the period-over-period changes in our product
sales:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except percentages) 2021 2020 Change 2021 2020 Change
HIV Products
Descovy (FTC /TAF) Based Products
Biktarvy - U.S. $ 1,586 $ 1,350 17 % $ 3,051 $ 2,762 10 %
Biktarvy - Europe 237 153 55 % 453 334 36 %
Biktarvy - Other International 171 101 69 % 314 201 56 %
1,994 1,604 24 % 3,818 3,297 16 %
Descovy - U.S. 357 337 6 % 639 700 (9) %
Descovy - Europe 44 46 (4) % 86 107 (20) %
Descovy - Other International 34 34 - % 69 68 1 %
435 417 4 % 794 875 (9) %
Genvoya - U.S. 551 646 (15) % 1,057 1,258 (16) %
Genvoya - Europe 100 109 (8) % 206 260 (21) %
Genvoya - Other International 55 61 (10) % 116 122 (5) %
706 816 (13) % 1,379 1,640 (16) %
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Odefsey - U.S. 258 273 (5) % 498 542 (8) %
Odefsey - Europe 111 98 13 % 224 225 - %
Odefsey - Other International 13 11 18 % 27 24 13 %
382 382 - % 749 791 (5) %
Revenue share - Symtuza(1) - U.S. 86 90 (4) % 175 162 8 %
Revenue share - Symtuza(1) - Europe 40 40 - % 84 78 8 %
Revenue share - Symtuza(1) - Other
International 3 2 50 % 5 4 25 %
129 132 (2) % 264 244 8 %
Total Descovy (FTC /TAF) Based
Products - U.S. 2,838 2,696 5 % 5,420 5,424 - %
Total Descovy (FTC /TAF) Based
Products - Europe 532 446 19 % 1,053 1,004 5 %
Total Descovy (FTC /TAF) Based
Products - Other International 276 209 32 % 531 419 27 %
3,646 3,351 9 % 7,004 6,847 2 %
Truvada (FTC /TDF) Based Products
Atripla - U.S. 52 95 (45) % 75 176 (57) %
Atripla - Europe 4 5 (20) % 8 12 (33) %
Atripla - Other International 4 3 33 % 8 10 (20) %
60 103 (42) % 91 198 (54) %
Complera / Eviplera - U.S. 20 27 (26) % 45 51 (12) %
Complera / Eviplera - Europe 39 42 (7) % 73 89 (18) %
Complera / Eviplera - Other
International 3 3 - % 7 8 (13) %
62 72 (14) % 125 148 (16) %
Stribild - U.S. 35 39 (10) % 66 73 (10) %
Stribild - Europe 11 12 (8) % 22 29 (24) %
Stribild - Other International 5 8 (38) % 9 10 (10) %
51 59 (14) % 97 112 (13) %
Truvada - U.S. 94 370 (75) % 213 753 (72) %
Truvada - Europe 6 6 - % 13 14 (7) %
Truvada - Other International 8 11 (27) % 17 26 (35) %
108 387 (72) % 243 793 (69) %
Total Truvada (FTC /TDF) Based
Products - U.S. 201 531 (62) % 399 1,053 (62) %
Total Truvada (FTC /TDF) Based
Products - Europe 60 65 (8) % 116 144 (19) %
Total Truvada (FTC /TDF) Based
Products - Other International 20 25 (20) % 41 54 (24) %
281 621 (55) % 556 1,251 (56) %
Other HIV(2) - U.S. 5 11 (55) % 11 14 (21) %
Other HIV(2) - Europe 4 1 300 % 5 3 67 %
Other HIV(2) - Other International 2 16 (88) % 12 19 (37) %
11 28 (61) % 28 36 (22) %
Total HIV - U.S. 3,044 3,238 (6) % 5,830 6,491 (10) %
Total HIV - Europe 596 512 16 % 1,174 1,151 2 %
Total HIV - Other International 298 250 19 % 584 492 19 %
3,938 4,000 (2) % 7,588 8,134 (7) %
HCV Products
Ledipasvir / Sofosbuvir(3) - U.S. 30 24 25 % 49 77 (36) %
Ledipasvir / Sofosbuvir(3) - Europe 3 4 (25) % 19 15 27 %
Ledipasvir / Sofosbuvir(3) - Other
International 29 39 (26) % 50 87 (43) %
62 67 (7) % 118 179 (34) %
Sofosbuvir / Velpatasvir(4) - U.S. 262 165 59 % 476 476 - %
Sofosbuvir / Velpatasvir(4) - Europe 82 57 44 % 157 179 (12) %
Sofosbuvir / Velpatasvir(4) - Other
International 98 113 (13) % 190 244 (22) %
442 335 32 % 823 899 (8) %
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Other HCV(5) - U.S. 35 31 13 % 60 65 (8) %
Other HCV(5) - Europe 8 9 (11) % 52 24 117 %
Other HCV(5) - Other International 2 6 (67) % 6 10 (40) %
45 46 (2) % 118 99 19 %
Total HCV - U.S. 327 220 49 % 585 618 (5) %
Total HCV - Europe 93 70 33 % 228 218 5 %
Total HCV - Other International 129 158 (18) % 246 341 (28) %
549 448 23 % 1,059 1,177 (10) %
HBV/HDV Products
Vemlidy - U.S. 86 76 13 % 163 149 9 %
Vemlidy - Europe 8 7 14 % 16 14 14 %
Vemlidy - Other International 106 68 56 % 202 124 63 %
200 151 32 % 381 287 33 %
Viread - U.S. 3 3 - % 7 7 - %
Viread - Europe 8 8 - % 15 19 (21) %
Viread - Other International 17 54 (69) % 37 79 (53) %
28 65 (57) % 59 105 (44) %
Other HBV/HDV(6) - U.S. 1 1 - % 1 9 (89) %
Other HBV/HDV(6) - Europe 8 2 300 % 16 4 300 %
9 3 200 % 17 13 31 %
Total HBV/HDV - U.S. 90 80 13 % 171 165 4 %
Total HBV/HDV - Europe 24 17 41 % 47 37 27 %
Total HBV/HDV - Other International 123 122 1 % 239 203 18 %
237 219 8 % 457 405 13 %
Veklury
Veklury - U.S. 416 - NM 1,236 - NM
Veklury - Europe 264 - NM 652 - NM
Veklury - Other International 149 - NM 397 - NM
829 - NM 2,285 - NM
Cell Therapy Products
Tecartus - U.S. 32 - NM 59 - NM
Tecartus - Europe 9 1 800 %
13 1 1,200 %
41 1 4,000 % 72 1 7,100 %
Yescarta - U.S. 108 95 14 % 200 198 1 %
Yescarta - Europe 61 56 9 % 122 93 31 %
Yescarta - Other International 9 5 80 % 16 5 220 %
178 156 14 % 338 296 14 %
Total Cell Therapy - U.S. 140 95 47 % 259 198 31 %
Total Cell Therapy - Europe 70 57 23 % 135 94 44 %
Total Cell Therapy - Other International 9 5 80 % 16 5 220 %
219 157 39 % 410 297 38 %
Trodelvy - U.S. 89 - NM 161 - NM
Other Products
AmBisome - U.S. 13 10 30 % 25 28 (11) %
AmBisome - Europe 69 49 41 % 135 108 25 %
AmBisome - Other International 74 36 106 % 117 78 50 %
156 95 64 % 277 214 29 %
Letairis - U.S. 57 80 (29) % 111 163 (32) %
Ranexa - U.S. 2 1 100 % 5 9 (44) %
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Zydelig - U.S. 8 8 - % 16 16 - %
Zydelig - Europe 13 9 44 % 20 21 (5) %
Zydelig - Other International 1 1 - % 1 1 - %
22 18 22 % 37 38 (3) %
Other(7) - U.S. 27 38 (29) % 54 71 (24) %
Other(7) - Europe 18 10 80 % 31 22 41 %
Other(7) - Other International 9 1 800 % 17 4 325 %
54 49 10 % 102 97 5 %
Total Other - U.S. 107 137 (22) % 211 287 (26) %
Total Other - Europe 100 68 47 % 186 151 23 %
Total Other - Other International 84 38 121 % 135 83 63 %
291 243 20 % 532 521 2 %
Total product sales - U.S. 4,213 3,770 12 % 8,453 7,759 9 %
Total product sales - Europe 1,147 724 58 % 2,422 1,651 47 %
Total product sales - Other
International 792 573 38 % 1,617 1,124 44 %
$ 6,152 $ 5,067 21 % $ 12,492 $ 10,534 19 %
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NM - Not Meaningful (1) Represents our revenue from cobicistat (C), emtricitabine (FTC) and tenofovir alafenamide (TAF) in Symtuza (darunavir/C/FTC /TAF), a fixed dose combination product commercialized byJanssen Sciences Ireland Unlimited Company . (2) Includes Emtriva and Tybost. (3) Amounts consist of sales of Harvoni and the authorized generic version of Harvoni sold by our separate subsidiary,Asegua Therapeutics LLC . (4) Amounts consist of sales of Epclusa and the authorized generic version of Epclusa sold by our separate subsidiary,Asegua Therapeutics LLC . (5) Includes Vosevi and Sovaldi. (6) Includes Hepcludex and Hepsera. The first half of 2021 includes$13 million of Hepcludex sales recorded subsequent to our acquisition of MYR. The first half of 2021 Hepcludex sales, including the period prior to the completion of our acquisition of MYR were$20 million . (7) Includes Cayston and Jyseleca. Costs and Expenses The following table summarizes the period-over-period changes in our costs and expenses: Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages) 2021 2020 Change 2021 2020 Change Cost of goods sold$ 1,390 $ 1,064 31 %$ 2,751 $ 2,033 35 % Product gross margin 77.4 % 79.0 % -160 bps 78.0 % 80.7 % -270 bps Research and development ("R&D") expenses$ 1,134 $ 1,299 (13) %$ 2,189 $ 2,303 (5) % Acquired IPR&D expenses$ 96 $ 4,524 (98) %$ 158 $ 4,621 (97) % Selling, general and administrative ("SG&A") expenses$ 1,351 $ 1,239 9 %$ 2,406 $ 2,315 4 % Cost of Goods Sold and Product Gross Margin Cost of goods sold for the second quarter and first half of 2021 increased by$326 million and$718 million , or 31% and 35%, respectively, compared to the same periods in 2020, primarily due to higher acquisition-related expenses from amortization of finite-lived intangible assets and inventory step-up charges driven by our acquisitions of Immunomedics and MYR, as well as increased product sales. The increase was partially offset by a decline in royalty expenses primarily due to lower sales of products containing emtricitabine and elvitegravir. Product gross margin for the second quarter and first half of 2021 compared to the same periods in 2020 decreased primarily due to higher amortization expense of finite-lived intangible assets partially offset by lower royalty expenses. Research and Development Expenses R&D expenses consist primarily of clinical studies performed by contract research organizations, materials and supplies, payments related to collaborative and other arrangements including milestone payments, licenses and fees, expense reimbursements to the collaboration partners, personnel costs including salaries, benefits and stock-based compensation expense, and overhead allocations including various support and infrastructure costs. 38 -------------------------------------------------------------------------------- We do not track total R&D expenses by product candidate, therapeutic area or development phase. However, we manage our R&D expenses by identifying the R&D activities we anticipate will be performed during a given period and then prioritizing efforts based on scientific data, probability of technical and regulatory successful development, market potential, available human and capital resources and other considerations. We continually review our R&D projects based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities that we believe will best support the long-term growth of our business. The following table provides a period-over-period breakout of our R&D expenses by major cost type: Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages) 2021 2020 Change 2021 2020 Change Clinical studies and outside services$ 365 $ 564 (35) %$ 703 $ 985 (29) % Personnel, infrastructure and other expenses 693 549 26 % 1,347 1,068 26 % Stock-based compensation expenses 76 186 (59) % 139 250 (44) % Total$ 1,134 $ 1,299 (13) %$ 2,189 $ 2,303 (5) % R&D expenses for the second quarter and first half of 2021 decreased by 13% and 5%, respectively, compared to the same periods in 2020, primarily due to lower expenses on clinical programs, including cancellations of certain filgotinib programs in connection with theDecember 2020 amended agreement with Galapagos as well as certain remdesivir-related studies. The decrease was partially offset by higher compensation expenses driven by headcount growth due to the fourth quarter 2020 acquisition of Immunomedics and higher investments in oncology programs including magrolimab and Trodelvy. R&D expenses for the second quarter and first half of 2020 also included investments in remdesivir due to the manufacturing ramp-up and clinical trial costs prior to the third quarter 2020 commercialization of Veklury, as well as stock-based compensation expense of$144 million related to our second quarter 2020 acquisition of Forty Seven.Acquired In-Process Research and Development Expenses Acquired IPR&D expenses reflect IPR&D impairments as well as the initial costs of externally developed IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use, including upfront and other payments related to various collaborations and the initial costs of rights to IPR&D projects. IPR&D assets capitalized are tested for impairment in the fourth quarter of each year, or earlier if impairment indicators exist. No IPR&D impairment charges were recorded during the second quarter and first half of 2021 and 2020. Acquired IPR&D expenses of$96 million and$158 million for the second quarter and first half of 2021, respectively, were related to licensing, collaboration, investment and other arrangements we entered into during the periods. The second quarter and first half of 2020 reflected an IPR&D charge of$4.5 billion related to our acquisition of Forty Seven. Selling, General and Administrative Expenses SG&A expenses relate to sales and marketing, finance, human resources, legal and other administrative activities, including information technology investments. Expenses consist primarily of personnel costs, facilities and overhead costs, outside marketing, advertising and legal expenses and other general and administrative costs. SG&A expenses also include the branded prescription drug fee. SG&A expenses for the second quarter and first half of 2021 increased by$112 million and$91 million , or 9% and 4%, respectively, compared to the same period in 2020. The increase was primarily due to an expense of$212 million related to the donation of certain equity securities at fair value to theGilead Foundation , aCalifornia nonprofit public benefit corporation (the "Foundation"), during the second quarter of 2021. The second quarter and first half of 2021 also reflected higher promotional and commercialization activities outside ofthe United States . The second quarter of 2020 included a$97 million charge related to aDepartment of Justice investigation, which settled in the third quarter of 2020. Other Income (Expense), Net and Interest Expense The following table summarizes the period-over-period changes in our Other income (expense), net and Interest expense: Three Months Ended Six Months Ended June 30, June 30, (in millions, except percentages) 2021 2020 Change 2021 2020 Change Other income (expense), net$ (173) $ 250 NM$ (542) $ 92 NM Interest expense$ (256) $ (240) 7 %$ (513) $ (481) 7 %
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NM - Not Meaningful
39
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The changes in Other income (expense), net for the second quarter and first half
of 2021, compared to the same periods in 2020 primarily reflect unfavorable fair
value adjustments from our investments in equity securities driven by our
investment in Galapagos as well as lower interest income.
Interest expense for the second quarter and first half of 2021 increased by $16
million and $32 million , or 7% and 7%, respectively, compared to the same
periods in 2020, primarily due to an increase in borrowing related to the fourth
quarter 2020 acquisition of Immunomedics, partially offset by favorable effects
from debt maturities and repayments.
Income Taxes
The following table summarizes the period-over-period changes in our Income tax
expense:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except percentages) 2021 2020 Change 2021 2020 Change
Income (loss) before income taxes
$ 4,790 $ 4,081 $ (970) $ 5,051 Income tax expense$ (300) $ (373) $ (73) $ (842) $ (838) $ 4 Effective tax rate 16.5 % (12.5) % 29.1 % 20.6 % (86.4) % 107.0 % Our effective tax rate and provision differed for the second quarter and first half of 2021, compared to the same periods in 2020, primarily due to a non-deductible$4.5 billion IPR&D charge recorded in connection with our second quarter 2020 acquisition of Forty Seven. LIQUIDITY AND CAPITAL RESOURCES We believe that our existing capital resources, supplemented by our cash flows generated from operating activities, will be adequate to satisfy our capital needs for the foreseeable future. The following table summarizes our cash, cash equivalents and marketable debt securities and working capital: (in millions) June 30, 2021 December 31, 2020 Cash, cash equivalents and marketable debt securities$ 7,361 $ 7,910 Working capital$ 3,711 $ 4,599 Cash,Cash Equivalents and Marketable Debt Securities Cash, cash equivalents and marketable debt securities as ofJune 30, 2021 decreased by$549 million , or 7%, compared toDecember 31, 2020 . During the first half of 2021, we generated$4.9 billion in operating cash flow, made early debt repayments of$1.25 billion , which included$1.0 billion principal amount of senior unsecured notes due inApril 2021 and$250 million principal amount under our$1.0 billion three-year senior unsecured term loan facility. In addition, we utilized$1.2 billion on our first quarter 2021 acquisition of MYR, including IPR&D, net of cash acquired, paid cash dividends of$1.8 billion and utilized$352 million on repurchases of our common stock. Working Capital Working capital, which is current assets less current liabilities, decreased by$888 million , or 19%, compared toDecember 31, 2020 , primarily due to the utilization of cash, cash equivalents and marketable debt securities for our first quarter 2021 acquisition of MYR as noted above. Accounts receivable decreased by$743 million , compared toDecember 31, 2020 , primarily due to collections of Veklury receivables during the first half of 2021. Other accrued liabilities decreased by$281 million compared toDecember 31, 2020 , primarily reflecting the timing of accruals and payments, as well as estimated and transition tax payments made to taxing authorities during the first half of 2021. 40 -------------------------------------------------------------------------------- Cash Flows The following table summarizes our cash flow activities: Six Months Ended June 30, (in millions) 2021 2020 Cash provided by (used in): Operating activities$ 4,926 $ 4,002 Investing activities$ (2,619) $ (5,367) Financing activities$ (3,408) $ (3,485) Operating Activities Cash provided by operating activities represents the cash receipts and disbursements related to all activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income for non-cash items and changes in operating assets and liabilities. Cash provided by operating activities increased by$924 million to$4.9 billion for the first half of 2021, compared to the same period in 2020. The increase was primarily the result of changes in working capital reflecting collections of Veklury receivables during the first half of 2021 and timing of accruals and payments. Operating cash flow activities for the first half of 2021 were adjusted for non-cash items, including net losses from equity securities primarily due to our investment in Galapagos and donation expense of$212 million related to the Foundation. Investing Activities Cash used in investing activities primarily consists of purchases, sales and maturities of our marketable debt securities, capital expenditures, acquisitions, including IPR&D, net of cash acquired, purchases of equity securities and other investments. Cash used in investing activities decreased by$2.7 billion to$2.6 billion for the first half of 2021, compared to the same period in 2020. The change in cash used in investing activities was due to$1.2 billion of payments made primarily related to our first quarter 2021 acquisition of MYR, compared to$4.7 billion of payments made primarily related to our second quarter 2020 acquisition of Forty Seven. Financing Activities The change in cash used in financing activities for the first half of 2021, compared to the same period in 2020, was primarily due to$1.0 billion lower repurchases of our common stock, partially offset by$750 million higher repayments of debt during the first half of 2021. Dividends paid to stockholders were$1.8 billion and$1.7 billion for the first half of 2021 and 2020, respectively. InJuly 2021 , the Board of Directors declared a quarterly dividend of$0.71 per share of common stock, which is payable inSeptember 2021 . Future dividends will be subject to Board approval. Debt and Credit Facilities A summary of our borrowings under various financing arrangements is included in Note 10. Debt and Credit Facilities of the Notes to Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q. We may choose to repay certain of our long-term debt obligations prior to maturity dates based on our assessment of current and long-term liquidity and capital requirements. During the first half of 2021, we repaid$1.25 billion of debt, including$1.0 billion of senior unsecured notes prior to theApril 2021 maturity and$250 million principal amount under our three-year$1.0 billion senior unsecured term loan facility, leaving$750 million principal amount outstanding as ofJune 30, 2021 . No new debt was issued during the second quarter and first half of 2021. We are required to comply with certain covenants under our note indentures governing our senior unsecured notes. As ofJune 30, 2021 , we were in compliance with all covenants. InAugust 2021 , we called$1.25 billion of senior unsecured notes prior to theDecember 2021 maturity by exercising a three-month par call. We expect to repay the$1.25 billion of senior unsecured notes prior to the maturity during the third quarter of 2021. CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS The preparation of our Condensed Consolidated Financial Statements in accordance withU.S. GAAP requires management to make estimates and judgments that affect the reported amounts in the financial statements and related disclosures. On an ongoing basis, we evaluate our significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the ongoing COVID-19 pandemic could have on our significant accounting estimates. Actual results may differ significantly from these estimates. A summary of our critical accounting 41
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policies and estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2020 . There were no material changes to our critical accounting policies and estimates during the six months endedJune 30, 2021 . OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. RECENT ACCOUNTING PRONOUNCEMENTS There have been no new accounting pronouncements issued nor adopted during the six months endedJune 30, 2021 that are of significance to us. ACQUISITIONS, COLLABORATIONS AND OTHER ARRANGEMENTS See Note 6. Acquisitions and Note 9. Collaborations and Other Arrangements of the Notes to Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q for additional information.
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