On May 2, 2017 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the first quarter ended March 31, 2017 (Press release, Gilead Sciences, MAY 2, 2017, View Source [SID1234518816]). Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
The financial results that follow represent a year-over-year comparison of the first quarter 2017 to the first quarter 2016. Total revenues were $6.5 billion in 2017 compared to $7.8 billion in 2016. Net income was $2.7 billion or $2.05 per diluted share in 2017 compared to $3.6 billion or $2.53 per diluted share in 2016. Non-GAAP net income, which excludes amounts related to acquisition-related, up-front collaboration, stock-based compensation and other expenses, was $2.9 billion or $2.23 per diluted share in 2017 compared to $4.3 billion or $3.03 per diluted share in 2016.
Three Months Ended
March 31,
(In millions, except per share amounts) 2017 2016
Product sales $ 6,377 $ 7,681
Royalty, contract and other revenues 128 113
Total revenues
$ 6,505 $ 7,794
Net income attributable to Gilead $ 2,702 $ 3,566
Non-GAAP net income* $ 2,949 $ 4,274
Diluted earnings per share $ 2.05 $ 2.53
Non-GAAP diluted earnings per share*
$ 2.23 $ 3.03
* Non-GAAP net income and non-GAAP diluted earnings per share exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8.
Product Sales
Total product sales for the first quarter of 2017 were $6.4 billion compared to $7.7 billion for the same period in 2016. Product sales for the first quarter of 2017 were $4.5 billion in the United States, $1.3 billion in Europe and $661 million in other locations. Product sales for the first quarter of 2016 were $4.4 billion in the United States, $1.6 billion in Europe and $1.7 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 $5.8 billion for the first quarter of 2017 compared to $7.2 billion for the same period in 2016.
HIV and HBV product sales were $3.3 billion compared to $2.9 billion for the same period in 2016. The increase was primarily due to 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) and Epclusa (sofosbuvir 400 mg/velpatasvir 100 mg), were $2.6 billion compared to $4.3 billion for the same period in 2016. The decline was due to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa, which was launched in the United States and Europe in June and July 2016, respectively.
Other Product Sales
Other product sales, which include Letairis (ambrisentan), Ranexa (ranolazine) and AmBisome (amphotericin B liposome for injection), were $536 million for the first quarter of 2017 compared to $498 million for the same period in 2016.
Operating Expenses
Three Months Ended
March 31,
(In millions) 2017 2016
Research and development expenses (R&D) $ 931 $ 1,265
Non-GAAP R&D expenses* $ 889 $ 769
Selling, general and administrative expenses (SG&A) $ 850 $ 685
Non-GAAP SG&A expenses* $ 807 $ 638
* Non-GAAP R&D and SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 and 8.
During the first quarter of 2017, compared to the same period in 2016:
R&D expenses decreased primarily due to the 2016 impact of up-front collaboration expenses related to Gilead’s license and collaboration agreement with Galapagos NV and impairment charges related to in-process R&D. These decreases were partially offset by expenses associated with Gilead’s purchase of a U.S. Food and Drug Administration (FDA) priority review voucher.
Non-GAAP R&D expenses* increased primarily due to expenses associated with Gilead’s purchase of an FDA priority review voucher.
SG&A expenses and non-GAAP SG&A expenses* increased primarily due to higher branded prescription drug fee expense.
Cash, Cash Equivalents and Marketable Securities
As of March 31, 2017, Gilead had $34.0 billion of cash, cash equivalents and marketable securities compared to $32.4 billion as of December 31, 2016. Cash flow from operating activities was $2.9 billion for the quarter. During the first quarter of 2017, Gilead utilized $565 million on stock repurchases and paid cash dividends of $687 million.
Full Year 2017 Guidance Reiterated
Gilead reiterates its full year 2017 guidance, initially provided on February 7, 2017:
(In millions, except percentages and per share amounts) Initially Provided
February 7, 2017
Net Product Sales $22,500 – $24,500
Non-HCV Product Sales $15,000 – $15,500
HCV Product Sales $7,500 – $9,000
Non-GAAP*
Product Gross Margin 86% – 88%
R&D Expenses $3,100 – $3,400
SG&A Expenses $3,100 – $3,400
Effective Tax Rate 25.0% – 28.0%
Diluted EPS Impact of Acquisition-related, Up-front Collaboration, Stock-based Compensation and Other Expenses $0.84 – $0.91
* 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. A reconciliation between GAAP and non-GAAP full year 2017 guidance is provided in the tables on page 9.
Corporate Highlights
Announced that Alessandro Riva, MD, joined the company as Senior Vice President and therapeutic area head for hematology and oncology.
Announced the recipients of Gilead’s HIV cure grants program, a fund totaling more than $22 million, which will support 12 new HIV cure research projects. These projects will be conducted by leading academic institutions, non-profit organizations and community groups from around the world, focusing on three key areas: translational research, efficacy studies in animal models and community perspectives of HIV cure.
Product and Pipeline Updates announced by Gilead during the First Quarter of 2017 include:
Antiviral and Liver Diseases Programs
Presented data at the 2017 Conference on Retroviruses and Opportunistic Infections which included the announcement of:
Positive results from a Phase 2 study evaluating the efficacy, safety and tolerability of a combination of bictegravir (75 mg) (BIC) and emtricitabine/tenofovir alafenamide (200/25 mg) (FTC/TAF) versus dolutegravir (50 mg) (DTG) and FTC/TAF in treatment-naïve, HIV-1 infected adults. Results found that the BIC+FTC/TAF and DTG+FTC/TAF regimens both demonstrated high virologic response rates at week 24 and week 48.
Positive findings from a preclinical study evaluating HIV capsid inhibitors (CAIs) for potential use as a long-acting antiretroviral (ARV) treatment. The study identified novel HIV-1 CAIs with highly potent antiviral activity and a favorable resistance profile to existing ARVs in vitro.
Positive 144-week data from two Phase 3 studies (Studies 104 and 111) evaluating the safety and efficacy of Genvoya for the treatment of HIV-1 infection in treatment-naïve adults. Through week 144, Genvoya demonstrated significantly higher rates of virologic suppression compared to Stribild (elvitegravir 150 mg, cobicistat 150 mg, emtricitabine 200 mg and tenofovir disoproxil fumarate 300 mg), based on the percentage of patients with HIV-1 RNA levels less than 50 copies/mL. Patients receiving Genvoya also demonstrated favorable renal and bone laboratory parameters compared to those treated with Stribild.
Announced that the marketing authorization application for the investigational, once-daily, single-tablet regimen of sofosbuvir 400 mg, velpatasvir 100 mg and voxilaprevir 100 mg (SOF/VEL/VOX) for the treatment of HCV-infected patients has been fully validated and is under assessment by the European Medicines Agency. Gilead also previously submitted a new drug application to FDA for SOF/VEL/VOX. Under the Prescription Drug User Fee Act, FDA has set a target action date of August 8, 2017.
Announced that the European Commission granted marketing authorization for Vemlidy (tenofovir alafenamide 25mg), a once-daily tablet for the treatment of chronic hepatitis B virus infection in adults and adolescents (aged 12 years and older with body weight at least 35 kg).
Non-GAAP Financial Information
The information presented in this document has been prepared by Gilead in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7, 8 and 9.