On February 4, 2020 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the fourth quarter and full year 2019 (Press release, Gilead Sciences, FEB 4, 2020, View Source [SID1234553832]). Total revenues for the fourth quarter of 2019 were $5.9 billion compared to $5.8 billion for the same period in 2018. Net income for the fourth quarter of 2019 was $2.7 billion, or $2.12 per diluted share, compared to net income of $3 million, or $0.00 per diluted share, for the same period in 2018. Non-GAAP net income for the fourth quarter of 2019 was $1.7 billion, or $1.30 per diluted share, compared to $1.9 billion, or $1.44 per diluted share, for the same period in 2018.
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Full year 2019 total revenues were $22.4 billion, compared to $22.1 billion for 2018. Net income for 2019 was $5.4 billion, or $4.22 per diluted share, compared to $5.5 billion, or $4.17 per diluted share, for 2018. Non-GAAP net income for 2019 was $8.5 billion, or $6.63 per diluted share, compared to $8.7 billion, or $6.67 per diluted share, for
For the fourth quarter of 2019, compared to the same period in 2018, net income attributable to Gilead increased primarily due to the net favorable tax effects of intra-entity intangible asset transfers to different tax jurisdictions and an increase in net gains from equity securities. In addition, during the fourth quarter of 2019 and 2018, Gilead recorded pre-tax
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Non-GAAP financial information excludes acquisition-related, up-front collaboration and licensing, stock-based compensation and other expenses, fair value adjustments of equity securities and discrete tax charges or benefits associated with changes in tax related laws and guidelines. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 9 through 12.
impairment charges of $800 million and $820 million, respectively, related to in-process research and development (IPR&D) intangible assets acquired in connection with the acquisition of Kite Pharma, Inc. (Kite) and pre-tax write-downs of $500 million and $410 million, respectively, for slow moving and excess raw material and work in process inventory.
In addition to the factors noted above, the full year 2019, compared to the same period in 2018, was impacted by pre-tax up-front collaboration and licensing expenses of $3.92 billion related to Gilead’s global research and development collaboration agreement with Galapagos NV (Galapagos) in 2019.
Product Sales
Total product sales for the fourth quarter of 2019 were $5.8 billion, compared to $5.7 billion for the same period in 2018. Product sales for the fourth quarter of 2019 were $4.5 billion in the United States, $840 million in Europe and $440 million in other locations. Product sales for the fourth quarter of 2018 were $4.5 billion in the United States, $813 million in Europe and $398 million in other locations.
Total product sales in 2019 were $22.1 billion, compared to $21.7 billion in 2018. For 2019, product sales were $16.6 billion in the United States, $3.6 billion in Europe and $2.0 billion in other locations. For 2018, product sales were $16.2 billion in the United States, $3.7 billion in Europe and $1.8 billion in other locations.
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February 4, 2020
HIV product sales were $4.6 billion for the fourth quarter of 2019 compared to $4.1 billion for the same period in 2018. For 2019, HIV product sales were $16.4 billion compared to $14.6 billion in 2018. The increases were primarily driven by higher sales volume as a result of the continued uptake of Biktarvy (bictegravir 50 mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg).
Chronic hepatitis C virus (HCV) product sales were $630 million for the fourth quarter of 2019 compared to $738 million for the same period in 2018. For 2019, HCV product sales were $2.9 billion compared to $3.7 billion in 2018. The declines were primarily due to lower average net selling price.
Yescarta (axicabtagene ciloleucel) generated $122 million in sales during the fourth quarter of 2019 compared to $81 million in 2018. For 2019, Yescarta sales were $456 million compared to $264 million in 2018. The increases were driven by a higher number of therapies provided to patients and the continued expansion in Europe.
Other product sales, which include products from chronic hepatitis B virus (HBV), cardiovascular, oncology and other categories, inclusive of Vemlidy (tenofovir alafenamide 25 mg), Viread (tenofovir disoproxil fumarate 300 mg), Letairis (ambrisentan 5 mg and 10 mg), Ranexa (ranolazine 500 mg and 1000 mg), Zydelig (idelalisib 150 mg), AmBisome (amphotericin B liposome for injection 50 mg/vial) and Cayston (aztreonam for inhalation solution 75 mg/vial), were $467 million for the fourth quarter of 2019 compared to $797 million for the same period in 2018. For 2019, other product sales were $2.3 billion compared to $3.1 billion in 2018. The decreases were expected and primarily due to declines in Ranexa and Letairis sales after generic entries in 2019.
For the fourth quarter of 2019, compared to the same period in 2018:
Cost of goods sold and non-GAAP cost of goods sold increased primarily due to higher inventory write-downs, partially offset by lower royalty expenses. During the fourth quarter of 2019 and 2018, Gilead recorded write-downs of $500 million and $410 million, respectively, for slow moving and excess raw material and work in process inventory primarily due to lower long-term demand for Gilead’s HCV products.
Product gross margin and non-GAAP product gross margin decreased primarily due to the factors noted above.
For the full year 2019, compared to the same period in 2018:
Cost of goods sold and non-GAAP cost of goods sold decreased primarily due to lower royalty expenses, partially offset by higher inventory write-downs. Costs of goods sold also decreased due to lower amortization expense related to intangible assets associated with Ranexa.
Product gross margin and non-GAAP product gross margin increased primarily due to changes in product mix and the factors noted above.
For the fourth quarter of 2019, compared to the same period in 2018:
R&D expenses decreased primarily due to lower up-front collaboration and licensing expenses, partially offset by higher personnel costs to support Gilead’s cell therapy business and increased investment in Gilead’s research projects. Gilead recorded impairment charges of $800 million in 2019 for the IPR&D intangible assets acquired in connection with the acquisition of Kite primarily related to the treatment of indolent non-Hodgkin lymphoma and $820 million in 2018 related to the KITE-585 program (an anti-B cell maturation antigen being evaluated for the treatment of multiple myeloma).
Non-GAAP R&D expenses increased primarily due to higher personnel costs to support Gilead’s cell therapy business and increased investment in Gilead’s research projects.
SG&A expenses and non-GAAP SG&A expenses increased primarily due to higher promotional expenses in the United States and expenses associated with the expansion of Gilead’s business in Japan.
For the full year 2019, compared to the same period in 2018:
R&D expenses increased primarily due to up-front collaboration and licensing expenses of $3.92 billion related to Gilead’s global research and development collaboration agreement with Galapagos, partially offset by lower stock-based compensation expense associated with Gilead’s acquisition of Kite. Furthermore, R&D expenses and non-GAAP R&D expenses increased primarily due to higher personnel costs to support Gilead’s cell therapy business.
SG&A expenses increased primarily due to promotional expenses in the United States and expenses associated with the expansion of Gilead’s business in Japan and China, partially offset by lower stock-based compensation expense associated with Gilead’s acquisition of Kite.
Non-GAAP SG&A increased primarily due to promotional expenses in the United States and expenses associated with the expansion of Gilead’s business in Japan and China.
Cash, Cash Equivalents and Marketable Debt Securities
As of December 31, 2019, Gilead had $25.8 billion of cash, cash equivalents and marketable debt securities compared to $31.5 billion as of December 31, 2018. During 2019, Gilead generated $9.1 billion in operating cash flow, paid $5.6 billion in connection with the global research and development collaboration agreement with Galapagos and equity investments in Galapagos, repaid $2.8 billion of principal amount of debt, paid cash dividends of $3.2 billion and utilized $1.7 billion on stock repurchases.
Full Year 2020 Guidance
Gilead provides its full year 2020 guidance below. Starting in 2020, Gilead will no longer regularly exclude stock-based compensation expense from its non-GAAP financial information. For comparability purposes, full year 2019 non-GAAP operating income and non-GAAP diluted earnings per share would have been $10.4 billion and $6.13, respectively, had stock-based compensation expense not been excluded.
Corporate, Product and Pipeline Updates for the Fourth Quarter, Including the Announcement of:
Viral Diseases
Licensing of The Rockefeller University’s portfolio of broadly neutralizing antibodies against HIV, including the two clinical-stage agents 3BNC117 and 10-1074.
Approval of Vosevi (sofosbuvir 400 mg/velpatasvir 100 mg/voxilaprevir 100 mg) by the China National Medical Products Administration for the treatment of chronic HCV infection in adults without cirrhosis or with compensated cirrhosis who have failed prior treatment with a direct-acting antiviral therapy.
Donation to the National AIDS Memorial to support relocation of The Aids Memorial Quilt to San Francisco, as well as related educational programs, under the stewardship of the National AIDS Memorial.
Presentation of data at The Liver Meeting, which included new data on Vemlidy evaluating its safety profile compared with tenofovir disoproxil fumarate in patients with chronic HBV infection.
Presentation of data at the 17th European AIDS Conference, which included:
96-week results from the DISCOVER trial, evaluating the safety and efficacy of Descovy (emtricitabine 200 mg/tenofovir alafenamide 25 mg) for HIV pre-exposure prophylaxis (PrEP), compared with Truvada for PrEP (emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg).
Data on investigational HIV-1 capsid inhibitor GS-6207 as a potential component of long-acting HIV therapy.
Findings from two Phase 3 studies evaluating the safety and efficacy of Biktarvy compared with dolutegravir-containing regimens for the treatment of HIV-1 infection in adults new to HIV therapy.
Inflammatory Diseases
Collaboration with Kyverna Therapeutics, Inc. to research and develop advanced cell therapies for the treatment of autoimmune disease.
Agreement with Eisai Co., Ltd. for the distribution and co-promotion of filgotinib in Japan, pending regulatory approval from the Japan Ministry of Health, Labor and Welfare (MHLW), for the treatment of rheumatoid arthritis (RA).
Submission of a New Drug Application under priority review to the U.S. Food and Drug Administration (FDA) for filgotinib for the treatment of adults with moderate-to-severe RA.
Presentation of data at the 2019 American College of Rheumatology/Association of Rheumatology Professionals Annual Meeting from the clinical research collaboration with Galapagos evaluating the efficacy and safety of filgotinib in adults with moderately-to-severely acute RA.
Oncology
European Medicines Agency’s validation of the marketing authorization application and submission of a Biologics License Application to the FDA for KTE-X19, an investigational chimeric antigen receptor (CAR) T cell therapy for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (MCL).
Collaboration with Kiniksa Pharmaceuticals, Ltd. to conduct a Phase 2, multicenter study of mavrilimumab, an investigational fully human monoclonal antibody that targets granulocyte macrophage colony stimulating factor receptor alpha, in combination with Yescarta in patients with relapsed or refractory large B-cell lymphoma.
The presentation of data at the 61st American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting & Exposition, which included:
Long-term data from the ZUMA-1 trial of Yescarta in adult patients with refractory large B-cell lymphoma.
Positive results from ZUMA-2 Phase 2 study of KTE-X19, an investigational CD19 CAR T cell therapy, in adult patients with relapsed or refractory MCL.
Positive real-world data from ongoing post-marketing study evaluating the safety and efficacy of Yescarta in adult patients with relapsed or refractory large B-cell lymphoma.
Fibrotic Diseases
Topline results from the Phase 2 ATLAS study of combination and monotherapy investigational treatments in patients with bridging fibrosis (F3) and compensated cirrhosis (F4) due to nonalcoholic steatohepatitis (NASH).
Presentation of data at The Liver Meeting, which included new data showing potential for machine learning to advance understanding of NASH.
Collaboration with Glympse Bio, Inc. to determine clinical trial participants’ stage of disease at initial screening and to determine responses to study treatment in Gilead’s NASH clinical program.
Non-GAAP Financial Information
The information presented in this document has been prepared 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 9 through 12.
Conference Call
At 4:30 p.m. Eastern Time today, Gilead’s management will host a conference call and a simultaneous webcast to discuss the company’s fourth quarter and full year 2019 financial results and provide a business update. The live webcast of the call can be accessed at Gilead’s Investors page at View Source Please connect to the website at least 15 minutes prior to the start of the call to allow adequate time for any software download that may be required to listen to the webcast. Alternatively, please call 877-359-9508 (U.S.) or 224-357-2393 (international) and dial the conference ID 9634129 to access the call. Telephone replay will be available approximately two hours after the call through 8:00 p.m. Eastern Time, February 6, 2020. To access the replay, please call 855-859-2056 (U.S.) or 404-537-3406 (international) and dial the conference ID 9634129. The webcast will be archived on www.gilead.com for one year.