On April 28, 2016 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the first quarter ended March 31, 2016 (Press release, Gilead Sciences, APR 28, 2016, View Source [SID:1234511574]). Schedule your 30 min Free 1stOncology Demo! The financial results that follow represent a year-over-year comparison of first quarter 2016 to the first quarter 2015. Total revenues were $7.8 billion in 2016 compared to $7.6 billion in 2015. Net income was $3.6 billion or $2.53 per diluted share in 2016 compared to $4.3 billion or $2.76 per diluted share in 2015. Non-GAAP net income, which excludes acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $4.3 billion or $3.03 per diluted share in 2016 compared to $4.6 billion or $2.94 per diluted share in 2015.
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Three Months Ended
March 31,
(In millions, except per share amounts) 2016 2015
Product sales $ 7,681 $ 7,405
Royalty, contract and other revenues 113 189
Total revenues $ 7,794 $ 7,594
Net income attributable to Gilead $ 3,566 $ 4,333
Non-GAAP net income attributable to Gilead $ 4,274 $ 4,604
Diluted EPS $ 2.53 $ 2.76
Non-GAAP diluted EPS $ 3.03 $ 2.94
Product Sales
Total product sales for the first quarter of 2016 were $7.7 billion compared to $7.4 billion for the same period in 2015. Product sales for the first quarter of 2016 were $4.4 billion in the U.S., $1.6 billion in Europe, $1.1 billion in Japan and $571 million in other international locations. Product sales for the first quarter of 2015 were $5.2 billion in the U.S., $1.8 billion in Europe and $364 million in other international locations.
Antiviral Product Sales
Antiviral product sales, which include products in our HIV and liver disease areas, were $7.2 billion for the first quarter of 2016 compared to $7.0 billion for the same period in 2015.
In the U.S., antiviral product sales were $4.0 billion for the first quarter of 2016 compared to $4.9 billion in 2015, primarily due to a decline in sales of Harvoni (ledipasvir 90 mg/sofosbuvir 400 mg), partially offset by increases in sales of Sovaldi (sofosbuvir 400 mg), Truvada (emtricitabine and tenofovir disoproxil fumarate) and Genvoya (elvitegravir 150 mg/cobicistat 150 mg/emtricitabine 200 mg/tenofovir alafenamide 10 mg). Genvoya was launched in the U.S. in November 2015.
In Europe, antiviral product sales were $1.6 billion for the first quarter of 2016 compared to $1.7 billion in 2015, primarily due to a decline in sales of Sovaldi.
In Japan, antiviral product sales were $1.1 billion. Sovaldi and Harvoni were launched in Japan in May and September 2015, respectively.
Other Product Sales
Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B liposome for injection), were $498 million for the first quarter of 2016 compared to $417 million for the same period in 2015.
Cost of Goods Sold
Non-GAAP* cost of goods sold increased to $983 million for the first quarter of 2016 compared to $674 million for the same period in 2015, primarily due to a $200 million litigation charge related to our sofosbuvir based product sales.
Operating Expenses
Three Months Ended
March 31,
(In millions) 2016 2015
Non-GAAP* research and development expenses (R&D) $ 769 $ 651
Non-GAAP* selling, general and administrative expenses (SG&A) $ 638 $ 600
* Non-GAAP Cost of Goods Sold, R&D and SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses
During the first quarter of 2016, compared to the same period in 2015:
Non-GAAP research and development expenses increased primarily due to the progression of Gilead’s clinical studies.
Non-GAAP selling, general and administrative expenses increased primarily due to higher costs to support Gilead’s geographic expansion of its business, partially offset by a decrease in our Branded Prescription Drug fee expense.
Cash, Cash Equivalents and Marketable Securities
As of March 31, 2016, Gilead had $21.3 billion of cash, cash equivalents and marketable securities compared to $26.2 billion as of December 31, 2015. During the first quarter of 2016, we utilized $8.0 billion on stock repurchases and made an upfront license fee payment of $300 million and an equity investment of $425 million related to our license and collaboration agreement with Galapagos NV. Cash flow from operating activities was $3.9 billion for the quarter.
Full Year 2016 Guidance
Gilead reiterates its full year 2016 guidance, initially provided on February 2, 2016:
(In millions, except percentages and per share amounts) Provided
February 2, 2016
Net Product Sales $30,000 – $31,000
Non-GAAP*
Product Gross Margin 88% – 90%
R&D expenses $3,200 – $3,500
SG&A expenses $3,300 – $3,600
Effective Tax Rate 18.0% – 20.0%
Diluted EPS Impact Related to Acquisition, Up-front Collaboration, Stock-based Compensation and Other Expenses $1.10 – $1.16
* Non-GAAP Product Gross Margin, R&D and SG&A expenses and effective tax rate exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses.
Corporate Highlights
Announced that Chairman and Chief Executive Officer (CEO) John C. Martin, PhD assumed the role of Executive Chairman of the company. John F. Milligan, PhD, formerly President and Chief Operating Officer, was promoted to President and CEO, effective March 10, 2016, and appointed to the company’s Board of Directors.
Announced that Gilead will provide grants for up to three years to academic institutions, nonprofit organizations and community groups engaged in HIV cure activities. The unrestricted grants are awarded to organizations with a track record of excellence in results-driven research.
Announced that the Board of Directors approved the repurchase of an additional $12 billion of the company’s common stock which commenced upon completion of the company’s existing $15 billion repurchase program authorized in January 2015.
Product & Pipeline Updates announced by Gilead during the First Quarter of 2016 include:
Announced that U.S. Food and Drug Administration (FDA) approved Odefsey (emtricitabine 200 mg/rilpivirine 25 mg/tenofovir alafenamide 25 mg or R/F/TAF) for the treatment of HIV-1 infection in certain patients. Emtricitabine and tenofovir alafenamide are from Gilead while rilpivirine is from Janssen Sciences Ireland UC, one of the Janssen Pharmaceutical Companies of Johnson & Johnson. Odefsey is Gilead’s second TAF-based regimen to receive FDA approval and represents the smallest pill of any single-tablet regimen available today for the treatment of HIV.
Announced that the Committee for Medicinal Products for Human Use, the scientific committee of the European Medicines Agency (EMA), adopted a positive opinion on the company’s Marketing Authorization Application (MAA) for two doses of Descovy (emtricitabine 200 mg/tenofovir alafenamide 25 mg, F/TAF), an investigational fixed-dose combination for the treatment of HIV-1 infection in adults and adolescents (ages 12 years and older with body weight at least 35 kg) in combination with other HIV antiretroviral agents.
Presented data at the 2016 Conference on Retroviruses and Opportunistic Infections, which included the announcement of:
48-week results from a Phase 3 study (Study 1089) evaluating the safety and efficacy of switching virologically suppressed HIV-1 infected adult patients from regimens containing Truvada to regimens containing the investigational fixed-dose combination of emtricitabine and F/TAF. At Week 48, the F/TAF-based regimens were found to be statistically non-inferior to the emtricitabine and tenofovir disoproxil fumarate (F/TDF) -based regimens, based on percentages of patients with HIV-1 RNA levels less than 50 copies/mL. The study also demonstrated statistically significant improvements in renal and bone laboratory parameters among patients receiving F/TAF-based regimens.
Results from a preclinical study conducted in collaboration with researchers at Beth Israel Deaconess Medical Center evaluating a proprietary investigational oral toll-like receptor 7 (TLR7) agonist, GS-9620, and a related molecular analogue, GS-986, as part of an HIV eradication strategy. Data from the study conducted in simian immunodeficiency virus (SIV)-infected virally suppressed rhesus macaques on antiretroviral therapy (ART) demonstrate that TLR7 agonist treatment induced transient plasma SIV RNA blips and reduced SIV DNA. In addition, TLR7 agonist treatment resulted in subsequent prolonged virus suppression in some of the macaques after stopping ART.
Announced that the company’s Type II variation application for once-daily Truvada in combination with safer sex practices to reduce the risk of sexually acquired HIV-1 infection among uninfected adults at high risk, a strategy known as pre-exposure prophylaxis or PrEP, was fully validated and under evaluation by the EMA.
Announced that the company’s MAA for TAF 25 mg, an investigational, once-daily treatment for adults with chronic hepatitis B virus (HBV) infection, was fully validated and under assessment by the EMA. The company also submitted a new drug application (NDA) to FDA for TAF 25 mg for the treatment for adults with chronic HBV infection.
Announced that FDA approved two supplemental indications for Harvoni for use in chronic hepatitis C patients with advanced liver disease. Harvoni in combination with ribavirin for 12 weeks was approved for use in chronic hepatitis C virus (HCV) genotype 1- or 4-infected liver transplant recipients without cirrhosis or with compensated cirrhosis (Child-Pugh A), and for HCV genotype 1-infected patients with decompensated cirrhosis (Child-Pugh B or C), including those who have undergone liver transplantation. Harvoni is approved for use in HCV genotypes 1, 4, 5 and 6, HCV/HIV-1 coinfection, HCV genotype 1 and 4 liver transplant recipients, and genotype 1-infected patients with decompensated cirrhosis.
Announced that FDA granted priority review to the company’s NDA for an investigational once-daily fixed-dose combination of sofosbuvir and velpatasvir (SOF/VEL), for the treatment of chronic genotype 1-6 HCV infection. FDA has set a target action date under the Prescription Drug User Fee Act of June 28, 2016.